As filed with the Securities and Exchange Commission on October 29, 2001
Registration No. 333-72350
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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WACHOVIA CORPORATION
(Formerly named First Union Corporation)
(Exact name of registrant as specified in its charter)
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North Carolina 56-0898180
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
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WACHOVIA CAPITAL TRUST II
(Exact Name of Registrant as Specified in Its Charter)
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Delaware 56-6494470
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
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CENTRAL FIDELITY CAPITAL TRUST I
(Exact Name of Registrant as Specified in Its Charter)
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Delaware 54-1848917
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
One First Union Center
Charlotte, North Carolina 28288-0013
(704) 374-6828
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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Mark C. Treanor, Esq.
Executive Vice President, Secretary and General Counsel
Wachovia Corporation
One First Union Center
Charlotte, North Carolina 28288-0013
(704) 374-6828
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copy to:
Mark J. Menting, Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004-2498
(212) 558-4859
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Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of the Registration Statement as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
maximum maximum
Title of each class of Amount to be offering price aggregate Amount of
securities to be registered registered(1) per unit offering price registration fee
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Junior Subordinated Deferrable
Interest Debentures of Wachovia
Corporation.......................... $0 $0
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Preferred Securities of Wachovia
Capital Trust II..................... $0 $0
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Guarantees of Preferred Securities of
Wachovia Capital Trust II by
Wachovia Corporation(2).............. N/A N/A
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Floating Rate Junior Subordinated
Debt Securities, Series A, of
Wachovia Corporation(3).............. $0 $0
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Floating Rate Capital Trust Pass-
through Securities, Series A, of
Central Fidelity Capital Trust I(3).. $0 $0
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Guarantee of Wachovia Corporation
with respect to Floating Rate Capital
Trust Pass-through Securities, Series
A(3)................................. N/A N/A
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(1)This registration statement relates only to market-making transactions by
and through affiliates of the registrants of (A) the Floating Rate Capital
Securities, previously registered by Wachovia Corporation and Wachovia
Capital Trust II pursuant to the Registration Statement on Form S-3
(Registration Nos. 333-19365 and 333-19365-01) and (B) the Floating Rate
Capital Trust Pass-through Securities, Series A previously registered by
Central Fidelity Banks, Inc. and Central Fidelity Capital Trust I pursuant
to the Registration Statement on Form S-4 (Registration Nos. 333-28917 and
333-28917-01).
(2)This Registration Statement is deemed to cover the Junior Subordinated
Deferrable Interest Debentures of Wachovia Corporation, the rights of holder
of the Junior Subordinated Deferrable Interest Debentures of Wachovia
Corporation under the related Indenture, the rights of the holder of the
Preferred Securities of Wachovia Capital Trust II under the Declaration, the
rights of holders of Preferred Securities under the Guarantee of Wachovia
Corporation, which taken together, fully irrevocably and unconditionally
guarantee all of the respective obligations of Wachovia Capital Trust II
under the Preferred Securities.
(3)This Registration Statement is deemed to cover the Floating Rate Junior
Subordinated Debt Securities, Series A of Wachovia Corporation, the rights
of holders of such Floating Rate Junior Subordinated Debt Securities, Series
A under the related Indenture, the rights of holders of Floating Rate
Capital Trust Pass-through Securities, Series A of Central Fidelity Capital
Trust I under the Amended and Restated Declaration of Trust of Central
Fidelity Capital Trust I and the rights of holders of the Floating Rate
Capital Trust Pass-through Securities, Series A under the Guarantee of
Wachovia Corporation, which taken together fully and unconditionally
guarantee the obligations of Central Fidelity Capital Trust I under the
Floating Rate Capital Trust Pass-through Securities, Series A.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to the registration or qualification under the securities laws of any State.
SUBJECT TO COMPLETION, DATED OCTOBER 29, 2001
$300,000,000
WACHOVIA CAPITAL TRUST II
Floating Rate Capital Securities
(Liquidation Amount $1,000 per Capital security)
Fully and unconditionally guaranteed, as described in this Prospectus, by
WACHOVIA CORPORATION
(Formerly named First Union Corporation)
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This Prospectus covers the remarketing from time to time of the Floating
Rate Capital Securities (the "Capital Securities") by First Union Securities,
Inc., an affiliate of Wachovia Corporation (formerly named First Union
Corporation) ("Wachovia") and Wachovia Capital Trust II. The Capital Securities
were originally offered pursuant to the Prospectus Supplement, dated January
28, 1997, and Base Prospectus, dated January 22, 1997, attached to this
Prospectus and constituting a part of this Prospectus. References to the former
Wachovia Corporation or the Corporation in the attached Prospectus Supplement
and Base Prospectus refer, where applicable, to Wachovia.
See "Risk Factors" beginning on page S-5 of the attached Prospectus
Supplement, dated January 28, 1997, for a discussion of certain factors that
you should consider before investing 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 FEDERAL
AGENCY.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Prospectus will be used by First Union Securities, Inc., an indirect,
wholly-owned subsidiary of Wachovia Corporation, in connection with offers and
sales related to market-making and other transactions in the Capital
Securities. First Union Securities, Inc. may act as principal or agent in these
transactions. The sales may be made at prices related to prevailing market
rates at the time of sale or otherwise. Wachovia Corporation conducts its
investment banking, institutional, and capital markets businesses through its
various bank, broker-dealer and nonbank subsidiaries (including First Union
Securities, Inc.) under the trade name "Wachovia Securities." Unless otherwise
stated, any reference to "Wachovia Securities" is not intended to be a
reference to Wachovia Securities, Inc., member NASD/SIPC, a separate
broker-dealer subsidiary of Wachovia Corporation and sister affiliate of First
Union Securities, Inc. which is not participating in the market-making
transactions.
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WACHOVIA SECURITIES
The date of this Prospectus is October , 2001.
TABLE OF CONTENTS
Prospectus
Page
----
Wachovia Corporation.............................................................. 3
Consolidated Ratios of Earnings to Fixed Charges.................................. 4
Incorporation of Certain Documents By Reference................................... 4
Certain Federal Income Tax Consequences........................................... 5
United States Holders.......................................................... 5
United States Alien Holders.................................................... 8
Backup Withholding and Information Reporting................................... 10
Experts........................................................................... 10
Plan of Distribution.............................................................. 10
Validity of Securities............................................................ 10
Prospectus Supplement dated January 28, 1997
Risk Factors...................................................................... S-5
Wachovia Capital Trust II......................................................... S-10
Wachovia Corporation.............................................................. S-11
Use of Proceeds................................................................... S-12
Ratio of Earnings to Fixed Charges................................................ S-13
Capitalization.................................................................... S-14
Summary Financial Data............................................................ S-15
Accounting Treatment.............................................................. S-16
Description of Capital Securities................................................. S-16
Description of Junior Subordinated Debentures..................................... S-19
Description of the Guarantee...................................................... S-24
ERISA Considerations.............................................................. S-25
Base Prospectus dated January 22, 1997
Available Information............................................................. B-3
Incorporation of Certain Documents by Reference................................... B-4
Wachovia Corporation.............................................................. B-5
The Trusts........................................................................ B-5
Use of Proceeds................................................................... B-6
Description of Junior Subordinated Debentures..................................... B-7
Description of Preferred Securities............................................... B-19
Book-Entry Issuance............................................................... B-30
Description of Guarantees......................................................... B-32
Relationship Among the Preferred Securities, the Corresponding Junior Subordinated
Debentures and the Guarantees................................................... B-35
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WACHOVIA CORPORATION
Wachovia was incorporated under the laws of North Carolina in 1967. We are
registered as a financial holding company and a bank holding company under the
Bank Holding Company Act of 1956, as amended, and are supervised and regulated
by the Board of Governors of the Federal Reserve System. Our banking and
securities subsidiaries are supervised and regulated by various federal and
state banking and securities regulatory authorities. On September 1, 2001, the
former Wachovia Corporation (which we refer to as "Legacy Wachovia") merged
with and into First Union Corporation, and First Union Corporation changed its
name to "Wachovia Corporation". As used in this prospectus, the terms
"Wachovia", "we", "our" and "us" refer to Wachovia Corporation, the holding
company, and not the consolidated entity.
In addition to North Carolina, Wachovia's full-service banking subsidiaries
operate in Connecticut, Delaware, Florida, Georgia, Maryland, New Jersey, New
York, Pennsylvania, South Carolina, Virginia and Washington, D.C. These
full-service banking subsidiaries provide a wide range of commercial and retail
banking and trust services. Wachovia also provides various other financial
services, including mortgage banking, home equity lending, leasing, investment
banking, insurance and securities brokerage services through other
subsidiaries.
In 1985, the Supreme Court upheld regional interstate banking legislation.
Since then, Wachovia has concentrated its efforts on building a large regional
banking organization in what it perceives to be some of the better banking
markets in the eastern United States. Since November 1985, Wachovia has
completed over 90 banking-related acquisitions.
Wachovia continually evaluates its business operations and organizational
structures to ensure they are aligned closely with its goal of maximizing
performance in its core business lines, Capital Management, Wealth Management,
the General Bank and Corporate and Investment Banking. When consistent with our
overall business strategy, we may consider the disposition of certain of our
assets, branches, subsidiaries or lines of business. We continue to routinely
explore acquisition opportunities, particularly in areas that would complement
our core business lines, and frequently conduct due diligence activities in
connection with possible acquisitions. As a result, acquisition discussions
and, in some cases, negotiations frequently take place, and future acquisitions
involving cash, debt or equity securities can be expected.
Wachovia is a separate and distinct legal entity from its banking and other
subsidiaries. Dividends received from our subsidiaries are our principal source
of funds to pay dividends on our common and preferred stock and debt service on
our debt. Various federal and state statutes and regulations limit the amount
of dividends that our banking and other subsidiaries may pay to us without
regulatory approval.
Wachovia and its affiliates had completed numerous acquisitions of financial
services institutions since 1985. These financial services institutions either
have merged into Wachovia or are wholly-owned subsidiaries of Wachovia.
Wachovia acquired Legacy Wachovia on September 1, 2001, by merging Legacy
Wachovia into Wachovia. As a result of this merger, Wachovia is responsible for
the obligations of Legacy Wachovia with respect to the Capital Securities.
3
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following table provides Wachovia's consolidated ratios of earnings to
fixed charges:
Six Months Years Ended December 31,
Ended -----------------------------
June 30, 2001 2000 1999 1998 1997 1996
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Consolidated Ratios of Earnings to Fixed Charges
Excluding interest on deposits.................. 1.86x 1.13x 2.29x 2.13x 2.50x 2.58x
Including interest on deposits.................. 1.39x 1.06x 1.62x 1.51x 1.57x 1.56x
For purposes of computing these ratios:
. earnings represent income from continuing operations before extraordinary
items and cumulative effect of a change in accounting principle, plus
income taxes and fixed charges (excluding capitalized interest);
. fixed charges, excluding interest on deposits, represent interest
(including capitalized interest), one-third of rents and all amortization
of debt issuance costs;
. fixed charges, including interest on deposits, represent all interest
(including capitalized interest), one-third of rents and all amortization
of debt issuance costs.
One-third of rents is used because it is the proportion deemed
representative of the interest factor.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. In addition, our SEC filings are
available to the public at the SEC's web site at http://www.sec.gov. You can
also inspect reports, proxy statements and other information about us at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York.
The SEC allows us to "incorporate by reference" into this prospectus the
information in documents we file with it. This means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be a part of this
prospectus and should be read with the same care. When we update the
information contained in documents that have been incorporated by reference by
making future filings with the SEC the information incorporated by reference in
this prospectus is considered to be automatically updated and superseded. In
other words, in the case of a conflict or inconsistency between information
contained in this prospectus and information incorporated by reference into
this prospectus, you should rely on the information contained in the document
that was filed later. We incorporate by reference the documents listed below:
. First Union's Annual Report on Form 10-K for the fiscal year ended
December 31, 2000;
. First Union's Quarterly Reports on Form 10-Q for the periods ended March
31, 2001 (as amended on June 26, 2001) and June 30, 2001;
. First Union's Current Reports on Form 8-K dated January 18, 2001, April
15, 2001, April 16, 2001 (as amended on June 25, 2001), May 15, 2001 (as
amended on June 25, 2001), July 12, 2001, July 20, 2001, August 30, 2001,
September 6, 2001 and October 23, 2001;
. All documents filed with the SEC pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended, after the date
of the initial registration statement and before effectiveness of the
registration statement, and after the date of this prospectus and before
the termination of this offering.
4
You may request a copy of these filings, other than an exhibit to a filing
unless that exhibit is specifically incorporated by reference into that filing,
at no cost, by writing to or telephoning us at the following address:
Corporate Relations
Wachovia Corporation
One First Union Center
301 South College Street
Charlotte, North Carolina 28288-0206
Telephone: (704) 374-6782
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
This section describes the material United States federal income tax
consequences of owning the Capital Securities. It is the opinion of Sullivan &
Cromwell, special tax counsel to Wachovia and to Wachovia Capital Trust II (the
"Trust"). It applies to you only if you hold the Capital Securities as capital
assets for tax purposes. This section does not apply to you if you are a member
of a class of holders subject to special rules, such as:
. a dealer in securities or currencies,
. a trader in securities that elects to use a mark-to-market method of
accounting for your securities holdings,
. a bank,
. a life insurance company,
. a thrift institution,
. a regulated investment company,
. a real estate investment trust,
. a tax-exempt organization,
. a person that owns Capital Securities that are a hedge or that are hedged
against interest rate risks,
. a person that owns Capital Securites as part of a straddle or conversion
transaction for tax purposes, or
. a person whose functional currency for tax purposes is not the U.S.
dollar.
This section is based on the Internal Revenue Code of 1986, as amended, its
legislative history, existing and proposed regulations under the Internal
Revenue Code, published rulings and court decisions, all as currently in
effect. These laws are subject to change, possibly on a retroactive basis.
Please consult your own tax advisor concerning the consequences of owning
the Capital Securities in your particular circumstances under the Code and the
laws of any other taxing jurisdiction.
United States Holders
This subsection describes the tax consequences to a United States holder.
You are a United States holder if you are a beneficial owner of a Capital
Security and you are:
. a citizen or resident of the United States,
. a domestic corporation,
. an estate whose income is subject to United States federal income tax
regardless of its source, or
5
. a trust if a United States court can exercise primary supervision over the
trust's administration and one or more United States persons are
authorized to control all substantial decisions of the trust.
If you are not a United States holder, this subsection does not apply to you
and you should refer to "--United States Alien Holders" below.
Classification of the Junior Subordinated Debentures and the Trust
Under current law and assuming continued compliance with the terms of the
Declaration, the Trust will not be classified as an association taxable as a
corporation for United States federal income tax purposes. Moreover, the Trust
should be classified as a grantor trust, and if not so classified will be
classified as a partnership, for United States federal income tax purposes. As
a result, each beneficial owner of the Capital Securities (each a
"Securityholder") that is a United States holder will be required to include in
its gross income its pro rata share of the interest income, including original
issue discount ("OID"), paid or accrued with respect to the Junior Subordinated
Debentures, whether or not cash is actually distributed to the Securityholder.
See "--Interest Income and Original Issue Discount" below. The following
discussion assumes that the Trust will be classified as a grantor trust for
federal income tax purposes. The Junior Subordinated Debentures are properly
classified as indebtedness of Wachovia for United States federal income tax
purposes.
Interest Income and Original Issue Discount
Under applicable U.S. Treasury regulations, a contingency under which stated
interest may not be timely paid is ignored in determining whether a debt
instrument is issued with OID if the contingency is "remote". Wachovia has not
exercised its option to defer payments and has concluded that the likelihood of
its exercising this option is remote. Assuming that Wachovia's conclusion is
correct, as of the date of this prospectus, the Junior Subordinated Debentures
would not be considered to have been issued or reissued with OID, although the
Internal Revenue Service could take the position that the Junior Subordinated
Debentures were issued with OID at the time of their original issuance.
The following discussion assumes that unless and until Wachovia exercises
its option to defer interest on the Junior Subordinated Debentures, the Junior
Subordinated Debentures will not be treated as issued or reissued with OID
other than de minimis OID.
Under U.S. Treasury regulations, if Wachovia exercised its option to defer
any payment of interest, the Junior Subordinated Debentures would be treated as
reissued with OID, and, thereafter, all stated interest on the Junior
Subordinated Debentures would be treated as OID as long as the Junior
Subordinated Debentures remained outstanding. In such an event, all of a United
States holder's taxable interest income with respect to the Junior Subordinated
Debentures would be accounted for as OID on an economic accrual basis
regardless of such holder's method of tax accounting, and actual distributions
of stated interest would not be reported separately as taxable income.
Consequently, a United States holder would be required to include OID in gross
income even though Wachovia would not make any actual cash payments during an
extension period.
Because income on the Capital Securities will generally constitute interest,
holders that are corporations will not be entitled to the dividend-received
deduction with respect to any income recognized with respect to the Capital
Securities.
Market Discount and Purchase Premium
The following discussion of market discount and purchase premium assumes
that the Trust is properly treated as a grantor trust for United States federal
income tax purposes. If the Internal Revenue Service were to determine that the
Trust should not be treated as a grantor trust, but should instead be treated
as a partnership, the following discussion may not apply. See below for a
discussion of the application of the market discount and purchase premium rules
if the Trust is properly treated as a partnership.
6
Market Discount. A United States holder will be treated as if such holder
purchased its pro rata share of the underlying Junior Subordinated Debentures
at a market discount, and the Junior Subordinated Debentures represented by
such holder's Capital Security will be market discount securities if the
difference between the Junior Subordinated Debenture's stated redemption price
at maturity or revised issue price and the purchase price for a Capital
Security that is allocable to such Junior Subordinated Debenture is equal to or
greater than 1/4 of 1 percent of the Junior Subordinated Debenture's stated
redemption price at maturity or revised issue price, respectively, multiplied
by the number of complete years to the Junior Subordinated Debenture's
maturity. To determine the revised issue price of a Junior Subordinated
Debenture for these purposes, a holder must generally add any OID that has
accrued on that Junior Subordinated Debenture to its issue price and subtract
any payments on the Junior Subordinated Debentures that are not qualified
stated interest.
If a Junior Subordinated Debenture's stated redemption price at maturity or
its revised issue price exceeds the purchase allocable to such debenture by
less than 1/4 of 1 percent multiplied by the number of complete years to the
Junior Subordinated Debenture's maturity, the excess constitutes de minimis
market discount, and the rules discussed below are not applicable.
A United States holder must treat any gain recognized on the maturity or
disposition of a Capital Security as ordinary income to the extent of the
accrued market discount on the underlying Junior Subordinated Debentures
allocable to such security. Alternatively, a United States holder may elect to
include a Junior Subordinated Debenture's market discount in income currently
over the life of a Junior Subordinated Debenture. If a United States holder
makes this election, it will apply to all debt instruments with market discount
that the United States holder acquires on or after the first day of the first
taxable year to which the election applies. A United States holder may not
revoke this election without the consent of the Internal Revenue Service. If
you own a market discount security and do not make this election, you will
generally be required to defer deductions for interest on borrowings allocable
to Capital Securities for which the underlying Junior Subordinated Debentures
are market discount securities in an amount not exceeding the accrued market
discount on the Junior Subordinated Debentures until the maturity of the Junior
Subordinated Debentures or the disposition of the Capital Securities.
Market discount will accrue on a straight-line basis unless a United States
holder elects to accrue market discount using a constant-yield method. If a
holder makes this election, it will apply only to the Junior Subordinated
Debentures with respect to which it is made. Once made such election may not be
revoked.
Purchase Premium. If the purchase price allocable to a Junior Subordinated
Debenture is an amount in excess of a Junior Subordinated Debenture's principal
amount, a United States holder may elect to treat the excess as amortizable
bond premium. If a holder makes this election, the holder will reduce the
amount required to be included in income each year with respect to interest
earned by the amount of amortizable bond premium allocable to that year, based
on the underlying Junior Subordinated Debenture's yield to maturity. If a
United States holder makes an election to amortize bond premium, it will apply
to all debt instruments, other than debt instruments the interest on which is
excludible from gross income, held by such holder at the beginning of the first
taxable year to which the election applies and to any debt instruments that the
holder acquires thereafter. A holder may not revoke an election without the
consent of the Internal Revenue Service.
Distributions of the Junior Subordinated Debentures to Holders of Capital
Securities
A distribution by the Trust of the Junior Subordinated Debentures, as
described in the Prospectus Supplement dated January 22, 1997 under the caption
"Description of Capital Securities--Liquidation of the Trust and Distribution
of Junior Subordinated Debentures", will be non-taxable and will result in a
United States holder receiving directly its pro rata share of the Junior
Subordinated Debentures previously held indirectly through the Trust, with a
holding period and aggregate adjusted tax basis equal to the holding period and
aggregate adjusted tax basis such United States holder had in its Capital
Securities immediately before such distribution. If, however, the liquidation
of the Trust were to occur because the Trust was subject to United States
federal income tax with respect to income accrued or received on the Junior
Subordinated Debentures, the
7
distribution of Junior Subordinated Debentures to United States holders by the
Trust would be a taxable event to the Trust and to each United States holder,
and each United States holder would recognize gain or loss as if the United
States holder had exchanged its Capital Securities for the Junior Subordinated
Debentures it received upon the liquidation of the Trust. A United States
holder will include interest in respect of the Junior Subordinated Debentures
received from the Trust in the manner described above under "--Interest Income
and Original Issue Discount".
Sale or Redemption of the Capital Securities
Gain or loss will be recognized by a United States holder on a sale,
exchange or other disposition of the Capital Securities (including a redemption
for cash) in an amount equal to the difference between the amount realized and
the United States holder's adjusted tax basis in the Capital Securities sold or
so redeemed. A United States holder's adjusted tax basis in the Capital
Securities generally will be its initial purchase price, increased by any
market discount or OID previously included in such United States holder's gross
income to the date of disposition and decreased by distributions or other
payments received on the Capital Securities other than payments of stated
interest and any amortizable bond premium applied to reduce the United States
holder's pro rata share of any interest on the Junior Subordinated Debentures.
Gain or loss recognized by a United States holder on the Capital Securities
generally will be taxable as capital gain or loss (except to the extent any
amount realized is treated as a payment of accrued interest with respect to
such United States holder's pro rata share of the Junior Subordinated
Debentures or as described above under the heading "--Market Discount and
Purchase Premium--Market Discount") and generally will be long-term capital
gain or loss if the Capital Securities have been held for more than one year.
Should Wachovia exercise its option to defer any payment of interest on the
Junior Subordinated Debentures, 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. In the event of such
a deferral, a Securityholder that disposes of its Capital Securities between
record dates for payments of distributions (and consequently does not receive a
distribution from the Trust for the period prior to such disposition) will
nevertheless be required to include in income as ordinary income accrued but
unpaid interest on the Junior Subordinated Debentures through the date of
disposition and to add such amount to its adjusted tax basis in its Capital
Securities disposed of. Such United States holder would recognize a capital
loss on the disposition of its Capital Securities to the extent the selling
price (which may not fully reflect the value of accrued but unpaid interest) is
less than the United States holder's adjusted tax basis in the Capital
Securities (which will include accrued but unpaid interest). Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes.
United States Alien Holders
This subsection describes the tax consequences to a United States alien
holder. A United States alien holder is a holder that is the beneficial owner
of a Capital Security and is, for United States federal income tax purposes:
. a nonresident alien individual,
. a foreign corporation,
. a foreign partnership, or
. an estate or trust that in either case is not subject to United States
federal income tax on a net income basis on income or gain from a Capital
Security.
If you are a United States holder, this subsection does not apply to you.
Under United States federal income tax law, and subject to the discussion of
backup withholding below, if you are a United States alien holder of a Capital
Security:
8
. the Trust and other U.S. payors generally will not be required to deduct
United States withholding tax from payments of principal, premium, if any,
and interest, including OID, if, in the case of payments of interest:
1.the United States alien holder does not actually or constructively own
10% or more of the total combined voting power of all classes of stock
of Wachovia entitled to vote,
2.the United States alien holder is not a controlled foreign corporation
that is related to Wachovia through stock ownership, and
3.the U.S. payor does not have actual knowledge or reason to know that the
holder is a United States person and:
a.the United States alien holder has furnished to the U.S. payor an
Internal Revenue Service Form W-8BEN or an acceptable substitute form
upon which such holder certifies, under penalties of perjury, that the
holder is a non-United States person,
b.in the case of payments made outside the United States to a holder at
an offshore account (generally, an account maintained by a holder at a
bank or other financial institution at any location outside the United
States), the holder has furnished to the U.S. payor documentation that
establishes the holder's identity and status as a non-United States
person,
c.the U.S. payor has received a withholding certificate (furnished on an
appropriate Internal Revenue Service Form W-8 or an acceptable
substitute form) from a person claiming to be:
i.a withholding foreign partnership (generally a foreign partnership
that has entered into an agreement with the Internal Revenue Service
to assume primary withholding responsibility with respect to
distributions and guaranteed payments it makes to its partners),
ii.a qualified intermediary (generally a non-United States financial
institution or clearing organization or a non-United States branch
or office of a United States financial institution or clearing
organization that is a party to a withholding agreement with the
Internal Revenue Service), or
iii.a U.S. branch of a non-United States bank or of a non-United States
insurance company,
and the withholding foreign partnership, qualified intermediary or
U.S. branch has received documentation upon which it may rely to treat
the payment as made to a non-United States person in accordance with
U.S. Treasury regulations (or, in the case of a qualified
intermediary, in accordance with its agreement with the Internal
Revenue Service),
d.the U.S. payor receives a statement from a securities clearing
organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business:
i.certifying to the U.S. payor under penalties of perjury that an
Internal Revenue Service Form W-8BEN or an acceptable substitute
form has been received from you by it or by a similar financial
institution between it and you, and
ii.to which is attached a copy of the Internal Revenue Service Form
W-8BEN or acceptable substitute form, or
e.the U.S. payor otherwise possesses documentation upon which it may
rely to treat the payment as made to a non-United States person in
accordance with U.S. Treasury regulations; and
. no deduction for any United States federal withholding tax will be made
from any gain that you realize on the sale or exchange of your Capital
Security.
9
Backup Withholding and Information Reporting
Generally, income on the Capital Securities will be reported to
Securityholders on Form 1099, which form should be mailed to Securityholders by
January 31 following each calendar year. Payments made on, and proceeds from
the sale of, the Capital Securities may be subject to backup withholding tax
unless the Securityholder complies with certain certification requirements. Any
withheld amounts will be allowed as a credit against the Securityholder's
United States federal income tax liability, provided the required information
is furnished to the Internal Revenue Service on a timely basis.
EXPERTS
The consolidated balance sheets of Wachovia Corporation (formerly named
First Union Corporation) as of December 31, 2000 and 1999, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 2000,
included in Wachovia's 2000 Annual Report to Stockholders which is included in
Wachovia's Annual Report on Form 10-K for the year ended December 31, 2000, and
incorporated by reference in this prospectus, have been incorporated by
reference in this prospectus in reliance upon the report of KPMG LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The restated audited financial statements of Wachovia Corporation at December
31, 2000 and 1999, and for each of the three years in the period ended December
31, 2000, included in Wachovia Corporation's (formerly named First Union
Corporation) Current Report on Form 8-K dated August 30, 2001 and incorporated
by reference herein, have been incorporated by reference herein in reliance upon
the report of Ernst & Young LLP, independent auditors. The restated audited
financial statements referred to above are included in reliance upon such report
given on the authority of said firm as experts in accounting and auditing.
PLAN OF DISTRIBUTION
This prospectus will be used by First Union Securities, Inc., an indirect,
wholly-owned subsidiary of Wachovia, in connection with offers and sales
related to market-making and other transactions in the Capital Securities.
First Union Securities, Inc. may act as principal or agent in such
transactions. Sales will be made at prices relating to prevailing market prices
at the time of sale or otherwise. First Union Securities, Inc. will not receive
any compensation from Wachovia for engaging in those transactions.
Wachovia conducts its investment banking, institutional and capital markets
businesses through its various bank, broker-dealer and nonbank subsidiaries
(including First Union Securities, Inc.) under the trade name of "Wachovia
Securities." Any reference to "Wachovia Securities" is not intended to be a
reference to Wachovia Securities, Inc., member NASD/SIPC, a separate
broker-dealer subsidiary of Wachovia and sister affiliate of First Union
Securities, Inc., which is not participating in the market-making transactions.
VALIDITY OF SECURITIES
The validity of the Capital Securities and the guarantee and assumptions of
the Capital Securities and the guarantee by Wachovia has been passed upon for
Wachovia by Ross E. Jeffries, Esq., Senior Vice President and Assistant General
Counsel of Wachovia. Mr. Jeffries owns shares of Wachovia's common stock and
holds options to purchase additional shares of such common stock.
10
FILED PURSUANT TO RULE 424(B)(5)
REGISTRATION NOS. 33-19365 AND 33-19365-01
PROSPECTUS SUPPLEMENT
(To Base Prospectus dated January 22, 1997)
$300,000,000
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"
(Continued on next page)
See "Risk Factors" beginning on page S-5 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 BASE PROSPECTUS TO WHICH IT RELATES. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Initial Public
Offering Underwriting Proceeds To
Price (1) Commission (2) Trust (3)(4)
----------------------------------------------------------------
Per Capital Security $988.40 (3) $988.40
----------------------------------------------------------------
Total............... $296,520,000 (3) $296,520,000
----------------------------------------------------------------
--------------------------------------------------------------------------------
--------
(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.
The date of this Prospectus Supplement is January 28, 1997.
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)
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 Base Prospectus.
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" in
this Prospectus Supplement and "Certain Federal Income Tax Consequences--United
States Holders--Interest Income and Original Issue Discount" in the
accompanying Prospectus.
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 Base 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
S-2
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 Base 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 Base 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."
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 Base Prospectus and "Certain Federal Income
Tax Consequences--United States Holders--Distributions of the Junior
Subordinated Debentures to Holders of Capital Securities" in the accompanying
Prospectus.
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 BASE PROSPECTUS
IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE BASE
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
S-3
THIS PROSPECTUS SUPPLEMENT AND THE BASE 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 BASE 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 Base
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 Base Prospectus.
S-4
RISK FACTORS
Prospective purchasers of Capital Securities should carefully review the
information contained elsewhere in this Prospectus Supplement and in the
accompanying Base 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
Guarantees--Status of the Guarantees" and "Description of the Junior
Subordinated Debentures--Subordination" in the accompanying Base 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.
S-5
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 Consequences--United States Holders--Interest
Income and Original Issue Discount" and "--Sale or Redemption of the Capital
Securities'' in the accompanying Prospectus.
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 Consequences--United States Holders--Distributions of the
Junior Subordinated Debentures to Holders of Capital Securities" in the
accompanying Prospectus.
S-6
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 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," and "Description of Junior Subordinated
Debentures--Special Event Prepayment."
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 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."
S-7
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 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 Base 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 Base 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
S-8
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 Base 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.
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 Consequences--United States
Holders--Interest Income and Original Issue Discount" and "--Sale or Redemption
of the Capital Securities" in the accompanying Prospectus.
S-9
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 Base 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 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
Base 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-10
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.
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.
S-11
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-12
RATIO 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 Years Ended December 31,
September 30, ------------------------
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-13
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 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.
S-14
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.
Nine Months Ended
September 30, Year Ended December 31,
----------------- --------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(unaudited)
(dollars in millions, except per share data)
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
S-15
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 Base 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 the accompanying Base Prospectus form a part.
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 Base 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
S-16
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 Base 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 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" in this Prospectus Supplement and "Certain
Federal Income Tax Consequences--United States Holders--Interest Income and
Original Issue Discount" in the accompanying Prospectus.
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.
S-17
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."
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 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.
S-18
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 Base 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 Base Prospectus, Capital
Securities in certificated form will not be issued in exchange for the global
certificates. See "Book-Entry Issuance" in the accompanying Base 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 Base 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 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
Base 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 Base Prospectus) set forth in the accompanying Base 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 Base Prospectus form a part.
S-19
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 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 Base 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 Base Prospectus.
S-20
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.
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).
S-21
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 Consequences--United States Holders--Interest Income and
Original Issue Discount" in the accompanying Prospectus.
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 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 Base Prospectus.
S-22
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.
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.
S-23
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.
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 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.
S-24
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
Base Prospectus. The Declaration provides that each holder of Capital
Securities by acceptance thereof agrees to the provisions of the Guarantee and
the Indenture.
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.
S-25
BASE 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 BASE PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Base Prospectus is January 22, 1997.
(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 Base 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 Base 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.
B-2
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. 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 Base 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 Base 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, 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 Base
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 Base 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.
B-3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Corporation with the Commission are
incorporated into this Base 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.
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 Base Prospectus shall be
deemed to be incorporated by reference into this Base Prospectus and to be a
part of this Base 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 Base 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 Base
Prospectus.
The Corporation will provide without charge to any person to whom this Base
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.
B-4
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.
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 Base 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
B-5
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 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
B-6
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 Base Prospectus
forms a part, and to 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 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,
B-7
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.
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.
B-8
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, 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
B-9
persons that may hold interests through Participants. Ownership of beneficial
interests in such Global Junior Subordinated Debenture will be shown on, and
the transfer of that ownership will be effected only through, records
maintained by the applicable Depositary or its nominee (with respect to
interests of Participants) and the records of Participants (with respect to
interests of persons who hold through Participants). The laws of some states
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and such laws may impair the ability
to transfer beneficial interests in a Global Junior Subordinated Debenture.
So long as the Depositary for a Global Junior Subordinated Debenture, or its
nominee, is the registered owner of such Global Junior Subordinated Debenture,
such Depositary or such nominee, as the case may be, will be considered the
sole owner or holder of the Junior Subordinated Debentures represented by such
Global Junior Subordinated Debenture for all purposes under the Indenture
governing such Junior Subordinated Debentures. Except as provided below, owners
of beneficial interests in a Global Junior Subordinated Debenture 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 Debenture representing Junior Subordinated
Debentures of such series may, on terms
B-10
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 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.
B-11
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 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.
B-12
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 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.
B-13
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,
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.
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.
B-14
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, 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
B-15
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 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
B-16
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 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.
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.
B-17
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.
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.
B-18
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 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 Base 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
B-19
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 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."
B-20
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.
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.
B-21
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.
"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.
B-22
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."
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
B-23
relative Liquidation Amounts of such classes. The particular Preferred
Securities to be redeemed shall be selected on a pro rata basis not more than
60 days prior to the Redemption Date by the Property Trustee from the
outstanding Preferred Securities not previously called for redemption, by such
method as the Property Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of portions (equal to $25 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.
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
B-24
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.
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.
B-25
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.
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, 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.
B-26
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 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.
B-27
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.
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
B-28
Liquidation Amount of such Global Preferred Security for such Preferred
Securities as shown on the records of such Depositary or its nominee. The
Corporation also expects that payments by Participants to owners of beneficial
interests in such Global Preferred Security held through such Participants will
be governed by standing instructions and customary practices, as is now the
case with securities held for the accounts of customers in bearer form or
registered in "street name." Such payments will be the responsibility of such
Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if a
Depositary for a series of Preferred Securities is at any time unwilling,
unable or ineligible to continue as depositary and a successor depositary is
not appointed by the 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.
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
B-29
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.
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.
B-30
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.
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
B-31
Subordinated Debentures are required to be printed and delivered. The
Corporation, at its option, may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor depositary). After a Debenture
Event of Default, the holders of a majority in liquidation 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 Base
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 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
B-32
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.
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.
B-33
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 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.
B-34
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 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
B-35
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 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.
B-36
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 Base 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 Base 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 Base 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-5
Wachovia Capital Trust II.................................................................... S-10
Wachovia Corporation......................................................................... S-11
Use of Proceeds.............................................................................. S-12
Ratio of Earnings to Fixed Charges........................................................... S-13
Capitalization............................................................................... S-14
Summary Financial Data....................................................................... S-15
Accounting Treatment......................................................................... S-16
Description of Capital Securities............................................................ S-16
Description of Junior Subordinated Debentures................................................ S-19
Description of the Guarantee................................................................. S-24
ERISA Considerations......................................................................... S-25
Base Prospectus
Available Information........................................................................ B-3
Incorporation of Certain Documents by Reference.............................................. B-4
Wachovia Corporation......................................................................... B-5
The Trusts................................................................................... B-5
Use of Proceeds.............................................................................. B-6
Description of Junior Subordinated Debentures................................................ B-7
Description of Preferred Securities.......................................................... B-19
Book-Entry Issuance.......................................................................... B-30
Description of Guarantees.................................................................... B-32
Relationship Among the Preferred Securities, the Corresponding Junior Subordinated Debentures
and the Guarantees......................................................................... B-35
B-37
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to the registration or qualification under the securities laws of any State.
SUBJECT TO COMPLETION, DATED OCTOBER 29, 2001
$100,000,000
CENTRAL FIDELITY CAPITAL TRUST I
Floating Rate Capital Trust Pass-through Securities, Series A
(Liquidation Amount $1,000 per Capital Security )
Fully and unconditionally guaranteed, as described in this Prospectus, by
WACHOVIA CORPORATION
(Formerly named First Union Corporation)
-----------------
This Prospectus covers the remarketing from time to time of the Floating
Rate Capital Trust Pass-through Securities, Series A (the "Capital Securities")
by First Union Securities, Inc., an affiliate of Wachovia Corporation (formerly
named First Union Corporation) ("Wachovia") and Central Fidelity Capital Trust
I. The Capital Securities were originally offered pursuant to the Base
Prospectus, dated July 28, 1997, attached to this Prospectus and constituting a
part of this Prospectus. References to the former Wachovia Corporation or
Central Fidelity Banks, Inc. or the Corporation in the attached Base
Prospectus, dated July 28, 1997 refer, where applicable, to Wachovia.
See "Risk Factors" beginning on page B-12 of the attached Base Prospectus,
dated July 28, 1997, for a discussion of certain factors that you should
consider before investing 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 FEDERAL
AGENCY.
-----------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Prospectus will be used by First Union Securities, Inc., an indirect,
wholly-owned subsidiary of Wachovia Corporation in connection with offers and
sales related to market-making and other transactions in the Capital
Securities. First Union Securities, Inc. may act as principal or agent in these
transactions. The sales may be made at prices related to prevailing market
rates at the time of sale or otherwise. Wachovia Corporation conducts its
investment banking, institutional, and capital markets businesses through its
various bank, broker-dealer and nonbank subsidiaries (including First Union
Securities, Inc.) under the trade name "Wachovia Securities." Unless otherwise
stated, any reference to "Wachovia Securities" is not intended to be a
reference to Wachovia Securities, Inc., member NASD/SIPC, a separate
broker-dealer subsidiary of Wachovia Corporation and sister affiliate of First
Union Securities, Inc. which is not participating in the market-making
transactions.
-----------------
WACHOVIA SECURITIES
The date of this Prospectus is October , 2001.
TABLE OF CONTENTS
Prospectus
Page
----
Wachovia Corporation................................................... 3
Consolidated Ratios of Earnings to Fixed Charges....................... 4
Incorporation of Certain Documents By Reference........................ 4
Certain Federal Income Tax Consequences................................ 5
United States Holders............................................... 5
United States Alien Holders......................................... 8
Backup Withholding and Information Reporting........................ 10
Experts................................................................ 10
Plan of Distribution................................................... 10
Validity of Securities................................................. 10
Base Prospectus dated July 28, 1997
Available Information.................................................. B-1
Incorporation of Certain Documents by Reference........................ B-2
Summary................................................................ B-4
Risk Factors........................................................... B-12
Use of Proceeds from Sale of Old Capital Securities.................... B-18
Central Fidelity Capital Trust I....................................... B-18
Central Fidelity....................................................... B-19
Recent Developments.................................................... B-21
Ratio of Earnings to Fixed Charges for the Corporation................. B-21
Selected Historical Financial Information.............................. B-22
Capitalization......................................................... B-23
Accounting Treatment................................................... B-23
Regulatory Treatment................................................... B-23
The Exchange Offer..................................................... B-23
Description of New Capital Securities.................................. B-34
Description of New Junior Subordinated Debt Securities................. B-47
Description of New Guarantee........................................... B-57
Description of Old Securities.......................................... B-59
Relationship Among the Capital Securities, the Junior Subordinated Debt
Securities and the Guarantee......................................... B-60
Certain ERISA Considerations........................................... B-62
2
WACHOVIA CORPORATION
Wachovia was incorporated under the laws of North Carolina in 1967. We are
registered as a financial holding company and a bank holding company under the
Bank Holding Company Act of 1956, as amended, and are supervised and regulated
by the Board of Governors of the Federal Reserve System. Our banking and
securities subsidiaries are supervised and regulated by various federal and
state banking and securities regulatory authorities. On September 1, 2001, the
former Wachovia Corporation (which we refer to as "Legacy Wachovia") merged
with and into First Union Corporation, and First Union Corporation changed its
name to "Wachovia Corporation". As used in this prospectus, the terms
"Wachovia", "we", "our" and "us" refer to Wachovia Corporation, the holding
company, and not the consolidated entity.
In addition to North Carolina, Wachovia's full-service banking subsidiaries
operate in Connecticut, Delaware, Florida, Georgia, Maryland, New Jersey, New
York, Pennsylvania, South Carolina, Virginia and Washington, D.C. These
full-service banking subsidiaries provide a wide range of commercial and retail
banking and trust services. Wachovia also provides various other financial
services, including mortgage banking, home equity lending, leasing, investment
banking, insurance and securities brokerage services through other
subsidiaries.
In 1985, the Supreme Court upheld regional interstate banking legislation.
Since then, Wachovia has concentrated its efforts on building a large regional
banking organization in what it perceives to be some of the better banking
markets in the eastern United States. Since November 1985, Wachovia has
completed over 90 banking-related acquisitions.
Wachovia continually evaluates its business operations and organizational
structures to ensure they are aligned closely with its goal of maximizing
performance in its core business lines, Capital Management, Wealth Management,
the General Bank and Corporate and Investment Banking. When consistent with our
overall business strategy, we may consider the disposition of certain of our
assets, branches, subsidiaries or lines of business. We continue to routinely
explore acquisition opportunities, particularly in areas that would complement
our core business lines, and frequently conduct due diligence activities in
connection with possible acquisitions. As a result, acquisition discussions
and, in some cases, negotiations frequently take place, and future acquisitions
involving cash, debt or equity securities can be expected.
Wachovia is a separate and distinct legal entity from its banking and other
subsidiaries. Dividends received from our subsidiaries are our principal source
of funds to pay dividends on our common and preferred stock and debt service on
our debt. Various federal and state statutes and regulations limit the amount
of dividends that our banking and other subsidiaries may pay to us without
regulatory approval.
Wachovia and its affiliates had completed numerous acquisitions of financial
services institutions since 1985. These financial services institutions either
have merged into Wachovia or are wholly-owned subsidiaries of Wachovia.
Wachovia acquired Legacy Wachovia on September 1, 2001 by merging Legacy
Wachovia into Wachovia. Legacy Wachovia had previously acquired Central
Fidelity Banks, Inc. on December 15, 1997 by merging a wholly-owned subsidiary
of Legacy Wachovia with and into Central Fidelity and then merging Central
Fidelity into Legacy Wachovia. As a result of these mergers, Wachovia is
responsible for the obligations of Legacy Wachovia and Central Fidelity with
respect to the Capital Securities.
3
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following table provides Wachovia's consolidated ratios of earnings to
fixed charges:
Six Months Years Ended December 31,
Ended -----------------------------
June 30, 2001 2000 1999 1998 1997 1996
------------- ----- ----- ----- ----- -----
Consolidated Ratios of Earnings to Fixed Charges
Excluding interest on deposits.................. 1.86x 1.13x 2.29x 2.13x 2.50x 2.58x
Including interest on deposits.................. 1.39x 1.06x 1.62x 1.51x 1.57x 1.56x
For purposes of computing these ratios:
. earnings represent income from continuing operations before extraordinary
items and cumulative effect of a change in accounting principles, plus
income taxes and fixed charges (excluding capitalized interest);
. fixed charges, excluding interest on deposits, represent interest
(including capitalized interest), one-third of rents and all amortization
of debt issuance costs;
. fixed charges, including interest on deposits, represent all interest
(including capitalized interest), one-third of rents and all amortization
of debt issuance costs.
One-third of rents is used because it is the proportion deemed
representative of the interest factor.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. In addition, our SEC filings are
available to the public at the SEC's web site at http://www.sec.gov. You can
also inspect reports, proxy statements and other information about us at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York.
The SEC allows us to "incorporate by reference" into this prospectus the
information in documents we file with it. This means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be a part of this
prospectus and should be read with the same care. When we update the
information contained in documents that have been incorporated by reference by
making future filings with the SEC the information incorporated by reference in
this prospectus is considered to be automatically updated and superseded. In
other words, in the case of a conflict or inconsistency between information
contained in this prospectus and information incorporated by reference into
this prospectus, you should rely on the information contained in the document
that was filed later. We incorporate by reference the documents listed below:
. First Union's Annual Report on Form 10-K for the fiscal year ended
December 31, 2000;
. First Union's Quarterly Reports on Form 10-Q for the periods ended March
31, 2001 (as amended on June 26, 2001) and June 30, 2001;
. First Union's Current Reports on Form 8-K dated January 18, 2001, April
15, 2001, April 16, 2001 (as amended on June 25, 2001), May 15, 2001 (as
amended on June 25, 2001), July 12, 2001, July 20, 2001, August 30, 2001,
September 6, 2001 and October 23, 2001;
. All documents filed with the SEC pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended, after the date
of the initial registration statement and before effectiveness of the
registration statement, and after the date of this prospectus and before
the termination of this offering.
4
You may request a copy of these filings, other than an exhibit to a filing
unless that exhibit is specifically incorporated by reference into that filing,
at no cost, by writing to or telephoning us at the following address:
Corporate Relations
Wachovia Corporation
One First Union Center
301 South College Street
Charlotte, North Carolina 28288-0206
Telephone: (704) 374-6782
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
This section describes the material United States federal income tax
consequences of owning the Capital Securities. It is the opinion of Sullivan &
Cromwell, special tax counsel to Wachovia and to Central Fidelity Capital Trust
I (the "Trust"). It applies to you only if you hold the Capital Securities as
capital assets for tax purposes. This section does not apply to you if you are
a member of a class of holders subject to special rules, such as:
. a dealer in securities or currencies,
. a trader in securities that elects to use a mark-to-market method of
accounting for your securities holdings,
. a bank,
. a life insurance company,
. a thrift institution,
. a regulated investment company,
. a real estate investment trust,
. a tax-exempt organization,
. a person that owns Capital Securities that are a hedge or that are hedged
against interest rate risks,
. a person that owns Capital Securities as part of a straddle or conversion
transaction for tax purposes, or
. a person whose functional currency for tax purposes is not the U.S.
dollar.
This section is based on the Internal Revenue Code of 1986, as amended, its
legislative history, existing and proposed regulations under the Internal
Revenue Code, published rulings and court decisions, all as currently in
effect. These laws are subject to change, possibly on a retroactive basis.
Please consult your own tax advisor concerning the consequences of owning the
Capital Securities in your particular circumstances under the Code and the
laws of any other taxing jurisdiction.
United States Holders
This subsection describes the tax consequences to a United States holder.
You are a United States holder if you are a beneficial owner of a Capital
Security and you are:
. a citizen or resident of the United States,
. a domestic corporation,
. an estate whose income is subject to United States federal income tax
regardless of its source, or
5
. a trust if a United States court can exercise primary supervision over the
trust's administration and one or more United States persons are
authorized to control all substantial decisions of the trust.
If you are not a United States holder, this subsection does not apply to you
and you should refer to "--United States Alien Holders" below.
Classification of the Junior Subordinated Debt Securities and the Trust
Under current law and assuming continued compliance with the terms of the
Declaration, the Trust will not be classified as an association taxable as a
corporation for United States federal income tax purposes. Moreover, the Trust
should be classified as a grantor trust, and if not so classified will be
classified as a partnership, for United States federal income tax purposes. As
a result, each beneficial owner of the Capital Securities (each a
"Securityholder") that is a United States holder will be required to include in
its gross income its pro rata share of the interest income, including original
issue discount ("OID"), paid or accrued with respect to the Junior Subordinated
Debt Securities, whether or not cash is actually distributed to the
Securityholder. See "--Interest Income and Original Issue Discount" below. The
following discussion assumes that the Trust will be classified as a grantor
trust for federal income tax purposes. The Junior Subordinated Debt Securities
are properly classified as indebtedness of Wachovia for United States federal
income tax purposes.
Interest Income and Original Issue Discount
Under applicable U.S. Treasury regulations, a contingency under which stated
interest may not be timely paid is ignored in determining whether a debt
instrument is issued with OID if the contingency is "remote". Wachovia has not
exercised its option to defer payments and has concluded that the likelihood of
its exercising this option is remote. Assuming that Wachovia's conclusion is
correct, as of the date of this prospectus, the Junior Subordinated Debt
Securities would not be considered to have been issued or reissued with OID,
although the Internal Revenue Service could take the position that the Junior
Subordinated Debt Securities were issued with OID at the time of their original
issuance.
The following discussion assumes that unless and until Wachovia exercises
its option to defer interest on the Junior Subordinated Debt Securities, the
Junior Subordinated Debt Securities will not be treated as issued or reissued
with OID other than de minimis OID.
Under U.S. Treasury regulations, if Wachovia exercised its option to defer
any payment of interest, the Junior Subordinated Debt Securities would be
treated as reissued with OID, and, thereafter, all stated interest on the
Junior Subordinated Debt Securities would be treated as OID as long as the
Junior Subordinated Debt Securities remained outstanding. In such an event, all
of a United States holder's taxable interest income with respect to the Junior
Subordinated Debt Securities would be accounted for as OID on an economic
accrual basis regardless of such holder's method of tax accounting, and actual
distributions of stated interest would not be reported separately as taxable
income. Consequently, a United States holder would be required to include OID
in gross income even though Wachovia would not make any actual cash payments
during an extension period.
Because income on the Capital Securities will generally constitute interest,
holders that are corporations will not be entitled to the dividend-received
deduction with respect to any income recognized with respect to the Capital
Securities.
Market Discount and Purchase Premium
The following discussion of market discount and purchase premium assumes
that the Trust is properly treated as a grantor trust for United States federal
income tax purposes. If the Internal Revenue Service were to determine that the
Trust should not be treated as a grantor trust, but should instead be treated
as a partnership, the following discussion may not apply. See below for a
discussion of the application of the market discount and purchase premium rules
if the Trust is properly treated as a partnership.
6
Market Discount. A United States holder will be treated as if such holder
purchased its pro rata share of the underlying Junior Subordinated Debt
Securities at a market discount, and the Junior Subordinated Debt Securities
represented by such holder's Capital Security will be market discount
securities if the difference between the Junior Subordinated Debt Security's
stated redemption price at maturity or revised issue price and the purchase
price for a Capital Security that is allocable to such Junior Subordinated Debt
Security is equal to or greater than 1/4 of 1 percent of the Junior
Subordinated Debt Security's stated redemption price at maturity or revised
issue price, respectively, multiplied by the number of complete years to the
Junior Subordinated Debt Security's maturity. To determine the revised issue
price of a Junior Subordinated Debt Securities for these purposes, a holder
must generally add any OID that has accrued on that Junior Subordinated Debt
Securities to its issue price and subtract any payments on the Junior
Subordinated Debt Securities that are not qualified stated interest.
If a Junior Subordinated Debt Security's stated redemption price at maturity
or, its revised issue price, exceeds the purchase allocable to such Debt
Securities by less than 1/4 of 1 percent multiplied by the number of complete
years to the Junior Subordinated Debt Security's maturity, the excess
constitutes de minimis market discount, and the rules discussed below are not
applicable.
A United States holder must treat any gain recognized on the maturity or
disposition of a Capital Security as ordinary income to the extent of the
accrued market discount on the underlying Junior Subordinated Debt Securities
allocable to such security. Alternatively, a United States holder may elect to
include a Junior Subordinated Debt Security's market discount in income
currently over the life of a Junior Subordinated Debenture. If a United States
holder makes this election, it will apply to all debt instruments with market
discount that the United States holder acquires on or after the first day of
the first taxable year to which the election applies. A United States holder
may not revoke this election without the consent of the Internal Revenue
Service. If you own a market discount security and do not make this election,
you will generally be required to defer deductions for interest on borrowings
allocable to Capital Securities for which the underlying Junior Subordinated
Debt Securities are market discount securities in an amount not exceeding the
accrued market discount on the Junior Subordinated Debt Securities until the
maturity of the Junior Subordinated Debt Securities or the disposition of the
Capital Securities.
Market discount will accrue on a straight-line basis unless a United States
holder elects to accrue market discount using a constant-yield method. If a
holder makes this election, it will apply only to the Junior Subordinated Debt
Securities with respect to which it is made. Once made such election may not be
revoked.
Purchase Premium. If the purchase price allocable to a Junior Subordinated
Debt Securities is an amount in excess of a Junior Subordinated Debt Security's
principal amount, a United States holder may elect to treat the excess as
amortizable bond premium. If a holder makes this election, the holder will
reduce the amount required to be included in income each year with respect to
interest earned by the amount of amortizable bond premium allocable to that
year, based on the underlying Junior Subordinated Debt Security's yield to
maturity. If a United States holder makes an election to amortize bond premium,
it will apply to all debt instruments, other than debt instruments the interest
on which is excludible from gross income, held by such holder at the beginning
of the first taxable year to which the election applies and to any debt
instruments that the holder acquires thereafter. A holder may not revoke an
election it without the consent of the Internal Revenue Service.
Distributions of the Junior Subordinated Debt Securities to Holders of
Capital Securities
A distribution by the Trust of the Junior Subordinated Debt Securities, as
described in Amendment No. 1 to Form S-4 dated July 24, 1997 under the caption
"Description of Capital Securities--Liquidation of the Trust and Distribution
of Junior Subordinated Debt Securities", will be non-taxable and will result in
a United States holder receiving directly its pro rata share of the Junior
Subordinated Debt Securities previously held indirectly through the Trust, with
a holding period and aggregate adjusted tax basis equal to the holding period
and aggregate adjusted tax basis such United States holder had in its Capital
Securities immediately before such distribution. If, however, the liquidation
of the Trust were to occur because the Trust was subject to United States
federal income tax with respect to income accrued or received on the Junior
Subordinated Debt Securities, the
7
distribution of Junior Subordinated Debt Securities to United States holders by
the Trust would be a taxable event to the Trust and to each United States
holder, and each United States holder would recognize gain or loss as if the
United States holder had exchanged its Capital Securities for the Junior
Subordinated Debt Securities it received upon the liquidation of the Trust. A
United States holder will include interest in respect of the Junior
Subordinated Debt Securities received from the Trust in the manner described
above under "--Interest Income and Original Issue Discount".
Sale or Redemption of the Capital Securities
Gain or loss will be recognized by a United States holder on a sale,
exchange or other disposition of the Capital Securities (including a redemption
for cash) in an amount equal to the difference between the amount realized and
the United States holder's adjusted tax basis in the Capital Securities sold or
so redeemed. A United States holder's adjusted tax basis in the Capital
Securities generally will be its initial purchase price, increased by any
market discount or OID previously included in such United States holder's gross
income to the date of disposition and decreased by distributions or other
payments received on the Capital Securities other than payments of stated
interest and any amortizable bond premium applied to reduce the United States
holder's pro rata share of any interest on the Junior Subordinated Debt
Securities. Gain or loss recognized by a United States holder on the Capital
Securities generally will be taxable as capital gain or loss (except to the
extent any amount realized is treated as a payment of accrued interest with
respect to such United States holder's pro rata share of the Junior
Subordinated Debt Securities or as described above under the heading "--Market
Discount and Purchase Premium--Market Discount") and generally will be
long-term capital gain or loss if the Capital Securities have been held for
more than one year.
Should Wachovia exercise its option to defer any payment of interest on the
Junior Subordinated Debt Securities, 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 Debt Securities. In the event of
such a deferral, a Securityholder that disposes of its Capital Securities
between record dates for payments of distributions (and consequently does not
receive a distribution from the Trust for the period prior to such disposition)
will nevertheless be required to include in income as ordinary income accrued
but unpaid interest on the Junior Subordinated Debt Securities through the date
of disposition and to add such amount to its adjusted tax basis in its Capital
Securities disposed of. Such United States holder would recognize a capital
loss on the disposition of its Capital Securities to the extent the selling
price (which may not fully reflect the value of accrued but unpaid interest) is
less than the United States holder's adjusted tax basis in the Capital
Securities (which will include accrued but unpaid interest). Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes.
United States Alien Holders
This subsection describes the tax consequences to a United States alien
holder. A United States alien holder is a holder that is the beneficial owner
of a Capital Security and is, for United States federal income tax purposes:
. a nonresident alien individual,
. a foreign corporation,
. a foreign partnership, or
. an estate or trust that in either case is not subject to United States
federal income tax on a net income basis on income or gain from a Capital
Security.
If you are a United States holder, this subsection does not apply to you.
8
Under United States federal income tax law, and subject to the discussion of
backup withholding below, if you are a United States alien holder of a Capital
Security:
. the Trust and other U.S. payors generally will not be required to deduct
United States withholding tax from payments of principal, premium, if any,
and interest, including OID, if, in the case of payments of interest:
1.the United States alien holder does not actually or constructively own 10%
or more of the total combined voting power of all classes of stock of
Wachovia entitled to vote,
2.the United States alien holder is not a controlled foreign corporation
that is related to Wachovia through stock ownership, and
3.the U.S. payor does not have actual knowledge or reason to know that the
holder is a United States person and:
a.the United States alien holder has furnished to the U.S. payor an
Internal Revenue Service Form W-8BEN or an acceptable substitute form
upon which such holder certifies, under penalties of perjury, that the
holder is a non-United States person,
b.in the case of payments made outside the United States to a holder at an
offshore account (generally, an account maintained by a holder at a bank
or other financial institution at any location outside the United
States), the holder has furnished to the U.S. payor documentation that
establishes the holder's identity and status as a non-United States
person,
c.the U.S. payor has received a withholding certificate (furnished on an
appropriate Internal Revenue Service Form W-8 or an acceptable
substitute form) from a person claiming to be:
i.a withholding foreign partnership (generally a foreign partnership
that has entered into an agreement with the Internal Revenue Service
to assume primary withholding responsibility with respect to
distributions and guaranteed payments it makes to its partners),
ii.a qualified intermediary (generally a non-United States financial
institution or clearing organization or a non-United States branch or
office of a United States financial institution or clearing
organization that is a party to a withholding agreement with the
Internal Revenue Service), or
iii.a U.S. branch of a non-United States bank or of a non-United States
insurance company,
and the withholding foreign partnership, qualified intermediary or U.S.
branch has received documentation upon which it may rely to treat the
payment as made to a non-United States person in accordance with U.S.
Treasury regulations (or, in the case of a qualified intermediary, in
accordance with its agreement with the Internal Revenue Service),
d.the U.S. payor receives a statement from a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business:
i.certifying to the U.S. payor under penalties of perjury that an
Internal Revenue Service Form W-8BEN or an acceptable substitute form
has been received from you by it or by a similar financial institution
between it and you, and
ii.to which is attached a copy of the Internal Revenue Service Form
W-8BEN or acceptable substitute form, or
e.the U.S. payor otherwise possesses documentation upon which it may rely
to treat the payment as made to a non-United States person in accordance
with U.S. Treasury regulations; and
. no deduction for any United States federal withholding tax will be made
from any gain that you realize on the sale or exchange of your Capital
Security.
9
Backup Withholding and Information Reporting
Generally, income on the Capital Securities will be reported to
Securityholders on Form 1099, which form should be mailed to Securityholders by
January 31 following each calendar year. Payments made on, and proceeds from
the sale of, the Capital Securities may be subject to backup withholding tax
unless the Securityholder complies with certain certification requirements. Any
withheld amounts will be allowed as a credit against the Securityholder's
United States federal income tax liability, provided the required information
is furnished to the Internal Revenue Service on a timely basis.
EXPERTS
The consolidated balance sheets of Wachovia Corporation (formerly named
First Union Corporation) as of December 31, 2000 and 1999, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 2000,
included in Wachovia's 2000 Annual Report to Stockholders which is included in
Wachovia's Annual Report on Form 10-K for the year ended December 31, 2000, and
incorporated by reference in this prospectus, have been incorporated by
reference in this prospectus in reliance upon the report of KPMG LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The restated audited financial statements of Legacy Wachovia at December 31,
2000 and 1999, and for each of the three years in the period ended December 31,
2000, included in Wachovia Corporation's (formerly named First Union
Corporation) Current Report on Form 8-K dated August 30, 2001 and incorporated
by reference herein, have been incorporated by reference herein in reliance
upon the report of Ernst & Young LLP, independent auditors. The restated
audited financial statements referred to above are included in reliance upon
such report given on the authority of said firm as experts in accounting and
auditing.
PLAN OF DISTRIBUTION
This prospectus will be used by First Union Securities, Inc., an indirect,
wholly-owned subsidiary of Wachovia, in connection with offers and sales
related to market-making and other transactions in the Capital Securities.
First Union Securities, Inc. may act as principal or agent in such
transactions. Sales will be made at prices relating to prevailing market prices
at the time of sale or otherwise. First Union Securities, Inc. will not receive
any compensation from Wachovia for engaging in those transactions.
Wachovia conducts its investment banking, institutional and capital markets
businesses through its various bank, broker-dealer and nonbank subsidiaries
(including First Union Securities, Inc.) under the trade name of ''Wachovia
Securities.'' Any reference to "Wachovia Securities" is not intended to be a
reference to Wachovia Securities, Inc., member NASD/SIPC, a separate
broker-dealer subsidiary of Wachovia and sister affiliate of First Union
Securities, Inc., which is not participating in the market-making transactions.
VALIDITY OF SECURITIES
The validity of the Capital Securities and the guarantee and assumptions of
the Capital Securities and the guarantee by Wachovia has been passed upon for
Wachovia by Ross E. Jeffries, Esq., Senior Vice President and Assistant General
Counsel of Wachovia. Mr. Jeffries owns shares of Wachovia's common stock and
holds options to purchase additional shares of such common stock.
10
BASE PROSPECTUS
$100,000,000
Central Fidelity Capital Trust I
OFFER TO EXCHANGE ITS FLOATING RATE CAPITAL TRUST PASS-THROUGH SECURITIES,
SERIES A, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, FOR ANY
AND ALL OF THE OUTSTANDING FLOATING RATE CAPITAL TRUST PASS-THROUGH SECURITIES
OF CENTRAL FIDELITY CAPITAL TRUST I (LIQUIDATION AMOUNT $1,000 PER CAPITAL
SECURITY) FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
Central Fidelity Banks, Inc.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON SEPTEMBER 2, 1997, UNLESS EXTENDED.
Central Fidelity Banks, Inc., a Virginia corporation ("Central Fidelity" or
the "Corporation"), hereby offers, upon the terms and subject to the conditions
set forth in this Base Prospectus (as the same may be amended or supplemented
from time to time, the "Base Prospectus") and in the accompanying Letter of
Transmittal (which together constitute the "Exchange Offer"), to exchange up to
$100,000,000 aggregate Liquidation Amount (as defined herein) of the Floating
Rate Capital Trust Pass-through Securities, Series A (Liquidation Amount $1,000
per Capital Trust Pass-through Security) (the "New Capital Securities") of
Central Fidelity Capital Trust I, a statutory business trust created under the
laws of the State of Delaware (the "Trust"), which have been registered under
the Securities Act of 1933 (the "Securities Act"), pursuant to a Registration
Statement (as defined herein) of which this Base Prospectus constitutes a part,
for a like Liquidation Amount of the outstanding Floating Rate Capital Trust
Pass-through Securities (Liquidation Amount $1,000 per Capital Security) (the
"Old Capital Securities") of the Trust, of which $100,000,000 aggregate
Liquidation Amount is outstanding. The New Capital Securities will have the
benefit of the New Guarantee (as defined herein) of the Corporation, which will
be identical in all material respects (except as described herein) to the Old
Guarantee (as defined herein) relating to the Old Capital Securities (the "Old
Guarantee"). The Trust will hold Floating Rate Junior Subordinated Debt
Securities, Series A, of the Corporation (the "New Junior Subordinated Debt
Securities") in an aggregate principal amount equal to the aggregate
Liquidation Amount of the New Capital Securities issued pursuant to the
Exchange Offer and the Common Securities currently outstanding, which will be
identical in all material respects (except as described herein) to the
Corporation's outstanding Floating Rate Junior Subordinated Debt Securities
(the "Old Junior Subordinated Debt Securities"), of which $103,093,000
aggregate principal amount is outstanding. The New Guarantee relating to the
New Capital Securities and $100,000,000 aggregate principal amount of the New
Junior Subordinated Debt Securities also have been registered under the
Securities Act. The Old Capital Securities, the Old Guarantee and the Old
Junior Subordinated Debt Securities are collectively referred to herein as the
"Old Securities" and the New Capital Securities, the New Guarantee and the New
Junior Subordinated Debt Securities are collectively referred to herein as the
"New Securities."
(continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE B-12 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 BASE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Base Prospectus is July 28, 1997.
(cover page continued)
The terms of the New Securities are identical in all material respects to
the respective terms of the Old Securities, except that (i) the New Securities
have been registered under the Securities Act and therefore will not be subject
to certain of the restrictions on transfer applicable to the Old Securities,
(ii) the New Capital Securities will not provide for any increase in the rate
at which Distributions (as defined herein) accumulate thereon and (iii) the New
Junior Subordinated Debt Securities will not provide for any increase in the
interest rate thereon. See "Description of New Capital Securities,"
"Description of New Junior Subordinated Debt Securities," "Description of New
Guarantee" and "Description of Old Securities." The New Capital Securities are
being offered for exchange in order to satisfy certain obligations of the
Corporation and the Trust under the Registration Agreement, dated as of April
23, 1997 (the "Registration Agreement"), by and among the Corporation, the
Trust and Salomon Brothers Inc and Keefe, Bruyette & Woods, Inc. (collectively,
the "Initial Purchasers").
The New Capital Securities offered hereby represent beneficial ownership
interests in the Trust. Central Fidelity is the owner of all of the beneficial
ownership interests represented by common securities of the Trust (the "Common
Securities" and, collectively with the Capital Securities, the "Trust
Securities"). The Bank of New York is the Property Trustee of the Trust. The
Trust exists for the exclusive purposes of (i) issuing and selling the Trust
Securities, (ii) using the proceeds from the sale of the Trust Securities to
acquire the Junior Subordinated Debt Securities issued by the Corporation and
(iii) engaging in only those other activities necessary, advisable or
incidental thereto, which includes engaging in this Exchange Offer. The Junior
Subordinated Debt Securities will mature on April 15, 2027 (the "Stated
Maturity"). The Capital Securities will have a preference under certain
circumstances with respect to cash distributions and amounts payable on
liquidation, redemption or otherwise over the Common Securities. See
"Description of New Capital Securities--Subordination of Common Securities."
As used herein, (i) the "Indenture" means the Junior Subordinated Indenture,
as amended and supplemented from time to time, between the Corporation and The
Bank of New York, as trustee (the "Debenture Trustee"), (ii) the "Declaration"
means the Amended and Restated Declaration of Trust, dated as of April 23,
1997, among the Corporation, as Depositor (the "Depositor"), The Bank of New
York, as Property Trustee (the "Property Trustee"), The Bank of New York
(Delaware), as Delaware Trustee (the "Delaware Trustee"), and the individuals
named as Administrative Trustees therein (the "Administrative Trustees," and
collectively with the Property Trustee and the Delaware Trustee, the "Issuer
Trustees"), (iii) the "Old Guarantee Agreement" means the Guarantee Agreement,
dated as of April 23, 1997, between the Corporation and The Bank of New York,
as Trustee (the "Guarantee Trustee"), providing a guarantee, on the terms and
conditions described herein, for the benefit of holders of Old Capital
Securities and the Common Securities (the "Old Guarantee") and (iv) the "New
Guarantee Agreement" means the New Guarantee Agreement between the Corporation
and the Guarantee Trustee, providing a guarantee, on the terms and conditions
described herein, for the benefit of holder of the Capital Securities and the
Common Securities (the "New Guarantee"). In addition, as the context may
require, unless expressly stated otherwise, (i) "Capital Securities" includes
the Old Capital Securities and the New Capital Securities, (ii) "Junior
Subordinated Debt Securities" includes the Old Junior Subordinated Debt
Securities and the New Junior Subordinated Debt Securities and (iii)
"Guarantee" includes the Old Guarantee and the New Guarantee. All share and per
share data have been adjusted to reflect the 3-for-2 stock split in the form of
a dividend paid on June 14, 1996.
Holders of the Trust Securities are entitled to receive cumulative cash
distributions, in each case arising from the payment of interest on the Junior
Subordinated Debt Securities accruing from the date of original issuance of the
Old Capital Securities and payable quarterly in arrears on the 15th day of
January, April, July and October of each year, commencing July 15, 1997 at a
variable annual rate equal to LIBOR (as defined herein) plus 1.00% of the
Liquidation Amount of $1,000 per Trust Security ("Distributions"). Subject to
certain exceptions, the Corporation has the right to defer payments of interest
on the Junior Subordinated Debt Securities at any time or from time to time for
a period not exceeding 20 consecutive quarterly periods with respect to each
ii
deferral period (each, an "Extension Period"); provided, however, that no
Extension Period may extend beyond the Stated Maturity of the Junior
Subordinated Debt Securities. Upon the termination of any Extension Period and
the payment of all interest then accrued and unpaid (together with interest
thereon accumulated at a variable annual rate equal to LIBOR plus 1.00%,
compounded quarterly, to the extent permitted by applicable law), the
Corporation may elect to begin a new Extension Period, subject to the
requirements set forth herein. If interest payments on the Junior Subordinated
Debt Securities are so deferred, during any Extension Period, 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, or make purchases of, the Corporation's
capital stock (which includes common and preferred stock) or to make any
payment with respect to debt securities of the Corporation that rank pari passu
in all respects with or junior to the Junior Subordinated Debt Securities.
During an Extension Period, interest on the Junior Subordinated Debt Securities
will continue to accrue (and the amount of Distributions to which holders of
the Capital Securities are entitled will accumulate) at a variable annual rate
equal to LIBOR plus 1.00% per annum, compounded quarterly, and holders of
Capital Securities will be required to accrue interest income for United States
Federal income tax purposes. See "Description of New Junior Subordinated Debt
Securities--Option to Extend Interest Payment Date" in this Base Prospectus and
"Certain Federal Income Tax Consequences--United States Holders--Interest
Income and Original Issue Discount" in the accompanying prospectus.
Taken together, the Corporation's obligations under the Guarantee, the
Declaration, the Junior Subordinated Debt Securities and the Indenture,
including the Corporation's obligation to pay the costs, expenses and
liabilities of the Trust (other than the Trust's obligations to holders of the
Trust Securities under such Trust Securities), provide, in the aggregate, a
full irrevocable and unconditional guarantee, as described herein, of all of
the payments of Distributions and other amounts due on the Capital Securities.
See "Relationship Among the Capital Securities, the Junior Subordinated Debt
Securities and the Guarantee--Full and Unconditional Guarantee." The
Corporation has agreed to guarantee the payment of Distributions and payments
on liquidation or redemption of the Trust Securities, but only in each case to
the extent of funds held by the Trust, as described herein. See "Description of
New Guarantee." If the Corporation does not make interest payments on the
Junior Subordinated Debt Securities held by the Trust, the Trust will have
insufficient funds to pay Distributions on the Capital Securities. The
Guarantee does not cover the payment of Distributions when the Trust does not
have sufficient funds to pay such Distributions. In such event, 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
interest on Junior Subordinated Debt Securities having a principal amount equal
to the aggregate Liquidation Amount of the Capital Securities held by such
holder (a "Direct Action"). See "Description of New Junior Subordinated Debt
Securities--Enforcement of Certain Rights by Holders of Capital Securities."
The obligations of the Corporation under the Guarantee and the Junior
Subordinated Debt Securities are subordinate and junior in right of payment to
all Senior Debt (as defined in "Description of New Junior Subordinated Debt
Securities--Subordination") of the Corporation. In addition, because the
Corporation is a holding company, the Junior Subordinated Debt Securities and
the Guarantee are effectively subordinated to all existing and future
liabilities of the Corporation's subsidiaries, including deposits. See "Risk
Factors--Ranking of Obligations Under the Guarantee and the Junior Subordinated
Debt Securities" and "--Status of the Corporation as a Bank Holding Company."
The Junior Subordinated Debt Securities are redeemable by the Corporation at
par, plus accrued and unpaid interest to the date of redemption, in whole or in
part, at any time and from time to time, on or after April 15, 2007. In
addition, in certain circumstances described herein, upon the occurrence and
continuation of a Tax Event or a Capital Treatment Event (each as defined
herein), the Junior Subordinated Debt Securities also are redeemable by the
Corporation at any time, within 90 days following the occurrence of such Tax
Event or Capital Treatment Event, as the case may be, in whole but not in part,
at par, plus accrued and unpaid interest thereon to the date of the redemption.
Any redemption prior to maturity is subject to the Corporation having received
prior approval from 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. Upon repayment in full at maturity or the
redemption in whole or in part of the Junior Subordinated Debt Securities
(other than following the distribution of the Junior Subordinated Debt
Securities to the holders of the Trust Securities), the proceeds from such
iii
repayment or payment shall concurrently be applied to redeem on a pro rata
basis Trust Securities having an aggregate liquidation amount equal to the
aggregate principal amount of the Junior Subordinated Debt Securities so
redeemed or matured at a redemption price equal to $1,000 per Trust Security,
plus accrued and unpaid Distributions on such Trust Securities to the date
fixed for redemption (the "Redemption Price"). See "Description of New Capital
Securities--Mandatory Redemption." The Capital Securities will be redeemed upon
maturity of the Junior Subordinated Debt Securities, whereupon the Trust will
be dissolved. See "Description of New Junior Subordinated Debt Securities."
The Corporation, as the holder of the outstanding Common Securities, has the
right at any time (including, without limitation, upon the occurrence of a Tax
Event or a Capital Treatment Event (as defined herein)) to terminate the Trust
and cause a Like Amount (as defined herein) of the Junior Subordinated Debt
Securities to be distributed to the holders of the Trust Securities upon
liquidation of the Trust, subject to prior approval of the Federal Reserve to
do so if then required under applicable capital guidelines or policies of the
Federal Reserve. In the event of such termination of the Trust, 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, which may be in the
form of a distribution of a Like Amount of Junior Subordinated Debt Securities
in certain circumstances. See "Description of New Capital
Securities--Liquidation of the Trust and Distribution of Junior Subordinated
Debt Securities."
Except as provided below, the Capital Securities will be represented by
global Capital Securities in fully registered form, deposited with a custodian
for and registered in the name of a nominee of The Depository Trust Company
("DTC"). Beneficial interests in such Capital Securities will be shown on, and
transfers thereof will be effected through, records maintained by DTC and its
participants. Beneficial interests in such Capital Securities will trade in
DTC's Same-Day Funds Settlement System and secondary market trading activity in
such interests will therefore settle in immediately available funds. The
Capital Securities will be issued, and may be transferred, only in a block
having a Liquidation Amount of $100,000 (100 Capital Securities) and integral
multiples of $1,000 in excess thereof.
The Corporation and the Trust are making the Exchange Offer of the New
Capital Securities in reliance on the position of the staff of the Division of
Corporation Finance of the Securities and Exchange Commission (the
"Commission") as set forth in certain interpretive letters addressed to third
parties in other transactions. However, neither the Corporation nor the Trust
has sought its own interpretive letter, and there can be no assurance that the
staff of the Division of Corporation Finance of the Commission would make a
similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
staff of the Division of Corporation Finance, and subject to the two
immediately following sentences, the Corporation and the Trust believe that New
Capital Securities issued pursuant to this Exchange Offer in exchange for Old
Capital Securities may be offered for resale, resold and otherwise transferred
by a holder thereof (other than a holder who is a broker-dealer) without
further compliance with the registration and prospectus delivery requirements
of the Securities Act, provided that such New Capital Securities are acquired
in the ordinary course of such holder's business and that such holder is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such New Capital Securities. However, any holder of Old Capital Securities who
is an "affiliate" of the Corporation or the Trust within the meaning of Rule
405 under the Securities Act (an "Affiliate") or who intends to participate in
the Exchange Offer for the purpose of distributing New Capital Securities, or
any broker-dealer who purchased Old Capital Securities from the Trust to resell
pursuant to Rule 144A under the Securities Act ("Rule 144A") or any other
available exemption under the Securities Act, (i) will not be able to rely on
the interpretations of the staff of the Division of Corporation Finance of the
Commission set forth in the above-mentioned interpretive letters, (ii) will not
be entitled to tender such Old Capital Securities in the Exchange Offer and
(iii) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or other transfer of such Old
Capital Securities unless such sale or other transfer is made pursuant to an
exemption from such requirements. In addition, as
iv
described below, if any broker-dealer holds Old Capital Securities acquired for
its own account as a result of market-making or other trading activities and
exchanges such Old Capital Securities for New Capital Securities (such
broker-dealer referred to herein as a "Participating Broker-Dealer"), then such
Participating Broker-Dealer must deliver a prospectus meeting the requirements
of the Securities Act in connection with any resales of such New Capital
Securities.
Each holder of Old Capital Securities who wishes to exchange Old Capital
Securities for New Capital Securities in the Exchange Offer will be required to
represent that (i) it is not an Affiliate, (ii) any New Capital Securities to
be received by it are being acquired in the ordinary course of its business,
(iii) it has no arrangement or understanding with any person to participate in
a distribution (within the meaning of the Securities Act) of such New Capital
Securities and (iv) if such holder is not a broker-dealer, such holder is not
engaged in, and does not intend to engage in, a distribution (within the
meaning of the Securities Act) of such New Capital Securities. The Letter of
Transmittal contains the foregoing representations. In addition, the
Corporation and the Trust may require such holder, as a condition to such
holder's eligibility to participate in the Exchange Offer, to furnish to the
Corporation and the Trust (or an agent thereof) in writing information as to
the number of "beneficial owners" (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) on behalf of
whom such holder holds the Capital Securities to be exchanged in the Exchange
Offer. Each Participating Broker-Dealer must acknowledge that it acquired the
Old Capital Securities for its own account as the result of market-making
activities or other trading activities and must agree that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of such New Capital Securities. See "Plan of Distribution." The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. Based on the
position taken by the staff of the Division of Corporation Finance of the
Commission in the interpretive letters referred to above, the Corporation and
the Trust believe that Participating Broker-Dealers may fulfill their
prospectus delivery requirements with respect to the New Capital Securities
received upon exchange of such Old Capital Securities (other than Old Capital
Securities which represent an unsold allotment from the original sale of the
Old Capital Securities) with a prospectus meeting the requirements of the
Securities Act, which may be the prospectus prepared for an exchange offer so
long as it contains a description of the plan of distribution with respect to
the resale of such New Capital Securities. Accordingly, this Base Prospectus,
as it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer during the period referred to below in connection
with resales of New Capital Securities received in exchange for Old Capital
Securities where such Old Capital Securities were acquired by such
Participating Broker-Dealer for its own account as a result of market-making or
other trading activities. Subject to certain provisions set forth in the
Registration Agreement, the Corporation and the Trust have agreed that this
Base Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection with resales of such New
Capital Securities for a period ending on the close of business on the first
anniversary following the Expiration Date (as defined herein) or, if earlier,
when all such New Capital Securities have been disposed of by such
Participating Broker-Dealer. See "Plan of Distribution." Any person, including
any Participating Broker-Dealer, who is an Affiliate may not rely on such
interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. See "The Exchange Offer--Resales of New Capital Securities."
Each Participating Broker-Dealer who surrenders Old Capital Securities
pursuant to the Exchange Offer will be deemed to have agreed, by execution of
the Letter of Transmittal or delivery of an Agent's Message (as defined herein)
that, upon receipt of notice from the Corporation or the Trust of the
occurrence of any event or the discovery of any fact which makes any statement
contained or incorporated by reference in this Base Prospectus untrue in any
material respect or which causes this Base Prospectus to omit to state a
material fact necessary in order to make the statements contained or
incorporated by reference herein, in the light of the circumstances under which
they were made, not misleading, or of the occurrence of certain other events
specified in the Registration Agreement, such Participating Broker-Dealer will
suspend the sale of New Capital Securities pursuant to this Base Prospectus
until the Corporation or the Trust has amended or supplemented this Base
Prospectus to correct such misstatement or omission and has furnished copies of
the amended or supplemented
v
Prospectus to such Participating Broker-Dealer, or the Corporation or the Trust
has given notice that the sale of the New Capital Securities may be resumed, as
the case may be.
Prior to the Exchange Offer, there has been only a limited secondary market
and no public market for the Old Capital Securities. The New Capital Securities
will be a new issue of securities for which there currently is no established
market. The Initial Purchasers informed the Corporation and the Trust in
connection with the offering of the Old Capital Securities that they each
intended to make a market in the Old Capital Securities and, if issued, the New
Capital Securities. However, the Initial Purchasers are not obligated to do so,
and any such market making may be discontinued at any time without notice.
Accordingly, there can be no assurance as to the development or liquidity of
any market for the New Capital Securities.
Any Old Capital Securities not tendered and accepted in the Exchange Offer
will remain outstanding and will be entitled to all the same rights and will be
subject to the same limitations applicable thereto under the Declaration
(except for those rights which terminate upon consummation of the Exchange
Offer). Following consummation of the Exchange Offer, the holders of Old
Capital Securities will continue to be subject to all of the existing
restrictions upon transfer thereof and neither the Corporation nor the Trust
will have any further obligation to such holders (other than under certain
limited circumstances) to provide for registration under the Securities Act of
the Old Capital Securities held by them. To the extent that Old Capital
Securities are tendered and accepted in the Exchange Offer, a holder's ability
to sell untendered Old Capital Securities could be adversely affected. See
"Risk Factors--Consequences of a Failure to Exchange Old Capital Securities."
THIS BASE PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD CAPITAL SECURITIES ARE URGED TO READ THIS BASE
PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING
WHETHER TO TENDER THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
Old Capital Securities may be tendered for exchange on or prior to 5:00
p.m., New York City time, on September 2, 1997 (such time on such date being
hereinafter called the "Expiration Date"), unless the Exchange Offer is
extended by the Corporation and the Trust (in which case the term "Expiration
Date" shall mean the latest date and time to which the Exchange Offer is
extended). Tenders of Old Capital Securities may be withdrawn at any time on or
prior to the Expiration Date. The Exchange Offer is not conditioned upon any
minimum Liquidation Amount of Old Capital Securities being tendered for
exchange. However, the Exchange Offer is subject to certain events and
conditions which may be waived by the Corporation or the Trust and to the terms
and provisions of the Registration Agreement. Holders may tender their Old
Capital Securities in whole or in part in a Liquidation Amount of not less than
$100,000 (100 Old Capital Securities) and any integral multiple of $1,000
Liquidation Amount (1 Old Capital Security) in excess thereof. The Corporation
has agreed to pay all expenses of the Exchange Offer, except as otherwise
specified herein. See "The Exchange Offer--Fees and Expenses." Each New Capital
Security will pay cumulative Distributions from the most recent Distribution
Date (as defined herein) on the Old Capital Securities surrendered in exchange
for such New Capital Securities or, if no Distributions have been paid on such
Old Capital Securities, from April 23, 1997. Holders of the Old Capital
Securities whose Old Capital Securities are accepted for exchange will not
receive accumulated Distributions on such Old Capital Securities for any period
from and after the last Distribution Date with respect to such Old Capital
Securities prior to the original issue date of the New Capital Securities or,
if no such Distributions have been paid, will not receive any accumulated
Distributions on such Old Capital Securities, and will be deemed to have waived
the right to receive any Distributions on such Old Capital Securities
accumulated from and after such Distribution Date or, if no such Distributions
have been paid or duly provided for, from and after April 23, 1997. This Base
Prospectus, together with the Letter of Transmittal, is being sent to all
registered holders of Old Capital Securities as of July 21, 1997.
vi
Neither the Corporation nor the Trust will receive any proceeds from the
issuance of the New Capital Securities offered hereby. No dealer-manager is
being used in connection with this Exchange Offer. See "Use of Proceeds from
Sale of Old Capital Securities."
THIS BASE PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON
REQUEST FROM SUSAN LAWRENCE MISTR, PUBLIC RELATIONS MANAGER, CENTRAL FIDELITY
BANKS, INC., 1021 EAST CARY STREET, P.O. BOX 27602, RICHMOND, VIRGINIA
23261-7602, TELEPHONE NUMBER (804) 697-7261. IN ORDER TO ENSURE TIMELY DELIVERY
OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY AUGUST 26, 1997.
THE JUNIOR SUBORDINATED DEBT SECURITIES ARE DIRECT AND UNSECURED OBLIGATIONS
OF THE CORPORATION, DO NOT EVIDENCE DEPOSITS AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION (THE "FDIC") OR ANY OTHER INSURER OR GOVERNMENTAL
AGENCY. THE JUNIOR SUBORDINATED DEBT SECURITIES ARE SUBORDINATE TO THE CLAIMS
OF DEPOSITORS AND GENERAL CREDITORS OF THE CORPORATION.
NO EMPLOYEE BENEFIT OR OTHER PLAN SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"), NO ENTITY
WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S
INVESTMENT IN THE ENTITY (A "PLAN ASSET ENTITY"), AND NO PERSON INVESTING "PLAN
ASSETS" OF ANY PLAN, MAY ACQUIRE OR HOLD THE CAPITAL SECURITIES OR ANY INTEREST
THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF
AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION
("PTCE") 96-23, 95-60, 91-38, 90-1 OR 84-14 WITH RESPECT TO SUCH PURCHASE OR
HOLDING. ANY PURCHASER OR HOLDER OF THE CAPITAL SECURITIES OR ANY INTEREST
THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF
THAT IT EITHER (A) IS NOT A PLAN OR A PLAN ASSET ENTITY AND IS NOT PURCHASING
SUCH SECURITIES ON BEHALF OF OR WITH "PLAN ASSETS" OF ANY PLAN OR (B) IS
ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER PTCE 96-23, 95-60, 91-38,
90-1 OR 84-14 WITH RESPECT TO SUCH PURCHASE OR HOLDING.
THE NEW CAPITAL SECURITIES WILL BE ISSUED, AND MAY BE TRANSFERRED, ONLY IN
BLOCKS HAVING A LIQUIDATION AMOUNT OF $100,000 AND INTEGRAL MULTIPLES OF $1,000
IN EXCESS THEREOF. ANY TRANSFER, SALE OR OTHER DISPOSITION OF NEW CAPITAL
SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000 SHALL
BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH TRANSFEREE
SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH NEW CAPITAL SECURITIES FOR ANY
PURPOSE, INCLUDING BUT NOT LIMITED TO THE RECEIPT OF DISTRIBUTIONS ON SUCH NEW
CAPITAL SECURITIES, AND SUCH TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST
WHATSOEVER IN SUCH NEW CAPITAL SECURITIES.
vii
TABLE OF CONTENTS
Page
----
Available Information.................................................. B-1
Incorporation of Certain Documents by Reference........................ B-2
Summary................................................................ B-4
Risk Factors........................................................... B-12
Use of Proceeds from Sale of Old Capital Securities.................... B-18
Central Fidelity Capital Trust I....................................... B-18
Central Fidelity....................................................... B-19
Recent Developments.................................................... B-21
Ratio of Earnings to Fixed Charges for the Corporation................. B-21
Selected Historical Financial Information.............................. B-22
Capitalization......................................................... B-23
Accounting Treatment................................................... B-23
Regulatory Treatment................................................... B-23
The Exchange Offer..................................................... B-23
Description of New Capital Securities.................................. B-34
Description of New Junior Subordinated Debt Securities................. B-47
Description of New Guarantee........................................... B-57
Description of Old Securities.......................................... B-59
Relationship Among the Capital Securities, the Junior Subordinated Debt
Securities and the Guarantee......................................... B-60
Certain ERISA Considerations........................................... B-62
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER MADE HEREBY EXCEPT AS CONTAINED IN
THIS BASE PROSPECTUS AND, IF GIVEN OR MADE, NO SUCH INFORMATION OR
REPRESENTATIONS SHOULD BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
CORPORATION, THE TRUST OR ANY OF THEIR RESPECTIVE AGENTS. NEITHER THE DELIVERY
OF THIS BASE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF THE CORPORATION OR THE TRUST
SINCE THE DATE HEREOF. THIS BASE PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE CAPITAL SECURITIES 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 ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the Exchange
Act, and in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the regional offices of the Commission located at 7 World Trade Center, 13th
Floor, Suite 1300, New York, New York 10048 and Suite 1400, Citicorp Center,
14th Floor, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material can also be obtained at prescribed rates by writing to the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. Such information may also be accessed electronically by means of the
Commission's home page on the Internet (http://www.sec.gov).
B-1
The Corporation and the Trust have filed with the Commission a Registration
Statement on Form S-4 (together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act with respect to the
securities offered hereby. This Base 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 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. Statements made in this Base 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 the Trust have been included herein. The
Corporation and the Trust do not consider that such financial statements would
be material to holders of the Capital Securities because the Trust is a newly
formed special purpose entity, has no operating history or independent
operations and exists for the exclusive purposes of (i) issuing and selling the
Trust Securities, (ii) using the proceeds from the sale of the Trust Securities
to acquire the Junior Subordinated Debt Securities issued by the Corporation
and (iii) engaging in only those other activities necessary, advisable or
incidental thereto, which includes engaging in this Exchange Offer. See
"Central Fidelity Capital Trust I," "Description of New Capital Securities,"
"Description of New Junior Subordinated Debt Securities," "Description of New
Guarantee" and "Description of Old Securities." In addition, the Corporation
does not expect that the Trust will file reports under the Exchange Act with
the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Corporation with the Commission
pursuant to Section 13(a) or Section 15(d) of the Exchange Act are incorporated
into this Base Prospectus by reference:
1. The Corporation's Annual Report on Form 10-K for the year ended December
31, 1996.
2. The Corporation's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997.
3. The Corporation's Current Report on Form 8-K dated as of March 6, 1997.
4. The Corporation's Current Report on Form 8-K dated as of April 23, 1997.
5. The Corporation's Current Report on Form 8-K dated as of June 23, 1997.
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 Base Prospectus shall be
deemed to be incorporated by reference into this Base Prospectus and to be a
part of this Base 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 this Base Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Base Prospectus.
B-2
As used herein, the terms "Base Prospectus" and "herein" mean this Base
Prospectus, including the documents incorporated or deemed to be incorporated
herein by reference, as the same may be amended, supplemented or otherwise
modified from time to time. Statements contained in this Base Prospectus as to
the contents of any contract or other document referred to herein do not
purport to be complete, and where reference is made to the particular
provisions of such contract or other document, such provisions are qualified in
all respects by reference to all of the provisions of such contract or other
document. The Corporation will provide without charge to any person to whom
this Base 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:
Central Fidelity Banks, Inc.
1021 East Cary Street
P.O. Box 27602
Richmond, Virginia 23261-7602
Telephone: (804) 697-7261
Susan Lawrence Mistr
Public Relations Manager
B-3
SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Base Prospectus and in the documents
incorporated by reference in this Base Prospectus.
CENTRAL FIDELITY CAPITAL TRUST I
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) the Declaration and (ii) the filing of a certificate of trust with the
Delaware Secretary of State on April 2, 1997. The Trust's business and affairs
are conducted by the Issuer Trustees: The Bank of New York, as Property
Trustee, The Bank of New York (Delaware), as Delaware Trustee, and three
individual Administrative Trustees who are employees or officers of or
affiliated with the Corporation. The Trust exists for the exclusive purposes of
(i) issuing and selling the Trust Securities, (ii) using the proceeds from the
sale of the Trust Securities to acquire the Junior Subordinated Debt Securities
issued by the Corporation and (iii) engaging in only those other activities
necessary, advisable or incidental thereto, which includes engaging in this
Exchange Offer. The Junior Subordinated Debt Securities will be the sole assets
of the Trust, and payments under the Junior Subordinated Debt Securities will
be the sole revenues of the Trust. All of the Common Securities are owned by
the Corporation. The Trust's executive offices are located at 1021 East Cary
Street, Richmond, Virginia 23219. Its mailing address is c/o Central Fidelity
Banks, Inc., Post Office Box 27602, Richmond, Virginia 23261-7602, and its
telephone number is (804) 782-4000.
CENTRAL FIDELITY BANKS, INC.
Central Fidelity, the third largest banking company headquartered in
Virginia, serves Virginia markets primarily through its wholly-owned banking
subsidiary, Central Fidelity National Bank, a national banking association (the
"Bank"). At June 30, 1997, the Bank operated 243 branch offices, including 28
full-service supermarket locations, and 237 automated teller machines
throughout the Commonwealth of Virginia. Central Fidelity was formed in the
late 1970's through the consolidation of two bank holding companies, Central
National Corporation and Fidelity American Bankshares, Inc., the earliest
predecessors of which were organized in 1911 and 1865, respectively. At June
30, 1997, Central Fidelity had total assets of approximately $10.7 billion,
deposits of approximately $8.1 billion and shareholders' equity of
approximately $803.6 million.
Central Fidelity, through the Bank and its other subsidiaries, provides a
wide variety of financial services to a broad customer base of individuals,
corporations, institutions and governments primarily located in Virginia. The
Bank is an issuer of MasterCard(R) and VISA(R) credit cards. Through the use of
reciprocally shared automated teller machines, Central Fidelity can deliver
services through its membership in the Internet/HONOR regional and PLUS(R)
national networks of automated teller machines. Central Fidelity also engages
in limited international banking activities, primarily in connection with
foreign trade financing for Virginia-based companies. In addition to
traditional retail and commercial banking activities, Central Fidelity
generates noninterest income by sales of trust and fiduciary services,
annuities and other investment services.
Central Fidelity is a legal entity separate and distinct from the Bank and
its nonbanking subsidiaries. Accordingly, the right of Central Fidelity, and
thus the right of Central Fidelity's creditors, to participate in any
distribution of the assets or earnings of the Bank or any other subsidiary is
necessarily subject to the prior claims of creditors of the Bank or such
subsidiary, except to the extent that claims of Central Fidelity in its
capacity as a creditor may be recognized. The principal sources of Central
Fidelity's revenues are dividends and fees from the Bank.
B-4
Central Fidelity, a Virginia corporation, is a bank holding company
registered with the Board of Governors of the Federal Reserve under the Bank
Holding Company Act of 1956, as amended (the "BHCA"). Central Fidelity's
executive offices are located at 1021 East Cary Street, Richmond, Virginia
23219. Its mailing address is Post Office Box 27602, Richmond, Virginia
23261-7602, and its telephone number is (804) 782-4000.
On June 23, 1997, Central Fidelity entered into a definitive Agreement and
Plan of Merger with Wachovia Corporation, a North Carolina corporation
("Wachovia"), providing for the merger of Central Fidelity with and into
Wachovia. See "Recent Developments."
THE EXCHANGE OFFER
The Exchange Offer Up to $100,000,000 aggregate Liquidation Amount of New Capital
Securities are being offered in exchange for a like aggregate Liquidation
Amount of Old Capital Securities. Holders may tender their Old Capital
Securities in whole or in part in a Liquidation Amount of $100,000 (100
Capital Securities), or any integral multiple of $1,000 in excess thereof.
The Corporation and the Trust are making the Exchange Offer in order to
satisfy their obligations under the Registration Agreement relating to the
Old Capital Securities. For a description of the procedures for tendering
Old Capital Securities, see "The Exchange Offer--Procedures For
Tendering Old Capital Securities."
Expiration Date... 5:00 p.m., New York City time, on September 2, 1997 (such time on such
date being hereinafter called the "Expiration Date") unless the Exchange
Offer is extended by the Corporation and the Trust (in which case the
term "Expiration Date" shall mean the latest date and time to which the
Exchange Offer is extended). See "The Exchange Offer--Expiration
Date; Extensions; Amendments."
Conditions to the The Exchange Offer is subject to certain conditions, which may be
Exchange Offer.... waived by the Corporation and the Trust in their sole discretion. The
Exchange Offer is not conditioned upon any minimum Liquidation
Amount of Old Capital Securities being tendered. See "The Exchange
Offer--Conditions to the Exchange Offer." The Corporation and the
Trust reserve the right in their sole and absolute discretion, subject to
applicable law, at any time and from time to time, (i) to delay the
acceptance of the Old Capital Securities for exchange, (ii) to terminate
the Exchange Offer if certain specified conditions have not been
satisfied, (iii) to extend the Expiration Date of the Exchange Offer and
retain all Old Capital Securities tendered pursuant to the Exchange Offer,
subject, however, to the right of holders of Old Capital Securities to
withdraw their tendered Old Capital Securities and (iv) to waive any
condition or otherwise amend the terms of the Exchange Offer in any
respect. See "The Exchange Offer--Expiration Date; Extensions;
Amendments."
Withdrawal Rights. Tenders of Old Capital Securities may be withdrawn at any time on or
prior to the Expiration Date by delivering a written notice of such
withdrawal to the Exchange Agent (as defined below) in conformity with
certain procedures set forth below under "The Exchange Offer--
Withdrawal Rights."
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Procedures for Tendering To participate in the Exchange Offer, holders of Old Capital Securities
Old Capital Securities........... must tender by (a) book-entry transfer pursuant to the procedures set
forth under "The Exchange Offer--Procedures for Tendering Old Capital
Securities" or (b) forwarding certificates representing such Old Capital
Securities with the Letter of Transmittal. Holders who are participants in
DTC tendering by book-entry transfer must execute such tender through
the DTC's ATOP (as defined herein) procedures. A holder using ATOP
should transmit its acceptance to DTC on or prior to the Expiration Date.
DTC will verify such acceptance, execute a book-entry transfer of the
tendered Old Capital Securities into the Exchange Agent's account at
DTC and then send to the Exchange Agent confirmation of such book-
entry transfer, including an Agent's Message confirming that DTC has
received an express acknowledgment from such holder that such holder
has received and agrees to be bound by the Letter of Transmittal and that
the Trust and the Corporation may enforce the Letter of Transmittal
against such holder. The book-entry confirmation must be received by
the Exchange Agent in order for the tender relating thereto to be
effective.
If the tender is not made through ATOP, certificates for such Old Capital
Securities, as well as the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature
guarantees, and any other documents required by the Letter of
Transmittal, must be received by the Exchange Agent at its address set
forth in the Letter of Transmittal on or prior to the Expiration Date in
order for such tender to be effective. See "The Exchange Offer--
Procedures for Tendering Old Capital Securities."
Letters of Transmittal and certificates representing Old Capital Securities
should not be sent to the Corporation or the Trust. Such documents
should only be sent to the Exchange Agent. Questions regarding how to
tender and requests for information should be directed to the Exchange
Agent. See "The Exchange Offer--Exchange Agent."
Resales of New Capital Securities The Corporation and the Trust are making the Exchange Offer of the
New Capital Securities in reliance on the position of the staff of the
Division of Corporation Finance of the Commission as set forth in certain
interpretive letters addressed to third parties in other transactions.
However, neither the Corporation nor the Trust has sought its own
interpretive letter, and there can be no assurance that the staff of the
Division of Corporation Finance of the Commission would make a
similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
staff of the Division of Corporation Finance, and subject to the two
immediately following sentences, the Corporation and the Trust believe
that New Capital Securities issued pursuant to this Exchange Offer in
exchange for Old Capital Securities may be offered for resale, resold and
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otherwise transferred by a holder thereof (other than a holder who is a
broker-dealer) without further compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that
such New Capital Securities are acquired in the ordinary course of such
holder's business and that such holder is not participating, and has no
arrangement or understanding with any person to participate, in a
distribution (within the meaning of the Securities Act) of such New
Capital Securities. However, any holder of Old Capital Securities who is
an Affiliate or who intends to participate in the Exchange Offer for the
purpose of distributing New Capital Securities, or any broker-dealer who
purchased the Old Capital Securities from the Trust to resell pursuant to
Rule 144A or any other available exemption under the Securities Act,
(a) will not be able to rely on the interpretations of the staff of the
Division of Corporation Finance of the Commission set forth in the
above-mentioned interpretive letters, (b) will not be permitted or entitled
to tender such Old Capital Securities in the Exchange Offer and (c) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or other transfer of such Old
Capital Securities unless such sale or other transfer is made pursuant to
an exemption from such requirements. In addition, as described below, if
any Participating Broker-Dealer holds Old Capital Securities acquired for
its own account as a result of market-making or other trading activities
and exchanges such Old Capital Securities for New Capital Securities,
then such Participating Broker-Dealer must deliver a prospectus meeting
the requirements of the Securities Act in connection with any resales of
such New Capital Securities.
Each holder of Old Capital Securities who wishes to exchange Old
Capital Securities for New Capital Securities in the Exchange Offer
will be required to represent that (i) it is not an Affiliate, (ii) any New
Capital Securities to be received by it are being acquired in the ordinary
course of its business, (iii) it has no arrangement or understanding with
any person to participate in a distribution (within the meaning of the
Securities Act) of such New Capital Securities and (iv) if such holder is
not a broker-dealer, such holder is not engaged in, and does not intend to
engage in, a distribution (within the meaning of the Securities Act) of
such New Capital Securities. The Letter of Transmittal contains the
foregoing representations. Each Participating Broker-Dealer must
acknowledge that it acquired the Old Capital Securities for its own
account as the result of market-making activities or other trading
activities and must agree that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
New Capital Securities. See "Plan of Distribution." The Letter of
Transmittal states that by so acknowledging and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.
Based on the position taken by the staff of the Division of Corporation
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Finance of the Commission in the interpretive letters referred to above,
the Corporation and the Trust believe that Participating Broker-Dealers
may fulfill their prospectus delivery requirements with respect to the
New Capital Securities received upon exchange of such Old Capital
Securities (other than Old Capital Securities which represent an unsold
allotment from the original sale of the Old Capital Securities) with a
prospectus meeting the requirements of the Securities Act, which may be
the prospectus prepared for an exchange offer so long as it contains a
description of the plan of distribution with respect to the resale of such
New Capital Securities. Accordingly, this Base Prospectus, as it may be
amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of New Capital
Securities received in exchange for Old Capital Securities where such
Old Capital Securities were acquired by such Participating Broker-Dealer
for its own account as a result of market-making or other trading
activities. Subject to certain provisions set forth in the Registration
Agreement, the Corporation and the Trust have agreed that this Base
Prospectus, as it may be amended or supplemented from time to time,
may be used by a Participating Broker-Dealer in connection with resales
of such New Capital Securities for a period ending on the close of
business on the first anniversary following the Expiration Date or, if
earlier, when all such New Capital Securities have been disposed of by
such Participating Broker-Dealer. Any person, including any
Participating Broker-Dealer, who is an Affiliate may not rely on such
interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. See "The Exchange Offer--Resales of New Capital
Securities."
Exchange Agent.... The Exchange Agent with respect to the Exchange Offer is The Bank of
New York (the "Exchange Agent"). The addresses, and telephone and
facsimile numbers of the Exchange Agent are set forth in "The Exchange
Offer--Exchange Agent" and in the Letter of Transmittal.
Federal Income Tax The exchange of an Old Capital Security for a New Capital Security
Consequences...... should not constitute a taxable exchange.
THE NEW CAPITAL SECURITIES
Securities Offered $100,000,000 aggregate Liquidation Amount of Floating Rate Capital
Trust Pass-through Securities, Series A (Liquidation Amount $1,000 per
Capital Security).
Distributions..... Holders of the Capital Securities are entitled to receive cumulative cash
distributions at a variable annual rate equal to LIBOR plus 1.00% on the
stated Liquidation Amount of $1,000 per Capital Security, accruing from
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the original date of issuance of the Old Capital Securities, and (subject to
the extension of distribution payment periods described below) are
payable quarterly, in arrears, on the 15th day of January, April, July and
October of each year, commencing July 15, 1997. See "Description of
New Capital Securities--Distributions."
Each New Capital Security will pay cumulative Distributions from the
most recent Distribution Date on the Old Capital Securities, or if no
Distributions have been paid on such Old Capital Securities, from
April 23, 1997. Holders of Old Capital Securities whose Old Capital
Securities are accepted for exchange will not receive accumulated
Distributions on such Old Capital Securities for any period from and after
the last Distribution Date with respect to such Old Capital Securities
prior to the original issue date of the New Capital Securities or, if no such
Distributions have been paid, will not receive any accumulated
Distributions on such Old Capital Securities, and will be deemed to have
waived the right to receive any Distributions on such Old Capital
Securities accumulated from and after such Distribution Date or, if no
such Distributions have been paid, from and after April 23, 1997.
Extension Periods Distributions on Capital Securities will be deferred for the duration of
any Extension Period elected by the Corporation with respect to the
payment of interest on the Junior Subordinated Debt Securities. No
Extension Period will exceed 20 consecutive quarterly periods or extend
beyond the Stated Maturity of the Junior Subordinated Debt Securities.
See "Description of New Junior Subordinated Debt Securities--Option to
Extend Interest Payment Date" in this Base Prospectus and "Certain
Federal Income Tax Consequences--United States Holders--Interest
Income and Original Issue Discount" in the accompanying prospectus.
Ranking.......... The New Capital Securities will rank pari passu, and payments thereon
will be made pro rata, with the Common Securities except as described
under "Description of New Capital Securities--Subordination of
Common Securities." The New Junior Subordinated Debt Securities will
rank pari passu with all other junior subordinated debt securities to be
issued by the Corporation pursuant to the Indenture with substantially
similar subordination terms ("Other Debentures"), and which may be
issued and sold (if at all) to other trusts to be established by the
Corporation (if any), in each case similar to the Trust ("Other Trusts"),
and will be unsecured and subordinate and junior in right of payment to
the extent and in the manner set forth in the Indenture to all Senior Debt
of the Corporation. See "Description of New Junior Subordinated Debt
Securities." The New Guarantee will rank pari passu with all other
guarantees (if any) which may be issued by the Corporation with respect
to capital securities (if any) which may be issued by Other Trusts ("Other
Guarantees") and will constitute an unsecured obligation of the
Corporation and will rank subordinate and junior in right of payment to
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the extent and in the manner set forth in the New Guarantee to all Senior
Debt of the Corporation. See "Description of New Guarantee." In
addition, because the Corporation is a holding company, the New Junior
Subordinated Debt Securities and the New Guarantee are effectively
subordinated to all existing and future liabilities of the Corporation's
subsidiaries, including deposits. See "Risk Factors--Status of the
Corporation as a Bank Holding Company."
Optional Redemption........... The Corporation has the right to redeem the Junior Subordinated Debt
Securities, in whole or in part, at any time or from time to time on or
after April 15, 2007, at par, plus accrued and unpaid interest to the date
of redemption, subject to the Corporation having received prior approval
from the Federal Reserve if then required under applicable capital
guidelines or policies of the Federal Reserve. See "Description of New
Junior Subordinated Debt Securities--Optional Redemption." Upon the
redemption in whole or in part of the Junior Subordinated Debt
Securities, the proceeds of such redemption shall concurrently be applied
to redeem on a pro rata basis at the Redemption Price Trust Securities
having an aggregate Liquidation Amount equal to the aggregate principal
amount of the Junior Subordinated Debt Securities so redeemed, upon the
terms and conditions described herein. See "Description of New Capital
Securities--Mandatory Redemption."
Tax Event or Capital Treatment If at any time a Tax Event or a Capital Treatment Event should occur and
Event Redemption.............. be continuing, the Corporation may, within 90 days following the
occurrence of such Tax Event or Capital Treatment Event, redeem the
Junior Subordinated Debt Securities in whole but not in part in certain
circumstances described herein at a redemption price equal to par plus
accrued and unpaid interest thereon to the redemption date, subject to the
Corporation having received prior approval from the Federal Reserve if
then required under applicable capital guidelines or policies of the
Federal Reserve. See "Description of New Junior Subordinated Debt
Securities--Optional Redemption." Upon the redemption in whole or in
part of the Junior Subordinated Debt Securities, the proceeds of such
redemption shall concurrently be applied to redeem at the Redemption
Price Trust Securities having an aggregate Liquidation Amount equal to
the aggregate principal amount of the Junior Subordinated Debt
Securities so redeemed, upon the terms and conditions described herein.
See "Description of New Capital Securities--Mandatory Redemption."
Ratings....................... The New Capital Securities are expected to be rated "baa2" by Moody's
Investors Service, Inc. and "BBB-" by Standard & Poor's Ratings
Services. On June 25, 1997, Standard & Poor's Ratings Services placed
its rating of the Corporation on CreditWatch with positive implications.
A security rating is not a recommendation to buy, sell or hold securities
B-10
and may be subject to revision or withdrawal at any time by the assigning
rating organization.
ERISA Considerations..... Prospective purchasers must carefully consider the restrictions on
purchase set forth under "Certain ERISA Considerations."
Absence of Market for the
Capital Securities....... The New Capital Securities will be a new issue of securities for which
there is currently no established market. The Initial Purchasers informed
the Trust and the Corporation in connection with the offering of the Old
Capital Securities that they each intended to make a market in the Old
Capital Securities and, if issued, the New Capital Securities. However,
the Initial Purchasers are not obligated to do so, and any such market
making may be discontinued at any time without notice. Accordingly,
there can be no assurance as to the development or liquidity of any
market for the Old Capital Securities or the New Capital Securities.
Use of Proceeds.......... Neither the Corporation nor the Trust will receive any cash proceeds
from the issuance of the New Capital Securities offered hereby. See "Use
of Proceeds from Sale of Old Capital Securities."
For additional information regarding the Capital Securities, see
"Description of New Capital Securities," "Description of New Junior
Subordinated Debt Securities," "Description of New Guarantee,"
"Description of Old Capital Securities" in this Base Prospectus and
"Certain Federal Income Tax Consequences" in the accompanying
prospectus.
RISK FACTORS
Holders tendering Old Capital Securities in the Exchange Offer should
carefully consider the matters set forth under "Risk Factors."
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RISK FACTORS
Holders of the Old Capital Securities should carefully review the
information contained elsewhere in this Base Prospectus and should particularly
consider the following matters prior to tendering Old Capital Securities in the
Exchange Offer.
Ranking of Obligations Under the Guarantee and the Junior Subordinated Debt
Securities
The obligations of the Corporation under the Guarantee issued by the
Corporation for the benefit of the holders of Capital Securities and under the
Junior Subordinated Debt Securities are unsecured and rank subordinate and
junior in right of payment to all Senior Debt (which, as defined, includes all
outstanding subordinated debt of the Corporation) of the Corporation. At June
30, 1997, the aggregate outstanding Senior Debt of the Corporation was
approximately $250 million. The obligations of the Corporation under the
Guarantee also rank subordinate and junior in right of payment to creditors of
the Bank and the Corporation's other subsidiaries. See "--Status of the
Corporation as a Bank Holding Company." The Corporation does not have any
indebtedness that ranks pari passu with or junior to its obligations under the
Guarantee and the Junior Subordinated Debt Securities. None of the Indenture,
the Guarantee or the Declaration places any limitation on the amount of secured
or unsecured debt, including Senior Debt, that may be incurred by the
Corporation or any subsidiary. See "Description of New Junior Subordinated Debt
Securities--Subordination" and "Description of New Guarantee--Status of the
Guarantee."
The ability of the Trust to pay amounts due on the Capital Securities is
solely dependent upon the Corporation making payments on the Junior
Subordinated Debt Securities as and when required.
Status of the Corporation as a Bank Holding Company
The Corporation is a legal entity separate and distinct from the Bank and
its other subsidiaries, although the principal source of the Corporation's cash
revenues is dividends from the Bank. The right of the Corporation to
participate in the distribution of assets of any subsidiary, including the
Bank, upon the latter's liquidation, reorganization or otherwise (and thus the
ability of the holders of Capital Securities to benefit indirectly from any
such distribution) will be subject to the prior claims of such subsidiary's
creditors, which will take priority except to the extent that the Corporation
may itself be a creditor of such subsidiary with a recognized claim.
Accordingly, the Junior Subordinated Debt Securities will be effectively
subordinated to all existing and future liabilities of the Corporation's
subsidiaries, and holders of Junior Subordinated Debt Securities should look
only to the assets of the Corporation for payments on the Junior Subordinated
Debt Securities. Because the Corporation is a holding company with limited
assets and liabilities, a substantial portion of the consolidated liabilities
of the Corporation are liabilities of its subsidiaries. The Guarantee will
constitute an unsecured obligation of the Corporation and will rank subordinate
and junior in right of payment to all Senior Debt in the same manner as the
Junior Subordinated Debt Securities.
As a holding company, the Corporation conducts its operations principally
through its subsidiaries and, therefore, its principal source of cash, other
than its investing and financing activities, is receipt of dividends from the
Bank. However, there are legal limitations on the source and amount of
dividends that a national bank such as the Bank is permitted to pay. A national
bank may pay dividends only to the extent that retained net profits (including
the portion transferred to surplus) exceed bad debts (as defined by
regulation). Moreover, unless a national bank's surplus fund equals its common
capital, dividends may be paid only after 10 percent of its net profits (as
defined by regulation) for the specified preceding period have been transferred
to the bank's surplus fund. In addition, prior approval of the Office of
Comptroller of the Currency (the "OCC") is required if the total of all
dividends declared by a national bank in any calendar year will exceed the sum
of that bank's net profits for that year and its retained net profits for the
preceding two calendar years, less any required transfers to either surplus or
any fund for retirement of any preferred stock. At June 30, 1997, the Bank
could have paid approximately $82.4 million in dividends to the Corporation
without prior OCC approval. The payment of
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dividends by the Bank may also be affected by other factors, such as
requirements for the maintenance of adequate capital. In addition, the OCC is
authorized to determine, under certain circumstances relating to the financial
condition of a national bank, whether the payment of dividends would be an
unsafe or unsound banking practice and to prohibit payment thereof.
Option to Extend Interest Payment Date; Tax Consequences; Market Price
Consequences
So long as no Debenture Event of Default (as defined herein) has occurred
and is continuing, the Corporation has the right under the Indenture to defer
the payment of interest on the Junior Subordinated Debt Securities at any time
or from time to time for a period not exceeding 20 consecutive quarterly
periods with respect to each Extension Period, provided, however, that no
Extension Period may extend beyond the Stated Maturity of the Junior
Subordinated Debt Securities. As a consequence of any such deferral, quarterly
Distributions on the Capital Securities by the Trust will also be deferred (and
the amount of Distributions to which holders of the Capital Securities are
entitled will accumulate additional Distributions thereon at a variable annual
rate equal to LIBOR plus 1.00%, compounded quarterly from the relevant payment
date for such Distributions during any such Extension Period). During any
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 (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 (including Other Debentures) that rank pari passu with or junior in
interest to, the Junior Subordinated Debt Securities or (iii) make any
guarantee payments with respect to any guarantee by the Corporation of the debt
securities of any subsidiary of the Corporation (including Other Guarantees) if
such guarantee ranks pari passu with or junior in interest to the Junior
Subordinated Debt Securities (other than (a) dividends or distributions in
Common Stock, par value $5.00 per share (the "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) purchases or
acquisitions of shares of the Corporation's Common Stock in connection with the
satisfaction by the Corporation of its obligations under any employee benefit
plan or any other contractual obligation of the Corporation (other than a
contractual obligation ranking pari passu with or junior to the Junior
Subordinated Debt Securities), (e) 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 or (f) 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). Prior to the termination of any Extension Period, the Corporation
may further extend such Extension Period, provided, however, that such
extension does not cause such Extension Period to exceed 20 consecutive
quarterly periods or to extend beyond the Stated Maturity. Upon the termination
of any Extension Period and the payment of all interest then accrued and unpaid
on the Junior Subordinated Debt Securities (together with interest thereon
accrued at a variable annual rate equal to LIBOR plus 1.00%, compounded
quarterly, to the extent permitted by applicable law), and subject to the
foregoing limitations, the Corporation may elect to begin a new Extension
Period. There is no limitation on the number of times that the Corporation may
elect to begin an Extension Period. See "Description of New Capital
Securities--Distributions" and "Description of New Junior Subordinated Debt
Securities--Option to Extend Interest Payment Date."
If an Extension Period occurs, for United States federal income tax
purposes, a holder of Capital Securities will continue to include income (in
the form of original issue discount) in respect of its pro rata share of the
Junior Subordinated Debt Securities held by the Trust as long as the Junior
Subordinated Debt Securities remain outstanding. As a result, during an
Extension Period a holder of Capital Securities will include such income in
gross 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 thereafter. See "Certain Federal Income Tax
Consequences--United States Holders--Interest Income and Original Issue
Discount" and "--Sale or Redemption of the Capital Securities" in the
accompanying prospectus.
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Should the Corporation elect to exercise its right to defer payments of
interest on the Junior Subordinated Debt Securities in the future, the market
price of the Capital Securities is likely to be affected. A holder that
disposes of its Capital Securities during an Extension Period, therefore, might
not receive the same return on its investment as a holder that continues to
hold its Capital Securities. In addition, as a result of the existence of the
Corporation's right to defer interest payments on the Junior Subordinated Debt
Securities, the market price of the Capital Securities (which represent
beneficial ownership interests in the Trust holding the Junior Subordinated
Debt Securities as its sole assets) may be more volatile than the market prices
of other securities that are not subject to such deferrals.
Tax Event or Capital Treatment Event Redemption
Upon the occurrence and continuation of a Tax Event or a Capital Treatment
Event (each as defined herein), the Corporation may, at its option within 90
days following the occurrence of such Tax Event or Capital Treatment Event and
subject to receipt of prior approval of the Federal Reserve if such approval is
then required under applicable capital guidelines or policies, redeem the
Junior Subordinated Debt Securities in whole, but not in part, at par, plus
accrued and unpaid interest thereon to the date of redemption. In such event,
the Trust will redeem the Trust Securities. See "Description of New Junior
Subordinated Debt Securities--Optional Redemption," "Description of New Capital
Securities--Mandatory Redemption" and "Description of New Capital
Securities--Liquidation of the Trust and Distribution of Junior Subordinated
Debt Securities."
Possible Tax Law Changes Affecting the Capital Securities
On February 6, 1997, the revenue portion of President Clinton's fiscal year
1998 budget proposal (the "Budget Proposal") was released. If enacted, the
Budget Proposal would generally deny interest deductions for interest on an
instrument issued by a corporation that has a maximum term of more than 15
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 Corporation's consolidated
balance sheet. The above described provision of the Budget Proposal is proposed
to be effective generally for instruments issued on or after the date of first
Congressional committee action. No such action has yet occurred. If this
provision were to apply to the Junior Subordinated Debt Securities, the
Corporation would be unable to deduct interest on the Junior Subordinated Debt
Securities. Under current law, the Corporation will be able to deduct interest
on the Junior Subordinated Debt Securities. There can be no assurance, however,
that current or future legislative proposals, if enacted, or final legislation
will not affect the ability of the Corporation to deduct interest on the Junior
Subordinated Debt Securities. Such a change could give rise to a Tax Event,
which may permit the Corporation to cause a redemption of the Capital
Securities, as described more fully under "Description of New Capital
Securities--Mandatory Redemption" and "Description of New Junior Subordinated
Debt Securities--Optional Redemption."
Liquidation of the Trust and Distribution of Junior Subordinated Debt
Securities
The Corporation, as the holder of the outstanding Common Securities, has the
right at any time to terminate the Trust and cause the Junior Subordinated Debt
Securities to be distributed to the holders of the Trust Securities. Under
current United States federal income tax law, a distribution of Junior
Subordinated Debt Securities 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 Debt Securities may constitute a
taxable event to holders of Capital Securities. See "Certain Federal Income Tax
Consequences--United States Holders--Distributions of the Junior Subordinated
Debt Securities to Holders of Capital Securities" in the accompanying
prospectus.
There can be no assurance as to the market prices for Capital Securities or
Junior Subordinated Debt Securities that may be distributed in exchange for
Capital Securities if a liquidation of the Trust occurs.
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Accordingly, the Capital Securities or the Junior Subordinated Debt
Securities may trade at a discount to the price that the investor paid to
purchase the Capital Securities offered hereby. Because holders of Capital
Securities may receive Junior Subordinated Debt Securities on termination of
the Trust, prospective purchasers of Capital Securities are also making an
investment decision with regard to the Junior Subordinated Debt Securities and
should carefully review all the information regarding the Junior Subordinated
Debt Securities contained herein. See "Description of New Capital
Securities--Liquidation of the Trust and Distribution of the Junior
Subordinated Debt Securities" and "Description of New Junior Subordinated Debt
Securities--General."
Rights Under the Guarantee
The Guarantee guarantees to the holders of the Trust Securities the
following payments, to the extent not paid by the Trust: (i) any accumulated
and unpaid Distributions required to be paid on the Trust Securities, to the
extent that the Trust has funds on hand available therefor at such time, (ii)
the Redemption Price with respect to any Trust Securities called for
redemption, to the extent that the Trust has funds on hand available therefor
at such time, and (iii) upon a voluntary or involuntary dissolution, winding-
up or liquidation of the Trust (unless the Junior Subordinated Debt Securities
are distributed to holders of the Trust Securities or all of the Capital
Securities are redeemed), 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 available therefor at such time,
and (b) the amount of assets of the Trust remaining available for distribution
to holders of the Trust Securities after the satisfaction of liabilities to
creditors of the Trust as required by applicable law. See "Description of New
Guarantee."
The holders of not less than a majority in aggregate Liquidation Amount of
the Capital Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the 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 Trust
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 Debt Securities, 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, 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 interest on the Junior Subordinated Debt
Securities on the applicable payment date, then a holder of Capital Securities
may institute 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 interest on the
Junior Subordinated Debt Securities, 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 Debt Securities or assert
directly any other rights in respect of the Junior Subordinated Debt
Securities. See "Description of New Junior Subordinated Debt
Securities--Enforcement of Certain Rights by Holders of Capital Securities,"
"Description of New Junior Subordinated Debt Securities--Debenture Events of
Default" and "Description of New Guarantee." The Declaration provides that each
holder of Capital Securities by acceptance thereof agrees to the provisions of
the New Guarantee and the Indenture. The Bank of New York currently acts as
Guarantee Trustee under the Old Guarantee and will act as Guarantee Trustee
under the New Guarantee. In addition, the Guarantee Trustee currently holds the
Old Guarantee for the benefit of the holders of the Old Capital Securities and
will hold the New Guarantee for the benefit of the holders of the New Capital
Securities. The Bank of New York also acts as Property Trustee under the
Declaration and as Debenture Trustee under the Indenture.
B-15
Limited Voting Rights
Holders of Capital Securities will generally have limited voting rights
relating only to the modification of the Capital Securities, the dissolution,
winding-up or liquidation of the Trust, and the exercise of the Trust's rights
as holder of Junior Subordinated Debt Securities. The right to vote to appoint,
remove or replace the Property Trustee, the Delaware Trustee or the
Administrative Trustees is vested exclusively in the holder of the Common
Securities except, with respect to the Property Trustee and the Delaware
Trustee, upon the occurrence of certain events described herein. 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 not be classified for United States Federal income tax purposes
as an association taxable as a corporation or, as other than a grantor trust,
even if such action adversely affects the interests of such holders. See
"Description of New Capital Securities--Removal of Issuer Trustees" and
"Description of New Capital Securities--Voting Rights; Amendment of the
Declaration."
Regulatory Capital Requirements
The Corporation and the Bank are subject to regulatory capital guidelines.
At June 30, 1997, the Bank was in compliance with applicable regulatory capital
requirements. The Corporation, at that date, had a total capital to
risk-weighted assets ratio of 13.65% and a Tier 1 Capital to risk-weighted
assets ratio of 10.51%, both above the minimum requirements of 8.0% and 4.0%,
respectively. The Corporation's leverage ratio at that date was 8.11%.
Although the minimum leverage ratio requirement is 3.00%, most bank holding
companies, including the Corporation, are expected to maintain an additional
cushion of at least 100 to 200 basis points above the minimum. However, the
Federal Reserve may assign a specific capital ratio to an individual bank
holding company, including the Corporation, based on its assessment of asset
quality, earnings performance, interest-rate risk and liquidity. As of the date
of this Base Prospectus, the Federal Reserve has not advised the Corporation of
a specific leverage ratio requirement.
There can be no assurance that either the Corporation or the Bank will
continue to be able to meet their respective minimum capital ratios. In the
event that the Corporation or the Bank falls below the minimum capital
requirements described above, agencies may take regulatory action including, in
the case of the Bank, "prompt corrective action." Such actions could impair the
Corporation's ability to make principal and interest payments on the Junior
Subordinated Debt Securities.
Consequences of a Failure to Exchange Old Capital Securities
The Old Capital Securities have not been registered under the Securities Act
or any state securities laws and therefore may not be offered, sold or
otherwise transferred except in compliance with the registration requirements
of the Securities Act and any other applicable securities laws, or pursuant to
an exemption therefrom or in a transaction not subject thereto, and in each
case in compliance with certain other conditions and restrictions. Old Capital
Securities that remain outstanding after consummation of the Exchange Offer
will continue to bear a legend reflecting such restrictions on transfer. In
addition, upon consummation of the Exchange Offer, holders of Old Capital
Securities that remain outstanding will not be entitled to any rights to have
such Old Capital Securities registered under the Securities Act or to any
similar rights under the Registration Agreement (subject to certain limited
exceptions). The Corporation and the Trust do not intend to register under the
Securities Act any Old Capital Securities which remain outstanding after
consummation of the Exchange Offer (subject to such limited exceptions, if
applicable).
To the extent that Old Capital Securities are tendered and accepted in the
Exchange Offer, a holder's ability to sell untendered Old Capital Securities
could be adversely affected. In addition, to the extent that Old Capital
Securities are tendered and accepted in connection with the Exchange Offer, any
trading market for Old Capital Securities which remain outstanding after the
Exchange Offer could be adversely affected.
B-16
The New Capital Securities and any Old Capital Securities that remain
outstanding after consummation of the Exchange Offer will constitute a single
series of Capital Securities under the Declaration and, accordingly, will vote
together as a single class for purposes of determining whether holders of the
requisite percentage in outstanding Liquidation Amount thereof have taken
certain actions or exercised certain rights under the Declaration. See
"Description of New Capital Securities--General."
The Registration Agreement provides that if the Exchange Offer is not
consummated by November 19, 1997, the Distribution rate borne by the holders of
Old Capital Securities will increase by 0.25% per annum commencing on November
20, 1997 until the Exchange Offer is consummated. The aggregate amount of such
additional Distributions payable pursuant to the foregoing provisions will in
no event exceed 0.50% per annum. See "Description of Old Capital Securities."
Upon consummation of the Exchange Offer, the holders of Capital Securities will
not be entitled to any such increase in the Distribution rate thereon.
Absence of Public Market
The Old Capital Securities have not been registered under the Securities Act
and will be subject to significant restrictions on resale to the extent that
they are not exchanged for New Capital Securities. Although the New Capital
Securities will generally be permitted to be resold or otherwise transferred by
the holders (who are not affiliates of the Corporation or the Trust) without
compliance with the registration requirements under the Securities Act, they
will constitute a new issue of securities with no established trading market.
The Capital Securities may be transferred only in blocks having a Liquidation
Amount of $100,000 (100 Capital Securities) and integral multiples of $1,000 in
excess thereof. There is no existing market for the New Capital Securities and
there can be no assurance as to the development or liquidity of any markets
that may develop for the New Capital Securities, the ability of the holders to
sell their New Capital Securities or at what price holders of the New Capital
Securities will be able to sell their New Capital Securities. 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 Initial Purchasers informed the
Trust and the Corporation in connection with the offering of the Old Capital
Securities that they each intended to make a market in the Old Capital
Securities and, if issued, the New Capital Securities; however, the Initial
Purchasers are not obligated to do so, and any such market making activity may
be discontinued at any time without notice to the holders of the New Capital
Securities.
Notwithstanding the registration of the New Capital Securities pursuant to
the Exchange Offer, holders who are Affiliates of the Corporation or the Trust
may publicly offer for sale or resell the New Capital Securities only in
compliance with the provision of Rule 144 under the Securities Act.
Each Participating Broker-Dealer that receives New Capital Securities for
its own account in exchange for Old Capital Securities, where such Old Capital
Securities were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities, must acknowledge that it
acquired the Old Capital Securities for its own account as the result of
market-making activities or other trading activities and must agree that it
will deliver a prospectus in connection with any resale of such New Capital
Securities.
Exchange Offer Procedures
Subject to certain exceptions more fully described under "The Exchange
Offer--Acceptance for Exchange and Issuance of New Capital Securities,"
issuance of the New Capital Securities in exchange for Old Capital Securities
pursuant to the Exchange Offer will be made only after a timely receipt by the
Exchange Agent of such Old Capital Securities (unless such holder complies with
the procedures specified for guaranteed delivery of the Old Capital
Securities), a properly completed and duly executed Letter of Transmittal or
Agent's Message in lieu thereof and all other required documents. Therefore,
holders of the Old Capital Securities desiring to tender such Old Capital
Securities in exchange for New Capital Securities should allow sufficient time
to ensure timely
B-17
delivery. None of the Corporation, the Trust or the Exchange Agent is under any
duty to give notification of defects or irregularities with respect to the
tenders of Old Capital Securities for exchange.
USE OF PROCEEDS FROM SALE OF OLD CAPITAL SECURITIES
Neither the Trust nor the Corporation will receive cash proceeds from the
issuance of the New Capital Securities offered hereby. In consideration for
issuing the New Capital Securities in exchange for Old Capital Securities as
described in this Base Prospectus, the Trust will receive Old Capital
Securities in like Liquidation Amount. The Old Capital Securities surrendered
in exchange for the New Capital Securities will be retired and canceled.
The net proceeds to the Trust from the offering of the Old Capital
Securities were $99,134,000.
All of the proceeds from the sale of the Old Capital Securities and Common
Securities were invested by the Trust in the Old Junior Subordinated Debt
Securities. The Corporation has applied the net proceeds from the sale of the
Old Junior Subordinated Debt Securities to its general funds to be used for
general corporate purposes, including, from time to time, the making of
advances to its subsidiaries. In addition, a portion of the net proceeds has
been used by the Corporation to repurchase 2 million shares of its outstanding
Common Stock for an initial aggregate repurchase price of approximately $55.8
million, including expenses, pursuant to an accelerated stock repurchase
program. Final settlement on this transaction is expected to occur in the third
quarter of 1997.
CENTRAL FIDELITY CAPITAL TRUST I
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) the original declaration of trust executed by the Corporation, as
Depositor, The Bank of New York (Delaware), as Delaware Trustee, and the
Administrative Trustees named therein, which original declaration of trust was
amended and restated and executed on April 23, 1997 by the Corporation, as
Depositor, The Bank of New York, as Property Trustee, The Bank of New York
(Delaware), as Delaware Trustee, and the Administrative Trustees named therein,
and (ii) the filing of a certificate of trust with the Delaware Secretary of
State on April 2, 1997. The Trust exists for the exclusive purposes of (i)
issuing and selling the Trust Securities, (ii) using the proceeds from the sale
of the Trust Securities to acquire the Junior Subordinated Debt Securities and
(iii) engaging in only those other activities necessary or incidental thereto
(such as engaging in this Exchange Offer). Accordingly, the Junior Subordinated
Debt Securities will be the sole assets of the Trust, and payments under the
Junior Subordinated Debt Securities will be the sole revenues of the Trust. All
of the Common Securities are owned by the Corporation. The Common Securities
rank pari passu, and payments will be made thereon pro rata, with the Capital
Securities, except that upon the occurrence and continuance of any Debenture
Event of Default (or an event that, with notice or the passage of time, would
become such an Event of Default) or an Event of Default under the Declaration,
the rights of the Corporation as holder of the Common Securities to payment in
respect of Distributions and payments upon liquidation, redemption or otherwise
are subordinated to the rights of the holders of the Capital Securities. See
"Description of New Capital Securities--Subordination of Common Securities."
The Corporation has acquired Common Securities in an aggregate Liquidation
Amount equal to approximately 3% of the total capital of the Trust. The Trust
has a term of 40 years, but may terminate earlier as provided in the
Declaration. The Trust's business and affairs are conducted by its trustees,
each appointed by the Corporation, as holder of the Common Securities. The
trustees for the Trust are The Bank of New York, as the Property Trustee, The
Bank of New York (Delaware), as the Delaware Trustee, and three individual
trustees as Administrative Trustees who are employees or officers of or
affiliated with the Corporation. The Bank of New York, as Property Trustee,
will act as sole indenture trustee under the Declaration. The Bank of New York
also acts as trustee under the Old Guarantee Agreement and the Indenture and
will act as trustee under the New Guarantee Agreement. See "Description of New
Junior Subordinated Debt Securities" and "Description of New Guarantee." The
holder of the Common Securities, or the holders of a majority in Liquidation
Amount of the Capital Securities if an Event of Default
B-18
under the Declaration resulting from a Debenture Event of Default has occurred
and is continuing, are entitled to appoint, remove or replace the Property
Trustee and/or 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 are vested exclusively in the
holder of the Common Securities. The duties and obligations of each Issuer
Trustee are governed by the Declaration. Pursuant to the expense provisions
under the Indenture, the Corporation, as obligor on the Junior Subordinated
Debt Securities, will pay all fees and expenses related to the Trust and this
Exchange Offer and will pay, directly or indirectly, all ongoing costs,
expenses and liabilities of the Trust. See "Description of New Capital
Securities--Expenses and Taxes." The address and telephone number of the
principal executive office of the Trust is c/o
Central Fidelity Banks, Inc.
1021 East Cary Street
P.O. Box 27602
Richmond, Virginia 23261-7602
Telephone: (804) 697-7145
William N. Stoyko
Corporate Secretary
CENTRAL FIDELITY
Central Fidelity, the third largest banking company headquartered in
Virginia, serves Virginia markets primarily through its wholly-owned banking
subsidiary, Central Fidelity National Bank, a national banking association. At
June 30, 1997, the Bank operated 243 branch offices, including 28 full-service
supermarket locations, and 237 automated teller machines throughout the
Commonwealth of Virginia. Central Fidelity was formed in the late 1970s through
the consolidation of two bank holding companies, Central National Corporation
and Fidelity American Bankshares, Inc., the earliest predecessors of which were
organized in 1911 and 1865, respectively. At June 30, 1997, Central Fidelity
had total assets of approximately $10.7 billion, deposits of approximately $8.1
billion and shareholders' equity of approximately $803.6 million.
Central Fidelity, through the Bank and its other subsidiaries, provides a
wide variety of financial services to a broad customer base of individuals,
corporations, institutions and governments primarily located in Virginia. The
Bank is an issuer of MasterCard(R) and VISA(R) credit cards. Through the use of
reciprocally shared automated teller machines, Central Fidelity can deliver
services through its membership in the Internet/HONOR(R) regional and PLUS(R)
national networks of automated teller machines. Central Fidelity also engages
in limited international banking activities, primarily in connection with
foreign trade financing for Virginia-based companies. In addition to
traditional retail and commercial banking activities Central Fidelity generates
noninterest income by sales of trust and fiduciary services, annuities and
other investment services.
Year Ended December 31, 1996
Central Fidelity's net income for 1996 was $112.7 million, an increase of
7.0% from the $105.4 million reported for 1995. Central Fidelity's net interest
income, on a taxable equivalent basis, was $382.4 million for 1996, an increase
of 10.1% from $347.3 million in 1995. Noninterest income was $85.9 million for
1996 compared to $79.7 million in 1995, an increase of 7.8%. Noninterest
expense increased 5.8% to $251.9 million for 1996 compared to $238.2 million in
1995. The increase of noninterest expense for 1996 was adversely affected by
the special Savings Association Insured Fund ("SAIF") assessment in the amount
of $4.0 million for the year. The assessment was a one-time charge by the
Federal Deposit Insurance Corporation ("FDIC") to recapitalize the SAIF, and
was assessed on deposits acquired for SAIF-insured entities. Another
contributing factor was a $2.3 million charge associated with certain severance
arrangements. As a result of higher consumer loan charge-offs during 1996, the
provision for loan losses was $43.9 million in 1996, representing an increase
of 64.2% from $26.7 million in 1995.
B-19
Earning assets averaged $9.9 billion in 1996, compared to $9.7 billion in
1995, an increase of 1.4%. Total loans increased $486.2 million in 1996, or
8.1% from 1995, averaging $6.5 billion. Consumer loan categories accounted for
the majority of the loan growth. Securities available for sale declined 9.4% to
an average of $3.3 billion in 1996. Trading account securities averaged $1.9
million in 1996, reflecting an increase of 72.7% from 1995. Money market
investments declined 7.6% from 1995 to an average of $95.9 million in 1996.
Interest-bearing liabilities averaged $8.5 billion in 1996, down $31.3
million from 1995. Interest-bearing deposits increased 2.9% from 1995 to an
average of $6.8 billion in 1996. Certificates of deposit $100,000 and over
contributed the largest growth to total average interest-bearing deposits, up
26.7%. Borrowings from the Federal Home Loan Bank and other short-term
borrowings also contributed to the growth in funding sources, up 28.2% and
13.0%, respectively. Medium-term notes, capitalized lease obligations and
federal funds purchased and repos all registered declines for 1996, down 79.8%,
6.3% and 6.2%, respectively. The 79.8% decline in medium-term notes was a
result of notes maturing during 1996.
Shareholders' equity grew 8.8% to an average of $819.9 million in 1996 from
$753.4 million in 1995. The return on average shareholders' equity of 13.75% in
1996 declined from 13.99% in 1995.
Six Months Ended June 30, 1997
Central Fidelity's net income for the six months ended June 30, 1997 was
$61.6 million, an increase of 8.4% from the $56.8 million reported for the
first six months of 1996. Central Fidelity's net interest income on a taxable
equivalent basis for the six months ended June 30, 1997 was $202.8 million, an
8.6% increase from the net interest income reported in the corresponding 1996
period. Noninterest income for the Corporation increased 19.7% to $49.8 million
for the first six months of 1997 compared with $41.6 million for the same
period in 1996. Such increase resulted from growth in deposit fees and other
charges, increases in mutual funds and annuity sales as well as increased ATM
charges. Noninterest expense increased 8.2% to $130.4 million for the first six
months of 1997 compared to the corresponding 1996 period. Such growth was due
primarily to higher personnel, occupancy and equipment costs. Interest expense
on interest-bearing liabilities in the first six months of 1997 declined 4.8%
to $199.2 million from the corresponding 1996 period.
The Corporation's provision for loan losses increased to $27.6 million for
the six months ended June 30, 1997 compared with $21.0 million for the
corresponding period in 1996, as a result of a higher level of net charge-offs.
Such higher levels of net charge-offs resulted principally from losses in
consumer portfolios and a $3.7 million non-recurring loss in the Corporation's
commercial loan portfolio.
For the first six months of 1997, Central Fidelity's average earning assets
declined $67.2 million and interest earned on earning assets increased by a
modest $6.0 million from the levels recorded in the first six months of 1996.
The decline in earning assets was due primarily to the lower levels of
securities available for sale and money market investments during the first six
months of 1997.
Central Fidelity's total assets as of June 30, 1997 were $10.7 billion, a
modest increase from $10.5 billion at the end of 1996. Total loans at June 30,
1997 increased to $6.9 billion, an increase of 3.3% from the balance at
December 31, 1996, primarily as a result of the increase in the Corporation's
commercial and consumer mortgage loan portfolios. Central Fidelity's total
deposits were $8.1 billion at June 30, 1997, flat from the level of total
deposits at December 31, 1996. Shareholders' equity at June 30, 1997 was $803.6
million, or 7.5% of total assets, as compared to $846.5 million, or 8.0% of
total assets, at December 31, 1996. The return on average shareholders' equity
was 15.09% for the first six months of 1997 compared to 13.95% for the first
six months of 1996.
Stock Repurchase Program
On March 6, 1997, the Corporation announced that its Board of Directors
granted authority for the Corporation to purchase up to an additional 3 million
shares of its Common Stock under a repurchase program that commenced in January
1996. On May 1, 1997, the Corporation entered into an accelerated stock
repurchase program under which 2 million shares of its outstanding Common Stock
were acquired and cancelled for an initial amount of $55,810,000. Final
settlement on this transaction is expected to occur in the third quarter of
B-20
1997. On June 24, 1997, the Corporation announced that it had rescinded its
program to repurchase its Common Stock. See "Use of Proceeds from Sale of Old
Capital Securities."
Central Fidelity is a legal entity separate and distinct from the Bank and
its nonbanking subsidiaries. Accordingly, the right of Central Fidelity, and
thus the right of Central Fidelity's creditors, to participate in any
distribution of the assets or earnings of the Bank or any other subsidiary is
necessarily subject to the prior claims of creditors of the Bank or such
subsidiary, except to the extent that claims of Central Fidelity in its
capacity as a creditor may be recognized. The principal sources of Central
Fidelity's revenues are dividends and fees from the Bank.
Central Fidelity, a Virginia corporation, is a bank holding company
registered with the Federal Reserve under the BHCA. Central Fidelity's
executive offices are located at 1021 East Cary Street, Richmond, Virginia
23219. Its mailing address is Post Office Box 27602, Richmond, Virginia
23261-7602, and its telephone number is (804) 782-4000.
RECENT DEVELOPMENTS
On June 23, 1997, the Corporation entered into a definitive Agreement and
Plan of Merger with Wachovia, providing for the merger of the Corporation with
and into Wachovia. The agreement has been approved by the boards of directors
of both companies and is subject to the approval of the shareholders of the
Corporation and appropriate regulatory agencies. The merger is expected to be
accounted for as a pooling of interests and will result in a tax-free exchange
of 0.63 shares of Wachovia's common stock for each share of Common Stock of the
Corporation. In addition, the Corporation entered into a stock option agreement
granting Wachovia the option to purchase approximately 19.9% of the
Corporation's outstanding shares of Common Stock under certain circumstances.
Wachovia, which has dual headquarters in Winston-Salem, North Carolina and
Atlanta, Georgia, is the 20th largest banking company in the United States
based on total assets. As of March 31, 1997, Wachovia had total assets of
approximately $47.5 billion. As of the same date, Wachovia had 473 banking
offices and 830 ATM's, predominantly located in North Carolina, South Carolina
and Georgia. In addition, on June 10, 1997, Wachovia announced that it had
reached a definitive agreement to merge with Jefferson Bankshares, Inc., a
Virginia corporation, headquartered in Charlottesville, Virginia, which
operates principally in the Charlottesville, Tidewater, Richmond,
Fredericksburg and Shenandoah Valley markets of Virginia.
RATIO OF EARNINGS TO FIXED CHARGES FOR THE CORPORATION
The following table sets forth the consolidated ratios of earnings to fixed
charges for the Corporation for each of the years in the five-year period ended
December 31, 1996 and for each of the six months ended June 30, 1997 and June
30, 1996. For purposes of computing these ratios, earnings represent net
income, plus total taxes based on income, plus fixed charges. Fixed charges
include interest expense (ratios are presented both excluding and including
interest on deposits), the estimated interest component of net rental expense
and amortization of debt expense.
Six Months
Ended
June 30, Years Ended December 31,
----------- -----------------------------
1997 1996 1996 1995 1994 1993 1992
----- ----- ----- ----- ----- ----- -----
Ratio of Earnings to Fixed Charges
Excluding interest on deposits.... 3.01x 2.65x 2.74x 2.33x 2.37x 3.72x 3.98x
Including interest on deposits.... 1.45x 1.39x 1.40x 1.35x 1.37x 1.50x 1.38x
B-21
SELECTED HISTORICAL FINANCIAL INFORMATION
The following unaudited consolidated summary sets forth selected financial
data for Central Fidelity and its subsidiaries for each of the years in the
five-year period ended December 31, 1996 and for each of the six-month periods
ended June 30, 1997 and June 30, 1996. The following summary should be read in
conjunction with the financial information incorporated herein by reference to
other documents and Central Fidelity's press release dated July 9, 1997. See
"Incorporation of Certain Documents by Reference."
Six Months Ended
June 30, Years Ended December 31,
------------------------ ---------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ----------- ----------- -----------
(In thousands, except ratios and per share amounts)
SUMMARY OF
OPERATIONS:
Interest income............. $ 398,642 $ 392,383 $ 788,620 $ 771,920 $ 664,797 $ 613,845 $ 579,174
Interest expense............ 199,185 209,180 413,353 432,295 330,691 289,731 285,697
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net interest income......... 199,457 183,203 375,267 339,625 334,106 324,114 293,477
Provision for loan losses... 27,565 20,951 43,865 26,713 24,359 79,509 99,757
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income from earning
assets..................... 171,892 162,252 331,402 312,912 309,747 244,605 193,720
Noninterest income.......... 49,768 41,579 85,915 79,675 59,238 125,920 116,411
Noninterest expense......... 130,370 120,534 251,941 238,165 245,065 223,274 200,833
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before income taxes.. 91,290 83,297 165,376 154,422 123,920 147,251 109,298
Income taxes................ 29,715 26,507 52,674 49,052 39,056 44,334 30,782
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income.................. $ 61,575 $ 56,790 $ 112,702 $ 105,370 $ 84,864 $ 102,917 $ 78,516
----------- ----------- ----------- ----------- ----------- ----------- -----------
PER SHARE DATA:
Net income.................. $ 1.06 $ 0.95 $ 1.89 $ 1.77 $ 1.45 $ 1.77 $ 1.50
Cash dividends declared..... 0.46 0.42 0.86 0.79 0.76 0.68 0.55
Book value.................. 14.17 13.54 14.26 13.71 10.56 12.41 10.44
Average shares outstanding.. 58,068,245 60,041,921 59,736,817 59,673,709 58,741,982 58,102,754 52,440,425
PERIOD-END BALANCE
SHEET DATA:
Total assets................ $10,668,698 $10,491,529 $10,540,360 $10,810,974 $10,054,172 $ 9,662,284 $ 8,712,315
Loans....................... 6,939,448 6,474,293 6,716,836 6,316,813 5,772,093 4,812,509 3,953,354
Allowance for loan losses... 110,000 110,000 110,000 110,000 110,000 105,000 101,800
Earning assets.............. 10,043,462 9,913,528 9,937,036 10,179,856 9,456,750 9,107,251 8,139,100
Deposits.................... 8,076,620 7,964,060 8,071,454 7,985,898 7,227,244 6,656,016 6,672,453
Long-term debt.............. 249,425 150,350 150,324 150,386 150,440 151,389 158,423
Shareholders' equity........ 803,565 808,524 846,499 826,547 623,072 726,137 601,987
PERFORMANCE
RATIOS:
Return on average assets.... 1.19% 1.09% 1.09% 1.03% 0.89% 1.16% 1.06%
Return on average
shareholders' equity....... 15.09 13.95 13.75 13.99 12.72 15.91 15.60
Net interest margin......... 4.16 3.80 3.88 3.58 3.79 3.98 4.40
Efficiency.................. 51.76 52.21 53.38 55.85 54.60 51.36 53.30
Dividend payout............. 43.40 44.21 45.50 44.63 52.41 38.42 36.67
ASSET QUALITY
RATIOS:
Nonaccrual loans to loans... 0.62% 0.72% 0.57% 0.77% 1.17% 1.94% 2.13%
Nonperforming assets to
loans and foreclosed
properties................. 0.83 0.94 0.80 1.04 1.56 2.72 2.82
Net charge-offs to average
loans...................... 0.81 0.66 0.68 0.45 0.36 1.80 1.58
Provision for loan losses to
average loans.............. 0.81 0.66 0.68 0.45 0.46 1.87 2.67
Allowance to loans.......... 1.59 1.70 1.64 1.74 1.91 2.18 2.58
Allowance to nonaccrual
loans...................... 2.56x 2.36x 2.85x 2.26x 1.63x 1.12x 1.21x
Allowance to nonperforming
assets..................... 1.91x 1.81x 2.04x 1.67x 1.22x 0.79x 0.91x
LIQUIDITY AND
CAPITAL RATIOS:
Loans to deposits........... 85.92% 81.29% 83.22% 79.10% 79.87% 72.30% 59.25%
Equity to assets............ 7.53 7.71 8.03 7.65 6.20 7.52 6.91
Tangible equity to tangible
assets..................... 6.92 7.07 7.42 7.08 5.90 7.19 6.53
Tier 1 capital.............. 10.51 9.95 10.09 9.87 10.36 11.06 9.46
Total capital............... 13.65 13.18 13.29 13.12 13.85 14.88 13.22
Leverage.................... 8.11 7.35 7.57 7.06 7.04 7.10 6.85
B-22
CAPITALIZATION
The following table sets forth the consolidated capitalization of Central
Fidelity at June 30, 1997. The issuance of the New Capital Securities in the
Exchange Offer will have no effect on the capitalization of the Corporation.
The Capital Securities are treated as long-term debt. This table is based on,
and is qualified in its entirety by, the historical consolidated financial
statements of Central Fidelity, including the related notes thereto, which are
included in documents incorporated by reference herein, and should be read in
conjunction therewith.
June 30, 1997
----------------------
(Dollars in thousands)
Long-term debt...................................................... $ 249,425
Capitalized lease obligations....................................... 7,111
Shareholders' Equity
Preferred stock, none issued
Common Stock, par value $5 per share, authorized 100,000,000 shares,
shares outstanding--56,724,684.................................... 283,623
Capital surplus..................................................... 108,484
Unamortized deferred compensation................................... (682)
Retained earnings................................................... 403,526
Unrealized gains on securities available for sale,
net of income taxes................................................ 8,614
----------
Total shareholders' equity.......................................... 803,565
Total capitalization................................................ $1,060,101
----------
Consolidated Capital Ratios
Equity to assets.................................................... 7.53%
Tier 1 Capital...................................................... 10.51
Total Capital....................................................... 13.65
ACCOUNTING TREATMENT
The financial statements of the Trust will be consolidated into the
Corporation's consolidated financial statements, with the Capital Securities
treated as long-term debt. The financial statement footnotes of the Corporation
will reflect that the sole asset of the Trust will be $103,093,000 principal
amount of the Junior Subordinated Debt Securities maturing on April 15, 2027.
All future reports filed by the Corporation under the Exchange Act will present
information regarding the Trust and any other similar trusts in the manner
described above.
REGULATORY TREATMENT
As a registered bank holding company, the Corporation is required by the
Federal Reserve to maintain certain levels of capital for bank regulatory
purposes. The Corporation expects that the Capital Securities will be treated
as "Tier 1 Capital" of the Corporation for such purposes.
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
In connection with the sale of the Old Capital Securities, the Corporation
and the Trust entered into the Registration Agreement with the Initial
Purchasers, pursuant to which the Corporation and the Trust agreed to
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file and to use their reasonable best efforts to cause to be declared effective
by the Commission a Registration Statement with respect to the exchange of the
Old Capital Securities for capital securities with terms identical in all
material respects to the terms of the Old Capital Securities. A copy of the
Registration Agreement has been filed as an exhibit to the Registration
Statement of which this Base Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual obligations of
the Corporation and the Trust under the Registration Agreement. The form and
terms of the New Capital Securities are the same as the form and terms of the
Old Capital Securities, except that the New Capital Securities (i) have been
registered under the Securities Act and therefore will not be subject to
certain restrictions on transfer applicable to the Old Capital Securities and
(ii) will not provide for any increase in the Distribution rate thereon. In
that regard, the Registration Agreement provides, among other things, that, if
the Exchange Offer is not consummated by November 19, 1997, except in limited
circumstances, the Distribution rate borne by the Old Capital Securities will
increase by 0.25% per annum commencing on November 20, 1997 until the Exchange
Offer is consummated. The aggregate amount of such additional Distributions
payable pursuant to the foregoing provisions will in no event exceed 0.50% per
annum. Upon consummation of the Exchange Offer, holders of Old Capital
Securities will not be entitled to any such increase in the Distribution rate
thereon or any further registration rights under the Registration Agreement,
except under limited circumstances. See "Risk Factors--Consequences of a
Failure to Exchange Old Capital Securities" and "Description of Old
Securities."
The Exchange Offer is not being made to, nor will the Trust or the
Corporation accept tenders for exchange from, holders of Old Capital Securities
in any jurisdiction in which the Exchange Offer or the acceptance thereof would
not be in compliance with the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to the
Exchange Offer means any person in whose name the Old Capital Securities are
registered on the books of the Trust or any other person who has obtained a
properly completed bond power from the registered holder, or any person whose
Old Capital Securities are held of record by DTC who desires to deliver such
Old Capital Securities by book-entry transfer at DTC.
Pursuant to the Exchange Offer, the Corporation will exchange as soon as
practicable after the date hereof the Old Guarantee for the New Guarantee and
$100,000,000 aggregate principal amount of the Old Junior Subordinated Debt
Securities for a like aggregate principal amount of the New Junior Subordinated
Debt Securities. The New Guarantee and the New Junior Subordinated Debt
Securities have been registered under the Securities Act.
Terms of Exchange
The Trust and the Corporation hereby offer, upon the terms and subject to
the conditions set forth in this Base Prospectus and in the accompanying Letter
of Transmittal, to exchange up to $100,000,000 aggregate Liquidation Amount of
New Capital Securities for a like aggregate Liquidation Amount of Old Capital
Securities properly tendered on or prior to the Expiration Date and not
properly withdrawn in accordance with the procedures described below. The Trust
will issue, promptly after the Expiration Date, an aggregate Liquidation Amount
of up to $100,000,000 of New Capital Securities in exchange for a like
Liquidation Amount of outstanding Old Capital Securities tendered and accepted
in connection with the Exchange Offer. Holders may tender their Old Capital
Securities in whole or in part in a Liquidation Amount of not less than
$100,000 or any integral multiple of $1,000 in excess thereof.
The Exchange Offer is not conditioned upon any minimum Liquidation Amount of
Old Capital Securities being tendered. As of the date of this Base Prospectus,
$100,000,000 aggregate Liquidation Amount of Old Capital Securities is
outstanding.
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Holders of Old Capital Securities do not have any appraisal or dissenters'
rights in connection with the Exchange Offer. Old Capital Securities that are
not tendered for or are tendered but not accepted in connection with the
Exchange Offer will remain outstanding and be entitled to the benefits of the
Declaration, but will not be entitled to any further registration rights under
the Registration Agreement, except under limited circumstances. See "Risk
Factors--Consequences of a Failure to Exchange Old Capital Securities" and
"Description of Old Securities."
If any tendered Old Capital Securities are not accepted for exchange because
of an invalid tender, the occurrence of certain other events set forth herein
or otherwise, certificates for any such unaccepted Old Capital Securities will
be returned, without expense, to the tendering holder thereof promptly after
the Expiration Date.
Holders who tender Old Capital Securities in connection with the Exchange
Offer will not be required to pay brokerage commissions or fees or, subject to
the instructions in the Letter of Transmittal, transfer taxes with respect to
the exchange of Old Capital Securities in connection with the Exchange Offer.
The Corporation will pay all charges and expenses, other than certain
applicable taxes described below, in connection with the Exchange Offer. See
"--Fees and Expenses."
NEITHER THE BOARD OF DIRECTORS OF THE CORPORATION NOR ANY TRUSTEE OF THE
TRUST MAKES ANY RECOMMENDATION TO HOLDERS OF OLD CAPITAL SECURITIES AS TO
WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OLD
CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN
AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD CAPITAL SECURITIES
MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER
AND, IF SO, THE AGGREGATE AMOUNT OF OLD CAPITAL SECURITIES TO TENDER AFTER
READING THIS BASE PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSULTING WITH
THEIR ADVISERS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION AND REQUIREMENTS.
Expiration Date; Extensions; Amendments
The term "Expiration Date" means 5:00 p.m., New York City time, on September
2, 1997, unless the Exchange Offer is extended by the Corporation and the Trust
(in which case the term "Expiration Date" shall mean the latest date and time
to which the Exchange Offer is extended).
The Corporation and the Trust expressly reserve the right in their sole
discretion, subject to applicable law, at any time and from time to time, (i)
to delay the acceptance of the Old Capital Securities for exchange, (ii) to
terminate the Exchange Offer (whether or not any Old Capital Securities have
theretofore been accepted for exchange) if the Corporation and the Trust
determine, in their sole discretion, that any of the events or conditions
referred to under "--Conditions to the Exchange Offer" have occurred or exist,
(iii) to extend the Expiration Date of the Exchange Offer and retain all Old
Capital Securities tendered pursuant to the Exchange Offer, subject, however,
to the right of holders of Old Capital Securities to withdraw their tendered
Old Capital Securities as described under "--Withdrawal Rights," and (iv) to
waive any condition or otherwise amend the terms of the Exchange Offer in any
respect. If the Exchange Offer is amended in a manner determined by the
Corporation and the Trust to constitute a material change, or if the
Corporation and the Trust waive a material condition of the Exchange Offer, the
Corporation and the Trust will promptly disclose such amendment by means of an
amended or supplemented Prospectus that will be distributed to the registered
holders of the Old Capital Securities, and the Corporation and the Trust will
extend the Exchange Offer to the extent required by Rule 14e-1 under the
Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and
by making a public announcement thereof, and such
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announcement in the case of an extension will be made no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Without limiting the manner in which the Corporation and the
Trust may choose to make any public announcement and subject to applicable law,
the Corporation and the Trust shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a
release to an appropriate news agency.
Acceptance for Exchange and Issuance of New Capital Securities
Upon the terms and subject to the conditions of the Exchange Offer, the
Trust will exchange, and will issue to the Exchange Agent, New Capital
Securities for Old Capital Securities validly tendered and not withdrawn
(pursuant to the withdrawal rights described under "--Withdrawal Rights")
promptly after the Expiration Date.
In all cases, delivery of New Capital Securities in exchange for Old Capital
Securities tendered and accepted for exchange pursuant to the Exchange Offer
will be made only after timely receipt by the Exchange Agent of (i) Old Capital
Securities or a book-entry confirmation of a book-entry transfer of Old Capital
Securities into the Exchange Agent's account at DTC, including an Agent's
Message if the tendering holder has not delivered a Letter of Transmittal, (ii)
the Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees or, in the case of a
book-entry transfer, an Agent's Message in lieu of the Letter of Transmittal
and (iii) any other documents required by the Letter of Transmittal.
The term "book-entry confirmation" means a timely confirmation of a book-
entry transfer of Old Capital Securities into the Exchange Agent's account at
DTC. The term "Agent's Message" means a message, transmitted by DTC to and
received by the Exchange Agent and forming a part of a book-entry confirmation,
which states that DTC has received an express acknowledgment from the tendering
participant, which acknowledgment states that such participant has received and
agrees to be bound by the Letter of Transmittal and that the Trust and the
Corporation may enforce such Letter of Transmittal against such participant.
Subject to the terms and conditions of the Exchange Offer, the Corporation
and the Trust will be deemed to have accepted for exchange, and thereby
exchanged, Old Capital Securities validly tendered and not withdrawn as, if and
when the Trust gives oral or written notice to the Exchange Agent of the
Corporation's and the Trust's acceptance of such Old Capital Securities for
exchange pursuant to the Exchange Offer. The Exchange Agent will act as agent
for the Corporation and the Trust for the purpose of receiving tenders of Old
Capital Securities, Letters of Transmittal and related documents, and as agent
for tendering holders for the purpose of receiving Old Capital Securities,
Letters of Transmittal and related documents and transmitting New Capital
Securities to validly tendering holders. Such exchange will be made promptly
after the Expiration Date. If for any reason whatsoever, acceptance for
exchange or the exchange of any Old Capital Securities tendered pursuant to the
Exchange Offer is delayed (whether before or after the Corporation's and the
Trust's acceptance for exchange of Old Capital Securities) or the Corporation
and the Trust extend the Exchange Offer or are unable to accept for exchange or
exchange Old Capital Securities tendered pursuant to the Exchange Offer, then,
without prejudice to the Corporation's and the Trust's rights set forth herein,
the Exchange Agent may, nevertheless, on behalf of the Corporation and the
Trust and subject to Rule 14e-1(c) under the Exchange Act, retain tendered Old
Capital Securities and such Old Capital Securities may not be withdrawn except
to the extent tendering holders are entitled to withdrawal rights as described
under "--Withdrawal Rights."
Pursuant to the Letter of Transmittal or Agent's Message in lieu thereof, a
holder of Old Capital Securities will warrant and agree in the Letter of
Transmittal or Agent's Message, as the case may be, that it has full power and
authority to tender, exchange, sell, assign and transfer Old Capital
Securities, that the Trust will acquire good, marketable and unencumbered title
to the tendered Old Capital Securities, free and clear of all liens,
restrictions, charges and encumbrances, and that the Old Capital Securities
tendered for exchange are not subject to any adverse claims or proxies. The
holder also will warrant and agree that it will, upon request, execute and
deliver any additional documents deemed by the Corporation, the Trust or the
Exchange Agent to be necessary or
B-26
desirable to complete the exchange, sale, assignment and transfer of the Old
Capital Securities tendered pursuant to the Exchange Offer.
Procedures for Tendering Old Capital Securities
Valid Tender
Except as set forth below, in order for Old Capital Securities to be validly
tendered pursuant to the Exchange Offer, a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees, or, in the case of a book-entry tender, an Agent's Message in lieu
of the Letter of Transmittal, and any other required documents, must be
received by the Exchange Agent at its address set forth under "--Exchange
Agent," and either (i) tendered Old Capital Securities must be received by the
Exchange Agent, (ii) such Old Capital Securities must be tendered pursuant to
the procedures for book-entry transfer set forth below and a book-entry
confirmation, including an Agent's Message if the tendering holder has not
delivered a Letter of Transmittal, must be received by the Exchange Agent, in
each case on or prior to the Expiration Date, or (iii) the guaranteed delivery
procedures set forth below must be complied with.
If a tendering holder is tendering less than all of its Old Capital
Securities, the tendering holder should fill in the amount of Old Capital
Securities being tendered in the appropriate box on the Letter of Transmittal.
If fewer than all of the Old Capital Securities of a holder are tendered for
exchange, the untendered Liquidation Amount of the holder's remaining Old
Capital Securities must be $100,000 or any integral multiple of $1,000 in
excess thereof. The entire amount of Old Capital Securities delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. DELIVERY IS RECOMMENDED BY OVERNIGHT DELIVERY OR, IF DELIVERY
IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT REQUESTED, PROPERLY INSURED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Book Entry Transfer
The Exchange Agent will establish an account with respect to the Old Capital
Securities at DTC for purposes of the Exchange Offer within two business days
after the date of this Base Prospectus. Any financial institution that is a
participant in DTC's book-entry transfer facility system may make a book-entry
delivery of the Old Capital Securities by causing DTC to transfer such Old
Capital Securities into the Exchange Agent's account at DTC in accordance with
DTC's Authorized Tender Offer Program ("ATOP") procedures for transfers. Such
holder of Old Capital Securities using ATOP should transmit its acceptance on
DTC on or prior to the Expiration Date (or comply with the guaranteed delivery
procedures set forth below). DTC will verify such acceptance, execute a
book-entry transfer of the tendered Old Capital Securities into the Exchange
Agent's account at DTC and then send to the Exchange Agent confirmation of such
book-entry transfer, including an Agent's Message confirming that DTC has
received an express acknowledgment from such holder that such holder has
received and agrees to be bound by the Letter of Transmittal and that the Trust
and the Corporation may enforce the Letter of Transmittal against such holder.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Signature Guarantees
Certificates for the Old Capital Securities need not be endorsed and
signature guarantees on the Letter of Transmittal are unnecessary unless (i) a
certificate for the Old Capital Securities is registered in a name other than
that of the person surrendering the certificate or (ii) such registered holder
completes the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" in the Letter of Transmittal. In the case of (i) or (ii) above,
such certificates for Old Capital Securities must be duly endorsed or
accompanied by a properly executed bond power, with the endorsement or
signature on the bond power and on the Letter of Transmittal
B-27
guaranteed by a firm or other entity identified in Rule 17Ad-15 under the
Exchange Act as an "eligible guarantor institution," including (as such terms
are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities
broker or dealer or government securities broker or dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association
or clearing agency; or (v) a savings association that is a participant in a
Securities Transfer Association (an "Eligible Institution"), unless surrendered
on behalf of such Eligible Institution. See Instruction 1 to the Letter of
Transmittal.
Guaranteed Delivery
If a holder desires to tender Old Capital Securities pursuant to the
Exchange Offer and the certificates for such Old Capital Securities are not
immediately available or time will not permit all required documents to reach
the Exchange Agent on or before the Expiration Date, or the procedures for
book-entry transfer cannot be completed on a timely basis, such Old Capital
Securities may nevertheless be tendered, provided that all of the following
guaranteed delivery procedures are complied with:
(i)such tenders are made by or through an Eligible Institution;
(ii)a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form accompanying the Letter of Transmittal, is
received by the Exchange Agent, as provided below, on or prior to the
Expiration Date; and
(iii)the certificates (or a book-entry confirmation) representing all
tendered Old Capital Securities, in proper form for transfer, together
with a properly completed and duly executed Letter of Transmittal (or
facsimile thereof or Agent's Message in lieu thereof), with any required
signature guarantees and any other documents required by the Letter of
Transmittal, are received by the Exchange Agent within three New York
Stock Exchange trading days after the date of execution of such Notice
of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of New Capital
Securities in exchange for Old Capital Securities tendered and accepted for
exchange pursuant to the Exchange Offer will in all cases be made only after
timely receipt by the Exchange Agent of Old Capital Securities, or of a
book-entry confirmation with respect to such Old Capital Securities, and a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof or Agent's Message in lieu thereof), together with any required
signature guarantees and any other documents required by the Letter of
Transmittal. Accordingly, the delivery of New Capital Securities might be made
to all tendering holders at the same time, and will depend upon when Old
Capital Securities, book-entry confirmations with respect to Old Capital
Securities and other required documents are received by the Exchange Agent.
The Corporation's and the Trust's acceptance for exchange of Old Capital
Securities tendered pursuant to any of the procedures described above will
constitute a binding agreement among the tendering holder, the Corporation and
the Trust upon the terms and subject to the conditions of the Exchange Offer.
Determination of Validity
All questions as to the form of documents, validity, eligibility (including
time of receipt) and acceptance for exchange of any tendered Old Capital
Securities will be determined by the Corporation and the Trust, in their sole
discretion, whose determination shall be final and binding on all parties. The
Corporation and the Trust reserve the absolute right, in their sole discretion,
to reject any and all tenders determined by them not to be in proper form or
the acceptance of which, or exchange for, may, in the view of counsel to the
Corporation or the Trust, be unlawful. The Corporation and the Trust also
reserve the absolute right, subject to applicable law, to waive any of the
conditions of the Exchange Offer as set forth under "--Conditions to the
Exchange Offer" or any condition or irregularity in any tender of Old Capital
Securities of any particular holder whether or not similar conditions or
irregularities are waived in the case of other holders.
B-28
The Corporation's and the Trust's interpretation of the terms and conditions
of the Exchange Offer (including the Letter of Transmittal and the instructions
thereto) will be final and binding. No tender of Old Capital Securities will be
deemed to have been validly made until all irregularities with respect to such
tender have been cured or waived. Neither the Corporation, the Trust, any
affiliates or assigns of the Corporation or Trust, the Exchange Agent nor any
other person shall be under any duty to give any notification of any
irregularities in tenders or incur any liability for failure to give any such
notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney or
any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by the Trust or
the Corporation, proper evidence satisfactory to the Corporation and the Trust,
in their sole discretion, of such person's authority to so act must be
submitted.
A beneficial owner of Old Capital Securities that are held by or registered
in the name of a broker, dealer, commercial bank, trust company or other
nominee or custodian is urged to contact such entity promptly if such
beneficial holder wishes to participate in the Exchange Offer.
Resales of New Capital Securities
The Corporation and the Trust are making the Exchange Offer of the New
Capital Securities in reliance on the position of the staff of the Division of
Corporation Finance of the Commission as set forth in certain interpretive
letters addressed to third parties in other transactions. However, neither the
Corporation nor the Trust has sought its own interpretive letter, and there can
be no assurance that the staff of the Division of Corporation Finance of the
Commission would make a similar determination with respect to the Exchange
Offer as it has in such interpretive letters to third parties. Based on these
interpretations by the staff of the Division of Corporation Finance, and
subject to the two immediately following sentences, the Corporation and the
Trust believe that New Capital Securities issued pursuant to this Exchange
Offer in exchange for Old Capital Securities may be offered for resale, resold
and otherwise transferred by a holder thereof (other than a holder who is a
broker-dealer) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such New Capital
Securities are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or understanding
with any person to participate, in a distribution (within the meaning of the
Securities Act) of such New Capital Securities. However, any holder of Old
Capital Securities who is an Affiliate or who intends to participate in the
Exchange Offer for the purpose of distributing New Capital Securities, or any
broker-dealer who purchased Old Capital Securities from the Trust to resell
pursuant to Rule 144A or any other available exemption under the Securities
Act, (i) will not be able to rely on the interpretations of the staff of the
Division of Corporation Finance of the Commission set forth in the
above-mentioned interpretive letters, (ii) will not be entitled to tender such
Old Capital Securities in the Exchange Offer and (iii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or other transfer of such Old Capital Securities
unless such sale or transfer is made pursuant to an exemption from such
requirements. In addition, as described below, Participating Broker-Dealers
must deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of New Capital Securities.
Each holder of Old Capital Securities who wishes to exchange Old Capital
Securities for New Capital Securities in the Exchange Offer will be required to
represent that (i) it is not an Affiliate, (ii) any New Capital Securities to
be received by it are being acquired in the ordinary course of its business,
(iii) it has no arrangement or understanding with any person to participate in
a distribution (within the meaning of the Securities Act) of such New Capital
Securities and (iv) if such holder is not a broker-dealer, such holder is not
engaged in, and does not intend to engage in, a distribution (within the
meaning of the Securities Act) of such New Capital Securities. The Letter of
Transmittal contains the foregoing representations. In addition, the
Corporation and the Trust may require such holder, as a condition to such
holder's eligibility to participate in the Exchange Offer, to furnish to the
Corporation and the Trust (or an agent thereof) in writing information as to
the number of "beneficial
B-29
owners" (within the meaning of Rule 13d-3 under the Exchange Act) on behalf of
whom such holder holds the Capital Securities to be exchanged in the Exchange
Offer. Each Participating Broker-Dealer must acknowledge that it acquired the
Old Capital Securities for its own account as the result of market-making
activities or other trading activities and must agree that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of such New Capital Securities. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a Participating
Broker-Dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. Based on the position taken by the staff of
the Division of Corporation Finance of the Commission in the interpretive
letters referred to above, the Corporation and the Trust believe that
Participating Broker-Dealers may fulfill their prospectus delivery requirements
with respect to the New Capital Securities received upon exchange of such Old
Capital Securities (other than Old Capital Securities which represent an unsold
allotment from the original sale of the Old Capital Securities) with a
prospectus meeting the requirements of the Securities Act, which may be the
prospectus prepared for an exchange offer so long as it contains a description
of the plan of distribution with respect to the resale of such New Capital
Securities. Accordingly, this Base Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer
during the period referred to below in connection with resales of New Capital
Securities received in exchange for Old Capital Securities where such Old
Capital Securities were acquired by such Participating Broker-Dealer for its
own account as a result of market-making or other trading activities. Subject
to certain provisions set forth in the Registration Agreement, the Corporation
and the Trust have agreed that this Base Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of such New Capital Securities for a period ending on
the close of business on the first anniversary following the Expiration Date
or, if earlier, when all such New Capital Securities have been disposed of by
such Participating Broker-Dealer. Any person, including any Participating
Broker-Dealer, who is an Affiliate may not rely on such interpretive letters
and must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction.
In that regard, each Participating Broker-Dealer who surrenders Old Capital
Securities pursuant to the Exchange Offer will be deemed to have agreed, by
execution of the Letter of Transmittal or delivery of an Agent's Message in
lieu thereof, that, upon receipt of notice from the Corporation or the Trust of
the occurrence of any event or the discovery of any fact which makes any
statement contained or incorporated by reference in this Base Prospectus untrue
in any material respect or which causes this Base Prospectus to omit to state a
material fact necessary in order to make the statements contained or
incorporated by reference herein, in the light of the circumstances under which
they were made, not misleading, or of the occurrence of certain other events
specified in the Registration Agreement, such Participating Broker-Dealer will
suspend the sale of New Capital Securities pursuant to this Base Prospectus
until the Corporation or the Trust has amended or supplemented this Base
Prospectus to correct such misstatement or omission and has furnished copies of
the amended or supplemented Prospectus to such Participating Broker-Dealer, or
the Corporation or the Trust has given notice that the sale of the New Capital
Securities may be resumed, as the case may be.
Withdrawal Rights
Except as otherwise provided herein, tenders of Old Capital Securities may
be withdrawn at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective a written, telegraphic, telex or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at its address set forth under "--Exchange Agent" on or
prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Old Capital Securities to be withdrawn, the
aggregate principal amount of Old Capital Securities to be withdrawn, and (if
certificates for such Old Capital Securities have been tendered) the name of
the registered holder of the Old Capital Securities as set forth on the Old
Capital Securities, if different from that of the person who tendered such Old
Capital Securities. If Old Capital Securities have been delivered or otherwise
identified to the Exchange Agent, then prior to the physical release of such
Old Capital Securities, the tendering holder must
B-30
submit the certificate numbers shown on the particular Old Capital Securities
to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution, except in the case of Old Capital
Securities tendered for the account of an Eligible Institution. If Old Capital
Securities have been tendered pursuant to the procedures for book-entry
transfer set forth in "-- Procedures for Tendering Old Capital Securities," the
notice of withdrawal must specify the name and number of the account at DTC to
be credited with the withdrawal of Old Capital Securities, in which case a
notice of withdrawal will be effective if delivered to the Exchange Agent by
written, telegraphic, telex or facsimile transmission on or prior to the
Expiration Date. Withdrawals of tenders of Old Capital Securities may not be
rescinded. Old Capital Securities properly withdrawn will not be deemed validly
tendered for purposes of the Exchange Offer, but may be retendered at any
subsequent time on or prior to the Expiration Date by following any of the
procedures described above under " -- Procedures for Tendering Old Capital
Securities."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Corporation and
the Trust, in their sole discretion, whose determination shall be final and
binding on all parties. Neither the Corporation, the Trust, any Affiliates or
assigns of the Corporation or the Trust, the Exchange Agent nor any other
person shall be under any duty to give any notification of any irregularities
in any notice of withdrawal or incur any liability for failure to give any such
notification. Any Old Capital Securities which have been tendered but which are
withdrawn will be returned to the holder thereof without cost to such holder
promptly after withdrawal.
Distributions on the New Capital Securities
Each New Capital Security will pay cumulative Distributions from the most
recent Distribution Date on the Old Capital Securities, or if no Distributions
have been paid on such Old Capital Securities, from April 23, 1997. Holders of
Old Capital Securities whose Old Capital Securities are accepted for exchange
will not receive accumulated Distributions on such Old Capital Securities for
any period from and after the last Distribution Date with respect to such Old
Capital Securities prior to the original issue date of the New Capital
Securities or, if no such Distributions have been paid, will not receive any
accumulated Distributions on such Old Capital Securities, and will be deemed to
have waived the right to receive any Distributions on such Old Capital
Securities accumulated from and after such Distribution Date or, if no such
Distributions have been paid, from and after April 23, 1997.
Conditions to the Exchange Offer
Notwithstanding any other provisions of the Exchange Offer, or any extension
of the Exchange Offer, the Corporation and the Trust will not be required to
accept for exchange, or to exchange, any Old Capital Securities for any New
Capital Securities, and, as described below, may terminate the Exchange Offer
(whether or not any Old Capital Securities have theretofore been accepted for
exchange) or may waive any conditions to or amend the Exchange Offer, if any of
the following conditions has occurred or exists:
(i) there shall occur a change in the current interpretation by the staff
of the Commission (including oral interpretations) which permits the
New Capital Securities issued pursuant to the Exchange Offer in
exchange for Old Capital Securities to be offered for resale, resold
and otherwise transferred by holders thereof (other than
broker-dealers and any such holder which is an Affiliate) without
compliance with the registration and prospectus delivery provisions in
the ordinary course of such holders' business and such holders have no
arrangement or understanding with any person to participate in the
distribution of such New Capital Securities;
(ii) any action or proceeding shall have been instituted or threatened in
any court or by or before any governmental agency or body with respect
to the Exchange Offer which, in the Corporation's and the Trust's
judgment, would reasonably be expected to impair the ability of the
Trust or the Corporation to proceed with the Exchange Offer;
B-31
(iii)any law, statute, rule or regulation shall have been adopted or
enacted which, in the Corporation's and the Trust's judgment, would
reasonably be expected to impair the ability of the Trust or the
Corporation to proceed with the Exchange Offer;
(iv) a banking moratorium shall have been declared by United States federal
or New York state authorities which, in the Corporation's and the
Trust's judgment, would reasonably be expected to impair the ability
of the Trust or the Corporation to proceed with the Exchange Offer;
(v) trading on the New York Stock Exchange or generally in the United
States over-the-counter market shall have been suspended by order of
the Commission or any other governmental authority which, in the
Trust's and the Corporation's judgment, would reasonably be expected
to impair the ability of the Trust or the Corporation to proceed with
the Exchange Offer;
(vi) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration
Statement or proceedings shall have been initiated or, to the
knowledge of the Corporation or the Trust, threatened for that purpose
or any governmental approval has not been obtained, which approval the
Corporation and the Trust shall, in their sole discretion, deem
necessary for the consummation of the Exchange Offer as contemplated
hereby;
(vii)any change, or any development involving a prospective change, in the
business or financial affairs of the Trust or the Corporation or any
of its subsidiaries has occurred which, in the judgment of the
Corporation and the Trust, might materially impair the ability of the
Trust or the Corporation to proceed with the Exchange Offer;
(viii)there shall occur any change in law or in currently prevailing
interpretations thereof by the Commission's staff (including oral
interpretations) which causes the Trust and the Corporation to
determine upon advice of their outside counsel that they are not
permitted to effect the Exchange Offer as contemplated by this Base
Prospectus; or
(ix) the Corporation shall have received an opinion of a nationally
recognized independent tax counsel to the Corporation experienced in
such matters to the effect that as a result of the consummation of the
Exchange Offer, there is more than an insubstantial risk that (A) if
the Junior Subordinated Debt Securities are held by or on behalf of
the Trust, (x) 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 interest accrued or received on the Junior Subordinated Debt
Securities or subject to more than a de minimis amount of other taxes,
duties or other governmental charges as determined by such counsel or
(y) any portion of interest payable by the Corporation to the Trust on
the Junior Subordinated Debt Securities 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 (B)
with respect to Junior Subordinated Debt Securities which are no
longer held by or on behalf of the Trust, any portion of interest
payable by the Corporation on the Junior Subordinated Debt Securities
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.
If the Corporation and the Trust determine in their sole discretion that
any of the foregoing events or conditions has occurred or exists, the
Corporation and the Trust may, subject to applicable law, terminate the
Exchange Offer (whether or not any Old Capital Securities have theretofore
been accepted for exchange) or may waive any such condition or otherwise
amend the terms of the Exchange Offer in any respect. If such waiver or
amendment constitutes a material change to the Exchange Offer, the
Corporation and the Trust will promptly disclose such waiver by means of an
amended or supplemented Prospectus that will be distributed to the
registered holders of the Old Capital Securities, and the Corporation and
the Trust will extend the Exchange Offer to the extent required by Rule
14e-1 under the Exchange Act.
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Exchange Agent
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. Delivery of the Letters of Transmittal and any other required documents,
questions, requests for assistance, and requests for additional copies of this
Base Prospectus or of the Letter of Transmittal, all whether by registered or
certified mail, by hand or by overnight courier, should be directed to the
Exchange Agent as follows:
The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Reorganization Section
Telephone: (212) 571-3780
Facsimile: (212) 815-3687
Delivery to other than the above address or facsimile number will not
constitute a valid delivery.
Fees and Expenses
The Corporation has agreed to pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith. The Corporation will also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Base
Prospectus and related documents to the beneficial owners of Old Capital
Securities, and in handling or tendering for their customers.
Holders who tender their Old Capital Securities for exchange will not be
obligated to pay any transfer taxes in connection therewith. If, however, New
Capital Securities are to be delivered to, or are to be issued in the name of,
any person other than the registered holder of the Old Capital Securities
tendered, or if a transfer tax is imposed for any reason other than the
exchange of Old Capital Securities in connection with the Exchange Offer, then
the amount of any such transfer taxes (whether imposed on the registered holder
or any other persons) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
the Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder.
Neither the Corporation nor the Trust will make any payment to brokers,
dealers or others soliciting acceptances of the Exchange Offer.
Certain Federal Income Tax Consequences
The Corporation and the Trust expect that the exchange of Old Capital
Securities for New Capital Securities should not be a taxable exchange for
federal income tax purposes, and the holders of Old Capital Securities should
not recognize any taxable gain or loss or any interest income as a result of
such exchange.
B-33
DESCRIPTION OF NEW CAPITAL SECURITIES
Pursuant to the terms of the Declaration, the Issuer Trustees on behalf of
the Trust have issued the Old Capital Securities and the Common Securities and
will issue the New Capital Securities. The New Capital Securities 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 of the Trust Securities or
liquidation of the Trust over the Common Securities, as well as other benefits
as described in the Declaration. See "--Subordination of Common Securities."
The Declaration has been qualified under the Trust Indenture Act of 1939 (the
"Trust Indenture Act"). This summary of certain provisions of the Capital
Securities, the Common Securities and the Declaration does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Declaration, including the definitions therein of
certain terms. The Declaration is attached as an exhibit to the Registration
Statement.
General
The Capital Securities (including the Old Capital Securities and the New
Capital Securities) will be limited to $100,000,000 aggregate Liquidation
Amount at any one time outstanding. The Capital Securities will rank pari
passu, and payments will be made thereon pro rata, with the Common Securities
except as described under "--Subordination of Common Securities." Legal title
to the Junior Subordinated Debt Securities is held by the Property Trustee on
behalf of the Trust in trust for the benefit of the holders of the Capital
Securities and Common Securities. The Guarantee is a guarantee on a
subordinated basis with respect to the Capital Securities but does not
guarantee payment of Distributions or amounts payable on redemption of the
Capital Securities or on liquidation of the Trust when the Trust does not have
funds on hand available to make such payments. See "Description of New
Guarantee."
Distributions
The Capital Securities represent beneficial ownership interests in the
Trust, and Distributions on each Capital Security are payable at a variable
annual rate equal to LIBOR plus 1.00% of the stated Liquidation Amount of
$1,000, and are payable quarterly in arrears on the 15th day of January, April,
July and October of each year to the holders of the Capital Securities at the
close of business on the Business Day (as defined herein) immediately preceding
such Distribution Date (each, a "record date"). Distributions on the Capital
Securities will be cumulative. Distributions will accumulate from the original
issue date of the Old Capital Securities. The first Distribution Date for the
Capital Securities will be July 15, 1997. The amount of Distributions payable
for any period will be computed on the actual number of days elapsed in a year
of twelve 30-day months. In the event that any date on which Distributions are
payable on the Capital Securities 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 without any additional Distributions or other payments
in respect to any such delay) 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 The City of New York are authorized or required by law
or executive order to remain closed, or a day on which the corporate trust
office of the Property Trustee or the Debenture Trustee is closed for business.
So long as no Debenture Event of Default has occurred and is continuing, the
Corporation has the right under the Indenture to defer the payment of interest
on the Junior Subordinated Debt Securities 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 of the Junior Subordinated Debt Securities. As a consequence of
any such election, quarterly Distributions on the Capital Securities by the
Trust will be deferred during any such Extension Period. Distributions to which
holders of the Capital Securities are entitled will accumulate additional
Distributions thereon at a variable annual rate equal to LIBOR plus 1.00%,
compounded quarterly from the relevant payment date for such Distributions
during any such Extension
B-34
Period, to the extent permitted by applicable law. The term "Distributions" as
used herein shall include any such additional Distributions. 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 (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 (including Other Debentures) that rank pari passu with or junior in
interest to the Junior Subordinated Debt Securities, or (iii) make any
guarantee payments with respect to any guarantee by the Corporation of the debt
securities of any subsidiary of the Corporation (including Other Guarantees) if
such guarantee ranks pari passu with or junior in interest to the Junior
Subordinated Debt Securities (other than (a) dividends or distributions in
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) purchases or acquisitions of shares of the Corporation's Common
Stock in connection with the satisfaction by the Corporation of its obligations
under any employee benefit plan or any other contractual obligation of the
Corporation (other than a contractual obligation ranking pari passu with or
junior to the Junior Subordinated Debt Securities), (e) 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 or (f) the purchase
of fractional interests in shares of the Corporation's stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged). 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 of the Junior
Subordinated Debt Securities. Upon the termination of any such Extension Period
and the payment of all amounts then accrued and unpaid on the Junior
Subordinated Debt Securities (together with interest thereon accrued at a
variable annual rate equal to LIBOR plus 1.00%, compounded quarterly, to the
extent permitted by applicable law), and subject to the foregoing limitations,
the Corporation may elect to begin a new Extension Period. No interest or other
amounts 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 such Extension
Period at least three 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 such Extension Period or (ii) the date the Administrative
Trustees are required to give notice to any automated quotation system or to
holders of such Capital Securities of the record date or the date such
Distributions are payable, but in any event not less than three Business Days
prior to such record date. The Debenture Trustee shall give notice of the
Corporation's election to begin or extend an 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 New
Junior Subordinated Debt Securities--Option to Extend Interest Payment Date" in
this Base Prospectus and "Certain Federal Income Tax Consequences--United
States Holders--Interest Income and Original Issue Discount" in the
accompanying prospectus.
The Corporation has no current intention of exercising its right to defer
payments of interest on the Junior Subordinated Debt Securities.
The revenue of the Trust available for distribution to holders of the
Capital Securities will be limited to payments under the Junior Subordinated
Debt Securities in which the Trust will invest the proceeds from the issuance
and sale of the Trust Securities. See "Description of New Junior Subordinated
Debt Securities--General." If the Corporation does not make interest payments
on the Junior Subordinated Debt Securities, 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 legally available for
the payment of such Distributions and cash sufficient to make such payments) is
guaranteed by the Corporation on a limited basis as set forth herein under
"Description of New Guarantee."
B-35
Mandatory Redemption
The Junior Subordinated Debt Securities will mature on April 15, 2027. The
Junior Subordinated Debt Securities may be redeemed by the Corporation, in
whole or in part, at any time and from time to time on or after April 15, 2007,
at par, plus accrued and unpaid interest thereon to the date of redemption. In
addition, the Junior Subordinated Debt Securities may be redeemed by the
Corporation at any time, in whole but not in part, in certain circumstances
described herein upon the occurrence and continuation of a Tax Event or a
Capital Treatment Event, within 90 days following the occurrence of such Tax
Event or Capital Treatment Event, as the case may be, at par, plus accrued and
unpaid interest thereon to the date of redemption, upon not less than 30 nor
more than 60 days' notice to holders of such Junior Subordinated Debt
Securities. In each case, the right of the Corporation to redeem the Junior
Subordinated Debt Securities is subject to the Corporation having received
prior approval from the Federal Reserve, if then required under applicable
capital guidelines or policies of the Federal Reserve.
Upon the repayment in full at maturity or redemption in whole or in part of
the Junior Subordinated Debt Securities (other than following the distribution
of the Junior Subordinated Debt Securities to the holders of the Trust
Securities), the proceeds from such repayment or payment shall concurrently be
applied to redeem on a pro rata basis at the Redemption Price, Trust Securities
having an aggregate liquidation amount equal to the aggregate principal amount
of the Junior Subordinated Debt Securities so repaid or redeemed; provided,
however, that holders of such Trust Securities shall be given not less than 30
nor more than 60 days' notice of such redemption (other than at the Stated
Maturity of the Junior Subordinated Debt Securities). See "Description of New
Junior Subordinated Debt Securities--Optional Redemption." In the event that
fewer than all of the outstanding Capital Securities are to be redeemed, the
Capital Securities held in book-entry form will be redeemed in accordance with
the procedures of DTC as described under "--Form, Denominations, Book-Entry
Procedures and Transfer."
"Tax Event" means the receipt by the Trust or the Corporation of an opinion
of a nationally recognized independent tax counsel to the Corporation
experienced in such matters to the effect that, as a result of (a) any
amendment to or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, (b) any judicial decision
or official administrative pronouncement, ruling, regulatory procedure, notice
or announcement, including any notice or announcement of intent to adopt such
procedures or regulations (an "Administrative Action") or (c) any amendment to
or change in the administrative position or interpretation of any
Administrative Action or judicial decision that differs from the theretofore
generally accepted position, in each case, by any legislative body, court,
governmental agency or regulatory body, irrespective of the manner in which
such amendment or change is made known, which amendment or change is effective
or such Administrative Action or decision is announced, in each case, on or
after the Issue Date, there is more than an insubstantial risk that (x) if the
Trust holds the Junior Subordinated Debt Securities, (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 interest accrued or received on the Junior
Subordinated Debt Securities or subject to more than a de minimis amount of
other taxes, duties or other governmental charges as determined by such
counsel, or (ii) any portion of interest payable by the Corporation to the
Trust on the Junior Subordinated Debt Securities 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 (y) with respect to
Junior Subordinated Debt Securities which are no longer held by the Trust, any
portion of interest payable by the Corporation on the Junior Subordinated Debt
Securities 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.
"Capital Treatment Event" means 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
B-36
(including any announced prospective change) in, the laws (or any rules or
regulations thereunder) of the United States or any political subdivision
thereof or therein or any rules, guidelines or policies of the Federal Reserve
or (b) any official or administrative pronouncement or action or judicial
decision interpreting or applying such laws or regulations, which amendment or
change is effective or such pronouncement, action or decision is announced on
or after the Issue Date of the Capital Securities, the Corporation will not be
entitled to treat the Capital Securities as "Tier 1 Capital" (or the equivalent
thereof) for purposes of the risk-based capital adequacy guidelines of the
Federal Reserve, as then in effect and applicable to the Corporation; provided,
however, that the distribution of the Junior Subordinated Debt Securities in
connection with the liquidation of the Trust by the Corporation shall not in
and of itself constitute a Capital Treatment Event.
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 Debt Securities the Additional
Sums (as defined below).
"Additional Sums" means the 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 and other governmental charges to which
the Trust has become subject as a result of a Tax Event.
Redemption Procedures
Trust Securities shall be redeemed, if at all, at the Redemption Price with
the proceeds from the contemporaneous repayment or redemption of the Junior
Subordinated Debt Securities. Redemptions of the Trust Securities shall be made
and the Redemption Price shall be payable on each Redemption Date (as defined
below) only to the extent that the Trust has funds on hand available for the
payment of such Redemption Price. See also "--Subordination of Common
Securities."
If the Trust gives a notice of redemption in respect of the Capital
Securities, then, by 12:00 noon, New York City time, on the date fixed for
redemption (the "Redemption Date"), to the extent funds are available, with
respect to the Capital Securities held in global form, the Property Trustee
will deposit irrevocably with DTC funds sufficient to pay the Redemption Price
and will give DTC irrevocable instructions and authority to pay the Redemption
Price to the holders of the Capital Securities. See "--Form, Denomination,
Book-Entry Procedures and Transfer." With respect to the Capital Securities
held in certificated form, the Property Trustee, to the extent funds are
available, will irrevocably deposit with the paying agent for the Capital
Securities funds sufficient to pay the Redemption Price and will give such
paying agent irrevocable instructions and authority to pay the Redemption Price
to the holders thereof upon surrender of their certificates evidencing the
Capital Securities. See "--Payment and Paying Agency." Notwithstanding the
foregoing, Distributions payable on or prior to the Redemption Date shall be
payable to the holders of the Capital 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 the Capital Securities will cease, except the right of
the holders of the Capital Securities to receive the Redemption Price, but
without interest on such Redemption Price, and the Capital Securities will
cease to be outstanding. In the event that any date fixed for redemption of
Capital Securities is not a Business Day, then payment of the Redemption Price
payable on such date will be made on the next succeeding day which is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day. In the event
that payment of the Redemption Price 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 New Guarantee," Distributions on Capital
Securities will continue to accrue at the then applicable rate, from the
Redemption Date originally established by the Trust to the date such Redemption
Price is actually paid, in which case the actual payment date will be the date
fixed for redemption for purposes of calculating the Redemption Price.
B-37
Subject to applicable law (including, without limitation, United States
federal securities law), the Corporation or its subsidiaries may at any time
and from time to time purchase outstanding Capital Securities by tender in the
open market or by private agreement.
Notice of any redemption (other than at the Stated Maturity of the Junior
Subordinated Debt Securities) will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Trust Securities at its
registered address. Unless the Corporation defaults in payment of the
Redemption Price on, or in the repayment of, the Junior Subordinated Debt
Securities, on and after the Redemption Date, Distributions will cease to
accrue on the Trust Securities called for redemption.
Liquidation of the Trust and Distribution of Junior Subordinated Debt
Securities
The Corporation, as the holder of the outstanding Common Securities, will
have the right at any time (including, without limitation, upon the occurrence
of a Tax Event or Capital Treatment Event) to terminate the Trust and cause a
Like Amount of the Junior Subordinated Debt Securities to be distributed to the
holders of the Trust Securities upon liquidation of the Trust; provided,
however, that following such distribution of the Junior Subordinated Debt
Securities, the Corporation agrees to use its best efforts to maintain any
ratings of such Junior Subordinated Debt Securities by any nationally
recognized rating agency for so long as any such Junior Subordinated Debt
Securities are outstanding. Such right to terminate is subject to prior
approval of the Federal Reserve if then required under applicable capital
guidelines or policies of the Federal Reserve.
Upon liquidation of the Trust and certain other events, the Junior
Subordinated Debt Securities may be distributed to holders of the Capital
Securities. Under current United States federal income tax law, a distribution
of Junior Subordinated Debt Securities 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 Debt Securities may constitute a
taxable event to holders of Capital Securities. See "Certain Federal Income Tax
Consequences--United States Holders--Distributions of Junior Subordinated Debt
Securities to Holders of Capital Securities" in the accompanying prospectus.
The Trust shall automatically terminate upon 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 Junior Subordinated Debt
Securities to the holders of the Trust Securities if the Corporation, as
Depositor, has given written direction to the Property Trustee to terminate the
Trust (which direction is optional and, except as described above, wholly
within the discretion of the Corporation, as Depositor); (iii) redemption of
all of the Trust Securities as described under "--Mandatory Redemption" above;
(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 Issuer Trustees as expeditiously as
the Issuer Trustees determine to be possible by distributing, after
satisfaction of liabilities to creditors of the Trust as provided by applicable
law, to the holders of such Trust Securities a Like Amount of the Junior
Subordinated Debt Securities, unless such distribution would not be practical,
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 the Trust as provided by applicable law, an amount
equal to, in the case of holders of Capital Securities, the aggregate of the
Liquidation Amount plus accumulated 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 the Trust has
insufficient assets available to pay in full the aggregate Liquidation
Distribution, then the amounts payable directly by the Trust on the Capital
Securities shall be paid on a pro rata basis. The holder(s) of the Common
Securities will be entitled to receive Distributions upon any such liquidation
pro rata with the holders of the Capital Securities, except that if a Debenture
Event of Default (or an event that, with notice or passage of time, would
become such an Event of
B-38
Default) or an Event of Default under the Declaration has occurred and is
continuing, the Capital Securities shall have a priority over the Common
Securities with respect to any such distributions. See "--Subordination of
Common Securities." If an early termination occurs as described in clause (v)
above, the Junior Subordinated Debt Securities will be subject to optional
redemption in whole (but not in part).
"Like Amount" means (i) with respect to a redemption of Capital Securities,
Capital Securities having a Liquidation Amount equal to that portion of the
principal amount of Junior Subordinated Debt Securities to be contemporaneously
redeemed in accordance with the Indenture, allocated to the Common Securities
and to the Capital Securities based upon the relative Liquidation Amounts of
such classes and the proceeds of which will be used to pay the Redemption Price
of the Capital Securities and (ii) with respect to a distribution of Junior
Subordinated Debt Securities to holders of Capital Securities in connection
with a dissolution or liquidation of the Trust, Junior Subordinated Debt
Securities having a principal amount equal to the Liquidation Amount of the
Trust Securities of the holder to whom such Junior Subordinated Debt Securities
are distributed.
If the Corporation elects not to redeem the Junior Subordinated Debt
Securities prior to maturity and the Trust is not liquidated and the Junior
Subordinated Debt Securities are not distributed to holders of the Trust
Securities, the Capital Securities will remain outstanding until the repayment
of the Junior Subordinated Debt Securities at the Stated Maturity.
After the liquidation date is fixed for any distribution of Junior
Subordinated Debt Securities to holders of the Trust Securities, (i) the
Capital Securities will no longer be deemed to be outstanding, (ii) DTC or its
nominee, as the record holder of the Capital Securities, will receive a
registered global certificate or certificates representing the Junior
Subordinated Debt Securities to be delivered upon such distribution with
respect to Capital Securities held by DTC or its nominee and (iii) any
certificates representing Capital Securities not held by DTC or its nominee
will be deemed to represent Junior Subordinated Debt Securities having a
principal amount equal to the Liquidation Amount of such Capital Securities and
bearing accrued and unpaid interest in an amount equal to the accumulated and
unpaid Distributions on such Capital Securities until such certificates 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 Junior Subordinated Debt
Securities.
There can be no assurance as to the market prices for the Capital Securities
or the Junior Subordinated Debt Securities that may be distributed in exchange
for the Trust Securities if a dissolution and liquidation of the Trust were to
occur. Accordingly, the Capital Securities that an investor may purchase, or
the Junior Subordinated Debt Securities that the investor may receive on
dissolution and liquidation of the Trust, may trade at a discount to the price
that the investor paid to purchase the Capital Securities offered hereby.
Subordination of Common Securities
Payment of Distributions on, and the Redemption Price of, the Capital
Securities and Common Securities, as applicable, shall be made pro rata to the
holders of Capital Securities and Common Securities based on the Liquidation
Amount of the Trust Securities, provided that, if on any Distribution Date or
Redemption Date any Debenture Event of Default (or an event that, with notice
or passage of time, would become such an Event of Default) or an Event of
Default under the Declaration shall have occurred and be continuing, no payment
of any Distribution on, or Redemption Price of, any of the 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 outstanding
Capital 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 outstanding Capital Securities, shall have
been made or provided for, and all funds available to the Property Trustee
shall first be applied to the payment in full in cash of all Distributions on,
or the Redemption Price of, the Capital Securities then due and payable.
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In the case of any Event of Default under the Declaration resulting from a
Debenture Event of Default, the Corporation as holder of the Common Securities
will be deemed to have waived any right to act with respect to any such Event
of Default under the Declaration until the effect of all such Events of Default
have been cured, waived or otherwise eliminated. Until all such Events of
Default under the Declaration have been so cured, waived or otherwise
eliminated, the Property Trustee shall act solely on behalf of the holders of
such Capital Securities and not on behalf of the Corporation as holder of the
Common Securities, and only the holders of the Capital Securities will have the
right to direct the Property Trustee to act on their behalf.
Events of Default; Notice
Any one of the following events constitutes an "Event of Default" under the
Declaration (an "Event of Default") (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i)the occurrence of a Debenture Event of Default (see "Description of New
Junior Subordinated Debt Securities--Debenture Events of Default");
(ii)default by the Trust in the payment of any Distribution when it becomes
due and payable, and continuation of such default for a period of 30
days;
(iii)default by the Trust in the payment of any Redemption Price of any Trust
Security when it becomes due and payable;
(iv)default in the performance, or breach, in any material respect, of any
covenant or warranty of the Issuer Trustees in the Declaration (other
than a covenant or warranty, a default in the performance of which or
the breach of which is addressed in clause (ii) or (iii) above), and
continuation of such default or breach for a period of 60 days after
there has been given, by registered or certified mail, to the defaulting
Issuer Trustee or Issuer Trustees by the holders of at least 25% in
aggregate Liquidation Amount of the outstanding Capital Securities, a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" under the
Declaration; or
(v)the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by the Corporation to
appoint a successor Property Trustee within 60 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the Capital Securities, the
Administrative Trustees and the Corporation, as Depositor, unless such Event of
Default shall have been cured or waived. The Corporation, as Depositor, and the
Administrative Trustees are required to file annually with the Property Trustee
a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Declaration.
If a Debenture Event of Default (or an event that with notice or the passage
of time, would become such an Event of Default) or an Event of Default under
the Declaration has occurred and is continuing, the Capital Securities shall
have a preference over the Common Securities as described above. See "--
Liquidation of the Trust and Distribution of Junior Subordinated Debt
Securities" and "--Subordination of Common Securities."
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 Capital
Securities. In no event will the holders of the Capital Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights
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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 Declaration.
Co-Trustees and Separate Property Trustee
Unless an Event of Default shall have occurred and be continuing, at any
time or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the Trust's property
may at the time be located, the Corporation, as the holder of the Common
Securities, and the Administrative Trustees shall have power to appoint one or
more persons either to act as a co-trustee, jointly with the Property Trustee,
of all or any part of such Trust's 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 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 the
Declaration, provided such person shall be otherwise qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of the Trust
The 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 or as
otherwise set forth in the Declaration. The Trust may, at the request of the
Corporation, as Depositor, with the consent of the Administrative Trustees but
without the consent of the holders of the Capital 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
substantially as an entirety to, a trust organized as such under the laws of
any State; provided, however, that (i) such successor entity either (a)
expressly assumes all of the obligations of the Trust with respect to the
Capital Securities or (b) substitutes for the Capital Securities other
securities having substantially the same terms as the Capital Securities (the
"Successor Securities") so long as the Successor Securities rank the same as
the Capital Securities rank 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 Junior
Subordinated Debt Securities, (iii) the Successor Securities are listed or
traded, or any Successor Securities will be listed or traded upon notification
of issuance, on any national securities exchange or other organization on which
the Capital Securities are then listed or traded, if any, (iv) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does
not cause the Capital 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 Capital Securities (including any Successor Securities) in any
material respect, (vi) such successor entity has a purpose identical and
limited to that of the Trust, (vii) prior to such merger, 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, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the
rights, preferences and privileges of the holders of the Capital Securities
(including any Successor Securities) in any material respect, and (b) following
such merger, consolidation, amalgamation, replacement, conveyance,
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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
(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, the Trust shall not, except with the consent of
holders of 100% in Liquidation Amount of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by or convey, transfer or lease
its properties and assets substantially as an entirety to any other entity or
permit any other entity to consolidate, amalgamate, merge with or into, or
replace it, if such consolidation, amalgamation, merger, replacement,
conveyance, transfer or lease would cause the Trust or the successor entity to
be classified as an association taxable as a corporation or as other than a
grantor trust for United States federal income tax purposes.
Voting Rights; Amendment of the Declaration
Except as provided below and under "Description of New Guarantee--Amendments
and Assignment" and as otherwise required by law and the Declaration, the
holders of the Capital Securities will have no voting rights.
The 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 provision in the Declaration that may be inconsistent with any
other provision, or to make any other provisions with respect to matters or
questions arising under the Declaration, which shall not be inconsistent with
the other provisions of the Declaration, or (ii) to modify, eliminate or add to
any provisions of the 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 or as other than an association taxable as a
corporation 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 any holder of Trust Securities, and any amendments of the
Declaration shall become effective when notice thereof is given to the holders
of the Trust Securities. The 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 Capital
Securities, and (ii) receipt by the Issuer Trustees of an opinion of counsel to
the effect that such amendment or the exercise of any power granted to the
Issuer Trustees in accordance with such amendment will not cause the Trust to
be classified as an association taxable as a corporation or 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. In addition, without the consent of each holder of Trust
Securities, the Declaration may not be amended to (i) change the amount or
timing of any Distribution on the Trust Securities or otherwise adversely
affect the amount of any Distribution required to be made in respect of the
Trust Securities as of a specified date or (ii) restrict the right of a holder
of Trust Securities to institute suit for the enforcement of any such payment
on or after such date.
So long as any Junior Subordinated Debt Securities are held by the Trust,
the Issuer Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
executing any trust or power conferred on the Property Trustee with respect to
the Junior Subordinated Debt Securities, (ii) waive any past default that is
waivable under Section 5.13 of the Indenture, (iii) exercise any right to
rescind or annul a declaration that the principal of all the Junior
Subordinated Debt Securities shall be due and payable or (iv) consent to any
amendment, modification or termination of the Indenture or the Junior
Subordinated Debt Securities, where such consent shall be required, without, in
each case, obtaining the prior approval of the holders of a majority in
aggregate Liquidation Amount of all outstanding Capital Securities; provided,
however, that where a consent under the Indenture would require the consent of
each holder of Junior Subordinated Debt Securities affected thereby, no such
consent shall be given by the Property Trustee without the prior consent of
each holder of the Capital Securities. The Issuer Trustees shall not
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revoke any action previously authorized or approved by a vote of the holders of
the Capital Securities except by subsequent vote of such holders. The Property
Trustee shall notify each holder of Capital Securities of any notice of default
with respect to the Junior Subordinated Debt Securities. In addition to
obtaining the foregoing approvals of such holders of the Capital 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 as a result of such action and such action
would not cause the Trust to be classified as other than a grantor trust for
United States federal income tax purposes.
Any required approval of holders of Capital Securities may be given at a
meeting of such holders convened for such purpose or pursuant to written
consent. The Property Trustee will cause a notice of any meeting at which
holders of Capital Securities are entitled to vote, or of any matter upon which
action by written consent of such holders is to be taken, to be given to each
holder of record of Capital Securities in the manner set forth in the
Declaration.
No vote or consent of the holders of Capital Securities will be required for
the Trust to redeem and cancel the Capital Securities in accordance with the
Declaration.
Notwithstanding that holders of the Capital Securities are entitled to vote
or consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Corporation, the Issuer Trustees or any
affiliate of the Corporation or any Issuer Trustees, shall, for purposes of
such vote or consent, be treated as if they were not outstanding.
Expenses and Taxes
In the Indenture, the Corporation, as borrower, has agreed to pay all debts
and other obligations (other than with respect to payments of Distributions,
amounts payable upon redemption and the Liquidation Amount of the Trust
Securities) and all costs and expenses of the Trust (including costs and
expenses relating to the organization of the Trust, the fees and expenses of
the Issuer Trustees and the costs and expenses relating to the operation of the
Trust) and the offering of the Capital Securities, and to pay any and all taxes
and all costs and expenses with respect to the foregoing (other than United
States withholding taxes) to which the Trust might become subject. The
foregoing obligations of the Corporation under the Indenture are for the
benefit of, and shall be enforceable by, any person to whom any such debts,
obligations, costs, expenses and taxes are owed (a "Creditor") whether or not
such Creditor has received notice thereof. Any such Creditor may enforce such
obligations of the Corporation directly against the Corporation, and the
Corporation has irrevocably waived any right or remedy to require that any such
Creditor take any action against the Trust or any other person before
proceeding against the Corporation. The Corporation has also agreed in the
Indenture to execute such additional agreement(s) as may be necessary or
desirable to give full effect to the foregoing.
Form, Denomination, Book-Entry Procedures and Transfer
In the event that Capital Securities are issued in certificated form, such
Capital Securities will be in blocks having a Liquidation Amount of $100,000
(100 Capital Securities) and integral multiples of $1,000 in excess thereof and
may be transferred or exchanged in such blocks in the manner and at the offices
described below.
The New Capital Securities initially will be represented by one or more
Capital Securities in registered, global form (collectively, the "Global
Capital Securities"). The Global Capital Securities will be deposited upon
issuance with the Property Trustee as custodian for DTC, in New York, New York,
and registered in the name of DTC or its nominee, in each case for credit to an
account of a direct or indirect participant in DTC as described below.
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Except as set forth below, the Global Capital Securities may be transferred,
in whole and not in part, only to another nominee of DTC or to a successor of
DTC or its nominee and only in amounts that would not cause a holder to own
less than 100 Capital Securities. Beneficial interests in the Global Capital
Securities may not be exchanged for Capital Securities in certificated form
except in the limited circumstances described below. In addition, transfer of
beneficial interests in the Global Capital Securities will be subject to the
applicable rules and procedures of DTC and its direct or indirect participants
which may change from time to time. See "--Exchange of Book-Entry Capital
Securities for Certificated Capital Securities."
Depositary Procedures
DTC has advised the Trust and the Corporation as follows: DTC is a limited
purpose trust company organized under the laws of the State of New York, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
to accounts of its Participants, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers and dealers,
banks, trust companies, clearing corporations and certain other organizations.
Indirect access to DTC's system is also available to other entities such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
(collectively, the "Indirect Participants"). Persons who are not Participants
may beneficially own securities held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership interest and transfer
of ownership interest of each actual purchaser of each security held by or on
behalf of DTC are recorded on the records of the Participants and Indirect
Participants.
DTC has also advised the Trust and the Corporation that, pursuant to
procedures established by it, ownership of interests in the Global Capital
Securities will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interests in the Global Capital
Securities).
Investors in the Global Capital Securities may hold their interests therein
directly through DTC, if they are Participants in DTC, or indirectly through
organizations which are Participants in such system. All interests in a Global
Capital Security will be subject to the procedures and requirements of DTC. The
laws of some states require that certain persons take physical delivery in
certificated form of certain securities, such as the Capital Securities, that
they own. Consequently, the ability to transfer beneficial interests in a
Global Capital Security to such persons will be limited to that extent. Because
DTC can act only on behalf of Participants, which in turn act on behalf of
Indirect Participants and certain banks, the ability of a person having
beneficial interests in a Global Capital Security to pledge such interests to
persons or entities that do not participate in the DTC system, or otherwise
take actions in respect of such interests, may be affected by the lack of a
physical certificate evidencing such interests. For certain other restrictions
on the transferability of the Capital Securities, see "--Exchange of Book-Entry
Capital Securities for Certificated Capital Securities."
EXCEPT AS DESCRIBED BELOW, OWNERS OF BENEFICIAL INTERESTS IN THE GLOBAL
CAPITAL SECURITIES WILL NOT BE ENTITLED TO HAVE CAPITAL SECURITIES REGISTERED
IN THEIR NAMES, WILL NOT RECEIVE OR BE ENTITLED TO RECEIVE PHYSICAL DELIVERY OF
CAPITAL SECURITIES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE
REGISTERED OWNERS OR HOLDERS THEREOF UNDER THE DECLARATION FOR ANY PURPOSE.
Payments in respect of the Global Capital Security registered in the name of
DTC or its nominee will be payable by the Property Trustee to DTC or its
nominee as the registered holder under the Declaration by wire
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transfer in immediately available funds on each Distribution Date. Under the
terms of the Declaration, the Property Trustee will treat the persons in whose
names the Capital Securities, including the Global Capital Securities, are
registered as the owners thereof for the purpose of receiving such payments and
for any and all other purposes whatsoever. Consequently, neither the Property
Trustee nor any agent thereof has or will have any responsibility or liability
for (i) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to, or payments made on account of, beneficial
ownership interests in the Global Capital Securities, or for maintaining,
supervising or reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in the
Global Capital Securities, or (ii) any other matter relating to the actions and
practices of DTC or any of its Participants or Indirect Participants. DTC has
advised the Trust and the Corporation that its current practice, upon receipt
of any payment in respect of securities such as the Capital Securities, is to
credit the accounts of the relevant Participants with the payment on the
payment date, in amounts proportionate to their respective holdings in
Liquidation Amount of beneficial interests in the Global Capital Security, as
shown on the records of DTC, unless DTC has reason to believe it will not
receive payment on such payment date. Payments by the Participants and the
Indirect Participants to the beneficial owners of Capital Securities
represented by Global Capital Securities held through such Participants will be
governed by standing instructions and customary practices and will be the
responsibility of the Participants or the Indirect Participants and will not be
the responsibility of DTC, the Property Trustee or the Trust. Neither the Trust
nor the Property Trustee will be liable for any delay by DTC or any of its
Participants in identifying the beneficial owners of the Capital Securities,
and the Trust and the Property Trustee may conclusively rely on and will be
protected in relying on instructions from DTC or its nominee for all purposes.
Interests in the Global Capital Securities will trade in DTC's Same-Day
Funds Settlement System and secondary market trading activity in such interests
will therefore settle in immediately available funds, subject in all cases to
the rules and procedures of DTC and its Participants. Transfers between
Participants in DTC will be effected in accordance with DTC's procedures, and
will be settled in same-day funds.
DTC has advised the Trust and the Corporation that it will take any action
permitted to be taken by a holder of Capital Securities (including, without
limitation, the presentation of Capital Securities for exchange as described
below) only at the direction of one or more Participants to whose account with
DTC interests in the Global Capital Securities are credited and only in respect
of such portion of the aggregate Liquidation Amount of the Capital Securities
represented by the Global Capital Securities as to which such Participant or
Participants has or have given such direction. However, if there is an Event of
Default under the Declaration, DTC reserves the right to exchange the Global
Capital Securities for legended Capital Securities in certificated form and to
distribute such Capital Securities to its Participants.
So long as DTC or its nominee is the registered owner of the Global Capital
Securities, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Capital Securities represented by the Global
Capital Security for all purposes under the Declaration.
Neither DTC nor its nominee will consent or vote with respect to the Capital
Securities. Under its usual procedures, DTC would mail an omnibus proxy to the
Trust as soon as possible after the record date. The omnibus proxy assigns the
consenting or voting rights of DTC or its nominee to those Participants to
whose accounts the Capital Securities are credited on the record date
(identified in a listing attached to the omnibus proxy).
The information in this section concerning DTC and its book-entry system has
been obtained from sources that the Trust and the Corporation believe to be
reliable, but neither the Trust nor the Corporation takes responsibility for
the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interest in the Global Capital Securities among Participants in DTC, it is
under no obligation to perform or to continue to perform such procedures, and
such procedures may be discontinued at any time. Neither the Trust nor the
Property Trustee will
B-45
have any responsibility for the performance by DTC or its Participants or
Indirect Participants of their respective obligations under the rules and
procedures governing their operations.
Exchange of Book-Entry Capital Securities for Certificated Capital Securities
A Global Capital Security is exchangeable for Capital Securities in
registered certificated form if (i) DTC (x) notifies the Trust that it is no
longer willing or able to properly discharge its responsibilities with respect
to the Capital Securities and the Corporation is unable to locate a qualified
successor, or (y) has ceased to be a "clearing agency" registered under the
Exchange Act; (ii) the Trust at its sole option elects to terminate the book-
entry system through DTC; or (iii) there shall have occurred and be continuing
a Debenture Event of Default. In addition, beneficial interests in a Global
Capital Security may be exchanged by or on behalf of DTC for certificated
Capital Securities upon request by DTC, but only upon at least 20 days prior
written notice given to the Property Trustee in accordance with DTC's customary
procedures. In all cases, certificated Capital Securities delivered in exchange
for any Global Capital Security or beneficial interests therein will be
registered in the names, and issued in any approved denominations, requested by
or on behalf of DTC (in accordance with its customary procedures).
Payment and Paying Agency
Payments in respect of the Capital Securities held in global form shall be
made to DTC, which shall credit the relevant accounts at DTC on the applicable
Distribution Dates or in respect of the Capital Securities that are not held by
DTC, such payments shall be made by check mailed to the address of the holder
entitled thereto as such address shall appear on the register. The paying agent
(the "Paying Agent") initially is 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, the Administrative
Trustees 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.
The Bank of New York has informed the Trust that so long as it serves as
paying agent for the Capital Securities, it anticipates that information
regarding Distributions on the Capital Securities, including payment date,
record date and redemption information, will be made available through The Bank
of New York at 101 Barclay Street, New York, New York 10286, Attn: Corporate
Trust Department.
Restrictions on Transfer
The New Capital Securities will be issued, and may be transferred only, in
blocks having a liquidation amount (the "Liquidation Amount") of $100,000 (100
Capital Securities) and integral multiples of $1,000 in excess thereof. Any
attempted transfer, sale or other disposition of New Capital Securities in a
block having a Liquidation Amount of less than $100,000 shall be deemed to be
void and of no legal effect whatsoever. Any such transferee shall be deemed not
to be the holder of such New Capital Securities for any purpose, including but
not limited to the receipt of Distributions on such New Capital Securities, and
such transferee shall be deemed to have no interest whatsoever in such New
Capital Securities.
Registrar and Transfer Agent
The Property Trustee is acting as the registrar and transfer agent for the
Capital Securities.
Registration of transfers of the Capital Securities will be effected without
charge by or on behalf of the Trust, but upon payment of any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange. The Trust will not be required to register or cause to be registered
the transfer or exchange of the Capital Securities after they have been called
for redemption.
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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 the Declaration and, during the existence of an 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 Declaration at the request of any holder of Trust
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
Declaration or is unsure of the application of any provision of the
Declaration, and the matter is not one on which holders of the Capital
Securities or the Common Securities are entitled under the 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 Trust in such a way that the Trust will not 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 or as other than a grantor trust
for United States federal income tax purposes, and so that the Junior
Subordinated Debt Securities 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 the Trust or
the 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 Trust Securities.
Holders of the Trust Securities have no preemptive or similar rights.
The Trust may not borrow money or issue debt or mortgage or pledge any of
its assets.
DESCRIPTION OF NEW JUNIOR SUBORDINATED DEBT SECURITIES
The Old Junior Subordinated Debt Securities were issued, and the New Junior
Subordinated Debt Securities will be issued, as a separate series under the
Indenture. The Indenture has been qualified under the Trust Indenture Act. This
summary of certain terms and provisions of the Junior Subordinated Debt
Securities and the Indenture does not purport to be complete, and where
reference is made to particular provisions of the Indenture, such provisions,
including the definitions of certain terms, some of which are not otherwise
defined herein, are qualified in their entirety by reference to all of the
provisions of the Indenture and those terms made a part of the Indenture by the
Trust Indenture Act. The Indenture is attached as an exhibit to the
Registration Statement.
General
Concurrently with the issuance of the Old Capital Securities and the Common
Securities, the Trust invested the proceeds thereof in the Junior Subordinated
Debt Securities issued by the Corporation. The Junior Subordinated Debt
Securities bear interest at a variable annual rate equal to LIBOR plus 1.00%,
payable quarterly in arrears on the 15th day of January, April, July and
October of each year (each, an "Interest Payment Date"), commencing July 15,
1997, to the person in whose name each Junior Subordinated Debt Security is
registered, subject to certain exceptions, at the close of business on the
Business Day next preceding such Interest
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Payment Date. It is anticipated that, until the liquidation of the Trust, each
Junior Subordinated Debt Security 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 a year of twelve 30-day months. In the event
that any date on which interest is payable on the Junior Subordinated Debt
Securities is not a Business Day, then payment of the interest payable on such
date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay), with the
same force and effect as if made on the date such payment was originally
payable. Accrued interest that is not paid on the applicable Interest Payment
Date will bear additional interest on the amount thereof (to the extent
permitted by law) at a variable annual rate equal to LIBOR plus 1.00%,
compounded quarterly from the relevant Interest Payment Date. The term
"interest" as used herein shall include quarterly payments, interest on
quarterly interest payments not paid on the applicable Interest Payment Date
and Additional Sums, as applicable. Unless previously redeemed or repurchased,
the Junior Subordinated Debt Securities will mature on April 15, 2027. See
"--Optional Redemption."
Pursuant to the Exchange Offer, the Corporation will exchange the Old Junior
Subordinated Debt Securities for the New Junior Subordinated Debt Securities as
soon as practicable after the date hereof. No Old Junior Subordinated Debt
Securities will remain outstanding after such exchange. The Junior Subordinated
Debt Securities are unsecured and rank junior and be subordinate in right of
payment to all Senior Debt. Because the Corporation is a bank holding company,
the right of the Corporation to participate in any distribution of assets of
any subsidiary, including the Bank, 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 such subsidiary, except to the extent that the
Corporation may itself be recognized as a creditor of such subsidiary.
Accordingly, the Junior Subordinated Debt Securities will be subordinated to
all Senior Debt and effectively subordinated to all existing and future
liabilities of the Corporation's subsidiaries, and holders of Junior
Subordinated Debt Securities should look only to the assets of the Corporation
for payments on the Junior Subordinated Debt Securities. The Indenture does not
limit the incurrence or issuance of other secured or unsecured debt of the
Corporation, including Senior Debt, whether under the Indenture or any existing
or other indenture that the Corporation may enter into in the future or
otherwise. See "--Subordination."
The Junior Subordinated Debt Securities rank pari passu with all Other
Debentures issued under the Indenture and are unsecured and subordinate and
junior in right of payment to the extent and in the manner set forth in the
Indenture to all Senior Debt of the Corporation. See "--Subordination." As a
holding company, the Corporation conducts its operations principally through
its subsidiaries and, therefore, its principal source of cash, other than its
investing and financing activities, is receipt of dividends from the Bank. The
Corporation is a legal entity separate and distinct from the Bank and its other
subsidiaries. See "Risk Factors--Ranking of Obligations Under the Guarantee and
the Junior Subordinated Debt Securities" and "--Status of the Corporation as a
Bank Holding Company." The Bank is 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 Bank unless the loans are secured by
various types of collateral. In addition, payment of dividends to the
Corporation by the Bank 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. The Other 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.
Denominations, Registration and Transfer
The Junior Subordinated Debt Securities will be represented by one or more
global certificates registered in the name of Cede & Co. as the nominee of DTC
if, and only if, distributed to the holders of the Trust Securities. Until such
time, the Junior Subordinated Debt Securities will be held in the name of the
Property Trustee in trust for the benefit of the holders of the Trust
Securities. Should the Junior Subordinated Debt Securities be distributed to
holders of the Trust Securities, beneficial interests in the Junior
Subordinated Debt Securities will
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be shown on, and transfers thereof will be effected only through, records
maintained by Participants in DTC. Except as described below, Junior
Subordinated Debt Securities in certificated form will not be issued in
exchange for the global certificates.
A global security shall be exchangeable for Junior Subordinated Debt
Securities registered in the names of persons other than Cede & Co. only if (i)
DTC notifies the Corporation that it is unwilling or unable to continue as a
depositary for such global security and no successor depositary shall have been
appointed, or if at any time DTC ceases to be a "clearing agency" registered
under the Exchange Act, at a time when DTC is required to be so registered to
act as such depositary, (ii) the Corporation in its sole discretion determines
that such global security shall be so exchangeable, or (iii) there shall have
occurred and be continuing a Debenture Event of Default. Any global security
that is exchangeable pursuant to the preceding sentence shall be exchangeable
for certificates registered in such names as DTC shall direct. It is expected
that such instructions will be based upon directions received by DTC from its
Participants with respect to ownership of beneficial interests in such global
security. In the event that Junior Subordinated Debt Securities are issued in
certificated form, such Junior Subordinated Debt Securities will be in minimum
blocks having an aggregate principal amount of $100,000 and integral multiples
of $1,000 in excess thereof and may be transferred or exchanged only in such
minimum denominations and in the manner and at the offices described below.
Payments on Junior Subordinated Debt Securities represented by a global
security will be made to DTC, as the depositary for the Junior Subordinated
Debt Securities. In the event Junior Subordinated Debt Securities are issued in
certificated form, principal and interest will be payable, the transfer of the
Junior Subordinated Debt Securities will be registrable, and Junior
Subordinated Debt Securities will be exchangeable for Junior Subordinated Debt
Securities of other denominations of a like aggregate principal amount, at the
corporate office of the Debenture Trustee in New York, New York, or at the
offices of any paying agent or transfer agent appointed by the Corporation,
provided that payment of interest may be made at the option of the Corporation
by check mailed to the address of the persons entitled thereto or by wire
transfer.
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 "Description of New Capital Securities--Form,
Denomination, Book-Entry Procedures and Transfer." If the Junior Subordinated
Debt Securities are distributed to the holders of the Trust Securities upon the
termination of the Trust, the form, denomination, book-entry and transfer
procedures with respect to the Capital Securities as described under
"Description of New Capital Securities--Form, Denomination, Book-Entry
Procedures and Transfer," shall apply to the Junior Subordinated Debt
Securities mutatis mutandis.
Payment and Paying Agents
Payment of principal of and any interest on Junior Subordinated Debt
Securities 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, except that at the option of the
Corporation payment of any interest may be made (except in the case of Junior
Subordinated Debt Securities in global form), (i) by check mailed to the
address of the person entitled thereto as such address shall appear in the
register for Junior Subordinated Debt Securities or (ii) by wire transfer to an
account specified by the person entitled thereto as specified in such register,
provided that proper transfer instructions have been received by the relevant
Record Date. Payment of any interest on any Junior Subordinated Debt Security
will be made to the person in whose name such Junior Subordinated Debt Security
is registered at the close of business on the 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 the Junior Subordinated Debt
Securities.
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 or
interest on any Junior Subordinated Debt Security and remaining
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unclaimed for two years after such principal 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 Debt Security shall thereafter look,
as a general unsecured creditor, only to the Corporation for payment thereof.
Option to Extend Interest Payment Date
So long as no Debenture Event of Default has occurred and is continuing, the
Corporation has the right under the Indenture to defer the payment of interest
on the Junior Subordinated Debt Securities 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 of the Junior Subordinated Debt Securities. At the end of an
Extension Period, the Corporation must pay all interest then accrued and unpaid
on the Junior Subordinated Debt Securities (together with interest thereon
accrued at a variable annual rate equal to LIBOR plus 1.00%, compounded
quarterly from the relevant Interest Payment Date, to the extent permitted by
applicable law). During an Extension Period and for so long as the Junior
Subordinated Debt Securities remain outstanding, interest will continue to
accrue and holders of Junior Subordinated Debt Securities (and holders of the
Capital Securities while Capital Securities are outstanding) will be required
to accrue interest income (in the form of OID) for United States federal income
tax purposes. See "Certain Federal Income Tax Consequences--United States
Holders--Interest Income and Original Issue Discount" in the accompanying
prospectus.
During any 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
(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 (including any Other Debentures) that rank
pari passu with or junior in interest to the Junior Subordinated Debt
Securities or (iii) make any guarantee payments with respect to any guarantee
by the Corporation of the debt securities of any subsidiary of the Corporation
(including any Other Guarantees) if such guarantee ranks pari passu with or
junior in interest to the Junior Subordinated Debt Securities (other than (a)
dividends or distributions in 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) purchases or acquisitions of shares of
the Corporation's Common Stock in connection with the satisfaction by the
Corporation of its obligations under any employee benefit plan or any other
contractual obligation of the Corporation (other than a contractual obligation
ranking pari passu with or junior to the Junior Subordinated Debt Securities),
(e) 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 or (f) 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). Prior to the termination of any
Extension Period the Corporation may further extend such Extension Period,
provided, however, that such extension does not cause such Extension Period to
exceed 20 consecutive quarterly periods or to extend beyond the Stated Maturity
of the Junior Subordinated Debt Securities. Upon the termination of any
Extension Period and the payment of all interest then accrued and unpaid on the
Junior Subordinated Debt Securities (together with interest thereon accrued at
a variable annual rate equal to LIBOR plus 1.00%, compounded quarterly, to the
extent permitted by applicable law), and subject to the foregoing limitations,
the Corporation may elect to begin a new Extension Period. 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 three 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 or (ii) the date the
Administrative Trustees are required to give notice to any automated quotation
system or to holders of Capital Securities of the record date or the date such
Distributions are payable, but in any event not less than three 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
B-50
Capital Securities. There is no limitation on the number of times that the
Corporation may elect to begin an Extension Period.
Optional Redemption
The Corporation may redeem the Junior Subordinated Debt Securities, in whole
or in part, at any time and from time to time, on or after April 15, 2007 upon
not less than 30 nor more than 60 days' notice, at par plus accrued and unpaid
interest to the redemption date. In addition, the Junior Subordinated Debt
Securities may be redeemed by the Corporation at any time, in whole but not in
part, in certain circumstances described herein upon the occurrence and
continuation of a Tax Event or a Capital Treatment Event, upon not less than 30
nor more than 60 days' notice, within 90 days following the occurrence of such
Tax Event or Capital Treatment Event, as the case may be, at par, plus any
accrued and unpaid interest thereon to the redemption date. In each case, the
right of the Corporation to redeem the Junior Subordinated Debt Securities is
subject to the receipt by the Corporation of prior approval from the Federal
Reserve, if then required under applicable capital guidelines or policies of
the Federal Reserve. See "Description of New Capital Securities--Mandatory
Redemption."
Interest
The Junior Subordinated Debt Securities bear interest at a variable annual
rate equal to LIBOR plus 1.00%, from the original date of issuance of the Old
Junior Subordinated Debt Securities, payable quarterly in arrears on the 15th
day of January, April, July and October of each year, commencing July 15, 1997,
to the person in whose name such Junior Subordinated Debt Security is
registered, subject to certain exceptions, at the close of business on the
Business Day next preceding such Interest Payment Date. The term "interest" as
used herein, as such term relates to the Junior Subordinated Debt Securities,
includes any compounded interest or Additional Sums or any Additional
Distributions payable unless otherwise stated. In the event the Junior
Subordinated Debt Securities are not held solely in book-entry only form, the
Corporation will select relevant record dates, which shall be 15 days prior to
the relevant Interest Payment Date.
The Bank of New York, 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):
(i)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;
(ii)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 .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;
(iii)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 .00001%) of
such quotations;
(iv)if fewer than two such quotations are provided as requested in clause
(iii) 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 as of 11:00 a.m. (London
B-51
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 .00001%) of such quotations;
and
(v)if fewer than two such quotations are provided as requested in clause
(iv) above, LIBOR will be LIBOR determined with respect to the interest
period immediately preceding such current interest period.
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.
LIBOR for the initial interest period (commencing upon the original issuance
of the Old Junior Subordinated Debt Securities) shall be determined as provided
above.
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 office of Corporate
Trust Administration at the Calculation Agent at The Bank of New York, 101
Barclay Street, New York, New York 10286.
The amount of interest payable for any period will be computed on the basis
of the actual number of days elapsed in a year of twelve 30-day months. In the
event that any date on which interest is payable on the Junior Subordinated
Debt Securities is not a Business Day, then payment of the interest payable on
such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay) with the
same force and effect as if made on such date.
Additional Sums
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 Debt Securities such amounts as
shall be required so that the Distributions payable by the Trust shall not be
reduced as a result of any such additional taxes, duties or other governmental
charges. The Corporation has covenanted in the Indenture that, if and so long
as (i) the Trust is the holder of all Junior Subordinated Debt Securities and
(ii) a Tax Event in respect of the Trust has occurred and is continuing, it
will pay Additional Sums (as defined under "Description of New Capital
Securities--Mandatory Redemption") in respect of such Trust Securities to the
Trust.
Restrictions On Certain Payments
The Corporation has also covenanted 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
(which includes common and preferred 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 Debentures) that rank pari
passu with or junior in interest to the Junior Subordinated Debt Securities or
(iii) make any guarantee payments with respect to any guarantee by the
Corporation of the debt securities of any subsidiary of the Corporation
(including under Other Guarantees) if such guarantee ranks pari passu with or
junior in interest to the Junior Subordinated Debt Securities (other than (a)
dividends or distributions in 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) purchases or acquisitions of shares of
the Corporation's Common Stock in connection with the satisfaction by the
Corporation of its obligations under any
B-52
employee benefit plan or any other contractual obligation of the Corporation
(other than a contractual obligation ranking pari passu with or junior in
interest to the Junior Subordinated Debt Securities), (e) 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 or (f) 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), if at such time (i) there shall have occurred a
Debenture Event of Default, (ii) the Corporation shall be in default with
respect to its payment of any obligations under the Guarantee or (iii) the
Corporation shall have given notice of its election of an Extension Period as
provided in the Indenture and shall not have rescinded such notice, or such
Extension Period, or any extension thereof, shall be continuing.
Modification of Indenture
From time to time the Corporation and the Debenture Trustee may, without the
consent of the holders of Junior Subordinated Debt Securities, 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 Junior
Subordinated Debt Securities or the holders of the Capital Securities so long
as they remain outstanding) and qualifying, or maintaining the qualification
of, the Indenture under the Trust Indenture Act. The Indenture contains
provisions permitting the Corporation and the Debenture Trustee, with the
consent of the holders of not less than a majority in principal amount of
outstanding Junior Subordinated Debt Securities, to modify the Indenture in a
manner affecting the rights of the holders of Junior Subordinated Debt
Securities; provided, however, that no such modification may, without the
consent of the holder of each outstanding Junior Subordinated Debt Security so
affected, change the Stated Maturity, or reduce the principal amount of the
Junior Subordinated Debt Securities, or reduce the rate or extend the time of
payment of interest thereon or reduce the percentage of principal amount of
Junior Subordinated Debt Securities, or have certain other effects as set forth
in the Indenture.
In addition, the Corporation and the Debenture Trustee may execute, without
the consent of any holder of Junior Subordinated Debt Securities, any
supplemental Indenture for the purpose of creating any Other Debentures.
Debenture Events of Default
The Indenture provides that any one or more of the following described
events with respect to the Junior Subordinated Debt Securities that has
occurred and is continuing constitutes a "Debenture Event of Default":
(i)failure for 30 days to pay any interest on the Junior Subordinated Debt
Securities when due (subject to the deferral of any due date in the case
of an Extension Period);
(ii)failure to pay any principal on the Junior Subordinated Debt Securities
when due, whether at maturity, upon redemption, by declaration of
acceleration or otherwise;
(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 the holders of at least
25% in aggregate outstanding principal amount of the Junior Subordinated
Debt Securities;
(iv)certain events in bankruptcy, insolvency or reorganization of the
Corporation; or
(v)the voluntary or involuntary dissolution, winding-up or termination of
the Trust, except in connection with the distribution of the Junior
Subordinated Debt Securities to the holder 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 Declaration.
B-53
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debt Securities 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 the Junior Subordinated Debt
Securities may declare the principal due and payable immediately upon a
Debenture Event of Default and, should the Debenture Trustee or such holders of
Junior Subordinated Debt Securities fail to make such declaration, the holders
of at least 25% in aggregate Liquidation Amount of the Capital Securities shall
have such right. The holders of a majority in aggregate outstanding principal
amount of the Junior Subordinated Debt Securities may annul such declaration
and waive the default if the default (other than the non-payment of the
principal of the Junior Subordinated Debt Securities 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. Should the holders
of Junior Subordinated Debt Securities fail to annul such declaration and waive
such default, the holders of a majority in aggregate Liquidation Amount of the
Capital Securities shall have such right.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debt Securities affected thereby may, on behalf of the
holders of all the Junior Subordinated Debt Securities, waive any past default,
except a default in the payment of principal of 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) on the Junior Subordinated Debt Securities 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 Debt Security. Should the holders of such Junior
Subordinated Debt Securities fail to annul such declaration and waive such
default, the holders of a majority in aggregate Liquidation Amount of the
Capital Securities shall have such right. The Corporation is required to file
annually with the Debenture Trustee a certificate as to whether or not the
Corporation is in compliance with all the conditions and covenants applicable
to it under the Indenture.
In case a Debenture Event of Default shall occur and be continuing, the
Property Trustee will have the right to declare the principal of and the
interest on the Junior Subordinated Debt Securities, and any other amounts
payable under the Indenture, to be forthwith due and payable and to enforce its
other rights as a creditor with respect to the Junior Subordinated Debt
Securities.
Enforcement of Certain Rights by Holders of Capital Securities
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Corporation to pay interest or
principal on the Junior Subordinated Debt Securities on the date such interest
or principal is otherwise payable, a holder of Capital Securities may institute
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 Capital Securities. If the right to bring a Direct
Action is removed following the Exchange Offer, the Trust may become subject to
the reporting obligations under the Exchange Act. 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 interest on the Junior Subordinated Debt Securities, 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.
The holders of the Capital 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 Debt Securities unless there shall
have been an Event of Default under the Declaration. See "Description of New
Capital Securities--Events of Default; Notice."
B-54
Consolidation, Merger, Sale of Assets and Other Transactions
The Indenture provides that the Corporation shall not consolidate with or
merge with or 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 with or into the Corporation or convey, transfer or
lease its properties and assets substantially as an entirety to the
Corporation, unless (i) in case the Corporation consolidates with or merges
with or 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 Debt Securities issued under the Indenture; (ii)
immediately after giving effect thereto, no Debenture Event of Default, and no
event which, after notice or lapse of time or both, would become a Debenture
Event of Default, shall have occurred and be continuing; (iii) if at the time
any Capital Securities are outstanding, such transaction is permitted under the
Declaration and the Guarantee and does not give rise to any breach or violation
of the Declaration or the Guarantee; and (iv) certain other conditions as
prescribed in the Indenture are met.
The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debt Securities protection in the event of a highly leveraged or
other transaction involving the Corporation that may adversely affect holders
of the Junior Subordinated Debt Securities.
Subordination
In the Indenture, the Corporation has covenanted and agreed that any Junior
Subordinated Debt Securities issued thereunder shall be subordinate and junior
in right of payment to all Senior Debt to the extent provided in the Indenture.
Upon any payment or distribution of assets to creditors upon any liquidation,
dissolution, winding-up, reorganization, assignment for the benefit of
creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Corporation, the holders of Senior Debt will first
be entitled to receive payment in full of principal of and interest, if any, on
such Senior Debt before the holders of Junior Subordinated Debt Securities, or
the Property Trustee on behalf of the holders, will be entitled to receive or
retain any payment or distribution in respect thereof.
In the event of the acceleration of the maturity of the Junior Subordinated
Debt Securities, the holders of all Senior Debt outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon (including any amounts due upon acceleration) before the holders of
the Junior Subordinated Debt Securities will be entitled to receive or retain
any payment in respect of the principal of or interest, if any, on the Junior
Subordinated Debt Securities.
In the event that the Corporation shall default in the payment of any
principal of or interest, if any, on any Senior Debt when the same becomes due
and payable, whether at maturity or at a date fixed for prepayment or by
declaration of acceleration or otherwise, then, unless and until such default
shall have been cured or waived or shall have ceased to exist or all Senior
Debt shall have been paid, no direct or indirect payment (in cash, property,
securities, by set-off or otherwise) shall be made or agreed to be made for
principal or interest, if any, on the Junior Subordinated Debt Securities, or
in respect of any redemption, repayment, retirement, purchase or other
acquisition of any of the Junior Subordinated Debt Securities.
"Senior Debt" means (a) the principal of, and premium, if any, and interest
on all indebtedness of the Corporation for money borrowed, whether outstanding
on the date of execution of the Indenture or thereafter created, assumed or
incurred, (b) all obligations to make payment pursuant to the terms of
financial instruments, such as (i) securities contracts and foreign currency
exchange contracts, (ii) derivative instruments, such as swap agreements
(including interest rate and foreign exchange rate swap agreements), cap
agreements, floor agreements, collar agreements, interest rate agreements,
foreign exchange agreements, options, commodity
B-55
futures contracts and commodity options contracts, and (iii) similar financial
instruments; except, in the case of both (a) and (b) above, such indebtedness
and obligations that are expressly stated to rank junior in right of payment
to, or pari passu in right of payment with, the Junior Subordinated Debt
Securities, (c) and indebtedness or obligations of others of the kind described
in both (a) and (b) above for the payment of which the Corporation is
responsible or liable as guarantor or otherwise, and (d) any deferrals,
renewals or extensions of any such Senior Debt; provided, however, that Senior
Debt shall not be deemed to include (i) any debt of the Corporation which, when
incurred and without respect to any election under Section 1111(b) of the
United States Bankruptcy Code of 1978, was without recourse to the Corporation,
(ii) any debt of the Corporation to any of its subsidiaries, (iii) debt to any
employee of the Corporation, (iv) debt which by its terms is subordinated to
trade accounts payable or accrued liabilities arising in the ordinary course of
business to the extent that payments made to the holders of such debt by the
holders of the Junior Subordinated Debt Securities as a result of the
subordination provisions of the Indenture would be greater than such payments
otherwise would have been as a result of any obligation of such holders of such
debt to pay amounts over to the obligees on such trade accounts payable or
accrued liabilities arising in the ordinary course of business as a result of
subordination provisions to which such debt is subject, (v) trade accounts
payable or accrued liabilities arising in the ordinary course of business and
(vi) any other debt securities issued pursuant to the Indenture.
The Indenture places no limitation on the amount of Senior Debt that may be
incurred by the Corporation. The Corporation expects from time to time to incur
additional indebtedness constituting Senior Debt. At June 30, 1997, the
aggregate outstanding Senior Debt of the Corporation was approximately $250
million on an unconsolidated basis. The Indenture also places no limitation on
the indebtedness of the Corporation's subsidiaries, which rank senior in right
of payment to the Junior Subordinated Debt Securities.
Restrictions on Transfer
The New Junior Subordinated Debt Securities will be issued, and may be
transferred only, in blocks having aggregate principal amounts of $100,000 and
integral multiples of $1,000 in excess thereof. Any transfer, sale or other
disposition of New Junior Subordinated Debt Securities in a block having a
principal amount of less than $100,000 shall be deemed to be void and of no
legal effect whatsoever. Any such transferee shall be deemed not to be the
holder of such New Junior Subordinated Debt Securities for any purpose,
including but not limited to the receipt of payments on such New Junior
Subordinated Debt Securities, and such transferee shall be deemed to have no
interest whatsoever in such New Junior Subordinated Debt Securities.
Governing Law
The Indenture and the Junior Subordinated Debt Securities are governed by
and construed in accordance with the laws of the State of New York.
Information Concerning the Debenture Trustee
The Debenture Trustee has and is 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 Debt Securities, 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.
B-56
DESCRIPTION OF NEW GUARANTEE
The Old Guarantee was entered into by the Corporation concurrently with the
issuance by the Trust of the Old Capital Securities and the Common Securities
for the benefit of the holders from time to time of such Old Capital Securities
and the Common Securities. As soon as practicable after the date hereof, the
Old Guarantee will be exchanged by the Corporation for the New Guarantee. The
New Guarantee Agreement has been qualified under the "Trust Indenture Act."
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 Guarantee Trustee will hold the
Guarantee for the benefit of the holders of the Trust Securities. The New
Guarantee Agreement is attached as an exhibit to the Registration Statement.
General
The Corporation has agreed (and under the New Guarantee will agree) to pay
in full on a subordinated basis, to the extent set forth herein, the Guarantee
Payments (as defined herein) to the holders of the Trust 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 Trust Securities, to the extent not paid by or on
behalf of the Trust (the "Guarantee Payments"), will be subject to the
Guarantee: (i) any accrued and unpaid Distributions required to be paid on the
Trust Securities, to the extent that the Trust has funds on hand available
therefor at such time, (ii) the Redemption Price with respect to Trust
Securities called for redemption, to the extent that the Trust has funds on
hand available therefor at such time, and (iii) upon a voluntary or involuntary
dissolution, winding up or liquidation of the Trust (other than in connection
with the distribution of Junior Subordinated Debt Securities to the holders of
the Trust Securities or the redemption of all of the Capital Securities) the
lesser of (a) the Liquidation Distribution, to the extent the Trust has funds
available therefor and (b) the amount of assets of the Trust remaining
available for distribution to holders of the Trust Securities upon liquidation
of the Trust after satisfaction of liabilities to creditors of the Trust as
required by applicable law. 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 Trust Securities or by causing the Trust to
pay such amounts to such holders.
The Guarantee is an irrevocable guarantee on a subordinated basis of the
Trust's obligations under the Trust Securities, although it will apply only to
the extent that the 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 Junior Subordinated Debt Securities held by the Trust, the
Trust will not be able to pay Distributions on the Capital Securities and will
not have funds legally available therefor.
The Guarantee ranks subordinate and junior in right of payment to all Senior
Debt. See "--Status of the Guarantee." As a holding company, the Corporation
conducts its operations principally through its subsidiaries and, therefore,
its principal source of cash, other than its investing and financing
activities, is receipt of dividends from the Bank. However, there are legal
limitations on the source and amount of dividends that a national bank such as
the Bank is permitted to pay. A national bank may pay dividends only to the
extent that retained net profits (including the portion transferred to surplus)
exceed bad debts (as defined by regulation). Moreover, unless a national bank's
surplus fund equals its common capital, dividends may be paid only after 10
percent of its net profits (as defined by regulation) for the specified
preceding period have been transferred to the bank's surplus fund. In addition,
prior approval of the OCC is required if the total of all dividends declared by
a national bank in any calendar year will exceed the sum of that bank's net
profits for that year and its retained net profits for the preceding two
calendar years, less any required transfers to either surplus or any fund for
retirement of any preferred stock. At June 30, 1997, the Bank could have paid
approximately $82.4 million in dividends to the Corporation without prior OCC
approval. The payment of dividends by the Bank may also be affected by other
factors, such as requirements for the maintenance of adequate capital. In
addition, the OCC is authorized to determine, under certain circumstances
relating to the financial condition of a national bank, whether the
B-57
payment of dividends would be an unsafe or unsound banking practice and to
prohibit payment thereof. See "Central Fidelity." The Guarantee does not limit
the incurrence or issuance of other secured or unsecured debt of the
Corporation, including Senior Debt, whether under the Indenture, any other
indenture that the Corporation may enter into in the future or otherwise.
Taken together, the Corporation's obligations under the Guarantee, the
Declaration, the Junior Subordinated Debt Securities and the Indenture,
including the Corporation's obligation to pay the costs, expenses and other
liabilities of the Trust (other than the Trust's obligations to the holders of
the Trust Securities under the Trust Securities), provide, in the aggregate, a
full, irrevocable and unconditional guarantee of all of the Trust's obligations
under the Capital 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 Capital Securities. See "Relationship Among the
Capital Securities, the Junior Subordinated Debt Securities and the Guarantee."
Status of the Guarantee
The Guarantee constitutes an unsecured obligation of the Corporation and
ranks subordinate and junior in right of payment to all Senior Debt in the same
manner as Junior Subordinated Debt Securities.
The Guarantee ranks pari passu with all Other Guarantees issued by the
Corporation. The Guarantee constitutes 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). The Guarantee is held for the benefit of the holders of the Trust
Securities. The 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 Trust Securities of the Junior Subordinated
Debt Securities. The Guarantee does not place a limitation on the amount of
additional Senior Debt that may be incurred by the Corporation. The Corporation
expects from time to time to incur additional indebtedness constituting Senior
Debt.
Amendments and Assignment
Except with respect to any changes that do not materially adversely affect
the rights of holders of the Trust Securities (in which case no vote will be
required), the Guarantee may not be amended without the prior approval of the
holders of not less than a majority of the aggregate Liquidation Amount of such
outstanding Capital Securities. The manner of obtaining any such approval will
be as set forth under "Description of New Capital Securities--Voting Rights;
Amendment of the Declaration." All guarantees and agreements contained in the
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Corporation and shall inure to the benefit of the
holders of the Capital Securities then outstanding.
Events of Default
An event of default under the Guarantee will occur upon the failure of the
Corporation to perform any of its payment or other obligations thereunder;
provided, however, that except with respect to a default in payment of any
Guarantee Payment, the Corporation shall have received notice of default and
shall not have cured such default within 60 days after receipt of such notice;
and provided, further, that no event of default under the Guarantee shall occur
unless an Event of Default under the Declaration or a Debenture Event of
Default shall have occurred. The holders of not less than a majority in
aggregate Liquidation Amount of the Capital Securities have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee in respect of the Guarantee or to direct the
exercise of any trust or power conferred upon the Guarantee Trustee under the
Guarantee.
B-58
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.
The Corporation, as guarantor, is required to file annually with the
Guarantee Trustee a certificate as to whether or not the Corporation is in
compliance with all the conditions and covenants applicable to it under the
Guarantee.
Information Concerning the Guarantee Trustee
The Guarantee Trustee, other than during the occurrence and continuance of a
default by the Corporation in performance of the Guarantee, undertakes to
perform only such duties as are specifically set forth in the Guarantee and,
after default with respect to the 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 the Guarantee at
the request of any holder of the Trust Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
Termination of the Guarantee
The Guarantee will terminate and be of no further force and effect upon full
payment of the Redemption Price of the Trust Securities, upon full payment of
the amounts payable upon liquidation of the Trust or upon distribution of
Junior Subordinated Debt Securities to the holders of the Trust Securities. The
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of the Trust Securities must restore payment of
any sums paid under the Trust Securities or the Guarantee.
Governing Law
The Old Guarantee is and the New Guarantee will be governed by and construed
in accordance with the laws of the State of New York.
DESCRIPTION OF OLD SECURITIES
The terms of the Old Securities are identical in all material respects to
the New Securities, except that (i) the Old Securities have not been registered
under the Securities Act, are subject to certain restrictions on transfer and
are entitled to certain rights under the Registration Agreement (which rights
will terminate upon consummation of the Exchange Offer, except under limited
circumstances); and (ii) the New Capital Securities will not provide for any
increase in the Distribution rate thereon. The Old Securities provided that, in
the event that the Exchange Offer is not consummated on or prior to November
19, 1997, or in certain limited circumstances, in the event a shelf
registration statement (the "Shelf Registration Statement") with respect to the
resale of the Old Capital Securities is not declared effective on or prior to
November 19, 1997, the interest rate borne by the Old Junior Subordinated Debt
Securities would increase by 0.25% per annum, and the Distribution rate borne
by the Old Capital Securities would increase by 0.25% per annum, each
commencing on November 20, 1997 until the time the Exchange Offer is
consummated or any required Shelf Registration Statement is declared effective,
as the case may be. The aggregate amount of such additional interest and
Distributions payable pursuant to the foregoing provisions will in no event
exceed 0.50% per annum. The holders of New Securities are not, and upon
consummation of the Exchange Offer the holders of Old Securities will not be,
entitled to any such additional interest or Distributions. Accordingly, holders
of the Old Capital Securities should review the information set forth under
"Risk Factors--Consequences of a Failure to Exchange Old Capital Securities"
and "Description of New Capital Securities."
B-59
RELATIONSHIP AMONG THE CAPITAL SECURITIES,
THE JUNIOR SUBORDINATED DEBT SECURITIES AND THE GUARANTEE
Full and Unconditional Guarantee
Payments of Distributions and other amounts due on the Capital 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 New Guarantee." Taken together, the
Corporation's obligations under the Junior Subordinated Debt Securities, the
Indenture, the Declaration and the Guarantee provide, in the aggregate, a full,
irrevocable and unconditional guarantee of payments of Distributions and other
amounts due on the Capital 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 Capital Securities. If and to the extent that the
Corporation does not make payments on the Junior Subordinated Debt Securities,
the Trust will not pay Distributions or other amounts due on the Capital
Securities. The Guarantee does not cover payment of Distributions when the
Trust does not have sufficient funds to pay such Distributions. In such event,
the remedy of a holder of Capital Securities is to institute a Direct Action.
The obligations of the Corporation under the Guarantee are subordinate and
junior in right of payment to all Senior Debt.
Sufficiency of Payments
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debt Securities, such payments will be sufficient to cover
Distributions and other payments due on the Capital Securities, primarily
because (i) the aggregate principal amount or Redemption Price of the Junior
Subordinated Debt Securities will be equal to the sum of the aggregate
Liquidation Amount or Redemption Price, as applicable, of the Trust Securities;
(ii) the interest rate and interest and other payment dates on the Junior
Subordinated Debt Securities will match the Distribution rate and Distribution
and other payment dates for the Capital Securities; (iii) the Corporation shall
pay for all costs, expenses and liabilities of the Trust except the Trust's
obligations to holders of Trust Securities under such Trust Securities; and
(iv) the Declaration further provides that the Trust will not engage in any
activity that is not consistent with the limited purposes thereof.
Notwithstanding anything to the contrary in the Indenture, the Corporation
has the right to set off any payment it is otherwise required to make
thereunder with and to the extent the Corporation has theretofore made, or is
concurrently on the date of such payment making, any payment under the
Guarantee used to satisfy the related payment of indebtedness under the
Indenture.
Enforcement Rights of Holders of Capital Securities
A holder of any Capital Security may institute a legal proceeding directly
against the Corporation to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Guarantee Trustee, the Trust or any
other person or entity.
A default or event of default under any Senior Debt would not constitute a
default or Event of Default under the Declaration. However, in the event of
payment defaults under, or acceleration of, Senior Debt, the subordination
provisions of the Indenture provide that no payments may be made in respect of
the Junior Subordinated Debt Securities until such Senior Debt has been paid in
full or any payment default thereunder has been cured or waived. Failure to
make required payments on Junior Subordinated Debt Securities would constitute
an Event of Default under the Declaration.
B-60
Limited Purpose of the Trust
The Capital Securities evidence a beneficial interest in the Trust, and the
Trust exists for the sole purpose of issuing the Capital Securities and Common
Securities, investing the proceeds of the Trust Securities in Junior
Subordinated Debt Securities and engaging in other activities necessary or
incidental thereto.
Rights Upon Termination
Upon any voluntary or involuntary termination, winding-up or liquidation of
the Trust involving the liquidation of the Junior Subordinated Debt Securities,
after satisfaction of the liabilities of creditors of the Trust as required by
applicable law, the holders of the Trust Securities will be entitled to
receive, out of assets held by the Trust, the Liquidation Distribution in cash.
See "Description of New Capital Securities--Liquidation of the Trust and
Distribution of Junior Subordinated Debt Securities." Upon any voluntary or
involuntary liquidation or bankruptcy of the Corporation, the Property Trustee,
as holder of the Junior Subordinated Debt Securities, would be a subordinated
creditor of the Corporation, subordinated in right of payment to all Senior
Debt as set forth in the Indenture, but entitled to receive payment in full of
principal and interest, before any stockholders of the Corporation receive
payments or distributions. Since the Corporation is the guarantor under the
Guarantee and has agreed to pay for all costs, expenses and liabilities of the
Trust (other than the Trust's obligations to the holders of its Trust
Securities), the positions of a holder of Capital Securities and a holder of
Junior Subordinated Debt Securities 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.
B-61
CERTAIN ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing or other employee benefit plan
(a "Plan") subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), should consider the fiduciary standards of ERISA in the
context of the Plan's particular circumstances before authorizing an investment
in the Capital Securities. Accordingly, among other factors, the fiduciary
should consider whether the investment would satisfy the prudence and
diversification requirements of ERISA and would be consistent with the
documents and instruments governing the Plan.
Section 406 of ERISA and Section 4975 of the Code prohibit Plans, as well as
individual retirement accounts and Keogh plans subject to Section 4975 of the
Code (also "Plans"), from engaging in certain transactions involving "plan
assets" with persons who are "parties in interest" under ERISA or "disqualified
persons" under the Code ("Parties in Interest") with respect to such Plan. A
violation of these "prohibited transaction" rules may result in an excise tax
or other liabilities under ERISA and/or Section 4975 of the Code for such
persons, unless exemptive relief is available under an applicable statutory or
administrative exemption. Employee benefit plans that are governmental plans
(as defined in Section 3(32) of ERISA), certain church plans (as defined in
Section 3(33) of ERISA) and foreign plans (as described in Section 4(b)(4) of
ERISA) are not subject to the requirements of ERISA or Section 4975 of the
Code.
Under a regulation (the "Plan Assets Regulation") issued by the U.S.
Department of Labor (the "DOL"), the assets of the Trust would be deemed to be
"plan assets" of a Plan for purposes of ERISA and Section 4975 of the Code if
"plan assets" of the Plan were used to acquire an equity interest in the Trust
and no exception were applicable under the Plan Assets Regulation. An "equity
interest" is defined under the Plan Assets Regulation as any interest in an
entity other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features and
specifically includes a beneficial interest in a trust.
Pursuant to an exception contained in the Plan Assets Regulation, the assets
of the Trust would not be deemed to be "plan assets" of investing Plans if,
immediately after the most recent acquisition of any equity interest in the
Trust, less than 25% of the value of each class of equity interest in the Trust
were held by Plans, other employee benefit plans not subject to ERISA or
Section 4975 of the Code (such as governmental, church and foreign plans) and
entities holding assets deemed to be "plan assets" of any Plan (collectively,
"Benefit Plan Investors"), or if the New Capital Securities were
"publicly-offered securities" for purposes of the Plan Assets Regulation. No
assurance can be given by the Initial Purchaser that the value of the Capital
Securities held by Benefit Plan Investors will be less than 25% of the total
value of such Capital Securities at the completion of the initial offering or
thereafter, and no monitoring or other measures will be taken with respect to
the satisfaction of the conditions to this exception. Furthermore, it is not
anticipated that the New Capital Securities would be considered to be
"publicly-offered securities" under the Plan Assets Regulation. All of the
Common Securities are held by the Corporation.
Certain transactions involving the Trust could be deemed to constitute
direct or indirect prohibited transactions under ERISA and Section 4975 of the
Code with respect to a Plan if the Capital Securities were acquired with "plan
assets" of such Plan and assets of the Trust were deemed to be "plan assets" of
Plans investing in the Trust. For example, if the Corporation is a Party in
Interest with respect to an investing Plan (either directly or by reason of its
ownership of the Trust or of any of the Corporation's other subsidiaries),
extensions of credit between the Corporation and the Trust (as represented by
the Junior Subordinated Debt Securities and the Guarantee) would likely be
prohibited by Section 406(a)(1)(B) of ERISA and Section 4975(c)(1)(B) of the
Code, unless exemptive relief were available under an applicable administrative
exemption (see below).
The DOL has issued five prohibited transaction class exemptions ("PTCEs")
that may provide exemptive relief for direct or indirect prohibited
transactions resulting from the purchase or holding of the Capital Securities,
assuming that assets of the Trust were deemed to be "plan assets" of Plans
investing in the Trust (see
B-62
above). Those class exemptions are PTCE 96-23 (for certain transactions
determined by in-house asset managers), PTCE 95-60 (for certain transactions
involving insurance company general accounts), PTCE 91-38 (for certain
transactions involving bank collective investment funds), PTCE 90-1 (for
certain transactions involving insurance company pooled separate accounts) and
PTCE 84-14 (for certain transactions determined by independent qualified
professional asset managers).
Because the Capital Securities may be deemed to be equity interests in the
Trust for purposes of applying ERISA and Section 4975 of the Code, the Capital
Securities may not be purchased or held by any Plan, any entity whose
underlying assets include "plan assets" by reason of any Plan's investment in
the entity (a "Plan Asset Entity") or any person investing "plan assets" of any
Plan, unless such purchaser or holder is eligible for the exemptive relief
available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14. Any purchaser or
holder of the Capital Securities or any interest therein will be deemed to have
represented by its purchase and holding thereof that it either (a) is not a
Plan or a Plan Asset Entity and is not purchasing such securities on behalf of
or with "plan assets" of any Plan or (b) is eligible for the exemptive relief
available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 with respect to such
purchase or holding. Furthermore, to avoid certain prohibited transactions
under ERISA and the Code that could result under certain circumstances if the
Capital Securities are deemed to be such equity interests, each investing Plan,
by purchasing the Capital Securities, will be deemed to have directed the Trust
to invest in the Junior Subordinated Debt Securities and to have appointed the
Property Trustee.
Due to the complexity of these rules and the penalties that may be imposed
upon persons involved in non-exempt prohibited transactions, it is particularly
important that fiduciaries or other persons considering purchasing the Capital
Securities on behalf of or with "plan assets" of any Plan consult with their
counsel regarding the potential consequences if the assets of the Trust were
deemed to be "plan assets" and the availability of exemptive relief under PTCE
96-23, 95-60, 91-38, 90-1 or 84-14.
B-63
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following is a statement of the expenses (all of which are estimated
other than the SEC registration fee and the NASD fee), other than underwriting
discounts and commissions, to be incurred in connection with the distribution
of the securities registered under this registration statement.
Amount to
be paid
---------
Registration fee............................... $ 0
Printing expenses.............................. 100,000
Accounting fees................................ 15,000
Legal fees and expenses........................ 50,000
Blue sky and legal investment fees and expenses 4,000
--------
Total....................................... $169,000
========
Item 15. Indemnification of Directors and Officers.
Sections 55-8-50 through 55-8-58 of the revised North Carolina Business
Corporation Act (the "NCBC Act") contain specific provisions relating to
indemnification of directors and officers of North Carolina corporations. In
general, the statute provides that (i) a corporation must indemnify a director
or officer against reasonable expenses who is wholly successful in his defense
of a proceeding to which he is a party because of his status as such, unless
limited by the articles of incorporation, and (ii) a corporation may indemnify
a director or officer if he is not wholly successful in such defense, if it is
determined as provided in the statute that the director or officer meets a
certain standard of conduct, provided when a director or officer is liable to
the corporation or liable on the basis of receiving a personal benefit, the
corporation may not indemnify him. The statute also permits a director or
officer of a corporation who is a party to a proceeding to apply to the courts
for indemnification, unless the articles of incorporation provide otherwise,
and the court may order indemnification under certain circumstances set forth
in the statute. The statute further provides that a corporation may in its
articles of incorporation or bylaws or by contract or resolution provide
indemnification in addition to that provided by the statute, subject to certain
conditions set forth in the statute.
Wachovia's bylaws provide for the indemnification of Wachovia's directors
and executive officers by Wachovia against liabilities arising out of his
status as such, excluding any liability relating to activities which were at
the time taken known or believed by such person to be clearly in conflict with
the best interests of Wachovia. Wachovia's articles of incorporation provide
for the elimination of the personal liability of each director of Wachovia to
the fullest extent permitted by the provisions of the NCBC Act, as the same may
from time to time be in effect.
Wachovia maintains directors and officers liability insurance. In general,
the policy insures (i) Wachovia's directors and officers against loss by reason
of any of their wrongful acts, and/or (ii) Wachovia against loss arising from
claims against the directors and officers by reason of their wrongful acts, all
subject to the terms and conditions contained in the policy.
Under agreements which may be entered into by Wachovia, certain controlling
persons, directors and officers of Wachovia may be entitled to indemnification
by underwriters and agents who participate in the distribution of the Capital
Securities covered by the Registration Statement against certain liabilities,
including liabilities under the Securities Act.
II-1
The declaration of trust of Wachovia Capital Trust II provides that no
trustee, affiliate of any trustee or any officers, directors, stockholders,
members, partners, employees, representatives or agents of any trustee or any
employee or agent of Wachovia Capital Trust II or its affiliates, each referred
to as an indemnified person, shall be liable, responsible or accountable in
damages or otherwise to any employee or agent of Wachovia Capital Trust II or
its affiliates or any officers, directors, stockholders, employees,
representatives or agents of Wachovia, or its affiliates, or to any holders of
trust securities of Wachovia Capital Trust II for any loss, damage or claim
incurred by reason of any act or omission performed or omitted by such
indemnified person in good faith on behalf of Wachovia Capital Trust II and in
a manner such indemnified person reasonably believed to be within the scope of
the authority conferred on such indemnified person by the declaration of trust
or by law, except that an indemnified person shall be liable for any such loss,
damage or claim incurred by reason of such indemnified person's gross
negligence (or, in the case of the property trustee of Wachovia Capital Trust
II, negligence) or willful misconduct with respect to such acts or omissions.
The declaration of trust also provides that Wachovia shall indemnify and hold
harmless each indemnified person from and against any loss, liability, damage,
claim, or expense including taxes (other than taxes based on the income of such
indemnified person) incurred by such indemnified person without negligence or
bad faith on its part, arising out of or in connection with the acceptance or
administration of Wachovia Capital Trust II, including the costs and expenses
(including reasonable legal fees and expenses) of defending itself against or
investigating any claim or liability in connection with the exercise or
performance of any of its powers or duties under the declaration of trust. The
declaration of trust further provides that to the fullest extent permitted by
applicable law, expenses (including legal fees) incurred by an indemnified
person in defending any claim, demand, action, suit or proceeding or the final
disposition of such claim, demand, action, suit or proceeding shall, from time
to time, be advanced by Wachovia prior to the final disposition of such claim,
demand, action, suit or proceeding upon receipt by Wachovia of an undertaking
by or on behalf of the indemnified person to repay such amount if it shall be
determined that the indemnified person is not entitled to be indemnified
pursuant to the declaration of trust.
Under the amended and restated declaration of trust of Central Fidelity
Capital Trust I, to the extent that, at law or in equity, an administrative
trustee has duties (including fiduciary duties) and liabilities relating
thereto to Central Fidelity Capital Trust I or to the holders of the capital
securities, administrative trustee shall not be liable to Central Fidelity
Capital Trust I or to any holders of the capital securities for the amended and
restated declaration of trust, except that the administrative trustee will be
liable for any act or omission of gross negligence or willful misconduct. Under
the amended and restated declaration of trust of Central Fidelity Capital Trust
I, Wachovia, as depositor of Central Fidelity Capital Trust I, has agreed (i)
to indemnify and hold harmless each issuer trustee and any employee or agent of
Central Fidelity Capital Trust I or its affiliates from and against any loss,
damage, liability, tax, penalty, expense or claim of any kind or nature
whatsoever incurred by such person by reason of the creation, operation or
termination of Central Fidelity Capital Trust I or any act or omission
performed or omitted by such person in good faith on behalf of Central Fidelity
Capital Trust I and in a manner such person reasonably believes to be within
the scope of authority conferred on such person by the declaration of trust,
except that no person shall be entitled to be indemnified in respect of any
loss, damage or claim incurred by such person by reason of negligence or
willful misconduct with respect to such acts or omissions, and (ii) to advance
expenses (including legal fees) incurred by such person in defending any claim,
demand, action, suit or proceeding, from time to time, prior to the final
disposition of such claim, demand, action, suit or proceeding.
II-2
Item 16. Exhibits.
Exhibit
No. Description
----------- -----------
4(a)(i) --Certificate of Trust of Wachovia Capital Trust II (Incorporated by reference to Exhibit 4(a)(i)
to Legacy Wachovia's Registration Statement on Form S-3 (No. 333-19365)).
4(a)(ii) --Declaration of Trust of Wachovia Capital Trust II (Incorporated by reference to Exhibit 4(b)(ii)
to Legacy Wachovia's Registration Statement on Form S-3 (No. 333-19365)).
4(a)(iii) --Form of Amended and Restated Declaration of Trust to be used in connection with the issuance
of the Preferred Securities of Wachovia Capital Trust II (Incorporated by reference to Exhibit
4(b)(iv) to Legacy Wachovia's Registration Statement on Form S-3 (No. 333-19365)).
4(a)(iv) --Form of Junior Subordinated Indenture between Legacy Wachovia and The First National
Bank of Chicago, as Trustee (Incorporated by reference to Exhibit 4(c) to Legacy Wachovia's
Registration Statement on Form S-3 (No. 333-19365)).
4(a)(v) --First Supplemental Indenture among Wachovia, Legacy Wachovia and Bank One, National
Association, dated August 31, 2001.
4(a)(vi) --Form of Preferred Security of Wachovia Capital Trust II (Incorporated by reference to Exhibit
4(e) to Legacy Wachovia's Registration Statement on Form S-3 (No. 333-19365)).
4(a)(vii) --Form of Preferred Securities Guarantee (Incorporated by reference to Exhibit 4(g) to Legacy
Wachovia's Registration Statement on Form S-3 (No. 333-19365)).
4(a)(viii) --Form of Junior Subordinated Deferrable Interest Debenture of Legacy Wachovia (Incorporated
by reference to Exhibit 4(f) to Legacy Wachovia's Registration Statement on Form S-3 (No.
333-19365)).
4(b)(i) --Certificate of Trust of Central Fidelity Capital Trust I (Incorporated by reference to Exhibit 4.2
to Central Fidelity Banks, Inc.'s Registration Statement on Form S-4 (No. 333-28917)).
4(b)(ii) --Declaration of Trust of Central Fidelity Capital Trust I (Incorporated by reference to Exhibit
4.3 to Central Fidelity Banks, Inc.'s Registration Statement on Form S-4 (No. 333-28917)).
4(b)(iii) --Amended and Restated Declaration of Trust of Central Fidelity Capital Trust I (Incorporated by
reference to Exhibit 4.4 of Central Fidelity Banks, Inc.'s Registration Statement on Form S-4
(No. 333-28917)).
4(b)(iv) --Assignment of Declaration of Trust between Legacy Wachovia and Central Fidelity Banks,
Inc., dated December 15, 1997.
4(b)(v) --Assignment of Declaration of Trust of Central Fidelity Capital Trust I between Legacy
Wachovia and Wachovia, dated August 31, 2001.
4(b)(vi) --Junior Subordinated Indenture between Central Fidelity Banks, Inc. and The Bank of New
York, as Debenture Trustee (Incorporated by reference to Exhibit 4.1 to Central Fidelity Banks,
Inc.'s Registration Statement on Form S-4 (No. 333-28917)).
4(b)(vii) --First Supplemental Indenture between Legacy Wachovia and The Bank of New York, dated
December 15, 1997.
4(b)(viii) --Second Supplemental Indenture among Wachovia, Legacy Wachovia and The Bank of New
York, dated August 31, 2001.
4(b)(ix) --Form of Capital Security Certificate for Central Fidelity Capital Trust I (Incorporated by
reference to Exhibit 4.5 to Central Fidelity Banks, Inc.'s Registration Statement on Form S-4
(No. 333-28917)).
4(b)(x) --Form of Junior Subordinated Debt Security (Incorporated by reference to Exhibit 4.7 to Central
Fidelity Banks, Inc.'s Registration Statement on Form S-4 (No. 333-28917)).
II-3
Exhibit
No. Description
----------- -----------
4(b)(xi) --Form of New Guarantee Agreement for the benefit of the holders of the Trust Securities
(Incorporated by reference to Exhibit 4.6 to Central Fidelity Banks, Inc.'s Registration
Statement on Form S-4 (No. 333-28917)).
4(b)(xii) --Assignment of Guarantee between Legacy Wachovia and Central Fidelity Banks, Inc., dated
December 15, 1997.
4(b)(xiii) --Assignment of Guarantee between Legacy Wachovia and First Union Corporation dated
August 31, 2001.
4(b)(xiv) --Registration Agreement among Central Fidelity Banks, Inc., Central Fidelity Capital Trust I
and the Initial Purchasers (Incorporated by reference to Exhibit 4.8 to Central Fidelity Banks,
Inc.'s Registration Statement on Form S-4 (No. 333-28917)).
5 --Opinion of Ross E. Jeffries, Esq.
8 --Opinion of Sullivan & Cromwell as to certain federal income tax matters.
12 --Statement setting forth computation of the ratio of earnings to fixed charges.
23(a) --Consent of KPMG LLP.
23(b) --Consent of Ernst & Young LLP.
23(c) --Consent of Ross E. Jeffries, Esq. (Included in Exhibit 5).
23(d) --Consent of Sullivan & Cromwell (Included in Exhibit 8).
25(a)(i) --Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The
First National Bank of Chicago, as Trustee under the Indenture of Wachovia Capital Trust II
(Incorporated by reference to Exhibit 25(a) to Legacy Wachovia's Registration Statement on
Form S-3 (No. 333-19365)).
25(a)(ii) --Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The
First National Bank of Chicago, as Trustee under the Amended and Restated Declaration of
Trust of Wachovia Capital Trust II (Incorporated by reference to Exhibit 25(b) to Legacy
Wachovia's Registration Statement on Form S-3 (No. 333-19365)).
25(a)(iii) --Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The
First National Bank of Chicago, as Trustee under the Preferred Securities Guarantee of Legacy
Wachovia with respect to the Preferred Securities of Wachovia Capital Trust II (Incorporated
by reference to Exhibit 25(e) to Legacy Wachovia's Registration Statement on Form S-3 (No.
333-19365)).
25(b)(i) --Form T-1 Statement of Eligibility of The Bank of New York, as Trustee under the Junior
Subordinated Indenture of Central Fidelity Capital Trust I (Incorporated by reference to Exhibit
25.1 to Central Fidelity Banks, Inc.'s Registration Statement on Form S-4 (No. 333-28917)).
25(b)(ii) --Form T-1 Statement of Eligibility of The Bank of New York, as Trustee under the Amended
and Restated Declaration of Trust of Central Fidelity Capital Trust I (Incorporated by reference
to Exhibit 25.2 to Central Fidelity Banks, Inc.'s Registration Statement on Form S-4 (No. 333-
28917)).
25(b)(iii) --Form T-1 Statement of Eligibility of The Bank of New York, as Trustee under the New
Guarantee Agreement (Incorporated by reference to Exhibit 25.3 to Central Fidelity Banks,
Inc.'s Registration Statement on Form S-4 of Central Fidelity Capital Trust I (No. 333-28917)).
II-4
Item 17. Undertakings.
A. Undertakings to Update Annually.
(1) The undersigned registrant hereby undertakes:
(A) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section l0(a)(3) of the
Securities Act of 1933 (as amended, the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (1)(A)(i) and (l)(A)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with or furnished to the Commission by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934
(as amended, the "Exchange Act") that are incorporated by reference
in the registration statement;
(B) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(C) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(2) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant, the registrant has been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses in the defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 1 to the Registration Statement on Form S-3 (No. 333-72350) to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Charlotte, State of North Carolina, on October 29, 2001.
WACHOVIA CORPORATION
/S/ MARK C. TREANOR
By: _________________________________
Name: Mark C. Treanor
Title: Executive Vice President
Secretary and General Counsel
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No, 1 to the Registration Statement on Form S-3 (No. 333-72350) has been signed
by the following persons in the capacities and on the date indicated.
Signature Capacity
--------- --------
/S/ G. KENNEDY THOMPSON* President, Chief Executive Officer and Director
---------------------------
G. Kennedy Thompson
/S/ LESLIE M. BAKER JR.* Chairman and Director
---------------------------
Leslie M. Baker Jr.
/S/ ROBERT P. KELLY* Executive Vice President and Chief Financial Officer
---------------------------
Robert P. Kelly
/S/ DAVID M. JULIAN* Senior Vice President and Corporate
--------------------------- Controller (Principal Accounting Officer)
David M. Julian
/S/ F. DUANE ACKERMAN* Director
---------------------------
F. Duane Ackerman
/S/ JAMES S. BALLOUN* Director
---------------------------
James S. Balloun
/S/ ROBERT J. BROWN* Director
---------------------------
Robert J. Brown
/S/ PETER C. BROWNING* Director
---------------------------
Peter C. Browning
/S/ JOHN T. CASTEEN III* Director
---------------------------
John T. Casteen III
/S/ WILLIAM H. GOODWIN JR.* Director
---------------------------
William H. Goodwin Jr.
/S/ ROBERT A. INGRAM* Director
---------------------------
Robert A. Ingram
II-6
Signature Capacity
--------- --------
/s/ RADFORD D. LOVETT* Director
-------------------------
Radford D. Lovett
/s/ MACKEY J. MCDONALD* Director
-------------------------
Mackey J. McDonald
/s/ JOSEPH NEUBAUER* Director
-------------------------
Joseph Neubauer
/s/ LLOYD U. NOLAND III* Director
-------------------------
Lloyd U. Noland III
/s/ RUTH G. SHAW* Director
-------------------------
Ruth G. Shaw
/s/ LANTY L. SMITH* Director
-------------------------
Lanty L. Smith
/s/ JOHN C. WHITAKER JR.* Director
-------------------------
John C. Whitaker Jr.
/s/ DONA DAVIS YOUNG* Director
-------------------------
Dona Davis Young
/s/ MARK C. TREANOR
*By: ----------------------
Name: Mark C. Treanor
Attorney-in-Fact
Dated: October 29, 2001
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Wachovia Capital
Trust II and Central Fidelity Capital Trust I each has duly caused this
Amendment No.1 to the Registration Statement on Form S-3 (No. 333-72350) to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Charlotte, State of North Carolina on October 29, 2001.
WACHOVIA CAPITAL TRUST II
By: Wachovia Corporation, as Sponsor
/s/ MARK C. TREANOR
By: _________________________________
Name: Mark C. Treanor
Title: Executive Vice President,
Secretary and General Counsel
CENTRAL FIDELITY CAPITAL TRUST I
By: Wachovia Corporation, as Sponsor
/s/ MARK C. TREANOR
By: _________________________________
Name: Mark C. Treanor
Title: Executive Vice President,
Secretary and General Counsel
II-8
Exhibit Index
Exhibit
No. Description
----------- -----------
4(a)(i) --Certificate of Trust of Wachovia Capital Trust II (Incorporated by reference to Exhibit 4(a)(i)
to Legacy Wachovia's Registration Statement on Form S-3 (No. 333-19365)).
4(a)(ii) --Declaration of Trust of Wachovia Capital Trust II (Incorporated by reference to Exhibit 4(b)(ii)
to Legacy Wachovia's Registration Statement on Form S-3 (No. 333-19365)).
4(a)(iii) --Form of Amended and Restated Declaration of Trust to be used in connection with the issuance
of the Preferred Securities of Wachovia Capital Trust II (Incorporated by reference to Exhibit
4(b)(iv) to Legacy Wachovia's Registration Statement on Form S-3 (No. 333-19365)).
4(a)(iv) --Form of Junior Subordinate Indenture between Legacy Wachovia and The First National Bank
of Chicago, as Trustee (Incorporated by reference to Exhibit 4(c) to Legacy Wachovia's
Registration Statement on Form S-3 (No. 333-19365)).
4(a)(v) --First Supplemental Indenture among Wachovia, Legacy Wachovia and Bank One, National
Association, dated August 31, 2001.
4(a)(vi) --Form of Preferred Security of Wachovia Capital Trust II (Incorporated by reference to Exhibit
4(e) to Legacy Wachovia's Registration Statement on Form S-3 (No. 333-19365)).
4(a)(vii) --Form of Preferred Securities Guarantee (Incorporated by reference to Exhibit 4(g) to Legacy
Wachovia's Registration Statement on Form S-3 (No. 333-19365)).
4(a)(viii) --Form of Junior Subordinated Deferrable Interest Debenture of Legacy Wachovia (Incorporated
by reference to Exhibit 4(f) to Legacy Wachovia's Registration Statement on Form S-3 (No.
333-19365)).
4(b)(i) --Certificate of Trust of Central Fidelity Capital Trust I (Incorporated by reference to Exhibit 4.2
to Central Fidelity Banks, Inc.'s Registration Statement on Form S-4 (No. 333-28917)).
4(b)(ii) --Declaration of Trust of Central Fidelity Capital Trust I (Incorporated by reference to Exhibit
4.3 to Central Fidelity Banks, Inc.'s Registration Statement on Form S-4 (No. 333-28917)).
4(b)(iii) --Amended and Restated Declaration of Trust of Central Fidelity Capital Trust I (Incorporated by
reference to Exhibit 4.4 of Central Fidelity Banks, Inc.'s Registration Statement on Form S-4
(No. 333-28917)).
4(b)(iv) --Assignment of Declaration of Trust between Legacy Wachovia and Central Fidelity Banks,
Inc., dated December 15, 1997.
4(b)(v) --Assignment of Declaration of Trust of Central Fidelity Capital Trust I between Legacy
Wachovia and Wachovia, dated August 31, 2001.
4(b)(vi) --Junior Subordinated Indenture between Central Fidelity Banks, Inc. and The Bank of New
York, as Debenture Trustee (Incorporated by reference to Exhibit 4.1 to Central Fidelity Banks,
Inc.'s Registration Statement on Form S-4 (No. 333-28917)).
4(b)(vii) --First Supplemental Indenture between Legacy Wachovia and The Bank of New York, dated
December 15, 1997.
4(b)(viii) --Second Supplemental Indenture among Wachovia, Legacy Wachovia and The Bank of New
York, dated August 31, 2001.
4(b)(ix) --Form of Capital Security Certificate for Central Fidelity Capital Trust I (Incorporated by
reference to Exhibit 4.5 to Central Fidelity Banks, Inc.'s Registration Statement on Form S-4
(No. 333-28917)).
4(b)(x) --Form of Junior Subordinated Debt Security (Incorporated by reference to Exhibit 4.7 to Central
Fidelity Banks, Inc.'s Registration Statement on Form S-4 (No. 333-28917)).
Exhibit
No. Description
----------- -----------
4(b)(xi) --Form of New Guarantee Agreement for the benefit of the holders of the Trust Securities
(Incorporated by reference to Exhibit 4.6 to Central Fidelity Banks, Inc.'s Registration
Statement on Form S-4 (No. 333-28917)).
4(b)(xii) --Assignment of Guarantee between Legacy Wachovia and Central Fidelity Banks, Inc., dated
December 15, 1997.
4(b)(xiii) --Assignment of Guarantee between Legacy Wachovia and First Union Corporation dated
August 31, 2001.
4(b)(xiv) --Registration Agreement among Central Fidelity Banks, Inc., Central Fidelity Capital Trust I
and the Initial Purchasers (Incorporated by reference to Exhibit 4.8 to Central Fidelity Banks,
Inc.'s Registration Statement on Form S-4 (No. 333-28917)).
5 --Opinion of Ross E. Jeffries, Esq.
8 --Opinion of Sullivan & Cromwell as to certain federal income tax matters.
12 --Statement setting forth computation of the ratio of earnings to fixed charges.
23(a) --Consent of KPMG LLP.
23(b) --Consent of Ernst & Young LLP.
23(c) --Consent of Ross E. Jeffries, Esq. (Included in Exhibit 5).
23(d) --Consent of Sullivan & Cromwell (Included in Exhibit 8).
25(a)(i) --Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The
First National Bank of Chicago, as Trustee under the Indenture of Wachovia Capital Trust II
(Incorporated by reference to Exhibit 25(a) to Legacy Wachovia's Registration Statement on
Form S-3 (No. 333-19365)).
25(a)(ii) --Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The
First National Bank of Chicago, as Trustee under the Amended and Restated Declaration of
Trust of Wachovia Capital Trust II (Incorporated by reference to Exhibit 25(b) to Legacy
Wachovia's Registration Statement on Form S-3 (No. 333-19365)).
25(a)(iii) --Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The
First National Bank of Chicago, as Trustee under the Preferred Securities Guarantee of Legacy
Wachovia with respect to the Preferred Securities of Wachovia Capital Trust II (Incorporated
by reference to Exhibit 25(e) to Legacy Wachovia's Registration Statement on Form S-3 (No.
333-19365)).
25(b)(i) --Form T-1 Statement of Eligibility of The Bank of New York, as Trustee under the Junior
Subordinated Indenture of Central Fidelity Capital Trust I (Incorporated by reference to Exhibit
25.1 to Central Fidelity Banks, Inc.'s Registration Statement on Form S-4 (No. 333-28917)).
25(b)(ii) --Form T-1 Statement of Eligibility of The Bank of New York, as Trustee under the Amended
and Restated Declaration of Trust of Central Fidelity Capital Trust I (Incorporated by reference
to Exhibit 25.2 to Central Fidelity Banks, Inc.'s Registration Statement on Form S-4 (No. 333-
28917)).
25(b)(iii) --Form T-1 Statement of Eligibility of The Bank of New York, as Trustee under the New
Guarantee Agreement (Incorporated by reference to Exhibit 25.3 to Central Fidelity Banks,
Inc.'s Registration Statement on Form S-4 of Central Fidelity Capital Trust I (No. 333-28917)).