Filed Pursuant to Rule 424(b)(5)
File Number 333-34151
[First Union Logo Appears here]
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED SEPTEMBER 5, 1997
$200,000,000
FIRST UNION CORPORATION
6.30% PUTABLE/CALLABLE SUBORDINATED NOTES
DUE APRIL 15, 2028
------------------------
The Putable/Callable Subordinated Notes Due April 15, 2028 (the "Notes") of
First Union Corporation (the "Corporation") will bear interest at the rate of
6.30% per annum to April 15, 2008. The Notes will be subject to mandatory
redemption from the holders thereof on April 15, 2008 (the "Coupon Reset Date"),
either (i) through the exercise of the Call Option (as defined herein) by First
Union Investors, Inc., a subsidiary of the Corporation, the holder of the Call
Option (the "Callholder"), or (ii) in the event the Callholder does not exercise
the Call Option or, if exercised, does not for any reason pay the Call Price (as
defined herein) when required, or the Corporation exercises the Call Option
Override (as defined herein), through the automatic exercise of the Put Option
(as defined herein) by the Trustee (as defined herein) on behalf of the holders.
If the Callholder, or any successors or assigns, exercises the Call Option and
pays the Call Price when required and the Corporation does not exercise the Call
Option Override, the Notes will be acquired by the Callholder from the holders
on the Coupon Reset Date at 100 percent of the principal amount thereof. See
"Description of Certain Terms of the Notes -- Call Option; Put Option; Call
Option Override; Floater Option". If the Callholder for any reason does not
exercise the Call Option, or, if exercised, does not for any reason pay the Call
Price when required, or the Corporation exercises the Call Option Override, the
Corporation will be required to repurchase the Notes from the holders thereof on
the Coupon Reset Date, at 100 percent of the principal amount thereof (the "Put
Option"). See "Description of Certain Terms of the Notes -- Call Option; Put
Option; Call Option Override; Floater Option."
If the Callholder elects to exercise the Call Option and pays the Call
Price when required and the Corporation does not exercise the Call Option
Override, the interest rate on the Notes will be reset by the Calculation Agent
(as defined herein) effective on the Coupon Reset Date either (i) pursuant to
the Call Option Coupon Reset Process (as defined herein), or (ii) pursuant to
the Floater Option Coupon Reset Process (as defined herein) should the
Corporation exercise the Floater Option. See "Description of Certain Terms of
the Notes -- Call Option Coupon Reset Process" and " -- Floater Option Coupon
Reset Process."
The Notes will represent subordinated obligations of the Corporation and
will be issued under the Indenture (the "Indenture"), dated as of March 15,
1986, as amended by supplemental indentures dated as of August 1, 1990, November
15, 1992 and February 7, 1996, between the Corporation and Harris Trust and
Savings Bank, as successor trustee under the Indenture (the "Trustee"). The
Notes will rank PARI PASSU with Existing Subordinated Indebtedness of the
Corporation, subject to the Holders of the Notes being obligated to pay over any
Excess Proceeds to Entitled Persons in respect of Other Financial Obligations as
described in the Prospectus accompanying this Prospectus Supplement under
"Description of Debt Securities -- Subordination of the Subordinated Debt
Securities." Payment of the principal of the Notes may be accelerated only in
the case of certain events involving the bankruptcy, insolvency or
reorganization of the Corporation. There will be no right of acceleration in the
case of a default in the performance of any covenant of the Corporation,
including the payment of principal or interest. See "Description of Debt
Securities" in the Prospectus accompanying this Prospectus Supplement. Interest
on the Notes at the fixed rate set forth above will be payable semi-annually on
April 15 and October 15 of each year through April 15, 2008, commencing October
15, 1998.
Ownership of the Notes will be maintained in book-entry form by or through
The Depository Trust Company ("DTC"). Interests in the Notes will be shown on,
and transfers thereof will be effected only through, records maintained by DTC
and its participants (the "Participants"). The purchasers of the Notes will not
have the right to receive physical certificates evidencing their ownership
except under the limited circumstances described herein. Settlement for the
Notes will be made in immediately available funds. All payments of principal and
interest on the Notes will be made by the Corporation in immediately available
funds so long as the Notes are maintained in book-entry form.
The Notes will not be deposits or other obligations of a bank and will not
be insured by the Federal Deposit Insurance Corporation or any other
governmental agency.
This Prospectus Supplement and the accompanying Prospectus may be used by
First Union Capital Markets, a division of Wheat First Securities, Inc. ("First
Union Capital Markets"), an affiliate of the Corporation, in connection with
offers and sales related to market-making transactions in the Notes. First Union
Capital Markets may act as principal or agent in such transactions. Such sales
will be made at prices related to prevailing market prices at the time of sale
or otherwise.
------------------------
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>
INITIAL PUBLIC UNDERWRITING DISCOUNT PROCEEDS TO THE
OFFERING PRICE (1) AND COMMISSIONS (2) CORPORATION (1)(3)(4)
------------------ --------------------- ---------------------
<S> <C> <C> <C>
Per Note............................................ 99.622% 0.650% 104.082%
Total............................................... $199,244,000 $ 1,300,000 $ 208,164,000
</TABLE>
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(1) Plus accrued interest, if any, from April 23, 1998.
(2) The Corporation has agreed to indemnify the several Underwriters against
certain liabilities under the Securities Act of 1933. See "Underwriting."
(3) Before deduction of expenses payable by the Corporation estimated at
$300,000.
(4) Includes consideration for the Notes and consideration for the Call Option.
------------------------
The Notes are being offered by the Underwriters, subject to prior sale,
when, as and if delivered to, and accepted by, the Underwriters and subject to
certain other conditions. The Underwriters reserve the right to withdraw, cancel
or modify such offer and to reject orders in whole or in part. It is expected
that delivery of the Notes will be made through the book-entry facilities of DTC
on or about April 23, 1998.
FIRST UNION CAPITAL MARKETS
CREDIT SUISSE FIRST BOSTON
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
------------------------
The date of this Prospectus Supplement is April 16, 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE
SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "PLAN OF DISTRIBUTION" IN THE PROSPECTUS ACCOMPANYING THIS
PROSPECTUS SUPPLEMENT.
------------------------
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 accompanying Prospectus.
------------------------
DESCRIPTION OF CERTAIN TERMS OF THE NOTES
The following description of the particular terms of the Notes (referred to
in the accompanying Prospectus as the "Debt Securities", the "Offered Debt
Securities" and the "Subordinated Debt Securities") supplements and modifies the
description of the general terms and provisions of the Notes set forth in the
Prospectus under "Description of the Debt Securities", to which description
reference is hereby made. The following description does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the description set forth in the accompanying Prospectus and the provisions of
the Indenture. Section references used herein are referenced to the Indenture.
Capitalized terms not otherwise defined herein shall have the meanings given to
them in the Indenture.
GENERAL
All references in the accompanying Prospectus to the Subordinated Trustee
shall mean the Trustee, and all references to the Subordinated Indenture shall
mean the Indenture. As of December 31, 1997, $4.0 billion aggregate principal
amount of subordinated long-term debt was issued and outstanding as additional
series of Securities under the Indenture. The Trustee is the trustee for such
additional series. As of December 31, 1997, the Corporation had outstanding an
aggregate of $810 million of long-term Senior Indebtedness, an aggregate of $1.6
billion in short-term Senior Indebtedness, which consisted primarily of
repurchase agreements and commercial paper, and a net receivable position with
respect to outstanding Other Financial Obligations. The Indenture does not
prohibit or limit the incurrence of additional Senior Indebtedness or Other
Financial Obligations by the Corporation.
The Notes will be limited to $200,000,000 aggregate principal amount, will
be direct, unsecured, subordinated obligations of the Corporation and will
mature on April 15, 2028 (the "Final Maturity Date"). On April 15, 2008, the
holders of the Notes will be entitled to receive 100 percent of the principal
amount thereof either (i) from the Callholder, if it purchases the Notes upon
exercise of the Call Option, or (ii) in the event the Callholder does not
exercise the Call Option or, if exercised, does not for any reason pay the Call
Price to the Trustee when required (including as a result of the Corporation
exercising the Call Option Override), from the Corporation following the
automatic exercise of the Put Option by the Trustee for and on behalf of the
holders of the Notes. The Trustee will exercise the Put Option without the
consent of, or notice to, the holders of the Notes. Except as described herein,
the Notes are not subject to redemption prior to the Final Maturity Date.
The Notes will bear interest at the rate of 6.30% per annum from the date
of issuance to but excluding April 15, 2008, the Coupon Reset Date. If the
Callholder elects to purchase the aggregate principal amount of the Notes
pursuant to the Call Option and the Corporation does not exercise the Call
Option Override or the Floater Option, the Calculation Agent (as defined herein)
will reset the interest rate on the Notes effective on the Coupon Reset Date,
pursuant to the Call Option Coupon Reset Process described below. If the
Corporation exercises the Floater Option, the Calculation Agent will reset the
interest rate on the Notes effective on the Coupon Reset Date, pursuant to the
Floater Option Coupon Reset Process described below. In either case (i) the
aggregate principal amount of Notes will be purchased from the holders by the
Callholder, in whole but not in part, at 100 percent of the principal amount
thereof on the Coupon Reset Date, on the terms and subject to the conditions
described herein (interest accrued to but excluding the Coupon Reset Date will
be paid by the Corporation on such date to the holders of the Notes on the
Record Date (as defined herein) for such payment through the facilities of DTC),
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and (ii) on and after the Coupon Reset Date, the Notes will bear interest at the
rate determined by the Calculation Agent in accordance with the procedures set
forth below. See " -- Call Option Coupon Reset Process" and " -- Floater Option
Coupon Reset Process" below.
If the Callholder does not exercise the Call Option, or if exercised, does
not for any reason pay the Call Price when required, or if the Corporation
exercises the Call Option Override, the Trustee will be required to exercise the
Put Option without the consent of, or notice to, the holders of the Notes and
the Corporation will be required, on April 15, 2008, to repurchase the Notes
from the holders thereof at 100 percent of the principal amount thereof. In any
such case, interest accrued to but excluding April 15, 2008 will be paid by the
Corporation on such date to the holders of the Notes on the Record Date for such
payment through the facilities of DTC. See " -- Call Option; Put Option; Call
Option Override; Floater Option" below.
Interest will be payable on the Notes semi-annually on April 15 and October
15 of each year (each, an "Interest Payment Date"), commencing October 15, 1998,
to the persons in whose name the Notes are registered on the April 1 or October
1 (whether or not a Business Day) immediately preceding the related Interest
Payment Date (each, a "Record Date"). Interest will be calculated based on a
360-day year consisting of twelve 30-day months. "Business Day" means any day
other than a Saturday, a Sunday or a day on which banking institutions in the
City of New York or the City of Chicago or the City of Charlotte are authorized
or obligated by law, executive order or governmental decree to be closed.
The Notes will initially be represented by global securities deposited
with, or on behalf of, DTC and will not be issued as individual definitive
securities to their purchasers. Consequently, unless and until such individual
definitive securities are issued, such purchasers will not be recognized as
holders of the Notes under the Indenture and DTC will be the sole holder for all
purposes under the Indenture and the Notes. Hence, until such time, such
purchasers will only be able to exercise the rights of holders of the Notes
indirectly through DTC and its respective participating organizations and, as a
result, the ability of any such purchaser to pledge the Notes to persons or
entities that do not participate in DTC's system, or to otherwise act with
respect to such Notes, may be limited. See "Global Securities" in the
accompanying Prospectus.
The Corporation expects that DTC, for any Notes represented by a global
security, upon request of any payment of principal, premium or interest will
credit immediately Participants' DTC accounts with payments in amounts
proportionate to their respective beneficial interests in such global
securities. The Corporation also expects that payments by Participants to owners
of beneficial interests in such global security or securities 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 registered
in "street name", and will be the responsibility of such Participants. All
payments of principal, premium or interest will be made by the Corporation in
immediately available funds so long as the Notes are maintained in book-entry
form. See " -- Settlement and Exercise of the Put and Call Options" below.
CALL OPTION; PUT OPTION; CALL OPTION OVERRIDE; FLOATER OPTION
CALL OPTION. The Callholder will be First Union Investors, Inc., an
affiliate of the Corporation, the Calculation Agent and First Union Capital
Markets, or any successors or assigns. Pursuant to the terms of the Notes, and
subject to the Call Option Override, the Callholder has the right to purchase
the Notes in whole but not in part on the Coupon Reset Date (the "Call Option"),
at a price equal to 100 percent of the principal amount thereof (the "Call
Price"), by giving notice to the Trustee (the "Call Notice"). Such Call Notice
shall be given to the Trustee, in writing, no later than fifteen calendar days
prior to the Coupon Reset Date.
In the event the Callholder exercises the Call Option and the Corporation
does not exercise the Call Option Override (and whether or not the Floater
Option is exercised), then (i) not later than 2:00 p.m. New York time on the
Business Day prior to the Coupon Reset Date, the Callholder shall deliver the
Call Price in immediately available funds to the Trustee through the facilities
of DTC for payment of the Call Price on the Coupon Reset Date, and (ii) the
holders of the Notes shall be required to deliver, and will be deemed to have
delivered, the Notes to the Callholder against payment therefor on the Coupon
Reset Date through the facilities of DTC.
If the Callholder exercises the Call Option, the obligation of the
Callholder to pay the Call Price is subject to the conditions precedent that (i)
since the date of the Call Notice, no Event of Default (as defined in the
Indenture), or any event which, with the giving of notice or passage of time, or
both, would constitute an Event of
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Default, with respect to the Notes shall have occurred and be continuing; (ii)
no Market Disruption Event (as defined below) shall have occurred; (iii) two or
more Dealers shall not have provided timely Bids in the manner described herein
under "Call Option Coupon Reset Process", and (iv) the Corporation shall not
have exercised the Call Option Override. The Callholder is not required to
exercise the Call Option, and no holder of any Notes or any interest therein
shall have any right or claim against the Callholder as a result of the
Callholder purchasing or not purchasing the Notes.
The Call Option provides for certain circumstances under which the Call
Option may be terminated, including termination by the Corporation if it
exercises the Call Option Override. If the Call Option terminates, or if the
Callholder after having exercised the Call Option does not for any reason pay
the Call Price to the Trustee at or prior to the required time, the Put Option
will be automatically exercised by the Trustee as summarized below. In such
circumstances, the Trustee shall notify the holders of the Notes that it is
exercising the Put Option.
In the event that the Callholder exercises the Call Option and the
Corporation does not exercise the Call Option Override, the Corporation shall
have the right to exercise the Floater Option, as discussed below, the effect of
which will be to determine a floating interest rate for the Notes for the period
from April 15, 2008 to (but excluding) the New Coupon Reset Date (as defined
herein), and to alter the method for determining the coupon reset provided in
the Call Option Coupon Reset Process until the end of such period. See
" -- Floater Option Coupon Reset Process" below.
PUT OPTION. If the Call Option is not exercised or, if exercised, the
Callholder does not for any reason deliver the Call Price to the Trustee not
later than 2:00 p.m. New York time on the Business Day prior to the Coupon Reset
Date, or if the Corporation exercises the Call Option Override, the option to
put the Notes to the Corporation pursuant to the Put Option will be
automatically exercised by the Trustee on behalf of the holders of the Notes.
Upon exercise of the Put Option, the Corporation will be required to purchase
the Notes on April 15, 2008, at a purchase price equal to 100 percent of the
principal amount thereof (the "Put Redemption Price"). In any such case,
interest accrued to but excluding April 15, 2008 will be paid by the Corporation
on such date to the holders of the Notes on the Record Date for such payment
through the facilities of DTC. If the Put Option is exercised, the Corporation
will deliver the Put Redemption Price to the Trustee through the facilities of
DTC by no later than 12:00 noon New York time on April 15, 2008, and the holders
of the Notes will be required to deliver, and will be deemed to have delivered,
the Notes to the Corporation against payment therefor on such date, through the
facilities of DTC. The Notes will thereupon be cancelled and no Notes will be
issued in lieu of or in exchange therefor. No holder of any Notes or any
interest therein has the right to consent or object to the Trustee's duty to
exercise the Put Option.
CALL OPTION OVERRIDE. If the Call Option is exercised, the Corporation
shall have the option to override such exercise (the "Call Option Override") by
giving written notice of such exercise to the Callholder, the Calculation Agent
and the Trustee not later than 2:00 p.m. New York time no later than four
Business Days prior to April 15, 2008, in which case the Put Option will be
automatically exercised by the Trustee for and on behalf of the holders of the
Notes on April 15, 2008.
FLOATER OPTION. If the Call Option is exercised and the Corporation does
not exercise the Call Option Override, the Corporation shall have the option,
exercisable by giving written notice of exercise to the Call-
holder, the Calculation Agent and the Trustee not later than 2:00 p.m. New York
time no less than four
Business Days prior to April 15, 2008, to reset the coupon on the Notes to a
floating interest rate for the period from and including the Coupon Reset Date
to October 15, 2008, or such earlier date established by the Corporation by
written notice to the Callholder, the Trustee and the Calculation Agent at least
six Business Days prior to such date, as the new coupon reset date (the "New
Coupon Reset Date"), In such case, the Callholder shall remain obligated to
purchase the Notes from the holders, and the holders of the Notes shall remain
obligated to deliver, and will be deemed to have delivered, the Notes to the
Callholder, at the Call Price on the Coupon Reset Date. After the Coupon Rest
Date, the Corporation may elect (i) to exercise the Second Call Option (as
defined herein) and have the coupon reset to a fixed rate from the New Coupon
Reset Date to the Final Maturity Date or (ii) to purchase and cancel the Notes
on the New Coupon Reset Date, all as described below. See " -- Floater Option
Coupon Reset Process" below.
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CALL OPTION COUPON RESET PROCESS
Pursuant to a Calculation Agency Agreement with the Corporation, First
Union National Bank, a subsidiary of the Corporation, has been appointed the
calculation agent for the Notes (in such capacity, the "Calculation Agent"). If
the Callholder exercises the Call Option and the Corporation does not exercise
the Call Option Override or the Floater Option, each as set forth above under
"Call Option; Put Option; Call Option Override; Floater Option", the Corporation
and the Calculation Agent shall complete the following steps in order to
determine the interest rate to be paid on the Notes from and including the
Coupon Reset Date to the Final Maturity Date. The Corporation and the
Calculation Agent shall use reasonable efforts to cause the actions contemplated
below to be completed in as timely a manner as practicable.
(a) The Corporation shall provide the Calculation Agent with a list (the
"Dealer List"), no later than four Business Days prior to the Coupon Reset Date,
containing the names and addresses of at least three and not more than five
dealers, one of which shall be First Union Capital Markets, from which it
desires the Calculation Agent to obtain the Bids (as defined below) for the
purchase of the Notes on the Coupon Reset Date.
(b) Within one Business Day following receipt by the Calculation Agent of
the Dealer List, the Calculation Agent shall provide to each dealer ("Dealer")
on the Dealer List (i) a copy of this Prospectus Supplement and the accompanying
Prospectus relating to the offering of the Notes, (ii) a copy of the form of the
Notes, and (iii) a written request that each such Dealer submit a Bid to the
Calculation Agent by 12:00 noon, New York City time (the "Bid Deadline"), on the
third Business Day prior to the Coupon Reset Date (the "Bid Date"). "Bid" shall
mean an irrevocable written offer given by a Dealer for the purchase of the
Notes on the Coupon Reset Date, and shall be quoted by such Dealer as a stated
yield to maturity on the Notes ("Yield to Maturity"). Each Dealer shall be
provided with (i) the name of the Corporation, (ii) an estimate of the Purchase
Price (which shall be stated as a U.S. dollar amount and be calculated by the
Calculation Agent in accordance with paragraph (c) below), (iii) the principal
amount and maturity of the Notes, and (iv) the method by which interest will be
calculated on the Notes.
(c) The purchase price to be paid by any Dealer for the Notes (the
"Purchase Price") shall be equal to (i) the principal amount of the Notes plus
(ii) a premium (the "Fixed Notes Premium") equal to the Settlement Amount.
"Settlement Amount" means the present value of an annuity equal to the positive
difference, if any, of (x) a stream of interest payments which would have been
due on the Notes after the Coupon Reset Date assuming the Notes were to bear
interest at 6.50% (computed on the basis of a 360-day year consisting of twelve
30-day months) and the aggregate face amount of the Notes were to remain
outstanding until April 15, 2028, and (y) a stream of corresponding interest
payments which would have been due on the Notes after the Coupon Reset Date
assuming the Notes were to bear interest at the Swap Rate (computed on the basis
of a 360-day year consisting of twelve 30-day months) and the aggregate face
amount of Notes were to remain outstanding until April 15, 2028, determined by
discounting, such interest payments described in clauses (x) and (y) from the
respective dates on which such interest payments would have become due to the
Coupon Reset Date using a series of discount factors corresponding to those
dates as determined by the Calculation Agent from the yield curve a swap dealer
would use on the Bid Date in valuing a series of swap payments similar to that
annuity. "Swap Rate" for the Notes means the per annum rate equal to the sum of
the Base Rate plus the bid side yield to maturity of then current 20-year swaps
spread which appears on Telerate Page 19901 ("Swap Spread") at 11:00 a.m., New
York time, on the applicable Bid Date (or such other date or time that may be
agreed upon by the Corporation and the Calculation Agent) (the "Rate Setting
Time"), or if such Swap Spread does not appear on Telerate Page 19901 as of the
Rate Setting Time then such Swap Spread shall be as determined by the
Calculation Agent by obtaining bid quotations for the then current 20-year swap
spread (quoted over the then-current on-the-run ten-year U.S. Treasury Security)
from four reference market-makers (selected in good faith by the Calculation
Agent) as of the Rate Setting Time and then computing the arithmetic mean of the
two middle bid quotations (after discarding the highest and lowest of such
quotations), which arithmetic mean shall be such Swap Spread. "Telerate Page
19901" means the display designated as Page "19901" on the Dow Jones Telerate
Service (or any successor or substitute page as may replace such page on such
service). For purposes of the computation of Swap Rate, the "Base Rate" means
the per annum rate equal to the offered side yield to maturity of the
then-current on-the-run ten-year U.S. Treasury Security which appears on
Telerate Page 500 as of the Rate Setting Time or, if such rate does not appear
on Telerate Page 500 at such time, then the Base Rate shall be determined by the
Calculation Agent by obtaining offered quotations for the then
current-on-the-run ten-year U.S. Treasury Security from four government
securities dealers (selected in good faith by the Calculation Agent) as of the
Rate Setting Time and then computing the arithmetic mean of the yields of the
two middle offered quotations (after discarding the highest and lowest of such
quotations), which arithmetic mean shall be
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the "Base Rate"; provided, however, that if the Swap Spread reported by Telerate
on the applicable Bid Date is not based on an underlying ten-year U.S. Treasury
Security, then the Calculation Agent shall determine the Base Rate by
interpolation between a Base Rate computed on the basis of a U.S. Treasury
Security with a ten-year maturity and a Base Rate computed on the basis of a
U.S. Treasury Security with a 30-year maturity. "Telerate Page 500" means the
display designated as Page "500" on the Dow Jones Telerate Service (or any
successor or substitute page as may replace such page on such service).
(d) Following receipt of the Bids, the Calculation Agent shall provide
written notice to the Corporation, setting forth (i) the names of each of the
Dealers from whom the Calculation Agent received Bids on the Bid Date, (ii) the
Bid submitted by each such Dealer, and (iii) the Purchase Price as determined
pursuant to paragraph (c) above. Except as provided below, the Calculation Agent
shall thereafter select from the Bids received the Bid with the lowest Yield to
Maturity (the "Selected Bid") and establish the Coupon Reset Rate (the "Coupon
Reset Rate") equal to the interest rate which would amortize the Fixed Notes
Premium fully over the term of the Notes at the Yield to Maturity indicated by
the Selected Bid; provided, however, that if the Calculation Agent has not
received a Bid from a Dealer by the Bid Deadline, the Selected Bid shall be the
lowest of all Bids received by such time, and provided, further, that if any two
or more of the lowest Bids submitted are equivalent, the Corporation shall in
its sole discretion select any of such equivalent Bids (and such selected Bid
shall be the Selected Bid).
(e) Immediately after calculating the Coupon Reset Rate, the Calculation
Agent shall provide written notice to the Corporation and the Trustee setting
forth such Coupon Reset Rate as the new interest rate on the Notes, effective
from and including April 15, 2008, by delivery to the Trustee on or before the
Coupon Reset Date of an officers' certificate.
(f) The Callholder shall sell the Notes to the Dealer that made the
Selected Bid at the Purchase Price, such sale to be settled on the Coupon Reset
Date in immediately available funds.
(g) Notwithstanding the foregoing, if the Calculation Agent determines that
(i) since the Call Notice, an Event of Default, or any event which, with the
giving of notice or the passage of time, or both, would constitute an Event of
Default with respect to the Notes shall have occurred and be continuing, (ii) a
Market Disruption Event (as defined below) has occurred following the exercise
of the Call Option, or (iii) two or more of the Dealers have failed to provide
Bids in a timely manner substantially as provided above, the Call Option will be
automatically revoked, and the Put Option will be automatically exercised by the
Trustee on behalf of the holders of the Notes. "Market Disruption Event" shall
mean any of the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange or the establishment of
minimum prices in such exchange; (ii) a general moratorium on commercial banking
activities declared by either federal or New York State authorities; (iii) any
material adverse change in the existing financial, political or economic
conditions in the United States of America; (iv) an outbreak or escalation of
major hostilities involving the United States of America or the declaration of a
national emergency or war by the United States of America; or (v) any material
disruption of the U.S. government securities market, U.S. corporate bond market,
or U.S. federal wire system; provided, however, that in the case of a Market
Disruption Event, in the judgment of the Calculation Agent, the effect thereof
makes it impracticable to conduct the Call Option Coupon Reset Process.
FLOATER OPTION COUPON RESET PROCESS
If the Callholder has exercised the Call Option and the Corporation has
exercised the Floater Option, each as set forth above under "Call Option; Put
Option; Call Option Override; Floater Option", the Callholder shall remain
obligated to purchase the Notes from the holders, and the holders of the Notes
shall remain obligated to deliver, and will be deemed to have delivered, the
Notes to the Callholder, at the Call Price on the Coupon Reset Date. The
Calculation Agent shall complete the following steps in order to determine the
floating interest rate to be paid on such Notes from and including such Coupon
Reset Date to (but excluding) the New Coupon Reset Date and, in certain
circumstances, as described below, the fixed rate of interest to be paid on the
Notes from and after the New Coupon Reset Date to the Final Maturity Date. The
Corporation and the Calculation Agent shall use reasonable efforts to cause the
actions contemplated below to be completed in as timely a manner as possible.
Upon any reset of the interest rate on the Notes from a floating rate to a fixed
rate pursuant to the Floater Option Coupon Reset Process, as described below,
(i) the Corporation will deliver to the Trustee through the facilities of
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DTC, not later than 12:00 noon New York time on the New Coupon Reset Date, the
Call Price in immediately available funds for payment of such amount on the New
Coupon Reset Date, and (ii) the holders of the Notes shall be required to
deliver, and will be deemed to have delivered, the Notes to the Corporation
against payment therefor on such New Coupon Reset Date through the facilities of
DTC.
FLOATING RATE
(a) Not later than four Business Days prior to the Coupon Reset Date, the
Calculation Agent shall provide to a dealer selected by the Corporation (the
"Bidding Dealer") (i) a copy of this Prospectus Supplement and the accompanying
Prospectus relating to the offering of the Notes, (ii) a copy of the form of the
Notes, and (iii) a written request that the Bidding Dealer submit a Bid to the
Calculation Agent by the Bid Deadline on the Bid Date. The Bidding Dealer shall
be provided with (i) the name of the Corporation, (ii) the Purchase Price (which
shall be stated as a U.S. dollar amount in accordance with paragraph (b) below),
(iii) the principal amount and maturity of the Notes, and (iv) the method by
which interest will be calculated on the Notes. Unless the Corporation
determines otherwise at the time, First Union Capital Markets is expected to be
the Bidding Dealer.
(b) The Purchase Price shall be equal to the principal amount of the Notes.
The Notes shall bear interest at a per annum rate of interest, reset daily,
based on the three-month London Interbank Offered Rate ("LIBOR") plus or minus a
percentage spread to LIBOR to be determined by the Bidding Dealer (the
"Spread"). "LIBOR" means the offered rate (expressed as an interest rate per
annum) for three-month Eurodollar deposits for the semi-annual interest period
commencing on the Coupon Reset Date which appears on Telerate Screen Page 3750
(to five decimal places), as of 11:00 a.m., London time, on the Bid Date (or, if
such date is not a London Business Day, the next previous London Business Day,
where "London Business Day" means any Business Day on which dealings in deposits
in U.S. dollars are transacted in the London interbank market). "Telerate Page
3750" means the display designated as Page "3750" on the Dow Jones Telerate
Service (or such other page as may replace Page 3750 on that service or such
other service or services as may be nominated by the British Bankers'
Association for the purpose of displaying London interbank offered rates of
major banks for U.S. dollar deposits). If, on the Bid Date, LIBOR cannot be
determined as provided in the foregoing sentence, LIBOR will be determined on
the basis of the rates at which deposits in U.S. dollars having a maturity of
three months, commencing on the Coupon Reset Date in a principal amount of not
less than U.S. $1,000,000 that is representative for a single transaction in
such market at such time, are offered by four major banks in the London
interbank market selected by the Calculation Agent at approximately 11:00 a.m.,
London time, on the Bid Date to prime banks in the London interbank market. The
Calculation Agent will request the principal London office of each of such banks
to provide a quotation of its rate. If at least two such quotations are
provided, LIBOR in respect of the Bid Date will be the arithmetic mean (rounded
to the nearest one-thousandth of a percent, with five ten-thousandths of a
percent rounded upwards) of such quotations. If fewer than two quotations are
provided, LIBOR in respect of the Bid Date will be the arithmetic mean (rounded
to the nearest one-thousandth of a percent, with five ten thousandths of a
percent rounded upwards) of the rates quoted by three major banks in New York
City selected by the Calculation Agent at approximately 11:00 a.m., New York
City time, on the Bid Date for loans in U.S. dollars to leading European banks
having a maturity of three months commencing on the Coupon Reset Date and in a
principal amount of not less than U.S. $1,000,000 that is representative for a
single transaction in such market at such time.
(c) Following receipt of the Bid, the Calculation Agent shall provide
written notice to the Corporation, setting forth the Purchase Price and shall
establish the floating coupon reset rate (the "Floating Coupon Reset Rate")
equal to LIBOR (as determined pursuant to paragraph (b) above) plus or minus the
Spread (as determined pursuant to paragraph (b) above).
(d) Immediately after calculating the Floating Coupon Reset Rate, the
Calculation Agent shall provide written notice to the Corporation and the
Trustee, setting forth such Floating Coupon Reset Rate as the new interest rate
on the Notes, effective from and including April 15, 2008, to and excluding the
New Coupon Reset Date, by delivery to the Trustee on or before the Coupon Reset
Date of an officers' certificate.
(e) The Callholder shall sell the Notes to the Bidding Dealer at the
Purchase Price, such sale to be settled on the Coupon Reset Date in immediately
available funds.
(f) Notwithstanding the foregoing, if (A) the Calculation Agent determines
that (i) since the Call Notice, an Event of Default, or any event which, with
the giving of notice or the passage of time, or both, would constitute
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an Event of Default with respect to the Notes shall have occurred and be
continuing, (ii) a Market Disruption Event has occurred following the exercise
of the Call Option, or (iii) the Bidding Dealer shall not have provided its Bid
in a timely manner substantially as provided above, or (B) the Spread is not
acceptable to the Corporation, the Call Option and the Floater Option will be
automatically revoked, and the Put Option will be automatically exercised by the
Trustee on behalf of the holders of the Notes.
If the Corporation, at any time after April 15, 2008 and at least six
Business Days prior to October 15, 2008, irrevocably determines not to exercise
its right to reset the floating interest rate on the Notes to a fixed rate
pursuant to the Floater Option Coupon Reset Process, it may repurchase and
cancel the Notes and shall give written notice to the Trustee of such
determination at least six Business Days prior to the date on which it will make
such repurchase. In such case, or if the Corporation otherwise does not exercise
or is deemed not to have exercised the Second Call Option, the Corporation (i)
will be required to purchase the Notes on October 15, 2008, or such earlier date
as it may determine, at a purchase price equal to 100 percent of the principal
amount thereof, plus accrued and unpaid interest to October 15, 2008 or such
earlier date, (ii) will deliver to the Trustee, not later than 12 noon, New York
time, on such date, an amount equal to 100 percent of the principal amount of
the Notes plus any accrued and unpaid interest in immediately available funds
for payment of such amount on such date, and (iii) the holders of the Notes
shall be required to deliver, and will be deemed to have delivered, the Notes to
the Corporation or the Trustee against payment therefor on such date through the
facilities of DTC. The Notes will thereupon be cancelled and no Notes will be
issued in lieu of or in exchange therefor.
FLOATING RATE TO FIXED RATE
From the Coupon Reset Date until six Business Days prior to October 15,
2008, the Corporation shall have the right, exercisable by giving written notice
of exercise to the Trustee and the Calculation Agent, not later than 2:00 p.m.
New York time on such Business Day (which shall be a date not later than October
15, 2008), to purchase the Notes in whole but not in part on such New Coupon
Reset Date at the Call Price, plus accrued interest from the Coupon Reset Date
to the New Coupon Reset Date (the "Second Call Option"). If the Corporation has
exercised the Second Call Option, the Corporation and the Calculation Agent
shall complete the following steps in order to determine the interest rate to be
paid on the Notes from and including the New Coupon Reset Date to the Final
Maturity Date. The Corporation and the Calculation Agent shall use reasonable
efforts to cause the actions contemplated below to be completed in as timely a
manner as possible.
(a) The Corporation shall provide the Calculation Agent with the Dealer
List, no later than four Business Days prior to the New Coupon Reset Date,
containing the names and addresses of at least three and no more than five
dealers, one of which shall be First Union Capital Markets, from which it
desires the Calculation Agent to obtain the Bids for the purchase of such Notes.
(b) Within one Business Day following receipt by the Calculation Agent of
the Dealer List, the Calculation Agent shall provide to each Dealer on the
Dealer List (i) a copy of this Prospectus Supplement and the accompanying
Prospectus relating to the offering of the Notes, (ii) a copy of the form of the
Notes, and (iii) a written request that each such Dealer submit a Bid to the
Calculation Agent by the Bid Deadline on the third Business Day prior to the New
Coupon Reset Date (the "New Bid Date"). Each Dealer shall be provided with (i)
the name of the Corporation, (ii) an estimate of the Purchase Price (which shall
be stated as a U.S. dollar amount and be calculated by the Calculation Agent in
accordance with paragraph (c) below), (iii) the principal amount and maturity of
the Notes, (iv) the New Coupon Reset Date, and (v) the method by which interest
will be calculated on the Notes.
(c) The Purchase Price shall be equal to (i) the principal amount of the
Notes plus (ii) a premium which shall be equal to the Settlement Amount plus an
amount equal to the interest payable on a note with a maturity of the New Coupon
Reset Date, accruing interest (payable at maturity) at a per annum rate, reset
daily, equal to three-month LIBOR accruing from the Coupon Reset Date, and
having a principal amount equal to the Settlement Amount (the "New Fixed Notes
Premium").
(d) Following receipt of the Bids, the Calculation Agent shall provide
written notice to the Corporation, setting forth (i) the names of each of the
Dealers from whom the Calculation Agent received Bids on the New Bid Date, (ii)
the Bid submitted by each such Dealer, and (iii) the Purchase Price as
determined pursuant to paragraph (c) above. Except as provided below, the
Calculation Agent shall thereafter select, from the three Bids received, the
Selected Bid and establish a new rate of interest for the Notes (the "New Coupon
Reset Rate") equal to the interest rate which would amortize the New Fixed Notes
Premium fully over the term of the Notes at the
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Yield to Maturity indicated by the Selected Bid; provided, however, that if the
Calculation Agent has not received a Bid from a Dealer by the Bid Deadline on
the New Bid Date, the Selected Bid shall be the lowest of all Bids received by
such time and provided, further that if any two or more of the lowest Bids
submitted are equivalent, the Corporation shall in its sole discretion select
any of such equivalent Bids (and such selected Bid shall be the Selected Bid).
(e) Immediately after calculating the New Coupon Reset Rate, the
Calculation Agent shall provide written notice to the Corporation and the
Trustee, setting forth such New Coupon Reset Rate as the new interest rate on
the Notes, effective from and including the New Coupon Reset Date to the Final
Maturity Date, by delivery to the Trustee on or before the New Coupon Reset Date
of an officers' certificate.
(f) The Corporation shall sell the Notes to the Dealer that made the
Selected Bid at the Purchase Price, such sale to be settled on the New Coupon
Reset Date in immediately available funds.
(g) Notwithstanding the foregoing, if the Calculation Agent determines that
(i) since the exercise of the Second Call Option, an Event of Default, or any
event which, with the giving of notice or the passage of time or both, would
constitute an Event of Default with respect to the Notes shall have occurred and
be continuing, (ii) a Market Disruption Event has occurred following the
exercise of the Second Call Option, or (iii) two or more of the Dealers shall
have failed to provide Bids in a timely manner substantially as provided above,
the Second Call Option will be automatically revoked, and the Corporation will
be deemed to have determined nor to exercise its right to reset the floating
rate on the Notes to a fixed rate, as described under " -- Floating Rate" above.
SETTLEMENT ON EXERCISE OF THE PUT AND CALL OPTIONS
If the Callholder has exercised the Call Option and the Corporation has not
exercised the Call Option Override, then, on the Coupon Reset Date, all
beneficial interests in the Notes will be transferred to a DTC account
designated by the Callholder. The transfers will be made automatically, without
any action on the part of any holder or beneficial owner, by book entry through
DTC. The Callholder will be obligated to make payment of the Call Price in
immediately available funds for credit to the accounts of the DTC Participants
through which beneficial interests in the Notes are held, by 2:00 p.m. New York
time on the Business Day prior to the Coupon Reset Date. Each transfer will be
made against the corresponding payment, and each payment will be made against
the corresponding transfer, in accordance with applicable DTC procedures. If the
Callholder fails to pay the Call Price when due or if the Corporation exercises
the Call Option Override, the Call Option will be deemed not to have been
exercised and the Put Option will be deemed to have been automatically
exercised. In these circumstances, the Corporation will be obligated to pay the
Put Redemption Price for the Notes on the Coupon Reset Date, with settlement
occurring as described in the next paragraph. In any event, the Corporation will
remain obligated to make payment of accrued and unpaid interest due on the
Notes, with interest payable on the Coupon Reset Date being payable to the
holders of the Notes on the Record Date for such payment.
If the Call Option is not exercised, the Callholder fails to pay the Call
Price when due, or the Corporation exercises the Call Option Override, and the
Put Option is therefore exercised, then, on the Coupon Reset Date, all
beneficial interests in the Notes to be purchased will be transferred to a DTC
account designated by the Corporation. The transfers will be made automatically,
without any action on the part of any holder or beneficial owner, by book entry
through DTC. The Corporation will be obligated to make payment of the Put
Redemption Price for credit to the accounts of the DTC Participants through
which beneficial interests in the Notes are held, by 12:00 noon New York Time on
the Coupon Reset Date. Each transfer will be made against the corresponding
payment, and each payment will be made against the corresponding transfer, in
accordance with applicable DTC procedures. If the Corporation fails to pay the
Put Redemption Price when due, accrued interest from the Coupon Reset Date to
the date the payment is made will be payable as part of the Put Redemption
Price. With respect to all the Notes, whether or not purchased pursuant to the
Put Option, the Corporation will remain obligated to make payment of accrued and
unpaid interest due on the Notes, with interest payable on the Coupon Reset Date
being payable to the holders of the Notes on the Record Date for such payment.
The transactions described above will be executed on the Coupon Reset Date
through DTC in accordance with the procedures of DTC, and the accounts of the
respective DTC Participants will be debited and credited and the Notes delivered
by book entry as necessary to effect the purchases and sales thereof. The
transactions will settle in immediately available funds through DTC's Same-Day
Funds Settlement System.
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Substantially similar procedures will also apply with respect to the Second
Call Option and the New Coupon Reset Date and the transactions described above
under " -- Floater Option Coupon Reset Process."
The settlement procedures described above, including those for payment for
and delivery of the Notes purchased by the Callholder or the Corporation on the
Coupon Reset Date or the New Coupon Reset Date, may be modified, notwithstanding
any contrary terms of the Indenture, to the extent required by DTC or, if the
book-entry system is no longer available for the Notes at the relevant time, to
the extent required to facilitate these transactions in the Notes in
certificated form. In addition, the Callholder and the Corporation may,
notwithstanding any contrary terms of the Indenture, modify the settlement
procedures referred to above in order to facilitate the settlement process.
Under the terms of the Notes, the Corporation has agreed that,
notwithstanding any provision to the contrary set forth in the Indenture, (i) it
will use its reasonable best efforts to maintain the Notes in book-entry form
with DTC or any successor thereto and to appoint a successor depository to the
extent necessary to maintain the Notes in book-entry form, and (ii) it will
waive any discretionary right it otherwise may have under the Indenture to cause
the Notes to be issued in certificated form.
For further information with respect to payments, transfers and settlement
through DTC, see "Global Securities" in the accompanying Prospectus.
CALCULATION AGENT
The Calculation Agency Agreement provides that the Calculation Agent may
resign at any time as Calculation Agent, such resignation to be effective ten
Business Days after the delivery to the Corporation and the Trustee of notice of
such resignation. In such case, the Corporation may appoint a successor
Calculation Agent, which may be a subsidiary or an affiliate of the Corporation.
The Calculation Agent, in its individual capacity, may buy, sell, hold and
deal in the Notes and may exercise any vote or join in any action which any
holder of the Notes may be entitled to exercise or take as if it were not the
Calculation Agent. The Calculation Agent, in its individual capacity, may also
engage in any transaction with the Corporation, the Callholder and First Union
Capital Markets as if it were not the Calculation Agent.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
There is no specific authority concerning the U.S. federal income tax
treatment of the Notes, and there can be no assurance that the Internal Revenue
Service will seek to treat the Notes in the manner described below. Prospective
purchasers should consult their own tax advisors regarding any uncertainties in
the tax treatment of the Notes.
The following summary deals only with Notes held as capital assets by a
beneficial owner who purchases the Notes in the initial public offering at their
original issue price and who or that is (i) a citizen or resident of the United
States, (ii) a domestic corporation, (iii) an estate the income of which is
subject to U.S. federal income taxation regardless of its source, or (iv) a
trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more U.S. persons
have the authority to control all substantial decisions of such trust (a "US
Holder"). It does not discuss the rules that may apply to special classes of US
Holders such as life insurance companies, banks, tax-exempt organizations,
dealers in securities or traders in securities that elect mark-to-market
accounting, persons that hold the Notes as a hedge or hedged against interest
rate risks or as part of a "straddle" or "conversion" transaction, or persons
whose functional currency is not the U.S. dollar.
In general, a US Holder will only include in income the interest actually
received on a Note. Moreover, it would be reasonable for such a US Holder to
account for income from a Note as if the US Holder had purchased, for the amount
paid for the Note, a note that pays interest at a fixed rate equal to the fixed
rate set forth on the cover page that is due to mature in ten years.
A US Holder might be required, however, to include interest in income from
a Note as "original issue discount", rather than as "qualified stated interest".
The practical consequence of this would be that a holder who otherwise accounts
for the receipt of interest income on a cash basis would be required to account
for interest from the Note on an accrual basis (I.E., in the case of an interest
period straddling a year-end, a holder would be
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required to include interest in income in the year in which the interest
accrued, rather than the year in which interest was received).
A US Holder might also be treated as having (i) purchased a Note for an
amount equal to its fair market value on the original issue date, and (ii)
effectively sold the Call Option to the Callholder for an amount equal to the
excess of such fair market value over the face value ("Face Value") of the Note
(the "Premium"). However, a US Holder that purchased a Note for an amount equal
to the Face Value would not therefore recognize net gain or loss upon the
exercise of the Put Option or Call Option, assuming that the holder had not made
an election to amortize bonds purchased at a premium.
If the holder had made an election to amortize bonds purchased at a
premium, the holder might effectively be able to reduce interest income accrued
over the life of the Note by an amount not in excess of the Premium. Such
"amortization" of the Premium would reduce the holder's basis in the Note,
however, and the holder would therefore recognize an offsetting capital gain
equal to the amount of such amortization when the holder disposed of the Note
pursuant to the Put Option or the Call Option.
The Notes might also be subject to certain rules governing the treatment of
bonds providing for contingent payments. The practical consequence is that gain
from the sale of a Note would be treated as ordinary income, rather than as
capital gain, and a US Holder would likewise be permitted to treat loss from the
sale of a Note as ordinary loss, rather than capital loss, to the extent not in
excess of previously accrued interest income. Gain from the sale of a Note might
also be treated, in whole or in part, as ordinary income under certain rules
relating to "conversion transactions", or as short-term capital gain by
operation of certain rules relating to "straddles".
A US Holder might be able to avoid the treatments described in the three
preceding paragraphs by electing to treat the Note and the Call Option as a
single instrument for U.S. tax purposes under the "integration" rules of Treas.
Reg. Section 1.1275-6. US Holders should consult their tax advisors concerning
satisfaction of the identification requirements for making this election, which
are set out in Treas. Reg. Section 1.1276-6(e). These requirements must be
satisfied on or before the date on which the US Holder acquires the Note.
USE OF PROCEEDS
The Corporation currently intends to use the net proceeds from the sale of
the Notes for general corporate purposes, which may include the reduction of
indebtedness, investments at the holding company level, investments in, or
extensions of credit to, its banking and other subsidiaries and other banks and
companies engaged in other financial service activities, possible acquisitions
and the repurchase of the Corporation's capital stock. Pending such use, the net
proceeds may be temporarily invested. The precise amounts and timing of the
application of proceeds will depend upon the funding requirements of the
Corporation and its subsidiaries and the availability of other funds.
Based upon the historical and anticipated future growth of the Corporation
and the financial needs of its subsidiaries, the Corporation may engage in
additional financings of a character and amount to be determined as the need
arises.
RECENT DEVELOPMENTS
CERTAIN FINANCIAL DATA FOR THE THREE MONTHS ENDED MARCH 31, 1998
The Corporation's net income was $587 million in the first quarter of 1998,
a 16 percent increase from $504 million in the first quarter of 1997 and 62
percent from $362 million in the fourth quarter of 1997. The first quarter of
1998 and the fourth quarter of 1997 included pre-tax merger-related and
restructuring charges of $29 million and $210 million, respectively. Net income
per diluted share increased to $0.90 from $0.79 in the first quarter of 1997 and
$0.56 in the fourth quarter of 1997.
The Corporation's return on average equity was 19.60 percent and its return
on average assets was 1.45 percent in the first quarter of 1998, compared with
19.15 percent and 1.40 percent, respectively, in the first quarter of 1997 and
12.29 percent and 0.94 percent, respectively, in the fourth quarter of 1997.
Tax-equivalent net interest income was $1.4 billion in each of the first
quarter of 1998, the first quarter of 1997 and the fourth quarter of 1997.
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Annualized net charge-offs as a percentage of average net loans were 0.36
percent in the first quarter of 1998, compared with 0.63 percent in the first
quarter of 1997 and 0.53 percent in the fourth quarter of 1997. The loan loss
provision was $90 million, compared to $162 million in the first quarter of 1997
and $325 million in the fourth quarter of 1997.
Net loans at March 31, 1998, were $98 billion, compared with $102 billion
at the end of first quarter of 1997 and $97 billion at year-end 1997.
Deposits were $103 billion at March 31, 1998, compared with $100 billion at
the end of the first quarter a year ago and $103 billion at year-end 1997. Total
stockholders' equity was $12 billion at March 31, 1998, compared with $10
billion at March 31, 1997 and $12 billion at year-end 1997.
At March 31, 1998, the Corporation had assets of $172 billion.
CERTAIN COMPLETED ACQUISITIONS
On January 31, 1998, the Corporation completed the pooling of interests
acquisition of Wheat First Butcher Singer, Inc. ("WFBS"), the parent of Wheat
First Securities, Inc. Approximately 10.3 million shares of the Corporation's
common stock were issued in the WFBS acquisition. At December 31, 1997, WFBS had
assets of $1 billion.
In addition to the WFBS acquisition, the Corporation completed the
acquisition of Covenant Bancorp, Inc. ("Covenant") on January 15, 1998. Covenant
had $415 million in assets as of December 31, 1997. Approximately 1.6 million
shares of the Corporation's common stock were issued in the Covenant
acquisition. The Covenant acquisition was accounted for as a purchase. A number
of shares of the Corporation's common stock equal to the number of such shares
issued in the Covenant acquisition has been repurchased by the Corporation in
the open market.
CERTAIN PENDING ACQUISITIONS
CORESTATES FINANCIAL CORP
On November 18, 1997, the Corporation entered into an agreement to acquire
CoreStates Financial Corp ("CoreStates"), a bank holding company based in
Philadelphia, Pennsylvania. CoreStates, through its lead bank subsidiary,
CoreStates Bank, N.A., provides financial services through banking offices
located in Pennsylvania, New Jersey and Delaware. As of December 31, 1997,
CoreStates reported assets of $48 billion, net loans of $35 billion, deposits of
$34 billion, stockholders' equity of $3 billion and net income of $813 million.
Under the terms of the CoreStates acquisition agreement, the Corporation will
exchange 1.62 shares of the Corporation's common stock for each outstanding
share of CoreStates common stock. The CoreStates acquisition, which will be
accounted for as a pooling of interests, is expected to close in the second
quarter of 1998, subject to certain conditions of closing. The stockholders of
the Corporation and CoreStates approved the CoreStates acquisition agreement on
February 27, 1998 and the Board of Governors of the Federal Reserve System
approved the transaction on April 13, 1998. On April 9, 1998, CoreStates reached
agreement with the United States Department of Justice and the Office of the
Pennsylvania Attorney General for the divestiture of 32 branches through a
competitive bidding process. The divestiture plan provides for the sale of
approximately $1.2 billion in deposits and approximately $400 million in loans.
Based on the 201 million shares of CoreStates common stock outstanding on March
31, 1998, and the 1.62 exchange ratio, approximately 326 million shares of the
Corporation's common stock are expected to be issued upon consummation of the
CoreStates acquisition.
In connection with the CoreStates acquisition, CoreStates granted the
Corporation an option to purchase, under certain circumstances, up to 19.9
percent of the outstanding shares of common stock of CoreStates at a price of
$72.00 per share, subject to certain adjustments, and the Corporation granted
CoreStates an option to purchase, under certain circumstances, up to 9.9 percent
of the outstanding shares of the Corporation's common stock at a price of $52.00
per share, subject to certain adjustments. Under certain circumstances, the
respective issuers of such options may be required to repurchase the options or
the shares acquired pursuant to the exercise thereof. In addition, following
consummation of the CoreStates acquisition Terrence A. Larsen, CoreStates'
Chairman and Chief Executive Officer, would become a Vice Chairman of the
Corporation. Also, six directors of CoreStates would become directors of the
Corporation, including Mr. Larsen.
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On November 18, 1997, the Corporation filed a Current Report on Form 8-K
with the Commission (the "CoreStates Form 8-K"), which contains, among other
things, certain financial and other information (the "CoreStates Form 8-K
Materials") about CoreStates and the CoreStates acquisition. The CoreStates Form
8-K Materials contain certain forward-looking statements regarding the
Corporation, CoreStates and the combined organization following the CoreStates
acquisition, including statements relating to estimated cost savings and
enhanced revenues that may be realized from the CoreStates acquisition, and
certain restructuring charges expected to be incurred in connection with the
CoreStates acquisition. Such forward-looking statements involve significant
risks and uncertainties. Actual results may differ materially from the results
discussed in the CoreStates Form 8-K Materials and herein. Factors that might
cause such a difference include, but are not limited to those discussed in the
CoreStates Form 8-K, the Corporation's 1997 Annual Report on Form 10-K and under
the heading "Cautionary Statement Concerning Forward-Looking Information" in
this Prospectus Supplement.
As indicated in the CoreStates Form 8-K:
(Bullet) The Corporation expects to realize before-tax expense savings
resulting from the CoreStates acquisition of approximately $406
million and $723 million in 1998 and 1999, respectively, or
approximately $258 million and $459 million after-tax,
respectively. These estimates assume that approximately 45 percent
of CoreStates' 1997 annualized expenses are eliminated by the end
of 1999.
(Bullet) The Corporation expects to realize before-tax revenue enhancements
relating to the CoreStates acquisition of approximately $123
million and $194 million in 1998 and 1999, respectively, or
approximately $58 million and $89 million after-tax, respectively.
These estimates are primarily based on the Corporation's broader
array of income generating products from its capital markets,
capital management and other fee producing businesses.
(Bullet) Assuming (i) the restructuring charges discussed below and the
expense savings and revenue enhancements discussed above are as
estimated, (ii) 985 million shares of the Corporation's common
stock are outstanding in 1998 and 999 million shares are
outstanding in 1999, (iii) the CoreStates acquisition is
consummated by mid-1998, (iv) the conversion of CoreStates'
operations and computer systems to the Corporation's operations
and computer systems is completed by November 1998, (v) 1998
earnings per share of (a) the Corporation's common stock are
$3.91, and (b) CoreStates common stock are $4.23, each of which
represents the First Call consensus earnings estimates as of
November 18, 1997 (before public announcement of the CoreStates
acquisition, the "1998 Illustrative First Call Consensus
Estimates"), (vi) 1999 earnings per share of the Corporation's
common stock and CoreStates common stock are equal to the 1998
Illustrative First Call Consensus Estimates plus 11 percent for
the Corporation and ten percent for CoreStates (the "1999
Illustrative Estimates") (I.E., $4.34 for the Corporation's common
stock and $4.65 for CoreStates common stock), and (vii) certain
other assumptions contained in the CoreStates Form 8-K, the
CoreStates acquisition is estimated to dilute the 1998
Illustrative First Call Consensus Estimate for the Corporation's
common stock by $.09 and add $.12 to the 1999 Illustrative
Estimate for the Corporation's common stock. The 1998 Illustrative
First Call Consensus Estimates and the 1999 Illustrative Estimates
are presented for illustrative purposes only, are subject to the
risks and uncertainties set forth in the CoreStates Form 8-K
Materials, the Corporation's 1997 Annual Report on Form 10-K and
under the heading "Cautionary Statement Concerning Forward-Looking
Information" in this Prospectus Supplement, among others, and do
not constitute earnings projections or estimates by the
Corporation or CoreStates.
(Bullet) The Corporation expects to record after-tax restructuring and
merger-related charges associated with the CoreStates acquisition,
currently estimated at $795 million, or $0.81 per share of the
Corporation's common stock in the second quarter of 1998. The
estimated $795 million restructuring charge is summarized below.
S-13
<PAGE>
<TABLE>
<CAPTION>
(IN MILLIONS, AFTER TAX)
- -------------------------------------------------------------------------------------
<S> <C>
Severance and change in control related obligations.................................. $214
Fixed asset write-downs and vacant space accruals.................................... 289
Service contract terminations........................................................ 127
Charitable support................................................................... 63
Other................................................................................ 102
-----
Total................................................................................ $795
-----
-----
</TABLE>
The estimated restructuring charge includes approximately $149 million in
non-cash charges. Cash payments included in the estimated restructuring charge
are expected to be completed within 18 months from the date of consummation. The
"Other" category includes CoreStates acquisition-related amounts, none of which
individually is estimated to exceed $50 million. The amounts included in the
$795 million estimated restructuring charge are subject to change prior to the
effective date of the CoreStates acquisition. The estimates include assumptions
about the timing of the consummation of the CoreStates acquisition and the
number of employees whose employment will terminate as a result of the
CoreStates acquisition. Changes in such assumptions could result in a change in
the estimated restructuring charge. In addition, the Corporation estimates that
another $75 million in CoreStates pre-tax, acquisition-related costs will be
incurred over the 12 months following the date the CoreStates acquisition is
consummated. These costs primarily relate to training and systems conversions.
THE MONEY STORE INC.
On March 4, 1998, the Corporation entered into an agreement to acquire The
Money Store Inc. ("The Money Store"), a consumer finance lender based in Union,
New Jersey. The Money Store operates 172 offices in all 50 states, Washington,
D.C. and Puerto Rico. Under the terms of the agreement, each share of The Money
Store common stock will be exchanged for a number of shares of the Corporation's
common stock (the "Exchange Ratio") having a value of $34 per share. In
addition, each share of The Money Store mandatory convertible preferred stock,
depending upon the outcome of the vote by the holders of such stock with respect
thereto, will be converted into either (i) a number of shares of the
Corporation's common stock equal to the Exchange Ratio times .92, or (ii) an
equal number of shares of a new series of the Corporation's Class A Preferred
Stock having terms substantially the same as The Money Store mandatory
convertible preferred stock, as adjusted to reflect The Money Store acquisition.
Based on a price of $52.75 per share of the Corporation's common stock (the last
reported sale price per share of the Corporation's common stock on the New York
Stock Exchange Composite Transactions tape on March 3, 1998, the day before the
acquisition was announced), the purchase price would be approximately $2.1
billion. The Money Store acquisition, which will be accounted for as a purchase,
is expected to close by the third quarter of 1998, subject to certain conditions
of closing. The Corporation expects to repurchase shares of the Corporation's
common stock in the open market in an amount up to the number of shares of the
Corporation's common stock expected to be issued in The Money Store acquisition,
which is estimated to be approximately 41 million shares. As of December 31,
1997, The Money Store had assets of $3 billion, net loans of $1 billion, total
stockholders' equity of $666 million and net income applicable to common
stockholders of $83 million.
BOWLES HOLLOWELL CONNER & CO.
On March 9, 1998, the Corporation entered into an agreement to acquire
Bowles Hollowell Conner & Co. ("Bowles Hollowell Conner"), a privately-held
mergers and acquisitions advisory firm based in Charlotte, North Carolina. The
Corporation will issue shares of the Corporation's common stock to the holders
of Bowles Hollowell Conner common stock. The terms of the Bowles Hollowell
Conner acquisition have not been publicly disclosed. The Bowles Hollowell Conner
acquisition, which will be accounted for as a purchase, is expected to close in
the second quarter of 1998, subject to certain conditions of closing. In
connection with the Bowles Hollowell Conner acquisition, the Corporation expects
to repurchase a number of shares of the Corporation's common stock in the open
market equal to the number of shares of the Corporation's common stock expected
to be issued in the Bowles Hollowell Conner acquisition.
S-14
<PAGE>
POSSIBLE FUTURE ACQUISITIONS
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
and 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 may occur in connection with future
acquisitions. See "The Corporation" in the accompanying Prospectus.
COMPUTATIONS OF CONSOLIDATED RATIOS
OF EARNINGS TO FIXED CHARGES
HISTORICAL COMPUTATIONS OF CONSOLIDATED RATIOS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1997* 1996* 1995* 1994 1993
------ ----- ----- ---- ----
<S> <C> <C> <C> <C> <C>
Excluding interest on deposits............................................. 2.31x 2.32 2.67 3.55 3.95
Including interest on deposits............................................. 1.51x 1.49 1.53 1.73 1.70
</TABLE>
PRO FORMA COMBINED COMPUTATIONS OF CONSOLIDATED RATIOS
(THE CORPORATION AND CORESTATES)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1997* 1996* 1995* 1994 1993
------ ----- ----- ---- ----
<S> <C> <C> <C> <C> <C>
Excluding interest on deposits............................................. 2.49x 2.60 2.90 3.54 4.17
Including interest on deposits............................................. 1.57x 1.57 1.59 1.72 1.74
</TABLE>
- ---------------
* Restated to reflect the pooling of interests acquisition of Signet Banking
Corporation ("Signet") on November 28, 1997.
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. Pro forma amounts exclude immaterial rental
and capitalized lease amounts related to CoreStates.
SELECTED CONSOLIDATED FINANCIAL DATA
The following is selected unaudited consolidated financial information for
the Corporation for each of the five years ended December 31, 1997. The summary
below should be read in conjunction with the pro forma financial information
reflecting the pooling of interests combination of the Corporation and
CoreStates (included on pages P-1 through P-5 of the Corporation's 1997 Annual
Report on Form 10-K), the consolidated financial statements of the Corporation,
and the related notes thereto, and the other detailed information contained in
the Corporation's 1997 Annual Report on Form 10-K, and the Corporation's 1998
Current Report on Form 8-K, which are incorporated herein by reference. All such
information as of and for the three years ended December 31, 1997, has been
restated to reflect the pooling of interests acquisition of Signet on November
28, 1997.
S-15
<PAGE>
THE CORPORATION (A)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
(In millions, except per share data) 1997 1996 1995 1994 1993
- ----------------------------------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARIES OF INCOME
Interest income.................................................. $ 10,933 10,460 9,553 7,231 6,602
Interest expense................................................ 5,190 4,995 4,424 2,793 2,482
-------- ------- ------- ------- -------
Net interest income............................................. 5,743 5,465 5,129 4,438 4,120
Provision for loan losses....................................... 840 449 259 179 370
-------- ------- ------- ------- -------
Net interest income after provision for loan losses............. 4,903 5,016 4,870 4,259 3,750
Securities available for sale transactions...................... 31 36 45 6 33
Investment security transactions................................ 3 4 6 4 7
Noninterest income.............................................. 3,362 2,596 2,125 1,566 1,542
Merger-related and restructuring charges........................ 269 281 94 -- --
SAIF special assessment......................................... -- 135 -- -- --
Noninterest expense............................................. 5,320 4,737 4,563 3,747 3,536
-------- ------- ------- ------- -------
Income before income taxes...................................... 2,710 2,499 2,389 2,088 1,796
Income taxes.................................................... 814 875 848 712 579
-------- ------- ------- ------- -------
Net income...................................................... 1,896 1,624 1,541 1,376 1,217
Dividends on preferred stock.................................... -- 9 26 46 46
-------- ------- ------- ------- -------
Net income applicable to common stockholders before redemption
premium....................................................... 1,896 1,615 1,515 1,330 1,171
Redemption premium on preferred stock........................... -- -- -- 41 --
-------- ------- ------- ------- -------
Net income applicable to common stockholders after redemption
premium....................................................... $ 1,896 1,615 1,515 1,289 1,171
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
PER COMMON SHARE DATA
Basic earnings................................................... $ 3.03 2.61 2.44 2.30 2.15
Diluted earnings................................................ 2.99 2.58 2.38 2.25 2.09
Cash dividends.................................................. 1.22 1.10 0.98 0.86 0.75
Book value...................................................... 18.91 17.06 15.66 14.10 13.36
CASH DIVIDENDS PAID ON COMMON STOCK 749 660 549 298 244
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
Assets........................................................... 157,274 151,847 142,858 113,529 104,550
Loans, net of unearned income................................... 96,873 102,316 96,730 77,831 68,263
Deposits........................................................ 102,889 102,702 100,148 87,865 81,885
Long-term debt.................................................. 8,042 8,060 7,374 4,242 3,675
Guaranteed preferred beneficial interests....................... 991 495 -- -- --
Preferred stockholders' equity.................................. -- -- 183 230 514
Common stockholders' equity..................................... 12,032 10,932 9,724 8,044 7,432
Total stockholders' equity...................................... $ 12,032 10,932 9,907 8,274 7,946
Preferred shares outstanding (IN THOUSANDS)..................... -- -- 3,388 5,213 11,560
Common shares outstanding (IN THOUSANDS)........................ 636,394 640,782 620,822 570,722 556,408
CONSOLIDATED AVERAGE BALANCE SHEET ITEMS
Assets........................................................... $150,375 145,491 129,276 106,413 99,610
Loans, net of unearned income................................... 100,429 97,181 89,978 70,726 62,996
Deposits........................................................ 99,880 98,909 94,642 80,760 76,830
Long-term debt.................................................. 7,942 7,860 6,072 4,009 3,598
Guaranteed preferred beneficial interests....................... 971 47 -- -- --
Common stockholders' equity (b)................................. 11,030 9,937 9,266 7,870 6,782
Total stockholders' equity (b).................................. $ 11,030 10,045 9,477 8,372 7,302
Common shares outstanding (IN THOUSANDS)
Basic......................................................... 625,649 619,237 619,777 561,442 543,321
Diluted....................................................... 633,772 625,224 637,186 577,709 565,239
CONSOLIDATED PERCENTAGES
Net income applicable to common stockholders before redemption
premium to average common stockholders' equity (b)............. 17.19% 16.25 16.35 16.91 17.26
Net income applicable to common stockholders after redemption
premium to average common stockholders' equity (b)............ 17.19 16.25 16.35 16.38 17.26
Net income to
Average total stockholders' equity (b)........................ 17.19 16.17 16.26 16.44 16.66
Average assets................................................ 1.26 1.12 1.19 1.29 1.22
Average stockholders' equity to average assets.................. 7.37 6.82 7.23 7.52 7.11
Allowance for loan losses to
Net loans..................................................... 1.25 1.47 1.69 2.03 2.38
Nonaccrual and restructured loans............................. 195 215 239 248 151
Nonperforming assets.......................................... 168 187 186 178 115
Net charge-offs to average net loans............................ 0.63 0.65 0.44 0.40 0.78
Nonperforming assets to loans, net and foreclosed properties.... 0.75 0.78 0.91 1.14 2.06
Capital ratios (c)
Tier 1 capital................................................ 8.41 7.33 6.70 7.76 9.14
Total capital................................................. 13.40 12.33 11.45 12.94 14.64
Leverage...................................................... 6.81 6.13 5.49 6.12 6.13
Net interest margin............................................. 4.36% 4.25 4.51 4.75 4.82
</TABLE>
- ---------------
(a) Amounts for 1997, 1996 and 1995 have been restated to reflect the pooling of
interests acquisition of Signet.
(b) Average common stockholders' equity and total stockholders' equity exclude
net unrealized gains and (losses) on debt and equity securities in 1994
through 1997.
(c) Risk-based capital ratio guidelines require a minimum ratio of tier 1
capital to risk-weighted assets of 4.00 percent and a minimum ratio of total
capital to risk-weighted assets of 8.00 percent. The minimum leverage ratio
of tier 1 capital to adjusted average quarterly assets is from 3.00 to 5.00
percent. Capital ratios presented herein have not been restated to reflect
pooling of interests acquisitions.
S-16
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") the Corporation has agreed to sell to the several
Underwriters listed below, and the Underwriters have agreed to purchase the
principal amount of the Notes set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITERS NOTES
- -------------------------------------------------------------------------- ------------
<S> <C>
First Union Capital Markets, a division of Wheat First Securities, Inc.... $ 50,000,000
Credit Suisse First Boston Corporation.................................... 50,000,000
Lehman Brothers Inc....................................................... 50,000,000
Morgan Stanley & Co. Incorporated......................................... 50,000,000
------------
Total.............................................................. $200,000,000
------------
------------
</TABLE>
Under the terms of the Underwriting Agreements, the Underwriters are
committed to take any pay for all of the Notes, if any are taken.
The Underwriters propose initially to offer the Notes to the public at the
initial public offering price set forth on the cover page hereof and in part to
certain securities dealers at such price less a concession of 0.40% of the
principal amount of the Notes. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of 0.25% of the principal amount of the
Notes to certain brokers and dealers. After the Notes are released for sale to
the public, the offering price and other selling terms may from time to time be
varied by the lead manager.
The Corporation has been advised by the Underwriters that the Underwriters
intend to make a market in the Notes, but they are not obligated to do so and
may discontinue market making at any time without notice.
The Corporation will indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, or
contribute to payments the Underwriters may be required to make in respect
thereof.
The Underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the Notes in accordance with Regulation M under the Exchange Act. Over-allotment
transactions involve syndicate sales in excess of the offering size creating a
syndicate short position. Stabilizing transactions permit bids to purchase the
Notes so long as the bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Notes in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the Underwriters to reclaim a selling concession from a
syndicate member when the Notes originally sold by such syndicate member are
purchased in a syndicate covering transaction. Such over-allotment transactions,
stabilizing transactions, syndicate covering transactions and penalty bids may
cause prices of the Notes to be higher than they would otherwise be in the
absence of such transactions. Neither the Corporation nor the Underwriters make
any representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of the Notes. In
addition, neither the Corporation nor the Underwriters make any representation
that the Underwriters will engage in such transactions or that such
transactions, once commenced, will not be discontinued without notice.
This Prospectus Supplement and the accompanying Prospectus may be used by
First Union Capital Markets, a division of Wheat First Securities, Inc., an
affiliate of the Corporation, in connection with offers and sales related to
market-making transactions in the Notes. First Union Capital Markets may act as
principal or agent in such transactions. Such sales will be made at prices
related to prevailing market prices at the time of sale or otherwise.
Following an interest coupon reset, the Notes may be remarketed to or
through underwriters, directly to purchasers, to dealers or otherwise. Such
transactions may be effected from time to time at a fixed price or prices, which
may be changed, or at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. If required at
the time, this Prospectus Supplement and the accompanying Prospectus, or an
amended or supplemented or new prospectus, may be used in connection with
remarketing the Notes. The Notes
S-17
<PAGE>
may also be remarketed following an interest coupon reset in one or more private
transactions, including pursuant to Rule 144A under the Securities Act of 1933.
The participation of First Union Capital Markets, a division of Wheat First
Securities, Inc., in the offer and sale of the Notes will comply with the
requirements of Rule 2720 of the National Association of Securities Dealers,
Inc. (the "NASD") regarding underwriting securities of an "affiliate". No NASD
member participating in offers and sales will execute a transaction in the Notes
in a discretionary account without the prior specific written approval of such
member's customer.
The Underwriters and certain of their affiliates and associates are
customers of, including borrowers from, engage in transactions with, and/or
perform services for, the Corporation and its subsidiaries, in the ordinary
course of business. The Underwriters have performed investment banking services
for the Corporation in the last two years and have received fees in connection
therewith.
EXPERTS
The consolidated balance sheets of the Corporation as of December 31, 1997
and 1996, 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, 1997, included in the Corporation's 1997 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 consolidated financial statements of CoreStates at December 31, 1997 and
1996, and for each of the three years in the period ended December 31, 1997,
included in the Corporation's 1997 Annual Report on Form 10-K and incorporated
by reference herein, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing in the Corporation's
1997 Annual Report on Form 10-K, and are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The consolidated balance sheet of Meridian Bancorp, Inc. and subsidiaries as
of December 31, 1995, and the related consolidated statements of income, changes
in shareholders' equity and cash flows for the year ended December 31, 1995,
included in the Corporation's 1997 Annual Report on Form 10-K, which is
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. Such financial statements were
combined with those of CoreStates for such period.
The consolidated balance sheet of United Counties Bancorporation and
subsidiaries as of December 31, 1995, and the related consolidated statements of
income, changes in stockholders' equity and cash flows for the year ended
December 31, 1995, included in the Corporation's 1997 Annual Report on Form
10-K, which is incorporated by reference herein, have been incorporated by
reference herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accounts, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing. Such
financial statements were combined with those of CoreStates for such period.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Corporation with the Commission (File
No. 1-10000) under Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), are hereby incorporated by reference in
the Prospectus as supplemented by this Prospectus Supplement:
(1) the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1997; and
(2) the Corporation's Current Reports on Form 8-K dated January 22,
1998 and April 15, 1998.
All documents filed pursuant to Section 13(a), 13(c), or 14 or 15(d) of the
Exchange Act subsequent to the date hereof and prior to the termination of the
offering of the Notes are hereby incorporated by reference into the Prospectus
as supplemented by this Prospectus Supplement and shall be deemed a part hereof
from the date of
S-18
<PAGE>
filing of such documents. Any statement contained in the Prospectus, in this
Prospectus Supplement or in a document incorporated or deemed to be incorporated
by reference in the Prospectus as supplemented by this Prospectus Supplement
shall be deemed to be modified or superseded for purposes of the Registration
Statement (as defined in the Prospectus) and the Prospectus as supplemented by
this Prospectus Supplement to the extent that a statement contained in the
Prospectus, in this Prospectus Supplement or in any subsequently filed document
which also is or is deemed to be incorporated by reference in the Prospectus as
supplemented by this Prospectus Supplement 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, the Prospectus or this Prospectus Supplement.
THE CORPORATION WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM A COPY OF
THE PROSPECTUS AS SUPPLEMENTED BY THIS PROSPECTUS SUPPLEMENT IS DELIVERED, UPON
THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL OF THE
DOCUMENTS INCORPORATED BY REFERENCE IN THE PROSPECTUS AS SUPPLEMENTED BY THIS
PROSPECTUS SUPPLEMENT, EXCEPT FOR CERTAIN EXHIBITS TO SUCH DOCUMENTS. WRITTEN
REQUESTS SHOULD BE SENT TO: INVESTOR RELATIONS, FIRST UNION CORPORATION, ONE
FIRST UNION CENTER, CHARLOTTE, NORTH CAROLINA 28288-0206. TELEPHONE REQUESTS MAY
BE DIRECTED TO (704) 374-6782.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This Prospectus Supplement (including information included or incorporated
by reference herein) contains certain forward-looking statements with respect to
the financial condition, results of operations, plans, objectives, future
performance and business of the Corporation, as well as certain information
relating to the Corporation's pending acquisition of CoreStates, including (i)
statements relating to the cost savings estimated to result from the CoreStates
acquisition, see "Recent Developments -- Certain Pending Acquisitions;
CORESTATES FINANCIAL CORP"; (ii) statements relating to revenues estimated to
result from the CoreStates acquisition, see "Recent Developments -- Certain
Pending Acquisitions; CORESTATES FINANCIAL CORP"; (iii) statements relating to
the restructuring charges estimated to be incurred in connection with the
CoreStates acquisition see "Recent Developments -- Certain Pending Acquisitions;
CORESTATES FINANCIAL CORP"; and (iv) statements preceded by, followed by or that
include the words "believes", "expects", "anticipates", "estimates" or similar
expressions (see "Recent Developments -- Certain Pending Acquisitions;
CORESTATES FINANCIAL CORP"). These forward-looking statements involve certain
risks and uncertainties. Factors that may cause actual results to differ
materially from those contemplated by such forward-looking statements include,
among others, the following possibilities: (a) expected cost savings from the
CoreStates acquisition and the Corporation's other recently completed or pending
acquisitions may not be fully realized with the expected time frame; (b)
revenues following the CoreStates acquisition and the Corporation's other
recently completed or pending acquisitions may be lower than expected, or
deposit attrition, operating costs or customer loss and business disruption
following the CoreStates acquisition and the Corporation's other recently
completed or pending acquisitions may be greater than expected; (c) competitive
pressures among depository and other financial institutions may increase
significantly; (d) costs or difficulties related to the integration of the
business of the Corporation with acquired or to be acquired companies may be
greater than expected; (e) changes in the interest rate environment may reduce
margins; (f) general economic or business conditions, either nationally or in
the states in which the Corporation, CoreStates or other acquired or to be
acquired companies are doing business, may be less favorable than expected
resulting in, among other things, a deterioration in credit quality or a reduced
demand for credit; (g) legislative or regulatory changes may adversely affect
the business in which the Corporation, CoreStates or other acquired or to be
acquired companies are engaged; and (h) changes may occur in the securities
markets.
S-19
<PAGE>
PROSPECTUS
FIRST UNION CORPORATION
COMMON STOCK, PREFERRED STOCK, CLASS A PREFERRED STOCK,
DEPOSITARY SHARES, DEBT SECURITIES AND WARRANTS
------------------------
First Union Corporation (the "Corporation") may offer from time to time (i)
common stock, $3.33 1/3 par value per share ("Common Stock"), (ii) one or more
series of Preferred Stock, no-par value per share ("Preferred Stock"), which may
be evidenced by Depositary Shares (as defined herein), (iii) one or more series
of Class A Preferred Stock, no-par value per share ("Class A Preferred Stock"),
which may be evidenced by Depositary Shares, (iv) one or more series of debt
securities ("Debt Securities"), consisting of debentures, notes and/or other
unsecured evidences of indebtedness, which may be unsubordinated ("Senior Debt
Securities") or subordinated ("Subordinated Debt Securities") to certain other
obligations of the Corporation, and (v) warrants to purchase Debt Securities,
Preferred Stock, Class A Preferred Stock, Depositary Shares or Common Stock
("Warrants", and together with the Common Stock, Preferred Stock, Class A
Preferred Stock, Depositary Shares and Debt Securities, "Securities"), at an
aggregate initial offering price not to exceed $2,000,000,000, plus up to
$390,000,000 in aggregate initial offering price of additional Debt Securities
(or at the option of the Corporation if so specified in the applicable
supplement or supplements to this Prospectus (each, a "Prospectus Supplement"),
the equivalent thereof in any other currency or currency unit), at prices and on
terms to be determined at the time of sale. Securities may be offered separately
or together, in separate series, in amounts, at prices and on terms to be set
forth in the applicable Prospectus Supplement.
The applicable Prospectus Supplement will set forth with regard to the
particular Securities in respect of which such Prospectus Supplement is being
delivered, the terms of the offering thereof, including (i) in the case of Debt
Securities, whether they are Senior Debt Securities or Subordinated Debt
Securities and the specific designation, aggregate principal amount, the
currency or currency unit in which payments are to be made, denominations,
maturity, premium, if any, rate (which may be fixed or variable) and time of
payment of interest, if any, terms for redemption at the option of the
Corporation or the holder, if any, terms for sinking fund payments, if any, and,
in the case of Subordinated Debt Securities, subordination terms and conversion
or exchange rights, if any; (ii) in the case of Preferred Stock or Class A
Preferred Stock, the specific serial designation, the number of shares, any
dividend, redemption, liquidation, conversion, exchange, sinking fund, voting
and other rights, if any, and whether interests in such Preferred Stock or Class
A Preferred Stock will be evidenced by Depositary Shares and, if so, the
identity of the Depositary (as defined herein); (iii) in the case of Common
Stock, the number of shares; and (iv) in the case of Warrants, the duration,
offering price, exercise price and detachability of such Warrants, as well as a
description of the Debt Securities, Preferred Stock, Class A Preferred Stock,
Depositary Shares or Common Stock issuable upon such exercise. Unless otherwise
specified in the applicable Prospectus Supplement, Securities other than Common
Stock will be issued in permanent global form and Common Stock will be issued in
definitive form.
The Common Stock is listed and traded on the New York Stock Exchange (the
"NYSE") under the symbol "FTU". The applicable Prospectus Supplement will also
contain information, where applicable, as to any other listing on a securities
exchange of Securities covered by such Prospectus Supplement.
The Corporation may sell Securities to or through underwriters, including
First Union Capital Markets Corp., an affiliate of the Corporation, acting as
principals for their own account or as agents, and also may sell Securities
directly to other purchasers or through agents designated from time to time. The
applicable Prospectus Supplement will set forth the initial public offering
price, the names of any underwriters or agents, the principal amounts, if any,
to be purchased by underwriters, the compensation of such underwriters and
agents, if any, and the net proceeds to the Corporation. If the Corporation,
directly or through agents, solicits offers to purchase Securities, the
Corporation reserves the sole right to accept and, together with its agents, to
reject in whole or in part any proposed purchase of Securities. See "Plan of
Distribution". Any underwriters, dealers or agents participating in the offering
may be deemed "underwriters" within the meaning of the Securities Act of 1933,
as amended (together with the rules and regulations thereunder, the "Securities
Act"). See "Plan of Distribution" for possible indemnification arrangements for
underwriters, agents and their controlling persons.
This Prospectus and the applicable Prospectus Supplements may be used by
First Union Capital Markets Corp. in connection with offers and sales related to
market-making transactions in Securities covered by such Prospectus Supplements.
First Union Capital Markets Corp. may act as principal or agent in such
transactions. Such sales will be made at prices related to prevailing market
prices at the time of sale.
NONE OF THE SECURITIES WILL BE SAVINGS ACCOUNTS, DEPOSITS OR OTHER
OBLIGATIONS OF ANY BANK OR NONBANK SUBSIDIARY OF THE CORPORATION, AND NONE OF
THE SECURITIES WILL BE INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
("FDIC"), THE BANK INSURANCE FUND ("BIF"), THE SAVINGS ASSOCIATION INSURANCE
FUND ("SAIF") OR ANY OTHER GOVERNMENTAL AGENCY.
------------------------
This Prospectus may not be used to consummate the sale of any Securities
unless accompanied by a Prospectus Supplement covering such Securities.
------------------------
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 SEPTEMBER 5, 1997.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE APPLICABLE
PROSPECTUS SUPPLEMENTS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER THIS
PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH THEY RELATE OR ANY 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 OR ANY PROSPECTUS SUPPLEMENT
NOR ANY SALE 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 THEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT
APPROVED OR DISAPPROVED THE OFFERING OF ANY SECURITIES NOR HAS SUCH COMMISSIONER
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT.
------------------------
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (together with the rules and
regulations thereunder, the "Exchange Act"), and in accordance therewith, files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Corporation can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's Regional Offices in New York (7 World Trade
Center, 13th Floor, New York, New York 10048) and Chicago (Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661) and copies of such
materials can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Certain of
such reports, proxy statements and other information is also available from the
Commission over the Internet at http://www.sec.gov. The Common Stock is listed
and traded on the NYSE. Reports, proxy statements and other information relating
to the Corporation can also be inspected at the offices of the NYSE, 20 Broad
Street, New York, New York 10005.
This Prospectus does not contain all of the information set forth in the
Registration Statement on Form S-3, of which this Prospectus is a part, and the
exhibits thereto (together with any amendments or supplements thereto, the
"Registration Statement"), which has been filed by the Corporation with the
Commission under the Securities Act, certain portions of which have been omitted
pursuant to the rules and regulations of the Commission and to which portions
reference is hereby made for further information.
------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Corporation with the Commission (File
No. 1-10000) under Section 13(a) or 15(d) of the Exchange Act are hereby
incorporated by reference in this Prospectus:
(i) the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1996;
(ii) the Corporation's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1997, and June 30, 1997; and
(iii) the Corporation's Current Reports on Form 8-K dated January 13, 1997,
July 21, 1997 and August 20, 1997.
All documents filed by the Corporation pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the offering of any Securities are hereby incorporated by
reference into this Prospectus and shall be deemed a part hereof from the date
of filing of such documents.
Any statement contained herein, in any supplement hereto or in a document
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 any Prospectus Supplement to the extent that a
statement contained herein, in any supplement hereto or in any subsequently
filed document which also is or is deemed to be incorporated by reference herein
or therein 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
supplement hereto.
THIS PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. A COPY OF SUCH DOCUMENTS IS AVAILABLE
WITHOUT CHARGE (OTHER THAN CERTAIN EXHIBITS TO SUCH DOCUMENTS) TO EACH PERSON TO
WHOM THIS PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST TO: FIRST UNION
CORPORATION, INVESTOR RELATIONS, ONE FIRST UNION CENTER, CHARLOTTE, NORTH
CAROLINA 28288-0206 (TELEPHONE NUMBER: (704) 374-6782).
2
<PAGE>
THE CORPORATION
GENERAL
Financial and other information relating to the Corporation, including
information relating to the Corporation's directors and executive officers, is
set forth in the Corporation's 1996 Annual Report on Form 10-K, 1997 Annual
Meeting Proxy Statement, 1997 Quarterly Reports on Form 10-Q, 1997 Current
Reports on Form 8-K, and such other documents filed by the Corporation under the
Exchange Act subsequent to the date hereof as specified under "Incorporation of
Certain Documents by Reference", copies of which may be obtained from the
Corporation as indicated under "Available Information".
HISTORY AND BUSINESS
The Corporation was incorporated under the laws of North Carolina in 1967
and is registered as a bank holding company under the Bank Holding Company Act
of 1956, as amended (the "BHCA"). Pursuant to a corporate reorganization in
1968, First Union National Bank, based in Charlotte, North Carolina ("FUNB-NC"),
and First Union Mortgage Corporation, a mortgage banking firm acquired by
FUNB-NC in 1964, became subsidiaries of the Corporation.
In addition to North Carolina, the Corporation's full-service banking
subsidiaries also operate in Connecticut, Delaware, Florida, Georgia, Maryland,
New Jersey, New York, Pennsylvania, South Carolina, Tennessee, Virginia and
Washington, D.C. In addition to providing a wide range of commercial and retail
banking and trust services through its full-service banking subsidiaries, the
Corporation also provides various other financial services, including mortgage
banking, home equity lending, leasing, investment banking, insurance and
securities brokerage services through other subsidiaries.
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 72 banking-related acquisitions and has pending
three acquisitions, including the more significant acquisitions (I.E.,
acquisitions involving the acquisition of $3.0 billion or more in assets or
deposits) set forth in the following table.
<TABLE>
<CAPTION>
CONSIDERATION/
ASSETS/ ACCOUNTING
NAME HEADQUARTERS DEPOSITS (1)(2) TREATMENT COMPLETION DATE
- -------------------------------------------- --------------- --------------- -------------------------- ---------------
<S> <C> <C> <C> <C>
Atlantic Bancorporation..................... Florida $ 3.8 billion common stock/pooling November 1985
Northwestern Financial Corporation.......... North Carolina 3.0 billion common stock/pooling December 1985
First Railroad & Banking Company of
Georgia................................... Georgia 3.7 billion common stock/pooling November 1986
Florida National Banks of Florida, Inc...... Florida 7.9 billion cash and preferred
stock/purchase January 1990
Southeast Banking Corporation subsidiary
banks ("Southeast")....................... Florida 9.9 billion cash, notes and preferred
stock/purchase September 1991
Resolution Trust Corporation ("RTC")
acquisitions.............................. Florida,
Georgia,
Virginia 5.3 billion cash/purchase 1991-1994
Dominion Bankshares Corporation............. Virginia 8.9 billion common and preferred
stock/pooling March 1993
Georgia Federal Bank, FSB................... Georgia 4.0 billion cash/purchase June 1993
First American Metro Corp................... Virginia 4.6 billion cash/purchase June 1993
American Savings of Florida, F.S.B.......... Florida 3.6 billion common stock/purchase July 1995
First Fidelity Bancorporation............... New Jersey 35.3 billion common and preferred
stock/pooling January 1996
Center Financial Corporation................ Connecticut 4.0 billion common stock/purchase November 1996
Signet Banking Corporation ("Signet")....... Virginia $ 11.9 billion common stock/pooling pending
</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, which represents assets of the two banking
subsidiaries of Southeast Banking Corporation acquired from the FDIC.
(2) In addition, the Corporation acquired (i) Lieber & Company, a mutual fund
advisory company with approximately $3.4 billion in assets under management,
in June 1994, and (ii) Keystone Investments, Inc., a mutual fund advisory
company
3
<PAGE>
with approximately $11.6 billion in assets under management, in December
1996. The consideration paid by the Corporation in each acquisition 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 future transactions.
RECENT DEVELOPMENTS
On July 21, 1997, the Corporation entered into an agreement to acquire
Signet. As of and for the six months ended June 30, 1997, Signet had total
assets of $11.9 billion, net loans of $6.3 billion, deposits of $8.1 billion,
stockholders' equity of $936 million and net income of $31 million, and as of
such date, Signet operated in Virginia, Washington, D.C., and Maryland.
The acquisition agreement provides for the issuance of 1.10 shares of
Common Stock for each share of Signet common stock. As of June 30, 1997, Signet
had approximately 60.4 million shares of common stock outstanding. The
transaction, which is subject to stockholder and regulatory approvals and other
conditions of closing, will be accounted for as a pooling of interests.
Additional information with respect to the proposed acquisition of Signet
is set forth in the Corporation's Current Report Form 8-K dated July 21, 1997.
See "Incorporation of Certain Documents by Reference."
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The Corporation's Consolidated Ratios of Earnings to Fixed Charges and
Consolidated Ratios of Earnings to Fixed Charges and Preferred Stock Dividends
for the periods indicated were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
-------------- -----------------------------------------
1997 1996 1995 1994 1993 1992
-------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
Excluding interest on deposits.......................... 2.61x 2.32 2.75 3.55 3.95 2.71
Including interest on deposits.......................... 1.61x 1.49 1.54 1.73 1.70 1.32
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
Excluding interest on deposits.......................... 2.61x 2.31 2.67 3.10 3.59 2.43
Including interest on deposits.......................... 1.61x 1.49 1.53 1.67 1.67 1.30
</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. For purposes of calculating the
Consolidated Ratios of Earnings to Fixed Charges and Preferred Stock Dividends,
fixed charges are combined with preferred stock dividends paid, adjusted to a
pretax basis.
4
<PAGE>
USE OF PROCEEDS
The Corporation currently intends to use the net proceeds from the sale of
any Securities for general corporate purposes, which may include the reduction
of indebtedness, investments at the holding company level, investments in, or
extensions of credit to, its banking and other subsidiaries and other banks and
companies engaged in other financial service activities, possible acquisitions,
stock repurchases and such other purposes as may be stated in any applicable
Prospectus Supplement. Pending such use, the net proceeds may be temporarily
invested. The precise amounts and timing of the application of proceeds will
depend upon the funding requirements of the Corporation and its subsidiaries and
the availability of other funds. Except as may be described in any applicable
Prospectus Supplement, specific allocations of the proceeds to such purposes
will not have been made at the date of such Prospectus Supplement.
Based upon the historical and anticipated future growth of the Corporation
and the financial needs of the Corporation and its subsidiaries, the Corporation
may engage in additional financings of a character and amount to be determined
as the need arises.
CERTAIN REGULATORY CONSIDERATIONS
AS A BANK HOLDING COMPANY, THE CORPORATION IS SUBJECT TO REGULATION UNDER
THE BHCA AND TO ITS EXAMINATION AND REPORTING REQUIREMENTS. 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
PARTICULAR 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 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, or a
waiver of the requirement for such approval by, the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"). In addition, bank holding
companies are generally prohibited under the BHCA from engaging in nonbanking
activities, subject to certain exceptions.
The earnings of the Corporation are affected by the legislative and
governmental actions of various regulatory authorities, including the Federal
Reserve Board, the Comptroller of the Currency (the "OCC") and the FDIC. 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 for the payment of any
dividend by a national bank if the total of all dividends declared by the board
of directors of such 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.
In addition to its national bank subsidiaries, the Corporation has one
state-chartered bank subsidiary which is subject to dividend limitations under
applicable state laws.
Under the foregoing dividend restrictions and certain restrictions
applicable to certain of the Corporation's nonbanking subsidiaries, as of June
30, 1997, the Corporation's subsidiaries, without obtaining affirmative
governmental approvals, could pay aggregate dividends of $717 million to the
Corporation. In the first six months of 1997, the Corporation's subsidiaries
paid $603 million in cash dividends to the Corporation. In addition, a corporate
reorganization of the Corporation's subsidiary banks in Georgia and Florida into
FUNB-NC on June 5, 1997, resulted in a reduction of capital in the amount of
$400 million, which was paid to the Corporation.
5
<PAGE>
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 subsidiary) have indicated that paying dividends that
deplete a bank's capital base to an inadequate level would be an unsound and
unsafe banking practice. The OCC, the FDIC and the Federal Reserve Board have
each indicated that banking organizations should generally pay dividends only
out of current operating earnings.
BORROWINGS; ETC.
There are also various legal restrictions on the extent to which each of
the Corporation and certain of 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") imposes
liability on an institution the deposits of which are insured by the FDIC, such
as the Corporation's subsidiary banks, for certain potential losses of 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 Federal Reserve Board, the FDIC and the OCC have adopted substantially
similar risk-based and leverage capital guidelines for United States banking
organizations. Under these risked-based capital standards, the minimum
consolidated ratio of total 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
stockholder's equity, retained earnings, a limited amount of qualifying
perpetual preferred stock and minority interests in the equity accounts of
consolidated subsidiaries, less goodwill and certain intangibles ("tier 1
capital" and, together with tier 2 capital, "total capital"). The remainder of
total capital may consist of mandatory convertible debt securities and a limited
amount of subordinated debt, qualifying preferred stock and loan loss allowance
("tier 2 capital"). At June 30, 1997, the Corporation's tier 1 and total capital
ratios were 7.55 percent and 12.64 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
less certain amounts ("leverage ratio") equal to three percent for bank holding
companies that meet certain specified criteria, including having the highest
regulatory rating. All other bank holding companies will generally be required
to maintain a leverage ratio of from at least four to five percent. The
Corporation's leverage ratio at June 30, 1997, was 6.23 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.
6
<PAGE>
Each of the Corporation's subsidiary 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 5.47 percent as of June 30,
1997. The federal banking agencies have not advised any of the subsidiary banks
of any specific minimum leverage ratio applicable to it.
PROMPT CORRECTIVE ACTION
The FDIA, among other things, requires the federal banking agencies to take
"prompt corrective action" in respect of depository institutions that do not
meet minimum capital requirements. The FDIA establishes five capital tiers:
"well capitalized"; "adequately capitalized"; "undercapitalized"; "significantly
undercapitalized"; and "critically undercapitalized". A depository institution's
capital tier will depend upon how its capital levels compare to various relevant
capital measures and certain other factors, as established by regulation.
The federal bank regulatory agencies have adopted regulations establishing
relevant capital measures and relevant capital levels applicable to FDIC-insured
banks. The relevant capital measures are the total capital ratio, tier 1 capital
ratio and the leverage ratio. Under the regulations, a FDIC-insured bank will be
(i) "well capitalized" if it has a total capital ratio of ten percent or
greater, a tier 1 capital ratio of six percent or greater and a leverage ratio
of five percent or greater and is not subject to any order or written directive
by the OCC to meet and maintain a specific capital level for any capital
measure; (ii) "adequately capitalized" if it has a total capital ratio of eight
percent or greater, a tier 1 capital ratio of four percent or greater and a
leverage ratio of four percent or greater (three percent in certain
circumstances) and is not "well capitalized"; (iii) "undercapitalized" if it has
a total capital ratio of less than eight percent, a tier 1 capital ratio of less
than four percent or a leverage ratio of less than four percent (three percent
in certain circumstances); (iv) "significantly undercapitalized" if it has a
total capital ratio of less than six percent, a tier 1 capital ratio of less
than three percent or a leverage ratio of less than three percent; and (v)
"critically undercapitalized" if its tangible equity is equal to or less than
two percent of average quarterly tangible assets. An institution may be
downgraded to, or deemed to be in, a capital category that is lower than is
indicated by its capital ratios if it is determined to be in an unsafe or
unsound condition or if it receives an unsatisfactory examination rating with
respect to certain matters. As of June 30, 1997, 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. A bank that is not "well capitalized" is subject
to certain limitations relating to so-called "brokered" deposits.
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") authorized interstate acquisitions of banks and bank holding
companies without geographic limitation beginning one year after enactment. In
addition, it authorized, beginning June 1, 1997, a bank to 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. In
addition, a bank may establish and
7
<PAGE>
operate a DE NOVO branch in a state in which the bank does not maintain a branch
if that state expressly permits DE NOVO interstate branching. It was pursuant to
authority from IBBEA that FUNB-NC completed its reorganizations in June and July
1997. In addition, First Union National Bank, based in Avondale, Pennsylvania,
which conducts banking operations in New York, New Jersey and Pennsylvania, is
to be merged with FUNB-NC in February 1998, pending regulatory approval.
FDIC INSURANCE ASSESSMENTS; DIFA
Effective January 1, 1996, the FDIC reduced the insurance premiums it
currently charges on bank deposits insured by the Bank Insurance Fund ("BIF") to
the statutory minimum of $2,000 for "well capitalized" banks. The Deposit
Insurance Funds Act of 1996, which was enacted on September 30, 1996 ("DIFA"),
reduced the amount of semi-annual FDIC insurance premiums for savings
association deposits acquired by banks and insured by SAIF to the same levels
assessed for deposits insured by BIF. DIFA also provided for a special one-time
assessment imposed on deposits insured by SAIF, including such deposits held by
banks, to bring the SAIF up to statutorily 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, and continues the
assessments currently imposed on depository institutions with respect to
SAIF-insured deposits, to pay for the cost of Financing Corporation funding.
DESCRIPTION OF COMMON STOCK
The following summary of certain provisions of the Corporation's Articles
of Incorporation, as amended (the "Articles"), the Corporation's Bylaws (the
"Bylaws") and the Rights Agreement (as defined below) does not purport to be
complete and is qualified in its entirety by reference to such instruments, each
of which is an exhibit to the Registration Statement of which this Prospectus is
a part.
AUTHORIZED CAPITAL
The authorized capital stock of the Corporation consists of 750,000,000
shares of Common Stock, 10,000,000 shares of Preferred Stock and 40,000,000
shares of Class A Preferred Stock. Each outstanding share of Common Stock
currently has attached to it one right (a "Right") issued pursuant to an Amended
and Restated Shareholder Protection Rights Agreement (the "Rights Agreement").
Each Right entitles its registered holder to purchase one one-hundredth of a
share of a junior participating series of Class A Preferred Stock, as described
under " -- Rights Plan" below.
As of July 31, 1997, there were 561,374,603 shares of Common Stock, no
shares of Preferred Stock and no shares of Class A Preferred Stock issued and
outstanding. The number of shares of Common Stock outstanding on July 31, 1997,
reflects the payment on such date of a two-for-one stock split in the form of a
100 percent Common Stock dividend.
GENERAL
Subject to the prior rights of the holders of any Preferred Stock, Class A
Preferred Stock and Depositary Shares then outstanding, holders of Common Stock
are entitled to receive such dividends as may be declared by the Board of
Directors out of funds legally available therefor and, in the event of
liquidation or dissolution, to receive the net assets of the Corporation
remaining after payment of all liabilities and after payment to holders of all
shares of Preferred Stock and Class A Preferred Stock and to the holders of
Depositary Shares of the full preferential amounts to which such holders are
respectively entitled, in proportion to their respective holdings.
See "Certain Regulatory Considerations -- Payment of Dividends" for
information relating to certain regulatory restrictions on the payment of
dividends by banks, including the Corporation's subsidiary banks.
Pursuant to an indenture dated as of November 27, 1996, between the
Corporation and Wilmington Trust Company, as trustee, under which certain of the
Corporation's outstanding junior subordinated debt securities have been issued,
the Corporation has covenanted that it generally will not declare or pay any
dividends or distributions on, or redeem, repurchase, acquire or make a
liquidation payment with respect to, any of the Corporation's capital stock,
including the Common Stock, Preferred Stock and Class A Preferred Stock, if, at
such time, certain defaults have occurred under such indenture or a related
guarantee of the Corporation or the Corporation shall have exercised its right
under such indenture to defer interest payments on the securities issued
thereunder.
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Subject to the rights of the holders of any Preferred Stock, Class A
Preferred Stock and Depositary Shares then outstanding, all voting rights are
vested in the holders of the shares of Common Stock, each share being entitled
to one vote on all matters requiring stockholder action and in the election of
directors. Holders of Common Stock have no preemptive, subscription or
conversion rights. All of the outstanding shares of Common Stock are, and any
issued and sold hereunder will be, fully paid and nonassessable.
FUNB-NC is the Transfer Agent, Registrar and Dividend Disbursement Agent
for the Common Stock.
RIGHTS PLAN
Each outstanding share of Common Stock currently has attached to it one
Right issued pursuant to the Rights Agreement. Each Right entitles its
registered holder to purchase one one-hundredth of a share of a junior
participating series of Class A Preferred Stock designed to have economic and
voting terms similar to those of one share of Common Stock, for $105, subject to
adjustment (the "Rights Exercise Price"), but only after the earlier to occur
of: (i) the tenth business day (subject to extension) after any person (an
"Acquiring Person") (x) commences a tender or exchange offer, which, if
consummated, would result in a person becoming the beneficial owner of 15
percent or more of the outstanding shares of Common Stock, or (y) is determined
by the Federal Reserve Board to "control" the Corporation within the meaning of
the BHCA (see " -- Other Provisions" below), subject to certain exceptions; and
(ii) the tenth business day after the first date (the "Flip-in Date") of a
public announcement by the Corporation that a person has become an Acquiring
Person (in either case, the "Separation Time"). The Rights will not trade
separately from the shares of Common Stock unless and until the Separation Time
occurs.
The Rights Agreement provides that a person will not become an Acquiring
Person under the BHCA control test described above if either (i) the Federal
Reserve Board's control determination would not have been made but for such
person's failure to make certain customary passivity commitments, or such
person's violation of such commitments made, to the Federal Reserve Board, so
long as the Federal Reserve Board determines that such person no longer controls
the Corporation within 30 days (or 60 days in certain circumstances), or (ii)
the Federal Reserve Board's control determination was not based on such a
failure or violation and such person (x) obtains a noncontrol determination
within three years, and (y) is using its best efforts to allow the Corporation
to make any acquisition or engage in any legally permissible activity
notwithstanding such person's being deemed to control the Corporation for
purposes of the BHCA.
The Rights will not be exercisable until the business day following the
Separation Time. The Rights will expire on the earliest of: (i) the Exchange
Time (as defined below); (ii) the close of business on December 28, 2000; and
(iii) the date on which the Rights are redeemed or terminated as described below
(in any such case, the "Expiration Time"). The Rights Exercise Price and the
number of Rights outstanding, or in certain circumstances the securities
purchasable upon exercise of the Rights, are subject to adjustment upon the
occurrence of certain events.
In the event that prior to the Expiration Time a Flip-in Date occurs, the
Corporation will take such action as shall be necessary to ensure and provide
that each Right (other than Rights beneficially owned by an Acquiring Person or
any affiliate, associate or transferee thereof, which Rights shall become void)
shall constitute the right to purchase, from the Corporation, shares of Common
Stock having an aggregate market price equal to twice the Rights Exercise Price
for an amount in cash equal to the then current Rights Exercise Price. In
addition, the Board of Directors of the Corporation may, at its option, at any
time after a Flip-in Date, elect to exchange all of the then outstanding Rights
for shares of Common Stock, at an exchange ratio of two shares of Common Stock
per Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the Separation Time (the "Rights Exchange
Rate"). Immediately upon such action by the Board of Directors (the "Exchange
Time"), the right to exercise the Rights will terminate, and each Right will
thereafter represent only the right to receive a number of shares of Common
Stock equal to the Rights Exchange Rate. If the Corporation becomes obligated to
issue shares of Common Stock upon exercise of or in exchange for Rights, the
Corporation, at its option, may substitute therefor shares of junior
participating Class A Preferred Stock upon exercise of each Right at a rate of
two one-hundredths of a share of junior participating Class A Preferred Stock
upon the exchange of each Right.
The Rights may be canceled and terminated without any payment to holders
thereof at any time prior to the date that they become exercisable, and are
redeemable by the Corporation at $0.01 per Right, subject to adjustment upon the
occurrence of certain events, at any date between the date on which they become
exercisable and the Flip-in Date. The Rights have no voting rights, and they are
not entitled to dividends.
The Rights will not prevent a takeover of the Corporation. The Rights,
however, may cause substantial dilution to a person or group that acquires 15
percent or more of Common Stock unless the Rights are first redeemed or
terminated by the
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Board of Directors of the Corporation. Nevertheless, the Rights should not
interfere with a transaction that is in the best interests of the Corporation
and its stockholders because the Rights can be redeemed or terminated, as
hereinabove described, before the consummation of such transaction.
The complete terms of the Rights are set forth in the Rights Agreement. The
Rights Agreement is incorporated by reference as an exhibit to the Registration
Statement of which this Prospectus is a part, and the foregoing description is
qualified in its entirety by reference thereto. A copy of the Rights Agreement
can be obtained upon written request to the Rights Agent, First Union National
Bank, 1525 West W.T. Harris Blvd., Charlotte, North Carolina 28288-1153.
OTHER PROVISIONS
In addition to the Rights Plan, the Articles and Bylaws of the Corporation
contain a number of provisions which may be deemed to have the effect of
discouraging or delaying attempts to gain control of the Corporation, including
provisions in the Articles: (i) classifying the Board of Directors into three
classes with each class to serve for three years, with one class being elected
annually; (ii) authorizing the Board of Directors to fix the size of the Board
of Directors between nine and 30 directors; (iii) authorizing directors to fill
vacancies on the Board of Directors that occur between annual meetings, except
that vacancies resulting from a removal of a director by a stockholder vote may
only be filled by a stockholder vote; (iv) providing that directors may be
removed only for cause and only by affirmative vote of the majority of shares
entitled to be voted in the election of directors, voting as a single class; (v)
authorizing only the Board of Directors, the Chairman of the Board or the
President to call a special meeting of stockholders (except for special meetings
called under specified circumstances for holders of classes or series of stock
ranking superior to the Common Stock); and (vi) requiring an 80 percent vote of
stockholders entitled to vote in the election of directors, voting as a single
class, to alter any of the foregoing provisions.
The Bylaws include provisions setting forth specific conditions under
which: (i) business may be transacted at an annual meeting of stockholders; and
(ii) persons may be nominated for election as directors of the Corporation at an
annual meeting of stockholders.
The Change in Bank Control Act prohibits a person or group of persons from
acquiring "control" of a bank holding company unless the Federal Reserve Board
has been given 60 days' prior written notice of such proposed acquisition, and
within that time period, the Federal Reserve Board has not issued a notice
disapproving the proposed acquisition or extending for up to another 30 days the
period during which such a disapproval may be issued, or unless the acquisition
is subject to Federal Reserve Board approval under the BHCA. An acquisition may
be made prior to the expiration of the disapproval period if the Federal Reserve
Board issues written notice of its intent not to disapprove the action. Under a
rebuttable presumption established by the Federal Reserve Board, the acquisition
of more than ten percent of a class of voting stock of a bank holding company
with a class of securities registered under Section 12 of the Exchange Act, such
as the Corporation, would, under the circumstances set forth in the presumption,
constitute the acquisition of control.
In addition, any "company" would be required to obtain the approval of the
Federal Reserve Board under the BHCA before acquiring 25 percent (five percent
in the case of an acquiror that is a bank holding company) or more of the
outstanding shares of Common Stock, or otherwise obtaining "control" over the
Corporation. Under the BHCA, "control" generally means (i) the ownership or
control of 25 percent or more of any class of voting securities of the bank
holding company, (ii) the ability to elect a majority of the bank holding
company's directors, or (iii) the ability otherwise to exercise a controlling
influence over the management and policies of the bank holding company.
Two North Carolina "anti-takeover" statutes adopted in 1987, The North
Carolina Shareholder Protection Act and The North Carolina Control Share
Acquisition Act, allowed North Carolina corporations to elect to either be
covered or not be covered by such statutes. The Corporation elected not to be
covered by such statutes.
In addition to the foregoing, in certain instances the issuance of
authorized but unissued shares of Common Stock, Preferred Stock or Class A
Preferred Stock may have an anti-takeover effect.
The existence of the foregoing provisions could result in (i) the
Corporation being less attractive to a potential acquiror, and (ii) the
Corporation's stockholders receiving less for their shares of Common Stock than
otherwise might be available in the event of a take-over attempt.
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DESCRIPTION OF PREFERRED STOCK AND CLASS A PREFERRED STOCK
The following summary of the Preferred Stock and the Class A Preferred
Stock does not purport to be complete and is qualified in its entirety by
reference to the Articles, as amended with respect to each series of Preferred
Stock or Class A Preferred Stock, which Articles are, and which amendments will
be, incorporated by reference in the Registration Statement of which this
Prospectus is a part in connection with the issuance of such series of Preferred
Stock or Class A Preferred Stock. Such summary relates to certain terms and
conditions applicable to the Preferred Stock as a class and the Class A
Preferred Stock as a class. The particular terms of any series of Preferred
Stock or Class A Preferred Stock will be described in the applicable Prospectus
Supplement. If so indicated in such Prospectus Supplement, the terms of any such
series may differ from the terms set forth below.
GENERAL
Under the Articles, the Preferred Stock and the Class A Preferred Stock may
be issued from time to time in one or more series, without stockholder approval,
when authorized by the Board of Directors. Subject to limitations prescribed by
law, the Board of Directors is authorized to determine the voting powers (if
any), designation, preferences and relative, participating, optional or other
rights, if any, and the qualifications, limitations or restrictions thereof, if
any, including specifically, but not limited to, the dividend rights, conversion
rights, exchange rights, redemption rights, liquidation preferences and voting
rights, if any, of any then unissued series of Preferred Stock or Class A
Preferred Stock (or the entire class of Preferred Stock or Class A Preferred
Stock, if none of such shares have been issued), the designation and number of
shares constituting any such series and the terms and conditions of the issuance
thereof. Thus, the Board of Directors, without stockholder approval, could
authorize the issuance of Preferred Stock or Class A Preferred Stock with
voting, conversion and other rights that could adversely affect the voting power
and other rights of holders of Common Stock or other outstanding series of
Preferred Stock or Class A Preferred Stock.
Each series of Preferred Stock or Class A Preferred Stock will have the
dividend, liquidation, redemption and voting rights set forth below unless
otherwise described in an applicable Prospectus Supplement relating to such
series of Preferred Stock or Class A Preferred Stock. The applicable Prospectus
Supplement will describe the following terms of the series of Preferred Stock or
Class A Preferred Stock in respect of which this Prospectus is being delivered:
(i) the designation of such series and the number of shares offered; (ii) the
amount of the liquidation preference per share (or the method of calculation of
such amount); (iii) the initial public offering price at which shares of such
series will be issued; (iv) the dividend rate (or the method of calculation of
such rate) applicable to such series, the dates on which dividends will be
payable and the dates from which dividends will commence to cumulate, if any;
(v) any redemption or sinking fund provisions; (vi) any conversion or exchange
rights; (vii) any additional voting and other rights, preferences, privileges,
qualifications, limitations and restrictions; (viii) any listing of such series
on any securities exchange; (ix) the relative ranking and preferences of such
series as to dividend rights and rights upon any liquidation, dissolution or
winding up of the affairs of the Corporation; and (x) any other terms of such
series.
Pursuant to an indenture dated as of November 27, 1996, between the
Corporation and Wilmington Trust Company, as trustee, under which certain of the
Corporation's outstanding junior subordinated debt securities have been issued,
the Corporation has covenanted that it generally will not declare or pay any
dividends or distributions on, or redeem, repurchase, acquire or make a
liquidation payment with respect to, any of the Corporation's capital stock,
including the Common Stock, Preferred Stock and Class A Preferred Stock, if, at
such time, certain defaults have occurred under such indenture or a related
guarantee of the Corporation or the Corporation shall have exercised its right
under such indenture to defer interest payments on the securities issued
thereunder.
No shares of Preferred Stock or Class A Preferred Stock are currently
outstanding. Shares of Preferred Stock and Class A Preferred Stock, upon
issuance against full payment of the purchase price therefor, will be fully paid
and nonassessable. The liquidation preference of any series of Preferred Stock
or Class A Preferred Stock is not necessarily indicative of the price at which
shares of such series of Preferred Stock or Class A Preferred Stock will
actually trade on or after the date of issuance.
RANK
Each series of Preferred Stock and Class A Preferred Stock will, with
respect to dividend rights and rights upon liquidation, dissolution or winding
up of the Corporation, rank prior or superior to the Common Stock. All shares of
each series of Preferred Stock will be of equal rank with each other. Shares of
Class A Preferred Stock will rank on a parity with or junior
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to (but not prior or superior to) Preferred Stock or any series thereof. Subject
to the foregoing and the terms of any particular series of Class A Preferred
Stock, series of Class A Preferred Stock may vary as to priority within that
class.
DIVIDENDS
Holders of each series of Preferred Stock and Class A Preferred Stock will
be entitled to receive, when, as and if declared by the Board of Directors out
of funds of the Corporation legally available for payment, cash dividends,
payable at such date or dates and at such rate or rates per share as described
in the applicable Prospectus Supplement. Such rate or rates may be fixed or
variable or both.
Dividends may be cumulative or noncumulative, as described in the
applicable Prospectus Supplement. If dividends on a series of Preferred Stock or
Class A Preferred Stock are noncumulative and if the Board of Directors fails to
declare a dividend in respect of a dividend period with respect to such series,
then holders of such Preferred Stock or Class A Preferred Stock will have no
right to receive a dividend in respect of such dividend period, and the
Corporation will have no obligation to pay the dividend for such period, whether
or not dividends are declared with respect to any future dividend payment dates.
If dividends on a series of Preferred Stock or Class A Preferred Stock are
cumulative, the dividends on such shares will accrue from and after the date set
forth in the applicable Prospectus Supplement.
No full dividends may be declared or paid or set apart for payment on any
series of Preferred Stock or Class A Preferred Stock ranking, as to dividends,
on a parity with or junior to the series of Preferred Stock or Class A Preferred
Stock offered by the applicable Prospectus Supplement (the "Offered Stock") for
any period unless full dividends for the immediately preceding dividend period
on such Offered Stock (including any accumulation in respect of unpaid dividends
for prior dividend periods, if dividends on such Offered Stock are cumulative)
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof is set apart for such payment. When dividends
are not so paid in full (or a sum sufficient for such full payment is not so set
apart) upon such Offered Stock and any other parity stock, dividends upon such
Offered Stock and dividends upon such parity stock will be declared pro rata so
that the amount of dividends declared per share on such Offered Stock and such
parity stock will in all cases bear to each other the same ratio that accrued
dividends for the then current dividend period per share on such Offered Stock
(including any accumulation in respect of unpaid dividends for prior dividend
periods, if dividends on such Offered Stock are cumulative) and accrued
dividends, including required or permitted accumulations, if any, on such parity
stock, bear to each other. No interest, or sum of money in lieu of interest,
will be payable in respect of any dividend payment on such Offered Stock that
may be in arrears. Unless full dividends on the Offered Stock have been declared
and paid or set apart for payment for the immediately preceding dividend period
(including any accumulation in respect of unpaid dividends for prior dividend
periods, if dividends on such Offered Stock are cumulative), (i) no cash
dividend or distribution (other than in junior stock) may be declared, set aside
or paid on junior stock (including Common Stock), (ii) the Corporation may not,
directly or indirectly, repurchase, redeem or otherwise acquire any junior stock
(or pay any monies into a sinking fund for the redemption of any junior stock)
except by conversion into or exchange for junior stock, and (iii) the
Corporation may not, directly or indirectly, repurchase, redeem or otherwise
acquire any parity stock (or pay any monies into a sinking fund for the
redemption of any parity stock) otherwise than pursuant to pro rata offers to
purchase or a concurrent redemption of all, or a pro rata portion, of the
Offered Stock and such parity stock (except by conversion into or exchange for
junior stock).
Any dividend payment made on a series of Preferred Stock or Class A
Preferred Stock will first be credited against the earliest accrued but unpaid
dividend due with respect to shares of such series that remains payable.
See "Certain Regulatory Considerations -- Payment of Dividends" for
information relating to certain regulatory restrictions on the payment of
dividends by banks, including the Corporation's subsidiary banks.
REDEMPTION
The terms, if any, on which Preferred Stock or Class A Preferred Stock of
any series may be redeemed will be set forth in the applicable Prospectus
Supplement. All shares of Preferred Stock or Class A Preferred Stock redeemed,
purchased or otherwise acquired by the Corporation (including shares surrendered
for conversion or exchange) shall be cancelled and thereupon restored to the
status of authorized but unissued shares of Preferred Stock or Class A Preferred
Stock, as the case may be, undesignated as to series.
LIQUIDATION
In the event of a voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation, the holders of a series of
Preferred Stock or Class A Preferred Stock will be entitled, subject to the
rights of creditors, but before
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any distribution or payment to the holders of Common Stock or any other junior
stock, to receive a liquidating distribution in the amount of the liquidation
preference per share as set forth in the applicable Prospectus Supplement, plus
accrued and unpaid dividends for the then current dividend period (including any
accumulation in respect of unpaid dividends for prior dividend periods, if
dividends on such series of Preferred Stock or Class A Preferred Stock are
cumulative). If the amounts available for distribution upon liquidation,
dissolution or winding up of the affairs of the Corporation are not sufficient
to satisfy the full liquidation rights of all the outstanding Preferred Stock or
Class A Preferred Stock and all stock ranking on a parity with such Preferred
Stock or Class A Preferred Stock, then the holders of each series of such stock
will share ratably in any such distribution of assets in proportion to the full
respective preferential amount (which in the case of Preferred Stock or Class A
Preferred Stock may include accumulated dividends) to which they are entitled.
After payment of the full amount of the liquidation preference, the holders of
Preferred Stock or Class A Preferred Stock will not be entitled to any further
participation in any distribution of assets by the Corporation.
VOTING
The terms, if any, on which Preferred Stock or Class A Preferred Stock of
any series may be entitled to vote will be set forth in the applicable
Prospectus Supplement. The shares of any series of Preferred Stock having voting
rights may not have more than one vote per share. The shares of any series of
Class A Preferred Stock having voting rights shall have such number of votes per
share (which may be more or less than one) as are specified in the amendment to
the Articles with respect to such series and in the applicable Prospectus
Supplement.
The North Carolina Business Corporation Act provides that, regardless of
whether a class or series of shares is granted voting rights by the terms of the
articles of incorporation of the North Carolina corporation issuing such shares,
the holders of shares of such class or series are entitled to vote as a separate
voting group (in certain cases together with other similarly affected series) on
certain amendments to the articles of incorporation and certain other
fundamental changes in the corporation that directly affect such class or
series.
Under regulations adopted by the Federal Reserve Board, if the holders of
any series of Preferred Stock or Class A Preferred Stock become entitled to vote
for the election of directors because dividends on such series are in arrears,
such series may then be deemed a "class of voting securities," and a holder of
25 percent or more of such series (or a holder of five percent or more if it
otherwise exercises a "controlling influence" over the Corporation) may then be
subject to regulation as a bank holding company in accordance with the BHCA. In
addition, at such time (i) any bank holding company may be required to obtain
the approval of the Federal Reserve Board under the BHCA, and any foreign bank,
and any company that controls a foreign bank, that has certain types of United
States banking operations may be required to obtain the approval of the Federal
Reserve Board under the International Banking Act of 1978, as amended, to
acquire or retain five percent or more of any series of Preferred Stock or Class
A Preferred Stock, and (ii) any person other than a bank holding company may be
required to obtain the approval of the Federal Reserve Board under the Change in
Bank Control Act to acquire ten percent or more of such series of Preferred
Stock or Class A Preferred Stock.
CONVERSION OR EXCHANGE
The terms, if any, on which Preferred Stock or Class A Preferred Stock of
any series may be converted into or exchanged for another class or series of
Securities will be set forth in the applicable Prospectus Supplement.
OTHER RIGHTS
The shares of a series of Preferred Stock or Class A Preferred Stock may
have such preferences, voting powers or relative, participating, optional or
other special rights as may be set forth in the applicable Prospectus
Supplement, the Articles (including the applicable amendment to the Articles) or
as otherwise required by law. The holders of Preferred Stock and Class A
Preferred Stock will not have any preemptive rights to subscribe to any
securities of the Corporation. Any shares of Preferred Stock or Class A
Preferred Stock sold hereunder will be fully paid and nonassessable.
TITLE
The Corporation, the transfer agent and registrar for a series of Preferred
Stock or Class A Preferred Stock, and any agent of the Corporation or the
transfer agent and registrar may treat the registered owner of such Preferred
Stock or Class A Preferred Stock as the absolute owner thereof (whether or not
any payment in respect of such Preferred Stock or Class A Preferred Stock shall
be overdue and notwithstanding any notice to the contrary) for the purpose of
making payment and for all other purposes. See "Global Securities".
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TRANSFER AGENT AND REGISTRAR
The Transfer Agent, Registrar and Dividend Disbursement Agent for each
series of Preferred Stock or Class A Preferred Stock will be named in the
applicable Prospectus Supplement.
DESCRIPTION OF DEPOSITARY SHARES
The following summary of each Deposit Agreement, the Depositary Shares and
the Depositary Receipts (each as defined below) does not purport to be complete
and is qualified in its entirety by reference to the Deposit Agreement and
Depositary Receipts with respect to the Depositary Shares relating to any
particular series of Preferred Stock or Class A Preferred Stock, the forms of
which will be incorporated by reference as exhibits to the Registration
Statement of which this Prospectus is a part in connection with the issuance of
such Depositary Shares. Such summary relates to certain terms and conditions
applicable to Depositary Shares generally. The particular terms of any series of
Depositary Shares will be described in the applicable Prospectus Supplement. If
so indicated in such Prospectus Supplement, the terms of any such series may
differ from the terms set forth below.
GENERAL
The Corporation may, at its option, elect to offer fractional interests in
shares of Preferred Stock or Class A Preferred Stock, rather than shares of
Preferred Stock or Class A Preferred Stock. If the Corporation elects to do so,
it will provide for the issuance by a Depositary (as described below) to the
public of Depositary Shares, each of which will represent a fractional interest
(to be set forth in the applicable Prospectus Supplement) of a share of
Preferred Stock or Class A Preferred Stock (the "Depositary Shares").
The shares of any series of the Preferred Stock or the Class A Preferred
Stock underlying any Depositary Shares will be deposited under a separate
Deposit Agreement (each, a "Deposit Agreement") between the Corporation and a
bank or trust company selected by the Corporation with respect to such series,
having its principal office in the United States and having a combined capital
and surplus of at least $50,000,000 (with respect to such series, the
"Depositary"). The applicable Prospectus Supplement relating to a series of
Depositary Shares will set forth the name and address of the Depositary. Subject
to the terms of the applicable Deposit Agreement, each owner of a Depositary
Share will be entitled, in proportion to the applicable fractional interest in a
share of the Preferred Stock or the Class A Preferred Stock underlying such
Depositary Share, to all the rights and preferences of such Preferred Stock or
Class A Preferred Stock (including dividend, voting, redemption, conversion,
exchange and liquidation rights).
Depositary Shares will be evidenced by one or more depositary receipts
issued pursuant to the applicable Deposit Agreement (the "Depositary Receipts").
Pending the preparation of definitive engraved Depositary Receipts, a
Depositary may, upon the Corporation's written order, issue temporary Depositary
Receipts substantially identical to (and entitling the holders thereof to all
the rights pertaining to) the definitive Depositary Receipts but not in
definitive form. Definitive Depositary Receipts will be prepared without
unreasonable delay, and the temporary Depositary Receipts will be exchangeable
for definitive Depositary Receipts at the Corporation's expense.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions received by the Depositary in respect of the Preferred Stock or
the Class A Preferred Stock to the record holders of Depositary Shares relating
to such Preferred Stock or Class A Preferred Stock pro rata in proportion to the
number of such Depositary Shares owned by such holders on the relevant record
date. The Depositary will distribute only such amount, however, as can be
distributed without attributing to any holder of Depositary Shares a fraction of
one cent, and any balance not so distributed will be added to and treated as
part of the next sum received by the Depositary for distribution to record
holders of such Depositary Shares.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may, with the Corporation's
approval, adopt such method as it deems equitable and practicable for the
purpose of effecting such distribution, including the sale of such property and
the distribution of the net proceeds from such sale to such holders.
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Each Deposit Agreement will also contain provisions relating to the manner
in which any subscription or similar rights offered by the Corporation to
holders of the Preferred Stock or the Class A Preferred Stock of the applicable
series will be made available to holders of Depositary Shares.
WITHDRAWAL OF STOCK
Upon surrender of Depositary Receipts at the office of the Depositary
(unless the related Depositary Shares have previously been called for
redemption), the holder of the Depositary Shares evidenced thereby will be
entitled to delivery at such office to or upon such holder's order, of the
number of whole shares of the related series of Preferred Stock or Class A
Preferred Stock and any money or other property represented by such Depositary
Shares. Holders of Depositary Shares will be entitled to receive whole shares of
the related series of Preferred Stock or Class A Preferred Stock, as the case
may be, on the basis set forth in the applicable Prospectus Supplement, but
holders of such whole shares of such Preferred Stock or Class A Preferred Stock
will not thereafter be entitled to receive Depositary Shares in exchange
therefor. If the Depositary Receipts delivered by the holder evidence a number
of Depositary Shares in excess of the number of Depositary Shares representing
the number of whole shares of the related series of Preferred Stock or Class A
Preferred Stock to be withdrawn, the Depositary will deliver to such holder at
the same time a new Depositary Receipt evidencing such excess number of
Depositary Shares.
REDEMPTION; LIQUIDATION
The terms, if any, on which the Depositary Shares relating to the Preferred
Stock or the Class A Preferred Stock of any series may be redeemed, and any
amounts distributable upon any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Corporation, will be set forth in the
applicable Prospectus Supplement.
VOTING
Upon receipt of notice of any meeting at which the holders of the Preferred
Stock or Class A Preferred Stock of any series are entitled to vote, the
applicable Depositary will mail the information contained in such notice of
meeting to the record holders of the Depositary Shares relating to such series
of Preferred Stock or Class A Preferred Stock. Each record holder of such
Depositary Shares on the record date (which will be the same date as the record
date for the Preferred Stock or the Class A Preferred Stock, as the case may be)
will be entitled to instruct the Depositary as to the exercise of the voting
rights pertaining to the number of shares of Preferred Stock or Class A
Preferred Stock underlying such holder's Depositary Shares. The Depositary will
endeavor, insofar as practicable, to vote the number of shares of Preferred
Stock or Class A Preferred Stock underlying such Depositary Shares in accordance
with such instructions, and the Corporation will agree to take all action that
may be deemed reasonably necessary by the Depositary in order to enable the
Depositary to do so. To the extent the Depositary does not receive specific
instructions from the holders of Depositary Shares relating to such Preferred
Stock or Class A Preferred Stock, it will abstain from voting such shares of
Preferred Stock or Class A Preferred Stock, unless otherwise indicated in the
applicable Prospectus Supplement.
AMENDMENT AND TERMINATION OF DEPOSITARY AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the applicable Deposit Agreement may at any time be amended by
agreement between the Corporation and the Depositary. However, any amendment
that materially and adversely alters the rights of the existing holders of
Depositary Shares will not be effective unless such amendment has been approved
by the record holders of a majority of the Depositary Shares then outstanding. A
Deposit Agreement may be terminated by the Corporation or the Depositary only if
(i) all outstanding Depositary Shares relating thereto have been redeemed or
otherwise reacquired by the Corporation, (ii) all Preferred Stock or Class A
Preferred Stock of the applicable series has been withdrawn, or (iii) there has
been a final distribution in respect of the Preferred Stock or the Class A
Preferred Stock of the applicable series in connection with any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation and such distribution has been distributed to the holders of the
related Depositary Shares.
CHARGES OF DEPOSITARY
The Corporation will pay all charges of each Depositary in connection with
the initial deposit of the Preferred Stock or the Class A Preferred Stock of any
series and any redemption of such Preferred Stock or Class A Preferred Stock.
Holders of Depositary Shares will be required to pay any other transfer and
other taxes and governmental charges and such other charges as are expressly
provided in the Deposit Agreement to be for their accounts.
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MISCELLANEOUS
Each Depositary will forward to the holders of the applicable Depositary
Shares all reports and communications from the Corporation that are delivered to
such Depositary and that the Corporation is required to furnish to the holders
of the Preferred Stock or the Class A Preferred Stock of the applicable series.
Neither any Depositary nor the Corporation will be liable if it is
prevented or delayed by law or any circumstance beyond its control in performing
its obligations under any Deposit Agreement. The obligations of the Corporation
and each Depositary under any Deposit Agreement will be limited to performance
in good faith of their duties thereunder, and they will not be obligated to
prosecute or defend any legal proceeding in respect of any Depositary Shares,
Preferred Stock or Class A Preferred Stock unless indemnity satisfactory to them
is furnished. They may rely upon written advice of counsel or accountants, or
information provided by persons presenting Preferred Stock or Class A Preferred
Stock for deposit, holders of Depositary Shares or other persons believed to be
competent and on documents believed to be genuine.
TITLE
The Corporation, each Depositary and any agent of the Corporation or the
applicable Depositary may treat the registered owner of any Depositary Share as
the absolute owner thereof (whether or not any payment in respect of such
Depositary Share shall be overdue and notwithstanding any notice to the
contrary) for the purpose of making payment and for all other purposes. See
"Global Securities".
RESIGNATION AND REMOVAL OF DEPOSITARY
A Depositary may resign at any time by delivering to the Corporation notice
of its election to do so, and the Corporation may at any time remove a
Depositary, and such resignation or removal will take effect upon the
appointment of a successor Depositary and its acceptance of such appointment.
Such successor Depositary must (i) be appointed within 60 days after delivery of
the notice of resignation or removal, (ii) be a bank or trust company having its
principal office in the United States, and (iii) have combined capital and
surplus of at least $50,000,000.
DESCRIPTION OF THE DEBT SECURITIES
GENERAL
The following summary of the Indentures (as defined below) and the Debt
Securities does not purport to be complete and is qualified in its entirety by
reference to the applicable Indenture pursuant to which such Debt Securities are
issued, which Indentures are incorporated by reference as exhibits to the
Registration Statement of which this Prospectus is a part. Such summary relates
to certain terms and conditions applicable to the Debt Securities generally. The
particular terms of any series of Debt Securities will be described in the
applicable Prospectus Supplement. If so indicated in such Prospectus Supplement,
the terms of any such series may differ from the terms set forth below.
Senior Debt Securities are to be issued under an Indenture, dated as of
April 1, 1983, as amended by supplemental indentures dated as of May 17, 1986,
July 1, 1988 and August 1, 1990 (the "Senior Indenture"), between the
Corporation and The Chase Manhattan Bank (formerly Chemical Bank), as Trustee
(the "Senior Trustee"). Subordinated Debt Securities are to be issued under an
Indenture, dated as of March 15, 1986, as amended by supplemental indentures
dated as of August 1, 1990, November 15, 1992 and February 7, 1996 (the
"Subordinated Indenture" and together with the Senior Indenture, the
"Indentures"), between the Corporation and Harris Trust and Savings Bank, as
successor Trustee to The Bank of New York (formerly Irving Trust Company) (the
"Subordinated Trustee", and together with the Senior Trustee, the "Trustees").
The following summaries of certain provisions of the Senior Debt Securities, the
Subordinated Debt Securities, the Senior Indenture and the Subordinated
Indenture, as modified or superseded by the applicable Prospectus Supplement,
are brief summaries of certain provisions thereof, do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all the
provisions of the Indenture applicable to a particular series of Debt Securities
(the "Applicable Indenture"), including the definitions therein of certain
terms. Whenever particular provisions or defined terms in one or both of the
Indentures are referred to, such provisions or defined terms are incorporated
herein by reference. Section references used herein are references to the
Applicable Indenture. Capitalized terms not otherwise defined herein shall have
the meaning given to them in the Applicable Indenture.
The Debt Securities will be limited to an aggregate initial offering price
of $2,390,000,000 (or, at the option of the Corporation if so specified in the
applicable Prospectus Supplement, the equivalent thereof in any other currency
or currency
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unit such as the European Currency Unit), and will be direct, unsecured
obligations of the Corporation. The Debt Securities will not be deposits or
other obligations of a bank and will not be insured by the FDIC.
The Indentures do not limit the aggregate principal amount of Debt
Securities or of any particular series of Debt Securities which may be issued
thereunder and provide that Debt Securities issued thereunder may be issued from
time to time in one or more series, in each case with the same or various
maturities, at par or at a discount. (SECTION 301). The Indentures provide that
there may be more than one trustee under the Indentures with respect to
different series of Debt Securities. As of June 30, 1997, $809 million aggregate
principal amount of Senior Debt Securities was issued and outstanding under the
Senior Indenture. The Senior Trustee is trustee for such series. As of June 30,
1997, $4.0 billion aggregate principal amount of Subordinated Debt Securities
was issued and outstanding under the Subordinated Indenture. The Subordinated
Trustee is trustee for such series.
The Indentures do not limit the amount of other debt that may be issued by
the Corporation and do not contain financial or similar restrictive covenants.
As of June 30, 1997, the Corporation had an aggregate of $1.7 billion of
short-term Senior Indebtedness outstanding which consisted primarily of
commercial paper. The Corporation expects from time to time to incur additional
indebtedness constituting Senior Indebtedness and Other Financial Obligations
(as defined below). The Indentures do not prohibit or limit the incurrence of
additional Senior Indebtedness or Other Financial Obligations.
Because the Corporation is a holding company and a legal entity separate
and distinct from its subsidiaries, the rights of the Corporation to participate
in any distribution of assets of any subsidiary upon its liquidation of assets
or reorganization or otherwise (and thus the ability of Holders of Debt
Securities to benefit indirectly from such distribution) would be subject to the
prior claims of creditors of that subsidiary, except to the extent that the
Corporation itself may be a creditor of that subsidiary with recognized claims.
Claims on the Corporation's subsidiary banks by creditors other than the
Corporation include long-term debt and substantial obligations with respect to
deposit liabilities and federal funds purchased, securities sold under
repurchase agreements, other short-term borrowings and various other financial
obligations. The Indentures do not contain any covenants designed to afford
Holders of Debt Securities protection in the event of a highly leveraged
transaction involving the Corporation.
Reference is made to the applicable Prospectus Supplement for the following
terms of the Debt Securities offered thereby: (i) the title of the Debt
Securities; (ii) whether the Debt Securities are Senior Debt Securities or
Subordinated Debt Securities; (iii) any limit upon the aggregate principal
amount of the Debt Securities and the percentage of such principal amount at
which such Debt Securities may be issued; (iv) the date or dates on which the
principal of the Debt Securities is payable (the "Stated Maturity"); (v) the
rate or rates (which may be fixed or variable) per annum at which the Debt
Securities will bear interest, or the method of determining such rate or rates,
if any, the date or dates from which any such interest will accrue, the Interest
Payment Dates on which any such interest will be payable, the Regular Record
Date for the interest payable on any Interest Payment Date, the Person to whom
any Debt Security of such series will be payable, if other than the Person in
whose name that Debt Security (or one or more predecessor Debt Securities) is
registered at the close of business on the Regular Record Date for such interest
and the extent to which, or the manner in which, any interest payable on a
permanent global Debt Security on an Interest Payment Date will be paid; (vi) if
other than the location specified in this Prospectus, the place or places where
the principal of and premium, if any, and interest on the Debt Securities will
be payable; (vii) the period or periods within which, the price or prices at
which and the terms and conditions upon which the Debt Securities will, pursuant
to any mandatory sinking fund provisions or otherwise, or may, pursuant to any
optional sinking fund provisions or otherwise, be redeemed in whole or in part
by the Corporation; (viii) the period or periods within which, the price or
prices at which and the terms and conditions upon which the Debt Securities may
be repaid, in whole or in part, at the option of the Holders thereof; (ix) if
other than denominations of $1,000 and any integral multiple thereof, the
denominations in which the Debt Securities shall be issuable; (x) if other than
the principal amount thereof, the portion of the principal amount of the Debt
Securities which shall be payable upon declaration of acceleration of the
maturity thereof; (xi) the currency or currency unit of payment of principal and
premium, if any, and interest on such Debt Securities, and any index used to
determine the amount of payment of principal or premium, if any, and interest on
such Debt Securities; (xii) whether the Debt Securities are to be issuable in
permanent global form and, in such case, the initial depository with respect
thereto and the circumstances under which such permanent global Debt Security
may be exchanged; (xiii) whether the subordination provisions summarized below
or different subordination provisions, including a different definition of
"Senior Indebtedness", "Entitled Persons", "Existing Subordinated Indebtedness"
or "Other Financial Obligations", shall apply to the Debt Securities; (xiv) the
terms and conditions of any obligation or right of the Corporation or a Holder
to convert or exchange Subordinated Debt Securities into other Securities; and
(xv) any other material terms of the Debt Securities not specified in this
Prospectus. (SECTION 301). Where appropriate, the applicable Prospectus
Supplement will describe the United States federal income tax considerations
relevant to the Debt Securities.
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Unless otherwise indicated in the applicable Prospectus Supplement,
principal, premium, if any, and interest, if any, on the Debt Securities will be
payable, and the Debt Securities will be transferable, at the Corporate Trust
Office of FUNB-NC in Charlotte, North Carolina, except that interest may be paid
at the option of the Corporation by check mailed to the address of the Holder
entitled thereto as it appears on the Security Register. (SECTIONS 301, 305 and
1002).
Unless otherwise indicated in the applicable Prospectus Supplement, the
Debt Securities will be issued only in fully registered form, without coupons,
in denominations of $1,000 and any integral multiple thereof. (SECTION 302). The
Indentures provide that Debt Securities of any series may be issuable in
permanent global form (SECTION 301) and, unless otherwise specified in the
applicable Prospectus Supplement, Debt Securities will be issued in permanent
global form. See "Global Securities". No service charge will be made for any
registration of transfer or exchange of the Debt Securities, but the Corporation
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. (SECTION 305).
Both Senior Debt Securities and Subordinated Debt Securities may be issued
as Original Issue Discount Securities to be offered and sold at a substantial
discount below their stated principal amount. Federal income tax consequences
and other special considerations applicable to any such Original Issue Discount
Securities will be described in the applicable Prospectus Supplement. "Original
Issue Discount Security" means any security which provides for an amount less
than the principal amount thereof to be due and payable upon the declaration of
acceleration of the maturity thereof in accordance with the terms of the related
Indenture. (SECTION 101).
Reference is made to the Prospectus Supplement relating to any series of
Debt Securities that are Original Issue Discount Securities for the particular
provisions relating to acceleration of the maturity of a portion of the
principal amount of such series of Original Issue Discount Securities upon the
occurrence of an Event of Default and the continuation thereof.
SUBORDINATION OF THE SUBORDINATED DEBT SECURITIES
The obligations of the Corporation to make any payment on account of the
principal of and interest on any Subordinated Debt Securities will, to the
extent set forth in the Subordinated Indenture, be subordinate and junior in
right of payment to all Senior Indebtedness of the Corporation. Unless otherwise
specified in the Prospectus Supplement relating to the particular series of
Subordinated Debt Securities offered thereby, "Senior Indebtedness" of the
Corporation is defined in the Subordinated Indenture to mean the principal of,
premium, if any, and interest on (i) all indebtedness of the Corporation for
money borrowed (including indebtedness of others guaranteed by the Corporation)
other than the Subordinated Debt Securities, whether outstanding on the date of
execution of the Indenture or thereafter created, assumed or incurred, except
(a) any obligations on account of Existing Subordinated Indebtedness, and (b)
such indebtedness as is by terms expressly stated to be not superior in right of
payment to the Subordinated Debt Securities or to rank PARI PASSU with the
Subordinated Debt Securities, and (ii) any deferrals, renewals or extensions of
any such Senior Indebtedness. The term "indebtedness of the Corporation for
money borrowed" is defined in the Subordinated Indenture to mean any obligation
of, or any obligation guaranteed by, the Corporation for the repayment of
borrowed money, whether or not evidenced by bonds, debentures, notes or other
written instruments, and any deferred obligation for the payment of the purchase
price of property or assets. (SECTION 101 and ARTICLE FOURTEEN of the
Subordinated Indenture).
The payment of the principal of and interest on the Subordinated Debt
Securities will, to the extent set forth in the Subordinated Indenture, be
subordinated in right of payment to the prior payment in full of all Senior
Indebtedness. Unless otherwise specified in the Prospectus Supplement relating
to the particular series of Subordinated Debt Securities offered thereby, in
certain events of insolvency, the payment of the principal of and interest on
the Subordinated Debt Securities, other than Subordinated Debt Securities that
are also Existing Subordinated Indebtedness (as defined below), will, to the
extent set forth in the Subordinated Indenture, also be effectively subordinated
in right of payment to the prior payment in full of all Other Financial
Obligations. Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshalling of assets or any bankruptcy, insolvency or similar
proceedings of the Corporation, the holders of all Senior Indebtedness will
first be entitled to receive payment in full of all amounts due or to become due
thereon before the Holders of the Subordinated Debt Securities will be entitled
to receive any payment in respect of the principal of or interest on the
Subordinated Debt Securities. If upon any such payment or distribution of assets
to creditors, there remains, after giving effect to such subordination
provisions in favor of the holders of Senior Indebtedness, any amount of cash,
property or securities available for payment or distribution in respect of
Subordinated Debt Securities (defined in the Subordinated Indenture as "Excess
Proceeds") and if, at such time, any Entitled Persons (as defined below) in
respect of Other Financial Obligations have not received payment in full of all
amounts due or to become due on or in respect of such Other Financial
Obligations, then such Excess Proceeds shall first be applied to pay or
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provide for the payment in full of such Other Financial Obligations before any
payment or distribution may be made in respect of the Subordinated Debt
Securities which are not Existing Subordinated Indebtedness. In the event of the
acceleration of the maturity of any Subordinated Debt Securities, the holders of
all Senior Indebtedness will first be entitled to receive payment in full of all
amounts due thereon before the Holders of the Subordinated Debt Securities will
be entitled to receive any payment upon the principal of or interest on the
Subordinated Debt Securities.
By reason of such subordination in favor of the holders of Senior
Indebtedness, in the event of insolvency, creditors of the Corporation who are
not holders of Senior Indebtedness or Holders of the Subordinated Debt
Securities may recover less, ratably, than the holders of Senior Indebtedness
and may recover more, ratably, than the Holders of the Subordinated Debt
Securities. By reason of the obligation of the Holders of Subordinated Debt
Securities (other than Existing Subordinated Indebtedness) to pay over any
Excess Proceeds to Entitled Persons in respect to Other Financial Obligations,
in the event of insolvency, holders of Existing Subordinated Indebtedness may
recover less, ratably, than Entitled Persons in respect of Other Financial
Obligations and may recover more, ratably, than the Holders of Subordinated Debt
Securities (other than Existing Subordinated Indebtedness).
Unless otherwise specified in the Prospectus Supplement relating to the
particular series of Subordinated Debt Securities offered thereby, "Existing
Subordinated Indebtedness" means Subordinated Debt Securities issued pursuant to
the Subordinated Indenture prior to November 15, 1992. (SECTION 101 of the
Subordinated Indenture).
Unless otherwise specified in the Prospectus Supplement relating to the
particular series of Subordinated Debt Securities offered thereby, "Other
Financial Obligations" means all obligations of the Corporation to make payment
pursuant to the terms of financial instruments, such as (i) securities contracts
and foreign currency exchange contracts, (ii) derivative instruments, such as
swap agreements (including interest rate and foreign exchange rate swap
agreements), cap agreements, floor agreements, collar agreements, interest rate
agreements, foreign exchange rate agreements, options, commodity futures
contracts, commodity option contracts, and (iii) in the case of both (i) and
(ii) above, similar financial instruments, other than (a) obligations on account
of Senior Indebtedness, and (b) obligations on account of indebtedness for money
borrowed ranking pari passu with or subordinate to the Subordinated Debt
Securities. Unless otherwise specified in the Prospectus Supplement relating to
the particular series of Subordinated Debt Securities offered thereby, "Entitled
Persons" means any person who is entitled to payment pursuant to the terms of
Other Financial Obligations.
The Corporation's obligations under the Subordinated Debt Securities shall
rank PARI PASSU in right of payment with each other and with the Existing
Subordinated Indebtedness, subject (unless otherwise specified in the Prospectus
Supplement relating to the particular series of Subordinated Debt Securities
offered thereby) to the obligations of the Holders of Subordinated Debt
Securities (other than Existing Subordinated Indebtedness) to pay over any
Excess Proceeds to Entitled Persons in respect of Other Financial Obligations as
provided in the Subordinated Indenture.
The applicable Prospectus Supplement may further describe the provisions,
if any, applicable to the subordination of the Subordinated Debt Securities of a
particular series.
CONVERSION OR EXCHANGE
If and to the extent indicated in the applicable Prospectus Supplement, the
Subordinated Debt Securities of any series may be convertible or exchangeable
into other Debt Securities or Common Stock, Preferred Stock, Class A Preferred
or Depositary Shares. The specific terms on which Subordinated Debt Securities
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 amount or number of Securities to
be received by the Holders of Subordinated Debt Securities would be calculated
as of a time and in the manner stated in the applicable Prospectus Supplement.
DEFAULTS
THE SENIOR INDENTURE
An Event of Default is defined in the Senior Indenture as, with respect to
Senior Debt Securities of any series issued thereunder: default in payment of
principal of or premium, if any, on any Senior Debt Security of that series at
maturity; default for 30 days in payment of interest of any Senior Debt Security
of that series; failure to deposit any sinking fund payment when due in respect
of that series; failure by the Corporation for 60 days after due notice in
performance of any
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other of the covenants or warranties in the Senior Indenture (other than a
covenant or warranty included in the Senior Indenture solely for the benefit of
a series of Senior Debt Securities other than that series); failure to pay when
due any indebtedness of the Corporation or, in the case of any series of Senior
Debt Securities issued on or after August 1, 1990, any Major Subsidiary Bank,
or, in the case of any series of Senior Debt Securities issued before August 1,
1990, FUNB-NC, for borrowed money in excess of $5,000,000, or acceleration of
the maturity of any such indebtedness in excess of such amount if acceleration
results from a default under the instrument giving rise to such indebtedness and
is not annulled within 30 days after due notice, unless in either case such
default is contested in good faith by appropriate proceedings; certain events of
bankruptcy, insolvency or reorganization of the Corporation or, in the case of
any series of Senior Debt Securities issued on or after August 1, 1990, any
Major Subsidiary Bank, or, in the case of any series of Senior Debt Securities
issued before August 1, 1990, FUNB-NC; and any other Event of Default provided
with respect to Senior Debt Securities of that series. (SECTION 501).
The Senior Indenture provides that, if any Event of Default with respect to
Senior Debt Securities of any series at the time Outstanding thereunder occurs
and is continuing, either the Senior Trustee or the Holders of not less than 25
percent in principal amount of the Outstanding Senior Debt Securities of that
series may declare the principal amount (or, if the Senior Debt Securities of
that series are Original Issue Discount Securities, such portion of the
principal amount as may be specified in the terms of that series) of all Senior
Debt Securities of that series to be due and payable immediately (provided that
no such declaration is required upon certain events of bankruptcy), but upon
certain conditions such declaration may be annulled and past defaults (except,
unless theretofore cured, a default in payment of principal of or premium, if
any, or interest on the Senior Debt Securities of that series and certain other
specified defaults) may be waived by the Holders of a majority in principal
amount of the Outstanding Senior Debt Securities of that series on behalf of the
Holders of all Senior Debt Securities of that series. (SECTIONS 502 and 513).
See the penultimate paragraph under " -- General" above. In the event of the
bankruptcy, insolvency or reorganization of the Corporation, the claims of
Holders of the Senior Debt Securities would be subject as to enforcement to the
broad equity power of a federal bankruptcy court, and to the determination by
that court of the nature of the rights of such Holders.
The Senior Indenture contains a provision entitling the Senior Trustee,
subject to the duty of the Senior Trustee upon the occurrence and continuation
of an Event of Default to act with the required standard of care, to be
indemnified by the Holders of any series of Outstanding Senior Debt Securities
thereunder before proceeding to exercise any right or power under the Senior
Indenture at the request of the Holders of such series of Senior Debt
Securities. (SECTION 603). The Senior Indenture provides that the Holders of a
majority in principal amount of Outstanding Senior Debt Securities thereunder of
any series may direct the time, method and place of conducting any proceeding
for any remedy available to the Senior Trustee, or exercising any trust or other
power conferred on the Senior Trustee, with respect to the Senior Debt
Securities of such series, provided that the Senior Trustee may decline to act
if such direction is contrary to law or the Senior Indenture or would involve
the Senior Trustee in personal liability. (SECTION 512).
The Corporation will file annually with the Senior Trustee a certificate as
to compliance with all conditions and covenants in the Senior Indenture.
(SECTION 1007).
THE SUBORDINATED INDENTURE
Payment of principal of the Subordinated Debt Securities may be accelerated
only upon an Event of Default. There is no right of acceleration in the case of
a default in the payment of interest or the payment of principal prior to the
date of maturity or a default in the performance of any other covenant of the
Corporation in the Subordinated Indenture, unless the terms of a particular
series of Subordinated Debt Securities specifically provide otherwise, in which
case any such extension of such right of acceleration will be described in the
applicable Prospectus Supplement.
An Event of Default is defined in the Subordinated Indenture as, with
respect to Subordinated Debt Securities of any series issued thereunder, certain
events involving the bankruptcy, insolvency or reorganization of the Corporation
and any other Event of Default which may be provided for with respect to the
Subordinated Debt Securities of that series. (SECTION 501). A Default, with
respect to Subordinated Debt Securities of that series, is defined in the
Subordinated Indenture to include: (i) any Event of Default; (ii) a default in
the payment of principal or premium, if any, of any Subordinated Debt Security
of that series at its maturity; (iii) default in the payment of any interest
when due, continued for 30 days; (iv) a default in any required designation of
funds as Available Funds; or (v) default in the performance, or breach, of any
other covenant of the Corporation in the Subordinated Indenture or in the
Subordinated Debt Securities of that series, continued for 90 days after written
notice to the Corporation by the Subordinated Trustee or to the Corporation and
the Subordinated Trustee by the Holders of not less than 25 percent in aggregate
principal amount of the Outstanding Subordinated Debt
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Securities of such series. (SECTION 503). If an Event of Default with respect to
the Subordinated Debt Securities of any series occurs and is continuing, either
the Subordinated Trustee or the Holders of not less than 25 percent in aggregate
principal amount of the Outstanding Subordinated Debt Securities of that series
may accelerate the maturity of all Outstanding Subordinated Debt Securities of
such series. The Holders of a majority in aggregate principal amount of the
Outstanding Subordinated Debt Securities of that series may waive an Event of
Default resulting in acceleration of the Subordinated Debt Securities of such
series, but only if all Events of Default have been remedied and all payments
due on the Subordinated Debt Securities of that series (other than those due as
a result of acceleration) have been made and certain other conditions have been
met. (SECTION 502). Subject to the provisions of the Subordinated Indenture
relating to the duties of the Subordinated Trustee, in case a Default shall
occur and be continuing, the Subordinated Trustee will be under no obligation to
exercise any of its rights or powers under the Subordinated Indenture at the
request or direction of any of the Holders of the Outstanding Securities of that
series, unless such Holders shall have offered to the Subordinated Trustee
reasonable indemnity. (SECTION 603). Subject to such provisions for the
indemnification of the Subordinated Trustee, the Holders of a majority in
aggregate principal amount of the Outstanding Subordinated Debt Securities of
that series will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Subordinated Trustee
or exercising any trust or power conferred on the Subordinated Trustee. (SECTION
512). The Holders of a majority in aggregate principal amount of the Outstanding
Subordinated Debt Securities of that series may waive any past default under the
Subordinated Indenture with respect to such series, except a default in the
payment of principal or interest or a default in respect of a covenant in the
Subordinated Indenture which cannot be modified without the consent of the
Holder of each Outstanding Subordinated Debt Security of the series affected.
(SECTION 513). See the penultimate paragraph under " -- General" above. In the
event of the bankruptcy, insolvency or reorganization of the Corporation, the
claims of the Holders of Subordinated Debt Securities would be subject as to
enforcement to the broad equity power of a federal bankruptcy court, and to the
determination by that court of the nature of the rights of such Holders.
The Corporation will file annually with the Subordinated Trustee a
certificate as to compliance with all conditions and covenants in the
Subordinated Indenture. (SECTION 1007).
MODIFICATION AND WAIVER
Certain modifications and amendments of each of the Senior Indenture or the
Subordinated Indenture may be made by the Corporation and the Trustee under the
Applicable Indenture only with the consent of the Holders of not less than a
majority in aggregate principal amount of the Outstanding Debt Securities of
each series issued under such Indenture and affected by the modification or
amendment, provided that no such modification or amendment may, without the
consent of the Holder of each Outstanding Debt Security issued under such
Indenture and affected thereby: (i) change the Stated Maturity of the principal
of, or any installment of principal of or interest on, any such Outstanding Debt
Security; (ii) reduce the principal amount of, or the premium, if any, or the
interest on, any such Outstanding Debt Security (including in the case of an
Original Issue Discount Security the amount payable upon acceleration of the
maturity thereof); (iii) change the place of payment where, or the coin or
currency or currency unit in which, any principal of, or premium, if any, or
interest on, any such Outstanding Debt Security is payable; (iv) impair the
right to institute suit for the enforcement of any such payment on or after the
Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date); (v) reduce the above-stated percentage of Outstanding Debt
Securities of any series the consent of the Holders of which is necessary to
modify or amend the Applicable Indenture; or (vi) modify the foregoing
requirements or reduce the percentage of aggregate principal amount of
Outstanding Debt Securities of any series required to be held by Holders seeking
to waive compliance with certain provisions of the Applicable Indenture or
seeking to waive certain defaults. (SECTION 902).
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Debt Securities of any series may on behalf of the Holders of
all Outstanding Debt Securities of that series waive, insofar as that series is
concerned, compliance by the Corporation with certain restrictive provisions of
the Applicable Indenture. (SECTION 1008). The Holders of not less than a
majority in aggregate principal amount of the Outstanding Debt Securities of any
series may on behalf of the Holders of all Outstanding Debt Securities of that
series waive any past default under the Applicable Indenture with respect to
that series, except a default in the payment of the principal of, or premium, if
any, or interest on any Outstanding Debt Security of that series or in respect
of a covenant or provision which under the Applicable Indenture cannot be
modified or amended without the consent of the Holder of each Outstanding Debt
Security issued thereunder of the series affected. (SECTION 513).
Certain modifications and amendments of each of the Senior Indenture and
the Subordinated Indenture may be made by the Corporation and the Trustee under
the Applicable Indenture without the consent of Holders of the Outstanding Debt
Securities issued under such Indenture. (SECTION 901).
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Each Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Debt Securities issued under such
Indenture have given any request, demand, authorization, direction, notice,
consent or waiver thereunder or are present at a meeting of Holders of
Outstanding Debt Securities for quorum purposes, (i) the principal amount of an
Original Issue Discount Security that shall be deemed to be Outstanding shall be
the amount of the principal thereof that would be due and payable as of the date
of such determination upon acceleration of the maturity thereof, and (ii) the
principal amount of Outstanding Debt Securities denominated in a foreign
currency or currency unit shall be the United States dollar equivalent,
determined on the date of original issuance of such Outstanding Debt Security,
of the principal amount of such Outstanding Debt Security or, in the case of an
Original Issue Discount Security, the United States dollar equivalent,
determined on the date of original issuance of such Outstanding Debt Security,
of the amount determined as provided in (i) above. (SECTION 101).
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indentures each provide that the Corporation may not consolidate with
or merge into any other corporation or transfer its properties and assets
substantially as an entirety to any Person unless (i) the corporation formed by
such consolidation or into which the Corporation is merged or the Person to
which the properties and assets of the Corporation are so transferred shall be a
corporation organized and existing under the laws of the United States, any
State thereof or Washington, D.C. and shall expressly assume by supplemental
indenture the payment of the principal of and premium, if any, and interest on
the Senior Debt Securities or the Subordinated Debt Securities, as the case may
be, and the performance of the other covenants of the Corporation under the
Applicable Indenture; (ii) immediately after giving effect to such transaction,
no Event of Default or Default, as applicable, and no event which, after notice
or lapse of time or both, would become an Event of Default or Default, as
applicable, shall have occurred and be continuing; and (iii) certain other
conditions are met. (SECTION 801).
LIMITATION ON DISPOSITION OF STOCK OF FUNB-NC
THE SENIOR INDENTURE
The Senior Indenture contains a covenant by the Corporation that, so long
as any of the Senior Debt Securities issued thereunder before August 1, 1990 are
outstanding, but subject to the rights of the Corporation in connection with its
consolidation with or merger into another corporation or a sale of the
Corporation's assets, it will not sell, assign, transfer, grant a security
interest in or otherwise dispose of any shares of, securities convertible into,
or options, warrants or rights to subscribe for or purchase shares of, Voting
Stock of FUNB-NC, nor will it permit FUNB-NC to issue (other than to the
Corporation) any shares (other than directors' qualifying shares) of, or
securities convertible into, or options, warrants or rights to subscribe for or
purchase shares of, Voting Stock of FUNB-NC, unless (i) any such sale,
assignment, transfer, issuance, grant of a security interest or other
disposition is made for fair market value, as determined by the Board of
Directors of the Corporation, and (ii) the Corporation will own at least 80
percent of the issued and outstanding Voting Stock of FUNB-NC (or any successor
to FUNB-NC) free and clear of any security interest after giving effect to such
transaction. (SECTION 1006).
The foregoing covenant is not a covenant for the benefit of any series of
Senior Debt Securities issued on or after August 1, 1990.
THE SUBORDINATED INDENTURE
The Subordinated Indenture contains a covenant by the Corporation that, so
long as any of the Subordinated Debt Securities issued thereunder before August
1, 1990 are outstanding, but subject to the rights of the Corporation in
connection with its consolidation with or merger into another corporation or a
sale of the Corporation's assets, it will not sell, assign, transfer, grant a
security interest in or otherwise dispose of any shares of, securities
convertible into, or options, warrants or rights to subscribe for or purchase
shares of, Voting Stock of FUNB-NC (other than to a Wholly-Owned Subsidiary),
nor will it permit FUNB-NC to issue (other than to the Corporation or to a
Wholly-Owned Subsidiary) any shares (other than directors' qualifying shares)
of, or securities convertible into, or options, warrants or rights to subscribe
for or purchase shares of, Voting Stock of FUNB-NC, unless (i) any such sale,
assignment, transfer, issuance, grant of a security interest or other
disposition is made for fair market value, as determined by the Board of
Directors of the Corporation, and (ii) the Corporation and/or its Wholly-Owned
Subsidiaries will own at least 80 percent of the issued and outstanding Voting
Stock of FUNB-NC (or any successor to FUNB-NC) free and clear of any security
interest after giving effect to such transaction. (SECTION 1006).
The foregoing covenant is not a covenant for the benefit of any series of
Subordinated Debt Securities issued on or after August 1, 1990.
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RESTRICTION ON SALE OR ISSUANCE OF VOTING STOCK OF MAJOR SUBSIDIARY BANKS
The Indentures each contain a covenant by the Corporation that it will not,
and will not permit any Subsidiary to, sell, assign, transfer, grant a security
interest in, or otherwise dispose of, any shares of Voting Stock, or any
securities convertible into shares of Voting Stock, of any Major Subsidiary Bank
or any Subsidiary owning, directly or indirectly, any shares of Voting Stock of
any Major Subsidiary Bank and that it will not permit any Major Subsidiary Bank
or any Subsidiary owning, directly or indirectly, any shares of Voting Stock of
a Major Subsidiary Bank to issue any shares of its Voting Stock or any
securities convertible into shares of its Voting Stock, except for sales,
assignments, transfers or other dispositions which: (i) are for the purpose of
qualifying a Person to serve as a director; (ii) are for fair market value (as
determined by the Board of Directors of the Corporation) and, after giving
effect to such dispositions and to any potential dilution, the Corporation will
own not less than 80 percent of the shares of Voting Stock of such Major
Subsidiary Bank or any such Subsidiary owning any shares of Voting Stock of such
Major Subsidiary Bank; (iii) are made (x) in compliance with an order of a court
or regulatory authority of competent jurisdiction, or (y) in compliance with a
condition imposed by any such court or authority permitting the acquisition by
the Corporation, directly or indirectly, of any other Bank or entity the
activities of which are legally permissible for a Person such as the Corporation
or a Subsidiary to engage in, or (z) in compliance with an undertaking made to
such authority in connection with such an acquisition (provided that, in the
case of clauses (y) and (z), the assets of the Bank or entity being acquired and
its consolidated subsidiaries equal or exceed 75 percent of the assets of such
Major Subsidiary Bank or such Subsidiary owning, directly or indirectly, any
shares of Voting Stock of a Major Subsidiary Bank and its respective
consolidated subsidiaries on the date of acquisition); or (iv) are made to the
Corporation or any Wholly-Owned Subsidiary. Notwithstanding the foregoing, any
Major Subsidiary Bank may be merged into or consolidated with another banking
institution organized under the laws of the United States, any State thereof or
Washington D.C., if after giving effect to such merger or consolidation the
Corporation or any Wholly-Owned Subsidiary owns at least 80 percent of the
Voting Stock of such other banking institution then issued and outstanding free
and clear of any security interest and if, immediately after giving effect
thereto, no Event of Default, and no event which, after notice or lapse of time
or both, would become an Event of Default, shall have happened and be
continuing. (SECTION 1007). A Major Subsidiary Bank is defined in each Indenture
to mean any Subsidiary which is a bank and has total assets equal to 25 percent
or more of the consolidated assets of the Corporation determined as of the date
of the most recent audited financial statements of such entities. At present,
the only Major Subsidiary Banks are FUNB-NC and First Union National Bank based
in Avondale, Pennsylvania.
The foregoing covenant is not a covenant for the benefit of any series of
Debt Securities issued before August 1, 1990, or, in the case of Subordinated
Debt Securities, issued after November 15, 1992.
TRUSTEES
Either or both of the Trustees may resign or be removed with respect to one
or more series of Debt Securities and a successor Trustee may be appointed to
act with respect to such series. (SECTION 610). In the event that two or more
persons are acting as Trustee with respect to different series of Debt
Securities, each such Trustee shall be a Trustee of a trust under the Applicable
Indenture separate and apart from the trust administered by any other such
Trustee (SECTION 611), and any action described herein to be taken by the
"Trustee" may then be taken by each such Trustee with respect to, and only with
respect to, the one or more series of Debt Securities for which it is Trustee.
In the normal course of business, the Corporation and its subsidiaries
conduct banking transactions with the Trustees, and the Trustees conduct banking
transactions with the Corporation and its subsidiaries.
TITLE
The Corporation, the Trustees and any agent of the Corporation or the
applicable Trustee may treat the registered owner of any Debt Security as the
absolute owner thereof (whether or not such Debt Security shall be overdue and
notwithstanding any notice to the contrary) for the purpose of making payment
and for all other purposes. See "Global Securities".
DESCRIPTION OF WARRANTS
The following summary of each Warrant Agreement (as defined below), the
Warrants and the Warrant Certificates (as defined below) does not purport to be
complete and is qualified in its entirety by reference to the Warrant Agreement
with respect to the Warrants of any particular series, which are or will be
incorporated by reference as exhibits to the Registration Statement of which
this Prospectus is a part in connection with the issuance of such Warrants. Such
summary relates to certain terms and conditions applicable to the Warrants
generally. The particular terms of any series of Warrants will be
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described in the applicable Prospectus Supplement. If so indicated in such
Prospectus Supplement, the terms of any such series may differ from the terms
set forth below.
GENERAL
The Corporation may issue Warrants for the purchase of Debt Securities,
Preferred Stock, Class A Preferred Stock, Depositary Shares or Common Stock.
Warrants may be issued independently or together with Debt Securities, Preferred
Stock, Class A Preferred Stock, Depositary Shares or Common Stock, and may be
attached to or separate from such Securities.
Each series of Warrants will be evidenced by certificates (the "Warrant
Certificates") issued pursuant to a separate Warrant Agreement to be entered
into between the Corporation and a bank (the "Warrant Agent") selected by the
Corporation with respect to such series, having its principal office in the
United States and having combined capital and surplus of at least $50,000,000
(with respect to such series, the "Warrant Agreement").
The applicable Prospectus Supplement relating to a series of Warrants will
set forth the name and address of the Warrant Agent. The applicable Prospectus
Supplement will describe the terms of the series of Warrants in respect of which
this Prospectus is being delivered, including: (i) the offering price; (ii) the
currency for which such Warrants may be purchased; (iii) if applicable, the
designation and terms of the Securities with which the Warrants are issued and
the number of Warrants issued with each such Security or each principal amount
of such Security; (iv) if applicable, the date on and after which the Warrants
and the related Securities will be separately transferable; (v) in the case of
Warrants to purchase Debt Securities, the principal amount of Debt Securities
purchasable upon exercise of one Warrant and the price at and currency in which
such principal amount of Debt Securities may be purchased upon such exercise
and, in the case of Warrants to purchase Preferred Stock, Class A Preferred
Stock, Depositary Shares or Common Stock, the number of Depositary Shares or
shares of Preferred Stock, Class A Preferred Stock or Common Stock, as the case
may be, purchasable upon the exercise of one Warrant and the price at which such
shares may be purchased upon such exercise; (vi) the date or dates on which the
right to exercise the Warrants will commence and the date or dates on which such
right will expire (the "Expiration Date"); (vii) certain federal income tax
consequences of holding or exercising such Warrants; (viii) the terms of the
Securities issuable upon exercise of such Warrants; and (ix) any other terms of
the Warrants.
Warrant Certificates may be exchanged for new Warrant Certificates of
different denominations, may be presented for registration of transfer, and may
be exercised at the corporate trust office of the Warrant Agent or any other
office indicated in the applicable Prospectus Supplement. If the Warrants are
not separately transferrable from the Securities with which they were issued,
such exchange may take place only in connection with an exchange of the
certificates representing such related Securities. Prior to the exercise of
their Warrants, holders of Warrants will not have any of the rights of holders
of the Securities purchasable upon such exercise, including, in the case of
Warrants to purchase Debt Securities, the right to receive payments of principal
of, premium, if any, or interest, if any, on the Debt Securities purchasable
upon such exercise or to enforce covenants in the applicable Indenture or, in
the case of Warrants to purchase Preferred Stock, Class A Preferred Stock,
Depositary Shares or Common Stock, the right to receive dividends, if any, or
payments upon the liquidation, dissolution or winding up of the Corporation or
to exercise voting rights, if any.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder to purchase the Securities specified
in the applicable Prospectus Supplement at the exercise price set forth in, or
calculated as described in, the applicable Prospectus Supplement. Unless
otherwise specified in the applicable Prospectus Supplement, Warrants may be
exercised at any time up to 5:00 p.m., New York time, on the Expiration Date set
forth in such Prospectus Supplement. After the close of business on the
Expiration Date, unexercised Warrants will become void.
Warrants may be exercised by delivery of the Warrant Certificate
representing the Warrants to be exercised, or in the case of Global Securities
(as defined in "Global Securities"), by delivery of a notice of exercise with
respect to such Warrants, together with certain information, and payment to the
Warrant Agent in immediately available funds, as provided in the applicable
Prospectus Supplement, of the amount required to purchase the Securities
purchasable upon such exercise. The information required to be delivered will be
set forth on the reverse side of the Warrant Certificate and in the applicable
Prospectus Supplement. Upon receipt of such payment and the Warrant Certificate
or notice of exercise properly completed and duly executed at the corporate
trust office of the Warrant Agent or any other office indicated in the
applicable Prospectus Supplement, the Corporation will, in the time period
provided by the applicable Warrant Agreement, issue and deliver the
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Securities purchasable upon such exercise. If fewer than all of the Warrants
represented by such Warrant Certificate are exercised, a new Warrant Certificate
will be issued for the remaining amount of Warrants.
If so indicated in the applicable Prospectus Supplement, Securities may be
surrendered as all or part of the exercise price for Warrants.
ANTIDILUTION PROVISIONS
In the case of Warrants to purchase Common Stock, the exercise price
payable and the number of shares of Common Stock purchasable upon the exercise
of each Warrant will be subject to adjustment in certain events, including (i)
the issuance of a stock dividend to holders of Common Stock or a combination,
subdivision or reclassification of Common Stock; (ii) the issuance of rights,
warrants or options to all holders of the Common Stock entitling the holders
thereof to purchase Common Stock for an aggregate consideration per share less
than the current market price per share of Common Stock; (iii) any distribution
by the Corporation to the holders of its Common Stock of evidences of
indebtedness of the Corporation or of assets (excluding cash dividends or
distributions referred to in (i) above); and (iv) any other events set forth in
the applicable Prospectus Supplement. No adjustment in the number of shares
purchasable upon exercise of the Warrants will be required until cumulative
adjustments require an adjustment of at least one percent of such number. No
fractional shares will be issued upon exercise of Warrants, but the Corporation
will pay the cash value of any fractional shares otherwise issuable.
MODIFICATION
Any Warrant Agreement and the terms of the related Warrants may be amended
by the Corporation and the applicable Warrant Agent by executing a supplemental
warrant agreement (a "Supplemental Agreement"), without the consent of the
holders of any such Warrants, for the purpose of (i) curing any ambiguity, or
curing, correcting or supplementing any defective or inconsistent provision
contained therein, or making any other provisions with respect to matters or
questions arising under the Warrant Agreement that are not inconsistent with the
provisions of the Warrant Agreement or the Warrant Certificates; (ii) evidencing
the succession of another corporation to the Corporation and the assumption by
any such successor of the covenants of the Corporation contained in such Warrant
Agreement and the Warrants; (iii) appointing a successor depository, if the
Warrants are issued in the form of Global Securities; (iv) evidencing and
providing for the acceptance of appointment by a successor Warrant Agent with
respect to the Warrants; (v) adding to the covenants of the Corporation for the
benefit of the holders of such Warrants or surrendering any right or power
conferred upon the Corporation under the Warrant Agreement; (vi) issuing
Warrants in definitive form, if such Warrants are initially issued in the form
of Global Securities; or (vii) amending the Warrant Agreement and the Warrants
in any manner that the Corporation may deem to be necessary or desirable and
that will not adversely affect the interests of the holders of such Warrants in
any material respect.
The Corporation and the Warrant Agent may also amend any Warrant Agreement
and the terms of the related Warrants by executing a Supplemental Agreement with
the consent of the holders of a majority in number of the unexercised Warrants
affected by such amendment, for the purpose of adding any provisions to or
modifying in any manner or eliminating any of the provisions of such Warrant
Agreement or of modifying in any manner the rights of the holders of such
Warrants, except that no such amendment that (i) changes the number or amount of
Securities purchasable upon exercise of such Warrants so as to reduce the number
or amount of Securities receivable upon such exercise, (ii) shortens the period
of time during which the Warrants may be exercised, (iii) otherwise adversely
affects the exercise rights of the holders of such Warrants in any material
respect, or (iv) reduces the number of unexercised Warrants the consent of
holders of which is required for amendment of the Warrant Agreement or the
related Warrants, may be made without the consent of each holder affected
thereby.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Each Warrant Agreement will provide that the Corporation may consolidate or
merge with or into any other corporation or sell, lease, transfer or convey all
or substantially all of its assets to any other corporation, provided that (i)
either the Corporation must be the continuing corporation, or the corporation
(if other than the Corporation) that is formed by or results from any such
consolidation or merger or that receives such assets must be a corporation
organized and existing under the laws of the United States or a State thereof
and must assume the obligations of the Corporation with respect to all the
unexercised Warrants and the performance and observance of all of the covenants
and conditions of the applicable Warrant Agreement to be performed or observed
by the Corporation, and (ii) the Corporation or such successor corporation, as
the case may be, must not immediately be in default under such Warrant
Agreement.
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ENFORCEABILITY OF RIGHTS BY HOLDERS OF WARRANTS
Each Warrant Agent will act solely as the agent of the Corporation under
the applicable Warrant Agreement and will not assume any obligation or
relationship of agency or trust for or with any holder of any Warrant. A single
bank or trust company may act as Warrant Agent for more than one issue of
Warrants. A Warrant Agent will have no duty or responsibility in case of any
default by the Corporation in the performance of its obligations under the
applicable Warrant Agreement or Warrant, including, without limitation, any duty
or responsibility to initiate any proceedings at law or otherwise or to make any
demand upon the Corporation. Any holder of a Warrant may, without the consent of
the related Warrant Agent or the holder of any other Warrant, enforce by
appropriate legal action, in and for its own behalf, its right to exercise, and
receive the Securities purchasable upon exercise of, such Warrant.
REPLACEMENT OF WARRANT CERTIFICATES
Any destroyed, lost, stolen or mutilated Warrant Certificate will be
replaced by the Corporation upon delivery to the Corporation and the applicable
Warrant Agent of evidence satisfactory to them of the ownership of such Warrant
Certificate and of the destruction, loss, theft or mutilation of such Warrant
Certificate, and (in the case of mutilation) surrender of such Warrant
Certificate to the applicable Warrant Agent, unless the Corporation or the
Warrant Agent has received notice that such Warrant Certificate has been
acquired by a bona fide purchaser. The holder of such Warrant will also be
required to provide indemnity satisfactory to the relevant Warrant Agent and the
Corporation before a replacement Warrant Certificate will be issued.
TITLE
The Corporation, the Warrant Agents and any agent of the Corporation or the
applicable Warrant Agent may treat the registered holder of any Warrant
Certificate as the absolute owner of the Warrants evidenced thereby
(notwithstanding any notice to the contrary) for any purpose and as the person
entitled to exercise the rights attaching to the Warrants requested thereby, any
notice to the contrary notwithstanding. See "Global Securities".
GLOBAL SECURITIES
Unless otherwise specified in the applicable Prospectus Supplement,
Securities other than Common Stock will be issued in the form of one or more
global certificates (collectively, with respect to each series or issue of
Securities, the "Global Security") registered in the name of a depositary or a
nominee of a depositary. Unless otherwise specified in the applicable Prospectus
Supplement, the depositary will be The Depository Trust Company ("DTC"). The
Corporation has been informed by DTC that its nominee will be Cede & Co.
("Cede"). Accordingly, Cede is expected to be the initial registered holder of
all Securities that are issued in global form. No person that acquires a
beneficial interest in such Securities will be entitled to receive a certificate
representing such person's interest in the Securities except as set forth herein
or in the applicable Prospectus Supplement. Unless and until definitive
Securities are issued under the limited circumstances described below, all
references to actions by holders of Securities issued in global form shall refer
to actions taken by DTC upon instructions from its Participants (as defined
below), and all references herein to payments and notices to holders shall refer
to payments and notices to DTC or Cede, as the registered holder of such
Securities.
DTC has informed the Corporation that it 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 Section 17A of the Exchange
Act, and that it was created to hold securities for its participating
organizations ("Participants") and to facilitate the clearance and settlement of
securities transactions among Participants through electronic book-entry,
thereby eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations, and may include certain other organizations. Indirect access to
the DTC system also is available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants").
Persons that are not Participants or Indirect Participants but desire to
purchase, sell or otherwise transfer ownership of, or other interests in,
Securities may do so only through Participants and Indirect Participants. Under
a book-entry format, holders may experience some delay in their receipt of
payments, as such payments will be forwarded by the agent designated by the
Corporation to Cede, as nominee for DTC. DTC will forward such payments to its
Participants, which thereafter will forward them to Indirect Participants or
holders. Holders will not be recognized by the applicable registrar, transfer
agent, Trustee, Depositary or Warrant Agent as registered holders of the
Securities entitled to the benefits of the Articles or the
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applicable Indenture, Deposit Agreement or Warrant Agreement. Beneficial owners
that are not Participants will be permitted to exercise their rights as such
only indirectly through and subject to the procedures of Participants and, if
applicable, Indirect Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations as currently in effect (the "Rules"), DTC will be required to
make book-entry transfers of Securities among Participants and to receive and
transmit payments to Participants. Participants, as well as Indirect
Participants, with which beneficial owners of Securities have accounts with
respect to the Securities similarly are required by the Rules to make book-entry
transfers and receive and transmit such payments on behalf of their respective
account holders.
Because DTC can act only on behalf of (i) Participants, who in turn act
only on behalf of Participants or Indirect Participants, and (ii) certain banks,
trust companies and other persons approved by it, the ability of a beneficial
owner of Securities issued in global form to pledge such Securities to persons
or entities that do not participate in the DTC system, or to otherwise act with
respect to such Securities, may be limited due to the unavailability of physical
certificates for such Securities.
DTC has advised the Corporation that DTC will take any action permitted to
be taken by a registered holder of any Securities under the Articles or the
applicable Indenture, Deposit Agreement or Warrant Agreement only at the
direction of one or more Participants to whose accounts with DTC such Securities
are credited.
Unless otherwise specified in the applicable Prospectus Supplement, a
Global Security will be exchangeable for the relevant definitive Securities
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
depositary for such Global Security 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 in order to act as such depositary, (ii) the Corporation
executes and delivers to the applicable registrar, transfer agent, Trustee,
Depositary and/or Warrant Agent an order complying with the requirements of the
Articles or the applicable Indenture, Deposit Agreement and/or Warrant Agreement
that such Global Security shall be so exchangeable, or (iii) there has occurred
and is continuing a default in the payment of any amount due in respect of the
Securities or, in the case of Debt Securities, an event of default or an event
that, with the giving of notice or lapse of time, or both, would constitute an
event of default with respect to such Debt Securities. Any Global Security that
is exchangeable pursuant to the preceding sentence will be exchangeable for
Securities registered in such names as DTC directs.
Upon the occurrence of any event described in the immediately preceding
paragraph, DTC is generally required to notify all Participants of the
availability through DTC of definitive Securities. Upon surrender by DTC of the
Global Security representing the Securities and delivery of instructions for
re-registration, the registrar, transfer agent, Trustee, Depositary or Warrant
Agent, as the case may be, will reissue the Securities as definitive Securities,
and thereafter such persons will recognize the holders of such definitive
Securities as registered holders of Securities entitled to the benefits of the
Articles or the applicable Indenture, Deposit Agreement and/or Warrant
Agreement.
Except as described above, the Global Security may not be transferred
except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC or to a successor depositary appointed by the
Corporation. Except as described above, DTC may not sell, assign, transfer or
otherwise convey any beneficial interest in a Global Security evidencing all or
part of any Securities unless such beneficial interest is in an amount equal to
an authorized denomination for such Securities.
None of the Corporation, the Trustees, any registrar and transfer agent,
any Warrant Agent or any Depositary, or any agent of any of them, will have any
responsibility or liability for any aspect of DTC's or any Participant's records
relating to, or for payments made on account of, beneficial interests in a
Global Security, or for maintaining, supervising or reviewing any records
relating to such beneficial interests.
Secondary trading in notes and debentures of corporate issuers is generally
settled in clearing-house or next-day funds. In contrast, beneficial interests
in a Global Security, in some cases, may trade in the Depositary's same-day
funds settlement system, in which secondary market trading activity in those
beneficial interests would be required by DTC to settle in immediately available
funds. There is no assurance as to the effect, if any, that settlement in
immediately available funds would have on trading activity in such beneficial
interests. Also, settlement for purchases of beneficial interests in a Global
Security upon the original issuance thereof may be required to be made in
immediately available funds.
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PLAN OF DISTRIBUTION
The Corporation may sell Securities to or through underwriters, including
First Union Capital Markets Corp., to be designated from time to time, and also
may sell Securities directly to other purchasers or through agents. The
distribution of Securities may be effected from time to time in one or more
transactions at a fixed price or prices, which may be changed, or at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices.
The Debt Securities, Preferred Stock, Class A Preferred Stock, Depositary
Shares and Warrants will be new issues of securities with no established trading
market. It has not presently been established whether the underwriters, if any,
of such Securities will make a market in such Securities. If a market in such
Securities is made by any such underwriters, such market making may be
discontinued at any time without notice. No assurance can be given as to the
liquidity of the trading market for any such Securities.
This Prospectus and the related Prospectus Supplement may be used by First
Union Capital Markets Corp. in connection with offers and sales related to
market-making transactions in the Securities. First Union Capital Markets Corp.
may act as principal or agent in such transactions. Such sales will be made at
prices related to prevailing market prices at the time of sale or otherwise.
In connection with the sale of Securities, underwriters may receive
compensation from the Corporation or from purchasers of Securities for whom they
may act as agents in the form of discounts, concessions or commissions.
Underwriters may sell Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers and agents that participate in the distribution of
Securities may be deemed to be underwriters, and any discounts or commissions
received by them from the Corporation and any profit on the resale of Securities
by them may be deemed to be underwriting discounts and commissions under the
Securities Act. Any such underwriter or agent will be identified, and any such
compensation received from the Corporation will be described, in the Prospectus
Supplement relating to such Securities.
Unless otherwise indicated in the applicable Prospectus Supplement, the
obligations of any such underwriters to purchase the Securities will be subject
to certain conditions precedent, and each of the underwriters with respect to a
sale of Securities will be obligated to purchase all of its Securities if any
are purchased. Unless otherwise indicated in the applicable Prospectus
Supplement, any such agent involved in the offer and sale of the Securities in
respect of which this Prospectus is being delivered will be acting on a best
efforts basis for the period of its appointment.
In connection with an offering of Securities, underwriters may purchase and
sell such Securities in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover short
positions created by underwriters in connection with the offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the securities; and short
positions created by underwriters involve the sale by underwriters of a greater
number of Securities than they are required to purchase from the Corporation in
the offering. Underwriters also may impose a penalty bid, whereby selling
concessions allowed to broker-dealers in respect of the Securities sold in the
offering may be reclaimed by underwriters if such Securities are repurchased by
underwriters in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Securities,
which may be higher than the price that might otherwise prevail in the open
market; and these activities, if commenced, may be discontinued at any time.
These transactions may be effected on the NYSE, in the over-the-counter market
or otherwise.
Under agreements which may be entered into by the Corporation,
underwriters, agents and their controlling persons who participate in the
distribution of Securities may be entitled to indemnification by the Corporation
against certain liabilities, including liabilities under the Securities Act.
If so indicated in the Prospectus Supplement relating to any Securities,
the Corporation will authorize dealers or other persons acting as the
Corporation's agents to solicit offers by certain institutions to purchase any
Securities from the Corporation pursuant to contracts providing for payment and
delivery on a future date. Institutions with which such contracts may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and others, but in
all cases such institutions must be approved by the Corporation. The obligations
of any purchaser under any such contract will be subject to the condition that
the purchase of any Securities shall not at the time of delivery be prohibited
under the laws of the jurisdiction to which such purchaser is subject. The
underwriters and such other agents will not have any responsibility in respect
of the validity or performance of such contracts.
The participation of First Union Capital Markets Corp. in the offer and
sale of the Securities must comply with the requirements of Schedule E to the
Bylaws of the National Association of Securities Dealers, Inc. (the "NASD"). In
such
28
<PAGE>
circumstances, no NASD member participating in offers and sales will execute a
transaction in the Securities in a discretionary account without the prior
specific written approval of such member's customer.
If the Corporation offers and sells Securities directly to a purchaser or
purchasers in respect of which this Prospectus is delivered, purchasers involved
in the reoffer or resale of such Securities, if such purchasers in respect
thereof may be deemed to be underwriters as that term is defined in the
Securities Act, will be named and the terms of such reoffers or resales will be
set forth in the applicable Prospectus Supplement. Such purchasers may then
reoffer and resell such Securities to the public or otherwise at varying prices
to be determined by such purchasers at the time of resale or as otherwise
described in the applicable Prospectus Supplement. Purchasers of Securities
directly from the Corporation may be entitled under agreements that they may
enter into with the Corporation to indemnification by the Corporation against
certain liabilities, including liabilities under the Securities Act, and may
engage in transactions with or perform services for the Corporation in the
ordinary course of their business or otherwise.
Underwriters or agents and their associates may be customers of (including
borrowers from), engage in transactions with, and/or perform services for, the
Corporation and its subsidiaries, the Senior Trustee and the Subordinated
Trustee, in the ordinary course of business.
VALIDITY OF SECURITIES
The validity of any Securities will be passed upon for the Corporation by
Marion A. Cowell, Jr., Esq., Executive Vice President, Secretary and General
Counsel of the Corporation, and for any underwriters or agents by Sullivan &
Cromwell, 125 Broad Street, New York, New York. Sullivan & Cromwell will rely
upon the opinion of Mr. Cowell as to matters of North Carolina law, and Mr.
Cowell will rely upon the opinion of Sullivan & Cromwell as to matters of New
York law. Mr. Cowell owns shares of Common Stock and holds options to purchase
additional shares of Common Stock. Sullivan & Cromwell regularly performs legal
services for the Corporation and its subsidiaries. Certain members of Sullivan &
Cromwell performing these legal services own shares of Common Stock.
EXPERTS
The supplemental balance sheets of the Corporation as of December 31, 1996
and 1995, and the related supplemental statements of income, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1996, included in the Corporation's 1996 Annual Report
to Stockholders which is incorporated by reference in the Corporation's 1996
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.
29
<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT 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 THE DATE OF SUCH INFORMATION.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT PAGE
----
<S> <C>
Description of Certain Terms of the Notes...... S-2
Certain Federal Income Tax Considerations...... S-10
Use of Proceeds................................ S-11
Recent Developments............................ S-11
Computations of Consolidated Ratios of Earnings
to Fixed Charges............................. S-15
Selected Consolidated Financial Data........... S-15
Underwriting................................... S-17
Experts........................................ S-18
Incorporation of Certain Documents by
Reference.................................... S-18
Cautionary Statement Concerning Forward-Looking
Information.................................. S-19
<CAPTION>
PROSPECTUS
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference.................................... 2
The Corporation................................ 3
Consolidated Ratios of Earnings to Fixed
Charges...................................... 4
Use of Proceeds................................ 5
Certain Regulatory Considerations.............. 5
Description of Common Stock.................... 8
Description of Preferred Stock and Class A
Preferred Stock.............................. 11
Description of Depositary Shares............... 14
Description of the Debt Securities............. 16
Description of Warrants........................ 23
Global Securities.............................. 26
Plan of Distribution........................... 28
Validity of Securities......................... 29
Experts........................................ 29
</TABLE>
$200,000,000
FIRST UNION CORPORATION
6.30% PUTABLE/CALLABLE
SUBORDINATED NOTES
DUE APRIL 15, 2028
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[First Union Logo appears here]
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FIRST UNION CAPITAL MARKETS
CREDIT SUISSE FIRST BOSTON
LEHMAN BROTHERS
MORGAN STANLEY DEAN WITTER
===================================================
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