FILED PURSUANT TO RULE 424(B)(5)
REGISTRATION NOS. 33-19365 AND 33-19365-01
PROSPECTUS SUPPLEMENT
(To Prospectus dated January 22, 1997)
$300,000,000
[WACHOVIA logo here]
Wachovia Capital Trust II
Floating Rate Capital Securities
(Liquidation Amount $1,000 per Capital Security)
fully and unconditionally guaranteed, as described herein, by
Wachovia Corporation
---------------------------
The Floating Rate Capital Securities (the "Capital Securities") offered
hereby represent preferred beneficial interests in Wachovia Capital Trust II, a
statutory business trust formed under the laws of the State of Delaware (the
"Trust"). Wachovia Corporation, a North Carolina corporation ("Wachovia" or the
"Corporation"), will be the owner of all the beneficial interests represented by
common securities of the Trust (the "Common Securities" and, together with the
Capital Securities, the "Trust Securities"). The Trust exists for the sole
purpose of issuing the Trust Securities and investing the proceeds thereof in
Floating Rate Junior Subordinated Deferrable Interest Debentures (the "Junior
Subordinated Debentures"), to be issued by the Corporation. The Junior
Subordinated Debentures will mature on January 15, 2027 (such date, the "Stated
Maturity Date"). The Capital Securities will have a preference over the Common
Securities under certain circumstances with respect to cash distributions and
amounts payable on liquidation, redemption or otherwise. See "Description of
Preferred Securities--Subordination of Common Securities" in the accompanying
Prospectus.
(Continued on next page)
---------------------------
See "Risk Factors" beginning on page S-6 hereof for certain information
relevant to an investment in the Capital Securities.
THESE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY. THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===========================================================================================================================
Initial Public Underwriting Proceeds To
Offering Price(1) Commission(2) Trust (3)(4)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Per Capital Security..................................... $988.40 (3) $988.40
- ---------------------------------------------------------------------------------------------------------------------------
Total ................................................... $296,520,000 (3) $296,520,000
===========================================================================================================================
</TABLE>
(1) Plus accrued distributions, if any, from January 31, 1997.
(2) The Trust and the Corporation have each agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Capital
Securities will be invested in the Junior Subordinated Debentures, the
Corporation has agreed to pay to the Underwriters as compensation for
their arranging the investment therein of such proceeds $10.00 per
Capital Security (or $3,000,000 in the aggregate). See "Underwriting."
(4) Expenses of the offering which are payable by the Corporation are
estimated to be $386,909, a portion of which will be reimbursed by the
Underwriters. See "Underwriting."
---------------------------
The Capital Securities are offered, subject to prior sale, when, as and
if accepted by the Underwriters named herein and subject to their right to
reject orders in whole or in part. It is expected that delivery of the Capital
Securities will be made on or about January 31, 1997 through the book entry
facilities of The Depository Trust Company in New York, New York, against
payment therefor in immediately available funds.
---------------------------
Merrill Lynch & Co.
Deutsche Morgan Grenfell
Lehman Brothers
J.P. Morgan & Co.
Morgan Stanley & Co.
Incorporated
UBS Securities
---------------------------
The date of this Prospectus Supplement is January 28, 1997.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CAPITAL
SECURITIES AT A LEVEL ABOVE THAT 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.
---------------------------
(cover page continued)
Holders of the Trust Securities will be entitled to receive cumulative
cash distributions, accumulating from the date of original issuance and payable
quarterly in arrears on the 15th day of January, April, July and October of each
year, commencing April 15, 1997, at a rate per annum reset quarterly equal to
LIBOR (as defined herein) plus .50% (the "Distribution Rate") on the Liquidation
Amount of $1,000 per Trust Security ("Distributions"). So long as no Debenture
Event of Default (as defined herein) has occurred and is continuing, the
Corporation will have the right to defer payments of interest on the Junior
Subordinated Debentures at any time or from time to time for a period not
exceeding 20 consecutive quarterly periods with respect to each deferral period
(each, an "Extension Period"), provided that no Extension Period may extend
beyond the Stated Maturity Date of the Junior Subordinated Debentures. Upon the
termination of any such Extension Period and the payment of all amounts then
due, the Corporation may elect to begin a new Extension Period subject to the
requirements set forth herein. If and for so long as interest payments on the
Junior Subordinated Debentures are so deferred, Distributions on the Trust
Securities will also be deferred and the Corporation will not be permitted,
subject to certain exceptions described herein, to declare or pay any cash
distributions with respect to the Corporation's capital stock or to make any
payment with respect to debt securities of the Corporation that rank pari passu
with or junior to the Junior Subordinated Debentures. During an Extension
Period, interest on the Junior Subordinated Debentures will continue to accrue
(and the amount of Distributions to which holders of the Trust Securities are
entitled will continue to accumulate) at the applicable periodic Distribution
Rate, compounded quarterly from the relevant payment date for such interest, and
holders of Trust Securities will be required to accrue interest income for
United States federal income tax purposes. See "Description of Junior
Subordinated Debentures--Option to Extend Interest Payment Date" and "Certain
Federal Income Tax Considerations--Interest Income and Original Issue Discount."
S-2
<PAGE>
The Corporation will, through the Guarantee, the Common Guarantee, the
Declaration, the Junior Subordinated Debentures and the Indenture (each as
defined herein), taken together, fully, irrevocably and unconditionally
guarantee all of the Trust's obligations under the Trust Securities. See
"Relationship Among the Preferred Securities, the Corresponding Junior
Subordinated Debentures and the Guarantees--Full and Unconditional Guarantee" in
the accompanying Prospectus. The Guarantee and the Common Guarantee will
guarantee the payments of Distributions and payments on liquidation or
redemption of the Trust Securities, but in each case only to the extent that the
Trust holds funds on hand legally available therefor and has failed to make such
payments, as described herein. See "Description of Guarantees" in the
accompanying Prospectus. If the Corporation fails to make a required payment on
the Junior Subordinated Debentures, the Trust will not have sufficient funds to
make the related payments, including Distributions on the Trust Securities. The
Guarantee and the Common Guarantee will not cover any such payment when the
Trust does not have sufficient funds legally available therefor. In such event,
a holder of Capital Securities may institute a legal proceeding directly against
the Corporation to enforce payment to such holder of accrued but unpaid interest
on Junior Subordinated Debentures with a principal amount equal to the
Liquidation Amount of the Capital Securities held by such holder. See
"Description of Junior Subordinated Debentures--Enforcement of Certain Rights By
Holders of Preferred Securities" in the accompanying Prospectus. The obligations
of the Corporation under the Guarantee and the Junior Subordinated Debentures
will be unsecured and subordinate and rank junior in right of payment to the
extent and in the manner set forth in the Indenture to all Senior Indebtedness
of the Corporation (as defined in "Description of Junior Subordinated
Debentures--Subordination" in the accompanying Prospectus), which totalled
approximately $1.635 billion at September 30, 1996 (exclusive of $200,000,000 of
6.625% Senior Notes due November 15, 2006 which were issued by the Corporation
on November 12, 1996).
The Trust Securities will be subject to mandatory redemption in a Like
Amount (as defined herein), in whole but not in part, on the Stated Maturity
Date upon repayment of the Junior Subordinated Debentures at a redemption price
equal to the principal amount of, plus accrued interest on, the Junior
Subordinated Debentures (the "Maturity Redemption Price"). In addition, the
Trust Securities will be subject to mandatory redemption in a Like Amount (i) in
whole but not in part, at any time before January 15, 2007, contemporaneously
with the optional prepayment of the Junior Subordinated Debentures, upon the
occurrence and continuation of a Special Event (as defined herein), and (ii) in
whole or in part, on or after January 15, 2007, contemporaneously with the
optional prepayment by the Corporation of the Junior Subordinated Debentures, in
each case at a redemption price equal to the Prepayment Price (as defined
herein) (the "Early Redemption Price"). Any of the Maturity Redemption Price and
the Early Redemption Price may be referred to herein as the "Redemption Price."
See "Description of Capital Securities--Redemption" and "Description of the
Junior Subordinated Debentures--Optional Prepayment" and "--Special Event
Prepayment."
S-3
<PAGE>
Subject to the Corporation having received prior approval of the Board
of Governors of the Federal Reserve System (the "Federal Reserve"), if then
required under applicable capital guidelines or policies of the Federal Reserve,
the Junior Subordinated Debentures will be prepayable prior to the Stated
Maturity Date at the option of the Corporation (i) on or after January 15, 2007,
in whole or in part, or (ii) at any time before January 15, 2007, in whole but
not in part, upon the occurrence and continuation of a Special Event, in each
case at a prepayment price (the "Prepayment Price") equal to 100% of the
principal amount of the Junior Subordinated Debentures so redeemed plus accrued
and unpaid interest thereon to the date of prepayment. See "Description of
Junior Subordinated Debentures--Optional Prepayment" and "--Special Event
Prepayment."
The Corporation, as the direct or indirect holder of the outstanding
Common Securities, will have the right at any time to terminate the Trust and
cause a Like Amount of the Junior Subordinated Debentures to be distributed to
the holders of the Trust Securities in liquidation of the Trust, subject to (i)
the Corporation having received an opinion of counsel to the effect that such
distribution will not be a taxable event to holders of the Capital Securities
and (ii) the prior approval of the Federal Reserve, if then required under
applicable capital guidelines or policies of the Federal Reserve. Unless the
Junior Subordinated Debentures are distributed to the holders of the Trust
Securities, in the event of a liquidation of the Trust as described herein,
after satisfaction of liabilities to creditors of the Trust as required by
applicable law, the holders of the Capital Securities generally will be entitled
to receive a Liquidation Amount of $1,000 per Capital Security plus accumulated
and unpaid Distributions thereon to the date of payment. See "Description of
Preferred Securities--Liquidation Distribution upon Termination" in the
accompanying Prospectus and "Certain Federal Income Tax Considerations--Receipt
of Junior Subordinated Debentures or Cash Upon Liquidation of the Trust."
S-4
<PAGE>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE 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 THE CORPORATION, THE TRUST OR THE
UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE CORPORATION OR THE TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
---------------------------
The information in this Prospectus Supplement supplements, and should
be read in conjunction with, the information contained in the accompanying
Prospectus. As used herein, (i) the "Indenture" means the Indenture, to be dated
as of January 31, 1997 (the "Original Indenture"), as amended and supplemented
from time to time, between the Corporation and The First National Bank of
Chicago, as trustee (the "Debenture Trustee"), as supplemented by the
supplemental indenture, to be dated January 31, 1997 (the "First Supplemental
Indenture" and together with the Original Indenture, the "Indenture") relating
to the Junior Subordinated Debentures, (ii) the "Declaration" means the Amended
and Restated Declaration of Trust relating to the Trust among the Corporation,
as Sponsor, The First National Bank of Chicago, as Property Trustee (the
"Property Trustee"), First Chicago Delaware Inc., as Delaware Trustee (the
"Delaware Trustee"), and the Administrative Trustees named therein
(collectively, with the Property Trustee and Delaware Trustee, the "Issuer
Trustees"), (iii) the "Guarantee" means the Guarantee Agreement relating to the
Capital Securities between the Corporation and The First National Bank of
Chicago, as trustee (the "Guarantee Trustee") and (iv) the "Common Guarantee"
means the Guarantee Agreement relating to the Common Securities between the
Corporation and The First National Bank of Chicago, as trustee. Each of the
other capitalized terms used in this Prospectus Supplement and not otherwise
defined in this Prospectus Supplement has the meaning set forth in the
accompanying Prospectus.
---------------------------
S-5
<PAGE>
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.
In addition, because holders of Capital Securities may receive Junior
Subordinated Debentures in exchange therefor upon liquidation of the Trust,
prospective purchasers of Capital Securities are also making an investment
decision with regard to the Junior Subordinated Debentures and should carefully
review all the information regarding the Junior Subordinated Debentures
contained herein.
Ranking of Subordinate Obligations Under the Guarantee and Junior Subordinated
Debentures
The obligations of the Corporation under the Guarantee and under the
Junior Subordinated Debentures will be unsecured and subordinate and rank junior
in right of payment to the extent and in the manner set forth in the Indenture
to all present and future Senior Indebtedness of the Corporation. No payment may
be made of the principal of, or premium, if any, or interest on the Junior
Subordinated Debentures, or in respect of any redemption, retirement, purchase
or other acquisition of any of the Junior Subordinated Debentures, at any time
when (i) there is a default in the payment of the principal of, or premium, if
any, or interest on or otherwise in respect of any Senior Indebtedness, whether
at maturity or at a date fixed for prepayment or by declaration or otherwise, or
(ii) any event of default with respect to any Senior Indebtedness has occurred
and is continuing, or would occur as a result of such payment on the Junior
Subordinated Debentures or any redemption, retirement, purchase or other
acquisition of any of the Junior Subordinated Debentures, permitting the holders
of such Senior Indebtedness (or a trustee on behalf of the holders thereof) to
accelerate the maturity thereof. At September 30, 1996, the aggregate principal
amount of outstanding Senior Indebtedness of the Corporation was approximately
$1.635 billion (exclusive of $200,000,000 of 6.625% Senior Notes due November
15, 2006 which were issued by the Corporation on November 12, 1996). Because the
Corporation is a bank holding company, the right of the Corporation to
participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise (and thus the ability of
holders of the Capital Securities to benefit indirectly from such distribution)
is subject to the prior claims of creditors of that subsidiary, except to the
extent that the Corporation may itself be recognized as a creditor of that
subsidiary. At September 30, 1996, the subsidiaries of the Corporation had total
liabilities (excluding liabilities owed to the Corporation) of approximately
$41.786 billion. Accordingly, the Junior Subordinated Debentures will be
effectively subordinated to all existing and future liabilities of the
Corporation's subsidiaries, and holders of Junior Subordinated Debentures should
look only to the assets of the Corporation for payments on the Junior
Subordinated Debentures. None of the Indenture, the Guarantee, the Common
Guarantee or the Declaration places any limitation on the amount of secured or
unsecured debt, including Senior Indebtedness, that may be incurred by the
Corporation or any of its subsidiaries. See "Description of the
S-6
<PAGE>
Guarantees--Status of the Guarantees" and "Description of the Junior
Subordinated Debentures--Subordination" in the accompanying Prospectus.
The ability of the Trust to pay amounts due on the Capital Securities
is dependent upon the Corporation making payments on the Junior Subordinated
Debentures as and when required.
Option to Extend Interest Payment Period; Tax Considerations
So long as no Debenture Event of Default shall have occurred and be
continuing, the Corporation will have the right under the Indenture to defer
payments of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 20 consecutive quarterly periods with
respect to each Extension Period, provided that no Extension Period may extend
beyond the Stated Maturity Date. Upon any such deferral, quarterly Distributions
on the Capital Securities by the Trust will be deferred (and the amount of
Distributions to which holders of the Capital Securities are entitled will
accumulate additional Distributions thereon at the applicable periodic
Distribution Rate, compounded quarterly from the relevant payment date for such
Distributions) during any such Extension Period.
The Corporation may extend any existing Extension Period, provided that
such extension does not cause such Extension Period to exceed 20 consecutive
quarterly periods or to extend beyond the Stated Maturity Date. Upon the
expiration of any Extension Period and the payment of all interest then accrued
and unpaid on the Junior Subordinated Debentures (together with interest thereon
at the applicable Interest Rate (as defined herein), compounded quarterly from
the interest payment date for such interest, to the extent permitted by
applicable law), the Corporation may elect to begin a new Extension Period,
subject to the above requirements. There is no limitation on the number of times
that the Corporation may elect to begin an Extension Period. See "Description of
Capital Securities--Distributions" and "Description of Junior Subordinated
Debentures--Option to Extend Interest Payment Date."
The Corporation has no current plan to exercise its right to defer
payments of interest on the Junior Subordinated Debentures. However, should the
Corporation exercise its right to defer payments of interest on the Junior
Subordinated Debentures, 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
Capital Securities. As a result, during an Extension Period, each holder of
Capital Securities will recognize income for United States federal income tax
purposes in advance of the receipt of cash and will not receive the cash related
to such income from the Trust if the holder disposes of the Capital Securities
prior to the record date for the payment of Distributions. See "Certain Federal
Income Tax Considerations--Interest Income and Original Issue Discount" and
"--Sales of Capital Securities."
S-7
<PAGE>
Should the Corporation elect to exercise its right to defer payments of
interest on the Junior Subordinated Debentures, 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, the mere existence of the Corporation's right to defer
payments of interest on the Junior Subordinated Debentures may cause the market
price of the Capital Securities to be more volatile than the market prices of
other securities on which OID accrues that are not subject to such deferrals.
Redemption or Distribution
Upon the occurrence and continuation of a Special Event (including a
Tax Event or a Regulatory Capital Event, in each case, as defined under
"Description of Junior Subordinated Debentures--Special Event Prepayment"),
prior to January 15, 2007 the Corporation will have the right to prepay the
Junior Subordinated Debentures in whole (but not in part) at the Prepayment
Price within 90 days following the occurrence of such Special Event and
therefore cause a mandatory redemption of the Capital Securities at the Early
Redemption Price. On or after January 15, 2007, the Corporation may redeem the
Junior Subordinated Debentures in whole or in part for any reason and thereby
cause an optional redemption of the Capital Securities, in whole or in part, at
the Early Redemption Price. The Corporation also will have the right at any time
to terminate the Trust and, after satisfaction of claims of creditors as
provided by applicable law, to cause the Junior Subordinated Debentures to be
distributed to the holders of the Trust Securities. Any such distribution or
redemption is subject to the Corporation having received prior approval of the
Federal Reserve to do so if then required under applicable guidelines or
policies of the Federal Reserve. See "Description of Capital
Securities--Redemption" and "--Liquidation of the Trust and Distribution of the
Junior Subordinated Debentures."
Under current United States federal income tax law, a distribution of
Junior Subordinated Debentures upon the dissolution of the Trust would not be a
taxable event to holders of the Capital Securities. If, however, the Trust is
characterized for United States federal income tax purposes as an association
taxable as a corporation at the time of dissolution of the Trust, the
distribution of the Junior Subordinated Debentures may constitute a taxable
event to holders of Capital Securities. Moreover, upon the occurrence of a
Special Event, a dissolution of the Trust in which holders of the Capital
Securities receive cash would be a taxable event to such holders. See "Certain
Federal Income Tax Considerations--Receipt of Junior Subordinated Debentures or
Cash Upon Liquidation of the Trust."
There can be no assurance as to the market prices for the Capital
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for Capital Securities if a dissolution or liquidation of the Trust
were to occur. Accordingly, the Capital Securities or the Junior Subordinated
Debentures may trade at a discount to the price that an investor pays to
purchase the Capital Securities offered hereby. Because holders of Capital
Securities
S-8
<PAGE>
may receive Junior Subordinated Debentures, prospective purchasers of Capital
Securities are also making an investment decision with regard to the Junior
Subordinated Debentures and should carefully review all the information
regarding the Junior Subordinated Debentures contained herein. See "Description
of Capital Securities--Redemption" and "--Liquidation of the Trust and
Distribution of the Junior Subordinated Debentures" and "Description of Junior
Subordinated Debentures."
On March 19, 1996, as part of President Clinton's Fiscal 1997 Budget
Proposal, the Treasury Department proposed legislation (the "Proposed
Legislation") which would, among other things, generally deny corporate issuers
a deduction for interest in respect of certain debt obligations, such as the
Junior Subordinated Debentures, 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. In addition,
the Proposed Legislation would generally deny corporate issuers a deduction for
interest in respect of certain debt obligations, such as the Junior Subordinated
Debentures, issued on or after December 7, 1995 if such debt obligations have a
weighted average maturity of more than 40 years. 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 the Proposed Legislation, if 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 the Treasury Department (the "Democrat Letters"), which concurred with the
view expressed in the Joint Statement. If the principles contained in the Joint
Statement and the Democrat Letters were followed and if the Proposed Legislation
were enacted, such legislation would not apply to the Junior Subordinated
Debentures. There can be no assurance, 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
Debentures. Such a change could give rise to a Tax Event, which may permit the
Corporation, upon approval of the Federal Reserve if then required under
applicable capital guidelines or policies of the Federal Reserve, to cause a
redemption of the Trust Securities at the Early Redemption Price by electing to
prepay the Junior Subordinated Debentures at the Prepayment Price. See
"Description of Capital Securities--Redemption," "--Description of Junior
Subordinated Debentures--Special Event Prepayment" and "Certain Federal Income
Tax Considerations--Proposed Tax Legislation."
Possible Adverse Effect on Market Prices
There can be no assurance as to the market prices for Capital
Securities or Junior Subordinated Debentures distributed to the holders of
Capital Securities if a termination of the Trust were to occur. Accordingly, the
Capital Securities or the Junior Subordinated Debentures may trade at a discount
from the price that the investor paid to purchase the
S-9
<PAGE>
Capital Securities offered hereby. Because holders of Capital Securities may
receive Junior Subordinated Debentures in liquidation of the Trust and because
Distributions are otherwise limited to payments on the Junior Subordinated
Debentures, prospective purchasers of Capital Securities are also making an
investment decision with regard to the Junior Subordinated Debentures and should
carefully review all the information regarding the Junior Subordinated
Debentures contained herein. See "Description of Junior Subordinated
Debentures."
Rights Under the Guarantee
The Guarantee will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The First
National Bank of Chicago will act as indenture trustee under the Guarantee (the
"Guarantee Trustee") for the purpose of compliance with the Trust Indenture Act
and will hold the Guarantee for the benefit of the holders of the Capital
Securities. The First National Bank of Chicago will also act as Property Trustee
under the Declaration and as Debenture Trustee under the Indenture. First
Chicago Delaware Inc. will act as Delaware Trustee under the Declaration. The
Guarantee will guarantee to the holders of the Capital Securities the following
payments, to the extent not paid by the Trust: (i) any accumulated and unpaid
Distributions required to be paid on the Capital Securities, to the extent that
the Trust has funds on hand legally available therefor; (ii) the applicable
Redemption Price with respect to any Capital Securities called for redemption,
to the extent that the Trust has funds on hand legally available therefor; and
(iii) upon a voluntary or involuntary termination, winding up or liquidation of
the Trust (unless the Junior Subordinated Debentures are distributed to holders
of the Capital Securities), the lesser of (a) the aggregate of the Liquidation
Amount and all accumulated and unpaid Distributions to the date of payment, to
the extent that the Trust has funds on hand legally available therefor on such
date and (b) the amount of assets of the Trust remaining available for
distribution to holders of the Capital Securities on such date. 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 Guarantee Trustee in respect of the Guarantee or to direct the
exercise of any trust power conferred upon the Guarantee Trustee. Any holder of
the Capital Securities may institute a legal proceeding directly against the
Corporation to enforce its rights under the Guarantee without first instituting
a legal proceeding against the Trust, the Guarantee Trustee or any other person
or entity. If the Corporation defaults on its obligation to pay amounts payable
under the Junior Subordinated Debentures, the Trust will not have sufficient
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 will not be able to rely upon the Guarantee for payment of such
amounts. Instead, in the event a Debenture Event of Default shall have occurred
and be continuing and such event is attributable to the failure of the
Corporation to pay principal of or premium, if any, or interest on the Junior
Subordinated Debentures on the payment date on which such payment is due and
payable, then a holder of Capital Securities may institute a legal proceeding
directly against the Corporation for enforcement of payment to such holder of
the principal of or premium, if any, or interest on such Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Capital
S-10
<PAGE>
Securities of such holder (a "Direct Action"). Notwithstanding any payments made
to a holder of Capital Securities by the Corporation in connection with a Direct
Action, the Corporation shall remain obligated to pay the principal of and
premium, if any, and interest on the Junior Subordinated Debentures, and the
Corporation 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 the Corporation to such holder in any Direct Action. Except
as described herein, holders of Capital Securities will not be able to exercise
directly any other remedy available to the holders of the Junior Subordinated
Debentures or to assert directly any other rights in respect of the Junior
Subordinated Debentures. See "Description of Junior Subordinated
Debentures--Enforcement of Certain Rights by Holders of Preferred Securities"
and "--Debenture Events of Default" and "Description of Guarantees" in the
accompanying Prospectus. The Declaration will provide that each holder of
Capital Securities by acceptance thereof agrees to the provisions of the
Indenture.
Limited Voting Rights
Holders of Capital Securities generally will have voting rights
relating only to the modification of the terms of the Capital Securities, the
termination or liquidation of the Trust, and the exercise of the Trust's rights
as holder of the Junior Subordinated Debentures. Holders of Capital Securities
will not be entitled to vote to appoint, remove or replace, or to increase or
decrease the number of, the Issuer Trustees, which voting rights are vested
exclusively in the holder of the Common Securities, except as described under
"Description of Preferred Securities--Removal of Issuer Trustees" in the
accompanying Prospectus. The Property Trustee, the Administrative Trustees and
the Corporation may amend the Declaration without the consent of holders of
Capital Securities to ensure that the Trust will be classified for United States
federal income tax purposes as a grantor trust even if such action adversely
affects the interests of such holders. See "Description of Preferred
Securities--Voting Rights; Amendment of each Declaration" in the accompanying
Prospectus.
Trading Price
The Corporation does not intend to have the Capital Securities listed
on the New York Stock Exchange or any other securities exchange. There is no
existing market for the Capital Securities and there can be no assurance as to
the liquidity of any markets that may develop for the Capital Securities, the
ability of the holders to sell their Capital Securities or at what price holders
of the Capital Securities will be able to sell their Capital Securities as the
case may be. Future trading prices of the Capital Securities will depend on many
factors including, among other things, prevailing interest rates, the
Corporation's operating results, and the market for similar securities. The
Underwriters have informed the Trust and the Corporation that they intend to
make a market in the Capital Securities as permitted by applicable laws and
regulations. However, the Underwriters are not obligated to do so and any such
market making activity may be terminated at any time without notice to the
holders of the Capital Securities.
S-11
<PAGE>
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 Debentures. A holder who uses the accrual method of accounting for
tax purposes (and a cash method holder, if the Junior Subordinated Debentures
are deemed to have been issued with OID) and who disposes of its Capital
Securities between record dates for payments of distributions thereon will be
required to include accrued but unpaid interest on the Junior Subordinated
Debentures through the date of disposition in income as ordinary income (i.e.,
interest or, possibly, OID), and to add such amount to its adjusted tax basis in
its share of the underlying Junior Subordinated Debentures 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 "Certain Federal Income Tax Considerations--Interest Income and Original
Issue Discount" and "--Sales of Capital Securities."
S-12
<PAGE>
WACHOVIA CAPITAL TRUST II
The Trust is a statutory business trust formed under Delaware law
pursuant to (i) a declaration of trust, dated as of January 6, 1997, executed by
the Corporation, as Sponsor, the Delaware Trustee and the Administrative
Trustees named therein (the "Initial Declaration"), and (ii) the filing of a
certificate of trust with the Secretary of State of the State of Delaware on
January 6, 1997. The Initial Declaration will be replaced by an amended and
restated declaration of trust executed on or prior to January 31, 1997 (the
"Issue Date") by the Corporation, as Sponsor, and the Issuer Trustees (the
"Declaration"). The Trust exists for the exclusive purposes of (i) issuing and
selling the Trust Securities, which represent undivided beneficial interests in
the assets of the Trust, (ii) investing the gross proceeds from the sale of the
Trust Securities in the Junior Subordinated Debentures and (iii) engaging in
only those other activities necessary, advisable or incidental thereto.
Accordingly, the Junior Subordinated Debentures will be the sole assets of the
Trust and payments under the Junior Subordinated Debentures will be the sole
revenues of the Trust. All of the Common Securities will be owned directly or
indirectly by the Corporation. The Common Securities will rank pari passu, and
payments will be made thereon pro rata, with the Capital Securities, except that
upon the occurrence and during the continuance of an Event of Default under the
Declaration resulting from a Debenture Event of Default, the rights of the
Corporation as holder of the Common Securities to payments in respect of
Distributions and payments upon liquidation, redemption or otherwise will be
subordinated and rank junior to the rights of the holders of the Capital
Securities. See "Description of Preferred Securities--Subordination of Common
Securities" in the accompanying Prospectus. The Corporation will acquire,
directly or indirectly, Common Securities in a Liquidation Amount equal to at
least 3% of the total capital of the Trust. The Trust has a term of 55 years,
but may terminate earlier as provided in the Declaration. The Trust's business
and affairs will be conducted by the Issuer Trustees appointed by the
Corporation as the direct or indirect holder of the Common Securities. The
Issuer Trustees will be The First National Bank of Chicago as the Property
Trustee (the "Property Trustee"), First Chicago Delaware Inc. as the Delaware
Trustee (the "Delaware Trustee"), and three individual trustees (the
"Administrative Trustees"). The First National Bank of Chicago, as Property
Trustee, will act as sole indenture trustee under the Declaration. The First
National Bank of Chicago will also act as indenture trustee under the Guarantee
and the Indenture. See "Description of the Guarantee" and "Description of Junior
Subordinated Debentures." The holder of the Common Securities of the Trust or,
if an Event of Default under the Declaration has occurred and is continuing, the
holders of a majority in Liquidation Amount of the Capital Securities, will be
entitled to appoint, remove or replace the Property Trustee and/or the Delaware
Trustee. In no event will the holders of the Capital Securities have the right
to vote to appoint, remove or replace the Administrative Trustees; such voting
rights will be vested exclusively in the holder of the Common Securities. The
duties and obligations of each Issuer Trustee are governed by the Declaration.
The Corporation will pay, directly or indirectly, all fees, expenses, debts and
obligations (other than the Trust Securities) related to the Trust and the
offering of the Capital Securities, including all ongoing costs, expenses and
S-13
<PAGE>
liabilities of the Trust. The principal executive office of the Trust is
Wachovia Capital Trust II, c/o Wachovia Corporation, 100 North Main Street,
Winston-Salem, North Carolina 27150, Attention: Chief Financial Officer. See
"The Trusts" in the accompanying Prospectus.
It is anticipated that the Trust will not be subject to the reporting
requirements under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
S-14
<PAGE>
WACHOVIA CORPORATION
Wachovia Corporation ("Wachovia" or the "Corporation"), a North
Carolina corporation, is an interstate bank holding company with dual
headquarters in Atlanta, Georgia and Winston-Salem, North Carolina, serving
regional, national and international markets. The Corporation has three
principal banking subsidiaries, Wachovia Bank of Georgia, N.A. ("Wachovia Bank
of Georgia"), Wachovia Bank of North Carolina, N.A. ("Wachovia Bank of North
Carolina") and Wachovia Bank of South Carolina, N.A. ("Wachovia Bank of South
Carolina" and together with Wachovia Bank of Georgia and Wachovia Bank of North
Carolina, the "Banks"), the assets of which together, as of September 30, 1996,
constituted substantially all of the assets of the Corporation. Wachovia's
common stock is traded on the New York Stock Exchange under the symbol WB.
Wachovia is a registered bank holding company under the Bank Holding Company Act
of 1956, as amended, and is a savings and loan holding company within the
meaning of the Home Owners' Loan Act of 1933, as amended.
The Banks had a total of 486 offices as of September 30, 1996. As of
September 30, 1996, Wachovia Bank of Georgia had 125 offices in 49 Georgia
cities and communities, Wachovia Bank of North Carolina had 219 offices in 95
North Carolina cities and communities, and Wachovia Bank of South Carolina had
142 offices in 64 South Carolina cities and communities. Subsidiaries of the
Corporation have domestic representative offices in Chicago and New York City;
international representative offices in New York City, London and Tokyo; foreign
branch offices in Grand Cayman; residential mortgage loan offices in Florida,
Georgia, North Carolina and South Carolina; operations centers in Atlanta,
Georgia, Charlotte, Greenville, Raleigh and Winston-Salem, North Carolina, and
Columbia, South Carolina; a major credit card operation in Delaware; and a
credit life and accident insurance company in Georgia.
At September 30, 1996, on a consolidated basis, Wachovia had total
assets of $47.5 billion, deposits of $27.4 billion, and a market capitalization
of $8.2 billion. Based on its consolidated asset size and market capitalization
at September 30, 1996, Wachovia was ranked 20th and 21st, respectively, among
domestic U.S. bank holding companies.
The Banks serve domestic U.S. retail and mid-market corporate customers
in their home markets. Also, at September 30, 1996, the Banks administered trust
assets totaling over $93.3 billion, including more than $23.0 billion in assets
under discretionary management, and provided a comprehensive array of trust
related services and products to institutional and retail clients. Other major
subsidiaries of the Corporation include Wachovia Corporate Services, Inc. which
directs large corporate and institutional relationship management and business
development in national and international markets; Wachovia Leasing Corporation
which provides corporate leasing services; Wachovia Operational Services
Corporation which provides remittance processing services for customers through
three operations centers; and Wachovia Investments, Inc. which offers brokerage
services to institutional and retail clients.
S-15
<PAGE>
During January 1997, the Board of Directors of the Corporation and the
Board of Directors of each of the Banks approved a plan of merger whereby
Wachovia Bank of Georgia and Wachovia Bank of South Carolina would be merged
with and into Wachovia Bank of North Carolina, which, as the survivor, would
change its name to Wachovia Bank, National Association. The resulting bank will
continue to operate in the states in which the Banks currently operate. The
proposed merger will build on the many efficiencies the Banks have already
achieved through standardization of operations and delivery systems and will
result in additional cost savings from consolidated financial reporting and
reduced regulatory fees. The proposed merger, which is subject to regulatory
approvals, is currently expected to take place on or after June 1, 1997 pursuant
to the authority of the Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 and applicable state interstate banking legislation.
USE OF PROCEEDS
The proceeds to the Trust (without giving effect to expenses of the
offering payable by the Corporation) from the offering of the Capital Securities
will be $296,520,000. All of the proceeds from the sale of Capital Securities
(together with the proceeds of the Common Securities) will be invested by the
Trust in the Junior Subordinated Debentures. The Corporation intends that the
net proceeds from the sale of the Junior Subordinated Debentures will be used
for general corporate purposes, which may include, but not be limited to,
investments in and advances to the Corporation's subsidiaries and the redemption
of certain of the Corporation's outstanding debt securities. The precise amount
and timing of the application of such net proceeds used for such corporate
purposes will depend on the funding requirements and the availability of other
funds to the Corporation and its subsidiaries. Pending such application by the
Corporation, such net proceeds may be temporarily invested in short-term
interest bearing securities. The Capital Securities will be eligible to qualify
as Tier I Capital under the capital guidelines of the Federal Reserve, provided
that under current Federal Reserve guidelines no more than 25% of the
Corporation's Tier I Capital may comprise Capital Securities and other capital
securities and cumulative preferred stock of the Corporation.
S-16
<PAGE>
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the Corporation's consolidated ratios of
earnings to fixed charges for the respective periods indicated.
Nine Months
Ended
September 30, Years Ended December 31,
1996 1995 1994 1993 1992 1991
------------- ---- ---- ---- ---- ----
Ratio of Earnings to Fixed
Charges:
Excluding interest on deposits 2.14x 2.13 2.48 3.32 3.57 1.71
Including interest on deposits 1.55x 1.54 1.72 1.81 1.61 1.19
For purposes of computing the ratios of earnings to fixed charges,
earnings represent net income (loss) before extraordinary items and cumulative
effect of changes in accounting principles plus applicable income taxes and
fixed charges. Fixed charges, excluding interest on deposits, include gross
interest expense (other than on deposits) and the proportion deemed
representative of the interest factor of rent expense, net of income from
subleases. Fixed charges, including gross interest on deposits, include all
interest expense and the proportion deemed representative of the interest factor
of rent expense, net of income from subleases.
S-17
<PAGE>
CAPITALIZATION
The following table sets forth the actual unaudited consolidated
capitalization of the Corporation at September 30, 1996, as adjusted to give
effect to (i) the consummation of the offering of Capital Securities and the
application of the estimated net proceeds from the sale of the Capital
Securities and (ii) the offering of $300 million of 7.64% Capital Securities of
Wachovia Capital Trust I on December 16, 1996 and the application of the net
proceeds from the sale of such Capital Securities. The table should be read in
conjunction with the Corporation's consolidated financial statements and notes
thereto included in the documents incorporated by reference herein. See
"Incorporation of Certain Documents by Reference."
At September 30, 1996
Actual As Adjusted
------ -----------
(in thousands)
Long-Term Debt(1)................................ $6,171,070 $ 6,171,070
Redeemable Capital
Securities of Subsidiaries(2)................ __ 600,000
------------ --------------
Total Long-Term Debt............................. 6,171,070 6,771,070
STOCKHOLDERS' EQUITY
Preferred Stock.................................. __ __
Common Stock at $5 par value..................... 826,067 826,067
Capital surplus.................................. 500,613 500,613
Retained earnings................................ 2,369,590 2,369,590
Net unrealized gain (loss) on securities......... 32,924 32,924
Total stockholders' equity....................... 3,729,194 3,729,194
------------ --------------
Total................................... $9,900,264 $10,500,264
============ ==============
- -----------------------
(1) Not reflected in this table are $200 million Wachovia Corporation
6.625% Senior Notes due November 15, 2006, issued November 12, 1996.
(2) The Capital Securities will be issued by Wachovia Capital Trust II.
Wachovia Capital Trust II will invest the proceeds of the offering of
the Capital Securities, together with the amounts to be paid by the
Corporation for Wachovia Capital Trust II's Common Securities, in
$309.28 million of Floating Rate Junior Subordinated Deferrable
Interest Debentures Due January 15, 2027 of the Corporation. The
Floating Rate Junior Subordinated Deferrable Interest Debentures Due
January 15, 2027 will bear interest at a floating rate and will mature
on January 15, 2027. Wachovia Capital Trust II will be a subsidiary of
the Corporation and will
S-18
<PAGE>
hold the Floating Rate Junior Subordinated Deferrable Interest
Debentures Due January 15, 2027 as its sole asset.
On December 16, 1996, Wachovia Capital Trust I issued $300 million of
7.64% Capital Securities. Wachovia Capital Trust I invested the
proceeds of the offering of such Capital Securities, together with
$9.28 million paid by the Corporation for Wachovia Capital Trust I's
Common Securities, in $309.28 million of 7.64% Junior Subordinated
Deferrable Interest Debentures Due January 15, 2027 of the Corporation.
The 7.64% Junior Subordinated Deferrable Interest Debentures Due
January 15, 2027 will bear interest at a rate of 7.64% per annum and
will mature on January 15, 2027. Wachovia Capital Trust I is a
subsidiary of the Corporation and holds the 7.64% Junior Subordinated
Deferrable Interest Debentures Due January 15, 2027 as its sole asset.
SUMMARY FINANCIAL DATA
The summary below should be read in connection with the financial
information included in the Corporation's 1995 Annual Report on Form 10-K. The
summary below should also be read in conjunction with the financial information
contained in the Corporation's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996. Interim unaudited data for the nine months ended
September 30, 1996 and 1995 reflect, in the opinion of management of the
Corporation, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of such data. Results for the nine months
ended September 30, 1996 are not necessarily indicative of results which may be
expected for any other interim period or for the year as a whole.
S-19
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
--------------------- ------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
(unaudited)
(dollars in millions, except per share data)
<S> <C>
Income Statement Data:
Net interest revenue $1,150 $1,074 $1,441 $1,324 $1,284 $1,255 $1,169
Provision for credit losses 103 74 104 72 93 119 293
-------- --------- -------- -------- -------- -------- ---------
Net interest revenue after provision for credit losses 1,047 1,000 1,337 1,252 1,191 1,136 876
Noninterest income 582 547 736 607 628 556 501
Noninterest expense 935 889 1,204 1,098 1,131 1,096 1,096
-------- --------- -------- -------- -------- -------- ---------
Income (Loss) before income taxes, extraordinary items &
cumulative effect of changes in accounting principles 694 658 869 761 688 596 281
Provision for (Benefit from) income taxes 220 202 266 222 196 163 51
-------- --------- -------- -------- -------- -------- ---------
Income (Loss) before extraordinary items & cumulative effect
of changes in accounting principles 474 456 603 539 492 433 230
Extraordinary items, net of tax
Cumulative effect of changes in accounting principles, net
-------- --------- -------- -------- -------- -------- ---------
Net income (Loss) $474 $456 $603 $539 $492 $433 $230
======== ========= ======== ======== ======== ======== =========
Per common share:
Income (Loss) before extraordinary items & cumulative
effect of changes in accounting principles:
Primary $2.79 $2.65 $3.50 $3.13 $2.83 $2.51 $1.34
Fully diluted 2.78 2.64 3.49 3.12 2.81 2.48 1.32
Net Income (Loss):
Primary 2.79 2.65 3.50 3.13 2.83 2.51 1.34
Fully diluted 2.78 2.64 3.49 3.12 2.81 2.48 1.32
Book value 22.57 21.24 22.15 19.23 17.61 16.18 14.56
Cash dividends declared 1.12 1.02 1.38 1.23 1.11 1.00 .92
Average number of common shares (in thousands):
Primary 169,758 171,993 172,089 172,339 173,941 172,641 171,481
Fully diluted 170,251 172,882 172,957 172,951 175,198 175,512 175,218
Average Balance Sheet Data:
Loans and lease financing $29,963 $27,180 $27,505 $24,213 $21,546 $20,032 $20,589
Total earning assets 40,270 36,420 36,997 32,794 29,780 28,097 28,360
Total assets 45,059 40,797 41,473 37,029 33,629 31,832 32,045
Deposits 26,028 23,654 24,262 22,315 22,373 22,831 22,519
Long-term debt 6,025 4,797 4,902 4,350 2,073 449 178
Stockholders' equity 3,654 3,354 3,410 3,096 2,872 2,596 2,462
</TABLE>
S-20
<PAGE>
ACCOUNTING TREATMENT
For financial reporting purposes the Trust will be treated as a
subsidiary of the Corporation and, accordingly, the accounts of the Trust will
be included in the consolidated financial statements of the Corporation. The
Capital Securities will be included as a component of long-term debt in a
separate line item in the consolidated balance sheets of the Corporation, and
appropriate disclosures about the Capital Securities, the Guarantee and the
Junior Subordinated Debentures will be included in the notes to the consolidated
financial statements. For financial reporting purposes, the Corporation will
record Distributions payable on the Capital Securities as an expense in the
consolidated statements of income.
The Corporation has agreed that future financial reports of the
Corporation will: (i) present the preferred securities issued by other trusts
created by the Corporation on the Corporation's balance sheet as a component of
long-term debt in a separate line item; (ii) include in a footnote to the
financial statements disclosure that the sole assets of the trusts are the
junior subordinated debentures and the related expense agreement (specifying as
to each trust the principal amount, interest rate and maturity date of junior
subordinated debentures held); and (iii) if Staff Accounting Bulletin 53
treatment is sought, include, in an audited footnote to the financial
statements, disclosure that (a) the trusts are wholly owned, (b) the sole assets
of the trusts are the junior subordinated debentures (specifying as to each
trust the principal amount, interest rate and maturity date of the junior
subordinated debentures held) and the related expense agreement, and (c) the
obligations of the Corporation under the junior subordinated debentures, the
relevant indenture, trust agreement and guarantee, in the aggregate, constitute
a full and unconditional guarantee by the Corporation of such trust's
obligations under the preferred securities issued by such trust.
DESCRIPTION OF CAPITAL SECURITIES
General
The following summary of certain terms and provisions of the Capital
Securities supplements the description of the terms and provisions of the
Preferred Securities set forth in the accompanying Prospectus under the heading
"Description of Preferred Securities," to which description reference is hereby
made. This summary of certain terms and provisions of the Capital Securities,
which describes the material provisions thereof, does not purport to be complete
and is subject to, and qualified in its entirety by reference to, the
Declaration, to which reference is hereby made. The form of the Declaration has
been filed as an exhibit to the Registration Statement of which this Prospectus
Supplement and accompanying Prospectus form a part.
S-21
<PAGE>
Distributions
The Capital Securities represent beneficial ownership interests in the
Trust, and Distributions on each Capital Security will be payable at a rate per
annum reset quarterly equal to LIBOR plus .50% (the "Distribution Rate") on the
stated Liquidation Amount of $1,000, payable quarterly in arrears on January 15,
April 15, July 15 and October 15 of each year (each, a "Distribution Date"), to
the holders of the Capital Securities on the relevant record dates. The record
dates for the Capital Securities will be, for so long as the Capital Securities
remain in book-entry form, one Business Day (as defined in the accompanying
Prospectus) prior to the relevant Distribution Date (as defined herein) and, in
the event the Capital Securities are not in book-entry form, the first day of
the month in which the relevant Distribution Date (as defined herein) falls.
Distributions will accumulate from and including the next preceding Distribution
Date in respect of which a Distribution has been paid (or from the date of
original issuance, if no Distributions have been paid) to but excluding the
related Distribution Date or Stated Maturity Date, as the case may be. The first
Distribution Date for the Capital Securities will be April 15, 1997. The amount
of Distributions payable for any period will be computed on the basis of the
actual number of days elapsed in such period and a year of 360 days. In the
event that any Distribution Date is not a Business Day (as defined herein), then
such Distribution Date will be postponed to the next succeeding day that is a
Business Day, except that if such Business Day falls in the next succeeding
calendar month, such Distribution Date will be the immediately preceding
Business Day. If the Stated Maturity Date falls on a day that is not a Business
Day, payment of the Distributions payable on such date will be made on the next
succeeding day that is a Business Day, and no interest or other payment will
accumulate for the period from and after the Stated Maturity Date. A "Business
Day" shall mean any day other than a Saturday or a Sunday, or a day on which
banking institutions in New York, New York or Winston-Salem, North Carolina are
authorized or required by law to close. See "Description of Preferred
Securities--Distributions" in the accompanying Prospectus.
So long as no Debenture Event of Default under the Indenture has
occurred and is continuing, the Corporation has the right under the Indenture to
defer the payment of interest on the Junior Subordinated Debentures at any time
or from time to time for a period not exceeding 20 consecutive quarterly periods
with respect to each Extension Period, provided that no Extension Period may
extend beyond the Stated Maturity Date of the Junior Subordinated Debentures.
Upon any such election, quarterly Distributions on the Capital Securities by the
Trust will be deferred during such Extension Period. Distributions to which
holders of the Capital Securities are entitled will accumulate additional
Distributions thereon at the then applicable periodic Distribution Rate,
compounded quarterly from the relevant Distribution Date. The term
"Distributions" as used herein shall include any such additional Distributions.
During any such Extension Period, the Corporation may extend such Extension
Period, provided that such extension does not cause such Extension Period to
exceed 20 consecutive quarterly periods including the first quarterly period
during such Extension Period or to extend beyond the Stated Maturity Date. Upon
the termination of any such Extension Period and the payment of all amounts then
due, and subject to the foregoing limitations, the Corporation may elect to
begin a new Extension Period. The Corporation must give the Property Trustee,
the Administrative Trustees and the Debenture Trustee notice
S-22
<PAGE>
of its election of any Extension Period or any extension thereof at least five
Business Days prior to the earlier of (i) the date the Distributions on the
Capital Securities would have been payable except for the election to begin or
extend such Extension Period and (ii) the date the Administrative Trustees are
required to give notice to any securities exchange or to holders of the Capital
Securities of the record date or the date such Distributions are payable, but in
any event not less than five Business Days prior to such record date. There is
no limitation on the number of times that the Corporation may elect to begin an
Extension Period. See "Description of Junior Subordinated Debentures--Option to
Extend Interest Payment Date" and "Certain Federal Income Tax
Considerations--Interest Income and Original Issue Discount."
During any such Extension Period, the Corporation may not (i) declare
or pay any dividends or distributions on, or redeem, purchase, acquire, or make
a liquidation payment with respect to, any of the Corporation's capital stock or
(ii) make any payment of principal of or premium, if any, or interest on or
repay, repurchase or redeem any debt securities of the Corporation (including
other junior subordinated debentures issued by the Corporation) that rank pari
passu with or junior in right of payment to the Junior Subordinated Debentures
or (iii) make any guarantee payments with respect to any guarantee by the
Corporation of the debt securities of any subsidiary of the Corporation if such
guarantee ranks pari passu with or junior in right of payment to the Junior
Subordinated Debentures (other than (a) dividends or distributions in shares of,
or options, warrants or rights to subscribe for or purchase shares of, common
stock of the Corporation, (b) any declaration of a dividend in connection with
the implementation of a stockholders' rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Guarantee, (d) as a result of a
reclassification of the Corporation's capital stock or the exchange or
conversion of one class, or series of the Corporation's capital stock for
another class or series of the Corporation's capital stock, (e) the purchase of
fractional interests in shares of the Corporation's capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged, and (f) purchases of common stock related to the
issuance of common stock or rights under any of the Corporation's benefit plans
for its directors, officers or employees or any of the Corporation's dividend
reinvestment plans).
Although the Corporation may in the future exercise its option to defer
payments of interest on the Junior Subordinated Debentures, the Corporation has
no such current intention.
The revenue of the Trust available for distribution to holders of the
Capital Securities will be limited to payments under the Junior Subordinated
Debentures in which the Trust will invest the proceeds from the issuance and
sale of the Trust Securities. See "Description of Junior Subordinated
Debentures--General." If the Corporation does not make interest payments on the
Junior Subordinated Debentures, the Property Trustee will not have funds
available to pay Distributions on the Capital Securities. The payment of
Distributions (if and to the extent the Trust has funds on hand legally
available for the payment of such Distributions) will be guaranteed by the
Corporation on a limited basis as set forth herein under "Description of the
Guarantee."
S-23
<PAGE>
Distribution Rate
LIBOR, the Distribution period and the amount of Distribution payable
in respect of each Distribution period will be calculated by The First National
Bank of Chicago, as Calculation Agent, in the same manner as LIBOR, the interest
period and the interest payable in respect of each interest period for the
Junior Subordinated Debentures, as described under "Description of Junior
Subordinated Debentures--Interest Rate."
Redemption
Upon the repayment on the Stated Maturity Date or prepayment prior to
the Stated Maturity Date of the Junior Subordinated Debentures, the proceeds
from such repayment or prepayment shall be applied by the Property Trustee to
redeem a Like Amount (as defined below) of the Trust Securities, upon not less
than 30 nor more than 60 days' notice of a date of redemption (the "Redemption
Date") at the applicable Redemption Price, which shall be equal to (i) in the
case of the repayment of the Junior Subordinated Debentures on the Stated
Maturity Date, the Maturity Redemption Price (equal to the principal of and
accrued interest on the Junior Subordinated Debentures), (ii) in the case of (A)
the optional prepayment of the Junior Subordinated Debentures prior to January
15, 2007 upon the occurrence and continuation of a Special Event, or (B) the
optional prepayment of the Junior Subordinated Debentures other than as
contemplated in clause (ii) (A) above, the Early Redemption Price (equal to the
Prepayment Price in respect of the Junior Subordinated Debentures). See
"Description of Junior Subordinated Debentures--Optional Prepayment" and
"--Special Event Prepayment."
"Like Amount" means (i) with respect to a redemption of the Trust
Securities, Trust Securities having a Liquidation Amount equal to the principal
amount of Junior Subordinated Debentures to be paid in accordance with their
terms and (ii) with respect to a distribution of Junior Subordinated Debentures
upon the liquidation of the Trust, Junior Subordinated Debentures having a
principal amount equal to the Liquidation Amount of the Trust Securities of the
holder to whom such Junior Subordinated Debentures are distributed.
The Corporation will have the option to prepay the Junior Subordinated
Debentures, (i) in whole or in part, on or after January 15, 2007, and (ii) in
whole but not in part, at any time prior to January 15, 2007, upon the
occurrence of a Special Event, in each case at the Prepayment Price, and in each
case subject to receipt of prior approval by the Federal Reserve if then
required under applicable capital guidelines or policies of the Federal Reserve.
Liquidation of the Trust and Distribution of Junior Subordinated Debentures
The Corporation will have the right at any time to terminate the Trust
and cause the Junior Subordinated Debentures to be distributed to the holders of
the Capital Securities in exchange therefor upon liquidation of the Trust. Such
right is subject to (i) the Corporation having received an opinion of counsel to
the effect that such distribution will not be a taxable
S-24
<PAGE>
event to holders of Capital Securities and (ii) the prior approval of the
Federal Reserve if then required under applicable capital guidelines or policies
of the Federal Reserve.
If the Corporation elects not to prepay the Junior Subordinated
Debentures prior to maturity in accordance with their terms and either elects
not to or is unable to liquidate the Trust and distribute the Junior
Subordinated Debentures to holders of the Trust Securities, the Trust Securities
will remain outstanding until the repayment of the Junior Subordinated
Debentures on the Stated Maturity Date.
Liquidation Value
The amount payable on the Capital Securities in the event of any
liquidation of the Trust is $1,000 per Capital Security plus accumulated and
unpaid Distributions, which amount may be paid in the form of a distribution of
a Like Amount of Junior Subordinated Debentures, subject to certain exceptions.
See "Description of Preferred Securities--Liquidation Distribution Upon
Termination" in the accompanying Prospectus.
Registration of Capital Securities
The Capital Securities will be represented by global certificates
registered in the name of The Depository Trust Company ("DTC") or its nominee.
Beneficial interests in the Capital Securities will be shown on, and transfers
thereof will be effected only through, records maintained by participants in
DTC. Except as described below and in the accompanying Prospectus, Capital
Securities in certificated form will not be issued in exchange for the global
certificates. See "Book-Entry Issuance" in the accompanying Prospectus.
A global security shall be exchangeable for Capital Securities
registered in the names of persons other than DTC or its nominee only if (i) DTC
notifies the Trust that it is unwilling or unable to continue as a depositary
for such global security and no successor depositary shall have been appointed,
or if at any time DTC ceases to be a clearing agency registered under the
Exchange Act at a time when DTC is required to be so registered to act as such
depositary, (ii) the Trust in its sole discretion determines that such global
security shall be so exchangeable or (iii) there shall have occurred and be
continuing an event of default under the Indenture with respect to the Junior
Subordinated Debentures. Any global security that is exchangeable pursuant to
the preceding sentence shall be exchangeable for definitive certificates
registered in such names as DTC shall direct. It is expected that such
instructions will be based upon directions received by DTC from its Participants
(as defined in the accompanying Prospectus) with respect to ownership of
beneficial interests in such global security. In the event that Capital
Securities are issued in definitive form, such Capital Securities will be in
denominations of $1,000 and integral multiples thereof and may be transferred or
exchanged at the offices described below.
Payments on Capital Securities represented by a global security will be
made to DTC, as the depositary for the Capital Securities. In the event Capital
Securities are issued in certificated form, the Liquidation Amount and
Distributions will be payable, the transfer of the Capital Securities will be
registrable, and Capital Securities will be exchangeable for
S-25
<PAGE>
Capital Securities of other denominations of a like aggregate Liquidation
Amount, at the corporate office of the Property Trustee in New York, New York,
or at the offices of any paying agent or transfer agent appointed by the
Administrative Trustees, provided that payment of any Distribution may be made
at the option of the Administrative Trustees by check mailed to the address of
the persons entitled thereto or by wire transfer. In addition, if the Capital
Securities are issued in certificated form, the record dates for payment of
Distributions will be the first day of the month in which the relevant
Distribution payment is scheduled to be paid. For a description of DTC and the
terms of the depositary arrangements relating to payments, transfers, voting
rights, redemptions and other notices and other matters, see "Book-Entry
Issuance" in the accompanying Prospectus.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
General
The following summary of certain terms and provisions of the Junior
Subordinated Debentures supplements the description of the terms and provisions
of the Corresponding Junior Subordinated Debentures (as defined in the
accompanying Prospectus) set forth in the accompanying Prospectus under the
heading "Description of Junior Subordinated Debentures" to which description
reference is hereby made. The summary of certain terms and provisions of the
Junior Subordinated Debentures set forth below, which describes the material
provisions thereof, does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the Indenture, to which reference is
hereby made. The form of Indenture has been filed as an exhibit to the
Registration Statement of which this Prospectus Supplement and accompanying
Prospectus form a part.
Concurrently with the issuance of the Capital Securities, the Trust
will invest the proceeds thereof, together with the consideration paid by the
Corporation for the Common Securities, in the Junior Subordinated Debentures
issued by the Corporation. The Junior Subordinated Debentures will bear interest
at a rate per annum reset quarterly equal to LIBOR plus .50% (the "Interest
Rate") on the principal amount thereof, payable quarterly in arrears on January
15, April 15, July 15 and October 15 of each year (each, an "Interest Payment
Date"), commencing April 15, 1997, to the person in whose name each Junior
Subordinated Debenture is registered at the close of business on the Business
Day next preceding such Interest Payment Date. It is anticipated that, until the
liquidation, if any, of the Trust, each Junior Subordinated Debenture will be
held in the name of the Property Trustee in trust for the benefit of the holders
of the Trust Securities. The amount of interest payable for any period will be
computed on the basis of the actual number of days elapsed in such period and a
year of 360-days. In the event that any Interest Payment Date is not a Business
Day, such Interest Payment Date will be postponed to the next succeeding day
that is a Business Day, except that if such Business Day falls in the next
succeeding calendar month, such Interest Payment Date will be the immediately
preceding Business Day. If the maturity date for the Junior Subordinated
Debentures falls on a day that is not a Business Day, payment of interest on
such date will be made on the next succeeding day that is a Business Day, and no
interest or other payment will accrue for the period from and after such
maturity date. Accrued interest that is not paid on the applicable Interest
Payment Date
S-26
<PAGE>
will bear additional interest on the amount thereof (to the extent permitted by
law) at the Interest Rate, compounded quarterly from the relevant Interest
Payment Date. The term "interest" as used herein shall include quarterly
interest payments, interest on quarterly interest payments not paid on the
applicable Interest Payment Date and Additional Sums (as defined below), as
applicable.
The Junior Subordinated Debentures will be issued in denominations of
$1,000 and integral multiples thereof. The Junior Subordinated Debentures will
mature on January 15, 2027.
The Junior Subordinated Debentures will rank pari passu with all other
junior subordinated debentures to be issued by the Corporation and will be
unsecured and subordinate and rank junior in right of payment to the extent and
in the manner set forth in the Indenture to all Senior Indebtedness of the
Corporation. See "Description of Junior Subordinated Debentures--Subordination"
in the accompanying Prospectus. The Corporation is a non-operating holding
company and almost all of the operating assets of the Corporation and its
consolidated subsidiaries are owned by such subsidiaries. The Corporation relies
primarily on dividends from such subsidiaries to meet its obligations. The
Corporation is a legal entity separate and distinct from its banking and
non-banking affiliates. The principal sources of the Corporation's income are
dividends, interest and fees from its banking and non-banking affiliates. The
Banks are subject to certain restrictions imposed by federal law on any
extensions of credit to, and certain other transactions with, the Corporation
and certain other affiliates, and on investments in stock or other securities
thereof. Such restrictions prevent the Corporation and such other affiliates
from borrowing from the Banks unless the loans are secured by various types of
collateral. Further, such secured loans, other transactions and investments by
any of the Banks are generally limited in amount as to the Corporation and as to
each of such other affiliates to 10% of such Bank's capital and surplus and as
to the Corporation and all of such other affiliates to an aggregate of 20% of
such Bank's capital and surplus. In addition, payment of dividends to the
Corporation by the Banks is subject to ongoing review by banking regulators and
is subject to various statutory limitations and in certain circumstances
requires approval by banking regulatory authorities. Because the Corporation is
a holding company, the right of the Corporation to participate in any
distribution of assets of any subsidiary upon such subsidiary's liquidation or
reorganization or otherwise is subject to the prior claims of creditors of the
subsidiary, except to the extent the Corporation may itself be recognized as a
creditor of that subsidiary. Accordingly, the Junior Subordinated Debentures
will be effectively subordinated to all existing and future liabilities of the
Corporation's subsidiaries, and holders of Junior Subordinated Debentures should
look only to the assets of the Corporation for payments on the Junior
Subordinated Debentures. The Indenture does not limit the incurrence or issuance
of other secured or unsecured debt of the Corporation, including Senior
Indebtedness. See "Description of Junior Subordinated Debentures--Subordination"
in the accompanying Prospectus.
S-27
<PAGE>
Interest Rate
The interest period with respect to the Junior Subordinated Debentures
is each successive period from and including an Interest Payment Date (or the
date of original issuance, in the case of the initial interest period) to but
excluding the next Interest Payment Date, or the Stated Maturity Date, as the
case may be, provided that if such Interest Payment Date would not be a Business
Day, then such Interest Payment Date and the first day of the next succeeding
interest period will be the next succeeding Business Day, except if such
Business Day is in the next succeeding calendar month, such Interest Payment
Date and the first day of the next succeeding interest period will be the
immediately preceding Business Day. The First National Bank of Chicago, as
Calculation Agent (the "Calculation Agent"), will calculate the Interest Rate
for each quarterly interest period based on LIBOR determined as of two London
Business Days (defined as any day, other than a Saturday or Sunday, on which
banks are open for business in London) prior to the first day of such interest
period (each, a "Determination Date"). "LIBOR" means, with respect to a
quarterly interest period relating to an Interest Payment Date (in the following
order of priority):
(1) the rate (expressed as a percentage per annum) for
Eurodollar deposits having a three-month maturity that appears on
Telerate Page 3750 as of 11:00 a.m. (London time) on the related
Determination Date;
(2) if such rate does not appear on Telerate Page 3750 as of
11:00 a.m. (London time) on the related Determination Date, LIBOR will
be the arithmetic mean (if necessary rounded upwards to the nearest
whole multiple of 0.00001%) of the rates (expressed as percentages per
annum) for Eurodollar deposits having a three-month maturity that
appear on Reuters Monitor Money Rates Page LIBO ("Reuters Page LIBO")
as of 11:00 a.m. (London time) on such Determination Date;
(3) if such rate does not appear on Reuters Page LIBO as of
11:00 a.m. (London time) on the related Determination Date, the
Calculation Agent will request the principal London offices of four
leading banks in the London interbank market to provide such banks'
offered quotations (expressed as percentages per annum) to prime banks
in the London interbank market for Eurodollar deposits having a
three-month maturity as of 11:00 a.m. (London time) on such
Determination Date. If at least two quotations are provided, LIBOR will
be the arithmetic mean (if necessary rounded upwards to the nearest
whole multiple of 0.00001%) of such quotations;
(4) if fewer than two such quotations are provided as
requested in clause (3) above, the Calculation Agent will request four
major New York City banks to provide such banks' offered quotations
(expressed as percentages per annum) to leading European banks for
loans in Eurodollars having a three-month maturity as of 11:00 a.m.
(London time) on such Determination Date. If at least two such
quotations are provided, LIBOR will be the arithmetic mean (if
necessary rounded upwards to the nearest whole multiple of 0.00001%) of
such quotations; and
(5) if fewer than two such quotations are provided as
requested in clause (4) above, LIBOR will be LIBOR as determined on the
previous Determination Date.
S-28
<PAGE>
If the rate for Eurodollar deposits having a three-month maturity that
initially appears on Telerate Page 3750 or Reuters Page LIBO, as the case may
be, as of 11:00 a.m. (London time) on the related Determination Date is
superseded on Telerate Page 3750 or Reuters Page LIBO, as the case may be, by a
corrected rate before 12:00 noon (London time) on such Determination Date, the
corrected rate as so substituted on the applicable page will be the applicable
LIBOR for such Determination Date.
Absent manifest error, the Calculation Agent's determination of LIBOR
and its calculation of the applicable Interest Rate for each interest period
will be final and binding. Investors may obtain the interest rates for the
current and preceding interest period by writing or calling the Corporate Trust
Department of the Calculation Agent at The First National Bank of Chicago, One
First National Plaza, Suite 0126, Chicago, Illinois 60670 (telephone
1-800-524-9472).
Option to Extend Interest Payment Date
So long as no Debenture Event of Default has occurred and is
continuing, the Corporation will have the right under the Indenture at any time
during the term of the Junior Subordinated Debentures to defer the payment of
interest at any time or from time to time for a period not exceeding 20
consecutive quarterly periods with respect to each Extension Period, provided
that no Extension Period may extend beyond the Stated Maturity Date. At the end
of an Extension Period, the Corporation must pay all interest then accrued and
unpaid (together with interest on such unpaid interest at the applicable
periodic Interest Rate, compounded quarterly from the relevant Interest Payment
Date, to the extent permitted by applicable law). During an Extension Period,
interest will continue to accrue and holders of Junior Subordinated Debentures
(and holders of the Trust Securities while Trust Securities are outstanding)
will be required to accrue interest income for United States federal income tax
purposes prior to the receipt of cash attributable to such income. See "Certain
Federal Income Tax Considerations--Interest Income and Original Issue Discount."
During any such Extension Period, the Corporation may not (i) declare
or pay any dividends or distributions on, or redeem, purchase, acquire, or make
a liquidation payment with respect to, any of the Corporation's capital stock,
(ii) make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Corporation (including other
junior subordinated debentures issued by the Corporation) that rank pari passu
with or junior in right of payment to the Junior Subordinated Debentures or
(iii) make any guarantee payments with respect to any guarantee by the
Corporation of the debt securities of any subsidiary of the Corporation if such
guarantee ranks pari passu with or junior in right of payment to the Junior
Subordinated Debentures (other than (a) dividends or distributions in shares of
or options, warrants or rights to subscribe for or purchase shares of, common
stock of the Corporation, (b) any declaration of a dividend in connection with
the implementation of a stockholders' rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Guarantee, (d) as a result of a
reclassification of the Corporation's capital stock or the exchange or
conversion of one class or series of the Corporation's capital stock for another
class or series of the Corporation's capital stock, (e) the purchase of
fractional interests in shares of the Corporation's capital stock pursuant to
the conversion or
S-29
<PAGE>
exchange provisions of such capital stock or the security being converted or
exchanged, and (f) purchases of common stock related to the issuance of common
stock or rights under any of the Corporation's benefit plans for its directors,
officers or employees or any of the Corporation's dividend reinvestment plans).
Prior to the termination of any such Extension Period, the Corporation
may further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 20 consecutive quarterly periods or to
extend beyond the Stated Maturity Date. Upon the termination of any such
Extension Period and the payment of all amounts then due on any Interest Payment
Date, the Corporation may elect to begin a new Extension Period, subject to the
above requirements. No interest shall be due and payable during an Extension
Period, except at the end thereof. The Corporation must give the Property
Trustee, the Administrative Trustees and the Debenture Trustee notice of its
election of any Extension Period (or an extension thereof) at least five
Business Days prior to the earlier of (i) the date the Distributions on the
Trust Securities would have been payable except for the election to begin or
extend such Extension Period or (ii) the date the Administrative Trustees are
required to give notice to any securities exchange or to holders of Capital
Securities of the record date or the date such Distributions are payable, but in
any event not less than five Business Days prior to such record date. The
Debenture Trustee shall give notice of the Corporation's election to begin or
extend a new Extension Period to the holders of the Capital Securities. There is
no limitation on the number of times that the Corporation may elect to begin an
Extension Period. See "Description of Junior Subordinated Debentures--Option to
Defer Interest Payments" in the accompanying Prospectus.
Optional Prepayment
The Junior Subordinated Debentures will be prepayable, in whole or in
part, at the option of the Corporation, on or after January 15, 2007 (the
"Initial Optional Prepayment Date"), subject to the Corporation having received
prior approval of the Federal Reserve if then required under applicable capital
guidelines or policies of the Federal Reserve, at a prepayment price equal to
100% of the principal amount of the Junior Subordinated Debentures so redeemed
plus accrued and unpaid interest thereon to the date of prepayment.
Special Event Prepayment
If a Special Event shall occur and be continuing, the Corporation may,
at any time prior to the Initial Optional Prepayment Date, at its option and
subject to receipt of prior approval of the Federal Reserve if then required
under applicable capital guidelines or policies of the Federal Reserve, prepay
the Junior Subordinated Debentures in whole (but not in part) at any time within
90 days of the occurrence of such Special Event, at a prepayment price equal to
100% of the principal amount of such Junior Subordinated Debentures plus accrued
and unpaid interest thereon to the date of prepayment.
A "Special Event" means a Tax Event or a Regulatory Capital Event, as
the case may be.
S-30
<PAGE>
A "Tax Event" means the receipt by the Corporation and the Trust of an
opinion of counsel experienced in such matters to the effect that, as a result
of any amendment to, or change (including any announced prospective change) in,
the laws or any regulations thereunder of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such pronouncement or decision is announced on or after the Issue Date, there is
more than an insubstantial risk that (i) the Trust is, or will be within 90 days
of the date of such opinion, subject to United States federal income tax with
respect to income received or accrued on the Junior Subordinated Debentures,
(ii) interest payable by the Corporation on the Junior Subordinated Debentures
is not, or within 90 days of the date of such opinion will not be, deductible by
the Corporation, in whole or in part, for United States federal income tax
purposes, or (iii) the Trust is, or will be within 90 days of the date of such
opinion, subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
A "Regulatory Capital Event" means that the Corporation shall have
received an opinion of independent bank regulatory 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 rules, guidelines or policies of the
Federal Reserve 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 Issue Date, the Capital Securities do not constitute, or within 90 days of
the date of such opinion, will not constitute, Tier I Capital (or its then
equivalent); provided, however, that the distribution of the Junior Subordinated
Debentures in connection with the liquidation of the Trust by the Corporation
shall not in and of itself constitute a Regulatory Capital Event unless such
liquidation shall have occurred in connection with a Tax Event.
"Additional Sums" means such additional amounts as may be necessary in
order that the amount of Distributions then due and payable by the Trust on the
outstanding Capital Securities and Common Securities shall not be reduced as a
result of any additional taxes, duties or other governmental charges to which
the Trust has become subject as a result of a Tax Event.
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
Debentures 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 Debentures called for
prepayment.
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Corporation will pay as
additional amounts on the Junior Subordinated Debentures the Additional Sums.
S-31
<PAGE>
Distribution of Junior Subordinated Debentures
As described under "Description of Capital Securities--Liquidation of
the Trust and Distribution of Junior Subordinated Debentures," under certain
circumstances involving the termination of the Trust, Junior Subordinated
Debentures may be distributed to the holders of the Capital Securities in
exchange therefor upon liquidation of the Trust after satisfaction of
liabilities to creditors of the Trust as provided by applicable law. If
distributed to holders of Capital Securities, the Junior Subordinated Debentures
will initially be issued in the form of one or more global securities and DTC,
or any successor depositary for the Capital Securities, will act as depositary
for the Junior Subordinated Debentures. It is anticipated that the depositary
arrangements for the Junior Subordinated Debentures would be substantially
identical to those in effect for the Capital Securities. There can be no
assurance as to the market price of any Junior Subordinated Debentures that may
be distributed to the holders of Capital Securities.
Registration of Junior Subordinated Debentures
The Junior Subordinated Debentures will be registered in the name of
the Trust. In the event that the Junior Subordinated Debentures are distributed
to holders of Capital Securities, it is anticipated that the depositary and
other arrangements for the Junior Subordinated Debentures will be substantially
identical to those in effect for the Capital Securities as applicable. See
"Description of Capital Securities--Registration of Capital Securities."
DESCRIPTION OF THE GUARANTEE
The Guarantee will be executed and delivered by the Corporation
concurrently with the issuance by the Trust of the Capital Securities for the
benefit of the holders from time to time of the Capital Securities. The First
National Bank of Chicago will act as indenture trustee ("Guarantee Trustee")
under the Guarantee. The Guarantee will be qualified as an indenture under the
Trust Indenture Act. First National Bank of Chicago will act as the Guarantee
Trustee for the purposes of compliance with the Trust Indenture Act and will
hold the Guarantee for the benefit of the holders of the Capital Securities.
First National Bank of Chicago will also act as Debenture Trustee for the Junior
Subordinated Debentures and as Property Trustee. This summary of certain
provisions of the Guarantee does not purport to be complete and is subject to,
and qualified in its entirety by reference to, all of the provisions of the
Guarantee, including the definitions therein of certain terms, and the Trust
Indenture Act.
The Corporation will irrevocably agree to pay in full on a subordinated
basis, to the extent set forth herein, the Guarantee Payments (as defined below)
to the holders of the Capital Securities, as and when due, regardless of any
defense, right of set-off or counterclaim that the Trust may have or assert
other than the defense of payment. The following payments with respect to the
Capital Securities, to the extent not paid by or on behalf of the Trust (the
"Guarantee Payments"), will be subject to the Guarantee: (i) any accumulated and
unpaid Distributions required to be paid on Capital Securities, to the extent
S-32
<PAGE>
the Trust has funds on hand legally available therefor, (ii) the Redemption
Price with respect to any Capital Securities called for redemption, to the
extent that the Trust has funds on hand legally available therefor, or (iii)
upon a voluntary or involuntary termination and liquidation of the Trust (unless
the Junior Subordinated Debentures are distributed to holders of the Capital
Securities), the lesser of (a) the Liquidation Distribution and (b) the amount
of assets of the Trust remaining available for distribution to holders of
Capital Securities. The Corporation's obligation to make a Guarantee Payment may
be satisfied by direct payment of the required amounts by the Corporation to the
holders of the Capital Securities or by causing the Trust to pay such amounts to
such holders.
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 Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust power conferred
upon the Guarantee Trustee under the Guarantee. Any holder of the Capital
Securities may institute a legal proceeding directly against the Corporation to
enforce its rights under the Guarantee without first instituting a legal
proceeding against the Trust, the Guarantee Trustee or any other person or
entity. If the Corporation were to default on its obligation to pay amounts
payable under the Junior Subordinated Debentures, 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 Guarantee for payment of such amounts.
Instead, if an event of default under the Indenture shall have occurred and be
continuing and such event is attributable to the failure of the Corporation to
pay interest or premium, if any, on or principal of the Junior Subordinated
Debentures on the applicable payment date, then a holder of Capital Securities
may institute a Direct Action against the Corporation pursuant to the terms of
the Indenture for enforcement of payment to such holder of the principal of or
interest or premium, if any, on such Junior Subordinated Debentures having a
principal amount equal to the aggregate Liquidation Amount of the Capital
Securities of such holder. In connection with such Direct Action, the
Corporation will have a right of set-off under the Indenture to the extent of
any payment made by the Corporation to such holder of Capital Securities in the
Direct Action. Except as described herein, holders of Capital Securities will
not be able to exercise directly any other remedy available to the holders of
the Junior Subordinated Debentures or assert directly any other rights in
respect of the Junior Subordinated Debentures. See "Description of Guarantees"
in the accompanying Prospectus. The Declaration provides that each holder of
Capital Securities by acceptance thereof agrees to the provisions of the
Guarantee and the Indenture.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
General
In the opinion of Brown & Wood LLP, special federal income tax counsel
to the Corporation and the Trust ("Tax Counsel"), 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 held as capital assets
by a holder who purchases such Capital Securities upon initial issuance. It does
not deal with special classes of holders such as
S-33
<PAGE>
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 the 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 Debentures
In connection with the issuance of the Junior Subordinated Debentures,
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 Debentures will be classified for
United States federal income tax purposes as indebtedness of the Corporation. An
opinion of Tax Counsel, however, is not binding on the Internal Revenue Service
(the "IRS") or the courts. Prospective investors should note that no rulings
have been or are expected to be sought from the IRS with respect to any of these
issues and no assurance can be given that the IRS will not take contrary
positions. Moreover, no assurance can be given that any of the opinions
expressed herein will not be challenged by the IRS or, if challenged, that such
a challenge would not be successful.
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 Debentures, and each holder will
be required to include in its gross income any interest (or OID accrued) with
respect to its allocable share of those Junior Subordinated Debentures.
Interest Income and Original Issue Discount
Under recently issued Treasury regulations (the "Regulations")
applicable to debt instruments 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. The Corporation
believes that the likelihood of its exercising its option to defer payments of
S-34
<PAGE>
interest is "remote" since exercising that option would prevent the Corporation
from declaring dividends on any class of its equity securities. Accordingly, the
Corporation intends to take the position, based on the advice of Tax Counsel,
that the Junior Subordinated Debentures will not be considered to be issued with
OID and, accordingly, stated interest on the Junior Subordinated Debentures
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 the Corporation were to exercise its option
to defer payments of interest, the Junior Subordinated Debentures would at that
time be treated as issued with OID, and all stated interest on the Junior
Subordinated Debentures would thereafter be treated as OID as long as the Junior
Subordinated Debentures remain outstanding. In such event, all of a holder's
taxable interest income with respect to the Junior Subordinated Debentures 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 in gross income OID even though the
Corporation would not make actual cash payments during an Extension Period.
Moreover, under the Regulations, if the option to defer the payment of interest
was determined not to be "remote," the Junior Subordinated Debentures would be
treated as having been originally issued with OID. In such event, all of a
holder's taxable interest income with respect to the Junior Subordinated
Debentures would 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.
The Regulations have not yet been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to Tax Counsel's interpretation herein.
Because income on the Capital Securities will constitute interest or
OID, corporate holders of the Capital Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the Capital Securities.
Receipt of Junior Subordinated Debentures or Cash Upon Liquidation of the Trust
The Corporation will have the right at any time to liquidate the Trust
and cause the Junior Subordinated Debentures to be distributed to the holders of
the Trust Securities. 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 have an aggregate tax basis in the Junior
Subordinated Debentures equal to such holder's aggregate tax basis in its
Capital Securities. A holder's holding period in the Junior Subordinated
Debentures so received in liquidation of the Trust would include the period
during which the Capital Securities were held by such holder. If, however, the
Trust is characterized for United States federal income tax purposes as an
association taxable as a corporation at the time of its dissolution, the
distribution of the Junior Subordinated Debentures may constitute a taxable
event to holders of Capital Securities and a holder's holding period in Junior
Subordinated Debentures would begin on the date such Junior Subordinated
Debentures were received.
S-35
<PAGE>
Under certain circumstances described herein (see "Description of
Capital Securities"), the Junior Subordinated Debentures may be redeemed for
cash and the proceeds of such redemption 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 could recognize gain or loss as if it
sold such redeemed Capital Securities for cash. See "--Sales of Capital
Securities" below.
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 (if any) received on the Capital
Securities in respect of OID. 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 Debentures. A holder who uses the accrual method of
accounting for tax purposes (and a cash method holder, if the Junior
Subordinated Debentures are deemed to have been issued with OID) who disposes of
such holder's Capital Securities between record dates for payments of
distributions thereon will be required to include accrued but unpaid interest on
the Junior Subordinated Debentures through the date of disposition in income as
ordinary income (i.e., interest or, possibly, OID), and to add such amount to
such holder's adjusted tax basis in such holder's pro rata share of the
underlying Junior Subordinated Debentures 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.
Proposed Tax Legislation
On March 19, 1996, President Clinton proposed the Proposed Legislation,
which would, among other things, generally deny corporate issuers a deduction
for interest in respect of certain debt obligations, such as the Junior
Subordinated Debentures, 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. In addition,
the Proposed Legislation would generally deny corporate issuers a deduction for
interest in respect of certain debt obligations, such as the Junior Subordinated
Debentures, issued on or after December 7, 1995 if such debt obligations have a
weighted average maturity of more than 40 years. On March 29, 1996, Senate
Finance Committee Chairman William V. Roth, Jr. and House Ways and Means
Committee Chairman Bill Archer issued the Joint Statement indicating their
intent that the Proposed Legislation, if adopted by either
S-36
<PAGE>
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, which concurred with the view expressed in the Joint
Statement. If the principles contained in the Joint Statement and the Democrat
Letters were followed and if the Proposed Legislation were enacted, such
legislation would not apply to the Junior Subordinated Debentures. There can be
no assurance, 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 Debentures. Accordingly, there can
be no assurance that a Tax Event will not occur. The occurrence of a Tax Event
may result in the redemption of the Junior Subordinated Debentures for cash, in
which event the holders of the Capital Securities would receive cash in
redemption of their Capital Securities. See "Description of Capital
Securities--Special Redemption."
United States Alien Holders
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is not a U.S. Holder
for United States federal income tax purposes.
A "U.S. Holder" is a holder of Capital Securities who or which is a
citizen or individual resident (or is treated as a citizen or individual
resident) of the United States for federal income tax purposes, a corporation or
partnership created or organized (or treated as created or organized for federal
income tax purposes) in or under the laws of the United States or any political
subdivision thereof, or a trust or estate the income of which is includable in
its gross income for federal income tax purposes without regard to its source.
Notwithstanding the foregoing, for taxable years beginning after December 31,
1996 (or for the immediately preceding taxable year, if the trustee of a trust
so elects), a trust is a U.S. Holder for federal income tax purposes if, and
only if, (i) a court within the United States is able to exercise primary
supervision over the administration of the trust and (ii) one or more United
States trustees have the authority to control all substantial decisions of the
trust.
Under present United States federal income tax laws: (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 the Corporation entitled to
vote, (b) the beneficial owner of the Capital Security is not a controlled
foreign corporation that is related to the Corporation 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
S-37
<PAGE>
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.
As discussed above, changes in legislation affecting the United States
federal income tax treatment of the Junior Subordinated Debentures are possible,
and could adversely affect the ability of the Corporation to deduct the interest
payable on the Junior Subordinated Debentures. Moreover, any such legislation
could, as the Proposed Legislation would have, adversely affect United States
Alien Holders by characterizing income derived from the Junior Subordinated
Debentures as dividends, generally subject to a 30% income tax (on a withholding
basis) when paid to a United States Alien Holder, rather than as interest which,
as discussed above, is generally exempt from income tax in the hands of a United
States Alien Holder.
A United States Alien Holder that holds Capital Securities in
connection with the active conduct of a United States trade or business will be
subject to income tax on all income and gains recognized with respect to its
proportionate share of the Junior Subordinated Debentures.
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.
S-38
<PAGE>
ERISA CONSIDERATIONS
The Corporation, the obligor with respect to the Junior Subordinated
Debentures held by the Trust, and its affiliates and the Property Trustee may be
considered a "party in interest" (within the meaning of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) or a "disqualified person"
(within the meaning of Section 4975 of the Code) with respect to many employee
benefit plans ("Plans") that are subject to ERISA. Any purchaser proposing to
acquire Capital Securities with assets of any Plan should consult with its
counsel. The purchase and/or holding of Capital Securities by a Plan that is
subject to the fiduciary responsibility provisions of ERISA or the prohibited
transaction provisions of Section 4975 of the Code (including individual
retirement arrangements and other plans described in Section 4975(e) of the
Code) and with respect to which the Corporation, the Property Trustee or any
affiliate is a service provider (or otherwise is a party in interest or a
disqualified person) may constitute or result in a prohibited transaction under
ERISA or Section 4975 of the Code, unless such Capital Securities are acquired
pursuant to and in accordance with an applicable exemption, such as Prohibited
Transaction Class Exemption ("PTCE") 84-14 (an exemption for certain
transactions determined by an independent qualified professional asset manager),
PTCE 91-38 (an exemption for certain transactions involving bank collective
investment funds), PTCE 90-1 (an exemption for certain transactions involving
insurance company pooled separate accounts), PTCE 95-60 (an exemption for
transactions involving certain insurance company general accounts) or PTCE 96-23
(an exception for certain transactions determined by an in-house asset manager).
In addition, a Plan fiduciary considering the purchase of Capital Securities
should be aware that the assets of the Trust may be considered "plan assets" for
ERISA purposes. Therefore, a Plan fiduciary should consider whether the purchase
of Capital Securities could result in a delegation of fiduciary authority to the
Property Trustee, and, if so, whether such a delegation of authority is
permissible under the Plan's governing instrument or any investment management
agreement with the Plan. In making such determination, a Plan fiduciary should
note that the Property Trustee is a U.S. bank qualified to be an investment
manager (within the meaning of Section 3(38) of ERISA) to which such a
delegation of authority generally would be permissible under ERISA. Further,
prior to an Event of Default with respect to the Junior Subordinated Debentures,
the Property Trustee will have only limited custodial and ministerial authority
with respect to Trust assets.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Corporation and the Trust have agreed that the Trust will sell to
each of the Underwriters named below, and each of such Underwriters, for whom
Merrill Lynch, Pierce, Fenner & Smith Incorporated is acting as representative
(the "Representative"), has severally agreed to purchase from the Trust, the
respective number of Capital Securities set forth opposite its name below.
S-39
<PAGE>
Number of
Underwriter Capital Securities
----------- ------------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... 50,000
Deutsche Morgan Grenfell Inc.............................. 50,000
Lehman Brothers Inc....................................... 50,000
J.P. Morgan Securities Inc................................ 50,000
Morgan Stanley & Co. Incorporated......................... 50,000
UBS Securities LLC........................................ 50,000
-------
Total......... 300,000
=======
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, the purchase commitments of the
nondefaulting Underwriters may be increased or the Underwriting Agreement may be
terminated.
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Capital Securities are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are committed to take and pay for all of the
Capital Securities if any are taken.
The Underwriters 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 $3.00 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 from the sale of the Capital
Securities will be used to purchase the Junior Subordinated Debentures issued by
the Corporation, the Underwriting Agreement provides that the Corporation will
pay as Underwriters' compensation for the Underwriters' arranging the investment
therein of such proceeds an amount of $10.00 per Capital Security for the
accounts of the several Underwriters.
Because the National Association of Securities Dealers, Inc. ("NASD")
is expected to view the Capital Securities offered hereby as interests in a
direct participation program, the offering is being made in compliance with Rule
2810 of the NASD's Conduct Rules. Offers and sales of Capital Securities will be
made only to (i) "qualified institutional buyers", as defined in Rule 144A under
the Securities Act of 1933, as amended ("Securities Act"); (ii) institutional
"accredited investors", as defined in Rule 501(a)(1)-(3) of Regulation D under
the Securities Act or (iii) individual investors for whom an investment in
non-convertible investment grade preferred securities is appropriate. The
Underwriters may not confirm
S-40
<PAGE>
sales to any accounts over which they exercise discretionary authority without
the prior written approval of the transaction by the customer.
During a period of 30 days from the date of this Prospectus Supplement,
neither the Trust nor the Company will, without the prior written consent of the
Representative, directly or indirectly, sell, offer to sell, grant any option
for the sale of, or otherwise dispose of, any Capital Securities, any security
convertible into or exchangeable into or exercisable for Capital Securities or
Junior Subordinated Debentures or any debt securities substantially similar to
the Junior Subordinated Debentures or equity securities substantially similar to
the Capital Securities (except for the Junior Subordinated Debentures and the
Capital Securities offered hereby).
The Capital Securities are a new issue of securities with no
established trading market. The Trust does not intend to apply for listing of
the Capital Securities on a national securities exchange, but has been advised
by the Underwriters that they presently intend to make a market in the Capital
Securities as permitted by applicable laws and regulations. The Underwriters are
not obligated, however, to make a market in the Capital Securities and any such
market making may be discontinued at any time at the sole discretion of the
Underwriters. Accordingly, no assurance can be given as to the liquidity of, or
trading markets for, the Capital Securities.
The Corporation and the Trust have agreed to indemnify the several
Underwriters against, or contribute to payments that the Underwriters may be
required to make in respect of, certain liabilities, including liabilities under
the Securities Act.
The several Underwriters have agreed to reimburse Wachovia for certain
expenses incurred in connection with the issuance and sale of the Capital
Securities offered hereby.
Certain of the Underwriters or their affiliates have provided from time
to time, and expect to provide in the future, investment or commercial banking
services to the Corporation and its affiliates, for which such Underwriters or
their affiliates have received or will receive customary fees and commissions.
VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Capital
Securities, the enforceability of the Declaration and the formation of the Trust
will be passed upon by Richards, Layton & Finger, special Delaware counsel to
the Corporation and the Trust. The validity of the Guarantee and the Junior
Subordinated Debentures will be passed upon for the Corporation by Kenneth W.
McAllister, General Counsel of the Corporation and for the Underwriters by Brown
& Wood LLP. Kenneth W. McAllister and Brown & Wood LLP will rely on the opinion
of Richards, Layton & Finger as to matters of Delaware law. Brown & Wood LLP
from time to time performs legal services for the Corporation. Certain matters
relating to United States federal income tax considerations described in this
Prospectus Supplement will be passed upon for the Corporation by Brown & Wood
LLP.
S-41
<PAGE>
PROSPECTUS
$300,000,000
WACHOVIA CORPORATION
JUNIOR SUBORDINATED DEFERRABLE
INTEREST DEBENTURES
WACHOVIA CAPITAL TRUST II
WACHOVIA CAPITAL TRUST III
WACHOVIA CAPITAL TRUST IV
PREFERRED SECURITIES FULLY AND UNCONDITIONALLY
GUARANTEED, AS DESCRIBED HEREIN, BY
WACHOVIA CORPORATION
Wachovia Corporation, a North Carolina corporation ("Wachovia" or the
"Corporation"), may from time to time offer in one or more series or issuances
its junior subordinated deferrable interest debentures (the "Junior Subordinated
Debentures"). The Junior Subordinated Debentures will be unsecured and
subordinate and junior in right of payment to the extent and in the manner set
forth herein to Senior Indebtedness (as defined in "Description of Junior
Subordinated Debentures--Subordination") of the Corporation. If provided in an
accompanying Prospectus Supplement, the Corporation will have the right to defer
payments of interest on any series of Junior Subordinated Debentures by
extending the interest payment period thereon at any time or from time to time
for up to such number of consecutive interest payment periods (which shall not
extend beyond the Stated Maturity Date (as defined herein) of the Junior
Subordinated Debentures) with respect to each deferral period as may be
specified in such Prospectus Supplement (each, an "Extension Period"). In such
circumstance, however, the Corporation would not be permitted, subject to
certain exceptions set forth herein, to declare or pay any dividends,
distributions or other payments with respect to, or repay, repurchase, redeem or
otherwise acquire, the Corporation's capital stock or debt securities that rank
pari passu with or junior to such series of Junior Subordinated Debentures. See
"Description of Junior Subordinated Debentures--Option to Defer Interest
Payments" and "--Restrictions on Certain Payments."
Wachovia Capital Trust II, Wachovia Capital Trust III and Wachovia
Capital Trust IV, each a trust created under the laws of the State of Delaware
(each, a "Trust," and collectively, the "Trusts"), may severally offer, from
time to time, preferred securities (the "Preferred Securities") representing
beneficial ownership interests in such Trust. The Corporation will be the owner
of the common securities (the "Common Securities" and, together with the
Preferred Securities, the "Trust Securities") representing common beneficial
ownership interests in such Trust. Holders of the Preferred Securities will be
entitled to receive preferential cumulative cash distributions ("Distributions")
accumulating from the date of original issuance and payable periodically as
specified in an accompanying Prospectus Supplement.
(continued on next page)
THESE SECURITIES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
---------------------------
The date of this Prospectus is January 22, 1997.
<PAGE>
(cover page continued)
Concurrently with the issuance by a Trust of its Preferred Securities,
such Trust will invest the proceeds thereof and of contributions received in
respect of the Common Securities in a corresponding series of the Corporation's
Junior Subordinated Debentures (the "Corresponding Junior Subordinated
Debentures") with terms corresponding to the terms of that Trust's Preferred
Securities (the "Related Preferred Securities"). Accordingly, if, as provided in
an accompanying Prospectus Supplement, the Corporation has the right to defer
the payment of interest on a series of Corresponding Junior Subordinated
Debentures, then, if interest payments are so deferred, Distributions on the
Related Preferred Securities would also be deferred, but would continue to
accumulate at the rate per annum set forth in the related Prospectus Supplement.
See "Description of Preferred Securities--Distributions."
Taken together, the Corporation's obligations under each series of
Corresponding Junior Subordinated Debentures, the Indenture and the related
Declaration and the related Guarantee (each, as defined herein), in the
aggregate, provide a full, irrevocable and unconditional guarantee of payments
of Distributions and other amounts due on the Related Preferred Securities. See
"Relationship Among the Preferred Securities, the Corresponding Junior
Subordinated Debentures and the Guarantees--Full and Unconditional Guarantee."
The payment of Distributions with respect to the Preferred Securities of each
Trust and payments on liquidation of such Trust or redemption of such Preferred
Securities, in each case out of funds held by such Trust, are each irrevocably
guaranteed by the Corporation to the extent described herein (each, a
"Guarantee"). See "Description of Guarantees." The obligations of the
Corporation under each Guarantee will be unsecured and subordinate and junior in
right of payment to all Senior Indebtedness of the Corporation to the extent and
in the manner set forth herein.
The Corresponding Junior Subordinated Debentures will be the sole
assets of each Trust, and payments under the Corresponding Junior Subordinated
Debentures will be the only revenue of each Trust. If so provided in an
accompanying Prospectus Supplement, the Corporation may, upon receipt of
approval of the Board of Governors of the Federal Reserve System (the "Federal
Reserve") (if such approval is then required under applicable capital guidelines
or policies), redeem the Corresponding Junior Subordinated Debentures (and
thereby cause the redemption of the Trust Securities) or may terminate each
Trust and, after satisfaction of liabilities to the creditors of such Trust as
required by applicable law, cause the Corresponding Junior Subordinated
Debentures to be distributed to the holders of Preferred Securities in exchange
therefor upon liquidation of their interests in such Trust. See "Description of
Preferred Securities--Liquidation Distribution Upon Termination."
The Junior Subordinated Debentures and Preferred Securities may be
offered in amounts, at prices and on terms to be determined at the time of
offering; provided, however, the aggregate initial public offering price of all
Junior Subordinated Debentures (other than Corresponding Junior Subordinated
Debentures) and Preferred Securities (including the Corresponding Junior
Subordinated Debentures) issued pursuant to the Registration Statement of which
this Prospectus forms a part shall not exceed $300,000,000. Certain specific
terms of the Junior Subordinated Debentures or Preferred Securities in respect
of which this
2
<PAGE>
Prospectus is being delivered will be described in an accompanying Prospectus
Supplement, including without limitation and where applicable and to the extent
not set forth herein, (a) in the case of Junior Subordinated Debentures, the
specific designation, aggregate principal amount, denominations, Stated Maturity
Date (including any provisions for the shortening or extension thereof),
interest payment dates, interest rate (which may be fixed or variable) or method
of calculating interest, if any, applicable Extension Period or interest
deferral terms, if any, place or places where principal, premium, if any, and
interest, if any, will be payable, any terms of redemption, any sinking fund
provisions, terms for any conversion or exchange into other securities, initial
offering or purchase price, methods of distribution and any other special terms,
and (b) in the case of Preferred Securities, the identity of the Trust, specific
title, aggregate stated liquidation amount, number of securities, Distribution
rate or method of calculating such rate, Distribution payment dates, applicable
Distribution deferral terms, if any, place or places where Distributions will be
payable, any terms of redemption, exchange, initial offering or purchase price,
methods of distribution and any other special terms.
The Prospectus Supplement also will contain information, as applicable,
about certain United States federal income tax consequences relating to the
Junior Subordinated Debentures or Preferred Securities.
The Junior Subordinated Debentures and Preferred Securities may be sold
to or through underwriters, through dealers, remarketing firms or agents or
directly to purchasers. See "Plan of Distribution." The names of any
underwriters, dealers, remarketing firms or agents involved in the sale of
Junior Subordinated Debentures or Preferred Securities in respect of which this
Prospectus is being delivered and any applicable fee, commission or discount
arrangements with them will be set forth in a Prospectus Supplement. The
Prospectus Supplement will state whether the Junior Subordinated Debentures or
Preferred Securities will be listed on any national securities exchange or
automated quotation system. If the Junior Subordinated Debentures or Preferred
Securities are not listed on any national securities exchange or automated
quotation system, there can be no assurance that there will be a secondary
market for the Junior Subordinated Debentures or Preferred Securities.
This Prospectus may not be used to consummate sales of Junior
Subordinated Debentures or Preferred Securities unless accompanied by a
Prospectus Supplement.
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 and at the regional offices of the
Commission located at 7 World Trade Center, 13th Floor, Suite 1300, New York,
New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 500 West Madison
Street,
3
<PAGE>
Chicago, Illinois 60661. Copies of such material can also be obtained at
prescribed rates by writing to the Public Reference Section of the Commission at
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. Such material
may also be accessed electronically by means of the Commission's home page on
the Internet at http://www.sec.gov. In addition, such reports, proxy statements
and other information concerning the Corporation can be inspected at the offices
of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Corporation and the Trusts have filed with the Commission a
Registration Statement on Form S-3 (together with all amendments and exhibits
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities offered hereby.
This Prospectus does not contain all the information set forth in the
Registration Statement, certain portions of which have been omitted as permitted
by the rules and regulations of the Commission. For further information with
respect to the Corporation and the securities offered hereby, reference is made
to the Registration Statement and the exhibits and the financial statements,
notes and schedules filed as a part thereof or incorporated by reference
therein, which may be inspected at the public reference facilities of the
Commission at the addresses set forth above or through the Commission's home
page on the Internet. Statements made in this Prospectus concerning the contents
of any documents referred to herein are not necessarily complete, and in each
instance are qualified in all respects by reference to the copy of such document
filed as an exhibit to the Registration Statement.
No separate financial statements of any Trust have been included
herein. The Corporation and the Trusts do not consider that such financial
statements would be material to holders of the Preferred Securities because each
Trust is a newly formed special purpose entity, has no operating history or
independent operations and is not engaged in and does not propose to engage in
any activity other than holding as trust assets the Corresponding Junior
Subordinated Debentures of the Corporation and issuing the Trust Securities. See
"The Trusts," "Description of Preferred Securities," "Description of Junior
Subordinated Debentures--Corresponding Junior Subordinated Debentures" and
"Description of Guarantees." In addition, the Corporation does not expect that
any of the Trusts will be filing reports under the Exchange Act with the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Corporation with the Commission
are incorporated into this Prospectus by reference:
1. Annual Report on Form 10-K for the year ended December 31,
1995.
2. Quarterly Reports on Form 10-Q for the quarters ended March
31, 1996, June 30, 1996 and September 30, 1996.
4
<PAGE>
Each document or report filed by the Corporation pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to
the termination of any offering of securities made by this Prospectus shall be
deemed to be incorporated by reference into this Prospectus and to be a part of
this Prospectus from the date of filing of such document. Any statement
contained herein, or in a document all or a portion of which is incorporated or
deemed to be incorporated by reference herein, shall be deemed to be modified or
superseded for purposes of the Registration Statement and 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 the Registration Statement or this Prospectus.
The Corporation will provide without charge to any person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated by reference herein (other
than exhibits not specifically incorporated by reference into the texts of such
documents). Requests for such documents should be directed to: Wachovia
Corporation, 100 North Main Street, Winston-Salem, North Carolina 27150,
Attention: Chief Financial Officer of Wachovia Corporation, telephone number
910-770-5000.
5
<PAGE>
WACHOVIA CORPORATION
Wachovia Corporation ("Wachovia" or the "Corporation"), a North
Carolina corporation, is an interstate bank holding company with dual
headquarters in Atlanta, Georgia and Winston-Salem, North Carolina, serving
regional, national and international markets. The Corporation has three
principal banking subsidiaries, Wachovia Bank of Georgia, N.A. ("Wachovia Bank
of Georgia"), Wachovia Bank of North Carolina, N.A. ("Wachovia Bank of North
Carolina") and Wachovia Bank of South Carolina, N.A. ("Wachovia Bank of South
Carolina" and together with Wachovia Bank of Georgia and Wachovia Bank of North
Carolina, the "Banks"), the assets of which together, as of September 30, 1996,
constituted substantially all of the assets of the Corporation. Wachovia's
common stock is traded on the New York Stock Exchange under the symbol WB.
Wachovia is a registered bank holding company under the Bank Holding Company Act
of 1956, as amended, and is a savings and loan holding company within the
meaning of the Home Owners' Loan Act of 1933, as amended.
The Banks had a total of 486 offices as of September 30, 1996. As of
September 30, 1996, Wachovia Bank of Georgia had 125 offices in 49 Georgia
cities and communities, Wachovia Bank of North Carolina had 219 offices in 95
North Carolina cities and communities, and Wachovia Bank of South Carolina had
142 offices in 64 South Carolina cities and communities. Subsidiaries of the
Corporation have domestic representative offices in Chicago and New York City;
international representative offices in New York City, London and Tokyo; foreign
branch offices in Grand Cayman; residential mortgage loan offices in Florida,
Georgia, North Carolina and South Carolina; operations centers in Atlanta,
Georgia, Charlotte, Greenville, Raleigh and Winston-Salem, North Carolina, and
Columbia, South Carolina; a major credit card operation in Delaware; and a
credit life and accident insurance company in Georgia.
At September 30, 1996, on a consolidated basis, Wachovia had total
assets of $47.5 billion, deposits of $27.4 billion, and a market capitalization
of $8.2 billion. Based on its consolidated asset size and market capitalization
at September 30, 1996, Wachovia was ranked 20th and 21st, respectively, among
domestic U.S. bank holding companies.
The Banks serve domestic U.S. retail and mid-market corporate customers
in their home markets. Also, at September 30, 1996, the Banks administered trust
assets totaling over $93.3 billion, including more than $23.0 billion in assets
under discretionary management, and provided a comprehensive array of trust
related services and products to institutional and retail clients. Other major
subsidiaries of the Corporation include Wachovia Corporate Services, Inc. which
directs large corporate and institutional relationship management and business
development in national and international markets; Wachovia Leasing Corporation
which provides corporate leasing services; Wachovia Operational Services
Corporation which provides remittance processing services for customers through
three operations centers; and Wachovia Investments, Inc. which offers brokerage
services to institutional and retail clients.
6
<PAGE>
The Corporation is a North Carolina corporation with dual executive
offices at 100 North Main Street, Winston-Salem, North Carolina 27150 and 191
Peachtree Street, N.E., Atlanta, Georgia 30303 and its telephone numbers are
(910) 770-5000 and (404) 332-5000, respectively.
THE TRUSTS
Each Trust is a statutory business trust created under Delaware law
pursuant to (i) a declaration of trust executed by the Corporation, as Sponsor
of the Trust, the Delaware Trustee and three Administrative Trustees (each as
defined herein) of such Trust and (ii) the filing of a certificate of trust with
the Delaware Secretary of State. Each declaration of trust will be amended and
restated in its entirety (each, as so amended and restated, a "Declaration")
substantially in the form filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. Each Declaration will be qualified as an
indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Each Trust exists for the exclusive purposes of (i) issuing and
selling its Trust Securities, which represent undivided beneficial interests in
the assets of such Trust, (ii) investing the gross proceeds from the sale of
such Trust Securities in a series of Corresponding Junior Subordinated
Debentures issued by the Corporation, and (iii) engaging in only those other
activities necessary, advisable or incidental thereto (such as registering the
transfer of Trust Securities). Accordingly, the Corresponding Junior
Subordinated Debentures will be the sole assets of each Trust, and payments
under the Corresponding Junior Subordinated Debentures will be the sole revenue
of each Trust.
All of the Common Securities of each Trust will be owned directly or
indirectly by the Corporation. The Common Securities of a Trust will rank pari
passu, and payments will be made thereon pro rata, with the Preferred Securities
of such Trust, except that upon the occurrence and continuance of an event of
default under a Declaration resulting from an event of default under the
Indenture, the rights of the Corporation as holder of the Common Securities to
payment in respect of Distributions and payments upon liquidation or redemption
will be subordinated to the rights of the holders of the Preferred Securities of
such Trust. See "Description of Preferred Securities--Subordination of Common
Securities." The Corporation will acquire, directly or indirectly, Common
Securities in an aggregate Liquidation Amount equal to at least 3% of the total
capital of each Trust.
Unless otherwise specified in the applicable Prospectus Supplement,
each Trust has a term of approximately 55 years, but may terminate earlier as
provided in the applicable Declaration. Each Trust's business and affairs are
conducted by its trustees, each appointed by the Corporation as holder of the
Common Securities. The trustees for each Trust will be The First National Bank
of Chicago, as the Property Trustee (the "Property Trustee"), First Chicago
Delaware Inc., as the Delaware Trustee (the "Delaware Trustee"), and three
individual trustees (the "Administrative Trustees") who are employees or
officers of or affiliated with the Corporation (collectively, the "Issuer
Trustees"). The First National Bank of Chicago, as Property Trustee, will act as
sole trustee under each Declaration for purposes of compliance with the Trust
Indenture Act. The First National Bank of Chicago will also
7
<PAGE>
act as trustee under the Guarantees and the Indenture. See "Description of
Guarantees" and "Description of Junior Subordinated Debentures." The holder of
the Common Securities of a Trust, or the holders of a majority in Liquidation
Amount of the Related Preferred Securities if an event of default under the
Declaration for such Trust has occurred and is continuing, will be entitled to
appoint, remove or replace the Property Trustee and/or the Delaware Trustee for
such Trust. In no event will the holders of the Preferred Securities have the
right to vote to appoint, remove or replace the Administrative Trustees; such
voting rights are vested exclusively in the holder of the Common Securities. The
duties and obligations of each Issuer Trustee are governed by the applicable
Declaration. The Corporation will pay all fees and expenses related to each
Trust and the offering of the Preferred Securities and will pay, directly or
indirectly, all ongoing costs, expenses and liabilities of each Trust.
The principal executive office of each Trust is c/o Wachovia
Corporation, 100 North Main Street, Winston-Salem, North Carolina 27150,
Attention: Chief Financial Officer of Wachovia Corporation and its telephone
number is 910-770-5000.
USE OF PROCEEDS
Except as otherwise set forth in the applicable Prospectus Supplement,
the Corporation intends to use the net proceeds from the sale of its Junior
Subordinated Debentures (including Corresponding Junior Subordinated Debentures
issued to the Trusts in connection with the investment by the Trusts of all of
the proceeds from the sale of Trust Securities) for general corporate purposes,
which may include, but not be limited to, investments in and advances to the
Corporation's subsidiaries and the redemption of certain of the Corporation's
outstanding debt securities. The precise amount and timing of the application of
such net proceeds used for such corporate purposes will depend on the funding
requirements and the availability of other funds to the Corporation and its
subsidiaries. Pending such application by the Corporation, such net proceeds may
be temporarily invested in short-term interest bearing securities. The Preferred
Securities will be eligible to qualify as Tier I Capital under current capital
guidelines of the Federal Reserve, provided that under current Federal Reserve
guidelines no more than 25% of the Corporation's Tier I Capital may comprise
Preferred Securities and other similar preferred securities and cumulative
preferred stock of the Corporation.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued in one or more
series under a Junior Subordinated Indenture, as supplemented from time to time
(as so supplemented, the "Indenture"), between the Corporation and The First
National Bank of Chicago, as trustee (the "Debenture Trustee"). This summary of
certain terms and provisions of the Junior Subordinated Debentures,
Corresponding Junior Subordinated Debentures and the Indenture, which summarizes
the material provisions thereof, does not purport to be complete and is subject
to, and is qualified in its entirety by reference to, the Indenture, the form of
which is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part, and to
8
<PAGE>
the Trust Indenture Act, to each of which reference is hereby made. The
Indenture is qualified under the Trust Indenture Act. Whenever particular
defined terms of the Indenture (as supplemented or amended from time to time)
are referred to herein or in a Prospectus Supplement, such defined terms are
incorporated herein or therein by reference.
General
Each series of Junior Subordinated Debentures will rank pari passu with
all other series of Junior Subordinated Debentures and will be unsecured and
subordinate and junior in right of payment to the extent and in the manner set
forth in the Indenture to all Senior Indebtedness (as defined below) of the
Corporation. See "--Subordination." Because the Corporation is a holding
company, the right of the Corporation to participate in any distribution of
assets of any subsidiary, including Wachovia Bank of Georgia, Wachovia Bank of
North Carolina and Wachovia Bank of South Carolina, upon such subsidiary's
liquidation or reorganization or otherwise, is subject to the prior claims of
creditors of the subsidiary, except to the extent the Corporation may itself be
recognized as a creditor of that subsidiary. Accordingly, the Junior
Subordinated Debentures will be effectively subordinated to all existing and
future liabilities of the Corporation's subsidiaries, and holders of Junior
Subordinated Debentures should look only to the assets of the Corporation for
payments on the Junior Subordinated Debentures. Except as otherwise provided in
the applicable Prospectus Supplement, the Indenture does not limit the
incurrence or issuance of other secured or unsecured debt of the Corporation,
including Senior Indebtedness, whether under the Indenture, any other existing
indenture or any other indenture that the Corporation may enter into in the
future or otherwise. See "--Subordination" and the applicable Prospectus
Supplement relating to any offering of Preferred Securities or Junior
Subordinated Debentures.
The Junior Subordinated Debentures will be 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 committee thereof.
The applicable Prospectus Supplement will describe the following terms
of the Junior Subordinated Debentures: (1) the title of the Junior Subordinated
Debentures; (2) any limit upon the aggregate principal amount of the Junior
Subordinated Debentures; (3) the date or dates on which the principal of the
Junior Subordinated Debentures is payable (the "Stated Maturity Date") or the
method of determination thereof; (4) the rate or rates, if any, at which the
Junior Subordinated Debentures shall bear interest, the dates on which any such
interest shall be payable (the "Interest Payment Dates"), the right, if any, of
the Corporation to defer or extend an Interest Payment Date, and the record
dates for any interest payable on any Interest Payment Date (the "Regular Record
Dates") or the method by which any of the foregoing shall be determined; (5) the
place or places where, subject to the terms of the Indenture as described below
under "--Payment and Paying Agents," the principal of and premium, if any, and
interest on the Junior Subordinated Debentures will be payable and where,
subject to the terms of the Indenture as described below under "--Denominations,
Registration and Transfer," the Junior Subordinated Debentures may be presented
for registration of transfer or exchange and the place or places where notices
and demands to or
9
<PAGE>
upon the Corporation in respect of the Junior Subordinated Debentures and the
Indentures may be made ("Place of Payment"); (6) any period or periods within
which, or date or dates on which, the price or prices at which and the terms and
conditions upon which Junior Subordinated Debentures may be redeemed, in whole
or in part, at the option of the Corporation or a holder thereof; (7) the
obligation or the right, if any, of the Corporation or a holder thereof to
redeem, purchase or repay the Junior Subordinated Debentures and the period or
periods within which, the price or prices at which, the currency or currencies
(including currency unit or units) in which and the other terms and conditions
upon which the Junior Subordinated Debentures shall be redeemed, repaid or
purchased, in whole or in part, pursuant to such obligation; (8) the
denominations in which any Junior Subordinated Debentures shall be issuable if
other than denominations of $25 and any integral multiple thereof; (9) if other
than in U.S. Dollars, the currency or currencies (including currency unit or
units) in which the principal of (and premium, if any) and interest, if any, on
the Junior Subordinated Debentures shall be payable, or in which the Junior
Subordinated Debentures shall be denominated; (10) any additions, modifications
or deletions in the events of default under the Indenture or covenants of the
Corporation specified in the Indenture with respect to the Junior Subordinated
Debentures; (11) if other than the principal amount thereof, the portion of the
principal amount of Junior Subordinated Debentures that shall be payable upon
declaration of acceleration of the maturity thereof; (12) any additions or
changes to the Indenture with respect to a series of Junior Subordinated
Debentures as shall be necessary to permit or facilitate the issuance of such
series in bearer form, registrable or not registrable as to principal, and with
or without interest coupons; (13) any index or indices used to determine the
amount of payments of principal of and premium, if any, on the Junior
Subordinated Debentures and the manner in which such amounts will be determined;
(14) the terms and conditions relating to the issuance of a temporary Global
Security representing all of the Junior Subordinated Debentures of such series
and the exchange of such temporary Global Security for definitive Junior
Subordinated Debentures of such series; (15) subject to the terms described
herein under "--Global Junior Subordinated Debentures," whether the Junior
Subordinated Debentures of the series shall be issued in whole or in part in the
form of one or more Global Securities and, in such case, the depositary for such
Global Securities, which depositary shall be a clearing agency registered under
the Exchange Act; (16) the appointment of any paying agent or agents; (17) the
terms and conditions of any obligation or right of the Corporation or a holder
to convert or exchange the Junior Subordinated Debentures into Preferred
Securities; (18) the form of Declaration and Guarantee Agreement, if applicable;
(19) the relative degree, if any, to which such Junior Subordinated Debentures
of the series shall be senior to or be subordinated to other series of such
Junior Subordinated Debentures or other indebtedness of the Corporation in right
of payment, whether such other series of Junior Subordinated Debentures or other
indebtedness are outstanding or not; and (20) any other terms of the Junior
Subordinated Debentures not inconsistent with the provisions of the Indenture.
Junior Subordinated Debentures may be sold at a substantial discount
below their stated principal amount, bearing no interest or interest at a rate
which at the time of issuance is below market rates. Certain United States
federal income tax consequences and special considerations applicable to any
such Junior Subordinated Debentures will be described in the applicable
Prospectus Supplement.
10
<PAGE>
If the purchase price of any of the Junior Subordinated Debentures is
payable in one or more foreign currencies or currency units or if any Junior
Subordinated Debentures are denominated in one or more foreign currencies or
currency units or if the principal of, premium, if any, or interest on any
Junior Subordinated Debentures is payable in one or more foreign currencies or
currency units, the restrictions, elections, certain United States federal
income tax consequences, specific terms and other information with respect to
such series of Junior Subordinated Debentures and such foreign currency or
currency units will be set forth in the applicable Prospectus Supplement.
If any index is used to determine the amount of payments of principal
of, premium, if any, or interest on any series of Junior Subordinated
Debentures, special United States federal income tax, accounting and other
considerations applicable thereto will be described in the applicable Prospectus
Supplement.
Denominations, Registration and Transfer
Unless otherwise specified in the applicable Prospectus Supplement, the
Junior Subordinated Debentures will be issuable only in registered form without
coupons in denominations of $25 and any integral multiple thereof. Junior
Subordinated Debentures of any series will be exchangeable for other Junior
Subordinated Debentures of the same issue and series, of any authorized
denominations, of a like aggregate principal amount, of the same original issue
date and stated maturity and bearing the same interest rate.
Junior Subordinated Debentures may be presented for exchange as
provided above, and may be presented for registration of transfer (with the form
of transfer endorsed thereon, or a satisfactory written instrument of transfer,
duly executed), at the office of the appropriate securities registrar or at the
office of any transfer agent designated by the Corporation for such purpose with
respect to any series of Junior Subordinated Debentures and referred to in the
applicable Prospectus Supplement, without service charge and upon payment of any
taxes and other governmental charges as described in the Indenture. The
Corporation will appoint the Debenture Trustee as securities registrar under the
Indenture. If the applicable Prospectus Supplement refers to any transfer agents
(in addition to the securities registrar) initially designated by the
Corporation with respect to any series of Junior Subordinated Debentures, the
Corporation may at any time rescind the designation of any such transfer agent
or approve a change in the location through which any such transfer agent acts,
provided that the Corporation maintains a transfer agent in each place of
payment for such series. The Corporation may at any time designate additional
transfer agents with respect to any series of Junior Subordinated Debentures.
In the event of any redemption, neither the Corporation nor the
Debenture Trustee shall be required to (i) issue, register the transfer of or
exchange Junior Subordinated Debentures of any series during a period beginning
at the opening of business 15 days before the day of selection for redemption of
Junior Subordinated Debentures of that series and ending at the close of
business on the day of mailing of the relevant notice of redemption or (ii)
transfer or exchange any Junior Subordinated Debentures so selected for
redemption,
11
<PAGE>
except, in the case of any Junior Subordinated Debentures being redeemed in
part, any portion thereof not to be redeemed.
Global Junior Subordinated Debentures
The Junior Subordinated Debentures of a series may be issued in whole
or in part in the form of one or more Global Junior Subordinated Debentures that
will be deposited with, or on behalf of, a depositary (the "Depositary")
identified in the Prospectus Supplement relating to such series. Global Junior
Subordinated Debentures may be issued only in fully registered form and in
either temporary or permanent form. Unless and until it is exchanged in whole or
in part for the individual Junior Subordinated Debentures represented thereby, a
Global Junior Subordinated Debenture may not be transferred except as a whole by
the Depositary for such Global Junior Subordinated Debenture to a nominee of
such Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by the Depositary or any nominee to a successor
Depositary or any nominee of such successor.
The specific terms of the depositary arrangement with respect to a
series of Junior Subordinated Debentures will be described in the Prospectus
Supplement relating to such series. The Corporation anticipates that the
following provisions will generally apply to depositary arrangements.
Upon the issuance of a Global Junior Subordinated Debenture, and the
deposit of such Global Junior Subordinated Debenture with or on behalf of the
Depositary, the Depositary for such Global Junior Subordinated Debenture or its
nominee will credit, on its book-entry registration and transfer system, the
respective principal amounts of the individual Junior Subordinated Debentures
represented by such Global Junior Subordinated Debenture to the accounts of
persons that have accounts with such Depositary ("Participants"). Such accounts
shall be designated by the dealers, underwriters or agents with respect to such
Junior Subordinated Debentures or by the Corporation if such Junior Subordinated
Debentures are offered and sold directly by the Corporation. Ownership of
beneficial interests in a Global Junior Subordinated Debenture will be limited
to Participants or persons that may hold interests through Participants.
Ownership of beneficial interests in such Global Junior Subordinated Debenture
will be shown on, and the transfer of that ownership will be effected only
through, records maintained by the applicable Depositary or its nominee (with
respect to interests of Participants) and the records of Participants (with
respect to interests of persons who hold through Participants). The laws of some
states require that certain purchasers of securities take physical delivery of
such securities in definitive form. Such limits and such laws may impair the
ability to transfer beneficial interests in a Global Junior Subordinated
Debenture.
So long as the Depositary for a Global Junior Subordinated Debenture,
or its nominee, is the registered owner of such Global Junior Subordinated
Debenture, such Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Junior Subordinated Debentures
represented by such Global Junior Subordinated Debenture for all purposes under
the Indenture governing such Junior Subordinated
12
<PAGE>
Debentures. Except as provided below, owners of beneficial interests in a Global
Junior Subordinated Debenture will not be entitled to have any of the individual
Junior Subordinated Debentures of the series represented by such Global Junior
Subordinated Debenture registered in their names, will not receive or be
entitled to receive physical delivery of any such Junior Subordinated Debentures
of such series in definitive form and will not be considered the owners or
holders thereof under the Indenture.
Payments of principal of (and premium, if any) and interest on
individual Junior Subordinated Debentures represented by a Global Junior
Subordinated Debenture registered in the name of a Depositary or its nominee
will be made to the Depositary or its nominee, as the case may be, as the
registered owner of the Global Junior Subordinated Debenture representing such
Junior Subordinated Debentures. None of the Corporation, the Debenture Trustee,
any Paying Agent, or the Securities Registrar for such Junior Subordinated
Debentures will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of the Global Junior Subordinated Debenture representing such Junior
Subordinated Debentures or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
The Corporation expects that the Depositary for a series of Junior
Subordinated Debentures or its nominee, upon receipt of any payment of
principal, premium, if any, or interest in respect of a permanent Global Junior
Subordinated Debenture representing any of such Junior Subordinated Debentures,
immediately will credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interest in the principal amount of
such Global Junior Subordinated Debenture for such Junior Subordinated
Debentures as shown on the records of such Depositary or its nominee. The
Corporation also expects that payments by Participants to owners of beneficial
interests in such Global Junior Subordinated Debenture held through such
Participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name." Such payments will be the responsibility of
such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if
a Depositary for a series of Junior Subordinated Debentures is at any time
unwilling, unable or ineligible to continue as depositary and a successor
depositary is not appointed by the Corporation within 90 days or there shall
have occurred and be continuing an Event of Default with respect to such Global
Security, the Corporation will issue individual Junior Subordinated Debentures
of such series in exchange for the Global Junior Subordinated Debenture
representing such series of Junior Subordinated Debentures. In addition, the
Corporation may at any time and in its sole discretion, subject to any
limitations described in the Prospectus Supplement relating to such Junior
Subordinated Debentures, determine not to have any Junior Subordinated
Debentures of such series represented by one or more Global Junior Subordinated
Debentures and, in such event, will issue certificated Junior Subordinated
Debentures of such series in exchange for the Global Junior Subordinated
Debenture. Further, if the Corporation so specifies with respect to the Junior
Subordinated Debentures of a series, an owner of a beneficial interest in a
Global Junior Subordinated
13
<PAGE>
Debenture representing Junior Subordinated Debentures of such series may, on
terms acceptable to the Corporation, the Debenture Trustee and the Depositary
for such Global Junior Subordinated Debenture, receive certificated Junior
Subordinated Debentures of such series in exchange for such beneficial
interests, subject to any limitations described in the Prospectus Supplement
relating to such Junior Subordinated Debentures. In any such instance, an owner
of a beneficial interest in a Global Junior Subordinated Debenture will be
entitled to physical delivery of certificated Junior Subordinated Debentures of
the series represented by such Global Junior Subordinated Debenture equal in
principal amount to such beneficial interest and to have such Junior
Subordinated Debentures registered in its name. Individual Junior Subordinated
Debentures of such series so issued will be issued in denominations, unless
otherwise specified by the Corporation, of $25 and integral multiples thereof.
Payment and Paying Agents
Unless otherwise indicated in the applicable Prospectus Supplement,
payment of principal of (and premium, if any) and any interest on Junior
Subordinated Debentures will be made at the office of the Debenture Trustee in
the City of New York or at the office of such paying agent or paying agents as
the Corporation may designate from time to time in the applicable Prospectus
Supplement, except that at the option of the Corporation payment of any interest
may be made (i) except in the case of Global Junior Subordinated Debentures, by
check mailed to the address of the person entitled thereto as such address shall
appear in the securities register or (ii) by transfer to an account maintained
by the person entitled thereto as specified in the securities register, provided
that proper transfer instructions have been received by the Regular Record Date.
Unless otherwise indicated in the applicable Prospectus Supplement, payment of
any interest on Junior Subordinated Debentures will be made to the person in
whose name such Junior Subordinated Debenture is registered at the close of
business on the Regular Record Date for such interest, except in the case of
defaulted interest. The Corporation may at any time designate additional paying
agents or rescind the designation of any paying agent; however the Corporation
will at all times be required to maintain a paying agent in each place of
payment for each series of Junior Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any paying agent, or
then held by the Corporation in trust, for the payment of the principal of (and
premium, if any) or interest on any Junior Subordinated Debenture and remaining
unclaimed for two years after such principal (and premium, if any) or interest
has become due and payable shall, at the request of the Corporation, be repaid
to the Corporation and the holder of such Junior Subordinated Debenture shall
thereafter look, as a general unsecured creditor, only to the Corporation for
payment thereof.
Option to Defer Interest Payments
If provided in the applicable Prospectus Supplement, the Corporation
will have the right at any time and from time to time during the term of any
series of Junior Subordinated Debentures to defer payment of interest for up to
such number of consecutive interest
14
<PAGE>
payment periods as may be specified in the applicable Prospectus Supplement
(each, an "Extension Period"), subject to the terms, conditions and covenants,
if any, specified in such Prospectus Supplement, provided that such Extension
Period may not extend beyond the Stated Maturity Date of such series of Junior
Subordinated Debentures. Certain United States federal income tax consequences
and special considerations applicable to any such Junior Subordinated Debentures
will be described in the applicable Prospectus Supplement.
Redemption
Unless otherwise indicated in the applicable Prospectus Supplement,
Junior Subordinated Debentures will not be subject to any sinking fund.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Corporation may, at its option and subject to receipt of prior approval by the
Federal Reserve if then required under applicable capital guidelines or
policies, redeem the Junior Subordinated Debentures of any series in whole at
any time or in part from time to time. If the Junior Subordinated Debentures of
any series are so redeemable only on or after a specified date or upon the
satisfaction of additional conditions, the applicable Prospectus Supplement will
specify such date or describe such conditions. Junior Subordinated Debentures in
denominations larger than $25 may be redeemed in part but only in integral
multiples of $25. Except as otherwise specified in the applicable Prospectus
Supplement, the redemption price for any Junior Subordinated Debenture so
redeemed shall equal any accrued and unpaid interest thereon to the redemption
date, plus 100% of the principal amount thereof.
Except as otherwise specified in the applicable Prospectus Supplement,
if a Tax Event (as defined below) in respect of a series of Junior Subordinated
Debentures or a Regulatory Capital Event (as defined below) shall occur and be
continuing, the Corporation may, at its option and subject to receipt of prior
approval by the Federal Reserve if then required under applicable capital
guidelines or policies, redeem such series of Junior Subordinated Debentures in
whole (but not in part) at any time within 90 days following the occurrence of
such Tax Event or Regulatory Capital Event, at a redemption price equal to 100%
of the principal amount of such Junior Subordinated Debentures then outstanding
plus accrued and unpaid interest to the date fixed for redemption, except as
otherwise specified in the applicable Prospectus Supplement.
"Tax Event" means the receipt by the Corporation of an opinion of
counsel experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced proposed change) in, the laws
or any regulations thereunder of the United States or any political subdivision
or taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or such
pronouncement or decision is announced on or after the date of issuance of the
applicable series of Junior Subordinated Debentures under the Indenture, there
is more than an insubstantial risk that (i) the Trust is, or will be within 90
days of the date of such opinion, subject to United States federal income tax
with respect to income received or accrued on such series of Junior Subordinated
Debentures, (ii) interest payable by the Corporation on such series of Junior
15
<PAGE>
Subordinated Debentures is not, or within 90 days of the date of such opinion
will not be, deductible by the Corporation, in whole or in part, for United
States federal income tax purposes, or (iii) the Trust is, or will be within 90
days of the date of such opinion, subject to more than a de minimis amount of
other taxes, duties or other governmental charges.
A "Regulatory Capital Event" means that the Corporation shall have
received an opinion of independent bank regulatory 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 rules, guidelines or policies of the
Federal Reserve 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 issuance of the applicable series of Junior Subordinated Debentures
under the Indenture, the applicable Preferred Securities do not constitute, or
within 90 days of the date of such opinion, will not constitute, Tier I Capital
(or its then equivalent); provided, however, that the distribution of such
series of Junior Subordinated Debentures in connection with the liquidation of
the Trust by the Corporation shall not in and of itself constitute a Regulatory
Capital Event unless such liquidation shall have occurred in connection with a
Tax Event.
Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each holder of Junior Subordinated
Debentures to be redeemed at its registered address. Unless the Corporation
defaults in payment of the redemption price, on and after the redemption date
interest ceases to accrue on such Junior Subordinated Debentures or portions
thereof called for redemption.
Restrictions on Certain Payments
The Corporation will also covenant, as to each series of Junior
Subordinated Debentures, that it will not, (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Corporation's capital stock, (ii) make any payment
of principal, interest or premium, if any, on or repay or repurchase or redeem
any debt securities of the Corporation (including other series of Junior
Subordinated Debentures) that rank pari passu with or junior in right of payment
to the Junior Subordinated Debentures or (iii) make any guarantee payments with
respect to any guarantee by the Corporation of the debt securities of any
subsidiary of the Corporation if such guarantee ranks pari passu with or junior
in right of payment to the Junior Subordinated Debentures (other than (a)
dividends or distributions in shares of, or options, warrants or rights to
subscribe for or purchase shares of, common stock of the Corporation, (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Guarantee with respect to the series of Related Preferred
Securities, (d) as a result of a reclassification of the Corporation's capital
stock or the exchange or conversion of one class or series of the Corporation's
capital stock for another class or series of the Corporation's capital stock,
(e) the purchase of fractional interests in shares of the Corporation's capital
stock pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or
16
<PAGE>
exchanged, and (f) purchases of common stock related to the issuance of common
stock or rights under any of the Corporation's benefit plans for its directors,
officers or employees or any of the Corporation's dividend reinvestment plans)
if at such time (i) there shall have occurred any event of which the Corporation
has actual knowledge (a) that with the giving of notice or the lapse of time, or
both, would constitute an "Event of Default" under the Indenture with respect to
the Junior Subordinated Debentures of such series and (b) in respect of which
the Corporation shall not have taken reasonable steps to cure, (ii) the
Corporation shall be in default with respect to its payment of any obligations
under the Guarantee relating to the Related Preferred Securities or (iii) the
Corporation shall have given notice of its election of an Extension Period, or
any extension thereof, as provided in the Indenture with respect to the Junior
Subordinated Debentures of such series and shall not have rescinded such notice,
and such Extension Period, or any extension thereof, shall have commenced.
Modification of Indenture
From time to time the Corporation and the Debenture Trustee may,
without the consent of the holders of any series of Junior Subordinated
Debentures, amend, waive or supplement the Indenture for specified purposes,
including, among other things, curing ambiguities, defects or inconsistencies
(provided that any such action does not materially adversely affect the interest
of the holders of any series of Junior Subordinated Debentures) and qualifying,
or maintaining the qualification of, the Indenture under the Trust Indenture
Act. The Indenture contains provisions permitting the Corporation and the
Debenture Trustee, with the consent of the holders of not less than a majority
in principal amount of each outstanding series of Junior Subordinated Debentures
affected, to modify the Indenture in a manner adversely affecting the rights of
the holders of such series of the Junior Subordinated Debentures in any material
respect; provided, that no such modification may, without the consent of the
holder of each outstanding Junior Subordinated Debenture so affected, (i) change
the Stated Maturity Date of any series of Junior Subordinated Debentures (except
as otherwise specified in the applicable Prospectus Supplement), or reduce the
principal amount thereof, or reduce the rate or extend the time of payment of
interest thereon or (ii) reduce the percentage of principal amount of Junior
Subordinated Debentures of any series, the holders of which are required to
consent to any such modification of the Indenture.
In addition, the Corporation and the Debenture Trustee may execute,
without the consent of any holder of Junior Subordinated Debentures, any
supplemental Indenture for the purpose of creating any new series of Junior
Subordinated Debentures.
Debenture Events of Default
The Indenture provides that any one or more of the following described
events with respect to a series of Junior Subordinated Debentures that has
occurred and is continuing constitutes a "Debenture Event of Default" with
respect to such series of Junior Subordinated Debentures (whatever the reason
for such Debenture Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
17
<PAGE>
decree or order of any court of any order, rule or regulation or any
administrative or governmental body):
(i) failure for 30 days to pay any interest on such
series of Junior Subordinated Debentures or any other series of Junior
Subordinated Debentures when due (subject to the deferral of any due
date in the case of an Extension Period); or
(ii) failure to pay any principal or premium, if any, on
such series of Junior Subordinated Debentures or any other series of
Junior Subordinated Debentures when due whether at maturity, upon
redemption, by declaration of acceleration of maturity or otherwise; or
(iii) failure to observe or perform in any material
respect certain other covenants contained in the Indenture for 90 days
after written notice to the Corporation from the Debenture Trustee or
to the Corporation and the Debenture Trustee from the holders of at
least 25% in aggregate outstanding principal amount of such affected
series of outstanding Junior Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or
reorganization of the Corporation.
The holders of a majority in aggregate outstanding principal amount of
Junior Subordinated Debentures of each series affected have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Debenture Trustee. The Debenture Trustee or the holders of not less than
25% in aggregate outstanding principal amount of Junior Subordinated Debentures
of each series affected may declare the principal due and payable immediately
upon a Debenture Event of Default. The holders of a majority in aggregate
outstanding principal amount of Junior Subordinated Debentures of each series
affected may annul such declaration and waive the default if the default (other
than the nonpayment of the principal of such Junior Subordinated Debentures
which has become due solely by such acceleration) has been cured and a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee.
The holders of a majority in aggregate outstanding principal amount of
each series of the Junior Subordinated Debentures affected thereby may, on
behalf of the holders of all the Junior Subordinated Debentures, waive any past
default, except a default in the payment of principal or interest (unless such
default has been cured and a sum sufficient to pay all matured installments of
interest and principal due otherwise than by acceleration has been deposited
with the Debenture Trustee) or a default in respect of a covenant or provision
which under the Indenture cannot be modified or amended without the consent of
the holder of each outstanding Junior Subordinated Debenture. The Corporation is
required to file annually with the Debenture Trustee a certificate as to whether
or not the Corporation is in compliance with all the conditions and covenants
applicable to it under the Indenture.
18
<PAGE>
In case a Debenture Event of Default shall occur and be continuing as
to a series of Corresponding Junior Subordinated Debentures, the Property
Trustee will have the right to declare the principal of and the interest on such
Corresponding Junior Subordinated Debentures, and any other amounts payable
under the Indenture, to be forthwith due and payable and to enforce its other
rights as a creditor with respect to such Corresponding Junior Subordinated
Debentures.
Enforcement of Certain Rights by Holders of Preferred Securities
If a Debenture Event of Default with respect to a series of
Corresponding Junior Subordinated Debentures has occurred and is continuing and
such event is attributable to the failure of the Corporation to pay interest, or
premium, if any, on or principal of such Corresponding Junior Subordinated
Debentures on the due date, a holder of Preferred Securities may institute a
legal proceeding directly against the Corporation for enforcement of payment to
such holder of the principal of, or premium, if any, or interest on such
Corresponding Junior Subordinated Debentures having a principal amount equal to
the aggregate Liquidation Amount of the Related Preferred Securities of such
holder (a "Direct Action"). The Corporation may not amend the Indenture to
remove the foregoing right to bring a Direct Action without the prior written
consent of the holders of all of the Preferred Securities outstanding. If the
right to bring a Direct Action is removed, the applicable Trust may become
subject to the reporting obligations under the Exchange Act. Notwithstanding any
payments made to a holder of Preferred Securities by the Corporation in
connection with a Direct Action, the Corporation shall remain obligated to pay
the principal of or premium, if any, or interest on the Corresponding Junior
Subordinated Debentures, and the Corporation shall be subrogated to the rights
of the holder of such Preferred Securities with respect to payments on the
Preferred Securities to the extent of any payments made by the Corporation to
such holder in any Direct Action.
The holders of the Preferred Securities will not be able to exercise
directly any remedies other than those set forth in the preceding paragraph
available to the holders of the Junior Subordinated Debentures unless there
shall have been an event of default under the Declaration. See "Description of
Preferred Securities--Events of Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions
The Indenture provides that the Corporation shall not consolidate with
or merge into any other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, and no Person shall
consolidate with or merge into the Corporation or convey, transfer or lease its
properties and assets as an entirety or substantially as an entirety to the
Corporation, unless (i) in case the Corporation consolidates with or merges into
another Person or conveys or transfers its properties and assets substantially
as an entirety to any Person, the successor Person is organized under the laws
of the United States or any state or the District of Columbia, and such
successor Person expressly assumes the Corporation's obligations on the Junior
Subordinated Debentures issued under the Indenture; (ii) immediately after
giving effect thereto, no Debenture Event of Default, and no event which, after
notice or lapse of time or both, would become a Debenture Event of Default,
19
<PAGE>
shall have occurred and be continuing; and (iii) certain other conditions as
prescribed by the Indenture are met.
The general provisions of the Indenture do not afford holders of the
Junior Subordinated Debentures protection in the event of a highly leveraged or
other transaction involving the Corporation that may adversely affect holders of
the Junior Subordinated Debentures.
Satisfaction and Discharge
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and payable
at their Stated Maturity Date within one year of the date of deposit or (iii)
are to be called for redemption within one year under arrangements satisfactory
to the Trustee for the giving of notice of redemption by the Trustee in the
name, and at the expense of, the Corporation, and the Corporation deposits or
causes to be deposited with the Debenture Trustee funds, in trust, for the
purpose and in an amount in the currency or currencies in which the Junior
Subordinated Debentures are payable sufficient to pay and discharge the entire
indebtedness on the Junior Subordinated Debentures not previously delivered to
the Debenture Trustee for cancellation, for the principal (and premium, if any)
and interest to the date of the deposit or to the Stated Maturity Date or
redemption date, as the case may be, then the Indenture will cease to be of
further effect (except as to the Corporation's obligations to pay all other sums
due pursuant to the Indenture and to provide the officers' certificates and
opinions of counsel described therein), and the Corporation will be deemed to
have satisfied and discharged the Indenture.
Conversion or Exchange
If and to the extent indicated in the applicable Prospectus Supplement,
the Junior Subordinated Debentures of any series may be convertible or
exchangeable into Junior Subordinated Debentures of another series or into
Preferred Securities of another series. The specific terms on which Junior
Subordinated Debentures of any series may be so converted or exchanged will be
set forth in the applicable Prospectus Supplement. Such terms may include
provisions for conversion or exchange, either mandatory, at the option of the
holder, or at the option of the Corporation, in which case the number of shares
of Preferred Securities or other securities to be received by the holders of
Junior Subordinated Debentures would be calculated as of a time and in the
manner stated in the applicable Prospectus Supplement.
Subordination
In the Indenture, the Corporation has covenanted and agreed that any
Junior Subordinated Debentures issued thereunder will be subordinate and junior
in right of payment to all Senior Indebtedness to the extent provided in the
Indenture. Upon any payment or distribution of assets of the Corporation upon
any liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors, marshaling of assets or any
20
<PAGE>
bankruptcy, insolvency, debt restructuring or similar proceedings in connection
with any insolvency or bankruptcy proceeding of the Corporation, the holders of
Senior Indebtedness will first be entitled to receive payment in full of all
Allocable Amounts (as defined below) in respect of such Senior Indebtedness
before the holders of Junior Subordinated Debentures will be entitled to receive
or retain any payment in respect thereof.
In the event of the acceleration of the maturity of any Junior
Subordinated Debentures, the holders of all Senior Indebtedness outstanding at
the time of such acceleration will first be entitled to receive payment in full
of all Allocable Amounts in respect of such Senior Indebtedness before the
holders of Junior Subordinated Debentures will be entitled to receive or retain
any payment in respect of the Junior Subordinated Debentures.
No payments on account of principal (or premium, if any) or interest in
respect of the Junior Subordinated Debentures may be made if there shall have
occurred and be continuing a default in any payment with respect to Senior
Indebtedness, or an event of default with respect to any Senior Indebtedness
resulting in the acceleration of the maturity thereof, or if any judicial
proceeding shall be pending with respect to any such default.
"Allocable Amounts," when used with respect to any Senior Indebtedness,
means all amounts due or to become due on such Senior Indebtedness less, if
applicable, any amount which would have been paid to, and retained by, the
holders of such Senior Indebtedness (whether as a result of the receipt of
payments by the holders of such Senior Indebtedness from the Corporation or any
other obligor thereon or from any holders of, or trustee in respect of, other
indebtedness that is subordinate and junior in right of payment to such Senior
Indebtedness pursuant to any provision of such indebtedness for the payment over
of amounts received on account of such indebtedness to the holders of such
Senior Indebtedness or otherwise) but for the fact that such Senior Indebtedness
is subordinate or junior in right of payment to (or subject to a requirement
that amounts received on such Senior Indebtedness be paid over to obligees on)
trade accounts payable or accrued liabilities arising in the ordinary course of
business.
"Indebtedness" shall mean (i) any obligation of, or any obligation
guaranteed by, the Corporation for the repayment of borrowed money, whether or
not evidenced by bonds, debentures, notes or other written instruments and any
deferred obligation for the payment of the purchase price of property or assets
acquired other than in the ordinary course of business and (ii) all indebtedness
of the Corporation for claims in respect of derivative products such as interest
and foreign exchange rate contracts, commodity contracts and similar
arrangements, whether outstanding on the date of execution of the Indenture or
thereafter created, assumed or incurred. For purposes of this definition "claim"
shall have the meaning assigned in Section 101(5) of the Bankruptcy Code of
1978, as amended and in effect on the date of the execution of the Indenture.
"Indebtedness Ranking on a Parity with the Junior Subordinated
Debentures" shall mean (i) all Indebtedness, whether outstanding on the date of
execution of the Indenture or thereafter created, assumed or incurred, which
specifically by its terms ranks equally with
21
<PAGE>
and not prior to the Junior Subordinated Debentures in the right of payment upon
the happening of the dissolution or winding-up or liquidation or reorganization
of the Corporation and (ii) the 7.64% Junior Subordinated Deferrable Interest
Debentures Due January 15, 2027 of the Corporation.
"Indebtedness Ranking Junior to the Junior Subordinated Debentures"
shall mean any Indebtedness, whether outstanding on the date of execution of the
Indenture or thereafter created, assumed or incurred, which specifically by its
terms ranks junior to and not equally with or prior to the Junior Subordinated
Debentures (and any other Indebtedness Ranking on a Parity with the Junior
Subordinated Debentures) in right of payment upon the happening of the
dissolution or winding-up or liquidation or reorganization of the Corporation.
The securing of any Indebtedness, otherwise constituting Indebtedness Ranking on
a Parity with the Junior Subordinated Debentures or Indebtedness Ranking Junior
to the Junior Subordinated Debentures, as the case may be, shall not be deemed
to prevent such Indebtedness from constituting Indebtedness Ranking On a Parity
with the Junior Subordinated Debentures or Indebtedness Ranking Junior to the
Junior Subordinated Debentures, as the case may be.
"Senior Indebtedness" shall mean all Indebtedness, whether outstanding
on the date of execution of the Indenture or thereafter created, assumed or
incurred, except Indebtedness Ranking on a Parity with the Junior Subordinated
Debentures or Indebtedness Ranking Junior to the Junior Subordinated Debentures,
and any deferrals, renewals or extensions of such Senior Indebtedness.
The Corporation is a non-operating holding company and almost all of
the operating assets of the Corporation are owned by the Corporation's
subsidiaries. The Corporation relies primarily on dividends from such
subsidiaries to meet its obligations for payment of principal and interest on
its outstanding debt obligations and corporate expenses. The Corporation is a
legal entity separate and distinct from its banking and non-banking affiliates.
The principal sources of the Corporation's income are dividends, interest and
fees from its banking and non-banking affiliates. The Banks are subject to
certain restrictions imposed by federal law on any extensions of credit to, and
certain other transactions with, the Corporation and certain other affiliates,
and on investments in stock or other securities thereof. Such restrictions
prevent the Corporation and such other affiliates from borrowing from the Banks
unless the loans are secured by various types of collateral. Further, such
secured loans, other transactions and investments by any of the Banks are
generally limited in amount as to the Corporation and as to each of such other
affiliates to 10% of such Bank's capital and surplus and as to the Corporation
and all of such other affiliates to an aggregate of 20% of such Bank's capital
and surplus. In addition, payment of dividends to the Corporation by the
subsidiary banks is subject to ongoing review by banking regulators and is
subject to various statutory limitations and in certain circumstances requires
approval by banking regulatory authorities. Accordingly, the Junior Subordinated
Debentures will be effectively subordinated to all existing and future
liabilities of the Corporation's subsidiaries. Holders of Junior Subordinated
Debentures should look only to the assets of the Corporation for payments of
interest and principal and premium, if any.
22
<PAGE>
The Indenture places no limitation on the amount of additional Senior
Indebtedness that may be incurred by the Corporation. The Corporation expects
from time to time to incur additional indebtedness constituting Senior
Indebtedness.
Trust Expenses
Pursuant to the Indenture, the Corporation will irrevocably and
unconditionally agree with each Trust that holds Junior Subordinated Debentures
that the Corporation will pay to such Trust, and reimburse such Trust for, the
full amount of any costs, expenses or liabilities of the Trust, other than
obligations of the Trust to pay to the holders of any Preferred Securities or
other similar interests in the Trust the amounts due such holders pursuant to
the terms of the Preferred Securities or such other similar interests, as the
case may be. Such payment obligation will include any such costs, expenses or
liabilities of the Trust that are required by applicable law to be satisfied in
connection with a termination of such Trust.
Governing Law
The Indenture and the Junior Subordinated Debentures will be governed
by and construed in accordance with the laws of the State of New York, and for
all purposes shall be governed by and construed in accordance with the laws of
such State, without regard to the conflicts of laws principles thereof.
Information Concerning the Debenture Trustee
The Debenture Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Debenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Debenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
Corresponding Junior Subordinated Debentures
The Corresponding Junior Subordinated Debentures may be issued in one
or more series of Junior Subordinated Debentures under the Indenture with terms
corresponding to the terms of a series of Related Preferred Securities. In that
event, concurrently with the issuance of each Trust's Preferred Securities, such
Trust will invest the proceeds thereof and the consideration paid by the
Corporation for the Common Securities of such Trust in such series of
Corresponding Junior Subordinated Debentures issued by the Corporation to such
Trust. Each series of Corresponding Junior Subordinated Debentures will be in
the principal amount equal to the aggregate stated Liquidation Amount of the
Related Preferred Securities and the Common Securities of such Trust and will
rank pari passu with all other series of Junior Subordinated Debentures.
23
<PAGE>
Unless otherwise specified in the applicable Prospectus Supplement, if
a Tax Event or a Regulatory Capital Event in respect of a Trust shall occur and
be continuing, the Corporation may, at its option and subject to prior approval
of the Federal Reserve if then so required under applicable capital guidelines
or policies, redeem the Corresponding Junior Subordinated Debentures at any time
within 90 days of the occurrence of such Tax Event or Regulatory Capital Event,
in whole but not in part, subject to the provisions of the Indenture and whether
or not such Corresponding Junior Subordinated Debentures are then otherwise
redeemable at the option of the Corporation. The redemption price for any
Corresponding Junior Subordinated Debentures shall be set forth in the
applicable Prospectus Supplement. For so long as the applicable Trust is the
holder of all the outstanding Corresponding Junior Subordinated Debentures of
such series, the proceeds of any such redemption will be used by the Trust to
redeem the corresponding Trust Securities in accordance with their terms. The
Corporation may not redeem a series of Corresponding Junior Subordinated
Debentures in part unless all accrued and unpaid interest has been paid in full
on all outstanding Corresponding Junior Subordinated Debentures of such series
for all interest periods terminating on or prior to the Redemption Date.
The Corporation will covenant in the Indenture, as to each series of
Corresponding Junior Subordinated Debentures, that if and so long as (i) the
Trust of the related series of Trust Securities is the holder of all such
Corresponding Junior Subordinated Debentures, (ii) a Tax Event in respect of
such Trust has occurred and is continuing and (iii) the Corporation has elected,
and has not revoked such election, to pay Additional Sums (as defined under
"Description of Preferred Securities--Redemption or Exchange") in respect of
such Trust Securities, the Corporation will pay to such Trust such Additional
Sums. The Corporation will also covenant, as to each series of Corresponding
Junior Subordinated Debentures, (i) to directly or indirectly maintain 100
percent ownership of the Common Securities; provided, however, that any
permitted successor of the Corporation under the Indenture may succeed to the
Corporation's ownership of the Common Securities, (ii) to use its reasonable
efforts to cause the Trust (a) to remain a business trust, except in connection
with the distribution of Junior Subordinated Debentures to the holders of Trust
Securities in liquidation of the Trust, the redemption of all of the Trust
Securities of the Trust, or certain mergers, consolidations or amalgamations,
each as permitted by the related Declaration of the Trust, and (b) to continue
not to be classified as a grantor trust and not as an association taxable as a
corporation or a 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 Corresponding
Junior Subordinated Debentures.
DESCRIPTION OF PREFERRED SECURITIES
Pursuant to the terms of the Declaration for each Trust, the Issuer
Trustees on behalf of such Trust will issue the Preferred Securities and the
Common Securities. The Preferred Securities of a particular issue will represent
beneficial ownership interests in the Trust and the holders thereof will be
entitled to a preference in certain circumstances with respect to Distributions
and amounts payable on redemption or liquidation over the Common Securities of
such Trust, as well as other benefits as described in the corresponding
Declaration. This
24
<PAGE>
summary of certain provisions of the Preferred Securities and each Declaration,
which summarizes the material terms thereof, does not purport to be complete and
is subject to, and is qualified in its entirety by reference to, all the
provisions of each Declaration, including the definitions therein of certain
terms, and the Trust Indenture Act, to each of which reference is hereby made.
Wherever particular defined terms of a Declaration (as amended or supplemented
from time to time) are referred to herein or in a Prospectus Supplement, such
defined terms are incorporated herein or therein by reference. The form of the
Declaration has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part. Each of the Trusts is a legally separate entity
and the assets of one are not available to satisfy the obligations of any of the
others.
General
The Preferred Securities of a Trust will rank pari passu, and payments
will be made thereon pro rata, with the Common Securities of that Trust except
as described under "--Subordination of Common Securities." Legal title to the
Corresponding Junior Subordinated Debentures will be held by the Property
Trustee in trust for the benefit of the holders of the related Preferred
Securities and Common Securities. Each Guarantee Agreement executed by the
Corporation for the benefit of the holders of a Trust's Trust Securities (the
"Guarantee") will be a guarantee on a subordinated basis with respect to the
related Trust Securities but will not guarantee payment of Distributions or
amounts payable on redemption or liquidation of such Trust Securities when the
related Trust does not have funds on hand available to make such payments. See
"Description of Guarantees."
Distributions
Distributions on the Preferred Securities will be cumulative, will
accumulate from the date of original issuance and will be payable on such dates
as specified in the applicable Prospectus Supplement. In the event that any date
on which Distributions are payable on the Preferred Securities is not a Business
Day (as defined below), payment of the Distribution payable on such date will be
made on the next succeeding day that is a Business Day (and without any interest
or other payment in respect of any such delay), in either case with the same
force and effect as if made on the date such payment was originally payable
(each date on which Distributions are payable in accordance with the foregoing,
a "Distribution Date"). A "Business Day" shall mean any day other than a
Saturday or a Sunday, or a day on which banking institutions in New York, New
York or Winston-Salem, North Carolina are authorized or required by law or
executive order to close.
Each Trust's Preferred Securities represent beneficial ownership
interests in the applicable Trust, and the Distributions on each Preferred
Security will be payable at a rate specified in the applicable Prospectus
Supplement for such Preferred Securities. The amount of Distributions payable
for any period will be computed on the basis of a 360-day year of twelve 30-day
months and, for any period of less than a full calendar month, the number of
days elapsed in such month, unless otherwise specified in the applicable
Prospectus Supplement. Distributions to which holders of Preferred Securities
are entitled will accumulate additional Distributions at the rate per annum if
and as specified in the applicable
25
<PAGE>
Prospectus Supplement. The term "Distributions" as used herein includes any
such additional Distributions unless otherwise stated.
If provided in the applicable Prospectus Supplement, the Corporation
has the right under the Indenture, pursuant to which it will issue the
Corresponding Junior Subordinated Debentures, to elect to defer the payment of
interest at any time or from time to time on any series of the Corresponding
Junior Subordinated Debentures for up to such number of consecutive interest
payment periods which will be specified in such Prospectus Supplement relating
to such series (each, an "Extension Period"), provided that no Extension Period
may extend beyond the Stated Maturity Date of the Corresponding Junior
Subordinated Debentures. As a consequence of any such deferral, Distributions on
the Related Preferred Securities would be deferred (but would continue to
accumulate additional Distributions thereon at the rate per annum set forth in
the Prospectus Supplement for such Preferred Securities) by the Trust of such
Preferred Securities during any such Extension Period. During such Extension
Period, the Corporation may not (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Corporation's capital stock, (ii) make any payment
of principal of or premium, if any, or interest on or repay, repurchase or
redeem any debt securities of the Corporation that rank pari passu with or
junior in right of payment to the Corresponding Junior Subordinated Debentures
or (iii) make any guarantee payments with respect to any guarantee by the
Corporation of the debt securities of any subsidiary of the Corporation if such
guarantee ranks pari passu with or junior in right of payment to the
Corresponding Junior Subordinated Debentures (other than (a) dividends or
distributions in shares of, or options, warrants or rights to subscribe for or
purchase shares of, common stock of the Corporation, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the Guarantee
with respect to such Preferred Securities, (d) as a result of a reclassification
of the Corporation's capital stock or the exchange or conversion of one class,
or series of the Corporation's capital stock for another class or series of the
Corporation's capital stock, (e) the purchase of fractional interests in shares
of the Corporation's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
and (f) purchases of common stock related to the issuance of common stock or
rights under any of the Corporation's benefit plans for its directors, officers
or employees or any of the Corporation's dividend reinvestment plans).
The revenue of each Trust available for distribution to holders of its
Preferred Securities will be limited to payments under the Corresponding Junior
Subordinated Debentures in which the Trust will invest the proceeds from the
issuance and sale of its Trust Securities. See "Description of Junior
Subordinated Debentures--Corresponding Junior Subordinated Debentures." If the
Corporation does not make interest payments on such Corresponding Junior
Subordinated Debentures, the Property Trustee will not have funds available to
pay Distributions on the Related Preferred Securities. The payment of
Distributions (if and to the extent the Trust has funds legally available for
the payment of such Distributions and cash sufficient to make such payments) is
guaranteed by the Corporation on the basis set forth herein under "Description
of Guarantees."
26
<PAGE>
Distributions on the Preferred Securities will be payable to the
holders thereof as they appear on the register of such Trust on the relevant
record dates, which, as long as the Preferred Securities remain in book-entry
form, will be one Business Day prior to the relevant Distribution Date. Subject
to any applicable laws and regulations and the provisions of the applicable
Declaration, each such payment will be made as described under "Book- Entry
Issuance." In the event any Preferred Securities are not in book-entry form, the
relevant record date for such Preferred Securities shall be the date at least 15
days prior to the relevant Distribution Date, as specified in the applicable
Prospectus Supplement.
Redemption or Exchange
Mandatory Redemption. Upon the repayment or redemption, in whole or in
part, of any Corresponding Junior Subordinated Debentures, whether at maturity
or upon earlier redemption as provided in the Indenture, the proceeds from such
repayment or redemption shall be applied by the Property Trustee to redeem a
Like Amount (as defined below) of the Trust Securities, upon not less than 30
nor more than 60 days notice, at a redemption price (the "Redemption Price")
equal to the aggregate Liquidation Amount of such Trust Securities plus
accumulated and unpaid Distributions thereon to the date of redemption (the
"Redemption Date") and the related amount of the premium, if any, paid by the
Corporation upon the concurrent redemption of such Corresponding Junior
Subordinated Debentures. See "Description of Junior Subordinated
Debentures--Redemption." If less than all of any series of Corresponding Junior
Subordinated Debentures are to be repaid or redeemed on a Redemption Date, then
the proceeds from such repayment or redemption shall be allocated to the
redemption pro rata of the related Preferred Securities and the Common
Securities. The amount of premium, if any, paid by the Corporation upon the
redemption of all or any part of any series of any Corresponding Junior
Subordinated Debentures to be repaid or redeemed on a Redemption Date shall be
allocated to the redemption pro rata of the related Preferred Securities and the
Common Securities.
The Corporation will have the right to redeem any series of
Corresponding Junior Subordinated Debentures (i) on or after such date as may be
specified in the applicable Prospectus Supplement, in whole at any time or in
part from time to time, or (ii) at any time, in whole (but not in part), upon
the occurrence of a Tax Event or Regulatory Capital Event, in either case
subject to receipt of prior approval by the Federal Reserve if then required
under applicable capital guidelines or policies.
Distribution of Corresponding Junior Subordinated Debentures. Subject
to the Corporation having received prior approval of the Federal Reserve to do
so if then required under applicable capital guidelines or policies, the
Corporation has the right at any time to liquidate the related Trust and, after
satisfaction of the liabilities of creditors of such Trust as provided by
applicable law, cause such Corresponding Junior Subordinated Debentures in
respect of the Preferred Securities and Common Securities issued by such issuer
to be distributed to the holders of such Preferred Securities and Common
Securities in exchange therefor upon liquidation of the Trust.
27
<PAGE>
Tax Event or Regulatory Capital Event Redemption. If a Tax Event or
Regulatory Capital Event in respect of a series of Preferred Securities and
Common Securities shall occur and be continuing, the Corporation has the right
to redeem the Corresponding Junior Subordinated Debentures in whole (but not in
part) and thereby cause a mandatory redemption of such Preferred Securities and
Common Securities in whole (but not in part) at the Redemption Price within 90
days following the occurrence of such Tax Event or Regulatory Capital Event. In
the event a Tax Event or Regulatory Capital Event in respect of a series of
Preferred Securities and Common Securities has occurred and is continuing and
the Corporation does not elect to redeem the Corresponding Junior Subordinated
Debentures and thereby cause a mandatory redemption of such Preferred Securities
and Common Securities or to liquidate the related Trust and cause the
Corresponding Junior Subordinated Debentures to be distributed to holders of
such Preferred Securities and Common Securities in exchange therefor upon
liquidation of the Trust as described above, such Preferred Securities will
remain outstanding and, if a Tax Event has occurred, Additional Sums (as defined
below) may be payable on the Corresponding Junior Subordinated Debentures.
Possible Tax Law Changes. On March 19, 1996, the Revenue Reconciliation
Bill of 1996 (the "Bill"), was introduced in the 104th Congress which would
have, among other things, generally denied interest deductions for interest on
an instrument issued by a corporation that has a maximum weighted average
maturity of more than 40 years. The Bill also would generally have denied
interest deductions for interest on an instrument issued by a corporation that
has a maximum term of more than 20 years and that is not shown as indebtedness
on the separate balance sheet of the issuer or, where the instrument is issued
to a related party (other than a corporation), where the holder or some other
related party issues a related instrument that is not shown as indebtedness on
the issuer's consolidated balance sheet. For purposes of determining the
weighted average maturity or the term of an instrument, any right to extend
would be treated as exercised. The above-described provisions of the Bill were
proposed to be effective generally for instruments issued on or after December
7, 1995. If either provision were to apply to the Junior Subordinated
Debentures, the Corporation would not be able to deduct interest on the Junior
Subordinated Debentures. However, on March 29, 1996, the Chairmen of the Senate
Finance and House Ways and Means Committees issued a joint statement (the "Joint
Statement") to the effect that it was their intention that the effective date of
the Bill, if enacted, would be 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 view expressed in the Joint Statement (the "Democrat Letters"). The
104th Congress adjourned without enacting the Bill. Moreover, if the principles
contained in the Joint Statement and the Democrat Letters were followed, any
similar legislation in this area that is subsequently proposed would not apply
to the Junior Subordinated Debentures. Although the 104th Congress adjourned
without enacting the Bill, there can be no assurance that current or future
legislative proposals or final legislation will not adversely affect the ability
of the Corporation to deduct interest on the Junior Subordinated Debentures or
otherwise affect the tax treatment of the transaction described herein.
Moreover, such a change could give rise to a Tax Event, which may permit the
Corporation to cause a redemption of the Related Preferred Securities.
28
<PAGE>
"Additional Sums" means such additional amounts as may be necessary in
order that the amount of Distributions then due and payable by a Trust on the
outstanding Preferred Securities and Common Securities of the Trust shall not be
reduced as a result of any additional taxes, duties and other governmental
charges to which such Trust has become subject as a result of a Tax Event.
"Like Amount" means (i) with respect to a redemption of the Trust
Securities, Trust Securities having a Liquidation Amount (as defined below)
equal to the principal amount of Corresponding Junior Subordinated Debentures to
be paid in accordance with their terms and (ii) with respect to a distribution
of Corresponding Junior Subordinated Debentures upon the liquidation of the
related Trust, Corresponding Junior Subordinated Debentures having a principal
amount equal to the Liquidation Amount of the Trust Securities of the holder to
whom such Corresponding Junior Subordinated Debentures are distributed.
"Liquidation Amount" means (unless otherwise provided in the Prospectus
Supplement) the stated amount of $25 per Trust Security.
After the liquidation date is fixed for any distribution of
Corresponding Junior Subordinated Debentures to holders of the Trust Securities,
(i) the Trust Securities will no longer be deemed to be outstanding, (ii) each
holder of Trust Securities will receive a registered certificate or certificates
representing the Corresponding Junior Subordinated Debentures to be delivered
upon such distribution and (iii) Trust Securities will be deemed to represent
Corresponding Junior Subordinated Debentures having a principal amount equal to
the Liquidation Amount of such Trust Securities, and bearing accrued and unpaid
interest in an amount equal to the accumulated and unpaid Distributions on such
Trust Securities, until such Trust Securities are presented to the
Administrative Trustees or their agent for cancellation, whereupon the
Corporation will issue to such holder, and the Debenture Trustee will
authenticate, a certificate representing such Corresponding Junior Subordinated
Debentures.
There can be no assurance as to the market prices for the Preferred
Securities or the Corresponding Junior Subordinated Debentures that may be
distributed in exchange for Preferred Securities if a dissolution and
liquidation of a Trust were to occur. Accordingly, the Preferred Securities that
an investor may purchase, or the Corresponding Junior Subordinated Debentures
that the investor may receive on dissolution and liquidation of a Trust, may
trade at a discount to the price that the investor paid to purchase the
Preferred Securities offered hereby.
Redemption Procedures
Preferred Securities redeemed on each Redemption Date shall be redeemed
at the Redemption Price with the applicable proceeds from the contemporaneous
redemption of the Corresponding Junior Subordinated Debentures. Redemptions of
the Preferred Securities shall be made and the Redemption Price shall be payable
on each Redemption Date only to the extent that the related Trust has funds on
hand available for the payment of such Redemption Price. See also
"--Subordination of Common Securities."
29
<PAGE>
If a Trust gives a notice of redemption in respect of its Preferred
Securities, then, by 12:00 noon, New York City time, on the Redemption Date, to
the extent funds are available, the Property Trustee will pay the Redemption
Price to The Depository Trust Company ("DTC"). See "Book-Entry Issuance." If
such Preferred Securities are no longer in book-entry form, the Property
Trustee, to the extent funds are available, will irrevocably deposit with the
paying agent for such Preferred Securities funds sufficient to pay or cause the
paying agent to pay the applicable Redemption Price to the holders thereof upon
surrender of their certificates evidencing such Preferred Securities.
Distributions payable on or prior to the Redemption Date for any Preferred
Securities called for redemption shall be payable to the holders of such
Preferred Securities on the relevant record dates for the related Distribution
Dates. If notice of redemption shall have been given and funds deposited as
required, then upon the date of such deposit, all rights of the holders of such
Preferred Securities so called for redemption will cease, except the right of
the holders of such Preferred Securities to receive the Redemption Price, but
without interest on such Redemption Price, and such Preferred Securities will
cease to be outstanding. In the event that any date fixed for redemption of
Preferred Securities is not a Business Day, then payment of the Redemption Price
payable on such date will be made on the next succeeding day which is a Business
Day (and without any interest or other payment in respect of any such delay). In
the event that payment of the Redemption Price in respect of Preferred
Securities called for redemption is improperly withheld or refused and not paid
either by the Trust or by the Corporation pursuant to the Guarantee as described
under "Description of Guarantees," (i) Distributions on such Preferred
Securities will continue to accrue at the then applicable rate, from the
Redemption Date originally established by the Trust for such Preferred
Securities to the date such Redemption Price is actually paid, and (ii) the
actual payment date will be the date fixed for redemption for purposes of
calculating the Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law and the regulations of the Federal Reserve), the
Corporation or its subsidiaries may at any time and from time to time purchase
outstanding Preferred Securities by tender, in the open market or by private
agreement.
Payment of the Redemption Price on the Preferred Securities and any
distribution of Corresponding Junior Subordinated Debentures to holders of
Preferred Securities shall be made to the applicable recordholders thereof as
they appear on the register for such Preferred Securities on the relevant record
date, which shall be one Business Day prior to the relevant Redemption Date or
liquidation date, as applicable; provided, however, that in the event that any
Preferred Securities are not in book-entry form, the relevant record date for
such Preferred Securities shall be a date at least 15 days prior to the
Redemption Date or liquidation date, as applicable, as specified in the
applicable Prospectus Supplement.
If less than all of the Preferred Securities and Common Securities
issued by a Trust are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of such Preferred Securities and Common Securities to be
redeemed shall be allocated pro rata to the Preferred Securities and the Common
Securities based upon the relative Liquidation Amounts of such classes. The
particular Preferred Securities to be redeemed shall be selected on a
30
<PAGE>
pro rata basis not more than 60 days prior to the Redemption Date by the
Property Trustee from the outstanding Preferred Securities not previously called
for redemption, by such method as the Property Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
(equal to $25 or an integral multiple of $25 in excess thereof) of the
Liquidation Amount of Preferred Securities of a denomination larger than $25.
The Property Trustee shall promptly notify the trust registrar in writing of the
Preferred Securities selected for redemption and, in the case of any Preferred
Securities selected for partial redemption, the Liquidation Amount thereof to be
redeemed. For all purposes of each Declaration, unless the context otherwise
requires, all provisions relating to the redemption of Preferred Securities
shall relate, in the case of any Preferred Securities redeemed or to be redeemed
only in part, to the portion of the aggregate Liquidation Amount of Preferred
Securities which has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each holder of Trust Securities to be
redeemed at its registered address.
Subordination of Common Securities
Payment of Distributions on, and the Redemption Price of, each Trust's
Preferred Securities and Common Securities, as applicable, shall be made pro
rata based on the Liquidation Amount of such Preferred Securities and Common
Securities; provided, however, that if on any Distribution Date or Redemption
Date a Debenture Event of Default shall have occurred and be continuing, no
payment of any Distribution on, or Redemption Price of, any of the Trust's
Common Securities, and no other payment on account of the redemption,
liquidation or other acquisition of such Common Securities, shall be made unless
payment in full in cash of all accumulated and unpaid Distributions on all of
the Trust's outstanding Preferred Securities for all Distribution periods
terminating on or prior thereto, or in the case of payment of the Redemption
Price the full amount of such Redemption Price on all of the Trust's outstanding
Preferred Securities then called for redemption, shall have been made or
provided for, and all funds available to the Property Trustee shall first be
applied to the payment in full in cash of all Distributions on, or Redemption
Price of, the Trust's Preferred Securities then due and payable.
In the case of any event of default under the applicable Declaration
resulting from a Debenture Event of Default, the Corporation as holder of such
Trust's Common Securities will be deemed to have waived any right to act with
respect to any such event of default under the applicable Declaration until the
effect of all such events of default with respect to such Preferred Securities
have been cured, waived or otherwise eliminated. Until all events of default
under the applicable Declaration with respect to the Preferred Securities have
been so cured, waived or otherwise eliminated, the Property Trustee shall act
solely on behalf of the holders of such Preferred Securities and not on behalf
of the Corporation as holder of the Trust's Common Securities, and only the
holders of such Preferred Securities will have the right to direct the Property
Trustee to act on their behalf.
31
<PAGE>
Liquidation Distribution Upon Termination
Pursuant to each Declaration, each Trust shall automatically terminate
upon expiration of its term and shall terminate on the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Corporation;
(ii) the distribution of a Like Amount of the Corresponding Junior Subordinated
Debentures to the holders of its Trust Securities, if the Corporation, as
Sponsor, has given written direction to the Property Trustee to terminate such
Trust (which direction is optional and, except as otherwise provided herein,
wholly within the discretion of the Corporation, as Sponsor); (iii) redemption
of all of the Trust Securities as described under --Redemption or
Exchange--Mandatory Redemption;" (iv) expiration of the term of the Trust; and
(v) the entry of an order for the dissolution of the Trust by a court of
competent jurisdiction.
If an early termination occurs as described in clause (i), (ii), (iv)
or (v) above, the Trust shall be liquidated by the Administrative Trustees as
expeditiously as the Administrative Trustees determine to be possible by
distributing, after satisfaction of liabilities to creditors of such Trust as
provided by applicable law, to the holders of such Trust Securities in exchange
therefor a Like Amount of the Corresponding Junior Subordinated Debentures,
unless such distribution is determined by the Property Trustee not to be
practicable, in which event such holders will be entitled to receive out of the
assets of the Trust available for distribution to holders, after satisfaction of
liabilities to creditors of such Trust as provided by applicable law, an amount
equal to, in the case of holders of Preferred Securities, the aggregate of the
Liquidation Amount plus accrued and unpaid Distributions thereon to the date of
payment (such amount being the "Liquidation Distribution"). If such Liquidation
Distribution can be paid only in part because such Trust has insufficient assets
available to pay in full the aggregate Liquidation Distribution, then the
amounts payable directly by such Trust on its Trust Securities shall be paid on
a pro rata basis, except that if a Debenture Event of Default has occurred and
is continuing, the Preferred Securities shall have a priority over the Common
Securities.
Events of Default; Notice
The occurrence of a Debenture Event of Default under the Indenture (see
"Description of Junior Subordinated Debentures--Debenture Events of Default")
constitutes an "Event of Default" under each Declaration with respect to the
Preferred Securities issued thereunder.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of such Trust's Preferred
Securities, the Administrative Trustees and the Corporation, as Sponsor, unless
such Event of Default shall have been cured or waived. The Corporation, as
Sponsor, and the Administrative Trustees are required to file annually with the
Property Trustee a certificate as to whether or not they are in compliance with
all the conditions and covenants applicable to them under each Declaration.
32
<PAGE>
If a Debenture Event of Default has occurred and is continuing, the
Preferred Securities shall have a preference over the Common Securities as
described above. See "--Subordination of Common Securities" and "--Liquidation
Distribution Upon Termination." The existence of an Event of Default does not
entitle the holders of Preferred Securities to accelerate the maturity thereof.
Removal of Issuer Trustees
Unless a Debenture Event of Default shall have occurred and be
continuing, any Issuer Trustee may be removed at any time by the holder of the
Common Securities. If a Debenture Event of Default has occurred and is
continuing, the Property Trustee and the Delaware Trustee may be removed at such
time by the holders of a majority in Liquidation Amount of the outstanding
Preferred Securities. In no event will the holders of the Preferred Securities
have the right to vote to appoint, remove or replace the Administrative
Trustees, which voting rights are vested exclusively in the Corporation as the
holder of the Common Securities. No resignation or removal of an Issuer Trustee
and no appointment of a successor trustee shall be effective until the
acceptance of appointment by the successor trustee in accordance with the
provisions of the applicable Declaration.
Co-trustees and Separate Property Trustee
Unless an Event of Default shall have occurred and be continuing, at
any time or from time to time, for the purpose of meeting the legal requirements
of the Trust Indenture Act or of any jurisdiction in which any part of the Trust
Property may at the time be located, the Corporation, as the holder of the
Common Securities shall have power to appoint one or more persons either to act
as a co-trustee, jointly with the Property Trustee, of all or any part of such
Trust Property, or to act as separate trustee of any such property, in either
case with such powers as may be provided in the instrument of appointment, and
to vest in such person or persons in such capacity any property, title, right or
power deemed necessary or desirable, subject to the provisions of the applicable
Declaration. In case a Debenture Event of Default has occurred and is
continuing, the Property Trustee alone shall have power to make such
appointment.
Merger or Consolidation of Issuer Trustees
Any Person into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which such Issuer Trustee shall be a party, or
any Person succeeding to all or substantially all the corporate trust business
of such Issuer Trustee, shall be the successor of such Issuer Trustee under each
Declaration, provided such Person shall be otherwise qualified and eligible.
33
<PAGE>
Mergers, Consolidations, Amalgamations or Replacements of the Trusts
A Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except as
described below. A Trust may, at the request of the Corporation, with the
consent of the Administrative Trustees but without the consent of the holders of
the Preferred Securities, the Property Trustee or the Delaware Trustee, merge
with or into, consolidate, amalgamate, or be replaced by, or convey, transfer or
lease its properties and assets as an entirety or substantially as an entirety
to, a trust organized as such under the laws of any State; provided, that (i)
such successor entity either (a) expressly assumes all of the obligations of
such Trust with respect to the Preferred Securities or (b) substitutes for the
Preferred Securities other securities having substantially the same terms as the
Preferred Securities (the "Successor Securities") so long as the Successor
Securities rank the same as the Preferred Securities in priority with respect to
distributions and payments upon liquidation, redemption and otherwise, (ii) the
Corporation expressly appoints a trustee of such successor entity possessing the
same powers and duties as the Property Trustee as the holder of the
Corresponding Junior Subordinated Debentures, (iii) the Successor Securities are
listed or quoted, or any Successor Securities will be listed upon notification
of issuance, on any national securities exchange or other organization on which
the Preferred Securities are then listed or quoted, if any, (iv) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
cause the Preferred Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization, (v)
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights, preferences and privileges of the
holders of the Preferred Securities (including any Successor Securities) in any
material respect (other than any dilution of such holders' interests in the new
entity), (vi) such successor entity has a purpose identical to that of the
Trust, (vii) prior to such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Corporation has received an
opinion from independent counsel to the Trust experienced in such matters to the
effect that (a) such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the Preferred Securities (including
any Successor Securities) in any material respect (other than any dilution of
such holders' interests in the new entity), and (b) following such merger,
conversion, consolidation, amalgamation, replacement, conveyance, transfer or
lease, neither the Trust nor such successor entity will be required to register
as an investment company under the Investment Company Act of 1940, as amended
(the "Investment Company Act"), and (viii) the Corporation or any permitted
successor or assignee owns all of the Common Securities of such successor entity
and guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee. Notwithstanding the
foregoing, a Trust shall not, except with the consent of holders of 100% in
Liquidation Amount of the Preferred Securities, consolidate, amalgamate, merge
or convert with or into, or be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety or substantially as an
entirety to any other entity or permit any other entity to consolidate,
amalgamate, merge or convert with or into, or replace it if such consolidation,
amalgamation, merger, conversion, replacement,
34
<PAGE>
conveyance, transfer or lease would cause the Trust or the successor entity not
to be classified as a grantor trust for United States federal income tax
purposes.
Voting Rights; Amendment of Each Declaration
Except as provided below and under "Description of
Guarantees--Amendments and Assignment" and as otherwise required by law and the
applicable Declaration, the holders of the Preferred Securities will have no
voting rights.
Each Declaration may be amended from time to time by the Corporation,
the Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust Securities (i) to cure any ambiguity, correct or supplement
any provisions in such Declaration that may be inconsistent with any other
provision, or to make any other provisions with respect to matters or questions
arising under such Declaration, which shall not be inconsistent with the other
provisions of such Declaration, or (ii) to modify, eliminate or add to any
provisions of such Declaration to such extent as shall be necessary to ensure
that the Trust will be classified for United States federal income tax purposes
as a grantor trust at all times that any Trust Securities are outstanding or to
ensure that the Trust will not be required to register as an "investment
company" under the Investment Company Act; provided, however, that in the case
of clause (i) such action shall not adversely affect in any material respect the
interests of the holders of the Trust Securities, and any amendments of such
Declaration shall become effective when notice thereof is given to the holders
of Trust Securities. Each Declaration may be amended by the Issuer Trustees and
the Corporation with (i) the consent of holders representing not less than a
majority (based upon Liquidation Amounts) of the outstanding Trust Securities,
and (ii) upon receipt by the Issuer Trustees of an opinion of counsel to the
effect that such amendment or the exercise of any power granted to the Issuer
Trustees in accordance with such amendment will not affect the Trust's status as
a grantor trust for United States federal income tax purposes or the Trust's
exemption from status as an "investment company" under the Investment Company
Act, provided that, without the consent of each holder of Trust Securities, such
Declaration may not be amended to (i) change the amount or timing of any
Distribution or other payment on the Trust Securities or otherwise adversely
affect the amount of any Distribution or other payment required to be made in
respect of the Trust Securities as of a specified date or (ii) restrict the
right of a holder of Trust Securities to institute suit for the enforcement of
any such payment on or after such date.
So long as any Corresponding Junior Subordinated Debentures are held by
the Property Trustee, the Issuer Trustees shall not (i) direct the time, method
and place of conducting any proceeding for any remedy available to the Debenture
Trustee, or exercising any trust or power conferred on the Debenture Trustee
with respect to such Corresponding Junior Subordinated Debentures, (ii) waive
certain past defaults under the Indenture, (iii) exercise any right to rescind
or annul a declaration of acceleration of the maturity of principal of such
Corresponding Junior Subordinated Debentures or (iv) consent to any amendment,
modification or termination of the Indenture or such Corresponding Junior
Subordinated Debentures, where such consent shall be required, without, in each
case, obtaining the prior approval of the holders of a majority in aggregate
Liquidation Amount of
35
<PAGE>
all outstanding Preferred Securities; provided, however, that where a consent
under the Indenture would require the consent of each holder of Corresponding
Junior Subordinated Debentures affected thereby, no such consent shall be given
by the Property Trustee without the prior consent of each holder of the Related
Preferred Securities. The Issuer Trustees shall not revoke any action previously
authorized or approved by a vote of the holders of the Preferred Securities
except by subsequent vote of the holders of the Preferred Securities. The
Property Trustee shall notify each holder of Preferred Securities of any notice
of default with respect to the Corresponding Junior Subordinated Debentures. In
addition to obtaining the foregoing approvals of the holders of the Preferred
Securities, prior to taking any of the foregoing actions, the Issuer Trustees
shall obtain an opinion of counsel experienced in such matters to the effect
that the Trust will not be classified as an association taxable as a corporation
for United States federal income tax purposes on account of such action.
Any required approval of holders of Preferred Securities may be given
at a meeting of holders of Preferred Securities convened for such purpose or
pursuant to written consent. The Property Trustee will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of any
matter upon which action by written consent of such holders is to be taken, to
be given to each holder of record of Preferred Securities in the manner set
forth in each Declaration.
No vote or consent of the holders of Preferred Securities will be
required for a Trust to redeem and cancel its Preferred Securities in accordance
with the applicable Declaration.
Notwithstanding that holders of Preferred Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Preferred Securities that are owned by the Corporation or any affiliate of the
Corporation shall, for purposes of such vote or consent, be treated as if they
were not outstanding.
Global Preferred Securities
The Preferred Securities of a series may be issued in whole or in part
in the form of one or more Global Preferred Securities that will be deposited
with, or on behalf of, the Depositary identified in the Prospectus Supplement
relating to such series. Unless otherwise indicated in the applicable Prospectus
Supplement for such series, the Depositary will be DTC. Global Preferred
Securities may be issued only in fully registered form and in either temporary
or permanent form. Unless and until it is exchanged in whole or in part for the
individual Preferred Securities represented thereby, a Global Preferred Security
may not be transferred except as a whole by the Depositary for such Global
Preferred Security to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by the
Depositary or any nominee to a successor Depositary or any nominee of such
successor.
The specific terms of the depositary arrangement with respect to a
series of Preferred Securities will be described in the Prospectus Supplement
relating to such series. The Corporation anticipates that the following
provisions will generally apply to depositary arrangements.
36
<PAGE>
Upon the issuance of a Global Preferred Security, and the deposit of
such Global Preferred Security with or on behalf of the Depositary, the
Depositary for such Global Preferred Security or its nominee will credit, on its
book-entry registration and transfer system, the respective aggregate
Liquidation Amounts of the individual Preferred Securities represented by such
Global Preferred Securities to the accounts of Participants. Such accounts shall
be designated by the dealers, underwriters or agents with respect to such
Preferred Securities or by the Corporation if such Preferred Securities are
offered and sold directly by the Corporation. Ownership of beneficial interests
in a Global Preferred Security will be limited to Participants or persons that
may hold interests through Participants. Ownership of beneficial interests in
such Global Preferred Security will be shown on, and the transfer of that
ownership will be effected only through, records maintained by the applicable
Depositary or its nominee (with respect to interests of Participants) and the
records of Participants (with respect to interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Preferred Security.
So long as the Depositary for a Global Preferred Security, or its
nominee, is the registered owner of such Global Preferred Security, such
Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Preferred Securities represented by such Global Preferred
Security for all purposes under the Indenture governing such Preferred
Securities. Except as provided below, owners of beneficial interests in a Global
Preferred Security will not be entitled to have any of the individual Preferred
Securities of the series represented by such Global Preferred Security
registered in their names, will not receive or be entitled to receive physical
delivery of any such Preferred Securities of such series in definitive form and
will not be considered the owners or holders thereof under the Indenture.
Payments of principal of (and premium, if any) and interest on
individual Preferred Securities represented by a Global Preferred Security
registered in the name of a Depositary or its nominee will be made to the
Depositary or its nominee, as the case may be, as the registered owner of the
Global Preferred Security representing such Preferred Securities. None of the
Corporation, the Property Trustee, any Paying Agent, or the Securities Registrar
for such Preferred Securities will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests of the Global Preferred Security representing such Preferred
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Corporation expects that the Depositary for a series of Preferred
Securities or its nominee, upon receipt of any payment of Liquidation Amount,
Redemption Price, premium or Distributions in respect of a permanent Global
Preferred Security representing any of such Preferred Securities, immediately
will credit Participants' accounts with payments in amounts proportionate to
their respective beneficial interest in the aggregate Liquidation Amount of such
Global Preferred Security for such Preferred Securities as shown on the records
of such Depositary or its nominee. The Corporation also expects that payments by
Participants to owners of beneficial interests in such Global Preferred Security
held through such
37
<PAGE>
Participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name." Such payments will be the responsibility of
such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if
a Depositary for a series of Preferred Securities is at any time unwilling,
unable or ineligible to continue as depositary and a successor depositary is not
appointed by the Trust within 90 days, the Trust will issue individual Preferred
Securities of such series in exchange for the Global Preferred Security
representing such series of Preferred Securities. In addition, the Trust may at
any time and in its sole discretion, subject to any limitations described in the
Prospectus Supplement relating to such Preferred Securities, determine not to
have any Preferred Securities of such series represented by one or more Global
Preferred Securities and, in such event, will issue individual Preferred
Securities of such series in exchange for the Global Preferred Security or
Securities representing such series of Preferred Securities. Further, if the
Trust so specifies with respect to the Preferred Securities of a series, an
owner of a beneficial interest in a Global Preferred Security representing
Preferred Securities of such series may, on terms acceptable to the Trust, the
Property Trustee and the Depositary for such Global Preferred Security, receive
individual Preferred Securities of such series in exchange for such beneficial
interests, subject to any limitations described in the Prospectus Supplement
relating to such Preferred Securities. In any such instance, an owner of a
beneficial interest in a Global Preferred Security will be entitled to physical
delivery of individual Preferred Securities of the series represented by such
Global Preferred Security equal in principal amount to such beneficial interest
and to have such Preferred Securities registered in its name. Individual
Preferred Securities of such series so issued will be issued in denominations,
unless otherwise specified by the Trust, of $25 and integral multiples thereof.
Payment and Paying Agency
Payments in respect of the Preferred Securities shall be made to the
Depositary, which shall credit the relevant accounts at the Depositary on the
applicable Distribution Dates or, if any Trust's Preferred Securities are not
held by the Depositary, such payments shall be made by check mailed to the
address of the holder entitled thereto as such address shall appear on the
Register. Unless otherwise specified in the applicable Prospectus Supplement,
the paying agent (the "Paying Agent") shall initially be the Property Trustee
and any co-paying agent chosen by the Property Trustee and acceptable to the
Administrative Trustees and the Corporation. The Paying Agent shall be permitted
to resign as Paying Agent upon 30 days' written notice to the Property Trustee
and the Corporation. In the event that the Property Trustee shall no longer be
the Paying Agent, the Administrative Trustees shall appoint a successor (which
shall be a bank or trust company acceptable to the Administrative Trustees and
the Corporation) to act as Paying Agent.
38
<PAGE>
Registrar and Transfer Agent
Unless otherwise specified in the applicable Prospectus Supplement, the
Property Trustee will act as registrar and transfer agent for the Preferred
Securities.
Registration of transfers of Preferred Securities will be effected
without charge by or on behalf of each Trust, but upon payment of any tax or
other governmental charges that may be imposed in connection with any transfer
or exchange. The Trusts will not be required to register or cause to be
registered the transfer of their Preferred Securities after such Preferred
Securities have been called for redemption.
Information Concerning the Property Trustee
The Property Trustee, other than during the occurrence and continuance
of an Event of Default, undertakes to perform only such duties as are
specifically set forth in each Declaration and, after such Event of Default,
must exercise the same degree of care and skill as a prudent person would
exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the applicable Declaration at the request of any holder
of Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby. If no Event of
Default has occurred and is continuing and the Property Trustee is required to
decide between alternative causes of action, construe ambiguous provisions in
the applicable Declaration or is unsure of the application of any provision of
the applicable Declaration, and the matter is not one on which holders of
Preferred Securities are entitled under such Declaration to vote, then the
Property Trustee shall take such action as is directed by the Corporation and if
not so directed, shall take such action as it deems advisable and in the best
interests of the holders of the Trust Securities and will have no liability
except for its own bad faith, negligence or willful misconduct.
Miscellaneous
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Trusts in such a way that no Trust will be deemed
to be an "investment company" required to be registered under the Investment
Company Act or classified as an association taxable as a corporation for United
States federal income tax purposes and so that Corresponding Junior Subordinated
Debentures will be treated as indebtedness of the Corporation for United States
federal income tax purposes. In this connection, the Corporation and the
Administrative Trustees are authorized to take any action, not inconsistent with
applicable law, the certificate of trust of each Trust or each Declaration, that
the Corporation and the Administrative Trustees determine in their discretion to
be necessary or desirable for such purposes, as long as such action does not
materially adversely affect the interests of the holders of the Related
Preferred Securities.
Holders of the Preferred Securities have no preemptive or similar
rights.
No Trust may borrow money or issue debt or mortgage or pledge any of
its assets.
39
<PAGE>
BOOK-ENTRY ISSUANCE
DTC will act as securities depositary for all of the Preferred
Securities and the Junior Subordinated Debentures, unless otherwise referred to
in the Prospectus Supplement relating to an offering of Preferred Securities or
Junior Subordinated Debentures. The Preferred Securities and the Junior
Subordinated Debentures will be issued only as fully-registered securities
registered in the name of Cede & Co. (DTC's nominee). One or more
fully-registered global certificates will be issued for the Preferred Securities
of each Trust and the Junior Subordinated Debentures, representing in the
aggregate the total number of such Trust's Preferred Securities or aggregate
principal balance of Junior Subordinated Debentures, respectively, and will be
deposited with DTC.
DTC is a limited purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its Participants deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. "Direct Participants" include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. DTC is owned by a number of its Direct Participants and by
the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain custodial relationships with Direct
Participants, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Commission.
Purchases of Preferred Securities or Junior Subordinated Debentures
within the DTC system must be made by or through Direct Participants, which will
receive a credit for the Preferred Securities or Junior Subordinated Debentures
on DTC's records. The ownership interest of each actual purchaser of each
Preferred Security and each Junior Subordinated Debenture ("Beneficial Owner")
is in turn to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchases, but Beneficial Owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the Direct or Indirect Participants through which the Beneficial
Owners purchased Preferred Securities or Junior Subordinated Debentures.
Transfers of ownership interests in the Preferred Securities or Junior
Subordinated Debentures are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in Preferred
Securities or Junior Subordinated Debentures, except in the event that use of
the book-entry system for the Preferred Securities of such Trust or Junior
Subordinated Debentures is discontinued.
40
<PAGE>
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities or Junior Subordinated Debentures; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Preferred Securities
or Junior Subordinated Debentures are credited, which may or may not be the
Beneficial Owners. The Participants will remain responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Owners will
be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. as the registered holder
of the Preferred Securities or Junior Subordinated Debentures. If less than all
of a Trust's Preferred Securities or the Junior Subordinated Debentures are
being redeemed, DTC's current practice is to determine by lot the amount of the
interest of each Direct Participant to be redeemed.
Although voting with respect to the Preferred Securities or the Junior
Subordinated Debentures is limited to the holders of record of the Preferred
Securities or Junior Subordinated Debentures, in those instances in which a vote
is required, neither DTC nor Cede & Co. will itself consent or vote with respect
to Preferred Securities or Junior Subordinated Debentures. Under its usual
procedures, DTC would mail an omnibus proxy (the "Omnibus Proxy") to the
relevant Trustee as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts such Preferred Securities or Junior Subordinated Debentures are
credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Distribution payments on the Preferred Securities or the Junior
Subordinated Debentures will be made by the relevant Trustee to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices and will be the responsibility of such
Participant and not of DTC, the relevant Trustee, the Trust thereof or the
Corporation, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of Distributions to DTC is the responsibility
of the relevant Trustee, disbursement of such payments to Direct Participants is
the responsibility of DTC, and disbursements of such payments to the Beneficial
Owners is the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depositary
with respect to any of the Preferred Securities or the Junior Subordinated
Debentures at any time by giving reasonable notice to the relevant Trustee and
the Corporation. In the event that a successor securities depositary is not
obtained, definitive Preferred Security or Junior Subordinated Debenture
certificates representing such Preferred Securities or Junior Subordinated
41
<PAGE>
Debentures are required to be printed and delivered. The Corporation, at its
option, may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor depositary). After a Debenture Event of Default, the
holders of a majority in liquidation preference of Preferred Securities or
aggregate principal amount of Junior Subordinated Debentures may determine to
discontinue the system of book-entry transfers through DTC. In any such event,
definitive certificates for such Preferred Securities or Junior Subordinated
Debentures will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Trusts and the Corporation
believe to be accurate, but the Trusts and the Corporation assume no
responsibility for the accuracy thereof. Neither the Trusts nor the Corporation
has any responsibility for the performance by DTC or its Participants of their
respective obligations as described herein or under the rules and procedures
governing their respective operations.
DESCRIPTION OF GUARANTEES
A Guarantee will be executed and delivered by the Corporation
concurrently with the issuance by each Trust of its Preferred Securities for the
benefit of the holders from time to time of such Preferred Securities. The First
National Bank of Chicago will act as indenture trustee ("Guarantee Trustee")
under each Guarantee for the purposes of compliance with the Trust Indenture Act
and each Guarantee will be qualified as an indenture under the Trust Indenture
Act. This summary of certain provisions of the Guarantees, which summarizes the
material terms thereof, does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all of the provisions of each
Guarantee, including the definitions therein of certain terms, and the Trust
Indenture Act, to each of which reference is hereby made. The form of the
Guarantee has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part. Reference in this summary to Preferred Securities
means that Trust's Preferred Securities to which a Guarantee relates. The
Guarantee Trustee will hold each Guarantee for the benefit of the holders of the
related Trust's Preferred Securities.
General
The Corporation will irrevocably agree to pay in full on a subordinated
basis, to the extent set forth herein, the Guarantee Payments (as defined below)
to the holders of the Preferred Securities, as and when due, regardless of any
defense, right of set-off or counterclaim that such Trust may have or assert
other than the defense of payment. The following payments with respect to the
Preferred Securities, to the extent not paid by or on behalf of the related
Trust (the "Guarantee Payments"), will be subject to the Guarantee: (i) any
accumulated and unpaid Distributions required to be paid on such Preferred
Securities, to the extent that such Trust has funds on hand available therefor
at such time, (ii) the Redemption Price with respect to any Preferred Securities
called for redemption, to the extent that such Trust has funds on hand available
therefor, or (iii) upon a voluntary or involuntary termination and liquidation
of such Trust (unless the Corresponding Junior
42
<PAGE>
Subordinated Debentures are distributed to holders of such Preferred Securities
in exchange therefor), the lesser of (a) the Liquidation Distribution and (b)
the amount of assets of such Trust remaining available for distribution to
holders of Preferred Securities. The Corporation's obligation to make a
Guarantee Payment may be satisfied by direct payment of the required amounts by
the Corporation to the holders of the applicable Preferred Securities or by
causing the Trust to pay such amounts to such holders.
Each Guarantee will be an irrevocable guarantee on a subordinated basis
of the related Trust's obligations under the Preferred Securities, but will
apply only to the extent that such related Trust has funds sufficient to make
such payments, and is not a guarantee of collection.
If the Corporation does not make interest payments on the Corresponding
Junior Subordinated Debentures held by the Trust, the Trust will not be able to
pay Distributions on the Preferred Securities and will not have funds legally
available therefor. Each Guarantee will rank subordinate and junior in right of
payment to all Senior Indebtedness of the Corporation to the extent and in the
manner set forth in the Guarantee. See "--Status of the Guarantees." Because the
Corporation is a holding company, the right of the Corporation to participate in
any distribution of assets of any subsidiary upon such subsidiary's liquidation
or reorganization or otherwise, is subject to the prior claims of creditors of
that subsidiary, except to the extent the Corporation may itself be recognized
as a creditor of that subsidiary. Accordingly, the Corporation's obligations
under the Guarantees will be effectively subordinated to all existing and future
liabilities of the Corporation's subsidiaries, and claimants should look only to
the assets of the Corporation for payments thereunder. See "Wachovia
Corporation." Except as otherwise provided in the applicable Prospectus
Supplement, the Guarantees do not limit the incurrence or issuance of other
secured or unsecured debt of the Corporation, including Senior Indebtedness,
whether under the Indenture, any other existing indenture or any other indenture
that the Corporation may enter into in the future or otherwise. See the
applicable Prospectus Supplement relating to any offering of Preferred
Securities.
The Corporation will, through the applicable Guarantee, the applicable
Declaration, the applicable series of Corresponding Junior Subordinated
Debentures and the Indenture, taken together, fully, irrevocably and
unconditionally guarantee all of the Trust's obligations under the Preferred
Securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes such guarantee. It is only the
combined operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Trust's obligations under the
Preferred Securities. See "Relationship Among the Preferred Securities, the
Corresponding Junior Subordinated Debentures and the Guarantees."
Status of the Guarantees
Each Guarantee will constitute an unsecured obligation of the
Corporation and will rank subordinate and junior in right of payment to all
Senior Indebtedness of the Corporation in the same manner as the Junior
Subordinated Debentures.
43
<PAGE>
Each Guarantee will rank pari passu with all other guarantees issued by
the Corporation with respect to preferred securities issued by other issuers to
be established by the Corporation similar to the Trusts. Each Guarantee will
constitute a guarantee of payment and not of collection (i.e., the guaranteed
party may institute a legal proceeding directly against the Corporation to
enforce its rights under the Guarantee without first instituting a legal
proceeding against any other person or entity). Each Guarantee will be held for
the benefit of the holders of the related Preferred Securities. Each Guarantee
will not be discharged except by payment of the Guarantee Payments in full to
the extent not paid by the Trust or upon distribution to the holders of the
Preferred Securities of the Corresponding Junior Subordinated Debentures. None
of the Guarantees places a limitation on the amount of additional Senior
Indebtedness that may be incurred by the Corporation. The Corporation expects
from time to time to incur additional indebtedness constituting Senior
Indebtedness.
Events of Default
An event of default under each Guarantee will occur upon the failure of
the Corporation to perform any of its payment or other obligations thereunder.
The holders of not less than a majority in aggregate Liquidation Amount of the
Related Preferred Securities have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Guarantee Trustee
in respect of such Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under such Guarantee.
Any holder of the Preferred Securities may institute a legal proceeding
directly against the Corporation to enforce its rights under such Guarantee
without first instituting a legal proceeding against the Trust, the Guarantee
Trustee or any other person or entity.
The Corporation, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether or not the Corporation is in
compliance with all the conditions and covenants applicable to it under the
Guarantee.
Certain Covenants of the Corporation
In each Guarantee, the Corporation will covenant that, so long as any
Related Preferred Securities remain outstanding, if there shall have occurred
any event that would constitute an event of default under the Guarantee or the
Declaration, then the Corporation will not (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Corporation's capital stock (which includes common
and preferred stock), (ii) make any payment of principal, interest or premium,
if any, on or repay, repurchase or redeem any debt securities of the Corporation
that rank pari passu with or junior in right of payment to the Junior
Subordinated Debentures or (iii) make any guarantee payments with respect to any
guarantee by the Corporation of the debt securities of any subsidiary of the
Corporation if such guarantee ranks pari passu with or junior in right of
payment to the Junior Subordinated Debentures (other than (a) dividends or
distributions in shares of or options, warrants or rights to subscribe for or
purchase shares of, common stock of the Corporation, (b) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the issuance of stock under any such
44
<PAGE>
plan in the future, or the redemption or repurchase of any such rights pursuant
thereto, (c) payments under the Guarantee, (d) as a result of a reclassification
of the Corporation's capital stock or the exchange or conversion of one class or
series of the Corporation's capital stock for another class or series of the
Corporation's capital stock, (e) the purchase of fractional interests in shares
of the Corporation's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
and (f) purchases of common stock related to the issuance of common stock or
rights under any of the Corporation's benefit plans for its directors, officers
or employees or any of the Corporation's dividend reinvestment plans).
Information Concerning the Guarantee Trustee
The Guarantee Trustee, other than during the occurrence and continuance
of a default by the Corporation in performance of any Guarantee, undertakes to
perform only such duties as are specifically set forth in each Guarantee and,
after default with respect to any Guarantee, must exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to this provision, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by any Guarantee at the
request of any holder of any Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby. The Guarantee Trustee is not required to expend or risk its
own funds or otherwise incur personal financial liability in the performance of
its duties if it reasonably believes that repayment or adequate indemnity is not
reasonably assured to it.
Amendments and Assignment
Except with respect to any changes which do not materially adversely
affect the rights of holders of the Related Preferred Securities (in which case
no vote will be required), no Guarantee may be amended without the prior
approval of the holders of not less than a majority of the aggregate Liquidation
Amount of such outstanding Preferred Securities. The manner of obtaining any
such approval will be as set forth under "Description of Preferred
Securities--Voting Rights; Amendment of Each Declaration." All guarantees and
agreements contained in each Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of the Corporation and shall inure to
the benefit of the holders of the related Preferred Securities then outstanding.
Termination of the Guarantees
Each Guarantee will terminate and be of no further force and effect
upon full payment of the Redemption Price of the Related Preferred Securities,
upon full payment of the Liquidation Amount payable upon liquidation of the
related Trust or upon distribution of Corresponding Junior Subordinated
Debentures to the holders of the Related Preferred Securities. Each Guarantee
will continue to be effective or will be reinstated, as the case may be, if at
any time any holder of the Related Preferred Securities must restore payment of
any sums paid under such Preferred Securities or such Guarantee.
45
<PAGE>
Governing Law
Each Guarantee will be governed by and construed in accordance with the
laws of the State of New York, without regard to conflicts of laws principles
thereof.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE CORRESPONDING JUNIOR SUBORDINATED DEBENTURES
AND THE GUARANTEES
Full and Unconditional Guarantee
Payments of Distributions and other amounts due on the Preferred
Securities (to the extent the Trust has funds available for the payment of such
Distributions) are irrevocably guaranteed by the Corporation as and to the
extent set forth under "Description of Guarantees." Taken together, the
Corporation's obligations under each series of Corresponding Junior Subordinated
Debentures, the Indenture, the related Declaration and the related Guarantee
provide, in the aggregate, a full, irrevocable and unconditional guarantee of
payments of Distributions and other amounts due on the Related Preferred
Securities. No single document standing alone or operating in conjunction with
fewer than all of the other documents constitutes such guarantee. It is only the
combined operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Trust's obligations under the
Related Preferred Securities. If and to the extent that the Corporation does not
make payments on any series of Corresponding Junior Subordinated Debentures,
such Trust will not pay Distributions or other amounts due on the Related
Preferred Securities. The Guarantees do not cover payment of Distributions when
the related Trust does not have sufficient funds to pay such Distributions. In
such event, the remedy of a holder of a series of Preferred Securities is to
institute a legal proceeding directly against the Corporation pursuant to the
terms of the Indenture for enforcement of payment of amounts equal to such
Distributions to such holder. The obligations of the Corporation under each
Guarantee are subordinate and junior in right of payment to all Senior
Indebtedness of the Corporation in the same manner as the Junior Subordinated
Debentures.
Sufficiency of Payments
As long as payments of interest and other payments are made when due on
each series of Corresponding Junior Subordinated Debentures, such payments will
be sufficient to cover Distributions and other payments due on the Related
Preferred Securities, primarily because (i) the aggregate principal amount of
each series of Corresponding Junior Subordinated Debentures will be equal to the
sum of the aggregate stated Liquidation Amount of the Related Preferred
Securities and related Common Securities; (ii) the interest rate and interest
and other payment dates on each series of Corresponding Junior Subordinated
Debentures will match the Distribution rate and Distribution and other payment
dates for the Related Preferred Securities; (iii) the Corporation shall pay for
all and any costs, expenses and liabilities of such Trust except the Trust's
obligations to holders of its Trust Securities under
46
<PAGE>
such Trust Securities; and (iv) each Declaration further provides that the Trust
will not engage in any activity that is not consistent with the limited purposes
of such Trust.
Enforcement Rights of Holders of Preferred Securities
A holder of any Related Preferred Security may institute a legal
proceeding directly against the Corporation to enforce its rights under the
related Guarantee without first instituting a legal proceeding against the
Guarantee Trustee, the related Trust or any other person or entity.
A default or event of default under any Senior Indebtedness of the
Corporation would not constitute a default or Event of Default under the
Indenture. However, in the event of payment defaults under, or acceleration of,
Senior Indebtedness of the Corporation, the subordination provisions of the
Indenture provide that no payments may be made in respect of the Corresponding
Junior Subordinated Debentures until such Senior Indebtedness has been paid in
full or any payment default thereunder has been cured or waived. Failure to make
required payments on any series of Corresponding Junior Subordinated Debentures
would constitute an Event of Default under the Indenture.
Limited Purpose of Trusts
Each Trust's Preferred Securities evidence a preferred beneficial
interest in such Trust, and each Trust exists for the sole purpose of issuing
and selling the Trust Securities, using the proceeds from the sale of the Trust
Securities to acquire the Corresponding Junior Subordinated Debentures and
engaging in only those other activities necessary, advisable or incidental
thereto. A principal difference between the rights of a holder of a Preferred
Security and a holder of a Corresponding Junior Subordinated Debenture is that a
holder of a Corresponding Junior Subordinated Debenture will be entitled to
receive from the Corporation the principal amount of and premium, if any, and
interest on Corresponding Junior Subordinated Debentures held, while a holder of
Preferred Securities will be entitled to receive Distributions from such Trust
(or, in certain circumstances, from the Corporation under the applicable
Guarantee) if and to the extent such Trust has funds available for the payment
of such Distributions.
Rights Upon Termination
Unless the Corresponding Junior Subordinated Debentures are distributed
to holders of the Trust Securities, upon any voluntary or involuntary
termination and liquidation of any Trust, the holders of the related Trust
Securities will be entitled to receive, out of the assets held by such Trust,
the Liquidation Distribution in cash. See "Description of Preferred
Securities--Liquidation Distribution Upon Termination." Upon any voluntary or
involuntary liquidation or bankruptcy of the Corporation, the Property Trustee,
as holder of the Corresponding Junior Subordinated Debentures, would be a
subordinated creditor of the Corporation, subordinated in right of payment to
all Senior Indebtedness as and in the manner set forth in the Indenture, but
entitled to receive payment in full of principal (and premium, if any) and
interest, before any stockholders of the Corporation receive payments
47
<PAGE>
or distributions. Since the Corporation will be the guarantor under each
Guarantee and will agree to pay for all costs, expenses and liabilities of each
Trust (other than the Trust's obligations to the holders of its Trust
Securities), the positions of a holder of such Preferred Securities and a holder
of such Corresponding Junior Subordinated Debentures relative to other creditors
and to stockholders of the Corporation in the event of liquidation or bankruptcy
of the Corporation are expected to be substantially the same.
PLAN OF DISTRIBUTION
Wachovia may sell the Junior Subordinated Debentures and any Trust may
sell Preferred Securities (such Junior Subordinated Debentures and Preferred
Securities, the "Offered Securities") in any of, or any combination of, the
following ways: (i) directly to purchasers, (ii) through agents and (iii)
through underwriters or dealers. Such underwriters, dealers or agents may be
affiliates of Wachovia, and offers or sales of such securities may include
secondary market transactions by affiliates of Wachovia to the extent permitted
by applicable law.
Offers to purchase Offered Securities may be solicited directly by
Wachovia and/or any Trust, as the case may be, or by agents designated by
Wachovia and/or any 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 Wachovia to such agent will be set forth, in the Prospectus
Supplement. Unless otherwise indicated in the Prospectus Supplement, any such
agency will be acting on 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 Wachovia in
the ordinary course of business.
If an underwriter or underwriters are utilized in the sale, Wachovia
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, Wachovia and/or any 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 Wachovia and/or any Trust, as the case may be, against
certain liabilities, including liabilities under the Securities Act.
This Prospectus and related Prospectus Supplement may be used by direct
or indirect subsidiaries of Wachovia in connection with offers and sales related
to secondary market
48
<PAGE>
transactions. Such subsidiaries may act as principal or agent in such
transactions. Such sales may be made at prices related to prevailing market
prices at the time of sale.
In connection with the offering of the Preferred Securities of any
Trust, such Trust may grant to the underwriters an option to purchase additional
Preferred Securities to cover over-allotments, if any, at the initial public
offering price (with an additional underwriting commission), as may be set forth
in the accompanying Prospectus Supplement. If such Trust grants any
over-allotment option, the terms of such over-allotment option will be set forth
in the Prospectus Supplement for such Preferred Securities.
Underwriters and dealers may engage in transactions with, or perform
services for, the Corporation and/or the applicable Trust and/or any of their
affiliates in the ordinary course of business.
The Offered Securities will be new issues of securities and will have
no established trading market. Any underwriters to whom Offered Securities are
sold for public offering and sale may make a market in such Offered Securities,
but such underwriters will not be obligated to do so and may discontinue any
market making at any time without notice. Such Offered Securities may or may not
be listed on a national securities exchange or the Nasdaq National Market. No
assurance can be given as to the liquidity of or the existence of trading
markets for any Offered Securities.
VALIDITY OF SECURITIES
Unless otherwise indicated in the applicable Prospectus Supplement,
certain legal matters will be passed upon for the Corporation by Kenneth W.
McAllister, General Counsel of the Corporation, and for the Trusts by Richards,
Layton & Finger, special Delaware counsel to the Trusts and the Corporation. The
validity of the Guarantees and the Junior Subordinated Debentures will be passed
upon for the Underwriters by Brown & Wood LLP. Kenneth W. McAllister and Brown &
Wood LLP will rely on the opinion of Richards, Layton & Finger as to matters of
Delaware law.
EXPERTS
The consolidated financial statements of Wachovia Corporation and
subsidiaries at December 31, 1995 and 1994, and for each of the three years in
the period ended December 31, 1995, incorporated by reference in this Prospectus
and Registration Statement have been audited by Ernst & Young, LLP, independent
auditors, as set forth in its report thereon and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
49
- -----------------------------------------------------
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus
Supplement or the Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by Wachovia
Corporation, Wachovia Capital Trust II or any Underwriter. This Prospectus
Supplement and the Prospectus do not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. The delivery of this Prospectus Supplement
and the Prospectus at any time does not imply that the information they contain
is correct as of any time subsequent to their respective dates.
---------------
TABLE OF CONTENTS
Prospectus Supplement
Page
----
Risk Factors..................................... S-6
Wachovia Capital Trust II........................S-13
Wachovia Corporation.............................S-15
Use of Proceeds..................................S-16
Ratio of Earnings to Fixed Charges...............S-17
Capitalization...................................S-18
Summary Financial Data ..........................S-19
Accounting Treatment ............................S-21
Description of Capital Securities................S-21
Description of Junior
Subordinated Debentures........................S-26
Description of the Guarantee.....................S-32
Certain Federal Income Tax Considerations........S-33
ERISA Considerations.............................S-39
Underwriting.....................................S-39
Validity of Securities...........................S-41
Prospectus
Available Information............................ 3
Incorporation of Certain Documents
by Reference................................... 4
Wachovia Corporation............................. 6
The Trusts....................................... 7
Use of Proceeds.................................. 8
Description of Junior
Subordinated Debentures........................ 8
Description of Preferred Securities.............. 24
Book-Entry Issuance.............................. 40
Description of Guarantees........................ 42
Relationship Among the Preferred
Securities, the Corresponding Junior
Subordinated Debentures and the
Guarantees..................................... 46
Plan of Distribution............................. 48
Validity of Securities........................... 49
Experts.......................................... 49
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
<PAGE>
$300,000
[WACHOVIA Logo here]
Wachovia Capital Trust II
Floating Rate Capital Securities
(Liquidation Amount$1,000 per Capital Security)
fully and unconditionally guaranteed,
to the extent set forth herein, by
WACHOVIA CORPORATION
---------------------
PROSPECTUS SUPPLEMENT
---------------------
Merrill Lynch & Co.
Deutsche Morgan Grenfell
Lehman Brothers
J.P. Morgan & Co.
Morgan Stanley & Co.
Incorporated
UBS Securities
January 28, 1997
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
