EXHIBIT 99
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 WITHOUT THE DELIVERY OF A FINAL PROSPECTUS +
+SUPPLEMENT AND ACCOMPANYING PROSPECTUS. THIS PROSPECTUS SUPPLEMENT AND THE +
+ACCOMPANYING PROSPECTUS SHALL NOT 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 SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED JANUARY 16, 1997
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1997)
PREFERRED SECURITIES
FIRST CHICAGO NBD CAPITAL I
% PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED BY
FIRST CHICAGO NBD CORPORATION
----------
The % Preferred Securities (the "Preferred Securities") offered hereby
represent preferred undivided beneficial interests in the assets of First
Chicago NBD Capital I, a statutory business trust formed under the laws of the
State of Delaware ("FCN Capital Trust" or the "Trust"). First Chicago NBD
Corporation, a Delaware corporation ("FCN" or the "Company"), 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 FCN Capital Trust. FCN Capital Trust exists for the sole
purpose of issuing the Trust Securities and investing the proceeds thereof in
an equivalent amount of % Junior Subordinated Deferrable Interest Debentures
due (the "Subordinated Debt Securities") of FCN. The Subordinated Debt
Securities will mature on , , which date may be (i) shortened to a date
not earlier than , or (ii) extended to a date not later than ,
(each of such dates shall, in context, be referred to as the "Stated
Maturity"), in each case subject to satisfying certain conditions, including,
in the event of a shortening of the maturity date, the prior approval of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board")
if such approval is then required under applicable law, rules, guidelines or
policies. The Subordinated Debt Securities when issued will be unsecured
obligations of FCN and will be subordinate and junior in right of payment to
certain other indebtedness of the Company, as described herein. Upon an event
of 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 of distributions and payments upon redemption,
liquidation and otherwise.
(continued on next page)
----------
SEE "RISK FACTORS" BEGINNING ON PAGE S-6 OF THIS PROSPECTUS SUPPLEMENT FOR
CERTAIN INFORMATION RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES,
INCLUDING THE PERIOD DURING AND CIRCUMSTANCES UNDER WHICH PAYMENTS OF
DISTRIBUTIONS ON THE PREFERRED SECURITIES MAY BE DEFERRED AND THE RELATED
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF SUCH DEFERRAL.
Application has been made to list the Preferred Securities on the New York
Stock Exchange, Inc. (the "New York Stock Exchange"). If so approved, 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."
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR SAVINGS ACCOUNTS AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) COMMISSION(2) TRUST(3)(4)
- --------------------------------------------------------------------------------
Per Preferred Security............. $25.00 (3) $25.00
- --------------------------------------------------------------------------------
Total.............................. $ (3) $
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Plus accrued distributions, if any, from January , 1997.
(2) FCN Capital Trust and FCN 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 the Preferred
Securities will be invested in the Subordinated Debt Securities, FCN has
agreed to pay to the Underwriters as compensation (the "Underwriters'
Compensation") for their arranging the investment therein of such proceeds
$ per Preferred Security (or $ in the aggregate); provided, that such
compensation for sales of 10,000 or more Preferred Securities to a single
purchaser will be $ per Preferred Security. Therefore, to the extent of
such sales, the actual amount of Underwriters' Compensation will be less
than the aggregate amount specified in the preceding sentence. See
"Underwriting."
(4) Before deducting expenses of the offering payable by FCN estimated at $ .
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 delivery of the Preferred Securities will be made only in book-
entry form through the facilities of The Depository Trust Company, on or about
, 1997.
[This Prospectus Supplement and the related Prospectus may be used by First
Chicago Capital Markets, Inc. ("FCCM"), an affiliate of the Company and Trust,
in connection with offers and sales related to secondary market transactions in
the Preferred Securities. FCCM may act as principal or agent in such
transactions. Such sales will be made at prices related to prevailing market
prices at the time of sale or otherwise.]
----------
----------
The 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 percent of the liquidation amount of $25
per Preferred Security, 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 , ("distributions"). The payment of distributions out
of moneys held by FCN Capital Trust and payments on liquidation of FCN Capital
Trust or the redemption of Preferred Securities, as set forth below, are
guaranteed by FCN (the "Preferred Securities Guarantee") to the extent
described herein and under "Description of Preferred Securities Guarantees" in
the accompanying Prospectus. The Preferred Securities Guarantee covers payments
of distributions and other payments on the Preferred Securities only if, and to
the extent that, FCN Capital Trust has funds available therefor which will not
be the case unless FCN has made a payment of interest or principal or other
payments on the Subordinated Debt Securities held by FCN Capital Trust, which
are its only assets. The Preferred Securities Guarantee, when taken together
with FCN's obligations under the Subordinated Debt Securities and the Indenture
(as defined herein) and its obligations under the Declaration, including its
liabilities to pay costs, expenses, debts and obligations of FCN Capital Trust
(other than with respect to the Trust Securities), provide a full and
unconditional guarantee of amounts due on the Preferred Securities. See "Risk
Factors--Rights Under the Preferred Securities Guarantee" herein. The
obligations of FCN under the Preferred Securities Guarantee are subordinate and
junior in right of payment to all present and future Senior Indebtedness and
General Obligations (each as defined in "Description of the Subordinated Debt
Securities--Subordination") of FCN. The obligations of FCN under the
Subordinated Debt Securities are subordinate and junior in right of payment to
all present and future Senior Indebtedness (which includes both senior and
subordinated indebtedness for money borrowed) and General Obligations of FCN,
which aggregated approximately $5.13 billion at September 30, 1996. In
addition, because FCN is a holding company, the Subordinated Debt Securities
are effectively subordinated to all existing and future liabilities of FCN's
subsidiaries, including depositors. The Subordinated Debt Securities purchased
by the Trust may be subsequently distributed pro rata to holders of the
Preferred Securities and Common Securities in connection with the dissolution
of the Trust, upon the occurrence of certain events.
The distribution rate and the distribution payment date and other payment
dates for the Preferred Securities will correspond to the interest rate and
interest payment date and other payment dates for the Subordinated Debt
Securities, which will be the sole asset of the Trust. As a result, if
principal or interest is not paid on the Subordinated Debt Securities, no
amounts will be paid on the Preferred Securities. If FCN does not make
principal or interest payments on the Subordinated Debt Securities, the Trust
will not have sufficient funds to make distributions on the Preferred
Securities, in which event the Preferred Securities Guarantee will not apply to
such distributions until the Trust has sufficient funds available therefor.
So long as FCN is not in default in the payment of interest on the
Subordinated Debt Securities, FCN has the right to defer payments of interest
on the Subordinated Debt Securities by extending the interest payment period on
the Subordinated Debt Securities at any time for up to 20 consecutive quarters
(each, an "Extension Period"), provided that an Extension Period may not extend
beyond the Stated Maturity of the Subordinated Debt Securities. If interest
payments are so deferred, distributions on the Preferred Securities will also
be deferred. During such Extension Period, distributions will continue to
accrue with interest thereon (to the extent permitted by applicable law) at an
annual rate of percent per annum 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 Debt Securities. See
"Description of the Subordinated Debt Securities--Option to Extend Interest
Payment Period;" "Risk Factors--Option to Extend Interest Payment Period" and
"United States Federal Income Taxation--Interest Income and Original Issue
Discount."
Subject to FCN having received prior approval of the Federal Reserve Board to
do so if then required under applicable capital guidelines or policies of the
Federal Reserve Board, the Subordinated Debt Securities are redeemable prior to
maturity by FCN (i) on or after , in whole at any time or in part from time
to time, or
S-2
(ii) in whole (but not in part) at any time within 90 days following the
occurrence of a Tax Event or Capital Treatment Event (each as defined herein),
in each case at a redemption price equal to the accrued and unpaid interest on
the Subordinated Debt Securities so redeemed to the date fixed for redemption,
plus 100% of the principal amount thereof. If FCN redeems Subordinated Debt
Securities, the Trust must redeem Trust Securities on a pro rata basis having
an aggregate liquidation amount equal to the aggregate principal amount of the
Subordinated Debt Securities so redeemed at $25 per Preferred Security plus
accrued and unpaid distributions thereon (the "Redemption Price") to the date
fixed for redemption. See "Description of the Preferred Securities--Mandatory
Redemption." The Preferred Securities will be redeemed upon maturity of the
Subordinated Debt Securities.
FCN will have the right at any time to liquidate the Trust and, after
satisfaction of liabilities to creditors of the Trust as provided by
applicable law, cause the Subordinated Debt Securities to be distributed to
the holders of the Trust Securities in liquidation of the Trust, subject to
FCN having received prior approval of the Federal Reserve Board to do so if
then required under applicable capital guidelines or policies of the Federal
Reserve Board. If the Subordinated Debt Securities are distributed to the
holders of the Preferred Securities, FCN will use its best efforts to have the
Subordinated Debt Securities listed on the New York Stock Exchange or on such
other exchange on which the Preferred Securities are then listed. See
"Description of the Preferred Securities--Tax Event or Capital Treatment Event
Redemption" and "Description of the Subordinated Debt Securities."
In the event of the involuntary or voluntary dissolution, winding up or
termination of the Trust, the holders of the Preferred Securities will be
entitled to receive for each Preferred 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 Debt Securities are distributed to the holders of the Preferred
Securities. See "Description of the Preferred Securities--Liquidation
Distribution Upon Dissolution."
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
FIRST CHICAGO NBD CORPORATION
SUMMARY HISTORICAL FINANCIAL INFORMATION
SELECTED FINANCIAL DATA
This selected financial data of the Company is qualified in its entirety by
the detailed information and financial statements incorporated herein by
reference. See "Incorporation of Certain Documents by Reference" in the
Prospectus.
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1995 1994 1993 1992 1991 1996 1995
-------- -------- ------- ------- ------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
SUMMARY OF INCOME
Net interest income... $ 3,208 $ 2,956 $ 2,784 $ 2,692 $ 2,418 $ 2,737 $ 2,374
Provision for credit
losses............... 510 276 390 653 606 545 300
Provision for assets
held for accelerated
disposition(1)....... -- -- -- 625 -- -- --
Noninterest income.... 2,591 2,393 2,769 2,018 1,703 1,866 1,936
Merger-related
charges.............. 267 -- -- 76 -- -- --
Other noninterest
expense.............. 3,268 3,220 3,161 3,084 2,867 2,458 2,447
Income before
cumulative effect of
changes in accounting
principles........... 1,150 1,221 1,290 224 478 1,059 1,024
Net income............ 1,150 1,221 1,290 394 478 1,059 1,024
EARNINGS PER SHARE
Primary
Income before
cumulative effect
of changes in
accounting
principles......... $ 3.45 $ 3.62 $ 3.91 $ 0.60 $ 1.56 $ 3.24 $ 3.07
Net income.......... 3.45 3.62 3.91 1.17 1.56 3.24 3.07
Fully Diluted
Income before
cumulative effect
of changes in
accounting
principles......... 3.41 3.58 3.79 0.60 1.55 3.19 3.03
Net income.......... 3.41 3.58 3.79 1.17 1.55 3.19 3.03
PERIOD-END BALANCES
Total assets.......... $122,002 $112,763 $93,140 $90,011 $87,573 $106,694 $124,056
Long-term debt........ 8,163 7,246 5,250 4,175 3,822 7,967 8,445
Total stockholders'
equity............... 8,450 7,809 7,499 6,323 5,660 9,087 8,445
COMMON SHARE DATA
Dividends declared.... $ 1.35 $ 1.23 $ 1.08 $ 1.04 $ 0.95 $ 1.08 $ 0.99
Book value, period-
end.................. 25.25 22.60 21.25 18.27 18.06 27.11 24.96
Market price, period-
end.................. 39 1/2 27 3/8 29 3/4 32 3/4 29 3/4 45 1/4 38 1/4
CAPITAL RATIOS (2)
Common equity-to-
assets ratio......... 6.9% 6.8% 7.6% 6.5% 6.0% 8.1% 6.8%
Regulatory leverage
ratio................ 6.9 7.3 7.8 6.6 6.5 8.1 6.9
Risk-based capital
Tier 1 ratio........ 7.8 8.6 9.0 7.4 6.5 8.4 8.2
Total capital
ratio.............. 11.8 13.0 13.6 11.3 9.8 12.4 12.4
- --------
(1) Of the total provision, $491 million relates to loans and $134 million
relates to other real estate held for accelerated disposition.
(2) Net of investment in First Chicago Capital Markets, Inc.
S-4
RECENT DEVELOPMENTS
[TO COME]
S-5
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.
ABSENCE OF PRIOR PUBLIC MARKET
Prior to this offering, there has been no public market for the Preferred
Securities. Although an application has been made to list the Preferred
Securities on the New York Stock Exchange, there can be no assurance that,
once listed, an active trading market will develop for the Preferred
Securities or that, if such market develops, the market price will equal or
exceed the public offering price set forth on the cover page of this
Prospectus Supplement. The public offering price for the Preferred Securities
has been determined through negotiations between the Company and the
Underwriters. Prices for the Preferred Securities will be determined in the
marketplace and may be influenced by many factors, including the liquidity of
the market for the Preferred Securities, investor perceptions of the Company
and general industry and economic conditions.
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE PREFERRED SECURITIES GUARANTEE
AND SUBORDINATED DEBT SECURITIES
FCN's obligations under the Preferred Securities Guarantee are subordinate
and junior in right of payment to all present and future Senior Indebtedness
and General Obligations (each as defined herein) of FCN. The obligations of
FCN under the Subordinated Debt Securities are subordinate and junior in right
of payment to all present and future Senior Indebtedness and General
Obligations of FCN. No direct or indirect payment may be made of principal of,
premium, if any, or interest on the Subordinated Debt Securities, or in
respect of any redemption, repayment, retirement, purchase or other
acquisition of any of the Subordinated Debt Securities, at any time when there
is a default in the payment of the principal of, premium, if any, interest on
or otherwise in respect of any Senior Indebtedness, whether at maturity or at
a date fixed for prepayment or by declaration or otherwise, unless and until
such default shall have been cured or waived or shall have ceased to exist or
all Senior Indebtedness shall have been paid. As of September 30, 1996, Senior
Indebtedness and General Obligations of FCN aggregated approximately $5.13
billion. Because FCN is a holding company, the right of FCN to participate in
any distribution of assets of any subsidiary upon such subsidiary's
liquidation or reorganization or otherwise (and thus the ability of holders of
the Preferred Securities to benefit indirectly from such distribution), is
subject to the prior claims of creditors of that subsidiary except to the
extent that FCN may itself be recognized as a creditor of that subsidiary. In
addition, there are various legal limitations on the extent to which FCN's
depository subsidiaries may extend credit, pay dividends or otherwise supply
funds to FCN or various of its affiliates. Accordingly, the Subordinated Debt
Securities and Preferred Securities Guarantee will be effectively subordinated
to all existing and future liabilities of FCN's subsidiaries, including
depositors, and holders of Subordinated Debt Securities and the Preferred
Securities Guarantee should look only to the assets of FCN for payments on the
Subordinated Debt Securities and the Preferred Securities Guarantee. See
"First Chicago NBD Corporation" in the accompanying Prospectus. There are no
terms in the Preferred Securities, the Subordinated Debt Securities or the
Preferred Securities Guarantee that limit FCN's ability to incur additional
indebtedness, including indebtedness that ranks senior to the Subordinated
Debt Securities and the Preferred Securities Guarantee. See "Description of
the Preferred Securities Guarantees--Status of the Preferred Securities
Guarantees" and "Description of the Subordinated Debt Securities" in the
accompanying Prospectus, and "Description of the Subordinated Debt
Securities--Subordination" herein.
The ability of the Trust to pay amounts due on the Preferred Securities is
solely dependent upon FCN making payments on the Subordinated Debt Securities
as and when required.
S-6
RIGHTS UNDER THE PREFERRED SECURITIES GUARANTEE
The Preferred Securities Guarantee will be qualified as an indenture under
the Trust Indenture Act. The Chase Manhattan Bank will act as indenture
trustee under the Preferred Securities Guarantee for the purposes of
compliance with the provisions of the Trust Indenture Act (the "Preferred
Securities Guarantee Trustee"). The Preferred Securities Guarantee Trustee
will hold the Preferred Securities Guarantee for the benefit of the holders of
the Preferred Securities.
The Preferred Securities 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, (ii) the Redemption Price with respect to
Preferred Securities called for redemption by the Trust, to the extent the
Trust has funds available therefor, and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of the Trust (other than in connection
with the distribution of Subordinated Debt Securities to the holders of
Preferred Securities or a 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 or (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 Preferred Securities Guarantee Trustee or to direct the exercise of any
trust or power conferred upon the Preferred Securities Guarantee Trustee under
the Preferred Securities Guarantee. Notwithstanding the foregoing, any holder
of Preferred Securities may institute a legal proceeding directly against FCN
to enforce such holder's rights under the Preferred Securities Guarantee
without first instituting a legal proceeding against the Trust, the Preferred
Securities Guarantee Trustee or any other person or entity. If FCN were to
default on its obligation to pay amounts payable on the Subordinated Debt
Securities or otherwise, 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 Preferred Securities Guarantee for payment of
such amounts. Instead, holders of the Preferred Securities would rely on the
enforcement (1) by the Institutional Trustee (as defined herein) of its rights
as registered holder of the Subordinated Debt Securities against FCN pursuant
to the terms of the Subordinated Debt Securities or (2) by such holder of its
right against FCN to enforce payments on the Subordinated Debt Securities. See
"Description of the Preferred Securities Guarantees" and "Description of the
Subordinated Debt Securities" in the accompanying Prospectus. The Declaration
provides that each holder of Preferred Securities, by acceptance thereof,
agrees to the provisions of the Preferred Securities Guarantee, including the
subordination provisions thereof, and the Indenture.
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 Preferred Securities would rely on the
enforcement by the Institutional Trustee of its rights as a holder of the
Subordinated Debt Securities against FCN. In addition, the holders of a
majority in 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 Institutional Trustee or to direct the exercise of any
trust or power conferred upon the Institutional Trustee under the Declaration,
including the right to direct the Institutional Trustee to exercise the
remedies available to it as a holder of the Subordinated Debt Securities. If
the Institutional Trustee fails to enforce its rights under the Subordinated
Debt Securities, a holder of Preferred Securities may institute a legal
proceeding directly against FCN to enforce the Institutional Trustee's rights
under the Subordinated Debt Securities without first instituting any legal
proceeding against the Institutional Trustee or any other person or entity.
Notwithstanding the foregoing, if a Declaration Event of Default has occurred
and is continuing and such event is attributable to the failure of FCN to pay
interest or principal on the Subordinated Debt Securities on the date such
interest or principal is otherwise payable (or in the case of redemption, on
the redemption date), then a holder of Preferred Securities may directly
institute a proceeding for enforcement of payment to such holder of the
principal of or interest on the Subordinated Debt Securities having a
principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder (a "Direct Action") on or after the respective due
S-7
date specified in the Subordinated Debt Securities. In connection with such
Direct Action, FCN will be subrogated to the rights of such holder of
Preferred Securities under the Declaration to the extent of any payment made
by FCN to such holder of Preferred Securities in such Direct Action. The
holders of Preferred Securities will not be able to exercise directly any
other remedy available to the holders of the Subordinated Debt Securities. See
"Description of the Preferred Securities--Declaration Events of Default."
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Indenture Event of Default (as defined herein) has occurred
and is continuing, FCN has the right under the Indenture to defer payments of
interest on the Subordinated Debt Securities by extending the interest payment
period at any time, and from time to time, on the Subordinated Debt
Securities. As a consequence of such an extension, quarterly distributions on
the Preferred Securities would be deferred (but would continue to accrue at
the rate of % per annum, despite such deferral, 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
Debt Securities is limited to a period not exceeding 20 consecutive quarters,
but no such Extension Period may extend beyond the Stated Maturity of the
Subordinated Debt Securities. During any such Extension Period, FCN may not,
and may not permit any subsidiary of FCN to, (i) declare or pay any dividends
or distributions on, or redeem, purchase, acquire, or make a liquidation
payment with respect to, any of FCN's capital stock or (ii) make any payment
of principal, interest or premium, if any, on or repay, repurchase or redeem
any debt securities of FCN (including other Subordinated Debt Securities) that
rank pari passu in all respects with or junior in interest to the Subordinated
Debt Securities or make any guarantee payments with respect to any guarantee
by FCN of the debt securities of any subsidiary of FCN if such guarantee ranks
pari passu with or junior in interest to the Subordinated Debt Securities
(other than (a) dividends or distributions in common stock of FCN, (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto,
(c) payments under the Preferred Securities Guarantee or Common Securities
Guarantee, (d) purchases of common stock related to the issuance of common
stock or rights under any of FCN's benefit plans for its directors, officers
or employees and (e) obligations under any dividend reinvestment and stock
purchase plan). Prior to the termination of any such Extension Period, FCN 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 or extend beyond the Stated Maturity of the
Subordinated Debt Securities. Upon the termination of any Extension Period and
the payment of all amounts then due, FCN may commence a new Extension Period,
subject to the above requirements. See "Description of the Preferred
Securities--Distributions" and "Description of the Subordinated Debt
Securities--Option to Extend Interest Payment Period."
Should FCN exercise its right to defer payments of interest by extending the
interest payment period, each holder of Preferred Securities will be required
to accrue income (as original issue discount ("OID")) in respect of the
deferred stated interest allocable to its Preferred Securities for United
States federal income tax purposes, even though no cash is distributed. As a
result, each such holder of Preferred Securities will include such income in
gross income for United States federal income tax purposes in advance of the
receipt of cash attributable thereto and will not receive the cash from the
FCN Capital Trust related to such income if such holder disposes of its
Preferred Securities prior to the record date for the date on which
distributions of such amounts are made. FCN has no current intention of
exercising its right to defer payments of interest by extending the interest
payment period on the Subordinated Debt Securities. However, should FCN elect
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, 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 FCN's right to defer
interest payments, the market price of the Preferred Securities (which
represent an undivided beneficial interest in the Subordinated Debt
Securities) may be more volatile than other securities on which OID accrues
that are not subject to such deferrals. See "United States Federal Income
Taxation--Sales of Preferred Securities."
S-8
PROPOSED TAX LEGISLATION
On March 19, 1996, as part of President Clinton's Fiscal 1996 Budget
Proposal, the United States Treasury Department proposed legislation that
would, among other things, treat as equity for United States Federal income
tax purposes instruments--such as the Subordinated Debt Securities--with a
maximum term of more than 20 years that are not shown as indebtedness on the
consolidated balance sheet of the issuer. If the proposed legislation were
enacted, such legislation would not be expected to apply to the Subordinated
Debt Securities because, based on statements by Congressional leaders, it is
not expected that the legislation would have a retroactive effective date.
There can be no assurances, however, that legislation enacted after the date
hereof would not adversely affect the tax treatment of the Subordinated Debt
Securities, or that such tax treatment would not cause a Tax Event resulting
in the redemption of the Preferred Securities. See "Description of the
Preferred Securities--Tax Event and Capital Treatment Event Redemption."
REDEMPTION OR DISTRIBUTION OF THE SUBORDINATED DEBT SECURITIES
FCN will have the right at any time to terminate the Trust and, after the
satisfaction of claims of creditors as required by law, to cause the
Subordinated Debt Securities to be distributed to the holders of the Trust
Securities in liquidation of the Trust. In certain circumstances, FCN shall
have the right to redeem the Subordinated Debt Securities, in whole or in
part, in which event the Trust will redeem the Trust Securities on a pro rata
basis to the same extent as the Subordinated Debt Securities are redeemed by
FCN. Any such distribution or redemption will require prior approval of the
Federal Reserve Board if then required under applicable law rules, guidelines
or policies. See "Description of the Preferred Securities--Tax Event and
Capital Treatment Event Redemption."
Under current United States federal income tax law, a distribution of
Subordinated Debt Securities upon the dissolution of FCN Capital Trust would
not be a taxable event to holders of the Preferred Securities. If, however,
the Trust is characterized for United States federal income tax purposes as an
association taxable as a corporation at the time of the dissolution of the
Trust, the distribution of the Subordinated Debt Securities may constitute a
taxable event to holders of Preferred Securities. Moreover, upon occurrence of
a Tax Event or a Capital Treatment Event, a dissolution of the Trust in which
holders of the Preferred Securities receive cash, would be a taxable event to
such holders. See "United States Federal Income Taxation--Receipt of
Subordinated Debt Securities or Cash Upon Liquidation of FCN Capital Trust."
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Debt Securities that may be distributed in
exchange for Preferred Securities if a dissolution or liquidation of the Trust
were to occur. Accordingly, the Preferred Securities or the Subordinated Debt
Securities may trade at a discount to the price that the investor paid to
purchase the Preferred Securities offered hereby. Because holders of Preferred
Securities may receive Subordinated Debt Securities, prospective purchasers of
Preferred Securities are also making an investment decision with regard to the
Subordinated Debt Securities and should carefully review all the information
regarding the Subordinated Debt Securities contained herein and in the
accompanying Prospectus. See "Description of the Preferred Securities--Tax
Event and Capital Treatment Event Redemption" and "Description of the
Subordinated Debt Securities--General."
SHORTENING OR EXTENDING THE STATED MATURITY OF THE SUBORDINATED DEBT
SECURITIES
FCN will have the right at any time to shorten the maturity of the
Subordinated Debt Securities to a date not earlier than , . The exercise
of such right will be subject to the prior approval of the Federal Reserve
Board if such approval is then required under applicable law, rules,
guidelines or policies.
FCN will also have the right to extend the maturity of the Subordinated Debt
Securities, whether or not the Trust is terminated and the Subordinated Debt
Securities are distributed to holders of the Preferred Securities, to a date
no later than , , so long as at the time such election is made and at
the time such extension commences (i) FCN is not in bankruptcy, otherwise
insolvent or in liquidation, (ii) FCN is not in default in the payment of any
interest or principal on the Subordinated Debt Securities, (iii) the Trust is
not in arrears on
S-9
payments of distributions on the Preferred Securities and no deferred
distributions are accumulated and (iv) the Subordinated Debt Securities are
rated not less than BBB- by Standard & Poor's Ratings Services or Baa3 by
Moody's Investors Service, Inc., or not less than the equivalent by any other
nationally recognized statistical rating organization.
FCN's exercise of its right to shorten the maturity of the Subordinated Debt
Securities will be a taxable event to holders of Preferred Securities if the
Subordinated Debt Securities are treated as equity for purposes of United
States federal income taxation before the maturity is shortened.
CONSEQUENCES OF HIGHLY LEVERAGED TRANSACTION
The Indenture does not contain provisions that afford holders of the
Subordinated Debt Securities protection in the event of a highly leveraged
transaction, including a change of control, or other similar transactions
involving FCN that may adversely affect such holders. See "Description of the
Subordinated Debt Securities--General."
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, FCN Trustees, which voting rights are vested exclusively in the
holder of the Common Securities. The Institutional Trustee, the Regular
Trustees and FCN may amend the Declaration without the consent of the holders
of the Preferred Securities to ensure that the Trust will be classified for
United States federal income tax purposes as a grantor trust unless such
action materially and adversely affects the interests of such holders. See
"Description of Preferred Securities--Voting Rights."
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 Debt Securities. A holder who uses the accrual method of
accounting for tax purposes (and a cash method holder, if the Subordinated
Debt Securities are deemed to have been issued with OID) and who disposes of
his Preferred Securities between record dates for payments of distributions
thereon will be required to include accrued but unpaid interest on the
Subordinated Debt Securities through the date of disposition in income as
ordinary income (i.e., interest or, possibly, OID), and to add such amount to
his adjusted tax basis in his pro rata share of the underlying Subordinated
Debt Securities deemed disposed of. To the extent the selling price is less
than the holder's adjusted tax basis (which will include all accrued but
unpaid interest), 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 "United States Federal
Income Taxation--Interest Income and Original Issue Discount" and "--Sales of
Preferred Securities."
S-10
FIRST CHICAGO NBD CORPORATION
GENERAL
The Company is a multi-bank holding company registered under the Bank
Holding Company Act, as amended, which was incorporated under the laws of the
State of Delaware in 1972. The Company is the surviving corporation resulting
from the merger, effective December 1, 1995, of First Chicago Corporation, a
Delaware corporation and registered bank holding company, with and into NBD
Bancorp, Inc., a Delaware corporation and registered bank holding company.
Through its bank subsidiaries, the Company provides consumer and corporate
banking products and services. The Company's lead bank is The First National
Bank of Chicago ("FNBC"). The Company also is the parent corporation of NBD
Bank (Michigan), American National Bank and Trust Company of Chicago ("ANB"),
FCC National Bank ("FCCNB") and NBD Bank, N.A. (Indiana) ("NBD Indiana").
The Company directly or indirectly raises funds principally to finance the
operations of its nonbank subsidiaries. A substantial portion of the Company's
annual income typically has been derived from dividends from its subsidiaries,
and from interest on loans, some of which are subordinated, to its
subsidiaries.
The Company is a legal entity separate and distinct from the Company's
banking subsidiaries (the "Banks") and the Company's other affiliates. There
are various legal limitations on the extent to which the Banks may extend
credit, pay dividends or otherwise supply funds to the Company. Dividend
payments by national banks, such as FNBC, ANB, NBD Indiana and FCCNB, are
limited to the lesser of (i) the level of "undivided profits then on hand"
less the amount of bad debts, as defined, in excess of the allowance for
credit losses and (ii) absent regulatory approval, an amount not in excess of
"net profits" for the current year combined with "retained net profits" for
the preceding two years. As of January 1, 1996, the Banks could have declared
additional dividends of approximately $1.2 billion without the approval of
banking regulatory agencies. The payment of dividends by any Bank may also be
affected by other factors, such as the maintenance of adequate capital for
such Bank. Bank regulatory agencies have the authority to prohibit the banking
organizations they supervise from paying dividends if, in the regulator's
opinion, the payment of such dividends would, in light of the financial
condition of such bank, constitute an unsafe or unsound practice. In addition,
there are numerous other governmental requirements and regulations that affect
the activities of the Company and its subsidiaries.
Under the longstanding policy of the Federal Reserve Board, a bank holding
company is expected to act as a source of financial strength for its
subsidiary banks and to commit resources to support such banks. As a result of
this policy, the Company may be required to commit resources to the Banks in
circumstances where it might not otherwise do so.
Because the Company is a holding company, its rights and the rights of its
creditors, including the holders of the Subordinated Debt Securities and the
Preferred Securities Guarantees, to participate in the distribution and
payment of assets of any subsidiary upon the subsidiary's liquidation or
recapitalization would be subject to the prior claims of such subsidiary's
creditors except to the extent that the Company may itself be a creditor with
recognized claims against the subsidiary.
The Company's executive offices are located at One First National Plaza,
Chicago, Illinois 60670, and the telephone number is (312) 732-4000.
S-11
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges for the Company, which are computed
on the basis of the total enterprise (as defined by the Securities and
Exchange Commission (the "SEC")) by dividing earnings before fixed charges and
income taxes by fixed charges, are set forth below for the periods indicated.
Fixed charges consist principally of interest expense on all long- and short-
term borrowings, excluding or including interest on deposits as indicated.
YEAR ENDED DECEMBER 31, NINE MONTHS
------------------------ ENDED
1995 1994 1993 1992 1991 SEPTEMBER 30, 1996
---- ---- ---- ---- ---- ------------------
Earnings to Fixed Charges:
Excluding interest expense on de-
posits.......................... 1.8x 2.2x 3.0x 1.3x 1.6x 2.1x
Including interest expense on de-
posits.......................... 1.4x 1.6x 1.8x 1.1x 1.1x 1.5x
FCN CAPITAL TRUST
FCN Capital Trust is a statutory business trust formed under Delaware law
pursuant to (i) a declaration of trust, originally dated as of November 6,
1996, executed by FCN, as sponsor (the "Sponsor"), and the trustees of FCN
Capital Trust (the "FCN Capital Trustees") and (ii) the filing of a
certificate of trust with the Secretary of State of the State of Delaware on
November 6, 1996. Such declaration will be amended and restated in its
entirety (as so amended and restated, the "Declaration") substantially in the
form filed as an exhibit to the Registration Statement of which this
Prospectus Supplement and the accompanying Prospectus form a part. The
Declaration will be qualified as an indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). Upon issuance of the Preferred
Securities, the purchasers thereof will own all of the Preferred Securities.
See "Description of the Preferred Securities--Book-Entry Only Issuance--The
Depository Trust Company." FCN will directly or indirectly acquire Common
Securities in an aggregate liquidation amount equal to at least 3 percent of
the total capital of FCN Capital Trust. FCN Capital Trust exists for the
exclusive purposes of (x) issuing the Trust Securities representing undivided
beneficial interests in the assets of the Trust, (y) investing the gross
proceeds of the Trust Securities in the Subordinated Debt Securities and (z)
engaging in only those other activities necessary or incidental thereto.
Pursuant to the Declaration, the number of FCN Capital Trustees will
initially be five. Three of the FCN Trustees (the "Regular Trustees") will be
persons who are employees or officers of, or who are affiliated with, FCN. The
fourth trustee will be a financial institution that is unaffiliated with FCN,
which trustee will serve as institutional trustee under the Declaration and as
indenture trustee for the purposes of compliance with the provisions of the
Trust Indenture Act (the "Institutional Trustee"). Initially, The Chase
Manhattan Bank will be the Institutional Trustee until removed or replaced by
the holder of the Common Securities. For the purpose of compliance with the
Trust Indenture Act, The Chase Manhattan Bank will act as Preferred Securities
Guarantee Trustee under the Preferred Securities Guarantee and as Debt Trustee
(as defined herein) under the Indenture. The fifth trustee will be an entity
that maintains its principal place of business in the state of Delaware (the
"Delaware Trustee"). Chase Manhattan Bank Delaware ("Chase Delaware") will act
as Delaware Trustee. See "Description of the Preferred Securities Guarantees"
in the accompanying Prospectus and "Description of the Preferred Securities--
Voting Rights" herein.
The Institutional Trustee will hold title to the Subordinated Debt
Securities for the benefit of the holders of the Trust Securities and will
have the power to exercise all rights, powers and privileges under the
Indenture as the holder of the Subordinated Debt Securities. In addition, the
Institutional Trustee will maintain exclusive control of a segregated non-
interest bearing bank account (the "Property Account") to hold all payments
made in respect of the Subordinated Debt Securities for the benefit of the
holders of the Trust Securities. The Property Account may be held at the
Institutional Trustee or any Paying Agent of the Institutional Trustee,
including FNBC. The Institutional Trustee will make payments of distributions
and payments on liquidation, redemption and otherwise to the holders of the
Trust Securities out of funds from the Property Account. The Preferred
S-12
Securities Guarantee Trustee will hold the Preferred Securities Guarantee for
the benefit of the holders of the Preferred Securities. FCN, as the direct or
indirect holder of all the Common Securities, will have the right to appoint,
remove or replace any FCN Capital Trustee and to increase or decrease the
number of FCN Capital Trustees. FCN will pay all fees and expenses related to
FCN Capital Trust and the offering of the Trust Securities. See "Description
of the Subordinated Debt Securities--Miscellaneous."
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are set forth in the
Declaration, the Delaware Business Trust Act (the "Trust Act") and the Trust
Indenture Act. See "Description of the Preferred Securities."
The Chase Manhattan Bank ("Chase"), which serves as the Institutional
Trustee, the Debt Trustee and the Preferred Securities Guarantee Trustee, has
a principal corporate trust office at 450 West 33rd Street, New York, New York
10001. Chase also serves as property trustee under declarations of trust for
two other statutory business trusts formed under the laws of the State of
Delaware and sponsored by the Company. Chase serves as debt trustee under an
indenture dated as of November 15, 1996 with respect to junior subordinated
debentures of the Company purchased by such trusts and is the guarantee
trustee under each of two guarantee agreements dated as of December 3, 1996
and December 5, 1996, respectively, from the Company to the applicable trust
guaranteeing certain payments to such trust. In addition, Chase serves as
trustee for certain subordinated debt securities issued by FCN under
indentures originally dated as of July 1, 1986, July 15, 1992, April 30, 1993,
May 17, 1995 and December 1, 1995. Chase Delaware also serves as trustee for
senior debt securities of FCN issued under an indenture dated as of April 1,
1986. The Company and its affiliates have normal banking relationships with
Chase, Chase Delaware and their affiliates in the ordinary course of business.
S-13
CAPITALIZATION
The following table sets forth the actual capitalization of FCN at September
30, 1996, and the "As Adjusted" column reflects (i) the application of the
estimated net proceeds from the sale of the Preferred Securities and (ii) the
application of the net proceeds from the sale of $500,000,000 of 7.95% Capital
Securities, Series A (the "Series A Capital Securities") of First Chicago NBD
Institutional Capital A (the "Series A Trust") and $250,000,000 of 7.75%
Capital Securities (the "Series B Capital Securities") of First Chicago NBD
Institutional Capital B (the "Series B Trust"), which offerings were
consummated on December 3, 1996 and December 5, 1996, respectively. See "Use
of Proceeds." The table should be read in conjunction with FCN's consolidated
financial statements and notes thereto included in the documents incorporated
by reference herein. See "Incorporation of Certain Documents by Reference" in
the accompanying Prospectus.
SEPTEMBER 30, 1996
--------------------------
ACTUAL AS ADJUSTED
----------- -------------
(DOLLARS IN MILLIONS)
Long-term Debt..................................... $ 7,967 $ 7,967
Guaranteed preferred beneficial interests in
Corporation's junior subordinated debt(1)......... --
----------- ----------
STOCKHOLDERS' EQUITY
Preferred Stock.................................. 475 475
Common stock par value $1.00 par share........... 319 319
Capital surplus.................................. 2,179 2,179
Retained earnings................................ 6,189 6,189
Fair value adjustment on investment securities
available for sale.............................. 23 23
Deferred compensation............................ (57) (57)
Accumulated translation adjustment............... 7 7
Treasury stock................................... (48) (48)
----------- ----------
Total Stockholders' Equity..................... 9,087 9,087
----------- ----------
Total(2)..................................... $ 17,054 $
=========== ==========
- --------
(1) The Preferred Securities are issued by the Trust. The sole assets of the
Trust consist of approximately $ principal amount of Subordinated Debt
Securities issued by FCN to the Trust. The Subordinated Debt Securities
will bear interest at the rate of % per annum and will mature on
which date may be shortened to a date not earlier than or extended to
a date not later than , in either case, if certain conditions are met.
FCN owns all of the Common Securities of the Trust.
The Series A Capital Securities were issued by the Series A Trust. The sole
assets of the Series A Trust consist of $515,464,000 principal amount of
7.95% Junior Subordinated Deferrable Interest Debentures, Series A (the
"Series A Debentures") issued by FCN to the Series A Trust. The Series A
Debentures bear interest at the rate of 7.95% per annum and will mature on
December 1, 2026. FCN owns all of the Common Securities of the Series A
Trust.
The Series B Capital Securities were issued by the Series B Trust. The sole
assets of the Series B Trust consist of $257,732,000 principal amount of
7.75% Junior Subordinated Deferrable Interest Debentures, Series B (the
"Series B Debentures") issued by FCN to the Series B Trust. The Series B
Debentures bear interest at the rate of 7.75% per annum and will mature on
December 1, 2026. FCN owns all of the Common Securities of the Series B
Trust.
(2) Subsequent to September 30, 1996, the capitalization of the Company and
its consolidated subsidiaries has been affected by various issuances,
redemptions, repurchases and maturities which are not reflected in this
table.
S-14
ACCOUNTING TREATMENT
For financial reporting purposes, the FCN Capital Trust will be treated as a
subsidiary of the Company and, accordingly, the accounts of the FCN Capital
Trust will be included in the consolidated financial statements of the
Company. The Preferred Securities will be reported as "Guaranteed preferred
beneficial interests in Corporation's junior subordinated debt" as either a
separate line item in the consolidated balance sheet of the Company or in the
notes to the consolidated financial statements of the Company. Appropriate
disclosures about the Preferred Securities, the Preferred Securities Guarantee
and the Subordinated Debt Securities will be included in the notes to the
consolidated financial statements. For financial reporting purposes, the
Company will classify distributions payable on the Preferred Securities as an
expense in the consolidated statements of income.
The Company has agreed that future financial reports of the Company will:
(i) report the preferred securities issued by other trusts created by the
Company as "Guaranteed preferred beneficial interests in Corporation's junior
subordinated debt" as either a separate line item in the consolidated balance
sheet or in the notes to the consolidated financial statements; (ii) include
in a footnote to the financial statements disclosure that the sole assets of
the trusts are the junior subordinated debentures (specifying as to each trust
the principal amount, interest rate and maturity date of junior subordinated
debentures held); and (iii) if Staff Accounting Bulletin 53 treatment is
sought, include, in an audited footnote to the financial statements,
disclosure that (a) the trusts are wholly owned, (b) the sole assets of the
trusts are the junior subordinated debentures (specifying as to each trust the
principal amount, interest rate and maturity date of junior subordinated
debentures held), and (c) the obligations of the Company under the junior
subordinated debentures, the relevant indenture, trust agreement and
guarantee, in the aggregate, constitute a full and unconditional guarantee by
the Company of such trust's obligations under the preferred securities issued
by such trust.
USE OF PROCEEDS
The Trust will use all proceeds received from the sale of the Preferred
Securities to purchase Subordinated Debt Securities from FCN. FCN intends to
use the net proceeds from the sale of the Subordinated Debt Securities for
general corporate purposes, including the funding of investments in, or
extensions of credit to, the Company's subsidiaries. Pending such use, the
Company may temporarily invest the net proceeds in various short-term
securities or apply the net proceeds to reduce short-term indebtedness. Based
upon the historic and anticipated future growth of the Company and the
financial needs of its subsidiaries, FCN anticipates that it will, on a
recurrent basis, engage in additional financings in character and amount to be
determined.
DESCRIPTION OF THE 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 Institutional Trustee, The Chase Manhattan Bank, will act
as indenture trustee for the Preferred Securities under the Declaration for
the purpose of compliance with 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, which
supplements, and to the extent inconsistent, replaces, the description set
forth under the caption "Description of the Preferred Securities" in the
accompanying Prospectus, does not purport to be complete and is subject to,
and qualified in its entirety by reference to, the Declaration, a copy of the
form of which is filed as an exhibit to the Registration Statement of which
this Prospectus Supplement is a part, 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,
S-15
directly or indirectly, by FCN. 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 and during the continuance 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 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
Institutional Trustee will own the Subordinated Debt Securities 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 FCN
to the extent described under "Description of the Preferred Securities
Guarantees" in the accompanying Prospectus. The Preferred Securities Guarantee
will be held by The Chase Manhattan Bank, the Preferred Securities Guarantee
Trustee, for the benefit of the holders of the Preferred Securities. The
Preferred Securities Guarantee does not cover payment of distributions when
the Trust does not have sufficient available funds to pay such distributions.
In such event, the remedy of a holder of Preferred Securities is to vote to
direct the Institutional Trustee to enforce the Institutional Trustee's rights
under the Subordinated Debt Securities except in the limited circumstances in
which the holder may take Direct Action. See "--Voting Rights" and "--
Declaration Events of Default."
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of percent 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 percent thereof 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.
Distributions on the Preferred Securities will be cumulative, will accrue
from January , 1997 and, except as otherwise described below, will be payable
quarterly in arrears on [March 31, June 30, September 30 and December 31] of
each year, commencing , 1997, when, as and if available for payment.
So long as no Indenture Event of Default has occurred and is continuing, FCN
has the right under the Indenture to defer payments of interest on the
Subordinated Debt Securities by extending the interest payment period from
time to time on the Subordinated Debt Securities, which, if exercised, would
defer quarterly distributions on the Preferred Securities (though such
distributions would continue to accrue with interest since interest would
continue to accrue on the Subordinated Debt Securities) during any such
Extension Period. Such right to extend the interest payment period for the
Subordinated Debt Securities is limited to a period not exceeding 20
consecutive quarters and such period may not extend beyond the Stated Maturity
of the Subordinated Debt Securities. In the event that FCN exercises this
right, then FCN shall not (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire, or make a liquidation payment with respect
to, any of FCN's capital stock or (ii) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Company that rank pari passu in all respects with or junior
in interest to the Subordinated Debt Securities or make any guarantee payments
with respect to any guarantee by the Company of the debt securities of any
subsidiary of the Company if such guarantee ranks pari passu with or junior in
interest to the Subordinated Debt Securities (other than (a) dividends or
distributions in common stock of FCN, (b) any declaration of a dividend in
connection with the implementation of a stockholders' rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the
Preferred Securities Guarantee or Common Securities Guarantee, (d) purchases
of common stock related to the issuance of common stock or rights under any of
the Company's benefit plans for its directors, officers, or employees and (e)
obligations under any dividend reinvestment and stock purchase plan). Prior to
the termination of any such Extension Period, FCN 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 or extend beyond the Stated Maturity of the Subordinated
Debt Securities. Upon the termination of any Extension Period and the payment
of all amounts then due, FCN may select a new Extension Period, subject to the
foregoing requirements. See "Description of the Subordinated Debt Securities--
Interest" and "--Option to Extend Interest Payment Period."
S-16
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period of the
Subordinated Debt Securities.
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 in the Property Account. The Trust's funds available for
distribution to the holders of the Preferred Securities will be limited to
payments received from FCN on the Subordinated Debt Securities. See
"Description of the Subordinated Debt Securities." The payment of
distributions out of moneys held by the Trust is guaranteed by FCN to the
extent set forth under "Description of the Preferred Securities Guarantees" 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 (as defined below) prior to the relevant
payment dates. Such distributions will be paid through the Institutional
Trustee who will hold amounts received in respect of the Subordinated Debt
Securities in the Property Account for the benefit of the holders of the Trust
Securities. The Property Account may be held at the Institutional Trustee or
any Paying Agent of the Institutional Trustee, including FNBC. 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 record dates for payment
of distributions will be [March 15, June 15, September 15 and December 15], as
applicable. 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 payment date. A "Business Day" shall mean any day other than Saturday,
Sunday or any other day on which banking institutions in New York, New York or
Chicago, Illinois are authorized or required by any applicable law or
executive order to close.
MANDATORY REDEMPTION
The Subordinated Debt Securities will mature on , , which date may be
shortened or extended as provided herein. Moreover, the Subordinated Debt
Securities are redeemable (i) in whole or in part, at any time on or after
, , or (ii) in whole, but not in part, at any time within 90 days
following the occurrence of a Tax Event or Capital Treatment Event, in each
case at a redemption price equal to the accrued and unpaid interest on the
Subordinated Debt Securities so redeemed to but excluding the date fixed for
redemption, plus 100% of the principal amount thereof. See "Description of the
Subordinated Debt Securities." Upon the repayment of the Subordinated Debt
Securities, 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 Debt Securities 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 Debt Securities--Optional Redemption." 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
under "--Book-Entry Only Issuance--The Depository Trust Company" below. Any
such redemption or distribution of the Subordinated Debt Securities will
require the prior approval of the Federal Reserve Board if such approval is
then required under applicable law, rules, guidelines or policies.
TAX EVENT AND CAPITAL TREATMENT EVENT REDEMPTION
Subject to the prior approval of the Federal Reserve Board if such approval
is then required under applicable law, rules, guidelines or policies, if, at
any time, a Tax Event or Capital Treatment Event shall occur and be
continuing, FCN shall have the right, upon not less than 30 and no more than
60 days' notice, to redeem the Subordinated Debt Securities, in whole, but not
in part, for cash within 90 days following the occurrence of such
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Tax Event or Capital Treatment Event and, following such redemption, all Trust
Securities shall be redeemed by the Trust at the Redemption Price.
"Tax Event" means the receipt by the Trust of an opinion of counsel to the
Company experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of issuance
of such Preferred Securities under the Declaration, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days of the
date of such opinion, subject to United States federal income tax with respect
to income received or accrued on the Subordinated Debt Securities, (ii)
interest payable by the Company on the Subordinated Debt Securities is not, or
within 90 days of the date of such opinion, will not be, deductible by the
Company, in whole or in part, for United States federal income tax purposes or
(iii) the Trust is, or will be within 90 days of the date of such opinion,
subject to more than de minimis amount of other taxes, duties or other
governmental charges.
"Capital Treatment Event" means the reasonable determination by the Company
that, as a result of the occurrence of any amendment to, or change (including
any announced prospective change) in, the laws (or any regulations thereunder)
of the United States or any political subdivision thereof or therein, or as a
result of any official or administrative pronouncement or action or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or such pronouncement, action or decision is announced on
or after the date of issuance of the Preferred Securities under the
Declaration, there is more than an insubstantial risk that the Company will
not be entitled to treat an amount equal to the liquidation amount of the
Preferred Securities as "Tier 1 Capital" (or the then equivalent thereof) for
purposes of the capital adequacy guidelines of the Federal Reserve Board, as
then in effect and applicable to the Company.
DISTRIBUTION OF THE SUBORDINATED DEBT SECURITIES
FCN will have the right at any time to liquidate the Trust and cause the
Subordinated Debt Securities to be distributed to the holders of the Trust
Securities, subject to the prior approval of the Federal Reserve Board if such
approval is then required under applicable law, rules, guidelines or policies.
If the Subordinated Debt Securities are distributed to the holders of the
Preferred Securities, FCN will use its best efforts to cause the Subordinated
Debt Securities to be listed on the New York Stock Exchange or on such other
exchange on which the Preferred Securities are then listed.
After the date for any distribution of Subordinated Debt Securities upon
dissolution of the Trust, (i) the Preferred Securities will no longer be
deemed to be outstanding, (ii) the Depositary (as defined herein) or its
nominee, as the record holder of the Preferred Securities, will receive a
registered global certificate or certificates representing the Subordinated
Debt Securities to be delivered upon such distribution, and (iii) any
certificates representing Preferred Securities not held by the Depositary or
its nominee will be deemed to represent Subordinated Debt Securities having an
aggregate principal amount equal to the aggregate stated liquidation amount
of, with an interest rate identical to the distribution rate of, and accrued
and unpaid interest equal to accrued and unpaid distributions on, such
Preferred Securities until such certificates are presented to FCN or its agent
for transfer or reissuance.
There can be no assurance as to the market prices for either the Preferred
Securities or the Subordinated Debt Securities 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 or the Subordinated
Debt Securities may trade at a discount to the price that the investor paid to
purchase the Preferred Securities offered hereby.
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.
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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, provided that FCN has paid to the Institutional
Trustee a sufficient amount of cash in connection with the related redemption
or maturity of the Subordinated Debt Securities, the Trust 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 the holders of the Preferred Securities. See "--
Book-Entry Only Issuance--The Depository Trust Company." If notice of
redemption shall have been given and funds deposited as required, then, from
and after the announced redemption date, 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 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 FCN pursuant to
the Preferred Securities Guarantee, distributions on such Preferred Securities
will continue to accrue at the then applicable rate from the original
redemption date to the 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 in accordance with
procedures of the Depository as described below under "--Book-Entry Only
Issuance--The Depository Trust Company."
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws and the regulations of the Federal
Reserve Board), FCN 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.
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,
distributions in 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 Debt Securities in an aggregate
stated principal amount equal to the aggregate stated liquidation amount of,
with an interest rate identical to the distribution rate of, and accrued and
unpaid interest 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.
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 , the
expiration of the term of the Trust, (ii) upon the bankruptcy of FCN, (iii)
upon the filing of a certificate of dissolution or its equivalent with respect
to FCN, the filing of a certificate of cancellation with respect to the Trust
after obtaining the consent of the holders of at least a majority in
liquidation amount of the Trust Securities affected thereby voting together as
a single class to file such certificate of cancellation or the revocation of
the charter of FCN and the expiration of 90 days after the date of revocation
without a reinstatement thereof, (iv) upon the distribution of Subordinated
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Debt Securities to holders of the Preferred Securities, (v) upon the entry of
a decree of a judicial dissolution of FCN or the Trust, or (vi) upon the
redemption of all the Trust Securities.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture relating to the Subordinated Debt
Securities (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 Institutional 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 Institutional Trustee with
respect to certain matters under the Declaration, and therefore the Indenture.
If the Institutional Trustee fails to enforce its rights under the
Subordinated Debt Securities after a holder of Preferred Securities has made a
written request, such holder of record of Preferred Securities may institute a
legal proceeding against FCN to enforce the Institutional Trustee's rights
under the Subordinated Debt Securities without first instituting any legal
proceeding against the Institutional Trustee or any other person or entity.
Notwithstanding the foregoing, if a Declaration Event of Default has occurred
and is continuing and such event is attributable to the failure of FCN to pay
interest or principal on the Subordinated Debt Securities on the date such
interest or principal is otherwise payable (or in the case of redemption, the
redemption date), then a holder of Preferred Securities may institute a Direct
Action for enforcement of payment to such holder directly of the principal of
or interest on the Subordinated Debt Securities 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 Debt
Securities. In connection with such Direct Action, FCN will be subrogated to
the rights of such holder of Preferred Securities under the Declaration to the
extent of any payment made by FCN to such holder of Preferred Securities in
such Direct Action. The holders of Preferred Securities will not be able to
exercise directly any other remedy available to the holders of the
Subordinated Debt Securities.
Upon the occurrence of a Declaration Event of Default, the Institutional
Trustee as the sole holder of the Subordinated Debt Securities will have the
right under the Indenture to declare the principal of and interest on the
Subordinated Debt Securities to be immediately due and payable. FCN and the
Trust are each required to file annually with the Institutional Trustee an
officer's certificate as to its compliance with all conditions and covenants
under the Declaration.
VOTING RIGHTS
Except as described herein and under "Description of the Preferred
Securities Guarantees--Modification of the Preferred Securities Guarantees;
Assignment" in the accompanying Prospectus, as provided under the Trust Act
and the Trust Indenture Act, 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 Institutional Trustee obtaining a tax
opinion in certain circumstances set forth in the following paragraph, the
holders of a majority in aggregate 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 Institutional Trustee, or to
direct the exercise of any trust or power conferred upon the Institutional
Trustee under the Declaration including the right to direct the Institutional
Trustee, as holder of the Subordinated Debt Securities, to (i) exercise the
remedies available to it under the Indenture as a holder of the Subordinated
Debt Securities, (ii) waive any past Indenture Event of Default that is
waivable under the Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Subordinated Debt Securities shall
be due and payable or (iv) consent to any amendment, modification or
termination of the Indenture or the Subordinated Debt Securities where such
consent of the holders of the Subordinated Debt Securities shall be required;
provided, however, that, where a consent or action under the Indenture would
require the consent or
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act of holders of more than a majority in principal amount of the Subordinated
Debt Securities (a "Super-Majority") affected thereby, only the holders of at
least such Super-Majority in aggregate liquidation amount of the Preferred
Securities may direct the Institutional Trustee to give such consent or take
such action. If the Institutional Trustee fails to enforce its rights under
the Subordinated Debt Securities after a holder of record of Preferred
Securities has made a written request, such holder of record of Preferred
Securities may institute a legal proceeding directly against FCN to enforce
the Institutional Trustee's rights under the Subordinated Debt Securities
without first instituting any legal proceeding against the Institutional
Trustee or any other person or entity.
Notwithstanding the foregoing, if a Declaration Event of Default has
occurred and is continuing and such event is attributable to the failure of
FCN to pay interest or principal on the Subordinated Debt Securities on the
date such interest or principal is otherwise payable (or in the case of
redemption on the redemption date), then a holder of Preferred Securities may
institute a Direct Action for enforcement of payment to such holder of the
principal of or interest on the Subordinated Debt Securities 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 Debt Securities. The Institutional Trustee shall within 90 days
notify all holders of the Preferred Securities of any notice of default
received from the Debt Trustee with respect to the Subordinated Debt
Securities. 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
Institutional Trustee shall not take any of the actions described in clauses
(i), (ii) or (iii) of the preceding paragraph unless the Institutional Trustee
has obtained an opinion of a nationally recognized tax counsel experienced in
such matters to the effect that, as a result of such action, for the purposes
of United States federal income tax the Trust will not be classified as other
than a grantor trust. The holders of a majority in aggregate outstanding
principal amount of Subordinated Debt Securities may annul any declaration of
acceleration under the Indenture and waive any default if the default has been
cured and a sum sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration has been deposited with the Debt
Trustee. In the case of the Subordinated Debt Securities held by the
Institutional Trustee on behalf of the Trust, a waiver of any default shall
not be effective until a majority in liquidation amount of the Trust
Securities shall have consented to such waiver; provided that if the Indenture
requires the consent of a Super-Majority, such waiver shall only be effective
if 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 Debt Securities outstanding so consent.
In the event the consent of the Institutional Trustee, as the holder of the
Subordinated Debt Securities, is required under the Indenture with respect to
any amendment, modification or termination of the Indenture, the Institutional
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 Indenture
would require the consent of a Super-Majority, the Institutional 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 Debt Securities outstanding. The Institutional Trustee shall not
take any such action in accordance with the directions of the holders of the
Trust Securities unless the Institutional Trustee has obtained an opinion of a
nationally recognized tax counsel experienced in such matters to the effect
that for the purposes of United States federal income tax the Trust will not
be classified as other than a grantor trust on account of such action.
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
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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 Debt Securities in accordance with 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 FCN or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, FCN, 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.
Holders of the Preferred Securities will have no rights to appoint or remove
the FCN Capital Trustees, who may be appointed, removed or replaced solely by
FCN as the indirect or direct holder of all of the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by the Regular
Trustees (and in certain circumstances the Institutional 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 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 a majority in liquidation amount of the Trust Securities affected
thereby; 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 a majority 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 Institutional Trustee or (iii) cause the Trust to be deemed an "investment
company" which is required to be registered under the Investment Company Act
of 1940, as amended (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 the Regular Trustees and
without the consent of the holders of the Trust Securities, the Institutional
Trustee or the Delaware Trustee consolidate, amalgamate, merge with or into,
or be replaced by a trust organized as such under the laws of any State of the
United States; provided, that (i) if the Trust is not the survivor, such
successor entity either (x) expressly assumes all of the obligations of the
Trust under the Trust Securities or (y) substitutes for the Preferred
Securities other securities having substantially the same terms as the Trust
Securities (the "Successor Securities"), so long as the Successor Securities
rank the
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same as the Trust Securities rank with respect to distributions and payments
upon liquidation, redemption and otherwise, (ii) FCN expressly acknowledges a
trustee of such successor entity possessing the same powers and duties as the
Institutional Trustee as the holder of the Subordinated Debt Securities, (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 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, FCN has received an opinion of a
nationally recognized 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)
FCN guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Preferred Securities
Guarantee and the Common Securities Guarantee (as described in the
accompanying Prospectus). Notwithstanding the foregoing, the Trust shall not,
except with the consent of holders of 100 percent in liquidation amount of the
Trust Securities, consolidate, amalgamate, merge with or into, or be replaced
by any other entity 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 the Successor Entity to be classified
as other than a grantor trust for United States federal income tax purposes.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary (the
"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) or such other nominee as selected by DTC. One or more
fully-registered global Preferred Securities certificates, representing the
total aggregate number of Preferred Securities, will be issued and will be
deposited with DTC.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form ("Certificated
Securities"). 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. Participants in DTC include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations ("Direct Participants") . DTC is owned by a
number of its 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 SEC.
Purchases of Preferred Securities within the DTC system must be made by or
through Participants, which will receive a credit for the Preferred Securities
on DTC's records. The ownership interest of each actual
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purchaser of each Preferred Security ("Beneficial Owner") is in turn to be
recorded on the Participants' 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.
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 and Indirect Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Certificate, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the Preferred Securities represented
thereby for all purposes under the Declaration and the Preferred Securities.
No beneficial owner of an interest in a Global Certificate will be able to
transfer that interest except in accordance with DTC's applicable procedures,
in addition to those provided for under the Declaration.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Preferred Securities (including the presentation of
Preferred Securities for exchange as described below) only at the direction of
one or more Participants to whose account the DTC interests in the Global
Certificates are credited and only in respect of such portion of the aggregate
liquidation amount of Preferred Securities as to which such Participant or
Participants has or have given such direction. However, if there is an Event
of Default under the Preferred Securities, DTC will exchange the Global
Certificates for Certificated Securities, which it will distribute to its
Participants and which will be legended as set forth under the heading
"Notices to Investors."
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants, and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Redemption notices in respect of the Preferred Securities held in book-entry
form will be sent to Cede & Co. If less than all of the Preferred Securities
are being redeemed, DTC will determine the amount of the interest of each
Participant to be redeemed in accordance with its procedures.
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.'s consenting or
voting rights to those Participants to whose accounts the Preferred Securities
are credited on the record date (identified in a listing attached to the
Omnibus Proxy).
Distributions on the Preferred Securities held in book-entry form will be
made to DTC in immediately available funds. DTC's practice is to credit
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 and Indirect Participants to Beneficial Owners will be governed
by standing instructions and customary practices and will be the
responsibility of such Participants and Indirect Participants and not of DTC,
the Trust or the Company, subject to any statutory or regulatory requirements
as may be in effect from time to time. Payment of distributions to DTC is the
responsibility of the Trust, disbursement of such payments to Participants is
the responsibility of DTC, and disbursement of such payments to the Beneficial
Owners is the responsibility of Participants and Indirect Participants.
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Except as provided herein, a Beneficial Owner of an interest in a Global
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.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Certificates among Participants of DTC,
DTC is under no obligation to perform or continue to perform such procedures,
and such procedures may be discontinued at any time. Neither the Company, the
Issuer nor the Trustee will have any responsibility for the performance by DTC
or its Participants or Indirect Participants under the rules and procedures
governing DTC. DTC may discontinue providing its services as securities
depositary with respect to the Preferred Securities at any time by giving
notice to the Trust. Under such circumstances, in the event that a successor
securities depositary is not obtained, Preferred Security certificates are
required to be printed and delivered. Additionally, the Trust (with the
consent of the Company) may decide to discontinue use of the system of book-
entry transfers through DTC (or a successor depositary). In that event,
certificates for the Preferred Securities will be printed and delivered. In
each of the above circumstances, the Company will appoint a paying agent with
respect to the Preferred Securities.
The information in this section concerning DTC and DTC's book entry system
has been obtained from sources that the Company and the Trust believe to be
reliable, but neither the Company nor the Trust takes responsibility for the
accuracy thereof.
PAYMENT
Payments in respect of the Preferred Securities represented by the Global
Certificates shall be made to DTC, which shall credit the relevant accounts at
DTC on the applicable distribution dates or, in the case of Preferred
Securities represented by Certificated Securities, such payments shall be made
by check mailed to the address of the holder entitled thereto as such address
shall appear on the Securities Register.
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
The First National Bank of Chicago ("FNBC") will act as registrar, transfer
agent and paying agent for the Preferred Securities (the "Paying Agent"). FNBC
is presently located at One First National Plaza, Chicago, Illinois 60670. If
the Preferred Securities do not remain in book-entry only form, one or more
additional paying agents may be appointed if so required by any rule or
regulation of any securities exchange upon which the Preferred Securities may
be listed at such time. The Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Issuer Trustees. In the event
that FNBC shall no longer be the Paying Agent, the Institutional Trustee shall
appoint a successor to act as Paying Agent (which shall be a bank or trust
company acceptable to the Company).
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 the Company may require) in respect of any tax or
other government charges which 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.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The Institutional Trustee, prior to the occurrence of a default with respect
to the Trust Securities and after the curing of any defaults that may have
occurred, 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
S-25
exercise in the conduct of his or her own affairs. Subject to such provisions,
the Institutional 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, provided,
that, the Institutional Trustee shall not be relieved of its obligation to
exercise the rights and powers vested in it by the Declaration following the
occurrence of a Declaration Event of Default. The Institutional Trustee also
serves as trustee under the Preferred Securities Guarantee and the Indenture.
For information concerning the relationship between the Institutional Trustee
and the Company, see "FCN Capital Trust" herein.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the 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 characterized as other than a
grantor trust for United States federal income tax purposes. FCN is authorized
and directed to conduct its affairs so that the Subordinated Debt Securities
will be treated as indebtedness of FCN for United States federal income tax
purposes. In this connection, FCN 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 FCN, that each of
FCN and the Regular Trustees determine in their 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 or vary the
terms thereof.
Holders of the Preferred Securities have no preemptive rights.
DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEE
Pursuant to the Preferred Securities Guarantee, FCN will irrevocably and
unconditionally agree, to the extent set forth therein, to pay in full to the
holders of the Preferred Securities issued by the Trust, the Guarantee
Payments (as defined in the accompanying Prospectus) (except to the extent
paid by the Trust), as and when due, regardless of any defense, right of set-
off or counterclaim which the Trust may have or assert. The Company's
obligation to make a Guarantee Payment may be satisfied by direct payment of
the required amounts by the Company to the holders of Preferred Securities or
by causing the Trust to pay such amounts to such holders. The Preferred
Securities Guarantee will be qualified as an indenture under the Trust
Indenture Act. The Chase Manhattan Bank will act as the Preferred Securities
Guarantee Trustee under the Preferred Securities Guarantee. The terms of the
Preferred Securities Guarantee will be those set forth in such Preferred
Securities Guarantee and those made part of such Preferred Securities
Guarantee by the Trust Indenture Act. The Preferred Securities Guarantee will
be held by the Preferred Securities Guarantee Trustee for the benefit of the
holders of the Preferred Securities. A summary description of the Preferred
Securities Guarantee appears in the accompanying Prospectus under the caption
"Description of the Preferred Securities Guarantees."
DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES
Set forth below is a description of the specific terms of the Subordinated
Debt Securities 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 Debt Securities set
forth in the accompanying Prospectus under the caption "Description of the
Subordinated Debt Securities." The following description does not purport to
be complete and is subject to, and is qualified in its entirety by reference
to, the description in the
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accompanying Prospectus and the Indenture, dated as of January 1, 1997 (the
"Base Indenture"), between FCN and The Chase Manhattan Bank, as Trustee (the
"Debt Trustee"), as supplemented by a First Supplemental Indenture, dated as
of January , 1997 (the Base Indenture, as so supplemented, is hereinafter
referred to as the "Indenture"), the forms of which are filed as Exhibits 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 Indenture.
FCN will have the right to liquidate the Trust and cause the Subordinated
Debt Securities to be distributed to the holders of the Trust Securities. If
the Subordinated Debt Securities are distributed to the holders of the
Preferred Securities, FCN will use its best efforts to have the Subordinated
Debt Securities listed on the New York Stock Exchange or on such other
national securities exchange or similar organization on which the Preferred
Securities are then listed or quoted.
GENERAL
The Subordinated Debt Securities will be issued as unsecured indebtedness
under the Indenture. The Subordinated Debt Securities will be limited in
aggregate principal amount to approximately $ , such amount being the sum of
the aggregate stated liquidation of the Preferred Securities and the Common
Securities.
The Subordinated Debt Securities are not subject to a sinking fund
provision. The entire principal amount of the Subordinated Debt Securities
will mature and become due and payable, together with any accrued and unpaid
interest thereon including Compound Interest (as defined herein) and
Additional Sums (as defined herein), if any, on , , subject to the
right of FCN to shorten the Stated Maturity to a date no earlier than ,
and to extend the Stated Maturity to a date no later than , ,
subject in each case to certain conditions.
If Subordinated Debt Securities are distributed to holders of Preferred
Securities in liquidation of such holders' interests in the Trust, such
Subordinated Debt Securities will initially be issued as a Global Security (as
defined herein). As described herein, Subordinated Debt Securities may be
issued in certificated form in exchange for a Global Security. See "--Book-
Entry and Settlement" below. In the event that Subordinated Debt Securities
are issued in certificated form, such Subordinated Debt Securities will be in
denominations of $25 and integral multiples thereof and may be transferred or
exchanged at the offices described below. Payments on Subordinated Debt
Securities 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 Debt Securities. In the event Subordinated Debt Securities
are issued in certificated form, principal and interest will be payable, the
transfer of the Subordinated Debt Securities will be registrable and
Subordinated Debt Securities will be exchangeable for Subordinated Debt
Securities of other denominations of a like aggregate principal amount at the
corporate trust office of (i) the Institutional Trustee in New York, New York,
(ii) FNBC in Chicago, Illinois, or (iii) any other Paying Agent or transfer
agent appointed in addition or lieu thereof; provided, that payment of
interest may be made at the option of FCN by check mailed to the address of
the holder entitled thereto or by wire transfer to an account appropriately
designated by the holder entitled thereto. Notwithstanding the foregoing, so
long as the holder of any Subordinated Debt Securities is the Institutional
Trustee, the payment of principal and interest on the Subordinated Debt
Securities held by the Institutional Trustee will be made at such place and to
such account as may be designated by the Institutional Trustee.
Any moneys deposited with the Debt Trustee or any Paying Agent, or then held
by FCN in trust, for the payment of principal of (and premium, if any) or
interest on any Subordinated Debt Securities and remaining unclaimed for two
years after such principal (and premium, if any) or interest has become due
and payable shall, at the request of FCN, be repaid to FCN and the holder of
such Subordinated Debt Security shall thereafter look, as a general unsecured
creditor, only to FCN for payment thereof.
The Indenture does not contain provisions that afford holders of the
Subordinated Debt Securities protection in the event of a highly leveraged
transaction or other similar transaction involving FCN that may adversely
affect such holders.
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SUBORDINATION
The Indenture provides that the Subordinated Debt Securities are
subordinated and junior in right of payment to all present and future Senior
Indebtedness (as defined herein and which includes both senior and
subordinated indebtedness for money borrowed) and General Obligations (as
defined herein) and rank pari passu and are equivalent to creditor obligations
of those holding general unsecured claims not entitled to statutory priority
under the United States Bankruptcy Code or otherwise. In addition, no direct
or indirect payment may be made of principal, premium, if any, or interest on
the Subordinated Debt Securities, or in respect of any redemption, repayment,
retirement, purchase or other acquisition of any of the Subordinated Debt
Securities, at any time when there is a default in the payment of the
principal of, premium, if any, interest on or otherwise with respect to any
Senior Indebtedness, whether at maturity or any date fixed for prepayment or
by declaration or otherwise, unless and until such default shall have been
cured or waived or shall have ceased to exist or all Senior Indebtedness shall
have been paid. Upon any distribution of assets of the Company to creditors
upon any dissolution, winding-up, liquidation or reorganization, whether
voluntary or involuntary, or in a bankruptcy, insolvency, receivership or
other proceedings, the payment of the principal of, and interest on, the
Subordinated Debt Securities will, to the extent set forth in the Indenture,
be subordinated in right of payment to the prior payment in full of all Senior
Indebtedness and General Obligations of FCN. Upon any payment or distribution
of assets to creditors upon dissolution, winding-up, liquidation,
reorganization, assignment for benefit of creditors, marshalling of assets or
any bankruptcy, insolvency or similar proceedings of FCN, the holders of all
Senior Indebtedness and the creditors in respect of all General Obligations
will first be entitled to receive payment in full of all amount due or to
become due thereon before the holders of the Subordinated Debt Securities will
be entitled to receive and retain any payments in respect of the principal of,
or interest on, the Subordinated Debt Securities. By reason of such
subordination, in the event of the insolvency of the Company, holders of
Senior Indebtedness and creditors in respect of General Obligations may
receive more, ratably, and holders of Subordinated Debt Securities having a
claim pursuant to such securities may receive less, ratably, than other
creditors of FCN.
The term "Senior Indebtedness" means, with respect to FCN, the principal of,
premium, if any, and interest on (i) all of FCN's indebtedness for money
borrowed (but excluding trade accounts payable arising in the ordinary course
of business) whether outstanding on the date of execution of the Indenture or
thereafter created, assumed or incurred and (ii) any deferrals, renewals or
extensions of any such Senior Indebtedness, except that Senior Indebtedness
shall not include (1) any such indebtedness that is by its terms subordinated
to or ranks pari passu with the Subordinated Debt Securities, (2) any
indebtedness between or among such obligor or its affiliates, including all
other debt securities and guarantees in respect of those debt securities,
issued to any other trust, or a trustee of such trust, partnership or other
entity affiliated with FCN that is a financing vehicle of FCN (a "financing
entity") in connection with the issuance by such financing entity of
securities that rank pari passu with, or junior to, the Trust Securities, and
(3) indebtedness evidenced by securities issued under an indenture dated as of
November 15, 1996 between the Company and The Chase Manhattan Bank, as trustee
(unless such securities are by their terms senior in right of payment to the
securities heretofore issued under said indenture). The term "indebtedness for
money borrowed" as used in the foregoing sentence shall include, without
limitation, any obligation of, or any obligation guaranteed by, the Company
for the repayment of borrowed money, whether or not evidenced by bonds,
debentures, notes or other written instruments, and any deferred obligation
for the payment of the purchase price of property or assets.
The term "General Obligations" means all the obligations of FCN to make
payment on account of claims in respect of derivative products such as
interest and foreign exchange rate contracts, commodity contracts and similar
arrangements, other than (i) obligations on account of Senior Indebtedness,
(ii) obligations on account of indebtedness for money borrowed ranking pari
passu with or subordinate to the Subordinated Debt Securities and (iii)
obligations which by their terms are expressly stated not to be superior in
right of payment of the Subordinated Debt Securities or to rank on a parity
with the Subordinated Debt Securities; provided, however, that notwithstanding
the foregoing, in the event that any rule, guideline or interpretation
promulgated or issued by the Federal Reserve Board (or other competent
regulatory agency or authority), as from time to time in effect, establishes
or specifies criteria for the inclusion in regulatory capital of subordinated
debt of a bank holding
S-28
company requiring that such subordinated debt be subordinated to obligations
to creditors in addition to those set forth above, then the term "General
Obligations" shall include such additional obligations to creditors (excluding
trade accounts payable arising in the ordinary course of business), as from
time to time in effect pursuant to such rules, guidelines or interpretations.
For purposes of this definition, "claim" shall have the meaning assigned
thereto in Section 101(4) of the Bankruptcy Code of 1978, as amended to the
date of the Indenture.
The Subordinated Debt Securities will rank pari passu with the Series A
Debentures issued to the Series A Trust and the Series B Debentures issued to
the Series B Trust.
To the extent of any payments made on Senior Indebtedness and General
Obligations, the rights of the holders of the Subordinated Debt Securities
will be subrogated to the rights of holders of the Senior Indebtedness and
General Obligations of FCN until all amounts owing to the holders of the
Subordinated Debt Securities are paid in full. Such Senior Indebtedness and
General Obligations shall continue to be Senior Indebtedness and General
Obligations and be entitled to the benefits of the subordination provisions
irrespective of any amendment, modification or waiver of any term of such
Senior Indebtedness and General Obligations.
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued by FCN or the amount of General Obligations which FCN may
incur. As of September 30, 1996, Senior Indebtedness and General Obligations
of FCN aggregated approximately $5.13 billion. In addition, because FCN is a
holding company, the Subordinated Debt Securities are effectively subordinated
to all existing and future liabilities of FCN's subsidiaries, including
depositors of its banking subsidiaries.
OPTIONAL REDEMPTION
Subject to FCN having received prior approval of the Federal Reserve Board
if then required under applicable capital guidelines or policies of the
Federal Reserve Board, FCN shall have the right to redeem the Subordinated
Debt Securities, (i) in whole or in part, from time to time, on or after ,
, or (ii) in whole, but not in part, at any time within 90 days following
the occurrence of a Tax Event or Capital Treatment Event, in either case, upon
not less than 30 nor more than 60 days, notice, at a redemption price equal to
100 percent of the principal amount to be redeemed plus any accrued and unpaid
interest, including Additional Sums, if any, to the redemption date.
In the event of any redemption, neither FCN, the Debt Trustee nor any Paying
Agent shall be required to issue, register the transfer of or exchange (i)
Subordinated Debt Securities for the period of 15 days next preceding the
redemption date, or (ii) Subordinated Debt Securities so selected for
redemption, except, in the case of any Subordinated Debt Securities being
redeemed in part, any portion thereof not to be redeemed.
OPTION TO CHANGE MATURITY DATE
FCN will have the right at any time to shorten the Stated Maturity of the
Subordinated Debt Securities to a date not earlier than , . The
exercise of such right is subject to the prior approval of the Federal Reserve
Board if such approval is then required under applicable law, rules,
guidelines or policies.
FCN will also have the right to extend the Stated Maturity of the
Subordinated Debt Securities to a date no later than , , so long as at
the time such election is made and at the time such extension commences (i)
FCN is not in bankruptcy, otherwise insolvent or in liquidation, (ii) FCN is
not in default in the payment of any interest or principal on the Subordinated
Debt Securities, (iii) the Trust is not in arrears on payments of
distributions on the Preferred Securities and no deferred distributions are
accumulated and (iv) the Subordinated Debt Securities are rated not less than
BBB- by Standard & Poor's Ratings Services or Baa3 by Moody's Investors
Service, Inc., or not less than the equivalent by any other nationally
recognized statistical rating organization. In the event that FCN elects to
shorten or extend the Stated Maturity of the Subordinated Debt Securities, it
shall give notice to the Debt Trustee, and the Debt Trustee shall give notice
of such shortening or extension to the holders of the Subordinated Debt
Securities no more than 90 and no less than 30 days prior to the effectiveness
thereof.
S-29
INTEREST
The Subordinated Debt Securities shall bear interest at the rate of
percent per annum from , payable quarterly in arrears on [March 31, June
30, September 30 and December 31] of each year (each an "Interest Payment
Date"), commencing , 1997, to the person in whose name such Subordinated
Debt Securities 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 Debt Securities are not in book-entry only form (except
if the Subordinated Debt Securities are held by the Institutional Trustee),
the record dates shall be the [March 15, June 15, September 15 and December
15] prior to the applicable 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 for which interest is
computed, will be computed on the basis of the actual number of days elapsed
per a 30-day month. In the event that any date on which interest is payable on
the Subordinated Debt Securities is not a Business Day, then payment of the
interest payable on such date will be made on the next succeeding day that is
a Business Day (and without any interest or other payment in respect of any
such delay), except that, if such Business Day is in the next succeeding
calendar year, then 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.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Indenture Event of Default has occurred and is continuing, FCN
shall have the right at any time, and from time to time, during the term of
the Subordinated Debt Securities to defer payments of interest by extending
the interest payment period for a period not exceeding 20 consecutive quarters
or extending beyond the Stated Maturity, at the end of which Extension Period,
FCN shall pay all interest then accrued and unpaid (including any Additional
Sums, as herein defined) together with interest thereon compounded quarterly
at the rate specified for the Subordinated Debt Securities to the extent
permitted by applicable law ("Compound Interest"); provided, that during any
such Extension Period, FCN shall not, and shall not permit any subsidiary of
FCN to, (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of FCN's
capital stock or (ii) make any payment of principal of or interest or premium,
if any, on or repay, repurchase or redeem any debt securities of the Company
that rank pari passu in all respects with or junior in interest to the
Subordinated Debt Securities or make any guarantee payments with respect to
any guarantee by the Company of the debt securities of any subsidiary of the
Company if such guarantee ranks pari passu with or junior in interest to the
Subordinated Debt Securities (other than (a) dividends or distributions in
common stock of FCN, (b) any declaration of a dividend in connection with the
implementation of a stockholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Preferred Securities Guarantee
or Common Securities Guarantee, (d) purchases of common stock related to the
issuance of common stock or rights under any of the Company's benefit plans
for its directors, officers, or employees and (e) obligations under any
dividend reinvestment and stock purchase plan). Prior to the termination of
any such Extension Period, FCN may further defer payments of interest by
extending the interest payment period; provided, however, that, such Extension
Period, including all such previous and further extensions, may not exceed 20
consecutive quarters or beyond the Stated Maturity of the Subordinated Debt
Securities. Upon the termination of any Extension Period and the payment of
all amounts then due, FCN may commence a new Extension Period, subject to the
terms set forth in this section. No interest during an Extension Period,
except at the end thereof, shall be due and payable. FCN has no present
intention of exercising its right to defer payments of interest by extending
the interest payment period on the Subordinated Debt Securities. If the
Institutional Trustee shall be the sole holder of the Subordinated Debt
Securities, FCN shall give the Regular Trustees and the Institutional Trustee
notice of its selection of such Extension Period at least one Business Day
prior to the earlier of (i) the date distributions on the Preferred Securities
are payable or (ii) the date the Trustees or FCN Capital Trust 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 not
less than one Business Day prior to such record date. The Regular Trustees
shall give notice
S-30
of FCN's selection of such Extension Period to the holders of the Preferred
Securities. If the Institutional Trustee is not the sole holder of the
Subordinated Debt Securities, FCN shall give the holders of the Subordinated
Debt Securities notice of its selection of such Extension Period at least ten
Business Days before the earlier of (i) the next succeeding Interest Payment
Date, or (ii) the date upon which FCN is required to give notice of the record
date or payment date of such interest payment to the New York Stock Exchange
(or other applicable self-regulatory organization) or to holders of the
Subordinated Debt Securities.
ADDITIONAL SUMS
In the event a Tax Event has occurred and is continuing and 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, FCN will pay as
additional interest ("Additional Sums") such additional amounts as shall be
required so that the net amounts received and retained by the Trust after
paying any such taxes, duties, assessments or other governmental charges will
be not less than the amounts the Trust would have received had it not been
subject to such taxes, duties, assessments or other governmental charges as a
result of such Tax Event.
PROPOSED TAX LEGISLATION
On March 19, 1996, as part of President Clinton's Fiscal 1996 Budget
Proposal, the United States Treasury Department proposed legislation that
would, among other things, treat as equity for United States Federal income
tax purposes instruments--such as the Subordinated Debt Securities--with a
maximum term of more than 20 years that are not shown as indebtedness on the
consolidated balance sheet of the issuer. If the proposed legislation were
enacted, such legislation would not be expected to apply to the Subordinated
Debt Securities because, based on statements by Congressional leaders, it is
not expected that the legislation would have a retroactive effective date.
There can be no assurances, however, that legislation enacted after the date
hereof would not adversely affect the tax treatment of the Subordinated Debt
Securities, or that such tax treatment would not cause a Tax Event resulting
in the redemption of the Preferred Securities. See "Description of the
Preferred Securities--Tax Event and Capital Treatment Event Redemption."
INDENTURE EVENTS OF DEFAULT
If any Indenture Event of Default shall occur and be continuing, the
Institutional Trustee, as the holder of the Subordinated Debt Securities, will
have the right to declare the principal of and the interest on the
Subordinated Debt Securities (including any Compound Interest and Additional
Interest, if any) and any other amounts payable under the Indenture to be
forthwith due and payable and to enforce its other rights as a creditor with
respect to the Subordinated Debt Securities. See "Description of Subordinated
Debt Securities--Events of Default, Waiver and Notice" in the accompanying
Prospectus for a description of the Indenture 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
Institutional Trustee to exercise its rights as the holder of the Subordinated
Debt Securities. See "Description of the Preferred Securities--Declaration
Events of Default" and "--Voting Rights." The holders of a majority in
aggregate outstanding principal amount of Subordinated Debt Securities may
annul any declaration of acceleration under the Indenture and waive any
default if the default has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Debt Trustee. In the case of the Subordinated Debt
Securities held by the Institutional Trustee on behalf of the Trust, a waiver
of any default shall not be effective until a majority in liquidation amount
of the Trust Securities shall have consented to such waiver; provided that if
the Indenture requires the consent of a Super-Majority, such waiver shall only
be effective if 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 Debt Securities outstanding so
consent.
Notwithstanding the foregoing, if an Event of Default has occurred and is
continuing and such event is attributable to the failure of FCN to pay
interest or principal on the Subordinated Debt Securities on the date such
interest or principal is otherwise payable, FCN acknowledges that a holder of
Preferred Securities may then
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institute a Direct Action for payment on or after the respective due date
specified in the Subordinated Debt Securities. Notwithstanding any payments
made to such holder of Preferred Securities by FCN in connection with a Direct
Action, FCN shall remain obligated to pay the principal of or interest on the
Subordinated Debt Securities held by the Trust or the Institutional Trustee of
the Trust, and FCN shall be subrogated to the rights of the holder of such
Preferred Securities with respect to payments on the Preferred Securities to
the extent of any payments made by the Company to such holder in any Direct
Action. The holders of Preferred Securities will not be able to exercise
directly any other remedy available to the holders of the Subordinated Debt
Securities.
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,
the Subordinated Debt Securities 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 Debt Securities represented by the Global Security will
not be exchangeable for, and will not otherwise be issuable as, Subordinated
Debt Securities 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
Debt Securities in definitive form and will not be considered the holders (as
defined in the Indenture) thereof for any purpose under the Indenture, and no
Global Security representing Subordinated Debt Securities 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 Indenture.
THE DEPOSITARY
If Subordinated Debt Securities 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 Debt Securities. For a
description of DTC and the specific terms of the depositary arrangements, see
"Description of the Preferred Securities--Book-Entry Only Issuance--The
Depository Trust Company." As of the date of this Prospectus Supplement, the
description therein 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 FCN. FCN 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 FCN, the Trust, the Institutional Trustee, any paying agent and any
other agent of FCN, or the Debt 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 Debt Securities 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 Debt Securities
registered in the names of persons other than the Depositary or its nominee
only if (i) the Depositary notifies FCN 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
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Depositary, at any time, ceases to be a clearing agency registered under the
Exchange Act at which time the Depositary is required to be so registered to
act as such depositary and no successor depositary shall have been appointed,
(iii) FCN, in its sole discretion, determines that such Global Security shall
be so exchangeable or (iv) there shall have occurred an Indenture Event of
Default with respect to such Subordinated Debt Securities. Any Global Security
that is exchangeable pursuant to the preceding sentence shall be exchangeable
for Subordinated Debt Securities 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.
GOVERNING LAW
The Indenture and the Subordinated Debt Securities will be governed by, and
construed in accordance with, the laws of the State of New York.
INFORMATION CONCERNING THE DEBT TRUSTEE
The Debt Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the
Trust Indenture Act. Subject to such provisions, the Debt Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Subordinated Debt Securities, unless offered
reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby. The Debt Trustee is not required
to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the Debt Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
The Debt Trustee also serves as the Institutional Trustee under the
Declaration and the trustee under the Preferred Securities Guarantee. For
information concerning the relationship between the Debt Trustee and the
Company, see "FCN Capital Trust" herein.
MISCELLANEOUS
The Indenture will provide that FCN will pay all fees and expenses related
to (i) the offering of the Trust Securities and the Subordinated Debt
Securities, (ii) the organization, maintenance and dissolution of the Trust,
(iii) the retention of the FCN Capital Trustees and (iv) the enforcement by
the Institutional Trustee of the rights of the holders of the Preferred
Securities. The payment of such fees and expenses will be fully and
unconditionally guaranteed by FCN.
EFFECT OF OBLIGATIONS UNDER THE SUBORDINATED DEBT
SECURITIES AND THE PREFERRED SECURITIES 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 Debt Securities.
As long as payments of interest and other payments are made when due on the
Subordinated Debt Securities, such payments will be sufficient to cover
distributions and payments due on the Trust Securities because of the
following factors: (i) the aggregate principal amount of Subordinated Debt
Securities will be equal to the sum of the aggregate stated liquidation amount
of the Trust Securities; (ii) the interest rate and the interest and other
payment dates on the Subordinated Debt Securities will match the distribution
rate and distribution and other payment dates for the Preferred Securities;
(iii) FCN shall pay all, and the Trust shall not be obligated to pay, directly
or indirectly, all costs, expenses, debt, and obligations of the Trust (other
than with respect to the Trust Securities); and (iv) the Declaration further
provides that the FCN Capital Trustees shall not take or cause or permit the
Trust to, among other things, engage in any activity that is not consistent
with the purposes of the Trust.
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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 FCN as and to the extent set forth under
"Description of the Preferred Securities Guarantees" in the accompanying
Prospectus. If FCN does not make interest payments on the Subordinated Debt
Securities purchased by the Trust, the Trust will not have sufficient funds to
pay distributions on the Preferred Securities. The Preferred Securities
Guarantee does not apply to any payment of distributions unless and until the
Trust has sufficient funds for the payment of such distributions. The
Preferred Securities Guarantee covers the payment of distributions and other
payments on the Preferred Securities if and to the extent that FCN has made a
payment of interest or principal on the Subordinated Debt Securities held by
the Trust as its sole asset. The Preferred Securities Guarantee, when taken
together with FCN's obligations under the Subordinated Debt Securities and the
Indenture and its obligations under the Declaration, including its obligations
to pay costs, expenses, debts and liabilities of the Trust (other than with
respect to the Trust Securities), provide a full and unconditional guarantee
on a subordinated basis of amounts due on the Preferred Securities.
If FCN fails to make interest or other payments on the Subordinated Debt
Securities when due (taking account of any Extension Period), the Declaration
provides a mechanism whereby the holders of the Preferred Securities, using
the procedures described in "Description of the Preferred Securities--Book-
Entry Only Issuance--The Depository Trust Company" and "--Voting Rights," may
direct the Institutional Trustee to enforce its rights under the Subordinated
Debt Securities. If the Institutional Trustee fails to enforce its rights
under the Subordinated Debt Securities, a holder of Preferred Securities may
institute a legal proceeding against FCN to enforce the Institutional
Trustee's rights under the Subordinated Debt Securities without first
instituting any legal proceeding against the Institutional Trustee or any
other person or entity. Notwithstanding the foregoing, if a Declaration Event
of Default has occurred and is continuing and such event is attributable to
the failure of FCN to pay interest or principal on the Subordinated Debt
Securities on the date such interest or principal is otherwise payable (or in
the case of redemption on the redemption date), then a holder of Preferred
Securities may institute a Direct Action for payment on or after the
respective due date specified in the Subordinated Debt Securities. In
connection with such Direct Action, FCN will be subrogated to the rights of
such holder of Preferred Securities under the Declaration to the extent of any
payment made by FCN to such holder of Preferred Securities in such Direct
Action. FCN, under the Preferred Securities Guarantee, acknowledges that the
Preferred Securities Guarantee Trustee shall enforce the Preferred Securities
Guarantee on behalf of the holders of the Preferred Securities. If FCN fails
to make payments under the Preferred Securities Guarantee, any holder of
Preferred Securities may institute a Direct Action against FCN to enforce the
Preferred Guarantee Trustee's rights under the Preferred Securities Guarantee
without first instituting a legal proceeding against the Trust, the Preferred
Guarantee Trustee, or any other person or entity.
UNITED STATES FEDERAL INCOME TAXATION
GENERAL
The following is a summary of certain United States Federal income tax
consequences of the purchase, ownership, and disposition of the Preferred
Securities. Unless otherwise stated, this summary deals only with Preferred
Securities held as capital assets (generally, assets held for investment) by
holders who purchase the Preferred Securities upon original issuance. The tax
treatment of a holder of Preferred Securities may vary depending on his
particular situation. This summary does not address all of the tax
consequences that may be relevant to holders who may be subject to special tax
treatment such as, for example, insurance companies, broker-dealers, tax-
exempt organizations, or, except to the extent described below, foreign
taxpayers. In addition, this summary does not address any aspects of state,
local, or foreign tax laws. This summary is based on the United States Federal
income tax law in effect as of the date hereof, which is subject to change,
possibly on a retroactive basis. Each investor is urged to consult his tax
advisor as to the particular tax consequences of purchasing, owning, and
disposing of the Preferred Securities, including the application and effect of
United States Federal, state, local, foreign, and other tax laws.
S-34
CLASSIFICATION OF THE SUBORDINATED DEBT SECURITIES
In connection with the issuance of the Subordinated Debt Securities,
Skadden, Arps, Slate, Meagher & Flom LLP, special tax counsel to FCN and the
Trust ("Tax Counsel"), will render an opinion generally to the effect that
under current 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 Debt Securities to be held by the
Trust will be classified, for United States Federal income tax purposes, as
indebtedness of FCN.
CLASSIFICATION OF FCN CAPITAL TRUST
In connection with the issuance of the Preferred Securities, Tax Counsel
will render an opinion generally to the effect that, under current law and
assuming full compliance with the terms of the Declaration, the 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
holder of Preferred Securities will generally be treated as the owner of an
undivided interest in the Subordinated Debt Securities and, as further
discussed below, each holder will be required to include in ordinary income
his allocable share of interest (or original issue discount) paid or accrued
on the Subordinated Debt Securities.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under recently issued Treasury regulations (the "Regulations"), a debt
instrument will be deemed to be issued with original issued discount if there
is more that a "remote" contingency that periodic stated interest payments due
on the instrument will not be timely paid. Because the exercise by FCN of its
option to defer the payment of stated interest on the Subordinated Debt
Securities would prevent FCN from declaring dividends on any class of equity,
FCN believes that the likelihood of its exercising the option is "remote"
within the meaning of the Regulations. As a result, FCN intends to take the
position, based on the advice of Tax Counsel, that the Subordinated Debt
Securities will not be deemed to be issued with original issue discount.
Accordingly, based on this position, stated interest payments on the
Subordinated Debt Securities will be includible in the ordinary income of a
holder at the time that such payments are paid or accrued in accordance with
the holder's regular method of accounting. Because the Regulations have not
yet been addressed in any published rulings or other published interpretations
issued by the Internal Revenue Service, it is possible that the Internal
Revenue Service could take a position contrary the position taken by the
Company.
Exercise of Deferral Option. If FCN were to exercise its option to defer the
payment of stated interest on the Subordinated Debt Securities, the
Subordinated Debt Securities would be treated, solely for purpose of the
original issue discount rules, as being "re-issued" at such time with original
issue discount. Under these rules, a holder of the Subordinated Debt
Securities would be required to include original issue discount in ordinary
income, on a current basis, over the period that the instrument is held even
though FCN would not be making any actual cash payments during the extended
interest payment period. The amount of interest income includible in the
taxable income of a holder of the Subordinated Debt Securities would be
determined on the basis of a constant yield method over the remaining term of
the instrument and the actual receipt of future payments of stated interest on
the Subordinated Debt Securities would no longer be separately reported as
taxable income. The amount of original issue discount that would accrue, in
the aggregate, during the extended interest payment period would be
approximately equal to the amount of the cash payment due at the end of such
period. Any original issue discount included in income would increase the
holder's adjusted tax basis in the Subordinated Debt Securities and the
holder's actual receipt of interest payments would reduce such basis.
Because income on the Preferred Securities will constitute interest income
for United States Federal income tax purposes, corporate holders of Preferred
Securities will not be entitled to claim a dividends received deduction in
respect of such income.
RECEIPT OF SUBORDINATED DEBT SECURITIES OR CASH UPON LIQUIDATION OF FCN
CAPITAL TRUST
If FCN exercises its right to liquidate the Trust and cause the Subordinated
Debt Securities to be distributed on a pro rata basis to the holders of the
Preferred Securities, such distribution would be treated as a nontaxable
S-35
event to the holders. In such event, each holder of Preferred Securities would
have an adjusted tax basis in the Subordinated Debt Securities received in the
liquidation equal to the adjusted tax basis in his Preferred Securities
surrendered therefor and the holding period of the Subordinated Debt
Securities would include the period during which the holder had held the
Preferred Securities. If, however, the Trust is characterized, for United
States Federal income tax purposes, as an association taxable as a corporation
at the time of such liquidation, the distribution of the Subordinated Debt
Securities would constitute a taxable event to the holders of Preferred
Securities.
If the Subordinated Debt Securities are redeemed for cash and the proceeds
of such redemption are distributed to holders in redemption of their Preferred
Securities, the redemption would be treated as a sale of the Preferred
Securities, in which gain or loss would be recognized, as described
immediately below.
SALES OF PREFERRED SECURITIES
Upon the sale of the Preferred Securities, a holder will recognize gain or
loss in an amount equal to the difference between adjusted tax basis in the
Preferred Securities and the amount realized in the sale (except to the extent
any amount received in respect of accrued but unpaid interest not previously
included in income). Such gain or loss will be a capital gain or loss and will
be a long term capital gain or loss if the Preferred Securities have been held
for more than one year.
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest (or original issue discount
if the Subordinated Debt Securities are treated as having been issued, or
reissued, with original issue discount) with respect to the underlying
Subordinated Debt Securities. A holder who disposes of his Preferred
Securities will be required to include in ordinary income (i) any portion of
the amount realized that is attributable to such accrued but unpaid interest
to the extent not previously included in income or (ii) any amount of such
interest (original issue discount, in either case), that has accrued on his
pro rata share of the underlying Subordinated Debt Securities during the
taxable year of sale through the date of disposition. Any such income
inclusion will increase the holder's adjusted tax basis in his Preferred
Securities disposed of. To the extent that the amount realized in the sale 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.
RIGHT TO SHORTEN THE STATED MATURITY OF THE SUBORDINATED DEBT SECURITIES
FCN's exercise of its right to shorten the maturity of the Subordinated Debt
Securities will be a taxable event to holders of Preferred Securities if the
Subordinated Debt Securities are treated as equity for purposes of United
States federal income taxation before the maturity is shortened. See
"Description of the Subordinated Debt Securities--Option to Change Maturity
Date."
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the
United States, a foreign corporation, a nonresident alien individual, a
foreign partnership, or a nonresident fiduciary of a foreign estate or trust.
Payments made to a holder of a Preferred Securities who is a United States
Alien Holder will not be subject to withholding of United States Federal
income tax, provided that (a) the beneficial owner of the Preferred Securities
does not actually or constructively own 10% or more of the total combined
voting power of all classes of stock of FCN entitled to vote, (b) the
beneficial owner of the Preferred Securities is not a controlled foreign
corporation that is related to FCN through stock ownership, and (c) either (A)
the beneficial owner of the Preferred Securities certifies to the Trust or its
agent, under the penalty of perjury, that it is not a United States holder and
provides his name and address or (B) a securities clearing organization, bank
or other financial institution that holds customers' securities in the
ordinary course of its trade or business (a "Financial Institution"), and
holds the Preferred Securities in such capacity, certifies to the Trust or its
agent, under the
S-36
penalty of perjury, that such statement has been received from the beneficial
owner by it or by a Financial Institution between it and the beneficial owner
and furnishes the Trust or its agent with a copy thereof. In addition, a United
States Alien Holder of Preferred Securities will not be subject to withholding
of United States Federal income tax on any gain realized upon the sale or other
disposition of a Preferred Security.
PROPOSED TAX LEGISLATION
On March 19, 1996, as part of President Clinton's Fiscal 1996 Budget
Proposal, the United States Treasury Department proposed legislation that
would, among other things, treat as equity for United States Federal income tax
purposes instruments--such as the Subordinated Debt Securities--with a maximum
term of more than 20 years that are not shown as indebtedness on the
consolidated balance sheet of the issuer. If the proposed legislation were
enacted, such legislation would not be expected to apply to the Subordinated
Debt Securities because, based on statements by Congressional leaders, it is
not expected that the legislation would have a retroactive effective date.
There can be no assurances, however, that legislation enacted after the date
hereof would not adversely affect the tax treatment of the Subordinated Debt
Securities, or that such tax treatment would not cause a Trust Tax Event
resulting in the redemption of the Preferred Securities. See "Description of
the Preferred Securities--Tax Event and Capital Treatment Event Redemption."
INFORMATION REPORTING TO HOLDERS
Income on the Preferred Securities will be reported to holders on Forms 1099,
which forms should be mailed to holders of Preferred Securities by January 31
following each calendar year.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), FCN Capital Trust has agreed to sell to each of
the Underwriters named below, and each of the Underwriters, for whom and
are acting as representatives (the "Representatives"), has severally
agreed to purchase the number of Preferred Securities set forth opposite its
name below. In the Underwriting Agreement, the several Underwriters have
agreed, subject to the terms and conditions set forth therein, to purchase all
the Preferred Securities offered hereby if any of the Preferred Securities are
purchased. In the event of default by an Underwriter, the Underwriting
Agreement provides that, in certain circumstances, the purchase commitments of
the non-defaulting Underwriters may be increased or the Underwriting Agreement
may be terminated.
NUMBER OF
UNDERWRITERS PREFERRED SECURITIES
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---
Total.................................................
===
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 Representatives.
In view of the fact that the proceeds of the sale of the Preferred Securities
will ultimately be used to purchase the Subordinated Debt Securities of FCN,
the Underwriting Agreement provides that FCN will pay as compensation
("Underwriters' Compensation") to the Underwriters arranging the investment
therein of such
S-37
proceeds, an amount in immediately available funds of $ per Preferred
Security (or $ in the aggregate) for the accounts of the several
Underwriters; provided that, such compensation for sales of 10,000 or more
Preferred Securities to any single purchaser will be $ per Preferred
Security. Therefore, to the extent of such sales, the actual amount of
Underwriters' Compensation will be less than the aggregate amount specified in
the preceding sentence.
[During the period from the date of the Underwriting Agreement and continuing
to and including the closing date for the Preferred Securities, neither FCN
Capital Trust nor FCN will, without the prior written consent of the
Underwriters, directly or indirectly, sell, offer 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
FCN which are substantially similar to the Preferred Securities, including any
guarantee of such securities (except for the Preferred Securities offered
hereby).]
Application has been made to list the Preferred Securities on the New York
Stock Exchange. If so approved, 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. The Representatives have advised
FCN Capital Trust that they intend to make a market in the Preferred Securities
prior to the commencement of trading on the New York Stock Exchange. The
Representatives will have no obligation to make a market in the Preferred
Securities, however, and may cease market making activities, if commenced, at
any time.
Prior to this offering there has been no public market for the Preferred
Securities. In order to meet one of the requirements for listing the Preferred
Securities on the New York Stock Exchange, the Underwriters will undertake to
sell lots of 100 or more Preferred Securities to a minimum of 400 beneficial
holders.
FCN Capital Trust and FCN have agreed to indemnify the Underwriters against,
or contribute to payments that the Underwriters may be required to make in
respect of, certain liabilities, including liabilities under the Securities Act
of 1933, as amended.
First Chicago Capital Markets, Inc. ("FCCM") is a wholly owned subsidiary of
the Company.
Any offer and sale of the Preferred Securities will comply with Rule 2810 of
the Rules of Conduct of the National Association of Securities Dealers, Inc.
(the "NASD"). In addition, no NASD member participating in the offering of the
Preferred Securities will execute a transaction in the Preferred Securities in
a discretionary account without the prior written specific approval of the
member's customer.
This Prospectus Supplement and the accompanying Prospectus may be used by
FCCM in connection with offers and sales related to secondary market
transactions in the Preferred Securities. FCCM may act as principal or agent in
such transactions. Such sales will be made at prices related to the prevailing
market prices at the time of sale or otherwise.
Certain of the Underwriters engage in transactions with, and, from time to
time, have performed services for, FCN and its subsidiaries in the ordinary
course of business.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Preferred
Securities, the enforceability of the Declaration and the creation the Trust
will be passed upon by Skadden, Arps, Slate, Meagher & Flom (Delaware) special
Delaware counsel to the Company and the Trust. The validity of the Subordinated
Debt Securities and the Preferred Securities Guarantee and certain matters
relating thereto will be passed upon for FCN by Sherman I. Goldberg, Esq.,
Executive Vice President, General Counsel and Secretary of FCN and for the
Underwriters by Skadden, Arps, Slate, Meagher & Flom LLP. Certain United States
federal income taxation matters will be passed upon for FCN and the Trust by
Skadden, Arps, Slate, Meagher & Flom LLP. As of September 30, 1996, Sherman I.
Goldberg was the record and beneficial owner of 189,122 shares of common stock
of FCN and had options to purchase 221,083 shares of common stock of FCN.
S-38
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY FIRST CHICAGO NBD CORPORATION,
FIRST CHICAGO NBD CAPITAL I OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND
THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF FIRST CHICAGO NBD CORPORATION OR FIRST
CHICAGO NBD CAPITAL I SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE
PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
First Chicago NBD Corporation Summary Historical Financial Information... S-4
Recent Developments...................................................... S-5
Risk Factors............................................................. S-6
First Chicago NBD Corporation............................................ S-11
FCN Capital Trust........................................................ S-12
Capitalization........................................................... S-14
Accounting Treatment..................................................... S-15
Use of Proceeds.......................................................... S-15
Description of the Preferred Securities.................................. S-15
Description of the Preferred Securities Guarantee........................ S-26
Description of the Subordinated Debt Securities.......................... S-26
Effect of Obligations Under the Subordinated Debt Securities and the
Preferred Securities Guarantee.......................................... S-33
United States Federal Income Taxation.................................... S-34
Underwriting............................................................. S-37
Legal Matters............................................................ S-38
PROSPECTUS
Available Information..................................................... 3
Incorporation of Documents by Reference................................... 4
First Chicago NBD Corporation............................................. 5
The Trusts................................................................ 6
Use of Proceeds........................................................... 7
Description of the Subordinated Debt Securities........................... 7
Description of the Preferred Securities................................... 11
Description of the Preferred Securities Guarantees........................ 13
Effect of Obligations Under the Subordinated Debt Securities and the
Preferred Securities Guarantee........................................... 16
Plan of Distribution...................................................... 17
Legal Matters............................................................. 18
Experts................................................................... 18
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PREFERRED SECURITIES
FIRST CHICAGO NBD
CAPITAL I
% PREFERRED SECURITIES
FULLY AND UNCONDITIONALLY
GUARANTEED BY
FIRST CHICAGO NBD
CORPORATION
------------------------
PROSPECTUS SUPPLEMENT
------------------------
JANUARY , 1997
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