-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, AAetONJwsJWmAyhJCka4+pn5Ro2vOWYMwji1cQM8jBhPbM0wIw5iOcw+K56T+2xQ m3vrlsWLhtoViOx7q3Syow== 0000950131-94-000365.txt : 19940323 0000950131-94-000365.hdr.sgml : 19940323 ACCESSION NUMBER: 0000950131-94-000365 CONFORMED SUBMISSION TYPE: 424B2 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19940322 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST BANK SYSTEM INC CENTRAL INDEX KEY: 0000036104 STANDARD INDUSTRIAL CLASSIFICATION: 6021 IRS NUMBER: 410255900 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B2 SEC ACT: 33 SEC FILE NUMBER: 033-51407 FILM NUMBER: 94517259 BUSINESS ADDRESS: STREET 1: 601 SECOND AVE S STREET 2: FIRST BANK PL CITY: MINNEAPOLIS STATE: MN ZIP: 55402-4302 BUSINESS PHONE: 6129731111 FORMER COMPANY: FORMER CONFORMED NAME: FIRST BANK STOCK CORP DATE OF NAME CHANGE: 19720317 424B2 1 FORM 424B2 RULE NO. 424(B)(2) REGISTRATION NO. 33-51407 PROSPECTUS SUPPLEMENT (To Prospectus Dated February 15, 1994) FIRST BANK SYSTEM, INC. LOGO $450,000,000 Medium-Term Notes, Series F (Senior) Medium-Term Notes, Series G (Subordinated) Due Nine Months or More From Date of Issue First Bank System, Inc. (the "Company") may offer from time to time its Medium- Term Notes which are issuable in one or more series. Although the Medium-Term Notes, Series F (the "Series F Notes") and the Medium-Term Notes, Series G (the "Series G Notes" and, together with the Series F Notes, the "Notes") are not limited by series as to aggregate principal amount, the Notes offered by this Prospectus Supplement will not exceed an aggregate principal amount of $450,000,000, or the equivalent thereof in foreign currencies or foreign currency units, subject to reduction as a result of the sale of other Securities. See "Description of Notes--General" and "Plan of Distribution of Notes". Except as otherwise specified in an applicable pricing supplement, the Notes will bear interest at fixed rates (the "Fixed Rate Notes") or at floating rates (the "Floating Rate Notes"). Each Note will mature on a day nine months or more from its date of issue, as agreed to by the Company and the purchaser. If so specified in the applicable pricing supplement to this Prospectus Supplement (a "Pricing Supplement"), a Note may be redeemed by the Company on the specified date or dates prior to maturity at the specified price or prices. The Notes may be denominated, and payments of principal and interest on the Notes may be made, in U.S. dollars or in such foreign currencies or foreign currency units as may be designated by the Company in the applicable Pricing Supplement ("Foreign Currency Notes"). The interest rate or rates and/or interest rate formula or formulas, if any, issue price, stated maturity, and other variable terms of the Notes will be established by the Company prior to the date of issuance of such Note and will be specified in a Pricing Supplement. Interest rates and interest rate formulas are subject to change by the Company but no such change will affect any Note already issued or which the Company has agreed to issue. Each Note that bears interest will bear interest for the specified Interest Periods either at one or more fixed rates or at floating rates determined by reference to the Commercial Paper Rate, the Federal Funds Rate, LIBOR, the Prime Rate, the Eleventh District Cost of Funds Rate, the CD Rate, the Treasury Rate, the J.J. Kenny Rate, the CMT Rate or one or more other interest rate formulas as may be specified in the applicable Pricing Supplement, as adjusted by the Spread, Spread Multiplier, Alternate Rate Event Spread or Alternate Rate Event Spread Multiplier, if any, applicable to such Note. Notes may be issued at a discount from the principal amount payable at maturity thereof and constitute Original Issue Discount Notes. Zero Coupon Notes will not provide for periodic payments of interest. See "Description of Notes" and "United States Taxation--United States Noteholders--Original Issue Discount". The Series F Notes will represent senior, unsubordinated debt of the Company and will rank equally with all other unsecured and unsubordinated debt of the Company. The Series G Notes will represent subordinated debt of the Company and will rank junior to, and be subordinated to, all Senior Indebtedness. Unless otherwise specified in an applicable Pricing Supplement, the Subordinated Note Indenture (as defined herein) does not provide for any right of acceleration of the payment of principal of the Series G Notes upon a default in the payment of principal or interest on the Series G Notes or in the performance of any covenant or agreement in the Series G Notes or the Subordinated Note Indenture. See "Description of Debt Securities--Subordination of Subordinated Notes" in the Prospectus. Unless otherwise specified in the applicable Pricing Supplement, interest on Fixed Rate Notes is payable each February 1 and August 1 and at maturity or, if applicable, upon redemption. Interest on Floating Rate Notes is payable on the dates specified in such Notes and in the applicable Pricing Supplement. See "Description of Notes--Interest and Interest Rates". THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND OR THE BANK INSURANCE FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - --------------------------------------------------------------------------------
PRICE TO AGENTS' PROCEEDS TO PUBLIC(1) COMMISSIONS(2) COMPANY(2)(3) - ------------------------------------------------------------------------------ Per Note 100% .125%-.750% 99.875%-99.250% - ------------------------------------------------------------------------------ $449,437,500- Total(4) $450,000,000 $562,500-$3,375,000 $446,625,000 - ------------------------------------------------------------------------------
(Footnotes on following page) J. P. MORGAN SECURITIES INC. DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION GOLDMAN, SACHS & CO. LEHMAN BROTHERS MERRILL LYNCH & CO. MORGAN STANLEY & CO. INCORPORATED March 22, 1994 (Continued from cover page) (1) Unless otherwise specified in a Pricing Supplement, Notes will be issued at 100% of their principal amount. (2) The Company will pay a commission to one or more Agents (as defined herein) named in the applicable Pricing Supplement ranging from .125% to .750% of the principal amount of any Note (unless otherwise specified in the applicable Pricing Supplement), depending upon its maturity, sold through any such Agent. The Company may also sell Notes to any Agent named in the applicable Pricing Supplement at a discount for resale to one or more investors or other purchasers at varying prices related to prevailing market prices at the time of resale as determined by such Agent. Unless otherwise specified in the applicable Pricing Supplement, any Note sold to an Agent as principal will be purchased by such Agent at a price equal to 100% of the principal amount thereof less a percentage agreed upon by the Company and such Agent, and may be resold by such Agent. See "Plan of Distribution of Notes". (3) Before deducting other expenses payable by the Company, estimated at up to $875,000, including reimbursement of the Agents' expenses. (4) Or the equivalent thereof in foreign currencies or foreign currency units. ---------------- Unless otherwise specified in the applicable Pricing Supplement, the Notes will be issued in fully registered form in denominations of $1,000 and any integral multiple of $1,000 in excess thereof, or in the case of Foreign Currency Notes, in the denominations indicated in the applicable Pricing Supplement. Each Note will be represented either by a global security registered in the name of a nominee of The Depository Trust Company, which will act as Depositary, or a certificate issued in definitive form. Interests in Notes represented by a global security will be shown on, and transfers thereof will be effected only through, records maintained by the Depositary (with respect to its participants' interests) and its participants. Except as described herein under "Description of Notes--Book-Entry Notes", owners of beneficial interests in a global security will not be considered the holders thereof and will not be entitled to receive physical delivery of Notes in definitive form, and no global security will be exchangeable except for another global security of like denomination and terms to be registered in the name of the Depositary or its nominee. See "Description of Notes". The Notes are being offered on a continuing basis by the Company through the Agents (as defined under "Plan of Distribution of Notes"), each of which will have agreed to use its reasonable efforts to solicit offers to purchase the Notes. The Company also may sell Notes to any Agent acting as principal for resale to investors or other purchasers at varying prices related to prevailing market prices at the time of resale, as determined by such Agent, and may sell Notes directly to investors on its own behalf in jurisdictions where it is authorized to do so. The Notes will not be listed on any securities exchange, and there can be no assurance that the Notes offered by this Prospectus Supplement will be sold or that there will be a secondary market for the Notes. The Company reserves the right to withdraw, cancel or modify the offer made hereby without notice. The Company or any Agent may reject any offer to purchase Notes, in whole or in part. See "Plan of Distribution of Notes". NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT, A PRICING SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY AGENT. THIS PROSPECTUS SUPPLEMENT, A PRICING SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY AND THEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT, A PRICING SUPPLEMENT OR THE PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR RESPECTIVE DATES. TABLE OF CONTENTS
Page PROSPECTUS SUPPLEMENT Description of Notes....................................................... S-3 United States Taxation--United States Noteholders.......................... S-16 United States Taxation--Foreign Noteholders................................ S-20 Plan of Distribution of Notes.............................................. S-22 Validity of Securities..................................................... S-23 PROSPECTUS Available Information...................................................... 2
Page Incorporation of Certain Documents by Reference............................ 2 First Bank System, Inc..................................................... 3 Use of Proceeds............................................................ 4 Ratios of Earnings to Fixed Charges........................................ 4 Description of Debt Securities............................................. 5 Description of Warrants.................................................... 11 Foreign Currency Risks..................................................... 12 Plan of Distribution....................................................... 13 Experts.................................................................... 14 Validity of Securities..................................................... 14
S-2 DESCRIPTION OF NOTES GENERAL The following description of the particular terms of the Notes offered hereby supplements, and to the extent inconsistent therewith replaces, the description of the general terms and provisions of the Debt Securities set forth in the accompanying Prospectus, to which description reference is hereby made. Unless different terms or additional terms are specified in the applicable Pricing Supplement, the Notes will have the terms described below. References to interest payments and interest-related information do not apply to Zero Coupon Notes (as defined below). The Series F Notes will be issued pursuant to an Indenture dated as of October 1, 1991 (the "Senior Note Indenture") between the Company and Citibank, N.A., as Trustee and the Series G Notes will be issued pursuant to an Indenture dated as of October 1, 1991, as amended by a First Supplemental Indenture dated as of April 1, 1993 (as so amended, the "Subordinated Note Indenture" and, together with the Senior Note Indenture, the "Indentures") between the Company and Citibank, N.A., as Trustee. The Series F Notes will represent senior, unsubordinated debt of the Company and will rank equally with all other unsecured and unsubordinated debt of the Company. The Series G Notes will represent subordinated debt of the Company and will rank junior to, and be subordinated to, all Senior Indebtedness as defined in the Subordinated Note Indenture. See "Description of Debt Securities--Subordination of Subordinated Notes" in the Prospectus. The Series F Notes constitute a separate series for purposes of the Senior Note Indenture, and the Series G Notes constitute a separate series for purposes of the Subordinated Note Indenture. Neither series of Notes is limited by series as to aggregate principal amount. However, the Notes offered by this Prospectus Supplement will be limited to an aggregate principal amount of $450,000,000, or the equivalent thereof in foreign currencies or foreign currency units, subject to reduction as a result of the sale of other Securities (as defined in the accompanying Prospectus). The following summaries of certain provisions of the Indentures do not purport to be complete and are subject to and are qualified in their entirety by reference to, all of the provisions of the Indentures, including the definitions therein of certain terms. Each Note will mature on a Business Day (as defined below) from 9 months or more from its date of issue, as agreed to by the Company and the purchaser and specified in the Note and the applicable Pricing Supplement; provided, however, that no Commercial Paper Rate Note will mature less than 9 months and 1 day from its date of issue. Unless otherwise authorized by or pursuant to a resolution of the Board of Directors of the Company, no Series G Note will mature less than 1 year and 1 day from its date of issue. If the Maturity Date specified in the applicable Pricing Supplement for any Note is a day that is not a Business Day (as defined below), interest, principal and premium, if any, will be paid on the next succeeding Business Day with the same force and effect as if made on such specified Maturity Date, and no interest on such payment will accrue for the period from and after such Maturity Date. The applicable Pricing Supplement will specify any redemption terms applicable to the Notes. See "--Redemption" below. Unless otherwise specified in the applicable Pricing Supplement, the Notes, other than Foreign Currency Notes, will be issuable only in fully registered form in denominations of $1,000 and integral multiples of $1,000 in excess thereof. The authorized denominations of Foreign Currency Notes will be indicated in the applicable Pricing Supplement. Each Note will be represented either by a global security (a "Global Security") registered in the name of a nominee of The Depository Trust Company, as depositary (the "Depositary") (each such Note represented by a Global Security being herein referred to as a "Book-Entry Note"), or by a Note issued in definitive registered form, without coupons (a "Certificated Note"), as set forth in the applicable Pricing Supplement. Except as set forth under "--Book- Entry Notes" below, Book-Entry Notes will not be issuable in certificated form. So long as the Depositary or its nominee is the registered holder of any Global Security, the Depositary or its nominee, as the case may be, will be considered the sole registered holder of the Book-Entry Note S-3 represented by such Global Security for all purposes under the applicable Indenture and Note. For a further description of the respective forms, denominations and transfer and exchange procedures with respect to any such Global Security and Book-Entry Note, reference is made to "--Book-Entry Notes" below and to the applicable Pricing Supplement. Unless otherwise specified in the applicable Pricing Supplement and except as provided below under "--Book-Entry Notes", principal, premium (if any) and interest (if any) will be payable, the transfer of any Notes will be registrable and any Notes will be exchangeable for Notes bearing identical terms and provisions at the corporate trust office of Citibank, N.A. (the "Paying Agent"), in the Borough of Manhattan, The City of New York, provided that payments of interest with respect to any Certificated Note, other than interest at maturity or upon redemption, may be made at the option of the Company by check mailed to the address of the person entitled thereto as it appears on the registry books of the Company at the close of business on the Regular Record Date (as defined below) corresponding to the relevant Interest Payment Date. Unless otherwise specified in the applicable Pricing Supplement, holders of $10,000,000 or more in aggregate principal amount of Certificated Notes shall be entitled to receive payments of interest, other than interest at maturity or upon redemption, by wire transfer of immediately available funds, if appropriate wire transfer instructions have been given to the Paying Agent in writing not later than the Regular Record Date. Unless otherwise specified in the applicable Pricing Supplement, the principal, premium (if any) and interest (if any) payable at maturity or upon redemption on each Note will be paid in immediately available funds against presentation of the Note at the corporate trust office of the Paying Agent. The applicable Pricing Supplement will specify any additional terms applicable to any Foreign Currency Note with respect to the payment of principal and any premium or interest thereon. Notes may be issued as Original Issue Discount Notes offered at a discount from the principal amount thereof due at the stated maturity as specified in the applicable Pricing Supplement. Unless otherwise specified in the applicable Pricing Supplement, the amount payable to the holder of Zero Coupon Notes and certain of such interest bearing Notes issued as Original Issue Discount Notes (as specified in the applicable Pricing Supplement) upon any acceleration of the maturity thereof will be the Amortized Face Amount (as defined below) thereof, and the amount payable to the holder of such Original Issue Discount Note upon any redemption thereof will be the applicable percentage of the Amortized Face Amount thereof specified in the applicable Pricing Supplement, in each case as determined by the Company plus, in the case of any interest bearing Note issued as an Original Issue Discount Note, any accrued but unpaid "qualified stated interest" payments (as defined under "United States Taxation--United States Noteholders--Original Issue Discount"). The "Amortized Face Amount" of an Original Issue Discount Note is equal to the sum of (i) the Issue Price (as defined below) of such Original Issue Discount Note and (ii) that portion of the difference between the Issue Price and the principal amount of such Original Issue Discount Note that has been amortized at the Stated Yield (as defined below) of such Original Issue Discount Note (computed in accordance with Section 1272(a)(4) of the Internal Revenue Code of 1986, as amended, and Section 1.1275-1(b) of the Regulations (as defined under "United States Taxation--United States Noteholders--Original Issue Discount"), in each case as in effect on the issue date of such Original Issue Discount Note), at the date as of which the Amortized Face Amount is calculated, but in no event can the Amortized Face Amount exceed the principal amount of such Note due at the stated maturity thereof. As used in the preceding sentence, the term "Issue Price" means the principal amount of such Original Issue Discount Note due at the stated maturity thereof less the "Original Issue Discount" of such Original Issue Discount Note specified on the face thereof and in the applicable Pricing Supplement. The term "Stated Yield" of such Original Issue Discount Note means the "Yield to Maturity" specified on the face of such Original Issue Discount Note and in the applicable Pricing Supplement for the period from the Original Issue Date of such Original Issue Discount Note, as specified on the face of such Original Issue Discount Note and in the applicable Pricing Supplement, to the stated maturity thereof based on its Issue Price and the principal amount payable at the stated maturity thereof. See "United States Taxation--United States Noteholders--Original Issue Discount". Unless otherwise indicated in the applicable Pricing Supplement, neither Indenture contains covenants specifically designed to protect Holders in the event of a highly leveraged transaction involving the Company. S-4 Unless otherwise indicated in the applicable Pricing Supplement, the Subordinated Note Indenture does not provide for any right of acceleration of the payment of principal of the Series G Notes upon a default in the payment of principal or interest or in the performance of any covenant or agreement in the Series G Notes or the Subordinated Note Indenture. BOOK-ENTRY NOTES Upon issuance, all Book-Entry Notes of the same series and bearing interest (if any) at the same rate or pursuant to the same formula and having the same date of issuance, redemption provisions (if any), Stated Maturity and other terms will be represented by a single Global Security. Each Global Security representing Book-Entry Notes will be deposited with, or on behalf of, the Depositary and will be registered in the name of the Depositary or a nominee of the Depositary. Upon the issuance of a Global Security, the Depositary will credit accounts held with it with the respective principal or face amounts of the Book-Entry Notes represented by such Global Security. The accounts to be credited shall be designated initially by the Agent through which the Note was sold or, to the extent that such Notes are offered and sold directly, by the Company. Ownership of beneficial interests in a Global Security will be limited to institutions that have accounts with the Depositary ("participants") and to persons that may hold interests through participants. Ownership of beneficial interests by participants in a Global Security will be shown on, and the transfer of that ownership interest will be effected only through, records maintained by the Depositary for such Global Security. Ownership of beneficial interests in such Global Security by persons that hold through participants will be shown on, and the transfer of that ownership interest within such participant will be effected only through, records maintained by such participant. Payment of principal of, premium (if any) and interest (if any) on Book-Entry Notes represented by any such Global Security will be made to the Depositary or its nominee, as the case may be, as the sole registered holder of the Book- Entry Notes represented thereby for all purposes under the applicable Indenture. None of the Company, the Trustee, the Paying Agent or any agent of the Company or the Trustee will have any responsibility or liability for any aspect of the Depositary's records relating to or payments made on account of beneficial ownership interests in a Global Security representing any Book-Entry Notes or for maintaining, supervising or reviewing any of the Depositary's records relating to such beneficial ownership interests. The Company has been advised by the Depositary that upon receipt of any payment of principal of, premium (if any) or interest (if any) on any such Global Security, the Depositary will immediately credit, on its book-entry registration and transfer system, the accounts of participants with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Security as shown on the records of the Depositary at the close of business on the Business Day preceding such Interest Payment Date or such maturity date. Payments by participants to owners of beneficial interests in a Global Security held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held by such participants for customer accounts registered in "street name", and will be the sole responsibility of such participants. No Global Security may be transferred except as a whole by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor of the Depositary or a nominee of such successor. Unless otherwise specified in the applicable Pricing Supplement, a Global Security representing Book-Entry Notes is exchangeable for Certificated Notes of the same series and bearing interest (if any) at the same rate or pursuant to the same formula, having the same date of issuance, redemption provisions (if any), Stated Maturity and other terms and of differing authorized denominations aggregating a like amount, only if (x) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global S-5 Security or if at any time the Depositary ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (y) the Company in its sole discretion determines that such Global Security shall be exchangeable for Certificated Notes or (z) there shall have occurred and be continuing an Event of Default with respect to the Notes. Such Certificated Notes shall be registered in the names of the owners of the beneficial interests in such Global Security as provided by the Depositary's relevant participants (as identified by the Depositary). Except as provided above, owners of beneficial interests in a Global Security will not be entitled to receive physical delivery of Notes in certificated form and will not be considered the registered holders thereof for any purpose under the applicable Indenture, and no Global Security representing Book-Entry Notes shall be exchangeable or transferrable. Accordingly, each person owning a beneficial interest in such a Global Security must rely on the procedures of the Depositary and, if such person is not a participant, on the procedures of the participant through which such person owns its interest, to exercise any rights of a registered holder under the applicable Indenture. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of such securities in certificated form. Such limits and such laws may impair the ability to transfer beneficial interests in a Global Security. The Depositary, as the registered holder of each Global Security, may appoint agents and otherwise authorize participants to give or take any request, demand, authorization, direction, notice, consent, waiver or other action which a registered holder is entitled to give or take under the applicable Indenture. The Company understands that under existing industry practices, in the event that the Company requests any action of registered holders or that an owner of a beneficial interest in such a Global Security desires to give or take any action which a registered holder is entitled to give or take under the Indenture, the Depositary would authorize the participants holding the relevant beneficial interests to give or take such action, and such participants would authorize beneficial owners owning through such participants to give or take such action or would otherwise act upon the instructions of beneficial owners owning through them. The Depositary has advised the Company that the Depositary is a limited- purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered under the Exchange Act. The Depositary was created to hold the securities of its participants and to facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. The Depositary's participants include securities brokers and dealers (including the Agents), banks (including the Trustee), trust companies, clearing corporations, and certain other organizations some of whom (and/or their representatives) own the Depositary. Access to the Depositary's book-entry system is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. INTEREST AND INTEREST RATES Each Note that bears interest will bear interest at either (a) in the case of Fixed Rate Notes, a fixed rate or (b) in the case of Floating Rate Notes, a floating rate determined by reference to one or more interest rate formulas, which may be adjusted by a Spread, Spread Multiplier, Alternate Rate Event Spread or Alternate Rate Event Spread Multiplier (each as defined below), and, if so specified in the applicable Pricing Supplement with respect to one or more Interest Periods (as defined below), one or more fixed rates. Any Floating Rate Note may also have either or both of the following: (i) a maximum interest rate limitation, or ceiling, on the rate of interest which may accrue during any Interest Period; and (ii) a minimum interest rate limitation, or floor, on the rate of interest which may accrue during any Interest Period. The applicable Pricing Supplement may designate any of the following interest rate formulas as applicable to one or more Interest Periods on each Floating Rate Note: (a) the Commercial Paper Rate; (b) the Federal Funds Rate; (c) LIBOR; (d) the Prime Rate; (e) the Eleventh District Cost of Funds Rate; (f) the CD Rate; (g) the Treasury Rate; (h) the J.J. Kenny Rate; (i) the CMT Rate; or (j) such other interest rate formula as is set forth in the applicable Pricing Supplement. S-6 The interest rate on each Floating Rate Note for each Interest Period will be determined by reference to (i) the applicable interest rate formula specified in the applicable Pricing Supplement for such Interest Period, plus or minus the Spread (or Alternate Rate Event Spread, if applicable), if any, or multiplied by the Spread Multiplier (or Alternate Rate Event Spread Multiplier, if applicable), if any, or (ii) the applicable fixed rate per annum specified in the applicable Pricing Supplement for such Interest Period. The "Spread" is the number of basis points specified in the applicable Pricing Supplement as being applicable to such Floating Rate Note for such Interest Period, and the "Spread Multiplier" is the percentage specified in the applicable Pricing Supplement as being applicable to such Floating Rate Note for such Interest Period. "Alternate Rate Event Spread" and "Alternate Rate Event Spread Multiplier", if applicable, have the respective meanings specified under "-- Floating Rate Notes--Eleventh District Cost of Funds Rate". Each Note that bears interest will bear interest from and including its date of issue or from and including the most recent Interest Payment Date (as defined below) to which interest on such Note (or any predecessor Note) has been paid or duly provided for (i) at the fixed rate per annum applicable to the related Interest Period or Interest Periods, or (ii) at the rate per annum determined pursuant to the interest rate formula applicable to the related Interest Period or Interest Periods, in each case as specified therein and in the applicable Pricing Supplement, until the principal thereof is paid or made available for payment. Interest will be payable on each Interest Payment Date and at maturity or upon redemption. Except as provided above under "--Book Entry Notes", interest will be payable to the person in whose name a Note (or any predecessor Note) is registered at the close of business on the Regular Record Date (as defined below) next preceding each Interest Payment Date; provided, however, that interest payable at maturity or upon redemption will be payable to the person to whom principal shall be payable. Except as provided above under "--Book Entry Notes", the first payment of interest on any Note originally issued after a Regular Record Date and on or before an Interest Payment Date will be made on the Interest Payment Date following the next succeeding Regular Record Date to the registered holder on such next succeeding Regular Record Date. Interest rates and interest rate formulas are subject to change by the Company from time to time but no such change will affect any Note theretofore issued or which the Company has agreed to issue. Unless otherwise specified in the applicable Pricing Supplement, the "Interest Payment Dates" and the "Regular Record Dates" for Fixed Rate Notes shall be as described below under "--Fixed Rate Notes" and the "Interest Payment Dates" and the "Regular Record Dates" for Floating Rate Notes shall be as described below under "-- Floating Rate Notes". The interest rate on a Note for any Interest Period will in no event be higher than the maximum rate permitted by New York law as the same may be modified by United States law of general application. Under present New York law, the maximum rate of interest is 25% per annum on a simple interest basis. This limit may not apply to Notes in which $2,500,000 or more has been invested. The applicable Pricing Supplement will specify with respect to each Note that bears interest: (i) the issue price, Interest Payment Dates and Regular Record Dates; (ii) with respect to any Fixed Rate Note, the interest rate; (iii) with respect to any Floating Rate Note, the Initial Interest Rate (as defined below), the method (which may vary from Interest Period to Interest Period) of calculating the interest rate applicable to each Interest Period (including, if applicable, the fixed rate per annum applicable to one or more Interest Periods, the period to maturity of any instrument on which the interest rate formula for any Interest Period is based (the "Index Maturity"), the Spread or Spread Multiplier (or the Alternate Rate Event Spread or Alternate Rate Event Spread Multiplier, if applicable), the Interest Determination Dates (as defined below), the Interest Reset Dates (as defined below) and any minimum or maximum interest rate limitations); (iv) whether such Note is an Original Issue Discount Note; and (v) any other terms related to interest on the Notes. FIXED RATE NOTES Each Fixed Rate Note, whether or not issued as an Original Issue Discount Note, will bear interest at the annual rate specified therein and in the applicable Pricing Supplement. Unless otherwise specified in the applicable Pricing Supplement, the Interest Payment Dates for the Fixed Rate Notes will be on February 1 S-7 and August 1 of each year and at maturity or, if applicable, upon redemption and the Regular Record Dates for the Fixed Rate Notes will be on the fifteenth day (whether or not a Business Day) of the month next preceding each Interest Payment Date. Unless otherwise specified in the applicable Pricing Supplement, interest payments for Fixed Rate Notes shall be the amount of interest accrued to, but excluding, the relevant Interest Payment Date. Interest on Fixed Rate Notes will be computed and paid on the basis of a 360-day year of twelve 30-day months. In the event that any Interest Payment Date on a Fixed Rate Note is not a Business Day, interest will be paid on the next succeeding Business Day with the same force and effect as if made on such Interest Payment Date, and no interest on such payment will accrue for the period from and after such Interest Payment Date. FLOATING RATE NOTES The Interest Payment Dates for the Floating Rate Notes shall be as specified in such Notes and in the applicable Pricing Supplement, and, unless otherwise specified in the applicable Pricing Supplement, the Regular Record Dates for the Floating Rate Notes will be the day (whether or not a Business Day) fifteen calendar days preceding each Interest Payment Date. Unless otherwise specified in the applicable Pricing Supplement and except as provided below, interest on Floating Rate Notes will be payable on the following Interest Payment Dates: in the case of Floating Rate Notes (other than Eleventh District Cost of Funds Rate Notes) with a daily, weekly or monthly Interest Reset Date, on the third Wednesday of each month or on the third Wednesday of March, June, September and December of each year; in the case of Eleventh District Cost of Funds Rate Notes (all of which reset monthly), on the first Business Day of each month or on the first Business Day of March, June, September and December of each year, all as specified in the applicable Pricing Supplement; in the case of Floating Rate Notes with a quarterly Interest Reset Date, on the third Wednesday of March, June, September and December of each year; in the case of Floating Rate Notes with a semi-annual Interest Reset Date, on the third Wednesday of the two months of each year specified in the applicable Pricing Supplement; and in the case of Floating Rate Notes with an annual Interest Reset Date, on the third Wednesday of the month of each year specified in the applicable Pricing Supplement, and in each case at maturity or upon redemption. If any Interest Payment Date for any Floating Rate Note would otherwise be a day that is not a Business Day, the Interest Payment Date for such Floating Rate Note shall be postponed to the next day that is a Business Day, except that in the case of a LIBOR Note, if such Business Day is in the next succeeding calendar month, such Interest Payment Date shall be the immediately preceding Business Day. "Business Day" means (a) with respect to any Note, any day that is not a Saturday or Sunday and that in The City of New York (and, with respect to LIBOR Notes, London, England) is not a day on which banking institutions generally are authorized or obligated by law or executive order to close and (b) with respect to Foreign Currency Notes only, any day that, in the capital city of the country of the currency in which such Notes are denominated or, with respect to Foreign Currency Notes denominated in European Currency Units ("ECUs"), Brussels, is not a day on which banking institutions generally are authorized or obligated by law to close. The rate of interest on each Floating Rate Note will be reset daily, weekly, monthly, quarterly, semi-annually or annually (the date on which each such reset occurs, an "Interest Reset Date"), as specified in the applicable Pricing Supplement. Unless otherwise specified in the applicable Pricing Supplement, the Interest Reset Date will be as follows: in the case of Floating Rate Notes which are reset daily, each Business Day; in the case of Floating Rate Notes (other than Treasury Rate Notes) which are reset weekly, the Wednesday of each week; in the case of Treasury Rate Notes which are reset weekly, the Tuesday of each week (except if the auction date falls on a Tuesday, then the next Business Day, as provided below); in the case of Floating Rate Notes (other than Eleventh District Cost of Funds Rate Notes) which are reset monthly, the third Wednesday of each month; in the case of Eleventh District Cost of Funds Rate Notes (all of which reset monthly), the first Business Day of each month; in the case of Floating Rate Notes which are reset quarterly, the third Wednesday of March, June, September and December of each year; in the case of Floating Rate Notes which are reset semi-annually, the third Wednesday of the two months of each year specified in the applicable Pricing Supplement; and in the case of Floating Rate Notes which are reset annually, the third Wednesday of the month of each year specified in the applicable Pricing Supplement. S-8 Unless otherwise specified in the applicable Pricing Supplement, the interest rate determined with respect to any Interest Determination Date will become effective on and as of the next succeeding Interest Reset Date; provided, however, that (i) the interest rate in effect from the date of issue to the first Interest Reset Date with respect to a Floating Rate Note (the "Initial Interest Rate") will be as specified in the applicable Pricing Supplement and (ii) the interest rate in effect for the 10 days immediately prior to maturity will be that in effect on the tenth day preceding such maturity. If any Interest Reset Date for any Floating Rate Note would otherwise be a day that is not a Business Day, such Interest Reset Date shall be postponed to the next day that is a Business Day, except that in the case of a LIBOR Note, if such Business Day is in the next succeeding calendar month, such Interest Reset Date shall be the immediately preceding Business Day. As used herein, "Interest Determination Date" means the date as of which the interest rate for a Floating Rate Note is to be determined, to be effective as of the following Interest Reset Date and calculated on the related Calculation Date (as defined below). Unless otherwise specified in the applicable Pricing Supplement, the Interest Determination Date pertaining to any Interest Reset Date for a Commercial Paper Rate Note, a Federal Funds Rate Note, a LIBOR Note, a Prime Rate Note, a CD Rate Note, a J.J. Kenny Rate Note or a CMT Rate Note (the "Commercial Paper Interest Determination Date", the "Federal Funds Interest Determination Date", the "LIBOR Interest Determination Date", the "Prime Interest Determination Date", the "CD Interest Determination Date", the "J.J. Kenny Interest Determination Date" and the "CMT Interest Determination Date", respectively) will be the second Business Day prior to such Interest Reset Date. Unless otherwise specified in the applicable Pricing Supplement, the Interest Determination Date pertaining to an Interest Reset Date for an Eleventh District Cost of Funds Rate Note (the "Eleventh District Cost of Funds Interest Determination Date") will be the last day of the month of the District Bank (as defined below) preceding the Interest Reset Date on which the District Bank is open for business and publishes the Index (as defined below). Unless otherwise specified in the applicable Pricing Supplement, the Interest Determination Date pertaining to an Interest Reset Date for a Treasury Rate Note (the "Treasury Interest Determination Date") will be the day of the week on which Treasury bills would normally be auctioned in the week in which such Interest Reset Date falls. Treasury bills are usually sold at auction on Monday of each week, unless that day is a legal holiday, in which case the auction is usually held on the following Tuesday, except that such auction may be held on the preceding Friday. If, as the result of a legal holiday, an auction is so held on the preceding Friday, such Friday will be the Treasury Interest Determination Date pertaining to the Interest Reset Date occurring in the next succeeding week. If an auction date shall fall on any Interest Reset Date for a Treasury Rate Note, then such Interest Reset Date shall instead be the first Business Day immediately following such auction date. Unless otherwise specified in the applicable Pricing Supplement, interest payments on an Interest Payment Date for a Floating Rate Note will include interest accrued from, and including, the next preceding Interest Payment Date to which interest has been paid or duly provided for (or from, and including, the date of issue if no interest has been paid or duly provided for with respect to such Floating Rate Note) to, but excluding, such Interest Payment Date (each such interest accrual period, an "Interest Period"). Accrued interest from the date of issue or from the last date to which interest has been paid or duly provided for to the date for which interest is being calculated is calculated by multiplying the face amount of a Floating Rate Note by the applicable accrued interest factor (the "Accrued Interest Factor"). The Accrued Interest Factor is computed by adding together the interest factors calculated for each day from the date of issue, or from the last date to which interest has been paid or duly provided for to the date for which accrued interest is being calculated. The interest factor for each such day is computed by dividing the per annum interest rate applicable to such day by 360 in the case of Commercial Paper Rate Notes, Federal Funds Rate Notes, LIBOR Notes, Prime Rate Notes, Eleventh District Cost of Funds Rate Notes, CD Rate Notes and J.J. Kenny Rate Notes, or by the actual number of days in the year in the case of Treasury Rate Notes and CMT Rate Notes. The interest rate in effect on each day will be (i) if such day is an Interest Reset Date, the interest rate with respect to the Interest Determination Date pertaining to such Interest Reset Date or (ii) if such day is not an Interest Reset Date, the interest rate with respect to the Interest Determination Date pertaining to the next preceding Interest Reset Date, subject in either case to any maximum or minimum interest rate limitation referred to above or in the applicable Pricing Supplement. S-9 Unless otherwise specified in the applicable Pricing Supplement, Citibank, N.A. will be the "Calculation Agent". On or before each Calculation Date, the Calculation Agent will determine the interest rate as described below and notify the Paying Agent. The Paying Agent will determine the Accrued Interest Factor applicable to any such Floating Rate Note. The Paying Agent will, upon the request of the holder of any Floating Rate Note, provide the interest rate then in effect and the interest rate which will become effective as a result of a determination made with respect to the most recent Interest Determination Date with respect to such Floating Rate Note. The determinations of interest rates made by the Calculation Agent shall be conclusive and binding, and neither the Trustee nor the Paying Agent shall have the duty to verify determinations of interest rates made by the Calculation Agent. The determinations of Accrued Interest Factors made by the Paying Agent shall be conclusive and binding. Unless otherwise specified in the applicable Pricing Supplement, the "Calculation Date", if applicable, pertaining to any Interest Determination Date on a Floating Rate Note having monthly, quarterly, semi- annual or annual Interest Reset Dates will be the tenth calendar day after such Interest Determination Date, or, if any such day is not a Business Day, the next succeeding Business Day, and the "Calculation Date", if applicable, pertaining to any Interest Determination Date on a Floating Rate Note having daily or weekly Interest Reset Dates will be the second Business Day after such Interest Determination Date. Unless otherwise specified in the applicable Pricing Supplement, all percentages resulting from any calculation on Floating Rate Notes will be rounded, if necessary, to the nearest one hundred-thousandth of one percentage point, with five one-millionths of one percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655) and 9.876544% (or .09876544) being rounded to 9.87654% (or .0987654); all calculations of the interest factor for any day on Floating Rate Notes will be rounded, if necessary, to the nearest one hundred-millionth, with five one-billionths rounded upward (e.g., .098765455 being rounded to .09876546 and .098765454 being rounded to .09876545); and all dollar amounts used in or resulting from such calculations on Floating Rate Notes will be rounded to the nearest cent (with one-half cent being rounded upward). COMMERCIAL PAPER RATE. Commercial Paper Rate Notes will bear interest at the interest rates (calculated with reference to the Commercial Paper Rate and the Spread or Spread Multiplier, if any) specified in the Commercial Paper Rate Note and in the applicable Pricing Supplement. Unless otherwise specified in the applicable Pricing Supplement, "Commercial Paper Rate" means, with respect to any Commercial Paper Interest Determination Date, the Money Market Yield (calculated as described below) of the rate on that date for commercial paper having the Index Maturity specified in the applicable Pricing Supplement as such rate is released by the Board of Governors of the Federal Reserve System as reported on page 120 (or other applicable page) of Telerate Data Service, under the heading "Dealer Commercial Paper". If by 3:00 p.m., New York City time, on the Calculation Date pertaining to such Commercial Paper Interest Determination Date such rate is not so reported on Telerate Data Service, then the Commercial Paper Rate shall be the Money Market Yield of the rate on that Commercial Paper Interest Determination Date for commercial paper having the Index Maturity designated in the applicable Pricing Supplement as published by the Federal Reserve Bank of New York in its daily statistical release, "Composite 3:30 p.m. Quotations for U.S. Government Securities" ("Composite Quotations") under the heading "Commercial Paper". If by 3:00 p.m., New York City time, on such Calculation Date such rate is not so published in Composite Quotations, the Commercial Paper Rate for that Commercial Paper Interest Determination Date shall be calculated by the Calculation Agent and shall be the Money Market Yield of the arithmetic mean of the offered rates of three leading dealers of commercial paper in The City of New York selected by the Calculation Agent as of 11:00 a.m., New York City time, on that Commercial Paper Interest Determination Date, for commercial paper having the Index Maturity specified in the applicable Pricing Supplement placed for an industrial issuer whose bond rating is "AA", or the equivalent, from a nationally recognized securities rating agency; provided, however, that if fewer than three dealers selected as aforesaid by the Calculation Agent are quoting as specified in this sentence, the Commercial Paper Rate with respect to such Commercial Paper Interest Determination Date will remain the Commercial Paper Rate in effect on such Commercial Paper Interest Determination Date. S-10 "Money Market Yield" shall be a yield calculated in accordance with the following formula: D X 360 Money Market Yield = X 100 360 - (D X M) where "D" refers to the per annum rate for the commercial paper, quoted on a bank discount basis and expressed as a decimal, and "M" refers to the actual number of days in the interest period for which interest is being calculated. FEDERAL FUNDS RATE. Federal Funds Rate Notes will bear interest at the interest rates (calculated with reference to the Federal Funds Rate and the Spread or Spread Multiplier, if any) specified in the Federal Funds Rate Notes and in the applicable Pricing Supplement. Unless otherwise specified in the applicable Pricing Supplement, "Federal Funds Rate" means, with respect to any Federal Funds Interest Determination Date, the rate on that day for Federal Funds as released by the Board of Governors of the Federal Reserve System as reported on page 120 (or other applicable page) of Telerate Data Service, under the heading "Fed Funds Effective" or, if not so reported on Telerate Data Service by 3:00 p.m., New York City time, on the Calculation Date pertaining to such Federal Funds Interest Determination Date, the Federal Funds Rate will be the rate on such Federal Funds Interest Determination Date as published in Composite Quotations under the heading "Federal Funds/Effective Rate". If such rate is not so published by 3:00 p.m., New York City time, on the Calculation Date pertaining to such Federal Funds Interest Determination Date, the Federal Funds Rate for such Federal Funds Interest Determination Date will be calculated by the Calculation Agent and will be the arithmetic mean of the rates for the last transaction in overnight Federal Funds arranged by three leading dealers of Federal Funds transactions in The City of New York selected by the Calculation Agent as of 11:00 a.m., New York City time, on such Federal Funds Interest Determination Date; provided, however, that if fewer than three dealers selected as aforesaid by the Calculation Agent are quoting as specified in this sentence, the Federal Funds Rate will remain the Federal Funds Rate in effect on such Federal Funds Interest Determination Date. LIBOR. LIBOR Notes will bear interest at the interest rates (calculated with reference to LIBOR and the Spread or Spread Multiplier, if any) specified in the LIBOR Notes and in the applicable Pricing Supplement. Unless otherwise specified in the applicable Pricing Supplement, LIBOR will be determined by the Calculation Agent in accordance with the following provisions: (i) With respect to a LIBOR Interest Determination Date, LIBOR will be determined on the basis of the offered rates for deposits in United States dollars having the Index Maturity designated in the applicable Pricing Supplement, commencing on the second Business Day immediately following that LIBOR Interest Determination Date, that appears as of 11:00 a.m. London time on such LIBOR Interest Determination Date on the display screen designated "Page 3750" by Telerate Data Service, or such other page as may replace such page on that service or such other service or services as may be nominated by the British Bankers' Association for the purpose of displaying London interbank offered rates for U.S. dollar deposits. If no rate appears on Telerate Page 3750, then LIBOR in respect of that LIBOR Interest Determination Date will be determined as described in (ii) below. (ii) With respect to a LIBOR Interest Determination Date on which no rate appears on Telerate Page 3750 as specified in (i) above, LIBOR will be determined on the basis of the rates at which deposits in United States dollars are offered by four major banks in the London interbank market selected by the Calculation Agent (the "Reference Banks") at approximately 11:00 a.m., London time, on that LIBOR Interest Determination Date to prime banks in the London interbank market having the Index Maturity designated in the applicable Pricing Supplement commencing on the second Business Day immediately following such LIBOR Interest Determination Date and in a principal amount, not less than United S-11 States $1,000,000, that, in the judgment of the Calculation Agent, is representative for a single transaction in such market at such time. The Calculation Agent will request the principal London office of each of such Reference Banks to provide a quotation of its rate. If at least two such quotations are provided, LIBOR in respect of that LIBOR Interest Determination Date will be the arithmetic mean of such quotations. If fewer than two quotations are provided, LIBOR in respect of that LIBOR Interest Determination Date will be the arithmetic mean of the rates quoted by three major banks in The City of New York selected by the Calculation Agent at approximately 11:00 a.m., New York City time, on that LIBOR Interest Determination Date for loans in United States dollars to leading European banks, having the Index Maturity specified in the applicable Pricing Supplement, commencing on the second Business Day immediately following that LIBOR Interest Determination Date and in a principal amount, not less than United States $1,000,000, that, in the judgment of the Calculation Agent, is representative for a single transaction in such market at such time; provided, however, that if fewer than three banks in The City of New York selected as aforesaid by the Calculation Agent are quoting as specified in this sentence, LIBOR with respect to such LIBOR Interest Determination Date will remain LIBOR in effect on such LIBOR Interest Determination Date. PRIME RATE. Prime Rate Notes will bear interest at the interest rates (calculated with reference to the Prime Rate and the Spread or Spread Multiplier, if any) specified in the Prime Rate Notes and in the applicable Pricing Supplement. Unless otherwise specified in the applicable Pricing Supplement, "Prime Rate" means, with respect to any Prime Interest Determination Date, the arithmetic mean of the prime rates or base rates for commercial loans quoted on the basis of the actual number of days in the year divided by a 360-day year as of the close of business on such Prime Interest Determination Date by three major money center banks in The City of New York selected by the Calculation Agent (after consultation with the Company). If fewer than three quotations are provided, the Prime Rate shall be calculated by the Calculation Agent and shall be determined as the arithmetic mean on the basis of the prime rates or base rates for commercial loans quoted in The City of New York on such date by three substitute banks or trust companies organized and doing business under the laws of the United States, or any State thereof, having total equity capital of at least $500,000,000 and being subject to supervision or examination by a federal or state authority, selected by the Calculation Agent (after consultation with the Company); provided, however, that if fewer than three banks or trust companies selected as aforesaid by the Calculation Agent are quoting as specified in this sentence, the Prime Rate will remain the Prime Rate in effect on such Prime Interest Determination Date. ELEVENTH DISTRICT COST OF FUNDS RATE. Eleventh District Cost of Funds Rate Notes will bear interest at the interest rates (calculated with reference to the Eleventh District Cost of Funds Rate and the Spread or Spread Multiplier, if any, or Alternate Rate Event Spread or Alternate Rate Event Spread Multiplier, if applicable) specified in the Eleventh District Cost of Funds Rate Notes and in the applicable Pricing Supplement. Unless otherwise indicated in the applicable Pricing Supplement, "Eleventh District Cost of Funds Rate" means, with respect to any Eleventh District Cost of Funds Interest Determination Date, the monthly Eleventh District Cost of Funds Index (the "Index") published during the month immediately preceding the Interest Reset Date to which the Eleventh District Cost of Funds Interest Determination Date applies. The Index is published by the Federal Home Loan Bank for the Eleventh District (the "District Bank") on the last day on which the District Bank is open for business in each month and represents the monthly weighted average cost of funds for savings institutions in the Eleventh District for the month preceding the month in which the Index is published. Currently, the Index is computed by the District Bank for each month by dividing the cost of funds (interest paid during the month by Eleventh District savings institutions on savings, advances and other borrowings) by the average of the total amount of those funds outstanding at the S-12 end of that month and the prior month and annualizing and adjusting the result to reflect the actual number of days in the particular month. If necessary, before these calculations are made, the component figures are adjusted by the District Bank to neutralize the effect of events such as member institutions leaving the Eleventh District or acquiring institutions outside the Eleventh District. Receipt by mail of Information Bulletins announcing Index changes may be arranged by contacting the District Bank. If the District Bank shall fail in any month to publish the Index (each such failure being referred to herein as an "Alternate Rate Event"), then the Cost of Funds Rate for the first Eleventh District Cost of Funds Interest Determination Date after the Alternate Rate Event shall be calculated on the basis of the Index most recently published prior to such Eleventh District Cost of Funds Interest Determination Date. If an Alternate Rate Event occurs in the month immediately following a month in which a prior Alternate Rate Event occurred, then the Eleventh District Cost of Funds Rate for the Eleventh District Cost of Funds Interest Determination Date immediately following the second Alternate Rate Event shall be calculated on the basis of the Index most recently published prior to such Eleventh District Cost of Funds Interest Determination Date and, thereafter, the Eleventh District Cost of Funds Rate for each succeeding Eleventh District Cost of Funds Interest Determination Date until the maturity of such Eleventh District Cost of Funds Rate Notes shall be LIBOR, determined as if such Notes were LIBOR Notes, and the Spread shall be the number of basis points specified in the applicable Pricing Supplement as the "Alternate Rate Event Spread", if any, and the Spread Multiplier shall be the percentage specified in the applicable Pricing Supplement as the "Alternate Rate Event Spread Multiplier", if any. CD RATE. CD Rate Notes will bear interest at the interest rates (calculated with reference to the CD Rate and the Spread or Spread Multiplier, if any) specified in the CD Rate Notes and in the applicable Pricing Supplement. Unless otherwise specified in the applicable Pricing Supplement, "CD Rate" means, with respect to any CD Interest Determination Date, the rate on such date for negotiable certificates of deposit having the Index Maturity specified in the applicable Pricing Supplement as such rate is released by the Board of Governors of the Federal Reserve System as reported on page 120 (or other applicable page) of Telerate Data Service, under the heading "Certs of Deposit". If by 3:00 p.m., New York City time, on the Calculation Date pertaining to such CD Interest Determination Date such rate is not so reported on Telerate Data Service, then the CD Rate shall be the rate on such CD Interest Determination Date for negotiable certificates of deposit of the Index Maturity specified in the applicable Pricing Supplement as published in Composite Quotations under the heading "Certificates of Deposit". If by 3:00 p.m., New York City time, on such Calculation Date such rate is not so published in Composite Quotations, the CD Rate for that CD Interest Determination Date shall be calculated by the Calculation Agent and shall be the arithmetic mean of the secondary market offered rates as of 3:00 p.m., New York City time, on such CD Interest Determination Date, of three leading nonbank dealers in negotiable United States dollar certificates of deposit in The City of New York selected by the Calculation Agent for negotiable certificates of deposit of major United States money market banks which are then rated A-1+ by Standard & Poor's Corporation and P-1 by Moody's Investors Service with a remaining maturity closest to the Index Maturity specified in the applicable Pricing Supplement in denominations of $5,000,000; provided, however, that if fewer than three dealers selected as aforesaid by the Calculation Agent are quoting as specified in this sentence, the CD Rate will remain the CD Rate in effect on such CD Interest Determination Date. TREASURY RATE. Treasury Rate Notes will bear interest at the interest rates (calculated with reference to the Treasury Rate and the Spread or Spread Multiplier, if any) specified in the Treasury Rate Notes and in the applicable Pricing Supplement. Unless otherwise specified in the applicable Pricing Supplement, "Treasury Rate" means, with respect to any Treasury Interest Determination Date, the rate for the most recent auction of direct obligations of the United States ("Treasury bills") having the Index Maturity specified in the applicable Pricing Supplement as S-13 such rate is released by the Board of Governors of the Federal Reserve System as reported on page 56 or 57 (or other applicable page) of Telerate Data Service, under the heading "Avge Invest Yield" or, if not so reported on Telerate Data Service by 3:00 p.m., New York City time, on the Calculation Date pertaining to such Treasury Interest Determination Date, such rate as published in "Statistical Release H.15(519), Selected Interest Rates", or any successor publication of the Board of Governors of the Federal Reserve System ("H.15(519)"), under the heading "U.S. Government Securities--Treasury Bills-- auction average (investment)" or, if not so published in H.15(519) by 3:00 p.m., New York City time, on the Calculation Date pertaining to such Treasury Interest Determination Date, the auction average rate (expressed as a bond equivalent on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis) as otherwise announced by the United States Department of the Treasury. In the event that the results of the auction of Treasury bills having the Index Maturity designated in the applicable Pricing Supplement are not otherwise reported as provided above by 3:00 p.m., New York City time, on such Calculation Date or no such auction is held in a particular week, then the Treasury Rate shall be calculated by the Calculation Agent and shall be a yield to maturity (expressed as a bond equivalent on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis) of the arithmetic mean of the secondary market bid rates, as of 3:30 p.m., New York City time, on such Treasury Interest Determination Date, of three leading primary United States government securities dealers selected by the Calculation Agent for the issue of Treasury bills with a remaining maturity closest to the Index Maturity designated in the applicable Pricing Supplement; provided, however, that if fewer than three dealers selected as aforesaid by the Calculation Agent are quoting as specified in this sentence, the Treasury Rate with respect to such Treasury Interest Determination Date will remain the Treasury Rate in effect on such Treasury Interest Determination Date. J.J. KENNY RATE. J.J. Kenny Rate Notes will bear interest at the interest rates (calculated with reference to the J.J. Kenny Rate and the Spread or Spread Multiplier, if any) specified in the J.J. Kenny Rate Note and in the applicable Pricing Supplement. Unless otherwise specified in the applicable Note or Pricing Supplement, "J.J. Kenny Rate" means, with respect to any J.J. Kenny Interest Determination Date, the rate in the high grade weekly index (the "Weekly Index") on such date made available by Kenny Information Systems ("Kenny") to the Calculation Agent. The Weekly Index is, and shall be, based upon 30-day yield evaluations at par of bonds, the interest of which is exempt from Federal income taxation under the Internal Revenue Code of 1986, as amended, of not less than five high grade component issuers selected by Kenny which shall include, without limitation, issuers of general obligation bonds. The specific issuers included among the component issuers may be changed from time to time by Kenny in its discretion. The bonds on which the Weekly Index is based shall not include any bonds on which the interest is subject to a minimum tax or similar tax under the Internal Revenue Code of 1986, as amended, unless all tax-exempt bonds are subject to such tax. In the event Kenny ceases to make available such Weekly Index, a successor indexing agent will be selected by the Calculation Agent, such index to reflect the prevailing rate for bonds rated in the highest short- term rating category by Moody's Investors Service, Inc. and Standard & Poor's Corporation in respect of issuers most closely resembling the high grade component issuers selected by Kenny for its Weekly Index, the interest on which is (A) variable on a weekly basis, (B) exempt from Federal income taxation under the Internal Revenue Code of 1986, as amended, and (C) not subject to a minimum tax or similar tax under the Internal Revenue Code of 1986, as amended, unless all tax-exempt bonds are subject to such tax. If such successor indexing agent is not available, the rate for the J.J. Kenny Interest Determination Date shall be 67% of the rate determined if the Treasury Rate option had been originally selected. The Calculation Agent shall calculate the J.J. Kenny Rate in accordance with the foregoing. CMT RATE. CMT Rate Notes will bear interest at the interest rates (calculated with reference to the CMT Rate and the Spread or Spread Multiplier, if any) specified in the CMT Rate Note and in the applicable Pricing Supplement. Unless otherwise specified in the applicable Note or Pricing Supplement, "CMT Rate" means, with respect to any CMT Interest Determination Date (as defined below), the rate displayed for the applicable S-14 Index Maturity on Telerate Page 7055 for "Daily Treasury Constant Maturities and Money Markets/Federal Reserve Board Release H.15 Monday's Approx. 3:45 p.m. EDT," for the applicable CMT Interest Determination Date (or such other page as may replace that page on such service for the purpose of displaying rates or prices comparable to the CMT Rate, as determined by the Calculation Agent). If such rate is not so available by 3:00 p.m., New York City time, on the applicable Calculation Date (as defined below), then the CMT Rate for such CMT Interest Determination Date shall be the bond equivalent yield to maturity of the arithmetic mean (as calculated by the Calculation Agent) of the secondary market bid rates, as of 3:00 P.M., New York City time, on the applicable CMT Interest Determination Date, reported, according to their written records, by three leading primary United States government securities dealers in The City of New York (each, a "Reference Dealer") selected by the Calculation Agent, for the most recently issued direct noncallable fixed rate Treasury Bills with an original maturity approximately equal to the applicable Index Maturity; provided, however, that if the Calculation Agent is not able to obtain such quotations from at least three such Reference Dealers, the CMT Rate will remain the CMT Rate then in effect on such CMT Interest Determination Date. ZERO COUPON NOTES Notes may be issued in the form of Original Issue Discount Notes that do not provide any periodic payments of interest (the "Zero Coupon Notes"). The specific terms of any Zero Coupon Notes will be set forth in the applicable Pricing Supplement. REDEMPTION If so specified in the applicable Pricing Supplement, a Note will be redeemable at the option of the Company on the date or dates prior to maturity specified in the applicable Pricing Supplement at the price or prices specified in the applicable Pricing Supplement (unless otherwise specified in such Pricing Supplement, expressed as a percentage of the principal amount of such Note or, in the case of Zero Coupon Notes or certain interest bearing Notes issued as Original Issue Discount Notes (as specified in the applicable Pricing Supplement), as a percentage of the Amortized Face Amount of such Note), together with accrued interest, if any, to the date of redemption determined as specified in the applicable Pricing Supplement. Unless otherwise specified in the applicable Pricing Supplement, the Company may redeem any of the Notes which are redeemable and remain outstanding either in whole or from time to time in part upon not less than 30 nor more than 60 days' notice mailed by or on behalf of the Company to the registered holder thereof. Unless otherwise specified in the applicable Pricing Supplement, the Company will not be obligated to redeem or purchase the Notes pursuant to any sinking fund or analogous provision or at the option of any holder. If less than all of the Notes of like tenor are to be redeemed, the Notes to be redeemed shall be selected by the Trustee by such method as the Trustee shall deem fair and appropriate. Upon any redemption of less than all of the principal of a Note prior to maturity, a new Note of like tenor and of an authorized denomination representing the unredeemed portion thereof will be issued to the registered holder thereof. FOREIGN CURRENCY NOTES Unless otherwise specified in an applicable Pricing Supplement, Notes denominated in other than United States dollars or ECUs will not be sold in, or to residents of, the country issuing the Specified Currency in which particular Notes are denominated. The information set forth in this Prospectus Supplement is directed to prospective purchasers who are United States residents, and the Company disclaims any responsibility to advise prospective purchasers who are residents of countries other than the United States with respect to any matters that may affect the purchase, holding or receipt of payments of principal of and interest on the Notes. Such persons should consult their own financial and legal advisors with regard to such matters. See "Foreign Currency Risks" in the accompanying Prospectus. S-15 UNITED STATES TAXATION--UNITED STATES NOTEHOLDERS The following is a summary of the principal general federal income tax consequences to a holder of Notes who is (i) a citizen or resident of the United States, (ii) a domestic corporation or (iii) otherwise subject to United States federal income taxation on a net basis (a "United States Noteholder") and may not be authoritative in individual cases, where special rules may apply. It deals only with Notes held as capital assets by initial purchasers at the issue price who are United States Noteholders and not with special classes of holders, such as dealers in securities or currencies, life insurance companies, persons holding Notes as a hedge against or which are hedged against currency risks, and persons whose functional currency is not the U.S. dollar. A person considering the purchase of Notes should consult his or her own tax adviser concerning these matters and as to the tax treatment under foreign, state and local tax laws and regulations. GENERAL As a general rule, interest paid or accrued on the Notes, as well as original issue discount, if any, will be treated as ordinary income to the Noteholders. A Noteholder using the accrual method of accounting for federal income tax purposes is required to include interest paid or accrued on the Notes in ordinary income as such interest accrues, while a Noteholder using the cash receipts and disbursements method of accounting for federal income tax purposes must include such interest in ordinary income when payments are received (or made available for receipt) by such holder. In the event that any of the Notes are determined to be "applicable high yield discount obligations", under the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), additional information regarding the federal income tax consequences associated with such Notes will be provided as part of the Pricing Supplement for such Notes. ORIGINAL ISSUE DISCOUNT The Notes, including the Original Issue Discount Notes, may be issued with "original issue discount". In general, in the hands of the original holder of a Note, original issue discount is the difference between the "stated redemption price at maturity" of the Note and its "issue price". The original issue discount with respect to a Note will be considered to be zero if it is less than one quarter of one percentage point of the Note's stated redemption price at maturity multiplied by the number of complete years from the date of issue of such Note to its maturity date. In addition, special rules described below apply to Notes having a fixed maturity date not more than one year from the date of issue. Regulations regarding original issue discount were issued by the Treasury Department in January 1994 (the "Regulations"). The Regulations are effective for Notes issued on or after April 4, 1994. The Internal Revenue Service has stated that, except for the Constant Yield Election described below, holders of Notes issued before April 4, 1994 may rely on the Regulations. The stated redemption price at maturity of a Note generally will be equal to the sum of all payments, whether denominated as principal or interest, to be made with respect thereto other than "qualified stated interest" payments. Pursuant to the Regulations, qualified stated interest payments are interest payments based on a single fixed rate of interest (or under certain circumstances, a variable rate tied to an objective index) that is actually and unconditionally payable at fixed periodic intervals of one year or less during the entire term of the Note. Although, if so provided in a Pricing Supplement, the Notes may be subject to optional redemption by the Company under certain circumstances for an amount in excess of their principal amount, based on the Regulations, this excess should not be considered when determining the stated redemption price at maturity of a Note. In general, the issue price of a Note is the initial offering price to the public at which a substantial amount of Notes are sold. It is possible that Notes which are not denominated as Original Issue Discount Notes may also be treated as issued at an original issue discount. For example, Floating Rate Notes providing for one or more qualified S-16 floating rates of interest, a single fixed rate and one or more qualified floating rates, a single rate based on one or more qualified floating rates or a single rate based on the price of actively traded property or an index of the prices of such property, other than foreign currency (an "objective rate"), or a single fixed rate and a single objective rate that is a qualified inverse floating rate will also be deemed to have original issue discount unless such interest is unconditionally payable at least annually during the term of the Note at a single qualified floating rate or a single objective rate within the meaning of the Regulations. If a Floating Rate Note provides for two or more qualified floating rates that can reasonably be expected to have approximately the same values throughout the term of the Note, the qualified floating rates together constitute a single qualified floating rate. If interest on a debt instrument is stated at a fixed rate for an initial period of less than 1 year followed by a variable rate that is either a qualified floating rate or an objective rate for a subsequent period, and the value of the variable rate on the issue date is intended to approximate the fixed rate, the fixed rate and the variable rate together constitute a single qualified floating rate or objective rate. Two or more rates will be conclusively presumed to meet the requirements of the preceding sentences if the values of the applicable rates on the issue date are within 1/4 of 1 percent of each other. Special tax considerations (including possible original issue discount) may arise with respect to Floating Rate Notes providing for (i) one Base Rate followed by one or more Base Rates, (ii) a single fixed rate followed by a qualified floating rate or (iii) a Spread Multiplier. Purchasers of Floating Rate Notes with any of such features should carefully examine the applicable Pricing Supplement and should consult their tax advisors with respect to such a feature since the tax consequences will depend, in part, on the particular terms of the purchased Note. Special rules may also apply if a Floating Rate Note is subject to a cap, floor, governor or similar restriction that is not fixed throughout the term of the Note and is reasonably expected as of the issue date to cause the yield on the Note to be significantly less or more than the expected yield determined without the restriction. In the case of Notes that are determined to be issued with original issue discount ("Discount Notes"), a Noteholder must generally include the original issue discount in ordinary gross income for federal income tax purposes as it accrues in advance of the receipt of any cash attributable to such income. The amount of original issue discount, if any, required to be included in a Noteholder's ordinary gross income for federal income tax purposes in any taxable year will be computed in accordance with Section 1272(a) of the Code and the Regulations. Under such Section and the Regulations, original issue discount accrues on a daily basis under a constant yield method that takes into account the compounding of interest. The daily portions of original issue discount are determined by allocating to each day in any "accrual period" a pro rata portion of the original issue discount for that period. Accrual periods may be of any length and may vary in length over the term of the Notes, provided that each accrual period is not longer than one year and each scheduled payment of principal or interest occurs either on the final day of an accrual period or on the first day of an accrual period. Original issue discount for any accrual period will be the excess of (i) the product of the Note's "adjusted issue price" at the beginning of such accrual period and its yield to maturity over (ii) any qualified stated interest payments for that accrual period. The adjusted issue price of a Note at the start of any accrual period is the sum of the issue price and the accrued original issue discount for each prior accrual period. One effect of this method is that United States Noteholders generally will have to include in income increasingly greater amounts of original issue discount in successive accrual periods. Under the Regulations, a holder may make an election (the "Constant Yield Election") to include in gross income all interest that accrues on a Note (including stated interest, acquisition discount, original issue discount, de minimis original issue discount, market discount, de minimis market discount, and unstated interest, as adjusted by any amortizable bond premium or acquisition premium) in accordance with the foregoing constant yield method that takes into account the compounding of interest. The original issue discount provisions described above do not apply to Notes having a fixed maturity date not more than one year from the date of issue. Under the Regulations, such a "short-term" Note will be treated as having been issued at an original issue discount equal to the excess of the total principal and interest payments on the Note over its issue price. An individual or other holder using the cash receipts and disbursements method of tax accounting will not be required to include original issue discount in ordinary gross income for federal income tax purposes on a daily basis unless an election to do so is made. Holders of S-17 such short-term Notes who report income under the accrual method of tax accounting and certain other holders including banks, regulated investment companies and dealers in such securities are required to include original issue discount in income on a daily basis pursuant to a straight-line method, unless such holders make an election to accrue original issue discount under the constant yield method described above but taking into account daily compounding. In the case of holders of such short-term Notes not required and not electing to include original issue discount in income currently, any gain realized on the sale or maturity of such short-term Notes will be ordinary gross income to the extent of the original issue discount accrued on a straight-line basis (or, if elected on a constant yield method, based on daily compounding) to the date of sale or maturity. Holders of such short-term Notes not required and not electing to include the original issue discount in income currently will be required to defer deductions for interest on indebtedness incurred or continued to purchase or carry such short-term Notes in an amount not exceeding the deferred income until the deferred income is realized. The Regulations contain aggregation rules stating that in certain circumstances if more than one type of Note is issued as part of the same issuance of securities to a single holder, some or all of such Notes may be treated together as a single debt instrument with a single issue price, maturity date, yield to maturity and stated redemption price at maturity for purposes of calculating and accruing any original issue discount. Unless otherwise provided in the related Pricing Supplement, the Company does not expect to treat any of the Notes as being subject to the aggregation rules for purposes of computing original issue discount. In addition to reporting interest paid on the Notes, the Company will report annually to the Internal Revenue Service and holders of record of the Notes, information with respect to the original issue discount accruing thereon. OPTIONAL REDEMPTION Under the Regulations, if the Company has an option to redeem a Note prior to its stated maturity, such option will be presumed to be exercised if, by utilizing any date on which such Note may be redeemed as the maturity date and the amount payable on such date in accordance with the terms of such Note (the "redemption price") as the stated redemption price at maturity, the yield on the Note would be lower than its yield to stated maturity. If such option is not in fact exercised when presumed to be exercised, the Note would be treated solely for original issue discount purposes as if it were redeemed, and a new Note were issued, on the presumed exercised date for an amount equal to the redemption price. AMORTIZABLE BOND PREMIUM In general, if a United States Noteholder purchases the Note at a premium (i.e., an amount in excess of the amount payable upon the maturity thereof), such Noteholder will be considered to have purchased such Note with "amortizable bond premium" equal in amount to such excess. A United States Noteholder may elect to deduct the amortizable bond premium as it accrues under a constant yield method that is similar to the method used for the accrual of original issue discount over the remaining term of the Note. A Noteholder's tax basis in the Note will be reduced by the amount of the amortizable bond premium deducted. Noteholders should consult with their own tax advisers regarding special rules that apply for determining the amount of and method for amortizing bond premium with respect to Notes that may be redeemed in whole or in part prior to maturity. SALE OF NOTES If a Note is sold by a United States Noteholder or redeemed by the Company, such holder will recognize gain or loss equal to the difference between the amount realized from the sale and the holder's adjusted basis in such Note or applicable portion thereof. Such adjusted basis generally will equal the cost of such Note to such holder, increased by any original issue discount included in such holder's ordinary gross income with respect to such Note and reduced by any principal payments on the Note previously received by such holder S-18 (including any interest payments on the Note that are not qualified stated interest payments) and by any amortizable bond premium deducted by such holder. Except as discussed with respect to short-term obligations, or to the extent cash is received attributable to accrued interest, any gain or loss recognized upon a sale, exchange, retirement or other disposition of a Note will be capital gain or loss, if the Note is held as a capital asset. If, however, it is determined that the Company intended on the date of issue of the Notes to call all or any portion of the Notes prior to their stated maturity, any gain realized upon a sale, exchange, retirement or other disposition of a Note would be considered, under Section 1271(a)(2)(A) of the Code, ordinary income, to the extent it does not exceed the unrecognized portion of the original issue discount, if any, with respect to the Note. WITHHOLDING TAXES AND REPORTING REQUIREMENTS Interest payments, accrual of original issue discount and payments of principal and any premium with respect to a Note will be reported to the extent required by the Code to the Noteholders and the Internal Revenue Service. Such amounts will ordinarily not be subject to withholding of United States federal income tax. However, a backup withholding tax at a rate of 31% will apply to such payments if a United States Noteholder fails to supply the Company or its agent with such Noteholder's taxpayer identification number or to report all interest and dividends required to be shown on its federal income tax returns. FOREIGN CURRENCY NOTES The following summary relates to Notes that are denominated in a currency or currency unit other than the U.S. dollar ("Foreign Currency Notes"). A United States Noteholder who uses the cash method of accounting and who receives interest (other than original issue discount) in a foreign currency with respect to a Foreign Currency Note will be required to include in income the U.S. dollar value of the interest received (determined on the date such interest is received) regardless of whether the interest payment is in fact converted to U.S. dollars at that time, and such U.S. dollar value will be the United States Noteholder's tax basis in the foreign currency. To the extent the above paragraph is not applicable, a United States Noteholder who (i) uses the cash method of accounting and accrues original issue discount or (ii) uses the accrual method of accounting will be required to include in income the U.S. dollar value of the amount of interest income (including original issue discount, but reduced by amortizable bond premium to the extent applicable) that has accrued and is otherwise required to be taken into account with respect to a Foreign Currency Note during an accrual period. The U.S. dollar value of such accrued income will be determined by translating such income at the average rate of exchange for the accrual period or, with respect to an accrual period that spans two taxable years, at the average rate for the partial period within the taxable year. Such United States Noteholder will recognize ordinary income or loss with respect to accrued interest income on the date such income is actually received. The amount of ordinary income or loss recognized will equal the difference between the U.S. dollar value of the foreign currency payment received (determined on the date such payment is received) in respect of such accrual period and the U.S. dollar value of interest income that has accrued during such accrual period (as determined above). A United States Noteholder may elect to translate interest income (including original issue discount) into U.S. dollars at the spot rate on the last day of the interest accrual period (or, in the case of a partial accrual period, the spot rate on the last day of the taxable year) or, if the date of receipt is within five business days of the last day of the interest accrual period, the spot rate on the date of receipt. A United States Noteholder that makes such an election must apply it consistently to all debt instruments from year to year and cannot change the election without the consent of the Internal Revenue Service. Any loss realized on the sale, exchange or retirement of a Foreign Currency Note with amortizable bond premium by a United States Noteholder who has not elected to amortize such premium will be a capital loss to the extent of such bond premium. If such an election is made, amortizable bond premium taken into account on a current basis shall reduce interest income in units of the relevant foreign currency. Exchange gain or loss is realized on such amortized bond premium with respect to any period by treating the bond premium amortized in such period as a return of principal. S-19 A United States Noteholder's tax basis in a Foreign Currency Note, and the amount of any subsequent adjustment to such holder's tax basis, will be the U.S. dollar value of the foreign currency amount paid for such Foreign Currency Note, or of the foreign currency amount of the adjustment, determined on the date of such purchase or adjustment. A United States Noteholder who purchases a Foreign Currency Note with previously owned foreign currency will recognize ordinary income or loss in an amount equal to the difference, if any, between such United States Noteholder's tax basis in the foreign currency and the U.S. dollar fair market value of the Foreign Currency Note on date of purchase. Gain or loss realized on the sale, exchange or retirement of a Foreign Currency Note that is attributable to fluctuations in currency exchange rates will be ordinary income or loss which will not be treated as interest income or expense. Gain or loss attributable to fluctuations in exchange rates will equal the difference between (i) the U.S. dollar value of the foreign currency principal amount of such Note, and any payment with respect to accrued interest, determined on the date such payment is received or such Note is disposed of, and (ii) the U.S. dollar value of the foreign currency principal amount of such Note, determined on the date such United States Noteholder acquired such Note, and the U.S. dollar value of the accrued interest received, determined by translating such interest at the average exchange rate for the accrual period. Such foreign currency gain or loss will be recognized only to the extent of the total gain or loss realized by a United States Noteholder on the sale, exchange or retirement of the Foreign Currency Note. The source of such foreign currency gain or loss will be determined by reference to the residence of the holder or the "qualified business unit" of the holder on whose books the Note is properly reflected. Any gain or loss realized by such a holder in excess of such foreign currency gain or loss will be capital gain or loss (except in the case of a short-term Discount Note, to the extent of any original issue discount not previously included in the holder's income). A United States Noteholder will have a tax basis in any foreign currency received on the sale, exchange or retirement of a Foreign Currency Note equal to the U.S. dollar value of such foreign currency, determined at the time of such sale, exchange or retirement. Regulations issued under Section 988 of the Code provide a special rule for purchases and sales of publicly traded Foreign Currency Notes by a cash method taxpayer under which units of foreign currency paid or received are translated into U.S. dollars at the spot rate on the settlement date of the purchase or sale. Accordingly, no exchange gain or loss will result from currency fluctuations between the trade date and the settlement of such purchase or sale. An accrual method taxpayer may elect the same treatment required of cash method taxpayers with respect to the purchase and sale of publicly traded Foreign Currency Notes provided the election is applied consistently. Such election cannot be changed without the consent of the Internal Revenue Service. Any gain or loss realized by a United States Noteholder on a sale or other disposition of foreign currency (including its exchange for U.S. dollars or its use to purchase Foreign Currency Notes) will be ordinary income or loss. UNITED STATES TAXATION--FOREIGN NOTEHOLDERS The following summary describes the principal United States federal income and estate tax consequences of ownership and disposition of the Notes by a Foreign Noteholder (as defined below). This summary is based on the Code and existing and proposed Treasury regulations, revenue rulings and judicial decisions. This summary does not discuss all of the tax consequences that may be relevant to holders in light of their particular circumstances or to holders subject to special rules, such as persons other than Foreign Noteholders, nonresident alien individuals that have lost their United States citizenship or that have ceased to be treated as resident aliens, corporations that are treated as foreign or domestic personal holding companies, controlled foreign corporations, or passive foreign investment companies and Foreign Noteholders that are owned or controlled by United States Noteholders. Persons considering the purchase of the Notes should consult with their own tax advisors with regard to the application of the United States federal income and estate tax laws to their particular situations as well as any tax consequences arising under the laws of any state, local or foreign tax jurisdiction or under an applicable tax treaty. S-20 As used herein, the term "Foreign Noteholder" means a beneficial owner of a Note that is for United States federal income tax purposes (i) a nonresident alien individual, (ii) a corporation, partnership or other entity that was not created or organized in or under the laws of the United States or any political subdivision thereof or (iii) a nonresident alien or foreign fiduciary or grantor of a trust or estate. Under present United States federal income and estate tax law, and subject to the discussion below concerning backup withholding: (a) payments of principal, interest (including original issue discount, if any) and premium on the Notes by the Company or any paying agent to any Foreign Noteholder will not be subject to United States federal withholding tax, provided that, in the case of interest, (i) such holder does not own, actually or constructively, 10 percent or more of the total combined voting power of all classes of stock of the Company entitled to vote, is not a controlled foreign corporation related, directly or indirectly, to the Company through stock ownership, and is not a bank receiving interest described in Section 881(c)(3)(A) of the Code and (ii) if the Note is issued in registered form, the beneficial owner thereof fulfills the statement requirement set forth in Section 871(h) or Section 881(c) of the Code; (b) a Foreign Noteholder of a Note will not be subject to United States federal income tax on gain realized on the sale, exchange or other disposition of such Note, unless (i) such holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition, and either (a) such individual has a "tax home" (as defined in Code Section 911(d)(3)) in the United States (unless such gain is attributable to a fixed place of business in a foreign country maintained by such individual and has been subject to foreign tax of at least 10%) or (b) the gain is attributable to an office or other fixed place of business maintained by such individual in the United States or (ii) such gain is effectively connected with the conduct by such holder of a trade or business in the United States; and (c) a Note or coupon held by an individual who is not a citizen or resident of the United States at the time of his death will not be subject to United States federal estate tax as a result of such individual's death, provided that the individual does not own, actually or constructively, 10 percent or more of the total combined voting power of all classes of stock of the Company entitled to vote and, at the time of such individual's death, payments with respect to such Note would not have been effectively connected to the conduct by such individual of a trade or business in the United States. Sections 871(h) and 881(c) of the Code require that, in order to obtain the portfolio interest exemption from withholding tax described in paragraph (a) above in the case of a Note issued in registered form, either the beneficial owner of the Note or a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "Financial Institution") and that is holding the Note on behalf of such beneficial owner, files a statement with the withholding agent to the effect that the beneficial owner of the Note is not a United States Noteholder. Under temporary United States Treasury Regulations, such requirement will be fulfilled if the beneficial owner of a Note certifies on Internal Revenue Service Form W-8, under penalties of perjury, that it is not a United States Noteholder and provides its name and address, and any Financial Institution holding the Note on behalf of the beneficial owner files a statement with the withholding agent to the effect that it has received such a statement from the holder (and furnishes the withholding agent with a copy thereof). If a Foreign Noteholder is engaged in a trade or business in the United States, and if interest (including original issue discount) on the Note is effectively connected with the conduct of such trade or business, the Foreign Noteholder, although exempt from the withholding tax discussed in the preceding paragraph, will generally be subject to regular United States income tax on interest (including any original issue discount) and on any gain realized on the sale, exchange or other disposition of a Note in the same manner as if it were a United States Noteholder. See "United States Taxation--United States Noteholders" above. In lieu of the certificate described in the preceding paragraph, such a holder will be required to provide to the Company a properly executed Internal Revenue Service Form 4224 in order to claim an exemption from withholding tax. In addition, if such Foreign Noteholder is a foreign corporation, it may be subject to a branch profits S-21 tax equal to 30% (or such lower rate provided by an applicable treaty) of its effectively connected earnings and profits for the taxable year, subject to certain adjustments. For purposes of the branch profits tax, interest (including original issue discount) on and any gain recognized on the sale, exchange or other disposition of a Note will be included in the effectively connected earnings and profits of such Foreign Noteholder if such interest or gain, as the case may be, is effectively connected with the conduct by the Foreign Noteholder of a trade or business in the United States. BACKUP WITHHOLDING AND INFORMATION REPORTING Under current United States federal income tax law, a 31% backup withholding tax and information reporting requirements apply to certain payments of principal, premium and interest (including original issue discount) made to, and to the proceeds of sale before maturity by, certain noncorporate United States persons. Under current Treasury Regulations, backup withholding will not apply to payments made on a Note issued in registered form if the certifications required by Sections 871(h) and 881(c) are received, provided in each case that the Company or such paying agent, as the case may be, does not have actual knowledge that the payee is a United States person. Under current Treasury Regulations, payments on the sale, exchange or other disposition of a Note made to or through a foreign office of a broker generally will not be subject to backup withholding. However, if such broker is a United States person, a controlled foreign corporation for United States tax purposes or a foreign person 50 percent or more of whose gross income is effectively connected with a United States trade or business for a specified three-year period, information reporting will be required unless the broker has in its records documentary evidence that the beneficial owner is not a United States person and certain other conditions are met or the beneficial owner otherwise establishes an exemption. Under proposed Treasury Regulations, backup withholding may apply to any payment which such broker is required to report if such broker has actual knowledge that the payee is a United States person. Payments to or through the United States office of a broker will be subject to backup withholding and information reporting unless the holder certifies, under penalties of perjury, that it is not a United States person or otherwise establishes an exemption. Foreign Noteholders should consult their tax advisers regarding the application of information reporting and backup withholding in their particular situations, the availability of an exemption therefrom, and the procedure for obtaining such an exemption, if available. Any amounts withheld from a payment to a Foreign Noteholder under the backup withholding rules will be allowed as a credit against such holder's United States federal income tax liability and may entitle such holder to a refund, provided that the required information is furnished to the United States Internal Revenue Service. PLAN OF DISTRIBUTION OF NOTES The Company has entered into a Distribution Agreement with J. P. Morgan Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation, Goldman, Sachs & Co., Lehman Brothers Inc., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated and Piper Jaffray Inc., and may enter into similar agreements with other agents (collectively, the "Agents"). Under the terms of such Distribution Agreement and any such other similar agreements, the Notes will be offered on a continuing basis by the Company through the Agents, each of which has agreed or will have agreed to use its reasonable efforts to solicit purchases of the Notes. The Company will pay each Agent a commission of from .125% to .750% (or such other amount as may be specified in the applicable Pricing Supplement) of the principal amount of each Note, depending on its maturity, sold through such Agent. The Company will have the sole right to accept offers to purchase Notes and may reject any offer, in whole or in part. Each Agent shall have the right to reject any offer to purchase Notes received by it, in whole or in part. The Company will also have the right to sell Notes to any Agent, acting as principal, at a discount to be agreed upon at the time of sale, for resale to one or more investors or other purchasers at varying prices related to prevailing market prices at the time of such resale, as determined by such Agent. In addition, such Agent may offer the Notes it has purchased as principal to other dealers. Such Agent may sell Notes to any dealer at a discount S-22 and, unless otherwise specified in the applicable Pricing Supplement, such discount allowed to any dealer will not be in excess of 66 2/3% of the discount to be received by such Agent. In the course of their respective businesses, certain of the affiliates of J.P. Morgan Securities Inc., one of the Agents, have engaged and may in the future engage in commercial banking transactions with the Company and affiliates of the Company. Certain of the other Agents and their associates may also be customers of, engage in transactions with and perform services for the Company, including its subsidiaries, in the ordinary course of business. The Notes may also be sold by the Company directly to investors in those jurisdictions in which the Company is permitted to do so. No commission will be paid on Notes sold directly by the Company. Unless otherwise indicated in the applicable Pricing Supplement, payment of the purchase price of Notes will be required to be made in funds immediately available in The City of New York. The Agents may be deemed to be "underwriters" within the meaning of the Securities Act of 1933 (the "Act"). The Company has agreed or will have agreed to indemnify the Agents against and contribute toward certain liabilities, including liabilities under the Act. The Company also has agreed or will have agreed to reimburse the Agents for certain expenses in connection with the offering of the Notes. Each of the Agents may from time to time purchase and sell Notes in the secondary market, but will not be obligated to do so, and there can be no assurance that there will be a secondary market for the Notes or liquidity in the secondary market if one develops. From time to time, each of the Agents may make a market in the Notes. The Company has authorized or will authorize the Agents to solicit offers by certain institutions to purchase Notes pursuant to delayed delivery contracts. See "Plan of Distribution" in the Prospectus. VALIDITY OF SECURITIES The validity of the Notes has been passed upon for the Company by Dorsey & Whitney, Pillsbury Center South, 220 South Sixth Street, Minneapolis, Minnesota 55402-1498, and for the Agents by Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. Davis Polk & Wardwell has relied as to all matters governed by Minnesota law on the opinions of Dorsey & Whitney and Michael J. O'Rourke, General Counsel of the Company, and Dorsey & Whitney has relied as to all matters governed by New York law on the opinion of Davis Polk & Wardwell. The opinions of Dorsey & Whitney and Davis Polk & Wardwell are conditioned upon, and subject to certain assumptions regarding, future action required to be taken by the Company and the Trustee in connection with the issuance and sale of any particular Note, the specific terms of Notes and other matters which may affect the validity of Notes but which cannot be ascertained on the date of such opinions. The Dorsey & Whitney firm and certain of its members are indebted to and have other banking and trust relationships with certain banking subsidiaries of the Company. S-23 PROSPECTUS $775,000,000 FIRST BANK SYSTEM, INC. LOGO DEBT SECURITIES AND WARRANTS TO PURCHASE DEBT SECURITIES ---------------- First Bank System, Inc. ("FBS" or the "Company") may offer from time to time its debt securities (the "Debt Securities") in an aggregate principal amount not to exceed $775,000,000, or its equivalent (based on the applicable exchange rate at the time of the offering) in such foreign currency or units of two or more foreign currencies as may be designated by the Company at the time of the offering, on terms to be determined at the time of sale. The Debt Securities may be senior debt securities (the "Senior Notes") or subordinated debt securities (the "Subordinated Notes"). The Company may also offer, alone or with the Debt Securities, warrants to purchase Debt Securities ("Warrants" and, together with the Debt Securities, the "Securities"). The specific designation, aggregate principal amount, purchase price, maturity, any interest rate or rates (which may be fixed or variable) and time of payment of any interest, any redemption or extension terms and other specific terms of the Debt Securities (including any Debt Securities purchasable upon exercise of Warrants) and the principal amount of Debt Securities purchasable upon exercise of each Warrant and the purchase price thereof, the date on or after which the Warrants may be exercised, the expiration date and other specific terms of the Warrants will be set forth in one or more supplements to this Prospectus (each a "Prospectus Supplement"). As used herein, the term "Debt Securities" shall include securities denominated in United States dollars or, if so specified in the applicable Prospectus Supplement, in any other currency or currency units or in amounts determined by reference to an index. The Senior Notes, when issued, will rank on a parity with all other unsecured and unsubordinated indebtedness of the Company. The Subordinated Notes, when issued, will be subordinated as described herein under "Description of Debt Securities--Subordination of Subordinated Notes." ---------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COM- MISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ---------------- The Securities may be sold to or through underwriters, dealers or agents for public offering or directly to other purchasers pursuant to terms of offering fixed at the time of sale. See "Plan of Distribution." Any underwriters, dealers or agents participating in an offering of Securities will be named in the accompanying Prospectus Supplement or Prospectus Supplements. Such underwriters, dealers or agents may be deemed "underwriters" within the meaning of the Securities Act of 1933. ---------------- THE DATE OF THIS PROSPECTUS IS FEBRUARY 15, 1994. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith files reports and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information filed by the Company can be inspected and copied at the public reference facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's Regional Offices at Seven World Trade Center, 13th floor, New York, New York 10048 and Northwest Atrium Building, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Reports, proxy statements and other information concerning the Company can also be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. The Company has filed with the Commission a registration statement on Form S- 3 (herein, together with all amendments and exhibits, referred to as the "Registration Statement") under the Securities Act of 1933, as amended. This Prospectus does not contain all the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information, reference is hereby made to the Registration Statement. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents of the Company which have been filed with the Commission are hereby incorporated by reference in this Prospectus: (a) Annual Report on Form 10-K for the year ended December 31, 1992; (b) Quarterly Reports on Form 10-Q for the quarters ended March 31, 1993, June 30, 1993 and September 30, 1993; (c) Current Reports on Form 8-K filed March 1, 1993, April 16, 1993, May 3, 1993, July 16, 1993, July 30, 1993, August 13, 1993, October 13, 1993 and January 18, 1994; and (d) Amendment Nos. 1, 2 and 3, dated March 22, 1993, April 22, 1993 and May 28, 1993, respectively (to Current Report on Form 8-K dated November 8, 1992). All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, subsequent to the date of this Prospectus and prior to the termination of the offering of the Securities shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the respective dates of filing of such documents. Any statement contained herein or in a document all or any portion of which is incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to any person to whom this Prospectus is delivered, upon the written or oral request of such person, a copy of any or all of the foregoing documents incorporated herein by reference (other than certain exhibits to such documents). Requests for such copies should be directed to Ann E. Underbrink, First Bank System, Inc., First Bank Place, 601 Second Avenue South, Minneapolis, Minnesota 55402-4302, telephone number (612) 973-1111. Unless otherwise indicated, currency amounts in this Prospectus and any Prospectus Supplement are stated in United States dollars ("$" or "dollars"). 2 FIRST BANK SYSTEM, INC. GENERAL FBS is a regional bank holding company headquartered in Minneapolis, Minnesota. FBS is comprised of 9 banks, 5 trust companies and several nonbank subsidiaries with more than 200 offices primarily in Minnesota, Colorado, Montana, North Dakota, South Dakota and Wisconsin. Through its subsidiaries, FBS provides commercial and agricultural finance, consumer banking, trust, capital markets, cash management, investment management, data processing, leasing, mortgage banking and brokerage services. At December 31, 1993, FBS and its consolidated subsidiaries had consolidated assets of $26.4 billion, consolidated deposits of $21.0 billion and shareholders' equity of $2.2 billion. The subsidiary banks of FBS engage in general commercial banking business, principally in domestic markets, and provide banking and ancillary services to individuals, businesses, institutional organizations, governmental entities and other financial institutions. The largest subsidiary bank, First Bank National Association ("FBNA"), had assets of $15.7 billion at December 31, 1993. FBS is a legal entity separate and distinct from its banking and non-banking affiliates. The principal sources of FBS' income are dividends, interest and fees from FBNA and the other banking and non-banking affiliates. The bank subsidiaries of FBS, including FBNA (the "Banks"), are subject to certain restrictions imposed by federal law on any extensions of credit to, and certain other transactions with, FBS and certain other affiliates, and on investments in stock or other securities thereof. Such restrictions prevent FBS and such other affiliates from borrowing from the Banks unless the loans are secured by various types of collateral. Further, such secured loans, other transactions and investments by any of the Banks are generally limited in amount as to FBS and as to each of such other affiliates to 10% of such Bank's capital and surplus and as to FBS and all of such other affiliates to an aggregate of 20% of such Bank's capital and surplus. In addition, payment of dividends to FBS by the subsidiary banks is subject to ongoing review by banking regulators and is subject to various statutory limitations and in certain circumstances requires approval by banking regulatory authorities. FBS was incorporated under Delaware law in 1929 and has functioned as a multi-bank holding company since that time. Its principal executive offices are located at First Bank Place, 601 Second Avenue South, Minneapolis, Minnesota 55402-4302 (telephone (612) 973-1111). For further information concerning FBS, see the FBS documents incorporated by reference herein as described under "Incorporation of Certain Documents by Reference." RECENT DEVELOPMENTS FBS reported fourth quarter 1993 earnings of $95.9 million, an increase of $113 million from the fourth quarter 1992 loss of $17.1 million. On a per share basis, earnings were $.81 in the fourth quarter of 1993 compared to a loss of $.23 in the fourth quarter of 1992. Reported net income for the year 1993 totaled $298 million, including after- tax merger-related charges of $50 million recorded in the second quarter in connection with the acquisition of Colorado National Bankshares, Inc. Reported net income for 1992 was $311.8 million, which included net income of $157.3 million related to the cumulative effect of changes in accounting principles and charges on an after-tax basis of $81.8 million related to the acquisition of Western Capital Investment Corporation and Bank Shares Incorporated. Earnings per share were $2.39 in 1993 and $2.67 in 1992. Excluding merger-related charges and the cumulative effect of accounting changes, earnings of $95.9 million ($.81 per share) for the fourth quarter of 1993 were $31.2 million or 48.2% higher than the fourth quarter 1992 earnings of $64.7 million ($.54 per share) and earnings for the year 1993 of $348 million ($2.83 per share) were $111.7 million or 47.3% higher than the prior year's earnings of $236.3 million ($1.96 per share). 3 The improvement in the fourth quarter 1993 earnings over the same period in 1992 resulted principally from an increase in net interest income on a taxable- equivalent basis of $30 million or 11.4% and a decrease in the provision for credit losses of $25.9 million or 49.0%. The 1992 provision included merger- related charges of $13.6 million. Also contributing to the strong results for the fourth quarter of 1993 was continuing progress on achieving cost savings from the integration of recent acquisitions. Compared with noninterest expense for the fourth quarter of 1992, excluding 1992 merger-related charges, noninterest expense for the quarter declined $3.3 million or 1.3%. The improvement in the 1993 annual earnings was due to the same factors. Net interest income on a taxable-equivalent basis increased $132.8 million, or 13% over 1992, the provision for credit losses decreased $58.2 million, or 31.7% from the 1992 provision (1992 included $13.6 million of merger-related charges) and 1993 noninterest expenses declined $13.8 million or 1.2%. Return on average assets was 1.45% in the fourth quarter of 1993 compared with a negative .28% in the fourth quarter of 1992. Excluding the merger- related charges, the 1992 fourth quarter return would have been 1.07%. For the year 1993, the return on average assets was 1.17% compared to 1.32% for 1992. Nonperforming assets dropped to $226 million at the end of 1993, a decline of $186.1 million or 45.2% from the end of 1992 and a decrease of $40.8 million or 15.3% from the third quarter of 1993. The ratio of the allowance for credit losses to nonperforming loans continues to indicate strong reserve coverage, increasing to 269% at the end of 1993 from 179% at the end of 1992 and 233% at the end of the third quarter of 1993. USE OF PROCEEDS The net proceeds from the sale of the Securities will be used for general corporate purposes, including repayment of outstanding indebtedness of the Company, investments in, or extension of credit to, the Company's subsidiaries and possible acquisitions. Specific allocations of the proceeds to such purposes may not have been made at the date of the applicable Prospectus Supplement, although management of the Company will have determined that funds should be borrowed at that time in anticipation of future funding requirements. The precise amount and timing of the application of such proceeds will depend upon the funding requirements of the Company and the availability and cost of other funds. Pending such application, such net proceeds may be temporarily invested or applied to the reduction of short-term indebtedness. RATIOS OF EARNINGS TO FIXED CHARGES Effective December 18, 1992, the Company completed its acquisition of Western Capital Investment Corporation ("WCIC"), a $2.5 billion financial institution headquartered in Denver, Colorado. Effective May 28, 1993, the Company completed the acquisition of Colorado National Bankshares, Inc. ("CNB"), the largest independent commercial bank holding company in Colorado with $3.1 billion in assets, $2.6 billion in deposits and $252 million in common equity. These mergers were accounted for using the pooling of interests method of accounting and, accordingly, the Company's financial statements have been restated for all periods prior to the acquisitions to include the accounts and operations of WCIC and CNB. The following ratios have been recomputed based on the restated financial statements of the Company.
NINE MONTHS YEAR ENDED DECEMBER 31 ENDED ------------------------ SEPTEMBER 30, 1988 1989 1990 1991 1992 1993 ---- ---- ---- ---- ---- ------------- Excluding interest on deposits........... .59 .81 1.17 2.09 2.54 4.25 Including interest on deposits........... .84 .94 1.04 1.21 1.32 1.76
For purposes of computing these ratios, earnings represent income (loss) before income taxes and cumulative effect of changes in accounting principles and fixed charges (excluding capitalized interest). Fixed 4 charges, excluding interest on deposits, include interest (other than on deposits but including capitalized interest) and the portion deemed representative of the interest factor of rents. Fixed charges, including interest on deposits, include all interest (including capitalized interest) and the portion deemed representative of the interest factor of rents. For the years ended December 31, 1989 and 1988, the Company's earnings were inadequate to cover fixed charges. The amount of the deficiency was $106.3 million in 1989 and $320.7 million in 1988. The 1989 deficiency resulted primarily from the $191.3 million provision for losses on loans and property acquired in settlement of loans recorded in the fourth quarter. The 1988 deficiency resulted primarily from losses of $506.3 million realized in connection with the Company's decision to sell approximately $4.7 billion of investment securities. DESCRIPTION OF DEBT SECURITIES The Senior Notes will be issued under an Indenture dated as of October 1, 1991 (the "Senior Note Indenture") between the Company and Citibank, N.A., as Trustee (the "Senior Note Trustee"), and the Subordinated Notes will be issued under an Indenture dated as of October 1, 1991, as amended by a First Supplemental Indenture dated as of April 1, 1993 (as so amended, the "Subordinated Note Indenture" and, together with the Senior Note Indenture, the "Indentures") between the Company and Citibank, N.A., as Trustee (the "Subordinated Note Trustee"). Copies of the Indentures have been filed as exhibits to the Registration Statement of which this Prospectus is a part. The following brief summaries of certain provisions of the Indentures do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all of the provisions of the applicable Indenture. Certain terms capitalized and not otherwise defined herein are defined in one or both of the Indentures. The Debt Securities may be issued from time to time in one or more series. The terms of each series of Debt Securities will be established by or pursuant to a resolution of the Board of Directors of the Company (a "Board Resolution") and set forth or determined in the manner provided in an Officers' Certificate or by a supplemental indenture. The particular terms of the Debt Securities offered pursuant to any Prospectus Supplement or Prospectus Supplements will be described in such Prospectus Supplement or Prospectus Supplements. Because the Company is a holding company, its rights and the rights of its creditors, including the holders of the Debt Securities offered hereby, to participate in the assets of any subsidiary upon the latter's liquidation or reorganization will be subject to the prior claims of such subsidiary's creditors, except to the extent that the Company may itself be a creditor with recognized claims against the subsidiary. Any capital loans by the Company to any of the Banks would be subordinate in right of payment to deposits and to certain other indebtedness of such Banks. Claims on the subsidiaries by creditors other than the Company may include long-term and medium-term debt and substantial obligations with respect to deposit liabilities, federal funds purchased, securities sold under repurchase agreements and other short-term borrowings. GENERAL The Indentures do not limit the aggregate principal amount of Debt Securities which may be issued thereunder nor the amount of other debt which may be issued by the Company. The Debt Securities will be unsecured obligations of the Company and those issued under the Senior Note Indenture will rank on a parity with all other unsecured and unsubordinated indebtedness of the Company, while those issued under the Subordinated Note Indenture will be subordinated as hereinafter described under "Subordination of Subordinated Notes." Unless otherwise indicated in the applicable Prospectus Supplement or Prospectus Supplements, the Debt Securities of any series will be issued only in fully registered form in denominations of $1,000 or any amount in excess thereof which is an integral multiple of $1,000. (Section 302) Debt Securities may be issuable in the form of one or more Global Securities, as described below under "Global Securities." A Global Security 5 will be issued in a denomination equal to the aggregate principal amount of outstanding Debt Securities of the series represented by such Global Security. The Debt Securities (other than those issued in the form of a Global Security) are exchangeable or transferable without charge therefor, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith and require the holders to furnish appropriate endorsements and transfer documents. (Section 305) Debt Securities may be issued as Original Issue Discount Debt Securities to be sold at a substantial discount below their principal amount. Special Federal income tax and other considerations applicable thereto and special Federal tax and other considerations applicable to any Debt Securities which are denominated in a currency or currency unit other than United States dollars will be described in the Prospectus Supplement or Prospectus Supplements relating thereto. Unless otherwise indicated in the applicable Prospectus Supplement or Prospectus Supplements, principal of and any premium and interest on the Debt Securities will be payable, and the transfer of the Debt Securities will be registrable, at the principal corporate trust office of the applicable Trustee. In addition, unless otherwise provided in the applicable Prospectus Supplement or Prospectus Supplements, payment of interest may be made at the option of the Company by check mailed to the address of the person entitled thereto as it appears on the Security Register. (Sections 301, 305, 1001 and 1002) The applicable Prospectus Supplement or Prospectus Supplements will describe the terms of the Debt Securities offered thereby, including the following: (1) the title of the offered Debt Securities; (2) whether the offered Debt Securities are Senior Notes or Subordinated Notes; (3) any limit on the aggregate principal amount of the offered Debt Securities; (4) the price or prices (expressed as a percentage of the aggregate principal amount thereof) at which the offered Debt Securities will be issued; (5) the date or dates on which the offered Debt Securities will mature and any rights of extension; (6) the rate or rates, if any (which may be fixed or variable), per annum at which the offered Debt Securities will bear interest, if any, or the formula pursuant to which such rate or rates shall be determined, and the date from which any such interest will accrue; (7) the dates on which any such interest on the offered Debt Securities will be payable and the regular record dates therefor; (8) any mandatory or optional sinking fund or analogous provisions; (9) the period or periods, if any, within which and the price or prices at which the offered Debt Securities may be redeemed, pursuant to any redemption provisions, at the option of the Company or of the holder thereof and other detailed terms of any such optional redemption provision; (10) the currency or currency units, including European Currency Units ("ECUs") or other composite currencies, for the payment of principal of and any premium and interest payable on the offered Debt Securities, if other than United States dollars; (11) the place or places where the principal of and any premium and interest on the offered Debt Securities will be payable; (12) any other event or events of default applicable with respect to the offered Debt Securities in addition to or in lieu of those described under "Events of Default"; (13) the denominations in which any offered Debt Securities will be issuable, if other than denominations of $1,000 or any amount in excess thereof which is an integral multiple of $1,000; (14) whether such Debt Securities are to be issued in whole or in part in the form of one or more Global Securities and, if so, the identity of the Depositary for such Global Security or Securities and the circumstances under which any such Global Security may be exchanged for Securities registered in the name of, and any transfer of such Global Security may be registered to, a Person other than such Depositary or its nominee; and (15) any other terms of the offered Debt Securities not inconsistent with the provisions of the Indenture. GLOBAL SECURITIES The Debt Securities of a series may be issued in whole or in part in the form of one or more Global Securities that will be deposited with, or on behalf of, a Depositary identified in the applicable Prospectus Supplement or Prospectus Supplements. Unless otherwise indicated in the applicable Prospectus Supplement or Prospectus Supplements, Global Securities will be issued in registered form. (Section 305) The specific terms of the depositary arrangement with respect to a series of Debt Securities will be described in the applicable Prospectus Supplement or Prospectus Supplements. 6 SUBORDINATION OF SUBORDINATED NOTES The payment of the principal of and interest on the Subordinated Notes will, to the extent set forth in the Subordinated Note Indenture, be subordinate in right of payment to the prior payment in full of all Senior Indebtedness of the Company. (Section 1301) In certain events of insolvency, the payment of the principal of and interest on the Subordinated Notes will, to the extent set forth in the Subordinated Note Indenture, also be effectively subordinated in right of payment to the prior payment in full of all General Obligations. No payment pursuant to the Subordinated Notes may be made and no Holder of the Subordinated Notes shall be entitled to demand or receive any such payment unless all amounts of principal of, premium, if any, and interest then due on all Senior Indebtedness of the Company shall have been paid in full or duly provided for and, at the time of such payment or immediately after giving effect thereto, there shall not exist with respect to any such Senior Indebtedness any event of default permitting the holders thereof to accelerate the maturity thereof or any event which, with notice or lapse of time or both, would become such an event of default. (Section 1302) Upon any payment or distribution of the assets of the Company in connection with dissolution, winding-up, liquidation or reorganization, the holders of Senior Indebtedness of the Company will be entitled to receive payment in full of principal, premium, if any, and interest in accordance with the terms of such Senior Indebtedness before any payment is made on the Subordinated Notes. (Section 1303) If upon any such payment or distribution of assets to creditors, there remains, after giving effect to such subordination provisions in favor of the holders of Senior Indebtedness, any amount of cash, property or securities available for payment or distribution in respect of Subordinated Notes (as defined in the Subordinated Note Indenture, "Excess Proceeds") and if, at such time, any creditors in respect of General Obligations have not received payment in full of all amounts due or to become due on or in respect of such General Obligations, then such Excess Proceeds shall first be applied to pay or provide for the payment in full of such General Obligations before any payment or distribution may be made in respect of the Subordinated Notes. (Section 1314) "Senior Indebtedness" of the Company is defined in the Subordinated Note Indenture to mean the principal of, premium, if any, and interest on (1) all indebtedness of the Company for money borrowed, whether outstanding on the date of execution of the Subordinated Note Indenture or thereafter created, assumed or incurred (including, without limitation, any Senior Notes issued pursuant to the Senior Note Indenture), except (a) such indebtedness as is by its terms expressly stated to rank junior in the right of payment to the Subordinated Notes or to rank pari passu with the Subordinated Notes and (b) the Company's Subordinated Floating Rate Notes Due November 2010 and its Floating Rate Subordinated Capital Notes Due 1996, and (2) any deferrals, renewals or extensions of any such Senior Indebtedness. "General Obligations" of the Company are defined in the Subordinated Note Indenture to mean all obligations of the Company to make payment on account of claims of general creditors, other than (1) obligations on account of Senior Indebtedness and (2) obligations on account of the Subordinated Notes and indebtedness of the Company for money borrowed ranking pari passu with or subordinate to the Subordinated Notes; provided, however, that if the Board of Governors of the Federal Reserve System (or other competent regulatory agency or authority) shall promulgate any rule or issue any interpretation defining or describing the term "general creditor" or "general creditors" for purposes of its criteria for the inclusion of subordinated debt of a bank holding company in capital, the term "General Obligations" shall mean obligations to "general creditors" as defined or described in such rule or interpretation, as from time to time in effect, other than obligations described in clauses (1) and (2) above. The term "claim" as used in the foregoing definition has the meaning assigned thereto in Section 101(5) of the Bankruptcy Code of 1978, as amended to April 1, 1993. The term "indebtedness of the Company for money borrowed" is defined to mean any obligation of, or any obligation guaranteed by, the Company for the repayment of money borrowed, whether or not evidenced by bonds, debentures, notes or other written instruments, and any deferred obligation for the payment of the purchase price of property or assets. (Section 101) By reason of the subordination described above, in the event of the bankruptcy, insolvency or reorganization of the Company, holders of Senior Indebtedness of the Company may receive more, ratably, and Holders of the Subordinated Notes may receive less, ratably, than creditors of the Company who are not 7 holders of Senior Indebtedness or of the Subordinated Notes. Such subordination will not prevent the occurrence of any Event of Default in respect of the Subordinated Notes. Unless otherwise specified in the applicable Prospectus Supplement or Prospectus Supplements, the Subordinated Note Indenture does not provide for any right of acceleration of the payment of principal of the Subordinated Notes upon a default in the payment of principal or interest or in the performance of any covenant or agreement in the Subordinated Notes or the Subordinated Note Indenture. See "Events of Default" below. The subordination provisions of the Subordinated Note Indenture described herein are provided for the benefit of the holders of Senior Indebtedness and are not intended for the benefit of creditors in respect of General Obligations. The Company and the Subordinated Note Trustee may amend the Subordinated Note Indenture to reduce or eliminate the rights of creditors in respect of General Obligations without the consent of such creditors or the Holders of the Subordinated Notes. Upon (1) the promulgation of any rule or regulation or the issuance of any interpretation by the Board of Governors of the Federal Reserve System (or other competent regulatory agency or authority) that (a) permits the Company to include the Subordinated Notes in its capital if they were subordinated in right of payment to Senior Indebtedness without regard to any other obligations of the Company, (b) otherwise eliminates the requirement that subordinated debt of a bank holding company must be subordinated in right of payment to its "general creditors" in order to be included in capital or (c) causes the Subordinated Notes to be excluded from capital notwithstanding the subordination provisions described above, or (2) any event that results in the Company no longer being subject to capital requirements of bank regulatory authorities, the provisions of the Subordinated Note Indenture providing for subordination of the Subordinated Notes in favor of creditors in respect of General Obligations shall immediately and automatically be terminated without further action by the Company or the Subordinated Note Trustee. (Section 1315) RESTRICTIVE COVENANTS Subject to the provisions described under "Consolidation, Merger and Sale of Assets," the Senior Note Indenture prohibits the issuance, sale or other disposition of shares of or securities convertible into, or options, warrants or rights to subscribe for or purchase shares of, Voting Stock of a Principal Subsidiary Bank, the merger or consolidation of a Principal Subsidiary Bank with or into any other corporation or the sale or other disposition of all or substantially all of the assets of a Principal Subsidiary Bank if, after giving effect to any such transaction and the issuance of the maximum number of shares of Voting Stock issuable upon the conversion or exercise of all such convertible securities, options, warrants or rights, the Company would own, directly or indirectly, 80% or less of the shares of Voting Stock of such Principal Subsidiary Bank or the successor bank in such merger or consolidation or the bank which acquires such assets, as the case may be. (Section 1007) In the Senior Note Indenture the Company covenants that it will not create, assume, incur or suffer to exist any pledge, encumbrance or lien, as security for indebtedness for borrowed money, upon any shares of, or securities convertible into, or options, warrants or rights to subscribe for or purchase shares of, Voting Stock of a Principal Subsidiary Bank owned by the Company, directly or indirectly, without making effective provision whereby the Senior Notes of all series shall be equally and ratably secured, if, treating such pledge, encumbrance or lien as a transfer to the secured party, and after giving effect to the issuance of the maximum number of shares of Voting Stock issuable upon conversion or exercise of such convertible securities, options, warrants or rights, the Company would own, directly or indirectly, 80% or less of the shares of Voting Stock of such Principal Subsidiary Bank. (Section 1008) The term "Principal Subsidiary Bank" is defined in the Indentures as FBNA and any successor. Except as may be otherwise specified in the applicable Prospectus Supplement, the Subordinated Note Indenture does not contain either of the restrictive covenants set forth above with respect to the Senior Note Indenture nor does it contain any other provision which restricts the Company from incurring or becoming 8 liable with respect to any Senior Indebtedness or any General Obligations, whether secured or unsecured, or from paying dividends or making other distributions on its capital stock or purchasing or redeeming its capital stock or from creating any liens on its property for any purpose. Except as may be otherwise specified in the applicable Prospectus Supplement, neither Indenture contains covenants specifically designed to protect Holders in the event of a highly leveraged transaction involving the Company. EVENTS OF DEFAULT The following events are defined in the Senior Note Indenture as "Events of Default" with respect to any series of Senior Notes, unless otherwise provided with respect to such series: (1) failure to pay any interest on any Senior Note of that series when due and payable, continued for 30 days; (2) failure to pay principal of or any premium on any Senior Note of that series when due and payable; (3) failure to deposit any sinking fund payment, when due, in respect of any Senior Note of that series; (4) failure to perform any other covenant of the Company in the Senior Note Indenture (other than a covenant included in the Senior Note Indenture solely for the benefit of a series of Senior Notes other than that series), continued for 60 days after written notice as provided in the Senior Note Indenture; (5) the occurrence of an event of default under any indenture or instrument under which the Company or a Principal Subsidiary Bank has or shall hereafter have outstanding indebtedness for borrowed money in excess of $5,000,000 which has become due and payable by its terms and has not been paid or whose maturity has been accelerated and such payment default has not been cured or such acceleration has not been annulled within 60 days after written notice as provided in the Senior Note Indenture; (6) certain events in bankruptcy, insolvency or reorganization involving the Company or a Principal Subsidiary Bank; and (7) any other Event of Default provided with respect to Senior Notes of that series. The only events defined in the Subordinated Note Indenture as "Events of Default" with respect to any series of Subordinated Notes, unless otherwise provided with respect to such series, are (1) certain events in bankruptcy, insolvency or reorganization involving the Company; (2) certain events involving the receivership, conservatorship or liquidation of a Principal Subsidiary Bank; and (3) any other Event of Default provided with respect to Subordinated Notes of that series. (Section 501) If an Event of Default with respect to any series of Debt Securities Outstanding under either Indenture occurs and is continuing, then either the applicable Trustee or the Holders of at least 25% in aggregate principal amount of the Outstanding Debt Securities of that series by notice as provided in the applicable Indenture may declare the principal amount (or, if any of the Debt Securities of that series are Original Issue Discount Debt Securities, such lesser portion of the principal amount of such Debt Securities as may be specified in the terms thereof) of all of the Debt Securities of that series to be due and payable immediately. At any time after a declaration of acceleration with respect to Debt Securities of any series has been made, but before a judgment or decree for payment of money has been obtained by the applicable Trustee, the Holders of a majority in aggregate principal amount of the Outstanding Debt Securities of that series may, under certain circumstances, rescind and annul such acceleration. (Section 502) Each Indenture provides that, subject to the duty of the applicable Trustee during default to act with the required standard of care, such Trustee will be under no obligation to exercise any of its rights or powers under the applicable Indenture at the request or direction of any of the Holders, unless such Holders shall have offered to such Trustee reasonable indemnity. (Sections 601, 603) Subject to such provisions for the indemnification of the Trustee, the Holders of a majority in aggregate principal amount of the Outstanding Debt Securities of any series will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the applicable Trustee, or exercising any trust or power conferred on such Trustee, with respect to the Debt Securities of that series. (Section 512) The Company is required to furnish to each Trustee annually a statement as to the performance by the Company of certain of its obligations under the applicable Indenture and as to any default in such performance. (Section 704) 9 MODIFICATION AND WAIVER Modifications and amendments of the Indentures may be made by the Company and the applicable Trustee with the consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Debt Securities of each series affected by such modification or amendment; provided, however, that no such modification or amendment may, without the consent of the Holder of each Outstanding Debt Security affected thereby, (1) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Debt Security, (2) reduce the principal amount of, or premium or interest on, any Debt Security, (3) change any obligation of the Company to pay additional amounts, (4) reduce the amount of principal of an Original Issue Discount Debt Security due and payable upon acceleration of the Maturity thereof, (5) change the place of payment where or coin or currency in which the principal of, or any premium or interest on, any Debt Security is payable, (6) impair the right to institute suit for the enforcement of any payment on or with respect to any Debt Security, (7) reduce the percentage in principal amount of Outstanding Debt Securities of any series, the consent of the Holders of which is required for modification or amendment of the Indenture or for waiver of compliance with certain provisions of the applicable Indenture or for waiver of certain defaults, (8) modify the provisions of the Subordinated Note Indenture with respect to the subordination of any Subordinated Notes in a manner adverse to the Holders thereof, or (9) modify any of the above provisions. (Section 902) The Holders of not less than a majority in aggregate principal amount of the Outstanding Debt Securities of each series may, on behalf of the Holders of all Debt Securities of that series, waive, insofar as that series is concerned, compliance by the Company with certain restrictive provisions of the applicable Indenture. (Section 1009) The Holders of not less than a majority in aggregate principal amount of the Outstanding Debt Securities of each series may, on behalf of the Holders of all Debt Securities of that series, waive any past default under the applicable Indenture with respect to Debt Securities of that series, except a default (1) in the payment of principal of, or any premium or interest on, any Senior Notes, or (2) in respect of a covenant or provision of the applicable Indenture which cannot be modified or amended without the consent of the Holder of each Outstanding Debt Security of such series affected. (Section 513) Each Indenture provides that, in determining whether the Holders of the requisite principal amount of the Outstanding Debt Securities have given any request, demand, authorization, direction, notice, consent or waiver thereunder or whether a quorum is present at a meeting of Holders of Debt Securities, (1) the principal amount of an Original Issue Discount Debt Security that will be deemed to be Outstanding will be the amount of the principal thereof that would be due and payable as of the date of such determination upon acceleration of the Maturity thereof to such date, and (2) the principal amount of a Debt Security denominated in a foreign currency or currency unit that will be deemed to be Outstanding will be the United States dollar equivalent, determined as of the date of original issuance of such Debt Security, of the principal amount of such Debt Security (or, in the case of an Original Issue Discount Debt Security, the United States dollar equivalent, determined as of the date of original issuance of such Debt Security, of the amount determined as provided in (1) above). (Section 101) CONSOLIDATION, MERGER AND SALE OF ASSETS The Company, without the consent of the Holders of any of the Outstanding Debt Securities under either Indenture, may consolidate or merge with or into, or convey, transfer or lease its properties and assets substantially as an entirety to, any Person which is a corporation, partnership or trust organized and validly existing under the laws of any domestic jurisdiction, provided that any successor Person assumes the Company's obligations on the Debt Securities and under such Indenture, that after giving effect to the transaction no Event of Default, and no event which, after notice or lapse of time, would become an Event of Default, shall have occurred and be continuing under such Indenture and that certain other conditions are met. (Section 801) REGARDING CITIBANK, N.A. The Company and certain of its subsidiaries maintain deposits with and conduct other banking transactions with Citibank, N.A. in the ordinary course of business. 10 DESCRIPTION OF WARRANTS The Company may issue, together with Debt Securities or separately, Warrants for the purchase of Debt Securities. The Warrants are to be issued under Warrant Agreements (each a "Warrant Agreement") to be entered into between the Company and a bank or trust company, as Warrant Agent (the "Warrant Agent"), all as shall be set forth in the Prospectus Supplement relating to Warrants being offered thereby. A copy of the form of Warrant Agreement, including the form of Warrant Certificates representing the Warrants (the "Warrant Certificates"), reflecting the alternative provisions to be included in the Warrant Agreements that will be entered into with respect to particular offerings of Warrants, has been filed as an exhibit to the Registration Statement of which this Prospectus is a part. The following brief summaries of certain provisions of the Warrant Agreement and the Warrant Certificates do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all of the provisions of the applicable Warrant Agreement and Warrant Certificates, respectively, including the definitions therein of certain terms capitalized and not otherwise defined herein. GENERAL The applicable Prospectus Supplement or Prospectus Supplements will describe the terms of the Warrants offered thereby, the Warrant Agreement relating to such Warrants and the Warrant Certificates representing such Warrants, including the following: (1) the designation, aggregate principal amount and terms of the Debt Securities purchasable upon exercise of such Warrants and the procedures and conditions relating to the exercise of such Warrants; (2) the designation and terms of any related Debt Securities with which such Warrants are issued and the number of such Warrants issued with each such Debt Security; (3) the date, if any, on and after which such Warrants and the related Debt Securities will be separately transferable; (4) the principal amount of Debt Securities purchasable upon exercise of each Warrant and the price at which such principal amount of Debt Securities may be purchased upon such exercise; (5) the date on which the right to exercise such Warrants shall commence and the date on which such right shall expire (the "Expiration Date"); (6) if the Debt Securities purchasable upon exercise of such Warrants are Original Issue Discount Debt Securities, a discussion of Federal income tax considerations applicable thereto; and (7) whether the Warrant Certificates representing such Warrants will be issued in registered or bearer form, and, if registered, where they may be transferred and registered. Warrant Certificates will be exchangeable for new Warrant Certificates of different authorized denominations and Warrants may be exercised at the corporate trust office of the Warrant Agent or any other office indicated in the applicable Prospectus Supplement or Prospectus Supplements. Prior to the exercise of their Warrants, holders of Warrants will not have any of the rights of holders of the Debt Securities purchasable upon such exercise and will not be entitled to payments of principal of, and any premium or interest on, such Debt Securities. EXERCISE OF WARRANTS Each Warrant will entitle the Holder to purchase such principal amount of Debt Securities at such exercise price as shall in each case be set forth in, or be determinable as set forth in, the applicable Prospectus Supplement or Prospectus Supplements. Warrants may be exercised during the period or periods set forth in the applicable Prospectus Supplement or Prospectus Supplements. After the close of business on the Expiration Date, unexercised Warrants will become void. Warrants may be exercised as set forth in the applicable Prospectus Supplement or Prospectus Supplements. Upon receipt of payment of the exercise price and the properly completed and duly executed purchase form set forth in the Warrant Certificate at the corporate trust office of the Warrant Agent or any other office indicated in the applicable Prospectus Supplement or Prospectus Supplements, the Company will, as soon as practicable, forward the Debt Securities purchasable upon such exercise to the person entitled thereto. If less than all of the Warrants represented by such Warrant Certificates are exercised, a new Warrant Certificate will be issued for the remaining amount of Warrants. 11 FOREIGN CURRENCY RISKS GENERAL Debt Securities of a series may be denominated in and the principal of, and any interest or premium on, such Debt Securities may be payable in such foreign currencies or currency units as may be designated by the Company at the time of offering (the "Foreign Currency Securities"). THIS PROSPECTUS DOES NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN FOREIGN CURRENCY SECURITIES THAT RESULT FROM SUCH SECURITIES BEING DENOMINATED OR PAYABLE IN A FOREIGN CURRENCY OR CURRENCY UNIT, EITHER AS SUCH RISKS EXIST AT THE DATE OF THIS PROSPECTUS OR AS SUCH RISKS MAY CHANGE FROM TIME TO TIME. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN FOREIGN CURRENCY SECURITIES. FOREIGN CURRENCY SECURITIES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS. The information set forth below is by necessity incomplete. Prospective purchasers of Foreign Currency Securities should consult their own financial and legal advisors with respect to any matters that may affect the purchase or holding of a Foreign Currency Security or the receipt of payments of principal of and any premium and interest on a Foreign Currency Security in a Specified Currency (as defined below). EXCHANGE RATES AND EXCHANGE CONTROLS An investment in Foreign Currency Securities entails significant risks that are not associated with a similar investment in a security denominated in United States dollars. Such risks include, without limitation, the possibility of significant changes in the rate of exchange between the United States dollar and the currency or currency unit designated in the applicable Prospectus Supplement (the "Specified Currency") and the possibility of the imposition or modification of foreign exchange controls by either the United States or foreign governments. Such risks generally depend on economic and political events over which the Company has no control. In recent years, rates of exchange between the United States dollar and certain foreign currencies have been highly volatile and such volatility may be expected in the future. Fluctuations in any particular exchange rate that have occurred in the past are not necessarily indicative, however, of fluctuations in the rate that may occur during the term of any Foreign Currency Security. Depreciation of the Specified Currency applicable to a Foreign Currency Security against the United States dollar would result in a decrease in the United States dollar-equivalent yield of such Debt Security (or the Debt Security purchasable upon exercise of any Warrant), in the United States dollar-equivalent value of the principal repayable at maturity of such Debt Security (or the Debt Security purchasable upon exercise of such Warrant) and, generally, in the United States dollar- equivalent market value of such Security. Governments have imposed from time to time exchange controls and may in the future impose or revise exchange controls at or prior to a Foreign Currency Security's maturity (or the maturity of the Debt Security issuable upon exercise of a Warrant). Even if there are no exchange controls, it is possible that the Specified Currency for any particular Foreign Currency Security would not be available at such Debt Security's maturity (or the maturity of the Debt Security issuable upon exercise of a Warrant) due to other circumstances beyond the control of the Company. JUDGMENTS If an action based on Foreign Currency Securities were commenced in a court of the United States, it is likely that such court would grant judgment relating to such Securities only in United States dollars. It is not clear, however, whether, in granting such judgment, the rate of conversion into United States dollars would be determined with reference to the date of default, the date judgment is rendered or some other date. Under 12 current New York law, a state court in the State of New York rendering a judgment on a Foreign Currency Security would be required to render such judgment in the Specified Currency in which such Foreign Currency Security is denominated, and such judgment would be converted into United States dollars at the exchange rate prevailing on the date of entry of the judgment. Holders of Foreign Currency Securities would bear the risk of exchange rate fluctuations between the time the amount of the judgment is calculated and the time the applicable Trustee converts United States dollars to the Specified Currency for payment of the judgment. LIMITED FACILITIES FOR CONVERSION Currently, there are limited facilities in the United States for conversion of U.S. dollars into foreign currencies, and vice versa. In addition, banks generally do not offer non-U.S. dollar denominated checking or savings account facilities in the United States. Accordingly, payments on Foreign Currency Securities will, unless otherwise specified in the applicable Prospectus Supplement or Prospectus Supplements, be made from an account with a bank located in the country issuing the Specified Currency (or, with respect to Foreign Currency Securities denominated in ECUs, Brussels). PLAN OF DISTRIBUTION The Company may sell Securities to one or more underwriters for public offering and sale by them or may sell Securities to investors directly or through agents. The applicable Prospectus Supplement or Prospectus Supplements will set forth the terms of the offering of the Securities, including the name or names of any agents, underwriters or dealers, the purchase price of the Securities and the proceeds to be received by the Company from such sale, any underwriting discounts and other items constituting underwriters' compensation and any discounts and commissions allowed or reallowed or paid to dealers or agents. Any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers or agents may be changed from time to time. In connection with the sale of Securities, underwriters or agents may be deemed to have received compensation from the Company in the form of underwriting discounts or commissions and may also receive commissions from purchasers of Securities for whom they may act as agent. Underwriters may sell Securities to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agent. Underwriters, dealers and agents participating in the distribution of Securities may be deemed to be underwriters, and any discounts and commissions received by them and any profit realized by them on resale of the Securities may be deemed to be underwriting discounts and commissions, under the Securities Act of 1933, as amended. Such underwriters, dealers and agents may be entitled under agreements which may be entered into by the Company to indemnification by the Company against and contribution toward certain liabilities, including liabilities under the Securities Act of 1933, as amended. The Securities may be distributed in one or more transactions from time to time at a fixed price or prices, which may be changed, or from time to time at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. The Company also may offer and sell the Securities in exchange for one or more of its outstanding issues of debt or convertible debt securities. If so indicated in the applicable Prospectus Supplement or Prospectus Supplements, the Company will authorize dealers or other persons acting as the Company's agents to solicit offers by certain institutions to purchase Securities from the Company at the public offering price set forth in the applicable Prospectus Supplement or Prospectus Supplements pursuant to delayed delivery contracts ("Contracts") providing for payment and delivery on the date or dates stated in the applicable Prospectus Supplement or Prospectus 13 Supplements. There may be limitations on the minimum amount which may be purchased pursuant to a Contract or on the aggregate amount of Securities which may be sold pursuant to Contracts. Any such limitations will be set forth in the applicable Prospectus Supplement or Prospectus Supplements. Institutions with whom Contracts, when authorized, may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions, and other institutions, but will in all cases be subject to the approval of the Company. The obligations of any purchaser under any Contract will not be subject to any conditions except (1) the purchase by an institution of the Securities covered by its Contract shall not at the time of delivery be prohibited under the laws of any jurisdiction in the United States to which such institution is subject and (2) if Securities are being sold to underwriters, the Company shall have sold to such underwriters the total principal amount of such Securities less the principal amount thereof covered by Contracts. The Securities will be a new issue of securities with no established trading market. Any underwriters or agents to or through whom Securities are sold by the Company for public offering and sale may make a market in such Securities, but such underwriters and agents will not be obligated to do so and may discontinue any market-making at any time without notice. No assurance can be given as to the liquidity of the trading market for any Securities. Certain of the underwriters, dealers and/or agents and their associates may be customers of, engage in transactions with and perform services for the Company, including its subsidiaries, in the ordinary course of business. EXPERTS The supplemental consolidated financial statements of the Company appearing in FBS' Current Report on Form 8-K dated July 29, 1993 for the year ended December 31, 1992 have been audited by Ernst & Young, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference, which, as to the years 1991 and 1990, are based in part on the report of Deloitte & Touche, independent auditors, whose report is incorporated herein. Such supplemental consolidated financial statements are incorporated herein by reference in reliance upon such reports given upon the authority of such firms as experts in accounting and auditing. VALIDITY OF SECURITIES The validity of the Securities will be passed upon for the Company by Dorsey & Whitney, 220 South Sixth Street, Minneapolis, Minnesota 55402 and for any underwriters or agents by Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017. Davis Polk & Wardwell will rely as to all matters governed by Minnesota law on the opinions of Dorsey & Whitney and Michael J. O'Rourke, General Counsel of the Company, and Dorsey & Whitney will rely as to all matters governed by New York law on the opinion of Davis Polk & Wardwell. The Dorsey & Whitney firm and certain of its members are indebted to and have other banking and trust relationships with certain banking subsidiaries of the Company. 14 -----END PRIVACY-ENHANCED MESSAGE-----