<PAGE>
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED SEPTEMBER 27, 1993
(First Union Logo Appears Here)
$150,000,000
FIRST UNION CORPORATION
8.77% SUBORDINATED NOTES DUE NOVEMBER 15, 2004
Interest on the Notes will be payable on May 15 and November 15 of each
year. The first Interest Payment Date will be May 15, 1995, and will include
interest accrued from November 9, 1994. The Notes will be redeemable, at the
option of the Corporation upon not less than 30 days prior written notice, on
November 15, 1999, and on each Interest Payment Date thereafter, in whole or in
part, at a redemption price equal to 100% of the principal amount thereof.
Accrued interest will be paid as provided in the Indenture. Otherwise, the Notes
will not be redeemable prior to maturity. The Notes will be issued only in
registered form in denominations of $1,000 and integral multiples thereof.
Settlement of the Notes will be made in immediately available funds. See
"Description of Certain Terms of the Notes."
The Notes will be unsecured and subordinated to Senior Indebtedness of the
Corporation as described herein. The Notes will rank PARI PASSU with Existing
Subordinated Indebtedness of the Corporation, subject to the Holders of the
Notes being obligated to pay over any Excess Proceeds to Entitled Persons in
respect of Other Financial Obligations as described herein. Payment of the
principal of the Notes may be accelerated only in the case of certain events
involving the bankruptcy, insolvency or reorganization of the Corporation. There
is no right of acceleration in the case of a default in the performance of any
covenant of the Corporation, including the payment of principal or interest. See
"Description of the Debt Securities" in the Prospectus accompanying this
Prospectus Supplement. The Notes will not be deposits or other obligations of a
bank and will not be insured by the Federal Deposit Insurance Corporation or any
other governmental agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE (1) DISCOUNT (2) CORPORATION (1)(3)
Per Note................... 99.616% 0.650% 98.966%
Total...................... $149,424,000 $975,000 $148,449,000
</TABLE>
(1) Plus accrued interest from November 9, 1994, if any.
(2) The Corporation has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting".
(3) Before deducting estimated expenses of $100,000 payable by the Corporation.
The Notes offered hereby are offered by the several Underwriters, as
specified herein, subject to receipt and
acceptance by them and subject to their right to reject any order in whole or in
part. It is expected that the Notes will be ready for delivery in New York, New
York, on or about November 9, 1994.
<TABLE>
<S> <C>
DONALDSON, LUFKIN & JENRETTE CHASE SECURITIES, INC.
SECURITIES CORPORATION
</TABLE>
The date of this Prospectus Supplement is November 2, 1994.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AND OTHER SUBORDINATED NOTES OR DEBENTURES OF THE CORPORATION AT A LEVEL
ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING
MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
The Commissioner of Insurance of the State of North Carolina has not
approved or disapproved this offering, nor has the Commissioner passed upon the
accuracy or adequacy of this Prospectus Supplement or the accompanying
Prospectus.
DESCRIPTION OF CERTAIN TERMS OF THE NOTES
The following description of the particular terms of the 8.77% Subordinated
Notes Due November 15, 2004 offered hereby (the "Notes" and referred to in the
accompanying Prospectus as the "Debt Securities", the "Offered Debt Securities"
and the "Subordinated Debt Securities") supplements and modifies the description
of the general terms and provisions of the Notes set forth in the Prospectus
under "Description of the Debt Securities", to which description reference is
hereby made. The following description does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the description
set forth in the accompanying Prospectus and the provisions of the Indenture (as
defined below). Section references used herein are referenced to the Indenture.
Capitalized terms not otherwise defined herein shall have the meanings given to
them in the Indenture.
GENERAL
The Notes will be limited to $150,000,000 aggregate principal amount, will
be direct, unsecured, subordinated obligations of First Union Corporation (the
"Corporation") and will mature on November 15, 2004. No sinking fund will be
provided for the Notes.
The Notes are to be issued under the Indenture (the "Indenture"), dated as
of March 15, 1986, as amended by supplemental indentures dated as of August 1,
1990 and November 15, 1992, between the Corporation and The Bank of New York
(formerly Irving Trust Company), as Trustee (the "Trustee"). As of September 30,
1994, $2.1 billion aggregate principal amount of subordinated long-term debt was
issued and outstanding as additional series of Securities under the Indenture.
The Trustee is the trustee for such additional series. As of September 30, 1994,
the Corporation had outstanding an aggregate of $746 million of long-term Senior
Indebtedness, an aggregate of $410 million in short-term Senior Indebtedness,
which consisted primarily of commercial paper, and a net receivable position
with respect to outstanding Other Financial Obligations. The Indenture does not
prohibit or limit the incurrence of additional Senior Indebtedness or Other
Financial Obligations by the Corporation.
Principal of and interest on the Notes are to be payable, and the transfer
of the Notes will be registrable, at the Corporate Trust Office of the Trustee
in the City of New York or at the Corporate Trust Office of First Union National
Bank of North Carolina (the "Bank"), a subsidiary of the Corporation, in
Charlotte, North Carolina, except that interest may be paid at the option of the
Corporation by check mailed to the address of the Holder entitled thereto as it
appears on the Note Register. (SECTIONS 301, 305 AND 1002). The Notes will be
issued in fully registered form only in denominations of $1,000 and any integral
multiple of $1,000, and may be transferred or exchanged without payment of any
charge other than taxes or other governmental charges. (SECTIONS 302 AND 305).
Settlement for the Notes will be made in immediately available funds. The
Notes will be in the Same Day Funds Settlement System at The Depository Trust
Company and, to the extent that secondary market trading in the Notes is
effected through the facilities of such depositary, such trades will be settled
in immediately available funds.
S-2
<PAGE>
INTEREST
The Notes will bear interest at 8.77% per annum from November 9, 1994,
payable semi-annually in arrears on May 15 and November 15, of each year. The
first Interest Payment Date will be May 15, 1995, and will include interest
accrued from November 9, 1994. The interest to be paid on each Note on each
Interest Payment Date will be paid to the Person in whose name such Note (or any
Predecessor Note) is registered at the close of business on the preceding May 1
or November 1, as the case may be. (SECTION 307).
OPTIONAL REDEMPTION
The Notes will be redeemable, at the option of the Corporation, on November
15, 1999, and on each Interest Payment Date thereafter (the "Redemption Date"),
in whole or in part, at a redemption price equal to 100 percent of the principal
amount thereof. Accrued interest will be paid as provided in the Indenture.
Otherwise, the Notes will not be redeemable prior to maturity. Notice of
redemption will be given by first-class mail, postage prepaid, mailed not less
than 30 nor more than 60 days prior to the Redemption Date to each holder of the
Notes, at the address appearing in the register of the holders of the Notes
maintained by the Corporation.
USE OF PROCEEDS
The Corporation currently intends to use the net proceeds from the sale of
the Notes for general corporate purposes, which may include the reduction of
indebtedness, investments at the holding company level, investments in, or
extensions of credit to, its banking and other subsidiaries and other banks and
companies engaged in other financial service activities, possible acquisitions,
and the repurchase of capital stock. Pending such use, the net proceeds may be
temporarily invested. The precise amounts and timing of the application of
proceeds will depend upon the funding requirements of the Corporation and its
subsidiaries and the availability of other funds.
Based upon the historical and anticipated future growth of the Corporation
and the financial needs of its subsidiaries, the Corporation may engage in
additional financings of a character and amount to be determined as the need
arises.
RECENT DEVELOPMENTS
CERTAIN FINANCIAL DATA FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1994
The Corporation's earnings applicable to common stockholders were $235
million in the third quarter of 1994, or $1.35 per common share. The Corporation
earned $189 million, or $1.12 per share, in the third quarter of 1993. The
Corporation earned $223 million, or $1.32 per share, in the second quarter of
1994.
The Corporation's return on average common equity was 17.29 percent and the
return on average assets was 1.31 percent in the third quarter of 1994, compared
to 16.11 percent and 1.08 percent, respectively, in the third quarter of 1993,
and 17.53 percent and 1.28 percent, respectively, in the second quarter of 1994.
In the first nine months of 1994, net income applicable to common
stockholders was $675 million, or $3.94 per share, compared to $603 million, or
$3.61 per share, in the first nine months of 1993.
Important factors in the Corporation's third quarter 1994 earnings
performance included:
(Bullet) growth in loans of 12 percent, or $5.4 billion, since the
third quarter of 1993, and 6 percent, or $2.7 billion, (including $1.0
billion from 1994 acquisitions) since the second quarter of 1994;
(Bullet) growth in tax-equivalent net interest income to $799 million,
up 10 percent since the third quarter of 1993 and 3 percent since the
second quarter of 1994;
(Bullet) growth in fee income of 3 percent since the third quarter of
1993 and 11 percent since the second quarter of 1994, largely related to
increased capital management and mortgage banking income; and
(Bullet) continued improvement in credit quality, including a $556
million decrease in nonperforming assets since the third quarter of 1993
and a net $9 million decrease in nonperforming assets since the second
quarter of 1994. Excluding $95 million in nonperforming assets acquired
with the purchase accounting acquisition of BancFlorida Financial
Corporation on August 1, 1994, First Union's nonperforming assets would
have decreased $104 million in the third quarter of 1994 from the second
quarter of 1994.
S-3
<PAGE>
Nonperforming assets declined to the lowest level in five years, to $654
million, or 1.26 percent of net loans and foreclosed properties, at September
30, 1994, compared to $663 million, or 1.35 percent of net loans and foreclosed
properties, at June 30, 1994, and $1.2 billion, or 2.60 percent of net loans and
foreclosed properties, at September 30, 1993.
Annualized net charge-offs as a percentage of average net loans were .38
percent in the third quarter of 1994, compared to .27 percent in the second
quarter of 1994, and .50 percent in the third quarter of 1993. The loan loss
provision was $25 million in the third quarter of 1994, compared to $25 million
in the second quarter of 1994, and $50 million in the third quarter of 1993.
Net loans at September 30, 1994, were $51.6 billion, compared to $48.9
billion at June 30, 1994, and $46.2 billion at September 30, 1993. Deposits were
$53.7 billion at September 30, 1994, compared to $53.8 billion at June 30, 1994,
and $52.9 billion at September 30, 1993.
Total stockholders' equity was $5.6 billion at September 30, 1994, compared
to $5.4 billion at June 30, 1994, and $5.1 billion at September 30, 1993.
At September 30, 1994, the Corporation had assets of $74.2 billion and
operated over 1,300 banking offices in Florida, North Carolina, Georgia,
Virginia, South Carolina, Tennessee, Maryland and Washington, D.C.
ACQUISITIONS
On June 30, 1994, the Corporation acquired Lieber & Company ("Lieber"),
Purchase, New York, the investment adviser to the Evergreen family of mutual
funds. On June 30, 1994, the Evergreen family of mutual funds had net assets of
$3.4 billion. Since such assets are owned by the Evergreen mutual funds and not
by Lieber, such assets are not reflected on the Corporation's balance sheet. In
connection with the acquisition, the Corporation issued 3.1 million shares of
its common stock.
On August 1, 1994, the Corporation acquired BancFlorida Financial
Corporation ("BFL"), Naples, Florida. As of August 1, 1994, BFL had $1.6 billion
in assets and through a subsidiary operated 37 federal savings bank offices in
Florida. In connection with the acquisition, the Corporation issued 4.0 million
shares of its common stock. The acquisition has been accounted for as a
purchase. In connection with the acquisition, the Corporation repurchased 4.0
million shares of its common stock at a cost of $175 million, which were
subsequently cancelled. The Board of Directors of the Corporation has authorized
the repurchase from time to time by the Corporation of up to 13.0 million
additional shares of its common stock.
The Corporation currently has four pending acquisitions involving banking
operations in Florida (three acquisitions) and Virginia. Upon consummation of
the acquisitions, the Corporation expects to acquire approximately $3.0 billion
in assets and $2.6 billion in deposits.
The Corporation is continually evaluating acquisition opportunities and
frequently conducts due diligence activities in connection with possible
acquisitions. As a result, acquisition discussions and, in some cases,
negotiations frequently take place and future acquisitions involving cash, debt
or equity securities can be expected. Acquisitions typically involve the payment
of a premium over book and market values, and therefore some dilution of the
Corporation's book value and net income per common share may occur in connection
with any future transactions.
See "The Corporation" in the accompanying Prospectus.
S-4
<PAGE>
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE YEARS ENDED DECEMBER 31,
30, 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Excluding interest on deposits............................................ 3.36x 3.36 2.27 1.60 1.33 1.49
Including interest on deposits............................................ 1.73x 1.66 1.28 1.15 1.10 1.16
</TABLE>
For purposes of computing these ratios, earnings represent income from
continuing operations before extraordinary items and cumulative effect of a
change in accounting principle plus income taxes and fixed charges (excluding
capitalized interest). Fixed charges, excluding interest on deposits, represent
interest (other than on deposits, but including capitalized interest), one-third
(the proportion deemed representative of the interest factor) of rents and all
amortization of debt issuance costs. Fixed charges, including interest on
deposits, represent all interest (including capitalized interest), one-third
(the proportion deemed representative of the interest factor) of rents and all
amortization of debt issuance costs.
SELECTED CONSOLIDATED FINANCIAL DATA
The following is selected unaudited historical consolidated financial data
for the Corporation and its subsidiaries for each of the five years ended
December 31, 1993, and the six months ended June 30, 1994 and 1993. In the
opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of operations for
such six-month periods have been included. The results of operations for the six
months ended June 30, 1994, are not necessarily indicative of the results which
may be expected for any other interim period. The summary below should be read
in conjunction with (i) the Consolidated Financial Statements of the Corporation
and the related Notes thereto and the other detailed information contained in
the Corporation's Annual Report on Form 10-K for the year ended December 31,
1993, and (ii) the Corporation's Form 10-Q for the period ended June 30, 1994,
which are incorporated herein by reference. See "Incorporation of Certain
Documents by Reference" in the accompanying Prospectus.
S-5
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, DECEMBER 31,
1994 1993 1993 1992 1991
<S> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARIES OF INCOME
(In thousands)
Interest income............................................. $ 2,397,814 2,213,185 4,556,332 4,479,385 4,647,440
Interest expense............................................ 919,916 856,554 1,790,439 2,020,968 2,742,996
Net interest income......................................... 1,477,898 1,356,631 2,765,893 2,458,417 1,904,444
Provision for loan losses................................... 50,000 121,779 221,753 414,708 648,284
Net interest income after provision
for loan losses........................................... 1,427,898 1,234,852 2,544,140 2,043,709 1,256,160
Securities available for sale transactions.................. 1,365 18,821 25,767 34,402 --
Investment security transactions............................ 1,309 3,571 7,435 (2,881) 155,048
Noninterest income.......................................... 551,792 559,361 1,165,086 1,032,651 914,511
Noninterest expense......................................... 1,291,061 1,169,337 2,521,647 2,526,678 1,905,918
Income before income taxes.................................. 691,303 647,268 1,220,781 581,203 419,801
Income taxes................................................ 239,224 220,505 403,260 196,152 71,070
Net income.................................................. 452,079 426,763 817,521 385,051 348,731
Dividends on preferred stock................................ 11,927 13,171 24,900 31,979 34,570
Net income applicable to common stockholders................ $ 440,152 413,592 792,621 353,072 314,161
PER COMMON SHARE DATA
Net income.................................................. $ 2.59 2.49 4.73 2.23 2.24
Cash dividends.............................................. .80 .70 1.50 1.28 1.12
Book value.................................................. 30.26 27.27 28.90 25.25 23.23
CASH DIVIDENDS PAID ON COMMON STOCK
(In thousands).............................................. 135,520 108,176 243,845 167,601 126,029
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS (In thousands)
Assets...................................................... 72,604,401 71,958,939 70,786,969 63,828,031 59,273,177
Loans, net of unearned income............................... 48,925,495 45,902,305 46,876,177 41,923,767 41,383,580
Deposits.................................................... 53,772,260 55,436,871 53,742,411 49,150,965 47,176,223
Long-term debt.............................................. 3,129,444 2,791,620 3,061,944 3,151,260 2,630,930
Preferred stockholders' equity.............................. 284,041 284,041 284,041 297,215 397,356
Common stockholders' equity................................. 5,228,205 4,582,576 4,923,584 4,161,948 3,463,441
Total stockholders' equity.................................. $ 5,388,581 4,866,617 5,207,625 4,459,163 3,860,797
Preferred shares outstanding................................ 6,318 6,318 6,318 6,846 10,851
Common shares outstanding................................... 172,797 168,042 170,338 164,849 149,112
CONSOLIDATED AVERAGE BALANCE SHEET ITEMS (In thousands)
Assets...................................................... $71,088,849 64,316,522 68,101,222 61,145,974 55,095,439
Loans, net of unearned income............................... 46,775,003 41,350,895 43,631,410 41,270,991 37,314,358
Deposits.................................................... 52,147,743 47,707,145 50,248,848 47,173,706 40,482,433
Long-term debt.............................................. 3,143,570 2,856,637 3,006,560 2,789,653 2,187,595
Common stockholders' equity................................. 5,062,377 4,346,054 4,550,048 3,889,256 3,131,716
Total stockholders' equity.................................. $ 5,324,070 4,640,800 4,839,397 4,213,896 3,467,437
Common shares outstanding................................... 169,689 166,122 167,692 158,683 140,003
CONSOLIDATED PERCENTAGES
Net income applicable to common stockholders to average
common stockholders' equity............................... 17.53%* 19.19* 17.42 9.08 10.03
Net income to:
Average total stockholders' equity........................ 17.05* 18.54* 16.89 9.14 10.06
Average assets............................................ 1.28* 1.34* 1.20 .63 .63
Average stockholders' equity to average assets.............. 7.49 7.22 7.11 6.89 6.29
Allowance for loan losses to:
Net loans................................................. 2.06 2.26 2.18 2.24 2.06
Nonaccrual and restructured loans......................... 192 110 147 96 72
Nonperforming assets...................................... 152 81 111 70 50
Net charge-offs to average net loans........................ .27* .65* .58 .86 1.48
Nonperforming assets to loans, net and foreclosed
properties................................................ 1.35 2.75 1.95 3.19 4.10
Capital ratios:**
Tier 1 capital............................................ 9.30 7.97 9.14 9.22 7.56
Total capital............................................. 14.68 12.21 14.64 14.31 11.76
Leverage.................................................. 6.67 6.20 6.13 6.55 5.31
Net interest margin......................................... 4.78%* 4.96* 4.78 4.77 4.08
<CAPTION>
1990 1989
<S> <C> <C>
CONSOLIDATED SUMMARIES OF INCOME
(In thousands)
Interest income............................................. 4,829,520 4,179,100
Interest expense............................................ 3,094,334 2,703,623
Net interest income......................................... 1,735,186 1,475,477
Provision for loan losses................................... 425,409 139,291
Net interest income after provision
for loan losses........................................... 1,309,777 1,336,186
Securities available for sale transactions.................. -- --
Investment security transactions............................ 7,884 19,018
Noninterest income.......................................... 690,672 532,295
Noninterest expense......................................... 1,680,973 1,445,836
Income before income taxes.................................. 327,360 441,663
Income taxes................................................ 64,993 87,840
Net income.................................................. 262,367 353,823
Dividends on preferred stock................................ 33,868 1,380
Net income applicable to common stockholders................ 228,499 352,443
PER COMMON SHARE DATA
Net income.................................................. 1.68 2.62
Cash dividends.............................................. 1.08 1.00
Book value.................................................. 21.81 20.49
CASH DIVIDENDS PAID ON COMMON STOCK
(In thousands).............................................. 116,696 106,952
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS (In thousands)
Assets...................................................... 54,588,410 45,506,847
Loans, net of unearned income............................... 36,050,719 31,600,776
Deposits.................................................... 38,194,268 31,531,770
Long-term debt.............................................. 1,850,860 1,514,834
Preferred stockholders' equity.............................. 317,011 13,773
Common stockholders' equity................................. 2,983,361 2,868,913
Total stockholders' equity.................................. 3,300,372 2,882,686
Preferred shares outstanding................................ 7,293 551
Common shares outstanding................................... 136,777 140,023
CONSOLIDATED AVERAGE BALANCE SHEET ITEMS (In thousands)
Assets...................................................... 52,124,595 43,224,474
Loans, net of unearned income............................... 35,877,585 29,507,834
Deposits.................................................... 36,209,083 29,804,143
Long-term debt.............................................. 1,587,497 1,554,548
Common stockholders' equity................................. 2,937,441 2,758,156
Total stockholders' equity.................................. 3,244,473 2,771,982
Common shares outstanding................................... 135,622 134,446
CONSOLIDATED PERCENTAGES
Net income applicable to common stockholders to average
common stockholders' equity............................... 7.78 12.78
Net income to:
Average total stockholders' equity........................ 8.09 12.76
Average assets............................................ .50 .82
Average stockholders' equity to average assets.............. 6.22 6.41
Allowance for loan losses to:
Net loans................................................. 1.95 1.12
Nonaccrual and restructured loans......................... 77 131
Nonperforming assets...................................... 56 89
Net charge-offs to average net loans........................ .68 .39
Nonperforming assets to loans, net and foreclosed
properties................................................ 3.42 1.25
Capital ratios:**
Tier 1 capital............................................ 6.53 --
Total capital............................................. 10.83 --
Leverage.................................................. 4.90 --
Net interest margin......................................... 3.99 4.15
</TABLE>
* Annualized.
** The 1990-1992 capital ratios are not restated for pooling of interests
acquisitions.
S-6
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Corporation has agreed to sell to each of the Underwriters named
below, and each of the Underwriters has severally agreed to purchase, the
principal amount of Notes set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITER NOTES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation............................................... $100,000,000
Chase Securities, Inc............................................................................. 50,000,000
Total...................................................................................... $150,000,000
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Notes, if any are
taken.
The Underwriters propose to offer the Notes in part directly to retail
purchasers at the 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 0.45% of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a concession not to exceed
0.25% of the principal amount of the Notes to certain brokers and dealers. After
the Notes are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the Underwriters.
The Notes are a new issue of securities with no established trading market.
The Corporation has been advised by each Underwriter that each such Underwriter
intends to make a market in the Notes but is not obligated to do so and may
discontinue market making at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Notes.
The Corporation has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended, and to contribute to payments the several Underwriters may be required
to make in respect thereof.
The Underwriters and certain of their affiliates and associates are or may
be customers of, including borrowers from, engage in transactions with, and/or
perform services for, the Corporation and its subsidiaries, in the ordinary
course of business. Also, in the ordinary course of their respective businesses,
affiliates of Chase Securities, Inc. engage, and may in the future engage, in
commercial banking and investment banking transactions with the Corporation and
its subsidiaries. The Underwriters have performed investment banking services
for the Corporation in the last two years and have received fees in connection
therewith.
EXPERTS
The consolidated balance sheets of the Corporation as of December 31, 1993
and 1992, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1993, included in the Corporation's 1993 Annual Report
to Stockholders which is incorporated by reference in the Corporation's 1993
Annual Report on Form 10-K and incorporated by reference, have been incorporated
herein in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
S-7
<PAGE>
FIRST UNION CORPORATION
DEBT SECURITIES
First Union Corporation (the "Corporation" or "FUNC") may offer from time
to time at an aggregate initial offering price of not more than $1,000,000,000
(or, at the option of the Corporation if so specified in the applicable
prospectus supplement or prospectus supplements to this Prospectus (each, a
"Prospectus Supplement"), the equivalent thereof in any other currency or
currency unit such as the European Currency Unit), of its unsecured debt
securities (the "Debt Securities") consisting of unsecured senior debt
securities (the "Senior Debt Securities") and/or unsecured subordinated debt
securities (the "Subordinated Debt Securities"). The Debt Securities may be
offered as separate series in amounts, at maturities, at prices and on terms to
be determined at the time of sale as set forth in a Prospectus Supplement or
Prospectus Supplements. Although the aggregate initial offering price of the
Debt Securities is limited as set forth above, the respective indentures
pursuant to which the Senior Debt Securities and the Subordinated Debt
Securities are to be issued do not contain any limitation on the aggregate
principal amount of the debt securities covered thereby. The Senior Debt
Securities when issued will rank on a parity with all other unsecured and
unsubordinated indebtedness of the Corporation, and the Subordinated Debt
Securities when issued will be subordinated as described herein under
"Description of the Debt Securities -- Subordination of the Subordinated Debt
Securities".
When a particular series of Debt Securities is offered, a Prospectus
Supplement or Prospectus Supplements will be delivered setting forth the terms
of such Debt Securities, including the specific designation, aggregate principal
amount, the currency or currency unit in which payments are to be made,
denominations, maturity, premium, if any, rate (which may be fixed or variable)
and time of payment of interest, if any, terms for redemption at the option of
the Corporation or the holder, if any, terms for sinking fund payments, if any,
subordination terms, if any, and any other terms of such Debt Securities or
otherwise in connection with the offering and sale of the Debt Securities in
respect of which the Prospectus Supplement or Prospectus Supplements are being
delivered. In addition, the Prospectus Supplement or Prospectus Supplements will
set forth the initial public offering price, the names of any underwriters or
agents, the principal amounts, if any, to be purchased by underwriters, the
compensation of such underwriters and agents, if any, and the net proceeds to
the Corporation. The Debt Securities may be issued in definitive or permanent
global form.
The Corporation may sell Debt Securities to or through underwriters acting
as principals for their own account or as agents, and also may sell Debt
Securities directly to other purchasers or through agents designated from time
to time. If the Corporation, directly or through agents, solicits offers to
purchase the Debt Securities, the Corporation reserves the sole right to accept
and, together with its agents, to reject in whole or in part any proposed
purchase of Debt Securities. See "Plan of Distribution". Any underwriters,
dealers or agents participating in the offering may be deemed "underwriters"
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"). See "Plan of Distribution" for possible indemnification arrangements for
underwriters, agents and their controlling persons.
The Securities will be unsecured obligations of the Corporation and will
not be savings accounts, deposits or other obligations of any bank or nonbank
subsidiary of the Corporation and are not insured by the Federal Deposit
Insurance Corporation, the Bank Insurance Fund or any government agency.
This Prospectus may not be used to consummate the sale of Debt Securities
unless accompanied by a Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMIS-
SION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 27, 1993.
<PAGE>
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Corporation, can be inspected and copied at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's Regional Offices in
New York (7 World Trade Center, New York, New York 10048) and Chicago
(Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661),
and copies of such materials can be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Corporation's Common Stock and Series 1990 Cumulative
Perpetual Adjustable Rate Preferred Stock ("First Union Preferred Stock") are
listed and traded on the New York Stock Exchange, Inc. (the "NYSE"). Reports,
proxy statements and other information can also be inspected at the offices of
the NYSE, 20 Broad Street, New York, New York 10005. This Prospectus does not
contain all of the information set forth in the Registration Statement on Form
S-3 of which this Prospectus is a part (together with all amendments and
exhibits thereto, the "Registration Statement"), which the Corporation has
filed with the Commission under the Securities Act, certain portions of which
have been omitted pursuant to the rules and regulations of the Commission, and
to which reference is hereby made for further information.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Corporation with the Commission (File
No. 1-10000) under Section 13(a) or 15(d) of the Exchange Act are hereby
incorporated by reference in this Prospectus:
(1) the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1992 (the "Form 10-K");
(2) the Corporation's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1993 (as amended by Form 10-Q/A dated July 15, 1993) and June
30, 1993, respectively; and
(3) the Corporation's Current Reports on Form 8-K dated January 12, 1993,
February 26, 1993, March 12, 1993, April 22, 1993, and July 16, 1993.
All documents filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date hereof and prior to the termination of the
offering of any Debt Securities are hereby incorporated by reference into this
Prospectus and shall be deemed a part hereof from the date of filing of such
documents. Any statement contained herein, in any Prospectus Supplement or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of the Registration Statement
and this Prospectus to the extent that a statement contained herein, in any
Prospectus Supplement or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Registration
Statement, this Prospectus or any Prospectus Supplement.
THE CORPORATION WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM A COPY
OF THIS PROSPECTUS IS DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH
PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN,
EXCEPT FOR CERTAIN EXHIBITS TO SUCH DOCUMENTS. WRITTEN REQUESTS SHOULD BE SENT
TO: INVESTOR RELATIONS, FIRST UNION CORPORATION, TWO FIRST UNION CENTER,
CHARLOTTE, NORTH CAROLINA 28288-0206. TELEPHONE REQUESTS MAY BE DIRECTED TO
(704) 374-6782.
2
<PAGE>
THE CORPORATION
The Corporation was incorporated under the laws of North Carolina in 1967
and is registered as a bank holding company under the Bank Holding Company Act
of 1956, as amended (the "BHCA"). In 1968, the Corporation became the sole
stockholder of First Union National Bank of North Carolina ("FUNB-NC") and
First Union Mortgage Corporation, a mortgage banking firm acquired by FUNB-NC in
1964.
In addition to FUNB-NC, the Corporation also operates banks in Florida,
South Carolina, Georgia, Tennessee, Virginia, Maryland and the District of
Columbia. In addition to providing a wide range of commercial and retail banking
and trust services through its banking subsidiaries, the Corporation also
provides various other financial services, including mortgage banking, home
equity lending, consumer lending, asset-based financing, insurance and
securities brokerage services, through other subsidiaries.
The Corporation's principal executive offices are located at One First
Union Center, Charlotte, North Carolina 28288-0013 (telephone number
(704)374-6565).
Since the 1985 Supreme Court decision upholding regional interstate banking
legislation, the Corporation has concentrated its efforts on building a large
regional banking organization in the southeastern United States. Since November
1985, the Corporation has completed 38 banking related acquisitions, including
the more significant acquisitions set forth in the following table.
<TABLE>
<CAPTION>
CONSIDERATION/
ASSETS/ ACCOUNTING
NAME HEADQUARTERS DEPOSITS (1) TREATMENT COMPLETION DATE
<S> <C> <C> <C> <C>
Atlantic Bancorporation Florida $3.8 billion common stock/ November 1985
pooling
Northwestern Financial Corporation North Carolina 3.0 billion common stock/ December 1985
pooling
Southern Bancorporation, Inc. South Carolina 1.1 billion cash and notes/ March 1986
purchase
First Bankers Corporation of Florida Florida 1.3 billion cash and notes/ May 1986
purchase
First Railroad & Banking Company of
Georgia Georgia 3.7 billion common stock/ November 1986
pooling
Florida Commercial Banks, Inc. Florida 1.0 billion cash/purchase March 1988
Florida National Banks of Florida, Inc. Florida 7.9 billion cash and preferred January 1990
stock/purchase
Southeast Banks Florida 9.9 billion cash, notes September 1991
and preferred
stock/purchase
RTC acquisitions Florida 3.8 billion cash/purchase 1991-1992
PSFS Thrift Holding Company Florida 1.2 billion cash/purchase December 1992
South Carolina Federal Corporation ("SCF") South Carolina .9 billion common stock/ January 1993
pooling
DFSoutheastern, Inc. ("DFSE") Georgia 2.6 billion common stock/ January 1993
pooling
Dominion Bankshares Corporation
("Dominion") Virginia 8.9 billion common stock March 1993
and preferred
stock/pooling
Georgia Federal Bank, FSB ("GFB") Georgia 4.0 billion cash/purchase June 1993
First American Metro Corp. ("FAMC") Virginia $4.6 billion cash/purchase June 1993
</TABLE>
(1) The dollar amounts indicated represent assets of the related organization as
of the last reporting period prior to acquisition except for (i) the dollar
amount relating to RTC acquisitions, which represents savings and loan
deposits acquired from the Resolution Trust Corporation, and (ii) the dollar
amount relating to Southeast Banks, which represents assets of the two
banking subsidiaries of Southeast Banking Corporation acquired from the
Federal Deposit Insurance Corporation (the "FDIC").
3
<PAGE>
Interstate banking legislation has greatly impacted the Corporation and the
banking industry in general. North Carolina's regional interstate banking bill
includes the states of Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana,
Maryland, Mississippi, South Carolina, Tennessee, Texas, Virginia and West
Virginia and the District of Columbia, each of which has passed interstate
banking legislation, either on a regional or national basis. In addition,
various other states not named in the North Carolina legislation have also
adopted interstate banking legislation, which, under certain conditions, would
permit the Corporation to acquire banks in such states.
The Corporation is continually evaluating acquisition opportunities and
frequently conducts due diligence activities in connection with possible
acquisitions. As a result, acquisition discussions and, in some cases,
negotiations frequently take place and future acquisitions involving cash, debt
or equity securities can be expected. Acquisitions typically involve the payment
of a premium over book and market values, and therefore some dilution of the
Corporation's book value and net income per common share may occur in connection
with any future transactions.
USE OF PROCEEDS
The Corporation currently intends to use the net proceeds from the sale of
any Debt Securities for general corporate purposes, which may include the
reduction of indebtedness, investments at the holding company level, investments
in, or extensions of credit to, its banking and other subsidiaries and other
banks and companies engaged in other financial service activities, possible
acquisitions and such other purposes as may be stated in any Prospectus
Supplement. Pending such use, the net proceeds may be temporarily invested. The
precise amounts and timing of the application of proceeds will depend upon the
funding requirements of the Corporation and its subsidiaries and the
availability of other funds. Except as may be described in any Prospectus
Supplement, specific allocations of the proceeds to such purposes will not have
been made at the date of such Prospectus Supplement.
Based upon the historical and anticipated future growth of the Corporation
and the financial needs of the Corporation and its subsidiaries, the Corporation
may engage in additional financings of a character and amount to be determined
as the need arises.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE YEARS ENDED DECEMBER 31,*
30, 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C>
Excluding interest on deposits................................. 3.68x 2.29 1.60 1.34 1.50 1.73
Including interest on deposits................................. 1.74x 1.28 1.15 1.11 1.16 1.23
</TABLE>
* These ratios give effect to the pooling of interests acquisitions of SCF,
DFSE, and Dominion consummated in the first quarter of 1993, but do not
reflect the purchase acquisitions of GFB and FAMC consummated in June 1993.
For purposes of computing these ratios, earnings represent income from
continuing operations before extraordinary items and cumulative effect of a
change in accounting principle plus income taxes and fixed charges (excluding
capitalized interest). Fixed charges, excluding interest on deposits, represent
interest (other than on deposits, but including capitalized interest), one-third
(the proportion deemed representative of the interest factor) of rents and all
amortization of debt issuance costs. Fixed charges, including interest on
deposits, represent all interest (including capitalized interest), one-third
(the proportion deemed representative of the interest factor) of rents and all
amortization of debt issuance costs.
4
<PAGE>
CERTAIN REGULATORY CONSIDERATIONS
GENERAL
As a bank holding company, the Corporation is subject to regulation under
the BHCA and its examination and reporting requirements. Under the BHCA, bank
holding companies may not directly or indirectly acquire the ownership or
control of more than five percent of the voting shares or substantially all of
the assets of any company, including a bank, without the prior approval of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board").
In addition, bank holding companies are generally prohibited under the BHCA from
engaging in nonbanking activities, subject to certain exceptions.
The earnings of the Corporation's subsidiaries, and therefore the earnings
of the Corporation, are affected by general economic conditions, management
policies and the legislative and governmental actions of various regulatory
authorities, including the Federal Reserve Board and the Comptroller of the
Currency (the "Comptroller"). In addition, there are numerous governmental
requirements and regulations which affect the activities of the Corporation and
its subsidiaries.
PAYMENT OF DIVIDENDS
The Corporation is a legal entity separate and distinct from its banking
and other subsidiaries. A major portion of the revenues of the Corporation
result from amounts paid as dividends to the Corporation by its national bank
subsidiaries. The Corporation's banking subsidiaries are subject to legal
limitations on the amount of dividends they can pay. The prior approval of the
Comptroller is required if the total of all dividends declared by a national
bank in any calendar year will exceed the sum of such bank's net profits for
that year and its retained net profits for the preceding two calendar years,
less any required transfers to surplus. Federal law also prohibits national
banks from paying dividends which would be greater than the bank's undivided
profits after deducting statutory bad debt in excess of the bank's allowance for
loan losses.
Under the foregoing dividend restrictions and certain restrictions
applicable to certain of the Corporation's nonbanking subsidiaries, as of June
30, 1993, the Corporation's subsidiaries, without obtaining affirmative
governmental approvals, could pay aggregate dividends of $492 million to FUNC.
During the first six months of 1993, the Corporation's subsidiaries paid $150
million in cash dividends to FUNC.
In addition, both the Corporation and its bank subsidiaries are subject to
various general regulatory policies and requirements relating to the payment of
dividends, including requirements to maintain adequate capital above regulatory
minimums. The appropriate federal regulatory authority is authorized to
determine under certain circumstances relating to the financial condition of a
bank or bank holding company that the payment of dividends would be an unsafe or
unsound practice and to prohibit payment thereof. The Comptroller has indicated
that paying dividends that deplete a national bank's capital base to an
inadequate level would be an unsound and unsafe banking practice. The
Comptroller and the Federal Reserve Board have each indicated that banking
organizations should generally pay dividends only out of current operating
earnings.
BORROWINGS BY THE CORPORATION
There are also various legal restrictions on the extent to which the
Corporation and its nonbank subsidiaries can borrow or otherwise obtain credit
from its bank subsidiaries. In general, these restrictions require that any such
extensions of credit must be secured by designated amounts of specified
collateral and are limited, as to any one of the Corporation or such nonbank
subsidiaries, to ten percent of the lending bank's capital stock and surplus,
and as to the Corporation and all such nonbank subsidiaries in the aggregate, to
20 percent of such lending bank's capital stock and surplus.
CAPITAL
Under final risk-based capital requirements for bank holding companies,
effective as of December 31, 1992, the minimum requirement for the ratio of
capital to risk-weighted assets (including certain off-balance-sheet activities,
such as standby letters of credit) is eight percent. At least half of the total
capital is to be composed of common equity, retained earnings and qualifying
perpetual preferred stock, less certain intangibles ("tier 1 capital" and
together with tier 2 capital "total capital"). The remainder may consist of
subordinated debt, qualifying preferred stock and a limited amount of the loan
loss allowance ("tier 2 capital"). At June 30, 1993, the Corporation's tier 1
and total capital ratios were 7.97 percent and 12.21 percent, respectively.
5
<PAGE>
In addition, the Federal Reserve Board has established minimum leverage
ratio requirements for bank holding companies. These requirements provide for a
minimum leverage ratio of tier 1 capital to adjusted average
quarterly assets ("leverage ratio") equal to three percent for bank holding
companies that meet certain specified criteria, including having the highest
regulatory rating. All other bank holding companies will generally be required
to maintain a leverage ratio of from at least four to five percent. The
Corporation's leverage ratio at June 30, 1993, was 6.20 percent. The
requirements also provide that bank holding companies experiencing internal
growth or making acquisitions will be expected to maintain strong capital
positions substantially above the minimum supervisory levels without significant
reliance on intangible assets. Furthermore, the requirements indicate that the
Federal Reserve Board will continue to consider a "tangible tier 1 leverage
ratio" (deducting all intangibles) in evaluating proposals for expansion or new
activity. The Federal Reserve Board has not advised the Corporation of any
specific minimum tier 1 leverage ratio applicable to it.
Each of the Corporation's subsidiary banks is subject to similar capital
requirements adopted by the Comptroller or other applicable federal regulatory
agencies. As of June 30, 1993, each of the Corporation's subsidiary banks listed
below had a leverage ratio in excess of 5.24 percent. Certain of the banks
recently acquired by the Corporation are subject to certain regulatory
agreements, including agreements specifying certain minimum capital levels. As
of June 30, 1993, such minimum capital levels were satisfied. No other of such
subsidiary banks has been advised of any specific minimum capital ratios
applicable to it.
As of June 30, 1993, the capital ratios of the following banking
subsidiaries, FUNB-NC, First Union National Bank of South Carolina ("FUNB-SC"),
First Union National Bank of Georgia ("FUNB-GA"), First Union National Bank of
Florida ("FUNB-FL"), First Union National Bank of Tennessee ("FUNB-TN"),
Dominion Bank, N.A. ("DBNA"), Dominion Bank of Washington, N.A. ("DB-W") and
Dominion Bank of Maryland, N.A. ("DB-M"), were as follows:
<TABLE>
<CAPTION>
REGULATORY
MINIMUM FUNB-NC FUNB-SC FUNB-GA FUNB-FL FUNB-TN DBNA DB-W DB-M
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tier 1 capital ratio................... 4% 7.63 8.61 8.75 9.34 14.17 10.24 14.87 32.51
Total capital ratio.................... 8 10.87 12.88 11.56 11.05 15.44 12.81 16.15 33.94
Leverage ratio......................... 3-5% 5.25 6.23 8.48 5.88 8.55 7.78 46.06 16.62
</TABLE>
Banking regulators continue to indicate their desire to raise capital
requirements applicable to banking organizations, including a proposal to add an
interest rate risk component to risk-based capital requirements.
CORPORATION SUPPORT OF SUBSIDIARY BANKS
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989
("FIRREA"), among other things, imposes liability on an institution the deposits
of which are insured by the FDIC, such as the Corporation's subsidiary banks,
for certain potential obligations to the FDIC incurred in connection with other
FDIC-insured institutions under common control with such institution.
Under the National Bank Act, if the capital stock of a national bank is
impaired by losses or otherwise, the Comptroller is authorized to require
payment of the deficiency by assessment upon the bank's stockholders, pro rata,
and to the extent necessary, if any such assessment is not paid by any
stockholder after three months notice, to sell the stock of such stockholder to
make good the deficiency. Under Federal Reserve Board policy, the Corporation is
expected to act as a source of financial strength to each of its subsidiary
banks and to commit resources to support each of such subsidiaries. This support
may be required at times when, absent such Federal Reserve Board policy, the
Corporation may not find itself able to provide it.
Any capital loans by a bank holding company to any of its subsidiary banks
are subordinate in right of payment to deposits and to certain other
indebtedness of such subsidiary bank. In the event of a bank holding company's
bankruptcy, any commitment by the bank holding company to a federal bank
regulatory agency to maintain the capital of a subsidiary bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment.
FDICIA
In December 1991, the Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA") was enacted, which substantially revises the bank regulatory
and funding provisions of the Federal Deposit Insurance Act and makes revisions
to several other federal banking statutes.
6
<PAGE>
Among other things, FDICIA requires the federal banking agencies to take
"prompt corrective action" in respect of depository institutions that do not
meet minimum capital requirements. FDICIA establishes five capital tiers: "well
capitalized", "adequately capitalized", "undercapitalized", "significantly
undercapitalized" and "critically undercapitalized". A depository institution's
capital tier will depend upon where its capital levels compare to various
relevant capital measures and certain other factors, as established by
regulation.
The bank regulatory authorities have adopted regulations establishing
relevant capital measures and relevant capital levels. The relevant capital
measures are the total capital ratio, tier 1 capital ratio and the leverage
ratio. Under the regulations, a bank will be: (i) well capitalized if it has a
total capital ratio of ten percent or greater, a tier 1 capital ratio of six
percent or greater and a leverage ratio of five percent or greater and is not
subject to any order or written directive by any such regulatory authority to
meet and maintain a specific capital level for any capital measure; (ii)
adequately capitalized if it has a total capital ratio of eight percent or
greater, a tier 1 capital ratio of four percent or greater and a leverage ratio
of four percent or greater (three percent in certain circumstances) and is not
well capitalized; (iii) undercapitalized if it has a total capital ratio of less
than eight percent, a tier 1 capital ratio of less than four percent or a
leverage ratio of less than four percent (three percent in certain
circumstances); (iv) significantly undercapitalized if it has a total capital
ratio of less than six percent, a tier 1 capital ratio of less than three
percent or a leverage ratio of less than three percent; and (v) critically
undercapitalized if its tangible equity is equal to or less than two percent of
average quarterly tangible assets. As of June 30, 1993, all of the Corporation's
subsidiary banks listed above under "Capital" had capital levels that qualify
them as being well capitalized under such regulations, although certain of such
banks that have recently been acquired by the Corporation may not be considered
to be well capitalized because they have written agreements with their
regulators specifying certain minimum capital levels.
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to growth
limitations and are required to submit a capital restoration plan. The federal
banking agencies may not accept a capital plan without determining, among other
things, that the plan is based on realistic assumptions and is likely to succeed
in restoring the depository institution's capital. In addition, for a capital
restoration plan to be acceptable, the depository institution's parent holding
company must guarantee that the institution will comply with such capital
restoration plan. The aggregate liability of the parent holding company is
limited to the lesser of (i) an amount equal to five percent of the depository
institution's total assets at the time it became undercapitalized, and (ii) the
amount which is necessary (or would have been necessary) to bring the
institution into compliance with all capital standards applicable with respect
to such institution as of the time it fails to comply with the plan. If a
depository institution fails to submit an acceptable plan, it is treated as if
it is significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets, and cessation of receipt of deposits from correspondent banks.
Critically undercapitalized institutions are subject to the appointment of a
receiver or conservator.
FDICIA directs that each federal banking agency prescribe standards for
depository institutions and depository institution holding companies relating to
internal controls, information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth,
compensation, a maximum ratio of classified assets to capital, minimum earnings
sufficient to absorb losses, a minimum ratio of market value to book value for
publicly traded shares and such other standards as the agency deems appropriate.
The ultimate effect of these standards cannot be ascertained until final
regulations are adopted.
FDICIA also contains a variety of other provisions that may affect the
operations of the Corporation, including new reporting requirements, regulatory
standards for real estate lending, "truth in savings" provisions, and the
requirement that a depository institution give 90 days' prior notice to
customers and regulatory authorities before closing any branch and a prohibition
on the acceptance or renewal of brokered deposits by depository institutions
that are not well capitalized or are adequately capitalized and have not
received a waiver from the FDIC. Under regulations relating to the brokered
deposit prohibition, all of the Corporation's subsidiary banks listed above
under "Capital" are well capitalized and not subject to the prohibition.
7
<PAGE>
FDIC INSURANCE ASSESSMENTS
FUNC's subsidiary banks are subject to FDIC deposit insurance assessments.
The FDIC set assessment rates for the Bank Insurance Fund ("BIF") of $.23 per
$100 of deposits which became effective on June 30, 1991. In September 1992, the
FDIC adopted a new risk-based premium schedule which increased the assessment
rates for depository institutions. Under the new schedule, effective for the
assessment period beginning January 1, 1993, the premiums initially will range
from $.23 to $.31 for every $100 of deposits. Each financial institution will be
assigned to one of three capital groups -- well capitalized, adequately
capitalized or undercapitalized -- and further assigned to one of three
subgroups within a capital group, on the basis of supervisory evaluations by the
institution's primary federal and, if applicable, state supervisors and other
information relevant to the institution's financial condition and the risk posed
to the applicable insurance fund. The actual assessment rate applicable to a
particular institution will, therefore, depend in part upon the risk assessment
classification so assigned to the institution by the FDIC.
DEPOSITOR PREFERENCE STATUTE
Legislation has been enacted providing that deposits and certain claims for
administrative expenses and employee compensation against an insured depository
institution would be afforded a priority over other general unsecured claims
against such an institution, including federal funds and letters of credit, in
the "liquidation or other resolution" of such an institution by any receiver.
DESCRIPTION OF THE DEBT SECURITIES
GENERAL
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by any Prospectus Supplement (the "Offered Debt Securities") will be
described in the Prospectus Supplement or Prospectus Supplements relating to
such Offered Debt Securities (the "Applicable Prospectus Supplement(s)").
Senior Debt Securities are to be issued under an Indenture, dated as of
April 1, 1983, as amended by supplemental indentures dated as of May 17, 1986,
July 1, 1988 and August 1, 1990 (the "Senior Indenture"), between the
Corporation and Chemical Bank, as Trustee (the "Senior Trustee"). Subordinated
Debt Securities are to be issued under an Indenture, dated as of March 15, 1986,
as amended by supplemental indentures dated as of August 1, 1990 and November
15, 1992 (the "Subordinated Indenture"), between the Corporation and The Bank
of New York (formerly Irving Trust Company), as Trustee (the "Subordinated
Trustee"). Copies of the Senior Indenture and the Subordinated Indenture are
incorporated by reference as exhibits to the Registration Statement. The Senior
Indenture and the Subordinated Indenture are sometimes herein referred to
collectively as the "Indentures" and the Senior Trustee and the Subordinated
Trustee are sometimes herein referred to collectively as the "Trustees". The
following summaries of certain provisions of the Senior Debt Securities, the
Subordinated Debt Securities, the Senior Indenture and the Subordinated
Indenture, as modified or superseded by the Applicable Prospectus Supplement(s),
are brief summaries of certain provisions thereof, do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all the
provisions of the Indenture applicable to a particular series of Debt Securities
(the "Applicable Indenture"), including the definitions therein of certain
terms. Whenever particular provisions or defined terms in one or both of the
Indentures are referred to, such provisions or defined terms are incorporated
herein by reference. Section references used herein are references to the
Applicable Indenture. Capitalized terms not otherwise defined herein shall have
the meaning given to them in the Applicable Indenture.
The Debt Securities will be limited to an aggregate initial offering price
of $1,000,000,000 (or, at the option of the Corporation if so specified in the
Applicable Prospectus Supplement(s), the equivalent thereof in any other
currency or currency unit such as the European Currency Unit), and will be
direct, unsecured obligations of the Corporation. The Debt Securities will not
be deposits or other obligations of a bank and will not be insured by the FDIC.
The Indentures do not limit the aggregate principal amount of Securities or
of any particular series of Securities which may be issued thereunder and
provide that Securities issued thereunder may be issued from time to time in one
or more series, in each case with the same or various maturities, at par or at a
discount. (SECTION 301).
8
<PAGE>
The Indentures provide that there may be more than one trustee under the
Indentures with respect to different series of Securities. As of June 30, 1993,
$834 million aggregate principal amount of Senior Debt Securities was issued and
outstanding as additional series of Securities under the Senior Indenture. The
Senior Trustee is trustee for such additional series. As of June 30, 1993, $1.2
billion aggregate principal amount of Subordinated Debt Securities was issued
and outstanding as additional series of Securities under the Subordinated
Indenture. The Subordinated Trustee is trustee for such additional series.
The Indentures do not limit the amount of other debt that may be issued by
the Corporation and do not contain financial or similar restrictive covenants.
As of June 30, 1993, the Corporation had an aggregate of $1.0 billion of
long-term Senior Indebtedness (as defined below) outstanding and an aggregate of
$315 million of short-term Senior Indebtedness outstanding which consisted
primarily of commercial paper. The Corporation expects from time to time to
incur additional indebtedness constituting Senior Indebtedness and Other
Financial Obligations (as defined in the Subordinated Indenture). The Indentures
do not prohibit or limit the incurrence of additional Senior Indebtedness or
Other Financial Obligations.
Because the Corporation is a holding company and a legal entity separate
and distinct from its subsidiaries, the rights of the Corporation to participate
in any distribution of assets of any subsidiary upon its liquidation of assets
or reorganization or otherwise (and thus the ability of Holders of Debt
Securities to benefit indirectly from such distribution) would be subject to the
prior claims of creditors of that subsidiary, except to the extent that the
Corporation itself may be a creditor of that subsidiary with recognized claims.
Claims on the Corporation's subsidiary banks by creditors other than the
Corporation include long-term debt and substantial obligations with respect to
deposit liabilities and federal funds purchased, securities sold under
repurchase agreements, other short-term borrowings and various other financial
obligations. The Indentures do not contain any covenants designed to afford
holders of Securities, including holders of the Debt Securities, protection in
the event of a highly leveraged transaction involving the Corporation.
Reference is made to the Applicable Prospectus Supplement(s) for the
following terms of the Offered Debt Securities offered thereby: (i) the title of
the Offered Debt Securities; (ii) whether the Offered Debt Securities are Senior
Debt Securities or Subordinated Debt Securities; (iii) any limit upon the
aggregate principal amount of the Offered Debt Securities and the percentage of
such principal amount at which such Offered Debt Securities may be issued; (iv)
the date or dates on which the principal of the Offered Debt Securities is
payable (the "Stated Maturity"); (v) the rate or rates (which may be fixed or
variable) per annum at which the Offered Debt Securities will bear interest, or
the method of determining such rate or rates, if any, the date or dates from
which any such interest will accrue, the Interest Payment Dates on which any
such interest will be payable, the Regular Record Date for the interest payable
on any Interest Payment Date, the Person to whom any Offered Debt Security of
such series will be payable, if other than the Person in whose name that Offered
Debt Security (or one or more predecessor Debt Securities) is registered at the
close of business on the Regular Record Date for such interest and the extent to
which, or the manner in which, any interest payable on a permanent global
Offered Debt Security on an Interest Payment Date will be paid; (vi) if other
than the location specified in this Prospectus, the place or places where the
principal of and premium, if any, and interest on the Offered Debt Securities
will be payable; (vii) the period or periods within which, the price or prices
at which and the terms and conditions upon which the Offered Debt Securities
will, pursuant to any mandatory sinking fund provisions or otherwise, or may,
pursuant to any optional sinking fund provisions or otherwise, be redeemed in
whole or in part by the Corporation; (viii) the period or periods within which,
the price or prices at which and the terms and conditions upon which the Offered
Debt Securities may be repaid, in whole or in part, at the option of the Holders
thereof; (ix) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which the Offered Debt Securities shall be
issuable; (x) if other than the principal amount thereof, the portion of the
principal amount of the Offered Debt Securities which shall be payable upon
declaration of acceleration of the Maturity thereof; (xi) the currency or
currency unit of payment of principal and premium, if any, and interest on such
Offered Debt Securities, and any index used to determine the amount of payment
of principal or premium, if any, and interest on such Offered Debt Securities;
(xii) whether the Offered Debt Securities are to be issuable in permanent global
form and, in such case, the initial depository with respect thereto and the
circumstances under which such permanent global Debt Security may be exchanged;
(xiii) whether the subordination provisions summarized below or different
subordination provisions, including a different definition of "Senior
Indebtedness", "Entitled Persons", "Existing Subordinated Indebtedness" or
"Other Financial Obligations", shall apply to the Offered Debt Securities; and
(xiv) any other terms of the Offered Debt Securities not specified in this
Prospectus. (SECTION 301).
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Where appropriate, the Applicable Prospectus Supplement(s) will describe the
United States federal income tax considerations relevant to the Offered Debt
Securities.
Unless otherwise indicated in the Applicable Prospectus Supplement(s),
principal, premium, if any, and interest, if any, on the Debt Securities will be
payable, and the Debt Securities will be transferable, at the Corporate Trust
Office of FUNB-NC in Charlotte, North Carolina, except that interest may be paid
at the option of the Corporation by check mailed to the address of the Holder
entitled thereto as it appears on the Security Register. (SECTIONS 301, 305 AND
1002).
Unless otherwise indicated in the Applicable Prospectus Supplement(s), the
Debt Securities will be issued only in fully registered form, without coupons,
in denominations of $1,000 and any integral multiple thereof. (SECTION 302). The
Indentures provide that Offered Debt Securities of any series may be issuable in
permanent global form (SECTION 301). No service charge will be made for any
registration of transfer or exchange of the Debt Securities, but the Corporation
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. (SECTION 305).
Both Senior Debt Securities and Subordinated Debt Securities may be issued
as Original Issue Discount Securities to be offered and sold at a substantial
discount below their stated principal amount. Federal income tax consequences
and other special considerations applicable to any such Original Issue Discount
Securities will be described in the Applicable Prospectus Supplement(s).
"Original Issue Discount Security" means any security which provides for an
amount less than the principal amount thereof to be due and payable upon the
declaration of acceleration of the Maturity thereof in accordance with the terms
of the related Indenture. (SECTION 101).
Reference is made to the Applicable Prospectus Supplement(s) relating to
any series of Offered Debt Securities that are Original Issue Discount
Securities for the particular provisions relating to acceleration of the
maturity of a portion of the principal amount of such series of Original Issue
Discount Securities upon the occurrence of an Event of Default and the
continuation thereof.
The Corporation's Credit Agreement, dated as of June 30, 1993 (the "Credit
Agreement"), between the Corporation and various credit banks, contains certain
financial covenants of the Corporation. As of the date of this Prospectus the
Corporation is in compliance with such covenants.
PERMANENT GLOBAL DEBT SECURITIES
If any Debt Securities of a series are issuable in permanent global form,
the Applicable Prospectus Supplement(s) will describe the circumstances, if any,
under which beneficial owners of interests in any such permanent global Debt
Securities may exchange such interests for Debt Securities of such series and of
like tenor and principal amount in any authorized form and denomination.
Principal of and any premium and interest on any permanent global Debt Security
will be payable in the manner described in the Applicable Prospectus
Supplement(s).
SUBORDINATION OF THE SUBORDINATED DEBT SECURITIES
The obligations of the Corporation to make any payment on account of the
principal of and interest on any Subordinated Debt Securities will, to the
extent set forth in the Subordinated Indenture, be subordinate and junior in
right of payment to all Senior Indebtedness of the Corporation. Unless otherwise
specified in the Applicable Prospectus Supplement relating to the particular
series of Subordinated Debt Securities offered thereby, "Senior Indebtedness" of
the Corporation is defined in the Subordinated Indenture to mean the principal
of, premium, if any, and interest on (i) all indebtedness of the Corporation for
money borrowed (including indebtedness of others guaranteed by the Corporation)
other than the Subordinated Debt Securities, whether outstanding on the date of
execution of the Indenture or thereafter created, assumed or incurred, except
(a) any obligations on account of Existing Subordinated Indebtedness, and (b)
such indebtedness as is by terms expressly stated to be not superior in right of
payment to the Subordinated Debt Securities or to rank PARI PASSU with the
Subordinated Debt Securities, and (ii) any deferrals, renewals or extensions of
any such Senior Indebtedness. The term "indebtedness of the Corporation for
money borrowed" is defined in the Subordinated Indenture to mean any obligation
of, or any obligation guaranteed by, the Corporation 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. (SECTION 101 and ARTICLE FOURTEEN of the
Subordinated Indenture).
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The payment of the principal of and interest on the Subordinated Debt
Securities will, to the extent set forth in the Subordinated Indenture, be
subordinated in right of payment to the prior payment in full of all Senior
Indebtedness. Unless otherwise specified in the Applicable Prospectus Supplement
relating to the particular series of Subordinated Debt Securities offered
thereby, in certain events of insolvency, the payment of the principal of and
interest on the Subordinated Debt Securities, other than Subordinated Debt
Securities that are also Existing Subordinated Indebtedness (as defined in the
Subordinated Indenture), will, to the extent set forth in the Subordinated
Indenture, also be effectively subordinated in right of payment to the prior
payment in full of all Other Financial Obligations. Upon any payment or
distribution of assets to creditors upon any liquidation, dissolution, winding
up, reorganization, assignment for the benefit of creditors, marshalling of
assets or any bankruptcy, insolvency or similar proceedings of the Corporation,
the holders of all Senior Indebtedness will first be entitled to receive payment
in full of all amounts due or to become due thereon before the Holders of the
Subordinated Debt Securities will be entitled to receive any payment in respect
of the principal of or interest on the Subordinated Debt Securities. If upon any
such payment or distribution of assets to creditors, there remains, after giving
effect to such subordination provisions in favor of the holders of Senior
Indebtedness, any amount of cash, property or securities available for payment
or distribution in respect of Subordinated Debt Securities (defined in the
Subordinated Indenture as "Excess Proceeds") and if, at such time, any Entitled
Persons (as defined in the Subordinated Indenture) in respect of Other Financial
Obligations have not received payment in full of all amounts due or to become
due on or in respect of such Other Financial Obligations, then such Excess
Proceeds shall first be applied to pay or provide for the payment in full of
such Other Financial Obligations before any payment or distribution may be made
in respect of the Subordinated Debt Securities which are not Existing
Subordinated Indebtedness. In the event of the acceleration of the maturity of
any Subordinated Debt Securities, the holders of all Senior Indebtedness will
first be entitled to receive payment in full of all amounts due thereon before
the Holders of the Subordinated Debt Securities will be entitled to receive any
payment upon the principal of or interest on the Subordinated Debt Securities.
By reason of such subordination in favor of the holders of Senior
Indebtedness, in the event of insolvency, creditors of the Corporation who are
not holders of Senior Indebtedness or Holders of the Subordinated Debt
Securities may recover less, ratably, than the holders of Senior Indebtedness
and may recover more, ratably, than the Holders of the Subordinated Debt
Securities. By reason of the obligation of the Holders of Subordinated Debt
Securities (other than Existing Subordinated Indebtedness) to pay over any
Excess Proceeds to Entitled Persons in respect to Other Financial Obligations,
in the event of insolvency, holders of Existing Subordinated Indebtedness may
recover less, ratably, than Entitled Persons in respect of Other Financial
Obligations and may recover more, ratably, than the Holders of Subordinated Debt
Securities (other than Existing Subordinated Indebtedness).
Unless otherwise specified in the Applicable Prospectus Supplement relating
to the particular series of Subordinated Debt Securities offered thereby,
"Existing Subordinated Indebtedness" means Securities issued pursuant to the
Subordinated Indenture prior to November 15, 1992. (SECTION 101 of the
Subordinated Indenture).
Unless otherwise specified in the Applicable Prospectus Supplement relating
to the particular series of Subordinated Debt Securities offered thereby, "Other
Financial Obligations" means all obligations of the Corporation to make payment
pursuant to the terms of financial instruments, such as (i) securities contracts
and foreign currency exchange contracts, (ii) derivative instruments, such as
swap agreements (including interest rate and foreign exchange rate swap
agreements), cap agreements, floor agreements, collar agreements, interest rate
agreements, foreign exchange rate agreements, options, commodity futures
contracts, commodity option contracts, and (iii) in the case of both (i) and
(ii) above, similar financial instruments, other than (a) obligations on account
of Senior Indebtedness, and (b) obligations on account of indebtedness for money
borrowed ranking PARI PASSU with or subordinate to the Subordinated Debt
Securities. Unless otherwise specified in the Applicable Prospectus Supplement
relating to the particular series of Subordinated Debt Securities offered
thereby, "Entitled Persons" means any person who is entitled to payment pursuant
to the terms of Other Financial Obligations.
The Corporation's obligations under the Subordinated Debt Securities shall
rank PARI PASSU in right of payment with each other and with the Existing
Subordinated Indebtedness, subject (unless otherwise specified in the Applicable
Prospectus Supplement relating to the particular series of Subordinated Debt
Securities offered thereby) to the obligations of the Holders of Subordinated
Debt Securities (other than Existing Subordinated Indebtedness) to pay over any
Excess Proceeds to Entitled Persons in respect of Other Financial Obligations as
provided in the Subordinated Indenture.
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The Applicable Prospectus Supplement may further describe the provisions,
if any, applicable to the subordination of the Subordinated Debt Securities of a
particular series.
LIMITATION ON DISPOSITION OF STOCK OF FUNB-NC
THE SENIOR INDENTURE
The Senior Indenture contains a covenant by the Corporation that, so long
as any of the Senior Debt Securities issued thereunder before August 1, 1990 are
outstanding, but subject to the rights of the Corporation in connection with its
consolidation with or merger into another corporation or a sale of the
Corporation's assets, it will not sell, assign, transfer, grant a security
interest in or otherwise dispose of any shares of, securities convertible into,
or options, warrants or rights to subscribe for or purchase shares of, Voting
Stock of FUNB-NC, nor will it permit the FUNB-NC to issue (other than to the
Corporation) any shares (other than directors' qualifying shares) of, or
securities convertible into, or options, warrants or rights to subscribe for or
purchase shares of, Voting Stock of FUNB-NC, unless (i) any such sale,
assignment, transfer, issuance, grant of a security interest or other
disposition is made for fair market value, as determined by the Board of
Directors of the Corporation, and (ii) the Corporation will own at least 80
percent of the issued and outstanding Voting Stock of FUNB-NC (or any successor
to FUNB-NC) free and clear of any security interest after giving effect to such
transaction. (SECTION 1006).
The foregoing covenant is not a covenant for the benefit of any series of
Senior Debt Securities issued on or after August 1, 1990.
THE SUBORDINATED INDENTURE
The Subordinated Indenture contains a covenant by the Corporation that, so
long as any of the Subordinated Debt Securities issued thereunder before August
1, 1990 are outstanding, but subject to the rights of the Corporation in
connection with its consolidation with or merger into another corporation or a
sale of the Corporation's assets, it will not sell, assign, transfer, grant a
security interest in or otherwise dispose of any shares of, securities
convertible into, or options, warrants or rights to subscribe for or purchase
shares of, Voting Stock of FUNB-NC (other than to a Wholly-owned Subsidiary),
nor will it permit FUNB-NC to issue (other than to the Corporation or to a
Wholly-owned Subsidiary) any shares (other than directors' qualifying shares)
of, or securities convertible into, or options, warrants or rights to subscribe
for or purchase shares of, Voting Stock of FUNB-NC, unless (i) any such sale,
assignment, transfer, issuance, grant of a security interest or other
disposition is made for fair market value, as determined by the Board of
Directors of the Corporation, and (ii) the Corporation and/or its Wholly-owned
Subsidiaries will own at least 80 percent of the issued and outstanding Voting
Stock of FUNB-NC (or any successor to FUNB-NC) free and clear of any security
interest after giving effect to such transaction. (SECTION 1006).
The foregoing covenant is not a covenant for the benefit of any series of
Subordinated Debt Securities issued on or after August 1, 1990.
RESTRICTION ON SALE OR ISSUANCE OF VOTING STOCK OF MAJOR SUBSIDIARY BANKS
The Indentures each contain a covenant by the Corporation that it will not,
and will not permit any Subsidiary to, sell, assign, transfer, grant a security
interest or otherwise dispose of any shares of Voting Stock, or any securities
convertible into shares of Voting Stock, of any Major Subsidiary Bank or any
Subsidiary owning, directly or indirectly, any shares of Voting Stock of any
Major Subsidiary Bank and that it will not permit any Major Subsidiary Bank or
any Subsidiary owning, directly or indirectly, any shares of Voting Stock of a
Major Subsidiary Bank to issue any shares of its Voting Stock or any securities
convertible into shares of its Voting Stock, except for sales, assignments,
transfers or other dispositions which: (i) are for the purpose of qualifying a
Person to serve as a director; (ii) are for fair market value (as determined by
the Board of Directors of the Corporation) and, after giving effect to such
dispositions and to any potential dilution, the Corporation will own not less
than 80 percent of the shares of Voting Stock of such Major Subsidiary Bank or
any such Subsidiary owning any shares of Voting Stock of such Major Subsidiary
Bank; (iii) are made (x) in compliance with an order of a court or regulatory
authority of competent jurisdiction, or (y) in compliance with a condition
imposed by any such court or authority permitting the acquisition by the
Corporation, directly or indirectly, of any other Bank or entity the activities
of which are legally permissible for a Person such as the Corporation or a
Subsidiary to engage in, or (z) in compliance with an undertaking made to such
authority in connection with such an acquisition (provided that, in the case of
clauses (y) and (z), the assets of the Bank or entity being acquired and its
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consolidated subsidiaries equal or exceed 75 percent of the assets of such Major
Subsidiary Bank or such Subsidiary owning, directly or indirectly, any shares of
Voting Stock of a Major Subsidiary Bank and its respective consolidated
subsidiaries on the date of acquisition); or (iv) are made to the Corporation or
any Wholly-Owned Subsidiary. Notwithstanding the foregoing, any Major Subsidiary
Bank may be merged into or consolidated with another banking institution
organized under the laws of the United States, any State thereof or the District
of Columbia, if after giving effect to such merger or consolidation the Company
or any Wholly-Owned Subsidiary owns at least 80 percent of the Voting Stock of
such other banking institution then issued and outstanding free and clear of any
security interest and if, immediately after giving effect thereto, no Event of
Default, and no event which, after notice or lapse of time or both, would become
an Event of Default, shall have happened and be continuing. (SECTION 1007). A
Major Subsidiary Bank is defined in each Indenture to mean any Subsidiary which
is a Bank and has total assets equal to 25 percent or more of the consolidated
assets of the Corporation determined as of the date of the most recent audited
financial statements of such entities. At present, the only Major Subsidiary
Banks are FUNB-NC and FUNB-FL and the only Subsidiary as to which the foregoing
covenant is applicable is First Union Corporation of Florida.
The foregoing covenant is not a covenant for the benefit of any series of
Debt Securities issued before August 1, 1990, or, in the case of Subordinated
Debt Securities, issued after November 15, 1992.
DEFAULTS
THE SENIOR INDENTURE
An Event of Default is defined in the Senior Indenture as, with respect to
Debt Securities of any series issued thereunder: default in payment of principal
of or premium, if any, on any Security of that series at Maturity; default for
30 days in payment of interest of any Debt Security of that series; failure to
deposit any sinking fund payment when due in respect of that series; failure by
the Corporation for 60 days after due notice in performance of any other of the
covenants or warranties in the Indenture (other than a covenant or warranty
included in the Indenture solely for the benefit of a series of Securities other
than that series); failure to pay when due any indebtedness of the Corporation
or, in the case of any series of Senior Debt Securities issued on or after
August 1, 1990, any Major Subsidiary Bank, or, in the case of any series of
Senior Debt Securities issued before August 1, 1990, FUNB-NC, for borrowed money
in excess of $5,000,000, or acceleration of the maturity of any such
indebtedness in excess of such amount if acceleration results from a default
under the instrument giving rise to such indebtedness and is not annulled within
30 days after due notice, unless in either case such default is contested in
good faith by appropriate proceedings; certain events of bankruptcy, insolvency
or reorganization of the Corporation or, in the case of any series of Senior
Debt Securities issued on or after August 1, 1990, any Major Subsidiary Bank,
or, in the case of any series of Senior Debt Securities issued before August 1,
1990, FUNB-NC; and any other Event of Default provided with respect to Debt
Securities of that series. (SECTION 501).
The Senior Indenture provides that, if any Event of Default with respect to
Debt Securities of any series at the time Outstanding thereunder occurs and is
continuing, either the Senior Trustee or the Holders of not less than 25 percent
in principal amount of the Outstanding Securities of that series may declare the
principal amount (or, if the Debt Securities of that series are Original Issue
Discount Securities, such portion of the principal amount as may be specified in
the terms of that series) of all Debt Securities of that series to be due and
payable immediately (provided that no such declaration is required upon certain
events of bankruptcy), but upon certain conditions such declaration may be
annulled and past defaults (except, unless theretofore cured, a default in
payment of principal of or premium, if any, or interest on the Debt Securities
of that series and certain other specified defaults) may be waived by the
Holders of a majority in principal amount of the Outstanding Securities of that
series on behalf of the Holders of all Securities of that series. (SECTIONS 502
AND 513). See the penultimate paragraph under "General" above. In the event of
the bankruptcy, insolvency or reorganization of the Corporation, the claims of
Holders would be subject as to enforcement to the broad equity power of a
Federal Bankruptcy Court, and to the determination by that court of the nature
of the rights of the Holders.
The Senior Indenture contains a provision entitling the Senior Trustee,
subject to the duty of the Senior Trustee upon the occurrence and continuation
of an Event of Default to act with the required standard of care, to be
indemnified by the Holders of any series of Outstanding Securities thereunder
before proceeding to exercise any right or power under the Indenture at the
request of the Holders of such series of Securities. (SECTION 603). The Senior
Indenture provides that the Holders of a majority in principal amount of
Outstanding Securities thereunder of any series may direct the time, method and
place of conducting any proceeding for any remedy available
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to the Senior Trustee, or exercising any trust or other power conferred on the
Senior Trustee, with respect to the Securities of such series, provided that the
Senior Trustee may decline to act if such direction is contrary to law or the
Senior Indenture or would involve the Senior Trustee in personal liability.
(SECTION 512).
The Corporation will file annually with the Senior Trustee a certificate as
to compliance with all conditions and covenants in the Senior Indenture.
(SECTION 1007).
THE SUBORDINATED INDENTURE
Payment of principal of the Subordinated Debt Securities may be accelerated
only upon an Event of Default (as defined below). There is no right of
acceleration in the case of a default in the payment of interest or the payment
of principal prior to the date of maturity or a default in the performance of
any other covenant of the Corporation in the Subordinated Indenture, unless the
terms of a particular series of Subordinated Debt Securities specifically
provide otherwise, in which case any such extension of such right of
acceleration will be described in the Applicable Prospectus Supplement(s).
An Event of Default is defined in the Subordinated Indenture as, with
respect to Subordinated Debt Securities of any series issued thereunder, certain
events involving the bankruptcy, insolvency or reorganization of the Corporation
and any other Event of Default which may be provided for with respect to the
Subordinated Debt Securities of that series. (SECTION 501). A Default, with
respect to Securities of that series, is defined in the Subordinated Indenture
to include: (i) any Event of Default; (ii) a default in the payment of principal
or premium, if any, of any Security of that series at its Maturity; (iii)
default in the payment of any interest when due, continued for 30 days; (iv) a
default in any required designation of funds as Available Funds; or (v) default
in the performance, or breach, of any other covenant of the Corporation in the
Subordinated Indenture or in the Securities of that series, continued for 90
days after written notice to the Corporation by the Subordinated Trustee or to
the Corporation and the Subordinated Trustee by the Holders of not less than 25
percent in aggregate principal amount of the Outstanding Securities of such
series. (SECTION 503). If an Event of Default with respect to the Securities of
any series occurs and is continuing, either the Subordinated Trustee or the
Holders of not less than 25 percent in aggregate principal amount of the
Outstanding Securities of that series may accelerate the maturity of all
Outstanding Securities of such series. The Holders of a majority in aggregate
principal amount of the Outstanding Securities of that series may waive an Event
of Default resulting in acceleration of the Securities of such series, but only
if all Events of Default have been remedied and all payments due on the
Securities of that series (other than those due as a result of acceleration)
have been made and certain other conditions have been met. (SECTION 502).
Subject to the provisions of the Subordinated Indenture relating to the duties
of the Subordinated Trustee, in case a Default shall occur and be continuing,
the Subordinated Trustee will be under no obligation to exercise any of its
rights or powers under the Subordinated Indenture at the request or direction of
any of the Holders, unless such Holders shall have offered to the Subordinated
Trustee reasonable indemnity.
(SECTION 603). Subject to such provisions for the indemnification of the
Trustee, the Holders of a majority in aggregate principal amount of the
Outstanding Securities of that series will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Subordinated Trustee or exercising any trust or power conferred on the
Subordinated Trustee. (SECTION 512). The Holders of a majority in aggregate
principal amount of the Outstanding Securities of that series may waive any past
default under the Subordinated Indenture with respect to such series, except a
default in the payment of principal or interest or a default in respect of a
covenant in the Subordinated Indenture which cannot be modified without the
consent of the Holder of each Outstanding Security of the series affected.
(SECTION 513). See the penultimate paragraph under "General" above. In the event
of the bankruptcy, insolvency or reorganization of the Corporation, the claims
of the Holders would be subject as to enforcement to the broad equity power of a
Federal Bankruptcy Court, and to the determination by that court of the nature
of the rights of the Holders.
The Corporation will file annually with the Subordinated Trustee a
certificate as to compliance with all conditions and covenants in the
Subordinated Indenture. (SECTION 1007).
MODIFICATION AND WAIVER
Certain modifications and amendments of each of the Senior Indenture or the
Subordinated Indenture may be made by the Corporation and the Trustee under the
Applicable Indenture only with the consent of the Holders of not less than a
majority in aggregate principal amount of the Outstanding Securities of each
series issued under such Indenture and affected by the modification or
amendment, provided that no such modification or amendment may, without the
consent of the Holder of each Outstanding Security issued under such Indenture
and
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affected thereby: (i) change the Stated Maturity of the principal of, or any
instalment of principal of or interest on, any such Security; (ii) reduce the
principal amount of, or the premium, if any, or the interest on, any such
Security (including in the case of an Original Issue Discount Security the
amount payable upon acceleration of the maturity thereof); (iii) change the
place of payment where, or the coin or currency or currency unit in which, any
principal of, or premium, if any, or interest on, any such Security is payable;
(iv) impair the right to institute suit for the enforcement of any such payment
on or after the Stated Maturity thereof (or, in the case of redemption, on or
after the Redemption Date); (v) reduce the above-stated percentage of
Outstanding Securities of any series the consent of the Holders of which is
necessary to modify or amend the Applicable Indenture; or (vi) modify the
foregoing requirements or reduce the percentage of aggregate principal amount of
Outstanding Securities of any series required to be held by Holders seeking to
waive compliance with certain provisions of the Applicable Indenture or seeking
to waive certain defaults. (SECTION 902).
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Securities of any series may on behalf of the Holders of all
Securities of that series waive, insofar as that series is concerned, compliance
by the Corporation with certain restrictive provisions of the Applicable
Indenture. (SECTION 1008). The Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities of any series may on behalf of
the Holders of all Securities of that series waive any past default under the
Applicable Indenture with respect to that series, except a default in the
payment of the principal of, or premium, if any, or interest on any Security of
that series or in respect of a covenant or provision which under the Applicable
Indenture cannot be modified or amended without the consent of the Holder of
each Outstanding Security issued thereunder of the series affected. (SECTION
513).
Certain modifications and amendments of each of the Senior Indenture and
the Subordinated Indenture may be made by the Corporation and the Trustee under
the Applicable Indenture without the consent of Holders of the Outstanding
Securities issued under such Indenture. (SECTION 901).
Each Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities issued under such
Indenture have given any request, demand, authorization, direction, notice,
consent or waiver thereunder or are present at a meeting of Holders of
Securities for quorum purposes, (i) the principal amount of an Original Issue
Discount Security that shall be deemed to be Outstanding shall be the amount of
the principal thereof that would be due and payable as of the date of such
determination upon acceleration of the Maturity thereof, and (ii) the principal
amount of a Security denominated in a foreign currency or currency unit shall be
the U.S. dollar equivalent, determined on the date of original issuance of such
Security, of the principal amount of such Security or, in the case of an
Original Issue Discount Security, the U.S. dollar equivalent, determined on the
date of original issuance of such Security, of the amount determined as provided
in (i) above. (SECTION 101).
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indentures each provide that the Corporation may not consolidate with
or merge into any other corporation or transfer its properties and assets
substantially as an entirety to any Person unless (i) the corporation formed by
such consolidation or into which the Corporation is merged or the Person to
which the properties and assets of the Corporation are so transferred shall be a
corporation organized and existing under the laws of the United States, any
State thereof or the District of Columbia and shall expressly assume by
supplemental indenture the payment of the principal of and premium, if any, and
interest on the Senior Debt Securities or the Subordinated Debt Securities, as
the case may be, and the performance of the other covenants of the Corporation
under the Applicable Indenture; (ii) immediately after giving effect to such
transaction, no Event of Default or Default, as applicable, and no event which,
after notice or lapse of time or both, would become an Event of Default or
Default, as applicable, shall have occurred and be continuing; and (iii) certain
other conditions are met. (SECTION 801).
TRUSTEES
Either or both of the Trustees may resign or be removed with respect to one
or more series of Securities and a successor Trustee may be appointed to act
with respect to such series. (SECTION 610). In the event that two or more
persons are acting as Trustee with respect to different series of Securities,
each such Trustee shall be a Trustee of a trust under the related Indenture
separate and apart from the trust administered by any other such Trustee
(SECTION 611), and any action described herein to be taken by the "Trustee" may
then be taken by each such Trustee with respect to, and only with respect to,
the one or more series of Securities for which it is Trustee.
15
<PAGE>
In the normal course of business, the Corporation and its subsidiaries
conduct banking transactions with the Trustees, and the Trustees conduct banking
transactions with the Corporation and its subsidiaries.
VALIDITY OF OFFERED DEBT SECURITIES
The validity of any Offered Debt Securities will be passed upon for the
Corporation by Marion A. Cowell, Jr., Esq., Executive Vice President, Secretary
and General Counsel of the Corporation, and for any underwriters or agents by
Sullivan & Cromwell, 125 Broad Street, New York, New York. Sullivan & Cromwell
will rely upon the opinion of Mr. Cowell as to matters of North Carolina law,
and Mr. Cowell will rely upon the opinion of Sullivan & Cromwell as to matters
of New York law. Mr. Cowell owns shares of the Corporation's Common Stock and
holds options to purchase additional shares of such Common Stock. Sullivan &
Cromwell regularly performs legal services for the Corporation and its
subsidiaries. Members of Sullivan & Cromwell performing these legal services own
shares of the Corporation's Common Stock.
EXPERTS
The supplemental consolidated balance sheets of the Corporation as of
December 31, 1992 and 1991 and the related supplemental consolidated statements
of income, changes in stockholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1992, included in the Corporation's
Current Report on Form 8-K dated March 12, 1993 and incorporated by reference,
have been incorporated herein in reliance upon the report of KPMG Peat Marwick,
independent certified public accountants, incorporated by reference herein, and
the report of other auditors insofar as it relates to the consolidated financial
statements of Dominion as of December 31, 1992 and 1991 and for the years then
ended, and upon the authority of said firms as experts in accounting and
auditing.
The consolidated balance sheets of Dominion as of December 31, 1992 and
1991 and the related consolidated statements of income (loss), changes in
stockholders' equity, and cash flows for the years then ended, included in the
Corporation's Current Report on Form 8-K dated March 12, 1993, and incorporated
herein by reference, have been incorporated herein in reliance on the report of
Coopers & Lybrand, independent accountants, given on the authority of that firm
as experts in accounting and auditing.
The consolidated statements of loss, changes in stockholders' equity and
cash flows of Dominion for the year ended December 31, 1990, included in the
Corporation's Current Report on Form 8-K dated March 12, 1993, and incorporated
herein by reference, have been incorporated herein in reliance upon the report
of KPMG Peat Marwick, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
PLAN OF DISTRIBUTION
The Corporation may sell Debt Securities to or through underwriters to be
designated from time to time, and also may sell Debt Securities directly to
other purchasers or through agents. The distribution of the Debt Securities may
be effected from time to time in one or more transactions at a fixed price or
prices, which may be changed, or at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices.
The Debt Securities will be new issues of securities with no established
trading market. It has not presently been established whether the underwriters,
if any, of the Debt Securities will make a market in the Debt Securities. If a
market in the Debt Securities is made by any such underwriters, such market
making may be discontinued at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Debt Securities.
In connection with the sale of Debt Securities, underwriters may receive
compensation from the Corporation or from purchasers of Debt Securities for whom
they may act as agents in the form of discounts, concessions or commissions.
Underwriters may sell Debt Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agents. Underwriters, dealers and agents that participate in the
distribution of Debt Securities may be deemed to be underwriters, and any
discounts or commissions received by them from the Corporation and any profit on
the resale of Debt Securities by them may be deemed to be underwriting discounts
and commissions, under the Securities Act. Any such underwriter or agent will be
identified, and any
16
<PAGE>
such compensation received from the Corporation will be described, in the
Prospectus Supplement relating to such Debt Securities.
Unless otherwise indicated in the Applicable Prospectus Supplement(s), the
obligations of any such underwriters to purchase the Debt Securities will be
subject to certain conditions precedent, and each of the underwriters with
respect to a sale of Debt Securities will be obligated to purchase all of its
Debt Securities if any are purchased. Unless otherwise indicated in the
Applicable Prospectus Supplement(s), any such agent involved in the offer and
sale of the Debt Securities in respect of which this Prospectus is being
delivered will be acting on a best efforts basis for the period of its
appointment.
Under agreements which may be entered into by the Corporation,
underwriters, agents and their controlling persons who participate in the
distribution of Debt Securities may be entitled to indemnification by the
Corporation against certain liabilities, including liabilities under the
Securities Act.
If so indicated in the Prospectus Supplement relating to any Offered Debt
Securities, the Corporation will authorize dealers or other persons acting as
the Corporation's agents to solicit offers by certain institutions to purchase
any Offered Debt Securities from the Corporation pursuant to contracts providing
for payment and delivery on a future date. Institutions with which such
contracts may be made include commercial and savings banks, insurance companies,
pension funds, investment companies, educational and charitable institutions and
others, but in all cases such institutions must be approved by the Corporation.
The obligations of any purchaser under any such contract will be subject to the
condition that the purchase of any Offered Debt Securities shall not at the time
of delivery be prohibited under the laws of the jurisdiction to which such
purchaser is subject. The underwriters and such other agents will not have any
responsibility in respect of the validity or performance of such contracts.
Underwriters or agents and their associates may be customers of (including
borrowers from), engage in transactions with, and/or perform services for, the
Corporation and its subsidiaries, the Senior Trustee and the Subordinated
Trustee, in the ordinary course of business.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PROSPECTUS SUPPLEMENT
Description of Certain Terms of the
Notes........................................... S-2
Use of Proceeds................................... S-3
Recent Developments............................... S-3
Consolidated Ratios of Earnings to Fixed
Charges......................................... S-5
Selected Consolidated Financial Data.............. S-5
Underwriting...................................... S-7
Experts........................................... S-7
PROSPECTUS
Available Information............................. 2
Incorporation of Certain Documents by Reference... 2
The Corporation................................... 3
Use of Proceeds................................... 4
Consolidated Ratios of Earnings
to Fixed Charges................................ 4
Certain Regulatory Considerations................. 5
Description of the Debt Securities................ 8
Validity of Offered Debt Securities............... 16
Experts........................................... 16
Plan of Distribution.............................. 16
</TABLE>
(First Union Logo Appears Here)
$150,000,000
FIRST UNION CORPORATION
8.77% SUBORDINATED NOTES
DUE NOVEMBER 15, 2004
PROSPECTUS SUPPLEMENT
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CHASE SECURITIES, INC.
NOVEMBER 2, 1994
******************************************************************************
APPENDIX
On the Prospectus Supplement Cover page the First Union logo appears
where noted.
On the Prospectus Supplement Back Cover page the First Union logo appears
where noted.
