<PAGE>
424(B)(4)
333-15375-02
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED NOVEMBER 27, 1996)
365,000 CAPITAL SECURITIES
NB CAPITAL TRUST II
7.83% CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
NATIONSBANK(Register mark)
The 7.83% Capital Securities (the "Capital Securities") offered hereby
represent preferred undivided beneficial interests in the assets of NB Capital
Trust II, a statutory business trust formed under the laws of the State of
Delaware ("NB Capital Trust" or the "Trust"). NationsBank Corporation, a North
Carolina corporation ("NationsBank" or the "Corporation"), will own all the
common securities (the "Common Securities" and, together with the Capital
Securities, the "Trust Securities") representing undivided beneficial interests
in the assets of NB Capital Trust. NB Capital Trust
(CONTINUED ON NEXT PAGE)
SEE "RISK FACTORS" BEGINNING ON PAGE S-7 OF THIS PROSPECTUS SUPPLEMENT FOR
CERTAIN INFORMATION RELEVANT TO AN INVESTMENT IN THE CAPITAL SECURITIES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH
CAROLINA (THE "COMMISSIONER") OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION, THE COMMISSIONER OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE OFFERED SECURITIES ARE NOT SAVINGS ACCOUNTS OR BANK DEPOSITS, ARE NOT
OBLIGATIONS OF OR GUARANTEED BY ANY BANKING OR NONBANKING AFFILIATE OF
NATIONSBANK (EXCEPT TO THE EXTENT THAT THE CAPITAL SECURITIES ARE
GUARANTEED BY NATIONSBANK AS DESCRIBED HEREIN), ARE NOT INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY AND INVOLVE INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
[CAPTION]
<TABLE>
<S> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC (1) DISCOUNT (2) TRUST (3)(4)
<S> <C> <C> <C>
Per Capital Security................................ $1,000 (3) $1,000
Total............................................... $365,000,000 (3) $365,000,000
</TABLE>
(1) Plus accrued distributions, if any, from December 17, 1996.
(2) NB Capital Trust and NationsBank have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Capital Securities
will be invested in the Junior Subordinated Notes as described herein,
NationsBank has agreed to pay directly to the Underwriters as compensation
(the "Underwriters' Compensation") for their arranging the investment
therein of such proceeds $10 per Capital Security (or $3,650,000 in the
aggregate). See "Underwriting."
(4) Expenses of the offering which are payable by NationsBank are estimated to
be $600,000.
The Capital Securities are offered by the several Underwriters subject to
prior sale, when, as and if issued to and accepted by them, subject to approval
of certain legal matters by counsel for the Underwriters and certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the Capital Securities will be made in book-entry only form through
the facilities of The Depository Trust Company on or about December 17, 1996.
NATIONSBANC CAPITAL MARKETS, INC.
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
The date of this Prospectus Supplement is December 10, 1996.
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
exists for the sole purpose of issuing the Trust Securities and investing the
gross proceeds thereof in an equivalent amount of 7.83% Junior Subordinated
Deferrable Interest Notes due 2026 (the "Junior Subordinated Notes") of
NationsBank. The Junior Subordinated Notes, the Capital Securities and the
related Capital Securities Guarantee (as defined herein) in respect of which
this Prospectus Supplement is being delivered are referred to herein as the
"Offered Securities." The Junior Subordinated Notes will mature on December 15,
2026 (the "Stated Maturity"). The Junior Subordinated Notes when issued will be
unsecured obligations of NationsBank and will be subordinate and junior in right
of payment to other indebtedness of the Corporation, as described herein. Upon
an Event of Default (as defined in the accompanying Prospectus) under the
Declaration (as defined herein), the holders of Capital Securities will have a
preference over the holders of the Common Securities with respect to payments in
respect of distributions and payments upon redemption, liquidation and
otherwise.
The preferred undivided beneficial interests in the assets of the Trust
referred to in this Prospectus Supplement as the "Capital Securities" and the
related guarantee referred to in this Prospectus Supplement as the "Capital
Securities Guarantee" are referred to in the accompanying Prospectus as the
"Preferred Securities" and the "Preferred Securities Guarantee", respectively.
Because holders of Capital Securities may receive Junior Subordinated Notes
upon dissolution of the Trust, prospective purchasers of Capital Securities are
also making an investment decision with regard to the Junior Subordinated Notes
and should carefully review all the information regarding the Junior
Subordinated Notes contained herein and in the accompanying Prospectus. See
"Description of the Junior Subordinated Notes -- General", "Description of the
Capital Securities -- Distribution of the Junior Subordinated Notes to Trust
Securityholders" and " -- Liquidation Distribution Upon Dissolution."
Holders of the Capital Securities are entitled to receive cumulative cash
distributions at an annual rate of 7.83 percent of the liquidation amount of
$1,000 per Capital Security, accruing from the date of original issuance and
payable semi-annually in arrears on June 15 and December 15 of each year,
commencing June 15, 1997 ("distributions"). The payment of distributions out of
moneys held by NB Capital Trust and payments on liquidation of NB Capital Trust
or the redemption of Capital Securities, as set forth below, are guaranteed on a
subordinated basis by NationsBank (the "Capital Securities Guarantee") to the
extent described herein and under "Description of the Preferred Securities
Guarantees" in the accompanying Prospectus. The Capital Securities Guarantee
covers payments of distributions and other payments on the Capital Securities
only if and to the extent that NB Capital Trust has funds available therefor
which will only occur if NationsBank has made a payment of interest or principal
or other payments on the Junior Subordinated Notes held by NB Capital Trust as
its sole asset. The Capital Securities Guarantee, when taken together with the
Corporation's obligations under the Junior Subordinated Notes and the Indenture
(as defined herein) and its obligations under the Declaration, including its
liabilities to pay costs, expenses, debts and obligations of NB Capital Trust
(other than with respect to the Trust Securities), provide a full and
unconditional guarantee on a subordinated basis of amounts due on the Capital
Securities. See "Risk Factors -- Rights Under the Capital Securities Guarantee"
herein. The obligations of NationsBank under the Capital Securities Guarantee
rank (i) subordinate and junior in right of payment to all other liabilities,
including contingent liabilities, of NationsBank (ii) pari passu with the most
senior preferred or preference stock now or hereafter issued by the Corporation
and with any guarantee now or hereafter entered into by NationsBank in respect
of any preferred or preference stock of any affiliate of the Corporation and
(iii) senior to the Corporation's common stock. The obligations of NationsBank
under the Junior Subordinated Notes are subordinate and junior in right of
payment to all present and future Senior Obligations (as defined herein) of
NationsBank, which were approximately $17.6 billion at September 30, 1996. The
Junior Subordinated Notes purchased by the Trust may be subsequently distributed
pro rata to holders of the Trust Securities in connection with the dissolution
of the Trust.
The distribution rate and the distribution payment date and other payment
dates for the Capital Securities will correspond to the interest rate and
interest payment dates and other payment dates on the Junior Subordinated Notes,
which will be the sole assets of the Trust. As a result, if NationsBank does not
make principal or interest payments on the Junior Subordinated Notes, the Trust
will not have sufficient funds to make distributions on the Capital Securities;
in which event, the Capital Securities Guarantee will not apply to such
distributions until the Trust has sufficient funds available therefor.
(CONTINUED ON NEXT PAGE)
S-2
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
So long as NationsBank is not in default in the payment of interest on the
Junior Subordinated Notes, it has the right to defer payments of interest on the
Junior Subordinated Notes by extending the interest payment period on the Junior
Subordinated Notes for up to 10 consecutive semi-annual periods (each, an
"Extension Period"), provided that no Extension Period may extend beyond the
Stated Maturity of the Junior Subordinated Notes. If interest payments are so
deferred, distributions on the Capital Securities will also be deferred. During
such Extension Period, distributions will continue to accrue with interest
thereon (to the extent permitted by applicable law) at an annual rate of 7.83
percent per annum compounded semi-annually. During any Extension Period, holders
of Capital Securities will be required to include deferred interest income in
their gross income for United States federal income tax purposes in advance of
receipt of the cash distributions with respect to such deferred interest
payments. There could be multiple Extension Periods of varying lengths
throughout the term of the Junior Subordinated Notes. See "Risk
Factors -- Option to Extend Interest Payment Period"; "Description of the Junior
Subordinated Notes -- Option to Extend Interest Payment Period"; and "United
States Federal Income Taxation -- Interest Income and Original Issue Discount."
The Junior Subordinated Notes are payable in whole at the Stated Maturity.
Subject to the Corporation having received prior approval of the Board of
Governors of the Federal Reserve Board System (the "Federal Reserve Board") to
do so if required, the Junior Subordinated Notes may be prepaid prior to the
Stated Maturity at the option of the Corporation (i) in whole or in part at any
time on or after December 15, 2006 (an "Optional Prepayment"), at a prepayment
price (the "Optional Prepayment Price") equal to 103.915% of the principal
amount thereof on December 15, 2006, which price declines ratably on each
December 15 thereafter to 100% on or after December 15, 2016, plus accrued
interest thereon to the date of prepayment, or (ii) in whole, but not in part,
prior to December 15, 2006 (a "Special Event Prepayment"), upon the occurrence
and continuation of a Special Event (as defined herein), at a prepayment price
(the "Special Event Prepayment Price") equal to the greater of (a) 100% of the
principal amount thereof or (b) as determined by a Quotation Agent (as defined
herein), the sum of (x) the present values of the principal amount and premium
that would be payable as part of the Optional Prepayment Price with respect to
an Optional Prepayment of such Junior Subordinated Notes on December 15, 2006
and (y) the present values of scheduled payments of interest from the prepayment
date to December 15, 2006, in each case discounted to the prepayment date on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Adjusted Treasury Rate (as defined herein), plus, in the case of either
(a) or (b), accrued interest on the Junior Subordinated Notes up to but
excluding the date of prepayment. Either of the Optional Prepayment Price or the
Special Event Prepayment Price may be referred to herein as the "Prepayment
Price." See "Description of the Junior Subordinated Notes -- Optional
Prepayment" and " -- Special Event Prepayment."
As a result of the payment and prepayment terms of the Junior Subordinated
Notes, the Capital Securities are subject to mandatory redemption as follows:
(i) at the Stated Maturity upon payment of the Junior Subordinated Notes, at a
redemption price equal to the principal amount of, plus accrued interest on, the
Junior Subordinated Notes (the "Maturity Redemption Price"), (ii) in whole but
not in part prior to December 15, 2006 contemporaneously with a Special Event
Prepayment, at a redemption price equal to the Special Event Prepayment Price
(the "Special Event Redemption Price") and (iii) in whole or in part on or after
December 15, 2006 contemporaneously with an Optional Prepayment at a redemption
price equal to the Optional Prepayment Price (the "Optional Redemption Price").
Any of the Maturity Redemption Price, the Special Event Redemption Price and the
Optional Redemption Price may be referred to herein as the "Redemption Price."
See "Description of Capital Securities -- Redemption of Capital Securities Upon
Payment or Prepayment of Junior Subordinated Notes."
NationsBank will have the right at any time to liquidate the Trust and
cause the Junior Subordinated Notes to be distributed to the holders of the
Trust Securities, provided that NationsBank has received prior approval from the
Federal Reserve Board, if required. See "Description of the Junior Subordinated
Notes" and "Description of the Capital Securities -- Redemption of Capital
Securities Upon Payment or Prepayment of Junior Subordinated Notes." If the
Junior Subordinated Notes are distributed to the holders of the Capital
Securities, NationsBank will use its best efforts to have the Junior
Subordinated Notes listed on any exchanges on which the Capital Securities are
then listed. NationsBank and NB Capital Trust do not intend to apply to list the
Capital Securities on any national securities exchange.
(CONTINUED ON NEXT PAGE)
S-3
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
In the event of the involuntary or voluntary dissolution, winding-up or
termination of the Trust, the holders of the Capital Securities will be entitled
to receive for each Capital Security a liquidation amount of $1,000 plus accrued
and unpaid distributions thereon (including interest thereon) to the date of
payment, unless, in connection with such dissolution, the Junior Subordinated
Notes are distributed to the holders of the Capital Securities. See "Description
of the Capital Securities -- Liquidation Distribution Upon Dissolution." Any
such distribution of the Junior Subordinated Notes may be subject to the prior
approval of the Federal Reserve Board.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CAPITAL
SECURITIES OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER
MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
S-4
<PAGE>
NATIONSBANK CORPORATION
NationsBank is a multi-bank holding company established as a North Carolina
corporation in 1968 and is registered under the Bank Holding Company Act of
1956, as amended (the "BHCA"), with its principal assets being the stock of its
subsidiaries. Through its banking subsidiaries (the "Banks") and its various
non-banking subsidiaries, NationsBank provides banking and banking-related
services, primarily throughout the Southeast and Mid-Atlantic states and Texas.
The principal executive offices of NationsBank are located at NationsBank
Corporate Center in Charlotte, North Carolina 28255. Its telephone number is
(704) 386-5000.
NB CAPITAL TRUST
NB Capital Trust is a statutory business trust formed under Delaware law
pursuant to (i) a declaration of trust, dated as of October 29, 1996, executed
by NationsBank, as sponsor (the "Sponsor"), and the trustees of NB Capital Trust
(the "NB Trustees") and (ii) a certificate of trust filed with the Secretary of
State of the State of Delaware on November 1, 1996. The initial declaration will
be amended and restated in its entirety (as so amended and restated, the
"Declaration") substantially in the form filed as an exhibit to the Registration
Statement of which this Prospectus Supplement and the accompanying Prospectus
form a part. The Declaration will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). NationsBank will
directly or indirectly acquire all the Common Securities which will represent an
aggregate liquidation amount equal to at least three percent of the total
capital of NB Capital Trust. NB Capital Trust exists for the exclusive purposes
of (i) issuing the Trust Securities representing undivided beneficial interests
in the assets of the Trust, (ii) investing the gross proceeds of the Trust
Securities in the Junior Subordinated Notes and (iii) engaging in only those
other activities necessary or incidental thereto.
Pursuant to the Declaration, the number of NB Trustees will initially be
five. Three of the NB Trustees (the "Regular Trustees") will be persons who are
employees or officers of, or who are affiliated with, NationsBank. The fourth
trustee will be a financial institution that is unaffiliated with NationsBank,
which trustee will serve as institutional trustee under the Declaration and as
indenture trustee for the purposes of compliance with the provisions of the
Trust Indenture Act (the "Property Trustee"). The Bank of New York, a New York
banking corporation, will be the Property Trustee until removed or replaced by
the holder of the Common Securities. For purposes of compliance with the
provisions of the Trust Indenture Act, The Bank of New York will act as trustee
(the "Capital Securities Guarantee Trustee") under the Capital Securities
Guarantee and as Debt Trustee (as defined herein) under the Indenture. The fifth
trustee will be an entity that maintains its principal place of business in the
State of Delaware (the "Delaware Trustee"). Initially, The Bank of New York
(Delaware), an affiliate of the Property Trustee, will act as Delaware Trustee.
See "Description of the Preferred Securities Guarantees" in the accompanying
Prospectus and "Description of the Capital Securities -- Voting Rights" herein.
The Property Trustee will hold title to the Junior Subordinated Notes for
the benefit of the holders of the Trust Securities and in such capacity will
have the power to exercise all rights, powers and privileges under the
Indenture. In addition, the Property Trustee will maintain exclusive control of
a segregated non-interest-bearing bank account (the "Property Account") to hold
all payments made in respect of the Junior Subordinated Notes for the benefit of
the holders of the Trust Securities. The Property Trustee will make payments of
distributions and payments on liquidation, redemption and otherwise to the
holders of the Trust Securities out of funds from the Property Account. The
Capital Securities Guarantee Trustee will hold the Capital Securities Guarantee
for the benefit of the holders of the Capital Securities. NationsBank, as the
direct or indirect holder of all the Common Securities, will have the right to
appoint, remove or replace any NB Trustee and to increase or decrease the number
of NB Trustees. NationsBank will pay all fees and expenses related to NB Capital
Trust and the offering of the Trust Securities. See "Description of the Junior
Subordinated Notes -- Miscellaneous."
The rights of the holders of the Capital Securities, including economic
rights, rights to information and voting rights, are set forth in the
Declaration, the Delaware Business Trust Act (the "Trust Act") and the Trust
Indenture Act. See "Description of the Capital Securities."
S-5
<PAGE>
NATIONSBANK CORPORATION
SELECTED FINANCIAL DATA
The following selected financial data for the five years ended December 31,
1995 are derived from financial statements of the Corporation audited by Price
Waterhouse LLP, independent accountants. The financial data for the nine months
ended September 30, 1996 and 1995 are derived from unaudited financial
statements. The unaudited financial statements include all adjustments,
consisting only of normal recurring accruals, that the Corporation considers
necessary for a fair presentation of its financial position and the results of
its operations as of such dates and for such periods. Results for the nine
months ended September 30, 1996 are not necessarily indicative of the results
that might be expected for any other interim period or for the year as a whole.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED
DECEMBER 31,
1996 1995 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
(AMOUNTS IN MILLIONS EXCEPT PER SHARE INFORMATION AND RATIOS)
Income statement:
Income from earning assets................................. $ 10,438 $ 9,859 $ 13,220 $ 10,529 $ 8,327 $ 7,780
Interest expense........................................... 5,699 5,825 7,773 5,318 3,690 3,682
Net interest income........................................ 4,739 4,034 5,447 5,211 4,637 4,098
Provision for credit losses................................ 455 240 382 310 430 715
Gains (losses) on sales of securities...................... 34 8 29 (13) 84 249
Noninterest income......................................... 2,688 2,232 3,078 2,597 2,101 1,913
Merger-related charge...................................... 118 -- -- -- 30 --
Other noninterest expense (including OREO expense)......... 4,212 3,831 5,181 4,930 4,371 4,149
Income before income taxes and effect of change in method
of accounting for income taxes........................... 2,676 2,203 2,991 2,555 1,991 1,396
Income tax expense (benefit)............................... 933 763 1,041 865 690 251
Income before effect of change in method of accounting for
income taxes............................................. 1,743 1,440 1,950 1,690 1,301 1,145
Effect of change in method of accounting for income
taxes.................................................... -- -- -- -- 200 --
Net income................................................. 1,743 1,440 1,950 1,690 1,501 1,145
Net income applicable to common shareholders............... 1,732 1,434 1,942 1,680 1,491 1,121
Per common share:
Earnings before effect of change in method of accounting
for income taxes......................................... $ 5.82 $ 5.26 $ 7.13 $ 6.12 $ 5.00 $ 4.60
Earnings................................................... 5.82 5.26 7.13 6.12 5.78 4.60
Cash dividends paid........................................ 1.74 1.50 2.08 1.88 1.64 1.51
Shareholders' equity (period-end).......................... 45.77 44.00 46.52 39.70 36.39 30.80
Balance sheet (period-end):
Total assets............................................... $187,671 $182,138 $187,298 $169,604 $157,686 $118,059
Total loans, leases and factored accounts receivable, net
of unearned income....................................... 122,078 114,601 117,033 103,371 92,007 72,714
Total deposits............................................. 108,132 97,870 100,691 100,470 91,113 82,727
Long-term debt............................................. 22,034 15,741 17,775 8,488 8,352 3,066
Common shareholders' equity................................ 13,186 11,904 12,759 10,976 9,859 7,793
Total shareholders' equity................................. 13,304 11,941 12,801 11,011 9,979 7,814
Average common shares issued (in thousands).................. 297,772 272,790 272,480 274,656 257,969 243,748
Performance ratios:
Return on average assets (1)............................... 1.15% 1.03% 1.03% 1.02% .97% 1.00%
Return on average common shareholders' equity (1)(2)....... 17.58 17.02 17.01 16.10 15.00 15.83
Risk-based capital ratios:
Tier 1..................................................... 7.05 7.16 7.24 7.43 7.41 7.54
Total...................................................... 12.05 11.23 11.58 11.47 11.73 11.52
Leverage capital ratio....................................... 6.30 5.96 6.27 6.18 6.00 6.16
Total equity to total assets................................. 7.09 6.56 6.83 6.49 6.33 6.62
Asset quality ratios:
Allowance for credit losses as a percentage of loans,
leases and factored accounts receivable, net of unearned
income (period-end)...................................... 1.90 1.89 1.85 2.11 2.36 2.00
Allowance for credit losses as a percentage of
nonperforming loans (period-end)......................... 235.64 255.57 306.49 273.07 193.38 103.11
Net charge-offs as a percentage of average loans, leases
and factored accounts receivable, net of unearned
income................................................... .48 .33 .38 .33 .51 1.25
Nonperforming assets as a percentage of net loans, leases,
factored accounts receivable and other real estate owned
(period-end)............................................. .93 .90 .73 1.10 1.92 2.72
<CAPTION>
1991
<S> <<C>
Income statement:
Income from earning assets................................. $ 9,398
Interest expense........................................... 5,599
Net interest income........................................ 3,799
Provision for credit losses................................ 1,582
Gains (losses) on sales of securities...................... 454
Noninterest income......................................... 1,742
Merger-related charge...................................... 330
Other noninterest expense (including OREO expense)......... 3,974
Income before income taxes and effect of change in method
of accounting for income taxes........................... 109
Income tax expense (benefit)............................... (93)
Income before effect of change in method of accounting for
income taxes............................................. 202
Effect of change in method of accounting for income
taxes.................................................... --
Net income................................................. 202
Net income applicable to common shareholders............... 171
Per common share:
Earnings before effect of change in method of accounting
for income taxes......................................... $ .76
Earnings................................................... .76
Cash dividends paid........................................ 1.48
Shareholders' equity (period-end).......................... 27.03
Balance sheet (period-end):
Total assets............................................... $110,319
Total loans, leases and factored accounts receivable, net
of unearned income....................................... 69,108
Total deposits............................................. 88,075
Long-term debt............................................. 2,876
Common shareholders' equity................................ 6,252
Total shareholders' equity................................. 6,518
Average common shares issued (in thousands).................. 226,305
Performance ratios:
Return on average assets (1)............................... .17%
Return on average common shareholders' equity (1)(2)....... 2.70
Risk-based capital ratios:
Tier 1..................................................... 6.38
Total...................................................... 10.30
Leverage capital ratio....................................... 5.07
Total equity to total assets................................. 5.91
Asset quality ratios:
Allowance for credit losses as a percentage of loans,
leases and factored accounts receivable, net of unearned
income (period-end)...................................... 2.32
Allowance for credit losses as a percentage of
nonperforming loans (period-end)......................... 81.82
Net charge-offs as a percentage of average loans, leases
and factored accounts receivable, net of unearned
income................................................... 1.86
Nonperforming assets as a percentage of net loans, leases,
factored accounts receivable and other real estate owned
(period-end)............................................. 4.01
</TABLE>
(1) In 1993, return on average assets and return on average common shareholders'
equity after the tax benefit from the impact of adopting SFAS 109
(Accounting for Income Taxes) were 1.12% and 17.33%, respectively.
(2) Average common shareholders' equity does not include the effect of market
value adjustments to securities available for sale and marketable equity
securities.
S-6
<PAGE>
RECENT DEVELOPMENTS
PENDING MERGER WITH BOATMEN'S BANCSHARES, INC.
On August 29, 1996, the Corporation and Boatmen's Bancshares, Inc. a
corporation organized and existing under the laws of the State of Missouri
("Boatmen's"), and registered as a bank holding company under the BHCA, entered
into an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which
Boatmen's will be merged with a wholly-owned subsidiary of the Corporation (the
"Merger"). The Board of Directors of both the Corporation and Boatmen's approved
the Merger Agreement and the transactions contemplated thereby at their meetings
held on August 29, 1996.
Boatmen's is headquartered in St. Louis, Missouri, with its principal
assets being the stock of its subsidiaries. At September 30, 1996, Boatmen's had
total assets of $41 billion and had over 600 banking offices in Missouri,
Kansas, Arkansas, Oklahoma, New Mexico, Texas, Iowa, Illinois and Tennessee.
The Merger is intended to constitute a tax-free reorganization under the
Internal Revenue Code of 1986, as amended, and to be accounted for as a
purchase.
Consummation of the Merger is subject to various conditions, including, but
not limited to: (i) receipt of approval by the shareholders of each of
NationsBank and Boatmen's of appropriate matters relating to the Merger
Agreement and the Merger, as required under applicable law; (ii) receipt of
requisite regulatory approvals from the Federal Reserve Board and other federal
and state regulatory authorities; (iii) receipt of an opinion of counsel as to
the tax treatment of certain aspects of the Merger; and (iv) listing, subject to
notice of issuance, of the NationsBank stock to be issued in the Merger. The
Merger is expected to be completed in January 1997. For additional information
regarding this pending acquisition, see the Corporation's Current Report on Form
8-K filed September 6, 1996, as amended by Form 8-K/A-1 filed September 11, 1996
and Form 8-K/A-2 filed November 13, 1996, incorporated herein by reference.
RISK FACTORS
PROSPECTIVE PURCHASERS OF CAPITAL SECURITIES SHOULD CAREFULLY REVIEW THE
INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT AND IN THE
ACCOMPANYING PROSPECTUS AND SHOULD PARTICULARLY CONSIDER THE FOLLOWING MATTERS.
ABSENCE OF PRIOR PUBLIC MARKET
Prior to this offering, there has been no public market for the Capital
Securities. NationsBank and NB Capital Trust do not intend to apply to list the
Capital Securities on any national securities exchange. There can be no
assurance that an active public market will develop for the Capital Securities
or that, if such market develops, the market price will equal or exceed the
public offering price set forth on the cover page of this Prospectus Supplement.
The public offering price for the Capital Securities has been determined through
negotiations between the Corporation and the Representatives (as defined
herein). Prices for the Capital Securities will be determined in the marketplace
and may be influenced by many factors, including the liquidity of the market for
the Capital Securities, investor perceptions of the Corporation and general
industry and economic conditions. If the Underwriters do not make a market for
the Capital Securities, the liquidity and market price of the Capital Securities
could be adversely affected.
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE CAPITAL SECURITIES GUARANTEE AND
JUNIOR SUBORDINATED NOTES
The Corporation's obligations under the Capital Securities Guarantee rank
(i) subordinate and junior in right of payment to all other liabilities,
including contingent liabilities, of NationsBank (ii) pari passu with the most
senior preferred or preference stock now or hereafter issued by the Corporation
and with any guarantee now or hereafter entered into by NationsBank in respect
of any preferred or preference stock of any affiliate of the Corporation, and
(iii) senior to the Corporation's common stock. The obligations of NationsBank
under the Junior Subordinated Notes are subordinate and junior in right of
payment to all present and future Senior Obligations of NationsBank and rank
pari passu with obligations to or rights of the Corporation's other general
unsecured creditors. No payment of principal (including prepayments, if any),
premium, if any, or interest on the Junior Subordinated Notes may be made if (i)
any Senior Obligations of NationsBank are not paid when
S-7
<PAGE>
due and any applicable grace period with respect to such default has ended with
such default not having been cured or waived or ceasing to exist or (ii) the
maturity of any Senior Obligations has been accelerated because of a default. As
of September 30, 1996, Senior Obligations of NationsBank aggregated
approximately $17.6 billion. In addition, because NationsBank is a holding
company, the Junior Subordinated Notes are effectively subordinated to all
existing and future liabilities of the Corporation's subsidiaries, including
obligations to depositors. The terms of the Capital Securities, the Junior
Subordinated Notes or the Capital Securities Guarantee do not limit the
Corporation's ability to incur additional indebtedness, including indebtedness
that ranks senior to the Junior Subordinated Notes and the Capital Securities
Guarantee. See "Description of the Preferred Securities Guarantees -- Status of
the Preferred Securities Guarantees" and "Description of the Junior Subordinated
Notes" in the accompanying Prospectus and "Description of the Junior
Subordinated Notes -- Subordination" herein.
RIGHTS UNDER THE CAPITAL SECURITIES GUARANTEE
The Capital Securities Guarantee will be qualified as an indenture under
the Trust Indenture Act. The Capital Securities Guarantee Trustee will hold the
Capital Securities Guarantee for the benefit of the holders of the Capital
Securities.
The Capital Securities Guarantee guarantees to the holders of the Capital
Securities the payment of (i) any accrued and unpaid distributions that are
required to be paid on the Capital Securities, to the extent the Trust has funds
available therefor, (ii) the Redemption Price, with respect to Capital
Securities called for redemption by the Trust, to the extent the Trust has funds
available therefor, and (iii) upon a voluntary or involuntary dissolution,
winding-up or termination of the Trust (other than in connection with the
distribution of Junior Subordinated Notes to the holders of Capital Securities
or a redemption of all the Capital Securities), the lesser of (a) the aggregate
of the liquidation amount and all accrued and unpaid distributions on the
Capital Securities to the date of the payment to the extent the Trust has funds
available therefor or (b) the amount of assets of the Trust remaining available
for distribution to holders of the Capital Securities in liquidation of the
Trust. The holders of a majority in aggregate liquidation amount of the Capital
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Capital Securities Guarantee Trustee
or to direct the exercise of any trust or power conferred upon the Capital
Securities Guarantee Trustee under the Capital Securities Guarantee.
Notwithstanding the foregoing, any holder of Capital Securities may institute a
legal proceeding directly against NationsBank to enforce such holder's rights
under the Capital Securities Guarantee without first instituting a legal
proceeding against the Trust, the Capital Securities Guarantee Trustee or any
other person or entity. If NationsBank were to default on its obligation to pay
amounts payable on the Junior Subordinated Notes or otherwise, the Trust would
lack funds for the payment of distributions or amounts payable on redemption of
the Capital Securities or otherwise, and, in such event, holders of the Capital
Securities would not be able to rely upon the Capital Securities Guarantee for
payment of such amounts. Instead, holders of the Capital Securities would rely
on the enforcement (i) by the Property Trustee of its rights as registered
holder of the Junior Subordinated Notes against NationsBank pursuant to the
terms of the Indenture and the Junior Subordinated Notes or (ii) by such holder
of the Property Trustee's or such holder's own rights against NationsBank to
enforce payments on the Junior Subordinated Notes. See "Description of the
Preferred Securities Guarantees" and "Description of the Junior Subordinated
Notes" in the accompanying Prospectus, and " -- Enforcement of Certain Rights by
Holders of Capital Securities." The Declaration provides that each holder of
Capital Securities, by acceptance thereof, agrees to the provisions of the
Capital Securities Guarantee, including the subordination provisions thereof,
and the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES
If a Declaration Event of Default (as defined herein) occurs and is
continuing, then the holders of Capital Securities would rely on the enforcement
by the Property Trustee of its rights as a holder of the Junior Subordinated
Notes against NationsBank. In addition, the holders of a majority in liquidation
amount of the 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 trust or power conferred upon the
Property Trustee under the Declaration, including the right to direct the
Property Trustee to exercise the remedies available to it as a holder of the
Junior Subordinated Notes. If the Property Trustee fails to enforce its rights
under the Junior Subordinated Notes, a holder of Capital Securities may
institute a legal proceeding directly
S-8
<PAGE>
against NationsBank to enforce the Property Trustee's rights under the Junior
Subordinated Notes without first instituting any legal proceeding against the
Property Trustee or any other person or entity. Notwithstanding the foregoing,
if NationsBank fails to pay interest or principal on the Junior Subordinated
Notes on the date such interest or principal is otherwise payable (or in the
case of prepayment, on the prepayment date) (a "Note Payment Failure"), and such
Note Payment Failure is continuing, a holder of Capital Securities may directly
institute a proceeding for enforcement of payment to such holder of the
principal of or interest on the Junior Subordinated Notes having a principal
amount equal to the aggregate liquidation amount of the Capital Securities of
such holder (a "Direct Action") after the respective due date specified in the
Junior Subordinated Notes. In connection with such Direct Action, NationsBank
will be subrogated to the rights of such holder of Capital Securities under the
Declaration to the extent of any payment made by NationsBank to such holder of
Capital Securities in such Direct Action. The holders of Capital Securities will
not be able to exercise directly any other remedy available to the holders of
the Junior Subordinated Notes. See "Description of the Capital
Securities -- Declaration Events of Default and Note Payment Failures."
LIMITED RIGHTS OF ACCELERATION
The Property Trustee, as holder of the Junior Subordinated Notes, may
accelerate payment of the principal and accrued and unpaid interest on the
Junior Subordinated Notes only upon the occurrence and continuation of a
"Declaration Event of Default" which, generally is limited to certain events of
bankruptcy, insolvency and reorganization of the Corporation and certain events
of dissolution, winding-up or termination of the Trust. See "Description of the
Junior Subordinated Notes -- Events of Default, Waiver and Notice" in the
accompanying Prospectus for a description of the Events of Default. Accordingly,
there is no right to acceleration upon default by the Corporation of its payment
obligations under the Junior Subordinated Notes or defaults of the Corporation
under the Capital Securities Guarantee.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
NationsBank has the right under the Indenture to defer payments of interest
on the Junior Subordinated Notes by extending the interest payment period at any
time, and from time to time, on the Junior Subordinated Notes. As a consequence
of such an extension, semi-annual distributions on the Capital Securities would
be deferred (but would continue to accrue, despite such deferral, with interest
thereon compounded semi-annually) by the Trust during any such Extension Period.
Such right to extend the interest payment period for the Junior Subordinated
Notes is limited to a period not exceeding 10 consecutive semi-annual periods,
but no such Extension Period may extend beyond the Stated Maturity of the Junior
Subordinated Notes. During any such Extension Period (a) NationsBank shall not
declare or pay dividends on, or make a distribution with respect to, or redeem,
purchase or acquire, or make a liquidation payment with respect to, any of its
capital stock (other than (i) purchases or acquisitions of shares of NationsBank
common stock in connection with the satisfaction by NationsBank of its
obligations under any employee benefit plans, (ii) as a result of a
reclassification of NationsBank capital stock or the exchange or conversion of
one class or series of the Corporation's capital stock for another class or
series of NationsBank capital stock or (iii) the purchase of fractional
interests in shares of the Corporation's capital stock pursuant to an
acquisition or the conversion or exchange provisions of such NationsBank capital
stock or the security being converted or exchanged), (b) NationsBank shall not
make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities issued by NationsBank that rank pari
passu with or junior to the Junior Subordinated Notes and (c) NationsBank shall
not make any guarantee payments with respect to the foregoing (other than
pursuant to the Capital Securities Guarantee). Subject to the above
requirements, prior to the termination of any such Extension Period, NationsBank
may further extend the interest payment period and upon the termination of any
Extension Period and the payment of all amounts then due, NationsBank may
commence a new Extension Period. See "Description of the Junior Subordinated
Notes -- Option to Extend Interest Payment Period" and "Description of the
Capital Securities -- Distributions".
Should NationsBank exercise its right to defer payments of interest by
extending the interest payment period, each holder of Capital Securities will be
required to accrue income (as original issue discount ("OID")) in respect of the
deferred stated interest allocable to its Capital Securities for United States
federal income tax purposes, which will be allocated but not distributed, to
holders of record of Capital Securities. As a result, each such holder of
Capital Securities will recognize income for United States federal income tax
purposes in
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<PAGE>
advance of the receipt of cash and will not receive the cash from NB Capital
Trust related to such income if such holder disposes of its Capital Securities
prior to the record date for the date on which distributions of such amounts are
to be made. NationsBank has no current intention of exercising its right to
defer payments of interest by extending the interest payment period on the
Junior Subordinated Notes. However, should NationsBank determine to exercise
such right in the future, the market price of the Capital Securities is likely
to be affected. A holder that disposes of its Capital Securities during an
Extension Period, therefore, might not receive the same return on its investment
as a holder that continues to hold its Capital Securities. In addition, as a
result of the Corporation's right to defer interest payments, the market price
of the Capital Securities (which represent an undivided beneficial interest in
the Junior Subordinated Notes) may be more volatile than other securities on
which OID accrues that do not have such rights.
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed certain tax law changes that
would, among other things, generally deny corporate issuers a deduction for
interest in respect of certain debt obligations issued on or after December 7,
1995 (the "Proposed Legislation") if such debt obligations have a maximum term
in excess of 20 years and are not shown as indebtedness on the issuer's
applicable consolidated balance sheet. On March 29, 1996, Senate Finance
Committee Chairman William V. Roth, Jr. and House Ways and Means Committee
Chairman Bill Archer issued a joint statement (the "Joint Statement") indicating
their intent that certain legislative proposals initiated by the Clinton
administration, including the Proposed Legislation, that may be adopted by
either of the tax-writing committees of Congress would have an effective date
that is no earlier than the date of "appropriate Congressional action." In
addition, subsequent to the publication of the Joint Statement, Senator Daniel
Patrick Moynihan and Representatives Sam M. Gibbons and Charles B. Rangel wrote
letters to Treasury Department officials concurring with the views expressed in
the Joint Statement (the "Democrat Letters"). Based upon the Joint Statement and
the Democrat Letters, it is expected that if the Proposed Legislation were to be
enacted, such legislation would not apply to the Junior Subordinated Notes.
There can be no assurances, however, that the effective date guidance contained
in the Joint Statement and the Democrat Letters will be incorporated into the
Proposed Legislation, if enacted, or that other legislation enacted after the
date hereof will not otherwise adversely affect the ability of the Corporation
to deduct the interest payable on the Junior Subordinated Notes. Accordingly,
there can be no assurance that a Tax Event (as defined herein) will not occur.
See " -- Redemption of Capital Securities Upon Payment or Prepayment of Junior
Subordinated Notes."
DISTRIBUTION OF THE JUNIOR SUBORDINATED NOTES TO TRUST SECURITYHOLDERS
NationsBank will have the right at any time to dissolve the Trust and,
after the satisfaction of creditors as required by law, to cause the Junior
Subordinated Notes to be distributed to the holders of the Trust Securities in
connection with the liquidation of the Trust. In certain circumstances,
NationsBank shall have the right to redeem the Junior Subordinated Notes, in
whole or in part, in lieu of a distribution of the Junior Subordinated Notes by
the Trust, in which event the Trust will redeem the Trust Securities on a pro
rata basis to the same extent as the Junior Subordinated Notes are redeemed by
NationsBank. Any such distribution or redemption prior to the Stated Maturity
may require prior approval of the Federal Reserve Board. See "Description of the
Capital Securities -- Redemption of Capital Securities Upon Payment or
Prepayment of Junior Subordinated Notes."
Under current United States federal income tax law, a distribution of
Junior Subordinated Notes upon the dissolution of NB Capital Trust would not be
a taxable event to holders of the Capital Securities. If, however, the Trust is
characterized as an association taxable as a corporation at the time of the
dissolution of the Trust, the distribution of the Junior Subordinated Notes may
constitute a taxable event to holders of Capital Securities. Moreover, any
Special Event Prepayment or Optional Prepayment in which holders of the Capital
Securities receive cash may be a taxable event to such holders. See "United
States Federal Income Taxation -- Receipt of Junior Subordinated Notes or Cash
Upon Liquidation of NB Capital Trust."
There can be no assurance as to the market prices for the Capital
Securities or the Junior Subordinated Notes that may be distributed in exchange
for Capital Securities upon a dissolution or liquidation of the Trust.
Accordingly, the Capital Securities or the Junior Subordinated Notes, may trade
at a discount to the price that the investor paid to purchase the Capital
Securities offered hereby.
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<PAGE>
Because holders of Capital Securities may receive Junior Subordinated Notes
upon dissolution of the Trust, prospective purchasers of Capital Securities are
also making an investment decision with regard to the Junior Subordinated Notes
and should carefully review all the information regarding the Junior
Subordinated Notes contained herein and in the accompanying Prospectus. See
"Description of the Junior Subordinated Notes -- General," "Description of the
Capital Securities -- Distribution of the Junior Subordinated Notes to Trust
Securityholders" and " -- Liquidation Distribution Upon Dissolution."
REDEMPTION OF CAPITAL SECURITIES UPON PAYMENT OR PREPAYMENT OF JUNIOR
SUBORDINATED NOTES
The Capital Securities must be redeemed upon the payment of the Junior
Subordinated Notes at Stated Maturity or upon any prepayment of the Junior
Subordinated Notes. The Corporation has the right to make an Optional Prepayment
in whole or in part, at the option of the Corporation, at any time after
December 15, 2006 and to make a Special Event Prepayment in whole, but not in
part, prior to December 15, 2006, upon the occurrence and continuation of a
Special Event, within 90 days following the occurrence of such Special Event,
See "Description of the Junior Subordinated Notes -- Optional Prepayment" and
" -- Special Event Prepayment" and "Description of the Capital
Securities -- Redemption of Capital Securities Upon Payment or Prepayment of
Junior Subordinated Notes." The exercise of any prepayment right will be subject
to the prior approval of the Federal Reserve Board if required.
Since the Capital Securities must be redeemed upon prepayment of the Junior
Subordinated Notes, such prepayment may result in a holder's investment in the
Capital Securities being terminated in whole or, in the case of an Optional
Prepayment, in whole or in part, earlier than initially anticipated by such
holder.
"Special Event" means a Tax Event, a Capital Treatment Event or an
Investment Company Event.
"Tax Event" means that (i) NationsBank shall have received an opinion of
nationally recognized independent tax counsel experienced in such matters to the
effect that, as a result of (a) any amendment to, or change (including any
announced prospective change) in, the laws or any regulations thereunder of the
United States or any political subdivision or taxing authority thereof or
therein or (b) any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or such pronouncement or decision is announced on or after the date of
original issuance of the Capital Securities, there is more than an insubstantial
risk that interest payable on the Junior Subordinated Notes is not, or within 90
days of the date thereof, will not be deductible, in whole or in part, by
NationsBank for United States federal income tax purposes or (ii) the Regular
Trustees have been informed by a nationally recognized independent tax counsel
that a No Recognition Opinion cannot be delivered. "No Recognition Opinion"
means an opinion of nationally recognized independent tax counsel experienced in
such matters, which opinion may rely on published revenue rulings of the
Internal Revenue Service, to the effect that the holders of the Trust Securities
will not recognize any gain or loss for United States federal income tax
purposes as a result of the dissolution of the Trust and the distribution of the
Junior Subordinated Notes.
See "United States Federal Income Taxation -- Proposed Tax Legislation" for
a discussion of certain legislative proposals that, if adopted, could give rise
to a Tax Event, which may permit the Corporation to cause a redemption of the
Capital Securities prior to December 15, 2006.
"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 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 or regulations,
which amendment or change is effective or such pronouncement, action or decision
is announced on or after the date of issuance of the Capital Securities, there
is more than an insubstantial risk that the Corporation will not be entitled to
treat an amount equal to the aggregate liquidation amount of the Capital
Securities as Tier 1 capital (or the then equivalent thereof) for purposes of
the capital adequacy guidelines of the Federal Reserve Board, as then in effect
and applicable to the Corporation. See "NationsBank Corporation -- Supervision
and Regulation" in the accompanying Prospectus.
"Investment Company Event" means the receipt by the Trust of an opinion of
counsel experienced in such matters to the effect that, as a result of the
occurrence of a change in law or regulation or change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory
S-11
<PAGE>
authority (a "Change in 1940 Act Law"), the Trust is or will be considered an
investment company that is required to be registered under the Investment
Company Act of 1940, as amended, (the "1940 Act") which Change in 1940 Act Law
becomes effective on or after the date of original issuance of the Capital
Securities.
LIMITED VOTING RIGHTS
Holders of Capital Securities will have limited voting rights and will not
be entitled to vote to appoint, remove or replace, or to increase or decrease
the number of, NB Trustees, which voting rights are vested exclusively in the
holder of the Common Securities. See "Description of the Capital
Securities -- Voting Rights."
TRADING PRICE
The Capital Securities may trade at a price that does not fully reflect the
value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Notes. A holder who uses the accrual method of accounting for tax
purposes (and a cash method holder, if the Junior Subordinated Notes are deemed
to be issued with OID) and who disposes of his Capital Securities between record
dates for payments of distributions thereon will be required to include accrued
but unpaid interest on the Junior Subordinated Notes through the date of
disposition in income as ordinary income (i.e., interest or, possibly, OID), and
to add such amount to his adjusted tax basis in his pro rata share of the
underlying Junior Subordinated Notes deemed disposed of. To the extent the
selling price is less than the holder's adjusted tax basis (which will include
all accrued but unpaid interest), a holder will recognize a capital loss.
Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax purposes. See
"United States Federal Income Taxation -- Interest Income and Original Issue
Discount" and " -- Sales of Capital Securities."
S-12
<PAGE>
CAPITALIZATION
The following table sets forth the actual capitalization of the Corporation
and its subsidiaries as of September 30, 1996 and as adjusted to give effect to
(i) the issuance of the Capital Securities offered hereby; (ii) the issuance of
$600,000,000 aggregate liquidation amount of preferred securities by NB Capital
Trust I, a subsidiary of the Corporation, on December 4, 1996, (iii) the
issuance and the maturity of certain of the Corporation's and its subsidiaries'
notes during the period beginning October 1, 1996 through the date of this
Prospectus Supplement; and (iv) the issuance and the maturity of certain of the
Corporation's medium-term notes during the period beginning October 1, 1996
through the date of this Prospectus Supplement. This table does not reflect the
proposed issuance by NationsBank of its common stock and preferred stock in
connection with the Merger nor does it reflect the pro forma capitalization of
NationsBank assuming consummation of the Merger. For a discussion of the Merger
see "Recent Developments".
<TABLE>
<CAPTION>
NATIONSBANK AS
ACTUAL ADJUSTED
<S> <C> <C>
(AMOUNTS IN MILLIONS)
<CAPTION>
<S> <C> <C>
LONG-TERM DEBT
SENIOR DEBT:
NationsBank Corporation (parent):
Floating rate medium-term notes, due 1996-2006.................................................. $ 3,896 $ 4,255
4.55 to 8.20% medium-term notes, due 1996-2006.................................................. 1,078 1,073
8 1/2% notes, due 1996.......................................................................... 150 --
5.51% ESOP secured notes, due 1996-1999......................................................... 56 56
7 1/2% notes, due 1997.......................................................................... 250 250
5 1/8% notes, due 1998.......................................................................... 300 300
6 5/8% notes, due 1998.......................................................................... 400 400
Floating rate notes, due 1998................................................................... 300 300
5 3/8% notes, due 2000.......................................................................... 398 398
Floating rate notes, due 2000................................................................... 500 500
7% notes, due 2001.............................................................................. 499 499
Floating rate notes, due 2001................................................................... 200 200
Floating rate notes, due 2002................................................................... 499 499
7% notes, due 2003.............................................................................. 498 498
9 1/4% unsecured notes, due 2006................................................................ 124 124
Other senior notes.............................................................................. 30 30
9,178 9,382
Subsidiaries (1):
Bank notes with maturities greater than one year, due 1996-2003................................. 3,066 3,507
Floating rate mortgage-backed bonds, due 1998-2000.............................................. 2,999 3,000
Other senior notes.............................................................................. 638 635
6,703 7,142
Total senior debt............................................................................. 15,881 16,524
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NATIONSBANK AS
ACTUAL ADJUSTED
(AMOUNTS IN MILLIONS)
<S> <C> <C>
SUBORDINATED DEBT:
NationsBank Corporation (parent):
9 3/8% notes, due 1997.......................................................................... 75 75
9 3/4% notes, due 1999.......................................................................... 100 100
9 1/8% notes, due 2001.......................................................................... 299 299
8 1/8% notes, due 2002.......................................................................... 350 350
6.20% to 7.875% medium-term notes, due 2003 through 2011........................................ 521 625
6 1/2% notes, due 2003.......................................................................... 600 600
7 3/4% notes, due 2004.......................................................................... 299 299
6 7/8% notes, due 2005.......................................................................... 399 399
7 5/8% notes, due 2005.......................................................................... 297 297
6 1/2% notes, due 2006.......................................................................... 300 300
7 1/2% notes, due 2006.......................................................................... 500 500
9 3/8% notes, due 2009.......................................................................... 397 397
10.20% notes, due 2015.......................................................................... 200 200
7 3/4% notes, due 2015.......................................................................... 350 350
7.80% notes, due 2016........................................................................... 447 447
8.57% medium-term notes, due 2024, putable 2004................................................. 100 100
7 1/4% notes, due 2025.......................................................................... 444 444
Other subordinated notes........................................................................ 40 40
5,718 5,822
Subsidiaries (1):
9 1/2% notes, due 2004.......................................................................... 300 300
Floating rate notes, due 2019, putable 1999..................................................... 8 8
308 308
Total subordinated debt....................................................................... 6,026 6,130
Total long-term debt.......................................................................... 21,907 22,654
Guaranteed Preferred Beneficial Interests in Corporation's Junior Subordinated Notes.............. -- 965 (2)
SHAREHOLDERS' EQUITY
Preferred stock, authorized -- 45,000,000 shares; issued -- 5,280,406............................. 174 174
Common stock, authorized -- 800,000,000 shares; issued -- 288,111,941 (3)(4)...................... 3,956 3,956
Retained earnings................................................................................. 9,235 9,235
Other, including loan to ESOP trust............................................................... (61) (61 )
Total shareholders' equity.................................................................... 13,304 13,304
$35,211 $36,923
</TABLE>
(1) These obligations are direct obligations of certain of the subsidiaries of
NationsBank and, as such, constitute claims against such subsidiaries prior
to the Corporation's equity interest therein.
(2) The line item "Guaranteed Preferred Beneficial Interests in Corporation's
Junior Subordinated Notes" reflects (i) the issuance of $600 million
aggregate liquidation amount of preferred undivided beneficial interests in
NB Capital Trust I and (ii) the issuance of $365 million aggregate
liquidation amount of preferred undivided beneficial interests in NB Capital
Trust II represented by the Capital Securities being offered hereby. Such
preferred undivided beneficial interests, together with common interests in
such Trusts owned by the Corporation, represent all of the undivided
beneficial interests in the assets of the respective Trusts. As described
herein, the sole asset of the Trust will be $376,300,000 aggregate principal
amount of 7.83% Junior Subordinated Deferrable Interest Notes due 2026
issued by the Corporation to the Trust. The sole asset of NB Capital Trust I
is $618,560,000 aggregate principal amount of 7.84% Junior Subordinated
Deferrable Interest Notes due 2026 issued by the Corporation to NB Capital
Trust I on December 4, 1996.
(3) On July 16, 1996, the Corporation's Board of Directors authorized the
purchase of up to 20 million shares of NationsBank common stock, from time
to time during the next 36 months, in open market or private transactions.
Also on July 16, 1996, the Board of Directors authorized the repurchase of
NationsBank common stock in the open market, from time to time over the next
13 months, representing the number of shares of NationsBank common stock the
Corporation intends to issue for its Dividend Reinvestment and Stock
Purchase Plan and other employee and director benefit plans.
(4) As of September 30, 1996, (a) 55.7 million shares of NationsBank common
stock were reserved for issuance under various employee and director benefit
plans of the Corporation and upon the conversion of the ESOP Convertible
Preferred Stock, Series C, (b) 2.8 million shares of NationsBank common
stock were reserved for issuance under the Corporation's Dividend
Reinvestment and Stock Purchase Plan and (c) 110 million shares of common
stock were reserved for issuance in connection with the Merger.
As of September 30, 1996, the Corporation had $2.6 billion of commercial
paper and other short-term notes payable outstanding. During the nine months
ended September 30, 1996, the amount of commercial paper and other short-term
notes payable outstanding averaged $2.7 billion and ranged from a high of $3.1
billion to a low of $2.4 billion. At September 30, 1996, the Corporation had
unused lines of credit aggregating $1.5 billion, principally to support
commercial paper borrowings.
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<PAGE>
RATIOS OF EARNINGS TO FIXED CHARGES
The following are the Corporation's consolidated ratios of earnings to
fixed charges and ratios of earnings to combined fixed charges and preferred
stock dividend requirements for the nine months ended September 30, 1996 and for
each of the years in the five-year period ended December 31, 1995:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges:
Excluding interest on deposits...................................... 1.8 1.7 1.9 2.3 2.4 1.1
Including interest on deposits...................................... 1.5 1.4 1.5 1.5 1.4 1.0
Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends:
Excluding interest on deposits...................................... 1.8 1.6 1.8 2.3 2.3 1.1
Including interest on deposits...................................... 1.5 1.4 1.5 1.5 1.4 1.0
</TABLE>
For purposes of computing the consolidated ratios, earnings represent net
income of the Corporation plus applicable income taxes and fixed charges, less
capitalized interest and the equity in undistributed earnings of unconsolidated
subsidiaries and associated companies. Fixed charges represent interest expense
(exclusive of interest on deposits in one case and inclusive of such interest in
the other), capitalized interest, amortization of debt discount and appropriate
issuance costs and one-third (the amount deemed to represent an appropriate
interest factor) of net rent expense under all lease commitments. Preferred
stock dividend requirements represent dividend requirements on the outstanding
preferred stock adjusted to reflect the pre-tax earnings that would be required
to cover such dividend requirements.
ACCOUNTING TREATMENT
The financial statements of the Trust will be consolidated into the
Corporation's consolidated financial statements, with the 365,000 Capital
Securities shown under the separate line item "Guaranteed Preferred Beneficial
Interests in Corporation's Junior Subordinated Notes". The sole asset of the
Trust will be $376,300,000 aggregate principal amount of 7.83% Junior
Subordinated Deferrable Interest Notes due 2026 issued by NationsBank to the
Trust.
USE OF PROCEEDS
The Trust will use the gross proceeds received from the sale of the Capital
Securities to purchase Junior Subordinated Notes from NationsBank. NationsBank
intends to add the net proceeds from the sale of the Junior Subordinated Notes
to its general funds, to be used for general corporate purposes, including the
Corporation's working capital needs, the funding of investments in, or
extensions of credit to, its banking and nonbanking subsidiaries, possible
acquisitions of other financial institutions or their assets or liabilities,
possible acquisitions of or investments in other businesses of a type eligible
for bank holding companies and possible reduction of outstanding indebtedness or
repurchase of outstanding equity securities of the Corporation. Pending such
use, the Corporation may temporarily invest the net proceeds in investment grade
securities. The Corporation may, from time to time, engage in additional capital
financings of a character and in amounts to be determined by the Corporation in
light of its needs at such time or times and in light of prevailing market
conditions.
DESCRIPTION OF THE JUNIOR SUBORDINATED NOTES
Set forth below is a description of the specific terms of the Junior
Subordinated Notes in which the Trust will invest the proceeds from the issuance
and sale of the Trust Securities. This description supplements the description
of the general terms and provisions of the Junior Subordinated Notes set forth
in the accompanying Prospectus under the caption "Description of the Junior
Subordinated Notes." The following description does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
description in the accompanying Prospectus and the Indenture, dated as of
November 27, 1996 (the "Base Indenture"), between NationsBank and The Bank of
New York, as Trustee (the "Debt Trustee"), as supplemented by a
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Second Supplemental Indenture (the "Supplemental Indenture") to be dated as of
December 17, 1996 (the Base Indenture, as so supplemented, is hereinafter
referred to as the "Indenture"), the forms of which are filed as exhibits to, or
incorporated by reference into, the Registration Statement of which this
Prospectus Supplement and the accompanying Prospectus form a part. Certain
capitalized terms used herein are defined in the Indenture.
NationsBank will have the right at any time to dissolve the Trust and cause
the Junior Subordinated Notes to be distributed to the holders of the Trust
Securities. Any such distribution may require the prior approval of the Federal
Reserve Board.
GENERAL
The Junior Subordinated Notes will be issued as unsecured debt under the
Indenture. The Junior Subordinated Notes will be limited in aggregate principal
amount to approximately $376,300,000, such amount being the sum of the aggregate
stated liquidation amount of the Trust Securities.
The Junior Subordinated Notes are not subject to a sinking fund provision.
The entire principal amount of the Junior Subordinated Notes will mature and
become due and payable, together with any accrued and unpaid interest thereon
including Compounded Interest (as defined herein) and Additional Interest (as
defined herein), if any, on December 15, 2026.
If Junior Subordinated Notes are distributed to holders of Capital
Securities in liquidation of such holders' interests in the Trust, such Junior
Subordinated Notes will initially be issued as a Global Security (as defined
herein). As described herein, Junior Subordinated Notes also may be issued in
certificated form in exchange for a Global Security. See " -- Book-Entry and
Settlement; the Depositary" below. In the event that Junior Subordinated Notes
are issued in certificated form, such Junior Subordinated Notes will be in
denominations of $1,000 and integral multiples thereof and may be transferred or
exchanged at the offices described below. Payments on Junior Subordinated Notes
issued as a Global Security will be made to a Depositary (as defined herein) or,
in the event that no Depositary is used, to a Paying Agent for the Junior
Subordinated Notes. In the event Junior Subordinated Notes are issued in
certificated form, principal and interest will be payable, the transfer of the
Junior Subordinated Notes will be registrable and Junior Subordinated Notes will
be exchangeable for Junior Subordinated Notes of other denominations of a like
aggregate principal amount at the corporate trust office of the Property Trustee
in New York, New York; provided, that payment of interest may be made at the
option of NationsBank by check mailed to the address of the holder entitled
thereto or by wire transfer to an account appropriately designated by the holder
entitled thereto. Notwithstanding the foregoing, so long as the holder of any
Junior Subordinated Notes is the Property Trustee, the payment of principal and
interest on the Junior Subordinated Notes held by the Property Trustee will be
made at such place and to such account as may be designated by the Property
Trustee.
The Indenture does not contain provisions that afford holders of the Junior
Subordinated Notes protection in the event of a highly leveraged transaction or
other similar transaction involving NationsBank that may adversely affect such
holders.
SUBORDINATION
The Indenture provides that the Junior Subordinated Notes are subordinated
and junior in right of payment to all present and future Senior Obligations of
NationsBank (as defined herein) and rank pari passu and are equivalent to
creditor obligations of those holding general unsecured claims not entitled to
statutory priority under the United States Bankruptcy Code or otherwise. In
addition, no payment of principal (including prepayments), premium, if any, or
interest on the Junior Subordinated Notes may be made at any time when (i) there
is a default in the payment of the principal of, premium, if any, interest on or
otherwise with respect to any Senior Obligations, whether at maturity or any
date fixed for prepayment or by declaration or otherwise, (ii) any event of
default with respect to Senior Obligations has occurred and is continuing, or
would occur as a result of such payment on the Junior Subordinated Notes or any
prepayment, retirement, purchase or other acquisition of any of the Junior
Subordinated Notes, permitting the holders of such Senior Obligations (or a
trustee on behalf of the holder thereof) to accelerate the maturity thereof.
Upon any distribution of assets of
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the Corporation to creditors upon any dissolution, winding-up, liquidation or
reorganization, whether voluntary or involuntary, or in a bankruptcy,
insolvency, receivership or other proceedings, the payment of the principal of,
and interest on, the Junior Subordinated Notes will, to the extent set forth in
the Indenture, be subordinated in right of payment to the prior payment in full
of all Senior Obligations of NationsBank. Upon any payment or distribution of
assets to creditors upon dissolution, winding-up, liquidation, reorganization,
assignment for benefit of creditors, marshalling of assets or any bankruptcy,
insolvency or similar proceedings of NationsBank, the holders of all Senior
Obligations will first be entitled to receive payment in full of all amounts due
or to become due thereon before the holders of the Junior Subordinated Notes
will be entitled to receive and retain any payments in respect of the principal
of, or interest on, the Junior Subordinated Notes.
The term "Senior Obligations" means, with respect to NationsBank, (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of
NationsBank for money borrowed (whether or not denominated as senior or
subordinated) and (B) indebtedness evidenced by securities, debentures, bonds or
other similar instruments (whether or not denominated as senior or subordinated)
issued by NationsBank, (ii) all capital lease obligations of NationsBank, (iii)
all obligations of NationsBank issued or assumed as the deferred purchase price
of property, all conditional sale obligations of NationsBank and all obligations
of NationsBank under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business), (iv) all obligations of
NationsBank for the reimbursement on any letter of credit, banker's acceptance,
or similar credit transaction, (v) all obligations of the Corporation arising
from off-balance sheet guarantees by the Corporation and direct credit
substitutes and obligations of the Corporation associated with derivative
products such as interest and foreign exchange contracts, commodity contracts,
swap agreements (including interest rate and foreign exchange swap agreements),
cap agreements, floor agreements, collar agreements, interest rate agreements,
foreign exchange rate agreements, options, commodity futures contracts and
commodity option contracts; (vi) all obligations and financial instruments of
the type referred to in clauses (i) through (v) above of other persons for the
payment of which NationsBank is responsible or liable as obligor, guarantor or
otherwise and (vii) all obligations of the type referred to in clauses (i)
through (vi) above of other persons secured by any lien on any property or asset
of NationsBank (whether or not such obligation is assumed by NationsBank),
except for (1) any such indebtedness that is by its terms subordinated to or
ranks pari passu with the Junior Subordinated Notes and (2) any indebtedness
between or among NationsBank or its affiliates, including all other debt
securities and guarantees in respect of those debt securities, issued to (a) any
other NB Trust or a trustee of such trust and (b) any other trust, or a trustee
of such trust, partnership or other entity affiliated with NationsBank that is a
financing vehicle of NationsBank (a "financing entity") in connection with the
issuance by such financial entity of Capital Securities or other securities that
rank pari passu with, or junior to, the Capital Securities.
The rights of the holders of the Junior Subordinated Notes will be
subrogated to the rights of holders of or obligees under the Senior Obligations
of NationsBank until all amounts owing to the holders of or obligees under the
Senior Obligations are paid in full. Such Senior Obligations shall continue to
be Senior Obligations and be entitled to the benefits of the subordination
provisions irrespective of any amendment, modification or waiver of any term of
such Senior Obligations.
The Indenture does not limit the aggregate amount of Senior Obligations
that may be issued by NationsBank. As of September 30, 1996, Senior Obligations
of NationsBank aggregated approximately $17.6 billion. In addition, because
NationsBank is a holding company, the Junior Subordinated Notes are effectively
subordinated to all existing and future liabilities of the Corporation's
subsidiaries, including obligations to depositors.
INTEREST
The Junior Subordinated Notes shall bear interest at the rate of 7.83
percent per annum from December 17, 1996, payable semi-annually in arrears on
June 15 and December 15 of each year (each an "Interest Payment Date"),
commencing June 15, 1997, to the person in whose name such Junior Subordinated
Notes is registered, subject to certain exceptions, at the close of business on
the Business Day next preceding such Interest Payment Date. In the event the
Junior Subordinated Notes shall not continue to remain in book-entry only form,
the record dates shall be the June 1 or December 1 prior to the applicable
Interest Payment Date.
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The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full semi-annual period for which interest is
computed, will be computed on the basis of the actual number of days elapsed in
a 30-day month. In the event that any date on which interest is payable on the
Junior Subordinated Notes is not a Business Day, then payment of the interest
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 of any such delay),
except that, if such Business Day is in the next succeeding calendar year, then
such payment shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
NationsBank shall have the right at any time, and from time to time, during
the term of the Junior Subordinated Notes to defer payments of interest by
extending the interest payment period for a period not exceeding 10 consecutive
semi-annual periods, but no such Extension Period may extend beyond the Stated
Maturity. At the end of any such Extension Period, NationsBank shall pay all
interest then accrued and unpaid (including any Additional Interest, as defined
herein) together with interest thereon compounded semi-annually at the rate
specified for the Junior Subordinated Notes to the extent permitted by
applicable law ("Compounded Interest"); provided, that during any such Extension
Period, (a) NationsBank shall not declare or pay dividends on, make any
distribution with respect to, or redeem, purchase, acquire or make a liquidation
payment with respect to any of its capital stock (other than (i) purchases or
acquisitions of shares of NationsBank common stock in connection with the
satisfaction by NationsBank of its obligations under any employee benefit plans,
(ii) as a result of a reclassification of NationsBank capital stock or the
exchange or conversion of one class or series of the Corporation's capital stock
for another class or series of NationsBank capital stock or (iii) the purchase
of fractional interests in shares of the Corporation's capital stock pursuant to
an acquisition or the conversion or exchange provisions of such NationsBank
capital stock or the security being converted or exchanged), (b) NationsBank
shall not make any payment of principal, premium, if any, or interest on or
repay, repurchase or redeem any debt securities issued by NationsBank that rank
pari passu with or junior to the Junior Subordinated Notes and (c) NationsBank
shall not make any guarantee payments with respect to the foregoing (other than
pursuant to the Capital Securities Guarantee). Prior to the termination of any
such Extension Period, NationsBank may further defer payments of interest by
extending the interest payment period; provided, however, that, such Extension
Period, including all such previous and further extensions, may not exceed 10
consecutive semi-annual periods or beyond the Stated Maturity. Upon the
termination of any Extension Period and the payment of all amounts then due,
NationsBank may commence a new Extension Period, subject to the terms set forth
in this section. No interest shall be due and payable during an Extension
Period, except at the end thereof, but NationsBank may prepay at any time all or
any portion of the interest accrued during an Extension Period. NationsBank has
no present intention of exercising its right to defer payments of interest by
extending the interest payment period on the Junior Subordinated Notes. If the
Property Trustee shall be the sole holder of the Junior Subordinated Notes,
NationsBank shall give the Regular Trustees and the Property Trustee notice of
its selection of such Extension Period at least one Business Day prior to the
earlier of (i) the date distributions on the Capital Securities are payable or
(ii) the date the Regular Trustees are required to give notice of the record
date or the date such distribution is payable to any applicable self-regulatory
organization or to holders of the Capital Securities, but in any event at least
one Business Day before such record date. The Regular Trustees shall give notice
of the Corporation's selection of such Extension Period to the holders of the
Capital Securities. If the Property Trustee shall not be the sole holder of the
Junior Subordinated Notes, NationsBank shall give the holders of the Junior
Subordinated Notes notice of its selection of such Extension Period at least 10
Business Days prior to the earlier of (i) the Interest Payment Date or (ii) the
date upon which NationsBank is required to give notice of the record or payment
date of such interest payment to any applicable self-regulatory organization or
to holders of the Junior Subordinated Notes.
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OPTIONAL PREPAYMENT
The Junior Subordinated Notes will be prepayable, in whole or in part, at
the option of the Corporation at any time on or after December 15, 2006, subject
to the Corporation having received prior approval of the Federal Reserve Board
if required. Such an Optional Prepayment shall be at the Optional Prepayment
Price equal to the percentage of the outstanding principal amount of the Junior
Subordinated Notes specified below, plus, in each case, accrued interest thereon
to the date of prepayment:
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
DATE OF OPTIONAL PREPAYMENT PRINCIPAL AMOUNT
<S> <C>
December 15, 2006 to December 14, 2007: 103.915%
December 15, 2007 to December 14, 2008: 103.524%
December 15, 2008 to December 14, 2009: 103.132%
December 15, 2009 to December 14, 2010: 102.741%
December 15, 2010 to December 14, 2011: 102.349%
December 15, 2011 to December 14, 2012: 101.958%
December 15, 2012 to December 14, 2013: 101.566%
December 15, 2013 to December 14, 2014: 101.175%
December 15, 2014 to December 14, 2015: 100.783%
December 15, 2015 to December 14, 2016: 100.392%
On or after December 15, 2016: 100.000%
</TABLE>
SPECIAL EVENT PREPAYMENT
If a Special Event shall occur and be continuing prior to December 15,
2006, the Corporation may, at its option and subject to receipt of prior
approval of the Federal Reserve Board if required, prepay the Junior
Subordinated Notes in whole, but not in part, at any time within 90 days of the
occurrence of such Special Event. Such a Special Event Prepayment shall be at
the Special Event Prepayment Price equal to the greater of (i) 100% of the
principal amount of such Junior Subordinated Notes or (ii) as determined by a
Quotation Agent (as defined herein), the sum of (a) the present values of the
principal amount and premium that would be payable as part of the Optional
Prepayment Price with respect to an Optional Prepayment of such Junior
Subordinated Notes on December 15, 2006, and (b) the present values of scheduled
payments of interest from the prepayment date to December 15, 2006 (the
"Remaining Life"), in each case discounted to the prepayment date on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Adjusted Treasury Rate (as defined herein), plus, in the case of either
(i) or (ii), accrued interest on the Junior Subordinated Notes up to but
excluding the date of prepayment.
"Adjusted Treasury Rate" means, with respect to any prepayment date, the
Treasury Rate plus (i) 1.00% if such prepayment date occurs on or before
December 15, 1997 or (ii) 0.50% if such prepayment date occurs after December
15, 1997.
"Treasury Rate" means the yield, under the heading which represents the
average for the immediately prior week, 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 yields on
actively traded United States Treasury securities adjusted to constant maturity
under the caption "Treasury Constant Maturities", for the maturity corresponding
to the Remaining Life. If no maturity is within three months before or after the
Remaining Life, yields for the two published maturities most closely
corresponding to the Remaining Life shall be determined and the Treasury Rate
shall be interpolated or extrapolated from such yields on a straight-line basis,
rounding to the nearest month. If such release (or any successor release) is not
published during the week preceding the calculation date or does not contain
such yields, the rate per annum equal to the semi-annual equivalent yield 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
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the Comparable Treasury Price for such prepayment date. The Treasury Rate shall
be calculated on the third Business Day preceding the prepayment date.
"Comparable Treasury Issue" means with respect to any prepayment date the
United States Treasury security selected by the Quotation Agent as having a
maturity comparable to the Remaining Life that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the Remaining
Life. If no United States Treasury security has a maturity which is within a
period from three months before to three months after December 15, 2006, the two
most closely corresponding United States Treasury securities shall be used as
the Comparable Treasury Issues, and the Treasury Rate shall be interpolated or
extrapolated on a straight-line basis, rounding to the nearest month using such
securities.
"Quotation Agent" means NationsBanc Capital Markets, Inc. or any successor
appointed by the Corporation.
"Reference Treasury Dealer" means (i) NationsBanc Capital Markets, Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated and their respective successors; provided, however, that if any of
the foregoing shall cease to be a primary U.S. Government securities dealer (a
"Primary Treasury Dealer"), the Corporation shall substitute therefor another
Primary Treasury Dealer; and (ii) any other Primary Treasury Dealer selected by
the Property Trustee after consultation with the Corporation.
"Comparable Treasury Price" means (A) the average of three Reference
Treasury Dealer Quotations for such prepayment date or (B) if the Property
Trustee obtains fewer than three such Reference Treasury Dealer Quotations, the
average of the Quotations obtained.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any prepayment date, the average, as determined by
the Property 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 Property Trustee by such Reference Treasury Dealer at 2:00 p.m.
on the third Business Day preceding such prepayment date.
PREPAYMENT PROCEDURES
Notice of any prepayment will be mailed at least 30 days but not more than
60 days before the prepayment date to each holder of Junior Subordinated Notes
to be prepaid at its registered address. Unless the Corporation defaults in
payment of the prepayment price, on and after the prepayment date interest
ceases to accrue on such Junior Subordinated Notes called for prepayment.
ADDITIONAL INTEREST
If at any time the Trust shall be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other domestic taxing authority,
then, in any such case, NationsBank will pay as additional interest ("Additional
Interest") on the Junior Subordinated Notes held by the Property Trustee, such
additional amounts as shall be required so that the net amounts received and
retained by the Trust and the Property Trustee after paying such taxes, duties,
assessments or other governmental charges will be equal to the amounts the Trust
and the Property Trustee would have received and retained had no such taxes,
duties, assessments or other governmental charges been imposed.
INDENTURE EVENTS OF DEFAULT AND NOTE PAYMENT FAILURES
"Indenture Events of Default" are limited to certain events of bankruptcy,
insolvency and reorganization of the Corporation and certain events of
dissolution, winding-up or termination of the Trust and do not include defaults
of the Corporation in payment obligations with respect to the Junior
Subordinated Notes or defaults of the Corporation under the Capital Securities
Guarantee. If any Indenture Event of Default shall occur and be continuing, the
Property Trustee, as the holder of the Junior Subordinated Notes, will have the
right to declare the principal of and the interest on the Junior Subordinated
Notes (including any Compounded Interest and
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Additional Interest, if any) 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 the Junior Subordinated Notes. See "Description of Junior
Subordinated Notes -- Events of Default, Waiver and Notice" in the accompanying
Prospectus for a description of the Indenture Events of Default. An Indenture
Event of Default also constitutes a Declaration Event of Default. The holders of
Capital Securities in certain circumstances have the right to direct the
Property Trustee to exercise its rights as the holder of the Junior Subordinated
Notes. See "Description of the Capital Securities -- Declaration Events of
Default and Note Payment Failures" and " -- Voting Rights." Notwithstanding the
foregoing, if a Note Payment Failure has occurred and is continuing, a holder of
Capital Securities may institute a Direct Action for payment after the
respective due date specified in the Junior Subordinated Notes. Notwithstanding
any payments made to such holder of Capital Securities by NationsBank in
connection with a Direct Action, NationsBank shall remain obligated to pay the
principal of or interest on the Junior Subordinated Notes held by the Trust or
the Property Trustee of the Trust, and NationsBank shall be subrogated to the
rights of the holder of such Capital Securities with respect to payments on the
Capital Securities to the extent of any payments made by NationsBank to such
holder in any Direct Action. The holders of Capital Securities will not be able
to exercise directly any other remedy available to the holders of the Junior
Subordinated Notes.
BOOK-ENTRY AND SETTLEMENT; THE DEPOSITARY
If Junior Subordinated Notes are distributed to holders of Capital
Securities in liquidation of such holders' interests in the Trust, the Junior
Subordinated Notes previously registered in the name of the Property Trustee on
behalf of the Trust will be re-registered in the name of Cede & Co., as nominee
for The Depository Trust Company ("DTC"), in which case, DTC will act as
securities depositary for the Junior Subordinated Notes. For a description of
DTC and the specific terms of the depositary arrangements, see "Description of
the Capital Securities -- Book-Entry Only Issuance -- The Depository Trust
Company." As of the date of this Prospectus Supplement, the description herein
of DTC's book-entry system and DTC's practices as they relate to purchases,
transfers, notices and payments with respect to the Capital Securities applies
in all material respects to the Junior Subordinated Notes represented by one or
more Global Securities when, and if, held by DTC. NationsBank may appoint
another Depositary in the event DTC or any successor or alternate depositary is
unable or unwilling to act or continue to act as a depositary for the Global
Securities.
Except under the limited circumstances described below, Junior Subordinated
Notes represented by a Global Security will not be exchangeable for, and will
not otherwise be issuable as, Junior Subordinated Notes in definitive form. The
Global Securities described above may not be transferred except by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or to a successor Depositary
or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such a Global
Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Junior
Subordinated Notes in definitive form and will not be considered the holders (as
defined in the Indenture) thereof for any purpose under the Indenture, and no
Global Security representing Junior Subordinated Notes shall be exchangeable,
except for another Global Security of like denomination and tenor to be
registered in the name of the Depositary or its nominee or to a successor
Depositary or its nominee. Accordingly, each Beneficial Owner (as defined
herein) must rely on the procedures of the Depositary or if such person is not a
Participant (as defined herein), on the procedures of the Participant through
which such person owns its interest to exercise any rights of a holder under the
Indenture.
None of NationsBank, the Trust, the Property Trustee, any paying agent and
any other agent of NationsBank, or the Debt Trustee will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in a Global Security for such Junior
Subordinated Notes or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
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DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
A Global Security shall be exchangeable for Junior Subordinated Notes
registered in the names of persons other than the Depositary or its nominee only
if (i) the Depositary notifies NationsBank that it is unwilling or unable to
continue as a depositary for such Global Security and no successor depositary
shall have been appointed, (ii) the Depositary, at any time, ceases to be a
clearing agency registered under the Exchange Act at which time the Depositary
is required to be so registered to act as such depositary and no successor
depositary shall have been appointed, (iii) NationsBank, in its sole discretion,
determines that such Global Security shall be so exchangeable or (iv) there
shall have occurred an Indenture Event of Default with respect to such Junior
Subordinated Notes. Any Global Security that is exchangeable pursuant to the
preceding sentence shall be exchangeable for Junior Subordinated Notes
registered in such names as the Depositary shall direct. It is expected that
such instructions will be based upon directions received by the Depositary from
its Participants with respect to ownership of beneficial interests in such
Global Security.
GOVERNING LAW
The Indenture and the Junior Subordinated Notes will be governed by, and
construed in accordance with, the internal laws of the State of New York.
MISCELLANEOUS
The Indenture provides that NationsBank will pay all fees and expenses
related to (i) the offering of the Trust Securities and the Junior Subordinated
Notes, (ii) the organization, maintenance and dissolution of the Trust, (iii)
the retention of the NB Trustees and (iv) the enforcement by the Property
Trustee of the rights of the holders of the Capital Securities. The payment of
such fees and expenses will be fully and unconditionally guaranteed by
NationsBank.
NationsBank will have the right at all times to assign any of its
respective rights or obligations under the Indenture to a direct or indirect
wholly-owned subsidiary of NationsBank; provided that, in the event of any such
assignment, NationsBank will remain liable for all of their respective
obligations. Subject to the foregoing, the Indenture will be binding upon and
inure to the benefit of the parties thereto and their respective successors and
assigns. The Indenture provides that it may not otherwise be assigned by the
parties thereto.
DESCRIPTION OF THE CAPITAL SECURITIES
The Capital Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the Trust
Indenture Act. The Property Trustee will act as indenture trustee for the
Capital Securities under the Declaration for purposes of compliance with the
provisions of the Trust Indenture Act. The terms of the Capital Securities will
include those stated in the Declaration and those made part of the Declaration
by the Trust Indenture Act. The following summary of the material terms and
provisions of the Capital Securities which supplements, and to the extent
inconsistent, replaces the description set forth under the caption "Description
of the Preferred Securities" in the accompanying Prospectus does not purport to
be complete and is subject to, and qualified in its entirety by reference to,
the Declaration, a copy of which is filed as an exhibit to the Registration
Statement of which this Prospectus Supplement is a part, the Trust Act and the
Trust Indenture Act.
GENERAL
The Declaration authorizes the Regular Trustees to issue the Trust
Securities on behalf of the Trust, which represent undivided beneficial
interests in the assets of the Trust. All of the Common Securities will be
owned, directly or indirectly, by NationsBank. The Common Securities rank pari
passu, and payments will be made thereon on a pro rata basis, with the Capital
Securities, except that upon the occurrence and during the continuance of a
Declaration Event of Default, the rights of the holders of the Common Securities
to receive payment of periodic distributions and payments upon liquidation,
redemption and otherwise will be subordinated to the rights of the holders of
the Capital Securities. The Declaration does not permit the issuance by the
Trust of any securities other than the Trust Securities or the incurrence of any
indebtedness by the Trust. Pursuant to the Declaration, the Property Trustee
will own the Junior Subordinated Notes purchased by the Trust for the benefit of
the holders of the Trust Securities. The payment of distributions out of money
held by
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the Trust, and payments upon redemption of the Capital Securities or liquidation
of the Trust, are guaranteed by NationsBank to the extent described under
"Description of the Preferred Securities Guarantees" in the accompanying
Prospectus. The Capital Securities Guarantee will be held by The Bank of New
York, as the Capital Securities Guarantee Trustee, for the benefit of the
holders of the Capital Securities. The Capital Securities Guarantee does not
cover payment of distributions when the Trust does not have sufficient available
funds to pay such distributions. In such event, the remedy of a holder of
Capital Securities is to vote to direct the Property Trustee to enforce the
Property Trustee's rights under the Junior Subordinated Notes. Notwithstanding
the foregoing, in the circumstances of a Note Payment Failure, a holder of
Capital Securities may institute a Direct Action without first instituting any
legal proceeding against the Property Trustee or any person or entity. See
" -- Declaration Events of Default and Note Payment Failures" and " -- Voting
Rights."
DISTRIBUTIONS
Distributions on the Capital Securities will be fixed at a rate per annum
of 7.83 percent of the stated liquidation amount of $1,000 per Capital Security.
Distributions on the Capital Securities will be cumulative, will accrue from
December 17, 1996 and, except as otherwise described below, will be payable
semi-annually in arrears on June 15 and December 15 of each year, commencing
June 15, 1997, when, as and if available for payment. Distributions in arrears
for more than one six month period will bear interest thereon at the rate per
annum of 7.83 percent thereof compounded semi-annually to the extent permitted
by applicable law. The term "distribution" as used herein includes any such
interest payable unless otherwise stated. The amount of distributions payable
for any period will be computed on the basis of a 360-day year of twelve 30-day
months.
NationsBank has the right under the Indenture to defer payments of interest
on the Junior Subordinated Notes by extending the interest payment period from
time to time on the Junior Subordinated Notes, which, if exercised, would defer
semi-annual distributions on the Capital Securities (though such distributions
would continue to accrue with interest since interest would continue to accrue
on the Junior Subordinated Notes) during any such Extension Period. Such right
to extend the interest payment period for the Junior Subordinated Notes is
limited to a period not exceeding 10 consecutive semi-annual periods and such
period may not extend beyond the Stated Maturity of the Junior Subordinated
Notes. In the event that NationsBank exercises this right, then (a) NationsBank
shall not declare or pay dividends on, make distributions with respect to, or
redeem, purchase or acquire, or make a liquidation payment with respect to, any
of its capital stock (other than (i) purchases or acquisitions of shares of
NationsBank common stock in connection with the satisfaction by NationsBank of
its obligations under any employee benefit plans, (ii) as a result of a
reclassification of the Corporation's capital stock or the exchange or
conversion of one class or series of NationsBank capital stock for another class
or series of NationsBank capital stock or (iii) the purchase of fractional
interests in shares of NationsBank capital stock pursuant to an acquisition or
the conversion or exchange provisions of such NationsBank capital stock or the
security being converted or exchanged), (b) NationsBank shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities issued by NationsBank that rank pari passu with or
junior to such Junior Subordinated Notes and (c) NationsBank shall not make any
guarantee payments with respect to the foregoing (other than pursuant to the
Capital Securities Guarantee). Subject to the above requirements, prior to the
termination of any such Extension Period, NationsBank may further extend the
interest payment period; and, upon the termination of any Extension Period and
the payment of all amounts then due, NationsBank may select a new Extension
Period. See "Description of the Junior Subordinated Notes -- Interest" and
" -- Option to Extend Interest Payment Period." If distributions are deferred,
the deferred distributions and accrued interest thereon shall be paid to holders
on the record date next following the termination of such Extension Period.
Distributions on the Capital Securities must be paid on the dates payable
to the extent that the Trust has funds available for the payment of such
distributions in the Property Account. The Trust's funds available for
distribution to the holders of the Capital Securities will be limited to
payments received from NationsBank on the Junior Subordinated Notes. See
"Description of the Junior Subordinated Notes." The payment of distributions out
of moneys held by the Trust is guaranteed by NationsBank to the extent set forth
under "Description of the Capital Securities Guarantees" in the accompanying
Prospectus.
Distributions on the Capital Securities will be payable to the holders
thereof on the relevant record dates, which, as long as the Capital Securities
remain in book-entry only form, will be one Business Day prior to the relevant
payment dates. Such distributions will be paid through the Property Trustee who
will hold amounts
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received in respect of the Junior Subordinated Notes in the Property Account for
the benefit of the holders of the Trust Securities. Subject to any applicable
laws and regulations and the provisions of the Declaration, each such payment
will be made as described under " -- Book-Entry Only Issuance -- The Depository
Trust Company" below. In the event that the Capital Securities do not continue
to remain in book-entry only form, the record dates for payment of distributions
will be June 1 and December 1. In the event that any date on which distributions
are to be made on the Capital Securities is not a Business Day, then payment of
the distributions 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 is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such record date.
A "Business Day" shall mean any day other than a day on which federal or state
banking institutions in New York, New York or Charlotte, North Carolina are
authorized or obligated by law, executive order or regulation to close.
REDEMPTION OF CAPITAL SECURITIES UPON PAYMENT OR PREPAYMENT OF JUNIOR
SUBORDINATED NOTES
The Junior Subordinated Notes will mature on December 15, 2026. Moreover,
the Junior Subordinated Notes are subject to prepayment (i) in whole or in part,
at any time on or after December 15, 2006 at the applicable Optional Prepayment
Price and (ii) prior to December 15, 2006 upon the occurrence of a Special Event
at the Special Event Prepayment Price. Such prepayments shall be subject to
receipt of Federal Reserve Board approval if required. See "Description of the
Junior Subordinated Notes." Upon the payment of the Junior Subordinated Notes,
at maturity or upon prepayment, the proceeds from such payment or prepayment
shall simultaneously be applied to redeem Trust Securities having an aggregate
liquidation amount equal to the aggregate principal amount of Junior
Subordinated Notes so paid or prepaid. In the event that fewer than all of the
outstanding Capital Securities are to be redeemed, the Capital Securities will
be redeemed pro rata as described under " -- Book-Entry Only Issuance -- The
Depository Trust Company" below.
Upon the payment in full at the Stated Maturity or prepayment in whole, but
not in part, of the Junior Subordinated Notes, the proceeds from such payment or
prepayment shall be applied by the Property Trustee to redeem the Trust
Securities, upon not less than 15 nor more than 60 days' notice of a date of
redemption (the "Redemption Date"), at the applicable Redemption Price, which
shall be equal to (i) in the case of the payment of the Junior Subordinated
Notes at the Stated Maturity, the Maturity Redemption Price (equal to the
principal of, and accrued interest on, the Junior Subordinated Notes), (ii) in
the case of a Special Event Prepayment, the Special Event Redemption Price
(which is equal to the Special Event Prepayment Price in respect of the Junior
Subordinated Notes) (see "Description of the Junior Subordinated
Notes -- Special Event Prepayment") and (iii) in the case of an Optional
Prepayment, the Optional Redemption Price (equal to the Optional Prepayment
Price in respect of the Junior Subordinated Notes). See "Description of the
Junior Subordinated Notes -- Optional Prepayment."
DISTRIBUTION OF THE JUNIOR SUBORDINATED NOTES TO TRUST SECURITYHOLDERS
NationsBank will have the right at any time to dissolve the Trust and cause
the Junior Subordinated Notes to be distributed to the holders of the Trust
Securities. Any such dissolution and distribution may require prior approval of
the Federal Reserve Board.
After the date for any distribution of Junior Subordinated Notes upon
dissolution of the Trust, (i) the Capital Securities will no longer be deemed to
be outstanding, (ii) the Depositary or its nominee, as the record holder of the
Capital Securities, will receive a registered global certificate or certificates
representing the Junior Subordinated Notes to be delivered upon such
distribution, and (iii) any certificates representing Capital Securities not
held by the Depositary or its nominee will be deemed to represent Junior
Subordinated Notes having an aggregate principal amount equal to the aggregate
stated liquidation amount of, with an interest rate identical to the
distribution rate of, and accrued and unpaid interest equal to accrued and
unpaid distributions on such Capital Securities until such certificates are
presented to NationsBank or its agent for transfer or reissuance.
There can be no assurance as to the market prices for either the Capital
Securities or the Junior Subordinated Notes that may be distributed in exchange
for the Capital Securities upon a dissolution and liquidation of
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the Trust. Accordingly, the Capital Securities or the Junior Subordinated Notes
may trade at a discount to the price that the investor paid to purchase the
Capital Securities offered hereby.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Capital
Securities unless all accrued and unpaid distributions have been paid on all
Capital Securities for all semi-annual distribution periods terminating on or
prior to the date of redemption.
If the Trust gives a notice of redemption in respect of Capital Securities
(which notice will be irrevocable), then, by 12:00 noon, New York City time, on
the Redemption Date, provided that NationsBank has paid to the Property Trustee
a sufficient amount of cash in connection with the related redemption or
maturity of the Junior Subordinated Notes, the Trust will irrevocably deposit
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 the Capital Securities. See " -- Book-Entry
Only Issuance -- The Depository Trust Company." If notice of redemption shall
have been given and funds deposited as required, then, immediately prior to the
close of business on the date of such deposit, distributions will cease to
accrue and all rights of holders of such Capital Securities so called for
redemption will cease, except the right of the holders of such Capital
Securities to receive the Redemption Price but without interest on such
Redemption Price. In the event that any date fixed for redemption of Capital
Securities is not a Business Day, then payment of the Redemption Price payable
on such date will be made on the next succeeding day that is a Business Day
(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 Capital Securities is improperly withheld or
refused and not paid either by the Trust, or by NationsBank pursuant to the
Capital Securities Guarantee, distributions on such Capital Securities will
continue to accrue at the then applicable rate from the original Redemption Date
to the date of payment, in which case the actual payment date will be considered
the date fixed for redemption for purposes of calculating the Redemption Price.
In the event that fewer than all of the outstanding Capital Securities are
to be redeemed, the Capital Securities will be redeemed pro rata as described
below under " -- Book-Entry Only Issuance -- The Depository Trust Company."
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws and the regulations of the Federal Reserve
Board), NationsBank or its subsidiaries may at any time, and from time to time,
purchase outstanding Capital Securities by tender, in the open market or by
private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each a "Liquidation"), the then holders
of the Capital Securities will be entitled to receive out of the assets of the
Trust, after satisfaction of liabilities to creditors, distributions in an
amount equal to the aggregate of the stated liquidation amount of $1,000 per
Capital Security plus accrued and unpaid distributions thereon to the date of
payment (the "Liquidation Distribution"), unless, in connection with such
Liquidation, Junior Subordinated Notes in an aggregate stated principal amount
equal to the aggregate stated liquidation amount of, with an interest rate
identical to the distribution rate of, and accrued and unpaid interest equal to
accrued and unpaid distributions on, the Capital Securities have been
distributed on a pro rata basis to the holders of the Capital Securities. Any
Liquidation Distribution may require prior approval of the Federal Reserve
Board.
If, upon any such Liquidation, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Capital Securities shall be paid on a pro rata basis. The holders
of the Common Securities will be entitled to receive distributions upon any such
dissolution pro rata with the holders of the Capital Securities, except that if
a Declaration Event of Default has occurred and is continuing, the Capital
Securities shall have a preference over the Common Securities with regard to
such distributions.
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Pursuant to the Declaration, the Trust shall terminate (i) on November 1,
2051, the expiration of the term of the Trust, (ii) upon the bankruptcy of the
Corporation, (iii) upon the filing of a certificate of dissolution or its
equivalent with respect to the Corporation, the filing of a certificate of
cancellation with respect to the Trust after obtaining the consent of the
holders of at least a majority in aggregate liquidation amount of the Trust
Securities affected thereby voting together as a single class to file such
certificate of cancellation or the revocation of the charter of NationsBank and
the expiration of 90 days after the date of revocation without a reinstatement
thereof, (iv) upon the distribution of Junior Subordinated Notes to holders of
the Capital Securities, (v) upon the entry of a decree of a judicial dissolution
of NationsBank or the Trust, or (vi) upon the redemption of all the Trust
Securities.
DECLARATION EVENTS OF DEFAULT AND NOTE PAYMENT FAILURES
An Indenture Event of Default constitutes an event of default under the
Declaration with respect to the Trust Securities (a "Declaration Event of
Default"); provided, that pursuant to the Declaration, the holder of the Common
Securities will be deemed to have waived any Declaration Event of Default with
respect to the Common Securities until all Declaration Events of Default with
respect to the Capital Securities have been cured, waived or otherwise
eliminated. Until such Declaration Events of Default with respect to the Capital
Securities have been so cured, waived, or otherwise eliminated, the Property
Trustee will be deemed to be acting solely on behalf of the holders of the
Capital Securities and only the holders of the Capital Securities will have the
right to direct the Property Trustee with respect to certain matters under the
Declaration, and therefore the Indenture. If the Property Trustee fails to
enforce its rights under the Junior Subordinated Notes after a holder of Capital
Securities has made a written request, such holder of record of Capital
Securities may institute a legal proceeding against NationsBank to enforce the
Property Trustee's rights under the Junior Subordinated Notes without first
instituting any legal proceeding against the Property Trustee or any other
person or entity.
Notwithstanding the foregoing, if a Note Payment Failure (which involves a
failure to make a timely interest, principal or redemption payment but does not
constitute a Declaration Event of Default) has occurred and is continuing, a
holder of Capital Securities may institute directly a proceeding for enforcement
of payment to such holder directly of the principal of or interest on the Junior
Subordinated Notes having a principal amount equal to the aggregate liquidation
amount of the Capital Securities of such holder after the respective due date
specified in the Junior Subordinated Notes. In connection with such Direct
Action, NationsBank will be subrogated to the rights of such holder of Capital
Securities under the Declaration to the extent of any payment made by
NationsBank to such holder of Capital Securities in such Direct Action. The
holders of Capital Securities will not be able to exercise directly any other
remedy available to the holders of the Junior Subordinated Notes.
Upon the occurrence of a Declaration Event of Default, the Property Trustee
as the sole holder of the Junior Subordinated Notes will have the right under
the Indenture to declare the principal of and interest on the Junior
Subordinated Notes to be immediately due and payable. NationsBank and the Trust
are each required to file annually with the Property Trustee an officer's
certificate as to its compliance with all conditions and covenants under the
Declaration.
VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture Act
and under "Description of the Preferred Securities Guarantees -- Modification of
the Preferred Securities Guarantees; Assignment" in the accompanying Prospectus,
and as otherwise required by law and the Declaration, the holders of the Capital
Securities will have no voting rights.
Subject to the requirement of the Property Trustee obtaining a tax opinion
in certain circumstances set forth in the last sentence of this paragraph, the
holders of a majority in aggregate liquidation amount of the Capital Securities,
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Property Trustee, or direct the exercise of any
trust or power conferred upon the Property Trustee under the Declaration
including the right to direct the Property Trustee, as holder of the Junior
Subordinated Notes, to (i) exercise the remedies available to it under the
Indenture as a holder of the Junior Subordinated Notes, (ii) waive any past
Indenture Event of Default that is waivable under the Indenture,
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(iii) exercise any right to rescind or annul a declaration that the principal of
all the Junior Subordinated Notes shall be due and payable or (iv) consent to
any amendment, modification or termination of the Indenture or the Junior
Subordinated Notes where such consent shall be required; provided, however,
that, where a consent or action under the Indenture would require the consent or
act of holders of more than a majority in principal amount of the Junior
Subordinated Notes (a "Super Majority") affected thereby, only the holders of at
least such Super Majority in aggregate liquidation amount of the Capital
Securities may direct the Property Trustee to give such consent or take such
action. If the Property Trustee fails to enforce its rights under the Junior
Subordinated Notes after a holder of record of Capital Securities has made a
written request, such holder of record of Capital Securities may institute a
legal proceeding directly against NationsBank to enforce the Property Trustee's
rights under the Junior Subordinated Notes without first instituting any legal
proceeding against the Property Trustee or any other person or entity.
Notwithstanding the foregoing, if a Note Payment Failure has occurred and is
continuing, a holder of Capital Securities may institute directly a proceeding
for enforcement of payment to such holder of the principal of, premium, if any,
or interest on the Junior Subordinated Notes having a principal amount equal to
the aggregate liquidation amount of the Capital Securities of such holder after
the respective due date specified in the Junior Subordinated Notes. The Property
Trustee shall notify all holders of the Capital Securities of any notice of an
Event of Default or Note Payment Failure received from the Debt Trustee with
respect to the Junior Subordinated Notes. Such notice, in the case of an Event
of Default, shall state that such Indenture Event of Default also constitutes a
Declaration Event of Default. Except with respect to directing the time, method
and place of conducting a proceeding for a remedy, the Property Trustee shall
not take any of the actions described in clauses (i), (ii) or (iii) above unless
the Property Trustee has obtained an opinion of a nationally recognized tax
counsel experienced in such matters to the effect that, as a result of such
action, the Trust will not fail to be classified as a grantor trust for United
States federal income tax purposes.
In the event the consent of the Property Trustee, as the holder of the
Junior Subordinated Notes, is required under the Indenture with respect to any
amendment, modification or termination of the Indenture, the Property Trustee
shall request the direction of the holders of the Trust Securities with respect
to such amendment, modification or termination and shall vote with respect to
such amendment, modification or termination as directed by a majority in
aggregate liquidation amount of the Trust Securities voting together as a single
class; provided, however, that where a consent under the Indenture would require
the consent of a Super Majority, the Property Trustee may only give such consent
at the direction of the holders of at least the proportion in liquidation amount
of the Trust Securities which the relevant Super Majority represents of the
aggregate principal amount of the Junior Subordinated Notes outstanding and;
provided further, in the case of a consent under the Indenture which requires
the consent of holders of all the Junior Subordinated Notes outstanding, the
Property Trustee may only give such consent at the direction of the holders of
all of the Trust Securities. The Property Trustee shall not take any such action
in accordance with the directions of the holders of the Trust Securities unless
the Property Trustee has obtained an opinion of a nationally recognized tax
counsel experienced in such matters to the effect that for the purposes of
United States federal income tax the Trust will not be classified as other than
a grantor trust.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Capital Securities may be
given at a separate meeting of holders of Capital Securities convened for such
purpose, at a meeting of all of the holders of Trust Securities or pursuant to
written consent. The Regular Trustees will cause a notice of any meeting at
which holders of Capital Securities are entitled to vote, or of any matter upon
which action by written consent of such holders is to be taken, to be mailed to
each holder of record of Capital Securities. Each such notice will include a
statement setting forth the following information: (i) the date of such meeting
or the date by which such action is to be taken; (ii) a description of any
resolution proposed for adoption at such meeting on which such holders are
entitled to vote or of such matter upon which written consent is sought; and
(iii) instructions for the delivery of proxies or consents. No vote or consent
of the holders of Capital Securities will be required for the Trust to redeem
and cancel Capital Securities or distribute Junior Subordinated Notes in
accordance with the Declaration.
Notwithstanding that holders of Capital Securities are entitled to vote or
consent under any of the circumstances described above, any of the Capital
Securities that are owned at such time by NationsBank or any
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entity directly or indirectly controlling or controlled by, or under direct or
indirect common control with, NationsBank, shall not be entitled to vote or
consent and shall, for purposes of such vote or consent, be treated as if such
Capital Securities were not outstanding.
The procedures by which holders of Capital Securities may exercise their
voting rights are described below. See " -- Book-Entry Only Issuance -- The
Depository Trust Company."
Holders of the Capital Securities will have no rights to appoint or remove
the NB Trustees, who may be appointed, removed or replaced solely by NationsBank
as the indirect or direct holder of all of the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by the Regular
Trustees (or, if there are more than two Regular Trustees, a majority of the
Regular Trustees) and, in certain circumstances, the Property Trustee or the
Delaware Trustee, provided that, if any proposed amendment provides for, or the
Regular Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the Trust
Securities, whether by way of amendment to the Declaration or otherwise or (ii)
the dissolution, winding-up or termination of the Trust other than pursuant to
the terms of the Declaration, then the holders of the Trust Securities voting
together as a single class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of at least a majority in liquidation amount of the Trust Securities
affected thereby; provided, that, if any amendment or proposal referred to in
clause (i) above would adversely affect only the Capital Securities or the
Common Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a majority in liquidation amount of such class of
Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified for purposes of United States federal income taxation as other
than a grantor trust, (ii) reduce or otherwise adversely affect the powers of
the Property Trustee or (iii) cause the Trust to be deemed an "investment
company" which is required to be registered under the 1940 Act.
MERGERS OR CONSOLIDATIONS
The Trust may not consolidate or merge with or into, or be replaced by, or
convey, transfer or lease its properties and assets substantially as an
entirety, to any corporation or other body, except as described below. The Trust
may, with the consent of a majority of the Regular Trustees and without the
consent of the holders of the Trust Securities, the Property Trustee or the
Delaware Trustee consolidate or merge with or into, or be replaced by a trust
organized as such under the laws of any State of the United States; provided,
that (i) if the Trust is not the survivor such successor entity (the "Succesor
Entity") either (x) expressly assumes all of the obligations of the Trust under
the Trust Securities or (y) substitutes for the Trust Securities other
securities having substantially the same terms as the Trust Securities (the
"Successor Securities"), so long as the Successor Securities rank the same as
the Trust Securities rank with respect to distributions and payments upon
liquidation, redemption and otherwise, (ii) NationsBank expressly acknowledges a
trustee of such successor entity possessing the same powers and duties as the
Property Trustee as the holder of the Junior Subordinated Notes, (iii) the
Capital Securities or any Successor Securities are listed, or any Successor
Securities of the Capital Securities will be listed upon notification of
issuance, on any national securities exchange or with another organization on
which the Capital Securities are then listed or quoted, if any, (iv) such
merger, consolidation or replacement does not cause the Capital Securities
(including any Successor Securities thereof) to be downgraded by any nationally
recognized statistical rating organization, (v) such merger, consolidation or
replacement does not adversely affect the rights, preferences and privileges of
the holders of the Trust Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of the holders'
interest in the new entity), (vi) such successor entity has a purpose identical
to that of the Trust, (vii) prior to such merger, consolidation or replacement,
NationsBank has received an opinion of a nationally recognized independent
counsel to the Trust experienced in such matters to the effect that, (A) such
merger, consolidation or replacement does not adversely affect the rights,
preferences and privileges of the holders of the Trust Securities (including any
Successor Securities) in any material respect (other than with respect to
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any dilution of the holders' interest in the new entity), (B) following such
merger, consolidation or replacement, neither the Trust nor such Successor
Entity will be required to register as an investment company under the 1940 Act
and (C) following such merger, consolidation or replacement, the Trust or the
Successor Entity will continue to be classified as a grantor trust for United
States federal income tax purposes and (viii) NationsBank guarantees the
obligations of such successor entity under the Successor Securities at least to
the extent provided by the Capital Securities Guarantee and the Common
Securities Guarantee (as described in the accompanying Prospectus).
Notwithstanding the foregoing, the Trust shall not, except with the consent of
holders of 100 percent in liquidation amount of the Trust Securities,
consolidate, merge with or into, or be replaced by any other entity or permit
any other entity to consolidate, merge with or into, or replace it, if such
consolidation, merger or replacement would cause the Trust or the Successor
Entity to be classified as other than a grantor trust for United States federal
income tax purposes.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
DTC will act as securities depositary (the "Depositary") for the Capital
Securities. The Capital Securities will be issued only as fully-registered
securities registered in the name of Cede & Co. (DTC's nominee). One or more
fully-registered global Capital Securities certificates, representing the total
aggregate number of Capital Securities, will be issued 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 Securities Exchange
Act of 1934, as amended (the "Exchange Act"). DTC holds securities that its
participants ("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. Participants in DTC include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. DTC is owned by a number of its Participants and by the New
York Stock Exchange, 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 transactions through or maintain a direct or indirect
custodial relationship with a Direct Participant either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants are
on file with the Securities and Exchange Commission.
Purchases of Capital Securities within the DTC system must be made by or
through Participants, which will receive a credit for the Capital Securities on
DTC's records. The ownership interest of each actual purchaser of each Capital
Security ("Beneficial Owner") is in turn to be recorded on the Participants' 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 Capital Securities. Transfers of
ownership interests in the Capital Securities are to be accomplished by entries
made on the books of Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in the Capital Securities, except in the event that use of the
book-entry system for the Capital Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Capital
Securities. DTC's records reflect only the identity of the Direct Participants
to whose accounts such Capital Securities are credited, which may or may not be
the Beneficial Owners. The Participants and Indirect Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Security, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Capital Securities represented thereby for all
purposes under the Declaration and the Capital Securities. No beneficial owner
of an interest in a Global Security will be able to transfer that interest
except in accordance with DTC's applicable procedures, in addition to those
provided for under the Declaration.
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DTC has advised the Corporation that it will take any action permitted to
be taken by a holder of Capital Securities (including the presentation of
Capital Securities for exchange as described below) only at the direction of one
or more Participants to whose account the DTC interests in the Global Securities
are credited and only in respect of such portion of the aggregate liquidation
amount of Capital Securities as to which such Participant or Participants has or
have given such direction. However, if there is an Event of Default under the
Capital Securities, DTC will exchange the Global Securities for certificated
securities, which it will distribute to its Participants.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants, and by Participants and Indirect
Participants to 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 in respect of the Capital Securities held in book-entry
form will be sent to Cede & Co. If less than all of the Capital Securities are
being redeemed, DTC will determine the amount of the interest of each
Participant to be redeemed in accordance with its procedures.
Although voting with respect to the Capital Securities is limited, in those
cases where a vote is required, neither DTC nor Cede & Co. will itself consent
or vote with respect to Capital Securities. Under its usual procedures, DTC
would mail an Omnibus Proxy to the Trust as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to
those Participants to whose accounts the Capital Securities are credited on the
record date (identified in a listing attached to the Omnibus Proxy).
Distributions on the Capital Securities held in book-entry form will be
made to DTC in immediately available funds. DTC's practice is to credit
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 and
Indirect Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participants and Indirect Participants and not of DTC, the Trust 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 Trust, disbursement of such payments to Participants is the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners is the responsibility of Participants and Indirect Participants.
Except as provided herein, a Beneficial Owner of an interest in a Global
Security will not be entitled to receive physical delivery of Capital
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Capital Securities.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Securities among Participants of DTC, DTC
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. Neither the Corporation, the
Trust nor the Trustee will have any responsibility for the performance by DTC or
its Participants or Indirect Participants under the rules and procedures
governing DTC. DTC may discontinue providing its services as securities
depositary with respect to the Capital Securities at any time by giving notice
to the Trust. Under such circumstances, in the event that a successor securities
depositary is not obtained, Capital Security certificates are required to be
printed and delivered. Additionally, the Trust (with the consent of the
Corporation) may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor depositary). In that event, certificates for the
Capital Securities will be printed and delivered. In each of the above
circumstances, the Corporation will appoint a paying agent with respect to the
Capital Securities.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the global Capital
Securities as represented by a Global Security.
PAYMENT AND PAYING AGENCY
Payments in respect of the Capital Securities represented by the Global
Securities shall be made to DTC, which shall credit the relevant accounts at DTC
on the applicable distribution dates or, in the case of certificated securities,
such payments shall be made by check mailed to the address of the holder
entitled thereto. The Paying Agent shall initially be The Bank of New York. The
Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written
notice to the Regular Trustees. In the event that The Bank of New York shall no
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longer be the Paying Agent, the Regular Trustees shall appoint a successor to
act as Paying Agent (which shall be a bank or trust company).
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
The Property Trustee will act as registrar, transfer agent and paying agent
for the Capital Securities. In the event The Bank of New York shall no longer be
the Paying Agent, the Regular Trustees shall appoint a successor to act as
Paying Agent (which shall be a bank or trust company).
Registration of transfers of Capital Securities will be effected without
charge by or on behalf of the Trust, but upon payment (with the giving of such
indemnity as the Trust or the Corporation may require) in respect of any tax or
other government charges which may be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of Capital Securities after such Capital Securities have been called
for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a default with respect to
the Trust Securities and after the curing of any defaults that may have
occurred, undertakes to perform only such duties as are specifically set forth
in the Declaration and, after default, shall exercise the same degree of care as
a prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provisions, the Property Trustee is under no obligation to
exercise any of the powers vested in it by the Declaration at the request of any
holder of Capital Securities, unless offered reasonable indemnity by such holder
against the costs, expenses and liabilities which might be incurred thereby. The
holders of Capital Securities will not be required to offer such indemnity in
the event such holders, by exercising their voting rights, direct the Property
Trustee to take any action it is empowered to take under the Declaration
following a Declaration Event of Default. The Property Trustee also serves as
trustee under the Capital Securities Guarantee and the Indenture.
The Corporation and certain of its affiliates have from time to time
maintained deposit accounts and conducted other banking transactions with the
Property Trustee and its affiliated entities in the ordinary course of business.
The Property Trustee also serves as trustee for certain series of the
Corporation's outstanding indebtedness under other indentures.
GOVERNING LAW
The Declaration and the Capital Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to operate the Trust in
such a way so that the Trust will not be required to register as an "investment
company" under the 1940 Act or characterized as other than a grantor trust for
United States federal income tax purposes. NationsBank is authorized and
directed to conduct its affairs so that the Junior Subordinated Notes will be
treated as indebtedness of NationsBank for United States federal income tax
purposes. In this connection, NationsBank and the Regular Trustees are
authorized to take any action, not inconsistent with applicable law, the
Declaration, the certificate of trust of the Trust or the certificate of
incorporation of NationsBank, that each of NationsBank and the Regular Trustees
determine in their discretion to be necessary or desirable to achieve such end,
as long as such action does not adversely affect the interests of the holders of
the Capital Securities or vary the terms thereof.
Holders of the Capital Securities have no preemptive rights.
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DESCRIPTION OF THE CAPITAL SECURITIES GUARANTEE
Pursuant to the Capital Securities Guarantee, NationsBank will agree, to
the extent the Trust shall have funds available therefor, to pay in full to the
holders of the Capital Securities issued by the Trust, the Guarantee Payments
(as defined in the accompanying Prospectus) (except to the extent paid by the
Trust), as and when due, regardless of any defense, right of set-off or
counterclaim which the Trust may have or assert. 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 Capital Securities or by causing
the Trust to pay such amounts to such holders. The Capital Securities Guarantee
will be qualified as an indenture under the Trust Indenture Act. The Bank of New
York will act as Capital Securities Guarantee Trustee. The terms of the Capital
Securities Guarantee will be those set forth in such Capital Securities
Guarantee and those made part of such Capital Securities Guarantee by the Trust
Indenture Act. The Capital Securities Guarantee will be held by the Preferred
Guarantee Trustee for the benefit of the holders of the Capital Securities. The
Capital Securities Guarantee, when taken together with the Corporation's
obligations under the Junior Subordinated Notes, the Indenture and the
Declaration, including the Corporation's obligations to pay costs, expenses,
debts and liabilities of the NB Capital Trusts under the Indenture (other than
with respect to the Trust Securities), will provide a full and unconditional
guarantee, on a subordinated basis, to the extent the applicable Trust shall
have funds available therefor, by the Corporation of payments due on the Capital
Securities. A summary description of the Capital Securities Guarantee appears in
the accompanying Prospectus under the caption "Description of the Preferred
Securities Guarantees."
EFFECT OF OBLIGATIONS UNDER THE JUNIOR SUBORDINATED
NOTES AND THE CAPITAL SECURITIES GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is to issue
the Trust Securities evidencing undivided beneficial interests in the assets of
the Trust, and to invest the proceeds from such issuance and sale in the Junior
Subordinated Notes.
As long as payments of interest and other payments are made when due on the
Junior Subordinated Notes, such payments will be sufficient to cover
distributions and payments due on the Trust Securities because of the following
factors: (i) the aggregate principal amount of Junior Subordinated Notes will be
equal to the sum of the aggregate stated liquidation amount of the Trust
Securities; (ii) the interest rate and the interest and other payment dates on
the Junior Subordinated Notes will match the distribution rate and distribution
and other payment dates for the Capital Securities; (iii) NationsBank shall pay
all, and the Trust shall not be obligated to pay, directly or indirectly, all
costs, expenses, debt, and obligations of the Trust (other than with respect to
the Trust Securities); and (iv) the Declaration further provides that the
Regular Trustees shall not take or cause or permit the Trust to, among other
things, engage in any activity that is not consistent with the purposes of the
Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Capital Securities (to the extent funds therefor are
available) are guaranteed on a subordinated basis by NationsBank as and to the
extent set forth under "Description of the Preferred Securities Guarantees" in
the accompanying Prospectus. If NationsBank does not make interest payments on
the Junior Subordinated Notes purchased by the Trust, it is expected that the
Trust will not have sufficient funds to pay distributions on the Capital
Securities. The Capital Securities Guarantee does not apply to any payment of
distributions unless and until the Trust has sufficient funds for the payment of
such distributions. The Capital Securities Guarantee covers the payment of
distributions and other payments on the Capital Securities only if and to the
extent that NationsBank has made a payment of interest or principal on the
Junior Subordinated Notes held by the Trust as its sole asset. The Capital
Securities Guarantee, when taken together with the Corporation's obligations
under the Junior Subordinated Notes and the Indenture and its obligations under
the Declaration, including its obligations to pay costs, expenses, debts and
liabilities of the Trust (other than with respect to the Trust Securities),
provide a full and unconditional guarantee on a subordinated basis of amounts on
the Capital Securities.
If NationsBank fails to make interest or other payments on the Junior
Subordinated Notes when due (taking account of any Extension Period), the
Declaration provides a mechanism whereby the holders of the Capital
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Securities, using the procedures described in "Description of the Capital
Securities -- Book-Entry Only Issuance -- The Depository Trust Company" and
" -- Voting Rights," may direct the Property Trustee to enforce its rights under
the Junior Subordinated Notes. If the Property Trustee fails to enforce its
rights under the Junior Subordinated Notes, a holder of Capital Securities may
institute a legal proceeding against NationsBank to enforce the Property
Trustee's rights under the Junior Subordinated Notes without first instituting
any legal proceeding against the Property Trustee or any other person or entity.
Notwithstanding the foregoing, if a Note Payment Failure has occurred and is
continuing, a holder of Capital Securities may then institute a Direct Action
for payment after the respective due date specified in the Junior Subordinated
Notes. In connection with such Direct Action, NationsBank will be subrogated to
the rights of such holder of Capital Securities under the Declaration to the
extent of any payment made by NationsBank to such holder of Capital Securities
in such Direct Action. NationsBank, under the Capital Securities Guarantee,
acknowledges that the Capital Securities Guarantee Trustee shall enforce the
Capital Securities Guarantee on behalf of the holders of the Capital Securities.
If NationsBank fails to make payments under the Capital Securities Guarantee,
the Capital Securities Guarantee provides a mechanism whereby the holders of the
Capital Securities may direct the Capital Securities Guarantee Trustee to
enforce its rights thereunder. Any holder of Capital Securities may institute a
legal proceeding directly against NationsBank to enforce the Capital Securities
Guarantee Trustee's rights under the Capital Securities Guarantee without first
instituting a legal proceeding against the Trust, the Capital Securities
Guarantee Trustee, or any other person or entity.
NationsBank and the Trust believe that the above mechanisms and
obligations, taken together, provide a full and unconditional guarantee by
NationsBank on a subordinated basis of payments due on the Capital Securities.
See "Description of the Preferred Securities Guarantees -- General" in the
accompanying Prospectus.
UNITED STATES FEDERAL INCOME TAXATION
GENERAL
The following is a summary of certain of the material United States federal
income tax consequences of the purchase, ownership and disposition of Capital
Securities. The statements of law and legal conclusions set forth in this
summary regarding the tax consequences to the Beneficial Owners of the Capital
Securities represent the opinion of Stroock & Stroock & Lavan, special tax
counsel to NationsBank and the Trust ("Tax Counsel"). Unless otherwise stated,
this summary deals only with Capital Securities held as capital assets by
holders who purchase the Capital Securities upon original issuance ("Initial
Holders"). It does not deal with special classes of holders such as banks,
thrifts, real estate investment trusts, regulated investment companies,
insurance companies, dealers in securities or currencies, tax-exempt investors,
or persons that will hold the Capital Securities as a position in a "straddle,"
as part of a "synthetic security" or "hedge," as part of a "conversion
transaction" or other integrated investment, or as other than a capital asset.
This summary also does not address the tax consequences to persons that have a
functional currency other than the U.S. Dollar or the tax consequences to
shareholders, partners or beneficiaries of a holder of Capital Securities.
Further, it does not include any description of any alternative minimum tax
consequences or the tax laws of any state or local government or of any foreign
government that may be applicable to the Capital Securities. This summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations thereunder and administrative and judicial interpretations thereof,
as of the date hereof, all of which are subject to change, possibly on a
retroactive basis.
CLASSIFICATION OF THE JUNIOR SUBORDINATED NOTES
In connection with the issuance of the Junior Subordinated Notes, Tax
Counsel will render its opinion generally to the effect that under then current
law and assuming full compliance with the terms of the Indenture (and certain
other documents), and based on certain facts and assumptions contained in such
opinion, the Junior Subordinated Notes will be classified for United States
federal income tax purposes as indebtedness of NationsBank.
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CLASSIFICATION OF THE TRUST
In connection with the issuance of the Capital Securities, Tax Counsel will
render its opinion generally to the effect that, under then current law and
assuming full compliance with the terms of the Declaration and the Indenture
(and certain other documents), and based on certain facts and assumptions
contained in such opinion, the Trust will be classified for United States
federal income tax purposes as a grantor trust and not as an association taxable
as a corporation. Accordingly, for United States federal income tax purposes,
each holder of Capital Securities generally will be considered the owner of an
undivided interest in the Junior Subordinated Notes, and each holder will be
required to include in its gross income any interest (or accrued OID) with
respect to its allocable share of those Junior Subordinated Notes.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under recently issued Treasury regulations (the "Regulations") applicable
to debt instruments issued on or after August 13, 1996, a "remote" contingency
that stated interest will not be timely paid will be ignored in determining
whether a debt instrument is issued with OID. NationsBank believes that the
likelihood of its exercising its option to defer payments of interest is
"remote" since exercising that option would prevent NationsBank from declaring
dividends on any class of its equity. Accordingly, NationsBank intends to take
the position, based on the advice of Tax Counsel, that the Junior Subordinated
Notes will not be considered to be issued with OID and, accordingly, stated
interest on the Junior Subordinated Notes generally will be taxable to a holder
as ordinary income at the time it is paid or accrued in accordance with such
holder's method of accounting.
Under the Regulations, if NationsBank were to exercise its option to defer
payments of interest, the Junior Subordinated Notes would at that time be
treated as issued with OID, and all stated interest on the Junior Subordinated
Notes would thereafter be treated as OID as long as the Junior Subordinated
Notes remain outstanding. In such event, all of a holder's taxable interest
income with respect to the Junior Subordinated Notes would thereafter be
accounted for on an economic accrual basis regardless of such holder's method of
tax accounting, and actual distributions of stated interest would not be
reported as taxable income. Consequently, a holder of Capital Securities would
be required to include OID in its gross income even though NationsBank would not
make actual cash payments during an Extension Period.
The Regulations have not yet been addressed in any rulings or other
interpretations by the Internal Revenue Service ("IRS"), and the IRS could take
a position that the likelihood of deferral is not remote.
Because income on the Capital Securities will constitute interest or OID,
corporate holders of Capital Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the Capital Securities.
MARKET DISCOUNT AND BOND PREMIUM
Holders of Capital Securities other than Initial Holders may be considered
to have acquired their undivided interests in the Junior Subordinated Notes with
market discount or acquisition premium as such phrases are defined for United
States federal income tax purposes. Such holders are advised to consult their
tax advisors as to the income tax consequences of the acquisition, ownership and
disposition of the Capital Securities.
RECEIPT OF JUNIOR SUBORDINATED NOTES OR CASH UPON LIQUIDATION OF NB CAPITAL
TRUST
NationsBank will have the right at any time to dissolve the Trust and cause
the Junior Subordinated Notes to be distributed to the holders of the Trust
Securities, provided that NationsBank has received prior approval from the
Federal Reserve Board if required. Under current law, such a distribution, for
United States federal income tax purposes, would be treated as a nontaxable
event to each holder, and each holder would receive an aggregate tax basis in
the Junior Subordinated Notes equal to such holder's aggregate tax basis in its
Capital Securities. A holder's holding period in the Junior Subordinated Notes
so received in liquidation of the Trust would include the period during which
the Capital Securities were held by such holder. If, however, at the time of the
dissolution of the Trust there has been a Tax Event or similar circumstance
which results in the Trust being treated as an association taxable as a
corporation, the distribution of the Junior Subordinated Notes would likely
constitute a taxable event to holders of Capital Securities.
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Under certain circumstances described herein (see "Description of the
Junior Subordinated Notes -- Optional Prepayment" and " -- Special Event
Prepayment"), the Junior Subordinated Notes may be prepaid for cash and the
proceeds of such prepayment distributed to holders in redemption of their
Capital Securities. Under current law, such a redemption would, for United
States federal income tax purposes, constitute a taxable disposition of the
redeemed Capital Securities, and a holder would recognize gain or loss as if it
sold such redeemed Capital Securities for cash. See " -- Sales of Capital
Securities."
SALES OF CAPITAL SECURITIES
A holder that sells Capital Securities will recognize gain or loss equal to
the difference between its adjusted tax basis in the Capital Securities and the
amount realized on the sale of such Capital Securities (other than with respect
to accrued and unpaid interest which has not yet been included in income, which
will be treated as ordinary income). A holder's adjusted tax basis in the
Capital Securities generally will be its initial purchase price increased by OID
(if any) previously includable in such holder's gross income to the date of
disposition and decreased by payments received on the Capital Securities that
are principal payments on the Junior Subordinated Notes. Such gain or loss
generally will be a capital gain or loss and generally will be a long-term
capital gain or loss if the Capital Securities have been held for more than one
year.
The Capital Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
Junior Subordinated Notes. A holder who uses the accrual method of accounting
for tax purposes (and a cash method holder, if the Junior Subordinated Notes are
deemed to be issued with OID) and who disposes of his Preferred Securities
between record dates for payments of distributions thereon will be required to
include accrued but unpaid interest on the Junior Subordinated Notes through the
date of disposition in income as ordinary income (i.e., interest or, possibly,
OID), and to add such amount to his adjusted tax basis in his pro rata share of
the underlying Junior Subordinated Notes deemed disposed of. To the extent the
selling price is less than the holder's adjusted tax basis (which will include
all accrued but unpaid interest) a holder will recognize a capital loss. Subject
to certain limited exceptions, capital losses cannot be applied to offset
ordinary income for United States federal income tax purposes.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, under United
States tax law, a foreign corporation, a non-resident alien individual, a
foreign partnership, or an estate or trust treated as a foreign estate or trust
under Section 7701(a)(31) of the Code.
Under present United States federal income tax law: (i) payments by the
Trust or any of its paying agents to any holder of a Capital Security who or
which is a United States Alien Holder will not be subject to United States
federal withholding tax; provided, that, (a) the beneficial owner of the Capital
Security does not actually or constructively own 10 percent or more of the total
combined voting power of all classes of stock of NationsBank entitled to vote,
(b) the beneficial owner of the Capital Security is not a controlled foreign
corporation that is related to NationsBank through stock ownership and (c)
either (A) the beneficial owner of the Capital Security certifies to the Trust
or its agent, under penalties of perjury, that it is not a United States holder
and provides its name and address or (B) a securities clearing organization,
bank or other financial institution that holds customers' securities in the
ordinary course of its trade or business (a "Financial Institution"), and holds
the Capital Security in such capacity, certifies to the Trust or its agent,
under penalties of perjury, that such statement has been received from the
beneficial owner by it or by a Financial Institution between it and the
beneficial owner and furnishes the Trust or its agent with a copy thereof; and
(ii) a United States Alien Holder of a Capital Security will not be subject to
United States federal withholding tax on any gain realized upon the sale or
other disposition of a Capital Security.
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed the Proposed Legislation that
would, among other things, generally deny corporate issuers a deduction for
interest in respect of certain debt obligations issued on or after December 7,
1995 if such debt obligations have a maximum term in excess of 20 years and are
not shown as indebtedness on the issuer's applicable consolidated balance sheet.
On March 29, 1996, Senate Finance Committee Chairman William V. Roth, Jr. and
House Ways and Means Committee Chairman Bill Archer issued the
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Joint Statement indicating their intent that certain legislative proposals
initiated by the Clinton administration, including the Proposed Legislation,
that may be adopted by either of the tax-writing committees of Congress would
have an effective date that is no earlier than the date of "appropriate
Congressional action." In addition, subsequent to the publication of the Joint
Statement, Senator Daniel Patrick Moynihan and Representatives Sam M. Gibbons
and Charles B. Rangel wrote the Democrat Letters to Treasury Department
officials concurring with the views expressed in the Joint Statement. Based upon
the Joint Statement and the Democrat Letters, it is expected that if the
Proposed Legislation were to be enacted, such legislation would not apply to the
Junior Subordinated Notes. There can be no assurances, however, that the
effective date guidance contained in the Joint Statement and the Democrat
Letters will be incorporated into the Proposed Legislation, if enacted, or that
other legislation enacted after the date hereof will not otherwise adversely
affect the ability of the Corporation to deduct the interest payable on the
Junior Subordinated Notes. Accordingly, there can be no assurance that a Tax
Event will not occur. See "Description of the Capital Securities -- Redemption
of Capital Securities Upon Payment or Prepayment of Junior Subordinated Notes."
INFORMATION REPORTING TO HOLDERS
Generally, income on the Capital Securities will be reported to holders on
Forms 1099, which forms should be mailed to holders of Capital Securities by
January 31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Capital Securities may
be subject to a "backup" withholding tax of 31 percent unless the holder
complies with certain identification requirements. Any withheld amounts will be
allowed as a credit against the holder's United States federal income tax,
provided the required information is provided to the IRS.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
CAPITAL SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL
OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
GENERAL
A fiduciary of an employee benefit plan subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") should consider
fiduciary standards under ERISA in the context of the particular circumstances
of such plan before authorizing an investment in the Capital Securities. Such
fiduciary should consider whether the investment satisfies ERISA's
diversification and prudence requirements, whether the investment constitutes
unauthorized delegation of fiduciary authority and whether the investment is in
accordance with the documents and instruments governing the plan. In addition,
ERISA and the Code prohibit a wide range of transactions ("Prohibited
Transactions") involving the assets of a plan subject to ERISA or the assets of
an individual retirement account or plan subject to Section 4975 of the Code or
any entity in which such plan invests whose assets are deemed "plan assets"
(hereinafter an "ERISA Plan") and persons who have certain specified
relationships to the ERISA Plan ("parties in interest," within the meaning of
ERISA, and "disqualified persons," within the meaning of the Code). Such
transactions may require "correction" and may cause the ERISA Plan fiduciary to
incur certain liabilities and the parties in interest or disqualified persons to
be subject to excise taxes.
Governmental plans and certain church plans (each as defined under ERISA)
are not subject to the Prohibited Transaction rules. Such plans may, however, be
subject to federal, state or local laws or regulations which may affect their
investment in the Capital Securities. Any fiduciary of such a governmental or
church plan considering an investment in the Capital Securities should determine
the need for, and the availability, if necessary, of any exemptive relief under
such laws or regulations.
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TRUST ASSETS AS "PLAN ASSETS"
The Department of Labor has issued final regulations (the "Labor
Regulations") as to what constitutes assets of an employee benefit plan ("plan
asset") under ERISA. The Labor Regulations provide that, as a general rule, when
an ERISA Plan acquires an equity interest in an entity and such interest does
not represent a "publicly offered security" nor a security issued by an
investment company registered under the Investment Company Act of 1940, the
ERISA Plan's assets include both the equity interest and an undivided interest
in each of the underlying assets of the entity, unless it is established either
that the entity is an operating company or that equity participation in the
entity by "benefit plan investors" is not "significant." For purposes of the
Labor Regulations, the Trust will not be an investment company nor an operating
company.
Under the Labor Regulations, equity participation by benefit plan investors
will not be considered "significant" on any date only if, immediately after the
most recent acquisition of Capital Securities, the aggregate interest in the
Capital Securities held by benefit plan investors will be less than 25 percent
of the value of the Capital Securities. Although it is possible that the equity
participation by benefit plan investors on any date will not be "significant"
for purposes of the Labor Regulations, such result cannot be assured.
Consequently, if ERISA Plans or investors using plan assets of ERISA Plans
purchase the Capital Securities, the Trust's assets could be deemed to be "plan
assets" of such ERISA Plans for purposes of the fiduciary responsibility
provisions of ERISA and the Code. Under ERISA, any person who exercises any
authority or control respecting the management or disposition of the assets of
an ERISA Plan is considered to be a fiduciary of such ERISA Plan. For example,
the Property Trustee could therefore become a fiduciary of the ERISA Plans that
invest in the Capital Securities and be subject to the general fiduciary
requirements of ERISA in exercising its authority with respect to the management
of the assets of the Trust. However, the Property Trustee will have only limited
discretionary authority with respect to the Trust's assets and the remaining
functions and responsibilities performed by the Property Trustee will be for the
most part custodial and ministerial in nature.
PROHIBITED TRANSACTIONS
The Corporation may be a party in interest or a disqualified person with
respect to an ERISA Plan investing in the Capital Securities or acquiring Junior
Subordinated Notes, and therefore, such investment by an ERISA Plan may give
rise to a Prohibited Transaction in the form of a direct or indirect extension
of credit by the investing ERISA Plan to the Corporation. Consequently, before
investing in the Capital Securities or acquiring Junior Subordinated Notes, any
person who is, or who is acquiring such securities for, or on behalf of, an
ERISA Plan should determine that either a statutory or an administrative
exemption from the Prohibited Transaction rules discussed below or otherwise
available is applicable to such investment in the Capital Securities or
acquisition of Junior Subordinated Notes, or that such investment in, or
acquisition of, such securities will not result in a Prohibited Transaction.
The statutory or administrative exemptions from the Prohibited Transaction
rules under ERISA and the Code which may be available to an ERISA Plan which is
investing in the Capital Securities include: Prohibited Transaction Class
Exemption ("PTCE") 90-1, regarding investments by insurance company pooled
separate accounts; PTCE 91-38, regarding investments by bank collective
investment funds; PTCE 84-14, regarding transactions effected by qualified
professional asset managers; PTCE 96-23, regarding transactions effected by
in-house asset managers; and PTCE 95-60, regarding investments by insurance
company general accounts (collectively referred to as the "ERISA Investor
Exemptions").
Notwithstanding the foregoing, Capital Securities may not be acquired by
any Person who is, or who in acquiring such Capital Securities is using the
assets of, an ERISA Plan unless one of the ERISA Investor Exemptions or another
applicable exemption is available to the ERISA Plan. The acquisition of the
Capital Securities by any Person who is, or who in acquiring such Capital
Securities is using the assets of, an ERISA Plan shall be deemed to constitute a
representation by such Person to the Trust that such person is eligible for
exemptive relief available pursuant to either the ERISA Investor Exemptions or
another applicable exemption with respect to the acquisition and holding of such
Capital Securities.
THE DISCUSSION HEREIN OF ERISA IS GENERAL IN NATURE AND IS NOT INTENDED TO
BE ALL INCLUSIVE. ANY FIDUCIARY OF AN ERISA PLAN, GOVERNMENTAL PLAN OR CHURCH
PLAN CONSIDERING AN INVESTMENT IN THE CAPITAL SECURITIES SHOULD CONSULT WITH ITS
LEGAL ADVISORS REGARDING THE CONSEQUENCES OF SUCH INVESTMENT.
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UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
dated December 10, 1996 (the "Underwriting Agreement"), NB Capital Trust has
agreed to sell to each of the Underwriters named below, and each of the
Underwriters, for whom NationsBanc Capital Markets, Inc., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated are acting as
the representatives (the "Representatives"), has severally agreed to purchase
the number of Capital Securities set forth opposite its name below. In the
Underwriting Agreement, the several Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all the Capital Securities
offered hereby if any of the Capital Securities are purchased. In the event of
default by an Underwriter, the Underwriting Agreement provides that, in certain
circumstances, purchase commitments of the nondefaulting Underwriters may be
increased or the Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER CAPITAL SECURITIES
<S> <C>
NationsBanc Capital Markets, Inc................................................. 123,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................................... 121,000
Morgan Stanley & Co. Incorporated................................................ 121,000
Total.................................................................. 365,000
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The Representatives have advised the Trust that they propose initially to
offer the Capital Securities to the public at the public offering price set
forth on the cover page of this Prospectus Supplement, and to certain dealers at
such price less a concession not in excess of $6.00 per Capital Security. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $4.00 per Capital Security to certain other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.
In view of the fact that the proceeds of the sale of the Capital Securities
will ultimately be used to purchase the Junior Subordinated Notes of
NationsBank, the Underwriting Agreement provides that NationsBank will pay as
compensation ("Underwriters' Compensation") directly to the Underwriters for
their arranging the investment therein of such proceeds, an amount in
immediately available funds of $10 per Capital Security (or $3,650,000 in the
aggregate) for the accounts of the several Underwriters.
The Underwriting Agreement provides that NationsBank and NB Capital Trust
will indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act or contribute to payments the Underwriters
may be required to make in respect thereof.
The Capital Securities are a new issue of securities with no established
trading market. NationsBank and NB Capital Trust do not intend to apply for
listing of the Capital Securities on any national securities exchange.
NationsBank and NB Capital Trust have been advised by the Underwriters that they
may make a market in the Capital Securities. The Underwriters, however, are not
obligated to make a market in the Capital Securities and may discontinue any
market making at any time without notice. Neither the Corporation nor NB Capital
Trust can provide any assurance that a secondary market for the Capital
Securities will develop.
NationsBanc Capital Markets, Inc. ("NCMI") is a direct, wholly-owned
subsidiary of NationsBank. Under Section 2720 of the Conduct Rules ("Section
2720") of the NASD, when an NASD member, such as NCMI, participates in the
distribution of an affiliated company's securities, the offering must be
conducted in accordance with the applicable provisions of Section 2720.
NationsBank is considered to be an "affiliate" (as such term is defined in
Section 2720) of NCMI. The offer and sale of any Capital Securities by NCMI will
comply with the requirements of Section 2720 regarding the underwriting of
securities of affiliates and with any restrictions that may be imposed on NCMI
by the Federal Reserve Board. In addition, under Section 2720, no NASD member
participating in offers and sales of the Capital Securities may execute a
transaction in the Capital Securities in a discretionary account without the
specific prior written approval of the member's customer.
Each of the Underwriters provides or has provided investment banking
services to NationsBank from time to time in the ordinary course of business.
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LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Capital
Securities will be passed upon on behalf of the NB Capital Trust by Richards,
Layton & Finger, special Delaware counsel to the NB Capital Trust. The validity
of the Junior Subordinated Notes and the Capital Securities Guarantees and
certain matters relating thereto will be passed upon for NationsBank by Smith
Helms Mulliss & Moore, L.L.P. and for the Underwriters by Stroock & Stroock &
Lavan. Certain United States federal income taxation matters will be passed upon
for NationsBank and the NB Capital Trust by Stroock & Stroock & Lavan, special
tax counsel to NationsBank and the NB Capital Trust. Smith Helms Mulliss &
Moore, L.L.P. and Stroock & Stroock & Lavan will rely on the opinion of
Richards, Layton & Finger as to matters of Delaware law. As of the date of this
Prospectus Supplement, certain members of Smith Helms Mulliss & Moore, L.L.P.
beneficially own approximately 50,000 shares of the Corporation's common stock.
S-39
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PROSPECTUS
$1,000,000,000
NATIONSBANK(Register mark)
JUNIOR SUBORDINATED NOTES
NB CAPITAL TRUST I
NB CAPITAL TRUST II
NB CAPITAL TRUST III
PREFERRED SECURITIES
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
NATIONSBANK(Register mark)
NationsBank Corporation ("NationsBank" or the "Corporation") may offer from
time to time its subordinated debentures, notes or other evidence of
indebtedness (the "Junior Subordinated Notes") in one or more series and in
amounts, at prices and on terms to be determined at the time of the offering.
The Junior Subordinated Notes when issued will be unsecured obligations of the
Corporation. The Corporation's obligations under the Junior Subordinated Notes
will be subordinate and junior in right of payment to other indebtedness of the
Corporation, as may be described in an accompanying Prospectus Supplement (the
"Prospectus Supplement") and in an aggregate amount to be set forth as of the
most recent practicable date in such Prospectus Supplement.
NB Capital Trust I, NB Capital Trust II and NB Capital Trust III (each, a
"NB Capital Trust"), each a statutory business trust formed under the laws of
the State of Delaware, may offer, from time to time, preferred securities,
representing undivided beneficial interests in the assets of the respective NB
Capital Trust ("Preferred Securities"). The payment of periodic cash
distributions ("distributions") with respect to Preferred Securities of each of
the NB Capital Trusts out of moneys held by each of the NB Capital Trusts, and
payment on liquidation, redemption or otherwise with respect to such Preferred
Securities, will be guaranteed by NationsBank to the extent described herein
(each a "Preferred Securities Guarantee"). See "Description of the Preferred
Securities Guarantees" below. The Corporation's obligations under the Preferred
Securities Guarantees will be subordinate and junior in right of payment to all
other liabilities, including contingent liabilities, of the Corporation and will
rank pari passu with the most senior preferred or preference stock now or
hereafter issued by the Corporation and with any guarantee now or hereafter
entered into by NationsBank in respect of any preferred or preference stock of
any affiliate of the Corporation. The Preferred Securities Guarantee, when taken
together with the Corporation's obligations under the Junior Subordinated Notes,
the Indenture and the Declaration, including the Corporation's obligations to
pay costs, expenses, debts and liabilities of the NB Capital Trusts under the
Indenture (other than with respect to the Trust Securities (as defined below)),
will provide a full and unconditional guarantee, on a subordinated basis, to the
extent the applicable Trust shall have funds available therefor, by the
Corporation of payments due on the Preferred Securities.
Junior Subordinated Notes may be issued and sold from time to time in one
or more series to a NB Capital Trust, or a trustee of such NB Capital Trust, in
connection with the investment of the proceeds from the offering of Preferred
Securities and Common Securities (as defined herein, together the "Trust
Securities") of such NB Capital Trust. The Junior Subordinated Notes purchased
by a NB Capital Trust may be subsequently distributed pro rata to holders of the
Trust Securities in connection with the dissolution of such NB Capital Trust
upon the occurrence of certain events as may be described in an accompanying
Prospectus Supplement. The Junior Subordinated Notes and the Preferred
Securities and the related Preferred Securities Guarantees are sometimes
collectively referred to hereafter as the "Offered Securities."
<PAGE>
Specific terms of the Junior Subordinated Notes of any series or the
Preferred Securities of any NB Capital Trust, the terms of which will mirror the
terms of the Junior Subordinated Notes held by any NB Capital Trust, in respect
of which this prospectus (the "Prospectus") is being delivered will be set forth
in a Prospectus Supplement with respect to such securities, which will describe,
without limitation and where applicable, the following: (i) in the case of
Junior Subordinated Notes, the specific designation, aggregate principal amount,
denomination, maturity, premium, if any, any exchange, conversion, redemption or
sinking fund provisions, if any, interest rate (which may be fixed or variable),
if any, the time and method of calculating interest payments, if any, dates on
which premium, if any, and interest, if any, will be payable, the right of
NationsBank, if any, to defer payment of interest on the Junior Subordinated
Notes and the maximum length of such deferral period, the initial public
offering price, subordination terms, and any listing on a securities exchange
and other specific terms of the offering; and (ii) in the case of Preferred
Securities, the designation, number of securities, liquidation preference per
security, initial public offering price, any listing on a securities exchange,
distribution rate (or method of calculation thereof), dates on which
distributions shall be payable and dates from which distributions shall accrue,
any voting rights, terms for any conversion or exchange into other securities,
any redemption, exchange or sinking fund provisions, any other rights,
preferences, privileges, limitations or restrictions relating to the Preferred
Securities and the terms upon which the proceeds of the sale of the Preferred
Securities shall be used to purchase a specific series of Junior Subordinated
Notes of NationsBank.
The Offered Securities may be offered in amounts, at prices and on terms to
be determined at the time of offering. The Prospectus Supplement relating to any
series of Offered Securities will contain information concerning certain United
States federal income tax considerations, if applicable to the Offered
Securities.
NationsBank and/or each of the NB Capital Trusts may sell the Offered
Securities directly, through agents designated from time to time, or through
underwriters or dealers. See "Plan of Distribution" below. If any agents of
NationsBank and/or any NB Capital Trust or any underwriters or dealers are
involved in the sale of the Offered Securities, the names of such agents,
underwriters or dealers and any applicable commissions and discounts will be set
forth in any related Prospectus Supplement.
This Prospectus may not be used to consummate sales of securities unless
accompanied by a Prospectus Supplement.
THE OFFERED SECURITIES ARE NOT SAVINGS ACCOUNTS OR BANK DEPOSITS, ARE NOT
OBLIGATIONS OF OR GUARANTEED BY ANY BANKING OR NONBANKING AFFILIATE OF
NATIONSBANK (EXCEPT TO THE EXTENT THAT THE PREFERRED SECURITIES
ARE GUARANTEED BY NATIONSBANK AS DESCRIBED HEREIN), ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENT AGENCY AND INVOLVE INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH
CAROLINA (THE "COMMISSIONER") OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION, THE COMMISSIONER 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 November 27, 1996
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR ANY ACCOMPANYING PROSPECTUS
SUPPLEMENT IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS OR ANY
ACCOMPANYING PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY NATIONSBANK
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CORPORATION, ANY OF THE NB CAPITAL TRUSTS OR THE UNDERWRITERS. NEITHER THE
DELIVERY OF THIS PROSPECTUS OR ANY ACCOMPANYING PROSPECTUS SUPPLEMENT NOR ANY
SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF NATIONSBANK
CORPORATION OR ANY OF THE NB CAPITAL TRUSTS SINCE THE DATE HEREOF. THIS
PROSPECTUS OR ANY ACCOMPANYING PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, previously filed by the Corporation with the
Securities and Exchange Commission (the "Commission") pursuant to Section 13 of
the Securities Exchange Act of 1934, as amended (the "1934 Act"), are
incorporated herein by reference:
(a) The Corporation's Annual Report on Form 10-K for the year ended
December 31, 1995;
(b) The Corporation's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1996, June 30, 1996 and September 30, 1996;
(c) The Corporation's Current Reports on Form 8-K filed January 12,
1996, February 1, 1996, March 8, 1996, April 17, 1996, May 16, 1996, July
5, 1996, July 31, 1996, September 6, 1996 (as amended by Form 8-K/A-1 filed
September 11, 1996 and Form 8-K/A-2 filed November 13, 1996), September 20,
1996 (as amended by Form 8-K/A filed September 23, 1996), October 25, 1996
and November 14, 1996; and
(d) The description of the Corporation's Common Stock contained in its
registration statement filed pursuant to Section 12 of the 1934 Act, and
any amendment or report filed for the purpose of updating such description,
including the Corporation's Current Report on Form 8-K filed on September
21, 1994.
All reports and any definitive proxy or information statements filed by the
Corporation with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of
the 1934 Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Offered Securities offered hereby shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus 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 this Prospectus.
THE CORPORATION WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A
COPY OF ANY OR ALL OF THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE
IN SUCH DOCUMENTS). WRITTEN REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO JOHN
E. MACK, SENIOR VICE PRESIDENT AND TREASURER, NATIONSBANK CORPORATION,
NATIONSBANK CORPORATE CENTER, CORPORATE TREASURY DIVISION, CHARLOTTE, NORTH
CAROLINA 28255. TELEPHONE REQUESTS MAY BE DIRECTED TO (704) 386-5972.
AVAILABLE INFORMATION
This Prospectus constitutes a part of a combined Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") filed by NationsBank and the NB Capital Trusts with the Commission
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Offered Securities. This Prospectus does not contain all of the
information set forth in such Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission, although
it does include a summary of the material terms of the Indenture and the
Declarations (each as defined herein). Reference is made to such Registration
Statement and to the exhibits relating thereto for further information with
respect to the NationsBank, the NB Capital Trusts and the Offered Securities.
Any
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statements contained herein concerning the provisions of any document filed as
an exhibit to the Registration Statement or otherwise filed with the Commission
or incorporated by reference herein are not necessarily complete, and, in each
instance, reference is made to the copy of such document so filed for a more
complete description of the matter involved. Each such statement is qualified in
its entirety by such reference.
NationsBank is subject to the informational requirements of the 1934 Act
and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the following public reference
facilities maintained by the Commission: 450 Fifth Street, N.W., Washington,
D.C. 20549; 7 World Trade Center, Suite 1300, New York, New York 10048; and the
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material may also be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, upon payment of prescribed rates. The Commission
maintains an Internet web site that contains reports, proxy and information
statements and other information regarding issuers who file electronically with
the Commission. The address of that site is http://www.sec.gov. In addition,
reports, proxy statements and other information concerning NationsBank may be
inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005 and at the offices of The Pacific Stock Exchange
Incorporated, 301 Pine Street, San Francisco, California 94104.
No separate financial statements of any of the NB Capital Trusts have been
included herein. NationsBank does not consider that such financial statements
would be material to holders of the Preferred Securities because (i) all of the
voting securities of each of the NB Capital Trusts will be owned, directly or
indirectly, by NationsBank, a reporting company under the 1934 Act, (ii) each of
the NB Capital Trusts has no independent operations but exists for the sole
purpose of issuing securities representing undivided beneficial interests in the
assets of such NB Capital Trust and investing the proceeds thereof in Junior
Subordinated Notes issued by NationsBank, and (iii) the Corporation's
obligations described herein and in any accompanying Prospectus Supplement to
provide certain indemnities in respect of and be responsible for certain costs,
expenses, debts and liabilities of each of the NB Capital Trusts under the
Indenture and any supplemental indenture thereto and pursuant to the
Declarations of each NB Capital Trust, the guarantee issued with respect to
Preferred Securities issued by that NB Capital Trust, the Junior Subordinated
Notes purchased by that NB Capital Trust and the related Indenture, taken
together, constitute a full and unconditional guarantee of payments due on the
Preferred Securities. See "Description of the Junior Subordinated Notes" and
"Description of the Preferred Securities Guarantees."
The NB Capital Trusts are not currently subject to the information
reporting requirements of the 1934 Act. The NB Capital Trusts will become
subject to such requirements upon the effectiveness of the Registration
Statement, although they intend to seek and expect to receive exemptions
therefrom.
NATIONSBANK CORPORATION
GENERAL
NationsBank is a multi-bank holding company established as a North Carolina
corporation in 1968 and is registered under the Bank Holding Company Act of
1956, as amended (the "BHCA"), with its principal assets being the stock of its
subsidiaries. Through its banking subsidiaries (the "Banks") and its various
non-banking subsidiaries, NationsBank provides banking and banking-related
services, primarily throughout the Southeast and Mid-Atlantic states and Texas.
The principal executive offices of NationsBank are located at NationsBank
Corporate Center in Charlotte, North Carolina 28255. Its telephone number is
(704) 386-5000.
OPERATIONS
NationsBank provides a diversified range of banking and certain nonbanking
financial services and products through its various subsidiaries. NationsBank
manages its business activities through three major business units: the General
Bank, Global Finance and Financial Services.
The General Bank provides comprehensive services in the commercial and
retail banking fields, including the origination and servicing of home mortgage
loans, the issuance and servicing of credit cards (through a Delaware
subsidiary), indirect lending, dealer finance and certain insurance services.
The General Bank also
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provides retirement services for defined benefit and defined contribution plans,
full service and discount brokerage services, and investment advisory services,
including advising the NationsFund family of mutual funds, as well as private
banking, fiduciary and investment management services through subsidiaries of
NationsBank. As of September 30, 1996, the General Bank operated 1,980 banking
offices through the following Banks: NationsBank, N.A. (serving the states of
North Carolina, South Carolina, Maryland and Virginia and the District of
Columbia); NationsBank, N.A. (South) (serving the states of Florida and
Georgia); NationsBank of Kentucky, N.A.; NationsBank of Tennessee, N.A.;
NationsBank of Texas, N.A.; and Sun World, N.A. (serving the state of Texas).
The General Bank also provides fully automated, 24-hour cash dispensing and
depositing services throughout the states in which it is located, through 3,609
automated teller machines.
Global Finance provides comprehensive corporate and investment banking as
well as trading and distribution services to domestic and international
customers. The group serves as a principal lender and investor, as well as an
advisor, arranger and underwriter, and manages treasury and trade transactions
for clients and customers. Loan origination and syndication, asset-backed
lending, leasing, factoring, project finance and mergers and acquisitions are
representative of the services provided by the group. Global Finance also
underwrites, trades and distributes a wide range of securities (including
bank-eligible securities and, to a limited extent, bank-ineligible securities as
authorized by the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board")), and trades and distributes a wide range of derivative products
in certain interest rate, foreign exchange, commodity and equity markets. Global
Finance provides its services through various offices located in major United
States cities as well as in London, Frankfurt, Singapore, Bogota, Mexico City,
Grand Cayman, Nassau, Seoul, Tokyo, Osaka, Taipei and Hong Kong.
Financial Services includes NationsCredit Consumer Corporation, primarily a
consumer finance subsidiary, and NationsCredit Commercial Corporation, primarily
a commercial finance subsidiary. NationsCredit Consumer Corporation, which has
approximately 331 offices located in 36 states, provides personal, mortgage and
automobile loans to consumers and retail finance programs to dealers.
NationsCredit Commercial Corporation consists of seven divisions that specialize
in one or more of the following areas: equipment loans and leasing; loans for
debt restructuring, mergers and acquisitions and working capital; real estate,
golf/recreational and health care financing; and inventory financing to
manufacturers, distributors and dealers.
As part of its operations, NationsBank regularly evaluates the potential
acquisition of, and holds discussions with, various financial institutions and
other businesses of a type eligible for bank holding company investment. In
addition, NationsBank regularly analyzes the values of, and submits bids for,
the acquisition of customer-based funds and other liabilities and assets of such
financial institutions and other businesses. As a general rule, NationsBank
publicly announces such material acquisitions when a definitive agreement has
been reached.
SUPERVISION AND REGULATION
GENERAL. As a registered bank holding company, NationsBank is subject to
the supervision of, and to regular inspection by, the Federal Reserve Board. The
Banks are organized as national banking associations, which are subject to
regulation, supervision and examination by the Office of the Comptroller of the
Currency (the "Comptroller"). The Banks are also subject to regulation by the
Federal Deposit Insurance Corporation (the "FDIC") and other federal regulatory
agencies. In addition to banking laws, regulations and regulatory agencies,
NationsBank and its subsidiaries and affiliates are subject to various other
laws and regulations and supervision and examination by other regulatory
agencies, all of which directly or indirectly affect the Corporation's
operations, management and ability to make distributions. The following
discussion summarizes certain aspects of those laws and regulations that affect
NationsBank.
The activities of NationsBank, and those of companies which it controls or
in which it holds more than 5% of the voting stock, are limited to banking or
managing or controlling banks or furnishing services to or performing services
for its subsidiaries, or any other activity which the Federal Reserve Board
determines to be so closely related to banking or managing or controlling banks
as to be a proper incident thereto. In making such determinations, the Federal
Reserve Board is required to consider whether the performance of such activities
by a bank holding company or its subsidiaries can reasonably be expected to
produce benefits to the public such as greater convenience, increased
competition or gains in efficiency that outweigh possible adverse effects, such
as undue concentration of resources, decreased or unfair competition, conflicts
of interest or unsound banking
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practices. Generally, bank holding companies, such as NationsBank, are required
to obtain prior approval of the Federal Reserve Board to engage in any new
activity not previously approved by the Federal Reserve Board or to acquire more
than 5% of any class of voting stock of any company.
Bank holding companies are also required to obtain the prior approval of
the Federal Reserve Board before acquiring more than 5% of any class of voting
stock of any bank which is not already majority-owned by the bank holding
company. Pursuant to the Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 (the "Interstate Banking and Branching Act"), a bank holding company
became able to acquire banks in states other than its home state beginning
September 29, 1995, without regard to the permissibility of such acquisition
under state law, but subject to any state requirement that the bank has been
organized and operating for a minimum period of time, not to exceed five years,
and the requirement that the bank holding company, prior to or following the
proposed acquisition, controls no more than 10% of the total amount of deposits
of insured depository institutions in the United States and no more than 30% of
such deposits in that state (or such lesser or greater amount set by state law).
The Interstate Banking and Branching Act also authorizes banks to merge
across state lines, therefore creating interstate branches, beginning June 1,
1997. Under such legislation, each state has the opportunity either to "opt out"
of this provision, thereby prohibiting interstate branching in such states, or
to "opt in" at an earlier time, thereby allowing interstate branching within
that state prior to June 1, 1997. Furthermore, pursuant to such act, a bank is
now able to open new branches in a state in which it does not already have
banking operations if the laws of such state permit such DE NOVO branching. Of
those states in which the Banks are located, Delaware, Maryland, North Carolina
and Virginia have enacted legislation to "opt in," thereby permitting interstate
branching prior to June 1, 1997, and Texas has adopted legislation to "opt out"
of the interstate branching provisions (which Texas law currently expires on
September 2, 1999).
As previously described, NationsBank regularly evaluates merger and
acquisition opportunities, and it anticipates that it will continue to evaluate
such opportunities in light of the new legislation.
Proposals to change the laws and regulations governing the banking industry
are frequently introduced in Congress, in the state legislatures and before the
various bank regulatory agencies.
CAPITAL AND OPERATIONAL REQUIREMENTS. The Federal Reserve Board, the
Comptroller and the FDIC have issued substantially similar risk-based and
leverage capital guidelines applicable to United States banking organizations.
In addition, those regulatory agencies may from time to time require that a
banking organization maintain capital above the minimum levels, whether because
of its financial condition or actual or anticipated growth.
The Federal Reserve Board risk-based guidelines define a two-tier capital
framework. Tier 1 capital consists of common and qualifying preferred
shareholders' equity, less certain intangibles and other adjustments. Tier 2
capital consists of subordinated and other qualifying debt, and the allowance
for credit losses up to 1.25% of risk-weighted assets. The sum of Tier 1 and
Tier 2 capital less investments in unconsolidated subsidiaries represents
qualifying total capital, at least 50% of which must consist of Tier 1 capital.
Risk-based capital ratios are calculated by dividing Tier 1 and total capital by
risk-weighted assets. Assets and off-balance sheet exposures are assigned to one
of four categories of risk-weights, based primarily on relative credit risk. The
minimum Tier 1 capital ratio is 4% and the minimum total capital ratio is 8%.
The Corporation's Tier 1 and total risk-based capital ratios under these
guidelines at September 30, 1996 were 7.05% and 12.05%, respectively.
The leverage ratio is determined by dividing Tier 1 capital by adjusted
average total assets. Although the stated minimum ratio is 3%, most banking
organizations are required to maintain ratios of at least 100 to 200 basis
points above 3%. The Corporation's leverage ratio at September 30, 1996 was
6.30%. Management believes that NationsBank meets its leverage ratio
requirement.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), among other things, identifies five capital categories for insured
depository institutions (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized) and requires the respective Federal regulatory agencies to
implement systems for "prompt corrective action" for insured depository
institutions that do not meet minimum capital requirements within such
categories. FDICIA imposes progressively more restrictive constraints on
operations, management and capital distributions, depending on the category in
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which an institution is classified. Failure to meet the capital guidelines could
also subject a banking institution to capital raising requirements. An
"undercapitalized" bank must develop a capital restoration plan and its parent
holding company must guarantee that bank's compliance with the plan. The
liability of the parent holding company under any such guarantee is limited to
the lesser of 5% of the bank's assets at the time it became "undercapitalized"
or the amount needed to comply with the plan. Furthermore, in the event of the
bankruptcy of the parent holding company, such guarantee would take priority
over the parent's general unsecured creditors. In addition, FDICIA requires the
various regulatory agencies to prescribe certain non-capital standards for
safety and soundness relating generally to operations and management, asset
quality and executive compensation and permits regulatory action against a
financial institution that does not meet such standards.
The various regulatory agencies have adopted substantially similar
regulations that define the five capital categories identified by FDICIA, using
the total risk-based capital, Tier 1 risk-based capital and leverage capital
ratios as the relevant capital measures. Such regulations establish various
degrees of corrective action to be taken when an institution is considered
undercapitalized. Under the regulations, a "well capitalized" institution must
have a Tier 1 capital ratio of at least 6%, a total capital ratio of at least
10% and a leverage ratio of at least 5% and not be subject to a capital
directive order. An "adequately capitalized" institution must have a Tier 1
capital ratio of at least 4%, a total capital ratio of at least 8% and a
leverage ratio of at least 4%, or 3% in some cases. Under these guidelines, as
of September 30, 1996, each of the Banks was considered well capitalized.
On October 21, 1996 the Federal Reserve Board issued a press release (the
"Federal Reserve Press Release") announcing that it had approved the use of
certain cumulative preferred stock instruments, such as the Preferred
Securities, in Tier 1 capital for bank holding companies. Because NationsBank
intends to treat the Preferred Securities in Tier 1 capital and, under current
United States federal tax law, will receive a tax deduction for interest in
respect of the Junior Subordinated Notes, the issuance of the Offered Securities
is a cost effective method of raising capital on an after-tax basis.
Banking agencies have recently adopted final regulations which mandate that
regulators take into consideration concentrations of credit risk and risks from
non-traditional activities, as well as an institution's ability to manage those
risks, when determining the adequacy of an institution's capital. This
evaluation will be made as a part of the institution's regular safety and
soundness examination. Banking agencies also have recently adopted final
regulations requiring regulators to consider interest rate risk (when the
interest rate sensitivity of an institution's assets does not match the
sensitivity of its liabilities or its off-balance-sheet position) in the
evaluation of a bank's capital adequacy. Concurrently, banking agencies have
proposed a methodology for evaluating interest rate risk. After gaining
experience with the proposed measurement process, these banking agencies intend
to propose further regulations to establish an explicit risk-based capital
charge for interest rate risk.
DISTRIBUTIONS. The Corporation's funds for cash distributions to its
shareholders are derived from a variety of sources, including cash and temporary
investments. The primary source of such funds, however, is dividends received
from the Banks. The amount of dividends that each Bank may declare in a calendar
year without approval of the Comptroller is the Bank's net profits for that
year, as defined by statute, combined with its net retained profits, as defined,
for the preceding two years. In addition, from time to time NationsBank applies
for, and may receive, permission from the Comptroller for one or more of the
Banks to declare special dividends. As of January 1, 1996, the Banks can
initiate dividend payments without prior regulatory approval of up to $905
million plus an additional amount equal to their net profits for 1996 up to the
date of any such dividend declaration.
In addition to the foregoing, the ability of NationsBank and the Banks to
pay dividends may be affected by the various minimum capital requirements and
the capital and non-capital standards established under FDICIA as described
above. Furthermore, the Comptroller may prohibit the payment of a dividend by a
national bank if it determines that such payment would constitute an unsafe or
unsound practice. The right of NationsBank, its shareholders and its creditors
to participate in any distribution of the assets or earnings of its subsidiaries
is further subject to the prior claims of creditors of the respective
subsidiaries.
SOURCE OF STRENGTH. According to Federal Reserve Board policy, bank holding
companies are expected to act as a source of financial strength to each
subsidiary bank and to commit resources to support each such subsidiary. This
support may be required at times when a bank holding company may not be able to
provide such
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support. In the event of a loss suffered or anticipated by the FDIC -- either as
a result of default of a banking or thrift subsidiary of NationsBank or related
to FDIC assistance provided to a subsidiary in danger of default -- the other
Banks may be assessed for the FDIC's loss, subject to certain exceptions.
THE TRUSTS
Each of the NB Capital Trusts is a statutory business trust formed under
Delaware law pursuant to (i) a separate declaration of trust executed by the
Corporation, as sponsor for such trust (the "Sponsor") and the NB Trustees (as
defined herein) for such trust and (ii) the filing of a separate certificate of
trust with the Delaware Secretary of State. The declarations of trust with
respect to each of the NB Capital Trusts have identical terms (except with
respect to the name of the NB Capital Trust to which it relates) and each is
referred to as a "Declaration". Each NB Capital Trust exists for the exclusive
purposes of (i) issuing the Preferred Securities and common securities
representing undivided beneficial interests in the assets of such Trust (the
"Common Securities" and, together with the Preferred Securities, the "Trust
Securities"), (ii) investing the gross proceeds from the sale of the Trust
Securities in the purchase of Junior Subordinated Notes, and (iii) engaging in
only those other activities necessary or incidental thereto. The Common
Securities will rank pari passu, and payments will be made thereon pro rata,
with the Preferred Securities except that upon an event of default under the
Declaration with respect thereto, the rights of the holders of the Common
Securities to payment in respect of distributions and payments upon liquidation,
redemption and otherwise will be subordinated to the rights of the holders of
the Preferred Securities. The Corporation will, directly or indirectly, purchase
and own all of the Common Securities of each NB Capital Trust, which will
represent an aggregate liquidation amount equal to at least 3 percent of the
total capital of each NB Capital Trust. Each NB Capital Trust has a term of
approximately 55 years, but may earlier terminate as provided in the
Declaration. Each NB Capital Trust's business and affairs will be conducted by
the trustees (the "NB Trustees") appointed by the Corporation, as the direct or
indirect holder of all the Common Securities. The holder of the Common
Securities will be entitled to appoint, remove or replace any of, or increase or
reduce the number of, the NB Trustees of a NB Capital Trust. The duties and
obligations of the NB Trustees shall be governed by the Declaration of such NB
Capital Trust. One or more of the NB Trustees (the "Regular Trustees") of each
NB Capital Trust will be persons who are employees or officers of or who are
otherwise affiliated with the Corporation. One NB Trustee of each NB Capital
Trust will be a financial institution which will be unaffiliated with the
Corporation and which shall act as property trustee under the Declaration and as
indenture trustee (the "Property Trustee") for purposes of compliance with the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), pursuant to
the terms set forth in a Prospectus Supplement. The Property Trustee will hold
title to the Junior Subordinated Notes for the benefit of the holders of the
Trust Securities and will have the power to exercise all rights, power and
privileges under the Indenture as the holder of the Junior Subordinated Notes.
In addition, the Property Trustee will maintain exclusive control of a
segregated non-interest bearing bank account (the "Property Account") to hold
all payments made in respect of the Junior Subordinated Notes for the benefit of
the holders of Trust Securities. The Property Trustee will make payments of
distributions and payments on liquidation, redemption or otherwise to the
holders of the Trust Securities out of funds from the Property Account. In
addition, unless the Property Trustee maintains a principal place of business in
the State of Delaware, and otherwise meets the requirements of applicable law,
one NB Trustee of each NB Capital Trust will have its principal place of
business or reside in the State of Delaware (the "Delaware Trustee").
The Declaration may be modified or amended if approved by the Regular
Trustees (if there are more than two Regular Trustees, then approved by a
majority of the Regular Trustees) and, in certain circumstances, by the Property
Trustee or the Delaware Trustee, provided that, if any proposed amendment
provides for, or the Regular Trustees otherwise propose to effect, (i) any
action that would adversely affect the powers, preferences or special rights of
the Trust Securities, whether by way of amendment to the Declaration or
otherwise or (ii) the dissolution, winding-up or termination of the Trust other
than pursuant to the terms of the Declaration, then the holders of the Trust
Securities voting together as a single class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of at least a majority in liquidation amount of the
Trust Securities affected thereby; provided, that, if any amendment or proposal
referred to in clause (i) above would adversely affect only the Preferred
Securities or the Common Securities, then only the affected class will be
entitled to vote on such amendment or proposal and
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such amendment or proposal shall not be effective except with the approval of a
majority in liquidation amount of such class of Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified for purposes of United States federal income taxation as other
than a grantor trust, (ii) reduce or otherwise adversely affect the powers of
the Property Trustee or (iii) cause the Trust to be deemed an "investment
company" which is required to be registered under the Investment Company Act of
1940, as amended (the "1940 Act").
The Corporation will pay all fees and expenses related to the NB Capital
Trusts and the offering of Trust Securities. The office of the Delaware Trustee
for each NB Capital Trust in the State of Delaware is The Bank of New York
(Delaware), White Clay Center, Route 273, Newark, Delaware 19711. The principal
place of business of each NB Capital Trust shall be c/o NationsBank Corporation,
Corporate Treasury Division, NationsBank Corporate Center, Charlotte, North
Carolina 28255, telephone (704) 386-5972.
USE OF PROCEEDS
Each NB Capital Trust will use the gross proceeds received from the sale of
the Preferred Securities to purchase Junior Subordinated Notes from NationsBank.
NationsBank intends to add the net proceeds from the sale of the Junior
Subordinated Notes to its general funds, to be used for general corporate
purposes, including the Corporation's working capital needs, the funding of
investments in, or extensions of credit to, its banking and nonbanking
subsidiaries, possible acquisitions of other financial institutions or their
assets or liabilities, possible acquisitions of or investments in other
businesses of a type eligible for bank holding companies and possible reduction
of outstanding indebtedness or repurchase of outstanding equity securities of
the Corporation. Pending such use, the Corporation may temporarily invest the
net proceeds in investment grade securities. The Corporation may, from time to
time, engage in additional capital financings of a character and in amounts to
be determined by the Corporation in light of its needs at such time or times and
in light of prevailing market conditions. If the Corporation elects at the time
of issuance of Junior Subordinated Notes to make different or more specific use
of proceeds other than that set forth herein, such use will be described in the
applicable Prospectus Supplement.
RATIOS OF EARNINGS TO FIXED CHARGES
The following are the Corporation's consolidated ratios of earnings to
fixed charges and ratios of earnings to combined fixed charges and preferred
stock dividend requirements for the nine months ended September 30, 1996 and for
each of the years in the five-year period ended December 31, 1995:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges:
Excluding interest on deposits...................................... 1.8 1.7 1.9 2.3 2.4 1.1
Including interest on deposits...................................... 1.5 1.4 1.5 1.5 1.4 1.0
Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends:
Excluding interest on deposits...................................... 1.8 1.6 1.8 2.3 2.3 1.1
Including interest on deposits...................................... 1.5 1.4 1.5 1.5 1.4 1.0
</TABLE>
For purposes of computing the consolidated ratios, earnings represent net
income of the Corporation plus applicable income taxes and fixed charges, less
capitalized interest and the equity in undistributed earnings of unconsolidated
subsidiaries and associated companies. Fixed charges represent interest expense
(exclusive of interest on deposits in one case and inclusive of such interest in
the other), capitalized interest, amortization of debt discount and appropriate
issuance costs and one-third (the amount deemed to represent an appropriate
interest factor) of net rent expense under all lease commitments. Preferred
stock dividend requirements represent dividend requirements on the outstanding
preferred stock adjusted to reflect the pre-tax earnings that would be required
to cover such dividend requirements.
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PLAN OF DISTRIBUTION
NationsBank may sell the Junior Subordinated Notes and any NB Capital Trust
may sell Preferred Securities in any of, or any combination of, the following
ways: (i) directly to purchasers, (ii) through agents, (iii) through
underwriters, and (iv) through dealers.
Offers to purchase Offered Securities may be solicited directly by
NationsBank and/or any NB Capital Trust, as the case may be, or by agents
designated by NationsBank and/or any NB Capital Trust, as the case may be, from
time to time. Any such agent, who may be deemed to be an underwriter as that
term is defined in the Securities Act, involved in the offer or sale of the
Offered Securities in respect of which this Prospectus is delivered will be
named, and any commissions payable by NationsBank to such agent will be set
forth, in the Prospectus Supplement. Unless otherwise indicated in the
Prospectus Supplement, any such agency will be acting in a best efforts basis
for the period of its appointment (ordinarily five business days or less).
Agents, dealers and underwriters may be customers of, engage in transactions
with, or perform services for the Corporation in the ordinary course of
business.
If an underwriter or underwriters are utilized in the sale of the Offered
Securities, NationsBank and/or the NB Capital Trust as to which such Offered
Securities relate, will execute an underwriting agreement with such underwriters
at the time of sale to them and the names of the underwriters and the terms of
the transaction will be set forth in the Prospectus Supplement, which will be
used by the underwriters to make releases of the Offered Securities in respect
of which this Prospectus is delivered to the public.
If a dealer is utilized in the sale of the Offered Securities in respect of
which this Prospectus is delivered, NationsBank and/or any NB Capital Trust, as
the case may be, will sell such Offered Securities to the dealer, as principal.
The dealer may then resell such Offered Securities to the public at varying
prices to be determined by such dealer at the time of resale. The name of the
dealer and the terms of the transaction will be set forth in the Prospectus
Supplement.
Agents, underwriters, and dealers may be entitled under the relevant
agreements to indemnification by NationsBank and/or any NB Capital Trust, as the
case may be, against certain liabilities, including liabilities under the
Securities Act.
The place and time of delivery for the Offered Securities in respect of
which this Prospectus is delivered are set forth in the accompanying Prospectus
Supplement.
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DESCRIPTION OF THE JUNIOR SUBORDINATED NOTES
THE FOLLOWING DESCRIPTION OF THE JUNIOR SUBORDINATED NOTES SETS FORTH
CERTAIN GENERAL TERMS AND PROVISIONS OF THE JUNIOR SUBORDINATED NOTES TO WHICH
ANY PROSPECTUS SUPPLEMENT MAY RELATE. THE PARTICULAR TERMS OF THE JUNIOR
SUBORDINATED NOTES OFFERED BY ANY PROSPECTUS SUPPLEMENT AND THE EXTENT, IF ANY,
TO WHICH SUCH GENERAL PROVISIONS MAY APPLY TO THE JUNIOR SUBORDINATED NOTES SO
OFFERED WILL BE DESCRIBED IN THE PROSPECTUS SUPPLEMENT RELATING TO SUCH JUNIOR
SUBORDINATED NOTES.
Junior Subordinated Notes may be issued from time to time in one or more
series under an Indenture (the "Indenture"), between the Corporation and The
Bank of New York, as Trustee (in such capacity, the "Debt Trustee"). The
Indenture is incorporated by reference in the Registration Statement of which
this Prospectus forms a part. The terms of the Junior Subordinated Notes will
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act. The following summary of certain
provisions of the Indenture does not purport to be complete and is subject in
all respects to the provisions of, and is qualified in its entirety by reference
to, the Indenture, and the Trust Indenture Act. Unless otherwise indicated
capitalized terms shall have the meanings ascribed to them in the Indenture.
GENERAL
The Junior Subordinated Notes will be unsecured, subordinated obligations
of the Corporation. The Indenture does not limit the aggregate principal amount
of Junior Subordinated Notes which may be issued thereunder and provides that
the Junior Subordinated Notes may be issued from time to time in one or more
series. The Subordinated Notes are issuable in one or more series pursuant to an
indenture supplemental to the Indenture or a resolution of the Corporation's
Board of Directors or a special committee appointed thereby (each, a
"Supplemental Indenture"). With respect to any particular series of Junior
Subordinated Notes, the term "Indenture" shall be deemed to include any
Supplemental Indenture(s) with respect to such series of Junior Subordinated
Notes.
In the event Junior Subordinated Notes are issued to a NB Capital Trust or
a trustee of such trust in connection with the issuance of Trust Securities by
such NB Capital Trust, such Junior Subordinated Notes subsequently may be
distributed pro rata to the holders of such Trust Securities in connection with
the dissolution of such NB Capital Trust upon the occurrence of certain events
described in the Prospectus Supplement relating to such Trust Securities. Only
one series of Junior Subordinated Notes will be issued to a NB Capital Trust or
a trustee of such trust in connection with the issuance of Trust Securities by
such NB Capital Trust.
Reference is made to the Prospectus Supplement relating to the particular
Junior Subordinated Notes being offered thereby for the following terms: (i) the
designation of such Junior Subordinated Notes; (ii) the aggregate principal
amount of such Junior Subordinated Notes; (iii) the percentage of their
principal amount at which such Junior Subordinated Notes will be issued; (iv)
the date or dates on which such Junior Subordinated Notes will mature and the
right, if any, to extend such date or dates; (v) the rate or rates, if any, per
annum, at which such Junior Subordinated Notes will bear interest, or the method
of determination of such rate or rates; (vi) the date or dates from which such
interest shall accrue, the interest payment dates on which such interest will be
payable or the manner of determination of such interest payment dates and the
record dates for the determination of holders to whom interest is payable on any
such interest payment dates; (vii) the right to extend the interest payment
periods and the duration of such extension; (viii) provisions for a sinking
purchase or other analogous fund, if any; (ix) the period or periods, if any,
within which, the price or prices of which, and the terms and conditions upon
which such Subordinated Notes may be redeemed, in whole or in part, at the
option of the Corporation or the holder; (x) the form of such Junior
Subordinated Notes; and (xi) any other specific terms of the Junior Subordinated
Notes. Principal, premium, if any, and interest, if any, will be payable, and
the Junior Subordinated Notes offered hereby will be transferable, at the
corporate trust office of the Debt Trustee in New York, New York, provided that
payment of interest, if any, may be made at the option of the Corporation by
check mailed to the address of the person entitled thereto as it appears in the
Security Register.
The ability of NationsBank to make payments of principal of (and premium,
if any, on) and any interest on the Junior Subordinated Notes may be affected by
the ability of the Banks to pay dividends. The ability of the
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Banks, as well as of the Corporation, to pay dividends in the future currently
is, and could be further, influenced by bank regulatory requirements and capital
guidelines. See "NATIONSBANK CORPORATION -- Supervision and Regulation."
The covenants contained in the Indenture would not necessarily afford
protection to holders of the Junior Subordinated Notes in the event of a decline
in credit quality resulting from takeovers, recapitalization or similar
restructuring.
FORM, EXCHANGE, REGISTRATION, TRANSFER AND PAYMENT
Unless otherwise specified in the applicable Prospectus Supplement, the
Junior Subordinated Notes will be issued in fully registered form without
coupons and in denominations of $1,000 and multiples of $1,000. No service
charge will be made for any transfer or exchange of the Junior Subordinated
Notes, but the Corporation or the Debt Trustee may require payment of a sum
sufficient to cover any tax or other government charge payable in connection
therewith.
Unless otherwise provided in the applicable Prospectus Supplement,
principal and premium, if any, or interest, if any, will be payable and the
Junior Subordinated Notes may be surrendered for payment or transferred at the
offices of the Debt Trustee as paying and authenticating agent, provided that
payment of interest on registered securities that are not issued to a NB Capital
Trust may be made at the option of the Corporation by check mailed to the
address of the person entitled thereto as it appears in the Security Register.
BOOK-ENTRY JUNIOR SUBORDINATED NOTES
The Junior Subordinated Notes of a series may be issued in whole or in part
in the form of one or more Global Securities that will be deposited with, or on
behalf of, a depositary (the "Global Depositary"), or its nominee, identified in
the Prospectus Supplement relating to such series. In such case, one or more
Global Securities will be issued in a denomination or aggregate denomination
equal to the portion of the aggregate principal amount of Outstanding Junior
Subordinated Notes of the series to be represented by such Global Security or
Securities. Unless and until it is exchanged in whole or in part for Junior
Subordinated Notes in definitive registered form, a Global Security may not be
registered for transfer or exchange except as a whole by the Global Depositary
for such Global Security to a nominee for such Global Depositary and except in
the circumstances described in the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any
portion of a series of Subordinated Notes to be represented by a Global Security
and a description of the Global Depositary will be provided in the applicable
Prospectus Supplement.
SUBORDINATION
The Junior Subordinated Notes will be subordinated and junior in right of
payment to other indebtedness of the Corporation to the extent set forth in the
applicable Prospectus Supplement.
CERTAIN COVENANTS OF THE CORPORATION
If Junior Subordinated Notes are issued to a NB Capital Trust or a trustee
of such trust in connection with the issuance of Trust Securities by such NB
Capital Trust and (i) there shall have occurred any event that would constitute
an Event of Default (as defined herein) or (ii) the Corporation shall be in
default with respect to its payment of any obligations under the related
Preferred Securities Guarantee or Common Securities Guarantee, or (iii) the
Corporation shall have given notice to its election to defer payments of
interest on such Junior Subordinated Notes by extending the interest payment
period as provided in the Indenture and such period, or any extension thereof,
shall be continuing, then (a) the Corporation shall not declare or pay any
dividend on, make any distributions with respect to, or redeem, purchase or make
a liquidation payment with respect to, any of its capital stock (other than (i)
purchases or acquisitions of shares of NationsBank Common Stock in connection
with the satisfaction by NationsBank of its obligations under any employee
benefit plans, (ii) as a result of a reclassification of NationsBank capital
stock or the exchange or conversion of one class or series of NationsBank
capital stock for another class or series of NationsBank capital stock or (iii)
the purchase of fractional interests in shares of NationsBank capital stock
pursuant to an acquisition or the conversion or
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exchange provisions of such NationsBank capital stock or the security being
converted or exchanged ("Permitted Purchases/Exchanges")) or make any guarantee
payments with respect to the foregoing and (b) the Corporation shall not make
any payment of interest, principal or premium, if any, on or repay, repurchase
or redeem any debt securities (including guarantees) issued by the Corporation
which rank pari passu with or junior to such Junior Subordinated Notes.
If Junior Subordinated Notes are issued to a NB Capital Trust or a trustee
of such trust in connection with the issuance of Trust Securities by such NB
Capital Trust and the Corporation shall have given notice of its election to
defer payments of interest on such Junior Subordinated Notes by extending the
interest payment period as provided in the Indenture and such period, or any
extension thereof, shall be continuing, then (a) the Corporation shall not
declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase or make a liquidation payment with respect to, any of its
capital stock, and (b) the Corporation shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities (including guarantees) issued by the Corporation which rank pari
passu with or junior to such Junior Subordinated Notes.
If Junior Subordinated Notes are issued to a NB Capital Trust or a trustee
of such trust in connection with the issuance of Trust Securities by such NB
Capital Trust, for so long as such Trust Securities remain outstanding, the
Corporation will covenant (i) to directly or indirectly maintain 100 percent
ownership of the Common Securities of such NB Capital Trust; provided, however,
that any permitted successor of the Corporation under the Indenture may succeed
to the Corporation's ownership of such Common Securities, (ii) to use its
reasonable efforts to cause such NB Capital Trust (a) to remain a statutory
business trust, except in connection with the distribution of Junior
Subordinated Notes to the holders of Trust Securities in liquidation of such NB
Capital Trust, the redemption of all of the Trust Securities of such NB Capital
Trust, or certain mergers, consolidations or amalgamations, each as permitted by
the Declaration of such NB Capital Trust, and (b) to otherwise continue not to
be classified as an association taxable as a corporation or partnership for
United States federal income tax purposes and (iii) to use its reasonable
efforts to cause each holder of Trust Securities to be treated as owning an
undivided beneficial interest in the Junior Subordinated Notes.
LIMITATION ON MERGERS AND SALES OF ASSETS
The Corporation shall not consolidate with, or merge into, any corporation
or convey or transfer its properties and assets substantially as an entirety to
any Person unless (a) the successor entity shall be a corporation organized
under the laws of the United States or any State or the District of Columbia and
shall expressly assume the obligations of the Corporation under the Indenture
and the Preferred Securities Guarantees and (b) after giving effect thereto, no
Default shall have occurred and be continuing under the Indenture.
EVENTS OF DEFAULT, WAIVER AND NOTICE
The Indenture provides that any one or more of the following described
events which has occurred and is continuing constitutes an "Event of Default"
with respect to each series of Junior Subordinated Notes:
(a) certain events of bankruptcy, insolvency or reorganization of the
Corporation; or
(b) in the event Junior Subordinated Notes are issued to a NB Capital Trust
or a trustee of such trust in connection with the issuance of Trust Securities
by such NB Capital Trust, the voluntary or involuntary dissolution, winding-up
or termination of such NB Capital Trust, except in connection with the
distribution of Junior Subordinated Notes to the holders of Trust Securities in
liquidation of such NB Capital Trust, the redemption of all of the Trust
Securities of such NB Capital Trust, or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration of such NB Capital Trust.
The Indenture provides that, if an Indenture Event of Default on any series
of Junior Subordinated Notes shall have occurred and be continuing, either the
Debt Trustee or the holders of 25 percent in principal amount of the Junior
Subordinated Notes of such series then outstanding may declare the principal
(or, if the Junior Subordinated Notes of such series were issued with original
issue discount, such portion of the principal amount as may be specified in the
terms of such series) of all Junior Subordinated Notes to be due and payable
immediately. The holders or a majority in aggregate outstanding principal amount
of such series of Junior
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Subordinated Notes may annul such declaration and waive the default if the
default, other than default in payment of the principal of, or interest or
premiums on, such series of Junior Subordinated Notes.
The holders of a majority in principal amount of the Subordinated Notes of
any and all series affected and then outstanding shall have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Debt Trustee under the Indenture, provided that the holders of the Junior
Subordinated Notes shall have offered to the Debt Trustee reasonable indemnity
against expenses and liabilities. Notwithstanding the foregoing, subject to the
subordination provisions set forth in a Prospectus Supplement, the right of any
holder of Junior Subordinated Notes to receive payment of the principal of and
interest on such Junior Subordinated Notes on or after the due dates therefor,
as the same may be extended in accordance with the terms of such Junior
Subordinated Notes, or to institute suit for the enforcement of any such payment
provisions, shall not be impaired or affected without the consent of such
holder. If the Junior Subordinated Notes are issued to a NB Capital Trust, the
same rights with respect to the Junior Subordinated Notes will extend to the
holders of the Preferred Securities issued by such Trust. The Indenture requires
the annual filing by the Company with the Debt Trustee of a certificate as to
the absence of certain defaults under the Indenture.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Corporation and the Debt
Trustee, with the consent of the holders of not less than a majority in
principal amount of the Junior Subordinated Notes of all series affected by such
modification at the time outstanding, to modify the Indenture or any
supplemental indenture or the rights of the holders of the Junior Subordinated
Notes; provided that no such modification shall (i) extend the fixed maturity of
any Junior Subordinated Note, or reduce the principal amount thereof (including
in the case of a discounted Junior Subordinated Note the amount payable thereon
in the event of acceleration or the amount provable in bankruptcy) or any
redemption premium thereon, or reduce the rate or extend the time of payment of
interest thereon, or make the principal of, or interest or premium on, the
Junior Subordinated Notes payable in any coin or currency other than that
provided in the Junior Subordinated Notes, or impair or affect the right of any
holder of Junior Subordinated Notes to institute suit for the payment thereof or
the right of prepayment, if any, at the option of the holder, without the
consent of the holder of each Junior Subordinated Note so affected, or (ii)
reduce the aforesaid percentage of Junior Subordinated Notes the consent of the
holders of which is required for any such modification without the consent of
the holders of each Junior Subordinated Note affected. The Indenture further
provides that if the Junior Subordinated Notes are held by a NB Capital Trust or
a trustee of such trust, no modification of the Indenture shall be effective
until the holders of a majority in liquidation preference of the Trust
Securities of the applicable NB Capital Trust shall have consented to such
modification and that, whenever the consent of the holders of all outstanding
Junior Subordinated Notes is required with respect to a modification of the
Indenture, such modification shall not be effective until each holder of the
Trust Securities shall have consented to such modification. As a result of these
pass through voting rights with respect to modifications to the Indenture, no
modification thereto shall be effective until the holders of a majority in
liquidation preference of the Trust Securities consent to such modification and
no modification described in clauses (i) or (ii) shall be effective without the
consent of each holder of Preferred Securities and each holder of Common
Securities of the applicable NB Capital Trust.
DEFEASANCE AND DISCHARGE
The Indenture provides that the Corporation (a) will be Discharged from any
and all obligations in respect of the Junior Subordinated Notes of a series
(except for certain obligations to register the transfer or exchange of Junior
Subordinated Notes, replace stolen, lost or mutilated Junior Subordinated Notes,
maintain paying agencies and hold moneys for payment in trust) or (b) need not
comply with certain restrictive covenants of the Indenture (including those
described under "Certain Covenants of the Corporation"), in each case if the
Corporation, at its option, deposits, in trust with the Debt Trustee or the
Defeasance Agent, money or U.S. Government Obligations which through the payment
of interest thereon and principal thereof in accordance with their terms will
provide money, in an amount sufficient to pay all the principal of, and interest
and premium, if any, on, the Junior Subordinated Notes of such series on the
dates such payments are due in accordance with the terms of such Junior
Subordinated Notes. To exercise any such option, the Corporation is required to
deliver to the Debt Trustee and the Defeasance Agent, if any, an opinion of
counsel to the effect that (i) the deposit and
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related defeasance would not cause the holders of the Junior Subordinated Notes
of such series to recognize income, gain or loss for United States federal
income tax purposes and, in the case of a Discharge pursuant to clause (a), such
opinion shall be accompanied by a private letter ruling to that effect received
by the Corporation from the United States Internal Revenue Service or a revenue
ruling pertaining to a comparable form of transaction to that effect published
by the United States Internal Revenue Service, and (ii) if listed on any
national securities exchange, such Junior Subordinated Notes would not be
delisted from such exchange as a result of the exercise of such option.
GOVERNING LAW
The Indenture and the Junior Subordinated Notes will be governed by, and
construed in accordance with, the internal laws of the State of New York.
THE DEBT TRUSTEE
The Corporation and certain of its affiliates have from time to time
maintained deposit accounts and conducted other banking transactions with the
Debt Trustee and its affiliated entities in the ordinary course of business. The
Debt Trustee also serves as trustee for certain series of the Corporation's
outstanding indebtedness under other indentures.
DESCRIPTION OF THE PREFERRED SECURITIES
Each NB Capital Trust may issue, from time to time, only one series of
Preferred Securities having terms described in the Prospectus Supplement
relating thereto. The Declaration of each NB Capital Trust authorizes the
Regular Trustees of that NB Capital Trust to issue on behalf of the NB Capital
Trust one series of Preferred Securities. The Declaration will be qualified as
an indenture under the Trust Indenture Act. The Bank of New York will act as
Indenture Trustee for the purposes of the Trust Indenture Act. The Preferred
Securities will have such terms, including distributions, redemption, voting,
liquidation rights and such other preferred, deferred or other special rights or
such restrictions as shall be set forth in the Declaration or made part of the
Declaration by the Trust Indenture Act and which will mirror the terms of the
Junior Subordinated Notes held by that NB Capital Trust and described in the
Prospectus Supplement relating thereto. Since the terms regarding redemption of
the Preferred Securities will mirror the redemption terms of the Junior
Subordinated Notes, if any Junior Subordinated Notes are redeemed, an equivalent
portion of Preferred Securities will be redeemed on a pro rata basis. Reference
is made to the Prospectus Supplement relating to the Preferred Securities of the
NB Capital Trust for specific terms, including (i) the distinctive designation
of such Preferred Securities; (ii) the number of Preferred Securities issued by
such NB Capital Trust; (iii) the annual distribution rate (or method of
determining such rate) for Preferred Securities issued by such NB Capital Trust
and the date or dates upon which such distributions shall be payable; provided,
however, that distributions on such Preferred Securities shall be payable on a
quarterly basis to holders of such Preferred Securities as of a record date in
each quarter during which such Preferred Securities are outstanding; (iv)
whether distributions on Preferred Securities issued by such NB Capital Trust
shall be cumulative, and, in the case of Preferred Securities having cumulative
distribution rights, the date or dates or method of determining the date or
dates from which distributions on Preferred Securities issued by such NB Capital
Trust shall be cumulative; (v) the amount or amounts which shall be paid out of
the assets of such NB Capital Trust to the holders of Preferred Securities of
such NB Capital Trust upon voluntary or involuntary dissolution, winding-up or
termination of such NB Capital Trust; (vi) the obligation, if any, of such NB
Capital Trust to purchase or redeem Preferred Securities issued by such NB
Capital Trust and the price or prices at which, the period or periods within
which, and the terms and conditions upon which, Preferred Securities issued by
such NB Capital Trust shall be purchased or redeemed, in whole or in part,
pursuant to such obligation; (vii) the voting rights, if any, of Preferred
Securities issued by such NB Capital Trust in addition to those required by law,
including the number of votes per Preferred Security and any requirement for the
approval by the holders of Preferred Securities, or of Preferred Securities
issued by one or more NB Capital Trusts, or of both, as a condition to specified
action or amendments to the Declaration of such NB Capital Trust; (viii) the
terms and conditions, if any, upon which the Junior Subordinated Notes may be
distributed to holders of Preferred Securities; (ix) if applicable, any
securities exchange upon which the Preferred Securities shall be listed; and (x)
any other relevant rights, preferences, privileges, limitations or restrictions
of Preferred Securities issued by such NB Capital Trust not inconsistent with
the Declaration of such NB Capital Trust or with applicable law. The Indenture
provides pass
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through voting rights to the holders of the Trust Securities, including the
Preferred Securities, with respect to modifications to the Indenture. As a
result, the holders of Preferred Securities have a right to vote (in some cases
as a class with holders of Common Securities) on changes to the term of the
Junior Subordinated Notes. See "Description of Junior Subordinated
Notes -- Modification of the Indenture."
The Preferred Securities Guarantee, when taken together with the
Corporation's obligations under the Junior Subordinated Notes, the Indenture and
the Declaration, including its obligations to pay costs, expenses, debts and
liabilities of such NB Capital Trust (other than with respect to the Trust
Securities), will provide a full and unconditional guarantee on a subordinated
basis by the Corporation of payments due on the Preferred Securities.
"Description of the Preferred Securities Guarantees." Certain United States
federal income tax considerations applicable to any offering of Preferred
Securities will be described in the Prospectus Supplement relating thereto.
The Declaration of each NB Capital Trust authorizes its Regular Trustees to
issue on behalf of that NB Capital Trust one series of Common Securities having
such terms including distributions, redemption, voting, liquidation rights or
such restrictions as shall be set forth therein. Except for the voting rights
noted below, the terms of the Common Securities issued by a NB Capital Trust
will be substantially identical to the terms of the Preferred Securities issued
by that trust and the Common Securities will rank pari passu, and payments will
be made thereon pro rata, with the Preferred Securities except that, upon an
Event of Default under the Declaration, the rights of the holders of the Common
Securities to payment in respect of distributions and payments upon liquidation,
redemption and otherwise will be subordinated to the rights of the holders of
the Preferred Securities. Except in certain limited circumstances, the Common
Securities will also carry the right to vote to appoint, remove or replace any
of the NB Trustees of a NB Capital Trust. All of the Common Securities of each
NB Capital Trust will be directly or indirectly owned by the Corporation.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If an Event of Default under the Declaration of a NB Capital Trust occurs
and is continuing, then the holders of Preferred Securities of such NB Capital
Trust would rely on the enforcement by the Property Trustee of its rights as a
holder of the applicable series of Junior Subordinated Notes against the
Corporation. In addition, the holders of a majority in liquidation amount of the
Preferred Securities of such NB Capital Trust 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 trust or power conferred
upon the Property Trustee under the applicable Declaration, including the right
to direct the Property Trustee to exercise the remedies available to it as a
holder of the Junior Subordinated Notes. If the Property Trustee fails to
enforce its rights under the applicable series of Junior Subordinated Notes, a
holder of Preferred Securities of such NB Capital Trust may, to the extent
permitted by applicable law, institute a legal proceeding directly against the
Corporation to enforce the Property Trustee's rights under the applicable series
of Subordinated Notes without first instituting any legal proceeding against the
Property Trustee or any other person or entity.
Notwithstanding the foregoing, if NationsBank fails to pay interest or
principal on the applicable series of Junior Subordinated Notes (a "Note Payment
Failure") on the date such interest or principal is otherwise payable (or in the
case of redemption, on the redemption date) and such Note Payment Failure is
continuing, a holder of Preferred Securities of such NB Capital Trust may
directly institute a proceeding for enforcement of payment to such holder of the
principal of or interest on the applicable series of Junior Subordinated Notes
having a principal amount equal to the aggregate liquidation amount of the
Preferred Securities of such holder (a "Direct Action") after the respective due
date specified in the applicable series of Junior Subordinated Notes. In
connection with such Direct Action, the Corporation will be subrogated to the
rights of such holder of Preferred Securities under the applicable Declaration
to the extent of any payment made by the Corporation to such holder of Preferred
Securities in such Direct Action.
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed certain tax law changes that
would, among other things, generally deny corporate issuers a deduction for
interest in respect of certain debt obligations issued on or after December 7,
1995 (the "Proposed Legislation") if such debt obligations have a maximum term
in excess of 20 years and are not shown as indebtedness on the issuer's
applicable consolidated balance sheet. On March 29, 1996, Senate Finance
Committee Chairman William V. Roth, Jr. and House Ways and Means Committee
Chairman Bill Archer issued a joint statement (the "Joint Statement") indicating
their intent that certain legislative
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proposals initiated by the Clinton administration, including the Proposed
Legislation, that may be adopted by either of the tax-writing committees of
Congress would have an effective date that is no earlier than the date of
"appropriate Congressional action." In addition, subsequent to the publication
of the Joint Statement, Senator Daniel Patrick Moynihan and Representatives Sam
M. Gibbons and Charles B. Rangel wrote letters to Treasury Department officials
concurring with the views expressed in the Joint Statement (the "Democrat
Letters"). Based upon the Joint Statement and the Democrat Letters, it is
expected that if the Proposed Legislation were to be enacted, such legislation
would not apply to the Junior Subordinated Notes. There can be no assurances,
however, that the effective date guidance contained in the Joint Statement and
the Democrat Letters will be incorporated into the Proposed Legislation, if
enacted, or that other legislation enacted after the date hereof will not
otherwise adversely affect the ability of the Corporation to deduct the interest
payable on the Junior Subordinated Notes. Accordingly, there can be no assurance
that a Tax Event will not occur. See "Description of the Preferred
Securities -- Tax Event Redemption or Distribution."
DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEES
Set forth below is a summary of information concerning the Preferred
Securities Guarantees which will be executed and delivered by NationsBank for
the benefit of the holders from time to time of Preferred Securities. Each
Preferred Securities Guarantee will be qualified as an indenture under the Trust
Indenture Act. The Bank of New York will act as indenture trustee under each
Preferred Securities Guarantee for purposes of the Trust Indenture Act (the
"Preferred Guarantee Trustee"). The terms of each Preferred Securities Guarantee
will be those set forth in such Preferred Securities Guarantee and those made
part of such Preferred Securities Guarantee by the Trust Indenture Act. The
summary of the material terms of the Preferred Securities Guarantees does not
purport to be complete and is subject in all respects to the provisions of, and
is qualified in its entirety by reference to, the form of Preferred Securities
Guarantee, which is filed as an exhibit to the Registration Statement of which
this Prospectus forms a part, and the Trust Indenture Act. Each Preferred
Securities Guarantee will be held by the Preferred Guarantee Trustee for the
benefit of the holders of the Preferred Securities of the applicable NB Capital
Trust.
GENERAL
Pursuant to each Preferred Securities Guarantee, the Corporation will, to
the extent the applicable NB Capital Trust shall have funds available therefor,
agree to pay in full, to the holders of the Preferred Securities issued by a NB
Capital Trust, the Guarantee Payments (as defined herein) (except to the extent
paid by such NB Capital Trust), as and when due, regardless of any defense,
right of set-off or counterclaim which such NB Capital Trust may have or assert.
The following payments with respect to Preferred Securities issued by a NB
Capital Trust to the extent not paid by such NB Capital Trust (the "Guarantee
Payments"), will be subject to the Preferred Securities Guarantee thereon
(without duplication): (i) any accrued and unpaid distributions which are
required to be paid on such Preferred Securities, to the extent such NB Capital
Trust shall have funds available therefor; (ii) the redemption price, including
all accrued and unpaid distributions (the "Redemption Price"), to the extent
such NB Capital Trust has funds available therefor with respect to any Preferred
Securities called for redemption by such NB Capital Trust and (iii) upon a
voluntary or involuntary dissolution, winding-up or termination of such NB
Capital Trust (other than in connection with the distribution of Junior
Subordinated Notes to the holders of Preferred Securities or the redemption of
all of the Preferred Securities), the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid distributions on such Preferred
Securities to the date of payment, to the extent such NB Capital Trust has funds
available therefor and (b) the amount of assets of such NB Capital Trust
remaining available for distribution to holders of such Preferred Securities in
liquidation of such NB Capital Trust. The redemption price and liquidation
amount will be fixed at the time the Preferred Securities are issued. 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 Preferred
Securities or by causing the applicable NB Capital Trust to pay such amounts to
such holders.
Each Preferred Securities Guarantee will not apply to any payment of
distributions except to the extent such NB Capital Trust shall have funds
available therefor. If the Corporation does not make interest payments on the
Junior Subordinated Notes purchased by a NB Capital Trust, such NB Capital Trust
will not pay distributions on the Preferred Securities issued by such NB Capital
Trust and will not have funds available therefor. See "Description of the Junior
Subordinated Notes -- Certain Covenants of the Corporation." The Preferred
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Securities Guarantee, when taken together with the Corporation's obligations
under the Junior Subordinated Notes, the Indenture and the Declaration,
including its obligations to pay costs, expenses, debts and liabilities of such
NB Capital Trust (other than with respect to the Trust Securities), will provide
a full and unconditional guarantee on a subordinated basis by the Corporation of
payments due on the Preferred Securities.
The Corporation has also agreed separately to irrevocably and
unconditionally guarantee the obligations of the NB Capital Trusts with respect
to the Common Securities (the "Common Securities Guarantees") to the same extent
as the Preferred Securities Guarantees, except that upon an Event of Default
under the Indenture, holders of Preferred Securities shall have priority over
holders of Common Securities with respect to distributions and payments on
liquidation, redemption or otherwise.
CERTAIN COVENANTS OF THE CORPORATION
In each Preferred Securities Guarantee, the Corporation will covenant that,
so long as any Preferred Securities issued by the applicable NB Capital Trust
remain outstanding, if there shall have occurred any event that would constitute
an Event of Default under such Preferred Securities Guarantee or the Declaration
of such NB Capital Trust, then (a) the Corporation shall not declare or pay any
dividend on, make any distributions with respect to, or redeem, purchase or make
a liquidation payment with respect to, any of its capital stock (other than
Permitted Purchases/Exchanges) or make any guarantee payments with respect to
the foregoing, (b) the Corporation shall not declare or pay any dividend on,
make any distributions with respect to, or redeem, purchase or make a
liquidation payment with respect to, any of its Preferred Stock (other than
Permitted Purchases/Exchanges) except that the Corporation may meet the same
proportion of its payment obligations with respect to its Preferred Stock that
it meets under such Preferred Securities Guarantee and (c) the Corporation shall
not make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities (including guarantees) issued by the
Corporation which rank pari passu with or junior to such Junior Subordinated
Notes.
MODIFICATION OF THE PREFERRED SECURITIES GUARANTEES; ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of Preferred Securities (in which case no vote will be required),
each Preferred Securities Guarantee may be amended only with the prior approval
of the holders of not less than a majority in liquidation amount of the
outstanding Preferred Securities issued by the applicable NB Capital Trust. The
manner of obtaining any such approval of holders of such Preferred Securities
will be as set forth in an accompanying Prospectus Supplement. All guarantees
and agreements contained in a Preferred Securities Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the Corporation
and shall inure to the benefit of the holders of the Preferred Securities of the
applicable NB Capital Trust then outstanding.
TERMINATION
Each Preferred Securities Guarantee will terminate as to the Preferred
Securities issued by the applicable NB Capital Trust (a) upon full payment of
the Redemption Price of all Preferred Securities of such NB Capital Trust, (b)
upon distribution of the Junior Subordinated Notes held by such NB Capital Trust
to the holders of the Preferred Securities of such NB Capital Trust or (c) upon
full payment of the amounts payable in accordance with the Declaration of such
NB Capital Trust upon liquidation of such NB Capital Trust. Each Preferred
Securities Guarantee will continue to be effective or will be reinstated, as the
case may be, if at any time any holder of Preferred Securities issued by the
applicable NB Capital Trust must restore payment of any sums paid under such
Preferred Securities or such Preferred Securities Guarantee.
EVENTS OF DEFAULT
An Event of Default under a Preferred Securities Guarantee will occur upon
the failure of the Corporation to perform any of its payment or other
obligations thereunder.
The holders of a majority in liquidation amount of the Preferred Securities
relating to such Preferred Securities Guarantee have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Preferred Guarantee Trustee in respect of the Preferred Securities Guarantee
or to direct the exercise of any trust or power conferred upon the Preferred
Guarantee Trustee under such Preferred Securities. If the Preferred Guarantee
Trustee fails to enforce such Preferred Securities Guarantee, any holder of
Preferred Securities relating to such Preferred Securities Guarantee may
institute a legal proceeding
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directly against the Corporation to enforce the Preferred Guarantee Trustee's
rights under such Preferred Securities Guarantee, without first instituting a
legal proceeding against the relevant NB Capital Trust, the Preferred Guarantee
Trustee or any other person or entity. Notwithstanding the foregoing, if the
Corporation has failed to make a guarantee payment, a holder of Preferred
Securities may directly institute a proceeding against the Corporation for
enforcement of the Preferred Securities Guarantee for such payment. The
Corporation waives any right or remedy to require that any action be brought
first against such NB Capital Trust or any other person or entity before
proceeding directly against the Corporation.
STATUS OF THE PREFERRED SECURITIES GUARANTEES
The Preferred Securities Guarantees will constitute unsecured obligations
of the Corporation and will rank (i) subordinate and junior in right of payment
to all other liabilities, including contingent liabilities, of the Corporation,
(ii) pari passu with the most senior preferred or preference stock now or
hereafter issued by the Corporation and with any guarantee now or hereafter
entered into by NationsBank in respect of any preferred or preference stock of
any affiliate of the Corporation, and (iii) senior to the Corporation's common
stock. The terms of the Preferred Securities provide that each holder of
Preferred Securities issued by the applicable NB Capital Trust by acceptance
thereof agrees to the subordination provisions and other terms of the Preferred
Securities Guarantee relating thereto.
The Preferred Securities Guarantees will constitute a guarantee of payment
and not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the guarantor to enforce its rights under the
Preferred Securities Guarantee without instituting a legal proceeding against
any other person or entity).
INFORMATION CONCERNING THE PREFERRED GUARANTEE TRUSTEE
The Preferred Guarantee Trustee, prior to the occurrence of a default with
respect to a Preferred Securities Guarantee, undertakes to perform only such
duties as are specifically set forth in such Preferred Securities Guarantee and,
after default, shall exercise the same degree of care as a prudent individual
would exercise in the conduct of his or her own affairs. Subject to such
provisions, the Preferred Guarantee Trustee is under no obligation to exercise
any of the powers vested in it by a Preferred Securities Guarantee at the
request of any holder of Preferred Securities, unless offered reasonable
indemnity against the costs, expenses and liabilities which might be incurred
thereby.
The Corporation and certain of its affiliates have from time to time
maintained deposit accounts and conducted other banking transactions with the
Preferred Guarantee Trustee and its afifiliated entities in the ordinary course
of business. The Preferred Guarantee Trustee also serves as trustee for certain
series of the Corporation's outstanding indebtedness under other indentures.
GOVERNING LAW
The Preferred Securities Guarantees will be governed by and construed in
accordance with, the internal laws of the State of New York.
EFFECT OF OBLIGATIONS UNDER THE
JUNIOR SUBORDINATED NOTES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of each of the NB Capital
Trusts is to issue the Trust Securities evidencing undivided beneficial
interests in the assets of each of the NB Capital Trusts, and to invest the
proceeds from such issuance and sale in Junior Subordinated Notes.
As long as payments of interest and other payments are made when due on the
Junior Subordinated Notes held by a NB Capital Trust, such payments will be
sufficient to cover distributions and payments due on the Trust Securities
because of the following factors: (i) the aggregate principal amount of such
Junior Subordinated Notes will be equal to the sum of the aggregate stated
liquidation amount of the Trust Securities; (ii) the interest rate and the
interest and other payment dates on such Subordinated Notes will match the
distribution rate and distribution and other payment dates for the Preferred
Securities; (iii) NationsBank shall pay all, and the NB Capital Trust shall not
be obligated to pay, directly or indirectly, all costs, expenses, debt, and
obligations of such NB Capital Trust (other than with respect to the Trust
Securities); and (iv) the Declaration further provides that the NationsBank
Trustees shall not take or cause or permit the NB Capital Trust to, among other
things, engage in any activity that is not consistent with the purposes of such
NB Capital Trust.
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Pursuant to the Preferred Securities Guarantee, payments of distributions
and other payments due on the Preferred Securities are guaranteed by NationsBank
to the extent the applicable NB Capital Trust has funds available to make such
distributions or payments. If NationsBank does not make interest payments on the
Subordinated Notes purchased by the applicable NB Capital Trust, the applicable
NB Capital Trust will not have sufficient funds to pay distributions on the
Preferred Securities and the Preferred Securities Guarantee will not apply,
since the Preferred Securities Guarantee covers the payment of distributions and
other payments on the Preferred Securities only if and to the extent that
NationsBank has made a payment of interest or principal on the Junior
Subordinated Notes held by the applicable NB Capital Trust as its sole asset.
However, the Preferred Securities Guarantee, when taken together with the
Corporation's obligations under the Junior Subordinated Notes and the Indenture
and its obligations under the Declaration, including its obligations to pay
costs, expenses, debts and liabilities of the applicable NB Capital Trust (other
than with respect to the Trust Securities), provide a full and unconditional
guarantee, on a subordinated basis, by the Corporation of amounts due on the
Preferred Securities.
If NationsBank fails to make interest or other payments on the Junior
Subordinated Notes when due (taking account of any Extension Period), the
Declarations provide a mechanism whereby the holders of the Preferred Securities
affected thereby, using the procedures described in any accompanying Prospectus
Supplement, may direct the Property Trustee to enforce its rights under the
Junior Subordinated Notes. If the Property Trustee fails to enforce its rights
under the Junior Subordinated Notes, a holder of Preferred Securities of a Trust
may, to the extent permitted by applicable law, institute a legal proceeding
against NationsBank to enforce the Property Trustee's rights under the
Subordinated Notes owned by such Trust without first instituting any legal
proceeding against the Property Trustee or any other person or entity.
Notwithstanding the foregoing, if a Note Payment Failure has occurred and is
continuing, a holder of Preferred Securities may institute a Direct Action for
payment after the respective due date specified in the Junior Subordinated
Notes. In connection with such Direct Action, NationsBank will be subrogated to
the rights of such holder of Preferred Securities under the Declarations to the
extent of any payment made by NationsBank to such holder of Preferred Securities
in such Direct Action. NationsBank, under the Guarantee, acknowledges that the
Guarantee Trustee shall enforce the Preferred Securities Guarantee on behalf of
the holders of the Preferred Securities. If NationsBank fails to make payments
under the Preferred Securities Guarantee, the Preferred Securities Guarantee
provides a mechanism whereby the holders of the Preferred Securities may direct
the Preferred Securities Guarantee Trustee to enforce its rights thereunder. Any
holder of Preferred Securities may institute a legal proceeding directly against
NationsBank to enforce the Preferred Securities Guarantee Trustee's rights under
the Preferred Securities Guarantee without first instituting a legal proceeding
against the applicable NB Capital Trust, the Preferred Securities Guarantee
Trustee, or any other person or entity.
NationsBank and each of the NB Capital Trusts believe that the above
mechanisms and obligations, taken together, provide a full and unconditional
guarantee by NationsBank of payments due on the Preferred Securities. See
"Description of the Preferred Securities Guarantees -- General."
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of the NB Capital Trusts by Richards,
Layton & Finger, special Delaware counsel to the NB Capital Trusts. The validity
of the Junior Subordinated Notes and the Preferred Securities Guarantees and
certain matters relating thereto will be passed upon for NationsBank by Smith
Helms Mulliss & Moore, L.L.P. and for the underwriters by Stroock & Stroock &
Lavan. Certain United States federal income taxation matters will be passed upon
for NationsBank and the NB Capital Trusts by Stroock & Stroock & Lavan, special
tax counsel to NationsBank and the NB Capital Trusts. Smith Helms Mulliss &
Moore, L.L.P. and Stroock & Stroock & Lavan will rely on the opinion of
Richards, Layton & Finger as to matters of Delaware law.
EXPERTS
The consolidated financial statements of the Corporation incorporated in
this Prospectus by reference to the Corporation's Annual Report on Form 10-K for
the year ended December 31, 1995, have been so incorporated in reliance on the
report of Price Waterhouse LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY NATIONSBANK CORPORATION, NB CAPITAL TRUST II
OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF NATIONSBANK CORPORATION OR NB CAPITAL TRUST II SINCE THE DATE HEREOF. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PROSPECTUS SUPPLEMENT
NationsBank Corporation............................... S-5
NB Capital Trust...................................... S-5
NationsBank Corporation Selected Financial Data....... S-6
Recent Developments................................... S-7
Risk Factors.......................................... S-7
Capitalization........................................ S-13
Ratios of Earnings to Fixed Charges................... S-15
Accounting Treatment.................................. S-15
Use of Proceeds....................................... S-15
Description of the Junior Subordinated Notes.......... S-15
Description of the Capital Securities................. S-22
Description of the Capital Securities Guarantee....... S-32
Effect of Obligations Under the Junior Subordinated
Notes and the Capital Securities Guarantee.......... S-32
United States Federal Income Taxation................. S-33
ERISA Considerations.................................. S-36
Underwriting.......................................... S-38
Legal Matters......................................... S-39
<CAPTION>
PROSPECTUS
<S> <C>
Incorporation of Certain Documents by Reference....... 3
Available Information................................. 3
NationsBank Corporation............................... 4
The Trusts............................................ 8
Use of Proceeds....................................... 9
Ratios of Earnings to Fixed Charges................... 9
Plan of Distribution.................................. 10
Description of the Junior Subordinated Notes.......... 11
Description of the Preferred Securities............... 15
Description of the Preferred Securities Guarantees.... 17
Effect of Obligations Under the Junior Subordinated
Notes and the Guarantee............................. 19
Legal Matters......................................... 20
Experts............................................... 20
</TABLE>
365,000 CAPITAL SECURITIES
NB CAPITAL TRUST II
7.83% CAPITAL SECURITIES
GUARANTEED TO THE EXTENT
SET FORTH HEREIN BY
NATIONSBANK(Register mark)
PROSPECTUS SUPPLEMENT
NATIONSBANC CAPITAL MARKETS, INC.
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
DECEMBER 10, 1996
