<PAGE>
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED DECEMBER 31, 1996
(First Union logo)
$250,000,000
FIRST UNION CAPITAL I
7.935% CAPITAL SECURITIES, SERIES A
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, TO THE EXTENT DESCRIBED HEREIN, BY
FIRST UNION CORPORATION
The 7.935% Capital Securities, Series A (the "Series A Capital
Securities"), offered hereby represent preferred undivided beneficial interests
in the assets of 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 common undivided beneficial interests in the assets
(CONTINUED ON NEXT PAGE)
SEE "RISK FACTORS" BEGINNING ON PAGE S-4 FOR CERTAIN INFORMATION RELEVANT
TO AN INVESTMENT IN THE SERIES A CAPITAL SECURITIES.
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.
<TABLE>
<CAPTION>
PROCEEDS TO
INITIAL PUBLIC UNDERWRITING COMMISSIONS (2) THE SERIES A
OFFERING PRICE (1) ISSUER (1)(3)(4)
<S> <C> <C> <C>
Per Series A Capital Security....................... $1,000 (3) $1,000
Total............................................... $250,000,000 (3) $250,000,000
</TABLE>
(1) Plus accumulated Distributions, if any, from the date of original issuance.
(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 (the "Securities Act"). See
"Underwriting".
(3) In view of the fact that the proceeds of the sale of the Series A Capital
Securities will be invested in the Series A Subordinated Debentures, the
Corporation has agreed to pay to the Underwriters as compensation for their
arranging the investment therein of such proceeds $10 per Series A Capital
Security (or $2,500,000 in the aggregate). See "Underwriting".
(4) Expenses of the offering payable by the Corporation are estimated to be
$150,000.
The Series A Capital Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that the Series A Capital Securities will be ready for delivery in book-entry
form only through the facilities of The Depository Trust Company ("DTC") in New
York, New York, on or about January 16, 1997, against payment therefor in
immediately available funds.
GOLDMAN, SACHS & CO.
CHASE SECURITIES INC.
PAINEWEBBER INCORPORATED
PRUDENTAL SECURTES INCORPORATED
SMITH BARNEY INC.
UBS SECURITIES
The date of this Prospectus Supplement is January 10, 1997.
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES A
CAPITAL SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
(COVER PAGE CONTINUED)
of the Series A Issuer ("Series A Common Securities" and, collectively with the
Series A Capital Securities, the "Series A Securities"). The Series A Issuer
exists for the sole purpose of issuing the Series A Securities and investing the
proceeds thereof in $257,732,000 aggregate principal amount of 7.935% 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 January 15, 2027 (the "Stated Maturity").
The Series A Capital Securities will have a preference under certain
circumstances with respect to Distributions (as defined herein) 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 Series A Capital Securities will
constitute "Preferred Securities", as such term is used and defined in the
accompanying Prospectus.
Holders of the Series A Capital Securities will be entitled to receive
preferential cumulative cash distributions accruing from the date of original
issuance and payable semi-annually in arrears on the 15th day of January and
July of each year, commencing July 15, 1997, at the annual rate of 7.935% of the
Liquidation Amount (as defined herein) of $1,000 per Series A Capital Security
("Distributions"). Subject to certain exceptions 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 10 consecutive semi-annual periods with respect to each deferral
period (each, an "Extension Period"), provided that no Extension Period may
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, 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 Capital 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 Capital Securities are entitled will accumulate) at the
rate of 7.935% per annum, compounded semi-annually from the relevant payment
date for such interest, and holders of the Series A Capital Securities will be
required to recognize income (in the form of original issue discount) 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 Capital 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 and unconditionally guaranteed
all of the Series A Issuer's obligations under the Series A Capital Securities.
See "Relationship Among Preferred Securities, Corresponding Junior Subordinated
Debentures and 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 Capital Securities, but
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(COVER PAGE CONTINUED)
only in each case to the extent of funds held by the Series A Issuer, as
described herein. 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 Capital 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 Capital 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 Capital Securities are subordinate and junior in right of payment
to all Senior Debt of the Corporation.
The Series A Capital 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
January 15, 2007, in whole at any time or in part from time to time, at the
redemption prices set forth herein, or (ii) at any time prior to January 15,
2007, 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), at a redemption price equal to the Special Event Redemption
Price (as defined herein). See "Certain Terms of Series A Capital
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, 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 Capital Securities
in exchange therefor upon liquidation of the Series A Issuer. See "Certain Terms
of Series A Capital Securities -- Liquidation of Series A Issuer and
Distribution of Series A Subordinated Debentures to Holders".
In the event of any 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, the holders of the Series A Capital Securities
will be entitled to receive as a preference a Liquidation Amount of $1,000 per
Series A Capital Security, plus accumulated and unpaid Distributions thereon to
the date of payment, which may be in the form of a distribution of a Like Amount
(as defined in the accompanying Prospectus) of Series A Subordinated Debentures,
subject to certain exceptions. See "Certain Terms of Series A Capital
Securities -- Liquidation Value" herein and "Description of Preferred
Securities -- Liquidation Distribution Upon Termination" in the accompanying
Prospectus.
The Series A Capital Securities will be represented by global certificates
registered in the name of DTC or its nominee. Beneficial interests in the Series
A Capital Securities will be shown on, and transfers thereof will be effected
only through, records maintained by DTC and its participants. Beneficial
interests in such Series A Capital Securities will trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will
therefore settle in immediately available funds. Except as described in the
accompanying Prospectus, Series A Capital Securities in certificated form will
not be issued in exchange for the global certificates. See "Book-Entry Issuance"
in the accompanying Prospectus.
This Prospectus Supplement, together with the accompanying Prospectus, may
be used by First Union Capital Markets Corp., an affiliate of the Corporation,
in connection with offers and sales related to market making transactions in the
Series A Capital Securities effected from time to time after the commencement of
the offering to which this 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.
The Commissioner of Insurance of the State of North Carolina (the
"Commissioner") has not approved or disapproved this offering nor has the
Commissioner passed upon the accuracy or adequacy of this Prospectus Supplement
or the Prospectus to which it relates.
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<PAGE>
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"), THE
ADMINISTRATIVE TRUSTEES NAMED THEREIN (THE "ADMINISTRATIVE TRUSTEES" AND
TOGETHER WITH THE PROPERTY TRUSTEE AND DELAWARE TRUSTEE, THE "ISSUER TRUSTEES"),
AND THE SEVERAL REGISTERED HOLDERS FROM TIME TO TIME OF THE SERIES A SECURITIES,
(III) THE "EXPENSE AGREEMENT" MEANS THE AGREEMENT AS TO EXPENSES AND LIABILITIES
ENTERED INTO BY THE CORPORATION, AS HOLDER OF THE SERIES A COMMON SECURITIES,
PURSUANT TO THE TRUST AGREEMENT, AND (IV) THE "SERIES A GUARANTEE" MEANS THE
GUARANTEE ENTERED INTO BY THE CORPORATION FOR THE BENEFIT OF THE HOLDERS OF
SERIES A CAPITAL SECURITIES PURSUANT TO THE GUARANTEE AGREEMENT (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 Capital Securities should carefully
review the information contained in this Prospectus Supplement and in the
accompanying Prospectus and should particularly consider the following matters.
In addition, because holders of Series A Capital Securities may receive Series A
Subordinated Debentures in exchange therefor upon liquidation of the Series A
Issuer, prospective purchasers of Series A Capital 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 and in the accompanying Prospectus.
RANKING OF SUBORDINATED OBLIGATIONS UNDER SERIES A GUARANTEE AND SERIES A
SUBORDINATED DEBENTURES
The obligations of the Corporation under the Series A Guarantee 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
Capital 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
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
Capital 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 (as defined in the accompanying
Prospectus) 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 10
consecutive semi-annual periods 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, semi-annual
Distributions on the Series A Capital Securities by the Series A Issuer will be
deferred (and the amount of Distributions to which holders of the Series A
Capital Securities are entitled will accumulate additional Distributions thereon
at the rate of 7.935% per annum, compounded semi-annually from the relevant
payment date for such Distributions)
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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 (as defined in the accompanying
Prospectus)) 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 such 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 10 consecutive semi-annual periods 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 7.935%,
compounded semi-annually, 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 Capital
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 Capital
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 Capital 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 such cash from the Series A Issuer if the holder disposes of
the Series A Capital Securities prior to the record date for the payment of such
cash. See "Certain Federal Income Tax Consequences -- Interest Income and
Original Issue Discount" and " -- Sales or Redemption of Series A Capital
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 Capital Securities is
likely to be affected. A holder that disposes of its Series A Capital 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 Capital 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 Capital Securities (which
represent preferred undivided beneficial interests in the assets of 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 prior to January 15, 2007 (the date on which the Series A Capital
Securities otherwise would first become redeemable), 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 Capital
Securities. Any such redemption shall be at a price equal to the Special Event
Redemption Price together with accumulated and unpaid Distributions thereon to,
but excluding, the Redemption Date (as defined herein). The Corporation has
committed to the Federal Reserve Bank of Richmond that it will not exercise such
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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. See "Certain Terms of Series A Subordinated
Debentures -- Redemption".
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 Capital 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 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 Series A Capital 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 Capital Securities prior to January 15, 2007.
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 Capital 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 Capital 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 CAPITAL SECURITIES FOR SERIES A SUBORDINATED DEBENTURES
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, 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 Capital 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 owner 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 Capital 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 the Series A Capital Securities
upon liquidation of the Series A Issuer will not be a taxable event to holders
of the Series A Capital 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 Capital Securities. See
"Certain Federal Income Tax Consequences -- Distribution of Series A
Subordinated Debentures to Holders of Series A Capital Securities".
MARKET PRICES
There can be no assurance as to the market prices for the Series A Capital
Securities, or the Series A Subordinated Debentures that may be distributed in
exchange for Series A Capital Securities if a liquidation of the Series A Issuer
occurs. Accordingly, the Series A Capital 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 Capital
Securities may receive on liquidation of the Series A Issuer, may trade at a
discount to the price
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that the investor paid to purchase the Series A Capital Securities offered
hereby. Because holders of the Series A Capital Securities may receive Series A
Subordinated Debentures on termination of the Series A Issuer, prospective
purchasers of the Series A Capital 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 Series A Subordinated Debentures" herein and "Description of Junior
Subordinated Debentures -- Corresponding Junior Subordinated Debentures" in the
accompanying Prospectus.
RIGHTS UNDER 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 for the
purpose of compliance with the Trust Indenture Act and will hold the Series A
Guarantee for the benefit of the holders of the Series A Capital 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 Capital 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 Capital 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 Capital 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 Capital 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 Capital Securities in liquidation of the Series A Issuer.
The holders of not less than a majority in aggregate Liquidation Amount of
the Series A Capital 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 Capital 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 Capital
Securities or otherwise, and in such event, holders of the Series A Capital
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 Capital 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
Capital 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 Capital Securities in the Direct Action. Except as described herein,
holders of the Series A Capital 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 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 Capital Securities, by acceptance thereof, agrees to the provisions of
the Series A Guarantee and the Indenture.
LIMITED VOTING RIGHTS
Holders of the Series A Capital Securities generally will have limited
voting rights relating only to the modification of the Series A Capital
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
Capital Securities will not be entitled to vote to appoint, remove or replace
the Property Trustee, the Delaware Trustee or any Administrative Trustee, and
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such voting rights are vested exclusively in the holder of the Series A Common
Securities (I.E., 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 Capital 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 CAPITAL SECURITIES
The Series A Capital Securities and Series A Subordinated Debentures are
new issues of securities with no established trading market and will not be
listed on any securities exchange. No assurance can be given as to (i) the
existence or liquidity of the secondary market for the Series A Capital
Securities or the Series A Subordinated Debentures, (ii) the ability of the
holders of the Series A Capital Securities or the Series A Subordinated
Debentures to sell them, or (iii) the prices at which the Series A Capital
Securities or the Series A Subordinated Debentures may be sold.
The Series A Capital 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 Capital Securities
that disposes of its Series A Capital 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 Capital 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 Capital Securities".
POSSIBLE TAX LAW CHANGES AFFECTING SERIES A CAPITAL 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, 1995. 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 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" herein 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" herein.
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THE SERIES A ISSUER
The Series A Issuer is a statutory business trust created under Delaware
law pursuant to (i) the Trust Agreement, dated as of November 6, 1996, 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 Capital 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 Capital Securities, except that upon the
occurrence and continuance of an Event of Default (as defined in the
accompanying Prospectus) 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 Capital 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 stated amount equal to approximately three percent of the total
capital of the Series A Issuer. The Series A Issuer has a term of 31 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").
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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 over 2,100 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 North Carolina 3.0 billion common stock/pooling December 1985
Corporation......................
First Railroad & Banking Company of Georgia 3.7 billion common stock/pooling November 1986
Georgia..........................
Florida National Banks of Florida 7.9 billion cash/preferred January 1990
Florida, Inc..................... stock/purchase
Southeast banks.................... Florida 9.9 billion cash, notes/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/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, Florida 3.3 billion common stock/purchase July 1995
F.S.B............................
First Fidelity Bancorporation...... New Jersey, 35.3 billion common stock/preferred January 1996
Pennsylvania stock/pooling
Center Financial Corporation....... 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
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fund advisory company with $11.8 billion in assets under management, in
December 1996. The consideration paid by the Corporation in such
acquisitions was common stock. The Lieber & Company acquisition was
accounted for as a pooling of interests and the Keystone Investments, Inc.
acquisition was accounted for as a purchase.
The Corporation is continually evaluating acquisition opportunities and
frequently conducts due diligence activities in connection with possible
acquisitions. As a result, acquisition discussions and, in some cases
negotiations, frequently take place and future acquisitions involving cash, debt
or equity securities can be expected. Acquisitions typically involve the payment
of a premium over book and market values, and therefore, some dilution of the
Corporation's book value and net income per common share may occur in connection
with any future transactions.
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
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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.
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
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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.
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,
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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.
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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 Capital 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 Capital 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.
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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 (i) the consummation of the offering of the Series A Capital
Securities, and (ii) certain other Guaranteed Preferred Beneficial Interests in
Corporation's Junior Subordinated Deferrable Interest Debentures issued since
September 30, 1996. 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 3.00(6)
</TABLE>
(1) As described herein, the sole assets of the Series A Issuer will be
$257,732,000 of the Series A Subordinated Debentures. The Series A
Subordinated Debentures will mature on January 15, 2027. The Series A
Subordinated Debentures will accrue interest at a rate of 7.935% per annum.
The Corporation owns all of the Series A Common Securities, which accumulate
Distributions at the rate of 7.935% 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 Guaranteed Preferred Beneficial Interests in
Corporation's Junior Subordinated Deferrable Interest Debentures. On January
6, 1997, First Union Institutional Capital II, a statutory business trust
created under Delaware law, issued $250 million of Guaranteed Preferred
Beneficial Interests in Corporation's Junior Subordinated Deferrable
Interest Debentures.
(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
Capital 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.
S-16
<PAGE>
(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 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 Capital 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 Capital 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
Capital 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 (as defined in the accompanying
Prospectus) (including the Series A Capital Securities) issued by the Issuers
(as defined in the accompanying Prospectus) 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 Debentures (specifying as to each Issuer the
principal amount, interest rate and maturity date of the Junior Subordinated
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 Debentures (specifying as to each Issuer the
principal amount, interest rate and maturity date of the Junior Subordinated
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 (including the Series A Capital Securities) issued by each Issuer.
S-17
<PAGE>
CERTAIN TERMS OF SERIES A CAPITAL SECURITIES
GENERAL
The following summary of certain terms and provisions of the Series A
Capital Securities, which describes the material terms thereof, supplements the
description of the terms and provisions of the Preferred Securities (including
the Series A Capital 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 Capital 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 Capital Securities represent preferred undivided beneficial
interests in the assets of the Series A Issuer, and Distributions on each Series
A Capital Security will be payable as a preference at the annual rate of 7.935%
of the stated amount of $1,000 per Series A Capital Security (the "Liquidation
Amount"), semi-annually in arrears on January 15 and July 15 of each year, to
the holders of the Series A Capital Securities on the relevant record dates. The
record dates will be, for so long as the Series A Capital Securities remain in
book-entry form, one Business Day prior to the relevant Distribution payment
dates and, in the event the Series A Capital Securities are not in book-entry
form, the first day of the months in which the relevant Distribution payment
dates occur. Distributions will accumulate from the date of original issuance.
The first Distribution payment date for the Series A Capital Securities will be
July 15, 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 Capital
Securities is not a Business Day (as defined in the accompanying Prospectus),
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 10 consecutive semi-annual periods 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, semi-annual Distributions on the Series A Capital Securities
will be deferred by the Series A Issuer during any such Extension Period.
Distributions to which holders of the Series A Capital Securities are entitled
will accumulate additional Distributions thereon at the rate per annum of 7.935%
thereof, compounded semi-annually 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 such 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
S-18
<PAGE>
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 10
consecutive semi-annual periods 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, 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 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 price (the "Redemption
Price"), with respect to the Series A Capital Securities, equal to the aggregate
Liquidation Amount of such Series A Capital Securities plus accumulated and
unpaid Distributions thereon to but excluding the date of repayment or
redemption (the "Redemption Date") and the related amount of the premium, if
any, paid by the Corporation upon the concurrent redemption of the Series A
Subordinated Debentures. See "Description of Preferred Securities -- Redemption
or Exchange" in the accompanying Prospectus. If less than all of the Series A
Subordinated Debentures are to be repaid or redeemed on a Redemption Date, then
the proceeds from such repayment or redemption, including any premium paid by
the Corporation, shall be allocated to the redemption PRO RATA of the Series A
Capital Securities and the Series A Common Securities. For a description of the
redemption provisions of the Series A Subordinated Debentures, see "Certain
Terms of Series A Subordinated Debentures -- General" and " -- Redemption".
The Corporation has the right to redeem the Series A Subordinated
Debentures (i) on or after January 15, 2007, in whole at any time or in part
from time to time, or (ii) at any time prior to January 15, 2007, in whole (but
not in part), at any time within 90 days following the occurrence and
continuation of a Tax Event or Capital Treatment Event. A redemption of the
Series A Subordinated Debentures would cause a mandatory redemption of the
Series A Capital Securities and Series A Common Securities.
The Redemption Price, in the case of a redemption of Series A Capital
Securities described in clause (i) next above, shall equal the following prices,
expressed in percentages of the Liquidation Amount together with any accumulated
and unpaid Distributions thereon to but excluding the Redemption Date, if
redeemed during the 12-month period beginning January 15 of the years indicated
below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2007..................................................................................... 103.9675%
2008..................................................................................... 103.5708
2009..................................................................................... 103.1740
2010..................................................................................... 102.7773
2011..................................................................................... 102.3805
2012..................................................................................... 101.9838
2013..................................................................................... 101.5870
2014..................................................................................... 101.1903
2015..................................................................................... 100.7935
2016..................................................................................... 100.3968
2017 and thereafter...................................................................... 100.0000%
</TABLE>
The Redemption Price, in the case of a redemption following a Tax Event or
Capital Treatment Event as described in clause (ii) next above, shall be equal
to the Special Event Redemption Price.
S-19
<PAGE>
LIQUIDATION OF SERIES A ISSUER AND DISTRIBUTION OF SERIES A SUBORDINATED
DEBENTURES TO HOLDERS
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, 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 Capital 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 owner 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, a distribution of the
Series A Subordinated Debentures in exchange for Series A Capital Securities
will not be a taxable event to holders of the Series A Capital 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 Capital Securities. See "Certain Federal Income Tax
Consequences -- Distribution of Series A Subordinated Debentures to Holders of
Series A Capital 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 Capital Securities in exchange therefor, the Series A Capital
Securities will remain outstanding until the Stated Maturity of the Series A
Subordinated Debentures.
LIQUIDATION VALUE
The preference payable on the Series A Capital Securities in the event of
any liquidation of the Series A Issuer is $1,000 per Series A Capital Security,
plus accumulated and unpaid Distributions thereon, 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 CAPITAL SECURITIES
The Series A Capital Securities will be represented by global certificates
registered in the name of DTC or its nominee. Beneficial interests in the Series
A Capital Securities will be shown on, and transfers thereof will be effected
only through, records maintained by DTC and its Participants (as defined in the
accompanying Prospectus). Except as described below and in the accompanying
Prospectus, Series A Capital Securities in certificated form will not be issued
in exchange for the global certificates. See "Book-Entry Issuance" in the
accompanying Prospectus.
A global security shall be exchangeable for Series A Capital 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 Exchange Act 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 Capital Securities are issued in certificated form, such Series A
Capital Securities will be in denominations of $1,000 and integral multiples
thereof and may be transferred or exchanged at the offices described below.
Payments on Series A Capital Securities represented by a global security
will be made to DTC, as the depositary for the Series A Capital Securities. In
the event Series A Capital Securities are issued in certificated form, the
Liquidation Amount and Distributions will be payable, the transfer of the Series
A Capital Securities will be registrable, and Series A Capital Securities will
be exchangeable for Series A Capital 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
S-20
<PAGE>
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
Capital Securities are issued in certificated form, the record dates for payment
of Distributions will be the first day of the month in which the relevant
Distribution payment is scheduled to be made. 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 Junior Subordinated
Debentures (as defined in the accompanying Prospectus) with respect to the
Series A Capital 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 Capital 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 7.935%
of the principal amount thereof, semi-annually in arrears on January 15 and July
15 of each year (each, an "Interest Payment Date"), commencing July 15, 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 Capital 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 7.935% thereof, compounded
semi-annually. The term "interest" as used herein shall include semi-annual
interest payments, interest on semi-annual interest payments not paid on the
applicable Interest Payment Date and Additional Sums (as defined in the
accompanying Prospectus), as applicable.
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 January 15, 2027.
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 Capital 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
S-21
<PAGE>
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 10 consecutive semi-annual periods with respect to each Extension
Period; provided, however, that no Extension Period may extend beyond the Stated
Maturity of the Series A Subordinated Debentures. 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 7.935%, compounded semi-annually, 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 Capital Securities while such series is outstanding) will be
required to recognize income (in the form of original issue discount) 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 such 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 10 consecutive semi-annual periods 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 Capital 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 New York
Stock Exchange ("NYSE"), the Nasdaq National Market or other applicable
self-regulatory organization or to holders of the Series A Capital Securities of
the record date for such Distributions 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 Subordinated
Debentures, and, if the Series A Capital Securities are outstanding, the
Property Trustee shall give notice of the Corporation's election to begin a new
Extension Period to the holders of the Series A Capital 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.
S-22
<PAGE>
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 Additional
Sums 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 Corporation may, at its option, redeem the Series A Subordinated
Debentures on or after January 15, 2007, in whole or in part from time to time.
The Corporation has committed, however, to the Federal Reserve Bank of Richmond
that it will not exercise this 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 Series A Subordinated Debenture so redeemed shall equal
the following prices, expressed in percentages of the principal amount together
with any accrued and unpaid interest thereon to the Redemption Date, if redeemed
during the 12-month period beginning January 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2007..................................................................................... 103.9675%
2008..................................................................................... 103.5708
2009..................................................................................... 103.1740
2010..................................................................................... 102.7773
2011..................................................................................... 102.3805
2012..................................................................................... 101.9838
2013..................................................................................... 101.5870
2014..................................................................................... 101.1903
2015..................................................................................... 100.7935
2016..................................................................................... 100.3968
2017 and thereafter...................................................................... 100.0000%
</TABLE>
Series A Subordinated Debentures in denominations larger than $1,000 may be
redeemed in part but only in integral multiples of $1,000. The Corporation may
not redeem the Series A Subordinated Debentures in part unless all accrued and
unpaid interest has been paid in full on all outstanding Series A Subordinated
Debentures for all interest periods terminating on or prior to the Redemption
Date.
In addition, if prior to January 15, 2007 a Tax Event or Regulatory Capital
Event shall occur and be continuing, the Corporation may, at its option, redeem
Series A Subordinated Debentures in whole (but not in part) at any time within
90 days of the occurrence of such Tax Event or Regulatory Capital Event, at a
Redemption Price (the "Special Event Redemption Price") equal to the greater of
(i) 100 percent of the principal amount of the Series A Subordinated Debentures
or (ii) the sum, as determined by a Quotation Agent, of the present values of
the principal amount and premium payable as part of the Redemption Price with
respect to an optional redemption of such Subordinated Debentures on January 15,
2007, together with scheduled payments of interest from the Redemption Date to
January 15, 2007 (the "Remaining Life"), in each case discounted to the
Redemption Date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate, plus, in each case, accrued
interest thereon to the Redemption Date. The Corporation has committed to the
Federal Reserve Bank of Richmond that it will not exercise this redemption
option without having 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.
"Adjusted Treasury Rate" means, with respect to any Redemption Date, the
rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such Redemption Date, plus (i) .79% if such prepayment date
occurs on or prior to January 15, 1998, and (ii) .50% in all other cases.
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"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the Remaining
Life that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities
of comparable maturity to the Remaining Life.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
Debenture Trustee after consultation with the Corporation. "Reference Treasury
Dealer" means: (i) Goldman, Sachs & Co. and its successors; provided, however,
that if the foregoing shall cease to be a primary U.S. Government securities
dealer in New York City (a "Primary Treasury Dealer"), the Corporation shall
substitute therefor another Primary Treasury Dealer, and (ii) any other Primary
Treasury Dealer selected by the Debenture Trustee after consultation with the
Corporation.
"Comparable Treasury Price" means, with respect to any Redemption Date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such prepayment date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, (A) the average
of the Reference Treasury Dealer Quotations for such Redemption Date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if the Debenture Trustee obtains fewer than three such Reference Treasury
Dealer Quotations, the average of all such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Debenture Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted in
writing to the Debenture Trustee by such Reference Treasury Dealer at 5:00 p.m.,
New York City time, on the third Business Day preceding such Redemption Date.
DISTRIBUTION OF SERIES A SUBORDINATED DEBENTURES
As described under "Certain Terms of Series A Capital
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 Capital 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 Capital
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 Capital 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 Capital Securities. 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 Capital Securities.
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 DTC and its Participants.
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 Exchange Act 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 with respect to
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ownership of beneficial interests in such global security. In the event that
Series A Subordinated Debentures are issued in certificated form, such Series A
Subordinated Debentures will be in denominations of $1,000 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
certificated 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 first day of the
month in which the relevant payment of interest is scheduled to be made. 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 Capital
Securities. This summary only addresses the tax consequences to a person that
acquires Series A Capital 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 Capital 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
Capital 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 Capital 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 Capital 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 Capital
Securities. See " -- Possible Tax Law Changes". The 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 Capital 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 CAPITAL SECURITIES, AS
WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
CLASSIFICATION OF SERIES A ISSUER
In the opinion of Sullivan & Cromwell, under current law and assuming
compliance with the terms of 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 Capital Securities (a "Securityholder") will be
required to include in its gross income its PRO RATA share of the interest
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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".
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 the
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 defer payment of interest on the
Series A Subordinated Debentures, 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
Internal Revenue Service could take a position contrary to the interpretation
herein.
Because income on the Series A Capital 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
Capital Securities.
Subsequent uses of the term "interest" in this summary include income in
the form of OID.
DISTRIBUTION OF SERIES A SUBORDINATED DEBENTURES TO HOLDERS OF SERIES A CAPITAL
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 Capital
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 Capital 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 Capital Securities for
the Series A Subordinated Debentures it received upon the 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 CAPITAL SECURITIES
A Securityholder that sells (including a redemption for cash) Series A
Capital Securities will recognize gain or loss equal to the difference between
its adjusted tax basis in the Series A Capital Securities and the amount
realized on the sale of such Series A Capital 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
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are not considered issued with OID, a Securityholder's adjusted tax basis in the
Series A Capital 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 Capital 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 Capital Securities since and including the
date of the first Extension Period. Such gain or loss generally will be a
capital gain or loss (except to the extent any amount realized is treated as a
payment of accrued interest with respect to such 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 Capital
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 Capital 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
Capital 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 Capital
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 Capital 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 Capital Securities will be
reported to holders on Form 1099 and mailed to holders of the Series A Capital
Securities by January 31 following each calendar year.
POSSIBLE TAX LAW CHANGES
As discussed above, the Revenue Reconciliation Bill 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 exercised. The above-described provisions were proposed to
be effective as to instruments issued on or after December 7, 1995. 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,
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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".
CERTAIN ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (a "Plan"), should consider the fiduciary standards of ERISA in the
context of the Plan's particular circumstances before authorizing an investment
in the Series A Capital Securities. Accordingly, among other factors, the
fiduciary should consider whether the investment would satisfy the prudence and
diversification requirements of ERISA and would be consistent with the documents
and instruments governing the Plan.
Section 406 of ERISA and Section 4975 of the Code prohibit Plans, as well
as individual retirement accounts and Keogh plans subject to Section 4975 of the
Code (also "Plans"), from engaging in certain transactions involving "plan
assets" with persons who are "parties in interest" under ERISA or "disqualified
persons" under the Code ("Parties in Interest") with respect to such Plan. A
violation of these "prohibited transaction" rules may result in an excise tax or
other liabilities under ERISA and/or Section 4975 of the Code for such persons,
unless exemptive relief is available under an applicable statutory or
administrative exemption. Employee benefit plans that are governmental plans (as
defined in Section 3(32) of ERISA), certain church plans (as defined in Section
3(33) of ERISA) and foreign plans (as described in Section 4(b)(5) of ERISA) are
not subject to the requirements of ERISA or Section 4975 of the Code;
governmental plans may be subject to similar provisions under applicable state
laws.
Under a regulation (the "Plan Assets Regulation") issued by the U.S.
Department of Labor (the "DOL"), the assets of the Series A Issuer would be
deemed to be "plan assets" of a Plan for purposes of ERISA and Section 4975 of
the Code if "plan assets" of the Plan were used to acquire an equity interest in
the Series A Issuer and no exception were applicable under the Plan Assets
Regulation. An "equity interest" is defined under the Plan Assets Regulation as
any interest in an entity other than an instrument which is treated as
indebtedness under applicable local law and which has no substantial equity
features and specifically includes a beneficial interest in a trust.
Pursuant to an exception contained in the Plan Assets Regulation, the
assets of the Series A Issuer would not be deemed to be "plan assets" of
investing Plans if, immediately after the most recent acquisition of any equity
interest in the Series A Issuer, less that 25% of the value of each class of
equity interests in the Series A Issuer were held by Plans, other employee
benefit plans not subject to ERISA or Section 4975 of the Code (such as
governmental, church and foreign plans), and entities holding assets deemed to
be "plan assets" of any Plan (collectively, "Benefit Plan Investors"), or if the
Series A Capital Securities were "publicly-offered securities" for purposes of
the Plan Assets Regulation. No assurance can be given that the value of the
Series A Capital Securities held by Benefit Plan Investors will be less than 25%
of the total value of such Series A Capital Securities at the completion of the
initial offering or thereafter, and no monitoring or other measures will be
taken with respect to the satisfaction of the conditions of this exception. In
addition, no assurance can be given that the Series A Capital Securities would
be considered to be "publicly-offered securities" under the Plan Assets
Regulation. All of the Series A Common Securities will be purchased and held by
the Corporation.
Certain transactions involving the Series A Issuer could be deemed to
constitute direct or indirect prohibited transactions under ERISA and Section
4975 of the Code with respect to a Plan if the Series A Capital Securities were
acquired with "plan assets" of such Plan and the assets of the Series A Issuer
were deemed to be "plan assets" of Plans investing in the Series A Issuer. For
example, if the Corporation were a Party in Interest with respect to a Plan
(either directly or by reason of its ownership of its banking or other
subsidiaries), extensions of credit between the Corporation and the Series A
Issuer (as represented by the Series A Subordinated Debentures and the Series A
Guarantee) would likely be prohibited by Section 406(a)(1)(B) of ERISA and
Section 4975(c)(1)(B) of the Code, unless exemptive relief were available under
an applicable administrative exemption (see below). In addition, if the
Corporation were considered to be a fiduciary with respect to the Series A
Issuer as a result of certain powers it holds (such as the powers to remove and
replace the Property Trustee and the
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Administrative Trustees), certain operations of the Series A Issuer, including
the optional redemption or acceleration of the Series A Subordinated Debentures,
could be considered to be prohibited transactions under Section 406(b) of ERISA
and Section 4975(c)(1)(E) of the Code. In order to avoid such prohibited
transactions, each investing plan, by purchasing Series A Capital Securities,
will be deemed to have directed the Series A Issuer to invest in the Series A
Subordinated Debentures and to have appointed the Property Trustee.
The DOL has issued five prohibited transaction class exemptions ("PTCEs")
that may provide exemptive relief if required for direct or indirect prohibited
transactions that may arise from the purchase or holding of the Series A Capital
Securities if assets of the Series A Issuer were deemed to be "plan assets" of
Plans investing in the Series A Issuer as described above. Those class
exemptions are PTCE 96-23 (for certain transactions determined by in-house asset
managers), PTCE 95-60 (for certain transactions involving insurance company
general accounts), PTCE 91-38 (for certain transactions involving bank
collective investment funds), PTCE 90-1 (for certain transactions involving
insurance company separate accounts), and PTCE 84-14 (for certain transactions
determined by independent qualified asset managers).
Because the Series A Capital Securities may be deemed to be equity
interests in the Series A Issuer for purposes of applying ERISA and Section 4975
of the Code, the Series A Capital Securities may not be purchased and should not
be held by any Plan, any entity whose underlying assets include "plan assets" by
reason of any Plan's investment in the entity (a "Plan Asset Entity") or any
person investing "plan assets" of any Plan, unless such purchaser or holder is
eligible for the exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1
or 84-14 or another applicable exemption. Any purchaser or holder of the Series
A Capital Securities or any interest therein will be deemed to have represented
by its purchase and holding thereof that it either (a) is not a Plan or a Plan
Asset Entity and is not purchasing such securities on behalf of or with "plan
assets" of any Plan, or (b) is eligible for the exemptive relief available under
PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or another applicable exemption with
respect to such purchase or holding. If a purchaser of the Series A Capital
Securities that is a Plan or a Plan Asset Entity elects to rely on an exemption
other than PTCE 96-23, 95-60, 91-38, 90-1 or 84-14, the Corporation and the
Series A Issuer may require a satisfactory opinion of counsel or other evidence
with respect to the availability of such exemption for such purchase and
holding.
Due to the complexity of these rules and the penalties that may be imposed
upon persons involved in non-exempt prohibited transactions, it is particularly
important that fiduciaries or other persons considering purchasing the Series A
Capital Securities on behalf of or with "plan assets" of any Plan consult with
their counsel regarding the potential consequences if the assets of the Series A
Issuer were deemed to be "plan assets" and the availability of exemptive relief
under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or any other applicable exemption.
UNDERWRITERS
Subject to the terms and subject to the conditions contained in the
Underwriting Agreement dated the date hereof, the Corporation and the Series A
Issuer have agreed that the Series A Issuer will sell to each of the
Underwriters named below, and each of such Underwriters has severally agreed to
purchase from the Series A Issuer, the respective number of the Series A Capital
Securities set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SERIES A
CAPITAL
UNDERWRITERS SECURITIES
<S> <C>
Goldman, Sachs & Co................................................................ 41,750
Chase Securities Inc............................................................... 41,650
PaineWebber Incorporated........................................................... 41,650
Prudential Securities Incorporated................................................. 41,650
Smith Barney Inc................................................................... 41,650
UBS Securities LLC................................................................. 41,650
Total............................................................................ 250,000
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Series A Capital
Securities offered hereby, if any are taken.
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The Underwriters propose to offer the Series A Capital Securities in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement and in part to certain dealers at such
price less a concession not in excess of $6.00 per Series A Capital Security.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of $2.50 per Series A Capital Security to certain brokers and dealers.
After the Series A Capital Securities are released for sale to the public, the
offering price and other selling terms may from time to time be varied by the
Underwriters.
In view of the fact that the proceeds from the sale of the Series A Capital
Securities will be used to purchase the Series A Subordinated Debentures issued
by the Corporation, the Underwriting Agreement provides that the Corporation
will pay as Underwriters' compensation for the Underwriters' arranging the
investment therein of such proceeds an amount of $10.00 per Series A Capital
Security for the accounts of the several Underwriters.
Because the National Association of Securities Dealers, Inc. ("NASD") is
expected to view the Series A Capital Securities offered hereby as interests in
a direct participation program, the offering is being made in compliance with
Rule 2810 of the NASD's Conduct Rules. Offers and sales of the Series A Capital
Securities will be made only to (i) "qualified institutional buyers", as defined
in Rule 144A under the Securities Act, (ii) institutional "accredited
investors", as defined in subparagraphs (1), (2), (3) or (7) of Rule 501 of
Regulation D under the Securities Act, or (iii) individual investors for whom an
investment in non-convertible investment grade preferred securities is
appropriate. The Underwriters may not confirm sales to any accounts over which
they exercise discretionary authority without the prior written approval of the
transaction by the customer.
Prior to this offering, there has been no public market for the Series A
Capital Securities. The Series A Capital Securities will not be listed on any
securities exchange. The Underwriters have advised the Corporation that they
intend to make a market in the Series A Capital Securities, but are not
obligated to do so and may discontinue market making at any time without notice.
No assurance can be given as to the liquidity of the trading market for the
Series A Capital 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.
Certain of the Underwriters or their affiliates have provided from time to
time, and expect to provide in the future, general financing, 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
Capital Securities, the enforceability of the Trust Agreement and the creation
of the Series A Issuer will be passed upon by Richards, Layton & Finger,
Wilmington, Delaware, 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. Certain
federal income tax matters related to the offering of the Series A Capital
Securities have been passed upon for the Corporation by Sullivan & Cromwell. 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.
Members of Sullivan & Cromwell performing these legal services own shares of
capital stock of the Corporation.
S-30
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$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 statutory 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
(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 December 31, 1996.
<PAGE>
(COVER PAGE CONTINUED)
of payment to 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 Related
Preferred 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 and unconditional guarantee of payment 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 (as defined herein) 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
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<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.
The Commissioner of Insurance of the State of North Carolina (the
"Commissioner") has not approved or disapproved the offering nor has the
Commissioner passed upon the accuracy or adequacy of this Prospectus.
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 Indenture, the applicable Trust Agreement, the applicable
Expense Agreement and the applicable Guarantee provide, in the aggregate, a full
and unconditional guarantee of payment 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 statutory 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 series of Corresponding Junior Subordinated Debentures from the
Corporation, and (iii) engaging in only those other activities necessary or
incidental thereto. Accordingly, a series of 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
(as defined herein) under a Trust Agreement resulting from a Debenture Event of
Default (as defined herein) under the Indenture, 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. See "Description of Guarantees" and "Description of Junior
Subordinated Debentures". The holder of the Common Securities of an Issuer
(I.E., the Corporation), or the holders of a majority in Liquidation Amount (as
defined herein or in the applicable Prospectus Supplement) of the 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 (I.E., the Corporation). The
duties and obligations of each Issuer Trustee are governed by the applicable
Trust Agreement. The holder of the Common Securities (I.E., the Corporation)
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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<PAGE>
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 Related 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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<PAGE>
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 Junior Subordinated Debenture (as defined herein) representing
all of the Junior Subordinated Debentures of such series and the exchange of
such temporary Global Junior Subordinated Debenture 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 Junior Subordinated Debentures, and in such case, the
Depositary (as defined herein) for such Global Junior Subordinated Debentures,
which Depositary shall be a clearing agency registered under the Exchange Act;
(xvi) the appointment of any Paying Agent or Agents (as defined herein); (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 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
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or if the principal of, premium, if any, or interest, if any, on any Junior
Subordinated Debentures is payable in one or more 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 or rates.
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 ("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
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Participants or persons that may hold interests through Participants. Ownership
of beneficial interests in such Global Junior 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 certificated 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 or in the applicable Prospectus Supplement, of $25.00 and integral
multiples thereof.
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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 ("Paying
Agents") as the Corporation may designate from time to time in the applicable
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
applicable 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 payment,
except in the case of Defaulted Interest (as defined in the Indenture). 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, 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. 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 Board of
Governors of the Federal Reserve System (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 the minimum denomination therefor may be redeemed in
part but only in integral multiples of such minimum denomination. 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 or a Capital Treatment Event (each as defined herein) in respect of a
series of Junior Subordinated Debentures 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
proposed 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
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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 related 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 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.
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 theretofore entered into, (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.
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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 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 Related 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 due, whether at
maturity, upon redemption by declaration or otherwise; 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
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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 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 held by the Property
Trustee, 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 a series of Corresponding Junior Subordinated
Debentures on the date such interest or principal is due and payable, then a
holder of the 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 a series of Related 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 series of 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
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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.
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 Debenture held by the Property Trustee, the
Property Trustee on behalf of the holders thereof, 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 defined herein); 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
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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 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.
ISSUER EXPENSES
Pursuant to an Agreement as to Liabilities and Expenses, entered into by
the Corporation, as holder of the Common Securities of the applicable Issuer,
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
unconditionally agree with such Issuer that the Corporation will pay the full
amount of any costs, expenses or liabilities of such Issuer, other than
obligations of such Issuer to pay to the holders of the Related Preferred
Securities of such Issuer the amounts due such holders pursuant to the terms
thereof. 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 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
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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 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
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 Related Preferred 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) as holder of the applicable Common Securities, not to voluntarily
terminate, wind-up or liquidate any Issuer, other than (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
not to become an association 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 series will
represent preferred undivided beneficial interests in the assets of the
applicable 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 Preferred
Securities will be a guarantee on a subordinated basis with respect to such
Preferred Securities but will not guarantee payment of Distributions or amounts
payable on redemption or liquidation of such Preferred 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. Except as otherwise
provided 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 undivided beneficial
interests in the assets of the applicable Issuer, and the Distributions on each
Preferred Security will be payable at the rate or rates 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, provided that no such 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
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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 that rank PARI PASSU
in all respects 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 such 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
series of 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 the related 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 series of 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 herein) of the related 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
repayment or redemption (the "Redemption Date") and the related amount of the
premium, if any, paid by the Corporation upon the concurrent repayment or
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 repayment or 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 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
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Federal Reserve Board to do so, if then so required under applicable capital
guidelines or policies of the Federal Reserve Board.
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 the series of
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 for so long as the Corporation (or an affiliate)
is the holder of the Common Securities of an Issuer it will not exercise such
right with respect to such Issuer 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 Related 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 applicable 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 Related 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 series
of Related Preferred Securities and Common Securities or to liquidate the
related Issuer and cause the Corresponding Junior Subordinated Debentures to be
distributed to holders of such series of Related Preferred Securities and Common
Securities in exchange therefor upon liquidation of the Issuer as described
above, such series of Related Preferred Securities and Common Securities will
remain outstanding and Additional Sums 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.
"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.
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 Depositary
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 the Depositary or
its nominee will be deemed to represent the Corresponding Junior
Subordinated Debentures having a principal amount equal to the 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 series of
Related Preferred Securities, or the Corresponding Junior Subordinated
Debentures that may be distributed in exchange for such series of Related
Preferred Securities, if a liquidation of the Issuer were to occur.
Accordingly, the Related Preferred Securities that an investor may
purchase,
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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 Related
Preferred Securities.
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 weighted average maturity of more than
40 years. The Revenue Reconciliation Bill also would have generally denied
interest deductions for interest as 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 as to instruments issued on or after December 7, 1995. If
either provision were to have applied to the Junior Subordinated Debentures
of any series, the Corporation would have been unable to deduct interest on
the Junior Subordinated Debentures 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, would be no earlier than the date of appropriate Congressional
action. Under current law, the Corporation will be able to deduct interest
on the Junior 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 affect the ability of
the Corporation to deduct interest on the Junior Subordinated Debentures.
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
Related 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 Related 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 a
series of 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 the Depositary funds sufficient to
pay the applicable Redemption Price and will give the Depositary
irrevocable instructions and authority to pay the Redemption Price to the
holders of 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 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 unpaid Distributions payable in respect of the Preferred Securities on
or prior to the Redemption Date, but without additional Distributions
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.
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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 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
the minimum denomination of such Preferred Securities or an integral
multiple of such minimum denomination in excess thereof) of the Liquidation
Amount of such Preferred Securities of a denomination larger than such
minimum denomination. The Property Trustee shall promptly notify the trust
registrar and transfer agent 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 Preferred
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 such 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 herein) 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 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
(or Liquidation Distribution in respect of), the Issuer's Preferred
Securities then due and payable.
In the case of any Event of Default with respect to a series of
Related 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 series of Related Preferred Securities have been so cured,
waived or otherwise eliminated, the Property Trustee shall act solely on
behalf of the holders of such series of Related Preferred Securities and
not on behalf of the holder of
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the Issuer's Common Securities (I.E., the Corporation), and only the
holders of such series of Related 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 its Common Securities (I.E., the Corporation);
(ii) the distribution of a Like Amount of Corresponding Junior
Subordinated Debentures to the holders of its related Trust
Securities, if the holder of the Common Securities (I.E., the
Corporation) has given written direction to the Property Trustee to
terminate such Issuer (which direction is optional and wholly within
the discretion of the holder of the Common Securities (I.E., the
Corporation));
(iii) redemption of all of its 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 Issuer's 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
of such Preferred Securities, 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 of such Issuer's Common
Securities (I.E., the Corporation) will be entitled to receive distributions
upon any such liquidation PRO RATA with the holders of the Preferred Securities,
except that if a Debenture Event of Default has occurred and is continuing, such
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
(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
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(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 the related 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, Preferred
Securities shall have a preference over 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 (I.E., the Corporation). 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 assets
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 assets, or to act as separate trustee of any
such assets, 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 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 or as otherwise indicated in the applicable Trust Agreement. An
Issuer may, at the request of the holder of the Common Securities (I.E., 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, 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
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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 such 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 holder of the Common Securities 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 and 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 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 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 not be classified for United States
federal income tax purposes as an association taxable as a corporation or as
other than 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 classified as an association 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 series of 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 series of Corresponding Junior Subordinated
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
such series of Corresponding Junior Subordinated Debentures shall be due and
payable, or (iv) consent to any amendment, modification or termination of the
Indenture or such series of 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 Related Preferred Securities; provided, however, that where a
consent under the Indenture would require the consent of each holder of such
Related Corresponding
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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 the applicable 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 ("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 The Depository Trust Company ("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 aggregate Liquidation Amounts of the
individual Preferred Securities represented by such Global Preferred Security 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 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 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 certificated form and will not be
considered the owners or holders thereof under the Indenture.
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Payments of principal of (and premium, if any) and accumulated
Distributions 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 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 Corporation, or if there shall have occurred and be continuing
an Event of Default 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 or Securities representing such series of Preferred Securities. 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
Preferred Securities, determine not to have any Preferred Securities of such
series represented by one or more Global Preferred Securities and, in such
event, the Issuer 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
Liquidation 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 the minimum denomination of such Preferred Securities 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 shall initially be the Property Trustee
and any co-paying agent chosen by the Property Trustee and acceptable to the
Administrative Trustees. The Paying Agent shall be permitted to resign as Paying
Agent upon 30 days' written notice to the Property Trustee. 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) to act as Paying Agent.
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.
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INFORMATION CONCERNING 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 the applicable 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 Preferred
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 and 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, 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 sole 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 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
Liquidation Amount of such Issuer's Preferred Securities or aggregate principal
balance of such 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 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
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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 applicable 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 applicable 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 relevant Issuer 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 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 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
aggregate Liquidation Amount of the Related Preferred Securities or aggregate
principal amount of the Corresponding 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.
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.
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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 unconditionally agree to pay in full on a subordinated
basis, to the extent set forth herein, the Guarantee Payments (as defined
herein) 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 Related Preferred Securities or by causing
the Issuer to pay such amounts to such holders.
Each Guarantee will be an unconditional 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 and unconditionally
guarantee 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 providing a full and
unconditional guarantee of the Issuer's obligations with respect to such
Preferred Securities. See "Relationship Among Preferred Securities, the
Corresponding Junior Subordinated Debentures and Guarantees".
STATUS OF 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.
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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 Related Preferred Securities of Corresponding
Junior Subordinated Debentures in exchange therefor. 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
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 the related 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 the
related 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 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 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 the Corresponding Junior Subordinated Debentures to the
holders of such 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.
GOVERNING LAW
Each Guarantee will be governed by and construed in accordance with the
laws of the State of New York.
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THE EXPENSE AGREEMENT
Pursuant to the applicable Expense Agreement, the Corporation will, as
holder of the Common Securities of the applicable Issuer, 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 such 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 PREFERRED SECURITIES,
CORRESPONDING JUNIOR SUBORDINATED DEBENTURES
AND 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 unconditionally 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 and
unconditional guarantee of payment 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 and unconditional guarantee of the Issuer's
obligations under such Issuer's 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 of the Corporation.
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 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 the related Issuer except such Issuer's obligations
to holders of its Preferred Securities under such Preferred Securities; and (iv)
each Trust Agreement further provides that the related 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 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 Debenture Event of Default (and, therefore, would not
constitute an Event of Default under a Trust Agreement). 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 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 (subject to the deferral of any interest payment in the case of an
Extension Period) would constitute a Debenture Event of Default (and, therefore,
an Event of Default under a Trust Agreement).
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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 such Preferred Securities and the 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 any Corresponding Junior Subordinated
Debentures, after satisfaction of liabilities to creditors of such Issuer in
accordance with applicable law and the applicable Expense Agreement, 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.
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
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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, Wilmington, Delaware, 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. Mr.
Cowell is a stockholder of the Corporation and holds options to purchase
additional shares of the Corporation's Common Stock. Sullivan & Cromwell
regularly preform legal services for the Corporation and its subsidiaries.
Members of Sullivan & Cromwell performing these legal services own shares of
capital stock of the Corporation.
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.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE CORPORATION SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
<S> <C>
Risk Factors........................................ S-4
The Series A Issuer................................. S-9
The Corporation..................................... S-10
Consolidated Ratios of Earnings to Fixed Charges.... S-15
Use of Proceeds..................................... S-15
Capitalization...................................... S-16
Accounting Treatment................................ S-17
Certain Terms of Series A Capital Securities........ S-18
Certain Terms of Series A Subordinated Debentures... S-21
Certain Federal Income Tax Consequences............. S-25
Certain Erisa Considerations........................ S-28
Underwriters........................................ S-29
Validity of Securities.............................. S-30
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>
$250,000,000
FIRST UNION CAPITAL I
7.935% CAPITAL SECURITIES,
SERIES A
FULLY AND UNCONDITIONALLY GUARANTEED,
TO THE EXTENT DESCRIBED HEREIN, BY
FIRST UNION CORPORATION
(First Union logo)
GOLDMAN, SACHS & CO.
CHASE SECURITIES INC.
PAINEWEBBER INCORPORATED
PRUDENTAL SECURTES
INCORPORATED
SMITH BARNEY INC.
UBS SECURITIES
