<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1996
REGISTRATION NOS. 333-15743; 333-15743-01; 333-15743-02; 333-15743-03
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
<TABLE>
<S> <C>
FIRST UNION CAPITAL I
FIRST UNION CAPITAL II
FIRST UNION CORPORATION FIRST UNION CAPITAL III
(Exact name of registrant as (Exact name of each registrant as
specified in its charter) specified in its Trust Agreements)
NORTH CAROLINA DELAWARE
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation
or organization of each registrant)
56-0898180 EACH TO BE APPLIED FOR
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
C/O FIRST UNION CORPORATION
ONE FIRST UNION CENTER
ONE FIRST UNION CENTER CHARLOTTE, NORTH CAROLINA 28288-0013
CHARLOTTE, NORTH CAROLINA 28288-0013 (704) 374-6565
(704) 374-6565 (Address, including zip code, and
(Address, including zip code, and telephone number,
telephone number, including area code, of each
including area code, of registrant's registrant's
principal executive offices) principal executive offices)
</TABLE>
MARION A. COWELL, JR., ESQ.
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
FIRST UNION CORPORATION
ONE FIRST UNION CENTER
CHARLOTTE, NORTH CAROLINA 28288-0013
(704) 374-6565
(Name, address, including zip code, and telephone number, including area code,
of agent for service of each registrant)
COPY TO:
MITCHELL S. EITEL, ESQ.
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
(212) 558-4000
CALCULATION OF REGISTRATION FEE
[CAPTION]
<TABLE>
<S> <C> <C> <C>
TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE
TO BE REGISTERED REGISTERED PER UNIT (1) OFFERING PRICE (1)
<S> <C> <C> <C>
Junior Subordinated Deferrable
Interest Debentures of First
Union Corporation (2) $ 500,000,000 $25.00 $500,000,000
Preferred Securities of First Union
Capital I, First Union Capital II
and First Union Capital III (3) 20,000,000 $25.00 $500,000,000
First Union Corporation Guarantee
with respect to Preferred
Securities (3)(4) N/A N/A N/A
Total $ 500,000,000(5) 100% $500,000,000(5)
<CAPTION>
TITLE OF EACH
CLASS OF SECURITIES AMOUNT OF
TO BE REGISTERED REGISTRATION FEE (1)
<S> <C>
Junior Subordinated Deferrable
Interest Debentures of First
Union Corporation (2) N/A
Preferred Securities of First Union
Capital I, First Union Capital II
and First Union Capital III (3) $151,516.00
First Union Corporation Guarantee
with respect to Preferred
Securities (3)(4) N/A
Total $151,212.00
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee. A fee of
$304 was previously paid upon filing of the Registration Statement on
November 7, 1996. Such amount has been deducted from the amount payable
herewith.
(2) The Junior Subordinated Deferrable Interest Debentures will be purchased by
First Union Capital I, First Union Capital II and First Union Capital III
with the proceeds of the sale of the Preferred Securities.
(3) This Registration Statement is deemed to cover the Junior Subordinated
Deferrable Interest Debentures of First Union Corporation, the rights of
holders of Junior Subordinated Deferrable Interest Debentures of First Union
Corporation under the Indenture, the rights of holders of Preferred
Securities of First Union Capital I, First Union Capital II and First Union
Capital III under the applicable Trust Agreement, the rights of holders of
the Preferred Securities under the Guarantee of First Union Corporation and
the Expense Agreement entered into by First Union Corporation as described
in the Registration Statement. As described herein, the obligations of First
Union Corporation under such Debentures, Guarantee and Expense Agreement,
taken together, provide a full and unconditional guarantee of the
obligations of each issuer of Preferred Securities under the corresponding
Preferred Securities.
(4) No separate consideration will be received for the First Union Corporation
Guarantee.
(5) Such amount represents the principal amount of Junior Subordinated
Deferrable Interest Debentures issued at their principal amount and the
issue price rather than the principal amount of Junior Subordinated
Deferrable Interest Debentures issued at an original issue discount. Such
amount also represents the initial public offering price of the First Union
Capital I, First Union Capital II and First Union Capital III Preferred
Securities.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
PROSPECTUS SUPPLEMENT (SUBJECT TO COMPLETION, ISSUED DECEMBER , 1996)
(TO PROSPECTUS DATED , 1996)
[First Union
LOGO goes here]
PREFERRED SECURITIES
FIRST UNION CAPITAL I
% CUMULATIVE TRUST PREFERRED CAPITAL SECURITIES,
SERIES A
(LIQUIDATION AMOUNT $25.00 PER PREFERRED SECURITY)
GUARANTEED, TO THE EXTENT DESCRIBED HEREIN, BY
FIRST UNION CORPORATION
THE % CUMULATIVE TRUST PREFERRED CAPITAL SECURITIES, SERIES A (THE
"SERIES A PREFERRED SECURITIES "), OFFERED HEREBY REPRESENT BENEFICIAL INTERESTS
IN FIRST UNION CAPITAL I, A STATUTORY BUSINESS TRUST CREATED UNDER THE LAWS OF
THE STATE OF DELAWARE (THE "SERIES A ISSUER "). FIRST UNION CORPORATION, A NORTH
CAROLINA CORPORATION (THE "CORPORATION "), WILL BE THE OWNER OF ALL OF THE
BENEFICIAL INTERESTS REPRESENTED BY COMMON
(CONTINUED ON NEXT PAGE)
SEE "RISK FACTORS " BEGINNING ON PAGE S-7, FOR CERTAIN INFORMATION RELEVANT
TO AN INVESTMENT IN THE SERIES A PREFERRED SECURITIES, INCLUDING THE PERIOD AND
CIRCUMSTANCES DURING AND UNDER WHICH PAYMENT OF DISTRIBUTIONS ON THE SERIES A
PREFERRED SECURITIES MAY BE DEFERRED AND CERTAIN RELATED UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES.
APPLICATION WILL BE MADE TO LIST THE SERIES A PREFERRED SECURITIES ON THE NEW
YORK STOCK EXCHANGE. TRADING OF THE SERIES A PREFERRED SECURITIES ON THE NEW
YORK STOCK EXCHANGE IS EXPECTED TO COMMENCE WITHIN A THIRTY-DAY PERIOD AFTER THE
DATE OF THIS PROSPECTUS SUPPLEMENT. SEE "UNDERWRITING ".
THESE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT
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.
PRICE $25.00 PER SERIES A PREFERRED SECURITY AND ACCRUED DISTRIBUTIONS, IF ANY
<TABLE>
<CAPTION>
UNDERWRITING COMMISSIONS PROCEEDS TO THE
PRICE TO PUBLIC (1) AND DISCOUNTS (2) SERIES A ISSUER (3)(4)
<S> <C> <C> <C>
PER SERIES A PREFERRED SECURITY..................... $25.00 (3) $25.00
TOTAL............................................... $ (3) $
</TABLE>
(1) PLUS ACCRUED DISTRIBUTIONS, IF ANY, FROM , 1996.
(2) THE SERIES A ISSUER AND THE CORPORATION HAVE EACH AGREED TO INDEMNIFY THE
SEVERAL UNDERWRITERS AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SEE "UNDERWRITING ".
(3) IN VIEW OF THE FACT THAT THE PROCEEDS OF THE SALE OF THE SERIES A PREFERRED
SECURITIES WILL BE INVESTED IN THE SERIES A SUBORDINATED DEBENTURES, THE
CORPORATION HAS AGREED TO PAY TO THE UNDERWRITERS AS COMPENSATION
("UNDERWRITERS' COMPENSATION ") FOR THEIR ARRANGING THE INVESTMENT THEREIN
OF SUCH PROCEEDS $. PER SERIES A PREFERRED SECURITY (OR $ IN THE
AGGREGATE). SEE "UNDERWRITING ".
(4) EXPENSES OF THE OFFERING PAYABLE BY THE CORPORATION ARE ESTIMATED TO BE
$ .
THE SERIES A PREFERRED SECURITIES OFFERED HEREBY ARE OFFERED SUBJECT TO
PRIOR SALE, WHEN, AS AND IF ACCEPTED BY THE UNDERWRITERS NAMED HEREIN. IT IS
EXPECTED THAT DELIVERY OF THE SERIES A PREFERRED SECURITIES WILL BE MADE ON OR
ABOUT , 1996, THROUGH THE BOOK-ENTRY FACILITIES OF THE DEPOSITORY
TRUST COMPANY AGAINST PAYMENT THEREFOR IN IMMEDIATELY AVAILABLE FUNDS.
[INSERT UNDERWRITERS]
, 199
<PAGE>
(COVER PAGE CONTINUED)
SECURITIES OF THE SERIES A ISSUER ("SERIES A COMMON SECURITIES " AND,
COLLECTIVELY WITH THE SERIES A PREFERRED SECURITIES, THE "SERIES A
SECURITIES "). WILMINGTON TRUST COMPANY IS THE PROPERTY TRUSTEE OF THE SERIES A
ISSUER. THE SERIES A ISSUER EXISTS FOR THE SOLE PURPOSE OF ISSUING THE SERIES A
SECURITIES AND INVESTING THE PROCEEDS THEREOF IN $ INITIAL PRINCIPAL
AMOUNT OF % JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES, SERIES A
(THE "SERIES A SUBORDINATED DEBENTURES "), TO BE ISSUED BY THE CORPORATION. THE
SERIES A SUBORDINATED DEBENTURES WILL MATURE ON , 2027, WHICH DATE
MAY BE (I) SHORTENED TO A DATE NOT EARLIER THAN , 2002, OR (II)
EXTENDED TO A DATE NOT LATER THAN , 2046, IN EACH CASE IF CERTAIN
CONDITIONS ARE MET. THE SERIES A PREFERRED SECURITIES WILL HAVE A PREFERENCE
UNDER CERTAIN CIRCUMSTANCES WITH RESPECT TO CASH DISTRIBUTIONS AND AMOUNTS
PAYABLE ON LIQUIDATION, REDEMPTION OR OTHERWISE OVER THE SERIES A COMMON
SECURITIES. SEE "DESCRIPTION OF PREFERRED SECURITIES -- SUBORDINATION OF COMMON
SECURITIES " IN THE ACCOMPANYING PROSPECTUS.
HOLDERS OF THE SERIES A PREFERRED SECURITIES WILL BE ENTITLED TO RECEIVE
PREFERENTIAL CUMULATIVE CASH DISTRIBUTIONS ACCRUING FROM THE DATE OF ORIGINAL
ISSUANCE AND PAYABLE QUARTERLY IN ARREARS ON THE LAST DAY OF MARCH, JUNE,
SEPTEMBER AND DECEMBER OF EACH YEAR, COMMENCING MARCH 31, 1997, AT THE ANNUAL
RATE OF % OF THE LIQUIDATION AMOUNT OF $25.00 PER SERIES A PREFERRED
SECURITY ("DISTRIBUTIONS "). SUBJECT TO CERTAIN EXCEPTIONS, AS DESCRIBED HEREIN,
THE CORPORATION HAS THE RIGHT TO DEFER PAYMENT OF INTEREST ON THE SERIES A
SUBORDINATED DEBENTURES AT ANY TIME OR FROM TIME TO TIME FOR A PERIOD NOT
EXCEEDING 20 CONSECUTIVE QUARTERS WITH RESPECT TO EACH DEFERRAL PERIOD (EACH, AN
"EXTENSION PERIOD "), PROVIDED THAT NO EXTENSION PERIOD MAY EXTEND BEYOND THE
STATED MATURITY (AS HEREINAFTER DEFINED) OF THE SERIES A SUBORDINATED
DEBENTURES. UPON THE TERMINATION OF ANY SUCH EXTENSION PERIOD AND THE PAYMENT OF
ALL AMOUNTS THEN DUE, THE CORPORATION MAY ELECT TO BEGIN A NEW EXTENSION PERIOD
SUBJECT TO THE REQUIREMENTS SET FORTH HEREIN. IF INTEREST PAYMENTS ON THE SERIES
A SUBORDINATED DEBENTURES ARE SO DEFERRED, DISTRIBUTIONS ON THE SERIES A
PREFERRED SECURITIES WILL ALSO BE DEFERRED AND THE CORPORATION WILL NOT BE
PERMITTED, SUBJECT TO CERTAIN EXCEPTIONS DESCRIBED HEREIN, TO DECLARE OR PAY ANY
CASH DISTRIBUTIONS WITH RESPECT TO THE CORPORATION'S CAPITAL STOCK OR DEBT
SECURITIES OF THE CORPORATION THAT RANK PARI PASSU WITH OR JUNIOR TO THE SERIES
A SUBORDINATED DEBENTURES. DURING AN EXTENSION PERIOD, INTEREST ON THE SERIES A
SUBORDINATED DEBENTURES WILL CONTINUE TO ACCRUE (AND THE AMOUNT OF DISTRIBUTIONS
TO WHICH HOLDERS OF THE SERIES A PREFERRED SECURITIES ARE ENTITLED WILL
ACCUMULATE) AT THE RATE OF % PER ANNUM, COMPOUNDED QUARTERLY FROM THE
RELEVANT PAYMENT DATE FOR SUCH INTEREST, AND HOLDERS OF THE SERIES A PREFERRED
SECURITIES WILL BE REQUIRED TO ACCRUE INTEREST INCOME FOR UNITED STATES FEDERAL
INCOME TAX PURPOSES. SEE "CERTAIN TERMS OF SERIES A SUBORDINATED
DEBENTURES -- OPTION TO EXTEND INTEREST PAYMENT PERIOD " AND "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES -- INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT ".
THE SERIES A SUBORDINATED DEBENTURES ARE UNSECURED AND SUBORDINATED TO ALL
SENIOR DEBT (AS DEFINED IN THE ACCOMPANYING PROSPECTUS) OF THE CORPORATION.
SUBSTANTIALLY ALL OF THE CORPORATION'S EXISTING INDEBTEDNESS CONSTITUTES SENIOR
DEBT. BECAUSE THE CORPORATION IS A HOLDING COMPANY, THE RIGHT OF THE CORPORATION
TO PARTICIPATE IN ANY DISTRIBUTION OF ASSETS OF ANY SUBSIDIARY, INCLUDING ITS
BANK AND NONBANK SUBSIDIARIES, UPON SUCH SUBSIDIARY'S LIQUIDATION OR
REORGANIZATION OR OTHERWISE, IS SUBJECT TO THE PRIOR CLAIMS OF CREDITORS OF THAT
SUBSIDIARY, EXCEPT TO THE EXTENT THAT THE CORPORATION MAY ITSELF BE RECOGNIZED
AS A CREDITOR OF THAT SUBSIDIARY. ACCORDINGLY, THE SERIES A SUBORDINATED
DEBENTURES (AND THEREFORE THE SERIES A PREFERRED SECURITIES) WILL BE EFFECTIVELY
SUBORDINATED TO ALL EXISTING AND FUTURE LIABILITIES OF THE CORPORATION'S
SUBSIDIARIES, AND HOLDERS THEREOF SHOULD LOOK ONLY TO THE ASSETS OF THE
CORPORATION FOR PAYMENTS ON THE SERIES A SUBORDINATED DEBENTURES. SEE
"DESCRIPTION OF SUBORDINATED DEBENTURES -- SUBORDINATION " IN THE ACCOMPANYING
PROSPECTUS.
THE CORPORATION HAS, THROUGH THE SERIES A GUARANTEE, THE TRUST AGREEMENT,
THE SERIES A SUBORDINATED DEBENTURES, THE INDENTURE AND THE EXPENSE AGREEMENT
(EACH AS DEFINED HEREIN), TAKEN TOGETHER, FULLY, IRREVOCABLY AND UNCONDITIONALLY
GUARANTEED ALL OF THE SERIES A ISSUER'S OBLIGATIONS UNDER THE SERIES A PREFERRED
SECURITIES. SEE "RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE CORRESPONDING
JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEES -- FULL AND UNCONDITIONAL
GUARANTEE " IN THE ACCOMPANYING PROSPECTUS. THE SERIES A GUARANTEE OF THE
CORPORATION GUARANTEES THE PAYMENT OF DISTRIBUTIONS AND PAYMENTS ON LIQUIDATION
OR REDEMPTION OF THE SERIES A PREFERRED SECURITIES, BUT ONLY IN EACH CASE TO THE
EXTENT OF FUNDS HELD BY THE SERIES A ISSUER, AS DESCRIBED HEREIN (THE "SERIES A
GUARANTEE "). SEE "DESCRIPTION OF GUARANTEES " IN THE ACCOMPANYING PROSPECTUS.
IF THE CORPORATION DOES NOT MAKE INTEREST PAYMENTS ON THE SERIES A SUBORDINATED
DEBENTURES HELD BY THE SERIES A ISSUER, THE SERIES A ISSUER WILL HAVE
INSUFFICIENT FUNDS TO PAY DISTRIBUTIONS ON THE SERIES A PREFERRED SECURITIES.
THE SERIES A GUARANTEE DOES NOT COVER PAYMENT OF DISTRIBUTIONS WHEN THE SERIES A
ISSUER DOES NOT HAVE SUFFICIENT FUNDS TO PAY SUCH DISTRIBUTIONS. IN SUCH EVENT,
A HOLDER OF THE SERIES A PREFERRED SECURITIES MAY INSTITUTE A LEGAL PROCEEDING
DIRECTLY AGAINST THE CORPORATION TO ENFORCE PAYMENT OF SUCH DISTRIBUTIONS TO
SUCH HOLDER. SEE "DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES -- ENFORCEMENT
OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES " IN THE ACCOMPANYING
PROSPECTUS. THE OBLIGATIONS OF THE CORPORATION UNDER THE SERIES A GUARANTEE AND
THE SERIES A PREFERRED SECURITIES ARE SUBORDINATE AND JUNIOR IN RIGHT OF PAYMENT
TO ALL SENIOR DEBT OF THE CORPORATION.
S-2
<PAGE>
(COVER PAGE CONTINUED)
THE SERIES A PREFERRED SECURITIES ARE SUBJECT TO MANDATORY REDEMPTION, IN
WHOLE OR IN PART, UPON REPAYMENT OF THE SERIES A SUBORDINATED DEBENTURES AT
MATURITY OR THEIR EARLIER REDEMPTION. THE SERIES A SUBORDINATED DEBENTURES ARE
REDEEMABLE PRIOR TO MATURITY AT THE OPTION OF THE CORPORATION (I) ON OR AFTER
, 2002, IN WHOLE AT ANY TIME OR IN PART FROM TIME TO TIME, OR (II)
AT ANY TIME PRIOR TO , 2002 IN WHOLE (BUT NOT IN PART), AT ANY
TIME WITHIN 90 DAYS FOLLOWING THE OCCURRENCE AND CONTINUATION OF A TAX EVENT OR
A CAPITAL TREATMENT EVENT (EACH AS DEFINED HEREIN), IN EACH CASE AT A REDEMPTION
PRICE EQUAL TO THE ACCRUED AND UNPAID INTEREST ON THE SERIES A SUBORDINATED
DEBENTURES SO REDEEMED TO THE DATE FIXED FOR REDEMPTION, PLUS 100 PERCENT OF THE
PRINCIPAL AMOUNT THEREOF. SEE "CERTAIN TERMS OF SERIES A PREFERRED
SECURITIES -- REDEMPTION ".
THE HOLDER OF THE SERIES A COMMON SECURITIES (I.E. THE CORPORATION) WILL
HAVE THE RIGHT AT ANY TIME TO TERMINATE THE SERIES A ISSUER AND CAUSE THE SERIES
A SUBORDINATED DEBENTURES TO BE DISTRIBUTED TO THE HOLDERS OF THE SERIES A
PREFERRED SECURITIES IN EXCHANGE THEREFOR UPON LIQUIDATION OF THE SERIES A
ISSUER. SEE "CERTAIN TERMS OF SERIES A PREFERRED SECURITIES -- LIQUIDATION OF
SERIES A ISSUER AND DISTRIBUTION OF SERIES A SUBORDINATED DEBENTURES TO
HOLDERS ".
THE SERIES A SUBORDINATED DEBENTURES ARE UNSECURED AND SUBORDINATED TO ALL
SENIOR DEBT OF THE CORPORATION.
IN THE EVENT OF THE TERMINATION OF THE SERIES A ISSUER, AFTER SATISFACTION
OF LIABILITIES TO CREDITORS OF THE SERIES A ISSUER IN ACCORDANCE WITH APPLICABLE
LAW AND THE EXPENSE AGREEMENT, THE HOLDERS OF THE SERIES A PREFERRED SECURITIES
WILL BE ENTITLED TO RECEIVE AS A PREFERENCE A LIQUIDATION AMOUNT OF $25.00 PER
SERIES A PREFERRED SECURITY PLUS ACCUMULATED AND UNPAID DISTRIBUTIONS THEREON TO
THE DATE OF PAYMENT, WHICH MAY BE IN THE FORM OF A DISTRIBUTION OF SUCH AMOUNT
IN SERIES A SUBORDINATED DEBENTURES, SUBJECT TO CERTAIN EXCEPTIONS. SEE
"DESCRIPTION OF PREFERRED SECURITIES -- LIQUIDATION DISTRIBUTION UPON
TERMINATION " IN THE ACCOMPANYING PROSPECTUS.
THE SERIES A PREFERRED SECURITIES WILL BE REPRESENTED BY GLOBAL CERTIFICATES
REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY ("DTC ") OR ITS NOMINEE.
BENEFICIAL INTERESTS IN THE SERIES A PREFERRED SECURITIES WILL BE SHOWN ON, AND
TRANSFERS THEREOF WILL BE EFFECTED ONLY THROUGH, RECORDS MAINTAINED BY
PARTICIPANTS IN DTC. EXCEPT AS DESCRIBED IN THE ACCOMPANYING PROSPECTUS, SERIES
A PREFERRED SECURITIES IN CERTIFICATED FORM WILL NOT BE ISSUED IN EXCHANGE FOR
THE GLOBAL CERTIFICATES. SEE "BOOK-ENTRY ISSUANCE " IN THE ACCOMPANYING
PROSPECTUS.
S-3
<PAGE>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
CORPORATION, THE SERIES A ISSUER OR BY THE UNDERWRITERS. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CORPORATION OR THE SERIES A
ISSUER SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES A
PREFERRED SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NYSE OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
<S> <C>
Summary of the Offering................................................................................................ S-5
Risk Factors........................................................................................................... S-7
The Series A Issuer.................................................................................................... S-12
The Corporation........................................................................................................ S-13
Consolidated Ratios of Earnings to Fixed Charges....................................................................... S-17
Use of Proceeds........................................................................................................ S-17
Capitalization......................................................................................................... S-18
Accounting Treatment................................................................................................... S-19
Certain Terms of Series A Preferred Securities......................................................................... S-20
Certain Terms of Series A Subordinated Debentures...................................................................... S-22
Certain Federal Income Tax Consequences................................................................................ S-25
Underwriters........................................................................................................... S-28
Validity of Securities................................................................................................. S-29
PROSPECTUS
Available Information.................................................................................................. 4
Incorporation of Certain Documents by Reference........................................................................ 4
The Issuers............................................................................................................ 5
The Corporation........................................................................................................ 6
Use of Proceeds........................................................................................................ 6
Description of Junior Subordinated Debentures.......................................................................... 6
Description of Preferred Securities.................................................................................... 17
Book-Entry Issuance.................................................................................................... 27
Description of Guarantees.............................................................................................. 29
Relationship Among Preferred Securities, Corresponding Junior Subordinated Debentures and Guarantees................... 31
Plan of Distribution................................................................................................... 32
Validity of Securities................................................................................................. 33
Experts................................................................................................................ 33
</TABLE>
S-4
<PAGE>
SUMMARY OF THE OFFERING
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED HEREIN AND
SHOULD BE READ IN CONJUNCTION WITH SUCH INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS SUPPLEMENT AND IN THE ACCOMPANYING PROSPECTUS AND IS SUBJECT TO, AND
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, SUCH INFORMATION. CAPITALIZED TERMS
USED HEREIN HAVE THE RESPECTIVE MEANINGS ASCRIBED TO THEM ELSEWHERE IN THIS
PROSPECTUS SUPPLEMENT AND IN THE ACCOMPANYING PROSPECTUS.
GENERAL
The Series A Preferred Securities represent preferred undivided beneficial
interests in the assets of the Series A Issuer and will have a preference under
certain circumstances with respect to Distributions and amounts payable on
liquidation, redemption or otherwise over the Series A Common Securities. See
"Description of Preferred Securities -- Subordination of Common Securities" in
the accompanying Prospectus. The sole assets of the Series A Issuer will be the
Series A Subordinated Debentures and the right to receive certain reimbursement
payments under a related Expense Agreement, and payments under the Series A
Subordinated Debentures and such Expense Agreement will be the sole revenue of
the Series A Issuer. The Series A Subordinated Debentures are unsecured
subordinated debt securities issued under an Indenture between the Corporation
and Wilmington Trust Company, as trustee.
DISTRIBUTIONS
Holders of the Series A Preferred Securities will be entitled to receive as
a preference cumulative cash Distributions accruing from the date of original
issuance and payable quarterly in arrears on the last day of March, June,
September and December of each year, commencing March 31, 1997, at the per annum
rate set forth on the cover page of this Prospectus Supplement to the persons in
whose names the Series A Preferred Securities are registered at the close of
business on the relevant record dates. See "Certain Terms of Series A Preferred
Securities -- Distributions".
The Series A Subordinated Debentures are unsecured and rank subordinate and
junior in right of payment to all Senior Debt of the Corporation. The ability of
the Series A Issuer to pay amounts due on the Series A Preferred Securities is
solely dependent upon the Corporation making payments on the Series A
Subordinated Debentures as and when required. See "Risk Factors -- Ranking of
Subordinated Obligations Under the Series A Guarantee and the Series A
Subordinated Debentures".
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Debenture Event of Default has occurred and is continuing,
the Corporation has the right to defer payments of interest on the Series A
Subordinated Debentures at any time or from time to time by extending the
interest payment period thereon for Extension Periods of up to 20 consecutive
quarters with respect to each deferral period; provided, however, that no
Extension Period may extend beyond the Stated Maturity of the Series A
Subordinated Debentures. If interest payments on the Series A Subordinated
Debentures are deferred, Distributions on the Series A Preferred Securities also
will be deferred and the Corporation will not be permitted, subject to certain
exceptions set forth herein, to declare or pay any cash distributions with
respect to the Corporation's capital stock or debt securities of the Corporation
that rank PARI PASSU with or junior to the Series A Subordinated Debentures.
During an Extension Period, Distributions on the Series A Preferred Securities
will continue to accumulate and Distributions that are in arrears will bear
interest on the amount thereof at the per annum rate set forth on the cover page
of this Prospectus Supplement (to the extent permitted by applicable law),
compounded quarterly, and holders of the Series A Preferred Securities will be
required to accrue interest income for United States federal income tax purposes
in advance of receipt of cash attributable to such income. Upon the termination
of any Extension Period and the payment of all amounts then due, the Corporation
may elect to begin a new Extension Period, subject to the requirements set forth
herein.
The Corporation has no current plan to exercise its right to defer payments
of interest by extending the interest payment period on the Series A
Subordinated Debentures. However, should the Corporation elect to exercise such
right in the future, the market price of the Series A Preferred Securities is
likely to be affected. See "Risk Factors -- Option to Extend Interest Payment
Period; Tax Consequences", "Certain Terms of Series A Subordinated
Debentures -- Option to Extend Interest Payment Period" and "Certain Federal
Income Tax Consequences -- Interest Income and Original Issue Discount".
REDEMPTION
The Series A Preferred Securities are subject to mandatory redemption, in
whole or in part, upon repayment of the Series A Subordinated Debentures at
maturity or upon their earlier redemption. The Series A Subordinated Debentures
are redeemable, at the option of the Corporation, (i) on or after ,
2002, in whole at any time or in part from time to
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time, or (ii) at any time prior to , 2002, in whole (but not in
part), within 90 days following the occurrence and continuation of a Tax Event
or a Capital Treatment Event. See "Risk Factors -- Tax Event or Capital
Treatment Event Redemption" and "Certain Terms of Series A Subordinated
Debentures -- Redemption".
See "Risk Factors -- Possible Tax Law Changes Affecting the Series A
Preferred Securities" for a discussion of certain legislative proposals that, if
adopted, could give rise to a Tax Event, which may permit the Corporation to
cause a redemption of the Series A Preferred Securities prior to ,
2002.
No sinking fund will be established for the benefit of the Series A
Preferred Securities.
EXCHANGE OF SERIES A PREFERRED SECURITIES FOR SERIES A SUBORDINATED DEBENTURES
The holder of the Series A Common Securities (i.e., the Corporation) has
the right to terminate the Series A Issuer at any time and, after satisfaction
of liabilities to creditors of the Series A Issuer in accordance with applicable
law and the Expense Agreement, cause the Series A Subordinated Debentures to be
distributed to the holders of the Series A Preferred Securities in liquidation
of the Series A Issuer. See "Certain Terms of Series A Preferred
Securities -- Liquidation of Series A Issuer and Distribution of Series A
Subordinated Debentures to Holders".
SHORTENING OR EXTENSION OF STATED MATURITY OF SERIES A SUBORDINATED DEBENTURES
If certain conditions set forth herein are met, the Stated Maturity of the
Series A Subordinated Debentures may be (i) shortened to a date not earlier than
, 2002, or (ii) extended to a date not later than , 204 .
See "Certain Terms of Series A Subordinated Debentures -- General".
THE SERIES A GUARANTEE
The payment of Distributions and payments on the liquidation of the Series
A Issuer or the redemption of the Series A Preferred Securities are guaranteed
by the Corporation to the extent that the Series A Issuer has sufficient funds
available therefor. See "Risk Factors -- Rights Under the Series A Guarantee"
herein and "Description of Guarantees" in the accompanying Prospectus. Taken
together, the obligations of the Corporation under the Series A Subordinated
Debentures, the Series A Guarantee and the related Expense Agreement constitute
a full and unconditional guarantee by the Corporation of the obligations of the
Series A Issuer under the Series A Preferred Securities.
LISTING
Application will be made to list the Series A Preferred Securities on the
New York Stock Exchange. Trading of the Series A Preferred Securities on the New
York Stock Exchange is expected to commence within a 30-day period after the
date of this Prospectus Supplement. See "Underwriting".
USE OF PROCEEDS
The proceeds to be received by the Series A Issuer from the sale of Series
A Preferred Securities will be used to purchase Series A Subordinated Debentures
of the Corporation. The Corporation intends that the proceeds of such purchase
will be added to its general corporate funds and will be used for general
corporate purposes.
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THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT SUPPLEMENTS, AND SHOULD BE
READ IN CONJUNCTION WITH, THE INFORMATION CONTAINED IN THE ACCOMPANYING
PROSPECTUS. AS USED HEREIN, (I) THE "INDENTURE" MEANS THE INDENTURE, AS AMENDED
AND SUPPLEMENTED FROM TIME TO TIME, BETWEEN THE CORPORATION AND WILMINGTON TRUST
COMPANY, AS TRUSTEE (THE "DEBENTURE TRUSTEE"), PURSUANT TO WHICH THE SERIES A
SUBORDINATED DEBENTURES WILL BE ISSUED, (II) THE "TRUST AGREEMENT" MEANS THE
AMENDED AND RESTATED TRUST AGREEMENT, AS AMENDED OR SUPPLEMENTED FROM TIME TO
TIME RELATING TO THE SERIES A ISSUER AMONG THE CORPORATION, AS DEPOSITOR,
WILMINGTON TRUST COMPANY, AS PROPERTY TRUSTEE (THE "PROPERTY TRUSTEE"),
WILMINGTON TRUST COMPANY, AS DELAWARE TRUSTEE (THE "DELAWARE TRUSTEE"), AND THE
ADMINISTRATIVE TRUSTEES NAMED THEREIN (COLLECTIVELY, WITH THE PROPERTY TRUSTEE
AND DELAWARE TRUSTEE, THE "ISSUER TRUSTEES"), (III) THE "EXPENSE AGREEMENT"
MEANS THE AGREEMENT AS TO EXPENSES AND LIABILITIES ENTERED INTO BY THE
CORPORATION PURSUANT TO THE TRUST AGREEMENT AND (IV) THE "SERIES A GUARANTEE"
MEANS THE GUARANTY ENTERED INTO BY THE CORPORATION FOR THE BENEFIT OF THE
HOLDERS OF SERIES A PREFERRED SECURITIES PURSUANT TO THE GUARANTEE AGREEMENT, AS
AMENDED OR SUPPLEMENTED FROM TIME TO TIME, BETWEEN THE CORPORATION AND
WILMINGTON TRUST COMPANY, AS TRUSTEE (THE "GUARANTEE TRUSTEE"). EACH OF THE
OTHER CAPITALIZED TERMS USED IN THIS PROSPECTUS SUPPLEMENT AND NOT OTHERWISE
DEFINED IN THIS PROSPECTUS SUPPLEMENT HAS THE MEANING SET FORTH IN THE
ACCOMPANYING PROSPECTUS.
RISK FACTORS
Prospective purchasers of the Series A Preferred Securities should
carefully review the information contained elsewhere in this Prospectus
Supplement and in the accompanying Prospectus and should particularly consider
the following matters. In addition, because holders of Series A Preferred
Securities may receive Series A Subordinated Debentures in exchange therefor
upon liquidation of the Series A Issuer, prospective purchasers of Series A
Preferred Securities are also making an investment decision with regard to the
Series A Subordinated Debentures and should carefully review all the information
regarding the Series A Subordinated Debentures contained herein.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE SERIES A GUARANTEE AND THE SERIES
A SUBORDINATED DEBENTURES
The obligations of the Corporation under the Series A Guarantee issued by
the Corporation for the benefit of the holders of the Series A Preferred
Securities and under the Series A Subordinated Debentures are unsecured and rank
subordinate and junior in right of payment to all Senior Debt of the
Corporation. Substantially all the Corporation's indebtedness constitutes Senior
Debt. Because the Corporation is a holding company, the right of the Corporation
to participate in any distribution of assets of any subsidiary, upon such
subsidiary's liquidation or reorganization or otherwise (and thus the ability of
holders of the Series A Preferred Securities to benefit indirectly from such
distribution), is subject to the prior claims of creditors of that subsidiary,
except to the extent that the Corporation may itself be recognized as a creditor
of that subsidiary. Accordingly, the Series A Subordinated Debentures will be
effectively subordinated to all existing and future liabilities of the
Corporation's subsidiaries, and holders of Series A Subordinated Debentures
should look only to the assets of the Corporation for payments on the Series A
Subordinated Debentures. See "The Corporation". None of the Indenture, the
Series A Guarantee, the Trust Agreement or the Expense Agreement places any
limitation on the amount of secured or unsecured debt, including Senior Debt,
that may be incurred by the Corporation. See "Description of
Guarantees -- Status of the Guarantees" and "Description of Junior Subordinated
Debentures -- Subordination" in the accompanying Prospectus.
The ability of the Series A Issuer to pay amounts due on the Series A
Preferred Securities is solely dependent upon the Corporation making payments on
the Series A Subordinated Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
So long as no Debenture Event of Default has occurred and is continuing,
the Corporation has the right under the Indenture to defer the payment of
interest on the Series A Subordinated Debentures at any time or from time to
time for a period not exceeding 20 consecutive quarters with respect to each
Extension Period, provided that no Extension Period may extend beyond the Stated
Maturity of the Series A Subordinated Debentures. As a consequence of any such
deferral, quarterly Distributions on the Series A Preferred Securities by the
Series A Issuer will be deferred (and the amount of Distributions to which
holders of the Series A Preferred Securities are entitled will accumulate
additional Distributions thereon at the rate of % per annum, compounded
quarterly from the relevant payment date for such Distributions) during any such
Extension Period. During any such Extension Period, the Corporation may not, and
may not permit any subsidiary of the Corporation to, (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Corporation's capital stock, or
(ii) make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Corporation (including other
Junior Subordinated Debentures) that rank PARI PASSU in all respects with or
junior in interest to the Series A Subordinated Debentures (other than (a)
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repurchases, redemptions or other acquisitions of shares of capital stock of the
Corporation in connection with any employment contract, benefit plan or other
similar arrangement with or for the benefit of one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the issuance of capital
stock of the Corporation (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the applicable Extension Period, (b) as a result of any exchange or
conversion of any class or series of the Corporation's capital stock (or any
capital stock of a subsidiary of the Corporation) for any class or series of the
Corporation's capital stock or of any class or series of the Corporation's
indebtedness for any class or series of the Corporation's capital stock, (c) the
purchase of fractional interests in shares of the Corporation's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged, (d) any declaration of a dividend in
connection with any stockholder's rights plan, or the issuance of rights, stock
or property under any stockholder's rights plan, or the redemption or repurchase
of rights pursuant thereto, or (e) any dividend in the form of stock, warrants,
options or other rights where the dividend stock or the stock issuable upon
exercise of such warrants, options or other rights is the same stock as that on
which the dividend is being paid or ranks PARI PASSU with or junior to such
stock). Prior to the termination of any such Extension Period, the Corporation
may further defer the payment of interest, provided that no Extension Period may
exceed 20 consecutive quarters or extend beyond the Stated Maturity of the
Series A Subordinated Debentures. Upon the termination of any Extension Period
and the payment of all interest then accrued and unpaid (together with interest
thereon at the annual rate of %, compounded quarterly, to the extent permitted
by applicable law), the Corporation may elect to begin a new Extension Period
subject to the above requirements. There is no limitation on the number of times
that the Corporation may elect to begin an Extension Period. See "Certain Terms
of Series A Preferred Securities -- Distributions" and "Certain Terms of Series
A Subordinated Debentures -- Option to Extend Interest Payment Period".
Should an Extension Period occur, a holder of the Series A Preferred
Securities will be required to recognize income (in the form of original issue
discount) in respect of its PRO RATA share of the Series A Subordinated
Debentures held by the Series A Issuer for United States federal income tax
purposes. As a result, a holder of the Series A Preferred Securities will be
required to include such income in gross income for United States federal income
tax purposes in advance of the receipt of cash attributable to such income, and
will not receive the cash related to such income from the Series A Issuer if the
holder disposes of the Series A Preferred Securities prior to the record date
for the payment of Distributions. See "Certain Federal Income Tax
Consequences -- Interest Income and Original Issue Discount" and " -- Sales or
Redemption of Series A Preferred Securities".
The Corporation has no current plan to exercise its right to defer payments
of interest by extending the interest payment period on the Series A
Subordinated Debentures. However, should the Corporation elect to exercise such
right in the future, the market price of the Series A Preferred Securities is
likely to be affected. A holder that disposes of its Series A Preferred
Securities during an Extension Period, therefore, might not receive the same
return on its investment as a holder that continues to hold its Series A
Preferred Securities. In addition, as a result of the existence of the
Corporation's right to defer interest payments, the market price of the Series A
Preferred Securities (which represent preferred beneficial interests in the
Series A Issuer) may be more volatile than the market prices of other securities
on which original issue discount accrues that are not subject to such deferrals.
TAX EVENT OR CAPITAL TREATMENT EVENT REDEMPTION
Upon the occurrence and continuation of a Tax Event or Capital Treatment
Event, the Corporation has the right to redeem the Series A Subordinated
Debentures in whole (but not in part) within 90 days following the occurrence of
such Tax Event or Capital Treatment Event and therefore cause a mandatory
redemption of the Series A Preferred Securities before , 2002,
the date on which the Series A Preferred Securities otherwise would first become
redeemable. The Corporation has committed to the Federal Reserve Bank of
Richmond that it will not exercise such right without the Corporation having
received the prior approval of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"), if then so required under applicable
capital guidelines or policies of the Federal Reserve Board.
A "Tax Event" means the receipt by the Series A Issuer of an opinion of
counsel experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such pronouncement or decision is announced on or after the date of issuance of
the Series A Preferred Securities under the Trust Agreement, there is more than
an insubstantial risk that (i) the Series A Issuer is, or will be within 90 days
of the date of such opinion, subject to United States federal income tax with
respect to income
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received or accrued on the Series A Subordinated Debentures, (ii) interest
payable by the Corporation on the Series A Subordinated Debentures is not, or
within 90 days of such opinion, will not be, deductible by the Corporation, in
whole or in part, for United States federal income tax purposes, or (iii) the
Series A Issuer is, or will be within 90 days of the date of the opinion,
subject to more than a DE MINIMIS amount of other taxes, duties or other
governmental charges.
See " -- Possible Tax Law Changes Affecting the Series A Preferred
Securities" for a discussion of certain legislative proposals that, if adopted,
could give rise to a Tax Event, which may permit the Corporation to cause a
redemption of the Series A Preferred Securities prior to , 2002.
A "Capital Treatment Event" means the reasonable determination by the
Corporation that, as a result of the occurrence of any amendment to, or change
(including any announced prospective change) in, the laws (or any rules or
regulations thereunder) of the United States or any political subdivision
thereof or therein, or as a result of any official or administrative
pronouncement or action or judicial decision interpreting or applying such laws,
rules or regulations, which amendment or change is effective or which
pronouncement, action or decision is announced on or after the date of issuance
of the Series A Preferred Securities, there is more than an insubstantial risk
that the Corporation will not be entitled to treat an amount equal to the
aggregate Liquidation Amount of the Series A Preferred Securities as "tier 1
Capital" (or the then equivalent thereof) for purposes of the capital adequacy
guidelines of the Federal Reserve Board, as then in effect and applicable to the
Corporation.
EXCHANGE OF SERIES A PREFERRED SECURITIES FOR SERIES A SUBORDINATED DEBENTURES
The holder of the Series A Common Securities will have the right at any
time to terminate the Series A Issuer and, after satisfaction of the liabilities
of the Series A Issuer in accordance with applicable law and the Expense
Agreement, to cause the Series A Subordinated Debentures to be distributed to
the holders of the Series A Preferred Securities in exchange therefor upon
liquidation of the Series A Issuer. The Corporation has committed to the Federal
Reserve Bank of Richmond that, for so long as the Corporation (or an affiliate)
is the holder of the Series A Common Securities, it will not exercise such right
without the Corporation having received the prior approval of the Federal
Reserve Board, if then so required under applicable capital guidelines or
policies of the Federal Reserve Board. See "Certain Terms of Series A Preferred
Securities -- Liquidation of Series A Issuer and Distribution of Series A
Subordinated Debentures to Holders".
Under current United States Federal income tax law, a distribution of the
Series A Subordinated Debentures in exchange for Series A Preferred Securities
upon liquidation of the Series A Issuer should not be a taxable event to holders
of the Series A Preferred Securities. Should there occur a change in law, a
change in legal interpretation, a Tax Event, or other circumstances, however,
such a distribution of the Series A Subordinated Debentures by the Series A
Issuer could be a taxable event to the holders of the Series A Preferred
Securities. See "Certain Federal Income Tax Consequences -- Distribution of the
Series A Subordinated Debentures to Holders of Series A Preferred Securities."
SHORTENING OF STATED MATURITY OF SERIES A SUBORDINATED DEBENTURES
The Corporation will have the right at any time to shorten the maturity of
the Series A Subordinated Debentures to a date not earlier than ,
2002, provided that the Corporation has committed to the Federal Reserve Bank of
Richmond that it will not exercise such right without the Corporation having
received the prior approval of the Federal Reserve Board, if then so required
under applicable capital guidelines or policies of the Federal Reserve Board.
EXTENSION OF STATED MATURITY OF SERIES A SUBORDINATED DEBENTURES
The Corporation will also have the right to extend the maturity of the
Series A Subordinated Debentures whether or not the Series A Issuer is
liquidated and the Series A Subordinated Debentures are distributed to holders
of the Series A Preferred Securities to a date no later than the 49th
anniversary of the first Distribution payment date of the Series A Preferred
Securities (I.E., , 2046), provided that the Corporation can extend
the maturity only if at the time such election is made and at the time of such
extension (i) the Corporation is not in bankruptcy, otherwise insolvent or in
liquidation, (ii) if the Series A Issuer has not been liquidated, the
Corporation is not in default in the payment of any interest or principal on the
Series A Subordinated Debentures, (iii) the Series A Issuer is not in arrears on
payments of Distributions on the Series A Preferred Securities and no deferred
Distributions are accumulated, (iv) the Series A Subordinated Debentures are
rated not less than either BBB- by Standard & Poor's Ratings Services or Baa3 by
Moody's Investors Service, Inc. or the equivalent by any other nationally
recognized statistical rating organization, and (v) after such extension, the
Series A Subordinated Debentures shall not have a remaining term to maturity of
more than 30 years. To the extent that the Stated Maturity of the Series A
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Subordinated Debentures is extended at such time as the Series A Preferred
Securities are outstanding, the Series A Preferred Securities would remain
outstanding until such extended date or until redeemed at an earlier date.
MARKET PRICES
There can be no assurance as to the market prices for the Series A
Preferred Securities, or the Series A Subordinated Debentures that may be
distributed in exchange for Series A Preferred Securities if a liquidation of
the Series A Issuer occurs. Accordingly, the Series A Preferred Securities that
an investor may purchase, whether pursuant to the offer made hereby or in the
secondary market, or the Series A Subordinated Debentures that a holder of the
Series A Preferred Securities may receive on liquidation of the Series A Issuer,
may trade at a discount to the price that the investor paid to purchase the
Series A Preferred Securities offered hereby. In addition, because the
Corporation has the right (i) to shorten the Stated Maturity of the Series A
Subordinated Debentures, or (ii) to extend the maturity of the Series A
Subordinated Debentures (subject to the conditions described above), there can
be no assurance that the Corporation will not exercise its option to change the
maturity of the Series A Subordinated Debentures as permitted by the terms
thereof and of the Indenture. Because holders of the Series A Preferred
Securities may receive Series A Subordinated Debentures on termination of the
Series A Issuer, prospective purchasers of the Series A Preferred Securities are
also making an investment decision with respect to the Series A Subordinated
Debentures and should carefully review all the information regarding the Series
A Subordinated Debentures contained herein and in the accompanying Prospectus.
See "Certain Terms of the Series A Subordinated Debentures" herein and
"Description of Junior Subordinated Debentures -- Corresponding Junior
Subordinated Debentures" in the accompanying Prospectus.
RIGHTS UNDER THE SERIES A GUARANTEE
The Series A Guarantee will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). Wilmington Trust
Company will act as the indenture trustee under the Series A Guarantee (the
"Guarantee Trustee") for the purposes of compliance with the Trust Indenture Act
and will hold the Series A Guarantee for the benefit of the holders of the
Series A Preferred Securities. Wilmington Trust Company will also act as
Debenture Trustee for the Series A Subordinated Debentures, and as Property
Trustee and Delaware Trustee under the Trust Agreement. The Series A Guarantee
guarantees to the holders of the Series A Preferred Securities the following
payments, to the extent not paid by the Series A Issuer: (i) any accumulated and
unpaid Distributions required to be paid on the Series A Preferred Securities,
to the extent that the Series A Issuer has funds on hand available therefor at
such time, (ii) the redemption price with respect to any Series A Preferred
Securities called for redemption, to the extent that the Series A Issuer has
funds on hand available therefor at such time, and (iii) upon a voluntary or
involuntary termination, winding-up or liquidation of the Series A Issuer
(unless the Series A Subordinated Debentures are distributed to holders of the
Series A Preferred Securities), the lesser of (a) the aggregate of the
Liquidation Amount and all accumulated and unpaid Distributions to the date of
payment to the extent that the Series A Issuer has funds on hand available
therefor at such time, and (b) the amount of assets of the Series A Issuer
remaining available for distribution to holders of the Series A Preferred
Securities in liquidation of the Series A Issuer.
The holders of not less than a majority in aggregate Liquidation Amount of
the Series A Preferred Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Guarantee
Trustee in respect of the Series A Guarantee or to direct the exercise of any
trust power conferred upon the Guarantee Trustee under the Series A Guarantee.
Any holder of the Series A Preferred Securities may institute a legal proceeding
directly against the Corporation to enforce its rights under the Series A
Guarantee without first instituting a legal proceeding against the Series A
Issuer, the Guarantee Trustee or any other person or entity. If the Corporation
were to default on its obligation to pay amounts payable under the Series A
Subordinated Debentures, the Series A Issuer would lack funds for the payment of
Distributions or amounts payable on redemption of the Series A Preferred
Securities or otherwise, and in such event, holders of the Series A Preferred
Securities would not be able to rely upon the Series A Guarantee for payment of
such amounts. Instead, in the event (i) a Debenture Event of Default shall have
occurred and be continuing, and (ii) such event is attributable to the failure
of the Corporation to pay interest on or principal of the Series A Subordinated
Debentures on the payment date on which such payment is due and payable, then a
holder of the Series A Preferred Securities may institute a legal proceeding
directly against the Corporation for enforcement of payment to such holder of
the principal of or interest on such Series A Subordinated Debentures having a
principal amount equal to the aggregate Liquidation Amount of the Series A
Preferred Securities of such holder (a "Direct Action"). In connection with such
Direct Action, the Corporation will have a right of set-off under the Indenture
to the extent of any payment made by the Corporation to such holder of the
Series A Preferred Securities in the Direct Action. Except as described herein,
holders of the Series A Preferred Securities will not be able to exercise
directly any other remedy available to the holders of the Series A Subordinated
Debentures or assert directly any other rights in
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respect of the Series A Subordinated Debentures. See "Description of Junior
Subordinated Debentures -- Enforcement of Certain Rights of Holders of Preferred
Securities", and " -- Debenture Events of Default" and "Description of
Guarantees" in the accompanying Prospectus. The Trust Agreement provides that
each holder of the Series A Preferred Securities, by acceptance thereof, agrees
to the provisions of the Series A Guarantee and the Indenture.
LIMITED VOTING RIGHTS
Holders of the Series A Preferred Securities generally will have limited
voting rights relating only to the modification of the Series A Preferred
Securities and the exercise of the Series A Issuer's rights as holder of Series
A Subordinated Debentures and the Series A Guarantee. Holders of the Series A
Preferred Securities will not be entitled to vote to appoint, remove or replace
the Property Trustee, the Delaware Trustee or any Administrative Trustee, and
such voting rights are vested exclusively in the holder of the Series A Common
Securities (initially, the Corporation) except, with respect to the Property
Trustee and Delaware Trustee, upon the occurrence of certain events described in
the accompanying Prospectus. The Property Trustee, the Administrative Trustees
and the Corporation may amend the Trust Agreement without the consent of holders
of the Series A Preferred Securities to ensure that the Series A Issuer will be
classified for United States federal income tax purposes as a grantor trust or
as other than as an association taxable as a corporation unless such action
materially adversely affects the interests of such holders. See "Description of
Preferred Securities -- Voting Rights; Amendment of Each Trust Agreement" and
" -- Removal of Issuer Trustees" in the accompanying Prospectus.
TRADING CHARACTERISTICS OF SERIES A PREFERRED SECURITIES
Application will be made to list the Series A Preferred Securities on the
New York Stock Exchange (the "NYSE"). The Series A Preferred Securities may
trade at prices that do not fully reflect the value of accrued but unpaid
interest with respect to the underlying Series A Subordinated Debentures. A
holder of the Series A Preferred Securities that disposes of its Series A
Preferred Securities between record dates for payments of Distributions (and
consequently does not receive a Distribution from the Series A Issuer for the
period prior to such disposition) nevertheless may be required to include
accrued but unpaid interest on the Series A Subordinated Debentures through the
date of disposition in income as ordinary income and to add such amount to its
adjusted tax basis in the Series A Preferred Securities disposed of. Such holder
would recognize a capital loss to the extent the selling price (which may not
fully reflect the value of accrued but unpaid interest) is less than its
adjusted tax basis (which will include accrued but unpaid interest). Subject to
certain limited exceptions, capital losses cannot be applied to offset ordinary
income for United States federal income tax purposes. See "Certain Federal
Income Tax Consequences -- Sales or Redemption of Series A Preferred
Securities".
As indicated above, application will be made to list the Series A Preferred
Securities on the NYSE. If the Series A Preferred Securities are not listed on a
national securities exchange or the Nasdaq National Market and the Underwriters
do not make a market for the Series A Preferred Securities, the liquidity of the
Series A Preferred Securities could be adversely affected.
POSSIBLE TAX LAW CHANGES AFFECTING THE SERIES A PREFERRED SECURITIES
On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Revenue
Reconciliation Bill"), the revenue portion of President Clinton's budget
proposal, was introduced in the 104th Congress. The Revenue Reconciliation Bill,
if enacted into law, would have, among other things, generally denied interest
deductions for interest on an instrument issued by a corporation that has a
maximum weighted average maturity of more than 40 years. The Revenue
Reconciliation Bill also would have generally denied interest deductions for
interest on an instrument, issued by a corporation, that has a maximum term of
more than 20 years and that is not shown as indebtedness on the separate balance
sheet of the issuer or, where the instrument is issued to a related party (other
than a corporation), where the holder or some other related party issues a
related instrument that is not shown as indebtedness on the issuer's
consolidated balance sheet. For purposes of determining the weighted average
maturity or the term of an instrument, any right to extend would be treated as
if exercised. The above-described provisions were proposed to be effective as to
instruments issued on or after December 7, 1996. If either provision were to
have applied to the Series A Subordinated Debentures, the Corporation would have
been unable to deduct interest on the Series A Subordinated Debentures. However,
on March 29, 1996, the Chairmen of the Senate Finance and House Ways and Means
Committees issued a joint statement to the effect that it was their intention
that the effective date of the President's legislative proposals, presumably
including the Revenue Reconciliation Bill, if adopted, would be no earlier than
the date of appropriate Congressional action. Under current law, the Corporation
will be able to deduct interest on the Series A Subordinated Debentures.
Although the 104th Congress adjourned without enacting the above-described
provisions of the Revenue Reconciliation Bill, there can be no assurance that
current or future legislative proposals or final legislation will not
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adversely affect the ability of the Corporation to deduct interest on the Series
A Subordinated Debentures. Accordingly, there can be no assurance that a Tax
Event will not occur. See "Certain Terms of Series A Subordinated
Debentures -- Redemption" in this Prospectus Supplement and "Description of
Preferred Securities -- Redemption or Exchange; TAX EVENT REDEMPTION" in the
accompanying Prospectus. See also "Certain Federal Income Tax
Consequences -- Possible Tax Law Changes".
THE SERIES A ISSUER
The Series A Issuer is a statutory business trust created under Delaware
law pursuant to (i) the Trust Agreement and (ii) the filing of a certificate of
trust with the Delaware Secretary of State on November 6, 1996. The Series A
Issuer's business and affairs are conducted by the Issuer Trustees: Wilmington
Trust Company, as Property Trustee and Delaware Trustee, and two individual
Administrative Trustees who are employees or officers of or affiliated with the
Corporation. The Series A Issuer exists exclusively for the purposes of (i)
issuing and selling the Series A Securities, (ii) using the proceeds from the
sale of the Series A Securities to acquire the Series A Subordinated Debentures,
and (iii) engaging in only those other activities necessary or incidental
thereto (such as registering the transfer of the Series A Preferred Securities).
Accordingly, the Series A Subordinated Debentures will be the sole assets of the
Series A Issuer, and payments under the Series A Subordinated Debentures will be
the sole revenue of the Series A Issuer. All of the Series A Common Securities
will be owned by the Corporation. The Series A Common Securities will rank PARI
PASSU, and payments will be made thereon PRO RATA, with the Series A Preferred
Securities, except that upon the occurrence and continuance of an event of
default under the Trust Agreement resulting from a Debenture Event of Default,
the rights of the Corporation as holder of the Series A Common Securities to
payment in respect of Distributions and payments upon liquidation, redemption or
otherwise will be subordinated to the rights of the holders of the Series A
Preferred Securities. See "Description of Preferred Securities -- Subordination
of Common Securities" in the accompanying Prospectus. The Corporation will
acquire the Series A Common Securities in an aggregate liquidation amount equal
to three percent of the total capital of the Series A Issuer. The Series A
Issuer has a term of 55 years, but may terminate earlier as provided in the
Trust Agreement. See "The Issuers" in the accompanying Prospectus.
It is anticipated that the Series A Issuer will not be subject to the
reporting requirements under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
S-12
<PAGE>
THE CORPORATION
GENERAL
The Corporation is a North Carolina-based, multi-bank holding company
registered under the Bank Holding Company Act of 1956, as amended (the "BHCA").
Through its banking subsidiaries, the Corporation provides a wide range of
commercial and retail banking services and trust services in North Carolina,
Florida, South Carolina, Georgia, Tennessee, Virginia, Maryland, Delaware,
Pennsylvania, New Jersey, New York, Connecticut and Washington, D.C. The
Corporation also provides various other financial services, including mortgage
banking, leasing, investment banking, insurance and securities brokerage
services, through other subsidiaries. As of September 30, 1996, and for the nine
months then ended, the Corporation reported assets of $133.9 billion, net loans
of $92.5 billion, deposits of $91.4 billion, stockholders' equity of $8.7
billion and net income applicable to common stockholders of $1.0 billion, and as
of such date the Corporation operated through 2,138 offices in 38 states,
Washington, D.C. and four foreign countries. The Corporation is the sixth
largest bank holding company in the United States, based on assets at September
30, 1996.
HISTORY AND BUSINESS
The Corporation was incorporated under the laws of North Carolina in 1967.
Pursuant to a corporate reorganization in 1968, First Union National Bank of
North Carolina and First Union Mortgage Corporation, a mortgage banking firm
acquired by First Union National Bank of North Carolina in 1964, became
subsidiaries of the Corporation.
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 what it perceives to be some of the better
banking markets in the eastern region of the United States. Since November 1985,
the Corporation has completed over 70 banking-related acquisitions, including
the more significant acquisitions (I.E., involving the acquisition of $3.0
billion or more of assets or deposits) set forth in the following table.
<TABLE>
<CAPTION>
ASSETS/ CONSIDERATION/
NAME HEADQUARTERS DEPOSITS (1)(2) ACCOUNTING TREATMENT COMPLETION DATE
<S> <C> <C> <C> <C>
Atlantic Bancorporation................... Florida $ 3.8 billion common stock/pooling November 1985
Northwestern Financial Corporation........ North Carolina 3.0 billion common stock/pooling December 1985
First Railroad & Banking Company of Georgia 3.7 billion common stock/pooling November 1986
Georgia.................................
Florida National Banks of Florida 7.9 billion cash and preferred January 1990
Florida, Inc............................ stock/purchase
Southeast banks........................... Florida 9.9 billion cash, notes and preferred September 1991
stock/purchase
Resolution Trust Company ("RTC") Florida, Georgia, 5.3 billion cash/purchase 1991-1994
acquisitions............................ Virginia
Dominion Bankshares Corporation........... Virginia 8.9 billion common stock and preferred March 1993
stock/pooling
Georgia Federal Bank, FSB................. Georgia 4.0 billion cash/purchase June 1993
First American Metro Corp................. Virginia 4.6 billion cash/purchase June 1993
American Savings of Florida, F.S.B........ Florida 3.3 billion common stock/purchase July 1995
First Fidelity Bancorporation ("FFB")..... New Jersey, 35.4 billion common stock and preferred January 1996
Pennsylvania stock/pooling
Center Financial Corporation ("CFC")...... Connecticut $ 4.0 billion common stock/purchase November 1996
</TABLE>
(1) The dollar amounts indicated represent the 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 RTC, and (ii) the dollar amount
relating to Southeast banks, which represent assets of the two banking
subsidiaries of Southeast Banking Corporation acquired from the Federal
Deposit Insurance Corporation (the "FDIC").
(2) In addition, the Corporation acquired (i) Lieber & Company, a mutual fund
advisory company with approximately $3.4 billion in assets under management,
in June 1994 and (ii) Keystone Investments, Inc., a mutual fund advisory
company with $11.8 billion under management, in December 1996. The
consideration was paid by the Corporation in the form of common stock; and
the acquisitions were accounted for as poolings of interests.
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
S-13
<PAGE>
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.
SUPERVISION AND REGULATION
The following discussion sets forth certain of the material elements of the
regulatory framework applicable to bank holding companies and their subsidiaries
and provides certain specific information relevant to the Corporation. This
regulatory framework is intended primarily for the protection of depositors and
the federal deposit insurance funds and not for the protection of security
holders. To the extent that the following information describes statutory and
regulatory provisions, it is qualified in its entirety by reference to the
applicable statutory and regulatory provisions. A change in applicable statutes,
regulations or regulatory policy may have a material effect on the business of
the Corporation.
GENERAL. As a bank holding company, the Corporation is subject to
regulation under the BHCA and to its examination and reporting requirements.
Under the BHCA, bank holding companies generally 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 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 are affected by general economic
conditions, management policies and the legislative and governmental actions of
various regulatory authorities, including the Federal Reserve Board, the Office
of the Comptroller of the Currency (the "OCC"), which is the principal regulator
of the Corporation's national bank subsidiaries, and the FDIC, which is the
principal federal regulator of the Corporation's state-chartered bank
subsidiaries. In addition, there are numerous governmental requirements and
regulations which affect the activities of the Corporation.
PAYMENT OF DIVIDENDS. The Corporation is a legal entity separate and
distinct from its banking and other subsidiaries. A major portion of the
Corporation's revenues result from amounts paid as dividends to the Corporation
by its national bank subsidiaries. The prior approval of the OCC 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 any national bank from paying dividends
which would be greater than such bank's undivided profits after deducting
statutory bad debt in excess of such bank's allowance for loan losses. Similar
dividend limitations apply to the Corporation's two state-chartered bank
subsidiaries.
Under the foregoing dividend restrictions and certain restrictions
applicable to certain of the Corporation's nonbanking subsidiaries, as of
September 30, 1996, the Corporation's subsidiaries, without obtaining
affirmative governmental approvals, could pay aggregate dividends of $430
million to the Corporation. In the first nine months of 1996, the Corporation's
subsidiaries paid $1.1 billion in cash dividends to the Corporation.
In addition, 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
national bank or bank holding company that the payment of dividends would be an
unsafe or unsound practice and to prohibit payment thereof. The OCC (the
appropriate agency with respect to the Corporation's national bank subsidiaries)
and the FDIC (the appropriate agency with respect to the Corporation's
state-chartered bank subsidiaries) have indicated that paying dividends that
deplete a bank's capital base to an inadequate level would be an unsound and
unsafe banking practice. The OCC, the FDIC and the Federal Reserve Board have
each indicated that banking organizations should generally pay dividends only
out of current operating earnings.
BORROWINGS, ETC. There are also various legal restrictions on the extent to
which each of 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.
The Federal Deposit Insurance Act, as amended (the "FDIA"), among other
things, imposes liability on an institution the deposits of which are insured by
the FDIC, such as the Corporation's subsidiary national banks, for certain
potential obligations to the FDIC incurred in connection with other FDIC-insured
institutions under common control with such institution.
S-14
<PAGE>
Under the National Bank Act, if the capital stock of a national bank is
impaired by losses or otherwise, the OCC 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 willing or 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 banks. 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.
CAPITAL ADEQUACY. The minimum guidelines 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 a limited amount of
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 September 30, 1996, the Corporation's
tier 1 and total capital ratios were 6.38 percent and 10.94 percent,
respectively.
In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies. These guidelines 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
September 30, 1996, was 5.23 percent. The guidelines 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 guidelines 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 leverage
ratio or tangible tier 1 leverage ratio applicable to it.
Each of the Corporation's subsidiary national banks is subject to similar
capital requirements adopted by the OCC or the FDIC. Each of the Corporation's
subsidiary banks had a leverage ratio in excess of 5.17 percent, as of September
30, 1996. As of that date, the federal banking agencies have not advised any of
the subsidiary national banks of any specific minimum leverage ratio applicable
to it.
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 guidelines.
PROMPT CORRECTIVE ACTION. The FDIA, among other things, requires the
federal banking agencies to take "prompt corrective action" in respect of
depository institutions that do not meet minimum capital requirements. The FDIA
establishes five capital tiers: "well capitalized"; "adequately capitalized";
"undercapitalized"; "significantly undercapitalized"; and "critically
undercapitalized". A depository institution's capital tier will depend upon how
its capital levels compare to various relevant capital measures and certain
other factors, as established by regulation.
The federal bank regulatory agencies have adopted regulations establishing
relevant capital measures and relevant capital levels applicable to FDIC-insured
banks. The relevant capital measures are the total capital ratio, tier 1 capital
ratio and the leverage ratio. Under the regulations, a FDIC-insured 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 the OCC 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 September 30, 1996, all
of the Corporation's deposit-taking subsidiary banks had capital levels that
qualify them as being "well capitalized" under such regulations.
S-15
<PAGE>
The FDIA generally prohibits a FDIC-insured 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" insured 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.
DEPOSITOR PREFERENCE STATUTE. Under federal law, 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.
INTERSTATE BANKING AND BRANCHING LEGISLATION. The Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 (the "IBBEA") authorizes interstate
acquisitions of banks and bank holding companies without geographic limitation
beginning one year after enactment. In addition, beginning June 1, 1997, a bank
may merge with a bank in another state as long as neither of the states has
opted out of interstate branching between the date of enactment of the IBBEA and
May 31, 1997. The IBBEA further provides that states may enact laws permitting
interstate merger transactions prior to June 1, 1997. A bank may establish and
operate a DE NOVO branch in a state in which the bank does not maintain a branch
if that state expressly permits DE NOVO branching. Once a bank has established
branches in a state through an interstate merger transaction, the bank may
establish and acquire additional branches at any location in the state where any
bank involved in the interstate merger transaction could have established or
acquired branches under applicable federal or state law. A bank that has
established a branch in a state through DE NOVO branching may establish and
acquire additional branches in such state in the same manner and to the same
extent as a bank having a branch in such state as a result of an interstate
merger. If a state opts out of interstate branching within the specified time
period, no bank in any other state may establish a branch in the opting out
state, whether through an acquisition or DE NOVO.
FDIC INSURANCE ASSESSMENTS; DIFA. The FDIC reduced the insurance premiums
it charges on bank deposits insured by the Bank Insurance Fund ("BIF") to the
statutory minimum of $2,000.00 for "well capitalized" banks, effective January
1, 1996. Premiums related to deposits assessed by the Savings Association
Insurance Fund ("SAIF"), including savings association deposits acquired by
banks, continued to be assessed at a rate of between 23 cents and 31 cents per
$100.00 of deposits. On September 30, 1996, the Deposit Insurance Funds Act of
1996 ("DIFA") was enacted and signed into law. DIFA is expected to reduce the
amount of semi-annual FDIC insurance premiums for savings association deposits
acquired by banks to the same levels assessed for deposits insured by BIF. The
Corporation currently estimates such reductions in premiums may amount to
approximately $35 million pre-tax per year.
DIFA also provides for a special one-time assessment imposed on deposits
insured by the SAIF, including such deposits held by banks, to recapitalize the
SAIF to bring the SAIF up to statutory required levels. The Corporation accrued
for the one-time assessment in the third quarter of 1996 in the amount of $86
million after tax in connection with the SAIF recapitalization.
DIFA further provides for assessments to be imposed on insured depository
institutions with respect to deposits insured by the BIF (in addition to
assessments currently imposed on depository institutions with respect to
SAIF-insured deposits) to pay for the cost of Financing Corporation funding. The
Corporation currently estimates assessments may amount to up to $14 million
after-tax in 1997 with similar assessments per year through 1999 (or earlier if
no savings associations exist prior to December 31, 1999) in connection with
such funding.
S-16
<PAGE>
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the Corporation's ratios of earnings to
fixed charges for the years and periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Consolidated Ratios of Earnings to Fixed Charges
Excluding interest on deposits.................................... 2.23x 2.75 3.55 3.95 2.71 1.80
Including interest on deposits.................................... 1.46x 1.54 1.73 1.70 1.32 1.17
Consolidated Ratios of Earnings to Fixed Charges and Preferred Stock
Dividends
Excluding interest on deposits.................................... 2.22x 2.67 3.10 3.59 2.43 1.69
Including interest on deposits.................................... 1.45x 1.53 1.67 1.67 1.30 1.15
</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.
USE OF PROCEEDS
All of the proceeds from the sale of Series A Preferred Securities will be
invested by the Series A Issuer in Series A Subordinated Debentures. The
Corporation intends that the proceeds from the sale of the Series A Subordinated
Debentures will be added to its general corporate funds and will be used for
general corporate purposes.
The Corporation is required by the Federal Reserve Board to maintain
certain levels of capital for bank regulatory purposes. See "The
Corporation -- Supervision and Regulation; CAPITAL ADEQUACY". On October 21,
1996, the Federal Reserve Board announced that cumulative preferred securities
having the characteristics of the Series A Preferred Securities which qualify as
a minority interest could be included as tier 1 capital for bank holding
companies. Such tier 1 capital treatment, together with the Corporation's
ability to deduct, for income tax purposes, interest payable on the Series A
Subordinated Debentures, will provide the Corporation with a more cost-effective
means of obtaining capital for regulatory purposes than other tier 1 capital
alternatives currently available to it.
S-17
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Corporation and its subsidiaries as of September 30, 1996 and as adjusted to
give effect to the consummation of the offering of the Series A Preferred
Securities. The following data should be read in conjunction with the
consolidated financial statements and notes thereto of the Corporation and its
subsidiaries incorporated herein by reference. See "Incorporation of Certain
Documents by Reference" in the accompanying Prospectus. Also shown below are
certain consolidated regulatory capital ratios of the Corporation and its
subsidiaries at September 30, 1996. For additional discussion of regulatory
capital requirements applicable to the Corporation, see "The
Corporation -- Supervision and Regulation; -- CAPITAL ADEQUACY".
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
(DOLLARS IN MILLIONS) HISTORICAL AS ADJUSTED
<S> <C> <C>
LONG-TERM DEBT.................................................................................... $ 7,332 7,332
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN CORPORATION'S JUNIOR SUBORDINATED DEFERRABLE INTEREST
DEBENTURES (1).................................................................................. -- 1,000
STOCKHOLDERS' EQUITY
Preferred stock.................................................................................
Preferred stock, no par value per share, authorized 10,000,000 shares, none issued........... -- --
Class A, no par value per share, authorized 40,000,000 shares
Series B $2.15 Cumulative Convertible, 1,910,946 issued (2)................................ 48 48
Common stock, $3.33 1/3 par value; authorized 750,000,000 shares,
outstanding 270,507,508 shares............................................................... 901 901
Paid-in capital................................................................................. 1,408, 1,408
Retained earnings............................................................................... 6,431 6,431
Unrealized loss on debt and equity securities................................................... (99) (99)
Total stockholders' equity................................................................. 8,689 8,689
Total capitalization....................................................................... $ 16,021 17,021
</TABLE>
<TABLE>
<CAPTION>
THE REGULATORY
CORPORATION MINIMUM
<S> <C> <C>
CONSOLIDATED REGULATORY CAPITAL RATIOS (AT SEPTEMBER 30, 1996)
Tier 1 capital to risk-adjusted assets (3)........................................................ 6.38% 4.00
Total capital to risk-adjusted assets (4)......................................................... 10.94 8.00
Leverage (5)...................................................................................... 5.23 (6)
</TABLE>
(1) As described herein, the sole assets of the Series A Issuer will be $ of
the Series A Subordinated Debentures. The Series A Subordinated Debentures
will mature on , 2026, which date may be shortened to a date not
earlier than , 2002, or extended to a date not later than , 2046
if certain conditions are met. The Series A Subordinated Debentures will
accrue interest at a rate of % per annum. The Corporation owns all of
the Series A Common Securities of the Series A Issuer, which accumulate
distributions at the rate of % per annum. It is anticipated that the
Series A Issuer will not be subject to the reporting requirements under the
Exchange Act. See "Accounting Treatment". On November 27, 1996, First Union
Institutional Capital I, a statutory business trust created under Delaware
law, issued $500 million of company-obligated mandatorily redeemable
preferred securities.
(2) The outstanding shares of the Series B Cumulative Convertible Class A
Preferred Stock were redeemed on November 15, 1996.
(3) Tier 1 capital consists of common equity, retained earnings and a limited
amount of qualifying perpetual preferred stock (including the Series A
Preferred Securities), less certain intangibles.
(4) Total capital consists of tier 1 capital and subordinated debt, qualifying
preferred stock and a limited amount of the loan loss allowance. At least
half of a bank holding company's total capital is to be composed of tier 1
capital.
(5) The leverage ratio is defined as the ratio of tier 1 capital divided by
adjusted average quarterly assets.
(6) Federal Reserve Board guidelines provide for a minimum leverage ratio of
three percent for bank holding companies that meet certain specified
criteria, including that they have the highest regulatory rating. All other
bank holding companies will be required to maintain a leverage ratio of
three percent plus an additional amount of at least 100 to 200 basis points.
The guidelines also provide that banking organizations experiencing internal
growth or making acquisitions will be
S-18
<PAGE>
expected to maintain strong capital positions substantially above the
minimum supervisory levels, without significant reliance on intangible
assets.
ACCOUNTING TREATMENT
For financial reporting purposes, the Series A Issuer will be treated as a
subsidiary of the Corporation, and accordingly, the accounts of the Series A
Issuer will be included in the consolidated financial statements of the
Corporation. The Series A Preferred Securities will be presented as a separate
line item in the consolidated balance sheets of the Corporation, entitled
"Guaranteed Preferred Beneficial Interests in Corporation's Junior Subordinated
Deferrable Interest Debentures", which will be classified similar to minority
interests and appropriate disclosures about the Series A Preferred Securities,
the Series A Guarantee and the Series A Subordinated Debentures will be included
in the notes to the consolidated financial statements. For financial reporting
purposes, the Corporation will record Distributions payable on the Series A
Preferred Securities as an expense in the Corporation's consolidated statements
of income.
The Corporation has agreed that future financial reports of the Corporation
will: (i) present the preferred securities issued by the Issuers on the balance
sheet as a separate line item entitled "Guaranteed Preferred Beneficial
Interests in Corporation's Junior Subordinated Deferrable Interest Debentures",
which will be classified similar to minority interests; (ii) include in a
footnote to the Corporation's consolidated financial statements disclosure that
the sole assets of the Issuers are the Junior Subordinated Deferrable Interest
Debentures (specifying as to each Issuer the principal amount, interest rate and
maturity date of the Junior Subordinated Deferrable Interest Debentures held)
and whether Staff Accounting Bulletin 53 treatment is sought; (iii) include, in
an audited footnote to the consolidated financial statements, disclosure that
(a) the Issuers are wholly-owned; (b) the sole assets of the Issuers are the
Junior Subordinated Deferrable Interest Debentures (specifying as to each Issuer
the principal amount, interest rate and maturity date of the Junior Subordinated
Deferrable Interest Debentures held); and (c) the obligations of the Corporation
under the applicable documents, in the aggregate, constitute a full and
unconditional guarantee by the Corporation of the Issuer's obligations under the
Preferred Securities issued by each Issuer.
S-19
<PAGE>
CERTAIN TERMS OF SERIES A PREFERRED SECURITIES
GENERAL
The following summary of certain terms and provisions of the Series A
Preferred Securities, which describes the material terms thereof, supplements
the description of the terms and provisions of the Preferred Securities set
forth in the accompanying Prospectus under the heading "Description of Preferred
Securities", to which description reference is hereby made. This summary of
certain terms and provisions of the Series A Preferred Securities does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the Trust Agreement. The form of the Trust Agreement has been
filed as an exhibit to the Registration Statement of which this Prospectus
Supplement and the accompanying Prospectus form a part.
DISTRIBUTIONS
The Series A Preferred Securities represent beneficial interests in the
Series A Issuer, and Distributions on each Series A Preferred Security will be
payable as a preference at the annual rate of % of the stated Liquidation
Amount of $25.00, quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year, to the holders of the Series A Preferred Securities on
the relevant record dates. The record dates will be, for so long as the Series A
Preferred Securities remain in book-entry form, one Business Day prior to the
relevant Distribution payment date and, in the event the Series A Preferred
Securities are not in book-entry form, the 15th day of the month in which the
relevant Distribution payment date occurs. Distributions will accumulate from
the date of original issuance. The first Distribution payment date for the
Series A Preferred Securities will be March 31, 1997. The amount of
Distributions payable for any period will be computed on the basis of a 360-day
year of twelve 30-day months. In the event that any date on which Distributions
are payable on the Series A Preferred Securities is not a Business Day, then
payment of the Distributions payable on such date will be made on the next
succeeding Business Day (and without any additional Distributions or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same effect as if made on the date
such payment was originally payable. See "Description of Preferred
Securities -- Distributions" in the accompanying Prospectus.
So long as no Debenture Event of Default has occurred and is continuing,
the Corporation has the right under the Indenture to defer the payment of
interest on the Series A Subordinated Debentures at any time or from time to
time for a period not exceeding 20 consecutive quarters with respect to each
Extension Period, provided that no Extension Period may extend beyond the Stated
Maturity of the Series A Subordinated Debentures. As a consequence of any such
election, quarterly Distributions on the Series A Preferred Securities will be
deferred by the Series A Issuer during any such Extension Period. Distributions
to which holders of the Series A Preferred Securities are entitled will
accumulate additional Distributions thereon at the rate per annum of %
thereof, compounded quarterly from the relevant payment date for such
Distributions. The term "Distributions" as used herein shall include any such
additional Distributions. During any such Extension Period, the Corporation may
not, and may not permit any subsidiary of the Corporation to, (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Corporation's capital stock or
(ii) make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Corporation (including other
Junior Subordinated Debentures) that rank PARI PASSU in all respects with or
junior in interest to the Series A Subordinated Debentures (other than (a)
repurchases, redemptions or other acquisitions of shares of capital stock of the
Corporation in connection with any employment contract, benefit plan or other
similar arrangement with or for the benefit of one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the issuance of capital
stock of the Corporation (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the applicable Extension Period, (b) as a result of any exchange or
conversion of any class or series of the Corporation's capital stock (or any
capital stock of a subsidiary of the Corporation) for any class or series of the
Corporation's capital stock or of any class or series of the Corporation's
indebtedness for any class or series of the Corporation's capital stock, (c) the
purchase of fractional interests in shares of the Corporation's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged, (d) any declaration of a dividend in
connection with any stockholder's rights plan, or the issuance of rights, stock
or other property under any stockholder's rights plan, or the redemption or
repurchase of rights pursuant thereto, or (e) any dividend in the form of stock,
warrants, options or other rights where the dividend stock or the stock issuable
upon exercise of such warrants, options or other rights is the same stock as
that on which the dividend is being paid or ranks PARI PASSU with or junior to
such stock). Prior to the termination of any such Extension Period, the
Corporation may further defer the payment of interest, provided that no
Extension Period may exceed 20 consecutive quarters or extend beyond the Stated
Maturity of the Series A Subordinated Debentures. Upon the termination of any
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such Extension Period and the payment of all amounts then due, the Corporation
may elect to begin a new Extension Period. There is no limitation on the number
of times that the Corporation may elect to begin an Extension Period. See
"Certain Terms of Series A Subordinated Debentures -- Option to Extend Interest
Payment Period" and "Certain Federal Income Tax Consequences -- Interest Income
and Original Issue Discount".
The Corporation has no current plan to exercise its right to defer payments
of interest by extending the interest payment period on the Series A
Subordinated Debentures.
REDEMPTION
Upon the repayment or redemption, in whole or in part, of the Series A
Subordinated Debentures, whether at Stated Maturity or upon earlier redemption
as provided in the Indenture, the proceeds from such repayment or redemption
shall be applied by the Property Trustee to redeem a Like Amount (as defined in
the accompanying Prospectus) of the Series A Securities, upon not less than 30
nor more than 60 days notice prior to the date fixed for repayment or
redemption, at a redemption preference with respect to the Series A Preferred
Securities (the "Redemption Price") equal to the aggregate Liquidation Amount of
such Series A Preferred Securities plus accumulated and unpaid Distributions
thereon to the date of repayment or redemption (the "Redemption Date"). See
"Description of Preferred Securities -- Redemption or Exchange" in the
accompanying Prospectus. For a description of the Stated Maturity and redemption
provisions of the Series A Subordinated Debentures, see "Certain Terms of Series
A Subordinated Debentures -- General" and " -- Redemption".
LIQUIDATION OF SERIES A ISSUER AND DISTRIBUTION OF SERIES A SUBORDINATED
DEBENTURES TO HOLDERS
The Corporation will have the right at any time to liquidate the Series A
Issuer and cause the Series A Subordinated Debentures to be distributed to the
holders of the Series A Preferred Securities in exchange therefor upon
liquidation of the Series A Issuer. The Corporation has committed to the Federal
Reserve Bank of Richmond that, so long as the Corporation (or an affiliate) is
the holder of the Series A Common Securities, it will not exercise such right
without having received the prior approval of the Federal Reserve Board to do
so, if then so required under applicable capital guidelines or policies of the
Federal Reserve Board.
Under current United States federal income tax law, distribution of the
Series A Subordinated Debentures in exchange for Series A Preferred Securities
should not be a taxable event to holders of the Series A Preferred Securities.
Should there be a change in law, a change in legal interpretation, a Tax Event
or other circumstances, however, the distribution could be a taxable event to
holders of the Series A Preferred Securities. See "Certain Federal Income Tax
Consequences -- Distribution of Series A Subordinated Debentures to Holders of
Series A Preferred Securities". If the Corporation elects neither to redeem the
Series A Subordinated Debentures prior to maturity nor to terminate the Series A
Issuer and distribute the Series A Subordinated Debentures to holders of the
Series A Preferred Securities in exchange therefor, the Series A Preferred
Securities will remain outstanding until the Stated Maturity of the Series A
Subordinated Debentures.
If the Corporation elects to terminate the Series A Issuer and thereby
causes the Series A Subordinated Debentures to be distributed to holders of the
Series A Preferred Securities in exchange therefor upon liquidation of the
Series A Issuer, the Corporation shall continue to have the right to shorten or
extend the maturity of the Series A Subordinated Debentures, subject to certain
conditions as described under "Certain Terms of Series A Subordinated
Debentures -- General".
LIQUIDATION VALUE
The preference payable on the Series A Preferred Securities in the event of
any liquidation of the Series A Issuer is $25.00 per Series A Preferred
Security, plus accumulated and unpaid Distributions, which may be in the form of
a distribution of a Like Amount of Series A Subordinated Debentures, subject to
certain exceptions. See "Description of Preferred Securities -- Liquidation
Distribution Upon Termination" in the accompanying Prospectus.
REGISTRATION OF SERIES A PREFERRED SECURITIES
The Series A Preferred Securities will be represented by global
certificates registered in the name of DTC or its nominee. Beneficial interests
in the Series A Preferred Securities will be shown on, and transfers thereof
will be effected only through, records maintained by participants in DTC. Except
as described below and in the accompanying Prospectus, Series A Preferred
Securities in certificated form will not be issued in exchange for the global
certificates. See "Book-Entry Issuance" in the accompanying Prospectus.
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A global security shall be exchangeable for Series A Preferred Securities
registered in the names of persons other than DTC or its nominee only if (i) DTC
notifies the Series A Issuer that it is unwilling or unable to continue as a
depositary for such global security and no successor depositary shall have been
appointed, or if at any time DTC ceases to be a clearing agency registered under
the Securities Exchange Act of 1934, as amended, at a time when DTC is required
to be so registered to act as such depositary, (ii) the Series A Issuer in its
sole discretion determines that such global security shall be so exchangeable,
or (iii) there shall have occurred and be continuing a Debenture Event of
Default with respect to the Series A Subordinated Debentures. Any global
security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for definitive certificates registered in such names as DTC shall
direct. It is expected that such instructions will be based upon directions
received by DTC from its Participants (as defined in the accompanying
Prospectus) with respect to ownership of beneficial interests in such global
security. In the event that Series A Preferred Securities are issued in
definitive form, such Series A Preferred Securities will be in denominations of
$25.00 and integral multiples thereof and may be transferred or exchanged at the
offices described below.
Payments on Series A Preferred Securities represented by a global security
will be made to DTC, as the depositary for the Series A Preferred Securities. In
the event Series A Preferred Securities are issued in certificated form, the
Liquidation Amount and Distributions will be payable, the transfer of the Series
A Preferred Securities will be registrable, and Series A Preferred Securities
will be exchangeable for Series A Preferred Securities of other denominations of
a like aggregate Liquidation Amount, at the corporate trust office of the
Property Trustee in New York, New York, or at the offices of any paying agent or
transfer agent appointed by the Administrative Trustees, provided that payment
of any Distribution may be made at the option of the Administrative Trustees by
check mailed to the addresses of the persons entitled thereto or by wire
transfer. In addition, if the Series A Preferred Securities are issued in
certificated form, the record dates for payment of Distributions will be the
15th day of the last month of each calendar quarter. For a description of DTC
and the terms of the depositary arrangements relating to payments, transfers,
voting rights, redemptions and other notices and other matters, see "Book-Entry
Issuance" in the accompanying Prospectus.
CERTAIN TERMS OF SERIES A SUBORDINATED DEBENTURES
GENERAL
The following summary of certain terms and provisions of the Series A
Subordinated Debentures, which describes the material terms thereof, supplements
the description of the terms and provisions of the Junior Subordinated
Debentures set forth in the accompanying Prospectus under the headings
"Description of Junior Subordinated Debentures" and "Description of Junior
Subordinated Debentures -- Corresponding Junior Subordinated Debentures", to
which description reference is hereby made. (For purposes of such description,
the Series A Subordinated Debentures are the Corresponding Subordinated
Debentures with respect to the Series A Preferred Securities.) The summary of
certain terms and provisions of the Series A Subordinated Debentures set forth
below does not purport to be complete and is subject to, and qualified in its
entirety by reference to, the Indenture. The form of Indenture has been filed as
an exhibit to the Registration Statement of which this Prospectus Supplement and
the accompanying Prospectus form a part.
Concurrently with the issuance of the Series A Preferred Securities, the
Series A Issuer will invest the proceeds thereof, together with the
consideration paid by the Corporation for the Series A Common Securities, in the
Series A Subordinated Debentures issued by the Corporation. The Series A
Subordinated Debentures will bear interest payable, at the annual rate of %
of the principal amount thereof, quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year (each, an "Interest Payment Date"),
commencing March 31, 1997, to the person in whose name each Series A
Subordinated Debenture is registered, subject to certain exceptions, at the
close of business on the Business Day next preceding such Interest Payment Date.
It is anticipated that, until the liquidation, if any, of the Series A Issuer,
each Series A Subordinated Debentures will be held in the name of the Property
Trustee in trust for the benefit of the holders of the Series A Preferred
Securities. The amount of interest payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. In the event that any date
on which interest is payable on the Series A Subordinated Debentures is not a
Business Day, then payment of the interest payable on such date will be made on
the next succeeding Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the date such payment was originally payable. Accrued interest that is not
paid on the applicable Interest Payment Date will bear additional interest on
the amount thereof (to the extent permitted by law) at the rate per annum of
% thereof, compounded quarterly. The term "interest" as used herein shall
include quarterly interest payments, interest on quarterly interest payments not
paid on the applicable Interest Payment Date and Additional Sums (as defined
below), as applicable.
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The Series A Subordinated Debentures will be issued as a series of junior
subordinated deferrable interest debentures under the Indenture. The Series A
Subordinated Debentures will mature on , 2027 (such date, as it may
be shortened or extended as hereinafter described, the "Stated Maturity"). Such
date may be shortened at any time by the Corporation to any date not earlier
than , 2002, provided that the Corporation has committed to the
Federal Reserve Bank of Richmond that it will not exercise such right without
having received the prior approval of the Federal Reserve Board to do so, if
then so required under applicable capital guidelines or policies of the Federal
Reserve Board. Such date may also be extended at any time at the election of the
Corporation for one or more periods, but in no event to a date later than
, 2046, provided that at the time such election is made and at the
time of extension (i) the Corporation is not in bankruptcy, otherwise insolvent
or in liquidation, (ii) the Corporation is not in default in the payment of any
interest or principal on the Series A Subordinated Debentures, (iii) the Series
A Issuer is not in arrears on payments of Distributions on the Series A
Preferred Securities and no deferred Distributions are accumulated, (iv) the
Series A Subordinated Debentures are rated not less than either BBB- by Standard
& Poor's Ratings Services or Baa3 by Moody's Investors Service, Inc. or the
equivalent by any other nationally recognized statistical rating organization,
and (v) after such extension, the Series A Subordinated Debentures shall not
have a remaining term to maturity of more than 30 years. In the event the
Corporation elects to shorten or extend the Stated Maturity of the Series A
Subordinated Debentures, it shall give notice to the Debenture Trustee, and the
Debenture Trustee shall give notice of such shortening or extension to the
holders of the Series A Subordinated Debentures no more than 30 and no less than
60 days prior to the effectiveness thereof.
The Series A Subordinated Debentures will be unsecured and will rank junior
and subordinate in right of payment to all Senior Debt of the Corporation.
Because the Corporation is a holding company, the right of the Corporation to
participate in any distribution of assets of any subsidiary, upon such
subsidiary's liquidation or reorganization or otherwise (and thus the ability of
holders of the Series A Preferred Securities to benefit indirectly from such
distribution), is subject to the prior claims of creditors of that subsidiary,
except to the extent that the Corporation may itself be recognized as a creditor
of that subsidiary. Accordingly, the Series A Subordinated Debentures will be
effectively subordinated to all existing and future liabilities of the
Corporation's subsidiaries, and holders of Series A Subordinated Debentures
should look only to the assets of the Corporation for payments on the Series A
Subordinated Debentures. The Indenture does not limit the incurrence or issuance
of other secured or unsecured debt of the Corporation, including Senior Debt,
whether under the Indenture or any existing or other indenture that the
Corporation may enter into in the future or otherwise. See "Description of
Junior Subordinated Debentures -- Subordination" in the accompanying Prospectus.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no Debenture Event of Default has occurred and is continuing,
the Corporation has the right to defer the payment of interest on the Series A
Subordinated Debentures at any time or from time to time for a period not
exceeding 20 consecutive quarters with respect to each Extension Period;
provided, however, that no Extension Period may extend beyond the Stated
Maturity of the Series A Preferred Securities. At the end of such Extension
Period, the Corporation must pay all interest then accrued and unpaid (together
with interest thereon at the annual rate of %, compounded quarterly, to the
extent permitted by applicable law). During an Extension Period, interest will
continue to accrue and holders of Series A Subordinated Debentures (or holders
of Series A Preferred Securities while such series is outstanding) will be
required to accrue interest income for United States federal income tax
purposes. See "Certain Federal Income Tax Consequences -- Interest Income and
Original Issue Discount".
During any such Extension Period, the Corporation may not, and may not
permit any subsidiary of the Corporation to, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Corporation's capital stock, or (ii) make any
payment of principal, interest or premium, if any, on or repay, repurchase or
redeem any debt securities of the Corporation (including other Junior
Subordinated Debentures) that rank PARI PASSU in all respects with or junior in
interest to the Series A Subordinated Debentures (other than (a) repurchases,
redemptions or other acquisitions of shares of capital stock of the Corporation
in connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the issuance of capital
stock of the Corporation (or securities convertible into or exercisable for such
capital stock) as consideration in an acquisition transaction entered into prior
to the applicable Extension Period, (b) as a result of any exchange or
conversion of any class or series of the Corporation's capital stock (or any
capital stock of a subsidiary of the Corporation) for any class or series of the
Corporation's capital stock or of any class or series of the Corporation's
indebtedness for any class or series of the Corporation's capital stock, (c) the
purchase of fractional interests in shares of the Corporation's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged, (d) any declaration of a
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dividend in connection with any stockholder's rights plan, or the issuance of
rights, stock or other property under any stockholder's rights plan, or the
redemption or repurchase of rights pursuant thereto, or (e) any dividend in the
form of stock, warrants, options or other rights where the dividend stock or the
stock issuable upon exercise of such warrants, options or other rights is the
same stock as that on which the dividend is being paid or ranks PARI PASSU with
or junior to such stock). Prior to the termination of any such Extension Period,
the Corporation may further defer the payment of interest, provided that no
Extension Period may exceed 20 consecutive quarters or extend beyond the Stated
Maturity of the Series A Subordinated Debentures. Upon the termination of any
such Extension Period and the payment of all amounts then due on any Interest
Payment Date, the Corporation may elect to begin a new Extension Period subject
to the above requirements. No interest shall be due and payable during an
Extension Period, except at the end thereof. The Corporation must give the
Property Trustee, the Administrative Trustees and the Debenture Trustee notice
of its election of such Extension Period at least one Business Day prior to the
earlier of (i) the date the Distributions on the Series A Preferred Securities
would have been payable except for the election to begin such Extension Period,
or (ii) the date the Administrative Trustees are required to give notice to the
NYSE, the Nasdaq National Market or other applicable self-regulatory
organization or to holders of the Series A Preferred Securities of the record
date or the date such Distributions are payable, but in any event not less than
one Business Day prior to such record date. The Debenture Trustee shall give
notice of the Corporation's election to begin a new Extension Period to the
holders of the Series A Preferred Securities. There is no limitation on the
number of times that the Corporation may elect to begin an Extension Period. See
"Description of Junior Subordinated Debentures -- Option to Extend Interest
Payment Date" in the accompanying Prospectus.
ADDITIONAL SUMS
If the Series A Issuer is required to pay any additional taxes, duties or
other governmental charges as a result of a Tax Event, the Corporation will pay
as additional amounts on the Series A Subordinated Debentures such amounts as
shall be required so that the Distributions payable by the Series A Issuer shall
not be reduced as a result of any such additional taxes, duties or other
governmental charges.
REDEMPTION
The Series A Subordinated Debentures are redeemable prior to maturity at
the option of the Corporation (i) on or after , 2002, in whole at
any time or in part from time to time, or (ii) at any time prior to
, 2002, in whole (but not in part), within 90 days following the
occurrence and continuation of a Tax Event or Capital Treatment Event, in each
case at a redemption price equal to the accrued and unpaid interest on the
Series A Subordinated Debentures so redeemed to the date fixed for redemption,
plus 100 percent of the principal amount thereof. The Corporation has committed
to the Federal Reserve Bank of Richmond that it will not exercise its redemption
option without having received the prior approval of the Federal Reserve Board
to do so, if then so required under applicable capital guidelines or policies of
the Federal Reserve Board. See "Description of Junior Subordinated
Debentures -- Redemption" in the accompanying Prospectus.
DISTRIBUTION OF SERIES A SUBORDINATED DEBENTURES
As described under "Certain Terms of Series A Preferred
Securities -- Liquidation of Series A Issuer and Distribution of Series A
Subordinated Debentures to Holders", under certain circumstances involving the
liquidation of the Series A Issuer, Series A Subordinated Debentures may be
distributed to the holders of the Series A Preferred Securities in exchange
therefor upon liquidation of the Series A Issuer, after satisfaction of
liabilities to creditors of the Series A Issuer in accordance with applicable
law and the Expense Agreement. If distributed to holders of Series A Preferred
Securities in liquidation, the Series A Subordinated Debentures will initially
be issued in the form of one or more global securities and DTC, or any successor
depositary for the Series A Preferred Securities, will act as depositary for the
Series A Subordinated Debentures. It is anticipated that the depositary
arrangements for the Series A Subordinated Debentures would be substantially
identical to those in effect for the Series A Preferred Securities. If the
Series A Subordinated Debentures are distributed to the holders of Series A
Preferred Securities upon the liquidation of the Series A Issuer, the
Corporation will use its reasonable best efforts to list the Series A
Subordinated Debentures on the NYSE or such other stock exchanges, if any, on
which the Series A Preferred Securities are then listed. There can be no
assurance as to the market price of any Series A Subordinated Debentures that
may be distributed to the holders of Series A Preferred Securities.
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REGISTRATION OF SERIES A SUBORDINATED DEBENTURES
The Series A Subordinated Debentures will be represented by global
securities registered in the name of DTC or its nominee. Beneficial interests in
the Series A Subordinated Debentures will be shown on, and transfers thereof
will be effected only through, records maintained by participants in DTC. Except
as described below and in the accompanying Prospectus, Series A Subordinated
Debentures in certificated form will not be issued in exchange for the global
securities. See "Book-Entry Issuance" in the accompanying Prospectus.
A global security shall be exchangeable for Series A Subordinated
Debentures registered in the names of persons other than DTC or its nominee only
if (i) DTC notifies the Corporation that it is unwilling or unable to continue
as a depositary for such global security and no successor depositary shall have
been appointed, or if at any time DTC ceases to be a clearing agency registered
under the Securities Exchange Act of 1934, as amended, at a time when DTC is
required to be so registered to act as such depositary, (ii) the Corporation in
its sole discretion determines that such global security shall be so
exchangeable, or (iii) there shall have occurred and be continuing a Debenture
Event of Default with respect to such global security. Any global security that
is exchangeable pursuant to the preceding sentence shall be exchangeable for
definitive certificates registered in such names as DTC shall direct. It is
expected that such instructions will be based upon directions received by DTC
from its Participants (as defined in the accompanying Prospectus) with respect
to ownership of beneficial interests in such global security. In the event that
Series A Subordinated Debentures are issued in definitive form, such Series A
Subordinated Debentures will be in denominations of $25.00 and integral
multiples thereof and may be transferred or exchanged at the offices described
below.
Payments on Series A Subordinated Debentures represented by a global
security will be made to DTC, as the depositary for the Series A Subordinated
Debentures. In the event Series A Subordinated Debentures are issued in
definitive form, principal and interest will be payable, the transfer of the
Series A Subordinated Debentures will be registrable, and Series A Subordinated
Debentures will be exchangeable for Series A Subordinated Debentures of other
denominations of a like aggregate principal amount, at the corporate trust
office of the Debenture Trustee in New York, New York, or at the offices of any
paying agent or transfer agent appointed by the Corporation, provided that
payment of interest may be made at the option of the Corporation by check mailed
to the addresses of the persons entitled thereto or by wire transfer. In
addition, if the Series A Subordinated Debentures are issued in certificated
form, the record dates for payment of interest will be the 15th day of the last
month of each calendar quarter. For a description of DTC and the terms of the
depositary arrangements relating to payments, transfers, voting rights,
redemptions and other notices and other matters, see "Book-Entry Issuance" in
the accompanying Prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal income
tax consequences of the purchase, ownership and disposition of Series A
Preferred Securities. This summary only addresses the tax consequences to a
person that acquires Series A Preferred Securities on their original issue at
their original offering price and that is (i) an individual citizen or resident
of the United States, (ii) a corporation or partnership organized in or under
the laws of the United States or any state thereof or Washington, D.C., or (iii)
an estate or trust the income of which is subject to United States federal
income tax regardless of source (a "United States Person"). This summary does
not address all tax consequences that may be applicable to a United States
Person that is a beneficial owner of Series A Preferred Securities, nor does it
address the tax consequences to (i) persons that are not United States Persons,
(ii) persons that may be subject to special treatment under United States
federal income tax law, such as banks, insurance companies, thrift institutions,
regulated investment companies, real estate investment trusts, tax-exempt
organizations and dealers in securities or currencies, (iii) persons that will
hold Series A Preferred Securities as part of a position in a "straddle" or as
part of a "hedging", "conversion" or other integrated investment transaction for
federal income tax purposes, (iv) persons whose functional currency is not the
United States dollar, or (v) persons that do not hold Series A Preferred
Securities as capital assets.
The statements of law or legal conclusion set forth in this summary
constitute the opinion of Sullivan & Cromwell, special tax counsel to the
Corporation and the Series A Issuer. This summary is based upon the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, Internal
Revenue Service rulings and pronouncements and judicial decisions now in effect,
all of which are subject to change at any time. Such changes may be applied
retroactively in a manner that could cause the tax consequences to vary
substantially from the consequences described below, possibly adversely
affecting a beneficial owner of Series A Preferred Securities. In particular,
legislation has been proposed that could adversely affect the Corporation's
ability to deduct interest on the Series A Subordinated Debentures, which may in
turn permit the Corporation to cause a redemption of the Series A Preferred
Securities. See " -- Possible Tax Law Changes". The
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authorities on which this summary is based are subject to various
interpretations, and it is therefore possible that the federal income tax
treatment of the purchase, ownership and disposition of Series A Preferred
Securities may differ from the treatment described below.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS IN
LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES AS TO THE FEDERAL TAX CONSEQUENCES
OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF SERIES A PREFERRED SECURITIES, AS
WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
CLASSIFICATION OF THE SERIES A ISSUER
In the opinion of Sullivan & Cromwell, under current law and assuming
compliance with the terms fo the Trust Agreement and certain other factual
matters, the Series A Issuer will not be classified as an association taxable as
a corporation for United States federal income tax purposes. As a result, each
beneficial owner of the Series A Preferred Securities (a "Securityholder") will
be required to include in its gross income its PRO RATA share of the interest
income, including original issue discount, paid or accrued with respect to the
Series A Subordinated Debentures whether or not cash is actually distributed to
the Securityholders. See " -- Interest Income and Original Issue Discount". No
amount included in income with respect to the Series A Preferred Securities will
be eligible for the dividends-received deduction.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under recently issued Treasury Regulations applicable to debt instruments
issued on or after August 13, 1996 (the "Regulations"), a contingency that
stated interest will not be timely paid that is "remote" because of the terms of
the relevant debt instrument will be ignored in determining whether a debt
instrument is issued with original issue discount ("OID"). As a result of terms
and conditions of the Series A Subordinated Debentures that prohibit certain
payments with respect to the Corporation's capital stock and indebtedness if the
Corporation elects to extend interest payment periods, the Corporation believes
that the likelihood of its exercising its option to defer payments is remote.
Based on the foregoing, the Corporation believes that the Series A Subordinated
Debentures will not be considered to be issued with OID at the time of their
original issuance, and accordingly, a Securityholder should include in gross
income such holder's allocable share of interest on the Series A Subordinated
Debentures.
Under the Regulations, if the Corporation exercised its option to defer any
payment of interest, the Series A Subordinated Debentures would at that time be
treated as issued with OID, and all stated interest on the Series A Subordinated
Debentures would thereafter be treated as OID as long as the Series A
Subordinated Debentures remained outstanding. In such event, all of a
Securityholder's taxable interest income with respect to the Series A
Subordinated Debentures would be accounted for as OID on an economic accrual
basis regardless of such holder's method of tax accounting, and actual
distributions of stated interest would not be reported as taxable income.
Consequently, a Securityholder would be required to include in gross income OID
even though the Corporation would not make any actual cash payments during an
Extension Period.
The Regulations have not been addressed in any rulings or other
interpretations by the Internal Revenue Service, and it is possible that the IRS
could take a position contrary to the interpretation herein.
Because income on the Series A Preferred Securities will constitute
interest or OID, corporate Securityholders will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the Series A Preferred Securities.
DISTRIBUTION OF SERIES A SUBORDINATED DEBENTURES TO HOLDERS OF SERIES A
PREFERRED SECURITIES
Under current law, a distribution by the Series A Issuer of the Series A
Subordinated Debentures as described under "Certain Terms of Series A Preferred
Securities -- Liquidation of Series A Issuer and Distribution of Series A
Subordinated Debentures to Holders" will be non-taxable and will result in the
Securityholder receiving directly his PRO RATA share of the Series A
Subordinated Debentures previously held indirectly through the Series A Issuer,
with a holding period and aggregate tax basis equal to the holding period and
aggregate tax basis such Securityholder had in its Series A Preferred Securities
before such distribution. If, however, the liquidation of the Series A Issuer
were to occur because the Series A Issuer is subject to United States federal
income tax with respect to income accrued or received on the Series A
Subordinated Debentures, the distribution of Series A Subordinated Debentures to
Securityholders by the Series A Issuer would be a taxable event to the Series A
Issuer and each Securityholder, and each Securityholder would recognize gain or
loss as if the Securityholder had exchanged its Series A Preferred Securities
for the Series A Subordinated Debentures it received upon the
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liquidation of the Series A Issuer. A Securityholder will accrue interest in
respect of Series A Subordinated Debentures received from the Series A Issuer in
the manner described above under " -- Interest Income and Original Issue
Discount".
SALES OR REDEMPTION OF SERIES A PREFERRED SECURITIES
A Securityholder that sells Series A Preferred Securities will recognize
gain or loss equal to the difference between its adjusted tax basis in the
Series A Preferred Securities and the amount realized on the sale of such Series
A Preferred Securities. Assuming that the Corporation does not exercise its
option to defer payment of interest on the Series A Subordinated Debentures, and
the Series A Subordinated Debentures are not considered issued with OID, a
Securityholder's adjusted tax basis in the Series A Preferred Securities
generally will be its initial purchase price. If the Series A Subordinated
Debentures are deemed to be issued with OID as a result of the Corporation's
deferral of any interest payment, a Securityholder's adjusted tax basis in the
Series A Preferred Securities generally will be its initial purchase price,
increased by OID previously includible in such holder's gross income to the date
of disposition and decreased by distributions or other payments received on the
Series A Preferred Securities since and including the date of the first
Extension Period. Such gain or loss generally will be a capital gain or loss
(except to the extent of any accrued interest with respect to such
Securityholder's PRO RATA share of the Series A Subordinated Debentures required
to be included in income) and generally will be a long-term capital gain or loss
if the Series A Preferred Securities have been held for more than one year.
Should the Corporation exercise its option to defer any payment of interest
on the Series A Subordinated Debentures, the Series A Preferred Securities may
trade at a price that does not accurately reflect the value of accrued but
unpaid interest with respect to the underlying Series A Subordinated Debentures.
In the event of such a deferral, a Securityholder who disposes of its Series A
Preferred Securities between record dates for payments of distributions thereon
will be required to include in income as ordinary income accrued but unpaid
interest on the Series A Subordinated Debentures to the date of disposition and
to add such amount to its adjusted tax basis in its PRO RATA share of the
underlying Series A Subordinated Debentures deemed disposed of. To the extent
the selling price is less than the Securityholder's adjusted tax basis, such
holder will recognize a capital loss. Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for United States
federal income tax purposes.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of interest income paid and OID accrued on the Series A
Preferred Securities held of record by United States Persons (other than
corporations and other exempt Securityholders) will be reported to the Internal
Revenue Service. "Backup" withholding at a rate of 31 percent will apply to
payments of interest to non-exempt United States Persons unless the
Securityholder furnishes its taxpayer identification number in the manner
prescribed in applicable Treasury Regulations, certifies that such number is
correct, certifies as to no loss of exemption from backup withholding and meets
certain other conditions.
Payment of the proceeds from the disposition of Series A Preferred
Securities to or through the United States office of a broker is subject to
information reporting and backup withholding unless the holder or beneficial
owner establishes an exemption from information reporting and backup
withholding.
Any amounts withheld from a Securityholder under the backup withholding
rules will be allowed as a refund or a credit against such Securityholder's
United States federal income tax liability, provided the required information is
furnished to the Internal Revenue Service.
It is anticipated that income on the Series A Preferred Securities will be
reported to holders on Form 1099 and mailed to holders of the Series A Preferred
Securities by January 31 following each calendar year.
POSSIBLE TAX LAW CHANGES
As discussed above, the Revenue Reconciliation Bill would, among other
things, generally deny interest deductions for interest on an instrument issued
by a corporation that has a maximum weighted average maturity of more than 40
years. The Revenue Reconciliation Bill also would generally deny interest
deductions for interest on an instrument issued by a corporation that has a
maximum term of more than 20 years and that is not shown as indebtedness on the
separate balance sheet of the issuer or, where the instrument is issued to a
related party (other than a corporation), where the holder or some other related
party issues a related instrument that is not shown as indebtedness on the
issuer's consolidated balance sheet. For purposes of determining the weighted
average maturity or the term of an instrument, any right to extend would be
treated as exercised. The above-described provisions of the Bill were proposed
to be effective generally for instruments issued on or after December 7, 1995.
If either provision were to apply to the Series A Subordinated Debentures, the
Corporation would be
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unable to deduct interest on the Series A Subordinated Debentures. However, on
March 29, 1996, the Chairmen of the Senate Finance and House Ways and Means
Committees issued a joint statement to the effect that it was their intention
that the effective date of the President's legislative proposals, presumably
including the Revenue Reconciliation Bill, if adopted, will be no earlier than
the date of appropriate Congressional action. Under current law, the Corporation
will be able to deduct interest on the Series A Subordinated Debentures.
Although the 104th Congress adjourned without enacting the above-described
provisions of the Revenue Reconciliation bill, there can be no assurance that
current or future legislative proposals or final legislation will not adversely
affect the ability of the Corporation to deduct interest on the Series A
Subordinated Debentures. Accordingly, there can be no assurance that a Tax Event
will not occur. See "Description of Preferred Securities -- Redemption or
Exchange; TAX EVENT OR CAPITAL TREATMENT EVENT REDEMPTION.
UNDERWRITERS
Under the terms and subject to the conditions contained in the Underwriting
Agreement dated the date hereof, each of the Underwriters named below, for whom
are acting as
representatives (the "Representatives"), has severally agreed to purchase, and
the Series A Issuer has agreed to sell to each of the Underwriters, severally
the respective number of the Series A Preferred Securities set forth opposite
its name below:
NUMBER
OF SERIES A
UNDERWRITER PREFERRED SECURITIES
Total.........................................................................
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the Series A Preferred Securities
are subject to the approval of certain legal matters by their counsel and to
certain other conditions. The Underwriters are committed to take and pay for all
of the Series A Preferred Securities if any are taken.
The Underwriters initially propose to offer the Series A Preferred
Securities directly to the public at the price to public set forth on the cover
page of this Prospectus Supplement, and all or part to certain dealers at a
price that represents a concession not in excess of $. per Series A Preferred
Security. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $. per Series A Preferred Security to certain other dealers.
After the initial public offering, the offering price and other selling terms
may be varied by the Representatives.
In view of the fact that the proceeds from the sale of the Series A
Preferred Securities will be used to purchase the Series A Subordinated
Debentures issued by the Corporation, the Underwriting Agreement provides that
the Corporation will pay to the Underwriters, as compensation for their
services, an amount of $ per Series A Preferred Security (or $ in the
aggregate).
Prior to this offering, there has been no public market for the Series A
Preferred Securities. Application will be made to list the Series A Preferred
Securities on the NYSE. Listing is contingent upon meeting the requirements of
the NYSE, including those relating to distribution. In order to meet one such
requirement, the Underwriters will undertake to sell lots of 100 or more Series
A Preferred Securities to a minimum of 400 beneficial holders. Trading of the
Series A Preferred Securities on the NYSE is expected to commence within a
30-day period after the date of this Prospectus Supplement. The Underwriters
have advised the Corporation that they intend to make a market in the Series A
Preferred Securities prior to commencement of trading on the NYSE, but are not
obligated to do so and may discontinue market making at any time without notice.
No assurance can be given as to the liquidity of the trading market for the
Series A Preferred Securities.
The Corporation and the Series A Issuer have agreed to indemnify the
several Underwriters against, or contribute to payments that the Underwriters
may be required to make in respect of, certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
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Certain of the Underwriters or their affiliates have provided from time to
time, and expect to provide in the future, investment or commercial banking
services to the Corporation and its affiliates, for which such Underwriters or
their affiliates have received or will receive customary fees and commissions.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Series A
Preferred Securities, the enforceability of the Trust Agreement and the creation
of the Series A Issuer will be passed upon by Richards, Layton & Finger, special
Delaware counsel to the Corporation and the Series A Issuer. The validity of the
Series A Guarantee and the Series A Subordinated Debentures will be passed upon
for the Corporation by Marion A. Cowell, Jr., Executive Vice President,
Secretary and General Counsel of the Corporation, and for the Underwriters by
Sullivan & Cromwell, New York, New York. Mr. Cowell and Sullivan & Cromwell each
will rely upon the opinion of Richards, Layton & Finger as to matters of
Delaware law; 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 is a stockholder
of the Corporation and holds options to purchase additional shares of the
Corporation's Common Stock. Sullivan & Cromwell regularly perform legal services
for the Corporation and its subsidiaries. Mr. Cowell and members of Sullivan &
Cromwell performing these legal services own shares of capital stock of the
Corporation.
S-29
<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER , 1996
$500,000,000
FIRST UNION CORPORATION
JUNIOR SUBORDINATED DEFERRABLE
INTEREST DEBENTURES
FIRST UNION CAPITAL I
FIRST UNION CAPITAL II
FIRST UNION CAPITAL III
PREFERRED SECURITIES
GUARANTEED, TO THE EXTENT DESCRIBED HEREIN, BY
FIRST UNION CORPORATION
First Union Corporation, a North Carolina corporation (the "Corporation"),
may from time to time offer in one or more series or issuances its junior
subordinated deferrable interest debentures (the "Junior Subordinated
Debentures"). The Junior Subordinated Debentures will be unsecured and
subordinate and junior in right of payment to all Senior Debt (as defined
herein) of the Corporation. See "Description of Junior Subordinated
Debentures -- Subordination". If provided in an accompanying Prospectus
Supplement, the Corporation will have the right to defer payments of interest on
any series of Junior Subordinated Debentures by extending the interest payment
period thereon at any time or from time to time for up to such number of
consecutive interest payment periods (which shall not extend beyond the Stated
Maturity (as defined herein) of the Junior Subordinated Debentures) with respect
to each deferral period as may be specified in such Prospectus Supplement (each,
an "Extension Period"). See "Description of Junior Subordinated
Debentures -- Option to Extend Interest Payment Date".
First Union Capital I, First Union Capital II and First Union Capital III,
each a business trust created under the laws of the State of Delaware (each, an
"Issuer," and collectively, the "Issuers"), may severally offer, from time to
time, preferred securities ("Preferred Securities") representing preferred
undivided beneficial interests in the assets of such Issuer. The Corporation
will be the owner of the common securities (the "Common Securities" and,
together with the Preferred Securities, the "Trust Securities") representing
common undivided beneficial interests in the assets of such Issuer. The payment
of periodic cash distributions ("Distributions") with respect to the Preferred
Securities of each Issuer and payments on liquidation or redemption with respect
to such Preferred Securities, in each case out of funds held by such Issuer, are
each fully and unconditionally guaranteed by the Corporation to the extent
described herein (each, a "Guarantee"). See "Description of Guarantees". The
obligations of the Corporation under each Guarantee will be subordinate and
junior in right of payment to
(CONTINUED ON NEXT PAGE)
THESE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND
ARE NOT 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. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is , 1996.
<PAGE>
(COVER PAGE CONTINUED)
all Senior Debt of the Corporation. Concurrently with the issuance by an Issuer
of its Preferred Securities, such Issuer will invest the proceeds thereof and
any contributions made in respect of the Common Securities in a corresponding
series of the Corporation's Junior Subordinated Debentures (the "Corresponding
Junior Subordinated Debentures") with terms corresponding to the terms of that
Issuer's Preferred Securities (the "Related Preferred Securities"). The
Corresponding Junior Subordinated Debentures will be the sole asset of each
Issuer, and payments under the Corresponding Junior Subordinated Debentures will
be the only revenue of each Issuer. If provided in an accompanying Prospectus
Supplement, the Corporation may redeem the Corresponding Junior Subordinated
Debentures (and cause the redemption of the Trust Securities) or may terminate
each Issuer and cause the Corresponding Junior Subordinated Debentures to be
distributed to the holders of the Related Preferred Securities in exchange
therefor. See "Description of Preferred Securities -- Liquidation Distribution
Upon Termination".
Holders of the Preferred Securities will be entitled to receive
preferential cumulative cash Distributions accumulating from the date of
original issuance and payable periodically as specified in an accompanying
Prospectus Supplement. If provided in an accompanying Prospectus Supplement, the
Corporation will have the right to defer payments of interest on any series of
Corresponding Junior Subordinated Debentures by extending the interest payment
period thereon at any time or from time to time for one or more Extension
Periods (which shall not extend beyond the Stated Maturity of the Corresponding
Junior Subordinated Debentures). If interest payments are so deferred,
Distributions on the Related Preferred Securities will also be deferred and the
Corporation will not be permitted, subject to certain exceptions set forth
herein, to declare or to pay any cash distributions with respect to the
Corporation's capital stock or debt securities that rank PARI PASSU with or
junior to the Corresponding Junior Subordinated Debentures. During an Extension
Period, Distributions will continue to accumulate (and the Preferred Securities
will accumulate additional Distributions thereon at the rate per annum set forth
in the related Prospectus Supplement). See "Description of Preferred
Securities -- Distributions".
Taken together, with respect to a Series of Preferred Securities, the
Corporation's obligations under the Corresponding Junior Subordinated
Debentures, the Indenture, the applicable Trust Agreement, the applicable
Expense Agreement and the applicable Guarantee (each, as defined herein), in the
aggregate, provide a full, irrevocable and unconditional guarantee of payments
of distributions and other amounts due on such series of Preferred Securities.
See "Relationship Among Preferred Securities, Corresponding Junior Subordinated
Debentures and Guarantees -- Full and Unconditional Guarantee".
The Junior Subordinated Debentures and Preferred Securities may be offered
in amounts, at prices and on terms to be determined at the time of offering;
provided, however, that the aggregate initial public offering price of all
Preferred Securities (including the Corresponding Junior Subordinated
Debentures) issued pursuant to the Registration Statement of which this
Prospectus forms a part shall not exceed $500,000,000. Certain specific terms of
the Junior Subordinated Debentures or Preferred Securities in respect of which
this Prospectus is being delivered will be described in an accompanying
Prospectus Supplement, including without limitation and where applicable and to
the extent not set forth herein, (i) in the case of Junior Subordinated
Debentures, the specific designation, aggregate principal amount, denominations,
Stated Maturity (including any provisions for the shortening or extension
thereof), interest payment dates, interest rate (which may be fixed or variable)
or method of calculating interest, if any, applicable Extension Period or
interest deferral terms, if any, place or places where principal, premium, if
any, and interest, if any, will be payable, any terms of redemption, any sinking
fund provisions, terms for any conversion or exchange into other securities,
initial offering or purchase price, methods of distribution and any other
special terms, and (ii) in the case of Preferred Securities, the identity of the
Issuer, specific title, aggregate amount, stated liquidation preference, number
or amount of securities, Distribution rate or method of calculating such rate,
applicable Extension Period or Distribution deferral terms, if any, place or
places where Distributions will be payable, any terms of redemption, exchange,
initial offering or purchase price, methods of distribution and any other
special terms.
The Prospectus Supplement also will contain information, as applicable,
about certain United States federal income tax consequences relating to the
Junior Subordinated Debentures and Preferred Securities.
The Junior Subordinated Debentures and Preferred Securities may be sold to
or through underwriters, through dealers, remarketing firms or agents or
directly to purchasers. See "Plan of Distribution". The names of any
underwriters, dealers, remarketing firms or agents involved in the sale of
Junior Subordinated Debentures or Preferred Securities in respect of which this
Prospectus is being delivered and any applicable fee, commission or discount
arrangements with them will be set forth in the applicable Prospectus
Supplement. Such Prospectus Supplement will state whether the Junior
Subordinated Debentures or Preferred Securities will be listed on any national
securities exchange or automated quotation system. If the
2
<PAGE>
Junior Subordinated Debentures or Preferred Securities are not listed on any
national securities exchange or automated quotation system, there can be no
assurance that there will be a secondary market for the Junior Subordinated
Debentures or Preferred Securities.
This Prospectus may not be used to consummate sales of Junior Subordinated
Debentures or Preferred Securities unless accompanied by a Prospectus
Supplement.
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND THE APPLICABLE PROSPECTUS
SUPPLEMENT, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE CORPORATION, THE ISSUERS OR ANY
AGENT, UNDERWRITER OR DEALER. NEITHER THE DELIVERY OF THIS PROSPECTUS AND THE
APPLICABLE PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER AND THEREUNDER
SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF THE CORPORATION OR THE ISSUERS SINCE THE DATE HEREOF. THIS
PROSPECTUS AND THE APPLICABLE PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER
OF ANY SECURITIES OTHER THAN THOSE TO WHICH THEY RELATE, OR AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY THOSE TO WHICH THEY RELATE, IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION.
3
<PAGE>
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional offices of the Commission located at
7 World Trade Center, 13th Floor, Suite 1300, New York, New York 10048 and Suite
1400, Citicorp Center, 14th Floor, 500 West Madison Street, Chicago, Illinois
60661. Copies of such material can also be obtained at prescribed rates by
writing to the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. Such material may also be accessed electronically
by means of the Commission's home page on the Internet at http://www.sec.gov. In
addition, such reports, proxy statements and other information concerning the
Corporation can be inspected at the offices of the New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005.
The Corporation and the Issuers have filed with the Commission a
Registration Statement on Form S-3 (together with all amendments and exhibits
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities offered hereby.
This Prospectus does not contain all the information set forth in the
Registration Statement, certain portions of which have been omitted as permitted
by the rules and regulations of the Commission. For further information with
respect to the Corporation and the securities offered hereby, reference is made
to the Registration Statement and the exhibits and the financial statements,
notes and schedules filed as a part thereof or incorporated by reference
therein, which may be inspected at the public reference facilities of the
Commission, at the addresses set forth above or on the Commission's Internet
home page. Statements made in this Prospectus concerning the contents of any
documents referred to herein are not necessarily complete, and in each instance
are qualified in all respects by reference to the copy of such document filed as
an exhibit to the Registration Statement.
No separate financial statements of any Issuer have been included herein.
The Corporation and the Issuers do not consider that such financial statements
would be material to holders of the Preferred Securities because each Issuer is
a newly formed special purpose entity, has no operating history or independent
operations and is not engaged in and does not propose to engage in any activity
other than holding as trust assets the Corresponding Junior Subordinated
Debentures of the Corporation and issuing the Trust Securities. Furthermore,
with respect to a Series of Preferred Securities, taken together, the
Corporation's obligations under the Corresponding Junior Subordinated
Debentures, the applicable Trust Agreement, the applicable Expense Agreement and
the applicable Guarantee provide, in the aggregate, a full and unconditional
guarantee of payments of Distributions and other amounts due on such series of
Preferred Securities. See "The Issuers", "Description of Preferred Securities",
"Description of Junior Subordinated Debentures" and "Description of Guarantees".
In addition, the Corporation does not expect that any of the Issuers will be
filing reports under the Exchange Act with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Corporation with the Commission (File
No. 1-10000) pursuant to Section 13(a) or 15(d) of the Exchange Act are
incorporated into this Prospectus by reference:
1. The Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
2. The Corporation's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996; and
3. The Corporation's Current Reports on Form 8-K dated January 10, February
9, August 20, September 6 and October 16, 1996.
Each document or report filed by the Corporation pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
termination of any offering of securities made by this Prospectus shall be
deemed to be incorporated by reference into this Prospectus and to be a part of
this Prospectus from the date of filing of such document. Any statement
contained herein or in the applicable Prospectus Supplement, or in a document
all or a portion of which is incorporated or deemed to be incorporated by
reference herein or therein, shall be deemed to be modified or superseded for
purposes of the Registration Statement, this Prospectus and such Prospectus
Supplement to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any 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.
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<PAGE>
The Corporation will provide without charge to any person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated by reference herein (other
than exhibits not specifically incorporated by reference into the texts of such
documents). Requests for such documents should be directed to: Investor
Relations, First Union Corporation, Two First Union Center, Charlotte, North
Carolina 28288-0206, telephone number (704) 374-6782.
THE ISSUERS
Each Issuer is a business trust created under Delaware law pursuant to (i)
a trust agreement executed by the Corporation, as Depositor, and the Delaware
Trustee (as defined herein) of such Issuer and (ii) the filing of a certificate
of trust with the Delaware Secretary of State. Each trust agreement will be
amended and restated in its entirety (each, as so amended and restated, a "Trust
Agreement") substantially in the form filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. Each Trust Agreement will be
qualified as an indenture under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). Each Trust Agreement is subject to amendment from time
to time, as described under "Description of Preferred Securities -- Voting
Rights; Amendment of Each Trust Agreement." Each Issuer exists exclusively for
the purposes of (i) issuing and selling its Trust Securities, (ii) using the
proceeds from the sale of such Trust Securities to acquire a corresponding
series of Corresponding Junior Subordinated Debentures issued by the
Corporation, and (iii) engaging in only those other activities necessary or
incidental thereto. Accordingly, the Corresponding Junior Subordinated
Debentures will be the sole assets of each Issuer, and payments under the
Corresponding Junior Subordinated Debentures will be the sole revenue of each
Issuer.
All of the Common Securities of each Issuer will be owned by the
Corporation. The Common Securities of an Issuer will rank PARI PASSU, and
payments will be made thereon PRO RATA, with the Preferred Securities of such
Issuer, except that upon the occurrence and continuance of an event of default
under a Trust Agreement resulting from a Debenture Event of Default (as defined
herein), the rights of the Corporation as holder of the Common Securities to
payment in respect of Distributions and payments upon liquidation, redemption or
otherwise will be subordinated to the rights of the holders of the Preferred
Securities of such Issuer. See "Description of Preferred
Securities -- Subordination of Common Securities". The Corporation will acquire
Common Securities in an aggregate liquidation amount equal to not less than
three percent of the total capital of each Issuer.
Unless otherwise specified in the applicable Prospectus Supplement, each
Issuer has a term of approximately 55 years, but may terminate earlier as
provided in the applicable Trust Agreement. Each Issuer's business and affairs
are conducted by its trustees, each initially appointed by the Corporation as
holder of the Common Securities. The trustees for each Issuer (collectively, the
"Issuer Trustees") will be Wilmington Trust Company, as the Property Trustee
(the "Property Trustee"), Wilmington Trust Company, as the Delaware Trustee (the
"Delaware Trustee"), and two individual trustees (the "Administrative Trustees")
who are employees or officers of or affiliated with the Corporation. Wilmington
Trust Company, as Property Trustee, will act as sole indenture trustee under
each Trust Agreement for purposes of compliance with the Trust Indenture Act.
Wilmington Trust Company will also act as trustee under the Guarantees and the
Indenture (each as defined herein). See "Description of Guarantees" and
"Description of Junior Subordinated Debentures". The holder of the Common
Securities of an Issuer, or the holders of a majority in liquidation preference
of the Related Preferred Securities if an event of default under the Trust
Agreement for such Issuer has occurred and is continuing, will be entitled to
appoint, remove or replace the Property Trustee and/or the Delaware Trustee for
such Issuer. In no event will the holders of the Preferred Securities have the
right to vote to appoint, remove or replace the Administrative Trustees; such
voting rights are vested exclusively in the holder of the Common Securities. The
duties and obligations of each Issuer Trustee are governed by the applicable
Trust Agreement. The holder of the Common Securities will pay all fees and
expenses related to each Issuer and the offering of the Preferred Securities and
will pay, directly or indirectly, all ongoing costs, expenses and liabilities of
each Issuer.
Unless otherwise indicated in the applicable Prospectus Supplement, the
principal executive office of each Issuer is in care of First Union Corporation,
One First Union Center, Charlotte, North Carolina 28288-0013, Attention:
Secretary, and its telephone number is (704) 374-6565.
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THE CORPORATION
The Corporation is a North Carolina-based, multi-bank holding company
registered under the Bank Holding Company Act of 1956, as amended. Through its
banking subsidiaries, the Corporation provides a wide range of commercial and
retail banking services and trust services in North Carolina, Florida, South
Carolina, Georgia, Tennessee, Virginia, Maryland, Delaware, Pennsylvania, New
Jersey, New York, Connecticut and Washington, D.C. The Corporation also provides
various other financial services, including mortgage banking, leasing,
investment banking, insurance and securities brokerage services, through other
subsidiaries.
Financial and other information relating to the Corporation, including
information relating to the Corporation's directors and executive officers, is
set forth in the documents filed by the Corporation under the Exchange Act and
incorporated by reference herein, copies of which may be obtained from the
Corporation as indicated under "Available Information". See "Incorporation of
Certain Documents by Reference".
The principal executive offices of the Corporation are located at One First
Union Center, Charlotte, North Carolina 28288-0013, and its telephone number is
(704) 374-6565.
USE OF PROCEEDS
Except as otherwise set forth in the applicable Prospectus Supplement, the
Corporation intends to use the proceeds from the sale of its Junior Subordinated
Debentures (including Corresponding Junior Subordinated Debentures issued to the
Issuers in connection with the investment by the Issuers of all of the proceeds
from the sale of Preferred Securities) for general corporate purposes, including
working capital, capital expenditures, investments in or loans to subsidiaries,
refinancing of debt, including outstanding commercial paper and other short-term
bank indebtedness, redemption of shares of its outstanding common and preferred
stock, the satisfaction of other obligations or for such other purposes as may
be specified in the applicable Prospectus Supplement. To the extent applicable,
more detailed description of the use of proceeds of any specific offering will
be set forth in the Prospectus Supplement pertaining to such offering.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued in one or more series
under a Junior Subordinated Indenture, as supplemented from time to time (as so
supplemented, the "Indenture"), between the Corporation and Wilmington Trust
Company, as trustee (the "Debenture Trustee"). This summary of certain terms and
provisions of the Junior Subordinated Debentures, Corresponding Junior
Subordinated Debentures and the Indenture, which when taken together with any
supplementary information set forth in the applicable Prospectus Supplement
describes the material terms thereof, does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the Indenture, the
form of which is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part, and to the Trust Indenture Act. The Indenture is
qualified under the Trust Indenture Act. Whenever particular defined terms of
the Indenture (as supplemented or amended from time to time) are referred to
herein or in a Prospectus Supplement, such defined terms are incorporated herein
or therein by reference.
GENERAL
Except as otherwise provided in the applicable Prospectus Supplement, each
series of Junior Subordinated Debentures will rank PARI PASSU with all other
series of Junior Subordinated Debentures and will be unsecured and subordinate
and junior in right of payment to the extent and in the manner set forth in the
Indenture to all Senior Debt of the Corporation. See " -- Subordination". The
Corporation is a holding company and almost all of the operating assets of the
Corporation and its consolidated subsidiaries are owned by such subsidiaries.
The Corporation relies primarily on dividends from such subsidiaries to meet its
obligations. The payment by the Corporation's bank subsidiaries, in particular,
are subject to restrictions under federal (and, in the case of state-chartered
banks, state) law. Because the Corporation is a holding company, the right of
the Corporation to participate in any distribution of assets of any subsidiary
upon such subsidiary's liquidation or reorganization or otherwise, is subject to
the prior claims of creditors of the subsidiary, except to the extent the
Corporation may itself be recognized as a creditor of that subsidiary.
Accordingly, the Junior Subordinated Debentures will be effectively subordinated
to all existing and future liabilities of the Corporation's subsidiaries, and
holders of Junior Subordinated Debentures should look only to the assets of the
Corporation for payments on the Junior Subordinated Debentures. Except as
otherwise provided in the applicable Prospectus Supplement, the Indenture does
not limit the incurrence or issuance of other secured or unsecured debt of the
Corporation, including the Senior Debt, whether under the Indenture, any other
existing indenture or
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any other indenture that the Corporation may enter into in the future or
otherwise. See " -- Subordination" and the Prospectus Supplement relating to any
offering of Preferred Securities (including Corresponding Junior Subordinated
Debentures).
The Junior Subordinated Debentures will be issuable in one or more series
pursuant to an indenture supplemental to the Indenture, a resolution of the
Corporation's Board of Directors or a committee thereof or an order of an
authorized officer or officers of the Corporation, as provided in the Indenture.
The applicable Prospectus Supplement or Prospectus Supplements will
describe the following terms of the Junior Subordinated Debentures: (i) the
title of the Junior Subordinated Debentures; (ii) any limit upon the aggregate
principal amount of the Junior Subordinated Debentures; (iii) the date or dates
on which the principal of the Junior Subordinated Debentures is payable (the
"Stated Maturity") or the method of determination thereof; (iv) the rate or
rates, if any, at which the Junior Subordinated Debentures shall bear interest,
the Interest Payment Dates on which any such interest shall be payable, the
right, if any, of the Corporation to defer or extend an Interest Payment Date,
and the Regular Record Date for any interest payable on any Interest Payment
Date or the method by which any of the foregoing shall be determined; (v) the
place or places where, subject to the terms of the Indenture as described below
under " -- Payment and Paying Agents", the principal of and premium, if any, and
interest on the Junior Subordinated Debentures will be payable and where,
subject to the terms of the Indenture as described below under
" -- Denominations, Registration and Transfer", the Junior Subordinated
Debentures may be presented for registration of transfer or exchange and the
place or places where notices and demands to or upon the Corporation in respect
of the Junior Subordinated Debentures and the Indenture may be made ("Place of
Payment"); (vi) any period or periods within or date or dates on which, the
price or prices at which and the terms and conditions upon which Junior
Subordinated Debentures may be redeemed, in whole or in part, at the option of
the Corporation or a holder thereof; (vii) the obligation or the right, if any,
of the Corporation or a holder thereof to redeem, purchase or repay the Junior
Subordinated Debentures and the period or periods within which, the price or
prices at which, the currency or currencies (including currency unit or units)
in which and the other terms and conditions upon which the Junior Subordinated
Debentures shall be redeemed, repaid or purchased, in whole or in part, pursuant
to such obligation; (viii) the denominations in which any Junior Subordinated
Debentures shall be issuable if other than denominations of $25.00 and any
integral multiple thereof; (ix) if other than in United States dollars, the
currency or currencies (including currency unit or units) in which the principal
of (and premium, if any) and interest (including Additional Interest), if any,
on the Junior Subordinated Debentures shall be payable, or in which the Junior
Subordinated Debentures shall be denominated; (x) any additions, modifications
or deletions in the events of default ("Debenture Events of Default") or
covenants of the Corporation specified in the Indenture with respect to the
Junior Subordinated Debentures; (xi) if other than the principal amount thereof,
the portion of the principal amount of Junior Subordinated Debentures that shall
be payable upon declaration of acceleration of the maturity thereof; (xii) any
additions or changes to the Indenture with respect to a series of Junior
Subordinated Debentures as shall be necessary to permit or facilitate the
issuance of such series in bearer form, registrable or not registrable as to
principal, and with or without interest coupons; (xiii) any index or indices
used to determine the amount of payments of principal of and premium, if any, on
the Junior Subordinated Debentures and the manner in which such amounts will be
determined; (xiv) the terms and conditions relating to the issuance of a
temporary Global Security representing all of the Junior Subordinated Debentures
of such series and the exchange of such temporary Global Security for definitive
Junior Subordinated Debentures of such series; (xv) subject to the terms
described under " -- Global Junior Subordinated Debentures", whether the Junior
Subordinated Debentures of the series shall be issued in whole or in part in the
form of one or more Global Securities, and in such case, the Depositary for such
Global Securities, which Depositary shall be a clearing agency registered under
the Exchange Act; (xvi) the appointment of any Paying Agent or Agents; (xvii)
the terms and conditions of any obligation or right of the Corporation or a
holder to convert or exchange the Junior Subordinated Debentures into Preferred
Securities; (xviii) the form of Trust Agreement, Guarantee Agreement and Expense
Agreement, if applicable; (xix) the relative degree, if any, to which such
Junior Subordinated Debentures of the series shall be senior to or be
subordinated to other series of such Junior Subordinated Debentures or other
indebtedness of the Corporation in right of payment, whether such other series
of Junior Subordinated Debentures or other indebtedness are outstanding or not;
and (xx) any other terms of the Junior Subordinated Debentures not inconsistent
with the provisions of the Indenture.
Junior Subordinated Debentures may be sold at a substantial discount below
their stated principal amount, bearing no interest or interest at a rate which
at the time of issuance is below market rates. Certain United States federal
income tax consequences and special considerations applicable to any such Junior
Subordinated Debentures will be described in the applicable Prospectus
Supplement.
If the purchase price of any of the Junior Subordinated Debentures is
payable in one or more foreign currencies or currency units or if any Junior
Subordinated Debentures are denominated in one or more foreign currencies or
currency units or if the principal of, premium, if any, or interest, if any, on
any Junior Subordinated Debentures is payable in one or more
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foreign currencies or currency units, the restrictions, elections, certain
United States federal income tax consequences, specific terms and other
information with respect to such series of Junior Subordinated Debentures and
such foreign currency or currency units will be set forth in the applicable
Prospectus Supplement.
If any index is used to determine the amount of payments of principal of,
premium, if any, or interest on any series of Junior Subordinated Debentures,
special United States federal income tax, accounting and other considerations
applicable thereto will be described in the applicable Prospectus Supplement.
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable Prospectus Supplement, the
Junior Subordinated Debentures will be issuable only in registered form without
coupons in denominations of $25.00 and any integral multiple thereof. Junior
Subordinated Debentures of any series will be exchangeable for other Junior
Subordinated Debentures of the same issue and series, of any authorized
denominations, of a like aggregate principal amount, of the same Original Issue
Date and Stated Maturity and bearing the same interest rate.
Junior Subordinated Debentures may be presented for exchange as provided
above, and may be presented for registration of transfer (with the form of
transfer endorsed thereon, or a satisfactory written instrument of transfer,
duly executed), at the office of the appropriate Securities Registrar or at the
office of any transfer agent designated by the Corporation for such purpose with
respect to any series of Junior Subordinated Debentures and referred to in the
applicable Prospectus Supplement, without service charge and on payment of any
taxes and other governmental charges as described in the Indenture. The
Corporation will appoint the Debenture Trustee as Securities Registrar under the
Indenture. If the applicable Prospectus Supplement refers to any transfer agents
(in addition to the Securities Registrar) initially designated by the
Corporation with respect to any series of Junior Subordinated Debentures, the
Corporation may at any time rescind the designation of any such transfer agent
or approve a change in the location through which any such transfer agent acts,
provided the Corporation maintains a transfer agent in each Place of Payment for
such series. The Corporation may at any time designate additional transfer
agents with respect to any series of Junior Subordinated Debentures.
In the event of any redemption, neither the Corporation nor the Debenture
Trustee shall be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures of any series during a period beginning at the
opening of business 15 days before the day of selection for redemption of Junior
Subordinated Debentures of that series and ending at the close of business on
the day of mailing of the relevant notice of redemption, or (ii) transfer or
exchange any Junior Subordinated Debentures so selected for redemption, except,
in the case of any Junior Subordinated Debentures being redeemed in part, any
portion thereof not to be redeemed.
GLOBAL JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures of a series may be issued in whole or in
part in the form of one or more Global Junior Subordinated Debentures that will
be deposited with, or on behalf of, a depositary (the "Depositary") identified
in the Prospectus Supplement relating to such series. Global Junior Subordinated
Debentures may be issued only in fully registered form and in either temporary
or permanent form. Unless and until it is exchanged in whole or in part for the
individual Junior Subordinated Debentures represented thereby, a Global Junior
Subordinated Debenture may not be transferred except as a whole by the
Depositary for such Global Junior Subordinated Debenture to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by the Depositary or any nominee to a successor
Depositary or any nominee of such successor.
The specific terms of the depositary arrangement with respect to a series
of Junior Subordinated Debentures will be described in the Prospectus Supplement
relating to such series. The Corporation anticipates that the following
provisions will generally apply to depositary arrangements.
Upon the issuance of a Global Junior Subordinated Debenture, and the
deposit of such Global Junior Subordinated Debenture with or on behalf of the
Depositary, the Depositary for such Global Junior Subordinated Debenture or its
nominee will credit, on its book-entry registration and transfer system, the
respective principal amounts of the individual Junior Subordinated Debentures
represented by such Global Junior Subordinated Debenture to the accounts of
persons that have accounts with such Depositary ("Participants"). Such accounts
shall be designated by the dealers, underwriters or agents with respect to such
Junior Subordinated Debentures or by the Corporation if such Junior Subordinated
Debentures are offered and sold directly by the Corporation. Ownership of
beneficial interests in a Global Junior Subordinated Debenture will be limited
to Participants or persons that may hold interests through Participants.
Ownership of beneficial interests in such Global Junior
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Subordinated Debenture will be shown on, and the transfer of that ownership will
be effected only through, records maintained by the applicable Depositary or its
nominee (with respect to interests of Participants) and the records of
Participants (with respect to interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Junior Subordinated Debenture.
So long as the Depositary for a Global Junior Subordinated Debenture, or
its nominee, is the registered owner of such Global Junior Subordinated
Debenture, such Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Junior Subordinated Debentures
represented by such Global Junior Subordinated Debenture for all purposes under
the Indenture governing such Junior Subordinated Debentures. Except as provided
below, owners of beneficial interests in a Global Junior Subordinated Debenture
(i) will not be entitled to have any of the individual Junior Subordinated
Debentures of the series represented by such Global Junior Subordinated
Debenture registered in their names, (ii) will not receive or be entitled to
receive physical delivery of any such Junior Subordinated Debentures of such
series in definitive form, and (iii) will not be considered the owners or
holders thereof under the Indenture.
Payments of principal of (and premium, if any) and interest on individual
Junior Subordinated Debentures represented by a Global Junior Subordinated
Debenture registered in the name of a Depositary or its nominee will be made to
the Depositary or its nominee, as the case may be, as the registered owner of
the Global Junior Subordinated Debenture representing such Junior Subordinated
Debentures. None of the Corporation, the Debenture Trustee, any Paying Agent, or
the Securities Registrar for such Junior Subordinated Debentures will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of the Global Junior
Subordinated Debenture representing such Junior Subordinated Debentures or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The Corporation expects the Depositary for a series of Junior Subordinated
Debentures or its nominee, on receipt of any payment of principal, premium or
interest in respect of a permanent Global Junior Subordinated Debenture
representing any of such Junior Subordinated Debentures, will credit
Participants' accounts with payments in amounts proportionate to their
respective beneficial interest in the principal amount of such Global Junior
Subordinated Debenture for such Junior Subordinated Debentures as shown on the
records of such Depositary or its nominee. The Corporation also expects payments
by Participants to owners of beneficial interests in such Global Junior
Subordinated Debenture held through such Participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name". Such payments will be the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depositary for a series of Junior Subordinated Debentures is at any time
unwilling, unable or ineligible to continue as depositary and the Corporation is
unable to locate a qualified successor, the Corporation will issue certificated
Junior Subordinated Debentures of such series in exchange for the Global Junior
Subordinated Debenture representing such series of Junior Subordinated
Debentures. In addition, the Corporation may at any time and in its sole
discretion, subject to any limitations described in the Prospectus Supplement
relating to such Junior Subordinated Debentures, determine not to have any
Junior Subordinated Debentures of such series represented by one or more Global
Junior Subordinated Debentures, and in such event, will issue definitive
certificates for Junior Subordinated Debentures of such series in exchange for
the Global Junior Subordinated Debenture representing such series of Junior
Subordinated Debentures. Further, if the Corporation so specifies with respect
to the Junior Subordinated Debentures of a series, an owner of a beneficial
interest in a Global Junior Subordinated Debenture representing Junior
Subordinated Debentures of such series may, on terms acceptable to the
Corporation, the Debenture Trustee and the Depositary for such Global Junior
Subordinated Debenture, receive individual Junior Subordinated Debentures of
such series in exchange for such beneficial interests, subject to any
limitations described in the Prospectus Supplement relating to such Junior
Subordinated Debentures. In any such instance, an owner of a beneficial interest
in a Global Junior Subordinated Debenture will be entitled to physical delivery
of certificated Junior Subordinated Debentures of the series represented by such
Global Junior Subordinated Debenture equal in principal amount to such
beneficial interest and to have such Junior Subordinated Debentures registered
in its name. Certificated Junior Subordinated Debentures of such series so
issued will be issued in denominations, unless otherwise specified by the
Corporation, of $25.00 and integral multiples thereof.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of (and premium, if any) and any interest on Junior Subordinated
Debentures will be made at the office of the Debenture Trustee in the City of
New York or at the office of such Paying Agent or Paying Agents as the
Corporation may designate from time to time in the applicable
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Prospectus Supplement, except that at the option of the Corporation payment of
any interest may be made (i), except in the case of Global Junior Subordinated
Debentures, by check mailed to the address of the Person entitled thereto as
such address shall appear in the Securities Register, or (ii) by transfer to an
account maintained by the Person entitled thereto as specified in the Securities
Register, provided that proper transfer instructions have been received by the
Regular Record Date. Unless otherwise indicated in the applicable Prospectus
Supplement, payment of any interest on Junior Subordinated Debentures will be
made to the Person in whose name such Junior Subordinated Debenture is
registered at the close of business on the Regular Record Date for such
interest, except in the case of Defaulted Interest. The Corporation may at any
time designate additional Paying Agents or rescind the designation of any Paying
Agent; however the Corporation will at all times be required to maintain a
Paying Agent in each Place of Payment for each series of Junior Subordinated
Debentures.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or
then held by the Corporation in trust, for the payment of the principal of (and
premium, if any) or interest on any Junior Subordinated Debenture and remaining
unclaimed for two years after such principal (and premium, if any) or interest
has become due and payable shall, at the request of the Corporation, be repaid
to the Corporation and the holder of such Junior Subordinated Debenture shall
thereafter look, as a general unsecured creditor, only to the Corporation for
payment thereof.
OPTION TO EXTEND INTEREST PAYMENT DATE
If provided in the applicable Prospectus Supplement, the Corporation shall
have the right at any time and from time to time during the term of any series
of Junior Subordinated Debentures to defer payment of interest for up to such
number of consecutive interest payment periods as may be specified in the
applicable Prospectus Supplement (each, an "Extension Period"), subject to the
terms, conditions and covenants, if any, specified in such Prospectus
Supplement, provided that such Extension Period may not extend beyond the Stated
Maturity of such series of Junior Subordinated Debentures. Certain United States
federal income tax consequences and special considerations applicable to any
such Junior Subordinated Debentures will be described in the applicable
Prospectus Supplement.
REDEMPTION
Unless otherwise indicated in the applicable Prospectus Supplement, Junior
Subordinated Debentures will not be subject to any sinking fund.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Corporation may, at its option, redeem the Junior Subordinated Debentures of any
series in whole at any time or in part from time to time, provided that the
Corporation has committed to the Federal Reserve Bank of Richmond that it will
not exercise its redemption option without having received the prior approval of
the Federal Reserve Board to do so, if then so required under applicable capital
guidelines or policies of the Federal Reserve Board. If the Junior Subordinated
Debentures of any series are so redeemable only on or after a specified date or
upon the satisfaction of additional conditions, the applicable Prospectus
Supplement will specify such date or describe such conditions. Junior
Subordinated Debentures in denominations larger than $25.00 may be redeemed in
part but only in integral multiples of $25.00. Except as otherwise specified in
the applicable Prospectus Supplement, the redemption price for any Junior
Subordinated Debenture so redeemed shall equal any accrued and unpaid interest
(including Additional Interest) thereon to the redemption date, plus 100 percent
of the principal amount thereof.
Except as otherwise specified in the applicable Prospectus Supplement, if a
Tax Event (as defined below) in respect of a series of Junior Subordinated
Debentures or a Capital Treatment Event (as defined below) shall occur and be
continuing, the Corporation may, at its option, redeem such series of Junior
Subordinated Debentures in whole (but not in part) at any time within 90 days of
the occurrence of such Tax Event or Capital Treatment Event, at a redemption
price equal to 100 percent of the principal amount of such Junior Subordinated
Debentures then outstanding plus accrued and unpaid interest to the date fixed
for redemption. "Tax Event" means the receipt by an Issuer of a series of
Preferred Securities of an opinion of counsel experienced in such matters to the
effect that, as a result of any amendment to, or change (including any announced
prospective change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof or therein, or
as a result of any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or which pronouncement or decision is announced on or after the date
of issuance of such Preferred Securities under the Trust Agreement, there is
more than an insubstantial risk that (i) such Issuer is, or will be within 90
days of the date of such opinion, subject to United States federal income tax
with respect to income received or accrued on the corresponding series of
Corresponding Junior Subordinated Debentures, (ii) interest payable by the
Corporation on such series of Corresponding Junior Subordinated Debentures is
not, or within 90 days of the date of such opinion, will not be, deductible by
the Corporation, in whole or in part, for United States Federal
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income tax purposes, or (iii) such Issuer is, or will be within 90 days of the
date of such opinion, subject to more than a DE MINIMIS amount of other taxes,
duties or other governmental charges.
A "Capital Treatment Event" means the reasonable determination by the
Corporation that, as a result of the occurrence of any amendment to, or change
(including any announced prospective change) in, the laws (or any rules or
regulations thereunder) of the United States or any political subdivision
thereof or therein, or as a result of any official or administrative
pronouncement or action or judicial decision interpreting or applying such laws,
rules or regulations, which amendment or change is effective or which
pronouncement, action or decision is announced on or after the date of issuance
of the Preferred Securities, there is more than an insubstantial risk that the
Corporation will not be entitled to treat an amount equal to the aggregate
Liquidation Amount of the Preferred Securities as "tier 1 capital" (or the then
equivalent thereof) for purposes of the capital adequacy guidelines of the
Federal Reserve Board, as then in effect and applicable to the Corporation.
Notice of any redemption will be mailed at least 45 days but not more than
75 days before the redemption date to each holder of Junior Subordinated
Debentures to be redeemed at its registered address. Unless the Corporation
defaults in payment of the redemption price, on and after the redemption date
interest ceases to accrue on such Junior Subordinated Debentures or portions
thereof called for redemption.
RESTRICTIONS ON CERTAIN PAYMENTS
The Corporation will also covenant, as to each series of Junior
Subordinated Debentures, that it will not, and will not permit any subsidiary of
the Corporation to, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Corporation's capital stock, or (ii) make any payment of principal, interest
or premium, if any, on or repay, repurchase or redeem any debt securities of the
Corporation (including other Junior Subordinated Debentures) that rank PARI
PASSU in all respects with or junior in interest to the Junior Subordinated
Debentures or make any guarantee payments with respect to any guarantee by the
Corporation of the debt securities of any subsidiary of the Corporation if such
guarantee ranks PARI PASSU in all respects with or junior in interest to the
Junior Subordinated Debentures other than (a) repurchases, redemptions or other
acquisitions of shares of capital stock of the Corporation in connection with
any employment contract, benefit plan or other similar arrangement with or for
the benefit of one or more employees, officers, directors or consultants, in
connection with a dividend reinvestment or stockholder stock purchase plan or in
connection with the issuance of capital stock of the Corporation (or securities
convertible into or exercisable for such capital stock) as consideration in an
acquisition transaction entered into prior to the applicable Extension Period,
(b) as a result of any exchange or conversion of any class or series of the
Corporation's capital stock (or any capital stock of a subsidiary of the
Corporation) for any class or series of the Corporation's capital stock or of
any class or series of the Corporation's indebtedness for any class or series of
the Corporation's capital stock, (c) the purchase of fractional interests in
shares of the Corporation's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
(d) any declaration of a dividend in connection with any stockholder's rights
plan, or the issuance of rights, stock or other property under any stockholder's
rights plan, or the redemption or repurchase of rights pursuant thereto, or (e)
any dividend in the form of stock, warrants, options or other rights where the
dividend stock or the stock issuable upon exercise of such warrants, options or
other rights is the same stock as that on which the dividend is being paid or
ranks PARI PASSU with or junior to such stock), if at such time (i) there shall
have occurred any event of which the Corporation has actual knowledge that (a)
with the giving of notice or the lapse of time, or both, would constitute a
Debenture Event of Default with respect to the Junior Subordinated Debentures of
such series, and (b) in respect of which the Corporation shall not have taken
reasonable steps to cure, (ii) if such Junior Subordinated Debentures are held
by an Issuer of a series of Related Preferred Securities, the Corporation shall
be in default with respect to its payment of any obligations under the Guarantee
relating to such Related Preferred Securities, or (iii) the Corporation shall
have given notice of its selection of an Extension Period as provided in the
Indenture with respect to the Junior Subordinated Debentures of such series and
shall not have rescinded such notice, or such Extension Period, or any extension
thereof, shall be continuing.
MODIFICATION OF INDENTURE
From time to time the Corporation and the Debenture Trustee may, without
the consent of the holders of any series of Junior Subordinated Debentures,
amend, waive or supplement the Indenture for specified purposes, including,
among other things, curing ambiguities, defects or inconsistencies (provided
that any such action does not materially adversely affect the interest of the
holders of any series of Junior Subordinated Debentures or, in the case of
Corresponding Junior Subordinated Debentures, the holders of the Related
Preferred Securities so long as they remain outstanding) and qualifying, or
maintaining the qualification of, the Indenture under the Trust Indenture Act.
The Indenture contains provisions permitting the Corporation and the Debenture
Trustee, with the consent of the holders of not less than a majority in
principal amount of each
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outstanding series of Junior Subordinated Debentures affected, to modify the
Indenture in a manner affecting adversely the rights of the holders of such
series of the Junior Subordinated Debentures in any material respect; provided,
that no such modification may, without the consent of the holder of each
outstanding Junior Subordinated Debenture so affected, (i) change the Stated
Maturity of any series of Junior Subordinated Debentures (except as otherwise
specified in the applicable Prospectus Supplement), or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon, or (ii) reduce the percentage of principal amount of Junior
Subordinated Debentures of any series, the holders of which are required to
consent to any such modification of the Indenture, provided that, in the case of
Corresponding Junior Subordinated Debentures, so long as any of the Related
Preferred Securities remain outstanding, (a) no such modification may be made
that adversely affects the holders of such Preferred Securities in any material
respect, and no termination of the Indenture may occur, and no waiver of any
Debenture Event of Default or compliance with any covenant under the Indenture
may be effective, without the prior consent of the holders of at least a
majority of the aggregate Liquidation Amount of all outstanding Related
Preferred Securities affected unless and until the principal of the
Corresponding Junior Subordinated Debentures and all accrued and unpaid interest
thereon have been paid in full and certain other conditions have been satisfied
and (b) where a consent under the Indenture would require the consent of each
holder of Corresponding Junior Subordinated Debentures, no such consent will be
given by the Property Trustee without the prior consent of each holder of
Related Preferred Securities.
In addition, the Corporation and the Debenture Trustee may execute, without
the consent of any holder of Junior Subordinated Debentures, any supplemental
indenture to the Indenture for the purpose of creating any new series of Junior
Subordinated Debentures.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to a series of Junior Subordinated Debentures that has
occurred and is continuing constitutes a Debenture Event of Default with respect
to such series of Junior Subordinated Debentures:
(i) failure for 30 days to pay any interest on such series of the
Junior Subordinated Debentures, including any Additional Interest in
respect thereof, when due (subject to the deferral of any interest
payment in the case of an Extension Period); or
(ii) failure to pay any principal or premium, if any, on such
series of Junior Subordinated Debentures when by declaration or
otherwise due whether at maturity or upon redemption; or
(iii) failure to observe or perform any other covenants contained
in the Indenture for 90 days after written notice to the Corporation
from the Debenture Trustee or the holders of at least 25 percent in
aggregate outstanding principal amount of such series of outstanding
Junior Subordinated Debentures; or
(iv) certain events of bankruptcy, insolvency or reorganization
of the Corporation.
The holders of a majority in aggregate outstanding principal amount of such
series of Junior Subordinated Debentures have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Debenture Trustee. The Debenture Trustee or the holders of not less than 25
percent in aggregate outstanding principal amount of Junior Subordinated
Debentures may declare the principal (or if the Preferred Securities of such
series are Discount Securities, such portion of the principal amount as may be
specified in a Prospectus Supplement) due and payable immediately upon a
Debenture Event of Default, and in the case of Corresponding Junior Subordinated
Debentures, should the Debenture Trustee or such holders of such Corresponding
Junior Subordinated Debentures fail to make such declaration, the holders of at
least 25 percent in aggregate Liquidation Amount of the Related Preferred
Securities shall have such right. The holders of a majority in aggregate
outstanding principal amount of Junior Subordinated Debentures may annul such
declaration. In the case of Corresponding Junior Subordinated Debentures, should
the holders of such Corresponding Junior Subordinated Debentures fail to annul
such declaration and waive such default, the holders of a majority in aggregate
Liquidation Amount of the Related Preferred Securities shall have such right.
The holders of a majority in aggregate outstanding principal amount of each
series of Junior Subordinated Debentures affected thereby may, on behalf of the
holders of all the Junior Subordinated Debentures of such series, waive any
default, except a default in the payment of principal or interest (including any
Additional Interest) (unless such default has been cured and a sum sufficient to
pay all matured installments of interest and principal (including any Additional
Interest) due otherwise than by acceleration has been deposited with the
Debenture Trustee) or a default in respect of a covenant or provision which
under the Indenture cannot be modified or amended without the consent of the
holder of each outstanding Junior
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Subordinated Debenture of such series. In the case of Corresponding Junior
Subordinated Debentures, should the holders of such Corresponding Junior
Subordinated Debentures fail to annul such declaration and waive such default,
the holders of a majority in aggregate Liquidation Amount of the Related
Preferred Securities shall have such right. The Corporation is required to file
annually with the Debenture Trustee a certificate as to whether or not the
Corporation is in compliance with all the conditions and covenants applicable to
it under the Indenture.
In case a Debenture Event of Default shall occur and be continuing as to a
series of Corresponding Junior Subordinated Debentures, the Property Trustee
will have the right to declare the principal of and the interest on such
Corresponding Junior Subordinated Debentures, and any other amounts payable
under the Indenture, to be forthwith due and payable and to enforce its other
rights as a creditor with respect to such Corresponding Junior Subordinated
Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If (i) a Debenture Event of Default has occurred and is continuing and (ii)
such event is attributable to the failure of the Corporation to pay interest or
principal on the Corresponding Junior Subordinated Debentures on the date such
interest or principal is due and payable, then a holder of Related Preferred
Securities may institute a legal proceeding directly against the Corporation for
enforcement of payment to such holder of the principal of or interest (including
any Additional Interest) on such Corresponding Junior Subordinated Debentures
having a principal amount equal to the aggregate Liquidation Amount of the
related Preferred Securities of such holder (a "Direct Action"). The Corporation
may not amend the Indenture to remove the foregoing right to bring a Direct
Action without the prior written consent of the holders of all the Related
Preferred Securities outstanding. If the right to bring a Direct Action is
removed, the applicable Issuer may become subject to the reporting obligations
under the Exchange Act. The Corporation has the right under the Indenture to
set-off any payment made to such holder of Related Preferred Securities by the
Corporation in connection with a Direct Action.
The holders of Preferred Securities would not be able to exercise directly
any remedies other than those set forth in the preceding paragraph available to
the holders of the Corresponding Junior Subordinated Debentures unless there
shall have been an Event of Default under the Trust Agreement. See "Description
of Preferred Securities -- Events of Default; Notice".
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Corporation will not consolidate with or
merge into any other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, and no Person will
consolidate with or merge into the Corporation or convey, transfer or lease its
properties and assets substantially as an entirety to the Corporation, unless
(i) in case the Corporation consolidates with or merges into another Person or
conveys or transfers its properties and assets substantially as an entirety to
any Person, the successor Person is organized under the laws of the United
States or any state or Washington, D.C., and such successor Person expressly
assumes the Corporation's obligations on the Junior Subordinated Debentures
issued under the Indenture; (ii) immediately after giving effect thereto, no
Debenture Event of Default, and no event which, after notice or lapse of time or
both, would become a Debenture Event of Default, shall have occurred and be
continuing; and (iii) certain other conditions as prescribed in the Indenture
are met.
The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving the Corporation that may adversely affect holders of the
Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable, or (ii) will become due and
payable at their Stated Maturity within one year, and the Corporation deposits
or causes to be deposited with the Debenture Trustee funds, in trust, for the
purpose and in an amount in the currency or currencies in which the Junior
Subordinated Debentures are payable sufficient to pay and discharge the entire
indebtedness on the Junior Subordinated Debentures not previously delivered to
the Debenture Trustee for cancellation, for the principal (and premium, if any)
and interest (including Additional Interest) to the date of the deposit or to
the Stated Maturity, as the case may be, then the Indenture will cease to be of
further effect (except as to the Corporation's obligations to pay all other sums
due pursuant to the Indenture and to provide the officers' certificates and
opinions of counsel described therein), and the Corporation will be deemed to
have satisfied and discharged the Indenture.
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CONVERSION OR EXCHANGE
If and to the extent indicated in the applicable Prospectus Supplement, the
Junior Subordinated Debentures of any series may be convertible or exchangeable
into Junior Subordinated Debentures of another series or into Preferred
Securities (including, but not limited to, Related Preferred Securities). The
specific terms on which Junior Subordinated Debentures of any series may be so
converted or exchanged will be set forth in the applicable Prospectus
Supplement. Such terms may include provisions for conversion or exchange, either
mandatory, at the option of the holder, or at the option of the Corporation, in
which case the number of Preferred Securities or other securities to be received
by the holders of Junior Subordinated Debentures would be calculated as of a
time and in the manner stated in the applicable Prospectus Supplement.
SUBORDINATION
The Indenture provides that any Junior Subordinated Debentures issued
thereunder will be subordinate and junior in right of payment to all Senior Debt
of the Corporation to the extent provided in the Indenture. Upon any payment or
distribution of assets to creditors upon any liquidation, dissolution, winding
up, reorganization, assignment for the benefit of creditors, marshaling of
assets or any bankruptcy, insolvency, debt restructuring or similar proceedings
in connection with any insolvency or bankruptcy proceeding of the Corporation,
the holders of Senior Debt will first be entitled to receive payment in full of
principal of (and premium, if any) and interest, if any, on such Senior Debt
before the holders of Junior Subordinated Debentures or, in the case of
Corresponding Junior Subordinated Debentures, the Property Trustee on behalf of
the holders, will be entitled to receive or retain any payment in respect of the
principal of (and premium, if any) or interest, if any, on the Junior
Subordinated Debentures.
In the event of the acceleration of the maturity of any Junior Subordinated
Debentures, the holders of all Senior Debt outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon (including any amounts due upon acceleration) before the holders of
Junior Subordinated Debentures will be entitled to receive or retain any payment
in respect of the principal of (or premium, if any) or interest, if any, on the
Junior Subordinated Debentures.
No payments on account of principal (or premium, if any) or interest, if
any, in respect of the Junior Subordinated Debentures may be made if there shall
have occurred and be continuing a default in any payment with respect to Senior
Debt or an event of default with respect to any Senior Debt resulting in the
acceleration of the maturity thereof, or if any judicial proceeding shall be
pending with respect to any such default.
"Debt" means, with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; (vi) all Other
Financial Obligations (as hereinafter defined); and (vii) every obligation of
the type referred to in clauses (i) through (vi) of another Person and all
dividends of another Person the payment of which, in either case, such Person
has guaranteed or is responsible or liable, directly or indirectly, as obligor
or otherwise.
"Other Financial Obligations" means, with respect to any Person, all
obligations of such Person 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.
"Senior Debt" means the principal of (and premium, if any) and interest, if
any (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Corporation whether or not such
claim for post-petition interest is allowed in such proceeding), on Debt,
whether incurred on or prior to the date of the Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Junior Subordinated Debentures or to other
Debt which is PARI PASSU with, or subordinated to, the Junior Subordinated
Debentures; PROVIDED, HOWEVER, that Senior Debt shall not be deemed to include
(i) any Debt of the Corporation which when incurred and without respect to any
election under
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Section 1111(b) of the United States Bankruptcy Code of 1978, as amended, was
without recourse to the Corporation, (ii) any Debt of the Corporation to any of
its subsidiaries, (iii) Debt to any employee of the Corporation, and (iv) any
other debt securities issued pursuant to the Indenture. Senior Debt includes,
without limitation, Debt issued (i) under the indenture, dated as of April 1,
1983, and amended thereafter, between the Corporation and Chemical Bank, as
trustee, and (ii) except to the extent otherwise provided with respect to any
series of debt securities issued after the date hereof, under the indenture,
dated as of March 15, 1986, and amended thereafter, between the Corporation and
Harris Trust and Savings Bank, as trustee.
The Indenture places no limitation on the amount of additional Senior Debt
that may be incurred by the Corporation. The Corporation expects from time to
time to incur additional indebtedness constituting Senior Debt.
The Indenture provides that the foregoing subordination provisions, insofar
as they relate to any particular issue of Junior Subordinated Debentures, may be
changed prior to such issuance. Any such change would be described in the
applicable Prospectus Supplement.
TRUST EXPENSES
Pursuant to an Agreement as to Liabilities and Expenses, entered into by
the Corporation pursuant to the applicable Trust Agreement (each, an "Expense
Agreement"), with respect to each series of Corresponding Junior Subordinated
Debentures, the Corporation, as holder of the Common Securities of the
applicable Issuer, will irrevocably and unconditionally agree with each issuer
that holds Junior Subordinated Debentures that the Corporation will pay the full
amounts of any costs, expenses or liabilities of the Issuer, other than
obligations of the Issuer to pay to the holders of any Preferred Securities or
other similar interests in the Issuer the amounts due such holders pursuant to
the terms of the Preferred Securities or such other similar interests, as the
case may be. Such payment obligation will include any such costs, expenses or
liabilities of the Issuer that are required by applicable law to be satisfied in
connection with a termination of such Issuer.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by
and construed in accordance with the laws of the State of New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Debenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Debenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
CORRESPONDING JUNIOR SUBORDINATED DEBENTURES
The Corresponding Junior Subordinated Debentures may be issued in one or
more series under the Indenture with terms corresponding to the terms of a
series of Related Preferred Securities. In that event, concurrently with the
issuance of the Related Preferred Securities, the Issuer of the Related
Preferred Securities will invest the proceeds thereof and the consideration paid
by the Corporation for the Common Securities of such Issuer in such series of
Corresponding Junior Subordinated Debentures issued by the Corporation to such
Issuer. Each series of Corresponding Junior Subordinated Debentures will be in
the principal amount equal to the aggregate Liquidation Amount of the Related
Preferred Securities and the Common Securities of such Issuer and, unless
otherwise specified in the applicable Prospectus Supplement, will rank PARI
PASSU with all other series of Junior Subordinated Debentures. Holders of the
Related Preferred Securities for a series of Corresponding Junior Subordinated
Debentures will have the rights in connection with modifications to the
Indenture or upon occurrence of Debenture Events of Default described under
" -- Modification of Indenture" and " -- Debenture Events of Default", unless
otherwise provided in the Prospectus Supplement for such Related Preferred
Securities.
Unless otherwise provided in the applicable Prospectus Supplement, if a Tax
Event or Capital Treatment Event (each as defined below), in respect of an
Issuer of Related Preferred Securities shall occur and be continuing, the
Corporation may, at its option, redeem the Corresponding Junior Subordinated
Debentures at any time within 90 days of the occurrence of such Tax Event or
Capital Treatment Event, in whole but not in part, subject to the provisions of
the Indenture and whether or not
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such Corresponding Junior Subordinated Debentures are then otherwise redeemable
at the option of the Corporation, provided that the Corporation has committed to
the Federal Reserve Bank of Richmond that it will not exercise its redemption
option without having received the prior approval of the Federal Reserve Board
to do so, if then so required under applicable capital guidelines or policies of
the Federal Reserve Board. The redemption price for any Corresponding Junior
Subordinated Debentures shall be equal to 100 percent of the principal amount of
such Corresponding Junior Subordinated Debentures then outstanding plus accrued
and unpaid interest to the date fixed for redemption. For so long as the
applicable Issuer is the holder of all the outstanding series of Corresponding
Junior Subordinated Debentures, the proceeds of any such redemption will be used
by the Issuer to redeem the corresponding Trust Securities in accordance with
their terms. The Corporation may not redeem a series of Corresponding Junior
Subordinated Debentures in part unless all accrued and unpaid interest has been
paid in full on all outstanding Corresponding Junior Subordinated Debentures of
such series for all interest periods terminating on or prior to the Redemption
Date.
The Corporation will covenant in the Indenture as to each series of
Corresponding Junior Subordinated Debentures, that if and so long as (i) the
Issuer of the Related Preferred Securities is the holder of all such
Corresponding Junior Subordinated Debentures, (ii) a Tax Event in respect of
such Issuer has occurred and is continuing, and (iii) the Corporation has
elected, and has not revoked such election, to pay Additional Sums (as defined
herein) in respect of such Trust Securities, the Corporation will pay to such
Issuer such Additional Sums. The Corporation will also covenant, as to each
series of Corresponding Junior Subordinated Debentures, (i) to maintain directly
or indirectly 100 percent ownership of the Common Securities of the Issuer to
which such Corresponding Junior Subordinated Debentures have been issued,
provided that certain successors which are permitted pursuant to the Indenture
may succeed to the Corporation's ownership of the Common Securities, (ii) not to
voluntarily terminate, wind-up or liquidate any Issuer and (a) in connection
with a distribution of Corresponding Junior Subordinated Debentures to the
holders of the Related Preferred Securities in exchange therefor upon
liquidation of such Issuer, or (b) in connection with certain mergers,
consolidations or amalgamations permitted by the related Trust Agreement, and
(iii) to use its reasonable efforts, consistent with the terms and provisions of
the related Trust Agreement, to cause such Issuer to remain classified as a
grantor trust or as an association not taxable as a corporation for United
States federal income tax purposes.
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DESCRIPTION OF PREFERRED SECURITIES
Pursuant to the terms of the Trust Agreement for each Issuer, the Issuer
Trustees on behalf of such Issuer may issue the Preferred Securities and the
Common Securities. The Preferred Securities of a particular issue will represent
preferred beneficial interests in the Issuer and the holders thereof will be
entitled to a preference in certain circumstances with respect to Distributions
and amounts payable on redemption or liquidation over the Common Securities of
such Issuer, as well as other benefits as described in the applicable Trust
Agreement. This summary of certain provisions of the Preferred Securities and
each Trust Agreement, which when taken together with any supplementary material
set forth in the applicable Prospectus Supplement describes the material terms
thereof, does not purport to be complete and is subject to, and qualified in its
entirety by reference to, all the provisions of each Trust Agreement, including
the definitions therein of certain terms, and the Trust Indenture Act. Wherever
particular defined terms of a Trust Agreement (as amended or supplemented from
time to time) are referred to herein or in a Prospectus Supplement, such defined
terms are incorporated herein or therein by reference. The form of the Trust
Agreement has been filed as an exhibit to the Registration Statement. Each of
the Issuers is a legally separate entity and the assets of one are not available
to satisfy the obligations of any of the others.
GENERAL
The Preferred Securities of an Issuer will rank PARI PASSU, and payments
thereon will be made PRO RATA, with the Common Securities of that Issuer except
as described under " -- Subordination of Common Securities". Legal title to a
series of Corresponding Junior Subordinated Debentures will be held by the
Property Trustee in trust for the benefit of the holders of the Related
Preferred Securities and Common Securities. Each Guarantee Agreement executed by
the Corporation for the benefit of the holders of an Issuer's Trust Securities
(the "Guarantee" for such Trust Securities) will be a guarantee on a
subordinated basis with respect to the related Preferred Securities but will not
guarantee payment of Distributions or amounts payable on redemption or
liquidation of such Trust Securities when such Issuer does not have funds on
hand available to make such payments. See "Description of Guarantees".
DISTRIBUTIONS
Distributions on the Preferred Securities will be cumulative, will
accumulate from the date of original issuance and will be payable on such dates
as specified in the applicable Prospectus Supplement. In the event that any date
on which Distributions are payable on the Preferred Securities is not a Business
Day (as defined herein), payment of the Distribution payable on such date will
be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect to any such delay) except that, if such
Business Day is in the next succeeding calendar year, payment of such
Distribution shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date (each date on which
Distributions are payable in accordance with the foregoing, a "Distribution
Date"). A "Business Day" shall mean any day other than a Saturday or a Sunday,
or a day on which banking institutions in The City of New York are authorized or
required by law or executive order to remain closed or a day on which the
corporate trust office of the Property Trustee or the Debenture Trustee is
closed for business.
Each Issuer's Preferred Securities represent preferred beneficial interests
in the applicable Issuer, and the Distributions on each Preferred Security will
be payable at a rate specified in the applicable Prospectus Supplement for such
Preferred Securities. The amount of Distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months unless otherwise
specified in the applicable Prospectus Supplement. Distributions to which
holders of Preferred Securities are entitled will accumulate additional
Distributions at the rate per annum if and as specified in the applicable
Prospectus Supplement. The term "Distributions" as used herein includes any such
additional Distributions unless otherwise stated.
If provided in the applicable Prospectus Supplement, the Corporation has
the right under the Indenture, pursuant to which it will issue a series of
Corresponding Junior Subordinated Debentures, to defer the payment of interest
at any time or from time to time on such series of Corresponding Junior
Subordinated Debentures for a period which will be specified in such Prospectus
Supplement (each, an "Extension Period"), provided that no Extension Period may
extend beyond the Stated Maturity of the Corresponding Junior Subordinated
Debentures. As a consequence of any such extension, Distributions on the Related
Preferred Securities would be deferred (but would continue to accumulate
additional Distributions thereon at the rate per annum set forth in the
Prospectus Supplement for such Related Preferred Securities) by the Issuer of
such Related Preferred Securities during any such Extension Period. During such
Extension Period, the Corporation may not, and may not permit any subsidiary of
the Corporation to, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
the Corporation's capital stock, or (ii) make any payment of principal,
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interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Corporation that rank PARI PASSU with or junior in interest to
the Corresponding Junior Subordinated Debentures or make any guarantee payments
with respect to any guarantee by the Corporation of debt securities of any
subsidiary of the Corporation if such guarantee ranks PARI PASSU in all respects
with or junior in interest to the Corresponding Junior Subordinated Debentures
(other than (a) repurchases, redemptions or other acquisitions of shares of
capital stock of the Corporation in connection with any employment contract,
benefit plan or other similar arrangement with or for the benefit of one or more
employees, officers, directors or consultants, in connection with a dividend
reinvestment or stockholder stock purchase plan or in connection with the
issuance of capital stock of the Corporation (or securities convertible into or
exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of any exchange or conversion of any class or series of the Corporation's
capital stock (or any capital stock of a subsidiary of the Corporation) for any
class or series of the Corporation's capital stock or of any class or series of
the Corporation's indebtedness for any class or series of the Corporation's
capital stock, (c) the purchase of fractional interests in shares of the
Corporation's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged, (d) any
declaration of a dividend in connection with any stockholder's rights plan, or
the issuance of rights, stock or other property under any stockholder's rights
plan, or the redemption or repurchase of rights pursuant thereto, or (e) any
dividend in the form of stock, warrants, options or other rights where the
dividend stock or the stock issuable upon exercise of such warrants, options or
other rights is the same stock as that on which the dividend is being paid or
ranks PARI PASSU with or junior to such stock.
The revenue of each Issuer available for distribution to holders of any
Related Preferred Securities will be limited to payments under the Corresponding
Junior Subordinated Debentures in which the Issuer will invest the proceeds from
the issuance and sale of its Trust Securities. See "Description of Junior
Subordinated Debentures -- Corresponding Junior Subordinated Debentures". If the
Corporation does not make interest payments on such Corresponding Junior
Subordinated Debentures, the Property Trustee will not have funds available to
pay Distributions on the Related Preferred Securities. The payment of
Distributions (if and to the extent the Issuer has funds legally available for
the payment of such Distributions and cash sufficient to make such payments) is
guaranteed by the Corporation on a limited basis as set forth herein under
"Description of Guarantees".
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the register of such Issuer on the relevant record
dates, which, as long as the Preferred Securities remain in book-entry form,
will be one Business Day prior to the relevant Distribution Date. Subject to any
applicable laws and regulations and the provisions of the applicable Trust
Agreement, each such payment will be made as described under "Book-Entry
Issuance". In the event any Preferred Securities are not in book-entry form, the
relevant record date for such Preferred Securities shall be the date specified
in the applicable Prospectus Supplement.
REDEMPTION OR EXCHANGE
MANDATORY REDEMPTION. Upon the repayment or redemption, in whole or in
part, of any Corresponding Junior Subordinated Debentures, whether at maturity
or upon earlier redemption as provided in the Indenture, the proceeds from such
repayment or redemption shall be applied by the Property Trustee to redeem a
Like Amount (as defined below) of the Trust Securities, upon not less than 30
nor more than 60 days notice, at a redemption price (the "Redemption Price")
equal to the aggregate Liquidation Amount of such Trust Securities plus
accumulated but unpaid Distributions thereon to the date of redemption (the
"Redemption Date") and the related amount of the premium, if any, paid by the
Corporation upon the concurrent redemption of such Corresponding Junior
Subordinated Debentures. See "Description of Junior Subordinated
Debentures -- Redemption". If less than all of any series of Corresponding
Junior Subordinated Debentures are to be repaid or redeemed on a Redemption
Date, then the proceeds from such repayment or redemption shall be allocated to
the redemption PRO RATA of the Related Preferred Securities and Common
Securities. The amount of premium, if any, paid by the Corporation upon the
redemption of all or any part of any series of any Corresponding Junior
Subordinated Debentures to be repaid or redeemed on a Redemption Date shall be
allocated to the redemption PRO RATA of the Related Preferred Securities and the
Common Securities.
The Corporation will have the right to redeem any series of Corresponding
Junior Subordinated Debentures (i) on or after such date as may be specified in
the applicable Prospectus Supplement, in whole at any time or in part from time
to time, (ii) at any time, in whole (but not in part), upon the occurrence of a
Tax Event or Capital Treatment Event, or (iii) as may be otherwise specified in
the applicable Prospectus Supplement, provided that the Corporation has
committed to the Federal Reserve Bank of Richmond that it will not exercise any
such right without having received the prior approval of the Federal Reserve
Board to do so, if then so required under applicable capital guidelines or
policies of the Federal Reserve Board.
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DISTRIBUTION OF CORRESPONDING JUNIOR SUBORDINATED DEBENTURES. The
Corporation has the right at any time to terminate any Issuer and, after
satisfaction of the liabilities of creditors of such Issuer in accordance with
applicable law and the applicable Expense Agreement, cause such Corresponding
Junior Subordinated Debentures in respect of the Related Preferred Securities
and Common Securities issued by such Issuer to be distributed to the holders of
such Related Preferred Securities and Common Securities in liquidation of the
Issuer. The Corporation has committed to the Federal Reserve Bank of Richmond,
however, that it will not exercise such right without having received the prior
approval of the Federal Reserve Board to do so, if then so required under
applicable capital guidelines or policies of the Federal Reserve Board.
TAX EVENT OR CAPITAL TREATMENT EVENT REDEMPTION. If a Tax Event or Capital
Treatment Event in respect of a series of Preferred Securities and Common
Securities shall occur and be continuing, the Corporation has the right to
redeem the Corresponding Junior Subordinated Debentures in whole (but not in
part) and thereby cause a mandatory redemption of such Preferred Securities and
Common Securities in whole (but not in part) at the Redemption Price within 90
days following the occurrence of such Tax Event or Capital Treatment Event. In
the event a Tax Event or Capital Treatment Event in respect of a series of
Preferred Securities and Common Securities has occurred and is continuing and
the Corporation does not elect to redeem the Corresponding Junior Subordinated
Debentures and thereby cause a mandatory redemption of such Preferred Securities
or to liquidate the related Issuer and cause the Corresponding Junior
Subordinated Debentures to be distributed to holders of such Preferred
Securities and Common Securities in exchange therefor upon liquidation of the
Issuer as described above, such Preferred Securities will remain outstanding and
Additional Sums (as defined below) may be payable on the Corresponding Junior
Subordinated Debentures.
Unless otherwise provided in the applicable Prospectus Supplement:
"Additional Sums" means the additional amounts as may be necessary in
order that the amount of Distributions then due and payable by an Issuer on
the outstanding Preferred Securities and Common Securities of the Issuer
shall not be reduced as a result of any additional taxes, duties and other
governmental charges to which such Issuer has become subject as a result of
a Tax Event.
"Capital Treatment Event" means the reasonable determination by the
Corporation that, as a result of the occurrence of any amendment to, or
change (including any announced prospective change) in, the laws (or any
rules or regulations thereunder) of the United States or any political
subdivision thereof or therein, or as a result of any official or
administrative pronouncement or action or judicial decision interpreting or
applying such laws, rules or regulations, which amendment or change is
effective or such pronouncement, action or decision is announced on or
after the date of issuance of the Preferred Securities of an Issuer, there
is more than an insubstantial risk that the Corporation will not be
entitled to treat an amount equal to the aggregate Liquidation Amount of
such Preferred Securities as "tier 1 capital" (or the then equivalent
thereof) for purposes of the capital adequacy guidelines of the Federal
Reserve Board, as then in effect and applicable to the Corporation.
"Like Amount" means (i) with respect to a redemption of any series of
Trust Securities, Trust Securities of such series having a Liquidation
Amount equal to that portion of the principal amount of Corresponding
Junior Subordinated Debentures to be contemporaneously redeemed in
accordance with the Indenture, allocated to the Common Securities and to
the Related Preferred Securities based upon the relative Liquidation
Amounts of such classes and the proceeds of which will be used to pay the
Redemption Price of such Trust Securities, and (ii) with respect to a
distribution of Corresponding Junior Subordinated Debentures to holders of
any series of Trust Securities in connection with a dissolution or
liquidation of the related Issuer, Corresponding Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Trust Securities of the holder to whom such Corresponding Junior
Subordinated Debentures are distributed.
"Liquidation Amount" means the stated amount of $25.00 per Trust
Security.
"Tax Event" with respect to an Issuer means the receipt by such Issuer
of an opinion of counsel experienced in such matters to the effect that, as
a result of any amendment to, or change (including any announced
prospective change) in, the laws (or any regulations thereunder) of the
United States or any political subdivision or taxing authority thereof or
therein, or as a result of any official administrative pronouncement or
judicial decision interpreting or applying such laws or regulations, which
amendment or change is effective or which pronouncement or decision is
announced on or after the date of issuance of such Related Preferred
Securities under the Trust Agreement, there is more than an insubstantial
risk that (i) such Issuer is, or will be within 90 days of the date of such
opinion, subject to United States federal
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income tax with respect to income received or accrued on the corresponding
series of Corresponding Junior Subordinated Debentures, (ii) interest
payable by the Corporation on such series of Corresponding Junior
Subordinated Debentures is not, or within 90 days of the date of such
opinion, will not be, deductible by the Corporation, in whole or in part,
for United States federal income tax purposes, or (iii) such Issuer is, or
will be within 90 days of the date of such opinion, subject to more than a
DE MINIMIS amount of other taxes, duties or other governmental charges.
After the liquidation date fixed for the distribution of any Corresponding
Junior Subordinated Debentures in exchange
for any series of Related Preferred Securities (i) such series of Related
Preferred Securities will no longer be deemed to be outstanding, (ii) The
Depository Trust Company ("DTC") or its nominee, as the record holder of such
series of Related Preferred Securities, will receive a registered global
certificate or certificates representing the Corresponding Junior Subordinated
Debentures to be delivered upon such distribution, and (iii) any certificates
representing such series of Related Preferred Securities not held by DTC or its
nominee will be deemed to represent the Corresponding Junior Subordinated
Debentures having a principal amount equal to the stated Liquidation Amount of
such series of Related Preferred Securities, and bearing accrued and unpaid
interest in an amount equal to the accrued and unpaid Distributions on such
series of Related Preferred Securities until such certificates are presented to
the Administrative Trustees or their agent for transfer or reissuance.
There can be no assurance as to the market prices for any Preferred
Securities, or the Corresponding Junior Subordinated Debentures that may be
distributed in exchange for such Preferred Securities, if a liquidation of the
Issuer were to occur. Accordingly, the Preferred Securities that an investor may
purchase, or the Corresponding Junior Subordinated Debentures that the investor
may receive on dissolution and liquidation of an Issuer, may trade at a discount
to the price that the investor paid to purchase the Preferred Securities offered
hereby.
POSSIBLE TAX LAW CHANGES. On March 19, 1996, the Revenue Reconciliation
Bill of 1996 (the "Revenue Reconciliation Bill"), the revenue portion of
President Clinton's budget proposal, was introduced in the 104th Congress. If
enacted, the Revenue Reconciliation Bill would have generally denied interest
deductions for interest on an instrument issued by a corporation that has a
maximum term of more than 20 years and that is not shown as indebtedness on the
separate balance sheet of the issuer or, where the instrument is issued to a
related party (other than a corporation), where the holder or some other related
party issues a related instrument that is not shown as indebtedness on the
issuer's consolidated balance sheet. For purposes of determining the weighted
average maturity or the term of an instrument, any right to extend would be
treated as exercised. The above-described provisions of the Revenue
Reconciliation Bill were proposed to be effective generally for instruments
issued on or after December 7, 1995. If the proposed provision were to have
applied to the Preferred Securities of any Series, the Corporation would have
been unable to deduct interest on the Preferred Securities of such Series.
However, on March 29, 1996, the Chairmen of the Senate Finance and House Ways
and Means Committees issued a joint statement to the effect that it was their
intention that the effective date of the President's legislative proposals, if
adopted, will be no earlier than the date of appropriate Congressional action.
Under current law, the Corporation will be able to deduct interest on the
Preferred Securities. Although the 104th Congress adjourned without enacting the
above-described provisions of the Revenue Reconciliation Bill, there can be no
assurance that current or future legislative proposals or final legislation will
not affect the ability of the Corporation to deduct interest on the Preferred
Securities. Such a change could give rise to a Tax Event, which may permit the
Corporation to cause a redemption of the Preferred Securities, as described more
fully herein.
REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date shall be redeemed at
the applicable Redemption Price with the applicable proceeds from the
contemporaneous redemption of the Corresponding Junior Subordinated Debentures.
Redemptions of the Preferred Securities shall be made and the Redemption Price
shall be payable on each Redemption Date only to the extent that the related
Issuer has funds on hand and available for the payment of such Redemption Price.
See " -- Subordination of Common Securities".
If the Property Trustee gives a notice of redemption in respect of its
Preferred Securities, then by 12:00 noon, New York City time, on the Redemption
Date, to the extent funds are available, the Property Trustee will deposit
irrevocably with DTC funds sufficient to pay the applicable Redemption Price and
will give DTC irrevocable instructions and authority to pay the Redemption Price
to the holders of such Preferred Securities. See "Book-Entry Issuance". If such
Preferred Securities are no longer in book-entry form, the Property Trustee, to
the extent funds are available, will irrevocably deposit with the paying agent
for such Preferred Securities funds sufficient to pay the applicable Redemption
Price and will give such paying agent irrevocable instructions and authority to
pay the Redemption Price to the holders thereof upon surrender of their
certificates evidencing such Preferred Securities. Notwithstanding the
foregoing, Distributions payable on or prior to the Redemption
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Date for any Preferred Securities called for redemption shall be payable to the
holders of such Preferred Securities on the relevant record dates for the
related Distribution Dates. If notice of redemption shall have been given and
funds deposited as required, then upon the date of such deposit, all rights of
the holders of such Preferred Securities so called for redemption will cease,
except the right of the holders of such Preferred Securities to receive the
Redemption Price and any Distribution payable in respect of the Preferred
Securities on or prior to the Redemption Date, but without interest thereon, and
such Preferred Securities will cease to be outstanding. In the event that any
date fixed for redemption of Preferred Securities is not a Business Day, then
payment of the Redemption Price payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day falls
in the next calendar year, such payment will be made on the immediately
preceding Business Day. In the event that payment of the Redemption Price in
respect of Preferred Securities called for redemption is improperly withheld or
refused and not paid either by the Issuer or by the Corporation pursuant to the
Guarantee as described under "Description of Guarantees", Distributions on such
Preferred Securities will continue to accrue at the then applicable rate, from
the Redemption Date originally established by the Issuer for such Preferred
Securities to the date such Redemption Price is actually paid, in which case the
actual payment date will be the date fixed for redemption for purposes of
calculating the Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law), the Corporation or its subsidiaries may at any time and
from time to time purchase outstanding Preferred Securities by tender, in the
open market or by private agreement.
Payment of the Redemption Price on any Preferred Securities (or any
distribution of Corresponding Junior Subordinated Debentures in exchange for
Related Preferred Securities upon liquidation of the Issuer) shall be made to
the applicable recordholders thereof as they appear on the register for such
Preferred Securities on the relevant record date, which shall be one Business
Day prior to the relevant Redemption Date (or liquidation date); PROVIDED,
HOWEVER, that in the event that any Preferred Securities are not in book-entry
form, the relevant record date for such Preferred Securities shall be a date at
least 15 days prior to the Redemption Date (or liquidation date), as specified
in the applicable Prospectus Supplement.
If less than all of the outstanding Trust Securities of an Issuer are to be
redeemed on a Redemption Date, then the aggregate Liquidation Amount of such
Trust Securities to be redeemed shall be allocated PRO RATA to the outstanding
Preferred Securities and the Common Securities based upon the relative
Liquidation Amounts of such classes. The particular Preferred Securities to be
redeemed shall be selected on a PRO RATA basis not more than 60 days prior to
the Redemption Date by the Property Trustee from the outstanding Preferred
Securities not previously called for redemption, by such method as the Property
Trustee shall deem fair and appropriate and which may provide for the selection
for redemption of portions (equal to $25.00 or an integral multiple of $25.00 in
excess thereof) of the Liquidation Amount of Preferred Securities of a
denomination larger than $25.00. The Property Trustee shall promptly notify the
trust registrar in writing of the Preferred Securities selected for redemption,
and in the case of any Preferred Securities selected for partial redemption, the
Liquidation Amount thereof to be redeemed. For all purposes of each Trust
Agreement, unless the context otherwise requires, all provisions relating to the
redemption of Preferred Securities shall relate, in the case of any Preferred
Securities redeemed or to be redeemed only in part, to the portion of the
aggregate Liquidation Amount of Preferred Securities which has been or is to be
redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Trust Securities to be
redeemed at its registered address. Unless the Corporation defaults in payment
of the Redemption Price on the Corresponding Junior Subordinated Debentures, on
and after the Redemption Date interest will cease to accrue on such
Corresponding Junior Subordinated Debentures or portions thereof (and
distributions will cease to accrue on the Related Preferred Securities or
portions thereof) called for redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, each Issuer's
Preferred Securities and Common Securities, as applicable, shall be made PRO
RATA based on the Liquidation Amount of such Preferred Securities and Common
Securities; PROVIDED, HOWEVER, that if, on any Distribution Date or Redemption
Date (or Liquidation Date), a Debenture Event of Default shall have occurred and
be continuing, no payment of any Distribution on, or Redemption Price of (or
Liquidation Distribution (as defined below) in respect of) any of the Issuer's
Common Securities, and no other payment on account of the redemption,
liquidation or other acquisition of such Common Securities, shall be made unless
payment in full in cash of all accumulated and unpaid Distributions on all of
the Issuer's outstanding Preferred Securities for all Distribution periods
terminating on or prior thereto, or in the case of payment of the Redemption
Price the full amount of such Redemption Price on all of the Issuer's
outstanding Preferred Securities then called for redemption (or in the case of
payment of the Liquidation
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Distribution the full amount of such liquidation on all outstanding Preferred
Securities) shall have been made or provided for, and all funds available to the
Property Trustee shall first be applied to the payment in full in cash of all
Distributions on, or Redemption Price of, the Issuer's Preferred Securities then
due and payable.
In the case of any Event of Default (as defined below) with respect to
Preferred Securities resulting from a Debenture Event of Default with respect to
the Corresponding Junior Subordinated Debentures, the Corporation as holder of
the applicable Issuer's Common Securities will be deemed to have waived any
right to act with respect to any such Event of Default until the effect of all
such Events of Default with respect to such Preferred Securities have been
cured, waived or otherwise eliminated. See " -- Events of Default; Notice".
Until any such Events of Default with respect to such Preferred Securities have
been so cured, waived or otherwise eliminated, the Property Trustee shall act
solely on behalf of the holders of such Preferred Securities and not on behalf
of the Corporation as holder of the Issuer's Common Securities, and only the
holders of such Preferred Securities will have the right to direct the Property
Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
Pursuant to each Trust Agreement, each Issuer shall automatically terminate
upon expiration of its term and shall terminate on the first to occur of:
(i) certain events of bankruptcy, dissolution or liquidation of
the holder of the Common Securities;
(ii) the distribution of a Like Amount of the Corresponding
Junior Subordinated Debentures to the holders of its Trust Securities,
if the Corporation, as Depositor, has given written direction to the
Property Trustee to terminate such Issuer (which direction is optional
and wholly within the discretion of the Corporation, as Depositor);
(iii) redemption of all of the Issuer's Preferred Securities as
described under " -- Redemption or Exchange; MANDATORY REDEMPTION";
and
(iv) the entry of an order for the dissolution of the Issuer by a
court of competent jurisdiction.
If an early termination occurs as described in clause (i), (ii) or (iv)
above, the Issuer shall be liquidated by the Issuer Trustees as expeditiously as
the Issuer Trustees determine to be possible by distributing, after satisfaction
of liabilities to creditors of such Issuer in accordance with applicable law and
the applicable Expense Agreement, to the holders of such Trust Securities in
exchange therefor a Like Amount of the Corresponding Junior Subordinated
Debentures, unless such distribution is determined by the Property Trustee not
to be practical, in which event such holders will be entitled to receive out of
the assets of the Issuer available for distribution to holders, after
satisfaction of liabilities to creditors of such Issuer in accordance with
applicable law and the applicable Expense Agreement, an amount equal to, in the
case of holders of Preferred Securities, the aggregate of the Liquidation Amount
plus accrued and unpaid Distributions thereon to the date of payment (such
amount being the "Liquidation Distribution"). If such Liquidation Distribution
can be paid only in part because such Issuer has insufficient assets available
to pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by such Issuer on its Preferred Securities shall be paid on a PRO RATA
basis. The holder(s) of such Issuer's Common Securities will be entitled to
receive distributions upon any such liquidation PRO RATA with the holders of its
Preferred Securities, except that if a Debenture Event of Default has occurred
and is continuing, the Preferred Securities shall have a priority over the
Common Securities.
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under
each Trust Agreement (an "Event of Default") with respect to the Preferred
Securities issued thereunder (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(i) the occurrence of a Debenture Event of Default under the
Indenture (see "Description of Junior Subordinated
Debentures -- Debenture Events of Default"); or
(ii) default by the Property Trustee in the payment of any
Distribution when it becomes due and payable, and continuation of such
default for a period of 30 days; or
(iii) default by the Property Trustee in the payment of any
Redemption Price of any Trust Security when it becomes due and
payable; or
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(iv) default in the performance, or breach, in any material
respect, of any covenant or warranty of the Issuer Trustees in such
Trust Agreement (other than a covenant or warranty a default in the
performance of which or the breach of which is dealt with in clause
(ii) or (iii) above), and continuation of such default or breach for a
period of 60 days after there has been given, by registered or
certified mail, to the defaulting Issuer Trustee or Trustees by the
holders of at least 25 percent in aggregate Liquidation Amount of the
outstanding Preferred Securities of the applicable Issuer, a written
notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" under
such Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency
with respect to the Property Trustee and the failure by the
Corporation to appoint a successor Property Trustee within 90 days
thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of such Issuer's Preferred
Securities, the Administrative Trustees and the Corporation, as Depositor,
unless such Event of Default shall have been cured or waived. The Corporation,
as Depositor, and the Administrative Trustees are required to file annually with
the Property Trustee a certificate as to whether or not they are in compliance
with all the conditions and covenants applicable to them under each Trust
Agreement.
If a Debenture Event of Default has occurred and is continuing, the
Preferred Securities shall have a preference over the Common Securities as
described above. See " -- Liquidation Distribution Upon Termination". The
existence of an Event of Default does not entitle the holders of Preferred
Securities to accelerate the maturity thereof.
REMOVAL OF ISSUER TRUSTEES
Unless a Debenture Event of Default shall have occurred and be continuing,
any Issuer Trustee may be removed at any time by the holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing, the
Property Trustee and the Delaware Trustee may be removed at such time by the
holders of a majority in Liquidation Amount of the outstanding Preferred
Securities. In no event will the holders of the Preferred Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively in the Corporation as the holder of the
Common Securities. No resignation or removal of an Issuer Trustee and no
appointment of a successor trustee shall be effective until the acceptance of
appointment by the successor trustee in accordance with the provisions of the
applicable Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at any
time or from time to time, for the purpose of meeting the legal requirements of
the Trust Indenture Act or of any jurisdiction in which any part of the Trust
Property of an Issuer may at the time be located, the Corporation, as the holder
of the Common Securities, and the Administrative Trustees shall have power to
appoint one or more persons either to act as a co-trustee, jointly with the
Property Trustee, of all or any part of such Trust Property, or to act as
separate trustee of any such property, in either case with such powers as may be
provided in the instrument of appointment, and to vest in such person or persons
in such capacity any property, title, right or power deemed necessary or
desirable, subject to the provisions of the applicable Trust Agreement. In case
a Debenture Event of Default has occurred and is continuing, the Property
Trustee alone shall have power to make such appointment.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any person into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which such Trustee shall be a party, or any
Person succeeding to all or substantially all the corporate trust business of
such Trustee, shall be the successor of such Trustee under each Trust Agreement,
provided such Person shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE ISSUERS
An Issuer may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except as
described below. An Issuer may, at the request of the Corporation, with the
consent of the Administrative Trustees and without the consent of the holders of
the Preferred Securities of such Issuer, merge with or into, consolidate,
amalgamate, or be replaced by or convey, transfer or lease its properties and
assets substantially as an entirety to a trust organized as such under the laws
of any State; provided,
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that (i) such successor entity either (a) expressly assumes all of the
obligations of such Issuer with respect to such Preferred Securities, or (b)
substitutes for such Preferred Securities other securities having substantially
the same terms as such Preferred Securities (the "Successor Securities") so long
as the Successor Securities rank the same as such Preferred Securities in
priority with respect to distributions and payments upon liquidation, redemption
and otherwise, (ii) the Corporation expressly appoints a trustee of such
successor entity possessing the same powers and duties as the Property Trustee
as the holder of the Corresponding Junior Subordinated Debentures, (iii) the
Successor Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or other
organization on which such Preferred Securities are then listed, if any, (iv)
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not cause the Preferred Securities (including any Successor
Securities) to be downgraded by any nationally recognized statistical rating
organization, (v) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of such Preferred Securities (including any
Successor Securities) in any material respect, (vi) such successor entity has a
purpose substantially identical to that of the Issuer, (vii) prior to such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease,
the Corporation has received an opinion from independent counsel to the Issuer
experienced in such matters to the effect that (a) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of such Preferred
Securities (including any Successor Securities) in any material respect, and (b)
following such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, neither the Issuer nor such successor entity will be required
to register as an investment company under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), and (viii) the Corporation or any
permitted successor or assignee owns all of the Common Securities of such
successor entity and guarantees the obligations of such successor entity under
the Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, an Issuer shall not, except with the consent of
holders of 100 percent in Liquidation Amount of such Preferred Securities,
consolidate, amalgamate, merge with or into, or be replaced by or convey,
transfer or lease its properties and assets substantially as an entirety to any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger, replacement,
conveyance, transfer or lease would cause the Issuer or the successor entity to
be classified as an association taxable as a corporation or as other than a
grantor trust for United States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF EACH TRUST AGREEMENT
Except as provided below and under "Description of Guarantees -- Amendments
and Assignment" and as otherwise required by law and the applicable Trust
Agreement, the holders of the Preferred Securities will have no voting rights.
Each Trust Agreement may be amended from time to time by the Corporation,
the Property Trustee and the Administrative Trustees, without the consent of the
holders of the Preferred Securities (i) to cure any ambiguity, correct or
supplement any provisions in such Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters or
questions arising under such Trust Agreement, which shall not be inconsistent
with the other provisions of such Trust Agreement, or (ii) to modify, eliminate
or add to any provisions of such Trust Agreement to such extent as shall be
necessary to ensure that the Issuer will be classified for United States federal
income tax purposes other than as an association taxable as a corporation or as
a grantor trust at all times that any Trust Securities are outstanding or to
ensure that the Issuer will not be required to register as an "investment
company" under the Investment Company Act; PROVIDED, HOWEVER, that in the case
of either clause (i) or clause (ii), such action shall not adversely affect in
any material respect the interests of any holder of Preferred Securities, and
any amendments of such Trust Agreement shall become effective when notice
thereof is given to the holders of Trust Securities. Each Trust Agreement may be
amended by the Issuer Trustees and the Corporation with (i) the consent of
holders representing not less than a majority (based on Liquidation Amounts) of
the outstanding Trust Securities, and (ii) receipt by the Issuer Trustees of an
opinion of counsel to the effect that such amendment or the exercise of any
power granted to the Issuer Trustees in accordance with such amendment will not
cause the Issuer to be taxable as a corporation or affect the Issuer's status as
a grantor trust for United States federal income tax purposes or the Issuer's
exemption from status as an "investment company" under the Investment Company
Act, provided that without the consent of each holder of Trust Securities, such
Trust Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date, or (ii) restrict the right of a holder of Trust Securities to
institute suit for the enforcement of any such payment on or after such date.
So long as any Corresponding Junior Subordinated Debentures are held by the
Property Trustee, the Issuer Trustees shall not (i) direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee, or executing any trust or power conferred on the Property Trustee with
respect to such Corresponding Junior Subordinated
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Debentures, (ii) waive any past default that is waiveable under the Indenture,
(iii) exercise any right to rescind or annul a declaration that the principal of
all such Corresponding Junior Subordinated Debentures shall be due and payable,
or (iv) consent to any amendment, modification or termination of the Indenture
or such Corresponding Junior Subordinated Debentures, where such consent shall
be required, without, in each case, obtaining the prior approval of the holders
of a majority in aggregate Liquidation Amount of all outstanding Preferred
Securities; PROVIDED, HOWEVER, that where a consent under the Indenture would
require the consent of each holder of such Corresponding Junior Subordinated
Debentures, no such consent shall be given by the Property Trustee without the
prior consent of each holder of the Related Preferred Securities. The Issuer
Trustees shall not revoke any action previously authorized or approved by a vote
of the holders of the Related Preferred Securities except by subsequent vote of
the holders of the Related Preferred Securities. The Property Trustee shall
notify each holder of such Related Preferred Securities of any notice of default
with respect to the Corresponding Junior Subordinated Debentures. In addition to
obtaining the foregoing approvals of the holders of the Related Preferred
Securities, prior to taking any of the foregoing actions, the Issuer Trustees
shall obtain an opinion of counsel experienced in such matters to the effect
that the Issuer will not be classified as an association taxable as a
corporation or as other than a grantor trust for United States federal income
tax purposes on account of such action.
Any required approval of holders of a series of Preferred Securities may be
given at a meeting of holders of such series of Preferred Securities convened
for such purpose or pursuant to written consent. The Property Trustee will cause
a notice of any meeting at which holders of such series of Preferred Securities
are entitled to vote, or of any matter upon which action by written consent of
such holders is to be taken, to be given to each holder of record of such series
of Preferred Securities in the manner set forth in each Trust Agreement.
No vote or consent of the holders of Preferred Securities will be required
for an Issuer to redeem or cancel Preferred Securities in accordance with the
applicable Trust Agreement.
Notwithstanding that holders of a series of Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
Preferred Securities that are owned by the Corporation, the Issuer Trustees or
any affiliate of the Corporation or any Issuer Trustee, shall, for purposes of
such vote or consent, be treated as if they were not outstanding.
GLOBAL PREFERRED SECURITIES
The Preferred Securities of a series may be issued in whole or in part in
the form of one or more Global Preferred Securities that will be deposited with,
or on behalf of, the Depositary identified in the Prospectus Supplement relating
to such series. Unless otherwise indicated in the applicable Prospectus
Supplement for such series, the Depositary will be DTC. Global Preferred
Securities may be issued only in fully registered form and in either temporary
or permanent form. Unless and until it is exchanged in whole or in part for the
individual Preferred Securities represented thereby, a Global Preferred Security
may not be transferred except as a whole by the Depositary for such Global
Preferred Security to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by the
Depositary or any nominee to a successor Depositary or any nominee of such
successor.
The specific terms of the depositary arrangement with respect to a series
of Preferred Securities will be described in the Prospectus Supplement relating
to such series. The Corporation anticipates that the following provisions will
generally apply to depositary arrangements.
Upon the issuance of a Global Preferred Security, and the deposit of such
Global Preferred Security with or on behalf of the Depositary, the Depositary
for such Global Preferred Security or its nominee will credit, on its book-entry
registration and transfer system, the respective aggregate Liquidation Amounts
of the individual Preferred Securities represented by such Global Preferred
Securities to the accounts of Participants. Such accounts shall be designated by
the dealers, underwriters or agents with respect to such Preferred Securities or
by the Corporation if such Preferred Securities are offered and sold directly by
the Corporation. Ownership of beneficial interests in a Global Preferred
Security will be limited to Participants or persons that may hold interests
through Participants. Ownership of beneficial interests in such Global Preferred
Security will be shown on, and the transfer of that ownership will be effected
only through, records maintained by the applicable Depositary or its nominee
(with respect to interests of Participants) and the records of Participants
(with respect to interests of persons who hold through Participants). The laws
of some states require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Preferred
Security.
So long as the Depositary for a Global Preferred Security, or its nominee,
is the registered owner of such Global Preferred Security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or holder of
the
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Preferred Securities represented by such Global Preferred Security for all
purposes under the Trust Agreement governing such Preferred Securities. Except
as provided below, owners of beneficial interests in a Global Preferred Security
will not be entitled to have any of the individual Preferred Securities of the
series represented by such Global Preferred Security registered in their names,
will not receive or be entitled to receive physical delivery of any such
Preferred Securities of such series in definitive form and will not be
considered the owners or holders thereof under the Indenture.
Payments of principal of (and premium, if any) and interest on individual
Preferred Securities represented by a Global Preferred Security registered in
the name of a Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner of the Global Preferred
Security representing such Preferred Securities. None of the Corporation, the
Property Trustee, any Paying Agent, or the Securities Registrar for such
Preferred Securities will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests of the Global Preferred Security representing such Preferred
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Corporation expects that the Depositary for a series of Preferred
Securities or its nominee, upon receipt of any payment of any Liquidation
Amount, premium or Distributions in respect of a permanent Global Preferred
Security representing any of such Preferred Securities including payment of any
Redemption Price therefor, will credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interest in the aggregate
Liquidation Amount of such Global Preferred Security for such Preferred
Securities as shown on the records of such Depositary or its nominee. The
Corporation also expects that payments by Participants to owners of beneficial
interests in such Global Preferred Security held through such Participants will
be governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers in bearer form or registered
in "street name". Such payments will be the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depositary for a series of Preferred Securities is at any time unwilling, unable
or ineligible to continue as depositary and a successor depositary is not
appointed by the Issuer, or if there shall have occurred and be continuing an
Event of Default under the Indenture with respect to such series of Preferred
Securities, then within 90 days thereof the Issuer will issue definitive
certificates for Preferred Securities of such series in exchange for the Global
Preferred Security representing such series of Preferred Securities. In
addition, the Issuer may at any time and in its sole discretion, subject to any
limitations described in the Prospectus Supplement relating to such Preferred
Securities, determine not to have any Preferred Securities of such series
represented by one or more Global Preferred Securities and, in such event, will
issue individual Preferred Securities of such series in exchange for the Global
Preferred Security or Securities representing such series of Preferred
Securities. Further, if the Issuer so specifies with respect to the Preferred
Securities of a series, an owner of a beneficial interest in a Global Preferred
Security representing Preferred Securities of such series may, on terms
acceptable to the Issuer, the Property Trustee and the Depositary for such
Global Preferred Security, receive individual Preferred Securities of such
series in exchange for such beneficial interests, subject to any limitations
described in the Prospectus Supplement relating to such Preferred Securities. In
any such instance, an owner of a beneficial interest in a Global Preferred
Security will be entitled to physical delivery of individual Preferred
Securities of the series represented by such Global Preferred Security equal in
principal amount to such beneficial interest and to have such Preferred
Securities registered in its name. Individual Preferred Securities of such
series so issued will be issued in denominations, unless otherwise specified by
the Issuer, of $25.00 and integral multiples thereof.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities shall be made to the
Depositary, which shall credit the relevant accounts at the Depositary on the
applicable Distribution Dates or, if any Issuer's Preferred Securities are not
held by the Depositary, such payments shall be made by check mailed to the
address of the holder entitled thereto as such address shall appear on the
applicable Securities Register. Unless otherwise specified in the applicable
Prospectus Supplement, the paying agent (the "Paying Agent") shall initially be
the Property Trustee and any co-paying agent chosen by the Property Trustee and
acceptable to the Administrative Trustees and the Corporation. The Paying Agent
shall be permitted to resign as Paying Agent upon 30 days' written notice to the
Property Trustee and the Corporation. In the event that the Property Trustee
shall no longer be the Paying Agent, the Administrative Trustees shall appoint a
successor (which shall be a bank or trust company acceptable to the
Administrative Trustees and the Corporation) to act as Paying Agent.
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REGISTRAR AND TRANSFER AGENT
Unless otherwise specified in the applicable Prospectus Supplement, the
Property Trustee will act as registrar and transfer agent for the Preferred
Securities.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of each Issuer, but upon payment of any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange. The Issuers will not be required to register or cause to be registered
the transfer of their Preferred Securities after such Preferred Securities have
been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of
an Event of Default, undertakes to perform only such duties as are specifically
set forth in each Trust Agreement and, after such Event of Default, must
exercise the same degree of care and skill as a prudent person would exercise or
use in the conduct of his or her own affairs. Subject to this provision, the
Property Trustee is under no obligation to exercise any of the powers vested in
it by the applicable Trust Agreement at the request of any holder of Preferred
Securities unless it is offered reasonable indemnity against the costs, expenses
and liabilities that might be incurred thereby. If no Event of Default has
occurred and is continuing under the applicable Trust Agreement and the Property
Trustee is required to decide between alternative causes of action, construe
ambiguous provisions in such Trust Agreement or is unsure of the application of
any provision of such Trust Agreement, and the matter is not one on which
holders of Preferred Securities are entitled under such Trust Agreement to vote,
then the Property Trustee shall take such action as is directed by the
Corporation and if not so directed, shall take such action as it deems advisable
and in the best interests of the holders of the Trust Securities and will have
no liability except for its own bad faith, negligence or willful misconduct.
MISCELLANEOUS
The Administrative Trustees for each Issuer are authorized and directed to
conduct the affairs of and to operate such Issuer in such a way that such Issuer
will not be deemed to be an "investment company" required to be registered under
the Investment Company Act or classified as other than an association not
taxable as a corporation or a grantor trust for United States federal income tax
purposes, and so that the Corresponding Junior Subordinated Debentures held by
such Issuer will be treated as indebtedness of the Corporation for United States
federal income tax purposes. In this connection, the Corporation and the
Administrative Trustees are authorized to take any action, not inconsistent with
applicable law, the certificate of trust of each Issuer or each Trust Agreement,
that the Corporation and the Administrative Trustees determine in their
discretion to be necessary or desirable for such purposes, as long as such
action does not materially adversely affect the interests of the holders of the
Related Preferred Securities.
Holders of the Preferred Securities have no preemptive or similar rights.
No Issuer may borrow money or issue debt or mortgage or pledge any of its
assets.
BOOK-ENTRY ISSUANCE
DTC will act as securities depositary for all of the Preferred Securities
and the Junior Subordinated Debentures, unless otherwise referred to in the
Prospectus Supplement relating to an offering of Preferred Securities or Junior
Subordinated Debentures. The Preferred Securities and the Junior Subordinated
Debentures will be issued only as fully-registered securities registered in the
name of Cede & Co. (DTC's nominee). One or more fully-registered global
certificates will be issued for the Preferred Securities of each Issuer and the
Junior Subordinated Debentures, representing in the aggregate the total number
of such Issuer's Preferred Securities or aggregate principal balance of Junior
Subordinated Debentures, respectively, and will be deposited with DTC.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its Participants deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. "Direct Participants" include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. DTC is owned by a number of its Direct Participants and by
the New York Stock
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Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Access to the DTC system is also available to others
such as securities brokers and dealers, banks and trust companies that clear
through or maintain custodial relationships with Direct Participants, either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Commission.
Purchases of Preferred Securities or Junior Subordinated Debentures within
the DTC system must be made by or through Direct Participants, which will
receive a credit for the Preferred Securities or Junior Subordinated Debentures
on DTC's records. The ownership interest of each actual purchaser of each
Preferred Security and each Junior Subordinated Debenture ("Beneficial Owner")
is in turn to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchases, but Beneficial Owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the Direct or Indirect Participants through which the Beneficial
Owners purchased Preferred Securities or Junior Subordinated Debentures.
Transfers of ownership interests in the Preferred Securities or Junior
Subordinated Debentures are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in Preferred
Securities or Junior Subordinated Debentures, except in the event that use of
the book-entry system for the Preferred Securities of such Issuer or Junior
Subordinated Debentures is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities or Junior Subordinated Debentures; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Preferred Securities
or Junior Subordinated Debentures are credited, which may or may not be the
Beneficial Owners. The Participants will remain responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners will
be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. as the registered holder of
the Preferred Securities or Junior Subordinated Debentures. If less than all of
an Issuer's Preferred Securities or the Junior Subordinated Debentures are being
redeemed, DTC's current practice is to determine by lot the amount of the
interest of each Direct Participant to be redeemed.
Although voting with respect to the Preferred Securities or the Junior
Subordinated Debentures is limited to the holders of record of the Preferred
Securities or Junior Subordinated Debentures, in those instances in which a vote
is required, neither DTC nor Cede & Co. will itself consent or vote with respect
to Preferred Securities or Junior Subordinated Debentures. Under its usual
procedures, DTC would mail an omnibus proxy (the "Omnibus Proxy") to the
relevant Trustee as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts such Preferred Securities or Junior Subordinated Debentures are
credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Distribution payments on the Preferred Securities or the Junior
Subordinated Debentures will be made by the relevant Trustee to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participant and not of DTC, the relevant Trustee, the Issuer thereof or the
Corporation, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of Distributions to DTC is the responsibility
of the relevant Trustee, disbursement of such payments to Direct Participants is
the responsibility of DTC, and disbursements of such payments to the Beneficial
Owners is the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depositary with
respect to any of the Preferred Securities or the Junior Subordinated Debentures
at any time by giving reasonable notice to the relevant Trustee and the
Corporation. In the event that a successor securities depositary is not
obtained, definitive Preferred Security or Junior Subordinated Debenture
certificates representing such Preferred Securities or Junior Subordinated
Debentures are required to be printed and delivered. The Corporation, at its
option, may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor depositary). After a Debenture Event of Default, the
holders of a majority in Liquidation Amount of Preferred Securities or aggregate
principal amount of Junior Subordinated Debentures may determine to discontinue
the system of book-entry transfers through DTC. In any such event, definitive
certificates for such Preferred Securities or Junior Subordinated Debentures
will be printed and delivered.
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The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Issuers and the Corporation believe to
be accurate, but the Issuers and the Corporation assume no responsibility for
the accuracy thereof. Neither the Issuers nor the Corporation has any
responsibility for the performance by DTC or its Participants of their
respective obligations as described herein or under the rules and procedures
governing their respective operations.
DESCRIPTION OF GUARANTEES
A Guarantee will be executed and delivered by the Corporation concurrently
with the issuance by each Issuer of its Preferred Securities. Wilmington Trust
Company will act as indenture trustee ("Guarantee Trustee") under each Guarantee
for the purposes of compliance with the Trust Indenture Act and each Guarantee
will be qualified as an indenture under the Trust Indenture Act. This summary of
certain provisions of the Guarantees, which describes the material terms
thereof, does not purport to be complete and is subject to, and qualified in its
entirety by reference to, all of the provisions of each Guarantee, including the
definitions therein of certain terms, and the Trust Indenture Act. The form of
the Guarantee has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. Reference in this summary to Preferred
Securities means that Issuer's Preferred Securities to which a Guarantee
relates. The Guarantee Trustee will hold each Guarantee for the benefit of the
holders of the related Issuer's Preferred Securities.
GENERAL
The Corporation will irrevocably agree to pay in full on a subordinated
basis, to the extent set forth herein, the Guarantee Payments (as defined below)
to the holders of the Preferred Securities, as and when due, regardless of any
defense, right of set-off or counterclaim that such Issuer may have or assert
other than the defense of payment. The following payments with respect to the
Preferred Securities, to the extent not paid by or on behalf of the related
Issuer (the "Guarantee Payments"), will be subject to the Guarantee: (i) any
accumulated and unpaid Distributions required to be paid on such Preferred
Securities, to the extent that such Issuer has funds on hand available therefor
at such time; (ii) the Redemption Price with respect to any Preferred Securities
called for redemption, to the extent that such Issuer has funds on hand
available therefor at such time; or (iii) upon a voluntary or involuntary
termination, winding-up or liquidation of such Issuer (unless Corresponding
Junior Subordinated Debentures are distributed to holders of any Related
Preferred Securities in exchange therefor), the lesser of (a) the Liquidation
Distribution, and (b) the amount of assets of such Issuer remaining available
for distribution to holders of Preferred Securities, after satisfaction of
liabilities to creditors of such Issuer in accordance with applicable law and
the applicable Expense Agreement. The Corporation's obligation to make a
Guarantee Payment may be satisfied by direct payment of the required amounts by
the Corporation to the holders of the applicable Preferred Securities or by
causing the Issuer to pay such amounts to such holders.
Each Guarantee will be an irrevocable guarantee on a subordinated basis of
the related Issuer's obligations under the Preferred Securities, but will apply
only to the extent that such related Issuer has funds sufficient to make such
payments, and is not a guarantee of collection.
If the Corporation does not make interest payments on Corresponding Junior
Subordinated Debentures, if any, held by the Issuer, the Issuer will not be able
to pay Distributions on the Related Preferred Securities issued by it and will
not have funds legally available therefor. Each Guarantee will rank subordinate
and junior in right of payment to all Senior Debt of the Corporation. See
" -- Status of the Guarantees". Because the Corporation is a holding company,
the right of the Corporation to participate in any distribution of assets of any
subsidiary upon such subsidiary's liquidation or reorganization or otherwise, is
subject to the prior claims of creditors of that subsidiary, except to the
extent the Corporation may itself be recognized as a creditor of that
subsidiary. Accordingly, the Corporation's obligations under the Guarantees will
be effectively subordinated to all existing and future liabilities of the
Corporation's subsidiaries, and claimants should look only to the assets of the
Corporation for payments thereunder. See "The Corporation". Except as otherwise
provided in the applicable Prospectus Supplement, the Guarantees do not limit
the incurrence or issuance of other secured or unsecured debt of the
Corporation, including Senior Debt, whether under the Indenture, any other
existing indenture or any other indenture that the Corporation may enter into in
the future or otherwise.
The Corporation will, with respect to each series of Preferred Securities,
through the applicable Guarantee, the applicable Trust Agreement, the applicable
series of Corresponding Junior Subordinated Debentures, the Indenture and the
applicable Expense Agreement, taken together, fully, irrevocably and
unconditionally guaranteed all of the Issuer's obligations under such Preferred
Securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes such a guarantee. It is only
the combined operation of these documents that has the effect of
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providing a full, irrevocable and unconditional guarantee of the Issuer's
obligations with respect to such Preferred Securities. See "Relationship Among
the Preferred Securities, the Corresponding Junior Subordinated Debentures and
the Guarantees".
STATUS OF THE GUARANTEES
Each Guarantee will constitute an unsecured obligation of the Corporation
and will rank subordinate and junior in right of payment to all Senior Debt of
the Corporation in the same manner as Junior Subordinated Debentures.
Each Guarantee will rank PARI PASSU with any other Guarantee issued by the
Corporation. Each Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding directly
against the Guarantor to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). Each
Guarantee will be held for the benefit of the holders of the related Preferred
Securities. Each Guarantee will not be discharged except by payment of the
Guarantee Payments in full to the extent not paid by the Issuer or upon
distribution to the holders of the Preferred Securities of the Corresponding
Junior Subordinated Debentures. None of the Guarantees places a limitation on
the amount of additional Senior Debt that may be incurred by the Corporation.
The Corporation expects from time to time to incur additional indebtedness
constituting Senior Debt.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the related Preferred Securities (in which case no vote
will be required), no Guarantee may be amended without the prior approval of the
holders of not less than a majority of the aggregate Liquidation Amount of such
outstanding Preferred Securities. The manner of obtaining any such approval will
be as set forth under "Description of Preferred Securities -- Voting Rights;
Amendment of Each Trust Agreement". All guarantees and agreements contained in
each Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Corporation and shall inure to the benefit of the holders
of the related Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under each Guarantee will occur upon the failure of the
Corporation to perform any of its payment or other obligations thereunder. The
holders of not less than a majority in aggregate Liquidation Amount of the
related Preferred Securities have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Guarantee Trustee
in respect of such Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under such Guarantee.
Any holder of the related Preferred Securities may institute a legal
proceeding directly against the Corporation to enforce its rights under such
Guarantee without first instituting a legal proceeding against the Issuer, the
Guarantee Trustee or any other person or entity.
The Corporation, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether or not the Corporation is in
compliance with all the conditions and covenants applicable to it under the
Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of
an event of default under any Guarantee, undertakes to perform only such duties
as are specifically set forth in such Guarantee and, after an event of default
under such Guarantee, must exercise the same degree of care and skill as a
prudent person would exercise or use in the conduct of his or her own affairs.
Subject to this provision, the Guarantee Trustee is under no obligation to
exercise any of the powers vested in it by any Guarantee at the request of any
holder of the related Preferred Securities unless it is offered reasonable
indemnity against the costs, expenses and liabilities that might be incurred
thereby.
TERMINATION OF THE GUARANTEES
Each Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the related Preferred Securities, upon
full payment of the amounts payable upon liquidation of the related Issuer or
upon distribution of Corresponding Junior Subordinated Debentures to the holders
of the related Preferred Securities in exchange therefor. Each Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of the related Preferred Securities must restore payment of any
sums paid under such related Preferred Securities or such Guarantee.
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GOVERNING LAW
Each Guarantee will be governed by and construed in accordance with the
laws of the State of New York.
THE EXPENSE AGREEMENT
Pursuant to the applicable Expense Agreement, the Corporation will, as
holder of the Common Securities of the applicable Issuer, irrevocably and
unconditionally guarantee to each person or entity to whom such Issuer becomes
indebted or liable, the full payment of any costs, expenses or liabilities of
the Issuer, other than obligations of such Issuer to pay to the holders of any
of such Issuer's Preferred Securities or other similar interests in such Issuer
of the amounts due such holders pursuant to the terms of such Preferred
Securities or such other similar interests, as the case may be. Each Expense
Agreement is intended to be enforceable by third parties.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE CORRESPONDING JUNIOR SUBORDINATED DEBENTURES
AND THE GUARANTEES
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on any series of Preferred
Securities (to the extent the Issuer thereof has funds available for the payment
of such Distributions) are irrevocably guaranteed by the Corporation as and to
the extent set forth under "Description of Guarantees". Taken together, with
respect to each series of Preferred Securities the Corporation's obligations
under each series of Corresponding Junior Subordinated Debentures, the
Indenture, the applicable Trust Agreement, the applicable Expense Agreement, and
the applicable Guarantee will provide, in the aggregate, a full, irrevocable and
unconditional guarantee of payments of distributions and other amounts due on
such series of Preferred Securities. No single document standing alone or
operating in conjunction with fewer than all of the other documents constitutes
such guarantee. It is only the combined operation of these documents that will
have the effect of providing a full, irrevocable and unconditional guarantee of
the Issuer's obligations under Preferred Securities. If and to the extent that
the Corporation does not make payments on any series of Corresponding Junior
Subordinated Debentures, such Issuer will not pay Distributions or other amounts
due on its Related Preferred Securities. The Guarantees do not cover payment of
Distributions when the Issuer does not have sufficient funds to pay such
Distributions. In such event, the remedy of a holder of a series of Preferred
Securities is to institute a legal proceeding directly against the Corporation
pursuant to the terms of the Indenture for enforcement of payment of such
amounts. The obligations of the Corporation under each Guarantee are subordinate
and junior in right of payment to all Senior Debt.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on
each series of Corresponding Junior Subordinated Debentures, such payments will
be sufficient to cover Distributions and other payments due on the Related
Preferred Securities, primarily because (i) the aggregate principal amount of
each series of Corresponding Junior Subordinated Debentures will be equal to the
sum of the aggregate stated Liquidation Amount of the Related Preferred
Securities and Common Securities; (ii) the interest rate and interest and other
payment dates on each series of Corresponding Junior Subordinated Debentures
will match the Distribution rate and Distribution and other payment dates for
the Related Preferred Securities; (iii) the Corporation shall pay for all and
any costs, expenses and liabilities of such Issuer except the Issuer's
obligations to holders of its Preferred Securities under such Preferred
Securities; and (iv) each Trust Agreement further provides that the Issuer will
not engage in any activity that is not consistent with the limited purposes of
such Issuer.
Notwithstanding anything to the contrary in the Indenture, the Corporation
has the right to set-off any payment it is otherwise required to make thereunder
with and to the extent the Corporation has theretofore made, or is concurrently
on the date of such payment making, a payment under the related Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of any related Preferred Security may institute a legal proceeding
directly against the Corporation to enforce its rights under the related
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, the related Issuer or any other person or entity.
A default or event of default under any Senior Debt of the Corporation
would not constitute a default or event of default under the Indenture (and,
therefore, would not constitute a Debenture Event of Default with respect to any
series of Corresponding Junior Subordinated Debentures or Related Preferred
Securities). However, in the event of payment defaults under, or acceleration
of, Senior Debt of the Corporation, the subordination provisions of the
Indenture provide that no payments
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may be made in respect of any Junior Subordinated Debentures until such Senior
Debt has been paid in full or any payment default thereunder has been cured or
waived. Failure to make required payments on any series of Junior Subordinated
Debentures would constitute an event of default under the Indenture (and,
therefore, a Debenture Event of Default).
LIMITED PURPOSE OF ISSUERS
Each Issuer's Preferred Securities evidence preferred undivided beneficial
interests in the assets of such Issuer, and each Issuer exists for the sole
purpose of issuing its Preferred Securities and Common Securities and investing
the proceeds thereof in Corresponding Junior Subordinated Debentures. A
principal difference between the rights of a holder of such Preferred Security
and a holder of a Corresponding Junior Subordinated Debenture is that a holder
of a Corresponding Junior Subordinated Debenture is entitled to receive from the
Corporation the principal amount of and interest accrued on Corresponding Junior
Subordinated Debentures held, while a holder of Preferred Securities is entitled
to receive Distributions from such Issuer (or from the Corporation under the
applicable Guarantee) if and to the extent such Issuer has funds available for
the payment of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
any Issuer involving the liquidation of the Corresponding Junior Subordinated
Debentures, the holders of the related Preferred Securities will be entitled to
receive, out of the assets held by such Issuer, the Liquidation Distribution in
cash. See "Description of Preferred Securities -- Liquidation Distribution Upon
Termination". Upon any voluntary or involuntary liquidation or bankruptcy of the
Corporation, the Property Trustee, as holder of the Corresponding Junior
Subordinated Debentures, would be a subordinated creditor of the Corporation,
subordinated in right of payment to all Senior Debt of the Corporation as set
forth in the Indenture, but entitled to receive payment in full of principal and
interest, before any stockholders of the Corporation receive payments or
distributions. Since the Corporation is the guarantor under each Guarantee and
has agreed to pay for all costs, expenses and liabilities of each Issuer (other
than the Issuer's obligations to the holders of its Preferred Securities), the
positions of a holder of such Preferred Securities and a holder of such
Corresponding Junior Subordinated Debentures relative to other creditors and to
stockholders of the Corporation in the event of liquidation or bankruptcy of the
Corporation are expected to be substantially the same.
PLAN OF DISTRIBUTION
The Junior Subordinated Debentures or the Preferred Securities may be sold
in a public offering to or through underwriters or dealers designated from time
to time. The Corporation and each Issuer may sell all or a portion of its Junior
Subordinated Debentures or Preferred Securities as soon as practicable after
effectiveness of the Registration Statement of which this Prospectus is a part.
The names of any underwriters or dealers involved in the sale of the Junior
Subordinated Debentures or Preferred Securities in respect of which this
Prospectus is delivered, the amount or number of Junior Subordinated Debentures
and Preferred Securities to be purchased by any such underwriters and any
applicable commissions or discounts will be set forth in the applicable
Prospectus Supplement.
Underwriters may offer and sell Junior Subordinated Debentures or Preferred
Securities at a fixed price or prices, which may be changed, or from time to
time at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. In connection with the sale of
Preferred Securities, underwriters may be deemed to have received compensation
from the Corporation and/or the applicable Issuer in the form of underwriting
discounts or commissions and may also receive commissions. Underwriters may sell
Junior Subordinated Debentures or Preferred Securities to or through dealers,
and such dealers may receive compensation in the form of discounts, concessions
or commissions from the underwriters.
Any underwriting compensation paid by the Corporation and/or the applicable
Issuer to underwriters in connection with the offering of Junior Subordinated
Debentures or Preferred Securities, and any discounts, concessions or
commissions allowed by such underwriters to participating dealers, will be
described in a Prospectus Supplement. Underwriters and dealers participating in
the distribution of Junior Subordinated Debentures or Preferred Securities may
be deemed to be underwriters, and any discounts and commissions received by them
and any profit realized by them on resale of such Junior Subordinated Debentures
or Preferred Securities may be deemed to be underwriting discounts and
commissions, under the Securities Act. Underwriters and dealers may be entitled,
under agreement with the Corporation and the applicable Issuer, to
indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act, and to reimbursement by the
Corporation for certain expenses.
32
<PAGE>
In connection with the offering of the Preferred Securities of any Issuer,
such Issuer may grant to the underwriters an option to purchase additional
Preferred Securities to cover over-allotments, if any, at the initial public
offering price (with an additional underwriting commission), as may be set forth
in the accompanying Prospectus Supplement. If such Issuer grants any
over-allotment option, the terms of such over-allotment option will be set forth
in the Prospectus Supplement for such Preferred Securities.
Underwriters and dealers may engage in transactions with, or perform
services for, the Corporation and/or the applicable Issuer and/or any of their
affiliates in the ordinary course of business.
The Junior Subordinated Debentures and the Preferred Securities will be new
issues of securities and will have no established trading market. Any
underwriters to whom Junior Subordinated Debentures or Preferred Securities are
sold for public offering and sale may make a market in such Junior Subordinated
Debentures and Preferred Securities, but such underwriters will not be obligated
to do so and may discontinue any market making at any time without notice. Such
Junior Subordinated Debentures or Preferred Securities may or may not be listed
on a national securities exchange or the Nasdaq National Market. No assurance
can be given as to the liquidity of or the existence of trading markets for any
Junior Subordinated Debentures or Preferred Securities.
This Prospectus may be used, together with the applicable Prospectus
Supplement, by First Union Capital Markets Corp. In connection with offers and
sales related to market-making transactions in Junior Subordinated Debentures or
Preferred Securities effected from time to time after the commencement of the
offering to which such Prospectus Supplement relates, First Union Capital
Markets Corp. may act as principal or agent in such transactions, including as
agent for the counterparty when acting as principal or as agent for both
counterparties, and may receive compensation in the form of discounts and
commissions, including from both counterparties when it acts as agent for both.
Such sales will be made at prevailing market prices at the time of sale, at
prices related thereto or at negotiated prices.
First Union Capital Markets Corp. is a wholly owned subsidiary of the
Corporation and an affiliate of each of the Issuers.
The Corporation has been advised by First Union Capital Markets Corp. that,
subject to applicable laws and regulations, First Union Capital Markets Corp.
may make a market in Junior Subordinated Debentures or Preferred Securities.
However, they are not obligated to do so and any market-making may be
discontinued at any time without notice. In addition, such market-making
activity is subject to the limits imposed by the Securities Act, the Exchange
Act and federal banking laws and regulations. There can be no assurance that an
active trading market will be sustained.
The Corporation may agree to indemnify First Union Capital Markets Corp.
with respect to certain liabilities in connection with this Prospectus,
including liabilities under the Securities Act.
VALIDITY OF SECURITIES
Unless otherwise indicated in the applicable Prospectus Supplement, certain
legal matters will be passed upon for the Corporation by Marion A. Cowell, Jr.,
Executive Vice President, Secretary and General Counsel of the Corporation, and
certain matters of Delaware law will be passed upon for the Corporation and the
Issuers by Richards, Layton & Finger, special Delaware counsel to the
Corporation and the Issuers. The validity of the Guarantees and the Junior
Subordinated Debentures will be passed upon for the Underwriters by Sullivan &
Cromwell, New York, New York. Sullivan & Cromwell will rely upon the opinion of
Richards, Layton & Finger as to matters of Delaware law and the opinion of Mr.
Cowell as to matters of North Carolina law; Mr. Cowell will rely upon the
opinion of Sullivan & Cromwell as to matters of New York law.
EXPERTS
The Corporation's consolidated balance sheets as of December 31, 1995 and
1994, 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, 1995, included in the Corporation's 1995 Supplemental
Annual Report to Stockholders, which is incorporated by reference in the
Corporation's 1995 Annual Report on Form 10-K and incorporated by reference
herein, have been incorporated by reference 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. The aforementioned report of KPMG Peat Marwick LLP
covering the Corporation's consolidated financial statements refers to a change
in the method of accounting for investments.
33
<PAGE>
[First Union
LOGO goes here]
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Registration fee............................................................................................... $151,516.00
Blue Sky fees and expenses (including counsel fees)............................................................ *
Fees of rating agencies........................................................................................ *
Trustees' fees and expenses.................................................................................... *
Printing and engraving......................................................................................... *
Accounting fees and expenses................................................................................... *
Legal fees and expenses........................................................................................ *
Listing fees and expenses...................................................................................... *
Miscellaneous.................................................................................................. *
Total..................................................................................................... $ *
</TABLE>
* To be supplied in an amendment to this Registration Statement.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 55-8-50 through 55-8-58 of the North Carolina Business Corporation
Act ("NCBCA") contain specific provisions relating to indemnification of
directors and officers of North Carolina corporations. In general, the statute
provides that (i) a corporation must indemnify a director or officer who is
wholly successful in defense of a proceeding to which he or she is a party
because of their status as such, unless limited by the articles of
incorporation, and (ii) a corporation may indemnify a director or officer if he
or she is not wholly successful in such defense, if it is determined as provided
in the statute that the director or officer meets a certain standard of conduct,
provided when a director or officer is liable to the corporation, the
corporation may not so indemnify. The statute also permits a director or officer
of a corporation who is a party to a proceeding to apply to the courts for
indemnification, unless the articles of incorporation provide otherwise, and the
court may order indemnification under certain circumstances set forth in the
statute. The statute further provides that a corporation may in its articles of
incorporation or bylaws or by contract or resolution provide indemnification in
addition to that provided by the statute, subject to certain conditions set
forth in the statute.
The Corporation's Bylaws provide for the indemnification of the
Corporation's directors and executive officers by the Corporation against
liabilities arising out of their status as such, excluding any liability
relating to activities which were at the time taken, known or believed by such
person to be clearly in conflict with the best interests of the Corporation. The
Corporation's Articles provide for the elimination of the personal liability of
each director of the Corporation to the fullest extent permitted by the
provisions of the NCBCA, as the same may from time to time be in effect.
The Corporation maintains directors and officers liability insurance, which
provides coverage of up to $80,000,000, subject to certain deductible amounts.
In general, the policy insures (i) the Corporation's directors and officers
against loss by reason of any of their wrongful acts, and/or (ii) the
Corporation against loss arising from claims against the directors and officers
by reason of their wrongful acts, all subject to the terms and conditions
contained in the policy.
Under the Amended and Restated Trust Agreements, the Corporation will agree
to indemnify each of the Issuer Trustees, and to hold such Issuer Trustees
harmless, against any loss, damage, claims, liability or expense incurred
without negligence or bad faith on their part, arising out of or in connection
with the acceptance or administration of such Trust Agreements, including the
costs and expenses of defense against any claim or liability in connection with
the exercise or performance of any of their powers or duties under the Trust
Agreements.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of each
Registrant pursuant to the provisions described under Item 15 above, or
otherwise (other than insurance), each Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than insurance or the payment by each Registrant of expenses incurred or paid by
a director, officer or controlling person of each Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, each
Registrant will, unless in the opinion of its counsel the matter has been
settled by the controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-1
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
<C> <S>
1 Form of Underwriting Agreement*
4(a) Form of Indenture, dated as of , 1996, between the Corporation and Wilmington Trust Company, as
Debenture Trustee*
4(b) Certificate of Trust of First Union Capital I
4(c) Trust Agreement of First Union Capital I
4(d) Certificate of Trust of First Union Capital II
4(e) Trust Agreement of First Union Capital II
4(f) Certificate of Trust of First Union Capital III
4(g) Trust Agreement of First Union Capital III
4(h) Form of Amended and Restated Trust Agreement of First Union Capital I*
4(i) Form of Amended and Restated Trust Agreement of First Union Capital II*
4(j) Form of Amended and Restated Trust Agreement of First Union Capital III*
4(k) Form of Preferred Security Certificate for First Union Capital I (Included as Exhibit D of Exhibit 4(h))*
4(l) Form of Preferred Security Certificate for First Union Capital II (Included as Exhibit D of Exhibit 4(i))*
4(m) Form of Preferred Security Certificate for First Union Capital III (Included as Exhibit D of Exhibit 4(j))*
4(n) Form of Guarantee Agreement for First Union Capital I*
4(o) Form of Guarantee Agreement for First Union Capital II*
4(p) Form of Guarantee Agreement of First Union Capital III*
4(q) Form of Expense Agreement of the Corporation (Included in Exhibits 4(b),
4(c) and 4(j))*
4(r) All instruments defining the rights of holders of long-term debt of the Corporation and its subsidiaries (Not
filed pursuant to clause 4 (iii) of Item 601(b) of Regulation S-K; to be furnished upon request of the
Commission)
5(a) Opinion of Marion A. Cowell, Jr., Esq. as to validity of the Junior Subordinated Debentures and the Guarantees
to be issued by the Corporation*
5(b) Opinion of special Delaware counsel as to validity of the Preferred Securities to be issued by First Union
Capital I*
5(c) Opinion of special Delaware counsel as to validity of the Preferred Securities to be issued by First Union
Capital II*
5(d) Opinion of special Delaware counsel as to validity of the Preferred Securities to be issued by First Union
Capital III*
5(e) Opinion of Sullivan & Cromwell as to validity of the Junior Subordinated Debentures and the Guarantees to be
issued by the Corporation*
8 Opinion of Sullivan & Cromwell as to certain federal income tax matters*
12(a) Computations of Consolidated Ratios of Earnings to Fixed Charges (Incorporated by reference to Exhibit (12)(a)
to the Corporation's 1996 Third Quarter Report on Form 10-Q.)
12(b) Computations of Consolidated Ratios of Earnings to Fixed Charges and Preferred Stock Dividends (Incorporated
by reference to Exhibit (12)(b) to the Corporation's 1996 Third Quarter Report on Form 10-Q.)
23(a) Consent of KPMG Peat Marwick LLP
23(b) Consent of Marion A. Cowell, Jr., Esq. (Included in Exhibit 5(a))*
23(c) Consent of special Delaware counsel (Included in Exhibits 5(b), (c) and (d))*
23(d) Consent of Sullivan & Cromwell (Included in Exhibit 5(e))*
23(e) Consent of Sullivan & Cromwell (Included in Exhibit 8)*
24 Power of Attorney
25(a) Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee under the Junior Subordinated
Indenture*
25(b) Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee under the Amended and Restated
Trust Agreement of First Union Capital I*
25(c) Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee under the Amended and Restated
Trust Agreement of First Union Capital II*
25(d) Form T-1 Statement of Eligibility of Wilmington Trust Company to act as trustee under the Amended and Restated
Trust Agreement of First Union Capital III*
25(e) Form T-1 Statement of Eligibility of Wilmington Trust Company under the Guarantee for the benefit of the
holders of Preferred Securities of First Union Capital I*
25(f) Form T-1 Statement of Eligibility of Wilmington Trust Company under the Guarantee for the benefit of the
holders of Preferred Securities of First Union Capital II*
25(g) Form T-1 Statement of Eligibility of Wilmington Trust Company under the Guarantee for the benefit of the
holders of Preferred Securities of First Union Capital III*
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
<C> <S>
27 The Corporation's Financial Data Schedule (Incorporated by reference to Exhibit (27) to the Corporation's 1996
Third Quarter Report on Form 10-Q.)
</TABLE>
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
Each of the undersigned Registrants, hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, as amended, each
filing a Registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Each of the undersigned Registrants hereby also undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereto) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement;
provided, however, that paragraphs (1) (i) and (1) (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by a Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this Registration Statement.
(2) that, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) to provide to the underwriter at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the underwriter to permit prompt delivery to each
purchaser.
(5) That, for the purposes of determining any liability under the
Securities Act of 1933:
(i) The information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
the form of prospectus filed by the Registration pursuant to Rule 424(b)(1)
or (4) or 487(h) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.
(ii) Each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
First Union Corporation certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Charlotte, State of North Carolina, as of the
23rd day of December, 1996.
FIRST UNION CORPORATION
(Registrant)
By: /s/ MARION A. COWELL, JR.
MARION A. COWELL, JR., EXECUTIVE
VICE PRESIDENT, SECRETARY AND
GENERAL COUNSEL
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities indicated below and as of the date indicated above.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
<S> <C> <C>
*EDWARD E. CRUTCHFIELD Chairman and Chief Executive Officer and
EDWARD E. CRUTCHFIELD Director
*ROBERT T. ATWOOD Executive Vice President and Chief
ROBERT T. ATWOOD Financial Officer
*JAMES H. HATCH Senior Vice President and Corporate
JAMES H. HATCH Controller (Principal Accounting Officer)
*EDWARD E. BARR Director
EDWARD E. BARR
Director
G. ALEX BERNHARDT
*W. WALDO BRADLEY Director
W. WALDO BRADLEY
*ROBERT J. BROWN Director
ROBERT J. BROWN
*ROBERT T. DAVIS Director
ROBERT T. DAVIS
*R. STUART DICKSON Director
R. STUART DICKSON
*B.F. DOLAN Director
B.F. DOLAN
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C> <C>
*RODDEY DOWD, SR. Director
RODDEY DOWD, SR.
*JOHN R. GEORGIUS Director
JOHN R. GEORGIUS
Director
ARTHUR M. GOLDBERG
*WILLIAM N. GOODWIN Director
WILLIAM N. GOODWIN
*BRENTON S. HALSEY Director
BRENTON S. HALSEY
*HOWARD H. HAWORTH Director
HOWARD H. HAWORTH
Director
FRANK M. HENRY
Director
LEONARD G. HERRING
*JUAN RODRIGUEZ INCIARTE Director
JUAN RODRIGUEZ INCIARTE
Director
JACK A. LAUGHERY
*MAX LENNON Director
MAX LENNON
*RADFORD D. LOVETT Director
RADFORD D. LOVETT
*JOSEPH NEUBAUER Director
JOSEPH NEUBAUER
*HENRY D. PERRY, JR. Director
HENRY D. PERRY, JR.
*RANDOLPH N. REYNOLDS Director
RANDOLPH N. REYNOLDS
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C> <C>
Director
RUTH G. SHAW
*CHARLES M. SHELTON, SR. Director
CHARLES M. SHELTON, SR.
*LANTY L. SMITH Director
LANTY L. SMITH
*ANTHONY P. TERRACCIANO Director
ANTHONY P. TERRACCIANO
Director
DEWEY L. TROGDON
Director
JOHN D. UIBLE
*B.J. WALKER Director
B.J. WALKER
* By: Marion A. Cowell, Jr., Attorney-in-Fact
/s/ MARION A. COWELL, JR.
MARION A. COWELL, JR.
</TABLE>
Date: December 23, 1996
II-6
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
First Union Capital I certifies that it has reasonable grounds to believe that
it meets all the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Charlotte, State of North Carolina, as of the
23rd day of December, 1996.
FIRST UNION CAPITAL I
By: First Union Corporation, as
Depositor
By: /s/ KENNETH R. STANCLIFF
KENNETH R. STANCLIFF
SENIOR VICE PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, as amended,
First Union Capital II certifies that it has reasonable grounds to believe that
it meets all the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Charlotte, State of North Carolina, as of the
23rd day of December, 1996.
FIRST UNION CAPITAL II
By: First Union Corporation, as
Depositor
By: /s/ KENNETH R. STANCLIFF
KENNETH R. STANCLIFF
SENIOR VICE PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, as amended,
First Union Capital III certifies that it has reasonable grounds to believe that
it meets all the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Charlotte, State of North Carolina, as of the
23rd day of December, 1996.
FIRST UNION CAPITAL III
By: First Union Corporation, as
Depositor
By: /s/ KENNETH R. STANCLIFF
KENNETH R. STANCLIFF
SENIOR VICE PRESIDENT
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION LOCATION
<C> <S> <C>
1 Form of Underwriting Agreement *
4(a) Form of Indenture, dated as of November , 1996, between the
Corporation and Wilmington Trust Company, as Debenture Trustee *
4(b) Certificate of Trust of First Union Capital I Previously filed
4(c) Trust Agreement of First Union Capital I Previously filed
4(d) Certificate of Trust of Union Capital II Previously filed
4(e) Trust Agreement of First Union Capital II Previously filed
4(f) Certificate of Trust of First Union Capital III Previously filed
4(g) Trust Agreement of First Union Capital III Previously filed
4(h) Form of Amended and Restated Trust Agreement of First Union Capital I *
4(i) Form of Amended and Restated Trust Agreement of First Union Capital II *
4(j) Form of Amended and Restated Trust Trust Agreement of First Union
Capital III *
4(k) Form of Preferred Security Certificate for First Union Capital I
(Included as Exhibit D of Exhibit 4(h)) *
4(l) Form of Preferred Security Certificate for First Union Capital II
(Included as Exhibit D of Exhibit 4(i)) *
4(m) Form of Preferred Security Certificate for First Union Capital III
(Included as Exhibit D of Exhibit 4(j)) *
4(n) Form of Guarantee Agreement for First Union Capital I *
4(o) Form of Guarantee Agreement for First Union Capital II *
4(p) Form of Guarantee Agreement of First Union Capital III *
4(q) Form of Expense Agreement of the Corporation (Included in Exhibits 4(h),
4(i) and 4(j)) *
4(r) All instruments defining the rights of holders of long-term debt of the Not filed pursuant to clause 4(iii)
Corporation and its subsidiaries of Item 601(b) of Regulation S-K; to
be furnished upon request of the
Commission
5(a) Opinion of Marion A. Cowell, Jr., Esq. as to validity of the Junior
Subordinated Debentures and the Guarantees to be issued by the
Corporation *
5(b) Opinion of special Delaware counsel as to validity of the Preferred
Securities to be issued by First Union Capital I *
5(c) Opinion of special Delaware counsel as to validity of the Preferred
Securities to be issued by First Union Capital II *
5(d) Opinion of special Delaware counsel as to validity of the Preferred
Securities to be issued by First Union Capital III *
5(e) Opinion of Sullivan & Cromwell as to validity of the Junior Subordinated
Debentures and the Guarantees to be issued by the Corporation *
8 Opinion of Sullivan & Cromwell as to certain federal income tax matters *
12(a) Computations of Consolidated Ratios of Earnings to Fixed Charges Incorporated by reference to Exhibit
(12)(a) to the Corporation's 1996
Third Quarter Report on Form 10-Q
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION LOCATION
<C> <S> <C>
12(b) Computations of Consolidated Ratios of Earnings to Fixed Charges and Incorporated by reference to Exhibit
Preferred Stock Dividends (12)(b) to the Corporation's 1996
Third Quarter Report on Form 10-Q
23(a) Consent of KPMG Peat Marwick LLP Filed herewith
23(b) Consent of Marion A. Cowell, Jr. Esq. (Included in Exhibit 5(a)) *
23(c) Consent of special Delaware counsel (Included in Exhibits 5(b), (c) and
(d)) *
23(d) Consent of Sullivan & Cromwell (Included in Exhibit 5(e)) *
23(e) Consent of Sullivan & Cromwell (Included in Exhibit 8) *
24 Power of Attorney Previously filed
25(a) Form T-1 Statement of Eligibility of Wilmington Trust Company to act as
trustee under the Junior Subordinated Indenture *
25(b) Form T-1 Statement of Eligibility of Wilmington Trust Company to act as
trustee under the Amended and Restated Trust Agreement of First Union
Capital I *
25(c) Form T-1 Statement of Eligibility of Wilmington Trust Company to act as
trustee under the Amended and Restated Trust Agreement of First Union
Capital II *
25(d) Form T-1 Statement of Eligibility of Wilmington Trust Company to act as
trustee under the Amended and Restated Trust Agreement of First Union
Capital III *
25(e) Form T-1 Statement of Eligibility of Wilmington Trust Company under the
Guarantee for the benefit of the holders of Preferred Securities of
First Union Capital I *
25(f) Form T-1 Statement of Eligibility of Wilmington Trust Company under the
Guarantee for the benefit of the holders of Preferred Securities of
First Union Capital II *
25(g) Form T-1 Statement of Eligibility of Wilmington Trust Company under the
Guarantee for the benefit of the holders of Preferred Securities of
First Union Capital III *
27 The Corporation's Financial Data Schedule Incorporated by reference to Exhibit
(27) to the Corporation's 1996 Third
Quarter Report on Form 10-Q
</TABLE>
* To be filed by amendment.
<PAGE>
EXHIBIT 23(A)
CONSENT OF KPMG PEAT MARWICK LLP
BOARD OF DIRECTORS
FIRST UNION CORPORATION
We consent to the incorporation by reference in this Registration Statement
on Form S-3 of First Union Corporation, First Union Capital I, First Union
Capital II and First Union Capital III of our reported dated January 11, 1996,
relating to the consolidated balance sheets of First Union Corporation and
subsidiaries as of December 31, 1995 and 1994, 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, 1995, which report appears
in the 1995 Supplemental Annual Report to Stockholders which is incorporated by
reference in the 1995 Form 10-K of First Union Corporation. The report refers to
a change in the method of accounting for investments. We also consent to the
reference to our firm under the caption "Experts" in this Registration
Statement.
KPMG PEAT MARWICK LLP
Charlotte, North Carolina
December 23, 1996
<PAGE>
