THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS ARE NOT AN
OFFER TO SELL THESE SECURITIES AND THEY ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER AND SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
ISSUED MAY 5, 2003
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 23, 1994)
$100,000,000
[LOGO] FIRST TENNESSEE NATIONAL CORPORATION
% SUBORDINATED NOTES DUE MAY 15, 2013
------------------
First Tennessee National Corporation is offering $100,000,000 aggregate
principal amount of its % Subordinated Notes due May 15, 2013. The notes will
bear interest at the rate of % per year. Interest on the notes is payable on
May 15 and November 15 of each year, beginning on November 15, 2003. The notes
will mature on May 15, 2013. First Tennessee National Corporation will not have
the right to redeem the notes before their scheduled maturity.
The notes will be unsecured and will be subordinate to senior indebtedness
and general obligations of First Tennessee National Corporation. Holders of the
notes may not accelerate the maturity of the notes, except upon our bankruptcy
or insolvency.
------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE NOTES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
Per Note Total
-------- -----
Public Offering Price(1).................................... % $
Underwriting Discount....................................... % $
Proceeds, before expenses, to First Tennessee National
Corporation............................................... % $
---------
(1) Plus accrued interest from May , 2003, if settlement occurs
after that date.
------------------
THE NOTES ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY
BANK SUBSIDIARY OF FIRST TENNESSEE NATIONAL CORPORATION, ARE NOT OBLIGATIONS OF
FTN FINANCIAL SECURITIES CORP. AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
FTN Financial Securities Corp. expects to deliver the notes to purchasers in
book-entry form only through the Depository Trust Company on May , 2003.
------------------
FTN FINANCIAL SECURITIES CORP
------------------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS MAY , 2003
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
About this Prospectus Supplement and
the Accompanying Prospectus......... S-2
Where You Can Find More Information... S-2
Forward-Looking Statements............ S-3
The Corporation....................... S-4
Selected Consolidated Financial
Data................................ S-5
Use of Proceeds....................... S-6
Ratio of Earnings To Fixed Charges.... S-6
Capitalization........................ S-7
Description of The Notes.............. S-9
Underwriting.......................... S-10
Validity of The Notes................. S-11
Experts............................... S-11
PROSPECTUS
PAGE
----
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Corporation....................... 3
Use of Proceeds....................... 3
Consolidated Ratios of Earnings to
Fixed Charges and Combined Fixed
Charges and Preferred Stock Dividend
Requirements........................ 3
Supervision and Regulation............ 4
Description of Debt Securities........ 8
Description of Capital Stock.......... 21
Description of Depositary Shares...... 25
Plan of Distribution.................. 27
Validity of the Securities............ 28
Experts............................... 28
ABOUT THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS
This document is in two parts. The first part is this prospectus supplement,
which describes terms of the notes. The second part is the accompanying
prospectus, which gives more general information, some of which may not apply to
the notes. Generally, the term 'prospectus' refers to both parts combined.
If the description of the notes varies between this prospectus supplement
and the accompanying prospectus, you should rely on the information in this
prospectus supplement.
You should rely on the information contained in or incorporated by reference
in this prospectus supplement and the accompanying prospectus only. No person is
authorized to provide you with different information or to offer the notes in
any state where the offer is not permitted. You should not assume that the
information provided by this prospectus supplement or the accompanying
prospectus is accurate as of any date other than the date on the front of this
prospectus supplement. In this prospectus supplement, the 'Corporation,' 'we,'
'us,' and 'our' mean First Tennessee National Corporation and its consolidated
subsidiaries, unless otherwise specified.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. Our Commission filings
are available to the public over the Internet at the Commission's web site at
http://www.sec.gov. You may also read and copy any document we file at the
Commission's public reference room located at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further
information on the public reference room. 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 10005.
The Commission allows us to 'incorporate by reference' the information we
file with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus supplement and the accompanying prospectus
and information that we file later with the Commission will automatically update
and supersede this information. Until we sell all of the securities covered by
this prospectus supplement and the accompanying prospectus, we incorporate by
reference the documents listed below and any future filings we make with the
Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934 (other than information in such documents that is deemed not to be
filed):
S-2
Annual Report on Form 10-K for the year ended December 31,
2002 (including information specifically incorporated by
reference into our Form 10-K from our definitive Proxy
Statement for our 2003 annual meeting of shareholders) filed
on March 19, 2003; and
Current Report on Form 8-K dated May 5, 2003.
Each of these documents is available from the Commission's web site and its
public reference room. You may also request a copy of these filings, excluding
exhibits that are not specifically incorporated by reference therein, at no cost
by writing or telephoning us, at the address of our principal executive offices,
which is:
First Tennessee National Corporation
165 Madison Avenue
Memphis, Tennessee 38103
(901) 523-4444
Our web site address is www.firsttennessee.com. The information on our web
site is not incorporated by reference into this prospectus supplement or the
accompanying prospectus.
FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus and the documents
we incorporate by reference herein may contain forward-looking statements with
respect to our beliefs, plans, goals, expectations, and estimates.
Forward-looking statements are statements that are not a representation of
historical information but rather are related to future operations, strategies,
financial results or other developments. The words 'believe', 'expect',
'anticipate', 'intend', 'estimate', 'should', 'is likely', 'will', 'going
forward', and other expressions that indicate future events and trends identify
forward-looking statements. Forward-looking statements are necessarily based
upon estimates and assumptions that are inherently subject to significant
business, operational, economic and competitive uncertainties and contingencies,
many of which are beyond a company's control, and many of which, with respect to
future business decisions and actions (including acquisitions and divestitures),
are subject to change. Examples of uncertainties and contingencies include,
among other important factors, general and local economic and business
conditions; expectations of and actual timing and amount of interest rate
movements (which can have a significant impact on a financial services
institution); market and monetary fluctuations; inflation; the financial
condition of borrowers and other counterparties; competition within and outside
the financial services industry; geo-political developments including possible
terrorist activity; technology; and new products and services in the industries
in which we operate. Other factors are those inherent in originating and
servicing loans, including prepayment risks and fluctuation of collateral values
and changes in customer profiles. Additionally, the actions of the Commission,
the Financial Accounting Standards Board (FASB), the Office of the Comptroller
of the Currency, the Board of Governors of the Federal Reserve System, and other
regulators; regulatory and judicial proceedings and changes in laws and
regulations applicable to us; and our success in executing our business plans
and strategies and managing the risks involved in the foregoing, could cause
actual results to differ. We assume no obligation to update any forward-looking
statements that are made from time to time.
S-3
THE CORPORATION
First Tennessee National Corporation is a Tennessee corporation incorporated
in 1968. The Corporation is registered as a bank holding company under the Bank
Holding Company Act of 1956 and elected, effective March 13, 2000, to become a
financial holding company pursuant to the provisions of the Gramm-Leach-Bliley
Act. At December 31, 2002, the Corporation had total assets of $23.8 billion and
ranked second in terms of total assets among Tennessee-headquartered bank
holding companies and ranked 31st nationally in terms of assets. Through its
principal subsidiary, First Tennessee Bank National Association, and its other
banking and banking-related subsidiaries, the Corporation provides diversified
financial services through six business segments. During 2002 approximately 67%
of revenues were provided by fee income and approximately 33% of revenues were
provided by net interest income. As a financial holding company, the Corporation
coordinates the financial resources of the consolidated enterprise and maintains
systems of financial, operational and administrative control intended to
coordinate selected policies and activities.
Because we are a holding company, our rights and the rights of our
creditors, including you, as a holder of the notes, and shareholders to
participate in any distribution of assets of any subsidiary, such as First
Tennessee Bank National Association, upon the subsidiary's liquidation or
reorganization or otherwise would be subject to the prior claims of the
subsidiary's creditors, except to the extent that we are a creditor of the
subsidiary.
Our executive offices are located at 165 Madison Avenue, Memphis, Tennessee
38103; our telephone number is (901) 523-4444.
FIRST QUARTER RESULTS
For the quarter ended March 31, 2003 we reported record earnings of $119.0
million, or $.91 diluted earnings per share, compared to earnings of $87.1
million, or $.67 diluted earnings per share, for the quarter ended March 31,
2002. These earnings represent an increase of 37% from our first quarter 2002
earnings.
For the quarter ended March 31, 2003, our return on average shareholders'
equity and return on average assets were 27.7% and 2.07%, respectively, compared
to 23.6% and 1.77% for first quarter 2002, respectively. On March 31, 2003, our
total assets were $24.8 billion, shareholders' equity was $1.8 billion and
market capitalization was $5.0 billion, compared to $19.6 billion, $1.5 billion
and $4.4 billion, respectively, on March 31, 2002.
For the quarter ended March 31, 2003, our total revenues increased 40% to
$711.5 million, compared to $509.3 million in the first quarter of 2002.
Noninterest income provides the majority of our revenue and contributed 73% to
total revenue for the quarter ended March 31, 2003, compared to 64% in the first
quarter of 2002. For the quarter ended March 31, 2003, our noninterest income
increased 59% to $518.1 million from $324.9 million in 2002.
S-4
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data for the
Corporation as of the dates or for the periods indicated. This information
should be read in conjunction with, and is qualified in its entirety by
reference to, the detailed information and financial statements included in the
documents incorporated herein by reference. See 'Where You Can Find More
Information.'
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
2002 2001 2000 1999(1) 1998(1)
---- ---- ---- ------- -------
(IN MILLIONS EXCEPT PER SHARE DATA)
SUMMARY INCOME STATEMENTS
Interest income............................... $ 1,039.1 $ 1,198.9 $ 1,363.0 $ 1,207.2 $ 1,133.8
Interest expense.............................. 286.6 512.6 764.7 617.7 593.3
Net interest income........................... 752.5 686.3 598.3 589.5 540.5
Provision for loan losses..................... 92.2 93.2 67.5 57.4 51.2
Net interest income after provision for loan
losses...................................... 660.3 593.1 530.8 532.1 489.3
Noninterest income............................ 1,541.1 1,259.6 912.7 970.2 876.6
Noninterest expense........................... 1,643.3 1,364.1 1,106.5 1,122.9 1,013.0
Income before income taxes.................... 558.1 488.6 337.0 379.4 352.9
Applicable income taxes....................... 181.6 162.2 104.4 131.9 126.5
Income before cumulative effect of changes in
accounting principles....................... 376.5 326.4 232.6 247.5 226.4
Cumulative effect of changes in accounting
principles, net of tax...................... -- (8.2) -- -- --
--------- --------- --------- --------- ---------
Net income.................................... $ 376.5 $ 318.2 $ 232.6 $ 247.5 $ 226.4
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Earnings per common share(2).................. $ 2.97 $ 2.49 $ 1.79 $ 1.90 $ 1.77
Diluted earnings per share(2)................. 2.89 2.42 1.77 1.85 1.72
Cash dividends per common share(2)............ 1.05 0.91 0.88 0.79 0.69
SELECTED PERIOD-END BALANCES (IN MILLIONS)
Total assets.................................. $23,823.1 $20,621.6 $18,559.6 $18,378.0 $18,738.1
Total loans, net of unearned income........... 11,345.4 10,283.1 10,239.5 9,363.2 8,557.1
Investment securities......................... 2,700.3 2,525.9 2,839.0 3,101.3 2,426.3
Earning assets................................ 19,999.8 17,085.7 15,193.3 14,944.2 15,694.6
Deposits...................................... 15,713.9 13,606.3 12,188.7 11,358.7 11,723.0
Term borrowings............................... 929.7 550.4 409.7 358.7 414.5
Shareholders' equity.......................... 1,691.2 1,477.8 1,384.2 1,241.5 1,099.5
SELECTED FINANCIAL RATIOS
Return on average equity...................... 24.00% 22.71% 18.22% 20.86% 22.73%
Return on average assets...................... 1.82 1.66 1.20 1.33 1.35
Net interest margin........................... 4.33 4.27 3.73 3.80 3.80
Allowance for loan losses to period-end loans
(net of unearned income).................... 1.27 1.46 1.36 1.44 1.54
Nonperforming assets as a percentage of
period-end loans (net of unearned income)... .67 .83 .76 .50 .52
Net charge-offs to average loans (net of
unearned income)............................ .93 .80 .62 .59 .46
Average shareholders' equity to average
assets...................................... 7.58 7.29 6.61 6.37 5.96
---------
(1) Certain previously reported amounts have been reclassified
to agree with the current presentation.
(2) Common stock data reflects the 1998 two-for-one stock split.
S-5
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the notes, which is
expected to be $ (after deducting underwriting discounts and other expenses
of the offering), for general corporate purposes. The notes are intended to
qualify as Tier 2 or supplementary capital under the capital guidelines
established by the Board of Governors of the Federal Reserve System.
RATIO OF EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31,
-------------------------------------
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
Ratio of earnings to fixed charges (including
interest on deposits)............................. 2.76% 1.92% 1.43% 1.59% 1.55%
Ratio of earnings to fixed charges (excluding
interest on deposits)............................. 5.47% 3.52% 2.20% 2.58% 2.39%
Our ratios of earnings to fixed charges were computed based on:
'earnings,' which consist of pretax income from continuing
operations before income taxes and equity in undistributed
net income or loss of our subsidiaries, plus fixed charges
(excluding capitalized interest), amortization of
capitalized interest and income from subsidiaries, less
preferred security dividends of consolidated subsidiaries;
and
'fixed charges', which consist of interest expense,
capitalized interest, amortization of debt issue costs and
an estimate of rental expense net of income from subleases.
S-6
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Corporation and its subsidiaries at December 31, 2002 and as adjusted as of such
date to give effect to the issuance of the notes, after deduction of
underwriting discounts and estimated expenses of the offering and the
application of the net proceeds therefrom. This table should be read in
conjunction with the Corporation's consolidated financial statements and the
notes thereto incorporated by reference herein. See 'Where You Can Find More
Information.'
DECEMBER 31, 2002
---------------------------
ACTUAL AS ADJUSTED(4)
------ --------------
(UNAUDITED, IN THOUSANDS)
TERM BORROWINGS:
FIRST TENNESSEE NATIONAL CORPORATION:
Subordinated capital notes:
First Tennessee National Corporation notes offered
hereby................................................ $ -- $ 99,730
Matures on November 15, 2005 -- 6.75%................... 74,765 74,765
FIRST TENNESSEE BANK NATIONAL ASSOCIATION:
Subordinated capital notes:
Matures on December 1, 2008 -- 5.75%.................... 140,729 140,729
Matures on April 1, 2008 -- 6.40%....................... 89,630 89,630
Bank notes:(1)
Matures on October 6, 2003 -- 1.75%..................... 150,000 150,000
Matures on October 8, 2004 -- 1.84%..................... 149,947 149,947
Matures on November 26, 2004 -- 1.51%................... 74,971 74,971
Matures on July 6, 2004 -- 1.96% and 2.68% on December
31, 2002 and 2001, respectively....................... 59,957 59,957
Matures on April 17, 2003 -- 1.387%..................... 50,000 50,000
Matures on July 9, 2004 -- 1.96% and 2.68% on December
31, 2002 and 2001, respectively....................... 50,000 50,000
Matures on March 6, 2007 -- 1.65%....................... 49,920 49,920
Matures on May 23, 2003 -- 1.55% and 2.26% on December
31, 2002 and 2001, respectively....................... 19,998 19,998
Federal Home Loan Bank borrowings(2)........................ 4,181 4,181
Other(3).................................................... 6,692 6,692
FIRST NATIONAL BANK OF SPRINGDALE:
Federal Home Loan Bank borrowings(2)........................ 8,925 8,925
---------- ----------
Total....................................................... $ 929,715 $1,029,445
---------- ----------
SHAREHOLDERS' EQUITY:
Preferred stock (without par value); authorized -- 5,000,000
shares; issued and outstanding -- none.................... -- --
Common stock -- $.625 par value (shares
authorized -- 400,000,000; shares issued -- 125,600,024 on
December 31, 2002)........................................ 78,500 78,500
Capital surplus............................................. 119,318 119,318
Undivided profits........................................... 1,461,946 1,462,595
Accumulated other comprehensive income...................... 26,487 26,487
Deferred compensation on restricted stock incentive plans... (5,796) (5,796)
Deferred compensation obligation............................ 10,725 10,725
---------- ----------
Total shareholders' equity.............................. 1,691,180 1,691,829
---------- ----------
Total term borrowings and shareholders' equity.......... $2,620,895 $2,721,274
---------- ----------
---------- ----------
S-7
DECEMBER 31, 2002
-----------------------
ACTUAL AS ADJUSTED(4)
------ --------------
(UNAUDITED)
CAPITAL RATIOS:
Tier 1 capital to risk-adjusted assets.................. 8.93% 8.88%
Total capital to risk-adjusted assets................... 11.54% 12.05%
Leverage ratio.......................................... 6.91% 6.88%
---------
(1) First Tennessee Bank National Association has an ongoing
bank note program under which the bank may offer an
aggregate principal amount of up to $3.0 billion. Bank notes
with original maturities of one year or less are included in
other short-term borrowings. Bank notes with original
maturities greater than one year are classified as term
borrowings. On December 31, 2002, unused capacity under this
program was $1.6 billion.
(2) The Federal Home Loan Bank (FHLB) borrowings were issued
with fixed interest rates and terms of 2 to 27 years. These
borrowings had weighted average interest rates of 4.44
percent and 4.24 percent for FTBNA and 4.56 percent and 5.77
percent for the First National Bank of Springdale on
December 31, 2002 and December 31, 2001, respectively.
Borrowings from the FHLB were collateralized with $405.5
million first-lien permanent mortgage loans on December 31,
2002.
(3) Other long-term debt is comprised of unsecured obligations
issued with fixed interest rates and terms of 2 to 3 years.
These borrowings had a weighted average interest rate of
4.60 percent on December 31, 2002 and December 31, 2001.
(4) The 'As Adjusted' column does not reflect $250,000,000 of
4.625% Subordinated Bank Notes due May 15, 2013 of First
Tennessee Bank National Association issued on May 1, 2003.
S-8
DESCRIPTION OF THE NOTES
The following description of the particular terms of the notes supplements,
and to the extent inconsistent therewith modifies, the description of the
general terms and provisions of Subordinated Debt Securities in the accompanying
prospectus. The following description is qualified in its entirety by reference
to the provisions of the Subordinated Indenture (as defined below). Capitalized
terms not defined herein have the meanings assigned to such terms in the
accompanying prospectus or in the Subordinated Indenture.
GENERAL
The notes constitute a series of Subordinated Debt Securities described in
the accompanying Prospectus to be issued under the Indenture, dated as of
November 1, 1995 (the 'Subordinated Indenture'), between the Corporation and The
Bank of New York, as trustee, as supplemented by a supplemental indenture dated
as of May , 2003, between the Corporation and Bank One Trust Company, National
Association, as trustee for the notes (the 'Trustee'). The notes will be limited
to $100,000,000 aggregate principal amount, will be direct, unsecured,
subordinated obligations of the Corporation and will mature on May 15, 2013.
The notes will bear interest at the annual rate shown on the cover page of
this prospectus supplement from May , 2003, payable semiannually in arrears on
each May 15 and November 15, commencing November 15, 2003, to the persons in
whose names the notes are registered at the close of business on the preceding
May 1 or November 1.
We will have the ability, in addition to the ability to issue notes with
terms the same as or different from those of the notes being issued hereby, to
'reopen' this issue of notes and issue additional notes or establish additional
terms of the notes being issued hereby.
The notes will be issued in the form of a fully registered permanent global
note registered in the name of a nominee of the Depositary as described under
'Description of Debt Securities -- Global Securities' in the accompanying
prospectus. The Depositary has advised us that it is a limited-purpose trust
company organized under the New York Banking Law, a member of the Federal
Reserve System, a 'clearing corporation' within the meaning of the New York
Uniform Commercial Code and a 'clearing agency' registered pursuant to Section
17A of the Exchange Act. The Depositary holds securities that its participants
deposit with the Depositary. The Depositary also facilitates the settlement
among participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Participants include securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other organizations.
The Depositary is owned by a number of its Participants and by the New York
Stock Exchange, Inc., the American Stock Exchange LLC and the National
Association of Securities Dealers, Inc. Access to the Depositary's system is
also available to others such as securities brokers and dealers, banks, and
trust companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly. The rules applicable to the
Depositary and its Participants are on file with the Securities and Exchange
Commission.
The notes are not redeemable prior to maturity and do not provide for any
sinking fund.
SUBORDINATION
As described in the accompanying prospectus, the notes are subordinated to
all of our existing and future Senior Indebtedness and, in certain
circumstances, to all Other Financial Obligations. The notes will rank equally
with our Existing Subordinated Indebtedness, subject to the holders of the notes
being obligated in certain circumstances to pay over any Excess Proceeds to
Entitled Persons in respect of Other Financial Obligations as described in the
accompanying prospectus, while holders of Existing Subordinated Indebtedness are
not so obligated. See 'Description of Debt Securities -- Subordination of the
Subordinated Debt Securities' in the accompanying prospectus. As of December 31,
2002, the Corporation had no long-term Senior Indebtedness, an aggregate of
$25.7 million in short-term Senior Indebtedness, an aggregate of $74.8 million
of Existing Subordinated Indebtedness and no Other
S-9
Financial Obligations outstanding, respectively. The Subordinated Indenture does
not prohibit or limit our incurrence of additional indebtedness, senior or
subordinated, or Other Financial Obligations.
As described in the accompanying prospectus, payment of the principal of the
notes may be accelerated only in the case of certain events involving the
bankruptcy, insolvency or reorganization of the Corporation. There is no right
of acceleration in the case of a default in the performance of any of our
covenants, including the failure to pay principal of or interest on the notes
when due. See 'Description of Debt Securities -- Defaults -- The Subordinated
Indenture' in the accompanying prospectus.
DEFEASANCE AND DISCHARGE
The defeasance provisions of the Subordinated Indenture described under
'Description of Debt Securities -- Defeasance and Discharge' in the accompanying
prospectus will apply to the notes.
TRUSTEE
Bank One Trust Company, National Association, a national banking
association, will serve as the Trustee with respect to the notes.
UNDERWRITING
Subject to the terms and conditions contained in the underwriting agreement
between us and FTN Financial Securities Corp. (the 'Underwriter'), the
Underwriter has agreed to purchase from the Corporation all of the notes.
The Underwriting Agreement provides that the obligations of the Underwriter
are subject to certain conditions precedent and that the Underwriter will be
obligated to purchase all of the notes if any are purchased. The Underwriter
reserves the right to withdraw, cancel or modify offers to investors and to
reject orders in whole or in part.
We have agreed not to sell or transfer any notes, any similar debt
securities or any securities convertible into or exercisable or exchangeable for
notes or similar securities from the date of this offering circular until
completion of the distribution of the notes without first obtaining the written
consent of the Underwriter. Specifically, we have agreed not to
offer, sell, contract to sell or otherwise dispose of any
such securities,
sell or grant any option, right or warrant for the sale of
any such securities, or
enter into any swap or other derivatives transaction that
transfers benefits or risks of ownership of any such
securities.
There is currently no public market for the notes. We do not intend to apply
for listing of the notes on any national securities exchange. We have been
advised by the Underwriter that, following completion of the initial offering of
the notes, it presently intends to make a market in the notes although it is
under no obligation to do so and may discontinue any market-making activities at
any time without notice. Accordingly, there can be no assurance as to whether an
active trading market for the notes will develop or, if a public market
develops, as to the liquidity of the trading market for the notes.
The Underwriter, an indirect, wholly-owned broker-dealer subsidiary of the
Corporation, is a member of the National Association of Securities Dealers, Inc.
(the 'NASD'). Accordingly, the offering of the notes will conform to the
requirements of Rule 2720 of the Conduct Rules of the NASD. NASD members will
not confirm initial sales to accounts over which they exercise discretionary
authority without the prior specific written approval of the customer. We
estimate that our share of the total expenses of the offering, excluding
underwriting commissions, will be approximately $ .
S-10
The following table shows the underwriting commissions to be paid to the
Underwriter by us in connection with this offering (expressed as a dollar amount
and a percentage of the principal amount of the notes):
PAID BY US
--------------
Per note........................................... $ %
Total.............................................. $ %
Underwriting discounts or commissions in connection with sales of notes
under the accompanying prospectus will not exceed 8%.
The Underwriter and affiliates of the Underwriter, in the ordinary course of
business, engage in transactions with and perform services for the Corporation
that may include, among other things, investment banking transactions and
services.
In connection with the offering, the Underwriter may engage in transactions
that stabilize the market price of the notes. Such transactions consist of bids
or purchases to peg, fix or maintain the price of the notes. If the Underwriter
creates a short position in the notes in connection with the offering, i.e., if
it sells more notes than are listed on the cover page of this prospectus
supplement, the Underwriter may reduce that short position by purchasing notes
in the open market. Purchases of a security to stabilize the price or to reduce
a short position may cause the price of the security to be higher than it might
be in the absence of these purchases.
Neither we nor the Underwriter make any representation or prediction as to
the direction or magnitude of any effect that the transactions described above
may have on the price of the notes. In addition, neither we nor the Underwriter
make any representation that the Underwriter will engage in these transactions
or that these transactions, once commenced, will not be discontinued without
notice.
We have agreed to indemnify the Underwriter against certain liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments that the Underwriter may be required to make in respect thereof.
The Underwriter has advised us that it proposes to offer the notes to the
public initially at a price to the public set forth on the cover page of this
prospectus supplement and to certain dealers (who may include the Underwriter)
at such price less a concession not to exceed % of the principal amount of
the notes. The Underwriter may allow, and such dealers may re-allow, discounts
not in excess of % of the principal amount of the notes to any other
underwriter and other dealers.
FTN Financial Securities Corp. may use this prospectus supplement and the
accompanying prospectus for offers and sales related to market-making
transactions in the notes. FTN Financial Securities Corp. may act as principal
or agent in these transactions and the sales will be made at prices related to
prevailing market prices at the time of sale.
VALIDITY OF THE NOTES
The validity of the notes will be passed upon for us by Baker, Donelson,
Bearman & Caldwell, Memphis, Tennessee, and for the Underwriter by Sidley Austin
Brown & Wood LLP, New York, New York. Certain other matters will be passed upon
for us by Clyde A. Billings, Jr., our Senior Vice President and Assistant
General Counsel. Sidley Austin Brown & Wood LLP will rely as to all matters of
Tennessee law on the opinion of each of Baker, Donelson, Bearman & Caldwell and
Mr. Billings. Each of Baker, Donelson, Bearman & Caldwell and Mr. Billings will
rely as to all matters of New York law on the opinion of Sidley Austin Brown &
Wood LLP. Mr. Billings owns 49,100 shares of the Corporation's common stock,
including shares owned beneficially, shares to be acquired upon exercise of
options, shares held in the Corporation's 401(k) plan and shares as to which Mr.
Billings has deferred receipt.
EXPERTS
Our consolidated financial statements and schedules as of December 31, 2002
and for the year then ended have been incorporated by reference herein in
reliance upon the report of KPMG LLP,
S-11
independent public accountants, and upon the authority of said firm as experts
in accounting and auditing.
Our consolidated financial statements and schedules as of December 31, 2001
and for the years ended December 31, 2001 and 2000 included in our Annual Report
on Form 10-K for the year ended December 31, 2002 have been incorporated by
reference in this prospectus supplement and the accompanying prospectus in
reliance upon the report of Arthur Andersen LLP, independent public accountants,
and upon the authority of said firm as experts in accounting and auditing.
Because we have not been able to obtain, after reasonable efforts, the
written consent of Arthur Andersen LLP to our naming it in this prospectus
supplement as having certified our financial statements as of December 31, 2001
and for the two years ended December 31, 2001, as required by Section 7 of the
Securities Act, we have dispensed with the filing of their consent in reliance
on Rule 437a promulgated under the Securities Act. Consequently, your ability to
assert claims against Arthur Andersen LLP will be limited. In particular,
because of this lack of consent, you will not be able to sue Arthur Andersen LLP
under Section 11(a) of the Securities Act for any untrue statements of a
material fact contained in the financial statements audited by Arthur Andersen
or any omissions to state a material fact required to be stated in those
financial statements. Therefore, your right of recovery under that section will
be limited.
On May 16, 2002, we filed a Current Report on Form 8-K dated May 15, 2002
announcing that our board of directors engaged KPMG LLP as independent public
accountants for the fiscal year 2002, replacing Arthur Andersen LLP. The
decision to change independent public accountants was not the result of any
disagreement with Arthur Andersen LLP on matters of accounting principles or
practices, financial statement disclosure or auditing scope and procedure.
S-12
PROSPECTUS
$300,000,000
FIRST TENNESSEE NATIONAL CORPORATION
DEBT SECURITIES, PREFERRED STOCK AND COMMON STOCK
-------------------
First Tennessee National Corporation ('First Tennessee' or the
'Corporation') may offer from time to time in one or more series (i) debt
securities ('Debt Securities'), consisting of debentures, notes and/or other
unsecured evidences of indebtedness, which may be senior ('Senior Debt
Securities') or subordinated ('Subordinated Debt Securities'), (ii) preferred
stock, without par value, of the Corporation ('Preferred Stock') or (iii) common
stock, par value $2.50 per share, of the Corporation ('Common Stock') (the Debt
Securities, Preferred Stock and Common Stock are collectively referred to as the
'Securities'), at an aggregate initial offering price not to exceed U.S.
$300,000,000, at prices and on terms to be determined at the time of sale. The
Senior Debt Securities when issued will rank on a parity with all other
unsecured and unsubordinated indebtedness of the Corporation, and the
Subordinated Debt Securities when issued will be subordinated as described
herein under 'Description of Debt Securities -- Subordination of the
Subordinated Debt Securities.' The Debt Securities, Preferred Stock and Common
Stock may be offered, separately or together, in separate series, in amounts, at
prices and on terms to be set forth in the applicable supplement or supplements
to this Prospectus (each a 'Prospectus Supplement').
The accompanying Prospectus Supplement sets forth with regard to the
particular Securities in respect of which this Prospectus is being delivered (i)
in the case of Debt Securities, the title, aggregate principal amount,
denominations, maturity, rate of interest, if any (which may be fixed or
variable), or method of calculation thereof, time of payment of any interest,
any terms for redemption at the option of the Corporation or the holder, any
terms for sinking fund payments, subordination terms, if any, any conversion or
exchange rights, and the initial public offering price and the terms of the
offering thereof, (ii) in the case of Preferred Stock, the specific title, the
number of shares, any dividend, liquidation, redemption, conversion, voting or
other rights and whether interests in such Preferred Stock will be evidenced by
Depositary Shares (as defined herein) and in such event the Depositary (as
defined herein), the initial offering price and the terms of the offering
thereof and (iii) in the case of Common Stock, the number of shares, the initial
offering price and the terms of the offering thereof.
The Common Stock of the Corporation is quoted through the NASDAQ National
Market System under the symbol 'FTEN.' The accompanying Prospectus Supplement
also contains information, where applicable, as to any listing on a securities
exchange of the Securities covered by such Prospectus Supplement.
The Corporation may sell Securities to or through underwriters acting as
principals for their own account or as agents, and also may sell Securities
directly to other purchasers or through agents designated from time to time. The
accompanying Prospectus Supplement sets forth the names of any underwriters or
agents involved in the sale of the Securities in respect of which this
Prospectus is being delivered, the amounts of Securities, if any, to be
purchased by underwriters and the compensation, if any, of such underwriters or
agents. See 'Plan of Distribution.'
-------------------
THE DEBT SECURITIES WILL BE UNSECURED OBLIGATIONS OF THE CORPORATION
AND NO SECURITIES OFFERED HEREBY WILL BE SAVINGS ACCOUNTS, DEPOSITS OR
OTHER OBLIGATIONS OF ANY BANK SUBSIDIARY OF THE CORPORATION OR WILL
BE INSURED BY THE BANK INSURANCE FUND OR THE SAVINGS
ASSOCIATION INSURANCE FUND OF THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR BY ANY OTHER
GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
-------------------
THE DATE OF THIS PROSPECTUS IS MARCH 23, 1994
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'). The reports, proxy
statements and other information filed by the Corporation with the Commission
can be inspected and copied at the Commission's public reference facilities at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the following regional offices of the Commission: 7 World Trade Center, 13th
Floor, New York, New York 10007 and Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such information can
be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
This Prospectus constitutes a part of a registration statement on Form S-3
(the 'Registration Statement') filed by the Corporation with the Commission
under the Securities Act of 1933, as amended (the 'Securities Act'). As
permitted by the rules and regulations of the Commission, this Prospectus omits
certain of the information contained in the Registration Statement and reference
is hereby made to the Registration Statement and related exhibits for further
information with respect to the Corporation and the Securities offered hereby.
Statements contained herein concerning the provisions of any document filed as
an exhibit to the Registration Statement, incorporated by reference herein or
otherwise filed with the Commission are not necessarily complete, and in each
instance reference is made to the copy of such document so filed. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Corporation with the
Commission and are hereby incorporated by reference into this Prospectus: (1)
the Corporation's Current Report on Form 8-K, dated October 1, 1993, filed
October 18, 1993; (2) the Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993; (3) the description of the Corporation's
Common Stock included in the Corporation's registration statement on Form 10
(File No. 0-4491) filed on April 14, 1970 pursuant to Section 12 of the Exchange
Act (and any amendments or reports filed for the purpose of updating the
description); and (4) the description of the Corporation's rights to purchase
Participating Preferred Stock (the 'Rights') included in the Corporation's
registration statement on Form 8-A (File No. 0-4491) filed on September 8, 1989
pursuant to Section 12 of the Exchange Act. All other documents and reports
filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act from the
date of this Prospectus and prior to the termination of the offering of the
Securities shall be deemed to be incorporated by reference herein and shall be
deemed to be a part hereof from the date of the filing of such reports and
documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of the Registration Statement or this
Prospectus.
The Corporation will provide without charge to each person to whom a copy of
this Prospectus is delivered, on written or oral request of such person, a copy
of any or all documents which are incorporated herein by reference (not
including the exhibits to such documents, unless such exhibits are specifically
incorporated by reference in the document which this Prospectus incorporates).
Requests should be directed to the Treasurer of the Corporation, 165 Madison
Avenue, Memphis, Tennessee 38103; telephone number (901) 523-4444.
2
THE CORPORATION
The Corporation is a Tennessee corporation incorporated in 1968 and
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended (the 'BHCA'). Through First Tennessee Bank National Association (the
'Bank') and its other subsidiaries, the Corporation provides a broad range of
financial services. At December 31, 1993, the Corporation had consolidated total
assets of approximately $9.6 billion and consolidated total deposits of
approximately $7.1 billion. As of December 31, 1993, the Corporation ranked 63rd
among bank holding companies in the United States and first among bank holding
companies headquartered in Tennessee in terms of total assets.
The Corporation operates principally through the Bank, which as of
December 31, 1993 was the largest commercial bank headquartered in Tennessee
both in terms of total assets and deposits. At December 31, 1993, the Bank had
total assets of approximately $9.4 billion and total deposits of approximately
$7.0 billion. The Bank conducts a broad range of retail and commercial banking
and fiduciary services and had 211 banking locations at December 31, 1993. The
Bank also offers a comprehensive range of financial services, including bond
broker/agency services, mortgage banking and check clearing, to companies
nationally. Bond broker/agency services provided by the Bank consist primarily
of the sale of bank-eligible securities to other financial institutions.
Subsidiaries of the Corporation and the Bank are engaged primarily in providing
mortgage banking, integrated check processing solutions, discount brokerage,
equipment finance, venture capital, investment management and credit life
insurance.
The Corporation coordinates the financial resources of the consolidated
enterprise and maintains systems of financial, operational and administrative
control that allow coordination of selected policies and activities. The
Corporation derives substantially all of its consolidated total revenues from
the banking business of its subsidiaries. The Corporation's principal executive
offices are located at 165 Madison Avenue, Memphis, Tennessee 38103; telephone:
(901) 523-4444.
USE OF PROCEEDS
The Corporation intends to use the net proceeds of the sales of the
Securities for general corporate purposes, which may include the reduction of
indebtedness, investments in or extensions of credit to existing and future
subsidiaries and the financing of acquisitions or such other uses as may be set
forth in the accompanying Prospectus Supplement.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES AND
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS
For purposes of the following ratios, (i) earnings represent income from
continuing operations before income taxes, plus fixed charges, (ii) fixed
charges represent interest expense (excluding interest on deposits where
indicated) plus the estimated interest component of net rental expense and
(iii) combined fixed charges and preferred stock dividend requirements represent
interest expense (excluding interest on deposits where indicated), and an amount
equal to the pre-tax earnings required to meet applicable preferred stock
dividend requirements and the estimated interest component of net rental
expense. There were no shares of preferred stock outstanding during any of the
periods below indicated and therefore the ratio of earnings to combined fixed
charges and preferred stock dividend requirements would have been the same as
the ratio of earnings to fixed charges for each period indicated.
YEAR ENDED DECEMBER 31,
--------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
Ratio of earnings to fixed charges:
Including interest on deposits....................... 1.77x 1.52x 1.28x 1.19x 1.12x
Excluding interest on deposits....................... 4.69x 4.47x 2.94x 2.13x 1.67x
3
SUPERVISION AND REGULATION
The following discussion sets forth certain of the elements of the
comprehensive regulatory framework applicable to bank holding companies and
banks and provides certain specific information relevant to the Corporation and
its subsidiaries. Federal regulation of financial institutions such as the
Corporation and its subsidiaries is intended primarily for the protection of
depositors and the Federal Deposit Insurance Corporation Bank Insurance Fund
rather than shareholders or other creditors. See also 'Available Information'
and 'Incorporation of Certain Documents by Reference.'
GENERAL
As a bank holding company, the Corporation is subject to the regulation and
supervision of the Board of Governors of the Federal Reserve System (the
'Federal Reserve Board') under the BHCA. Under the BHCA, bank holding companies
may not in general directly or indirectly acquire the ownership or control of
more than 5% of the voting shares or substantially all of the assets of any
company, including a bank, without the prior approval of the Federal Reserve
Board. The BHCA also restricts the types of activities in which a bank holding
company and its subsidiaries may engage. Generally, activities are limited to
banking and activities found by the Federal Reserve Board to be so closely
related to banking as to be a proper incident thereto.
In addition, the BHCA generally prohibits the Federal Reserve Board from
approving an application by a bank holding company to acquire shares of a bank
or bank holding company located outside the acquiror's principal state of
operations unless such an acquisition is specifically authorized by statute in
the state in which the bank or bank holding company whose shares are to be
acquired is located. Tennessee has adopted legislation that authorizes
nationwide interstate bank acquisitions, subject to certain state law
reciprocity requirements, including the filing of an application with and
approval of the Tennessee Commissioner of Financial Institutions. The Tennessee
Bank Structure Act of 1974 prohibits a bank holding company from acquiring any
bank in Tennessee if the banks that it controls hold 16 1/2% or more of the
total deposits in individual, partnership and corporate demand and other
transaction accounts, savings accounts and time deposits in all federally
insured financial institutions in Tennessee, subject to certain limitations and
exclusions. As of December 31, 1993, the Corporation estimates that its
subsidiary banks (the 'Subsidiary Banks') held approximately 12% of such
deposits. Also, under this act, no bank holding company may acquire any bank in
operation for less than five years or begin a de novo bank in any county in
Tennessee with a population, in 1970, of 200,000 or less, subject to certain
exceptions. Under Tennessee law, branch banking is permitted in any county in
the state.
The Subsidiary Banks are subject to supervision and examination by
applicable federal and state banking agencies. The Bank is a national banking
association subject to regulation and supervision by the Comptroller of the
Currency (the 'Comptroller') as its primary federal regulator, as is First
Tennessee Bank National Association Mississippi, which is headquartered in
Southaven, Mississippi. The remaining Subsidiary Bank, Peoples and Union Bank,
is a Tennessee state-chartered bank that is not a member of the Federal Reserve
System, and therefore is subject to the regulations of and supervision by the
Federal Deposit Insurance Corporation (the 'FDIC') as well as state banking
authorities. In addition, all of the Subsidiary Banks are insured by, and
subject to regulation by, the FDIC. The Subsidiary Banks are subject to various
requirements and restrictions under federal and state law, including
requirements to maintain reserves against deposits, restrictions on the types
and amounts of loans that may be granted and the interest that may be charged
thereon and limitations on the types of investments that may be made, activities
that may be engaged in, and types of services that may be offered. Various
consumer laws and regulations also affect the operations of the Subsidiary
Banks. In addition to the impact of such regulation, commercial banks are
affected significantly by the actions of the Federal Reserve Board as it
attempts to control the money supply and credit availability in order to
influence the economy.
4
PAYMENT OF DIVIDENDS
The Corporation is a legal entity separate and distinct from its banking and
other subsidiaries. The principal source of cash flow of the Corporation,
including cash flow to pay dividends on its stock or principal (premium, if any)
and interest on debt securities, is dividends from the Subsidiary Banks. There
are statutory and regulatory limitations on the payment of dividends by the
Subsidiary Banks to the Corporation, as well as by the Corporation to its
shareholders.
Each Subsidiary Bank that is a national bank is required by federal law to
obtain the prior approval of the Comptroller for the payment of dividends if the
total of all dividends declared by the board of directors of such Subsidiary
Bank in any year will exceed the total of (i) its net profits (as defined and
interpreted by regulation) for that year plus (ii) the retained net profits (as
defined and interpreted by regulation) for the preceding two years, less any
required transfers to surplus. A national bank also can pay dividends only to
the extent that retained net profits (including the portion transferred to
surplus) exceed bad debts (as defined by regulation).
State-chartered banks are subject to varying restrictions on the payment of
dividends under applicable state laws. With respect to Peoples and Union Bank,
Tennessee law imposes dividend restrictions substantially similar to those
imposed under federal law on national banks, as described above.
If, in the opinion of the applicable federal bank regulatory authority, a
depository institution or a holding company is engaged in or is about to engage
in an unsafe or unsound practice (which, depending on the financial condition of
the depository institution or holding company, could include the payment of
dividends), such authority may require that such institution or holding company
cease and desist from such practice. The federal banking agencies have indicated
that paying dividends that deplete a depository institution's or holding
company's capital base to an inadequate level would be such an unsafe and
unsound banking practice. Moreover, the Federal Reserve Board, the Comptroller
and the FDIC have issued policy statements which provide that bank holding
companies and insured depository institutions generally should only pay
dividends out of current operating earnings.
In addition, under the Federal Deposit Insurance Corporation Improvement Act
of 1991 ('FDICIA'), an FDIC-insured depository institution may not make capital
distributions (including the payment of dividends) or pay any management fees to
its holding company or pay any dividend if it is undercapitalized or if such
payment would cause it to become undercapitalized. See '-- FDICIA.'
At December 31, 1993, under dividend restrictions imposed under applicable
federal and state laws, the Subsidiary Banks, without obtaining regulatory
approval, could legally declare aggregate dividends of approximately $168.2
million.
The payment of dividends by the Corporation and the Subsidiary Banks may
also be affected or limited by other factors, such as the requirement to
maintain adequate capital above regulatory guidelines.
TRANSACTIONS WITH AFFILIATES
There are various legal restrictions on the extent to which the Corporation
and its nonbank subsidiaries can borrow or otherwise obtain credit from the
Subsidiary Banks. There are also legal restrictions on the Subsidiary Banks'
purchases of or investments in the securities of and purchases of assets from
the Corporation and its nonbank subsidiaries, a Subsidiary Bank's loans or
extensions of credit to third parties collateralized by the securities or
obligations of the Corporation and its nonbank subsidiaries, the issuance of
guarantees, acceptances and letters of credit on behalf of the Corporation and
its nonbank subsidiaries, and certain bank transactions with the Corporation and
its nonbank subsidiaries, or with respect to which the Corporation and its
nonbank subsidiaries act as agent, participate or have a financial interest.
Subject to certain limited exceptions, a Subsidiary Bank (including for purposes
of this paragraph all subsidiaries of such Subsidiary Bank) may not extend
credit to the Corporation or to any other affiliate (other than another
Subsidiary Bank and certain exempted affiliates) in an amount which exceeds 10%
of the Subsidiary Bank's capital stock and surplus and may not extend credit in
the aggregate to all such affiliates in an amount which exceeds 20% of its
capital stock and surplus. Further, there are legal requirements as to the type,
amount and quality of
5
collateral which must secure such extensions of credit by the Subsidiary Banks
to the Corporation or to such other affiliates. Finally, extensions of credit
and other transactions between a Subsidiary Bank and the Corporation or other
such affiliates must be on terms and under circumstances, including credit
standards, that are substantially the same or at least as favorable to such
Subsidiary Bank as those prevailing at the time for comparable transactions with
non-affiliated companies.
CAPITAL ADEQUACY
The Federal Reserve Board has adopted risk-based capital guidelines for bank
holding companies. The minimum guideline for the ratio of total capital ('Total
Capital') to risk-weighted assets (including certain off-balance-sheet items,
such as standby letters of credit) is 8%. At least half of the Total Capital
must be composed of common stock, minority interests in the equity accounts of
consolidated subsidiaries, noncumulative perpetual preferred stock and a limited
amount of cumulative perpetual preferred stock, less goodwill and other
intangible assets, subject to certain exceptions ('Tier 1 Capital'). The
remainder may consist of qualifying subordinated debt, certain types of
mandatory convertible securities and perpetual debt, other preferred stock and a
limited amount of loan loss reserves. At December 31, 1993, the Corporation's
consolidated Tier 1 Capital and Total Capital ratios were 9.60% and 12.14%,
respectively.
In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum ratio of Tier 1 Capital to average assets, less goodwill and certain
other intangible assets subject to certain exceptions (the 'Leverage Ratio'), of
3% for bank holding companies that meet certain specific criteria, including
having the highest regulatory rating. All other bank holding companies generally
are required to maintain a Leverage Ratio of at least 3%, plus an additional
cushion of at least 100 to 200 basis points. The Corporation's Leverage Ratio at
December 31, 1993 was 6.55%. The guidelines also provide that bank holding
companies experiencing internal growth or making acquisitions will be expected
to maintain strong capital positions substantially above the minimum supervisory
levels without significant reliance on intangible assets. Furthermore, the
Federal Reserve Board has indicated that it will consider a 'tangible Tier 1
Capital leverage ratio' (deducting all intangibles) and other indicia of capital
strength in evaluating proposals for expansion or new activities.
Each of the Subsidiary Banks is subject to risk-based and leverage capital
requirements similar to those described above adopted by the Comptroller or the
FDIC, as the case may be. The Corporation believes that each of the Subsidiary
Banks was in compliance with applicable minimum capital requirements as of
December 31, 1993. Neither the Corporation nor any of the Subsidiary Banks has
been advised by any federal banking agency of any specific minimum Leverage
Ratio requirement applicable to it.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business and in certain circumstances
to the appointment of a conservator or receiver. See '-- FDICIA.'
All of the federal banking agencies have proposed regulations that would add
an additional risk-based capital requirement based upon the amount of an
institution's exposure to interest rate risk.
HOLDING COMPANY STRUCTURE AND SUPPORT OF SUBSIDIARY BANKS
Because the Corporation is a holding company, its right to participate in
the assets of any subsidiary upon the latter's liquidation or reorganization
will be subject to the prior claims of the subsidiary's creditors (including
depositors in the case of the Subsidiary Banks) except to the extent that the
Corporation may itself be a creditor with recognized claims against the
subsidiary. In addition, depositors of a bank, and the FDIC as their subrogee,
would be entitled to priority over other creditors in the event of liquidation
of a bank subsidiary.
Under Federal Reserve Board policy, the Corporation is expected to act as a
source of financial strength to, and to commit resources to support, each of the
Subsidiary Banks. This support may be required at times when, absent such
Federal Reserve Board policy, the Corporation may not be inclined to provide it.
In addition, any capital loans by a bank holding company to any of its
subsidiary banks are
6
subordinate in right of payment to deposits and to certain other indebtedness of
such subsidiary bank. In the event of a bank holding company's bankruptcy, any
commitment by the bank holding company to a federal bank regulatory agency to
maintain the capital of a subsidiary bank will be assumed by the bankruptcy
trustee and entitled to a priority of payment.
CROSS-GUARANTEE LIABILITY
Under the Federal Deposit Insurance Act (the 'FDIA'), a depository
institution insured by the FDIC can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC after August 9, 1989 in
connection with (i) the default of a commonly controlled FDIC-insured depository
institution or (ii) any assistance provided by the FDIC to any commonly
controlled FDIC-insured depository institution 'in danger of default.' 'Default'
is defined generally as the appointment of a conservator or receiver and 'in
danger of default' is defined generally as the existence of certain conditions
indicating that a default is likely to occur in the absence of regulatory
assistance. The FDIC's claim for damages is superior to claims of shareholders
of the insured depository institution or its holding company but is subordinate
to claims of depositors, secured creditors and holders of subordinated debt
(other than affiliates) of the commonly controlled insured depository
institution. The Subsidiary Banks are subject to these cross-guarantee
provisions. As a result, any loss suffered by the FDIC in respect of any of the
Subsidiary Banks would likely result in assertion of the cross-guarantee
provisions, the assessment of such estimated losses against the Corporation's
other Subsidiary Banks and a potential loss of the Corporation's investment in
such other Subsidiary Banks.
FDICIA
FDICIA, which was enacted on December 19, 1991, substantially revised the
depository institution regulatory and funding provisions of the FDIA and made
revisions to several other federal banking statutes. Among other things, FDICIA
requires the federal banking regulators to take 'prompt corrective action' in
respect of FDIC-insured depository institutions that do not meet minimum capital
requirements. FDICIA establishes five capital tiers: 'well capitalized,'
'adequately capitalized,' 'undercapitalized,' 'significantly undercapitalized'
and 'critically undercapitalized.' Under applicable regulations, an FDIC-insured
depository institution is defined to be well capitalized if it maintains a
Leverage Ratio of at least 5%, a risk-adjusted Tier 1 Capital Ratio of at least
6% and a Total Capital Ratio of at least 10% and is not subject to a directive,
order or written agreement to meet and maintain specific capital levels. An
insured depository institution is defined to be adequately capitalized if it
meets all of its minimum capital requirements as described above. An insured
depository institution will be considered undercapitalized if it fails to meet
any minimum required measure, significantly undercapitalized if it has a Total
Risk-Based Capital Ratio of less than 6%, a Tier 1 Risk-Based Capital Ratio of
less than 3% or a Leverage Ratio of less than 3% and critically undercapitalized
if it fails to maintain a level of tangible equity equal to at least 2% of total
assets. An insured depository institution may be deemed to be in a
capitalization category that is lower than is indicated by its actual capital
position if it receives an unsatisfactory examination rating.
FDICIA generally prohibits an FDIC-insured depository institution from
making any capital distribution (including payment of dividends) or paying any
management fee to its holding company if the depository institution would
thereafter be undercapitalized. Undercapitalized depository institutions are
subject to restrictions on borrowing from the Federal Reserve System. In
addition, undercapitalized depository institutions are subject to growth
limitations and are required to submit capital restoration plans. A depository
institution's holding company must guarantee the capital plan, up to an amount
equal to the lesser of 5% of the depository institution's assets at the time it
becomes undercapitalized or the amount of the capital deficiency when the
institution fails to comply with the plan for the plan to be accepted by the
applicable federal regulatory authority. The federal banking agencies may not
accept a capital plan without determining, among other things, that the plan is
based on realistic assumptions and is likely to succeed in restoring the
depository institution's capital. If a depository institution fails to submit an
acceptable plan, it is treated as if it is significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized,
7
requirements to reduce total assets and cessation of receipt of deposits from
correspondent banks. Critically undercapitalized depository institutions are
subject to appointment of a receiver or conservator, generally within 90 days of
the date on which they become critically undercapitalized.
The Corporation believes that at December 31, 1993 all of the Subsidiary
Banks were well capitalized under the criteria discussed above.
Various other legislation, including proposals to revise the bank regulatory
system and to limit the investments that a depository institution may make with
insured funds, is from time to time introduced in Congress.
BROKERED DEPOSITS AND 'PASS-THROUGH' INSURANCE
The FDIC has adopted regulations under FDICIA governing the receipt of
brokered deposits and 'pass-through' insurance. Under the regulations, a bank
cannot accept or rollover or renew brokered deposits unless (i) it is well
capitalized or (ii) it is adequately capitalized and receives a waiver from the
FDIC. A bank that cannot receive brokered deposits also cannot offer
'pass-through' insurance on certain employee benefit accounts. Whether or not it
has obtained such a waiver, an adequately capitalized bank may not pay an
interest rate on any deposits in excess of 75 basis points over certain
prevailing market rates specified by regulation. There are no such restrictions
on a bank that is well capitalized. Because it believes that all the Subsidiary
Banks were well capitalized as of December 31, 1993, the Corporation believes
the brokered deposits regulation will have no present effect on the funding or
liquidity of any of the Subsidiary Banks.
FDIC INSURANCE PREMIUMS
The Subsidiary Banks are required to pay semiannual FDIC deposit insurance
assessments. As required by FDICIA, the FDIC adopted a risk-based premium
schedule which has increased the assessment rates for most FDIC insured
depository institutions. Under the new schedule, the premiums initially range
from $.23 to $.31 for every $100 of deposits. Each financial institution is
assigned to one of three capital groups -- well capitalized, adequately
capitalized or undercapitalized -- and further assigned to one of three
subgroups within a capital group, on the basis of supervisory evaluations by the
institution's primary federal and, if applicable, state supervisors and other
information relevant to the institution's financial condition and the risk posed
to the applicable FDIC deposit insurance fund. The actual assessment rate
applicable to a particular institution will, therefore, depend in part upon the
risk assessment classification so assigned to the institution by the FDIC.
The FDIC is authorized by federal law to raise insurance premiums in certain
circumstances. Any increase in premiums would have an adverse effect on the
Subsidiary Banks' and the Corporation's earnings.
Under the FDIA, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices, is in
an unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order or condition imposed by a federal bank
regulatory agency.
DEPOSITOR PREFERENCE
The Omnibus Budget Reconciliation Act of 1993 provides that deposits and
certain claims for administrative expenses and employee compensation against an
insured depository institution would be afforded a priority over other general
unsecured claims against such an institution, including the Senior Securities,
in the 'liquidation or other resolution' of such an institution by any receiver.
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered hereunder (the 'Offered Debt Securities'), including the nature of any
8
variations from the following general provisions applicable to such Offered Debt
Securities, are described in the accompanying Prospectus Supplement relating to
such Offered Debt Securities.
Senior Debt Securities are to be issued under an Indenture (the 'Senior
Indenture'), between the Corporation and the trustee named in the applicable
Prospectus Supplement as the trustee therefor (the 'Senior Trustee').
Subordinated Debt Securities are to be issued under an Indenture (the
'Subordinated Indenture'), between the Corporation and The First National Bank
of Chicago as the trustee therefor (the 'Subordinated Trustee'). Copies of the
forms of the Senior Indenture and the Subordinated Indenture have been filed as
exhibits to the Registration Statement of which this Prospectus is a part. The
Senior Indenture and the Subordinated Indenture are sometimes herein referred to
collectively as the 'Indentures' and the Senior Trustee and the Subordinated
Trustee are sometimes herein referred to collectively as the 'Trustees.' The
following summaries of certain provisions of the Senior Debt Securities, the
Subordinated Debt Securities, the Senior Indenture and the Subordinated
Indenture, as modified or superseded by any applicable Prospectus Supplement,
are brief summaries of certain provisions thereof, do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all the
provisions of the Indenture applicable to a particular series of Debt Securities
(the 'Applicable Indenture'), including the definitions therein of certain
terms. Whenever particular provisions or defined terms in one or both of the
Indentures are referred to, such provisions or defined terms are incorporated
herein by reference. Section references used herein are references to the
Applicable Indenture. Capitalized terms not otherwise defined herein shall have
the meaning given to them in the Applicable Indenture.
GENERAL
The Debt Securities will be limited to the aggregate initial offering price
specified on the cover page of this Prospectus and will be direct, unsecured
obligations of the Corporation. The Debt Securities will not be deposits or
other obligations of a savings association or a bank and will not be insured by
the FDIC or any other governmental agency.
The Indentures do not limit the aggregate principal amount of Debt
Securities or of any particular series of Debt Securities which may be issued
thereunder and provide that Debt Securities issued thereunder may be issued from
time to time in one or more series, in each case with the same or various
maturities, at par or at a discount. (Section 301). The Indentures do not limit
the amount of other debt (including additional Senior Indebtedness or Other
Financial Obligations, each as defined in the Subordinated Indenture) that may
be issued by the Corporation and do not contain financial or similar restrictive
covenants. The Corporation expects from time to time to incur additional
indebtedness constituting Senior Indebtedness and Other Financial Obligations.
The Indentures provide that there may be more than one trustee (each, an
'Applicable Trustee') under the Indentures with respect to different series of
Debt Securities.
Because the Corporation is a holding company and a legal entity separate and
distinct from its subsidiaries, the rights of the Corporation to participate in
any distribution of assets of any subsidiary upon its liquidation of assets or
reorganization or otherwise (and thus the ability of Holders of Debt Securities
to benefit indirectly from such distribution) would be subject to the prior
claims of creditors of that subsidiary, except to the extent that the
Corporation itself may be a creditor of that subsidiary with recognized claims.
Claims on the Corporation's Subsidiary Banks by creditors other than the
Corporation include substantial obligations with respect to deposit liabilities
(which have priority in liquidation) and federal funds purchased, securities
sold under repurchase agreements, other short-term borrowing and various other
financial obligations.
The Indentures do not contain any provision intended to provide protection
to Holders of Debt Securities against a sudden or dramatic decline in credit
quality of the Corporation that could result from a takeover, recapitalization,
special dividend or other restructuring, although the Corporation's (or a third
party's) ability to engage in such transactions may be regulated or limited by
various bank regulatory agencies.
Reference is made to the accompanying Prospectus Supplement for the
following terms of the Offered Debt Securities offered thereby: (1) the title of
the Offered Debt Securities; (2) whether the
9
Offered Debt Securities are Senior Debt Securities or Subordinated Debt
Securities; (3) any limit upon the aggregate principal amount of the Offered
Debt Securities and the percentage of such principal amount at which such
Offered Debt Securities may be issued; (4) the date or dates on which the
principal of the Offered Debt Securities is scheduled to become payable (the
'Stated Maturity'); (5) the rate or rates (which may be fixed or variable) per
annum at which the Offered Debt Securities will bear interest, or the method of
determining such rate or rates, if any, the date or dates from which any such
interest will accrue, the Interest Payment Dates on which any such interest will
be payable, the Regular Record Date for the interest payable on any Interest
Payment Date, the Person to whom interest or principal on any Offered Debt
Security of such series will be payable, if other than the Person in whose name
that Offered Debt Security (or one or more predecessor Debt Securities) is
registered at the close of business on the Regular Record Date for such interest
and the extent to which, or the manner in which, any interest payable on a
permanent global Offered Debt Security on an Interest Payment Date will be paid;
(6) if other than the location specified in this Prospectus, the place or places
where the principal of and premium, if any, and interest on the Offered Debt
Securities will be payable; (7) the period or periods within which, the price or
prices at which and the terms and conditions upon which the Offered Debt
Securities will, pursuant to any mandatory sinking fund provisions or otherwise,
or may, pursuant to any optional sinking fund provisions or otherwise, be
redeemed in whole or in part by the Corporation; (8) the period or periods
within which, the price or prices at which and the terms and conditions upon
which the Offered Debt Securities may be repaid, in whole or in part, at the
option of the Holders thereof; (9) if other than denominations of $1,000 and any
integral multiple thereof, the denominations in which the Offered Debt
Securities shall be issuable; (10) if other than the principal amount thereof,
the portion of the principal amount of the Offered Debt Securities which shall
be payable upon declaration of acceleration of the Maturity thereof; (11) if
other than U.S. dollars, the currency or currency unit of payment of principal
and premium, if any, and interest on such Offered Debt Securities, and any index
used to determine the amount of payment of principal or premium, if any, and
interest on such Offered Debt Securities; (12) whether the Offered Debt
Securities are to be issuable in permanent global form and, in such case, the
initial depositary with respect thereto and the circumstances under which such
permanent global Offered Debt Security may be exchanged; (13) whether the
subordination provisions summarized below, or different subordination
provisions, including a different definition of 'Senior Indebtedness,' 'Entitled
Persons,' 'Existing Subordinated Indebtedness' or 'Other Financial Obligations,'
shall apply to the Offered Debt Securities that are Subordinated Debt
Securities; (14) in the case of convertible Subordinated Debt Securities,
whether the conversion provisions summarized below, or different conversion
provisions, shall apply to the Offered Debt Securities that are convertible
Subordinated Debt Securities, and the Initial Conversion Price, the Initial
Conversion Date and the Final Conversion Date therefor and any other terms
relating to the conversion thereof into Common Stock of the Corporation; and
(15) any other terms of the Offered Debt Securities not specified in this
Prospectus. (Section 301).
FORM, REGISTRATION AND TRANSFER
Unless otherwise indicated in the applicable Prospectus Supplement,
principal, premium, if any, and interest, if any, on the Debt Securities will be
payable, and the Debt Securities will be transferable, at the agency or office
of the Corporation maintained for such purpose in the Borough of Manhattan, The
City of New York except that interest may be paid at the option of the
Corporation by check mailed to the address of the Holder entitled thereto as it
appears on the Security Register. (Sections 301, 305 and 1002).
The Corporation, the Trustee and any agent of the Corporation or Trustee may
treat the Person in whose name an Offered Debt Security is registered as the
owner for all purposes, including for the purpose of receiving payment of
principal (and premium, if any) and interest on such Offered Debt Security.
Unless otherwise indicated in the applicable Prospectus Supplement, the Debt
Securities will be issued only in fully registered form, without coupons (the
'Registered Securities'), in denominations of $1,000 and any integral multiple
thereof. (Section 302). The Indentures provide that Offered Debt Securities of
any series may be issuable in permanent global form. (Section 301). No service
charge will
10
be made for any registration of transfer or exchange of the Debt Securities, but
the Corporation may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith. (Section 305).
Both Senior Debt Securities and Subordinated Debt Securities may be issued
as Original Issue Discount Securities to be offered and sold at a substantial
discount below their stated principal amount. Federal income tax consequences
and other special considerations applicable to any such Original Issue Discount
Securities will be described in the applicable Prospectus Supplement. 'Original
Issue Discount Security' means any Security which provides for an amount less
than the principal amount thereof to be due and payable upon the declaration of
acceleration of the Maturity thereof in accordance with the terms of the
Applicable Indenture. (Section 101).
Reference is made to the applicable Prospectus Supplement relating to any
series of Debt Securities that are Original Issue Discount Securities for the
particular provisions relating to acceleration of the Maturity of a portion of
the principal amount of such series of Original Issue Discount Securities upon
the occurrence of an Event of Default and the continuation thereof.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities ('Global Securities') that will be
deposited with, or on behalf of, a depositary (the 'Global Depositary')
identified in the applicable Prospectus Supplement. Global Securities may be
issued in either registered or bearer form and in either temporary or permanent
form. Unless and until it is exchanged in whole or in part for individual
certificates evidencing Debt Securities in definitive form represented thereby,
a Global Security may not be transferred except as a whole by the Global
Depositary for such Global Security to a nominee of such Global Depositary or by
a nominee of such Global Depositary to such Global Depositary or another nominee
of such Global Depositary or by such Global Depositary or any such nominee to a
successor of such Global Depositary or a nominee of such successor. (Section
305).
The specific terms of the depositary arrangement with respect to any Debt
Securities of a series will be described in the applicable Prospectus
Supplement. The Corporation anticipates that the following provisions will
generally apply to all depositary arrangements although no assurance can be
given that such will be the case.
Upon the issuance of a Global Security, the Global Depositary or its nominee
will credit, on its book-entry registration and transfer system, the respective
principal amounts of the Debt Securities represented by such Global Security to
the accounts of institutions that have accounts with such Global Depositary
('participants'). The accounts to be credited shall be designated by the
underwriters or agents of such Debt Securities or by the Corporation, if such
Debt Securities are offered and sold directly by the Corporation. Ownership of
beneficial interests in a Global Security will be limited to participants or
persons that may hold interests through participants. Ownership of beneficial
interests in such Global Securities will be shown on, and the transfer of that
ownership will be effected only through, records maintained by the Global
Depositary or its nominee for such Global Securities (with respect to interests
of participants) and the records of participants (with respect to persons other
than 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 Security.
So long as the Global Depositary, or its nominee, is the owner of a Global
Security, such Global Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Debt Securities represented by such
Global Security for all purposes under the Applicable Indenture. Except as set
forth below, owners of beneficial interests in a Global Security will not be
entitled to have Debt Securities represented by such Global Security registered
in their names, will not receive or be entitled to receive physical delivery of
Debt Securities of such series in definitive form and will not be considered the
owners or holders thereof under the Applicable Indenture.
Subject to the restrictions discussed under 'Description of Debt
Securities -- Form, Registration and Transfer,' payment of principal of,
premium, if any, and interest, if any, on, Debt Securities
11
registered in the name of or held by a Global Depositary or its nominee will be
made to the Global Depositary or its nominee, as the case may be, as the
registered owner or the Holder of the Global Security representing such Debt
Securities. None of the Corporation, the Applicable Trustee, any Paying Agent or
the Security Registrar for such Debt Securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in a Global Security for such Debt Securities
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Corporation expects that the Global Depositary for Debt Securities of a
series, upon receipt of any payment of principal, premium, if any, or any
interest in respect of a permanent Global Security, will credit immediately
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Security
as shown on the records of such Global Depositary or its nominee. The
Corporation also expects that payments by participants to owners of beneficial
interests in such Global 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,' and will be the responsibility of such participants.
If the Global Depositary for Debt Securities of a series is at any time
unwilling, unable or ineligible to continue as Global Depositary and a successor
Global Depositary is not appointed by the Corporation within 90 days or an Event
of Default has occurred and is continuing, the Corporation will issue Debt
Securities of such series in definitive form in exchange for the Global Security
or Securities representing the Debt Securities of such series. In addition, the
Corporation may at any time and in its sole discretion, subject to any
limitations described in the applicable Prospectus Supplement, determine not to
have any Debt Securities of a series represented by one or more Global
Securities and, in such event, will issue Debt Securities of such series in
definitive form in exchange for the Global Security or Securities representing
such Debt Securities. Further, if the Corporation so specifies with respect to
the Debt Securities of a series, an owner of a beneficial interest in a Global
Security representing Debt Securities of such series may, on terms acceptable to
the Corporation and the Global Depositary for such Global Security, receive Debt
Securities of such series in definitive form in exchange for such beneficial
interests, subject to any limitations described in the applicable Prospectus
Supplement relating to such Debt Securities. In any such instance, an owner of a
beneficial interest in a Global Security will be entitled to physical delivery
in definitive form of Debt Securities of the series represented by such Global
Security equal in principal amount to such beneficial interest and to have such
Debt Securities registered in its name (if the Debt Securities of such series
are issuable as Registered Securities).
SUBORDINATION OF THE SUBORDINATED DEBT SECURITIES
The payment of the principal of, premium, if any, and interest on the
Subordinated Debt Securities will, to the extent set forth in the Subordinated
Indenture, be subordinated in right of payment to the prior payment in full of
all Senior Indebtedness. Unless otherwise specified in the applicable Prospectus
Supplement, in certain events of insolvency, the payment of the principal of,
premium, if any, and interest on the Subordinated Debt Securities will, to the
extent set forth in the Subordinated Indenture, also be effectively subordinated
in right of payment to the prior payment in full of all Other Financial
Obligations. Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshalling of assets or any bankruptcy, insolvency or similar
proceedings of the Corporation, the holders of all Senior Indebtedness will
first be entitled to receive payment in full of all amounts due or to become due
thereon before the Holders of the Subordinated Debt Securities will be entitled
to receive any payment in respect of the principal of or interest on the
Subordinated Debt Securities (Section 402 of the Subordinated Indenture). If
upon any such payment or distribution of assets to creditors there remains,
after giving effect to such subordination provisions in favor of the holders of
Senior Indebtedness, any amount of cash, property or securities available for
payment or distribution in respect of Subordinated Debt Securities (defined in
the Subordinated Indenture as 'Excess Proceeds') and if, at such time, any
Entitled Persons (as defined in the Subordinated Indenture) in respect of Other
Financial Obligations
12
have not received payment in full of all amounts due or to become due on or in
respect of such Other Financial Obligations, then such Excess Proceeds shall
first be applied to pay or provide for the payment in full of such Other
Financial Obligations before any payment or distribution may be made in respect
of the Subordinated Debt Securities. (Section 1415 of the Subordinated
Indenture). In the event of the acceleration of the Maturity of any Subordinated
Debt Securities, the holders of all Senior Indebtedness will first be entitled
to receive payment in full of all amounts due thereon before the Holders of the
Subordinated Debt Securities will be entitled to receive any payment upon the
principal of, premium, if any, or interest on the Subordinated Debt Securities.
No payments on account of the principal of, or premium, if any, or interest on
the Subordinated Debt Securities or on account of the purchase or acquisition
thereof shall 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 Senior Indebtedness permitting the holders thereof to accelerate the
maturity thereof, or if any judicial proceeding shall be pending with respect to
any such default. (Section 1404 of the Subordinated Indenture).
By reason of such subordination in favor of the holders of Senior
Indebtedness, in the event of insolvency, creditors of the Corporation who are
not holders of Senior Indebtedness or Holders of the Subordinated Debt
Securities may recover less, ratably, than the holders of Senior Indebtedness
and may recover more, ratably, than the Holders of the Subordinated Debt
Securities. By reason of the obligation of the Holders of Subordinated Debt
Securities to pay over any Excess Proceeds to Entitled Persons in respect to
Other Financial Obligations, in the event of insolvency, holders of Existing
Subordinated Indebtedness may recover less, ratably, than Entitled Persons in
respect of Other Financial Obligations and may recover more, ratably, than the
Holders of Subordinated Debt Securities (other than Existing Subordinated
Indebtedness).
Unless otherwise specified in the applicable Prospectus Supplement, 'Senior
Indebtedness' of the Corporation is defined in the Subordinated Indenture to
mean the principal of, premium, if any, and interest on (1) all indebtedness of
the Corporation (including indebtedness of others guaranteed by the
Corporation), other than the Subordinated Debt Securities and obligations on
account of Existing Subordinated Indebtedness, whether outstanding on the date
of execution of the Indenture or thereafter created, incurred or assumed which
is (i) for money borrowed or (ii) evidenced by a note or similar instrument
given in connection with the acquisition of any business, properties or assets
of any kind, and (2) amendments, renewals, extensions, modifications or
refundings of any such indebtedness, unless in any case in the instrument
creating or evidencing such indebtedness or pursuant to which the same is
outstanding it is provided that such indebtedness is not superior in right of
payment to the Subordinated Debt Securities or is to rank pari passu with or
subordinate to the Subordinated Debt Securities. (Section 101 of the
Subordinated Indenture).
Unless otherwise specified in the applicable Prospectus Supplement, 'Other
Financial Obligations' means (a) all obligations of the Corporation under direct
credit substitutes, (b) obligations of, or any such obligation directly or
indirectly guaranteed by, the Corporation for purchased money or funds, (c) any
deferred obligation of, or any such obligation directly or indirectly guaranteed
by, the Corporation incurred in connection with the acquisition of any business,
properties or assets not evidenced by a note or similar instrument given in
connection therewith, and (d) all obligations of the Corporation to make payment
pursuant to the terms of financial instruments, such as (1) securities contracts
and foreign currency exchange contracts, (2) derivative instruments, such as
swap agreements (including interest rate and foreign exchange rate swap
agreements), cap agreements, floor agreements, collar agreements, interest rate
agreements, foreign exchange rate agreements, options, commodity futures
contracts, commodity option contracts, and (3) in the case of both (1) and (2)
above, similar financial instruments, other than (x) obligations on account of
Senior Indebtedness, and (y) obligations on account of indebtedness for money
borrowed ranking pari passu with or subordinate to the Subordinated Debt
Securities. Unless otherwise specified in the applicable Prospectus Supplement
relating to the particular series of Subordinated Debt Securities offered
thereby, 'Entitled Person' means any person who is entitled to payment pursuant
to the terms of Other Financial Obligations. (Section 101 of the Subordinated
Indenture).
13
Unless otherwise specified in the applicable Prospectus Supplement,
'Existing Subordinated Indebtedness' means the obligations of the Corporation
under securities issued pursuant to the indenture, dated as of June 1, 1987,
between the Corporation and Security Pacific National Trust Company (New York),
as trustee, relating to the Corporation's 10 3/8% Subordinated Capital Notes due
1999 (the 'Subordinated Capital Notes'). (Section 101 of the Subordinated
Indenture). As of the date of this Prospectus, there was outstanding
approximately $75.0 million aggregate principal amount of Existing Subordinated
Indebtedness.
The Corporation's obligations under the Subordinated Debt Securities shall
rank pari passu in right of payment with each other and with the Existing
Subordinated Indebtedness, subject (unless otherwise specified in the applicable
Prospectus Supplement relating to the particular series of Subordinated Debt
Securities offered thereby) to the obligations of the Holders of Subordinated
Debt Securities (other than Existing Subordinated Indebtedness) to pay over any
Excess Proceeds to Entitled Persons in respect of Other Financial Obligations as
provided in the Subordinated Indenture.
The applicable Prospectus Supplement may further describe the provisions, if
any, applicable to the subordination of the Subordinated Debt Securities of a
particular series offered thereby.
CONVERSION OF THE SUBORDINATED DEBT SECURITIES
If so specified in the applicable Prospectus Supplement, Subordinated Debt
Securities offered hereby will be convertible into Common Stock of the
Corporation prior to redemption during the time period specified in the
applicable Prospectus Supplement, initially at the Initial Conversion Price
therefor specified in such Prospectus Supplement ('Convertible Subordinated Debt
Security'). (Section 1501 of the Subordinated Indenture).
The conversion price will be subject to adjustment in certain events,
including (i) dividends (and other distributions) payable in Common Stock on any
class of capital stock of the Corporation, (ii) the issuance to all holders of
Common Stock of rights or warrants entitling them to subscribe for or purchase
Common Stock at less than the current market price (as defined), (iii)
subdivisions, combinations and reclassifications of Common Stock, and (iv)
distributions to all holders of Common Stock of evidences of indebtedness of the
Corporation or assets (including securities, but excluding those dividends,
rights, warrants and distributions referred to above and dividends and
distributions paid in cash out of the retained earnings of the Corporation). In
addition to the foregoing adjustments, the Corporation will be permitted to make
such reductions in the conversion price as it considers to be advisable in order
that any event treated for Federal income tax purposes as a dividend of stock or
stock rights will not be taxable to the holders of the Common Stock. (Section
1504 of the Subordinated Indenture). In case of certain consolidations or
mergers to which the Company is a party or the transfer of substantially all of
the assets of the Corporation, each Convertible Subordinated Debt Security then
outstanding would, without the consent of any Holders of such Convertible
Subordinated Debt Security, become convertible only into the kind and amount of
securities, cash and other property receivable upon the consolidation, merger or
transfer by a holder of the number of shares of Common Stock into which such
Convertible Subordinated Debt Security might have been converted immediately
prior to such consolidation, merger or transfer (assuming such holder of Common
Stock failed to exercise any rights of election and received per share the kind
and amount received per share by a plurality of non-electing shares). (Section
1512 of the Subordinated Indenture). Generally no adjustments to the conversion
price will be required to be made until cumulative adjustments amount to 1% or
more of the conversion price as last adjusted. (Section 1505 of the Subordinated
Indenture).
Fractional shares of Common Stock are not to be issued upon conversion, but,
in lieu thereof, the Corporation will pay a cash adjustment based upon market
price (as determined by the Board of Directors). (Section 1504 of the
Subordinated Indenture). Convertible Subordinated Debt Securities surrendered
for conversion during the period from the close of business on any Regular
Record Date next preceding any Interest Payment Date to the opening of business
on such Interest Payment Date (except Convertible Subordinated Debt Securities
called for redemption on a Redemption Date within such period) must be
accompanied by payment of an amount equal to the interest thereon which the
registered Holder is to receive. If any Convertible Subordinated Debt Security
is converted after any Regular Record Date and on or prior to the next
succeeding Interest Payment Date (other than any
14
Convertible Subordinated Debt Security whose Maturity is prior to such Interest
Payment Date), interest whose Stated Maturity is on such Interest Payment Date
shall be payable on such Interest Payment Date notwithstanding such conversion,
and such interest (whether or not punctually paid or duly provided for) shall be
paid to the Person in whose name that Convertible Subordinated Debt Security (or
one or more Predecessor Securities) is registered at the close of business on
such Regular Record Date. Except where Convertible Subordinated Debt Securities
surrendered for conversion must be accompanied by payment as described above, no
interest on converted Convertible Subordinated Debt Securities will be payable
by the Corporation on any Interest Payment Date subsequent to the date of
conversion. No other payment or adjustment for interest or dividends is to be
made upon conversion. (Sections 307 and 1503 of the Subordinated Indenture).
If at any time the Corporation makes a distribution of property to its
shareholders which would be taxable to such shareholders as a dividend for
Federal income tax purposes (e.g., distributions of evidences of indebtedness or
assets of the Corporation, but generally not stock dividends or rights to
subscribe for Common Stock) and, pursuant to the anti-dilution provisions of the
Subordinated Indenture, the conversion price of Convertible Subordinated Debt
Securities is reduced, such reduction may be deemed to be the payment of a
taxable dividend to holders of Convertible Subordinated Debt Securities.
LIMITATION ON DISPOSITION OF VOTING STOCK OF PRINCIPAL SUBSIDIARY BANKS
The Senior Indenture contains a covenant by the Corporation that it will not
sell, assign, transfer, grant a security interest in or otherwise dispose of any
shares of, securities convertible into or options, warrants or rights to
subscribe for or purchase shares of, Voting Stock (other than directors'
qualifying shares) of any Principal Subsidiary Bank and that it will not permit
any Principal Subsidiary Bank to issue (except to the Corporation) shares of,
securities convertible into, or options, warrants or rights to subscribe or
purchase shares of, Voting Stock, except for sales, assignments, transfers,
grants of security interests or other dispositions which: (1) are for fair
market value (as determined by the Board of Directors of the Corporation) and,
after giving effect to such dispositions and to any potential dilution, the
Corporation will own not less than 80% of the shares of Voting Stock of such
Principal Subsidiary Bank; (2) are made in compliance with an order of a court
or regulatory authority of competent jurisdiction, a condition imposed by any
such court or authority permitting the acquisition by the Corporation, directly
or indirectly, of any other bank or entity the activities of which are legally
permissible for a bank holding company or a subsidiary thereof to engage in, or
an undertaking made to such authority in connection with such an acquisition
(provided that the assets of the bank or entity being acquired and its
consolidated subsidiaries equal or exceed 75% of the assets of such Principal
Subsidiary Bank or such Subsidiary owning, directly or indirectly, any shares of
voting stock of such Principal Subsidiary Bank and its respective consolidated
Subsidiaries on the date of acquisition); or (3) are made to the Corporation or
any Wholly-Owned Subsidiary if such Wholly-Owned Subsidiary agrees to be bound
by this covenant and the Corporation agrees to maintain such Wholly-Owned
Subsidiary as a Wholly-Owned Subsidiary. Notwithstanding the foregoing, any
Principal Subsidiary Bank may be merged into or consolidated with another
banking institution organized under the laws of the United States, any State
thereof or the District of Columbia, if after giving effect to such merger or
consolidation, the Corporation or any Wholly-Owned Subsidiary owns at least 80%
of the Voting Stock of such other banking institution then issued and
outstanding free and clear of any security interest and if, immediately after
giving effect thereto, no Event of Default, and no event which, after notice or
lapse of time or both, would become an Event of Default, shall have happened and
be continuing. (Sections 101 and 1008 of the Senior Indenture). A 'Principal
Subsidiary Bank' is defined in the Senior Indenture to mean any Subsidiary which
is a Bank and has total assets equal to 30% or more of the consolidated assets
of the Corporation determined as of the date of the most recent audited
financial statements of such entities. At present, the only Principal Subsidiary
Bank is First Tennessee Bank National Association. 'Voting Stock' is defined in
the Senior Indenture to mean stock of the class or classes having general voting
power under ordinary circumstances to elect at least a majority of the board of
directors, managers or trustees of such corporation (irrespective of whether or
not at the time stock of any other class or classes shall have contingent voting
rights).
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The Subordinated Indenture contains no such covenant and the foregoing
covenant is not a covenant for the benefit of any series of Subordinated Debt
Securities. The Indenture relating to the Subordinated Capital Notes, however,
does contain a substantially identical covenant for the benefit of such
Subordinated Capital Notes.
DEFAULTS
THE SENIOR INDENTURE
An Event of Default is defined in the Senior Indenture as, with respect to
Senior Debt Securities of any series issued thereunder: (1) default in payment
of principal of or premium, if any, on any Senior Debt Security of that series
at Maturity; (2) default for 30 days in payment of interest on any Senior Debt
Security of that series; (3) default in the deposit of any sinking fund payment
when due in respect of that series; (4) default in the performance, or breach,
of any other covenant of the Corporation in the Senior Indenture or in the
Senior Debt Securities of that series, continued for 30 days after written
notice to the Corporation by the Senior Trustee or to the Corporation and the
Senior Trustee by the Holders of not less than 25% of the aggregate principal
amount of the Outstanding Senior Debt Securities of that series; (5) failure to
pay when due any indebtedness of the Corporation or any Principal Subsidiary
Bank for borrowed money in excess of $5,000,000, or acceleration of the maturity
of any such indebtedness in excess of such amount if acceleration results from a
default under the instrument giving rise to such indebtedness and is not
annulled within 30 days after due notice, unless in either case such default is
contested in good faith by appropriate proceedings; (6) certain events of
bankruptcy, insolvency or reorganization of the Corporation, or any Principal
Subsidiary Bank; and (7) any other Event of Default with respect to Senior Debt
Securities of that series that is specified in the applicable Prospectus
Supplement. (Section 501 of the Senior Indenture).
The Senior Indenture provides that, if any Event of Default with respect to
Senior Debt Securities of any series at the time outstanding thereunder occurs
and is continuing, either the Senior Trustee or the Holders of not less than 25%
in principal amount of the Outstanding Senior Debt Securities of that series may
declare the principal amount (or, if the Senior Debt Securities of that series
are Original Issue Discount Securities, such portion of the principal amount as
may be specified in the terms of that series) of all Senior Debt Securities of
that series to be due and payable immediately (provided that no such declaration
is required upon certain events of bankruptcy). The Holders of a majority in
aggregate principal amount of the Outstanding Senior Debt Securities of that
series may annul a declaration of acceleration of the Senior Debt Securities of
such series, but only if all Events of Default have been remedied and all
payments due on the Senior Debt Securities of that series (other than those due
as a result of acceleration) have been made and certain other conditions have
been met. (Section 502 of the Senior Indenture). Subject to the duty of the
Senior Trustee upon the occurrence and continuation of an Event of Default to
act with the required standard of care, the Senior Trustee will be under no
obligation to exercise any of its rights or powers under the Senior Indenture at
the request or direction of any of the Holders of Senior Debt Securities, unless
such Holders shall have offered to the Senior Trustee reasonable indemnity.
(Section 603 of the Senior Indenture). The Holders of a majority in aggregate
principal amount of the Outstanding Senior Debt Securities of that series will
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Senior Trustee or exercising any trust or power
conferred on the Senior Trustee. (Section 512 of the Senior Indenture). The
Holders of a majority in aggregate principal amount of the Outstanding Senior
Debt Securities of that series may waive any past default under the Senior
Indenture with respect to such series, except a default in the payment of
principal or interest or a default in respect of each covenant in the Senior
Indenture which cannot be modified without the consent of the Holder of each
Outstanding Senior Debt Security of the series affected. (Section 513 of the
Senior Indenture). See the second paragraph under 'Modification and Waiver'
below. In the event of the bankruptcy, insolvency or reorganization of the
Corporation, the claims of Holders of Senior Debt Securities would be subject as
to enforcement to the broad equity power of a Federal Bankruptcy Court, and to
the determination by that court of the nature of the rights of the Holders.
The Senior Indenture contains a provision entitling the Senior Trustee,
subject to the duty of the Senior Trustee upon the occurrence and continuation
of an Event of Default to act with the required
16
standard of care, to be indemnified by the Holders of any series of Outstanding
Senior Debt Securities thereunder before proceeding to exercise any right or
power under the Indenture at the request of the Holders of such series of Senior
Debt Securities. (Section 603 of the Senior Indenture). The Senior Indenture
provides that the Holders of a majority in principal amount of Outstanding
Senior Debt Securities thereunder of any series may direct the time, method and
place of conducting any proceeding for any remedy available to the Senior
Trustee, or exercising any trust or other power conferred on the Senior Trustee,
with respect to the Senior Debt Securities of such series, provided that the
Senior Trustee may decline to act if such direction is contrary to law or the
Senior Indenture. (Section 512 of the Senior Indenture).
The Corporation will file annually with the Senior Trustee a certificate as
to compliance with all conditions and covenants in the Senior Indenture.
(Section 1004 of the Senior Indenture).
THE SUBORDINATED INDENTURE
Payment of principal of the Subordinated Debt Securities may be accelerated
only upon an Event of Default (as defined below). There is no right of
acceleration in the case of a default in the payment of interest or the payment
of principal prior to the date of Maturity or a default in the performance of
any other covenant of the Corporation in the Subordinated Indenture, unless the
terms of a particular series of Subordinated Debt Securities specifically
provide otherwise, in which case any such extension of such right of
acceleration will be described in the applicable Prospectus Supplement.
An 'Event of Default' is defined in the Subordinated Indenture as certain
events involving the bankruptcy, insolvency or reorganization of the Corporation
and any other Event of Default which may be provided for with respect to the
Subordinated Debt Securities of that series. (Section 501 of the Subordinated
Indenture). A 'Default,' with respect to Subordinated Debt Securities of that
series, is defined in the Subordinated Indenture to include: (1) any Event of
Default with respect to any Subordinated Debt Securities of that series; (2) a
default in the payment of principal or premium, if any, of any Subordinated Debt
Security of that series at its Maturity; (3) default in the payment of any
interest on any Subordinated Debt Security of that series when due, continued
for 30 days; (4) default in the making of any sinking fund payment; (5) default
in the performance, or breach, of any other covenant or warranty of the
Corporation in the Subordinated Indenture or in the Subordinated Debt Securities
of that series, continued for 30 days after written notice to the Corporation by
the Subordinated Trustee or to the Corporation and the Subordinated Trustee by
the Holders of not less than 25% in aggregate principal amount of the
Outstanding Subordinated Debt Securities of such series; or (6) any other
Default with respect to Subordinated Debt Securities of that series that is
specified in the applicable Prospectus Supplement. (Section 503 of the
Subordinated Indenture). If an Event of Default with respect to the Subordinated
Debt Securities of any series occurs and is continuing, either the Subordinated
Trustee or the Holders of not less than 25% in aggregate principal amount of the
Outstanding Subordinated Debt Securities of that series may accelerate the
maturity of all Outstanding Subordinated Debt Securities of such series. The
Holders of a majority in aggregate principal amount of the Outstanding
Subordinated Debt Securities of that series may annul a declaration of
acceleration of the Subordinated Debt Securities of such series, but only if all
Events of Default have been remedied and all payments due on the Subordinated
Debt Securities of that series (other than those due as a result of
acceleration) have been made and certain other conditions have been met.
(Section 502 of the Subordinated Indenture). Subject to the duty of the
Subordinated Trustee upon the occurrence and continuation of a Default to act
with the required standard of care, the Subordinated Trustee will be under no
obligation to exercise any of its rights or powers under the Subordinated
Indenture at the request or direction of any of the Holders of Subordinated Debt
Securities, unless such Holders shall have offered to the Subordinated Trustee
reasonable indemnity. (Section 603 of the Subordinated Indenture). The Holders
of a majority in aggregate principal amount of the Outstanding Subordinated Debt
Securities of that series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Subordinated
Trustee or exercising any trust or power conferred on the Subordinated Trustee.
(Section 512 of the Subordinated Indenture). The Holders of a majority in
aggregate principal amount of the Outstanding Subordinated Debt Securities of
that series may waive any past default under the Subordinated
17
Indenture with respect to such series, except a default in the payment of
principal or interest or a default in respect of a covenant in the Subordinated
Indenture which cannot be modified without the consent of the Holder of each
Outstanding Subordinated Debt Security of the series affected. (Section 513 of
the Subordinated Indenture). See the second paragraph under 'Modification and
Waiver' below.
In the event of the bankruptcy, insolvency or reorganization of the
Corporation, the claims of the Holders of Subordinated Debt Securities would be
subject as to enforcement to the broad equity power of a Federal Bankruptcy
Court, and to the determination by that court of the nature of the rights of the
Holders.
The Corporation will file annually with the Subordinated Trustee a
certificate as to compliance with all conditions and covenants in the
Subordinated Indenture. (Section 1004 of the Subordinated Indenture).
DEFEASANCE AND DISCHARGE
Each Indenture provides that the terms of any series of Debt Securities
issued thereunder may provide that the Corporation may terminate all or certain
of its obligations under such Indenture with respect to the Debt Securities of
such series on the terms and subject to the conditions contained in the
Applicable Indenture, by (a) depositing irrevocably with the Applicable Trustee
as trust funds in trust (1) in the case of Debt Securities denominated in a
foreign currency, money in such foreign currency or Foreign Government
Obligations (as defined below) of the foreign government or governments issuing
such foreign currency which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will provide, not
later than one day before the due date of any payment, such foreign currency,
(2) in the case of Debt Securities denominated in U.S. dollars, U.S. dollars or
U.S. Government Obligations (as defined below), which through the payment of
interest, principal or premium, if any, in respect thereof in accordance with
their terms will provide, not later than one business day before the due date of
any payment, money, or (3) a combination of money and U.S. Government
Obligations (as hereinafter defined) or Foreign Government Obligations, as
applicable, in each case in an amount sufficient to pay the principal of or
premium, if any, and interest on, the Debt Securities of such series as such are
due and (b) satisfying certain other conditions precedent specified in the
Applicable Indenture. Such deposit and termination is conditioned, among other
things, upon the Corporation's delivery of (a) an opinion of independent counsel
that the Holders of the Debt Securities of such series will have no federal
income tax consequences as a result of such deposit and termination and (b) if
the Debt Securities of such series are then listed on the New York Stock
Exchange, an opinion of counsel that the Debt Securities of such series will not
be delisted as a result of the exercise of this option. (Article Thirteen).
'U.S. Government Obligations' means securities that are (1) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (2) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, under
clause (1) or (2) are not callable or redeemable at the option of the issuer
thereof. 'Foreign Government Obligations' means securities denominated in a
Foreign Currency that are (1) direct obligations of a foreign government for the
payment of which its full faith and credit is pledged or (2) obligations of a
Person controlled or supervised by and acting as an agency or instrumentality of
a foreign government the payment of which is unconditionally guaranteed as a
full faith and credit obligation by such foreign government, which, in either
case, under clause (1) or (2) are not callable or redeemable at the option of
the issuer thereof. (Section 101).
The accompanying Prospectus Supplement states whether any defeasance
provisions of the Applicable Indenture will apply to the Offered Debt
Securities.
MODIFICATION AND WAIVER
Certain modifications and amendments of each of the Indentures may be made
by the Corporation and the Trustee under the Applicable Indenture only with the
consent of the Holders of not less than a
18
majority in aggregate principal amount of the Outstanding Debt Securities of
each series issued under such Indenture and affected by the modification or
amendment, provided that no such modification or amendment may, without the
consent of the Holder of each Outstanding Debt Security issued under such
Indenture and affected thereby: (1) change the Stated Maturity of the principal
of, or any installment of principal of or interest on, any such Debt Security;
(2) reduce the principal amount of, or the premium, if any, or the interest on,
any such Debt Security (including in the case of an Original Issue Discount
Security the amount payable upon acceleration of the Maturity thereof); (3)
change the place of payment where, or the coin or currency or currency unit in
which, any principal of, or premium, if any, or interest on, any such Debt
Security is payable; (4) impair the right to institute suit for the enforcement
of any such payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date); (5) reduce the above-stated
percentage of Outstanding Debt Securities of any series the consent of the
Holders of which is necessary to modify or amend the Applicable Indenture; or
(6) modify the foregoing requirements or reduce the percentage of aggregate
principal amount of Outstanding Debt Securities of any series required to be
held by Holders seeking to waive compliance with certain provisions of the
Applicable Indenture or seeking to waive certain defaults. (Section 902).
The Holders of not less than a majority in aggregate principal amount of the
Outstanding Debt Securities of any series may on behalf of the Holders of all
Debt Securities of that series waive, insofar as that series is concerned,
compliance by the Corporation with certain restrictive provisions of the
Applicable Indenture. (Section 1008 of the Subordinated Indenture, Section 1009
of the Senior Indenture). The Holders of not less than a majority in aggregate
principal amount of the Outstanding Debt Securities of any series may on behalf
of the Holders of all Debt Securities of that series waive any past default
under the Applicable Indenture with respect to that series, except a default in
the payment of the principal of, or premium, if any, or interest on any Debt
Security of that series or in respect of a covenant or provision which under the
Applicable Indenture cannot be modified or amended without the consent of the
Holder of each Outstanding Debt Security issued thereunder of the series
affected. (Section 513).
Each of the Senior Indenture and the Subordinated Indenture may be modified
or amended by the Corporation and the Trustee under the Applicable Indenture
without the consent of Holders of the Outstanding Debt Securities issued under
such Indenture for the following purposes: (i) to evidence the succession of
another Person to the Corporation and the assumption by such successor of the
covenants of the Corporation, (ii) to add to the covenants of the Corporation or
to surrender any of its rights or powers, (iii) to add any Defaults or Events of
Default, (iv) to add to or change the provisions of the Applicable Indenture to
facilitate the issuance of Debt Securities in bearer or uncertificated form,
(v) to modify the Applicable Indenture provided that such modification (A) will
not apply to any Debt Securities of any series created prior to such
modification or modify the rights of any holder of such Debt Security and (B)
will become effective only when there is no such Debt Security Outstanding,
(vi) to secure the Debt Securities, (vii) to establish the form and terms of
Debt Securities of any series in accordance with the Applicable Indenture,
(viii) to evidence the acceptance of an appointment by a successor Trustee with
respect to Debt Securities of one or more series or to add to or change any
provisions of the Indentures to provide for or facilitate the administration of
the trusts thereunder by more than one trustee, or (ix) to make provision for
conversion rights or (x) to cure any ambiguity, correct or supplement any
defective or inconsistent provision or make other provisions with respect to
matters arising under the Indentures which do not adversely affect the interests
of the Holders of Debt Securities of any series in any material respect.
(Section 901).
Each Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Debt Securities issued under such
Indenture have given any request, demand, authorization, direction, notice,
consent or waiver thereunder or are present at a meeting of Holders of Debt
Securities for quorum purposes, (1) the principal amount of an Original Issue
Discount Security that shall be deemed to be Outstanding shall be the amount of
the principal thereof that would be due and payable as of the date of such
determination upon acceleration of the Maturity thereof, and (2) the principal
amount of a Debt Security denominated in a foreign currency or currency unit
shall be the U.S. dollar equivalent, determined on the date of original issuance
of such Debt Security, of the principal amount of such Debt Security or, in the
case of an Original Issue Discount Security, the U.S.
19
dollar equivalent, determined on the date of original issuance of such Debt
Security, of the amount determined as provided in (1) above. (Section 101).
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indentures each provide that the Corporation may not consolidate with or
merge into any other Person or transfer its properties and assets substantially
as an entirety to any Person unless (1) the Person formed by such consolidation
or into which the Corporation is merged or the Person to which the properties
and assets of the Corporation are so transferred shall be a corporation or
partnership organized and validly existing under the laws of the United States,
any State thereof or the District of Columbia and shall expressly assume by a
supplemental indenture the payment of the principal of and premium, if any, and
interest on the Senior Debt Securities or the Subordinated Debt Securities, as
the case may be, and the performance of the other covenants of the Corporation
under the Applicable Indenture; (2) immediately after giving effect to such
transaction, no Event of Default or Default, as applicable, and no event which,
after notice or lapse of time or both, would become an Event of Default or
Default, as applicable, shall have occurred and be continuing; and (3) certain
other conditions are met. (Section 801).
TRUSTEES
Any Trustee may resign or be removed with respect to one or more series of
Debt Securities and a successor Trustee may be appointed to act with respect to
such series. (Section 610). In the event that two or more persons are acting as
Trustee with respect to different series of Debt Securities, each such Trustee
shall be a Trustee of a trust under the Applicable Indenture separate and apart
from the trust administered by any other such Trustee (Section 611), and any
action described herein to be taken by the 'Trustee' may then be taken by each
such Trustee with respect to, and only with respect to, the one or more series
of Debt Securities for which it is Trustee.
In the normal course of business, the Corporation and its subsidiaries may
conduct banking transactions with any Trustee, and any Trustee may conduct
banking transactions with the Corporation and its subsidiaries.
The First National Bank of Chicago will be the Subordinated Trustee under
the Subordinated Indenture, unless otherwise specified with respect to any
series of Subordinated Debt Securities in the applicable Prospectus Supplement.
GOVERNING LAW
The Indentures and the Debt Securities will be governed by, and construed in
accordance with, the laws of the State of New York.
20
DESCRIPTION OF CAPITAL STOCK
The Corporation's Restated Charter, as amended (the 'Charter') authorizes
the issuance of up to 50,000,000 shares of Common Stock and 5,000,000 shares of
Preferred Stock. The Corporation intends to propose for shareholder approval at
the annual shareholders' meeting in April 1994 an amendment to the Charter to
increase the number of authorized shares of Common Stock from 50,000,000 to
100,000,000. As of February 23, 1994, 30,175,456 shares of Common Stock and no
shares of Preferred Stock were issued and outstanding, approximately 3.3 million
shares of Common Stock were reserved for issuance under various employee stock
plans and the Corporation's dividend reinvestment plan, and approximately 1.6
million shares were reserved for issuance in connection with pending
acquisitions anticipated to close in the first quarter of 1994. In addition,
301,755 shares of Preferred Stock are reserved for issuance under the Rights
Plan (defined below). The Common Stock of the Corporation is quoted through the
NASDAQ National Market System under the symbol 'FTEN.'
DESCRIPTION OF PREFERRED STOCK
The following is a description of certain general terms and provisions of
the Preferred Stock. The particular terms of any series of Preferred Stock will
be described in the applicable Prospectus Supplement. If so indicated in a
Prospectus Supplement, the terms of any such series may differ from the terms
set forth below.
The summary of terms of the Corporation's Preferred Stock contained in this
Prospectus and in any Prospectus Supplement does not purport to be complete and
is subject to, and qualified in its entirety by, the provisions of the Charter
and the Articles of Amendment relating to each series of the Preferred Stock
(the 'Articles of Amendment'), filed as an exhibit to the Registration Statement
of which this Prospectus is a part.
GENERAL
Under the Charter, the Corporation's Preferred Stock may be issued from time
to time in one or more series, without shareholder approval, when authorized by
the Board of Directors. Subject to limitations prescribed by law, the Board of
Directors is authorized to determine the voting powers (if any), designation,
preferences and relative, participating, optional or other special rights, and
the qualifications, limitations or restrictions thereof, for each series of
Preferred Stock that may be issued, and to fix the number of shares of each such
series. Thus, the Board of Directors, without shareholder approval, could
authorize the issuance of Preferred Stock with voting, conversion and other
rights that could adversely affect the voting power and other rights of holders
of Common Stock or other series of Preferred Stock.
The Preferred Stock shall have the dividend, liquidation, redemption and
voting rights set forth below unless otherwise described in a Prospectus
Supplement relating to a particular series of the Preferred Stock. The
applicable Prospectus Supplement will describe the following terms of the series
of Preferred Stock in respect of which this Prospectus is being delivered: (1)
the title of such Preferred Stock and the number of shares offered; (2) the
amount of liquidation preference per share; (3) the initial public offering
price at which such Preferred Stock will be issued; (4) the dividend rate (or
method of calculation), the dates on which dividends shall be payable and the
dates from which dividends shall commence to cumulate, if any; (5) any
redemption or sinking fund provisions; (6) any conversion or exchange rights;
(7) any additional voting, dividend, liquidation, redemption, sinking fund and
other rights, preferences, privileges, limitations and restrictions; (8) any
listing of such Preferred Stock on any securities exchange; and (9) the relative
ranking and preferences of such Preferred Stock as to dividend rights and rights
upon liquidation, dissolution or winding up of the affairs of the Corporation.
The Preferred Stock offered hereby will be issued in one or more series.
Shares of Preferred Stock, upon issuance against full payment of the purchase
price therefor, will be fully paid and nonassessable. Neither the par value nor
the liquidation preference is indicative of the price at which the Preferred
Stock will actually trade on or after the date of issuance.
21
RANK
The Preferred Stock shall, with respect to dividend rights and rights upon
liquidation, winding up and dissolution of the Corporation, rank prior to the
Corporation's Common Stock and to all other classes and series of equity
securities of the Corporation now or hereafter authorized, issued or outstanding
(the Common Stock and such other classes and series of equity securities
collectively may be referred to herein as the 'Junior Stock'), other than any
classes or series of equity securities of the Corporation which by their terms
specifically provide for a ranking on a parity with (the 'Parity Stock') or
senior to (the 'Senior Stock') the Preferred Stock as to dividend rights and
rights upon liquidation, winding up or dissolution of the Corporation. The
Preferred Stock shall be junior to all outstanding debt of the Corporation. The
Preferred Stock shall be subject to creation of Senior Stock, Parity Stock and
Junior Stock to the extent not expressly prohibited by the Corporation's
Charter. Unless otherwise specified in the applicable Prospectus Supplement, the
Preferred Stock shall rank on a parity with all other preferred stock of the
Corporation and with each other series of Preferred Stock.
DIVIDENDS
Holders of Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds of the Corporation legally
available for payment, cash dividends, payable at such dates and at such rates
per share per annum as described in the applicable Prospectus Supplement. Such
rates may be fixed or variable or both. Each declared dividend shall be payable
to holders of record as they appear at the close of business on the stock books
of the Corporation on such record dates, not more than 60 calendar days
preceding the payment dates therefor, as are determined by the Board of
Directors (each of such dates, a 'Record Date').
Such dividends may be cumulative or noncumulative, as described in the
applicable Prospectus Supplement. If dividends on a series of Preferred Stock
are noncumulative and if the Board of Directors fails to declare a dividend in
respect of a dividend period with respect to such series, then holders of such
Preferred Stock will have no right to receive a dividend in respect of such
dividend period, and the Corporation will have no obligation to pay the dividend
for such period, whether or not dividends are declared payable on any future
dividend payment dates. If dividends of a series of Preferred Stock are
cumulative, the dividends on such shares will accrue from and after the date set
forth in the applicable Prospectus Supplement.
No full dividends shall be declared or paid or set apart for payment on
preferred stock of the Corporation of any series ranking, as to dividends, on a
parity with or junior to the series of Preferred Stock offered by the applicable
Prospectus Supplement for any period unless full dividends for the immediately
preceding dividend period on such Preferred Stock (including any accumulation in
respect of unpaid dividends for prior dividend periods, if dividends on such
Preferred Stock are cumulative) have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof is set apart for
such payment. When dividends are not so paid in full (or a sum sufficient for
such full payment is not so set apart) upon such Preferred Stock and any other
preferred stock of the Corporation ranking on a parity as to dividends with the
Preferred Stock, dividends upon such Preferred Stock and dividends on such other
Preferred Stock ranking on a parity with the Preferred Stock shall be declared
pro rata so that the amount of dividends declared per share on such Preferred
Stock and such other Preferred Stock ranking on a parity with the Preferred
Stock shall in all cases bear to each other the same ratio that accrued
dividends for the then-current dividend period per share on such Preferred Stock
(including any accumulation in respect of unpaid dividends for prior dividend
periods, if dividends on such Preferred Stock are cumulative) and accrued
dividends, including required or permitted accumulations, if any, on shares of
such other Preferred Stock, bear to each other. No interest, or sum of money in
lieu of interest, shall be payable in respect of any dividend payment(s) on
Preferred Stock which may be in arrears. Unless full dividends on the series of
Preferred Stock offered by the applicable Prospectus Supplement have been
declared and paid or set apart for payment for the immediately preceding
dividend period (including any accumulation in respect of unpaid dividends for
prior dividend periods, if dividends on such Preferred Stock are cumulative),
(a) no cash dividend or distribution (other than in shares of Junior Stock) may
be declared, set aside or paid on the Junior Stock, (b) the Corporation may not,
directly or indirectly, repurchase, redeem or otherwise
22
acquire any shares of its Junior Stock (or pay any monies into a sinking fund
for the redemption of any shares) except by conversion into or exchange for
Junior Stock, and (c) the Corporation may not, directly or indirectly,
repurchase, redeem or otherwise acquire any Preferred Stock ranking on parity as
to dividends (or pay any monies into a sinking fund for the redemption of any
shares of any such stock) otherwise than pursuant to pro rata offers to purchase
or a concurrent redemption of all, or a pro rata portion, of the outstanding
Preferred Stock ranking on parity as to dividends (except by conversion into or
exchange for Junior Stock).
Any dividend payment made on a series of Preferred Stock shall first be
credited against the earliest accrued but unpaid dividend due with respect to
shares of such series which remains payable.
REDEMPTION
The terms, if any, on which Preferred Stock of any series may be redeemed
will be set forth in the applicable Prospectus Supplement.
LIQUIDATION
In the event of a voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation, the holders of a series of
Preferred Stock will be entitled, subject to the rights of creditors, but before
any distribution or payment to the holders of Common Stock or any other security
ranking junior to the Preferred Stock on liquidation, dissolution or winding up
of the Corporation, to receive a liquidating distribution in the amount of the
liquidation preference per share as set forth in the applicable Prospectus
Supplement, plus accrued and unpaid dividends for the then-current dividend
period (including any accumulation in respect of unpaid dividends for prior
dividend periods, if dividends on such series of Preferred Stock are
cumulative). If the amounts available for distribution with respect to the
Preferred Stock, and all other outstanding stock of the Corporation ranking on a
parity with the Preferred Stock upon liquidation, dissolution or winding up are
not sufficient to satisfy the full liquidation rights of all the outstanding
Preferred Stock and stock ranking on a parity therewith upon liquidation,
dissolution or winding up, then the holders of each series of such stock will
share ratably in any such distribution of assets in proportion to the full
respective preferential amount (which in the case of Preferred Stock may include
accumulated dividends) to which they are entitled. After payment of the full
amount of the liquidation preference, the holders of Preferred Stock will not be
entitled to any further participation in any distribution of assets by the
Corporation.
VOTING
The terms, if any, on which Preferred Stock of any series may be entitled to
vote will be set forth in the applicable Prospectus Supplement.
CONVERSION
The terms, if any, on which Preferred Stock of any series may be converted
into another class or series of securities of the Corporation will be set forth
in the applicable Prospectus Supplement.
NO OTHER RIGHTS
The shares of a series of Preferred Stock will not have any preferences,
voting powers or relative, participating, optional or other special rights
except as set forth above or in the applicable Prospectus Supplement or the
Charter and in the applicable Articles of Amendment or as otherwise required by
law.
TRANSFER AGENT AND REGISTRAR
The transfer agent for each series of Preferred Stock will be described in
the related Prospectus Supplement.
23
DESCRIPTION OF COMMON STOCK
The following summary of the terms and provisions of the Common Stock does
not purport to be complete and is qualified in its entirety by reference to the
Charter, which is filed as an exhibit to the Registration Statement of which
this Prospectus is a part.
The holders of Common Stock are entitled to receive, ratably, such dividends
as may be declared by the Board of Directors of the Corporation from funds
legally available therefor, provided that if any shares of preferred stock are
at the time outstanding, the payment of dividends on Common Stock or other
distributions (including purchases of Common Stock) may be subject to the
declaration and payment of full cumulative dividends, and the absence of
arrearages in any mandatory sinking fund, on outstanding shares of Preferred
Stock. The Board of Directors of the Corporation currently intends to maintain
its present policy of paying regular quarterly cash dividends; however, the
declaration and amount of future dividends will depend on circumstances existing
at the time, including the Corporation's earnings, financial condition and
capital requirements. See 'Supervision and Regulation.'
The holders of outstanding shares of Common Stock are entitled to one vote
for each share on all matters presented to shareholders, including elections of
directors. There is no cumulative voting in the election of directors, which
means that the holders of a majority of the outstanding Common Stock can elect
all of the directors then standing for election. The holders of Common Stock do
not have any conversion, redemption or preemptive rights to subscribe to any
securities of the Corporation. Upon any dissolution, liquidation or winding up
of the Corporation resulting in a distribution of assets to the shareholders,
the number of shares of Common Stock are entitled to receive such assets ratably
according to their respective number of shares after payment of all liabilities
and obligations and satisfaction of the liquidation preferences of any shares of
Preferred Stock at the time outstanding.
The Corporation's Board of Directors is divided into three classes, which
results in approximately one-third of the directors being elected each year. In
addition, the Charter and the Corporation's bylaws, among other things,
generally give to the Board the authority to fix the number of directors and to
remove directors from and fill vacancies on the Board, other than removal for
cause and the filling of vacancies created thereby which are reserved to
shareholders exercising at least a majority of the voting power of all
outstanding voting stock of the Corporation. To change these provisions of the
bylaws, other than by action of the Board, and to amend these provisions of the
Charter or to adopt any provision of the Charter inconsistent with such bylaw
provisions, would require approval by the holders of at least 80% of the voting
power of all outstanding voting stock. Such classification of the Board and such
other provisions of the Charter and the bylaws may have a significant effect on
the ability of the shareholders of the Corporation to change the composition of
an incumbent Board or to benefit from certain transactions which are opposed by
the Board.
Under the Corporation's Shareholder Protection Rights Agreement, dated as of
September 7, 1989 (the 'Rights Plan'), each share of Common Stock has, and each
share of Common Stock offered hereby will have, attached to it a Right to
purchase 1/100th of a share of Participating Preferred Stock, without par value,
for $76.67 (the 'Exercise Price'), subject to adjustment, upon the business day
following the earlier of (i) the 10th day after commencement of a tender or
exchange offer which, if consummated, would result in a person becoming the
beneficial owner of 10% or more of the outstanding shares of Common Stock (an
'Acquiring Person') and (ii) the first date (the 'Flip-in Date') of public
announcement that a person has become an Acquiring Person. The Rights will
expire on the earliest of (i) the Exchange Time (defined below), (ii) September
18, 1999 and (iii) the date on which the Rights are redeemed as described below.
The Board of Directors may, at its option, at any time prior to the Flip-in
Date, redeem all the Rights at a price of $.01 per Right. If a Flip-in Date
occurs, each Right (other than Rights beneficially owned by the Acquiring Person
or its affiliates, associates or transferees, which Rights will become void), to
the extent permitted by applicable law, will constitute the right to purchase
shares of Common Stock or Participating Preferred Stock having an aggregate
market price equal to twice the Exercise Price for an amount in cash equal to
the then-current Exercise Price. In addition, the Board of Directors may, at its
option, at any time after a Flip-in Date and prior to the time that an Acquiring
Person becomes the beneficial owner of more than 50% of the outstanding shares
of Common Stock, elect to exchange the Rights (other than Rights beneficially
owned by the Acquiring Person or its affiliates, associates, or transferees) for
shares of Common Stock
24
or Participating Preferred Stock at an exchange ratio of one share of Common
Stock or 1/100th of a share of Participating Preferred Stock per Right (the
'Exchange Right'). The Corporation may not agree to be acquired by an Acquiring
Person without providing that each Right, upon such acquisition, will constitute
the right to purchase common stock of the Acquiring Person having an aggregate
market price equal to twice the Exercise Price for an amount in cash equal to
the then-current Exercise Price. The Rights will not prevent a takeover of the
Corporation. The Rights, however, may have certain anti-takeover effects. The
Rights may cause substantial dilution to an Acquiring Person unless the Rights
are first redeemed by the Board of Directors.
The Common Stock shall have equal dividend, distribution, liquidation and
other rights, and shall have no preference, appraisal or exchange rights. All
outstanding shares of Common Stock are, and the shares offered hereby, upon
issuance, will be, fully paid and nonassessable.
The transfer agent for the Common Stock is The First National Bank of
Boston.
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below and in any Prospectus Supplement of certain
provisions of the Deposit Agreement and of the Depositary Shares and Depositary
Receipts (each as defined below) does not purport to be complete and is subject
to and qualified in its entirety by reference to the forms of Deposit Agreement
and Depositary Receipts relating to each series of the Preferred Stock which
have been or will be filed with the Commission at or prior to the time of the
offering of such series of the Preferred Stock. If so indicated in a Prospectus
Supplement, the terms of any series of Depositary Shares may differ from the
terms set forth herein.
GENERAL
The Corporation may, at its option, elect to offer fractional interests in
shares of Preferred Stock ('Depositary Shares'), rather than shares of Preferred
Stock. In the event such option is exercised, the Corporation will provide for
the issuance by a Depositary to the public of receipts for Depositary Shares
('Depositary Receipts'), each of which will represent a fractional interest (to
be set forth in the Prospectus Supplement relating to a particular series of
Preferred Stock which will be filed with the Commission at or prior to the time
of offering such series of the Preferred Stock as described below) of a share of
Preferred Stock.
The shares of any series of the Preferred Stock underlying the Depositary
Shares will be deposited under a separate Deposit Agreement (the 'Deposit
Agreement') each between the Corporation and a bank or trust company selected by
the Corporation having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000 (the 'Depositary'). The
Prospectus Supplement relating to a series of Depositary Shares will set forth
the name and address of the Depositary with respect to such series. Subject to
the terms of the applicable Deposit Agreement, each owner of a Depositary Share
will be entitled, in proportion to the applicable fractional interest in a share
of Preferred Stock underlying such Depositary Shares, to all the rights and
preferences of the Preferred Stock underlying such Depositary Share (including
dividend, voting, redemption, conversion and liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the Deposit Agreement.
Pending the preparation of definitive engraved Depositary Receipts, the
Depositary may, upon the written order of the Corporation, issue temporary
Depositary Receipts substantially identical to (and entitling the holders
thereof to all the rights pertaining to) the definitive Depositary Receipts but
not in definitive form. Definitive Depositary Receipts will be prepared
thereafter without unreasonable delay, and temporary Depositary Receipts will be
exchangeable for definitive Depositary Receipts at the Corporation's expense.
Upon surrender of Depositary Receipts at the office of the Depositary and
upon payment of the charges provided in the Deposit Agreement and subject to the
terms thereof, a holder of Depositary Shares is entitled to have the Depositary
deliver to such holder the whole shares of Preferred Stock
25
underlying the Depositary Shares evidenced by the surrendered Depositary
Receipts. No fractional shares of such Preferred Stock shall be delivered.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the Preferred Stock to the record holders
of Depositary Shares relating to such Preferred Stock in proportion to the
numbers of such Depositary Shares owned by such holders on the relevant record
date. The Depositary shall distribute only such amount, however, as can be
distributed without attributing to any holder of Depositary Shares a fraction of
one cent, and any balance not so distributed shall be added to and treated as
part of the next sum received by the Depositary for distribution to record
holders of Depositary Shares.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may, with the approval of
the Corporation, sell such property and distribute the net proceeds from such
sale to such holders.
The Deposit Agreement will also contain provisions relating to the manner in
which any subscription or similar rights offered by the Corporation to holders
of the Preferred Stock shall be made available to holders of Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES
If the series of Preferred Stock represented by the applicable series of
Depositary Shares is redeemable, such Depositary Shares will be redeemable from
the proceeds received by the Depositary resulting from the redemption, in whole
or in part, of such Preferred Stock. Whenever the Corporation redeems any
Preferred Stock held by the Depositary, the Depositary will redeem as of the
same redemption date the number of Depositary Shares representing the Preferred
Stock so redeemed.
VOTING THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the Preferred
Stock are entitled to vote, the Depositary will mail the information contained
in such notice of meeting to the record holders of the Depositary Shares
relating to such Preferred Stock. Each record holder of such Depositary Shares
on the record date (which will be the same date as the record date for the
Preferred Stock) will be entitled to instruct the Depositary as to the exercise
of the voting rights pertaining to the number of shares of Preferred Stock
underlying such holder's Depositary Shares. The Depositary will endeavor,
insofar as practicable, to vote the number of shares of Preferred Stock
underlying such Depositary Shares in accordance with such instructions, and the
Corporation will agree to take all action which may be deemed necessary by the
Depositary in order to enable the Depositary to do so. To the extent the
Depositary does not receive specific instructions from the holders of Depositary
Shares relating to such Preferred Stock, it will abstain from voting the related
shares of Preferred Stock unless otherwise indicated in the Prospectus
Supplement.
AMENDMENT AND TERMINATION OF DEPOSITARY AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Corporation and the Depositary. However, any amendment which
materially and adversely alters the rights of the existing holders of Depositary
Shares will not be effective unless such amendment has been approved by the
record holders of at least a majority of the Depositary Shares issued under such
Depositary Agreement then outstanding. A Deposit Agreement may be terminated by
the Corporation or the Depositary only if (i) all outstanding Depositary Shares
relating thereto have been redeemed or (ii) there has been a final distribution
in respect of the Preferred Stock of the relevant series in connection with any
liquidation, dissolution or winding up of the Corporation and such distribution
has been distributed to the holders of the related Depositary Shares.
26
CHARGES OF DEPOSITARY
The Corporation will pay all transfer and other taxes and governmental
charges arising solely from the existence of the depositary arrangements. The
Corporation will pay charges of the Depositary in connection with the initial
deposit of the Preferred Stock and any redemption of the Preferred Stock.
Holders of Depositary Shares will pay other transfer and other taxes and
governmental charges and such other charges as are expressly provided in the
Deposit Agreement to be for their accounts.
MISCELLANEOUS
The Depositary will forward to the holders of Depositary Shares all reports
and communications from the Corporation which are delivered to the Depositary
and which the Corporation is required to furnish to the holders of the Preferred
Stock.
Neither the Depositary nor the Corporation will be liable if it is prevented
or delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Corporation and
the Depositary under the Deposit Agreement will be limited to performance in
good faith of their duties thereunder and they will not be obligated to
prosecute or defend any legal proceeding in respect of any Depositary Shares or
Preferred Stock unless satisfactory indemnity is furnished. They may rely upon
written advice of counsel or accountants, or information provided by persons
presenting Preferred Stock for deposit, holders of Depositary Shares or other
persons believed to be competent and on documents believed to be genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to the Corporation
notice of its election to do so, and the Corporation may at any time remove the
Depositary, and such resignation or removal will take effect upon the
appointment of a successor Depositary and its acceptance of such appointment.
Such successor Depositary must be appointed within 60 days after delivery of the
notice of resignation or removal and must be a bank or trust company having its
principal office in the United States and having a combined capital and surplus
of at least $50,000,000.
PLAN OF DISTRIBUTION
The Corporation may sell the Securities to one or more underwriters for
public offering and sale by them or may sell the Securities to investors
directly or through agents. The applicable Prospectus Supplement will set forth
the terms of the offering of the Securities offered thereby, including the names
of any underwriters, agents or dealers, the purchase price of such Securities
and the proceeds to the Corporation from any sale, any underwriting discounts
and other items constituting underwriters' compensation and any discounts and
commissions allowed or reallowed or paid to dealers or agents. The Corporation
has reserved the right to sell the Securities directly to investors on its own
behalf in those jurisdictions where it is authorized to do so.
Underwriters may offer and sell the Securities at a fixed price or prices
that may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The
Corporation also may, from time to time, authorize dealers, acting as the
Corporation's agents, to offer and sell the Securities upon such terms and
conditions as set forth in the related Prospectus Supplement. In connection with
the sale of the Securities, underwriters may receive compensation from the
Corporation in the form of underwriting discounts or commissions and may also
receive commissions from purchasers of the Securities for whom they may act as
agent. Underwriters may sell the Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concession or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents.
Any underwriting compensation paid by the Corporation to underwriters or
agents in connection with the offering of the Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the related Prospectus Supplement. Dealers and agents
participating in the distribution of the Securities may be deemed to be
underwriters, and any discounts and commissions received by them and any profit
realized by them on resale of the Securities may be deemed to be underwriting
discounts and commissions. Underwriters, dealers and agents may
27
be entitled, under agreements entered into with the Corporation, to
indemnification against and contribution towards certain civil liabilities.
If so indicated in the related Prospectus Supplement, the Corporation will
authorize dealers acting as the Corporation's agents to solicit agreements by
certain institutions to purchase Securities from the Corporation at the public
offering price set forth in the related Prospectus Supplement pursuant to
delayed delivery contracts ('Contracts') providing for payment and delivery on
the date or dates stated in a Prospectus Supplement. Each Contract will be for
an amount not less than, and the aggregate amount of the Securities based on the
principal amount or liquidation value, as the case may be, thereof, sold
pursuant to Contracts will be not less nor more than the respective amounts
stated in a Prospectus Supplement. Institutions, with whom Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and other institutions, but will in all cases be subject to the
approval of the Corporation. Contracts will be subject to the condition that the
purchase by an institution of the Securities covered by Contracts will not at
the time of delivery be prohibited under the laws of any jurisdiction in the
United States to which such institution is subject.
Any Securities issued hereunder (other than Common Stock) will be new issues
of securities with no established trading market. Any underwriters or agents to
or through whom such Securities are sold by the Corporation for public offering
and sale may make a market in such Securities, but such underwriters or agents
will not be obligated to do so and may discontinue any market at any time
without notice. No assurance can be given as to the liquidity of the trading
market for any such Securities.
Certain of the underwriters, dealers or agents and their associates may be
customers of, engage in transactions with, and perform services for, the
Corporation and certain of its affiliates in the ordinary course of business.
VALIDITY OF THE SECURITIES
The validity of the Securities will be passed upon for the Corporation by
Harry A. Johnson, III, Esq., Executive Vice President and General Counsel of the
Corporation, unless otherwise specified in the applicable Prospectus Supplement,
and for any underwriters by the counsel named in the applicable Prospectus
Supplement. At February 28, 1994, Mr. Johnson beneficially owned approximately
30,948 shares of Common Stock.
EXPERTS
The consolidated financial statements of the Corporation and its
subsidiaries incorporated in this Prospectus by reference from the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1993 have been
audited by Arthur Andersen & Co., independent public accountants, as stated in
their report, dated January 18, 1994, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
With respect to the 1991 financial statements of Home Financial Corporation,
a company acquired by the Corporation during 1992 in a transaction accounted for
as a pooling-of-interests, Arthur Andersen & Co. relied upon the report of
Baylor and Backus, independent accountants, whose report dated February 21,
1992, except with respect to the information discussed in Note 27, as to which
the date is October 21, 1992, was incorporated by reference in the Corporation's
Form 10-K for 1993 and is incorporated herein by reference.
The consolidated financial statements of Maryland National Mortgage
Corporation and subsidiaries, appearing in First Tennessee National
Corporation's Current Report on Form 8-K, dated October 1, 1993, for the year
ended December 31, 1992, have been audited by Ernst & Young, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such consolidated financial statements referred to above
are incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
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$100,000,000
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% SUBORDINATED NOTES DUE MAY 15, 2013
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PROSPECTUS SUPPLEMENT
MAY , 2003
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FTN FINANCIAL SECURITIES CORP