PROSPECTUS SUPPLEMENT Filed under registration statement
NOVEMBER 9, 1999 Nos. 333-15743 and 333-15743-02
(TO PROSPECTUS -- DECEMBER 31, 1996) and under registration statement
Nos. 333-90593 and 333-90593-02
[FIRST UNION LOGO APPEARS HERE] covering additional securities
registered pursuant to Rule 462(b).
$300,000,000
FIRST UNION CAPITAL II
7.95% CAPITAL SECURITIES, SERIES A
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
GUARANTEED, TO THE EXTENT DESCRIBED HEREIN, BY
FIRST UNION CORPORATION
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FIRST UNION:
First Union Corporation THE OFFERING:
One First Union Center
301 South College Street o Securities Offered: 7.95% Capital
Charlotte, North Carolina 28288-0013 Securities, Series A
(704) 374-6565
o Distribution Dates: semi-annually
FIRST UNION CAPITAL II: on November 15 and May 15,
commencing on May 15, 2000
First Union Capital II
c/o First Union Corporation o Closing: November 15, 1999
One First Union Center
301 South College Street
Charlotte, North Carolina 28288-0013
(704) 374-6565
<TABLE>
<CAPTION>
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Per Series A Capital Security Total
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<S> <C> <C>
Public Offering Price (1): 99.883% $299,649,000
Underwriting fees: 1.00 3,000,000
Net proceeds to First Union
Capital (1): 98.883 296,649,000
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</TABLE>
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(1) Plus accumulated distributions from November 15, 1999, if any.
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You should carefully read "Risk Factors" beginning on page S-7 to learn about
specific risks associated with the Series A Capital Securities, as well as the
other information in this prospectus supplement and the accompanying
prospectus, before you make your investment decision.
THESE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF ANY OF THE SECURITIES OFFERED BY THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
First Union expects that the Series A Capital Securities will be ready for
delivery in New York, New York, on or about November 15, 1999.
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FIRST UNION SECURITIES, INC.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. NONE
OF FIRST UNION, FIRST UNION CAPITAL OR THE UNDERWRITERS HAS AUTHORIZED ANYONE
ELSE TO PROVIDE YOU WITH DIFFERENT INFORMATION. NONE OF FIRST UNION, FIRST
UNION CAPITAL OR THE UNDERWRITERS IS MAKING AN OFFER TO SELL THESE SECURITIES
IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. YOU SHOULD ASSUME
THAT THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IS ACCURATE AS OF THE RESPECTIVE DATES ON THE FRONT OF THOSE
DOCUMENTS ONLY. FIRST UNION'S BUSINESS, FINANCIAL CONDITION, RESULTS OF
OPERATIONS AND PROSPECTS MAY HAVE CHANGED SINCE THOSE DATES.
---------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
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PAGE
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<S> <C>
Forward-Looking Statements ............................................................... S-3
Summary of Offering ...................................................................... S-4
Risk Factors ............................................................................. S-7
First Union Capital II ................................................................... S-10
Recent Developments ...................................................................... S-11
Consolidated Earnings Ratio .............................................................. S-11
Use of Proceeds .......................................................................... S-11
Accounting Treatment ..................................................................... S-12
Description of the Series A Capital Securities ........................................... S-13
Description of the Series B Junior Subordinated Debentures ............................... S-18
Relationship Among the Series A Capital Securities, the Series B Junior Subordinated
Debentures and the Guarantee ............................................................ S-20
Material Federal Income Tax Considerations ............................................... S-21
ERISA Considerations ..................................................................... S-24
Underwriting ............................................................................. S-26
Validity of the Securities ............................................................... S-27
PROSPECTUS
Available Information .................................................................... 4
Incorporation of Certain Documents by Reference .......................................... 4
The Issuers .............................................................................. 5
The Corporation .......................................................................... 5
Use of Proceeds .......................................................................... 6
Description of Junior Subordinated Debentures ............................................ 6
Description of Preferred Securities ...................................................... 17
Book-Entry Issuance ...................................................................... 27
Description of Guarantees ................................................................ 28
Relationship Among Preferred Securities, Corresponding Junior Subordinated Debentures
and Guarantees .......................................................................... 31
Plan of Distribution ..................................................................... 32
Validity of the Securities ............................................................... 33
Experts .................................................................................. 33
</TABLE>
S-2
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus contain or
incorporate by reference statements that do not directly or exclusively relate
to historical facts. Such statements are "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. You can
typically identify forward-looking statements by the use of forward-looking
words, such as "may," "will," "could," "project," "believe," "anticipate,"
"expect," "estimate," "continue," "potential," "plan," "forecast" and the like.
Those statements represent First Union's intentions, plans, expectations,
assumptions and beliefs about future events and are subject to risks,
uncertainties and other factors. Many of those factors are outside First
Union's control and could cause actual results to differ materially from the
results expressed or implied by those forward-looking statements.
In light of these risks, uncertainties and assumptions, the
forward-looking events referred to in this prospectus supplement and the
accompanying prospectus might not occur. First Union undertakes no obligation
to publicly update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
S-3
<PAGE>
SUMMARY OF OFFERING
THIS SUMMARY HIGHLIGHTS INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS
SUPPLEMENT AND IN THE ACCOMPANYING PROSPECTUS. THIS SUMMARY DOES NOT CONTAIN
ALL THE INFORMATION YOU SHOULD CONSIDER BEFORE INVESTING IN THE SERIES A
CAPITAL SECURITIES. YOU SHOULD PAY SPECIAL ATTENTION TO THE RISK FACTORS
SECTION OF THIS PROSPECTUS SUPPLEMENT TO DETERMINE WHETHER AN INVESTMENT IN THE
SERIES A CAPITAL SECURITIES IS APPROPRIATE FOR YOU.
First Union Corporation......... First Union, a multi-bank holding company,
provides a wide range of commercial and
retail banking services and trust services
through its banking subsidiaries. First Union
also provides various other financial
services, including mortgage banking,
leasing, investment banking, insurance and
securities brokerage services, through other
subsidiaries.
The principal executive offices of First
Union are located at One First Union Center,
Charlotte, North Carolina 28288-0013
(telephone (704) 347-6565).
First Union Capital II.......... First Union Capital II is a statutory
business trust created solely for the purpose
of (1) issuing the Series A Capital
Securities to the public, (2) issuing the
Common Securities to First Union and (3)
using the proceeds from the issuance of the
Series A Capital Securities and the Common
Securities to purchase First Union's Series B
Junior Subordinated Debentures due November
15, 2029.
Capital Securities Offered...... 7.95% Capital Securities, Series A
Distributions; Distribution
Dates........................... Holders of the Series A Capital Securities
are entitled to receive cumulative cash
distributions at a yearly rate of 7.95% of
the liquidation amount of the Series A
Capital Securities. Distributions will accrue
from the original issue date. Distributions
will be payable, semi-annually, except during
extension periods, on November 15 and May 15
of each year, commencing on May 15, 2000.
The distribution dates will correspond to
the interest payment dates on the Series B
Junior Subordinated Debentures and the rate
at which distributions will be paid on the
Series A Capital Securities will correspond
to the interest rate on the Series B Junior
Subordinated Debentures. If First Union does
not pay principal or interest on the Series
B Junior Subordinated Debentures, no amounts
will be paid on the Series A Capital
Securities.
Record Dates.................... The close of business on the 15th calendar
day before the relevant distribution date.
Series B Junior
Subordinated Debentures......... First Union Capital will use the proceeds
from the sale of the Series A Capital
Securities and from the sale of the Common
Securities to purchase from First Union
$300,000,000 aggregate principal amount of
the Series B Junior Subordinated Debentures.
The Series B Junior Subordinated Debentures
will be unsecured subordinated obligations of
First Union.
Deferral of Distributions;
Extension Periods............... First Union has the right to defer payments
of interest on the Series B Junior
Subordinated Debentures by extending the
interest payment period on the Series B
Junior Subordinated Debentures, at any time
and as often as it wishes, for up to 10
consecutive semi-annual periods (each, an
"extension period") but not beyond the
maturity date of the Series B Junior
Subordinated Debentures. If First Union
defers payments of interest on the Series B
Junior Subordinated Debentures, distributions
on the Series A Capital Securities will also
be deferred.
S-4
<PAGE>
Deferred interest will bear interest at a
yearly rate of 7.95%, compounded
semi-annually, to the date of payment, to
the extent legally permitted.
Payments of deferred interest, and any
interest on deferred interest, on the Series
B Junior Subordinated Debentures will be
passed through to the holders of the Series
A Capital Securities.
The only restrictions on First Union's
ability to defer payments of interest are
that during an extension period First Union
may not, with certain exceptions, (1) pay
dividends on, or redeem or otherwise
purchase, any of its capital stock or (2)
pay principal or interest on, or redeem or
otherwise purchase, any of its debt
securities ranking equal in priority with or
subordinate to the Series B Junior
Subordinated Debentures.
During an extension period, holders of
Series A Capital Securities will recognize
interest income for U.S. federal income tax
purposes before the receipt of the cash
payments of those deferred distributions
even if the holder is a cash basis taxpayer.
Redemption...................... First Union Capital must redeem the Series
A Capital Securities and Common Securities:
(1) in whole but not in part when First Union
repays the principal on the Series B
Junior Subordinated Debentures at their
maturity;
(2) if First Union elects to redeem the
Series B Junior Subordinated Debentures
in whole but not in part at any time upon
the occurrence of a Special Event, as
described below; and
(3) if First Union elects to redeem the
Series B Junior Subordinated Debentures
in whole or in part at any time.
The redemption price will be calculated
pursuant to the applicable formula specified
in this prospectus supplement. The
applicable formula will depend upon which
redemption right First Union exercises.
Special Event................... A "Special Event" means a Tax Event or a
Capital Treatment Event.
A "Tax Event" means that because of changes
in certain tax laws or regulations, or in
how they are interpreted or applied, there
is more than an insubstantial risk that (1)
First Union Capital would be subject to U.S.
federal income tax with respect to income
accrued or received on the Series B Junior
Subordinated Debentures, (2) interest
payable on the Series B Junior Subordinated
Debentures would not be deductible by First
Union for U.S. federal income tax purposes
or (3) First Union Capital would be subject
to more than a de minimis amount of other
taxes, duties or other governmental charges.
A "Capital Treatment Event" means that
because of changes in certain laws or
regulations, or in how they are interpreted
or applied, there is more than an
insubstantial risk that First Union will not
be entitled to treat an amount equal to the
aggregate liquidation amount of the Series A
Capital Securities as "tier 1 capital" (or
the equivalent thereof) for purposes of the
capital adequacy guidelines of the Federal
Reserve Board, as then in effect and
applicable to First Union.
Termination of Trust............ First Union will have the right to
terminate First Union Capital at any time and
cause the Property Trustee to distribute the
Series B Junior
S-5
<PAGE>
Subordinated Debentures pro rata to the
holders of the Series A Capital Securities
in exchange for their Series A Capital
Securities. This right is optional and
wholly in First Union's discretion.
Ranking of Series B Junior
Subordinated Debentures......... The Series B Junior Subordinated Debentures
will be subordinate and junior in right of
payment to all indebtedness for borrowed
money and other obligations of First Union
included in the definition of Senior Debt.
See "Description of Junior Subordinated
Debentures -- Subordination" in the
accompanying prospectus for a description of
Senior Debt.
Guarantee....................... First Union will fully and unconditionally
guarantee the payment of distributions and
other payments by First Union Capital on the
Series A Capital Securities, but only to the
extent that First Union Capital has funds
legally and immediately available to make
those distributions and payments.
Ranking of Guarantee............ First Union's obligations under the
Guarantee will be subordinate and junior in
right of payment to all of First Union's
other liabilities, other than similar
guarantees. The Guarantee will rank equal in
priority with First Union's other similar
guarantees.
Book-Entry Issuance............. The Series A Capital Securities will be
represented by a global certificate or
certificates deposited with and registered in
the name of The Depository Trust Company, New
York, New York or its nominee. This means
that investors will not receive certificates
for their Series A Capital Securities.
The Trustees.................... Wilmington Trust Company will act as
Property Trustee and Delaware Trustee of
First Union Capital. Two of First Union's
officers will act as the Administrative
Trustees of First Union Capital. Wilmington
Trust Company also serves as the Indenture
Trustee -- the trustee under First Union's
Subordinated Indenture under which the Series
B Junior Subordinated Debentures will be
issued -- and will act as the Guarantee
Trustee -- the trustee under the Guarantee.
The Property Trustee, Delaware Trustee and
Administrative Trustees together are
sometimes referred to as the "Securities
Trustees" in this prospectus supplement.
S-6
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SERIES A CAPITAL SECURITIES INVOLVES A NUMBER OF
RISKS. SOME OF THE RISKS RELATE TO THE TERMS OF THE SERIES A CAPITAL SECURITIES
AND THE SERIES B JUNIOR SUBORDINATED DEBENTURES. OTHER RISKS RELATE TO FIRST
UNION OR FIRST UNION CAPITAL. YOU SHOULD CAREFULLY READ AND CONSIDER THE
FOLLOWING RISK FACTORS, AS WELL AS THE OTHER INFORMATION CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, BEFORE YOU BUY ANY
SERIES A CAPITAL SECURITIES.
PAYMENTS ON THE SERIES A CAPITAL SECURITIES DEPEND UPON PAYMENTS ON THE SERIES
B JUNIOR SUBORDINATED DEBENTURES BY FIRST UNION
The only source of funds for payments on the Series A Capital Securities
will be the payments that First Union makes on the Series B Junior Subordinated
Debentures. If First Union fails to make timely payments on the Series B Junior
Subordinated Debentures, First Union Capital will lack available funds for
distributions or other payments on the Series A Capital Securities.
RIGHTS UNDER THE GUARANTEE ARE LIMITED
If First Union Capital does not have sufficient funds legally and
immediately available, the holders of the Series A Capital Securities will not
be able to rely upon the Guarantee for distributions or other payments on the
Series A Capital Securities.
THE GUARANTEE RANKS SUBORDINATE TO MANY OF FIRST UNION'S OTHER OBLIGATIONS
First Union's obligations under the Guarantee will rank:
o subordinate and junior in right of payment to all of First Union's other
liabilities, other than obligations or liabilities that rank equal in
priority or subordinate by their terms;
o equal in priority with First Union's other similar guarantees; and
o senior to First Union's common stock.
THE SERIES B JUNIOR SUBORDINATED DEBENTURES RANK SUBORDINATE TO MANY OF FIRST
UNION'S OTHER OBLIGATIONS
First Union's obligations under the Series B Junior Subordinated
Debentures are subordinate and junior in right of payment to all of First
Union's Senior Debt and its subordinated debt senior to the Series B Junior
Subordinated Debentures. As of June 30, 1999, First Union's Senior Debt totaled
approximately $658 million and its subordinated debt senior to the Series B
Junior Subordinated Debentures totaled approximately $4.2 billion. For a
description of First Union's Senior Debt, see "Description of Junior
Subordinated Debentures -- Subordination" in the accompanying prospectus.
The Series A Capital Securities, the Series B Junior Subordinated
Debentures and the Guarantee do not limit First Union's ability to incur
additional Senior Debt or other indebtedness.
THE SERIES B JUNIOR SUBORDINATED DEBENTURES ARE SUBJECT TO STRUCTURAL
SUBORDINATION
First Union conducts its business through subsidiaries. Accordingly, First
Union's ability to meet its obligations under the Series B Junior Subordinated
Debentures is dependent on the earnings and cash flows of those subsidiaries
and the ability of those subsidiaries to pay dividends or to advance or repay
funds to First Union. In addition, the rights that First Union and its
creditors will have to participate in the assets of any such subsidiary upon
the subsidiary's liquidation or recapitalization will be subject to the prior
claims of the subsidiary's creditors.
OPTION TO DEFER INTEREST PAYMENTS ON THE SERIES B JUNIOR SUBORDINATED
DEBENTURES WHICH WOULD CAUSE A DEFERRAL OF DISTRIBUTIONS ON THE SERIES A
CAPITAL SECURITIES
First Union will have the right, at any time and from time to time, to
defer interest payments on the Series B Junior Subordinated Debentures for up
to 10 consecutive semi-annual periods, but not beyond the maturity date of the
Series B Junior Subordinated Debentures. Any such deferral period is called an
"extension period" in this prospectus supplement. During an extension period
distributions on the Series A Capital Securities will also be deferred.
First Union will pay interest on any deferred interest on the Series B
Junior Subordinated Debentures at a yearly rate of 7.95%, compounded
semi-annually, to the date of payment, to the extent legally permitted.
Payments of deferred interest, together with any interest on those payments,
will be passed through to the holders of the Series A Capital Securities.
S-7
<PAGE>
If First Union defers interest payments, each holder of Series A Capital
Securities, or of Series B Junior Subordinated Debentures, will recognize
income as original issue discount for U.S. federal income tax purposes before
the holder is paid deferred distributions. This will be so even if the holder
is a cash basis taxpayer. A holder of Series A Capital Securities, or of Series
B Junior Subordinated Debentures, will not receive cash related to that income
if the holder disposes of the Series A Capital Securities, or the Series B
Junior Subordinated Debentures, before the record date for the payment of such
amounts. Investors should consult their own tax advisors with respect to these
and other tax consequences of an investment in the Series A Capital Securities.
SPECIAL EVENT REDEMPTION
First Union will have the option to redeem the Series B Junior
Subordinated Debentures in whole at any time during the 90 days after the
occurrence of a Special Event. If First Union redeems the Series B Junior
Subordinated Debentures after the occurrence of a Special Event, First Union
Capital will redeem the Series A Capital Securities.
First Union has committed to the Federal Reserve Bank of Richmond that it
will not exercise such right without First Union having received the prior
approval of the Federal Reserve Board if then so required under the applicable
capital guidelines or policies of the Federal Reserve Board. See "Description
of Series B Junior Subordinated Debentures -- Redemption."
THE DEFERRAL AND THE TAX TREATMENT OF THE SERIES A CAPITAL SECURITIES COULD
ADVERSELY AFFECT MARKET PRICES FOR THE SERIES A CAPITAL SECURITIES
Because First Union has the right to defer interest payments on the Series
B Junior Subordinated Debentures, the market price of the Series A Capital
Securities may be more volatile than the market prices of similar securities
that are not subject to this right. Moreover, any exercise of this right could
cause the market price of the Series A Capital Securities to decline.
Accordingly, the Series A Capital Securities that you may purchase or the
Series B Junior Subordinated Debentures that a holder of Series A Capital
Securities may receive on liquidation of First Union Capital may trade at a
discount to the price that you paid to purchase the Series A Capital
Securities. Furthermore, a holder that disposes of any Series A Capital
Securities or Series B Junior Subordinated Debentures during an extension
period, when trading prices are likely to be adversely affected by deferral, is
not likely to receive the same return on its investment as a holder that holds
its Series A Capital Securities until the period ends.
A holder of Series A Capital Securities that disposes of its Series A
Capital Securities before the record date for the payment of distributions will
not receive payment of a distribution for the period prior to the disposition.
Nevertheless, that holder will be required to include accrued but unpaid
interest on the Series B Junior Subordinated Debentures through the date of
disposition as ordinary income for U.S. federal income tax purposes and to add
the amount of the accrued but unpaid interest to its tax basis in the Series A
Capital Securities. The holder will recognize a capital loss to the extent the
selling price is less than its adjusted tax basis. Subject to certain limited
exceptions, a holder of Series A Capital Securities cannot offset ordinary
income against capital losses for U.S. federal income tax purposes. See
"Material Federal Income Tax Considerations."
DISTRIBUTION OF SERIES B JUNIOR SUBORDINATED DEBENTURES UPON TERMINATION OF
FIRST UNION CAPITAL
First Union will have the right to terminate First Union Capital at any
time and cause the Series B Junior Subordinated Debentures to be distributed to
the holders of the Series A Capital Securities in liquidation of First Union
Capital. First Union has committed to the Federal Reserve Bank of Richmond
that, for so long as First Union (or an affiliate) is the owner of the Common
Securities, it will not exercise such right without having received the prior
approval of the Federal Reserve Board, if then so required under applicable
capital guidelines or policies of the Federal Reserve Board.
Under current U.S. federal income tax law and interpretations, and
assuming, as expected, that First Union Capital will not be classified as an
association taxable as a corporation, holders of the Series A Capital
Securities would not have a taxable event if the Series B Junior Subordinated
Debentures were distributed upon liquidation of First Union Capital. However,
if a Tax Event were to occur and First Union Capital became subject to U.S.
federal income tax with respect to income received or accrued on the Series B
Junior Subordinated Debentures, both First Union Capital and the holders of the
Series A Capital Securities could be taxed on that distribution. See "Material
Federal Income Tax Considerations."
There can be no assurance as to the market price for the Series B Junior
Subordinated Debentures if a termination and liquidation of First Union Capital
occurs and Series B Junior Subordinated Debentures are distributed in exchange
for Series A Capital Securities. The Series B Junior Subordinated Debentures
that the investor would receive may trade at less
S-8
<PAGE>
than the price that the investor paid to purchase the Series A Capital
Securities and/or less than the market price of the Series A Capital Securities
before the exchange.
THERE CAN BE NO ASSURANCE AS TO MARKET PRICES OF THE SERIES A CAPITAL
SECURITIES OR THE SERIES B JUNIOR SUBORDINATED DEBENTURES
There can be no assurance as to the market prices for either the Series A
Capital Securities or the Series B Junior Subordinated Debentures that may be
distributed in exchange for the Series A Capital Securities if a termination
and liquidation of First Union Capital occurs. Accordingly, the Series A
Capital Securities that an investor may purchase, or the Series B Junior
Subordinated Debentures that the investor may receive if First Union Capital is
terminated and liquidated, may trade at a price less than the price paid by the
investor to purchase the Series A Capital Securities and/or less than the
market price of the Series A Capital Securities before the exchange.
Because holders of the Series A Capital Securities may receive Series B
Junior Subordinated Debentures on liquidation of First Union Capital, potential
purchasers of the Series A Capital Securities are also making an investment
decision with respect to the Series B Junior Subordinated Debentures and should
carefully review all the information regarding the Series B Junior Subordinated
Debentures included in this prospectus supplement and the accompanying
prospectus. See "Description of the Series B Junior Subordinated Debentures"
herein and "Description of Junior Subordinated Debentures -- Corresponding
Junior Subordinated Debentures" in the accompanying prospectus.
LIMITED VOTING RIGHTS
Holders of Series A Capital Securities will have limited voting rights.
In general, holders of Series A Capital Securities will not be entitled to
vote to appoint, remove or replace any of the Securities Trustees. First Union,
as the holder of the Common Securities, generally has that right. However, the
holders of the Series A Capital Securities will have the right to appoint a
substitute Property Trustee or Delaware Trustee if an event of default with
respect to the Series B Junior Subordinated Debentures occurs and is
continuing.
TRADING CHARACTERISTICS OF SERIES A CAPITAL SECURITIES; NO PREVIOUS PUBLIC
MARKET FOR THE SERIES A CAPITAL SECURITIES
If a holder disposes of Series A Capital Securities prior to the
occurrence of an extension period, any portion of the amount received that is
attributable to accrued interest on the Series B Junior Subordinated Debentures
will be treated as interest income for U.S. federal income tax purposes and
will not be treated as part of the amount realized for purposes of determining
gain or loss on the disposition of the Series A Capital Securities. If an
extension period occurs, interest on the Series B Junior Subordinated
Debentures will be included in the income of holders of Series A Capital
Securities as it accrues rather than when it is paid. If an extension period
occurs, a holder that disposes of its Series A Capital Securities between
record dates for payments of distributions will be required to include in
income as original issue discount accrued but unpaid interest on the Series B
Junior Subordinated Debentures through the date of disposition and to add that
amount to the holder's adjusted tax basis in the related Series B Junior
Subordinated Debentures that are regarded as having been disposed of by that
holder. A holder generally will recognize a capital loss to the extent the
selling price is less than the holder's adjusted tax basis. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for U.S. federal income tax purposes.
No public market for the Series A Capital Securities existed before this
offering. There can be no assurance that an active public market for the Series
A Capital Securities will develop. If an active trading market for the Series A
Capital Securities does develop, there can be no assurance that it will be
sustained after this offering.
INVESTMENT IN TRUST INVOLVES RISKS PARALLEL TO THOSE OF INVESTMENT IN FIRST
UNION
An investment in First Union Capital, like an investment in First Union,
will involve risks associated with First Union's operating conditions and will
be affected by the competitive factors, economic conditions, industry
conditions and equity market conditions to which First Union is subject.
CONSEQUENCES OF HIGHLY LEVERAGED TRANSACTION
The Subordinated Indenture does not contain provisions that will protect
holders of the Series B Junior Subordinated Debentures if First Union engages
in a highly leveraged transaction. The Trust Agreement does not contain
provisions that will protect holders of Series A Capital Securities under those
circumstances.
S-9
<PAGE>
FIRST UNION CAPITAL II
First Union created First Union Capital as a statutory business trust
under Delaware law. First Union Capital's business is defined in a trust
agreement executed by First Union, as depositor, and the Delaware Trustee. That
trust agreement will be amended when the Series A Capital Securities are
issued. The amended trust agreement will be in substantially the form filed as
an exhibit to the initial registration statement of which this prospectus
supplement and the accompanying prospectus are a part. The amended trust
agreement is called the "Trust Agreement" in this prospectus supplement.
First Union Capital exists for the exclusive purposes of (1) issuing and
selling the Series A Capital Securities to the public, (2) issuing and selling
the Common Securities to First Union and (3) investing the gross proceeds from
those sales in the Series B Junior Subordinated Debentures. First Union Capital
may engage in only those other activities as are necessary, appropriate,
convenient or incidental to those purposes. The Series A Capital Securities and
the Common Securities together are sometimes called the "Trust Securities" in
this prospectus supplement.
First Union Capital has a term of approximately 31 years from its
creation, but may terminate earlier as provided in the Trust Agreement.
The Securities Trustees will conduct First Union Capital's business and
affairs. First Union, as the holder of the Common Securities, will appoint the
Securities Trustees. Two of First Union's officers initially will serve as
Administrative Trustees. Wilmington Trust Company will serve as Property
Trustee and as Delaware Trustee. First Union, as the holder of all the Common
Securities, will have the right to appoint, remove or replace any of the
Securities Trustees, subject to the right of the holders of a majority of the
Series A Capital Securities to appoint a substitute Property Trustee and
Delaware Trustee if an event of default with respect to the Series B Junior
Subordinated Debentures occurs and is continuing.
The Property Trustee will hold legal title to the Series B Junior
Subordinated Debentures for the benefit of First Union Capital and the holders
of the Trust Securities. The Property Trustee will have the power, with certain
exceptions, to exercise all rights, powers and privileges under the
Subordinated Indenture as the holder of the Series B Junior Subordinated
Debentures.
The Series B Junior Subordinated Debentures will constitute substantially
all the assets of First Union Capital. Other assets that may constitute "Trust
Property" include any cash on deposit in, or owing to, the payment account
established under the Trust Agreement. Trust Property will also include any
other property or assets that the Property Trustee holds under the Trust
Agreement. First Union Capital may from time to time receive cash from First
Union under the Agreement as to Expenses and Liabilities between First Union
and First Union Capital.
First Union Capital's office address in the State of Delaware is c/o
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware, 19890-0001. The principal place of business of First
Union Capital will be c/o First Union Corporation, One First Union Center,
Charlotte, North Carolina 28288-0013 (telephone (704) 374-6565).
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RECENT DEVELOPMENTS
First Union reported operating earnings of $802 million, or 84 cents per
share, in the third quarter of 1999 compared with $1.0 billion, or $1.02 per
share, in the third quarter of 1998. Operating earnings exclude merger related
and restructuring charges. The third quarter of 1999 included no merger related
and restructuring charges and the third quarter of 1998 included $16 million
after tax of such charges. Third quarter 1999 operating earnings represent a
return on average stockholders' equity of 19.91 percent and return on average
assets of 1.39 percent.
In the first nine months of 1999, operating earnings were $2.6 billion, or
$2.74 per share, compared with $2.7 billion, or $2.77 per share, in the first
nine months of 1998. After merger related and restructuring charges, net income
in the first nine months of 1999 was $2.4 billion, or $2.47 per share, compared
with $2.0 billion, or $2.08 per share, in the first nine months of 1998. Nine
month 1999 operating earnings represent a return on average stockholders'
equity of 21.74 percent and a return on average assets of 1.56 percent.
On October 1, 1999, First Union completed the purchase accounting
acquisition of EVEREN Capital Corporation.
Both houses of the U.S. Congress have passed, and the President has
indicated he will sign, the Gramm-Leach-Bliley Financial Modernization Act of
1999 into law. The Modernization Act will:
o allow bank holding companies meeting management, capital and CRA
standards to engage in a substantially broader range of nonbanking
activities than currently is permissible, including insurance
underwriting and making merchant banking investments in commercial and
financial companies;
o allow insurers and other financial services companies to acquire banks;
o remove various restrictions that currently apply to bank holding company
ownership of securities firms and mutual fund advisory companies; and
o establish the overall regulatory structure applicable to bank holding
companies that also engage in insurance and securities operations.
This part of the Modernization Act will become effective 120 days after
enactment. First Union currently believes it meets the requirements for the
broader range of activities that will be permitted by the Modernization Act.
The Modernization Act will also modify other current financial laws,
including laws related to financial privacy and community reinvestment. The new
financial privacy provisions will generally prohibit financial institutions,
including First Union, from disclosing nonpublic personal financial information
to third parties unless customers have the opportunity to "opt out" of the
disclosure.
CONSOLIDATED EARNINGS RATIOS
The following table provides First Union's consolidated ratios of earnings
to fixed charges.
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED -------------------------------------------------
JUNE 30, 1999 1998 1997 1996 1995 1994
-------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
Excluding interest on deposits ..................... 2.42x 2.13 2.50 2.58 2.87 3.47
Including interest on deposits ..................... 1.66x 1.51 1.57 1.56 1.58 1.72
</TABLE>
For purposes of computing the ratios, earnings represent income from
continuing operations before extraordinary items and the cumulative effect of
any changes in accounting principles 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.
USE OF PROCEEDS
All of the proceeds from the sale of the Series A Capital Securities will
be invested by First Union Capital in Series B Junior Subordinated Debentures.
First Union intends that the proceeds from the sale of the Series B Junior
Subordinated Debentures will be added to its general corporate funds and will
be used for general corporate purposes.
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First Union is required by the Federal Reserve Board to maintain certain
levels of capital for bank regulatory purposes. On October 21, 1996, the
Federal Reserve Board announced that cumulative preferred securities having the
characteristics of the Series A Capital Securities which qualify as a minority
interest could be included as tier 1 capital for bank holding companies. Such
tier 1 capital treatment, together with First Union's ability to deduct, for
U.S. federal income tax purposes, interest payable on the Series B Junior
Subordinated Debentures, will provide First Union with a more cost-effective
means of obtaining capital for regulatory purposes than other tier 1 capital
alternatives currently available to it.
ACCOUNTING TREATMENT
For financial reporting purposes, First Union Capital will be treated as a
subsidiary of First Union. Accordingly, the accounts of First Union Capital
will be included in First Union's consolidated financial statements.
The Series A Capital Securities will be included in long-term debt in
First Union's consolidated balance sheets. A separate line item entitled "Trust
preferred securities" will be included in the notes to First Union's
consolidated financial statements. Additionally, appropriate disclosures about
the Series A Capital Securities, the Guarantee, and the Series B Junior
Subordinated Debentures will also be included in the notes to First Union's
consolidated financial statements. For financial reporting purposes, First
Union will record distributions payable on the Series A Capital Securities as
interest expense in its consolidated statements of income.
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DESCRIPTION OF THE SERIES A CAPITAL SECURITIES
The following description of the Series A Capital Securities is only a
summary and is not intended to be comprehensive. For additional information you
should refer to the Trust Agreement. The form of the Trust Agreement is an
exhibit to the initial registration statement of which this prospectus
supplement and the accompanying prospectus are a part.
GENERAL
The Trust Agreement authorizes the Administrative Trustees to issue the
Series A Capital Securities and the Common Securities on behalf of First Union
Capital. The Series A Capital Securities represent preferred undivided
beneficial interests in the assets of First Union Capital. The Common
Securities represent common undivided beneficial interests in the assets of
First Union Capital. The Trust Agreement does not permit First Union Capital to
issue any other securities or to incur any indebtedness for borrowed money.
The Series A Capital Securities will have an aggregate liquidation amount
equal to approximately 97% of the total capital of First Union Capital. The
Common Securities will have an aggregate liquidation amount equal to
approximately 3% of the total capital of First Union Capital.
First Union will own all the Common Securities.
In general, the Series A Capital Securities will rank equal in priority
with the Common Securities and First Union Capital will make payments on the
Series A Capital Securities on a pro rata basis with the Common Securities. The
rights of the holders of the Series A Capital Securities to receive
distributions and liquidation, redemption and other payments will be senior to
the rights of the holder of the Common Securities if an event of default occurs
under the Subordinated Indenture with respect to the Series B Junior
Subordinated Debentures.
First Union has guaranteed, on a subordinated basis, certain payments with
respect to the Series A Capital Securities. Those payments are payments of
distributions and payments if the Series A Capital Securities are redeemed or
First Union Capital is liquidated, in each case to the extent set forth in the
Guarantee. The Guarantee does not cover those payments when First Union Capital
does not have sufficient funds legally and immediately available to make the
payments. In that event, the holders of a majority of the Series A Capital
Securities may direct the Property Trustee to enforce its rights under the
Series B Junior Subordinated Debentures. In addition, a holder of Series A
Capital Securities may institute a legal proceeding directly against First
Union, without first instituting a legal proceeding against the Property
Trustee or any other person or entity, to enforce payment to that holder of
principal or interest on Series B Junior Subordinated Debentures having a
principal amount equal to the liquidation amount of that holder's Series A
Capital Securities on or after the due dates specified or provided for in the
Series B Junior Subordinated Debentures. These mechanisms and obligations,
together with First Union's obligations under the Agreement as to Expenses and
Liabilities, provide a full and unconditional guarantee by First Union of the
payments due on the Series A Capital Securities, subject to certain
subordination provisions.
DISTRIBUTIONS
Distributions on the Series A Capital Securities will be fixed at a yearly
rate of 7.95% and will accrue from the original issue date of the Series A
Capital Securities.
Distributions on the Series A Capital Securities will be payable
semi-annually in arrears on the following distribution dates: November 15 and
May 15 of each year, commencing on May 15, 2000, except if an extension period
occurs. Distributions payable on a date that is not a business day will be paid
on the next day that is a business day (without any interest or other payment
due to the delay), except that if that business day falls in the next calendar
year, the payment will be made on the immediately preceding business day. In
each such case, payment will be made with the same effect as if made on the
date the payment was originally payable. As used in this prospectus supplement,
"business day" means any day other than a Saturday or Sunday, a day on which
banks in New York City are authorized or obligated by law or executive order to
remain closed or a day on which the principal corporate trust office of the
Property Trustee or the Indenture Trustee is closed for business.
Distributions on the Series A Capital Securities will be payable to
holders of record at the close of business on the 15th calendar day before the
relevant distribution date. Each payment of a distribution will be made as
described under the caption " -- Book-Entry Issuance -- The Depository Trust
Company" in this prospectus supplement while the Series A Capital Securities
are in book-entry only form. Distributions will be computed on the basis of a
360-day year of twelve 30-day months.
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First Union has the right to defer interest payments on the Series B
Junior Subordinated Debentures by extending the interest payment period from
time to time on the Series B Junior Subordinated Debentures. If First Union
exercises that right, distributions on the Series A Capital Securities will be
deferred during the extension period. Deferred interest installments on the
Series B Junior Subordinated Debentures will bear interest at a yearly rate of
7.95%, compounded semi-annually, to the payment date, to the extent legally
permitted. First Union will have the right to make partial payments of interest
on any interest payment date during an extension period. If distributions are
deferred, the deferred distributions and accrued interest on those
distributions will be paid, if funds are legally available for those payments,
to holders of record of the Series A Capital Securities on the record date
immediately after the extension period ends.
First Union Capital will pay distributions on the Series A Capital
Securities on the distribution dates to the extent that it has funds legally
and immediately available. Those funds will be limited to payments that First
Union makes under the Series B Junior Subordinated Debentures.
REDEMPTION
The Series A Capital Securities will remain outstanding until First Union
Capital redeems them or distributes the Series B Junior Subordinated Debentures
in exchange for the Series A Capital Securities. Any redemption of Series A
Capital Securities must occur as described below.
REDEMPTION OF SERIES A CAPITAL SECURITIES. If First Union repays or
redeems the Series B Junior Subordinated Debentures at any time, First Union
Capital will be obligated to redeem a like amount of Series A Capital
Securities and Common Securities. The redemption of the Series A Capital
Securities will occur on the redemption date, which means the date on which
payment of the principal of those Series B Junior Subordinated Debentures
becomes due under the Subordinated Indenture. The redemption price for the
Series A Capital Securities will be the total liquidation amount of the Series
A Capital Securities being redeemed plus (1) accumulated but unpaid
distributions up to but excluding the redemption date and (2) the related
amount of the premium, if any, paid by First Union on the concurrent redemption
of the Series B Junior Subordinated Debentures.
REPAYMENT AND REDEMPTION OF SERIES B JUNIOR SUBORDINATED DEBENTURES. First
Union may redeem the Series B Junior Subordinated Debentures before their
stated maturity as follows:
(1) in whole at any time or in part from time to time, PROVIDED that no partial
redemption may occur during an extension period; or
(2) in whole at any time within 90 days after the occurrence of a Tax Event or
a Capital Treatment Event, each as defined below.
If First Union elects to redeem the Series B Junior Subordinated
Debentures, First Union will do so at the relevant redemption price. The
redemption price will equal accrued and unpaid interest on the Series B Junior
Subordinated Debentures being redeemed plus the greater of:
o 100% of the principal amount of the Series B Junior Subordinated
Debentures being redeemed, or
o as determined by a Quotation Agent, the sum of the present value of
scheduled payments of principal and interest from the redemption date to
November 15, 2029, on the Series B Junior Subordinated Debentures being
redeemed, discounted to the redemption date on a semi-annual basis at a
discount rate equal to the Treasury Rate, plus .25%, in the case of a
redemption under clause (1) above, or plus .50%, in the case of a
redemption under clause (2) above.
DEFINITION OF QUOTATION AGENT "Quotation Agent" means Morgan Stanley & Co.
Incorporated. However, if Morgan Stanley & Co. Incorporated ceases to be a
primary U.S. Government securities dealer in New York City, First Union will
replace them with another primary U.S. Government securities dealer.
DEFINITION OF TREASURY RATE. "Treasury Rate" means (1) the yield, under
the heading which represents the average for the week immediately prior to the
date of calculation, appearing in the most recently published statistical
release designated H.15(519) or any successor publication which is published
weekly by the Federal Reserve Board and which establishes the yield on actively
traded U.S. Treasury securities adjusted to constant maturity under the caption
"Treasury Constant Maturities," for the maturity corresponding to the time
period from the redemption date to November 15, 2029, or if no maturity is
within three months before or after this time period, yields for the two
published maturities most closely corresponding to this time period will be
determined and the Treasury Rate will be interpolated or extrapolated from
those yields on a straight-line basis, rounding to the nearest month, or (2) if
the release or any successor release is not published during the week preceding
the calculation date or does not contain such yields, the annual rate equal to
the semi-annual equivalent yield
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<PAGE>
to maturity of the Comparable Treasury Issue, calculated using a price for the
Comparable Treasury Issue, expressed as a percentage of its principal amount,
equal to the Comparable Treasury Price for the redemption date. The Treasury
Rate shall be calculated on the third business day preceding the redemption
date.
DEFINITION OF COMPARABLE TREASURY ISSUE. "Comparable Treasury Issue" means
with respect to any redemption date the U.S. Treasury security selected by the
Quotation Agent as having a maturity comparable to the time period from the
redemption date to November 15, 2029 that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to this time period.
If no U.S. Treasury security has a maturity which is within a period from three
months before to three months after November 15, 2029 the two most closely
corresponding U.S. Treasury securities shall be used as the Comparable Treasury
Issue, and the Treasury Rate shall be interpolated or extrapolated on a
straight-line basis, rounding to the nearest month using such securities.
DEFINITION OF COMPARABLE TREASURY PRICE. "Comparable Treasury Price" means
(a) the average of five Reference Treasury Dealer Quotations for such
redemption date, after excluding the highest and lowest such Reference Treasury
Dealer Quotations, or (b) if the Indenture Trustee obtains fewer than five such
Reference Treasury Dealer Quotations, the average of all such quotations.
DEFINITION OF REFERENCE TREASURY DEALER QUOTATIONS. "Reference Treasury
Dealer Quotations" means, with respect to each Reference Treasury Dealer and
any redemption date, the average, as determined by the Indenture Trustee, of
the bid and asked prices for the Comparable Treasury Issue, expressed in each
case as a percentage of its principal amount, quoted in writing to the
Indenture Trustee by such Reference Treasury Dealer at 5:00 p.m., New York City
time, on the third business day preceding such redemption date.
DEFINITION OF REFERENCE TREASURY DEALER. "Reference Treasury Dealer" means
(1) the Quotation Agent and (2) any other primary U.S. Government securities
dealer selected by the Indenture Trustee after consultation with First Union.
DEFINITION OF CAPITAL TREATMENT EVENT. "Capital Treatment Event" means the
reasonable determination by First Union that as a result of:
o any amendment to or change, including any announced prospective change,
in the laws, or any rules or regulations under the laws, of the United
States or of any political subdivision of or in the United States, if
the amendment or change is effective on or after the original issue date
or
o any official or administrative pronouncement or action or any judicial
decision interpreting or applying such laws or regulations, if the
pronouncement, action or decision is announced on or after the original
issue date,
there is more than an insubstantial risk that First Union will not be entitled
to treat the liquidation amount of the Series A Capital Securities as "tier 1"
capital for purposes of the applicable Federal Reserve Board capital adequacy
guidelines as then in effect.
DEFINITION OF TAX EVENT. "Tax Event" means the receipt by First Union and
First Union Capital of an opinion of independent counsel, experienced in the
following matters, to the following effect:
As a result of any tax change, there is more than an insubstantial risk that
any of the following will occur:
(1) First Union Capital would be subject to U.S. federal income tax on income
received or accrued on the Series B Junior Subordinated Debentures;
(2) interest payable by First Union on the Series B Junior Subordinated
Debentures would not be deductible by First Union for U.S. federal income
tax purposes; or
(3) First Union Capital would be subject to more than a DE MINIMIS amount of
other taxes, duties or other government charges.
As used above, "tax change" means any of the following:
o any amendment to, or change, including any announced prospective change,
in the laws or any regulations under the laws of the United States or of
any political subdivision or taxing authority of or in the United
States; or
o any amendment to, or change in, an interpretation or application of such
laws or regulations.
PAYMENT OF ADDITIONAL INTEREST. The Subordinated Indenture provides that,
if a Tax Event described in items (1) or (3) of the definition of Tax Event
above has occurred and is continuing and First Union does not redeem the Series
B Junior
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Subordinated Debentures, First Union may be required to pay additional sums on
the Series B Junior Subordinated Debentures. These additional sums would be
those amounts necessary to ensure that distributions due and payable on the
Series A Capital Securities and Common Securities will not be reduced as a
result of any additional taxes, duties and other governmental charges to which
First Union Capital has become subject as a result of a Tax Event.
REDEMPTION PROCEDURES. The Property Trustee will give notice of any
redemption of Series A Capital Securities to the holders of Series A Capital
Securities not less than 30 nor more than 60 days before the redemption date,
unless the redemption results from acceleration of the maturity of the Series B
Subordinated Debentures and the Property Trustee cannot reasonably give this
notice during this period. In that case, the Property Trustee will give the
notice as soon as practicable.
Payment of the redemption price for any Series A Capital Securities will
be made against surrender of the certificates representing those Series A
Capital Securities, or, in the case of any Series A Capital Securities held in
book-entry form, in accordance with the applicable procedures of DTC. However,
any distributions that are payable on or before the redemption date will be
payable to the persons who are the holders of those Series A Capital Securities
on the record date for the distribution.
If the Property Trustee gives a notice of redemption, the Property Trustee
will deposit funds sufficient to pay the redemption price for all Series A
Capital Securities to be redeemed on that date to the extent the funds are
available to the Property Trustee. The Property Trustee, in the case of
book-entry Series A Capital Securities, or the Paying Agent, in the case of
non-book-entry Series A Capital Securities, will irrevocably deposit these
amounts with DTC by noon, New York City time, on the redemption date. If the
Property Trustee gives notice of redemption and deposits funds as required
under the Trust Agreement then upon the date of deposit all rights of the
holders of the Series A Capital Securities called for redemption will cease,
except the right of those holders to receive the redemption price, without
interest, and those Series A Capital Securities will cease to be outstanding.
If payment of the redemption price for any Series A Capital Securities called
for redemption is improperly withheld or refused and not paid either by First
Union Capital or by First Union under the Guarantee, or if notice of redemption
is not given as required, distributions on those Series A Capital Securities
will continue to accumulate from the original redemption date to the date the
redemption price is actually paid.
If First Union Capital redeems less than all the Series A Capital
Securities and Common Securities, the aggregate liquidation amount of Series A
Capital Securities and Common Securities to be redeemed will be allocated
proportionately between the outstanding Series A Capital Securities and the
outstanding Common Securities, based upon their respective aggregate
liquidation amounts. Not more than 60 days prior to the redemption date, the
Property Trustee will select the Series A Capital Securities to be redeemed
from among the outstanding Series A Capital Securities not previously called
for redemption. The Property Trustee may use any method of selection that it
deems to be fair and appropriate, including any method that involves the
redemption of a portion of the aggregate liquidation amount of any particular
holder's Series A Capital Securities.
DISTRIBUTION OF SERIES B JUNIOR SUBORDINATED DEBENTURES UPON TERMINATION OF
FIRST UNION CAPITAL
First Union will have the right to terminate First Union Capital at any
time and, after First Union Capital satisfies its liabilities to creditors,
cause the Series B Junior Subordinated Debentures to be distributed to the
holders of the Series A Capital Securities in liquidation of First Union
Capital. That right is optional and wholly within First Union's discretion.
Circumstances under which First Union may decide to exercise its right to
terminate First Union Capital could include:
o the occurrence of a Tax Event or a Capital Treatment Event;
o adverse tax consequences to First Union or First Union Capital that the
definition of a Tax Event does not cover because those consequences do
not result from an amendment or change described in that definition; and
o changes in the accounting applicable to the Series A Capital Securities.
After the date for any distribution of Series B Junior Subordinated
Debentures upon termination of First Union Capital:
o the Series A Capital Securities and the Guarantee will no longer be
considered outstanding;
o the securities depositary or its nominee, as the record holder of the
Series A Capital Securities, will receive a registered global
certificate or certificates representing the Series B Junior
Subordinated Debentures delivered upon the distribution; and
o any certificates representing Series A Capital Securities not held by
the securities depositary or its nominee will be deemed to represent
Series B Junior Subordinated Debentures.
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Those Series B Junior Subordinated Debentures will have:
o an aggregate principal amount equal to the aggregate liquidation amount
of those Series A Capital Securities;
o an interest rate identical to the rate at which cumulative cash
distributions are payable on those Series A Capital Securities; and
o accrued and unpaid interest equal to the accrued and unpaid
distributions on those Series A Capital Securities,
until the certificates are presented to First Union or its agent for transfer
or reissuance.
First Union has committed to the Federal Reserve Bank of Richmond that,
for so long as First Union (or an affiliate) is the owner of the Common
Securities, it will not exercise such right without having received the prior
approval of the Federal Reserve Board, if then so required under applicable
capital guidelines or policies of the Federal Reserve Board.
There can be no assurance as to the market prices for either the Series A
Capital Securities or the Series B Junior Subordinated Debentures that may be
distributed in exchange for the Series A Capital Securities if a termination
and liquidation of First Union Capital occurs. Accordingly, the Series A
Capital Securities that an investor may purchase, or the Series B Junior
Subordinated Debentures that the investor may receive if First Union Capital is
terminated or liquidated, may trade at a price less than the price paid by the
investor to purchase the Series A Capital Securities and/or less than the
market price of the Series A Capital Securities before the exchange.
BOOK-ENTRY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The Series A Capital Securities will be book-entry securities. Upon
issuance, all book-entry securities will be represented by one or more fully
registered global certificates. Each global certificate will be deposited with,
or on behalf of, The Depository Trust Company ("DTC"), a securities depositary,
and will be registered in the name of DTC or a nominee of DTC. DTC or its
nominee will thus be the only registered holder of those Series A Capital
Securities and will be considered the sole owner of the Series A Capital
Securities for purposes of the Trust Agreement.
Purchasers of Series A Capital Securities may only hold interests in the
global securities through DTC if they are participants in the DTC system.
Purchasers may also hold interests through a securities intermediary -- banks,
brokerage houses and other institutions that maintain securities accounts for
customers -- that has an account with DTC. DTC will maintain accounts showing
the Series A Capital Security holdings of its participants, and those
participants will in turn maintain accounts showing the Series A Capital
Security holdings of their customers. Some of those customers may themselves be
securities intermediaries holding Series A Capital Securities for their
customers. Thus, each beneficial owner of a book-entry Series A Capital
Security will hold that Series A Capital Security indirectly through a
hierarchy of intermediaries, with DTC at the "top" and the beneficial owner's
own securities intermediary at the "bottom."
The Series A Capital Securities of each beneficial owner of a book-entry
security will be evidenced solely by entries on the books of the beneficial
owner's securities intermediary. The actual purchaser of the Series A Capital
Securities will generally not be entitled to have the Series A Capital
Securities represented by the global securities registered in its name and will
not be considered the owner under the Trust Agreement. In most cases, a
beneficial owner will also not be able to obtain a paper certificate evidencing
the holder's ownership of Series A Capital Securities. The book-entry system
for holding Series A Capital Securities eliminates the need for physical
movement of certificates and is the system through which most publicly traded
common stock is held in the United States. However, the laws of some
jurisdictions require some purchasers of securities to take physical delivery
of their securities in definitive form. These laws may impair the ability to
transfer book-entry securities.
A beneficial owner of book-entry Series A Capital Securities represented
by a global security will receive definitive (paper) Series A Capital
Securities only if:
o DTC is unwilling or unable to continue as depositary for such global
security and First Union is unable to find a qualified replacement for
DTC within 90 days; or
o First Union in its sole discretion decides to terminate the book-entry
system with respect to the Series A Capital Securities.
Definitive Series A Capital Securities in registered form will have the
same terms and be in an equal aggregate principal amount as the equivalent
book-entry Series A Capital Securities, and will be in denominations of $1,000
or integral multiples of $1,000. Definitive Series A Capital Securities will be
registered in the name or names of the person or persons that
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DTC specifies in a written instruction to the registrar of the Series A Capital
Securities. DTC may base its written instruction upon directions it receives
from its participants.
In this prospectus supplement, for book-entry Series A Capital Securities,
references to actions taken by holders of Series A Capital Securities will mean
actions taken by DTC upon instructions from its participants, and references to
payments and notices of redemption to holders of Series A Capital Securities
will mean payments and notices of redemption to DTC or its nominee as the
registered holder of the Series A Capital Securities for distribution to
participants in accordance with DTC's procedures.
DTC is a limited purpose trust company organized under the laws of the
State of New York, 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 under section 17A of the Securities Exchange Act
of 1934. The rules applicable to DTC and its participants are on file with the
Securities and Exchange Commission.
DTC has advised First Union that DTC's management is aware that some
computer applications, systems and the like for processing data that are
dependent upon calendar dates, including dates before, on, and after January 1,
2000, may encounter "Year 2000" problems. DTC has informed its participants and
other members of the financial community that it has developed and is
implementing a program so that its systems, as they relate to the timely
payment of distributions (including principal and interest payments) to
security holders, book-entry deliveries and settlement of trades within DTC,
continue to function appropriately. This program includes a technical
assessment and a remediation plan, each of which is complete. Additionally,
DTC's plan includes a testing phase, which is expected to be completed within
appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as DTC's participants, third-party vendors from whom DTC licenses software
and hardware, and third-party vendors on whom DTC relies for information or the
provision of services, including telecommunication and electrical utility
service providers, among others. DTC has informed its participants and other
members of the financial community that it is contacting (and will continue to
contact) third-party vendors from whom DTC acquires services to: (1) impress
upon them the importance of such services being Year 2000 compliant, and (2)
determine the extent of their efforts for Year 2000 remediation (and, as
appropriate, testing) of their services. In addition, DTC is in the process of
developing such contingency plans as it deems appropriate.
According to DTC, the information in the preceding two paragraphs with
respect to DTC has been provided to members of the financial community for
informational purposes only and is not intended to serve as a representation,
warranty or contract modification of any kind.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that First Union and First Union Capital believe
to be reliable, but neither First Union nor First Union Capital takes any
responsibility for its accuracy. First Union and First Union Capital have no
responsibility for the performance by DTC br its participants of their
respective obligations, including obligations that they have under the rules
and procedures that govern their operations.
DESCRIPTION OF THE SERIES B JUNIOR SUBORDINATED DEBENTURES
The following description of the Series B Junior Subordinated Debentures
is only a summary and is not intended to be comprehensive. The description
should be read together with the description of the general terms and
provisions of the Junior Subordinated Debentures provided under the caption
"Description of Junior Subordinated Debentures" in the accompanying prospectus.
GENERAL
First Union will issue the Series B Junior Subordinated Debentures as a
Series B of Subordinated Debentures under the Subordinated Indenture. The
Series B Junior Subordinated Debentures will be limited in principal amount to
$309,279,000, which is the liquidation amount of the Trust Securities.
The Series B Junior Subordinated Debentures will mature and become due and
payable, together with any accrued and unpaid interest, including any
additional interest (as defined below), on November 15, 2029.
The Series B Junior Subordinated Debentures will rank equal in priority
with any other series of junior subordinated debentures issued under the
Subordinated Indenture.
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The Series B Junior Subordinated Debentures will not be subject to any
sinking fund provision.
REDEMPTION
First Union will have the option to redeem the Series B Junior
Subordinated Debentures before the stated maturity as follows:
(1) in whole at any time or in part from time to time, PROVIDED that no partial
redemption may occur during an extension period; or
(2) in whole at any time, within 90 days after the occurrence of a Tax Event or
a Capital Treatment Event.
The definitions of "Tax Event" and "Capital Treatment Event" are set forth
in "Description of the Series A Capital Securities -- Redemption."
If First Union redeems any Series B Junior Subordinated Debentures, First
Union will do so at the relevant redemption prices set forth in "Description of
Series A Capital Securities -- Redemption -- Repayment and Redemption of Series
B Junior Subordinated Debentures." Unless First Union defaults in payment of
the redemption price, interest will cease to accrue on the Series B Junior
Subordinated Debentures called for redemption on and after the redemption date.
First Union may not redeem Series B Junior Subordinated Debentures on a
redemption date that would occur during an extension period unless First Union
redeems all of the outstanding Series B Junior Subordinated Debentures.
First Union must give notice of any redemption to the holders of the
Series B Junior Subordinated Debentures not less than 30 days nor more than 60
days before the redemption date. In all other respects, the procedures for
redeeming the Series B Junior Subordinated Debentures will be similar to those
for redeeming the Series A Capital Securities. See "Description of the Series A
Capital Securities -- Redemption."
PAYMENT OF ADDITIONAL INTEREST. As described under "Description of the
Series A Capital Securities -- Redemption -- Payment of Additional Interest,"
if a Tax Event has occurred and is continuing, First Union may be obligated to
pay additional interest on the Series B Junior Subordinated Debentures.
If First Union redeems the Series B Junior Subordinated Debentures upon
not less than 30 nor more than 60 days' notice after the occurrence of a
Special Event, such Series B Junior Subordinated Debentures will be redeemed at
a redemption price equal to the principal amount to be redeemed plus any
accrued and unpaid interest, including any additonal interest, to the
redemption date.
INTEREST
The Series B Junior Subordinated Debentures will bear interest at a yearly
rate of 7.95% from the original issue date. Interest on the Series B Junior
Subordinated Debentures will be payable semi-annually in arrears on November 15
and May 15 of each year, commencing on May 15, 2000, unless the applicable
interest period is extended. Interest will be payable to the person or persons
in whose name the Series B Junior Subordinated Debentures are registered at the
close of business on the 15th calendar day before the relevant interest payment
date, except that interest payable on the maturity date or on a redemption date
will be paid to the person to whom principal is payable. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
If any date on which interest is payable on the Series B Junior
Subordinated Debentures is not a business day, the interest payable on that
date will be paid on the next day that is a business day (without any interest
or other payment due to the delay), except that if that business day falls in
the next calendar year, interest will be paid on the immediately preceding
business day.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
First Union will have the right, at any time and from time to time, to
defer interest payments on the Series B Junior Subordinated Debentures by
extending the interest payment period for up to 10 consecutive semi-annual
periods, but not beyond the maturity date. When the extension period has ended,
First Union will pay all accrued and unpaid interest, including any additional
interest, on the next interest payment date. Before any extension period ends,
First Union may further defer interest payments by extending the interest
payment period. However, an extension period, together with any previous and
further extensions, may not exceed 10 consecutive semi-annual periods. During
an extension period, First Union will have the right to make partial payments
of interest on any interest payment date. After an extension period terminates
and all amounts due are paid, First Union may select a new extension period,
subject to the previously mentioned requirements.
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First Union has no present intention of exercising its right to defer
payments by extending the interest payment period on the Series B Junior
Subordinated Debentures.
First Union will notify the holder or holders of the Series B Junior
Subordinated Debentures and the Indenture Trustee of its selection or extension
of an extension period at least one business day before the earlier of:
o the record date for the interest payment date on which the extension
period is to begin or the record date for the interest payment date on
which the extension period that is being extended would otherwise
terminate; or
o the date that First Union or First Union Capital is required to give
notice to the New York Stock Exchange or other self-regulatory
organization of the record date or the date those distributions are
payable.
BOOK-ENTRY ISSUANCE
First Union expects that the Series B Junior Subordinated Debentures will
be issued in the form of one or more global certificates registered in the name
of the securities depositary or its nominee if the Series B Junior Subordinated
Debentures are distributed to holders of Series A Capital Securities in
connection with the voluntary or involuntary dissolution, winding-up or
liquidation of First Union Capital. The procedures applicable to the transfer
and payment of the Series B Junior Subordinated Debentures are expected to be
substantially similar to those applicable to the transfer and payment of the
Series A Capital Securities.
RELATIONSHIP AMONG THE SERIES A CAPITAL SECURITIES,
THE SERIES B JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
As long as First Union makes interest and other payments on the Series B
Junior Subordinated Debentures when due, those payments will be sufficient to
cover distributions and payments due on the Series A Capital Securities and the
Common Securities. This is the case primarily because:
o the total principal amount of the Series B Junior Subordinated
Debentures will be equal to the total liquidation amount of the Trust
Securities;
o the interest rate and interest and other payment dates on the Series B
Junior Subordinated Debentures will correspond to the distribution rate
and distribution and other payment dates for the Series A Capital
Securities;
o the Agreement as to Expenses and Liabilities between First Union and
First Union Capital provides that First Union will pay all costs and
expenses of First Union Capital; and
o the Trust Agreement provides that the Securities Trustees will not
permit First Union Capital to engage in any activity that is
inconsistent with the purposes of First Union Capital.
If First Union does not make the required payments on the Series B Junior
Subordinated Debentures, it is expected that First Union Capital will not have
sufficient funds to make the related distributions on the Series A Capital
Securities. First Union will guarantee payments of distributions and other
payments due on the Series A Capital Securities but only to the extent that
First Union Capital has funds legally and immediately available for the payment
of those distributions and other payments.
If an event of default under the Subordinated Indenture with respect to
the Series B Junior Subordinated Debentures occurs and is continuing, then:
o the holders of Series A Capital Securities will rely on the Property
Trustee, as the holder of the Series B Junior Subordinated Debentures,
to enforce its rights against First Union; and
o the holders of a majority of the Series A Capital Securities will have
the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Property Trustee or to direct
the exercise of any power of the Property Trustee under the Trust
Agreement, including the right to direct the Property Trustee to
exercise the remedies available to it as a holder of the Series B Junior
Subordinated Debentures.
If the Property Trustee fails to enforce its rights under the Series B
Junior Subordinated Debentures, a holder of Series A Capital Securities may, to
the extent legally permitted, institute a legal proceeding against First Union
to enforce its rights under the Trust Agreement without first instituting a
legal proceeding against the Property Trustee, First Union Capital or any other
person or entity. Moreover, a holder of Series A Capital Securities may
institute a legal proceeding directly against First Union to enforce payment to
that holder of principal or interest on Series B Junior Subordinated Debentures
having a
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principal amount equal to the liquidation amount of the Series A Capital
Securities of that holder on or after the due dates specified in the Series B
Junior Subordinated Debentures. The Trust Agreement also provides a mechanism
whereby the holders of Series A Capital Securities may appoint a substitute
Property Trustee if an event of default under the Subordinated Indenture with
respect to the Series B Junior Subordinated Debentures occurs and is
continuing.
The Guarantee provides a mechanism whereby the holders of the Series A
Capital Securities may direct the Guarantee Trustee to enforce its rights under
the Guarantee if First Union fails to make payments under the Guarantee. In
addition, any holder of Series A Capital Securities may institute a legal
proceeding directly against First Union to enforce the Guarantee Trustee's
rights under the Guarantee without first instituting a legal proceeding against
the Guarantee Trustee or any other person or entity.
The Guarantee, the Subordinated Indenture, the Series B Junior
Subordinated Debentures, the Trust Agreement and the Agreement as to Expenses
and Liabilities provide a full and unconditional guarantee, subject to certain
subordination provisions, by First Union of the payments due on the Series A
Capital Securities.
The holders of Series A Capital Securities will be entitled to receive the
liquidation distribution with respect to those Series A Capital Securities in
cash, out of assets legally available for distribution to those holders, upon
any voluntary or involuntary dissolution, winding-up or termination of First
Union Capital unless the Series B Junior Subordinated Debentures are
distributed in connection with those events. Upon any voluntary or involuntary
liquidation or bankruptcy of First Union, the Property Trustee, as holder of
the Series B Junior Subordinated Debentures, would be a subordinated creditor
of First Union, subordinated in right of payment to all Senior Debt of First
Union and subordinate debt senior to the Series B Junior Subordinated
Debentures, but entitled to receive payment in full of principal and interest
before any of First Union's stockholders receive payments or distributions.
Because First Union is guarantor under the Guarantee and has agreed to pay all
costs, expenses and liabilities of First Union Capital under the Agreement as
to Expenses and Liabilities, other than First Union Capital's obligations to
holders of the Series A Capital Securities, the positions of a holder of Series
A Capital Securities and a holder of Series B Junior Subordinated Debentures
relative to other creditors and First Union's stockholders would be
substantially the same in the event of the liquidation or bankruptcy of First
Union.
A default or event of default under any Senior Debt is not a default or an
event of default under the Subordinated Indenture. However, if a default occurs
with respect to Senior Debt or if Senior Debt is accelerated, the subordination
provisions of the Series B Junior Subordinated Debentures provide that no
payments may be made in respect of the Series B Junior Subordinated Debentures:
o until that Senior Debt has been paid in full, in the case of any payment
by, or distribution of assets of, First Union to creditors upon a
dissolution, winding-up, liquidation or reorganization of First Union;
or
o until all amounts due on that Senior Debt have been paid, in the case of
a payment default beyond any grace period under that Senior Debt or the
acceleration of that Senior Debt because of a default with respect to
that Senior Debt.
For a description of First Union's Senior Debt, see "Description of Junior
Subordinated Debentures--Subordination" in the accompanying prospectus.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of the material U.S. federal income tax
consequences to the purchase, ownership and disposition of Series A Capital
Securities only addresses the tax consequences to a U.S. holder that acquires
Series A Capital Securities on their original issue date at their original
offering price and holds the Series A Capital Securities as capital assets for
tax purposes. You are a U.S. holder if you are a beneficial owner of a Series A
Capital Security and you are:
o a citizen or resident of the United States;
o a domestic corporation;
o an estate whose income is subject to U.S. federal income tax regardless
of its source; or
o a trust if a U.S. court can exercise primary supervision over the
trust's administration and one or more U.S. persons have authority to
control all substantial decisions of the trust.
This summary does not apply to you if you are a member of a class of
holders subject to special rules, such as:
o a dealer in securities or currencies;
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o a trader in securities that elects to use a mark-to-market method of
accounting;
o a bank;
o an insurance company;
o a thrift institution;
o a regulated investment company;
o a real estate investment trust;
o a tax-exempt organization;
o a person that holds Series A Capital Securities that are a hedge or that
are hedged against interest rate or currency risks;
o a person that holds Series A Capital Securities as part of a straddle or
conversion transaction for tax purposes; or
o a person whose functional currency is not the U.S. dollar.
The statements of law or legal conclusion set forth in this discussion
constitute the opinion of Sullivan & Cromwell, special tax counsel to First
Union and First Union Capital. This summary is based upon the U.S. Internal
Revenue Code of 1986, as amended, its legislative history, existing and
proposed regulations under the Internal Revenue Code, published rulings and
court decisions, all as currently in effect. These laws are subject to change,
possibly on a retroactive basis. The authorities on which this discussion is
based are subject to various interpretations, and it is therefore possible that
the federal income tax treatment of the purchase, ownership and disposition of
Series A Capital Securities may differ from the treatment described below.
PLEASE CONSULT YOUR OWN TAX ADVISOR CONCERNING THE CONSEQUENCES OF OWNING
THE SERIES A CAPITAL SECURITIES IN YOUR PARTICULAR CIRCUMSTANCES UNDER THE
INTERNAL REVENUE CODE AND THE LAWS OF ANY OTHER TAXING JURISDICTION.
CLASSIFICATION OF FIRST UNION CAPITAL
Under current law and assuming full compliance with the terms of the Trust
Agreement and the Subordinated Indenture, First Union Capital will not be
taxable as a corporation for U.S. federal income tax purposes. As a result, you
will be required to include in your gross income your proportional share of the
interest income, including original issue discount, paid or accrued on the
Series B Junior Subordinated Debentures, whether or not First Union Capital
actually distributes cash to you.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under Treasury regulations, an issuer and the Internal Revenue Service
will ignore a "remote" contingency that stated interest will not be timely paid
when determining whether a Series B Junior Subordinated Debenture is issued
with original issue discount, "OID." First Union believes that the likelihood
of exercising its option to defer interest payments is remote because it would
be prohibited from making certain distributions on its capital stock and
payments on its indebtedness if it exercises that option. Accordingly, First
Union believes that the Series B Junior Debentures will not be considered to be
issued with OID at the time of their original issuance.
Under these regulations, if First Union were to exercise its option to
defer any payment of interest, the Series B Junior Subordinated Debentures
would at that time be treated as issued with OID, and the Series B Junior
Subordinated Debentures would thereafter be treated as having OID as long as
the Series B Junior Subordinated Debentures remained outstanding. In that
event, all of your taxable interest income on the Series B Junior Subordinated
Debentures would be accounted for as OID on an economic accrual basis
regardless of your method of tax accounting, and actual distributions of stated
interest would not be reported as taxable income. Consequently, you would be
required to include OID in gross income even though we would not make any
actual cash payments during a deferral period.
Because income on the Series A Capital Securities will constitute interest
or OID, corporate U.S. holders of the Series A Capital Securities will not be
entitled to a dividends-received deduction for any income taken into account on
the Series A Capital Securities.
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In the rest of this discussion, First Union assumes that unless and until
it exercises the option to defer any payment of interest, the Series B Junior
Subordinated Debentures will not be treated as issued with OID, and whenever
First Union uses the term interest, it also includes income in the form of OID.
DISTRIBUTION OF SERIES B JUNIOR SUBORDINATED DEBENTURES TO HOLDERS OF SERIES A
CAPITAL SECURITIES UPON LIQUIDATION OF FIRST UNION CAPITAL
If First Union Capital distributes the Series B Junior Subordinated
Debentures as described under the caption "Description of Series A Capital
Securities -- Distribution of Series B Junior Subordinated Debentures upon
Termination of First Union Capital," you will receive directly your
proportional share of the Series B Junior Subordinated Debentures previously
held indirectly through First Union Capital. Under current law, you will not be
taxed on the distribution and your holding period and aggregate tax basis in
your Series B Junior Subordinated Debentures will be equal to the holding
period and aggregate tax basis you had in your Series A Capital Securities
before the distribution. If, however, First Union Capital were to become taxed
on the income received or accrued on the Series B Junior Subordinated
Debentures due to a Tax Event, First Union Capital might be taxed on a
distribution of Series B Junior Subordinated Debentures to you, and you might
recognize gain or loss as if you had exchanged your Series A Capital Securities
for the Series B Junior Subordinated Debentures you received upon the
liquidation of First Union Capital. You will include interest in income in
respect of Series B Junior Subordinated Debentures received from First Union
Capital in the manner described above under " -- Interest Income and Original
Issue Discount".
SALE OR REDEMPTION OF SERIES A CAPITAL SECURITIES
If you sell your Series A Capital Securities, including through a
redemption for cash, you will recognize gain or loss equal to the difference
between your adjusted tax basis in your Series A Capital Securities and the
amount you realize on the sale of your Series A Capital Securities. This gain
or loss generally will be a capital gain or loss, except to the extent any
amount that you realize is treated as a payment of accrued interest on your
proportional share of the Series B Junior Subordinated Debentures required to
be included in income. Capital gain of a non-corporate U.S. holder is generally
taxed at a maximum rate of 20% where the property is held for more than one
year.
Assuming that First Union does not exercise its option to defer payment of
interest on the Series B Junior Subordinated Debentures, your adjusted tax
basis in your Series A Capital Securities generally will be the price you paid
for them. If the Series B Junior Subordinated Debentures are deemed to be
issued with OID as a result of an actual deferral of interest payments, your
adjusted tax basis in your Series A Capital Securities generally will be the
price you paid for the Series A Capital Securities, increased by OID previously
includible in your gross income to the date of disposition and decreased by
distributions or other payments you received on your Series A Capital
Securities since and including the date of the first deferral period.
If First Union exercises its option to defer any payment of interest on
the Series B Junior Subordinated Debentures, your Series A Capital Securities
may trade at a price that does not accurately reflect the value of accrued but
unpaid interest with respect to the underlying Series B Junior Subordinated
Debentures. If you sell your Series A Capital Securities before the record date
for the payment of distributions, then you will not receive payment of a
distribution for the period before the sale. However, you will be required to
include accrued but unpaid interest on the Series B Junior Subordinated
Debentures through the date of the sale as ordinary income for U.S. federal
income tax purposes and to add the amount of accrued but unpaid interest to
your tax basis in the Series A Capital Securities. Your increased tax basis in
the Series A Capital Securities will decrease the amount of any capital gain,
or increase the amount of any capital loss, that you may have otherwise
realized on the sale. In general, an individual taxpayer may only offset $3,000
of capital losses against regular income during any year.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
The amount of interest income paid and OID accrued on your Series A
Capital Securities will be reported to the Internal Revenue Service unless you
are a corporation or other exempt U.S. holder. Backup withholding at a rate of
31% will apply to payments of interest to you unless you are an exempt U.S.
holder or you furnish your taxpayer identification number in the manner
prescribed in applicable regulations, certify that such number is correct,
certify as to no loss of exemption from backup withholding and meet certain
other conditions.
Payment of the proceeds from the disposition of Series A Capital
Securities to or through the U.S. office of a broker is subject to information
reporting and backup withholding unless you establish an exemption from
information reporting and backup withholding.
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Any amounts withheld from you under the backup withholding rules will be
allowed as a refund or a credit against your U.S. federal income tax liability,
provided the required information is furnished to the Internal Revenue Service.
It is anticipated that income on the Series A Capital Securities will be
reported to the Internal Revenue Service and to you on Form 1099 by January 31
following each calendar year.
ERISA CONSIDERATIONS
If you are a fiduciary of a pension, profit-sharing or other employee
benefit plan subject to the Employee Retirement Income Security Act ("ERISA"),
you should review the fiduciary standards of ERISA and the plan's particular
circumstances before deciding to invest in the Series A Capital Securities. You
should consider whether the investment would satisfy the prudence and
diversification requirements of ERISA and whether the investment would be
consistent with the terms of the plan and the other agreements which apply to
plan investments.
A fiduciary of a plan subject to ERISA, as well as a person investing on
behalf of an individual retirement account or a pension or profit sharing plan
for one or more self-employed persons, should also consider whether an
investment in the capital securities could result in a prohibited transaction.
ERISA and the Internal Revenue Code prohibit plans and individual retirement
accounts from engaging in certain transactions involving plan assets with
persons who are called parties in interest under ERISA or disqualified persons
under the Internal Revenue Code with respect to the plan or individual
retirement account. A violation of these rules may result in a substantial
excise tax under the Internal Revenue Code and other liabilities under ERISA.
Employee benefit plans which are governmental plans, foreign plans or church
plans generally are not subject to the prohibited transaction rules or the
fiduciary standards of ERISA.
The assets of First Union Capital would be treated as plan assets for
purposes of the prohibited transaction rules under a U.S. Department of Labor
regulation if plans and individual retirement accounts purchase capital
securities, unless an exception under the regulation applies. The only
exception in the regulation that could apply to First Union Capital requires
that after each purchase of capital securities in First Union Capital less than
25% of the total value of the securities is held by:
(1) plans subject to ERISA, individual retirement accounts and plans for
self-employed persons;
(2) other employee benefit plans not subject to ERISA, such as governmental,
church and foreign plans; and
(3) entities which are considered to hold assets of a plan subject to ERISA
according to the regulation.
The plans, individual retirement accounts and entities described in
clauses (1), (2) and (3) are referred to as "benefit plan investors." The
underwriters cannot be certain that benefit plan investors will hold less than
25% of the total value of capital securities when the initial offering is
completed. After that time, when a person sells capital securities, no one will
review the securities held by benefit plan investors to determine if the
exception applies.
Some of the transactions involving First Union Capital could be treated as
prohibited transactions if First Union Capital assets were considered to be
plan assets. For example, if First Union is a party in interest or a
disqualified person with respect to a plan or individual retirement account
which buys capital securities, either directly or because First Union owns
banking or other subsidiaries, extensions of credit from First Union and First
Union Capital would likely be prohibited transactions unless an administrative
exemption issued by the Department of Labor applies.
The Department of Labor has issued five class exemptions that may apply to
exempt transactions resulting from the purchase or holding of the capital
securities. Those class exemptions are:
o 96-23, for transactions determined by in-house asset managers;
o 95-60, for transactions involving insurance company general accounts;
o 91-38, for transactions involving bank collective investment funds;
o 90-1, for transactions involving insurance company separate accounts;
and
o 84-14, for transactions determined by independent qualified asset
managers.
Because the Series A Capital Securities may be treated as equity interest
in First Union Capital for purposes of applying the prohibited transaction
rules, the Series A Capital Securities may not be purchased or held by any
benefit plan investor unless such purchaser or holder can use one of the above
class exemptions. By purchasing or holding capital securities or any interest
in the Series A Capital Securities, any purchaser or holder is deemed to have
represented that it either:
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(1) is not a benefit plan investor; or
(2) can use one of the above class exemptions with respect to its purchase or
holding.
These rules are very complicated and the penalties that may be imposed
upon persons involved in prohibited transactions can be substantial. This makes
it very important that fiduciaries or other persons considering purchasing the
capital securities on behalf of a benefit plan investor consult with their
lawyer regarding what could happen if the assets of First Union Capital were
deemed to be plan assets and if the investor can use one of the above class
exemptions or another applicable exemption.
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UNDERWRITING
Subject to the terms and conditions of an underwriting agreement, First
Union Capital has agreed to sell to each of the underwriters named below, and
each of those underwriters has severally agreed to purchase, the number of
Series A Capital Securities specified opposite its name. In the underwriting
agreement, the underwriters have agreed, subject to certain conditions, to
purchase all of the Series A Capital Securities if any of the Series A Capital
Securities are purchased. First Union Securities, Inc., an affiliate of First
Union, is acting as representative for the underwriters in the offering.
<TABLE>
<CAPTION>
AMOUNT OF
SERIES A
CAPITAL
UNDERWRITER SECURITIES
- ----------- -----------
<S> <C>
First Union Securities, Inc. ............ $237,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated .......................... 21,000,000
Morgan Stanley & Co., Incorporated ...... 21,000,000
Salomon Smith Barney Inc. ............... 21,000,000
------------
Total ................................... $300,000,000
============
</TABLE>
The underwriters have advised First Union and First Union Capital that
they propose to offer the Series A Capital Securities:
o in part directly to the public at the initial public offering price that
is stated on the cover page of this prospectus supplement; and
o in part to certain securities dealers at that price less a concession
not in excess of $6.00 per Series A Capital Security.
The underwriters may allow, and those dealers may re-allow, a concession
not in excess of $3.00 per Series A Capital Security to certain other dealers.
The representative may vary the initial public offering price and other selling
terms from time to time after the Series A Capital Securities are released for
sale to the public.
There has been no public market for the Series A Capital Securities before
this offering.
The underwriters may purchase and sell the Series A Capital Securities in
the open market in connection with the offering. Those transactions may include
over-allotment and stabilizing transactions and purchases to cover syndicate
short positions created 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 Series A Capital Securities.
Syndicate short positions involve the sale by the underwriters of a greater
number of Series A Capital Securities than such underwriter is required to
purchase from First Union Capital in the offering. The underwriters also may
impose a penalty bid, by which selling concessions allowed to syndicate members
or other broker-dealers with respect to the Series A Capital Securities sold
for their account in the offering may be reclaimed by the syndicate if those
Series A Capital Securities are repurchased by the syndicate in stabilizing or
covering transactions. These activities may stabilize, maintain or otherwise
affect the market price of the Series A Capital Securities, which may be higher
than the price that might otherwise prevail in the open market. These
activities, if commenced, may be discontinued at any time. These transactions
may be effected in the over-the-counter market or otherwise.
This offering is being made in compliance with Rule 2810 of the Conduct
Rules of the National Association of Securities Dealers, Inc. Offers and sales
of the Series A Capital Securities will be made only to (i) "qualified
institutional buyers," as defined in Rule 144A under the Securities Act; (ii)
institutional "accredited investors", as defined in Rule 501(a)(1), (2), (3)
and (7) of Regulation D under the Securities Act or (iii) sophisticated
individual investors who understand the structure of the securities and merits
and risks of investment in the Series A Capital Securities. The underwriters
may not confirm sales to any accounts over which they exercise discretionary
authority without the prior specific written approval of the transaction by the
customer.
First Union estimates that its expenses in connection with this offering,
excluding underwriting discounts and commissions, will be approximately
$250,000.
First Union and First Union Capital have agreed to indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act.
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The Series A Capital Securities are a new issue of securities with no
established trading market. No assurance can be given as to the liquidity of
the trading market for the Series A Capital Securities.
First Union has been advised by each underwriter that each such
underwriter intends to make a market in the Series A Capital Securities but is
not obligated to do so and may discontinue market making at any time without
notice.
First Union Securities, Inc. is an affiliate of First Union and First
Union Capital and will be participating in the distribution of the Series A
Capital Securities. First Union Securities, Inc., as an affiliate, can use this
prospectus supplement and the attached prospectus for offers and sales related
to market-making transactions in the Series A Capital Securities effected from
time to time after the commencement of the offering to which this prospectus
supplement and the attached prospectus relate. First Union Securities, Inc. may
act as principal or agent in such transactions, including as agent for the
counterparty when acting as principal or as agent for both counterparties.
First Union Securities, Inc. may receive compensation in the form of discounts
and commissions, including from both counterparties when it acts as agent for
both. These sales will be made at prevailing market prices at the time of sale,
at prices related thereto or at negotiated prices.
From time to time certain of the underwriters engage in transactions with
First Union in the ordinary course of business and certain of the underwriters
have performed investment banking services for First Union in the last two
years and have received fees for these services.
VALIDITY OF THE SECURITIES
Certain matters of Delaware law relating to the validity of the Series A
Capital Securities, the enforceability of the Trust Agreement and the creation
of First Union Capital will be passed upon by Richards, Layton & Finger, PA,
Wilmington, Delaware, special Delaware counsel to First Union and First Union
Capital and counsel to Wilmington Trust Company. The validity of the Guarantee
and the Series B Junior Subordinated Debentures will be passed upon for First
Union by Kent S. Hathaway, Esq., Senior Vice President and Deputy General
Counsel of First Union, and for the underwriters by Sullivan & Cromwell, New
York, New York. Mr. Hathaway will rely upon the opinion of Richards, Layton &
Finger PA as to matters of Delaware law. Sullivan & Cromwell will rely upon the
opinion of Mr. Hathaway as to matters of North Carolina law; and Mr. Hathaway
will rely upon the opinion of Sullivan & Cromwell as to matters of New York
law. Certain federal income tax matters related to the offering of the Series A
Capital Securities have been passed upon for First Union by Sullivan &
Cromwell. Mr. Hathaway is a stockholder of First Union and holds options to
purchase additional shares of First Union's common stock. Sullivan & Cromwell
regularly performs legal services for First Union and its subsidiaries. Members
of Sullivan & Cromwell performing these legal services own shares of First
Union's common stock.
S-27
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$500,000,000
FIRST UNION CORPORATION
JUNIOR SUBORDINATED DEFERRABLE
INTEREST DEBENTURES
---------------
FIRST UNION CAPITAL I
FIRST UNION CAPITAL II
FIRST UNION CAPITAL III
PREFERRED SECURITIES
GUARANTEED, TO THE EXTENT DESCRIBED HEREIN, BY
FIRST UNION CORPORATION
---------------
First Union Corporation, a North Carolina corporation (the "Corporation"),
may from time to time offer in one or more series or issuances its junior
subordinated deferrable interest debentures (the "Junior Subordinated
Debentures"). The Junior Subordinated Debentures will be unsecured and
subordinate and junior in right of payment to all Senior Debt (as defined
herein) of the Corporation. See "Description of Junior Subordinated Debentures
- -- Subordination". If provided in an accompanying Prospectus Supplement, the
Corporation will have the right to defer payments of interest on any series of
Junior Subordinated Debentures by extending the interest payment period thereon
at any time or from time to time for up to such number of consecutive interest
payment periods (which shall not extend beyond the Stated Maturity (as defined
herein) of the Junior Subordinated Debentures) with respect to each deferral
period as may be specified in such Prospectus Supplement (each, an "Extension
Period"). See "Description of Junior Subordinated Debentures -- Option to
Extend Interest Payment Date".
First Union Capital I, First Union Capital II and First Union Capital III,
each a statutory business trust created under the laws of the State of Delaware
(each, an "Issuer," and collectively, the "Issuers"), may severally offer, from
time to time, preferred securities ("Preferred Securities") representing
preferred undivided beneficial interests in the assets of such Issuer. The
Corporation will be the owner of the common securities (the "Common Securities"
and, together with the Preferred Securities, the "Trust Securities")
representing common undivided beneficial interests in the assets of such
Issuer. The payment of periodic cash distributions ("Distributions") with
respect to the Preferred Securities of each Issuer and payments on liquidation
or redemption with respect to such Preferred Securities, in each case out of
funds held by such Issuer, are each fully and unconditionally guaranteed by the
Corporation to the extent described herein (each, a "Guarantee"). See
"Description of Guarantees". The obligations of the Corporation under each
Guarantee will be subordinate and junior in right
(CONTINUED ON NEXT PAGE)
---------------
THESE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
---------------
The date of this Prospectus is December 31, 1996.
<PAGE>
(COVER PAGE CONTINUED)
of payment to all Senior Debt of the Corporation. Concurrently with the
issuance by an Issuer of its Preferred Securities, such Issuer will invest the
proceeds thereof and any contributions made in respect of the Common Securities
in a corresponding series of the Corporation's Junior Subordinated Debentures
(the "Corresponding Junior Subordinated Debentures") with terms corresponding
to the terms of that Issuer's Preferred Securities (the "Related Preferred
Securities"). The Corresponding Junior Subordinated Debentures will be the sole
asset of each Issuer, and payments under the Corresponding Junior Subordinated
Debentures will be the only revenue of each Issuer. If provided in an
accompanying Prospectus Supplement, the Corporation may redeem the
Corresponding Junior Subordinated Debentures (and cause the redemption of the
Related Preferred Securities) or may terminate each Issuer and cause the
Corresponding Junior Subordinated Debentures to be distributed to the holders
of the Related Preferred Securities in exchange therefor. See "Description of
Preferred Securities -- Liquidation Distribution Upon Termination".
Holders of the Preferred Securities will be entitled to receive
preferential cumulative cash Distributions accumulating from the date of
original issuance and payable periodically as specified in an accompanying
Prospectus Supplement. If provided in an accompanying Prospectus Supplement,
the Corporation will have the right to defer payments of interest on any series
of Corresponding Junior Subordinated Debentures by extending the interest
payment period thereon at any time or from time to time for one or more
Extension Periods (which shall not extend beyond the Stated Maturity of the
Corresponding Junior Subordinated Debentures). If interest payments are so
deferred, Distributions on the Related Preferred Securities will also be
deferred and the Corporation will not be permitted, subject to certain
exceptions set forth herein, to declare or to pay any cash distributions with
respect to the Corporation's capital stock or debt securities that rank PARI
PASSU with or junior to the Corresponding Junior Subordinated Debentures.
During an Extension Period, Distributions will continue to accumulate (and the
Preferred Securities will accumulate additional Distributions thereon at the
rate per annum set forth in the related Prospectus Supplement). See
"Description of Preferred Securities -- Distributions".
Taken together, with respect to a series of Preferred Securities, the
Corporation's obligations under the Corresponding Junior Subordinated
Debentures, the Indenture, the applicable Trust Agreement, the applicable
Expense Agreement and the applicable Guarantee (each as defined herein), in the
aggregate, provide a full and unconditional guarantee of payment of
Distributions and other amounts due on such series of Preferred Securities. See
"Relationship Among Preferred Securities, Corresponding Junior Subordinated
Debentures and Guarantees -- Full and Unconditional Guarantee".
The Junior Subordinated Debentures and Preferred Securities may be offered
in amounts, at prices and on terms to be determined at the time of offering;
provided, however, that the aggregate initial public offering price of all
Preferred Securities (including the Corresponding Junior Subordinated
Debentures) issued pursuant to the Registration Statement (as defined herein)
of which this Prospectus forms a part shall not exceed $500,000,000. Certain
specific terms of the Junior Subordinated Debentures or Preferred Securities in
respect of which this Prospectus is being delivered will be described in an
accompanying Prospectus Supplement, including without limitation and where
applicable and to the extent not set forth herein, (i) in the case of Junior
Subordinated Debentures, the specific designation, aggregate principal amount,
denominations, Stated Maturity (including any provisions for the shortening or
extension thereof), interest payment dates, interest rate (which may be fixed
or variable) or method of calculating interest, if any, applicable Extension
Period or interest deferral terms, if any, place or places where principal,
premium, if any, and interest, if any, will be payable, any terms of
redemption, any sinking fund provisions, terms for any conversion or exchange
into other securities, initial offering or purchase price, methods of
distribution and any other special terms, and (ii) in the case of Preferred
Securities, the identity of the Issuer, specific title, aggregate amount,
stated liquidation preference, number or amount of securities, Distribution
rate or method of calculating such rate, applicable Extension Period or
Distribution deferral terms, if any, place or places where Distributions will
be payable, any terms of redemption, exchange, initial offering or purchase
price, methods of distribution and any other special terms.
The Prospectus Supplement also will contain information, as applicable,
about certain United States federal income tax consequences relating to the
Junior Subordinated Debentures and Preferred Securities.
The Junior Subordinated Debentures and Preferred Securities may be sold to
or through underwriters, through dealers, remarketing firms or agents or
directly to purchasers. See "Plan of Distribution". The names of any
underwriters, dealers, remarketing firms or agents involved in the sale of
Junior Subordinated Debentures or Preferred Securities in respect of which this
Prospectus is being delivered and any applicable fee, commission or discount
arrangements with them will be set forth in the applicable Prospectus
Supplement. Such Prospectus Supplement will state whether the Junior
Subordinated Debentures or Preferred Securities will be listed on any national
securities exchange or automated quotation system. If the
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Junior Subordinated Debentures or Preferred Securities are not listed on any
national securities exchange or automated quotation system, there can be no
assurance that there will be a secondary market for the Junior Subordinated
Debentures or Preferred Securities.
---------------
This Prospectus may not be used to consummate sales of Junior Subordinated
Debentures or Preferred Securities unless accompanied by a Prospectus
Supplement.
---------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND THE APPLICABLE PROSPECTUS
SUPPLEMENT, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE CORPORATION, THE ISSUERS OR ANY
AGENT, UNDERWRITER OR DEALER. NEITHER THE DELIVERY OF THIS PROSPECTUS AND THE
APPLICABLE PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER AND THEREUNDER
SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE CORPORATION OR THE ISSUERS SINCE THE DATE HEREOF.
THIS PROSPECTUS AND THE APPLICABLE PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN
OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH THEY RELATE, OR AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY THOSE TO WHICH THEY RELATE, IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION.
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AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information can be inspected and copied at the
public reference facilities of the Commission at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the regional offices of the Commission
located at 7 World Trade Center, 13th Floor, Suite 1300, New York, New York
10048 and Suite 1400, Citicorp Center, 14th Floor, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material can also be obtained at
prescribed rates by writing to the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material may also be
accessed electronically by means of the Commission's home page on the Internet
at http://www.sec.gov. In addition, such reports, proxy statements and other
information concerning the Corporation can be inspected at the offices of the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Corporation and the Issuers have filed with the Commission a
Registration Statement on Form S-3 (together with all amendments and exhibits
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities offered hereby.
This Prospectus does not contain all the information set forth in the
Registration Statement, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. For further
information with respect to the Corporation and the securities offered hereby,
reference is made to the Registration Statement and the exhibits and the
financial statements, notes and schedules filed as a part thereof or
incorporated by reference therein, which may be inspected at the public
reference facilities of the Commission, at the addresses set forth above or on
the Commission's Internet home page. Statements made in this Prospectus
concerning the contents of any documents referred to herein are not necessarily
complete, and in each instance are qualified in all respects by reference to
the copy of such document filed as an exhibit to the Registration Statement.
No separate financial statements of any Issuer have been included herein.
The Corporation and the Issuers do not consider that such financial statements
would be material to holders of the Preferred Securities because each Issuer is
a newly formed special purpose entity, has no operating history or independent
operations and is not engaged in and does not propose to engage in any activity
other than holding as trust assets the Corresponding Junior Subordinated
Debentures of the Corporation and issuing the Trust Securities. Furthermore,
with respect to a series of Preferred Securities, taken together, the
Corporation's obligations under the Corresponding Junior Subordinated
Debentures, the Indenture, the applicable Trust Agreement, the applicable
Expense Agreement and the applicable Guarantee provide, in the aggregate, a
full and unconditional guarantee of payment of Distributions and other amounts
due on such series of Preferred Securities. See "The Issuers", "Description of
Preferred Securities", "Description of Junior Subordinated Debentures" and
"Description of Guarantees". In addition, the Corporation does not expect that
any of the Issuers will be filing reports under the Exchange Act with the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Corporation with the Commission (File
No. 1-10000) pursuant to Section 13(a) or 15(d) of the Exchange Act are
incorporated into this Prospectus by reference:
1. the Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
2. the Corporation's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996; and
3. the Corporation's Current Reports on Form 8-K dated January 10, February
9, August 20, September 6 and October 16, 1996.
Each document or report filed by the Corporation pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior
to the termination of any offering of securities made by this Prospectus shall
be deemed to be incorporated by reference into this Prospectus and to be a part
of this Prospectus from the date of filing of such document. Any statement
contained herein or in the applicable Prospectus Supplement, or in a document
all or a portion of which is incorporated or deemed to be incorporated by
reference herein or therein, shall be deemed to be modified or superseded for
purposes of the Registration Statement, this Prospectus and such Prospectus
Supplement to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of the Registration Statement, this Prospectus
or any Prospectus Supplement.
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<PAGE>
The Corporation will provide without charge to any person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated by reference herein
(other than exhibits not specifically incorporated by reference into the texts
of such documents). Requests for such documents should be directed to: Investor
Relations, First Union Corporation, Two First Union Center, Charlotte, North
Carolina 28288-0206, telephone number (704) 374-6782.
THE ISSUERS
Each Issuer is a statutory business trust created under Delaware law
pursuant to (i) a trust agreement executed by the Corporation, as Depositor,
and the Delaware Trustee (as defined herein) of such Issuer and (ii) the filing
of a certificate of trust with the Delaware Secretary of State. Each trust
agreement will be amended and restated in its entirety (each, as so amended and
restated, a "Trust Agreement") substantially in the form filed as an exhibit to
the Registration Statement of which this Prospectus forms a part. Each Trust
Agreement will be qualified as an indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). Each Trust Agreement is subject
to amendment from time to time, as described under "Description of Preferred
Securities -- Voting Rights; Amendment of Each Trust Agreement". Each Issuer
exists exclusively for the purposes of (i) issuing and selling its Trust
Securities, (ii) using the proceeds from the sale of such Trust Securities to
acquire a series of Corresponding Junior Subordinated Debentures from the
Corporation, and (iii) engaging in only those other activities necessary or
incidental thereto. Accordingly, a series of Corresponding Junior Subordinated
Debentures will be the sole assets of each Issuer, and payments under the
Corresponding Junior Subordinated Debentures will be the sole revenue of each
Issuer.
All of the Common Securities of each Issuer will be owned by the
Corporation. The Common Securities of an Issuer will rank PARI PASSU, and
payments will be made thereon PRO RATA, with the Preferred Securities of such
Issuer, except that upon the occurrence and continuance of an Event of Default
(as defined herein) under a Trust Agreement resulting from a Debenture Event of
Default (as defined herein under the Indenture), the rights of the Corporation
as holder of the Common Securities to payment in respect of Distributions and
payments upon liquidation, redemption or otherwise will be subordinated to the
rights of the holders of the Preferred Securities of such Issuer. See
"Description of Preferred Securities -- Subordination of Common Securities".
The Corporation will acquire Common Securities in an aggregate liquidation
amount equal to not less than three percent of the total capital of each
Issuer.
Unless otherwise specified in the applicable Prospectus Supplement, each
Issuer has a term of approximately 55 years, but may terminate earlier as
provided in the applicable Trust Agreement. Each Issuer's business and affairs
are conducted by its trustees, each initially appointed by the Corporation as
holder of the Common Securities. The trustees for each Issuer (collectively,
the "Issuer Trustees") will be Wilmington Trust Company, as the Property
Trustee (the "Property Trustee"), Wilmington Trust Company, as the Delaware
Trustee (the "Delaware Trustee"), and two individual trustees (the
"Administrative Trustees") who are employees or officers of or affiliated with
the Corporation. Wilmington Trust Company, as Property Trustee, will act as
sole indenture trustee under each Trust Agreement for purposes of compliance
with the Trust Indenture Act. Wilmington Trust Company will also act as trustee
under the Guarantees and the Indenture. See "Description of Guarantees" and
"Description of Junior Subordinated Debentures". The holder of the Common
Securities of an Issuer (I.E., the Corporation), or the holders of a majority
in Liquidation Amount of the Preferred Securities if an Event of Default under
the Trust Agreement for such Issuer has occurred and is continuing, will be
entitled to appoint, remove or replace the Property Trustee and/or the Delaware
Trustee for such Issuer. In no event will the holders of the Preferred
Securities have the right to vote to appoint, remove or replace the
Administrative Trustees; such voting rights are vested exclusively in the
holder of the Common Securities (I.E., the Corporation). The duties and
obligations of each Issuer Trustee are governed by the applicable Trust
Agreement. The holder of the Common Securities (I.E., the Corporation) will pay
all fees and expenses related to each Issuer and the offering of the Preferred
Securities and will pay, directly or indirectly, all ongoing costs, expenses
and liabilities of each Issuer.
Unless otherwise indicated in the applicable Prospectus Supplement, the
principal executive office of each Issuer is in care of First Union
Corporation, One First Union Center, Charlotte, North Carolina 28288-0013,
Attention: Secretary, and its telephone number is (704) 374-6565.
THE CORPORATION
The Corporation is a North Carolina-based, multi-bank holding company
registered under the Bank Holding Company Act of 1956, as amended. Through its
banking subsidiaries, the Corporation provides a wide range of commercial and
retail banking services and trust services in North Carolina, Florida, South
Carolina, Georgia, Tennessee, Virginia, Maryland,
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Delaware, Pennsylvania, New Jersey, New York, Connecticut and Washington, D.C.
The Corporation also provides various other financial services, including
mortgage banking, leasing, investment banking, insurance and securities
brokerage services, through other subsidiaries.
Financial and other information relating to the Corporation, including
information relating to the Corporation's directors and executive officers, is
set forth in the documents filed by the Corporation under the Exchange Act and
incorporated by reference herein, copies of which may be obtained from the
Corporation as indicated under "Available Information". See "Incorporation of
Certain Documents by Reference".
The principal executive offices of the Corporation are located at One
First Union Center, Charlotte, North Carolina 28288-0013, and its telephone
number is (704) 374-6565.
USE OF PROCEEDS
Except as otherwise set forth in the applicable Prospectus Supplement, the
Corporation intends to use the proceeds from the sale of its Junior
Subordinated Debentures (including Corresponding Junior Subordinated Debentures
issued to the Issuers in connection with the investment by the Issuers of all
of the proceeds from the sale of Related Preferred Securities) for general
corporate purposes, including working capital, capital expenditures,
investments in or loans to subsidiaries, refinancing of debt, including
outstanding commercial paper and other short-term bank indebtedness, redemption
of shares of its outstanding common and preferred stock, the satisfaction of
other obligations or for such other purposes as may be specified in the
applicable Prospectus Supplement. To the extent applicable, more detailed
description of the use of proceeds of any specific offering will be set forth
in the Prospectus Supplement pertaining to such offering.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued in one or more series
under a Junior Subordinated Indenture, as supplemented from time to time (as so
supplemented, the "Indenture"), between the Corporation and Wilmington Trust
Company, as trustee (the "Debenture Trustee"). This summary of certain terms
and provisions of the Junior Subordinated Debentures, Corresponding Junior
Subordinated Debentures and the Indenture, which when taken together with any
supplementary information set forth in the applicable Prospectus Supplement
describes the material terms thereof, does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the Indenture,
the form of which is filed as an exhibit to the Registration Statement of which
this Prospectus forms a part, and to the Trust Indenture Act. The Indenture is
qualified under the Trust Indenture Act. Whenever particular defined terms of
the Indenture (as supplemented or amended from time to time) are referred to
herein or in a Prospectus Supplement, such defined terms are incorporated
herein or therein by reference.
GENERAL
Except as otherwise provided in the applicable Prospectus Supplement, each
series of Junior Subordinated Debentures will rank PARI PASSU with all other
series of Junior Subordinated Debentures and will be unsecured and subordinate
and junior in right of payment to the extent and in the manner set forth in the
Indenture to all Senior Debt of the Corporation. See " -- Subordination". The
Corporation is a holding company and almost all of the operating assets of the
Corporation and its consolidated subsidiaries are owned by such subsidiaries.
The Corporation relies primarily on dividends from such subsidiaries to meet
its obligations. The payment by the Corporation's bank subsidiaries, in
particular, are subject to restrictions under federal (and, in the case of
state-chartered banks, state) law. Because the Corporation is a holding
company, the right of the Corporation to participate in any distribution of
assets of any subsidiary upon such subsidiary's liquidation or reorganization
or otherwise, is subject to the prior claims of creditors of the subsidiary,
except to the extent the Corporation may itself be recognized as a creditor of
that subsidiary. Accordingly, the Junior Subordinated Debentures will be
effectively subordinated to all existing and future liabilities of the
Corporation's subsidiaries, and holders of Junior Subordinated Debentures
should look only to the assets of the Corporation for payments on the Junior
Subordinated Debentures. Except as otherwise provided in the applicable
Prospectus Supplement, the Indenture does not limit the incurrence or issuance
of other secured or unsecured debt of the Corporation, including the Senior
Debt, whether under the Indenture, any other existing indenture or any other
indenture that the Corporation may enter into in the future or otherwise. See "
- -- Subordination" and the Prospectus Supplement relating to any offering of
Preferred Securities (including Corresponding Junior Subordinated Debentures).
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The Junior Subordinated Debentures will be issuable in one or more series
pursuant to an indenture supplemental to the Indenture, a resolution of the
Corporation's Board of Directors or a committee thereof or an order of an
authorized officer or officers of the Corporation, as provided in the
Indenture.
The applicable Prospectus Supplement or Prospectus Supplements will
describe the following terms of the Junior Subordinated Debentures: (i) the
title of the Junior Subordinated Debentures; (ii) any limit upon the aggregate
principal amount of the Junior Subordinated Debentures; (iii) the date or dates
on which the principal of the Junior Subordinated Debentures is payable (the
"Stated Maturity") or the method of determination thereof; (iv) the rate or
rates, if any, at which the Junior Subordinated Debentures shall bear interest,
the Interest Payment Dates on which any such interest shall be payable, the
right, if any, of the Corporation to defer or extend an Interest Payment Date,
and the Regular Record Date for any interest payable on any Interest Payment
Date or the method by which any of the foregoing shall be determined; (v) the
place or places where, subject to the terms of the Indenture as described below
under " -- Payment and Paying Agents", the principal of and premium, if any,
and interest on the Junior Subordinated Debentures will be payable and where,
subject to the terms of the Indenture as described below under " --
Denominations, Registration and Transfer", the Junior Subordinated Debentures
may be presented for registration of transfer or exchange and the place or
places where notices and demands to or upon the Corporation in respect of the
Junior Subordinated Debentures and the Indenture may be made ("Place of
Payment"); (vi) any period or periods within or date or dates on which, the
price or prices at which and the terms and conditions upon which Junior
Subordinated Debentures may be redeemed, in whole or in part, at the option of
the Corporation or a holder thereof; (vii) the obligation or the right, if any,
of the Corporation or a holder thereof to redeem, purchase or repay the Junior
Subordinated Debentures and the period or periods within which, the price or
prices at which, the currency or currencies (including currency unit or units)
in which and the other terms and conditions upon which the Junior Subordinated
Debentures shall be redeemed, repaid or purchased, in whole or in part,
pursuant to such obligation; (viii) the denominations in which any Junior
Subordinated Debentures shall be issuable if other than denominations of $25.00
and any integral multiple thereof; (ix) if other than in United States dollars,
the currency or currencies (including currency unit or units) in which the
principal of (and premium, if any) and interest (including Additional Interest
(as defined herein)), if any, on the Junior Subordinated Debentures shall be
payable, or in which the Junior Subordinated Debentures shall be denominated;
(x) any additions, modifications or deletions in the events of default
("Debenture Events of Default") or covenants of the Corporation specified in
the Indenture with respect to the Junior Subordinated Debentures; (xi) if other
than the principal amount thereof, the portion of the principal amount of
Junior Subordinated Debentures that shall be payable upon declaration of
acceleration of the maturity thereof; (xii) any additions or changes to the
Indenture with respect to a series of Junior Subordinated Debentures as shall
be necessary to permit or facilitate the issuance of such series in bearer
form, registrable or not registrable as to principal, and with or without
interest coupons; (xiii) any index or indices used to determine the amount of
payments of principal of and premium, if any, on the Junior Subordinated
Debentures and the manner in which such amounts will be determined; (xiv) the
terms and conditions relating to the issuance of a temporary Global Junior
Subordinated Debenture (as defined herein) representing all of the Junior
Subordinated Debentures of such series and the exchange of such temporary
Global Junior Subordinated Debenture for definitive Junior Subordinated
Debentures of such series; (xv) subject to the terms described under " --
Global Junior Subordinated Debentures", whether the Junior Subordinated
Debentures of the series shall be issued in whole or in part in the form of one
or more Global Junior Subordinated Debentures, and in such case, the Depositary
(as defined herein) for such Global Junior Subordinated Debentures, which
Depositary shall be a clearing agency registered under the Exchange Act; (xvi)
the appointment of any Paying Agent or Agents (as defined herein); (xvii) the
terms and conditions of any obligation or right of the Corporation or a holder
to convert or exchange the Junior Subordinated Debentures into Preferred
Securities; (xviii) the form of Trust Agreement, Guarantee and Expense
Agreement, if applicable; (xix) the relative degree, if any, to which such
Junior Subordinated Debentures of the series shall be senior to or be
subordinated to other series of such Junior Subordinated Debentures or other
indebtedness of the Corporation in right of payment, whether such other series
of Junior Subordinated Debentures or other indebtedness are outstanding or not;
and (xx) any other terms of the Junior Subordinated Debentures not inconsistent
with the provisions of the Indenture.
Junior Subordinated Debentures may be sold at a substantial discount below
their stated principal amount, bearing no interest or interest at a rate which
at the time of issuance is below market rates. Certain United States federal
income tax consequences and special considerations applicable to any such
Junior Subordinated Debentures will be described in the applicable Prospectus
Supplement.
If the purchase price of any of the Junior Subordinated Debentures is
payable in one or more foreign currencies or currency units or if any Junior
Subordinated Debentures are denominated in one or more foreign currencies or
currency units or if the principal of, premium, if any, or interest, if any, on
any Junior Subordinated Debentures is payable in one or more
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foreign currencies or currency units, the restrictions, elections, certain
United States federal income tax consequences, specific terms and other
information with respect to such series of Junior Subordinated Debentures and
such foreign currency or currency units will be set forth in the applicable
Prospectus Supplement.
If any index is used to determine the amount of payments of principal of,
premium, if any, or interest on any series of Junior Subordinated Debentures,
special United States federal income tax, accounting and other considerations
applicable thereto will be described in the applicable Prospectus Supplement.
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable Prospectus Supplement, the
Junior Subordinated Debentures will be issuable only in registered form without
coupons in denominations of $25.00 and any integral multiple thereof. Junior
Subordinated Debentures of any series will be exchangeable for other Junior
Subordinated Debentures of the same issue and series, of any authorized
denominations, of a like aggregate principal amount, of the same original issue
date and Stated Maturity and bearing the same interest rate.
Junior Subordinated Debentures may be presented for exchange as provided
above, and may be presented for registration of transfer (with the form of
transfer endorsed thereon, or a satisfactory written instrument of transfer,
duly executed), at the office of the appropriate Securities Registrar or at the
office of any transfer agent designated by the Corporation for such purpose
with respect to any series of Junior Subordinated Debentures and referred to in
the applicable Prospectus Supplement, without service charge and on payment of
any taxes and other governmental charges as described in the Indenture. The
Corporation will appoint the Debenture Trustee as Securities Registrar under
the Indenture. If the applicable Prospectus Supplement refers to any transfer
agents (in addition to the Securities Registrar) initially designated by the
Corporation with respect to any series of Junior Subordinated Debentures, the
Corporation may at any time rescind the designation of any such transfer agent
or approve a change in the location through which any such transfer agent acts,
provided the Corporation maintains a transfer agent in each Place of Payment
for such series. The Corporation may at any time designate additional transfer
agents with respect to any series of Junior Subordinated Debentures.
In the event of any redemption, neither the Corporation nor the Debenture
Trustee shall be required to (i) issue, register the transfer of or exchange
Junior Subordinated Debentures of any series during a period beginning at the
opening of business 15 days before the day of selection for redemption of
Junior Subordinated Debentures of that series and ending at the close of
business on the day of mailing of the relevant notice of redemption, or (ii)
transfer or exchange any Junior Subordinated Debentures so selected for
redemption, except, in the case of any Junior Subordinated Debentures being
redeemed in part, any portion thereof not to be redeemed.
GLOBAL JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures of a series may be issued in whole or
in part in the form of one or more Global Junior Subordinated Debentures
("Global Junior Subordinated Debentures") that will be deposited with, or on
behalf of, a depositary (the "Depositary") identified in the Prospectus
Supplement relating to such series. Global Junior Subordinated Debentures may
be issued only in fully registered form and in either temporary or permanent
form. Unless and until it is exchanged in whole or in part for the individual
Junior Subordinated Debentures represented thereby, a Global Junior
Subordinated Debenture may not be transferred except as a whole by the
Depositary for such Global Junior Subordinated Debenture to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by the Depositary or any nominee to a successor
Depositary or any nominee of such successor.
The specific terms of the depositary arrangement with respect to a series
of Junior Subordinated Debentures will be described in the Prospectus
Supplement relating to such series. The Corporation anticipates that the
following provisions will generally apply to depositary arrangements.
Upon the issuance of a Global Junior Subordinated Debenture, and the
deposit of such Global Junior Subordinated Debenture with or on behalf of the
Depositary, the Depositary for such Global Junior Subordinated Debenture or its
nominee will credit, on its book-entry registration and transfer system, the
respective principal amounts of the individual Junior Subordinated Debentures
represented by such Global Junior Subordinated Debenture to the accounts of
persons that have accounts with such Depositary ("Participants"). Such accounts
shall be designated by the dealers, underwriters or agents with respect to such
Junior Subordinated Debentures or by the Corporation if such Junior
Subordinated Debentures are offered and sold directly by the Corporation.
Ownership of beneficial interests in a Global Junior Subordinated Debenture
will be limited to Participants or persons that may hold interests through
Participants. Ownership of beneficial interests in such Global Junior
Subordinated Debenture will be shown on, and the transfer of that ownership
will be effected only
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through, records maintained by the applicable Depositary or its nominee (with
respect to interests of Participants) and the records of Participants (with
respect to interests of persons who hold through Participants). The laws of
some states require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Junior
Subordinated Debenture.
So long as the Depositary for a Global Junior Subordinated Debenture, or
its nominee, is the registered owner of such Global Junior Subordinated
Debenture, such Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Junior Subordinated Debentures
represented by such Global Junior Subordinated Debenture for all purposes under
the Indenture governing such Junior Subordinated Debentures. Except as provided
below, owners of beneficial interests in a Global Junior Subordinated Debenture
(i) will not be entitled to have any of the individual Junior Subordinated
Debentures of the series represented by such Global Junior Subordinated
Debenture registered in their names, (ii) will not receive or be entitled to
receive physical delivery of any such Junior Subordinated Debentures of such
series in certificated form, and (iii) will not be considered the owners or
holders thereof under the Indenture.
Payments of principal of (and premium, if any) and interest on individual
Junior Subordinated Debentures represented by a Global Junior Subordinated
Debenture registered in the name of a Depositary or its nominee will be made to
the Depositary or its nominee, as the case may be, as the registered owner of
the Global Junior Subordinated Debenture representing such Junior Subordinated
Debentures. None of the Corporation, the Debenture Trustee, any Paying Agent,
or the Securities Registrar for such Junior Subordinated Debentures will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of the Global Junior
Subordinated Debenture representing such Junior Subordinated Debentures or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The Corporation expects the Depositary for a series of Junior Subordinated
Debentures or its nominee, on receipt of any payment of principal, premium or
interest in respect of a permanent Global Junior Subordinated Debenture
representing any of such Junior Subordinated Debentures, will credit
Participants' accounts with payments in amounts proportionate to their
respective beneficial interest in the principal amount of such Global Junior
Subordinated Debenture for such Junior Subordinated Debentures as shown on the
records of such Depositary or its nominee. The Corporation also expects
payments by Participants to owners of beneficial interests in such Global
Junior Subordinated Debenture held through such Participants will be governed
by standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name". Such payments will be the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depositary for a series of Junior Subordinated Debentures is at any time
unwilling, unable or ineligible to continue as depositary and the Corporation
is unable to locate a qualified successor, the Corporation will issue
certificated Junior Subordinated Debentures of such series in exchange for the
Global Junior Subordinated Debenture representing such series of Junior
Subordinated Debentures. In addition, the Corporation may at any time and in
its sole discretion, subject to any limitations described in the Prospectus
Supplement relating to such Junior Subordinated Debentures, determine not to
have any Junior Subordinated Debentures of such series represented by one or
more Global Junior Subordinated Debentures, and in such event, will issue
definitive certificates for Junior Subordinated Debentures of such series in
exchange for the Global Junior Subordinated Debenture representing such series
of Junior Subordinated Debentures. Further, if the Corporation so specifies
with respect to the Junior Subordinated Debentures of a series, an owner of a
beneficial interest in a Global Junior Subordinated Debenture representing
Junior Subordinated Debentures of such series may, on terms acceptable to the
Corporation, the Debenture Trustee and the Depositary for such Global Junior
Subordinated Debenture, receive individual Junior Subordinated Debentures of
such series in exchange for such beneficial interests, subject to any
limitations described in the Prospectus Supplement relating to such Junior
Subordinated Debentures. In any such instance, an owner of a beneficial
interest in a Global Junior Subordinated Debenture will be entitled to physical
delivery of certificated Junior Subordinated Debentures of the series
represented by such Global Junior Subordinated Debenture equal in principal
amount to such beneficial interest and to have such Junior Subordinated
Debentures registered in its name. Certificated Junior Subordinated Debentures
of such series so issued will be issued in denominations, unless otherwise
specified by the Corporation, of $25.00 and integral multiples thereof.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement,
payment of principal of (and premium, if any) and any interest on Junior
Subordinated Debentures will be made at the office of the Debenture Trustee in
the City of New York or at the office of such paying agent or paying agents
("Paying Agents") as the Corporation may designate from time to time in the
applicable Prospectus Supplement, except that at the option of the Corporation
payment of any interest may be
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made (i), except in the case of Global Junior Subordinated Debentures, by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Securities Register, or (ii) by transfer to an account maintained
by the Person entitled thereto as specified in the Securities Register,
provided that proper transfer instructions have been received by the applicable
Regular Record Date. Unless otherwise indicated in the applicable Prospectus
Supplement, payment of any interest on Junior Subordinated Debentures will be
made to the Person in whose name such Junior Subordinated Debenture is
registered at the close of business on the Regular Record Date for such
payment, except in the case of Defaulted Interest (as defined in the
Indenture). The Corporation may at any time designate additional Paying Agents
or rescind the designation of any Paying Agent; however the Corporation will at
all times be required to maintain a Paying Agent in each Place of Payment for
each series of Junior Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or
then held by the Corporation in trust, for the payment of the principal of (and
premium, if any) or interest on any Junior Subordinated Debenture and remaining
unclaimed for two years after such principal (and premium, if any) or interest
has become due and payable shall, at the request of the Corporation, be repaid
to the Corporation and the holder of such Junior Subordinated Debenture shall
thereafter look, as a general unsecured creditor, only to the Corporation for
payment thereof.
OPTION TO EXTEND INTEREST PAYMENT DATE
If provided in the applicable Prospectus Supplement, the Corporation shall
have the right at any time and from time to time during the term of any series
of Junior Subordinated Debentures to defer payment of interest for up to such
number of consecutive interest payment periods as may be specified in the
applicable Prospectus Supplement, subject to the terms, conditions and
covenants, if any, specified in such Prospectus Supplement, provided that such
Extension Period may not extend beyond the Stated Maturity of such series of
Junior Subordinated Debentures. Certain United States federal income tax
consequences and special considerations applicable to any such Junior
Subordinated Debentures will be described in the applicable Prospectus
Supplement.
REDEMPTION
Unless otherwise indicated in the applicable Prospectus Supplement, Junior
Subordinated Debentures will not be subject to any sinking fund.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Corporation may, at its option, redeem the Junior Subordinated Debentures of
any series in whole at any time or in part from time to time, provided that the
Corporation has committed to the Federal Reserve Bank of Richmond that it will
not exercise its redemption option without having received the prior approval
of the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board") to do so, if then so required under applicable capital guidelines or
policies of the Federal Reserve Board. If the Junior Subordinated Debentures of
any series are so redeemable only on or after a specified date or upon the
satisfaction of additional conditions, the applicable Prospectus Supplement
will specify such date or describe such conditions. Junior Subordinated
Debentures in denominations larger than $25.00 may be redeemed in part but only
in integral multiples of $25.00. Except as otherwise specified in the
applicable Prospectus Supplement, the redemption price for any Junior
Subordinated Debenture so redeemed shall equal any accrued and unpaid interest
(including Additional Interest) thereon to the redemption date, plus 100
percent of the principal amount thereof.
Except as otherwise specified in the applicable Prospectus Supplement, if
a Tax Event or a Capital Treatment Event (each as defined herein) in respect of
a series of Junior Subordinated Debentures shall occur and be continuing, the
Corporation may, at its option, redeem such series of Junior Subordinated
Debentures in whole (but not in part) at any time within 90 days of the
occurrence of such Tax Event or Capital Treatment Event, at a redemption price
equal to 100 percent of the principal amount of such Junior Subordinated
Debentures then outstanding plus accrued and unpaid interest to the date fixed
for redemption. "Tax Event" means the receipt by an Issuer of a series of
Preferred Securities of an opinion of counsel experienced in such matters to
the effect that, as a result of any amendment to, or change (including any
announced proposed change) in, the laws (or any regulations thereunder) of the
United States or any political subdivision or taxing authority thereof or
therein, or as a result of any official administrative pronouncement or
judicial decision interpreting or applying such laws or regulations, which
amendment or change is effective or which pronouncement or decision is
announced on or after the date of issuance of such Preferred Securities under
the related Trust Agreement, there is more than an insubstantial risk that (i)
such Issuer is, or will be within 90 days of the date of such opinion, subject
to United States federal income tax with respect to income received or accrued
on the series of Corresponding Junior Subordinated Debentures, (ii) interest
payable by the Corporation on such series of Corresponding Junior Subordinated
Debentures is not, or within 90 days of the date of such opinion, will not be,
deductible by the Corporation, in whole or in part, for United States federal
income tax
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purposes, or (iii) such Issuer is, or will be within 90 days of the date of
such opinion, subject to more than a DE MINIMIS amount of other taxes, duties
or other governmental charges.
A "Capital Treatment Event" means the reasonable determination by the
Corporation that, as a result of the occurrence of any amendment to, or change
(including any announced prospective change) in, the laws (or any rules or
regulations thereunder) of the United States or any political subdivision
thereof or therein, or as a result of any official or administrative
pronouncement or action or judicial decision interpreting or applying such
laws, rules or regulations, which amendment or change is effective or which
pronouncement, action or decision is announced on or after the date of issuance
of the Preferred Securities, there is more than an insubstantial risk that the
Corporation will not be entitled to treat an amount equal to the aggregate
Liquidation Amount (as defined herein) of the Preferred Securities as "tier 1
capital" (or the then equivalent thereof) for purposes of the capital adequacy
guidelines of the Federal Reserve Board, as then in effect and applicable to
the Corporation.
Notice of any redemption will be mailed at least 45 days but not more than
75 days before the redemption date to each holder of Junior Subordinated
Debentures to be redeemed at its registered address. Unless the Corporation
defaults in payment of the redemption price, on and after the redemption date
interest ceases to accrue on such Junior Subordinated Debentures or portions
thereof called for redemption.
RESTRICTIONS ON CERTAIN PAYMENTS
The Corporation will also covenant, as to each series of Junior
Subordinated Debentures, that it will not, and will not permit any subsidiary
of the Corporation to, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any
of the Corporation's capital stock, or (ii) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Corporation (including other Junior Subordinated Debentures)
that rank PARI PASSU in all respects with or junior in interest to the Junior
Subordinated Debentures or make any guarantee payments with respect to any
guarantee by the Corporation of the debt securities of any subsidiary of the
Corporation if such guarantee ranks PARI PASSU in all respects with or junior
in interest to the Junior Subordinated Debentures other than (a) repurchases,
redemptions or other acquisitions of shares of capital stock of the Corporation
in connection with any employment contract, benefit plan or other similar
arrangement with or for the benefit of one or more employees, officers,
directors or consultants, in connection with a dividend reinvestment or
stockholder stock purchase plan or in connection with the issuance of capital
stock of the Corporation (or securities convertible into or exercisable for
such capital stock) as consideration in an acquisition transaction entered into
prior to the applicable Extension Period, (b) as a result of any exchange or
conversion of any class or series of the Corporation's capital stock (or any
capital stock of a subsidiary of the Corporation) for any class or series of
the Corporation's capital stock or of any class or series of the Corporation's
indebtedness for any class or series of the Corporation's capital stock, (c)
the purchase of fractional interests in shares of the Corporation's capital
stock pursuant to the conversion or exchange provisions of such capital stock
or the security being converted or exchanged, (d) any declaration of a dividend
in connection with any stockholder's rights plan, or the issuance of rights,
stock or other property under any stockholder's rights plan, or the redemption
or repurchase of rights pursuant thereto, or (e) any dividend in the form of
stock, warrants, options or other rights where the dividend stock or the stock
issuable upon exercise of such warrants, options or other rights is the same
stock as that on which the dividend is being paid or ranks PARI PASSU with or
junior to such stock), if at such time (i) there shall have occurred any event
of which the Corporation has actual knowledge that (a) with the giving of
notice or the lapse of time, or both, would constitute a Debenture Event of
Default with respect to the Junior Subordinated Debentures of such series, and
(b) in respect of which the Corporation shall not have taken reasonable steps
to cure, (ii) if such Junior Subordinated Debentures are held by an Issuer of a
series of Related Preferred Securities, the Corporation shall be in default
with respect to its payment of any obligations under the Guarantee relating to
such Related Preferred Securities, or (iii) the Corporation shall have given
notice of its selection of an Extension Period as provided in the Indenture
with respect to the Junior Subordinated Debentures of such series and shall not
have rescinded such notice, or such Extension Period, or any extension thereof,
shall be continuing.
MODIFICATION OF INDENTURE
From time to time the Corporation and the Debenture Trustee may, without
the consent of the holders of any series of Junior Subordinated Debentures,
amend, waive or supplement the Indenture for specified purposes, including,
among other things, curing ambiguities, defects or inconsistencies (provided
that any such action does not materially adversely affect the interest of the
holders of any series of Junior Subordinated Debentures or, in the case of
Corresponding Junior Subordinated
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Debentures, the holders of the Related Preferred Securities so long as they
remain outstanding) and qualifying, or maintaining the qualification of, the
Indenture under the Trust Indenture Act. The Indenture contains provisions
permitting the Corporation and the Debenture Trustee, with the consent of the
holders of not less than a majority in principal amount of each outstanding
series of Junior Subordinated Debentures affected, to modify the Indenture in a
manner affecting adversely the rights of the holders of such series of the
Junior Subordinated Debentures in any material respect, provided that no such
modification may, without the consent of the holder of each outstanding Junior
Subordinated Debenture so affected, (i) change the Stated Maturity of any
series of Junior Subordinated Debentures (except as otherwise specified in the
applicable Prospectus Supplement), or reduce the principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon, or (ii)
reduce the percentage of principal amount of Junior Subordinated Debentures of
any series, the holders of which are required to consent to any such
modification of the Indenture, provided that, in the case of Corresponding
Junior Subordinated Debentures, so long as any of the Related Preferred
Securities remain outstanding, (a) no such modification may be made that
adversely affects the holders of such Preferred Securities in any material
respect, and no termination of the Indenture may occur, and no waiver of any
Debenture Event of Default or compliance with any covenant under the Indenture
may be effective, without the prior consent of the holders of at least a
majority of the aggregate Liquidation Amount of all outstanding Related
Preferred Securities affected unless and until the principal of the
Corresponding Junior Subordinated Debentures and all accrued and unpaid
interest thereon have been paid in full and certain other conditions have been
satisfied and (b) where a consent under the Indenture would require the consent
of each holder of Corresponding Junior Subordinated Debentures, no such consent
will be given by the Property Trustee without the prior consent of each holder
of Related Preferred Securities.
In addition, the Corporation and the Debenture Trustee may execute,
without the consent of any holder of Junior Subordinated Debentures, any
supplemental indenture to the Indenture for the purpose of creating any new
series of Junior Subordinated Debentures.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to a series of Junior Subordinated Debentures that has
occurred and is continuing constitutes a Debenture Event of Default with
respect to such series of Junior Subordinated Debentures:
(i) failure for 30 days to pay any interest on such series of the Junior
Subordinated Debentures, including any Additional Interest in respect
thereof, when due (subject to the deferral of any interest payment in the
case of an Extension Period); or
(ii) failure to pay any principal or premium, if any, on such series of
Junior Subordinated Debentures when due, whether at maturity, upon
redemption by declaration or otherwise; or
(iii) failure to observe or perform any other covenants contained in the
Indenture for 90 days after written notice to the Corporation from the
Debenture Trustee or the holders of at least 25 percent in aggregate
outstanding principal amount of such series of outstanding Junior
Subordinated Debentures; or
(iv) certain events of bankruptcy, insolvency or reorganization of the
Corporation.
The holders of a majority in aggregate outstanding principal amount of
such series of Junior Subordinated Debentures have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Debenture Trustee. The Debenture Trustee or the holders of not less than 25
percent in aggregate outstanding principal amount of Junior Subordinated
Debentures may declare the principal (or if the Preferred Securities of such
series are Discount Securities (as defined herein), such portion of the
principal amount as may be specified in a Prospectus Supplement) due and
payable immediately upon a Debenture Event of Default, and in the case of
Corresponding Junior Subordinated Debentures, should the Debenture Trustee or
such holders of such Corresponding Junior Subordinated Debentures fail to make
such declaration, the holders of at least 25 percent in aggregate Liquidation
Amount of the Related Preferred Securities shall have such right. The holders
of a majority in aggregate outstanding principal amount of Junior Subordinated
Debentures may annul such declaration. In the case of Corresponding Junior
Subordinated Debentures, should the holders of such Corresponding Junior
Subordinated Debentures fail to annul such declaration and waive such default,
the holders of a majority in aggregate Liquidation Amount of the Related
Preferred Securities shall have such right.
The holders of a majority in aggregate outstanding principal amount of
each series of Junior Subordinated Debentures affected thereby may, on behalf
of the holders of all the Junior Subordinated Debentures of such series, waive
any default, except a default in the payment of principal or interest
(including any Additional Interest) (unless such default has been
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cured and a sum sufficient to pay all matured installments of interest and
principal (including any Additional Interest) due otherwise than by
acceleration has been deposited with the Debenture Trustee) or a default in
respect of a covenant or provision which under the Indenture cannot be modified
or amended without the consent of the holder of each outstanding Junior
Subordinated Debenture of such series. In the case of Corresponding Junior
Subordinated Debentures, should the holders of such Corresponding Junior
Subordinated Debentures fail to annul such declaration and waive such default,
the holders of a majority in aggregate Liquidation Amount of the Related
Preferred Securities shall have such right. The Corporation is required to file
annually with the Debenture Trustee a certificate as to whether or not the
Corporation is in compliance with all the conditions and covenants applicable
to it under the Indenture.
In case a Debenture Event of Default shall occur and be continuing as to a
series of Corresponding Junior Subordinated Debentures held by the Property
Trustee, the Property Trustee will have the right to declare the principal of
and the interest on such Corresponding Junior Subordinated Debentures, and any
other amounts payable under the Indenture, to be forthwith due and payable and
to enforce its other rights as a creditor with respect to such Corresponding
Junior Subordinated Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If (i) a Debenture Event of Default has occurred and is continuing and
(ii) such event is attributable to the failure of the Corporation to pay
interest or principal on a series of Corresponding Junior Subordinated
Debentures on the date such interest or principal is due and payable, then a
holder of the Related Preferred Securities may institute a legal proceeding
directly against the Corporation for enforcement of payment to such holder of
the principal of or interest (including any Additional Interest) on such
Corresponding Junior Subordinated Debentures having a principal amount equal to
the aggregate Liquidation Amount of the Related Preferred Securities of such
holder (a "Direct Action"). The Corporation may not amend the Indenture to
remove the foregoing right to bring a Direct Action without the prior written
consent of the holders of all the Related Preferred Securities outstanding. If
the right to bring a Direct Action is removed, the applicable Issuer may become
subject to the reporting obligations under the Exchange Act. The Corporation
has the right under the Indenture to set-off any payment made to such holder of
Related Preferred Securities by the Corporation in connection with a Direct
Action.
The holders of a series of Related Preferred Securities would not be able
to exercise directly any remedies other than those set forth in the preceding
paragraph available to the holders of the series of Corresponding Junior
Subordinated Debentures unless there shall have been an Event of Default under
the Trust Agreement. See "Description of Preferred Securities -- Events of
Default; Notice".
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Corporation will not consolidate with or
merge into any other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, and no Person will
consolidate with or merge into the Corporation or convey, transfer or lease its
properties and assets substantially as an entirety to the Corporation, unless
(i) in case the Corporation consolidates with or merges into another Person or
conveys or transfers its properties and assets substantially as an entirety to
any Person, the successor Person is organized under the laws of the United
States or any state or Washington, D.C., and such successor Person expressly
assumes the Corporation's obligations on the Junior Subordinated Debentures
issued under the Indenture; (ii) immediately after giving effect thereto, no
Debenture Event of Default, and no event which, after notice or lapse of time
or both, would become a Debenture Event of Default, shall have occurred and be
continuing; and (iii) certain other conditions as prescribed in the Indenture
are met.
The general provisions of the Indenture do not afford holders of the
Junior Subordinated Debentures protection in the event of a highly leveraged or
other transaction involving the Corporation that may adversely affect holders
of the Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable, or (ii) will become due and
payable at their Stated Maturity within one year, and the Corporation deposits
or causes to be deposited with the Debenture Trustee funds, in trust, for the
purpose and in an amount in the currency or currencies in which the Junior
Subordinated Debentures are payable sufficient to pay and discharge the entire
indebtedness on the Junior Subordinated Debentures not previously delivered to
the Debenture Trustee for cancellation, for the principal (and premium, if any)
and interest (including Additional Interest) to the date of the deposit or to
the Stated Maturity, as the case may be, then the Indenture will cease to be of
further effect
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(except as to the Corporation's obligations to pay all other sums due pursuant
to the Indenture and to provide the officers' certificates and opinions of
counsel described therein), and the Corporation will be deemed to have
satisfied and discharged the Indenture.
CONVERSION OR EXCHANGE
If and to the extent indicated in the applicable Prospectus Supplement,
the Junior Subordinated Debentures of any series may be convertible or
exchangeable into Junior Subordinated Debentures of another series or into
Preferred Securities (including, but not limited to, Related Preferred
Securities). The specific terms on which Junior Subordinated Debentures of any
series may be so converted or exchanged will be set forth in the applicable
Prospectus Supplement. Such terms may include provisions for conversion or
exchange, either mandatory, at the option of the holder, or at the option of
the Corporation, in which case the number of Preferred Securities or other
securities to be received by the holders of Junior Subordinated Debentures
would be calculated as of a time and in the manner stated in the applicable
Prospectus Supplement.
SUBORDINATION
The Indenture provides that any Junior Subordinated Debentures issued
thereunder will be subordinate and junior in right of payment to all Senior
Debt of the Corporation to the extent provided in the Indenture. Upon any
payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Corporation, the holders of Senior Debt will first
be entitled to receive payment in full of principal of (and premium, if any)
and interest, if any, on such Senior Debt before the holders of Junior
Subordinated Debentures or, in the case of Corresponding Junior Subordinated
Debenture held by the Property Trustee, the Property Trustee on behalf of the
holders thereof, will be entitled to receive or retain any payment in respect
of the principal of (and premium, if any) or interest, if any, on the Junior
Subordinated Debentures.
In the event of the acceleration of the maturity of any Junior
Subordinated Debentures, the holders of all Senior Debt outstanding at the time
of such acceleration will first be entitled to receive payment in full of all
amounts due thereon (including any amounts due upon acceleration) before the
holders of Junior Subordinated Debentures will be entitled to receive or retain
any payment in respect of the principal of (or premium, if any) or interest, if
any, on the Junior Subordinated Debentures.
No payments on account of principal (or premium, if any) or interest, if
any, in respect of the Junior Subordinated Debentures may be made if there
shall have occurred and be continuing a default in any payment with respect to
Senior Debt or an event of default with respect to any Senior Debt resulting in
the acceleration of the maturity thereof, or if any judicial proceeding shall
be pending with respect to any such default.
"Debt" means, with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; (vi) all Other
Financial Obligations (as defined herein); and (vii) every obligation of the
type referred to in clauses (i) through (vi) of another Person and all
dividends of another Person the payment of which, in either case, such Person
has guaranteed or is responsible or liable, directly or indirectly, as obligor
or otherwise.
"Other Financial Obligations" means, with respect to any Person, all
obligations of such Person to make payment pursuant to the terms of financial
instruments, such as (i) securities contracts and foreign currency exchange
contracts, (ii) derivative instruments, such as swap agreements (including
interest rate and foreign exchange rate swap agreements), cap agreements, floor
agreements, collar agreements, interest rate agreements, foreign exchange rate
agreements, options, commodity futures contracts, commodity option contracts,
and (iii) in the case of both (i) and (ii) above, similar financial
instruments.
"Senior Debt" means the principal of (and premium, if any) and interest,
if any (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Corporation whether or not
such claim for post-petition interest is allowed in such proceeding), on Debt,
whether incurred on or prior to the date of the Indenture or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Junior Subordinated Debentures or to other
Debt
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which is PARI PASSU with, or subordinated to, the Junior Subordinated
Debentures; provided, however, that Senior Debt shall not be deemed to include
(i) any Debt of the Corporation which when incurred and without respect to any
election under Section 1111(b) of the United States Bankruptcy Code of 1978, as
amended, was without recourse to the Corporation, (ii) any Debt of the
Corporation to any of its subsidiaries, (iii) Debt to any employee of the
Corporation, and (iv) any other debt securities issued pursuant to the
Indenture. Senior Debt includes, without limitation, Debt issued (i) under the
indenture, dated as of April 1, 1983, and amended thereafter, between the
Corporation and Chemical Bank, as trustee, and (ii) except to the extent
otherwise provided with respect to any series of debt securities issued after
the date hereof, under the indenture, dated as of March 15, 1986, and amended
thereafter, between the Corporation and Harris Trust and Savings Bank, as
trustee.
The Indenture places no limitation on the amount of additional Senior Debt
that may be incurred by the Corporation. The Corporation expects from time to
time to incur additional indebtedness constituting Senior Debt.
The Indenture provides that the foregoing subordination provisions,
insofar as they relate to any particular issue of Junior Subordinated
Debentures, may be changed prior to such issuance. Any such change would be
described in the applicable Prospectus Supplement.
ISSUER EXPENSES
Pursuant to an Agreement as to Liabilities and Expenses, entered into by
the Corporation, as holder of the Common Securities of the applicable Issuer,
pursuant to the applicable Trust Agreement (each, an "Expense Agreement"), with
respect to each series of Corresponding Junior Subordinated Debentures, the
Corporation, as holder of the Common Securities of the applicable Issuer, will
unconditionally agree with such Issuer that the Corporation will pay the full
amount of any costs, expenses or liabilities of such Issuer, other than
obligations of such Issuer to pay to the holders of the Related Preferred
Securities of such Issuer the amounts due such holders pursuant to the terms
thereof. Such payment obligation will include any such costs, expenses or
liabilities of the Issuer that are required by applicable law to be satisfied
in connection with a termination of such Issuer.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by
and construed in accordance with the laws of the State of New York.
INFORMATION CONCERNING DEBENTURE TRUSTEE
The Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Debenture Trustee is not required to
expend or risk its own funds or otherwise incur personal financial liability in
the performance of its duties if the Debenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
CORRESPONDING JUNIOR SUBORDINATED DEBENTURES
The Corresponding Junior Subordinated Debentures may be issued in one or
more series under the Indenture with terms corresponding to the terms of a
series of Related Preferred Securities. In that event, concurrently with the
issuance of the Related Preferred Securities, the Issuer of the Related
Preferred Securities will invest the proceeds thereof and the consideration
paid by the Corporation for the Common Securities of such Issuer in such series
of Corresponding Junior Subordinated Debentures issued by the Corporation to
such Issuer. Each series of Corresponding Junior Subordinated Debentures will
be in the principal amount equal to the aggregate Liquidation Amount of the
Related Preferred Securities and the Common Securities of such Issuer and,
unless otherwise specified in the applicable Prospectus Supplement, will rank
PARI PASSU with all other series of Junior Subordinated Debentures. Holders of
the Related Preferred Securities for a series of Corresponding Junior
Subordinated Debentures will have the rights in connection with modifications
to the Indenture or upon occurrence of Debenture Events of Default described
under " -- Modification of Indenture" and " -- Debenture Events of Default",
unless otherwise provided in the Prospectus Supplement for such Related
Preferred Securities.
Unless otherwise provided in the applicable Prospectus Supplement, if a
Tax Event or Capital Treatment Event in respect of an Issuer of Related
Preferred Securities shall occur and be continuing, the Corporation may, at its
option, redeem
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the Corresponding Junior Subordinated Debentures at any time within 90 days of
the occurrence of such Tax Event or Capital Treatment Event, in whole but not
in part, subject to the provisions of the Indenture and whether or not such
Corresponding Junior Subordinated Debentures are then otherwise redeemable at
the option of the Corporation, provided that the Corporation has committed to
the Federal Reserve Bank of Richmond that it will not exercise its redemption
option without having received the prior approval of the Federal Reserve Board
to do so, if then so required under applicable capital guidelines or policies
of the Federal Reserve Board. The redemption price for any Corresponding Junior
Subordinated Debentures shall be equal to 100 percent of the principal amount
of such Corresponding Junior Subordinated Debentures then outstanding, plus
accrued and unpaid interest to the date fixed for redemption. For so long as
the applicable Issuer is the holder of all the outstanding series of
Corresponding Junior Subordinated Debentures, the proceeds of any such
redemption will be used by the Issuer to redeem the corresponding Trust
Securities in accordance with their terms. The Corporation may not redeem a
series of Corresponding Junior Subordinated Debentures in part unless all
accrued and unpaid interest has been paid in full on all outstanding
Corresponding Junior Subordinated Debentures of such series for all interest
periods terminating on or prior to the redemption date.
The Corporation will covenant in the Indenture as to each series of
Corresponding Junior Subordinated Debentures, that if and so long as (i) the
Issuer of the Related Preferred Securities is the holder of all such
Corresponding Junior Subordinated Debentures, (ii) a Tax Event in respect of
such Issuer has occurred and is continuing, and (iii) the Corporation has
elected, and has not revoked such election, to pay Additional Sums (as defined
herein) in respect of such Related Preferred Securities, the Corporation will
pay to such Issuer such Additional Sums. The Corporation will also covenant, as
to each series of Corresponding Junior Subordinated Debentures, (i) to maintain
directly or indirectly 100 percent ownership of the Common Securities of the
Issuer to which such Corresponding Junior Subordinated Debentures have been
issued, provided that certain successors which are permitted pursuant to the
Indenture may succeed to the Corporation's ownership of the Common Securities,
(ii) not to voluntarily terminate, wind-up or liquidate any Issuer and (a) in
connection with a distribution of Corresponding Junior Subordinated Debentures
to the holders of the Related Preferred Securities in exchange therefor upon
liquidation of such Issuer, or (b) in connection with certain mergers,
consolidations or amalgamations permitted by the related Trust Agreement, and
(iii) to use its reasonable efforts, consistent with the terms and provisions
of the related Trust Agreement, to cause such Issuer to remain classified as a
grantor trust or not to become an association taxable as a corporation for
United States federal income tax purposes.
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DESCRIPTION OF PREFERRED SECURITIES
Pursuant to the terms of the Trust Agreement for each Issuer, the Issuer
Trustees on behalf of such Issuer may issue the Preferred Securities and the
Common Securities. The Preferred Securities of a particular series will
represent preferred undivided beneficial interests in the assets of the
applicable Issuer and the holders thereof will be entitled to a preference in
certain circumstances with respect to Distributions and amounts payable on
redemption or liquidation over the Common Securities of such Issuer, as well as
other benefits as described in the applicable Trust Agreement. This summary of
certain provisions of the Preferred Securities and each Trust Agreement, which
when taken together with any supplementary material set forth in the applicable
Prospectus Supplement describes the material terms thereof, does not purport to
be complete and is subject to, and qualified in its entirety by reference to,
all the provisions of each Trust Agreement, including the definitions therein
of certain terms, and the Trust Indenture Act. Wherever particular defined
terms of a Trust Agreement (as amended or supplemented from time to time) are
referred to herein or in a Prospectus Supplement, such defined terms are
incorporated herein or therein by reference. The form of the Trust Agreement
has been filed as an exhibit to the Registration Statement. Each of the Issuers
is a legally separate entity and the assets of one are not available to satisfy
the obligations of any of the others.
GENERAL
The Preferred Securities of an Issuer will rank PARI PASSU, and payments
thereon will be made PRO RATA, with the Common Securities of that Issuer except
as described under " -- Subordination of Common Securities". Legal title to a
series of Corresponding Junior Subordinated Debentures will be held by the
Property Trustee in trust for the benefit of the holders of the Related
Preferred Securities and Common Securities. Each Guarantee Agreement executed
by the Corporation for the benefit of the holders of an Issuer's Preferred
Securities will be a guarantee on a subordinated basis with respect to such
Preferred Securities but will not guarantee payment of Distributions or amounts
payable on redemption or liquidation of such Preferred Securities when such
Issuer does not have funds on hand available to make such payments. See
"Description of Guarantees".
DISTRIBUTIONS
Distributions on the Preferred Securities will be cumulative, will
accumulate from the date of original issuance and will be payable on such dates
as specified in the applicable Prospectus Supplement. In the event that any
date on which Distributions are payable on the Preferred Securities is not a
Business Day (as defined herein), payment of the Distribution payable on such
date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect to any such delay) except
that, if such Business Day is in the next succeeding calendar year, payment of
such Distribution shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date (each date on
which Distributions are payable in accordance with the foregoing, a
"Distribution Date"). A "Business Day" shall mean any day other than a Saturday
or a Sunday, or a day on which banking institutions in The City of New York are
authorized or required by law or executive order to remain closed or a day on
which the corporate trust office of the Property Trustee or the Debenture
Trustee is closed for business.
Each Issuer's Preferred Securities represent preferred undivided
beneficial interests in the assets of the applicable Issuer, and the
Distributions on each Preferred Security will be payable at a rate specified in
the applicable Prospectus Supplement for such Preferred Securities. The amount
of Distributions payable for any period will be computed on the basis of a
360-day year of twelve 30-day months unless otherwise specified in the
applicable Prospectus Supplement. Distributions to which holders of Preferred
Securities are entitled will accumulate additional Distributions at the rate
per annum if and as specified in the applicable Prospectus Supplement. The term
"Distributions" as used herein includes any such additional Distributions
unless otherwise stated.
If provided in the applicable Prospectus Supplement, the Corporation has
the right under the Indenture, pursuant to which it will issue a series of
Corresponding Junior Subordinated Debentures, to defer the payment of interest
at any time or from time to time on such series of Corresponding Junior
Subordinated Debentures for a period which will be specified in such Prospectus
Supplement, provided that no such Extension Period may extend beyond the Stated
Maturity of the Corresponding Junior Subordinated Debentures. As a consequence
of any such extension, Distributions on the Related Preferred Securities would
be deferred (but would continue to accumulate additional Distributions thereon
at the rate per annum set forth in the Prospectus Supplement for such Related
Preferred Securities) by the Issuer of such Related Preferred Securities during
any such Extension Period. During such Extension Period, the Corporation may
not, and may not permit any subsidiary of the Corporation to, (i) declare or
pay any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Corporation's capital stock, or
(ii) make any payment of principal, interest or
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premium, if any, on or repay, repurchase or redeem any debt securities of the
Corporation that rank PARI PASSU in all respects with or junior in interest to
the Corresponding Junior Subordinated Debentures or make any guarantee payments
with respect to any guarantee by the Corporation of debt securities of any
subsidiary of the Corporation if such guarantee ranks PARI PASSU in all
respects with or junior in interest to the Corresponding Junior Subordinated
Debentures (other than (a) repurchases, redemptions or other acquisitions of
shares of capital stock of the Corporation in connection with any employment
contract, benefit plan or other similar arrangement with or for the benefit of
one or more employees, officers, directors or consultants, in connection with a
dividend reinvestment or stockholder stock purchase plan or in connection with
the issuance of capital stock of the Corporation (or securities convertible
into or exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to such Extension Period, (b) as a result of any
exchange or conversion of any class or series of the Corporation's capital
stock (or any capital stock of a subsidiary of the Corporation) for any class
or series of the Corporation's capital stock or of any class or series of the
Corporation's indebtedness for any class or series of the Corporation's capital
stock, (c) the purchase of fractional interests in shares of the Corporation's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (d) any declaration of a
dividend in connection with any stockholder's rights plan, or the issuance of
rights, stock or other property under any stockholder's rights plan, or the
redemption or repurchase of rights pursuant thereto, or (e) any dividend in the
form of stock, warrants, options or other rights where the dividend stock or
the stock issuable upon exercise of such warrants, options or other rights is
the same stock as that on which the dividend is being paid or ranks PARI PASSU
with or junior to such stock.
The revenue of each Issuer available for distribution to holders of any
series of Related Preferred Securities will be limited to payments under the
Corresponding Junior Subordinated Debentures in which the Issuer will invest
the proceeds from the issuance and sale of its Trust Securities. See
"Description of Junior Subordinated Debentures -- Corresponding Junior
Subordinated Debentures". If the Corporation does not make interest payments on
such Corresponding Junior Subordinated Debentures, the Property Trustee will
not have funds available to pay Distributions on the Related Preferred
Securities. The payment of Distributions (if and to the extent the Issuer has
funds legally available for the payment of such Distributions and cash
sufficient to make such payments) is guaranteed by the Corporation on a limited
basis as set forth herein under "Description of Guarantees".
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the register of the related Issuer on the relevant
record dates, which, as long as the Preferred Securities remain in book-entry
form, will be one Business Day prior to the relevant Distribution Date. Subject
to any applicable laws and regulations and the provisions of the applicable
Trust Agreement, each such payment will be made as described under "Book-Entry
Issuance". In the event any Preferred Securities are not in book-entry form,
the relevant record date for such Preferred Securities shall be the date
specified in the applicable Prospectus Supplement.
REDEMPTION OR EXCHANGE
MANDATORY REDEMPTION. Upon the repayment or redemption, in whole or in
part, of any series of Corresponding Junior Subordinated Debentures, whether at
maturity or upon earlier redemption as provided in the Indenture, the proceeds
from such repayment or redemption shall be applied by the Property Trustee to
redeem a Like Amount (as defined herein) of the related Trust Securities, upon
not less than 30 nor more than 60 days notice, at a redemption price (the
"Redemption Price") equal to the aggregate Liquidation Amount of such Trust
Securities, plus accumulated but unpaid Distributions thereon to the date of
repayment or redemption (the "Redemption Date") and the related amount of the
premium, if any, paid by the Corporation upon the concurrent repayment or
redemption of such Corresponding Junior Subordinated Debentures. See
"Description of Junior Subordinated Debentures -- Redemption". If less than all
of any series of Corresponding Junior Subordinated Debentures are to be repaid
or redeemed on a Redemption Date, then the proceeds from such repayment or
redemption shall be allocated to the redemption PRO RATA of the Related
Preferred Securities and Common Securities. The amount of premium, if any, paid
by the Corporation upon the repayment or redemption of all or any part of any
series of any Corresponding Junior Subordinated Debentures to be repaid or
redeemed on a Redemption Date shall be allocated to the redemption PRO RATA of
the Related Preferred Securities and Common Securities.
The Corporation will have the right to redeem any series of Corresponding
Junior Subordinated Debentures (i) on or after such date as may be specified in
the applicable Prospectus Supplement, in whole at any time or in part from time
to time, (ii) at any time, in whole (but not in part), upon the occurrence of a
Tax Event or Capital Treatment Event, or (iii) as may be otherwise specified in
the applicable Prospectus Supplement, provided that the Corporation has
committed to the
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Federal Reserve Bank of Richmond that it will not exercise any such right
without having received the prior approval of the Federal Reserve Board to do
so, if then so required under applicable capital guidelines or policies of the
Federal Reserve Board.
DISTRIBUTION OF CORRESPONDING JUNIOR SUBORDINATED DEBENTURES. The
Corporation has the right at any time to terminate any Issuer and, after
satisfaction of the liabilities of creditors of such Issuer in accordance with
applicable law and the applicable Expense Agreement, cause the series of
Corresponding Junior Subordinated Debentures in respect of the Related
Preferred Securities and Common Securities issued by such Issuer to be
distributed to the holders of such Related Preferred Securities and Common
Securities in liquidation of the Issuer. The Corporation has committed to the
Federal Reserve Bank of Richmond, however, that for so long as the Corporation
(or an affiliate) is the holder of the Common Securities of an Issuer it will
not exercise such right with respect to such Issuer without having received the
prior approval of the Federal Reserve Board to do so, if then so required under
applicable capital guidelines or policies of the Federal Reserve Board.
TAX EVENT OR CAPITAL TREATMENT EVENT REDEMPTION. If a Tax Event or Capital
Treatment Event in respect of a series of Related Preferred Securities and
Common Securities shall occur and be continuing, the Corporation has the right
to redeem the Corresponding Junior Subordinated Debentures in whole (but not in
part) and thereby cause a mandatory redemption of such Preferred Securities and
Common Securities in whole (but not in part) at the applicable Redemption Price
within 90 days following the occurrence of such Tax Event or Capital Treatment
Event. In the event a Tax Event or Capital Treatment Event in respect of a
series of Related Preferred Securities and Common Securities has occurred and
is continuing and the Corporation does not elect to redeem the Corresponding
Junior Subordinated Debentures and thereby cause a mandatory redemption of such
series of Related Preferred Securities and Common Securities or to liquidate
the related Issuer and cause the Corresponding Junior Subordinated Debentures
to be distributed to holders of such series of Related Preferred Securities and
Common Securities in exchange therefor upon liquidation of the Issuer as
described above, such series of Related Preferred Securities and Common
Securities will remain outstanding and Additional Sums may be payable on the
Corresponding Junior Subordinated Debentures.
Unless otherwise provided in the applicable Prospectus Supplement:
"Additional Sums" means the additional amounts as may be necessary in
order that the amount of Distributions then due and payable by an Issuer on
the outstanding Preferred Securities and Common Securities of the Issuer
shall not be reduced as a result of any additional taxes, duties and other
governmental charges to which such Issuer has become subject as a result of
a Tax Event.
"Like Amount" means (i) with respect to a redemption of any series of
Trust Securities, Trust Securities of such series having a Liquidation
Amount equal to that portion of the principal amount of Corresponding
Junior Subordinated Debentures to be contemporaneously redeemed in
accordance with the Indenture, allocated to the Common Securities and to
the Related Preferred Securities based upon the relative Liquidation
Amounts of such classes and the proceeds of which will be used to pay the
Redemption Price of such Trust Securities, and (ii) with respect to a
distribution of Corresponding Junior Subordinated Debentures to holders of
any series of Trust Securities in connection with a dissolution or
liquidation of the related Issuer, Corresponding Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Trust Securities of the holder to whom such Corresponding Junior
Subordinated Debentures are distributed.
"Liquidation Amount" means the stated amount of $25.00 per Trust
Security.
After the liquidation date fixed for the distribution of any Corresponding
Junior Subordinated Debentures in exchange for any series of Related Preferred
Securities (i) such series of Related Preferred Securities will no longer be
deemed to be outstanding, (ii) the Depositary or its nominee, as the record
holder of such series of Related Preferred Securities, will receive a
registered global certificate or certificates representing the Corresponding
Junior Subordinated Debentures to be delivered upon such distribution, and
(iii) any certificates representing such series of Related Preferred Securities
not held by the Depositary or its nominee will be deemed to represent the
Corresponding Junior Subordinated Debentures having a principal amount equal to
the Liquidation Amount of such series of Related Preferred Securities, and
bearing accrued and unpaid interest in an amount equal to the accrued and
unpaid Distributions on such series of Related Preferred Securities until such
certificates are presented to the Administrative Trustees or their agent for
transfer or reissuance.
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There can be no assurance as to the market prices for any series of
Related Preferred Securities, or the Corresponding Junior Subordinated
Debentures that may be distributed in exchange for such series of Related
Preferred Securities, if a liquidation of the Issuer were to occur.
Accordingly, the Related Preferred Securities that an investor may purchase, or
the Corresponding Junior Subordinated Debentures that the investor may receive
on dissolution and liquidation of an Issuer, may trade at a discount to the
price that the investor paid to purchase the Related Preferred Securities.
POSSIBLE TAX LAW CHANGES. On March 19, 1996, the Revenue Reconciliation
Bill of 1996 (the "Revenue Reconciliation Bill"), the revenue portion of
President Clinton's budget proposal, was introduced in the 104th Congress. If
enacted, the Revenue Reconciliation Bill would have generally denied interest
deductions for interest on an instrument issued by a corporation that has a
maximum weighted average maturity of more than 40 years. The Revenue
Reconciliation Bill also would have generally denied interest deductions for
interest as an instrument, issued by a corporation, that has a maximum term of
more than 20 years and that is not shown as indebtedness on the separate
balance sheet of the issuer or, where the instrument is issued to a related
party (other than a corporation), where the holder or some other related party
issues a related instrument that is not shown as indebtedness on the issuer's
consolidated balance sheet. For purposes of determining the weighted average
maturity or the term of an instrument, any right to extend would be treated as
exercised. The above-described provisions of the Revenue Reconciliation Bill
were proposed to be effective as to instruments issued on or after December 7,
1995. If either provision were to have applied to the Preferred Securities of
any series, the Corporation would have been unable to deduct interest on the
Preferred Securities of such series. However, on March 29, 1996, the Chairmen
of the Senate Finance and House Ways and Means Committees issued a joint
statement to the effect that it was their intention that the effective date of
the President's legislative proposals, if adopted, would be no earlier than the
date of appropriate Congressional action. Under current law, the Corporation
will be able to deduct interest on the Preferred Securities. Although the 104th
Congress adjourned without enacting the above-described provisions of the
Revenue Reconciliation Bill, there can be no assurance that current or future
legislative proposals or final legislation will not affect the ability of the
Corporation to deduct interest on the Preferred Securities. Such a change could
give rise to a Tax Event, which may permit the Corporation to cause a
redemption of the Preferred Securities, as described more fully herein.
REDEMPTION PROCEDURES
Related Preferred Securities redeemed on each Redemption Date shall be
redeemed at the applicable Redemption Price with the applicable proceeds from
the contemporaneous redemption of the Corresponding Junior Subordinated
Debentures. Redemptions of the Related Preferred Securities shall be made and
the Redemption Price shall be payable on each Redemption Date only to the
extent that the related Issuer has funds on hand and available for the payment
of such Redemption Price. See " -- Subordination of Common Securities".
If the Property Trustee gives a notice of redemption in respect of a
series of Preferred Securities, then by 12:00 noon, New York City time, on the
Redemption Date, to the extent funds are available, the Property Trustee will
deposit irrevocably with the Depositary funds sufficient to pay the applicable
Redemption Price and will give the Depositary irrevocable instructions and
authority to pay the Redemption Price to the holders of such Preferred
Securities. See "Book-Entry Issuance". If such Preferred Securities are no
longer in book-entry form, the Property Trustee, to the extent funds are
available, will irrevocably deposit with the Paying Agent for such Preferred
Securities funds sufficient to pay the applicable Redemption Price and will
give such Paying Agent irrevocable instructions and authority to pay the
Redemption Price to the holders thereof upon surrender of their certificates
evidencing such Preferred Securities. Notwithstanding the foregoing,
Distributions payable on or prior to the Redemption Date for any Preferred
Securities called for redemption shall be payable to the holders of such
Preferred Securities on the relevant record dates for the related Distribution
Dates. If notice of redemption shall have been given and funds deposited as
required, then upon the date of such deposit, all rights of the holders of such
Preferred Securities so called for redemption will cease, except the right of
the holders of such Preferred Securities to receive the Redemption Price and
any unpaid Distributions payable in respect of the Preferred Securities on or
prior to the Redemption Date, but without interest thereon, and such Preferred
Securities will cease to be outstanding. In the event that any date fixed for
redemption of Preferred Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in respect
of any such delay), except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately preceding Business
Day. In the event that payment of the Redemption Price in respect of Preferred
Securities called for redemption is improperly withheld or refused and not paid
either by the Issuer or by the Corporation pursuant to the Guarantee as
described under "Description of Guarantees", Distributions on such Preferred
Securities will continue to accrue at the then applicable rate, from the
Redemption Date originally established by the Issuer for such Preferred
Securities to the date such Redemption Price is actually paid, in which case
the actual payment date will be the date fixed for redemption for purposes of
calculating the Redemption Price.
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Subject to applicable law (including, without limitation, United States
federal securities law), the Corporation or its subsidiaries may at any time
and from time to time purchase outstanding Preferred Securities by tender, in
the open market or by private agreement.
Payment of the Redemption Price on any Preferred Securities (or any
distribution of Corresponding Junior Subordinated Debentures in exchange for
Related Preferred Securities upon liquidation of the Issuer) shall be made to
the applicable recordholders thereof as they appear on the register for such
Preferred Securities on the relevant record date, which shall be one Business
Day prior to the relevant Redemption Date (or liquidation date); provided,
however, that in the event that any Preferred Securities are not in book-entry
form, the relevant record date for such Preferred Securities shall be a date at
least 15 days prior to the Redemption Date (or liquidation date), as specified
in the applicable Prospectus Supplement.
If less than all of the outstanding Trust Securities of an Issuer are to
be redeemed on a Redemption Date, then the aggregate Liquidation Amount of such
Trust Securities to be redeemed shall be allocated PRO RATA to the outstanding
Preferred Securities and Common Securities based upon the relative Liquidation
Amounts of such classes. The particular Preferred Securities to be redeemed
shall be selected on a PRO RATA basis not more than 60 days prior to the
Redemption Date by the Property Trustee from the outstanding Preferred
Securities not previously called for redemption, by such method as the Property
Trustee shall deem fair and appropriate and which may provide for the selection
for redemption of portions (equal to $25.00 or an integral multiple of $25.00
in excess thereof) of the Liquidation Amount of Preferred Securities of a
denomination larger than $25.00. The Property Trustee shall promptly notify the
trust registrar and transfer agent in writing of the Preferred Securities
selected for redemption, and in the case of any Preferred Securities selected
for partial redemption, the Liquidation Amount thereof to be redeemed. For all
purposes of each Trust Agreement, unless the context otherwise requires, all
provisions relating to the redemption of Preferred Securities shall relate, in
the case of any Preferred Securities redeemed or to be redeemed only in part,
to the portion of the aggregate Liquidation Amount of Preferred Securities
which has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Preferred Securities to be
redeemed at its registered address. Unless the Corporation defaults in payment
of the Redemption Price on the Corresponding Junior Subordinated Debentures, on
and after the Redemption Date interest will cease to accrue on such
Corresponding Junior Subordinated Debentures or portions thereof (and
Distributions will cease to accrue on such Preferred Securities or portions
thereof) called for redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, each Issuer's
Preferred Securities and Common Securities, as applicable, shall be made PRO
RATA based on the Liquidation Amount of such Preferred Securities and Common
Securities; provided, however, that if, on any Distribution Date or Redemption
Date (or liquidation date), a Debenture Event of Default shall have occurred
and be continuing, no payment of any Distribution on, or Redemption Price of
(or Liquidation Distribution (as defined herein) in respect of) any of the
Issuer's Common Securities, and no other payment on account of the redemption,
liquidation or other acquisition of such Common Securities, shall be made
unless payment in full in cash of all accumulated and unpaid Distributions on
all of the Issuer's outstanding Preferred Securities for all Distribution
periods terminating on or prior thereto, or in the case of payment of the
Redemption Price the full amount of such Redemption Price on all of the
Issuer's outstanding Preferred Securities then called for redemption (or in the
case of payment of the Liquidation Distribution the full amount of such
liquidation on all outstanding Preferred Securities) shall have been made or
provided for, and all funds available to the Property Trustee shall first be
applied to the payment in full in cash of all Distributions on, or Redemption
Price of, the Issuer's Preferred Securities then due and payable.
In the case of any Event of Default with respect to a series of Related
Preferred Securities resulting from a Debenture Event of Default with respect
to the Corresponding Junior Subordinated Debentures, the Corporation as holder
of the applicable Issuer's Common Securities will be deemed to have waived any
right to act with respect to any such Event of Default until the effect of all
such Events of Default with respect to such Preferred Securities have been
cured, waived or otherwise eliminated. See " -- Events of Default; Notice".
Until any such Events of Default with respect to such series of Related
Preferred Securities have been so cured, waived or otherwise eliminated, the
Property Trustee shall act solely on behalf of the holders of such series of
Related Preferred Securities and not on behalf of the holder of the Issuer's
Common Securities (I.E., the Corporation), and only the holders of such series
of Related Preferred Securities will have the right to direct the Property
Trustee to act on their behalf.
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LIQUIDATION DISTRIBUTION UPON TERMINATION
Pursuant to each Trust Agreement, each Issuer shall automatically
terminate upon expiration of its term and shall terminate on the first to occur
of:
(i) certain events of bankruptcy, dissolution or liquidation of the
holder of its Common Securities (I.E., the Corporation);
(ii) the distribution of a Like Amount of Corresponding Junior
Subordinated Debentures to the holders of its related Trust Securities, if
the holder of the Common Securities (I.E., the Corporation) has given
written direction to the Property Trustee to terminate such Issuer (which
direction is optional and wholly within the discretion of the holder of the
Common Securities (I.E., the Corporation));
(iii) redemption of all of its Preferred Securities as described under "
-- Redemption or Exchange; MANDATORY REDEMPTION"; and
(iv) the entry of an order for the dissolution of the Issuer by a court
of competent jurisdiction.
If an early termination occurs as described in clause (i), (ii) or (iv)
above, the Issuer shall be liquidated by the Issuer Trustees as expeditiously
as the Issuer Trustees determine to be possible by distributing, after
satisfaction of liabilities to creditors of such Issuer in accordance with
applicable law and the applicable Expense Agreement, to the holders of such
Issuer's Trust Securities in exchange therefor a Like Amount of the
Corresponding Junior Subordinated Debentures, unless such distribution is
determined by the Property Trustee not to be practical, in which event such
holders will be entitled to receive out of the assets of the Issuer available
for distribution to holders, after satisfaction of liabilities to creditors of
such Issuer in accordance with applicable law and the applicable Expense
Agreement, an amount equal to, in the case of holders of Preferred Securities,
the aggregate of the Liquidation Amount of such Preferred Securities, plus
accrued and unpaid Distributions thereon to the date of payment (such amount
being the "Liquidation Distribution"). If such Liquidation Distribution can be
paid only in part because such Issuer has insufficient assets available to pay
in full the aggregate Liquidation Distribution, then the amounts payable
directly by such Issuer on its Preferred Securities shall be paid on a PRO RATA
basis. The holder of such Issuer's Common Securities (I.E., the Corporation)
will be entitled to receive distributions upon any such liquidation PRO RATA
with the holders of the Preferred Securities, except that if a Debenture Event
of Default has occurred and is continuing, such Preferred Securities shall have
a priority over the Common Securities.
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an "Event of Default" under
each Trust Agreement (an "Event of Default") with respect to the Preferred
Securities issued thereunder (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(i) the occurrence of a Debenture Event of Default under the Indenture
(see "Description of Junior Subordinated Debentures -- Debenture Events of
Default"); or
(ii) default by the Property Trustee in the payment of any Distribution
when it becomes due and payable, and continuation of such default for a
period of 30 days; or
(iii) default by the Property Trustee in the payment of any Redemption
Price of any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Issuer Trustees in such Trust Agreement
(other than a covenant or warranty a default in the performance of which or
the breach of which is dealt with in clause (ii) or (iii) above), and
continuation of such default or breach for a period of 60 days after there
has been given, by registered or certified mail, to the defaulting Issuer
Trustee or Trustees by the holders of at least 25 percent in aggregate
Liquidation Amount of the outstanding Preferred Securities of the
applicable Issuer, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" under such Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by the Corporation to
appoint a successor Property Trustee within 90 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the related Issuer's
Preferred Securities, the Administrative Trustees and the Corporation, as
Depositor, unless such Event of Default shall have been cured or waived.
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The Corporation, as Depositor, and the Administrative Trustees are required to
file annually with the Property Trustee a certificate as to whether or not they
are in compliance with all the conditions and covenants applicable to them
under each Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, Preferred
Securities shall have a preference over Common Securities as described above.
See " -- Liquidation Distribution Upon Termination". The existence of an Event
of Default does not entitle the holders of Preferred Securities to accelerate
the maturity thereof.
REMOVAL OF ISSUER TRUSTEES
Unless a Debenture Event of Default shall have occurred and be continuing,
any Issuer Trustee may be removed at any time by the holder of the Common
Securities (I.E., the Corporation). If a Debenture Event of Default has
occurred and is continuing, the Property Trustee and the Delaware Trustee may
be removed at such time by the holders of a majority in Liquidation Amount of
the outstanding Preferred Securities. In no event will the holders of the
Preferred Securities have the right to vote to appoint, remove or replace the
Administrative Trustees, which voting rights are vested exclusively in the
Corporation as the holder of the Common Securities. No resignation or removal
of an Issuer Trustee and no appointment of a successor trustee shall be
effective until the acceptance of appointment by the successor trustee in
accordance with the provisions of the applicable Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing, at any
time or from time to time, for the purpose of meeting the legal requirements of
the Trust Indenture Act or of any jurisdiction in which any part of the assets
of an Issuer may at the time be located, the Corporation, as the holder of the
Common Securities, and the Administrative Trustees shall have power to appoint
one or more persons either to act as a co-trustee, jointly with the Property
Trustee, of all or any part of such assets, or to act as separate trustee of
any such assets, in either case with such powers as may be provided in the
instrument of appointment, and to vest in such person or persons in such
capacity any property, title, right or power deemed necessary or desirable,
subject to the provisions of the applicable Trust Agreement. In case a
Debenture Event of Default has occurred and is continuing, the Property Trustee
alone shall have power to make such appointment.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any Person into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which such Trustee shall be a party, or any
Person succeeding to all or substantially all the corporate trust business of
such Trustee, shall be the successor of such Trustee under each Trust
Agreement, provided such Person shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF ISSUERS
An Issuer may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except as
described below. An Issuer may, at the request of the holder of the Common
Securities (I.E., the Corporation), with the consent of the Administrative
Trustees and without the consent of the holders of the Preferred Securities of
such Issuer, merge with or into, consolidate, amalgamate, or be replaced by or
convey, transfer or lease its properties and assets substantially as an
entirety to a trust organized as such under the laws of any state; provided,
that (i) such successor entity either (a) expressly assumes all of the
obligations of such Issuer with respect to such Preferred Securities, or (b)
substitutes for such Preferred Securities other securities having substantially
the same terms as such Preferred Securities (the "Successor Securities") so
long as the Successor Securities rank the same as such Preferred Securities in
priority with respect to distributions and payments upon liquidation,
redemption and otherwise, (ii) the Corporation expressly appoints a trustee of
such successor entity possessing the same powers and duties as the Property
Trustee as the holder of the Corresponding Junior Subordinated Debentures,
(iii) the Successor Securities are listed, or any Successor Securities will be
listed upon notification of issuance, on any national securities exchange or
other organization on which such Preferred Securities are then listed, if any,
(iv) such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not cause such Preferred Securities (including any
Successor Securities) to be downgraded by any nationally recognized statistical
rating organization, (v) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of such Preferred Securities (including any
Successor Securities) in any material respect, (vi) such
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successor entity has a purpose substantially identical to that of the Issuer,
(vii) prior to such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, the holder of the Common Securities has received
an opinion from independent counsel to the Issuer experienced in such matters
to the effect that (a) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of such Preferred Securities (including any
Successor Securities) in any material respect, and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease,
neither the Issuer nor such successor entity will be required to register as an
investment company under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and (viii) the Corporation or any permitted
successor or assignee owns all of the Common Securities of such successor
entity and guarantees the obligations of such successor entity under the
Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, an Issuer shall not, except with the consent of
holders of 100 percent in Liquidation Amount of such Preferred Securities,
consolidate, amalgamate, merge with or into, or be replaced by or convey,
transfer or lease its properties and assets substantially as an entirety to any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease would cause the Issuer or the
successor entity to be classified as an association taxable as a corporation or
as other than a grantor trust for United States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF EACH TRUST AGREEMENT
Except as provided below and under "Description of Guarantees --
Amendments and Assignment" and as otherwise required by law and the applicable
Trust Agreement, the holders of Preferred Securities will have no voting
rights.
Each Trust Agreement may be amended from time to time by the Corporation,
the Property Trustee and the Administrative Trustees, without the consent of
the holders of Preferred Securities (i) to cure any ambiguity, correct or
supplement any provisions in such Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters or
questions arising under such Trust Agreement, which shall not be inconsistent
with the other provisions of such Trust Agreement, or (ii) to modify, eliminate
or add to any provisions of such Trust Agreement to such extent as shall be
necessary to ensure that the Issuer will not be classified for United States
federal income tax purposes as an association taxable as a corporation or as
other than a grantor trust at all times that any Trust Securities are
outstanding or to ensure that the Issuer will not be required to register as an
"investment company" under the Investment Company Act; provided, however, that
in the case of either clause (i) or clause (ii), such action shall not
adversely affect in any material respect the interests of any holder of
Preferred Securities, and any amendments of such Trust Agreement shall become
effective when notice thereof is given to the holders of Trust Securities. Each
Trust Agreement may be amended by the Issuer Trustees and the Corporation with
(i) the consent of holders representing not less than a majority (based on
Liquidation Amounts) of the outstanding Trust Securities, and (ii) receipt by
the Issuer Trustees of an opinion of counsel to the effect that such amendment
or the exercise of any power granted to the Issuer Trustees in accordance with
such amendment will not cause the Issuer to be classified as an association
taxable as a corporation or affect the Issuer's status as a grantor trust for
United States federal income tax purposes or the Issuer's exemption from status
as an "investment company" under the Investment Company Act, provided that
without the consent of each holder of Trust Securities, such Trust Agreement
may not be amended to (i) change the amount or timing of any Distribution on
the Trust Securities or otherwise adversely affect the amount of any
Distribution required to be made in respect of the Trust Securities as of a
specified date, or (ii) restrict the right of a holder of Trust Securities to
institute suit for the enforcement of any such payment on or after such date.
So long as any series of Corresponding Junior Subordinated Debentures are
held by the Property Trustee, the Issuer Trustees shall not (i) direct the
time, method and place of conducting any proceeding for any remedy available to
the Debenture Trustee, or executing any trust or power conferred on the
Property Trustee with respect to such series of Corresponding Junior
Subordinated Debentures, (ii) waive any past default that is waiveable under
the Indenture, (iii) exercise any right to rescind or annul a declaration that
the principal of such series of Corresponding Junior Subordinated Debentures
shall be due and payable, or (iv) consent to any amendment, modification or
termination of the Indenture or such series of Corresponding Junior
Subordinated Debentures, where such consent shall be required, without, in each
case, obtaining the prior approval of the holders of a majority in aggregate
Liquidation Amount of all outstanding Related Preferred Securities; provided,
however, that where a consent under the Indenture would require the consent of
each holder of such Related Corresponding Junior Subordinated Debentures, no
such consent shall be given by the Property Trustee without the prior consent
of each holder of the Related Preferred Securities. The Issuer Trustees shall
not revoke any action previously authorized or approved by a vote of the
holders of the Related Preferred Securities except by subsequent vote of the
holders of the Related Preferred Securities. The Property Trustee shall notify
each holder of such Related Preferred Securities of any notice of default with
respect to the Corresponding Junior Subordinated Debentures. In addition to
obtaining the foregoing approvals of the holders of the Related Preferred
Securities, prior to taking any of the foregoing actions, the Issuer Trustees
shall obtain
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an opinion of counsel experienced in such matters to the effect that the Issuer
will not be classified as an association taxable as a corporation or as other
than a grantor trust for United States federal income tax purposes on account
of such action.
Any required approval of holders of a series of Preferred Securities may
be given at a meeting of holders of such series of Preferred Securities
convened for such purpose or pursuant to written consent. The Property Trustee
will cause a notice of any meeting at which holders of such series of Preferred
Securities are entitled to vote, or of any matter upon which action by written
consent of such holders is to be taken, to be given to each holder of record of
such series of Preferred Securities in the manner set forth in the applicable
Trust Agreement.
No vote or consent of the holders of Preferred Securities will be required
for an Issuer to redeem or cancel Preferred Securities in accordance with the
applicable Trust Agreement.
Notwithstanding that holders of a series of Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
Preferred Securities that are owned by the Corporation, the Issuer Trustees or
any affiliate of the Corporation or any Issuer Trustee, shall, for purposes of
such vote or consent, be treated as if they were not outstanding.
GLOBAL PREFERRED SECURITIES
The Preferred Securities of a series may be issued in whole or in part in
the form of one or more global Preferred Securities ("Global Preferred
Securities") that will be deposited with, or on behalf of, the Depositary
identified in the Prospectus Supplement relating to such series. Unless
otherwise indicated in the applicable Prospectus Supplement for such series,
the Depositary will be The Depository Trust Company ("DTC"). Global Preferred
Securities may be issued only in fully registered form and in either temporary
or permanent form. Unless and until it is exchanged in whole or in part for the
individual Preferred Securities represented thereby, a Global Preferred
Security may not be transferred except as a whole by the Depositary for such
Global Preferred Security to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary or by
the Depositary or any nominee to a successor Depositary or any nominee of such
successor.
The specific terms of the depositary arrangement with respect to a series
of Preferred Securities will be described in the Prospectus Supplement relating
to such series. The Corporation anticipates that the following provisions will
generally apply to depositary arrangements.
Upon the issuance of a Global Preferred Security, and the deposit of such
Global Preferred Security with or on behalf of the Depositary, the Depositary
for such Global Preferred Security or its nominee will credit, on its
book-entry registration and transfer system, the respective aggregate
Liquidation Amounts of the individual Preferred Securities represented by such
Global Preferred Security to the accounts of Participants. Such accounts shall
be designated by the dealers, underwriters or agents with respect to such
Preferred Securities or by the Corporation if such Preferred Securities are
offered and sold directly by the Corporation. Ownership of beneficial interests
in a Global Preferred Security will be limited to Participants or persons that
may hold interests through Participants. Ownership of beneficial interests in
such Global Preferred Security will be shown on, and the transfer of that
ownership will be effected only through, records maintained by the applicable
Depositary or its nominee (with respect to interests of Participants) and the
records of Participants (with respect to interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Preferred Security.
So long as the Depositary for a Global Preferred Security, or its nominee,
is the registered owner of such Global Preferred Security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or holder
of the Preferred Securities represented by such Global Preferred Security for
all purposes under the Trust Agreement governing such Preferred Securities.
Except as provided below, owners of beneficial interests in a Global Preferred
Security will not be entitled to have any of the individual Preferred
Securities of the series represented by such Global Preferred Security
registered in their names, will not receive or be entitled to receive physical
delivery of any such Preferred Securities of such series in certificated form
and will not be considered the owners or holders thereof under the Indenture.
Payments of principal of (and premium, if any) and interest on individual
Preferred Securities represented by a Global Preferred Security registered in
the name of a Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner of the Global Preferred
Security representing such Preferred Securities. None of the Corporation, the
Property Trustee, any Paying Agent, or the Securities Registrar for such
Preferred Securities will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
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interests of the Global Preferred Security representing such Preferred
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Corporation expects that the Depositary for a series of Preferred
Securities or its nominee, upon receipt of any payment of any Liquidation
Amount, premium or Distributions in respect of a Global Preferred Security
representing any of such Preferred Securities, including payment of any
Redemption Price therefor, will credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interest in the aggregate
Liquidation Amount of such Global Preferred Security for such Preferred
Securities as shown on the records of such Depositary or its nominee. The
Corporation also expects that payments by Participants to owners of beneficial
interests in such Global Preferred Security held through such Participants will
be governed by standing instructions and customary practices, as is now the
case with securities held for the accounts of customers in bearer form or
registered in "street name". Such payments will be the responsibility of such
Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depositary for a series of Preferred Securities is at any time unwilling,
unable or ineligible to continue as depositary and a successor depositary is
not appointed by the Issuer, or if there shall have occurred and be continuing
a Debenture Event of Default with respect to such series of Preferred
Securities, then within 90 days thereof the Issuer will issue definitive
certificates for Preferred Securities of such series in exchange for the Global
Preferred Security or Securities representing such series of Preferred
Securities. In addition, the Issuer may at any time and in its sole discretion,
subject to any limitations described in the Prospectus Supplement relating to
such Preferred Securities, determine not to have any Preferred Securities of
such series represented by one or more Global Preferred Securities and, in such
event, will issue individual Preferred Securities of such series in exchange
for the Global Preferred Security or Securities representing such series of
Preferred Securities. Further, if the Issuer so specifies with respect to the
Preferred Securities of a series, an owner of a beneficial interest in a Global
Preferred Security representing Preferred Securities of such series may, on
terms acceptable to the Issuer, the Property Trustee and the Depositary for
such Global Preferred Security, receive individual Preferred Securities of such
series in exchange for such beneficial interests, subject to any limitations
described in the Prospectus Supplement relating to such Preferred Securities.
In any such instance, an owner of a beneficial interest in a Global Preferred
Security will be entitled to physical delivery of individual Preferred
Securities of the series represented by such Global Preferred Security equal in
Liquidation Amount to such beneficial interest and to have such Preferred
Securities registered in its name. Individual Preferred Securities of such
series so issued will be issued in denominations, unless otherwise specified by
the Issuer, of $25.00 and integral multiples thereof.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities shall be made to the
Depositary, which shall credit the relevant accounts at the Depositary on the
applicable Distribution Dates or, if any Issuer's Preferred Securities are not
held by the Depositary, such payments shall be made by check mailed to the
address of the holder entitled thereto as such address shall appear on the
applicable Securities Register. Unless otherwise specified in the applicable
Prospectus Supplement, the Paying Agent shall initially be the Property Trustee
and any co-paying agent chosen by the Property Trustee and acceptable to the
Administrative Trustees. The Paying Agent shall be permitted to resign as
Paying Agent upon 30 days' written notice to the Property Trustee. In the event
that the Property Trustee shall no longer be the Paying Agent, the
Administrative Trustees shall appoint a successor (which shall be a bank or
trust company acceptable to the Administrative Trustees) to act as Paying
Agent.
REGISTRAR AND TRANSFER AGENT
Unless otherwise specified in the applicable Prospectus Supplement, the
Property Trustee will act as registrar and transfer agent for the Preferred
Securities.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of each Issuer, but upon payment of any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange. The Issuers will not be required to register or cause to be
registered the transfer of their Preferred Securities after such Preferred
Securities have been called for redemption.
INFORMATION CONCERNING PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of
an Event of Default, undertakes to perform only such duties as are specifically
set forth in the applicable Trust Agreement and, after such Event of Default,
must exercise the same degree of care and skill as a prudent person would
exercise or use in the conduct of his or her own affairs.
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Subject to this provision, the Property Trustee is under no obligation to
exercise any of the powers vested in it by the applicable Trust Agreement at
the request of any holder of Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby. If no Event of Default has occurred and is continuing under
the applicable Trust Agreement and the Property Trustee is required to decide
between alternative causes of action, construe ambiguous provisions in such
Trust Agreement or is unsure of the application of any provision of such Trust
Agreement, and the matter is not one on which holders of Preferred Securities
are entitled under such Trust Agreement to vote, then the Property Trustee
shall take such action as is directed by the Corporation and if not so
directed, shall take such action as it deems advisable and in the best
interests of the holders of the Preferred Securities and will have no liability
except for its own bad faith, negligence or willful misconduct.
MISCELLANEOUS
The Administrative Trustees for each Issuer are authorized and directed to
conduct the affairs of and to operate such Issuer in such a way that such
Issuer will not be deemed to be an "investment company" required to be
registered under the Investment Company Act and will not be classified as an
association taxable as a corporation or as other than a grantor trust for
United States federal income tax purposes, and so that the Corresponding Junior
Subordinated Debentures held by such Issuer will be treated as indebtedness of
the Corporation for United States federal income tax purposes. In this
connection, the Corporation and the Administrative Trustees are authorized to
take any action, not inconsistent with applicable law, the certificate of trust
of each Issuer or each Trust Agreement, that the Corporation and the
Administrative Trustees determine in their sole discretion to be necessary or
desirable for such purposes, as long as such action does not materially
adversely affect the interests of the holders of the Related Preferred
Securities.
Holders of the Preferred Securities have no preemptive or similar rights.
No Issuer may borrow money or issue debt or mortgage or pledge any of its
assets.
BOOK-ENTRY ISSUANCE
DTC will act as Depositary for all of the Preferred Securities and the
Junior Subordinated Debentures, unless otherwise referred to in the Prospectus
Supplement relating to an offering of Preferred Securities or Junior
Subordinated Debentures. The Preferred Securities and the Junior Subordinated
Debentures will be issued only as fully-registered securities registered in the
name of Cede & Co. (DTC's nominee). One or more fully-registered global
certificates will be issued for the Preferred Securities of each Issuer and the
Junior Subordinated Debentures, representing in the aggregate the total number
of such Issuer's Preferred Securities or aggregate principal balance of Junior
Subordinated Debentures, respectively, and will be deposited with DTC.
DTC is a limited purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC holds securities that its Participants deposit with DTC. DTC also
facilitates the settlement among Participants of securities transactions, such
as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. "Direct
Participants" include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. DTC is owned by a number
of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that clear through or
maintain custodial relationships with Direct Participants, either directly or
indirectly ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Commission.
Purchases of Preferred Securities or Junior Subordinated Debentures within
the DTC system must be made by or through Direct Participants, which will
receive a credit for the Preferred Securities or Junior Subordinated Debentures
on DTC's records. The ownership interest of each actual purchaser of each
Preferred Security and each Junior Subordinated Debenture ("Beneficial Owner")
is in turn to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchases, but Beneficial Owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the Direct or Indirect Participants through which the Beneficial
Owners purchased Preferred Securities or Junior Subordinated Debentures.
Transfers of ownership interests in the Preferred Securities or Junior
Subordinated Debentures are to be accomplished
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by entries made on the books of Participants acting on behalf of Beneficial
Owners. Beneficial Owners will not receive certificates representing their
ownership interests in Preferred Securities or Junior Subordinated Debentures,
except in the event that use of the book-entry system for the Preferred
Securities of such Issuer or Junior Subordinated Debentures is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities or Junior Subordinated Debentures; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Preferred Securities
or Junior Subordinated Debentures are credited, which may or may not be the
Beneficial Owners. The Participants will remain responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners will
be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. as the registered holder of
the Preferred Securities or Junior Subordinated Debentures. If less than all of
an Issuer's Preferred Securities or the Junior Subordinated Debentures are
being redeemed, DTC's current practice is to determine by lot the amount of the
interest of each Direct Participant to be redeemed.
Although voting with respect to the Preferred Securities or the Junior
Subordinated Debentures is limited to the holders of record of the Preferred
Securities or Junior Subordinated Debentures, in those instances in which a
vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to Preferred Securities or Junior Subordinated Debentures. Under its
usual procedures, DTC would mail an omnibus proxy (the "Omnibus Proxy") to the
relevant Trustee as soon as possible after the applicable record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts such Preferred Securities or Junior Subordinated
Debentures are credited on the applicable record date (identified in a listing
attached to the Omnibus Proxy).
Distribution payments on the Preferred Securities or the Junior
Subordinated Debentures will be made by the relevant Trustee to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment
date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payments on such payment
date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices and will be the responsibility of
such Participant and not of DTC, the relevant Trustee, the Issuer thereof or
the Corporation, subject to any statutory or regulatory requirements as may be
in effect from time to time. Payment of Distributions to DTC is the
responsibility of the relevant Trustee, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursements of such payments
to the Beneficial Owners is the responsibility of Direct and Indirect
Participants.
DTC may discontinue providing its services as Depositary with respect to
any of the Preferred Securities or the Junior Subordinated Debentures at any
time by giving reasonable notice to the relevant Trustee and the Corporation.
In the event that a successor Depositary is not obtained, definitive Preferred
Security or Junior Subordinated Debenture certificates representing such
Preferred Securities or Junior Subordinated Debentures are required to be
printed and delivered. The Corporation, at its option, may decide to
discontinue use of the system of book-entry transfers through DTC (or a
successor Depositary). After a Debenture Event of Default, the holders of a
majority in Liquidation Amount of Preferred Securities or aggregate principal
amount of Junior Subordinated Debentures may determine to discontinue the
system of book-entry transfers through DTC. In any such event, definitive
certificates for such Preferred Securities or Junior Subordinated Debentures
will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Issuers and the Corporation believe to
be accurate, but the Issuers and the Corporation assume no responsibility for
the accuracy thereof. Neither the Issuers nor the Corporation has any
responsibility for the performance by DTC or its Participants of their
respective obligations as described herein or under the rules and procedures
governing their respective operations.
DESCRIPTION OF GUARANTEES
A Guarantee will be executed and delivered by the Corporation concurrently
with the issuance by each Issuer of its Preferred Securities. Wilmington Trust
Company will act as indenture trustee ("Guarantee Trustee") under each
Guarantee for the purposes of compliance with the Trust Indenture Act and each
Guarantee will be qualified as an indenture under the Trust Indenture Act. This
summary of certain provisions of the Guarantees, which describes the material
terms thereof, does not purport to be complete and is subject to, and qualified
in its entirety by reference to, all of the provisions of each Guarantee,
including the definitions therein of certain terms, and the Trust Indenture
Act. The form of the Guarantee has been
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filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. Reference in this summary to Preferred Securities means that
Issuer's Preferred Securities to which a Guarantee relates. The Guarantee
Trustee will hold each Guarantee for the benefit of the holders of the related
Issuer's Preferred Securities.
GENERAL
The Corporation will unconditionally agree to pay in full on a
subordinated basis, to the extent set forth herein, the Guarantee Payments (as
defined herein) to the holders of the Preferred Securities, as and when due,
regardless of any defense, right of set-off or counterclaim that such Issuer
may have or assert other than the defense of payment. The following payments
with respect to the Preferred Securities, to the extent not paid by or on
behalf of the related Issuer (the "Guarantee Payments"), will be subject to the
Guarantee: (i) any accumulated and unpaid Distributions required to be paid on
such Preferred Securities, to the extent that such Issuer has funds on hand
available therefor at such time; (ii) the Redemption Price with respect to any
Preferred Securities called for redemption, to the extent that such Issuer has
funds on hand available therefor at such time; or (iii) upon a voluntary or
involuntary termination, winding-up or liquidation of such Issuer (unless
Corresponding Junior Subordinated Debentures are distributed to holders of any
Related Preferred Securities in exchange therefor), the lesser of (a) the
Liquidation Distribution, and (b) the amount of assets of such Issuer remaining
available for distribution to holders of Preferred Securities, after
satisfaction of liabilities to creditors of such Issuer in accordance with
applicable law and the applicable Expense Agreement. The Corporation's
obligation to make a Guarantee Payment may be satisfied by direct payment of
the required amounts by the Corporation to the holders of the Related Preferred
Securities or by causing the Issuer to pay such amounts to such holders.
Each Guarantee will be an unconditional guarantee on a subordinated basis
of the related Issuer's obligations under the Preferred Securities, but will
apply only to the extent that such related Issuer has funds sufficient to make
such payments, and is not a guarantee of collection.
If the Corporation does not make interest payments on Corresponding Junior
Subordinated Debentures, if any, held by the Issuer, the Issuer will not be
able to pay Distributions on the Related Preferred Securities issued by it and
will not have funds legally available therefor. Each Guarantee will rank
subordinate and junior in right of payment to all Senior Debt of the
Corporation. See " -- Status of the Guarantees". Because the Corporation is a
holding company, the right of the Corporation to participate in any
distribution of assets of any subsidiary upon such subsidiary's liquidation or
reorganization or otherwise, is subject to the prior claims of creditors of
that subsidiary, except to the extent the Corporation may itself be recognized
as a creditor of that subsidiary. Accordingly, the Corporation's obligations
under the Guarantees will be effectively subordinated to all existing and
future liabilities of the Corporation's subsidiaries, and claimants should look
only to the assets of the Corporation for payments thereunder. See "The
Corporation". Except as otherwise provided in the applicable Prospectus
Supplement, the Guarantees do not limit the incurrence or issuance of other
secured or unsecured debt of the Corporation, including Senior Debt, whether
under the Indenture, any other existing indenture or any other indenture that
the Corporation may enter into in the future or otherwise.
The Corporation will, with respect to each series of Preferred Securities,
through the applicable Guarantee, the applicable Trust Agreement, the
applicable series of Corresponding Junior Subordinated Debentures, the
Indenture and the applicable Expense Agreement, taken together, fully and
unconditionally guarantee all of the Issuer's obligations under such Preferred
Securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes such a guarantee. It is only
the combined operation of these documents that has the effect of providing a
full and unconditional guarantee of the Issuer's obligations with respect to
such Preferred Securities. See "Relationship Among Preferred Securities, the
Corresponding Junior Subordinated Debentures and Guarantees".
STATUS OF GUARANTEES
Each Guarantee will constitute an unsecured obligation of the Corporation
and will rank subordinate and junior in right of payment to all Senior Debt of
the Corporation in the same manner as Junior Subordinated Debentures.
Each Guarantee will rank PARI PASSU with any other Guarantee issued by the
Corporation. Each Guarantee will constitute a guarantee of payment and not of
collection (I.E., the guaranteed party may institute a legal proceeding
directly against the Guarantor to enforce its rights under the Guarantee
without first instituting a legal proceeding against any other person or
entity). Each Guarantee will be held for the benefit of the holders of the
Related Preferred Securities. Each Guarantee will not be discharged except by
payment of the Guarantee Payments in full to the extent not paid by the Issuer
or upon distribution to the holders of the Related Preferred Securities with
respect to a series of Corresponding Junior Subordinated
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Debentures. None of the Guarantees places a limitation on the amount of
additional Senior Debt that may be incurred by the Corporation. The Corporation
expects from time to time to incur additional indebtedness constituting Senior
Debt.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely
affect the rights of holders of the Series of Related Preferred Securities (in
which case no vote will be required), no Guarantee may be amended without the
prior approval of the holders of not less than a majority of the aggregate
Liquidation Amount of such Preferred Securities. The manner of obtaining any
such approval will be as set forth under "Description of Preferred Securities
- -- Voting Rights; Amendment of Each Trust Agreement". All guarantees and
agreements contained in each Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of the Corporation and shall inure to
the benefit of the holders of the Series of Related Preferred Securities then
outstanding.
EVENTS OF DEFAULT
An event of default under each Guarantee will occur upon the failure of
the Corporation to perform any of its payment or other obligations thereunder.
The holders of not less than a majority in aggregate Liquidation Amount of the
Series of Related Preferred Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee in respect of the related Guarantee or to direct the exercise
of any trust or power conferred upon the Guarantee Trustee under such
Guarantee.
Any holder of the series of Related Preferred Securities may institute a
legal proceeding directly against the Corporation to enforce its rights under
the related Guarantee without first instituting a legal proceeding against the
Issuer, the Guarantee Trustee or any other person or entity.
The Corporation, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether or not the Corporation is in
compliance with all the conditions and covenants applicable to it under the
Guarantee.
INFORMATION CONCERNING GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of
an event of default under any Guarantee, undertakes to perform only such duties
as are specifically set forth in such Guarantee and, after an event of default
under such Guarantee, must exercise the same degree of care and skill as a
prudent person would exercise or use in the conduct of his or her own affairs.
Subject to this provision, the Guarantee Trustee is under no obligation to
exercise any of the powers vested in it by any Guarantee at the request of any
holder of the series of Related Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
TERMINATION OF GUARANTEES
Each Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price of the series of Related Preferred
Securities, upon full payment of the amounts payable upon liquidation of the
related Issuer or upon distribution of such Corresponding Junior Subordinated
Debentures to the holders of such Related Preferred Securities in exchange
therefor. Each Guarantee will continue to be effective or will be reinstated,
as the case may be, if at any time any holder of the series of Related
Preferred Securities must restore payment of any sums paid under such Related
Preferred Securities or such Guarantee.
GOVERNING LAW
Each Guarantee will be governed by and construed in accordance with the
laws of the State of New York.
THE EXPENSE AGREEMENT
Pursuant to the applicable Expense Agreement, the Corporation will, as
holder of the Common Securities of the applicable Issuer unconditionally
guarantee to each person or entity to whom such Issuer becomes indebted or
liable, the full payment of any costs, expenses or liabilities of the Issuer,
other than obligations of such Issuer to pay to the holders of any of such
Issuer's Preferred Securities or other similar interests in such Issuer of the
amounts due such holders pursuant to the terms of such Preferred Securities or
such other similar interests, as the case may be. Each Expense Agreement is
intended to be enforceable by third parties.
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RELATIONSHIP AMONG PREFERRED SECURITIES,
CORRESPONDING JUNIOR SUBORDINATED DEBENTURES
AND GUARANTEES
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on any series of Preferred
Securities (to the extent the Issuer thereof has funds available for the
payment of such Distributions) are unconditionally guaranteed by the
Corporation as and to the extent set forth under "Description of Guarantees".
Taken together, with respect to each series of Preferred Securities the
Corporation's obligations under each series of Corresponding Junior
Subordinated Debentures, the Indenture, the applicable Trust Agreement, the
applicable Expense Agreement, and the applicable Guarantee will provide, in the
aggregate, a full and unconditional guarantee of payment of Distributions and
other amounts due on such series of Preferred Securities. No single document
standing alone or operating in conjunction with fewer than all of the other
documents constitutes such guarantee. It is only the combined operation of
these documents that will have the effect of providing a full and unconditional
guarantee of the Issuer's obligations under such Issuer's Preferred Securities.
If and to the extent that the Corporation does not make payments on any series
of Corresponding Junior Subordinated Debentures, such Issuer will not pay
Distributions or other amounts due on its Related Preferred Securities. The
Guarantees do not cover payment of Distributions when the Issuer does not have
sufficient funds to pay such Distributions. In such event, the remedy of a
holder of a series of Preferred Securities is to institute a legal proceeding
directly against the Corporation pursuant to the terms of the Indenture for
enforcement of payment of such amounts. The obligations of the Corporation
under each Guarantee are subordinate and junior in right of payment to all
Senior Debt of the Corporation.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on
each series of Corresponding Junior Subordinated Debentures, such payments will
be sufficient to cover Distributions and other payments due on the Related
Preferred Securities, primarily because (i) the aggregate principal amount of
each series of Corresponding Junior Subordinated Debentures will be equal to
the sum of the aggregate stated Liquidation Amount of the Related Preferred
Securities and Common Securities; (ii) the interest rate and interest and other
payment dates on each series of Corresponding Junior Subordinated Debentures
will match the Distribution rate and Distribution and other payment dates for
the Related Preferred Securities; (iii) the Corporation shall pay for all and
any costs, expenses and liabilities of such Issuer except the Issuer's
obligations to holders of its Preferred Securities under such Preferred
Securities; and (iv) each Trust Agreement further provides that the Related
Issuer will not engage in any activity that is not consistent with the limited
purposes of such Issuer.
Notwithstanding anything to the contrary in the Indenture, the Corporation
has the right to set-off any payment it is otherwise required to make
thereunder with and to the extent the Corporation has theretofore made, or is
concurrently on the date of such payment making, a payment under the related
Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of any Related Preferred Security may institute a legal
proceeding directly against the Corporation to enforce its rights under the
related Guarantee without first instituting a legal proceeding against the
Guarantee Trustee, the related Issuer or any other person or entity.
A default or event of default under any Senior Debt of the Corporation
would not constitute a Debenture Event of Default (and therefore would not
constitute an Event of Default under a Trust Agreement). However, in the event
of payment defaults under, or acceleration of, Senior Debt of the Corporation,
the subordination provisions of the Indenture provide that no payments may be
made in respect of any Junior Subordinated Debentures until such Senior Debt
has been paid in full or any payment default thereunder has been cured or
waived. Failure to make required payments on any series of Junior Subordinated
Debentures would constitute a Debenture Event of Default (and, therefore, an
Event of Default under a Trust Agreement).
LIMITED PURPOSE OF ISSUERS
Each Issuer's Preferred Securities evidence preferred undivided beneficial
interests in the assets of such Issuer, and each Issuer exists for the sole
purpose of issuing its Related Preferred Securities and Common Securities and
investing the proceeds thereof in Corresponding Junior Subordinated Debentures.
A principal difference between the rights of a holder of such Preferred
Security and a holder of a Corresponding Junior Subordinated Debenture is that
a holder of a Corresponding Junior Subordinated Debenture is entitled to
receive from the Corporation the principal amount of and interest accrued
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on Corresponding Junior Subordinated Debentures held, while a holder of
Preferred Securities is entitled to receive Distributions from such Issuer (or
from the Corporation under the applicable Guarantee) if and to the extent such
Issuer has funds available for the payment of such Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation
of any Issuer involving the liquidation of the Corresponding Junior
Subordinated Debentures, the holders of the Related Preferred Securities will
be entitled to receive, out of the assets held by such Issuer, the Liquidation
Distribution in cash. See "Description of Preferred Securities -- Liquidation
Distribution Upon Termination". Upon any voluntary or involuntary liquidation
or bankruptcy of the Corporation, the Property Trustee, as holder of the
Corresponding Junior Subordinated Debentures, would be a subordinated creditor
of the Corporation, subordinated in right of payment to all Senior Debt of the
Corporation as set forth in the Indenture, but entitled to receive payment in
full of principal and interest, before any stockholders of the Corporation
receive payments or distributions. Since the Corporation is the guarantor under
each Guarantee and has agreed to pay for all costs, expenses and liabilities of
each Issuer (other than the Issuer's obligations to the holders of its
Preferred Securities), the positions of a holder of such Preferred Securities
and a holder of such Corresponding Junior Subordinated Debentures relative to
other creditors and to stockholders of the Corporation in the event of
liquidation or bankruptcy of the Corporation are expected to be substantially
the same.
PLAN OF DISTRIBUTION
The Junior Subordinated Debentures or the Preferred Securities may be sold
in a public offering to or through underwriters or dealers designated from time
to time. The Corporation and each Issuer may sell all or a portion of its
Junior Subordinated Debentures or Preferred Securities as soon as practicable
after effectiveness of the Registration Statement of which this Prospectus is a
part. The names of any underwriters or dealers involved in the sale of the
Junior Subordinated Debentures or Preferred Securities in respect of which this
Prospectus is delivered, the amount or number of Junior Subordinated Debentures
and Preferred Securities to be purchased by any such underwriters and any
applicable commissions or discounts will be set forth in the applicable
Prospectus Supplement.
Underwriters may offer and sell Junior Subordinated Debentures or
Preferred Securities at a fixed price or prices, which may be changed, or from
time to time at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. In connection with
the sale of Preferred Securities, underwriters may be deemed to have received
compensation from the Corporation and/or the applicable Issuer in the form of
underwriting discounts or commissions and may also receive commissions.
Underwriters may sell Junior Subordinated Debentures or Preferred Securities to
or through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters.
Any underwriting compensation paid by the Corporation and/or the
applicable Issuer to underwriters in connection with the offering of Junior
Subordinated Debentures or Preferred Securities, and any discounts, concessions
or commissions allowed by such underwriters to participating dealers, will be
described in a Prospectus Supplement. Underwriters and dealers participating in
the distribution of Junior Subordinated Debentures or Preferred Securities may
be deemed to be underwriters, and any discounts and commissions received by
them and any profit realized by them on resale of such Junior Subordinated
Debentures or Preferred Securities may be deemed to be underwriting discounts
and commissions, under the Securities Act. Underwriters and dealers may be
entitled, under agreement with the Corporation and the applicable Issuer, to
indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act, and to reimbursement by the
Corporation for certain expenses.
In connection with the offering of the Preferred Securities of any Issuer,
such Issuer may grant to the underwriters an option to purchase additional
Preferred Securities to cover over-allotments, if any, at the initial public
offering price (with an additional underwriting commission), as may be set
forth in the accompanying Prospectus Supplement. If such Issuer grants any
over-allotment option, the terms of such over-allotment option will be set
forth in the Prospectus Supplement for such Preferred Securities.
Underwriters and dealers may engage in transactions with, or perform
services for, the Corporation and/or the applicable Issuer and/or any of their
affiliates in the ordinary course of business.
The Junior Subordinated Debentures and the Preferred Securities will be
new issues of securities and will have no established trading market. Any
underwriters to whom Junior Subordinated Debentures or Preferred Securities are
sold for
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public offering and sale may make a market in such Junior Subordinated
Debentures and Preferred Securities, but such underwriters will not be
obligated to do so and may discontinue any market making at any time without
notice. Such Junior Subordinated Debentures or Preferred Securities may or may
not be listed on a national securities exchange or the Nasdaq National Market.
No assurance can be given as to the liquidity of or the existence of trading
markets for any Junior Subordinated Debentures or Preferred Securities.
This Prospectus may be used, together with the applicable Prospectus
Supplement, by First Union Capital Markets Corp. In connection with offers and
sales related to market-making transactions in Junior Subordinated Debentures
or Preferred Securities effected from time to time after the commencement of
the offering to which such Prospectus Supplement relates, First Union Capital
Markets Corp. may act as principal or agent in such transactions, including as
agent for the counterparty when acting as principal or as agent for both
counterparties, and may receive compensation in the form of discounts and
commissions, including from both counterparties when it acts as agent for both.
Such sales will be made at prevailing market prices at the time of sale, at
prices related thereto or at negotiated prices.
First Union Capital Markets Corp. is a wholly owned subsidiary of the
Corporation and an affiliate of each of the Issuers.
The Corporation has been advised by First Union Capital Markets Corp.
that, subject to applicable laws and regulations, First Union Capital Markets
Corp. may make a market in Junior Subordinated Debentures or Preferred
Securities. However, they are not obligated to do so and any market-making may
be discontinued at any time without notice. In addition, such market-making
activity is subject to the limits imposed by the Securities Act, the Exchange
Act and federal banking laws and regulations. There can be no assurance that an
active trading market will be sustained.
The Corporation may agree to indemnify First Union Capital Markets Corp.
with respect to certain liabilities in connection with this Prospectus,
including liabilities under the Securities Act.
VALIDITY OF SECURITIES
Unless otherwise indicated in the applicable Prospectus Supplement,
certain legal matters will be passed upon for the Corporation by Marion A.
Cowell, Jr., Executive Vice President, Secretary and General Counsel of the
Corporation, and certain matters of Delaware law will be passed upon for the
Corporation and the Issuers by Richards, Layton & Finger, special Delaware
counsel to the Corporation and the Issuers. The validity of the Guarantees and
the Junior Subordinated Debentures will be passed upon for the Underwriters by
Sullivan & Cromwell, New York, New York. Sullivan & Cromwell will rely upon the
opinion of Richards, Layton & Finger as to matters of Delaware law and the
opinion of Mr. Cowell as to matters of North Carolina law; Mr. Cowell will rely
upon the opinion of Sullivan & Cromwell as to matters of New York law. Mr.
Cowell is a stockholder of the Corporation and holds options to purchase
additional shares of the Corporation's Common Stock. Sullivan & Cromwell
regularly preform legal services for the Corporation and its subsidiaries.
Members of Sullivan & Cromwell performing these legal services own shares of
capital stock of the Corporation.
EXPERTS
The Corporation's consolidated balance sheets as of December 31, 1995 and
1994, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1995, included in the Corporation's 1995 Supplemental
Annual Report to Stockholders, which is incorporated by reference in the
Corporation's 1995 Annual Report on Form 10-K and incorporated by reference
herein, have been incorporated by reference herein in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing. The aforementioned report of KPMG Peat
Marwick LLP covering the Corporation's consolidated financial statements refers
to a change in the method of accounting for investments.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED 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 FIRST
UNION 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.
--------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Forward-Looking Statements ............................. S-3
Summary of Offering .................................... S-4
Risk Factors ........................................... S-7
First Union Capital II ................................. S-10
Recent Developments .................................... S-11
Consolidated Earnings Ratio ............................ S-11
Use of Proceeds ........................................ S-11
Accounting Treatment ................................... S-12
Description of the Series A Capital Securities ......... S-13
Description of the Series B Junior Subordinated
Debentures .......................................... S-18
Relationship Among the Series A Caiptal
Securities, the Series B Junior Subordinated
Debentures and the Guarantee ........................ S-20
Material Federal Income Tax Considerations ............. S-21
ERISA Considerations ................................... S-24
Underwriting ........................................... S-26
Validity of the Securities ............................. S-27
PROSPECTUS
Available Information .................................. 4
Incorporation of Certain Documents by
Reference ........................................... 4
The Issuers ............................................ 5
The Corporation ........................................ 5
Use of Proceeds ........................................ 6
Description of Junior Subordinated Debentures .......... 6
Description of Preferred Securities .................... 17
Book-Entry Issuance .................................... 27
Description of Gurarantees ............................. 28
Relationship Among Preferred Securities,
Corresponding Junior Subordinated Debentures
and Guarantees ...................................... 31
Plan of Distribution ................................... 32
Validity of the Securities ............................. 33
Experts ................................................ 33
</TABLE>
================================================================================
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$300,000,000
FIRST UNION CAPITAL II
7.95% CAPITAL SECURITIES, SERIES A
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
GUARANTEED, TO THE EXTENT DESCRIBED HEREIN, BY
FIRST UNION CORPORATION
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[FIRST UNION LOGO APPEARS HERE]
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FIRST UNION SECURITIES, INC.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
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