++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE PROSPECTUS TO +
+WHICH IT RELATES SHALL CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN +
+OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN +
+WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO +
+REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JANUARY 13, 1997
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JANUARY , 1997
$165,000,000
GREAT WESTERN FINANCIAL TRUST II
% PREFERRED SECURITIES, SERIES A
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
GREAT WESTERN FINANCIAL CORPORATION
----------
The % Preferred Securities, Series A (the "Preferred Securities") offered
hereby represent preferred undivided beneficial interests in the assets of
Great Western Financial Trust II, a statutory business trust formed under the
laws of the State of Delaware (the "Trust"). Great Western Financial
Corporation, a Delaware corporation ("GWFC"), will own all the common
securities (the "Common Securities" and, together with the Preferred
Securities, the "Trust Securities") representing undivided beneficial interests
in the assets of the Trust. The Trust exists for the sole purpose of issuing
the Trust Securities and investing the proceeds thereof in an equivalent amount
of % Subordinated Deferrable Interest Notes due 2027 (the "Subordinated
Notes") of GWFC. The Subordinated Notes will mature on March 31, 2027, subject
to GWFC's right to shorten the maturity or to extend the maturity. Upon an
event of a default under the Declaration (as defined herein), the holders of
Preferred Securities will have a preference over the holders of the Common
Securities with respect to payments in respect of distributions and payments
upon redemption, liquidation and otherwise.
(continued on next page)
----------
SEE "RISK FACTORS" COMMENCING ON PAGE S-4 FOR CERTAIN INFORMATION RELEVANT TO
AN INVESTMENT IN THE PREFERRED SECURITIES.
----------
THESE SECURITIES ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND WILL NOT BE
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE UNITED
STATES OR ANY AGENCY OR FUND OF THE UNITED STATES.
----------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH
IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
INITIAL PUBLIC UNDERWRITING PROCEEDS TO THE
OFFERING PRICE(1) COMMISSION(2) TRUST(1)(3)(4)
----------------- ------------- ---------------
Per Preferred Security........ $25.00 (3) $25.00
Total(5)...................... $165,000,000 (3) $165,000,000
- -----
(1) Plus accrued distributions, if any, from the date of original issuance.
(2) GWFC and the Trust have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of Preferred Securities
will be invested in Subordinated Notes of GWFC, GWFC has agreed to pay the
Underwriters as compensation for their arranging the investment therein of
such proceeds $ per Preferred Security (or $ in the aggregate). See
"Underwriting."
(4) Before deducting estimated expenses of $ payable by GWFC.
(5) The Trust and the Company have granted the Underwriters an option for 30
days to purchase up to an additional 990,000 Preferred Securities at the
initial public offering price per security solely to cover over-allotments.
If such option is exercised in full, the total initial public offering
price, underwriting commission and proceeds to the Trust will be
$189,750,000, $ , and $189,750,000, respectively. See "Underwriting".
----------
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that the Preferred Securities will be ready for delivery in book-entry
form only through the facilities of The Depository Trust Company in New York,
New York, on or about January , 1997, against payment therefor in immediately
available funds.
GOLDMAN, SACHS & CO. MERRILL LYNCH & CO.
LEHMAN BROTHERS SMITH BARNEY INC.
----------
The date of this Prospectus Supplement is January , 1997.
(continued from previous page)
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of % of the liquidation amount of $25 per
Preferred Security ("distributions"), accruing from the date of original
issuance and payable quarterly in arrears on March 31, June 30, September 30
and December 31 of each year, commencing March 31, 1997 (each a "Distribution
Date"). The first distribution will be in an amount equal to $ per Preferred
Security. The payment of distributions out of moneys held by the Trust and
payments on liquidation of the Trust or the redemption of Preferred
Securities, as set forth below, are guaranteed by GWFC (the "Guarantee") to
the extent the Trust has funds available therefor as described under
"Description of Guarantee" in the accompanying Prospectus. The obligations of
GWFC under the Guarantee are subordinate and junior in right of payment to all
other liabilities of GWFC and pari passu with the most senior preferred or
preference stock issued, from time to time, if any, by GWFC. The obligations
of GWFC under the Subordinated Notes are subordinate and junior in right of
payment to all present and future Senior Indebtedness (as defined herein) and
any other subordinated debt (unless otherwise stated) of GWFC, which
aggregated approximately $673 million at September 30, 1996, and rank pari
passu with GWFC's other general unsecured creditors. In addition, because GWFC
is a holding company, its obligations under the Guarantee and the Subordinated
Notes will be effectively subordinated to all existing and future liabilities
of its subsidiaries. At September 30, 1996, the subsidiaries of GWFC had total
liabilities of approximately $39.9 billion.
The distribution rate and the distribution and other payment dates for the
Preferred Securities will correspond to the interest rate and interest and
other payment dates on the Subordinated Notes, which will be the sole assets
of the Trust. As a result, if principal or interest is not paid on the
Subordinated Notes, no amounts will be paid on the Preferred Securities. If
GWFC does not make principal or interest payments on the Subordinated Notes,
the Trust will not have sufficient funds to make distributions on the
Preferred Securities, in which event the Guarantee will not apply to such
distributions until the Trust has sufficient funds available therefor.
GWFC has the right to defer payments of interest on the Subordinated Notes
by extending the interest payment period on the Subordinated Notes at any time
for up to 20 consecutive quarters (each an "Extension Period"). If interest
payments are so deferred, distributions will also be deferred. During such
Extension Period, distributions will continue to accrue with interest thereon
(to the extent permitted by applicable law) at the then applicable annual rate
compounded quarterly, and during any Extension Period, holders of Preferred
Securities will be required to include deferred interest income in their gross
income for United States federal income tax purposes in advance of receipt of
the cash distributions with respect to such deferred interest payments. There
could be multiple Extension Periods of varying lengths throughout the term of
the Subordinated Notes and hence on the Preferred Securities. Extension of the
interest payment period will not extend the maturity date of the Subordinated
Notes. See "Risk Factors--Option to Extend Interest Payment Period,"
"Description of the Subordinated Notes--Option to Extend Interest Payment
Period" and "Certain Federal Income Tax Consequences--Interest Income and
Original Issue Discount."
The Subordinated Notes are redeemable by GWFC, in whole or in part, from
time to time, on or after March 31, 2002, or at any time in certain
circumstances upon the occurrence of a Tax Event (as defined herein) or in
whole (but not in part) for a limited time upon the occurrence of a Capital
Treatment Event (as defined herein). If GWFC redeems Subordinated Notes, the
Trust must redeem Trust Securities having an aggregate liquidation amount
equal to the aggregate principal amount of the Subordinated Notes to be
redeemed at $25 per Trust Security plus accrued and unpaid distributions
thereon (the "Redemption Price") to the date fixed for redemption. See
"Description of the Offered Preferred Securities--Mandatory Redemption." The
Trust Securities will be redeemed upon maturity of the Subordinated Notes. The
Subordinated Notes mature on March 31, 2027, but the maturity date may be
shortened as described under "Description of the Subordinated Notes--Right to
Shorten Maturity" and may be extended only once, for up to an additional 19
years at the option of GWFC, provided certain financial covenants are met. See
"Description of the Subordinated Notes--Option to Extend Maturity Date." In
addition, upon the occurrence of a Special Event (as defined herein) arising
from a change in
S-2
law or a change in legal interpretation, unless the Subordinated Notes are
redeemed in the limited circumstances described herein, the Trust shall be
dissolved, with the result that the Subordinated Notes will be distributed to
the holders of the Trust Securities, on a pro rata basis. See "Description of
the Offered Preferred Securities--Special Event Redemption or Distribution."
If the Subordinated Notes are distributed to the holders of the Preferred
Securities, GWFC will use its best efforts to have the Subordinated Notes
listed on the New York Stock Exchange or on such other exchange as the
Preferred Securities are then listed. See "Description of the Offered
Preferred Securities--Special Event Redemption or Distribution" and
"Description of the Subordinated Notes."
GWFC will have the right at any time to terminate the Trust and cause the
Subordinated Notes to be distributed to the holders of the Preferred
Securities in liquidation of the Trust. See "Description of Offered Preferred
Securities--Liquidation of Trust and Distribution of Subordinated Notes to
Holders." In the event of the termination of the Trust, after satisfaction of
liabilities to creditors of the Trust as required by applicable law, the
holders of the Preferred Securities will be entitled to receive a liquidation
amount of $25 per Preferred Security plus accumulated and unpaid distributions
thereon to the date of payment, which may be in the form of a distribution of
such amount in Subordinated Notes, subject to certain exceptions. See
"Description of Offered Preferred Securities--Liquidation Distribution Upon
Dissolution."
If the Subordinated Notes are distributed to the holders of Preferred
Securities upon the liquidation of the Trust, GWFC will use its best efforts
to have the Subordinated Notes listed on the New York Stock Exchange or on
such other exchange as the Preferred Securities are then listed.
In the event of the involuntary or voluntary liquidation, dissolution,
winding up or termination of the Trust, the holders of the Trust Securities
will be entitled to receive for each Trust Security a liquidation amount of
$25 plus accrued and unpaid distributions thereon (including interest thereon)
to the date of payment, unless, in connection with such dissolution, the
Subordinated Notes are distributed to the holders of the Trust Securities. See
"Description of the Offered Preferred Securities--Liquidation Distribution
Upon Dissolution."
The Preferred Securities have not yet been listed on the New York Stock
Exchange, Inc. (the "New York Stock Exchange"). Trading of the Preferred
Securities on the New York Stock Exchange is expected to commence within a 30-
day period after the initial delivery of the Preferred Securities. See
"Underwriting."
The Preferred Securities will be represented by global certificates
registered in the name of The Depository Trust Company ("DTC") or its nominee.
Beneficial interests in the Preferred Securities will be shown on, and
transfers thereof will be effected only through, records maintained by
participants in DTC. Except as described in this Prospectus Supplement and in
the accompanying Prospectus, Preferred Securities in certificated form will
not be issued in exchange for the global certificates. See "Book-Entry Only
Issuance--The Depositary Trust Company."
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING TRANSACTIONS, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-3
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained elsewhere in this Prospectus Supplement and in the
accompanying Prospectus and should particularly consider the following
matters:
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE GUARANTEE AND SUBORDINATED NOTES
GWFC's obligations under the Guarantee are subordinate and junior in right
of payment to all liabilities of GWFC and pari passu with the most senior
preferred or preference stock outstanding, from time to time, if any, of GWFC.
The obligations of GWFC under the Subordinated Notes are subordinate and
junior in right of payment to all present and future Senior Indebtedness and
any other subordinated debt (unless otherwise stated) of GWFC and pari passu
with obligations to or rights of GWFC's other general unsecured creditors. As
of September 30, 1996, Senior Indebtedness aggregated approximately $673
million. In addition, because GWFC is a holding company, its obligations under
the Guarantee and the Subordinated Notes will be effectively subordinated to
all existing and future liabilities of its subsidiaries. At September 30,
1996, such subsidiaries had total liabilities of approximately $39.9 billion.
There are no terms in the Preferred Securities, the Subordinated Notes or the
Guarantee that limit the ability of GWFC or its subsidiaries (other than the
Trust) to incur additional indebtedness, including indebtedness that ranks
senior to the Subordinated Notes and the Guarantee. See "Description of
Guarantee--Status of the Guarantee" and "Description of Debt Securities--
Particular Terms of the Subordinated Debt Securities Issued to the Trust" in
the accompanying Prospectus, and "Description of the Subordinated Notes--
Subordination" herein.
The ability of the Trust to pay amounts on the Preferred Securities is
solely dependent upon GWFC making payments on the Subordinated Notes as and
when required.
RIGHTS UNDER THE GUARANTEE
The Guarantee will be qualified as an indenture under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"). The First National Bank
of Chicago will act as indenture trustee under the Guarantee for the purposes
of compliance with the Trust Indenture Act (the "Guarantee Trustee"). The
Guarantee Trustee will hold the Guarantee for the benefit of the holders of
the Preferred Securities.
The Guarantee guarantees to the holders of the Preferred Securities the
payment of (i) any accrued and unpaid distributions that are required to be
paid on the Preferred Securities, to the extent the Trust has funds available
therefor, which funds would exist only to the extent GWFC has made a payment
of interest or principal on the Subordinated Notes, (ii) the Redemption Price,
including all accrued and unpaid distributions with respect to Preferred
Securities called for redemption by the Trust, to the extent the Trust has
funds available therefor, which funds would exist only to the extent GWFC has
made a payment of interest or principal on the Subordinated Notes, and (iii)
upon a voluntary or involuntary liquidation, dissolution, winding-up or
termination of the Trust (other than in connection with the distribution of
Subordinated Notes to the holders of Preferred Securities or the redemption of
all the Preferred Securities), the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid distributions on the Preferred
Securities to the date of the payment to the extent the Trust has funds
available therefor and (b) the amount of assets of the Trust remaining
available for distribution to holders of the Preferred Securities in
liquidation of the Trust. The holders of a majority in liquidation amount of
the Preferred Securities have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Guarantee Trustee
or to direct the exercise of any trust or power conferred upon the Guarantee
Trustee under the Guarantee. If GWFC were to default on its obligation to pay
amounts payable on the Subordinated Notes, the Trust would lack available
funds for the payment of distributions or amounts payable on redemption of the
Preferred Securities or otherwise, and, in such event, holders of the
Preferred Securities would not be able to rely upon the Guarantee for payment
of such amounts. Instead, holders of the Preferred Securities would rely on
the enforcement of the rights against GWFC pursuant to the terms of the
Subordinated Notes. See "Description of Guarantee" and "Description of Debt
Securities--Particular Terms of the Subordinated Debt Securities Issued to the
Trust" in the accompanying Prospectus. The Declaration provides that each
holder of Preferred Securities, by acceptance thereof, agrees to the
provisions of
S-4
the Guarantee, including the subordination provisions thereof, and the
Subordinated Indenture (as defined in the accompanying Prospectus).
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Declaration Event of Default (as defined herein) occurs and is
continuing, then the holders of a majority in aggregate liquidation amount of
the Preferred Securities will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Property
Trustee or to direct the exercise of any trust or power conferred upon the
Property Trustee under the Declaration, including the right to direct the
Property Trustee to exercise the remedies available to it as a holder of the
Subordinated Notes. If an Event of Default with respect to the Subordinated
Notes, constituting the failure to pay interest or principal on the
Subordinated Notes on the date such interest or principal is otherwise
payable, has occurred and is continuing, then a holder of Preferred Securities
may directly institute a proceeding for enforcement of payment to such holder
directly of the principal of or interest on the Subordinated Notes having a
principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder on or after the respective due date specified in the
Subordinated Notes. The holders of Preferred Securities will not be able to
exercise directly any other remedy available to the holders of the
Subordinated Notes unless the Property Trustee fails to do so.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
GWFC has the right under the Subordinated Indenture to defer payments of
interest on the Subordinated Notes by extending the interest payment period at
any time, and from time to time, on the Subordinated Notes in accordance with
the terms thereof. As a consequence of such an extension, quarterly
distributions on the Preferred Securities would be deferred (but despite such
deferral would continue to accrue with interest thereon compounded quarterly)
by the Trust during any such extended interest payment period. Such right to
extend the interest payment period for the Subordinated Notes is limited to a
period not exceeding 20 consecutive quarters. The extension of the interest
payment period will not extend the maturity date of the Subordinated Notes. In
the event that GWFC exercises this right to defer interest payments, then (a)
GWFC shall not, and shall cause any subsidiary of GWFC that is not a wholly
owned subsidiary of GWFC not to, declare or pay dividends on, or make any
distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock or the capital
stock of any such subsidiary, and (b) GWFC shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities (including guarantees) issued by GWFC that rank pari passu
with or junior to the Subordinated Notes; provided, however, that the
foregoing restriction (a) above does not apply to any stock dividend paid by
GWFC, or any of its subsidiaries, where the dividend stock is the same stock
as that on which the dividend is being paid. Prior to the termination of any
such Extension Period (as defined), GWFC may further extend the interest
payment period; provided that such Extension Period, together with all such
previous and further extensions thereof, may not exceed 20 consecutive
quarters. Upon the termination of any Extension Period and the payment of all
amounts then due, GWFC may commence a new Extension Period, as if no Extension
Period had previously been declared, subject to the above requirements. See
"Description of the Offered Preferred Securities--Distributions" and
"Description of the Subordinated Notes--Option to Extend Interest Payment
Period."
Should GWFC exercise its right to defer payments of interest on the
Subordinated Notes by extending the interest payment period thereon, each
holder of Preferred Securities will be required to accrue income (in the form
of original issue discount) in respect of its pro rata share of the
Subordinated Notes held by the Trust for United States federal income tax
purposes. As a result, a holder of Preferred Securities will be required to
include such income in gross income for United States federal income tax
purposes in advance of the receipt of cash attributable to such income, and
will not receive the cash related to such income from the Trust if the holder
disposes of the Preferred Securities prior to the record date for the payment
of distributions. See "Certain Federal Income Tax Consequences--Interest
Income and Original Issue Discount."
GWFC has no intention of exercising its right to defer payments of interest
by extending the interest payment period on the Subordinated Notes and
considers it unlikely that it will exercise that right in the future. However,
should GWFC determine to exercise such right in the future, the market price
of the Preferred Securities is likely to be affected. A holder that disposes
of its Preferred Securities during an Extension Period,
S-5
therefore, might not receive the same return on its investment as a holder
that continues to hold its Preferred Securities. In addition, as a result of
the existence of GWFC's right to defer interest payments, the market price of
the Preferred Securities (which represent an undivided beneficial interest in
the Subordinated Notes) may be more volatile than other securities to which
such rights do not apply.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Special Event, the Trust shall be dissolved, except
in the limited circumstance described below under "Description of the Offered
Preferred Securities--Special Event Redemption or Distribution," with the
result that the Subordinated Notes would be distributed to the holders of the
Trust Securities in connection with the liquidation of the Trust. In certain
circumstances relating to a Tax Event, GWFC shall have the right to redeem the
Subordinated Notes, in whole or in part, in lieu of a distribution of the
Subordinated Notes by the Trust, in which event the Trust will redeem the
Trust Securities on a pro rata basis to the same extent as the Subordinated
Notes are redeemed by GWFC. See "Description of the Offered Preferred
Securities--Special Event Redemption or Distribution."
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Notes that may be distributed in exchange for
Preferred Securities if a dissolution or liquidation of the Trust were to
occur. Accordingly, the Preferred Securities that an investor may purchase,
whether pursuant to the offer made hereby or in the secondary market, or the
Subordinated Notes that a holder of Preferred Securities may receive on
dissolution and liquidation of the Trust, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities. Because holders
of Preferred Securities may receive Subordinated Notes upon the occurrence of
a Special Event, prospective purchasers of Preferred Securities are also
making an investment decision with regard to the Subordinated Notes and should
carefully review all the information regarding the Subordinated Notes
contained herein and in the accompanying Prospectus. See "Description of the
Offered Preferred Securities--Special Event Redemption or Distribution" and
"Description of the Subordinated Notes."
See "Possible Tax Law Changes Affecting the Preferred Securities" below for
a discussion of certain legislative proposals that, if adopted, could give
rise to a Tax Event, which may permit GWFC to cause a redemption of the
Preferred Securities prior to March 31, 2002 or to shorten the maturity of the
Subordinated Notes to a date not earlier than 19 1/2 years after the date of
initial issuance of the Subordinated Notes, which would result in the
redemption of the Preferred Securities on such date.
CAPITAL TREATMENT EVENT REDEMPTION
Upon the occurrence and during the continuation of a Capital Treatment
Event, GWFC has the right to redeem the Subordinated Notes in whole (but not
in part) at any time within 90 days following the occurrence of such Capital
Treatment Event and thereby cause a mandatory redemption of the Preferred
Securities.
A "Capital Treatment Event" means that GWFC (or its successor) is, becomes
or pursuant to law or regulation will become within 180 days, subject to
capital requirements under which all or any portion of the Preferred
Securities would not constitute Tier 1 Capital applied as if GWFC (or its
successor) were a bank holding company (as that concept is used in the
guidelines or regulations issued by the Board of Governors of the Federal
Reserve System ("Federal Reserve Board") as of the date of this Prospectus
Supplement) or its then equivalent ("Tier 1 Capital").
EXCHANGE OF PREFERRED SECURITIES FOR SUBORDINATED NOTES
GWFC will have the right at any time to terminate the Trust and after
satisfaction of liabilities to creditors of the Trust as required by
applicable law, to cause Subordinated Notes to be distributed to the holders
of the Preferred Securities in exchange therefor upon liquidation of the
Trust. See "Description of Offered Preferred Securities--Liquidation of Trust
and Distribution of Subordinated Notes to Holders."
S-6
Under current United States federal income tax law and interpretations, a
distribution of the Subordinated Notes upon liquidation of the Trust should
not be a taxable event to holders of the Preferred Securities. However, if a
Tax Event were to occur which would cause the Trust to be subject to United
States federal income tax with respect to income received or accrued on the
Subordinated Notes, a distribution of the Subordinated Notes by the Trust
could be a taxable event to the holders of the Preferred Securities. See
"Certain Federal Income Tax Consequences--Receipt of Subordinated Notes or
Cash Upon Liquidation of the Trust."
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights and will not
be entitled to vote to appoint, remove or replace, or to increase or decrease
the number of Regular Trustees, which voting rights are vested exclusively in
the holder of the Common Securities.
TRADING PRICE
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying
Subordinated Notes. Accordingly, the Preferred Securities may trade at a
discount to the price that an investor paid to purchase the Preferred
Securities offered hereby. To the extent the selling price is less than the
holder's adjusted tax basis, a holder will recognize a capital loss. Subject
to certain limited exceptions, capital losses cannot be applied to offset
ordinary income for United States federal income tax purposes. See "Certain
Federal Income Tax Consequences--Interest Income and Original Issue Discount"
and "--Sale of Preferred Securities."
POSSIBLE TAX LAW CHANGES AFFECTING THE PREFERRED SECURITIES
On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Bill") was
released which would have, among other things, generally denied interest
deductions for interest on an instrument issued by a corporation that has a
maximum weighted average maturity of more than 40 years. The Bill would also
have generally denied interest deductions for interest on an instrument issued
by a corporation that has a maximum term of more than 20 years and that is not
shown as indebtedness on the separate balance sheet of the issuer or, where
the instrument is issued to a related party (other than a corporation), where
the holder or some other related party issues a related instrument that is not
shown as indebtedness on the issuer's consolidated balance sheet. For purposes
of determining the weighted average maturity or the term of an instrument, any
right to extend would be treated as exercised. The above-described provisions
of the Bill were proposed to be effective generally for instruments issued on
or after December 7, 1995. If either provision were to apply to the
Subordinated Notes, GWFC would not be able to deduct interest on the
Subordinated Notes. However, on March 29, 1996, the Chairmen of the Senate
Finance and House Ways and Means Committees issued a joint statement (the
"Joint Statement") to the effect that it was their intention that the
effective date of the Presidents's legislative proposals, if adopted, would be
no earlier that the date of appropriate Congressional action. In addition,
subsequent to the publication of the Joint Statement, Senator Daniel Patrick
Moynihan and Representatives Sam M. Gibbons and Charles B. Rangel wrote
letters to Treasury Department officials concurring with the view expressed in
the Joint Statement (the "Democrat Letters"). If the principles contained in
the Joint Statement and the Democrat Letters were enacted, such legislation
would not apply to the Subordinated Notes. Under current law, GWFC will be
able to deduct interest on the Subordinated Notes. There can be no assurance,
however, that current or future legislative proposals or final legislation
will not adversely affect the ability of GWFC to deduct interest on the
Subordinated Notes. Such a change could give rise to a Tax Event, which would
permit GWFC to cause a redemption of the Preferred Securities before March 31,
2002, or to shorten the maturity of the Subordinated Notes to a period of not
less than 19 1/2 years from the date of initial issuance, which will result in
redemption of the Preferred Securities as of such earlier maturity. See
"Description of the Subordinated Notes--Redemption," "Description of the
Offered Preferred Securities--Mandatory Redemption" and "--Right to Shorten
Maturity," and "Certain Federal Income Tax Consequences--Possible Tax Law
Changes."
S-7
RECENT FINANCIAL RESULTS
The following table sets forth selected financial data of GWFC and its
consolidated subsidiaries for the nine months ended September 30, 1996 and
1995 and at September 30, 1996 and 1995. This selected financial data is
derived from GWFC's unaudited consolidated financial statements which are
incorporated herein by reference and which include, in the opinion of
management, all adjustments (consisting of only normal, recurring accruals)
necessary for the fair presentation of the consolidated results of operations
and consolidated financial condition of GWFC for the periods and at the dates
presented. The operating results for the nine months ended September 30, 1996
are not necessarily indicative of the results to be expected for the full
year.
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
------------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE
DATA AND RATIOS)
SUMMARY OF OPERATIONS
Interest income..................................... $ 2,432,384 $ 2,403,824
Interest expense.................................... 1,389,378 1,452,536
Net interest income................................. 1,043,006 951,288
Provision for loan losses........................... 123,071 137,400
Operating and administrative expenses(1)............ 956,574 736,829
Earnings before taxes on income..................... 181,090 268,555
Taxes on income..................................... 70,400 106,100
Net earnings(1)..................................... 110,690 162,455
Fully diluted earnings per share.................... .68 1.05
Cash dividends per common share..................... .73 .69
Ratio of earnings to fixed charges(2)
Excluding interest on deposits..................... 1.34x 1.46x
Including interest on deposits..................... 1.13x 1.18x
Ratio of earnings to fixed charges and preferred
stock dividends(2):
Excluding interest on deposits..................... 1.27x 1.39x
Including interest on deposits..................... 1.11x 1.16x
AT SEPTEMBER 30,
-----------------------
1996 1995
----------- -----------
(DOLLARS IN THOUSANDS)
SUMMARY OF FINANCIAL CONDITION
Cash and securities................................... $ 2,011,912 $ 2,190,674
Loans receivable, net................................. 30,760,376 29,633,224
Mortgage-backed securities............................ 8,593,389 10,532,266
Total assets.......................................... 43,548,593 44,693,014
Deposits.............................................. 28,852,700 29,432,176
Borrowings............................................ 10,874,586 11,591,999
Stockholders' equity.................................. 2,616,781 2,654,299
- --------
(1) Includes in 1996 a $188.4 million pre-tax charge with respect to a one-
time special assessment in connection with the recapitalization of the
Savings Association Insurance Fund.
(2) For purposes of computing the ratio of earnings to fixed charges and the
ratio of earnings to fixed charges and preferred stock dividends, earnings
represent earnings before income taxes and fixed charges. Fixed charges,
excluding interest on deposits, represent other interest expense
(including capitalized interest) and one-third (the proportion deemed
representative of the interest factor) of rents. Fixed charges, including
interest on deposits, represent all interest expense (including
capitalized interest) and one-third of rents.
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CAPITALIZATION OF GWFC
The following table sets forth the unaudited summary capitalization of GWFC
and its consolidated subsidiaries as of September 30, 1996, and as adjusted to
reflect issuance of the Preferred Securities and the application of the
estimated net proceeds therefrom. See "Use of Proceeds" below. The table
should be read in conjunction with GWFC's consolidated financial statements
and notes thereto and other financial data incorporated by reference herein.
See "Incorporation of Certain Documents by Reference" in the accompanying
Prospectus.
AT SEPTEMBER 30, 1996
-----------------------
ACTUAL AS ADJUSTED
----------- -----------
(IN THOUSANDS)
Borrowings:
Federal Home Loan Bank.............................. $ 1,678,039 $ 1,678,039
Short-term debt..................................... 1,350,969 1,350,969
Long-term debt...................................... 3,258,933 3,258,933
Securities sold under agreement to repurchase....... 4,586,645 4,586,645
----------- -----------
Total borrowings.................................. 10,874,586 10,874,586
Company-obligated mandatorily redeemable preferred
securities of GWFC's subsidiary trust, holding solely
$103,093 aggregate principal amount of 8.25%
subordinated deferrable interest notes, due 2025, of
GWFC................................................. 100,000 100,000
Company-obligated mandatorily redeemable preferred
securities of GWFC's subsidiary trust, holding solely
$ aggregate principal amount of % subordinated
deferrable interest notes, due 2027, of GWFC......... -- 150,000
Preferred stock....................................... 165,000 165,000
Common stockholders' equity........................... 2,451,781 2,451,781
----------- -----------
Total capitalization.............................. $13,591,367 $13,741,367
=========== ===========
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust will be treated as a subsidiary
of GWFC and, accordingly, the accounts of the Trust will be included in the
consolidated financial statements of GWFC. The Preferred Securities will be
presented as a separate line item in the consolidated balance sheets of GWFC,
under the caption "Company-obligated mandatorily redeemable preferred
securities of GWFC's subsidiary trust, holding solely $ aggregate principal
amount of % subordinated deferrable interest notes, due 2027, of GWFC," and
appropriate disclosures about the Trust Securities, the Guarantee, the
Subordinated Notes and the Subordinated Indenture will be included in the
notes to the consolidated financial statements. For financial reporting
purposes, GWFC will record distributions payable on the Preferred Securities
as other expense in the consolidated statement of income.
USE OF PROCEEDS
All of the proceeds from the sale of the Preferred Securities will be
invested by the Trust in the Subordinated Notes described herein and
ultimately will be used by GWFC for general corporate purposes, which may
include investments in or extensions of credit to subsidiaries of GWFC.
DESCRIPTION OF THE OFFERED PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the Trust
Indenture Act. The Property Trustee, The First National Bank of
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Chicago, will act as the indenture trustee under the Declaration for purposes
of compliance with the provisions of the Trust Indenture Act. The terms of the
Preferred Securities will include those stated in the Declaration and those
made part of the Declaration by the Trust Indenture Act. The following summary
of the material terms and provisions of the Preferred Securities does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the Declaration, a copy of which is filed as an exhibit to the
Registration Statement of which this Prospectus Supplement is a part, the
Delaware Business Trust Act (the "Trust Act") and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Regular Trustees to issue on behalf of the
Trust the Trust Securities, which represent undivided beneficial interests in
the assets of the Trust. All of the Common Securities will be owned, directly
or indirectly, by GWFC. The Common Securities rank pari passu, and payments
will be made thereon on a pro rata basis, with the Preferred Securities,
except that upon the occurrence of a Declaration Event of Default, the rights
of the holders of the Common Securities to receive payment of periodic
distributions and payments upon liquidation, redemption and otherwise will be
subordinated to the rights to payment of the holders of the Preferred
Securities. The Declaration does not permit the issuance by the Trust of any
securities other than the Trust Securities or the incurrence of any
indebtedness by the Trust. Pursuant to the Declaration, the Property Trustee
will own the Subordinated Notes purchased by the Trust for the benefit of the
holders of the Trust Securities. The payment of distributions out of money
held by the Trust, and payments upon redemption of the Preferred Securities or
liquidation of the Trust, are guaranteed by GWFC to the extent described under
"Description of Guarantee" in the accompanying Prospectus. The Guarantee will
be held by The First National Bank of Chicago, the Guarantee Trustee, for the
benefit of the holders of the Preferred Securities. The Guarantee does not
cover payment of distributions when the Trust does not have sufficient
available funds to pay such distributions.
The Preferred Securities will not be savings accounts or deposits and will
not be insured by the Federal Deposit Insurance Corporation (the "FDIC"), the
United States or any agency or fund of the United States.
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of % of the stated liquidation amount of $25 per Preferred Security.
Distributions in arrears for more than one quarter will bear interest thereon
at the rate per annum of % compounded quarterly. The term "distribution" as
used herein includes any such interest payable unless otherwise stated. The
amount of distributions payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months (or for any period shorter than a
full quarterly period, on the basis of the actual number of days elapsed per
30-day month).
Distributions on the Preferred Securities will be cumulative, will accrue
from January , 1997, and will be payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year to the holders of record on
the applicable record date, commencing March 31, 1997, when, as and if
available for payment, except as otherwise described below. The first
distribution will be in an amount equal to $ per Preferred Security.
GWFC has the right under the Subordinated Indenture to defer payments of
interest on the Subordinated Notes by extending the interest payment period
from time to time on the Subordinated Notes, which, if exercised, would defer
quarterly distributions on the Preferred Securities (though such distributions
would continue to accrue with interest thereon, compounded quarterly (to the
extent permitted by applicable law), since interest would continue to accrue
on the Subordinated Notes) during any such extended interest payment period.
Such right to extend the interest payment period for the Subordinated Notes is
limited to a period not exceeding 20 consecutive quarters. In the event that
GWFC exercises this right, then (a) GWFC shall not, and shall cause any
subsidiary of GWFC that is not a wholly owned subsidiary of GWFC not to,
declare or pay dividends on, make any distributions with respect to, or
redeem, purchase or acquire, or make a liquidation payment with respect to,
any of its capital stock or the capital stock of any such subsidiary and (b)
GWFC shall not make any payment of
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interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities (including guarantees) issued by GWFC that rank pari passu
with or junior to such Subordinated Notes; provided, however, that, the
foregoing restriction (a) does not apply to any stock dividend paid by GWFC,
or any of its subsidiaries, where the dividend stock is the same stock as that
on which the dividend is being paid. Prior to the termination of any such
Extension Period, GWFC may further defer payments of interest by extending the
interest payment period, provided that such Extension Period, together with
all such previous and further extensions thereof, may not exceed 20
consecutive quarters. Upon the termination of any Extension Period and the
payment of all amounts then due, GWFC may select a new Extension Period as if
no Extension Period had previously been declared, subject to the above
requirements. See "Description of the Subordinated Notes--Interest" and "--
Option to Extend Interest Payment Period." If distributions are deferred, the
deferred distributions and accrued interest thereon shall be paid to holders
of record of the Preferred Securities as they appear on the books and records
of the Trust on the record date next following the termination of such
Extension Period.
Distributions on the Preferred Securities must be paid on the dates payable
to the extent that the Trust has funds available for the payment of such
distributions. The Trust's funds available for distribution to the holders of
the Preferred Securities will be limited to payments received from GWFC on the
Subordinated Notes. See "Description of the Subordinated Notes." The payment
of distributions out of moneys held by the Trust is guaranteed by GWFC to the
extent set forth under "Description of Guarantee" in the accompanying
Prospectus.
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the books and records of the Trust on the relevant
record dates, which, as long as the Preferred Securities remain in book-entry
only form, will be one Business Day prior to the relevant payment dates. Such
distributions will be paid through the Property Trustee who will hold amounts
received in respect of the Subordinated Notes for the benefit of the holders
of the Trust Securities. Subject to any applicable laws and regulations and
the provisions of the Declaration, each such payment will be made as described
under "Book-Entry Only Issuance--The Depository Trust Company" below. In the
event that the Preferred Securities do not continue to remain in book-entry
only form, the Regular Trustees shall have the right to select relevant record
dates, which shall be more than one but less than 60 Business Days prior to
the relevant payment dates. In the event that any date on which distributions
are to be made on the Preferred Securities is not a Business Day, then payment
of the distributions payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such distribution date. A "Business Day" shall mean any day other than
Saturday, Sunday or any other day on which banking institutions in the City of
New York or Los Angeles, California are authorized or required by any
applicable law to close.
MANDATORY REDEMPTION
The Subordinated Notes will mature on March 31, 2027, unless shortened as
described under "Right to Shorten Maturity" below or unless the maturity date
is extended at the option of GWFC (provided certain financial covenants are
met), and may be redeemed, in whole or in part, at any time on or after March
31, 2002, or at any time in certain circumstances upon the occurrence of a Tax
Event or in whole (but not in part) for a limited time upon the occurrence of
a Capital Treatment Event. Upon the repayment of the Subordinated Notes,
whether at maturity or upon redemption, the proceeds from such repayment or
payment shall simultaneously be applied to redeem Trust Securities having an
aggregate liquidation amount equal to the aggregate principal amount of the
Subordinated Notes so repaid or redeemed at the Redemption Price; provided
that, holders of Trust Securities shall be given not less than 30 nor more
than 60 days notice of such redemption. See "Description of the Subordinated
Notes--Optional Redemption."
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
"Tax Event" means that the Regular Trustees shall have received an opinion
from independent tax counsel experienced in such matters (a "Dissolution Tax
Opinion") to the effect that, as a result of (a) any amendment
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to, or change (including any announced prospective change) in, the laws (or
any regulations thereunder) of the United States or, with respect to clause
(iii) below, any political subdivision or taxing authority thereof or therein
or (b) any amendment to, or change in, an interpretation or application of
such laws or regulations, there is more than an insubstantial risk that (i)
the Trust would be subject to United States federal income tax with respect to
income accrued or received on the Subordinated Notes, (ii) interest payable to
the Trust on the Subordinated Notes would not be deductible by GWFC for United
States federal income tax purposes or (iii) the Trust would be subject to more
than a de minimis amount of other taxes, duties or other governmental charges,
which change or amendment is enacted (irrespective of any retroactive effect)
on or after the date of this Prospectus Supplement.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion from independent counsel experienced in such matters to
the effect that, as a result of the occurrence of a change in law or
regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), there is more than an insubstantial
risk that the Trust is or will within 90 days of the date of such opinion be
considered an "investment company" which is required to be registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), which Change
in 1940 Act Law becomes effective on or after the date of this Prospectus
Supplement.
If, at any time, a Tax Event or an Investment Company Event (each, as
defined above, a "Special Event") shall occur and be continuing, the Trust
shall, except in the circumstances described below, be dissolved with the
result that Subordinated Notes with an aggregate principal amount equal to the
aggregate stated liquidation amount of the Trust Securities would be
distributed to the holders of the Trust Securities, in liquidation of such
holders' interests in the Trust on a pro rata basis, within 90 days following
the occurrence of such Special Event; provided, however, that in the case of
the occurrence of a Tax Event, as a condition of such dissolution and
distribution, the Regular Trustees shall have received an opinion from
independent tax counsel experienced in such matters (a "No Recognition
Opinion"), which opinion may rely on published revenue rulings of the Internal
Revenue Service, to the effect that the holders of the Trust Securities will
not recognize any gain or loss for United States federal income tax purposes
as a result of such dissolution and distribution of Subordinated Notes; and
provided, further, that, if at the time there is available to the Trust the
opportunity to eliminate, within such 90 day period, the Special Event by
taking some ministerial action, such as filing a form or making an election,
or pursuing some other similar reasonable measure, which has no adverse effect
on the Trust, GWFC or the holders of the Trust Securities, the Trust will
pursue such measure in lieu of such dissolution and distribution. Furthermore,
if in the case of the occurrence of a Tax Event, (i) GWFC has received an
opinion (a "Redemption Tax Opinion") from independent tax counsel experienced
in such matters that, as a result of a Tax Event, there is more than an
insubstantial risk that GWFC would be precluded from deducting the interest on
the Subordinated Notes for United States federal income tax purposes even if
the Subordinated Notes were distributed to the holders of Trust Securities in
liquidation of such holders' interests in the Trust as described above or (ii)
the Regular Trustees shall have been informed by such tax counsel that a No
Recognition Opinion cannot be delivered, GWFC shall have the right, upon not
less than 30 nor more than 60 days notice, to redeem the Subordinated Notes in
whole or in part for cash within 90 days following the occurrence of such Tax
Event, and, following such redemption, Trust Securities with an aggregate
liquidation amount equal to the aggregate principal amount of the Subordinated
Notes so redeemed shall be redeemed by the Trust at the Redemption Price on a
pro rata basis; provided, however, that, if at the time there is available to
GWFC or the Trust the opportunity to eliminate, within such 90 day period, the
Tax Event by taking some ministerial action, such as filing a form or making
an election, or pursuing some other similar reasonable measure which has no
adverse effect on the Trust, or the holders of the Trust Securities or GWFC,
the Trust or GWFC will pursue such measure in lieu of redemption.
If Subordinated Notes are distributed to the holders of the Preferred
Securities, GWFC will use its best efforts to have the Subordinated Notes
listed on the New York Stock Exchange or on such other exchange as the
Preferred Securities are then listed.
S-12
After the date for any distribution of Subordinated Notes upon dissolution
of the Trust, (i) the Preferred Securities and Guarantee will no longer be
deemed to be outstanding, (ii) the depositary or its nominee, as the record
holder of the Preferred Securities, will receive a registered global
certificate or certificates representing the Subordinated Notes to be
delivered upon such distribution and (iii) any certificates representing
Preferred Securities and the Guarantee not held by the depositary or its
nominee will be deemed to represent Subordinated Notes having an aggregate
principal amount equal to the aggregate stated liquidation amount of such
Preferred Securities, until such certificates are presented to GWFC or its
agent for transfer or reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Notes that may be distributed in exchange for
the Preferred Securities if a dissolution and liquidation of the Trust were to
occur. Accordingly, the Preferred Securities that an investor may purchase, or
the Subordinated Notes that the investor may receive on dissolution and
liquidation of the Trust, may trade at a discount to the price that the
investor paid to purchase the Preferred Securities.
CAPITAL TREATMENT EVENT REDEMPTION
Upon the occurrence and during the continuation of a Capital Treatment
Event, GWFC has the right to redeem the Subordinated Notes in whole (but not
in part) at any time within 90 days following the occurrence of such Capital
Treatment Event and thereby cause a mandatory redemption of the Preferred
Securities.
RIGHT TO SHORTEN MATURITY
If a Tax Event occurs which relates to the deductibility of interest payable
by GWFC on the Subordinated Notes, and if the Redemption Tax Opinion relating
to such Tax Event states that the risk of non-deductibility would be avoided
if the maturity of the Subordinated Notes were shortened, GWFC shall have the
right to shorten the maturity of the Subordinated Notes by the amount stated
in such opinion to be the minimum extent required in order to avoid such risk,
but in no event may GWFC shorten the maturity of the Subordinated Notes to a
stated maturity of less than 19 1/2 years from the date of initial issuance.
In such event, the Preferred Securities would be redeemed as of such earlier
stated maturity of the Subordinated Notes. In addition, upon the exercise of
the right to shorten the maturity of the Subordinated Notes, GWFC will no
longer have the right to redeem the Subordinated Notes prior to the new stated
maturity upon the occurrence of a Tax Event or to further shorten the maturity
of the Subordinated Notes.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Preferred Securities for all quarterly distribution periods terminating on or
prior to the date of redemption.
If the Trust gives a notice of redemption in respect of Preferred Securities
(which notice will be irrevocable), then by 12:00 noon, New York City time, on
the redemption date, and if GWFC has paid to the Property Trustee a sufficient
amount of cash in connection with the related redemption or maturity of the
Subordinated Notes, then GWFC through the Property Trustee will irrevocably
deposit with the depositary funds sufficient to pay the applicable Redemption
Price and will give the depositary irrevocable instructions and authority to
pay the Redemption Price to holders of the Preferred Securities. See "Book-
Entry Only Issuance--The Depository Trust Company" below. If notice of
redemption shall have been given and funds deposited as required, then,
immediately prior to the close of business on the date of such deposit or
redemption date, if later, distributions will cease to accrue and all rights
of holders of such Preferred Securities so called for redemption will cease,
except the right of the holders of such Preferred Securities to receive the
Redemption Price but without interest
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on such Redemption Price. In the event that any date fixed for redemption of
Preferred Securities is not a Business Day, then payment of the Redemption
Price payable on such date will be made on the next succeeding day that is a
Business Day (without any interest or other payment in respect of any such
delay), except that, if such Business Day falls in the next calendar year,
such payment will be made on the immediately preceding Business Day. In the
event that payment of the Redemption Price in respect of Preferred Securities
is improperly withheld or refused and not paid either by the Trust, or by GWFC
pursuant to the Guarantee, distributions on such Preferred Securities will
continue to accrue at the then applicable rate from the original redemption
date to the actual date of payment, in which case the actual payment date will
be considered the date fixed for redemption for purposes of calculating the
Redemption Price.
In the event that fewer than all of the outstanding Preferred Securities are
to be redeemed, the Preferred Securities will be redeemed pro rata as
described below under "Book-Entry Only Issuance--The Depository Trust Company"
below; provided, however, that if the partial redemption of the Preferred
Securities would result in the delisting of the Preferred Securities,
Preferred Securities may only be redeemed in whole.
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), GWFC or its subsidiaries may at any
time, and from time to time, purchase outstanding Preferred Securities by
tender, in the open market or by private agreement, provided that the acquiror
is not the holder of the Common Securities or the obligor under the
Subordinated Indenture.
LIQUIDATION OF TRUST AND DISTRIBUTION OF SUBORDINATED NOTES TO HOLDERS
GWFC will have the right at any time to liquidate the Trust and cause
Subordinated Notes to be distributed to the holders of the Preferred
Securities in exchange therefor upon liquidation of the Trust.
Under current United States federal income tax law, a distribution of
Subordinated Notes in exchange for Preferred Securities should not be a
taxable event to holders of the Preferred Securities. Should there be a change
in law, a change in legal interpretation, a Tax Event or other circumstances,
however, the distribution of the Subordinated Notes could be a taxable event
to holders of the Preferred Securities. See "Certain Federal Income Tax
Consequences--Receipt of Subordinated Notes or Cash Upon Liquidation of the
Trust." If GWFC elects neither to redeem the Subordinated Notes prior to
maturity nor to liquidate the Trust and distribute the Notes to holders of the
Preferred Securities in exchange therefor, the Preferred Securities will
remain outstanding until the stated maturity of the Subordinated Notes.
If GWFC elects to liquidate the Trust and thereby causes the Subordinated
Notes to be distributed to holders of the Preferred Securities in exchange
therefor upon liquidation of the Trust, GWFC shall continue to have the right
to shorten or extend the maturity of the Subordinated Notes, subject to
certain conditions as described under "Description of the Subordinated Notes--
Right to Shorten Maturity" and "--Option to Extend Maturity Date."
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each a "Liquidation"), the then
holders of the Preferred Securities will be entitled to receive out of the
assets of the Trust, after satisfaction of liabilities to creditors, an amount
equal to the aggregate of the stated liquidation amount of $25 per Preferred
Security plus accrued and unpaid distributions thereon to the date of payment
(the "Liquidation Distribution"), unless, in connection with such Liquidation,
Subordinated Notes in an aggregate stated principal or liquidation amount, as
applicable, equal to the aggregate stated liquidation amount of the Preferred
Securities, with accrued and unpaid interest or dividends, as the case may be,
equal to accrued and unpaid distributions on the Preferred Securities, have
been distributed on a pro rata basis to the holders of the Preferred
Securities in exchange for such Preferred Securities.
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If, upon any such Liquidation, the Liquidation Distribution can be paid only
in part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Preferred Securities shall be paid on a pro rata basis. The
holders of the Common Securities will be entitled to receive distributions
upon any such dissolution pro rata with the holders of the Preferred
Securities, except that if a Declaration Event of Default has occurred and is
continuing, the Preferred Securities shall have a preference over the Common
Securities with regard to such distributions.
Pursuant to the Declaration, the Trust shall terminate (i) on March 31,
2052, the expiration of the term of the Trust, (ii) upon the bankruptcy of
GWFC or the holder of the Common Securities, (iii) upon the filing of a
certificate of dissolution or its equivalent with respect to the holder of the
Common Securities or GWFC, the filing of a certificate of cancellation with
respect to the Trust, or the revocation of the charter of the holder of the
Common Securities or GWFC and the expiration of 90 days after the date of
revocation without a reinstatement thereof, (iv) upon the distribution of
Subordinated Notes upon the occurrence of a Special Event, (v) upon the entry
of a decree of a judicial dissolution of the holder of the Common Securities,
GWFC or the Trust, or (vi) upon the redemption of all the Trust Securities.
DECLARATION EVENTS OF DEFAULT
An event of default under the Subordinated Indenture (an "Indenture Event of
Default") constitutes an event of default under the Declaration with respect
to the Trust Securities (a "Declaration Event of Default"); provided that,
pursuant to the Declaration, the holder of the Common Securities will be
deemed to have waived any Declaration Event of Default with respect to the
Common Securities until all Declaration Events of Default with respect to the
Preferred Securities have been cured, waived or otherwise eliminated. Until
such Declaration Events of Default with respect to the Preferred Securities
have been so cured, waived, or otherwise eliminated, the Property Trustee will
be deemed to be acting solely on behalf of the holders of the Preferred
Securities and only the holders of the Preferred Securities will have the
right to direct the Property Trustee with respect to certain matters under the
Declaration, and therefore the Subordinated Indenture. See "Voting Rights"
below.
Upon the occurrence of a Declaration Event of Default, the Property Trustee
as sole holder of the Subordinated Notes will have the right under the
Subordinated Indenture to declare the principal of and interest on the
Subordinated Notes to be immediately due and payable. GWFC and the Trust are
each required to file annually with the Property Trustee an officer's
certificate as to its compliance with all conditions and covenants under the
Declaration.
If an Event of Default with respect to the Subordinated Notes, constituting
the failure to pay interest or principal on the Subordinated Notes on the date
such interest or principal is otherwise payable, has occurred and is
continuing, then a holder of Trust Securities may directly institute a
proceeding for enforcement of payment to such holder directly of the principal
of or interest on the Subordinated Notes having a principal amount equal to
the aggregate liquidation amount of the Trust Securities of such holder on or
after the respective due date specified in the Subordinated Notes. The holders
of Trust Securities will not be able to exercise directly any other remedy
available to the holders of the Subordinated Notes unless the Property Trustee
fails to do so.
VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture Act and
under "Description of Guarantee--Modifications of the Guarantee; Assignment"
in the accompanying Prospectus, and as otherwise required by law and the
Declaration, the holders of the Preferred Securities will have no voting
rights.
Subject to the requirement of the Property Trustee obtaining a tax opinion
in certain circumstances set forth in the last sentence of this paragraph, the
holders of a majority in aggregate liquidation amount of the Preferred
Securities, voting separately as a class, have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Property Trustee, or to direct the exercise of any trust or power conferred
upon the Property Trustee under the Declaration, including the right to direct
the Property Trustee, as
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holder of the Subordinated Notes, to (i) exercise the remedies available under
the Indenture with respect to the Subordinated Notes, (ii) waive any past
Indenture Event of Default that is waivable under the Subordinated Indenture,
or (iii) exercise any right to rescind or annul a declaration that the
principal of all the Subordinated Notes shall be due and payable; provided,
however, that, where a consent or action under the Subordinated Indenture
would require the consent or act of more than a majority of the holders in
aggregate principal amount of Subordinated Notes (a "Super-Majority") affected
thereby (or all of such holders, as applicable), only the holders of at least
such Super-Majority of the Preferred Securities (or all of such holders, as
applicable) may direct the Property Trustee to give such consent to take such
action. The Property Trustee shall notify all holders of the Preferred
Securities of any notice of default received from the Indenture Trustee with
respect to the Subordinated Notes. Such notice shall state that such Indenture
Event of Default also constitutes a Declaration Event of Default. Except with
respect to directing the time, method and place of conducting a proceeding for
a remedy, the Property Trustee shall not take any of the actions described in
clauses (i), (ii) or (iii) above unless the Property Trustee has obtained an
opinion of independent tax counsel experienced in such matters to the effect
that, as a result of such action, the Trust will not fail to be classified as
a grantor trust for United States federal income tax purposes.
In the event the consent of the Property Trustee, as the holder of the
Subordinated Notes, is required under the Subordinated Indenture with respect
to any amendment, modification or termination of the Subordinated Indenture,
the Property Trustee shall request the direction of the holders of the Trust
Securities with respect to such amendment, modification or termination and
shall vote with respect to such amendment, modification or termination as
directed by a majority in liquidation amount of the Trust Securities voting
together as a single class; provided, however, that where a consent under the
Subordinated Indenture would require the consent of a Super-Majority, the
Property Trustee may only give such consent at the direction of the holders of
at least the proportion in liquidation amount of the Trust Securities which
the relevant Super-Majority represents of the aggregate principal amount of
the Subordinated Notes outstanding. The Property Trustee shall not take any
such action in accordance with the directions of the holders of the Trust
Securities unless the Property Trustee has obtained an opinion of independent
tax counsel experienced in such matters to the affect that for the purposes of
United States federal income tax the Trust will not be classified as other
than a grantor trust.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may be
given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the holders of Trust Securities or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be
taken, to be mailed to each holder of record of Preferred Securities. Each
such notice will include a statement setting forth the following information:
(i) the date of such meeting or the date by which such action is to be taken;
(ii) a description of any resolution proposed for adoption at such meeting on
which such holders are entitled to vote or of such matter upon which written
consent is sought; and (iii) instructions for the delivery of proxies or
consents. No vote or consent of the holders of Preferred Securities will be
required for the Trust to redeem and cancel Preferred Securities or distribute
Subordinated Notes in accordance with the Declaration. The Regular Trustees
shall be obligated to call a meeting of the holders of the Preferred
Securities if directed to do so by the holders of at least 10% in liquidation
amount of the Preferred Securities requesting such meeting in accordance with
the terms of the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by GWFC or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, GWFC shall not be entitled to vote or consent and shall, for
purposes of such vote or consent, be treated as if such Preferred Securities
were not outstanding.
The procedures by which holders of Preferred Securities may exercise their
voting rights are described below. See "Book-Entry Only Issuance--The
Depository Trust Company" below.
S-16
Holders of the Preferred Securities will have no rights to appoint or remove
the Regular Trustees, who may be appointed, removed or replaced solely by GWFC
as the indirect or direct holder of all the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by a majority of the
Regular Trustees (and in certain circumstances the Property Trustee); provided
that, if any proposed amendment provides for, or the Regular Trustees
otherwise propose to effect, (i) any action that would adversely affect the
powers, preferences or special rights of the Trust Securities, whether by way
of amendment to the Declaration or otherwise, or (ii) the liquidation,
dissolution, winding-up or termination of the Trust other than pursuant to the
terms of the Declaration, then the holders of the Trust Securities voting
together as a single class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of at least 66 2/3% in liquidation amount of the Trust Securities;
provided that, if any amendment or proposal referred to in clause (i) above
would adversely affect only the Preferred Securities or the Common Securities,
then only the affected class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of 66 2/3% in liquidation amount of such class of Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified for purposes of United States federal income taxation as other
than a grantor trust, (ii) reduce or otherwise adversely affect the powers of
the Property Trustee in contravention of the Trust Indenture Act or (iii)
cause the Trust to be deemed an "investment company" which is required to be
registered under the 1940 Act.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other body, except as
described below. The Trust may, with the consent of a majority of the Regular
Trustees and without the consent of the holders of the Trust Securities,
consolidate, amalgamate, merge with or into, or be replaced by a trust
organized as such under the laws of any State; provided that, (i) such
successor entity either (x) expressly assumes all of the obligations of the
Trust under the Trust Securities or (y) substitutes for the Trust Securities
other securities having substantially the same terms as the Trust Securities
(the "Successor Securities"), so long as the Successor Securities rank the
same as the Preferred Securities rank with respect to distributions and
payments upon liquidation, redemption and maturity, (ii) GWFC expressly
acknowledges a trustee of such successor entity possessing the same powers and
duties as the Property Trustee as the holder of the Subordinated Notes, (iii)
the Preferred Securities or any Successor Securities are listed, or any
Successor Securities will be listed upon notification of issuance, on any
national securities exchange or with another organization on which the
Preferred Securities are then listed or quoted, (iv) such merger,
consolidation, amalgamation or replacement does not cause the Preferred
Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation or replacement does not adversely affect the
rights, preferences and privileges of the holders of the Trust Securities
(including any Successor Securities) in any material respect (other than with
respect to any dilution of the holders' interest in the new entity), (vi) such
successor entity has a purpose identical to that of the Trust, (vii) prior to
such merger, consolidation, amalgamation or replacement, GWFC has received an
opinion of independent counsel to the Trust experienced in such matters to the
effect that, (A) such merger, consolidation, amalgamation or replacement does
not adversely affect the rights, preferences and privileges of the holders of
the Trust Securities (including any Successor Securities) in any material
respect (other than with respect to any dilution of the holders' interest in
the new entity), and (B) following such merger, consolidation, amalgamation or
replacement, neither the Trust nor such successor entity will be required to
register as an investment company under the 1940 Act and (viii) GWFC
guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee and the Common
Securities guarantee (as defined in the accompanying Prospectus).
Notwithstanding the foregoing, the Trust shall not, except with the consent of
holders of 100% in liquidation amount of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by any other entity
S-17
or permit any other entity to consolidate, amalgamate, merge with or into, or
replace it, if such consolidation, amalgamation, merger or replacement would
cause the Trust or such successor entity to be classified as other than a
grantor trust for United States federal income tax purposes.
There are no provisions which afford the holders of the Preferred Securities
protection in the event of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction involving GWFC. There are also no
provisions which require the repurchase of the Preferred Securities upon a
change in control of GWFC.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as initial securities
depositary for the Preferred Securities. The Preferred Securities will be
issued only as fully-registered securities registered in the name of Cede &
Co. (DTC's nominee). One or more fully-registered global Preferred Securities
certificates, representing the total aggregate number of Preferred Securities,
will be issued to or on behalf of DTC.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in the global Preferred
Securities as represented by a global certificate.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). DTC holds securities
that its participants ("Participants") deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations ("Direct Participants"). DTC is owned by a
number of its Direct Participants and by the New York Stock Exchange, the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others, such as
securities brokers and dealers, banks and trust companies that clear
transactions through or maintain a direct or indirect custodial relationship
with a Direct Participant either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Securities and Exchange Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser
of each Preferred Security ("Beneficial Owner") is in turn to be recorded on
the Direct and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchases, but Beneficial
Owners are expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the
Direct or Indirect Participants through which the Beneficial Owners purchased
Preferred Securities. Transfers of ownership interests in the Preferred
Securities are to be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in the Preferred
Securities, except in the event that use of the book-entry system for the
Preferred Securities is discontinued.
To facilitate subsequent transfers, all the Preferred Securities deposited
by Participants with DTC are registered in the name of DTC's nominee, Cede &
Co. The deposit of Preferred Securities with DTC and their registration in the
name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Preferred Securities. DTC's
records reflect only the identity of the Direct Participants to whose accounts
such Preferred Securities are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
S-18
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements that may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, DTC will reduce the amount of the
interest of each Direct Participant in such Preferred Securities in accordance
with its procedures; provided that if, as a result of such redemption, Direct
Participants would hold fractional interests in the Preferred Securities, DTC
will adjust the amount of the interest of each Direct Participant to be
redeemed to avoid such fractional interest.
Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to Preferred Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to the Trust as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co. consenting or
voting rights to those Direct Participants to whose accounts the Preferred
Securities are credited on the record date (identified in a listing attached
to the Omnibus Proxy). GWFC and the Trust believe that the arrangements among
DTC, Direct and Indirect Participants, and Beneficial Owners will enable the
Beneficial Owners to exercise rights equivalent in substance to the rights
that can be directly exercised by a holder of a beneficial interest in the
Trust.
Distribution payments on the Preferred Securities will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment
date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payments on such
payment date. Payments by participants to Beneficial Owners will be governed
by standing instructions and customary practices, as is the case with
securities held for the account of customers in bearer form or registered in
"street name," and such payments will be the responsibility of such
Participant and not of DTC, the Trust or GWFC, subject to any statutory or
regulatory requirements to the contrary that may be in effect from time to
time. Payment of distributions to DTC is the responsibility of the Trust;
disbursement of such payments to the Beneficial Owners is the responsibility
of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner in a global Preferred Security
certificate will not be entitled to receive physical delivery of Preferred
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Preferred Securities.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
the Trust. Under such circumstances, in the event that a successor securities
depositary is not obtained, Preferred Securities certificates are required to
be printed and delivered. Additionally, the Regular Trustees (with the consent
of GWFC) may decide to discontinue use of the system of book-entry transfers
through DTC (or any successor depositary) with respect to the Preferred
Securities. In that event, certificates for the Preferred Securities will be
printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that GWFC and the Trust believe to be reliable,
but neither GWFC nor the Trust takes responsibility for the accuracy thereof.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a default with respect to
the Trust Securities, undertakes to perform only such duties as are
specifically set forth in the Declaration and, after default, shall exercise
the same degree of care as a prudent individual would exercise in the conduct
of his or her own affairs. Subject to such provisions, the Property Trustee is
under no obligation to exercise any of the powers vested in it by the
Declaration at the request of any holder of Preferred Securities, unless
offered reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby.
S-19
PAYING AGENT
In the event that the Preferred Securities do not remain in book-entry only
form, the following provisions would apply:
The Property Trustee will act as paying agent, and may designate an
additional or substitute paying agent at any time.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of the Trust, but upon payment (with the giving of such
indemnity as the Trust or GWFC may require) in respect of any tax or other
government charges that may be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of Preferred Securities after such Preferred Securities have been
called for redemption.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to operate the Trust in
such a way so that the Trust will not be required to register as an
"investment company" under the 1940 Act or be characterized as other than a
grantor trust for United States federal income tax purposes. GWFC is
authorized and directed to conduct its affairs so that the Subordinated Notes
will be treated as indebtedness of GWFC for United States federal income tax
purposes. In this connection, GWFC and the Regular Trustees are authorized to
take any action, not inconsistent with applicable law, the certificate of
trust of the Trust or the certificate of incorporation of GWFC, as applicable,
that each of GWFC and the Regular Trustees determines in its discretion to be
necessary or desirable to achieve such end, as long as such action does not
adversely affect the interests of the holders of the Preferred Securities.
Holders of the Preferred Securities have no preemptive rights.
DESCRIPTION OF THE SUBORDINATED NOTES
Set forth below is a description of the specific terms of the Subordinated
Notes in which the Trust will invest the proceeds from the issuance and sale
of the Trust Securities. This description supplements the description of the
general terms and provisions of the Subordinated Notes set forth in the
accompanying Prospectus under the caption "Description of Debt Securities" and
in particular "Description of Debt Securities--Particular Terms of the
Subordinated Debt Securities Issued to the Trust." The following description
of the material terms and provisions of the Subordinated Notes does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the description in the accompanying Prospectus and the
Indenture, dated as of September 12, 1990, as amended and supplemented by a
First Supplemental Indenture, dated April 30, 1993, a Second Supplemental
Indenture, dated as of December 6, 1995, and the Third Supplemental Indenture,
dated as of January , 1997 (as amended and supplemented, the "Subordinated
Indenture"), between the Company and Harris Trust and Savings Bank, as
Indenture Trustee, filed as an exhibit to the Registration Statement of which
this Prospectus Supplement and the accompanying Prospectus form a part.
Certain capitalized terms used herein are defined in the Subordinated
Indenture.
Under certain circumstances, Subordinated Notes may be distributed to the
holders of the Trust Securities in liquidation of the Trust. See "Description
of the Offered Preferred Securities--Special Event Redemption or Distribution"
and "--Liquidation of Trust and Distribution of Subordinated Notes to
Holders."
S-20
If the Subordinated Notes are distributed to the holders of the Preferred
Securities, GWFC will use its best efforts to have the Subordinated Notes
listed on the New York Stock Exchange or on such other exchange on which the
Preferred Securities are then listed or quoted.
The Subordinated Notes will not be savings accounts or deposits and will not
be insured by the FDIC, the United States or any agency or fund of the United
States.
GENERAL
The Subordinated Notes will be issued as unsecured debt under the
Subordinated Indenture. The Subordinated Notes will be limited in aggregate
principal amount to $ , ($ , if the Underwriters' over-allotment option is
exercised in full) such amount being the sum of the aggregate stated
liquidation amount of the Preferred Securities and the capital contributed by
GWFC in exchange for the Common Securities (the "GWFC Payment").
The Subordinated Notes are not subject to a sinking fund provision. The
entire principal amount of the Subordinated Notes will mature and become due
and payable, together with any accrued and unpaid interest thereon including
Compound Interest (as hereinafter defined) and Additional Interest (as
hereinafter defined), if any, on March 31, 2027, subject to the election of
GWFC to shorten the maturity as described under "Right to Shorten Maturity"
below or extend the scheduled maturity date of the Subordinated Notes to a
date not later than March 31, 2046, which election to extend the maturity date
is subject to GWFC's satisfying certain financial covenants. See "Option to
Extend Maturity Date" below.
If Subordinated Notes are distributed to holders of Preferred Securities in
liquidation of such holders' interests in the Trust, such Subordinated Notes
will initially be issued as a Global Security (as defined below). As described
herein, under certain limited circumstances, Subordinated Notes may be issued
in certificated form in exchange for a Global Security (as defined below). See
"Book-Entry and Settlement" below. In the event that Subordinated Notes are
issued in certificated form, such Subordinated Notes will be in denominations
of $25 and integral multiples thereof and may be transferred or exchanged at
the offices described below. Payments on Subordinated Notes issued as a Global
Security will be made to DTC, a successor depositary or, in the event that no
depositary is used, to a Paying Agent for the Subordinated Notes. In the event
Subordinated Notes are issued in certificated form, principal and interest
will be payable, the transfer of the Subordinated Notes will be registrable
and Subordinated Notes will be exchangeable for Subordinated Notes of other
denominations of a like aggregate principal amount at the corporate trust
office of the Indenture Trustee; provided that, payment of interest may be
made at the option of GWFC by check mailed to the address of the persons
entitled thereto.
INTEREST
Each Subordinated Note shall bear interest at the rate of % per annum (the
"Original Coupon Rate") from the original date of issuance, payable quarterly
in arrears on March 31, June 30, September 30 and December 31 of each year
(each, an "Interest Payment Date"), commencing March 31, 1997, to the person
in whose name such Subordinated Note is registered, subject to certain
exceptions, at the close of business on the Business Day next preceding such
Interest Payment Date. In the event the Subordinated Notes shall not continue
to remain in book-entry only form, GWFC shall have the right to select such
record dates which shall be not less than one Business Day prior to each
Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period will be computed on the basis
of the actual number of days elapsed per 30-day month. In the event that any
date on which interest is payable on the Subordinated Notes is not a Business
Day, then payment of the interest payable on such date will be made on the
next succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date.
S-21
If at any time the Trust shall be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in
any such case, GWFC will pay as additional interest ("Additional Interest")
such additional amounts as shall be required so that the net amounts received
and retained by the Trust after paying such taxes, duties, assessments or
other governmental changes will be not less than the amounts the Trust would
have received had no such taxes, duties, assessments or other governmental
charges been imposed. This right shall not accrue to any holder of the
Subordinated Notes other than the Trust.
RIGHT TO SHORTEN MATURITY
If a Tax Event occurs which relates to the deductibility of interest payable
by GWFC on the Subordinated Notes, and if the Redemption Tax Opinion relating
to such Tax Event states that the risk of non-deductibility would be avoided
if the maturity of the Subordinated Notes were shortened, GWFC shall have the
right to shorten the maturity of the Subordinated Notes by the amount stated
in such opinion to be the minimum extent required in order to avoid such risk,
but in no event may GWFC shorten the maturity of the Subordinated Notes to a
stated maturity of less than 19 1/2 years from the date of initial issuance.
In such event, the Preferred Securities would be redeemed as of such earlier
stated maturity of the Subordinated Notes. In addition, upon the exercise of
the right to shorten the maturity of the Subordinated Notes, GWFC will no
longer have the right to redeem the Subordinated Notes prior to the new stated
maturity upon the occurrence of a Tax Event or to further shorten the maturity
of the Subordinated Notes.
OPTION TO EXTEND MATURITY DATE
The maturity date of the Subordinated Notes is March 31, 2027 (the
"Scheduled Maturity Date"). GWFC, however, may, before the Scheduled Maturity
Date, extend such maturity date no more than one time, for up to an additional
19 years from the Scheduled Maturity Date, provided that (a) GWFC is not in
bankruptcy or otherwise insolvent, (b) GWFC is not in default on the
Subordinated Notes, (c) GWFC has made timely payments on the Subordinated
Notes for the immediately preceding 18 months without deferrals, (d) the Trust
is not in arrears on payments of distributions on the Preferred Securities,
and (e) the Subordinated Notes are rated in one of the four highest rating
categories by either Standard & Poor's Rating Group, Moody's Investors
Service, Inc., Fitch Investor Services, Inc., Duff & Phelps Credit Rating
Company or any other nationally recognized statistical rating organization.
Pursuant to the Declaration, the Regular Trustees are required to give notice
of GWFC's election to extend the Scheduled Maturity Date to the holders of the
Preferred Securities.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
GWFC shall have the right at any time, and from time to time, during the
term of the Subordinated Notes to defer payments of interest by extending the
interest payment period for a period not exceeding 20 consecutive quarters. To
the extent permitted by applicable law, interest, the payment of which has
been deferred during such Extension Period, will bear interest at the
applicable Coupon Rate, compounded quarterly ("Compound Interest") during the
term of such Extension Period. At the end of any such Extension Period, GWFC
shall pay all interest then accrued and unpaid (including any Compound
Interest and Additional Interest); provided, that, during any such Extension
Period, (a) GWFC shall not, and shall cause any subsidiary of GWFC that is not
a wholly owned subsidiary of GWFC not to, declare or pay any dividend on, make
any distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock or the capital
stock of any such subsidiary, and (b) GWFC shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities (including guarantees) issued by GWFC which rank pari passu
with or junior to the Subordinated Notes; provided, however, that the
foregoing restriction (a) does not apply to any stock dividend paid by GWFC,
or any of its subsidiaries, where the dividend stock is the same stock as that
on which the dividend is being paid. Prior to the termination of any such
Extension Period, GWFC may further defer payments of interest by extending the
interest payment period, provided that such Extension Period together with all
such previous and further extensions thereof may not exceed 20 consecutive
quarters or extend beyond the maturity of the Subordinated Notes. Upon the
termination of any Extension Period
S-22
and the payment of all amounts then due, GWFC may select a new Extension
Period, as if no Extension Period had previously been declared, subject to the
above requirements. No interest during an Extension Period, except at the end
thereof, shall be due and payable. GWFC has no intention of exercising its
rights to defer payments of interest by extending the interest payment period
on the Subordinated Notes and considers it unlikely that it will exercise that
right in the future. If the Property Trustee shall be the sole holder of the
Subordinated Notes, GWFC shall give the Regular Trustees and the Property
Trustee notice of its selection of such Extension Period one Business Day
prior to the earlier of (i) the date distributions on the Preferred Securities
are payable or (ii) the date the Regular Trustees are required to give notice
to the New York Stock Exchange or other applicable self-regulatory
organization or to holders of the Preferred Securities of the record date or
the date such distribution is payable, but in any event no less than one
Business Day prior to such record date. The Regular Trustees shall give notice
of GWFC's selection of such Extension Period to the holders of the Preferred
Securities. If the Property Trustee shall not be the sole holder of the
Subordinated Notes, GWFC shall give the holders of the Subordinated Notes
notice of its selection of such Extension Period ten Business Days prior to
the earlier of (i) the Interest Payment Date or (ii) the date GWFC is required
to give notice to the New York Stock Exchange or other applicable self-
regulatory organization or to holders of the Subordinated Notes of the record
or payment date of such related interest payment.
OPTIONAL REDEMPTION
GWFC shall have the right to redeem the Subordinated Notes, in whole or in
part, from time to time, on or after March 31, 2002, or at any time in certain
circumstances upon the occurrence of a Tax Event or in whole (but not in part)
for a limited time upon the occurrence of a Capital Treatment Event as
described under "Description of the Offered Preferred Securities--Special
Event Redemption or Distribution" and "--Capital Treatment Event Redemption,"
upon not less than 30 nor more than 60 days' notice, at a Redemption Price
equal to 100% of the principal amount to be redeemed plus any accrued and
unpaid interest, including Compound Interest and Additional Interest, if any,
to the redemption date. If a partial redemption of the Preferred Securities
resulting from a partial redemption of the Subordinated Notes would result in
the delisting of the Preferred Securities, GWFC may only redeem the
Subordinated Notes in whole.
SUBORDINATION
The Subordinated Indenture provides that the Subordinated Notes are
subordinated and junior in right of payment to all present and future Senior
Indebtedness of GWFC. See "Description of Debt Securities--Subordination of
Subordinated Debt Securities" in the accompanying Prospectus. The Subordinated
Notes will also be subordinated to all other subordinated debt (unless
otherwise stated) of GWFC, other than subordinated debt issued to trusts
similar to the Trust. The Subordinated Indenture does not limit the aggregate
amount of Senior Indebtedness which may be issued by GWFC. As of September 30,
1996, Senior Indebtedness of GWFC aggregated approximately $673 million. In
addition, because GWFC is a holding company, its obligations under the
Subordinated Notes will be effectively subordinated to all existing and future
liabilities of its subsidiaries. At September 30, 1996, such subsidiaries had
total liabilities of approximately $39.9 billion.
CERTAIN COVENANTS
If (i) there shall have occurred any event that would constitute an Event of
Default under the Subordinated Indenture or (ii) GWFC shall be in default with
respect to its payment of any obligations under the Guarantee, then (a) GWFC
shall not, and shall cause any subsidiary of GWFC that is not a wholly owned
subsidiary of GWFC not to, declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase or make a liquidation
payment with respect to, any of its capital stock or the capital stock of any
such subsidiary, and (b) GWFC shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities (including guarantees) issued by GWFC which rank pari passu with or
junior to the Subordinated Notes; provided, however, that the foregoing
restriction (a) does not apply to any stock dividend paid by GWFC, or any of
its subsidiaries, where the dividend stock is the same stock as that on which
the dividend is being paid.
S-23
If GWFC shall have given notice of its election of an Extension Period as
provided in the Subordinated Indenture and such period, or any extension
thereof, shall be continuing, then (a) GWFC shall not, and shall cause any
subsidiary of GWFC that is not a wholly owned subsidiary of GWFC not to,
declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase or acquire, or make a liquidation payment with respect to,
any of its capital stock or the capital stock of any such subsidiary, and (b)
GWFC shall not make any payment of interest, principal or premium, if any, on
or repay, repurchase or redeem any debt securities (including guarantees)
issued by GWFC which rank pari passu with or junior to the Subordinated Notes;
provided, however, that the foregoing restriction (a) does not apply to any
stock dividend paid by GWFC, or any of its subsidiaries, where the dividend
stock is the same stock as that on which the dividend is being paid.
For so long as the Trust Securities remain outstanding, GWFC will covenant
(i) to directly or indirectly maintain 100% ownership of the Common Securities
of the Trust; provided, however, that any permitted successor of GWFC under
the Subordinated Indenture may succeed to GWFC's ownership of such Common
Securities, and (ii) to use its reasonable efforts to cause the Trust (a) to
remain a statutory business trust, except in connection with the distribution
of Subordinated Notes to the holders of Trust Securities in liquidation of the
Trust, the redemption of all of the Trust Securities of the Trust, or certain
mergers, consolidations or amalgamations, each as permitted by the
Declaration, and (b) to otherwise continue to be classified as a grantor trust
for United States federal income tax purposes.
INDENTURE EVENTS OF DEFAULT
An Indenture Event of Default is: (a) the failure to pay principal of any of
the Subordinated Notes when due; provided, however, that a valid extension by
GWFC of the maturity for the Subordinated Notes shall not constitute a default
in the payment for this purpose; (b) the failure to pay any interest on any of
the Subordinated Notes when due, continued for 10 days; provided, however,
that a valid extension by GWFC of the interest payment period for the
Subordinated Notes shall not constitute a default in the payment for this
purpose; (c) failure to perform any other covenant of GWFC in the Subordinated
Indenture (other than a covenant included in the Subordinated Indenture solely
for the benefit of one or more series of Debt Securities other than the
Subordinated Notes), continued for 60 days after written notice as provided in
the Subordinated Indenture; (d) certain events of bankruptcy, insolvency,
conservatorship, receivership or reorganization; (e) a default under any
mortgage, indenture or instrument evidencing any indebtedness for borrowed
money by GWFC (including the Subordinated Indenture) resulting in an aggregate
principal amount exceeding $10,000,000 becoming or being declared due and
payable prior to its maturity date or constituting a failure to pay at a
maturity an aggregate principal amount exceeding $10,000,000 unless such
acceleration has been rescinded or annulled or such indebtedness has been
discharged within 10 days after written notice to GWFC by the Indenture
Trustee or holders of at least 25% in aggregate principal amount of the
outstanding Subordinated Notes declaring a default or GWFC is contesting the
validity of such default in good faith by appropriate proceedings; and (f) the
voluntary or involuntary liquidation, dissolution, winding-up or termination
of the Trust to which (or to the Trustee of the Trust to which) Subordinated
Notes were issued in connection with the issuance of the Trust Securities by
the Trust, except in connection with the distribution of the Subordinated
Notes to the holders of Trust Securities in liquidation of the Trust, the
redemption of all the Trust Securities, or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration.
If any Indenture Event of Default shall occur and be continuing, the
Property Trustee, as the holder of the Subordinated Notes, will have the right
to declare the principal of and the interest on the Subordinated Notes
(including any Compound Interest and Additional Interest, if any) and any
other amounts payable under the Subordinated Indenture to be forthwith due and
payable and to enforce its other rights as a creditor with respect to the
Subordinated Notes. See "Description of Debt Securities--Events of Default" in
the accompanying Prospectus for a description of the Events of Default. An
Indenture Event of Default also constitutes a Declaration Event of Default.
The holders of Preferred Securities in certain circumstances have the right to
direct the Property Trustee to exercise its rights as the holder of the
Subordinated Notes. See "Description of the Offered Preferred Securities--
Declaration Events of Default" and "--Voting Rights."
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BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Preferred Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of the Trust
as a result of the occurrence of a Special Event, the Subordinated Notes will
be issued in the form of one or more global certificates (each a "Global
Security") registered in the name of the depositary or its nominee. Except
under the limited circumstances described below, Subordinated Notes
represented by the Global Security will not be exchangeable for, and will not
otherwise be issuable as, Subordinated Notes in definitive form. The Global
Securities described above may not be transferred except by the depositary to
a nominee of the depositary or by a nominee of the depositary to the
depositary or another nominee of the depositary or to a successor depositary
or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Subordinated
Notes in definitive form and will not be considered the holders (as defined in
the Subordinated Indenture) thereof for any purpose under the Subordinated
Indenture, and no Global Security representing Subordinated Notes shall be
exchangeable, except for another Global Security of like denomination and
tenor to be registered in the name of the depositary or its nominee or to a
successor depositary or its nominee. Accordingly, each Beneficial Owner must
rely on the procedures of the depositary or 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 holder under the Subordinated
Indenture.
THE DEPOSITARY
If Subordinated Notes are distributed to holders of Preferred Securities in
liquidation of such holders' interests in the Trust, DTC will act as
securities depositary for the Subordinated Notes. For a description of DTC and
the specific terms of the depositary arrangements, see "Description of the
Offered Preferred Securities--Book-Entry Only Issuance--The Depository Trust
Company." As of the date of this Prospectus Supplement, the description herein
of DTC's book-entry system and DTC's practices as they relate to purchases,
transfers, notices and payments with respect to the Preferred Securities apply
in all material respects to any debt obligations represented by one or more
Global Securities held by DTC. GWFC may appoint a successor to DTC or any
successor depositary in the event DTC or such successor depositary is unable
or unwilling to continue as a depositary for the Global Securities.
None of GWFC, the Trust, the Indenture Trustee, any paying agent and any
other agent of GWFC or the Indenture Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in a Global Security for such
Subordinated Notes or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
A Global Security shall be exchangeable for Subordinated Notes registered in
the names of persons other than the depositary or its nominee only if (i) the
depositary notifies GWFC that it is unwilling or unable to continue as a
depositary for such Global Security and no successor depositary shall have
been appointed, (ii) the depositary, at any time, ceases to be registered to
act as such depositary and no successor depositary shall have been appointed,
or (iii) GWFC, in its sole discretion, determines that such Global Security
shall be so exchangeable. Any Global Security that is exchangeable pursuant to
the preceding sentence shall be exchangeable for Subordinated Notes registered
in such names as the depositary shall direct. It is expected that such
instructions will be based upon directions received by the depositary from its
Participants with respect to ownership of beneficial interests in such Global
Security.
MISCELLANEOUS
The Subordinated Indenture will provide that GWFC, in its capacity as issuer
of the Subordinated Notes, will pay all costs, expenses, debts and obligations
of the Trust other than with respect to the Trust Securities.
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EFFECT OF OBLIGATIONS UNDER THE
SUBORDINATED NOTES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is to issue
the Trust Securities evidencing undivided beneficial interests in the assets
of the Trust, and to invest the proceeds from such issuance and sale in the
Subordinated Notes.
As long as payments of interest and other payments are made when due on the
Subordinated Notes, such payments will be sufficient to cover distributions
and payments due on the Trust Securities primarily because (i) the aggregate
principal amount of Subordinated Notes will be equal to the sum of the
aggregate stated liquidation amount of the Trust Securities; (ii) the interest
rate and payment dates on the Subordinated Notes will match the distribution
rate and distribution and other payment dates for the Preferred Securities;
(iii) GWFC shall pay for all costs, expenses, debts and obligations of the
Trust (other than with respect to the Trust Securities); and (iv) the
Declaration provides that the Regular Trustees shall not take any action, or
cause or permit the Trust to, among other things, engage in any activity, that
is not consistent with the purposes of the Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor
are available) are guaranteed by GWFC as and to the extent set forth under
"Description of Guarantee" in the accompanying Prospectus. If GWFC does not
make interest payments on the Subordinated Notes purchased by the Trust, it is
expected that the Trust will not have sufficient funds to pay distributions on
the Preferred Securities. The Guarantee does not apply to any payment of
distributions unless and until the Trust has sufficient funds for the payment
of such distributions.
If GWFC fails to make interest or other payments on the Subordinated Notes
when due (taking into account any Extension Period), the Declaration provides
a mechanism whereby the holders of the Preferred Securities, using the
procedures described in "Description of the Offered Preferred Securities--
Voting Rights," may direct the Property Trustee to enforce its rights under
the Subordinated Notes, including proceeding directly against GWFC to enforce
the Subordinated Notes.
If GWFC fails to make payments under the Guarantee, the Guarantee provides a
mechanism whereby the holders of the Preferred Securities may direct the
Guarantee Trustee to enforce its rights thereunder. Any holder of Preferred
Securities may institute a legal proceeding directly against GWFC to enforce
the Guarantee Trustee's rights under the Guarantee, without first instituting
a legal proceeding against the Trust, the Guarantee Trustee or any other
person or entity.
The obligations of GWFC under the Declaration, the Guarantee, the
Subordinated Notes and the Subordinated Indenture, taken together, provide a
full, irrevocable and unconditional guarantee on a subordinated basis by GWFC
of payments due on the Preferred Securities. See "Description of Guarantee--
General" in the accompanying Prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following summary of certain United States federal income tax
consequences of the purchase, ownership and disposition of the Preferred
Securities is based upon laws, regulations, rulings and decisions now in
effect, all of which are subject to change (with possible retroactive effect)
and possible differing interpretations. This discussion deals only with
Preferred Securities held as capital assets and (i) does not purport to deal
with persons in special tax situations, such as financial institutions,
insurance companies, regulated investment companies, dealers in securities or
currencies, or persons whose functional currency is not the United States
dollar, (ii) does not include any description of the tax laws of any state or
local government or of any foreign government that may be applicable to the
Preferred Securities, and (iii) does not deal with persons holding Preferred
Securities as part of a position in a "straddle" or as part of a "hedging,"
"conversion" or
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other integrated investment transaction for federal income tax purposes. This
discussion also does not deal with holders other than the original purchasers
of the Preferred Securities or with holders who are not U.S. Holders (as
defined below). Persons considering the purchase of the Preferred Securities
should consult their tax advisors concerning the application of United States
federal income tax laws to their particular situations as well as any
consequences of the purchase, ownership and disposition of the Preferred
Securities arising under the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a
Preferred Security that is for United States federal income tax purposes (i) a
citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, (iii) an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source, or (iv) any other person whose income or gain in respect of a
Preferred Security is effectively connected with the conduct of a United
States trade or business. As used herein, the term "non-U.S. Holder" means a
holder of a Preferred Security that is not a U.S. Holder.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Preferred Securities, O'Melveny &
Myers LLP, special tax counsel to GWFC and the Trust, has rendered its opinion
to the effect that, under then current law and assuming full compliance with
the terms of the Declaration and the Subordinated Indenture (and certain other
documents), and based on certain facts and assumptions contained in such
opinion, the Trust will be classified for United States federal income tax
purposes as a grantor trust and not as an association taxable as a
corporation. Accordingly, for United States federal income tax purposes, each
U.S. Holder of a Preferred Security will generally be considered the owner of
an undivided interest in the Subordinated Notes, and each U.S. Holder will be
required to include in its gross income its pro rata share of the interest
income, including original issue discount (as described below), paid or
accrued with respect to its undivided interest in those Subordinated Notes
whether or not cash is actually distributed to the U.S. Holder. See "Interest
Income and Original Issue Discount."
CLASSIFICATION OF THE SUBORDINATED NOTES
In connection with the issuance of the Subordinated Notes, O'Melveny & Myers
LLP, special tax counsel to GWFC and the Trust, will render its opinion
generally to the effect that, under then current United States federal income
tax law and assuming full compliance with the terms of the Indenture (and
certain other documents), and based on certain facts and assumptions contained
in such opinion, the Subordinated Notes held by the Trust will be classified
for United States federal income tax purposes as indebtedness of GWFC. By
acceptance of a Preferred Security, each holder covenants to treat the
Subordinated Notes as indebtedness and the Preferred Securities as evidence of
an indirect beneficial ownership in the Subordinated Notes.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under recently issued Treasury regulations applicable to debt instruments
issued on or after August 13, 1996 (the "Regulations"), a "remote" contingency
that stated interest will not be timely paid will be ignored in determining
whether a debt instrument is issued with original issue discount ("OID"). GWFC
believes that the likelihood of its exercising its option to defer payments is
remote. Based on the foregoing, GWFC believes that the Subordinated Notes will
not be considered to be issued with OID at the time of their original issuance
and, accordingly, a holder of a Preferred Security should include in gross
income such holder's allocable share of interest on the Subordinated Notes.
Under the Regulations, if GWFC exercised its option to defer any payment of
interest, the Subordinated Notes would at that time be treated as issued with
OID, and all stated interest on the Subordinated Notes would thereafter be
treated as OID as long as the Subordinated Notes remained outstanding. In such
event, all of a holder's taxable interest income with respect to the
Subordinated Notes would be accounted for as OID on an
S-27
economic accrual basis regardless of such holder's method of tax accounting,
and actual distributions of stated interest would not be reported as taxable
income. Consequently, a holder would be required to include in gross income
OID even though GWFC would not make any actual cash payments during an
Extension Period.
The Regulations have not been addressed in any rulings or other
interpretations by the Internal Revenue Service (the"IRS"), and it is possible
that the IRS could take a position contrary to the interpretation herein.
Subsequent uses of the term "interest" in this summary include income in the
form of OID.
Corporate U.S. Holders of Preferred Securities will not be entitled to a
dividends received deduction with respect to any income recognized with
respect to the Preferred Securities.
MARKET DISCOUNT AND BOND PREMIUM
U.S. Holders of Preferred Securities, other than U.S. Holders who purchased
the Preferred Securities for a price equal to their par amount plus accrued
interest upon their original issuance, may be considered to have acquired
their undivided interests in the Subordinated Notes at a market discount,
premium or acquisition premium as such phrases are defined for United States
federal income tax purposes. Such U.S. Holders are advised to consult their
tax advisors as to the income tax consequences of the acquisition, ownership
and disposition of the Preferred Securities.
RECEIPT OF SUBORDINATED NOTES OR CASH UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under the captions "Description of
the Offered Preferred Securities--Special Event Redemption or Distribution,"
and "--Liquidation of Trust and Distribution of Subordinated Notes to
Holders," Subordinated Notes may be distributed to U.S. Holders in exchange
for the Preferred Securities and in liquidation of the Trust. Under current
law, such a distribution, for United States federal income tax purposes, would
be treated as a non-taxable event to each U.S. Holder, and each U.S. Holder
would receive an aggregate tax basis in the Subordinated Notes equal to such
U.S. Holder's aggregate tax basis in its Preferred Securities. A U.S. Holder's
holding period in the Subordinated Notes so received in liquidation of the
Trust would include the period during which the Preferred Securities were held
by such U.S. Holder.
If, however, the liquidation of the Trust were to occur because the Trust is
subject to United States federal income tax with respect to income accrued or
received on the Subordinated Notes, the distribution of the Subordinated Notes
to holders of Preferred Securities by the Trust would be a taxable event to
the Trust and each holder, and the holder would recognize gain or loss as if
the holder had exchanged its Preferred Securities for the Subordinated Notes
it received upon the liquidation of the Trust. A holder of Preferred
Securities will include interest in income in respect of Subordinated Notes
received from the Trust in the manner described above under "Interest Income
and Original Issue Document."
Under certain circumstances described herein (see "Description of the
Offered Preferred Securities"), the Subordinated Notes may be redeemed for
cash and the proceeds of such redemption distributed to U.S. Holders in
redemption of their Preferred Securities. Under current law, such a redemption
would, for United States federal income tax purposes, constitute a taxable
disposition of the redeemed Preferred Securities, and a U.S. Holder would
recognize gain or loss as if it sold such redeemed Preferred Securities for
cash. See "Sales of Preferred Securities" below.
SALES OF PREFERRED SECURITIES
A holder that sells (including a redemption for cash) Preferred Securities
will recognize gain or loss equal to the difference between its adjusted tax
basis in the Preferred Securities and the amount realized on the sale of such
Preferred Securities. Assuming that GWFC does not exercise its option to defer
payment of interest on the Subordinated Notes, and the Preferred Securities
are not considered issued with OID, a holder's adjusted tax basis in the
Preferred Securities generally will be its initial purchase price. If the
Subordinated Notes are deemed
S-28
to be issued with OID as a result of GWFC's deferral of any interest payment
or otherwise, a holder's tax basis in the Preferred Securities generally will
be its initial purchase price, increased by OID previously includible in such
holder's gross income to the date of disposition and decreased by
distributions or other payments received on the Preferred Securities since and
including the date of the first Extension Period. Such gain or loss generally
will be a capital gain or loss (except to the extent any amount realized is
treated as a payment of accrued interest with respect to such holder's pro
rata share of the Subordinated Notes required to be included in income) and
generally will be long-term capital gain or loss if the Preferred Securities
have been held for more than one year.
Should GWFC exercise its option to defer any payment of interest on the
Subordinated Notes, the Preferred Securities may trade at a price that does
not accurately reflect the value of accrued but unpaid interest with respect
to the underlying Subordinated Notes. In the event of such a deferral, a
holder who disposes of its Preferred Securities between record dates for
payments of distributions thereon will be required to include in income as
ordinary income accrued but unpaid interest on the Subordinated Notes to the
date of disposition as OID and to add such amount to its adjusted tax basis in
its pro rata share of the underlying Subordinated Notes deemed disposed of. To
the extent the selling price is less than the holder's adjusted tax basis,
such holder will recognize a capital loss. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes.
INFORMATION REPORTING TO U.S. HOLDERS
Income on the Preferred Securities will be reported to U.S. Holders on Forms
1099, which forms should be mailed to U.S. Holders of Preferred Securities by
January 31 following each calendar year.
BACKUP WITHHOLDING
Backup withholding of the United States federal income tax at a rate of 31%
may apply to payments made in respect of Subordinated Notes to registered
owners who are not "exempt recipients" or who fail to comply with certain
procedures for providing certain identifying information (such as the
registered owner's taxpayer identification number) in the required manner.
Upon the sale of Subordinated Notes to (or through) certain brokers, the
broker must withhold 31% of the entire purchase price, unless either (i) the
broker determines that the seller is an exempt recipient or (ii) the seller
provides, in the required manner, certain identifying information.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States federal income tax provided the required
information is furnished to the Internal Revenue Service.
POSSIBLE TAX LAW CHANGES
On March 19, 1996, President Clinton proposed the Bill, which would have,
among other things, generally denied corporate issuers a deduction for
interest in respect of certain debt obligations, such as the Subordinated
Notes issued on or after December 7, 1995. On March 29, 1996, Senate Finance
Committee Chairman William V. Roth, Jr. and House Ways and Means Committee
Chairman Bill Archer issued the joint statement, which indicated their intent
that the Bill, if adopted by either of the tax-writing committees of Congress,
would have an effective date that is no earlier than the date of "appropriate
Congressional action." In addition, Senator Daniel Patrick Moynihan and
Representatives Sam M. Gibbons and Charles B. Rangel wrote the Democrat
Letters, which supported the view expressed in the Joint Statement. Based upon
the Joint Statement, it is expected that if the Proposed Legislation were to
be enacted, such legislation would not apply to the Subordinated Notes. There
can be no assurances, however, that the effective date guidance contained in
the Joint Statement and Democrat Letters will be incorporated into the Bill,
if enacted, or that other legislation enacted after the date hereof will not
otherwise adversely affect the ability of GWFC to deduct the interest payable
on the Subordinated Notes. Accordingly, there can be no assurance that a Tax
Event will not occur. See "Description of the Offered Preferred Securities--
Special Event Redemption or Distribution" and "Risk Factors--Possible Tax Law
Changes Affecting the Preferred Securities."
S-29
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT
TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF
THE PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR
OTHER TAX LAWS.
CERTAIN ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (a "Plan"), should consider the fiduciary standards of ERISA in the
context of the Plan's particular circumstances before authorizing an
investment in the Preferred Securities. Accordingly, among other factors, the
fiduciary should consider whether the investment would satisfy the prudence
and diversification requirements of ERISA and would be consistent with the
documents and instruments governing the Plan.
Section 406 of ERISA and Section 4975 of the Code prohibit Plans, as well as
individual retirement accounts and Keogh plans subject to Section 4975 of the
Code (also "Plans"), from engaging in certain transactions involving "plan
assets" with persons who are "parties in interest" under ERISA or
"disqualified persons" under the Code ("Parties in Interest") with respect to
such Plan. A violation of these "prohibited transaction" rules may result in
an excise tax or other liabilities under ERISA and/or Section 4975 of the Code
for such persons, unless exemptive relief is available under an applicable
statutory or administrative exemption. Employee benefit plans that are
governmental plans (as defined in Section 3(32) of ERISA), certain church
plans (as defined in Section 3(33) of ERISA) and foreign plans (as described
in Section 4(b)(5) of ERISA) are not subject to the requirements of ERISA or
Section 4975 of the Code.
Under a regulation (the "Plan Assets Regulation") issued by the U.S.
Department of Labor (the "DOL"), the assets of the Trust would be deemed to be
"plan assets" of a Plan for purposes of ERISA and Section 4975 of the Code if
"plan assets" of the Plan were used to acquire an equity interest in the Trust
and no exception were applicable under the Plan Assets Regulation. An "equity
interest" is defined under the Plan Assets Regulation as any interest in an
entity other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features and
specifically includes a beneficial interest in a trust.
Pursuant to an exception contained in the Plan Assets Regulation, the assets
of the Trust would not be deemed to be "plan assets" of investing Plans if,
immediately after the most recent acquisition of any equity interest in the
Trust, less than 25% of the value of each class of equity interests in the
Trust were held by Plans, other employee benefit plans not subject to ERISA or
Section 4975 of the Code (such as governmental, church and foreign plans), and
entities holding assets deemed to be "plan assets" of any Plan (collectively,
"Benefit Plan Investors"), or if the Preferred Securities were "publicly-
offered securities" for purposes of the Plan Assets Regulation. No assurance
can be given that the value of the Preferred Securities held by Benefit Plan
Investors will be less than 25% of the total value of such Preferred
Securities at the completion of the initial offering or thereafter, and no
monitoring or other measures will be taken with respect to the satisfaction of
the conditions to this exception. In addition, the Preferred Securities may be
"publicly-offered securities" under the Plan Assets Regulation if they are
widely held (i.e., held by 100 or more investors independent of the Trust and
each other) and freely transferable; no assurance can be given that these
conditions will be met. All of the Common Securities will be purchased and
initially held by GWFC.
Certain transactions involving the Trust could be deemed to constitute
direct or indirect prohibited transactions under ERISA and Section 4975 of the
Code with respect to a Plan if the Preferred Securities were acquired with
"plan assets" of such Plan and the assets of the Trust were deemed to be "plan
assets" of Plans investing in the Trust. For example, if GWFC is a Party in
Interest with respect to an investing Plan (either
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directly or by reason of its ownership of its subsidiaries), extensions of
credit between GWFC and the Trust (as represented by the Subordinated Notes
and the Guarantee) would likely be prohibited by Section 406(a)(1)(B) of ERISA
and Section 4975(c)(1)(B) of the Code, unless exemptive relief were available
under an applicable administrative exemption (see below). In addition, if GWFC
were considered to be a fiduciary with respect to the Notes as a result of
certain powers it holds (such as the powers to remove and replace the Property
Trustee), certain operations of the Notes, including the optional redemption
of the Subordinated Notes, could be considered to be prohibited transactions
under Section 406(b) of ERISA and Section 4975(c)(1)(E) of the Code. In
addition, each investing plan, by purchasing the Preferred Securities, will be
deemed to have directed the Trust to invest in the Subordinated Notes, to have
appointed the Property Trustee, and to have agreed that GWFC is not a
fiduciary with respect to such plan's interest in the Preferred Securities.
The DOL has issued five prohibited transaction class exemptions ("PTCEs")
that may provide exemptive relief if required for direct or indirect
prohibited transactions that may arise from the purchase or holding of the
Preferred Securities if assets of the Trust were deemed to be "plan assets" of
Plans investing in the Trust as described above. Those class exemptions are
PTCE 96-23 (for certain transactions determined by in-house asset managers),
PTCE 95-60 (for certain transactions involving insurance company general
accounts), PTCE 91-38 (for certain transactions involving bank collective
investment funds), PTCE 90-1 (for certain transactions involving insurance
company separate accounts), and PTCE 84-14 (for certain transactions
determined by independent qualified asset managers).
Because the Preferred Securities may be deemed to be equity interests in the
Trust for purposes of applying ERISA and Section 4975 of the Code, the
Preferred Securities may not be purchased or held by any Plan, any entity
whose underlying assets include "plan assets" by reason of any Plan's
investment in the entity (a "Plan Asset Entity") or any person investing "plan
assets" of any Plan, unless such purchaser or holder is eligible for the
exemptive relief available under PTCE 96-23, 95-60, 91-38 90-1 or 84-14 or
another applicable exemption. Any purchaser or holder of the Preferred
Securities or any interest therein will be deemed to have represented by its
purchase and holding thereof that it either (a) is not a Plan or (b) is
eligible for the exemptive relief available under PTCE 96-23, 95-60, 91-38,
90-1 or 84-14 or another applicable exemption with respect to such purchase or
holding. If a purchaser or holder of the Preferred Securities that is a Plan
or a Plan Asset Entity elects to rely on an exemption other than PTCE 96-23,
95-60, 91-38, 90-1 or 84-14, GWFC and the Trust may require a satisfactory
opinion of counsel or other evidence with respect to the availability of such
exemption for such purpose and holding.
Due to the complexity of these rules and the penalties that may be imposed
upon persons involved in non-exempt prohibited transactions, it is
particularly important that fiduciaries or other persons considering
purchasing the Preferred Securities on behalf of or with "plan assets" of any
Plan consult with their counsel regarding the potential consequences if the
assets of the Trust were deemed to be "plan assets" and the availability of
exemptive relief under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or any other
applicable exemption.
S-31
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, GWFC and
the Trust have agreed that the Trust will sell to each of the Underwriters
named below, and each of such Underwriters has severally agreed to purchase
from the Trust, the respective number of Preferred Securities set forth
opposite its name below:
NUMBER OF
PREFERRED
UNDERWRITER SECURITIES
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Goldman, Sachs & Co. .............................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................................
Lehman Brothers Inc. .............................................
Smith Barney Inc. ................................................
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Total......................................................... 6,600,000
=========
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all the Preferred Securities
offered hereby, if any are taken.
The Underwriters propose to offer the Preferred Securities in part directly
to the public at the initial public offering price set forth on the cover page
of this Prospectus Supplement and in part to certain securities dealers at
such price less a concession of $ per Preferred Security. The Underwriters
may allow, and such dealers may reallow, a concession not in excess of $
per Preferred Security to certain brokers and dealers. After the Preferred
Securities are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the Underwriters.
The Trust and the Company have granted the Underwriters an option
exercisable 30 days after the date of this Prospectus Supplement to purchase
up to an aggregate of 990,000 additional Preferred Securities to cover over-
allotments, if any. If the Underwriters exercise their over-allotment option,
the Underwriters have severally agreed, subject to certain conditions, to
purchase approximately the same percentage thereof that the number of
Preferred Securities to be purchased by each of them, as shown in the
foregoing table, bears to the 6,600,000 Preferred Securities offered.
In view of the fact that the proceeds from the sale of the Preferred
Securities will be used to purchase the Subordinated Notes issued by GWFC, the
Underwriting Agreement provides that GWFC will pay as Underwriters'
compensation for the Underwriters' arranging the investment therein of such
proceeds an amount of $ per Preferred Security for the accounts of the
several Underwriters.
GWFC and the Trust have agreed that, during the period beginning from the
date of the Underwriting Agreement and continuing to and including ,
they will not offer, sell, contract to sell or otherwise dispose of any
Preferred Securities, any other beneficial interests in the assets of the
Trust, or any preferred securities or any other securities of the Trust or
GWFC which are substantially similar to the Preferred Securities, including
any guarantee of such securities, or any securities convertible into or
exchangeable for or representing the right to receive securities, preferred
securities or any such substantially similar securities of either the Trust or
GWFC, without the prior written consent of the Underwriters, except for the
Preferred Securities offered in connection with this offering.
S-32
Prior to this offering, there has been no public market for the Preferred
Securities. The Underwriters have advised GWFC that they intend to make a
market in the Preferred Securities, but are not obligated to do so and may
discontinue market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for the Preferred Securities.
GWFC and the Trust have agreed to indemnify the several Underwriters
against, or contribute to payments that the Underwriters may be required to
make in respect of, certain liabilities, including liabilities under the
Securities Act of 1933.
Certain of the Underwriters or their affiliates have provided from time to
time, and expect to provide in the future, investment or commercial banking
services to GWFC and its affiliates, for which such Underwriters or their
affiliates have received or will receive customary fees and commissions.
LEGAL MATTERS
The validity of the Preferred Securities will be passed upon by Skadden,
Arps, Slate, Meager & Flom, special counsel to the Trust. The validity of the
Subordinated Notes, the Guarantee and certain matters relating thereto will be
passed upon for GWFC by O'Melveny & Myers LLP. Brown & Wood LLP will act as
counsel to the Underwriters.
S-33
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PRO-
SPECTUS SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS
NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CRE-
ATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF GWFC SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Risk Factors.............................................................. S-4
Recent Financial Results.................................................. S-8
Capitalization of GWFC.................................................... S-9
Accounting Treatment...................................................... S-9
Use of Proceeds........................................................... S-9
Description of the Offered Preferred Securities........................... S-9
Description of the Subordinated Notes..................................... S-20
Effect of Obligations Under the Subordinated Notes and the Guarantee...... S-26
Certain Federal Income Tax Consequences................................... S-26
Certain ERISA Considerations.............................................. S-30
Underwriting.............................................................. S-32
Legal Matters............................................................. S-33
PROSPECTUS
Available Information....................................................... 2
Incorporation of Certain Documents by Reference............................. 2
The Company................................................................. 4
The Trust................................................................... 4
Use of Proceeds............................................................. 5
Selected Financial Data..................................................... 6
Ratio of Earnings to Fixed Charges.......................................... 7
Description of Debt Securities.............................................. 7
Description of Preferred Stock.............................................. 14
Description of Depositary Shares............................................ 18
Description of Common Stock................................................. 21
Description of Preferred Securities......................................... 22
Description of Guarantee.................................................... 23
Description of Securities Warrants.......................................... 25
Plan of Distribution........................................................ 29
Experts..................................................................... 29
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GREAT WESTERN FINANCIAL TRUST II
% PREFERRED SECURITIES, SERIES A
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
GREAT WESTERN FINANCIAL CORPORATION
-----------
PROSPECTUS SUPPLEMENT
-----------
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
LEHMAN BROTHERS
SMITH BARNEY INC.
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