As filed with the Securities and Exchange Commission on October 29, 2001
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Wachovia Corporation
(Formerly named First Union Corporation)
(Exact name of registrant as specified in its charter)
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North Carolina 56-0898180
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
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One First Union Center
Charlotte, North Carolina 28288-0013
(704) 374-6565
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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Ross E. Jeffries, Jr., Esq.
Senior Vice President and Assistant General Counsel
Wachovia Corporation
One First Union Center
Charlotte, North Carolina 28288-0630
(704) 374-6611
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copy to:
Mark J. Menting, Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004-2498
(212) 558-4859
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Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement, as determined
in the light of market and other conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Amount Maximum Maximum
Title of Each Class of to be Offering Price Aggregate Amount of
Securities to be Registered Registered(1)(2) Per Unit(3) Offering Price(3) Registration Fee
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Medium-Term Notes..... $4,000,000,000 100% $4,000,000,000 $1,000,000
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(1)The amount to be registered equals the aggregate principal amount of the
Medium-Term Notes. If any Medium-Term Notes are issued at an original
discount or with a principal amount that cannot be determined at issuance or
is denominated in a foreign currency or currency unit, the aggregate
principal amount of the Medium-Term Notes will be an amount that results in
an aggregate initial offering price for the Medium-Term Notes equivalent to
U.S. $4,000,000,000.
(2)This registration statement also covers an undeterminable amount of the
Medium-Term Notes that may be reoffered and resold on an ongoing basis after
their initial sale in market-making transactions by affiliates of the
registrant.
(3)Estimated solely for purposes of determining the registration fee.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the SEC
is effective. This prospectus is not an offer to sell these securities and we
are not soliciting an offer to buy these securities in any state where the
offer or sale is prohibited.
Subject to Completion, Dated October 29, 2001
$4,000,000,000
WACHOVIA CORPORATION
(Formerly named First Union Corporation)
Senior Global Medium-Term Notes, Series E
and
Subordinated Global Medium-Term Notes, Series F
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Terms of Sale
The following terms may apply to the notes that Wachovia Corporation may
sell from time to time. The final terms of each note will be included in a
prospectus supplement. Wachovia will receive between $3,995,000,000 and
$3,960,000,000 of the proceeds from the sale of the notes, after paying the
agents' commissions of between $5,000,000 and $40,000,000.
.stated maturity of 9 months or longer .amount of principal or interest may be determined by
.fixed or floating interest rate, zero-coupon or issued referenceto an index or formula
with original issue discount; a floating interest rate .may be book-entry form only
may be based on: .may be subject to redemption at the option of
.commercial paper rate Wachovia or repayment at the option of the holder
.prime rate .not amortized or subject to a sinking fund
.LIBOR .interest on floating rate notes paid monthly, quarterly,
.EURIBOR semi-annually or annually
.treasury rate .denominations of $1,000 and multiples of $1,000
.CMT rate .may be denominated in a currency other than U.S.
.CD rate dollarsor in a composite currency
.federal funds rate .settlement in immediately available funds
Wachovia has filed an application to list the notes on the Luxemburg Stock
Exchange.
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Prior to September 1, 2001, our company was named "First Union Corporation".
We changed our name on September 1, 2001, following our merger with the former
Wachovia Corporation.
These securities have not been approved or disapproved by the SEC, any state
securities commission or the Commissioner of Insurance of the state of North
Carolina nor have these organizations determined if this prospectus is truthful
or complete. Any representation to the contrary is a criminal offense.
These securities will be our unsecured obligations and will not be savings
accounts, deposits or other obligations of any bank or non-bank subsidiary of
ours and are not insured by the Federal Deposit Insurance Corporation, the Bank
Insurance Fund or any other governmental agency.
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Wachovia may sell the notes directly or through one or more agents or
dealers, including the agents listed below. The agents are not required to sell
any particular amount of the notes.
Wachovia may use this prospectus in the initial sale of any notes. In
addition, First Union Securities, Inc. or any other affiliate of Wachovia may
use this prospectus in a market-making or other transaction in any note after
its initial sale. Unless Wachovia or its agent informs the purchaser otherwise
in the confirmation of sale or prospectus supplement, this prospectus is being
used in a market-making transaction.
WACHOVIA SECURITIES
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This prospectus is dated , 2001
TABLE OF CONTENTS
About This Prospectus............................................................................. 1
Where You Can Find More Information............................................................... 2
Forward-Looking Statements........................................................................ 3
Wachovia Corporation.............................................................................. 3
Use of Proceeds................................................................................... 4
Consolidated Ratios of Earnings to Fixed Charges.................................................. 4
Regulatory Considerations......................................................................... 5
Description of the Notes We May Offer............................................................. 6
Global Notes...................................................................................... 31
Considerations Relating to Indexed Notes.......................................................... 35
Considerations Relating to Notes Denominated or Payable in or Linked to a Non-U.S. Dollar Currency 38
United States Taxation............................................................................ 40
Employee Retirement Income Security Act........................................................... 51
Plan of Distribution.............................................................................. 52
Validity of The Notes............................................................................. 56
Experts........................................................................................... 56
General Information............................................................................... 56
i
About This Prospectus
This document is called a prospectus and is part of a registration statement
that we filed with the SEC using a "shelf" registration or continuous offering
process. Under this shelf process, we may from time to time sell any
combination of the securities described in this prospectus in one or more
offerings up to a total dollar amount of $4,000,000,000.
This prospectus provides you with a general description of the securities we
may offer. Each time we sell securities we will provide a prospectus supplement
containing specific information about the terms of the securities being
offered. That prospectus supplement may include a discussion of any risk
factors or other special considerations that apply to those securities. The
prospectus supplement may also add, update or change the information in this
prospectus. If there is any inconsistency between the information in this
prospectus and any prospectus supplement, you should rely on the information in
that prospectus supplement. You should read both this prospectus and any
prospectus supplement together with additional information described under the
heading "Where You Can Find More Information".
The registration statement containing this prospectus, including exhibits to
the registration statement, provides additional information about us and the
securities offered under this prospectus. The registration statement can be
read at the SEC web site or at the SEC offices mentioned under the heading
"Where You Can Find More Information".
When acquiring any securities discussed in this prospectus, you should rely
only on the information provided in this prospectus and in any prospectus
supplement, including the information incorporated by reference. Neither we nor
any underwriters or agents have authorized anyone to provide you with different
information. We are not offering the securities in any state where the offer is
prohibited. You should not assume that the information in this prospectus, any
prospectus supplement or any document incorporated by reference is truthful or
complete at any date other than the date mentioned on the cover page of these
documents.
We may sell securities to underwriters who will sell the securities to the
public on terms fixed at the time of sale. In addition, the securities may be
sold by us directly or through dealers or agents designated from time to time,
which agents may be our affiliates. If we, directly or through agents, solicit
offers to purchase the securities, we reserve the sole right to accept and,
together with our agents, to reject, in whole or in part, any of those offers.
The prospectus supplement will contain the names of the underwriters,
dealers or agents, if any, together with the terms of offering, the
compensation of those underwriters and the net proceeds to us. Any
underwriters, dealers or agents participating in the offering may be deemed
"underwriters" within the meaning of the Securities Act of 1933 (the
"Securities Act").
One or more of our subsidiaries, including First Union Securities, Inc., may
buy and sell any of the securities after the securities are issued as part of
their business as a broker-dealer. Those subsidiaries may use this prospectus
and the related prospectus supplement in those transactions. Any sale by a
subsidiary will be made at the prevailing market price at the time of sale.
Unless otherwise mentioned or unless the context requires otherwise, any
reference in this prospectus to "Wachovia Securities" means First Union
Securities, Inc. and does not mean Wachovia Securities, Inc., a broker-dealer
subsidiary of Wachovia which is not participating in this offering.
Unless otherwise mentioned or unless the context requires otherwise, all
references in this prospectus to "Wachovia", "we", "us", "our", or similar
references mean Wachovia Corporation and its subsidiaries.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. In addition, our SEC filings are
available to the public at the SEC's web site at http://www.sec.gov. You can
also inspect reports, proxy statements and other information about us at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York.
The SEC allows us to "incorporate by reference" into this prospectus the
information in documents we file with it. This means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be a part of this
prospectus and should be read with the same care. When we update the
information contained in documents that have been incorporated by reference by
making future filings with the SEC the information incorporated by reference in
this prospectus is considered to be automatically updated and superseded. In
other words, in the case of a conflict or inconsistency between information
contained in this prospectus and information incorporated by reference into
this prospectus, you should rely on the information contained in the document
that was filed later. We incorporate by reference the documents listed below
and any documents we file with the SEC in the future under Section 13(a),
13(c), 14, or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act")
until our offering is completed:
. Annual Report on Form 10-K for the year ended December 31, 2000;
. Quarterly Reports on Form 10-Q for the periods ended March 31, 2001 (as
amended on June 26, 2001) and June 30, 2001; and
. Current Reports on Form 8-K dated January 18, 2001, April 16, 2001 (as
amended on June 25, 2001), May 3, 2001, May 15, 2001 (as amended on June
25, 2001), July 12, 2001, July 20, 2001, July 23, 2001, August 30, 2001,
September 6, 2001 and October 23, 2001.
You may request a copy of these filings, other than an exhibit to a filing
unless that exhibit is specifically incorporated by reference into that filing,
at no cost, by writing to or telephoning us at the following address:
Corporate Relations
Wachovia Corporation
One First Union Center
301 South College Street
Charlotte, North Carolina 28288-0206
(704) 374-6782
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FORWARD-LOOKING STATEMENTS
This prospectus and accompanying prospectus supplements contain or
incorporate statements that are "forward-looking statements" within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act. These
statements can be identified by the use of forward-looking language such as
"will likely result", "may", "are expected to", "is anticipated", "estimate",
"projected", "intends to", or other similar words. Our actual results,
performance or achievements could be significantly different from the results
expressed in or implied by these forward-looking statements. These statements
are subject to certain risks and uncertainties, including but not limited to
certain risks described in the prospectus supplement or the documents
incorporated by reference. When considering these forward-looking statements,
you should keep in mind these risks, uncertainties and other cautionary
statements made in this prospectus and the prospectus supplements. You should
not place undue reliance on any forward-looking statement, which speaks only as
of the date made. You should refer to our periodic and current reports filed
with the SEC for specific risks which could cause actual results to be
significantly different from those expressed or implied by these
forward-looking statements.
WACHOVIA CORPORATION
Wachovia was incorporated under the laws of North Carolina in 1967. We are
registered as a financial holding company and a bank holding company under the
Bank Holding Company Act of 1956, as amended, and are supervised and regulated
by the Board of Governors of the Federal Reserve System. Our banking and
securities subsidiaries are supervised and regulated by various federal and
state banking and securities regulatory authorities. On September 1, 2001, the
former Wachovia Corporation merged with and into First Union Corporation, and
First Union Corporation changed its name to "Wachovia Corporation".
In addition to North Carolina, Wachovia's full-service banking subsidiaries
operate in Connecticut, Delaware, Florida, Georgia, Maryland, New Jersey, New
York, Pennsylvania, South Carolina, Virginia and Washington, D.C. These
full-service banking subsidiaries provide a wide range of commercial and retail
banking and trust services. Wachovia also provides various other financial
services, including mortgage banking, home equity lending, leasing, investment
banking, insurance and securities brokerage services through other
subsidiaries.
In 1985, the Supreme Court upheld regional interstate banking legislation.
Since then, Wachovia has concentrated its efforts on building a large regional
banking organization in what it perceives to be some of the better banking
markets in the eastern United States. Since November 1985, Wachovia has
completed over 90 banking-related acquisitions.
Wachovia continually evaluates its business operations and organizational
structures to ensure they are aligned closely with its goal of maximizing
performance in its core business lines, Capital Management, Wealth Management,
the General Bank and Corporate and Investment Banking. When consistent with our
overall business strategy, we may consider the disposition of certain of our
assets, branches, subsidiaries or lines of business. We continue to routinely
explore acquisition opportunities, particularly in areas that would complement
our core business lines, and frequently conduct due diligence activities in
connection with possible acquisitions. As a result, acquisition discussions
and, in some cases, negotiations frequently take place, and future acquisitions
involving cash, debt or equity securities can be expected.
Wachovia is a separate and distinct legal entity from its banking and other
subsidiaries. Dividends received from our subsidiaries are our principal source
of funds to pay dividends on our common and preferred stock and debt service on
our debt. Various federal and state statutes and regulations limit the amount
of dividends that our banking and other subsidiaries may pay to us without
regulatory approval.
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USE OF PROCEEDS
Wachovia currently intends to use the net proceeds from the sale of any
notes for general corporate purposes, which may include:
. reducing debt;
. investments at the holding company level;
. investing in, or extending credit to, our operating subsidiaries;
. possible acquisitions;
. stock repurchases; and
. other purposes as mentioned in any prospectus supplement.
Pending such use, we may temporarily invest the net proceeds. The precise
amounts and timing of the application of proceeds will depend upon our funding
requirements and the availability of other funds. Except as mentioned in any
prospectus supplement, specific allocations of the proceeds to such purposes
will not have been made at the date of that prospectus supplement.
Based upon our historical and anticipated future growth and our financial
needs, we may engage in additional financings of a character and amount that we
determine as the need arises.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following table provides Wachovia's consolidated ratios of earnings to
fixed charges:
Six Months Year Ended December 31,
Ended -----------------------------
June 30, 2001 2000 1999 1998 1997 1996
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Consolidated Ratios of Earnings to Fixed Charges
Excluding interest on deposits.................. 1.86x 1.13x 2.29x 2.13x 2.50x 2.58x
Including interest on deposits.................. 1.39x 1.06x 1.62x 1.51x 1.57x 1.56x
For purposes of computing these ratios
. earnings represent income from continuing operations before extraordinary
items and cumulative effect of a change in accounting principles, plus
income taxes and fixed charges (excluding capitalized interest);
. fixed charges, excluding interest on deposits, represent interest
(including capitalized interest), one-third of rents and all amortization
of debt issuance costs; and
. fixed charges, including interest on deposits, represent all interest
(including capitalized interest), one-third of rents and all amortization
of debt issuance costs.
One-third of rents is used because it is the proportion deemed
representative of the interest factor.
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REGULATORY CONSIDERATIONS
As a financial holding company and a bank holding company under the Bank
Holding Company Act, the Federal Reserve Board regulates, supervises and
examines Wachovia. For a discussion of the material elements of the regulatory
framework applicable to financial holding companies, bank holding companies and
their subsidiaries and specific information relevant to Wachovia, please refer
to Wachovia's annual report on Form 10-K for the fiscal year ended December 31,
2000, quarterly reports on Form 10-Q, and any subsequent reports we file with
the SEC, which are incorporated by reference in this prospectus. This
regulatory framework is intended primarily for the protection of depositors and
the federal deposit insurance funds and not for the protection of security
holders. As a result of this regulatory framework, Wachovia's earnings are
affected by actions of the Federal Reserve Board, the Office of Comptroller of
the Currency, that regulates our banking subsidiaries, the Federal Deposit
Insurance Corporation, that insures the deposits of our banking subsidiaries
within certain limits, and the SEC, that regulates the activities of certain
subsidiaries engaged in the securities business.
Wachovia's earnings are also affected by general economic conditions, our
management policies and legislative action.
In addition, there are numerous governmental requirements and regulations
that affect our business activities. A change in applicable statutes,
regulations or regulatory policy may have a material effect on Wachovia's
business.
Depository institutions, like Wachovia's bank subsidiaries, are also
affected by various federal laws, including those relating to consumer
protection and similar matters. Wachovia also has other financial services
subsidiaries regulated, supervised and examined by the Federal Reserve Board,
as well as other relevant state and federal regulatory agencies and
self-regulatory organizations. Wachovia's non-bank subsidiaries may be subject
to other laws and regulations of the federal government or the various states
in which they are authorized to do business.
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DESCRIPTION OF THE NOTES WE MAY OFFER
The following information outlines some of the provisions of the indentures
and the notes. This information may not be complete in all respects, and is
qualified entirely by reference to the indenture under which the notes are
issued. These indentures are incorporated by reference as exhibits to the
registration statement of which this prospectus is a part. This information
relates to certain terms and conditions that generally apply to the notes. The
specific terms of any series of notes will be described in the relevant
prospectus supplement. As you read this section, please remember that the
specific terms of your note as described in your prospectus supplement will
supplement and, if applicable, may modify or replace the general terms
described in this section. If your prospectus supplement is inconsistent with
this prospectus, your prospectus supplement will control with regard to your
note. Thus, the statements we make in this section may not apply to your note.
General
Senior notes will be issued under an indenture between Wachovia and The
Chase Manhattan Bank, as trustee. Subordinated notes will be issued under an
indenture between Wachovia and Bank One Trust Company, N.A., as trustee. Each
of the senior and the subordinated notes constitutes a single series of debt
securities of Wachovia issued under the senior and the subordinated indenture,
respectively. The term "debt securities," as used in this prospectus, refers to
all debt securities, including the notes, issued and issuable from time to time
under the relevant indenture. The indentures are subject to, and governed by,
the Trust Indenture Act of 1939, as amended. These indentures are more fully
described below in this section. Whenever we refer to specific provisions or
defined terms in one or both of the indentures, those provisions or defined
terms are incorporated in this prospectus by reference. Section references used
in this discussion are references to the relevant indenture. Capitalized terms
which are not otherwise defined shall have the meaning given to them in the
relevant indenture.
The notes will be limited to an aggregate initial offering price of
$4,000,000,000, or at Wachovia's option if so specified in the relevant
prospectus supplement, the equivalent of this amount in any other currency or
currency unit, and will be Wachovia's direct, unsecured obligations. The notes
will not be deposits or other bank obligations and will not be FDIC insured.
The notes are being offered on a continuous basis by Wachovia through the
agents listed on the cover of this prospectus. The indentures do not limit the
aggregate principal amount of senior or subordinated notes that we may issue.
We may, from time to time, without the consent of the holders of the notes,
provide for the issuance of notes or other debt securities under the indentures
in addition to the $4,000,000,000 aggregate initial offering price of notes
noted on the cover of this prospectus. Each note issued under this prospectus
will mature nine months or more from its date of issue, as selected by the
purchaser and agreed to by Wachovia and may be subject to redemption or
repayment before its stated maturity. Notes may be issued at significant
discounts from their principal amount due on the stated maturity (or on any
prior date on which the principal or an installment of principal of a note
becomes due and payable, whether by the declaration of acceleration, call for
redemption at the option of Wachovia, repayment at the option of the holder or
otherwise), and some notes may not bear interest.
Unless we specify otherwise in the relevant prospectus supplement, currency
amounts in this prospectus are expressed in United States dollars. Unless we
specify otherwise in any note and prospectus supplement, the notes will be
denominated in U.S. dollars and payments of principal, premium, if any, and any
interest on the notes will be made in U.S. dollars. If any note is to be
denominated other than exclusively in U.S. dollars, or if the principal of,
premium, if any, or any interest on the note is to be paid in one or more
currencies (or currency units or in amounts determined by reference to an index
or indices) other than that in which that note is denominated, additional
information (including authorized denominations and related exchange rate
information) will be provided in the relevant prospectus supplement. Unless we
specify otherwise in any prospectus supplement, notes denominated in U.S.
dollars will be issued in denominations of $1,000 or any integral multiple of
$1,000.
6
Interest rates that we offer on the notes may differ depending upon, among
other factors, the aggregate principal amount of notes purchased in any single
transaction. Notes with different variable terms other than interest rates may
also be offered concurrently to different investors. We may change interest
rates or formulas and other terms of notes from time to time, but no change of
terms will affect any note we have previously issued or as to which we have
accepted an offer to purchase.
Each note will be issued as a book-entry note in fully registered form
without coupons. Each note issued in book-entry form will be represented by a
global note that we deposit with and register in the name of a financial
institution or its nominee, that we select. The financial institution that we
select for this purpose is called the depositary. Unless we specify otherwise
in the applicable prospectus supplement, The Depository Trust Company, New
York, New York, will be the depositary for all notes issued in book-entry form.
Except as discussed below under "Global Notes", owners of beneficial interests
in book-entry notes will not be entitled to physical delivery of notes in
certificated form. We will make payments of principal of, and premium, if any
and interest, if any, on the notes through the applicable trustee to the
depositary for the notes. See "Global Notes".
The indentures do not limit the aggregate principal amount of debt
securities or of any particular series of debt securities which may be issued
under the indentures and provide that these debt securities may be issued at
various times in one or more series, in each case with the same or various
maturities, at par or at a discount. (Section 301) The indentures provide that
there may be more than one trustee under the indentures with respect to
different series of debt securities. As of June 30, 2001, $10.9 billion
aggregate principal amount of senior debt securities was outstanding under the
senior indenture. The senior trustee is trustee for such series. As of June 30,
2001, $25.2 billion aggregate principal amount of subordinated debt securities
was outstanding under the subordinated indenture. The subordinated trustee is
trustee for such series.
The indentures do not limit the amount of other debt that Wachovia may issue
and do not contain financial or similar restrictive covenants. As of June 30,
2001, Wachovia had an aggregate of $4.4 billion of short-term senior
indebtedness outstanding which consisted primarily of commercial paper.
Wachovia expects from time to time to incur additional senior indebtedness and
Other Financial Obligations (as defined below). The indentures do not prohibit
or limit additional senior indebtedness or Other Financial Obligations.
Because Wachovia is a holding company and a legal entity separate and
distinct from its subsidiaries, Wachovia's rights to participate in any
distribution of assets of any subsidiary upon its liquidation, reorganization
or otherwise, and the holders of notes' ability to benefit indirectly from such
distribution, would be subject to prior creditor's claims, except to the extent
that Wachovia itself may be a creditor of that subsidiary with recognized
claims. Claims on Wachovia's subsidiary banks by creditors other than Wachovia
include long-term debt and substantial obligations with respect to deposit
liabilities and federal funds purchased, securities sold under repurchase
agreements, other short-term borrowings and various other financial
obligations. The indentures do not contain any covenants designed to afford
holders of notes protection in the event of a highly leveraged transaction
involving Wachovia.
Legal Ownership
Street Name and Other Indirect Holders
Investors who hold their notes in accounts at banks or brokers will
generally not be recognized by us as legal holders of notes. This is called
holding in street name. Instead, we would recognize only the bank or broker, or
the financial institution the bank or broker uses to hold its notes. These
intermediary banks, brokers and other financial institutions pass along
principal, interest and other payments on the notes, either because they agree
to do so in their customer agreements or because they are legally required to
do so. If you hold your notes in street name, you should check with your own
institution to find out:
. how it handles note payments and notices;
. whether it imposes fees or charges;
. how it would handle voting if it were ever required;
. whether and how you can instruct it to send you notes registered in your
own name so you can be a direct holder as described below; and
7
. how it would pursue rights under the notes if there were a default or
other event triggering the need for holders to act to protect their
interests.
Direct Holders
Our obligations, as well as the obligations of the trustee and those of any
third parties employed by us or the trustee, under the notes run only to
persons who are registered as holders of notes. As noted above, we do not have
obligations to you if you hold in street name or other indirect means, either
because you choose to hold your notes in that manner or because the notes are
issued in the form of global securities as described below. For example, once
we make payment to the registered holder we have no further responsibility for
the payment even if that holder is legally required to pass the payment along
to you as a street name customer but does not do so.
Global Notes
What is a Global Note? A global note is a special type of indirectly held
security, as described above under "--Street Name and Other Indirect Holders".
If we choose to issue notes in the form of global notes, the ultimate
beneficial owners of global notes can only be indirect holders. We require that
the global note be registered in the name of a financial institution we select.
We also require that the notes included in the global note not be
transferred to the name of any other direct holder except in the special
circumstances described in the section "Global Notes". The financial
institution that acts as the sole direct holder of the global note is called
the depositary. Any person wishing to own a global note must do so indirectly
by virtue of an account with a broker, bank or other financial institution that
in turn has an account with the depositary. The prospectus supplement indicates
whether your series of notes will be issued only in the form of global notes.
Further details of legal ownership are discussed in the section "Global
Notes" below.
In the remainder of this description "you" or "holder" means direct holders
and not street name or other indirect holders of notes. Indirect holders
should read the previous subsection on page 7 titled "--Street Name and Other
Indirect Holders".
Types of Notes
We may issue the following four types of notes:
. Fixed Rate Notes. A note of this type will bear interest at a fixed rate
described in the applicable prospectus supplement. This type includes
zero-coupon notes, which bear no interest and are instead issued at a price
lower than the principal amount.
. Floating Rate Notes. A note of this type will bear interest at rates that are
determined by reference to an interest rate formula. In some cases, the rates
may also be adjusted by adding or subtracting a spread or multiplying by a
spread multiplier and may be subject to a minimum rate or a maximum rate. The
various interest rate formulas and these other features are described below
in "--Interest Rates--Floating Rate Notes". If your note is a floating rate
note, the formula and any adjustments that apply to the interest rate will be
specified in your prospectus supplement.
. Indexed Notes. A note of this type provides that the principal amount payable
at its maturity, and/or the amount of interest payable on an interest payment
date, will be determined by reference to:
. one or more securities;
. one or more currencies;
. one or more commodities;
. any other financial, economic or other measures or instruments, including
the occurrence or non-occurrence of any event or circumstance; and/or
. indices or baskets of any of these items.
8
If you are a holder of an indexed note, you may receive a principal amount
at maturity that is greater than or less than the face amount of your note
depending upon the value of the applicable index at maturity. That value may
fluctuate over time. If you purchase an indexed note your prospectus supplement
will include information about the relevant index and about how amounts that
are to become payable will be determined by reference to that index. Before you
purchase any indexed note, you should read carefully the section entitled
"Considerations Relating to Indexed Securities" below.
. Exchangeable Notes. We may issue notes, which we refer to as "exchangeable
notes," that are exchangeable, at our option or the option of the holder,
into securities of an issuer other than Wachovia or into other property. The
exchangeable notes may or may not bear interest or be issued with original
issue discount or at a premium. The general terms of the exchangeable notes
are described below.
Optionally Exchangeable Notes. The holder of an optionally exchangeable note
may, during a period, or at specific times, exchange the note for the
underlying property at a specified rate of exchange. If specified in your
prospectus supplement, we will have the option to redeem the optionally
exchangeable note prior to maturity. If the holder of an optionally
exchangeable note does not elect to exchange the note prior to maturity or any
redemption date, the holder will receive the principal amount of the note plus
any accrued interest at maturity or upon redemption.
Mandatorily Exchangeable Notes. At maturity, the holder of a mandatorily
exchangeable note must exchange the note for the underlying property at a
specified rate of exchange, and, therefore, depending upon the value of the
underlying property at maturity, the holder of a mandatorily exchangeable note
may receive less than the principal amount of the note at maturity. If so
indicated in your prospectus supplement, the specified rate at which a
mandatorily exchangeable note may be exchanged may vary depending on the value
of the underlying property so that, upon exchange, the holder participates in a
percentage, which may be less than, equal to, or greater than 100% of the
change in value of the underlying property. Mandatorily exchangeable notes may
include notes where we have the right, but not the obligation, to require
holders of notes to exchange their notes for the underlying property.
Payments upon Exchange. Your prospectus supplement will specify if upon
exchange, at maturity or otherwise, the holder of an exchangeable note may
receive, at the specified exchange rate, either the underlying property or the
cash value of the underlying property. The underlying property may be the
securities of either U.S. or foreign entities or both. The exchangeable notes
may or may not provide for protection against fluctuations in the exchange rate
between the currency in which that note is denominated and the currency or
currencies in which the market prices of the underlying security or securities
are quoted. Exchangeable notes may have other terms, which will be specified in
your prospectus supplement.
Special Requirements for Exchange of Global Securities. If an optionally
exchangeable note is represented by a global security, the depositary's nominee
will be the holder of that note and therefore will be the only entity that can
exercise a right to exchange. In order to ensure that the depositary's nominee
will timely exercise a right to exchange a particular note or any portion of a
particular note, the beneficial owner of the note must instruct the broker or
other direct or indirect participant through which it holds an interest in that
note to notify the depositary of its desire to exercise a right to exchange.
Different firms have different deadlines for accepting instructions from their
customers. Each beneficial owner should consult the broker or other participant
through which it holds an interest in a note in order to ascertain the deadline
for ensuring that timely notice will be delivered to the depositary.
Payments upon Acceleration of Maturity or upon Tax Redemption. If the
principal amount payable at maturity of any exchangeable note is declared due
and payable prior to maturity, the amount payable on:
. an optionally exchangeable note will equal the face amount of the note
plus accrued interest, if any, to but excluding the date of payment,
except that if a holder has exchanged an optionally exchangeable note
prior to the date of declaration or tax redemption without having received
the amount due upon exchange, the amount payable will be an amount of cash
equal to the amount due upon exchange and will not include any accrued but
unpaid interest; and
9
. a mandatorily exchangeable note will equal an amount determined as if the
date of declaration or tax redemption were the maturity date plus accrued
interest, if any, to but excluding the date of payment.
Original Issue Discount Notes
A fixed rate note, a floating rate note or an indexed note may be an
original issue discount note. A note of this type is issued at a price lower
than its principal amount and provides that, upon redemption or acceleration of
its maturity, an amount less than its principal amount will be payable. An
original issue discount note may be a zero coupon note. A note issued at a
discount to its principal may, for U.S. federal income tax purposes, be
considered an original issue discount note, regardless of the amount payable
upon redemption or acceleration of maturity. See "United States Taxation" below
for a brief description of the U.S. federal income tax consequences of owning
an original issue discount note.
Information in the Prospectus Supplement
Your prospectus supplement will describe one or more of the following terms
of your note:
. the stated maturity;
. the specified currency or currencies for principal and interest, if not
U.S. dollars;
. the price at which we originally issue your note, expressed as a
percentage of the principal amount, and the original issue date;
. whether your note is a fixed rate note, a floating rate note, an indexed
note or an exchangeable note;
. if your note is a fixed rate note, the yearly rate at which your note will
bear interest, if any, and the interest payment dates;
. if your note is a floating rate note, the interest rate basis, which may
be one of the eight base rates described in "-- Interest Rates -- Floating
Rate Notes" below; any applicable index currency or maturity, spread or
spread multiplier or initial, maximum or minimum rate; and the interest
reset, determination, calculation and payment dates, all of which we
describe under " -- Interest Rates -- Floating Rate Notes" below;
. if your note is an indexed note, the principal amount, if any, we will pay
you at maturity, the amount of interest, if any, we will pay you on an
interest payment date or the formula we will use to calculate these
amounts, if any, and whether your note will be exchangeable for or payable
in cash, securities of an issuer other than Wachovia or other property;
. if your note is an exchangeable note, the securities or property for which
the notes may be exchanged, whether the notes are exchangeable at your
option or at Wachovia's option, and the other items described in
"Exchangeable Notes" above;
. if your note is an original issue discount note, the yield to maturity;
. if applicable, the circumstances under which your note may be redeemed at
our option before the stated maturity, including any redemption
commencement date, redemption price(s) and redemption period(s);
. if applicable, the circumstances under which you may demand repayment of
your note before the stated maturity, including any repayment commencement
date, repayment price(s) and repayment period(s);
. any special United States federal income tax consequences of the purchase,
ownership or disposition of a particular issuance of notes;
. the use of proceeds, if materially different than those discussed in this
prospectus; and
. any other terms of your note, which could be different from those
described in this prospectus.
. Market-Making Transactions. lf you purchase your note in a market-making
transaction, you will receive information about the price you pay and your
trade and settlement dates in a separate confirmation of sale. A
market-making transaction is one in which Wachovia Securities or another of
our affiliates resells a note that it has previously acquired from another
holder. A market-making transaction in a particular note occurs after the
original sale of the note.
10
Redemption at the Option of Wachovia; No Sinking Fund
If an initial redemption date is specified in the applicable prospectus
supplement, we may redeem the particular notes prior to their stated maturity
date at our option on any date on or after that initial redemption date in
whole or from time to time in part in increments of $1,000 or any other
integral multiple of an authorized denomination specified in the applicable
prospectus supplement (provided that any remaining principal amount thereof
shall be at least $1,000 or other minimum authorized denomination applicable
thereto), at the applicable redemption price (as defined below), together with
unpaid interest accrued thereon to the date of redemption. We must give written
notice to registered holders of the particular notes to be redeemed at our
option not more than 60 nor less than 30 calendar days prior to the date of
redemption. "Redemption price", with respect to a note, means an amount equal
to the initial redemption percentage specified in the applicable prospectus
supplement (as adjusted by the annual redemption percentage reduction, if
applicable) multiplied by the unpaid principal amount thereof to be redeemed.
The initial redemption percentage, if any, applicable to a note shall decline
at each anniversary of the initial redemption date by an amount equal to the
applicable annual redemption percentage reduction, if any, until the redemption
price is equal to 100% of the unpaid principal amount thereof to be redeemed.
The notes will not be subject to, or entitled to the benefit of, any sinking
fund.
Repayment at the Option of the Holder
If one or more optional repayment dates are specified in the applicable
prospectus supplement, registered holders of the particular notes may require
us to repay those notes prior to their stated maturity date on any optional
repayment date in whole or from time to time in part in increments of $1,000 or
any other integral multiple of an authorized denomination specified in the
applicable prospectus supplement (provided that any remaining principal amount
thereof shall be at least $1,000 or other minimum authorized denomination
applicable thereto), at a repayment price equal to 100% of the unpaid principal
amount thereof to be repaid, together with unpaid interest accrued thereon to
the date of repayment. A registered holder's exercise of the repayment option
will be irrevocable.
For any note to be repaid, the applicable trustee must receive, at its
corporate trust office in the Borough of Manhattan, The City of New York, not
more than 60 nor less than 30 calendar days prior to the date of repayment, the
particular notes to be repaid and, in the case of a book-entry note, repayment
instructions from the applicable beneficial owner (as defined below) to the
depositary and forwarded by the depositary.
Only the depositary may exercise the repayment option in respect of global
notes representing book-entry notes. Accordingly, beneficial owners of global
notes that desire to have all or any portion of the book-entry notes
represented thereby repaid must instruct the participant (as defined below)
through which they own their interest to direct the depositary to exercise the
repayment option on their behalf by forwarding the repayment instructions to
the applicable trustee as aforesaid. In order to ensure that these instructions
are received by the applicable trustee on a particular day, the applicable
beneficial owner must so instruct the participant through which it owns its
interest before that participant's deadline for accepting instructions for that
day. Different firms may have different deadlines for accepting instructions
from their customers. Accordingly, beneficial owners should consult their
participants for the respective deadlines. All instructions given to
participants from beneficial owners of global notes relating to the option to
elect repayment shall be irrevocable. In addition, at the time repayment
instructions are given, each beneficial owner shall cause the participant
through which it owns its interest to transfer the beneficial owner's interest
in the global note representing the related book-entry notes, on the
depositary's records, to the applicable trustee. See "Global Notes."
If applicable, we will comply with the requirements of Section 14(e) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
promulgated thereunder, and any other securities laws or regulations in
connection with any repayment of notes at the option of the registered holders
thereof.
We may at any time purchase notes at any price or prices in the open market
or otherwise. Notes so purchased by us may, at our discretion, be held, resold
or surrendered to the applicable trustee for cancellation.
Interest
Each interest-bearing note will bear interest from its date of issue at the
rate per annum, in the case of a fixed rate note, or pursuant to the interest
rate formula, in the case of a floating rate note, in each case as specified in
the applicable prospectus supplement, until the principal thereof is paid. We
will make interest
11
payments in respect of fixed rate notes and floating rate notes in an amount
equal to the interest accrued from and including the immediately preceding
interest payment date in respect of which interest has been paid or from and
including the date of issue, if no interest has been paid, to but excluding the
applicable interest payment date or the maturity date, as the case may be
(each, an "interest period").
Interest on fixed rate notes and floating rate notes will be payable in
arrears on each interest payment date and on the maturity date. The first
payment of interest on any note originally issued between a record date and the
related interest payment date will be made on the interest payment date
immediately following the next succeeding record date to the registered holder
on the next succeeding record date. The "record date" shall be the fifteenth
calendar day, whether or not a "business day", immediately preceding the
related interest payment date. "Business Day" is defined below under "--Special
Rate Calculation Terms". For the purpose of determining the holder at the close
of business on a regular record date when business is not being conducted, the
close of business will mean 5:00 P.M., New York City time, on that day.
Interest Rates
This subsection describes the different kinds of interest rates that may
apply to your note, if it bears interest.
Fixed Rate Notes
The relevant prospectus supplement will specify the interest payment dates
for a fixed rate note as well as the maturity date. Interest on fixed rate
notes will be computed on the basis of a 360-day year of twelve 30-day months.
If any interest payment date or the maturity date of a fixed rate note falls
on a day that is not a business day, we will make the required payment of
principal, premium, if any, and/or interest on the next succeeding business
day, and no additional interest will accrue in respect of the payment made on
that next succeeding business day.
Floating Rate Notes
In this subsection, we use several specialized terms relating to the manner in
which floating interest rates are calculated. These terms appear in bold,
italicized type the first time they appear, and we define these terms in
"--Special Rate Calculation Terms" at the end of this subsection.
The following will apply to floating rate notes.
Base Rates. We currently expect to issue floating rate notes that bear
interest at rates based on one or more of the following base rates:
. commercial paper rate;
. prime rate;
. LIBOR;
. EURIBOR;
. treasury rate;
. CMT rate;
. CD rate; and/or
. federal funds rate.
We describe each of these base rates in further detail below in this
subsection. If you purchase a floating rate note, your prospectus supplement
will specify the type of base rate that applies to your note.
Calculation of Interest. Calculations relating to floating rate notes will
be made by the calculation agent, an institution that we appoint as our agent
for this purpose. That institution may include any affiliate of ours, such as
Wachovia Securities or First Union National Bank. If other than Wachovia
Securities or First Union National Bank, the prospectus supplement for a
particular floating rate note will name the institution that we have appointed
to act as the calculation agent for that note as of its original issue date. We
may appoint a different institution to serve as calculation agent from time to
time after the original issue date of the note without your consent and without
notifying you of the change.
12
For each floating rate note, the calculation agent will determine, on the
corresponding interest calculation or determination date, as described below,
the interest rate that takes effect on each interest reset date. In addition,
the calculation agent will calculate the amount of interest that has accrued
during each interest period--i.e., the period from and including the original
issue date, or the last date to which interest has been paid or made available
for payment, to but excluding the payment date. For each interest period, the
calculation agent will calculate the amount of accrued interest by multiplying
the face or other specified amount of the floating rate note by an accrued
interest factor for the interest period. This factor will equal the sum of the
interest factors calculated for each day during the interest period. The
interest factor for each day will be expressed as a decimal and will be
calculated by dividing the interest rate, also expressed as a decimal,
applicable to that day by 360 or by the actual number of days in the year, as
specified in the relevant prospectus supplement.
Upon the request of the holder of any floating rate note, the calculation
agent will provide for that note the interest rate then in effect--and, if
determined, the interest rate that will become effective on the next interest
reset date. The calculation agent's determination of any interest rate, and its
calculation of the amount of interest for any interest period, will be final
and binding in the absence of manifest error.
All percentages resulting from any calculation relating to a note will be
rounded upward or downward, as appropriate, to the next higher or lower one
hundred-thousandth of a percentage point, e.g., 9.876541% (or .09876541) being
rounded down to 9.87654% (or .0987654) and 9.876545% (or .09876545) being
rounded up to 9.87655% (or .0987655). All amounts used in or resulting from any
calculation relating to a floating rate note will be rounded upward or
downward, as appropriate, to the nearest cent, in the case of U.S. dollars, or
to the nearest corresponding hundredth of a unit, in the case of a currency
other than U.S. dollars, with one-half cent or one-half of a corresponding
hundredth of a unit or more being rounded upward.
In determining the base rate that applies to a floating rate note during a
particular interest period, the calculation agent may obtain rate quotes from
various banks or dealers active in the relevant market, as discussed below.
Those reference banks and dealers may include the calculation agent itself and
its affiliates, as well as any agent participating in the distribution of the
relevant floating rate notes and its affiliates, and they may include
affiliates of Wachovia.
Initial Base Rate. For any floating rate note, the base rate in effect from
the original issue date to the first interest reset date will be the initial
base rate. We will specify the initial base rate in the relevant prospectus
supplement.
Spread or Spread Multiplier. In some cases, the base rate for a floating
rate note may be adjusted:
. by adding or subtracting a specified number of basis points, called the
spread, with one basis point being 0.01%; or
. by multiplying the base rate by a specified percentage, called the spread
multiplier.
If you purchase a floating rate note, your prospectus supplement will
indicate whether a spread or spread multiplier will apply to your note and, if
so, the amount of the spread or spread multiplier.
Maximum and Minimum Rates. The actual interest rate, after being adjusted by
the spread or spread multiplier, may also be subject to either or both of the
following limits:
. a maximum rate--i.e., a specified upper limit that the actual interest
rate in effect at any time may not exceed; and/or
. a minimum rate--i.e., a specified lower limit that the actual interest
rate in effect at any time may not fall below.
If you purchase a floating rate note, your prospectus supplement will
indicate whether a maximum rate and/or minimum rate will apply to your note
and, if so, what those rates are.
Whether or not a maximum rate applies, the interest rate on a floating rate
note will in no event be higher than the maximum rate permitted by New York
law, as it may be modified by U.S. law of general application. Under current
New York law, the maximum rate of interest, with some exceptions, for any loan
in an amount less than $250,000 is 16% and for any loan in the amount of
$250,000 or more but less than $2,500,000 is 25% per year on a simple interest
basis. These limits do not apply to loans of $2,500,000 or more.
13
The rest of this subsection describes how the interest rate and the interest
payment dates will be determined, and how interest will be calculated, on a
floating rate note.
Interest Reset Dates. The rate of interest on a floating rate note will be
reset, by the calculation agent described below, daily, weekly, monthly,
quarterly, semi-annually or annually. The date on which the interest rate
resets and the reset rate becomes effective is called the interest reset date.
Except as otherwise specified in the applicable prospectus supplement, the
interest reset date will be as follows:
. for floating rate notes that reset daily, each business day;
. for floating rate notes that reset weekly and are not treasury rate notes,
the Wednesday of each week;
. for treasury rate notes that reset weekly, the Tuesday of each week,
except as otherwise described in the next to last paragraph under "--
Interest Determination Dates" below;
. for floating rate notes that reset monthly, the third Wednesday of each
month;
. for floating rate notes that reset quarterly, the third Wednesday of
March, June, September and December of each year;
. for floating rate notes that reset semi-annually, the third Wednesday of
each of two months of each year as indicated in the relevant prospectus
supplement; and
. for floating rate notes that reset annually, the third Wednesday of one
month of each year as indicated in the relevant prospectus supplement.
For a floating rate note, the interest rate in effect on any particular day
will be the interest rate determined with respect to the latest interest reset
date that occurs on or before that day. There are several exceptions, however,
to the reset provisions described above.
The base rate in effect from the original issue date to the first interest
reset date will be the initial base rate. For floating rate notes that reset
daily or weekly, the base rate in effect for each day following the second
business day before an interest payment date to, but excluding, the interest
payment date, and for each day following the second business day before the
maturity to, but excluding, the maturity, will be the base rate in effect on
that second business day.
If any interest reset date for a floating rate note would otherwise be a day
that is not a business day, the interest reset date will be postponed to the
next day that is a business day. For a LIBOR note, however, if that business
day is in the next succeeding calendar month, the interest reset date will be
the immediately preceding business day.
Interest Determination Dates. The interest rate that takes effect on an
interest reset date will be determined by the calculation agent by reference to
a particular date called an interest determination date. Except as otherwise
indicated in the relevant prospectus supplement:
. For commercial paper rate, federal funds rate and prime rate notes, the
interest determination date relating to a particular interest reset date
will be the business day preceding the interest reset date;
. For CD rate and CMT rate notes, the interest determination date relating
to a particular interest reset date will be the second business day
preceding the interest reset date;
. For LIBOR notes, the interest determination date relating to a particular
interest reset date will be the second London business day preceding the
interest reset date, unless the index currency is pounds sterling, in
which case the interest determination date will be the interest reset
date. We refer to an interest determination date for a LIBOR note as a
LIBOR interest determination date.
. For EURIBOR notes, the interest determination date relating to a
particular interest reset date will be the second euro business day
preceding the interest reset date. We refer to an interest determination
date for a EURIBOR note as a EURIBOR interest determination date.
. For treasury rate notes, the interest determination date relating to a
particular interest reset date, which we refer to as a treasury interest
determination date, will be the day of the week in which the interest
reset date falls on which treasury bills--i.e., direct obligations of the
U.S. government--would normally be
14
auctioned. Treasury bills are usually sold at auction on the Monday of
each week, unless that day is a legal holiday, in which case the auction
is usually held on the following Tuesday, except that the auction may be
held on the preceding Friday. If as the result of a legal holiday an
auction is held on the preceding Friday, that Friday will be the treasury
interest determination date relating to the interest reset date occurring
in the next succeeding week. If the auction is held on a day that would
otherwise be an interest reset date, then the interest reset date will
instead be the first business day following the auction date.
The interest determination date pertaining to a floating rate note the
interest rate of which is determined with reference to two or more base rates
will be the latest business day which is at least two business days before the
related interest reset date for the applicable floating rate note on which each
base rate is determinable.
Interest Calculation Dates. As described above, the interest rate that takes
effect on a particular interest reset date will be determined by reference to
the corresponding interest determination date. Except for LIBOR notes and
EURIBOR notes, however, the determination of the rate will actually be made on
a day no later than the corresponding interest calculation date. The interest
calculation date will be the earlier of the following:
. the tenth calendar day after the interest determination date or, if that
tenth calendar day is not a business day, the next succeeding business
day; and
. the business day immediately preceding the interest payment date or the
maturity, whichever is the day on which the next payment of interest will
be due.
The calculation agent need not wait until the relevant interest calculation
date to determine the interest rate if the rate information it needs to make
the determination is available from the relevant sources sooner.
Interest Payment Dates. The interest payment dates for a floating rate note
will depend on when the interest rate is reset and, unless we specify otherwise
in the relevant prospectus supplement, will be as follows:
. for floating rate notes that reset daily, weekly or monthly, the third
Wednesday of each month or the third Wednesday of March, June, September
and December of each year, as specified in the relevant prospectus
supplement;
. for floating rate notes that reset quarterly, the third Wednesday of
March, June, September and December of each year;
. for floating rate notes that reset semi-annually, the third Wednesday of
the two months of each year specified in the relevant prospectus
supplement; or
. for floating rate notes that reset annually, the third Wednesday of the
month specified in the relevant prospectus supplement.
Regardless of these rules, if a note is originally issued after the regular
record date and before the date that would otherwise be the first interest
payment date, the first interest payment date will be the date that would
otherwise be the second interest payment date.
In addition, the following special provision will apply to a floating rate
note with regard to any interest payment date other than one that falls on the
maturity. If the interest payment date would otherwise fall on a day that is
not a business day, then the interest payment date will be the next day that is
a business day. However, if the floating rate note is a LIBOR note or a EURIBOR
note and the next business day falls in the next calendar month, then the
interest payment date will be advanced to the next preceding day that is a
business day. In all cases, an interest payment date that falls on the maturity
will not be changed.
Calculation Agent. We have initially appointed First Union National Bank as
our calculation agent for the notes. See "--Calculation of Interest" above for
details regarding the role of the calculation agent.
Commercial Paper Rate Notes
If you purchase a commercial paper rate note, your note will bear interest
at a base rate equal to the commercial paper rate and adjusted by the spread or
spread multiplier, if any, indicated in your prospectus supplement.
15
The commercial paper rate will be the money market yield of the rate, for
the relevant interest determination date, for commercial paper having the index
maturity indicated in your prospectus supplement, as published in H.15(519)
under the heading "Commercial Paper--Nonfinancial". If the commercial paper
rate cannot be determined as described above, the following procedures will
apply.
. If the rate described above does not appear in H.15(519) at 3:00 P.M., New
York City time, on the relevant interest calculation date, unless the
calculation is made earlier and the rate is available from that source at
that time, then the commercial paper rate will be the rate, for the
relevant interest determination date, for commercial paper having the
index maturity specified in your prospectus supplement, as published in
H.15 daily update or any other recognized electronic source used for
displaying that rate, under the heading "Commercial Paper--Nonfinancial".
. If the rate described above does not appear in H.15(519), H.15 daily
update or another recognized electronic source at 3:00 P.M., New York City
time, on the relevant interest calculation date, unless the calculation is
made earlier and the rate is available from one of those sources at that
time, the commercial paper rate will be the money market yield of the
arithmetic mean of the following offered rates for U.S. dollar commercial
paper that has the relevant index maturity and is placed for an industrial
issuer whose bond rating is "AA", or the equivalent, from a nationally
recognized rating agency: the rates offered as of 11:00 A.M., New York
City time, on the relevant interest determination date, by three leading
U.S. dollar commercial paper dealers in New York City selected by the
calculation agent.
. If fewer than three dealers selected by the calculation agent are quoting
as described above, the commercial paper rate for the new interest period
will be the commercial paper rate in effect for the prior interest period.
If the initial base rate has been in effect for the prior interest period,
however, it will remain in effect for the new interest period.
Prime Rate Notes
If you purchase a prime rate note, your note will bear interest at a base
rate equal to the prime rate and adjusted by the spread or spread multiplier,
if any, indicated in your prospectus supplement.
The prime rate will be the rate, for the relevant interest determination
date, published in H.15(519) under the heading "Bank Prime Loan". If the prime
rate cannot be determined as described above, the following procedures will
apply.
. If the rate described above does not appear in H.15(519) at 3:00 P.M., New
York City time, on the relevant interest calculation date, unless the
calculation is made earlier and the rate is available from that source at
that time, then the prime rate will be the rate, for the relevant interest
determination date, as published in H.15 daily update or another
recognized electronic source used for the purpose of displaying that rate,
under the heading "Bank Prime Loan".
. If the rate described above does not appear in H.15(519), H.15 daily
update or another recognized electronic source at 3:00 P.M., New York City
time, on the relevant interest calculation date, unless the calculation is
made earlier and the rate is available from one of those sources at that
time, then the prime rate will be the arithmetic mean of the following
rates as they appear on the Reuters screen US PRIME 1 page: the rate of
interest publicly announced by each bank appearing on that page as that
bank's prime rate or base lending rate, as of 11:00 A.M., New York City
time, on the relevant interest determination date.
. If fewer than four of these rates appear on the Reuters screen US PRIME 1
page, the prime rate will be the arithmetic mean of the prime rates or
base lending rates, as of the close of business on the relevant interest
determination date, of three major banks in New York City selected by the
calculation agent. For this purpose, the calculation agent will use rates
quoted on the basis of the actual number of days in the year divided by a
360-day year.
. If fewer than three banks selected by the calculation agent are quoting as
described above, the prime rate for the new interest period will be the
prime rate in effect for the prior interest period. If the initial base
rate has been in effect for the prior interest period, however, it will
remain in effect for the new interest period.
16
LIBOR Notes
If you purchase a LIBOR note, your note will bear interest at a base rate
equal to LIBOR, which will be the London interbank offered rate for deposits in
U.S. dollars or any other index currency, as noted in your prospectus
supplement. In addition, the applicable LIBOR base rate will be adjusted by the
spread or spread multiplier, if any, indicated in your prospectus supplement.
LIBOR will be determined in the following manner:
. LIBOR will be either:
. the offered rate appearing on the Telerate LIBOR page; or
. the arithmetic mean of the offered rates appearing on the Reuters screen
LIBOR page unless that page by its terms cites only one rate, in which
case that rate;
in either case, as of 11:00 A.M., London time, on the relevant LIBOR interest
determination date, for deposits of the relevant index currency having the
relevant index maturity beginning on the relevant interest reset date. Your
prospectus supplement will indicate the index currency, the index maturity and
the reference page that apply to your LIBOR note. If no reference page is
mentioned in your prospectus supplement, Telerate LIBOR page will apply to your
LIBOR note.
. If Telerate LIBOR page applies and the rate described above does not
appear on that page, or if Reuters screen LIBOR page applies and fewer
than two of the rates described above appears on that page or no rate
appears on any page on which only one rate normally appears, then LIBOR
will be determined on the basis of the rates, at approximately 11:00 A.M.,
London time, on the relevant LIBOR interest determination date, at which
deposits of the following kind are offered to prime banks in the London
interbank market by four major banks in that market selected by the
calculation agent: deposits of the index currency having the relevant
index maturity, beginning on the relevant interest reset date, and in a
representative amount. The calculation agent will request the principal
London office of each of these banks to provide a quotation of its rate.
If at least two quotations are provided, LIBOR for the relevant LIBOR
interest determination date will be the arithmetic mean of the quotations.
. If fewer than two quotations are provided as described above, LIBOR for
the relevant LIBOR interest determination date will be the arithmetic mean
of the rates for loans of the following kind to leading European banks
quoted, at approximately 11:00 A.M., in the principal financial center for
the country of the index currency, on that LIBOR interest determination
date, by three major banks in that financial center selected by the
calculation agent: loans of the index currency having the relevant index
maturity, beginning on the relevant interest reset date, and in a
representative amount.
. If fewer than three banks selected by the calculation agent are quoting as
described above, LIBOR for the new interest period will be LIBOR in effect
for the prior interest period. If the initial base rate has been in effect
for the prior interest period, however, it will remain in effect for the
new interest period.
EURIBOR Notes
If you purchase a EURIBOR note, your note will bear interest at a base rate
equal to the interest rate for deposits in euro, designated as "EURIBOR" and
sponsored jointly by the European Banking Federation and ACI--the Financial
Market Association, or any company established by the joint sponsors for
purposes of compiling and publishing that rate. In addition, the EURIBOR base
rate will be adjusted by the spread or spread multiplier, if any, specified in
your prospectus supplement. EURIBOR will be determined in the following manner:
. EURIBOR will be the offered rate for deposits in euros having the index
maturity specified in your prospectus supplement, beginning on the second
euro business day after the relevant EURIBOR interest determination date,
as that rate appears on Telerate page 248 as of 11:00 A.M., Brussels time,
on the relevant EURIBOR interest determination date.
. If the rate described above does not appear on Telerate page 248, EURIBOR
will be determined on the basis of the rates, at approximately 11:00 A.M.,
Brussels time, on the relevant EURIBOR interest determination date, at
which deposits of the following kind are offered to prime banks in the
euro-zone interbank market by the principal euro-zone office of each of
four major banks in that market selected by the calculation agent: euro
deposits having the relevant index maturity, beginning on the relevant
interest
17
reset date, and in a representative amount. The calculation agent will
request the principal euro-zone office of each of these banks to provide a
quotation of its rate. If at least two quotations are provided, EURIBOR
for the relevant EURIBOR interest determination date will be the
arithmetic mean of the quotations.
. If fewer than two quotations are provided as described above, EURIBOR for
the relevant EURIBOR interest determination date will be the arithmetic
mean of the rates for loans of the following kind to leading euro-zone
banks quoted, at approximately 11:00 A.M., Brussels time on that EURIBOR
interest determination date, by three major banks in the euro-zone
selected by the calculation agent: loans of euros having the relevant
index maturity, beginning on the relevant interest reset date, and in a
representative amount.
. If fewer than three banks selected by the calculation agent are quoting as
described above, EURIBOR for the new interest period will be EURIBOR in
effect for the prior interest period. If the initial base rate has been in
effect for the prior interest period, however, it will remain in effect
for the new interest period.
Treasury Rate Notes
If you purchase a treasury rate note, your note will bear interest at a base
rate equal to the treasury rate and adjusted by the spread or spread
multiplier, if any, indicated in your prospectus supplement.
The treasury rate will be the rate for the auction, on the relevant treasury
interest determination date, of treasury bills having the index maturity
specified in your prospectus supplement, as that rate appears on Telerate page
56 or 57 under the heading "Investment Rate". If the treasury rate cannot be
determined in this manner, the following procedures will apply.
. If the rate described above does not appear on either page at 3:00 P.M.,
New York City time, on the relevant interest calculation date, unless the
calculation is made earlier and the rate is available from that source at
that time, the treasury rate will be the bond equivalent yield of the
rate, for the relevant interest determination date, for the type of
treasury bill described above, as published in H.15 daily update, or
another recognized electronic source used for displaying that rate, under
the heading "U.S. Government Securities/Treasury Bills/Auction High".
. If the rate described in the prior paragraph does not appear in H.15 daily
update or another recognized electronic source at 3:00 P.M., New York City
time, on the relevant interest calculation date, unless the calculation is
made earlier and the rate is available from one of those sources at that
time, the treasury rate will be the bond equivalent yield of the auction
rate, for the relevant treasury interest determination date and for
treasury bills of the kind described above, as announced by the U.S.
Department of the Treasury.
. If the auction rate described in the prior paragraph is not so announced
by 3:00 P.M., New York City time, on the relevant interest calculation
date, or if no such auction is held for the relevant week, then the
treasury rate will be the bond equivalent yield of the rate, for the
relevant treasury interest determination date and for treasury bills
having a remaining maturity closest to the specified index maturity, as
published in H.15(519) under the heading "U.S. Government Securities
/Treasury Bills/Secondary Market".
. If the rate described in the prior paragraph does not appear in H.15(519)
at 3:00 P.M., New York City time, on the relevant interest calculation
date, unless the calculation is made earlier and the rate is available
from one of those sources at that time, then the treasury rate will be the
rate, for the relevant treasury interest determination date and for
treasury bills having a remaining maturity closest to the specified index
maturity, as published in H.15 daily update, or another recognized
electronic source used for displaying that rate, under the heading "U.S.
Government Securities/Treasury Bills/Secondary Market".
. If the rate described in the prior paragraph does not appear in H.15 daily
update or another recognized electronic source at 3:00 P.M., New York City
time, on the relevant interest calculation date, unless the calculation is
made earlier and the rate is available from one of those sources at that
time, the treasury rate will be the bond equivalent yield of the
arithmetic mean of the following secondary market bid rates for the issue
of treasury bills with a remaining maturity closest to the specified index
maturity: the rates bid
18
as of approximately 3:30 P.M., New York City time, on the relevant
treasury interest determination date, by three primary U.S. government
securities dealers in New York City selected by the calculation agent.
. If fewer than three dealers selected by the calculation agent are quoting
as described in the prior paragraph, the treasury rate in effect for the
new interest period will be the treasury rate in effect for the prior
interest period. If the initial base rate has been in effect for the prior
interest period, however, it will remain in effect for the new interest
period.
CD Rate Notes
If you purchase a CD rate note, your note will bear interest at a base rate
equal to the CD rate and adjusted by the spread or spread multiplier, if any,
indicated in your prospectus supplement.
The CD rate will be the rate, on the relevant interest determination date,
for negotiable U.S. dollar certificates of deposit having the index maturity
specified in your prospectus supplement, as published in H.15(519) under the
heading "CDs (Secondary Market)". If the CD rate cannot be determined in this
manner, the following procedures will apply.
. If the rate described above does not appear in H.15(519) at 3:00 P.M., New
York City time, on the relevant interest calculation date, unless the
calculation is made earlier and the rate is available from that source at
that time, then the CD rate will be the rate, for the relevant interest
determination date, described above as published in H.15 daily update, or
another recognized electronic source used for displaying that rate, under
the heading "CDs (Secondary Market)."
. If the rate described above does not appear in H.15(519), H.15 daily
update or another recognized electronic source at 3:00 P.M., New York City
time, on the relevant interest calculation date, unless the calculation is
made earlier and the rate is available from one of those sources at that
time, the CD rate will be the arithmetic mean of the following secondary
market offered rates for negotiable U.S. dollar certificates of deposit of
major U.S. money market banks with a remaining maturity closest to the
specified index maturity, and in a representative amount: the rates
offered as of 10:00 A.M., New York City time, on the relevant interest
determination date, by three leading nonbank dealers in negotiable U.S.
dollar certificates of deposit in New York City, as selected by the
calculation agent.
. If fewer than three dealers selected by the calculation agent are quoting
as described above, the CD rate in effect for the new interest period will
be the CD rate in effect for the prior interest period. If the initial
base rate has been in effect for the prior interest period, however, it
will remain in effect for the new interest period.
CMT Rate Notes
If you purchase a CMT rate note, your note will bear interest at a base rate
equal to the CMT rate and adjusted by the spread or spread multiplier, if any,
indicated in your prospectus supplement.
The CMT rate will be the following rate displayed on the designated CMT
Telerate page under the heading ". . . Treasury Constant Maturities . . .
Federal Reserve Board Release H.15 Mondays Approximately 3:45 P.M.," under the
column for the designated CMT index maturity:
. if the designated CMT Telerate page is Telerate page 7051, the rate for
the relevant interest determination date; or
. if the designated CMT Telerate page is Telerate page 7052, the weekly or
monthly average, as specified in your prospectus supplement, for the week
that ends immediately before the week in which the relevant interest
determination date falls, or for the month that ends immediately before
the month in which the relevant interest determination date falls, as
applicable.
If the CMT rate cannot be determined in this manner, the following
procedures will apply.
. If the applicable rate described above is not displayed on the relevant
designated CMT Telerate page at 3:00 P.M., New York City time, on the
relevant interest calculation date, unless the calculation is made earlier
and the rate is available from that source at that time, then the CMT rate
will be the applicable treasury constant maturity rate described
above--i.e., for the designated CMT index maturity and for either the
relevant interest determination date or the weekly or monthly average, as
applicable--as published in H.15(519).
19
. If the applicable rate described above does not appear in H.15(519) at
3:00 P.M., New York City time, on the relevant interest calculation date,
unless the calculation is made earlier and the rate is available from one
of those sources at that time, then the CMT rate will be the treasury
constant maturity rate, or other U.S. treasury rate, for the designated
CMT index maturity and with reference to the relevant interest
determination date, that:
. is published by the Board of Governors of the Federal Reserve System, or
the U.S. Department of the Treasury; and
. is determined by the calculation agent to be comparable to the
applicable rate formerly displayed on the designated CMT Telerate page
and published in H.15(519).
. If the rate described in the prior paragraph does not appear at 3:00 P.M.,
New York City time, on the relevant interest calculation date, unless the
calculation is made earlier and the rate is available from one of those
sources at that time, then the CMT rate will be the yield to maturity of
the arithmetic mean of the following secondary market offered rates for
the most recently issued treasury notes having an original maturity of
approximately the designated CMT index maturity and a remaining term to
maturity of not less than the designated CMT index maturity minus one
year, and in a representative amount: the offered rates, as of
approximately 3:30 P.M., New York City time, on the relevant interest
determination date, of three primary U.S. government securities dealers in
New York City selected by the calculation agent. In selecting these
offered rates, the calculation agent will request quotations from five of
these primary dealers and will disregard the highest quotation--or, if
there is equality, one of the highest--and the lowest quotation--or, if
there is equality, one of the lowest. Treasury notes are direct,
non-callable, fixed rate obligations of the U.S. government.
. If the calculation agent is unable to obtain three quotations of the kind
described in the prior paragraph, the CMT rate will be the yield to
maturity of the arithmetic mean of the following secondary market offered
rates for treasury notes with an original maturity longer than the
designated CMT index maturity, with a remaining term to maturity closest
to the designated CMT index maturity and in a representative amount: the
offered rates, as of approximately 3:30 P.M., New York City time, on the
relevant interest determination date, of three primary U.S. government
securities dealers in New York City selected by the calculation agent. In
selecting these offered rates, the calculation agent will request
quotations from five of these primary dealers and will disregard the
highest quotation--or, if there is equality, one of the highest and the
lowest quotation--or, if there is equality, one of the lowest. If two
treasury notes with an original maturity longer than the designated CMT
index maturity have remaining terms to maturity that are equally close to
the designated CMT index maturity, the calculation agent will obtain
quotations for the treasury note with the shorter remaining term to
maturity.
. If fewer than five but more than two of these primary dealers are quoting
as described in the prior paragraph, then the CMT rate for the relevant
interest determination date will be based on the arithmetic mean of the
offered rates so obtained, and neither the highest nor the lowest of those
quotations will be disregarded.
. If two or fewer primary dealers selected by the calculation agent are
quoting as described above, the CMT rate in effect for the new interest
period will be the CMT rate in effect for the prior interest period. If
the initial base rate has been in effect for the prior interest period,
however, it will remain in effect for the new interest period.
Federal Funds Rate Notes
If you purchase a federal funds rate note, your note will bear interest at a
base rate equal to the federal funds rate and adjusted by the spread or spread
multiplier, if any, indicated in your prospectus supplement.
The federal funds rate will be the rate for U.S. dollar federal funds on the
relevant interest determination date, as published in H.15 (519) under the
heading "Federal Funds (Effective)", as that rate is displayed on Telerate page
120. If the federal funds rate cannot be determined in this manner, the
following procedures will apply.
20
. If the rate described above is not displayed on Telerate page 120 at 3:00
P.M., New York City time, on the relevant interest calculation date,
unless the calculation is made earlier and the rate is available from that
source at that time, then the federal funds rate, for the relevant
interest determination date, will be the rate described above as published
in H.15 daily update, or another recognized electronic source used for
displaying that rate, under the heading "Federal Funds (Effective)".
. If the rate described above is not displayed on Telerate page 120 and does
not appear in H.15(519), H.15 daily update or another recognized
electronic source at 3:00 P.M., New York City time, on the relevant
interest calculation date, unless the calculation is made earlier and the
rate is available from one of those sources at that time, the federal
funds rate will be the arithmetic mean of the rates for the last
transaction in overnight, U.S. dollar federal funds arranged, before 9:00
A.M., New York City time, on the relevant interest determination date, by
three leading brokers of U.S. dollar federal funds transactions in New
York City selected by the calculation agent.
. If fewer than three brokers selected by the calculation agent are quoting
as described above, the federal funds rate in effect for the new interest
period will be the federal funds rate in effect for the prior interest
period. If the initial base rate has been in effect for the prior interest
period, however, it will remain in effect for the new interest period.
. If fewer than five but more than two of these primary dealers are quoting
as described in the prior paragraph, then the CMT rate for the relevant
interest determination date will be based on the arithmetic mean of the
offered rates so obtained, and neither the highest nor the lowest of those
quotations will be disregarded.
Special Rate Calculation Terms
In this subsection entitled "-- Interest Rates", we use several terms that
have special meanings relevant to calculating floating interest rates. We
define these terms as follows:
The term "bond equivalent yield" means a yield expressed as a percentage and
calculated in accordance with the following formula:
D X N
bond equivalent yield = --------------------------- X 100
360 - (D X M)
where
. "D" means the annual rate for treasury bills quoted on a bank discount
basis and expressed as a decimal;
. "N" means 365 or 366, as the case may be; and
. "M" means the actual number of days in the applicable interest reset
period.
The term "business day" means, for any note, a day that meets all the
following applicable requirements:
. for all notes, is a Monday, Tuesday, Wednesday, Thursday or Friday that is
not a day on which banking institutions in New York City generally are
authorized or obligated by law, regulation or executive order to close;
. if the note is a LIBOR note, is also a London business day;
. if the note has a specified currency other than U.S. dollars or euros, is
also a day on which banking institutions are not authorized or obligated
by law, regulation or executive order to close in the principal financial
center of the country issuing the specified currency; and
. if the note is a EURIBOR note or has a specified currency of euros, or is
a LIBOR note for which the index currency is euros, is also a euro
business day.
The term "designated CMT index maturity" means the index maturity for a CMT
rate note and will be the original period to maturity of a U.S. treasury
security--either 1, 2, 3, 5, 7, 10, 20 or 30 years--specified in the applicable
prospectus supplement. If no such original maturity period is so specified, the
designated CMT index maturity will be 2 years.
21
The term "designated CMT Telerate page" means the Telerate page mentioned in
the relevant prospectus supplement that displays treasury constant maturities
as reported in H.15(519). If no Telerate page is so specified, then the
applicable page will be Telerate page 7052. If Telerate page 7052 applies but
the relevant prospectus supplement does not specify whether the weekly or
monthly average applies, the weekly average will apply.
The term "euro business day" means any day on which the Trans-European
Automated Real-Time Gross Settlement Express Transfer (TARGET) System, or any
successor system, is open for business.
The term "euro-zone" means, at any time, the region comprised of the member
states of the European Economic and Monetary Union that, as of that time, have
adopted a single currency in accordance with the Treaty on European Union of
February 1992.
"H.15(519)" means the weekly statistical release entitled "Statistical
Release H.15 (519)", or any successor publication, published by the Board of
Governors of the Federal Reserve System.
"H.15 daily update" means the daily update of H.15(519) available through
the worldwide website of the Board of Governors of the Federal Reserve System,
at http://www.bog.frb.fed.us/releases/h15/update, or any successor site or
publication.
The term "index currency" means, with respect to a LIBOR note, the currency
specified as such in the relevant prospectus supplement. The index currency may
be U.S. dollars or any other currency, and will be U.S. dollars unless another
currency is specified in the relevant prospectus supplement.
The term "index maturity" means, with respect to a floating rate note, the
period to maturity of the instrument or obligation on which the interest rate
formula is based, as specified in the applicable prospectus supplement.
"London business day" means any day on which dealings in the relevant index
currency are transacted in the London interbank market.
The term "money market yield" means a yield expressed as a percentage and
calculated in accordance with the following formula:
D X 360
money market yield = _____________________________ X 100
360 - (D x M)
where
. "D" means the annual rate for commercial paper quoted on a bank discount
basis and expressed as a decimal; and
. "M" means the actual number of days in the relevant interest reset period.
The term "representative amount" means an amount that, in the calculation
agent's judgment, is representative of a single transaction in the relevant
market at the relevant time.
"Reuters screen LIBOR page" means the display on the Reuters Monitor Money
Rates Service, or any successor service, on the page designated as "LIBO" or
any replacement page or pages on which London interbank rates of major banks
for the relevant index currency are displayed.
22
"Reuters screen US PRIME 1 page" means the display on the "US PRIME 1" page
on the Reuters Monitor Money Rates Service, or any successor service, or any
replacement page or pages on that service, for the purpose of displaying prime
rates or base lending rates of major U.S. banks.
"Telerate LIBOR page" means Telerate page 3750 or any replacement page or
pages on which London interbank rates of major banks for the relevant index
currency are displayed.
"Telerate page" means the display on Bridge Telerate, Inc., or any successor
service, on the page or pages specified in this prospectus or the relevant
prospectus supplement, or any replacement page or pages on that service.
If, when we use the terms designated CMT Telerate page, H.15(519), H.15
daily update, Reuters screen LIBOR page, Reuters screen US PRIME 1 page,
Telerate LIBOR page or Telerate page, we refer to a particular heading or
headings on any of those pages, those references include any successor or
replacement heading or headings as determined by the calculation agent.
Payment of Additional Amounts to United States Aliens
Wachovia will, subject to certain exceptions and limitations listed below
(unless otherwise specified in any prospectus supplement), pay to the holder of
any note who is a United States Alien (as defined below), as additional
interest, certain amounts ("Additional Amounts") as may be necessary so that
every net payment on that note (including payment of the principal of and
interest on that note) by Wachovia or a paying agent, after deduction or
withholding for or on account of any present or future tax, assessment or other
governmental charge imposed upon or as a result of such payment by the United
States (or any political subdivision or taxing authority of or in the United
States), will not be less than the amount provided in that note to be then due
and payable; this obligation to pay Additional Amounts, however, will not apply
to:
(a) any tax, assessment or other governmental charge that would not have
been so imposed but for (i) the existence of any present or former
connection between the holder or beneficial owner of that note (or between a
fiduciary, settlor or beneficiary of, or a person holding a power over, that
holder, if that holder is an estate or a trust, or a member or shareholder
of that holder, if that holder is a partnership or corporation) and the
United States or any political subdivision or taxing authority, including
but not limited to that holder (or the fiduciary, settlor, beneficiary,
person holding a power, member or shareholder) being or having been a
citizen or resident of the United States or treated as a resident of the
United States or being or having been engaged in a trade or business in the
United States or present in the United States or having or having had a
permanent establishment in the United States or (ii) that holder's or
beneficial owner's past or present status as a personal holding company,
foreign personal holding company, foreign private foundation or other
foreign tax-exempt organization relating to the United States, controlled
foreign corporation for United States tax purposes or corporation that
accumulates earnings to avoid United States Federal income tax;
(b) any estate, inheritance, gift, excise, sales, transfer, wealth or
personal property tax or any similar tax, assessment or other governmental
charge;
(c) any tax, assessment or other governmental charge that would not have
been imposed but for the presentation by the holder of a note for payment
more than 30 days after the date on which that payment became due and
payable or the date on which payment on that note was duly provided for,
whichever occurred later;
(d) any tax, assessment or other governmental charge that is payable
otherwise than by withholding from a payment on a note;
(e) any tax, assessment or other governmental charge required to be
withheld by any paying agent from a payment on a note, if that payment can
be made without that withholding by any other paying agent;
23
(f) any tax, assessment or other governmental charge that would not have
been imposed but for a failure to comply with applicable certification,
information, documentation, identification or other reporting requirements
concerning the nationality, residence, identity or connection with the
United States of the holder or beneficial owner of a note if that compliance
is required by statute or regulation of the United States or by an
applicable tax treaty to which the United States is a party as a
precondition to relief or exemption from that tax, assessment or other
governmental charge;
(g) any tax, assessment or other governmental charge imposed on a holder
that actually or constructively owns 10 percent or more of the combined
voting power of all classes of Wachovia's stock; or
(h) any combination of items (a), (b), (c), (d), (e), (f) and (g);
nor shall Additional Amounts be paid in relation to a payment on a note to a
holder that is a fiduciary or partnership or other than the sole beneficial
owner of that payment to the extent a beneficiary or settlor with respect to
that fiduciary or a member of that partnership or a beneficial owner would not
have been entitled to Additional Amounts (or payment of Additional Amounts
would not have been necessary) had that beneficiary, settlor, member or
beneficial owner been the holder of that note.
For the purposes of this discussion, a "United States Alien" means any
person who, for United States Federal income tax purposes, is a foreign
corporation, a non-resident alien individual, a non-resident alien fiduciary of
a foreign estate or trust, or a foreign partnership one or more of the members
of which is, for United States Federal income tax purposes, a foreign
corporation, a non-resident alien individual or a non-resident alien fiduciary,
of a foreign estate or trust. "United States" means the United States of
America (including the States and the District of Columbia) and its
territories, its possessions and other areas that come under its jurisdiction.
Redemption for Tax Purposes
If (a) as a result of any change in the laws, regulations or rulings of the
United States (or any political subdivision or taxing authority of or in the
United States), or any change in the official application (including a ruling
by a court of competent jurisdiction in the United States) or interpretation of
those laws, regulations or rulings, which change or amendment is announced or
becomes effective on or after the consummation of any offering of the notes,
Wachovia is obligated to pay Additional Amounts as described above or (b) any
act is taken by a taxing authority of the United States on or after the
consummation of any offering of the notes, whether or not this act is taken in
relation to Wachovia or any affiliate, that results in a substantial likelihood
that Wachovia will or may be required to pay these Additional Amounts, then
Wachovia may, at its option, redeem, as a whole, but not in part, the notes on
not less than 30 nor more than 60 days' prior notice, at a redemption price
equal to 100% of their principal amount, together with accrued interest to the
date fixed for redemption; provided that Wachovia determines, in its business
judgment, that the obligation to pay these Additional Amounts cannot be avoided
by the use of reasonable measures available to it, not including substitution
of the obligor under the notes or any action that would entail a material cost
to Wachovia. No redemption under (b) above may be made unless Wachovia shall
have received an opinion of independent counsel to the effect that an act taken
by a taxing authority of the United States results in a substantial likelihood
that it will or may be required to pay Additional Amounts described above and
Wachovia shall have delivered to the Trustee a certificate, signed by a duly
authorized officer, saying that based on this opinion Wachovia is entitled to
redeem the notes according to their terms.
Other Provisions; Addenda
Any provisions relating to the notes, including the determination of a base
rate, calculation of the interest rate applicable to a floating rate note, its
interest payment dates, any redemption or repayment provisions, or any other
term relating thereto, may be modified and/or supplemented by the terms as
specified under "Other Provisions" on the face of the applicable notes or in an
Addendum relating to the applicable notes, if so specified on the face of the
applicable notes, and, in each case, in the relevant prospectus supplement.
24
Subordination of the Subordinated Notes
Wachovia's obligations to make any payment of the principal and interest on
any subordinated notes will, to the extent the subordinated indenture
specifies, be subordinate and junior in right of payment to all of Wachovia's
senior indebtedness. Unless otherwise specified in the prospectus supplement
relating to a specific series of subordinated notes, Wachovia's "senior
indebtedness" is defined in the subordinated indenture to mean the principal
of, premium and interest, if any, on
. all Wachovia indebtedness for money borrowed, including indebtedness Wachovia
guarantees, other than the subordinated notes, whether outstanding on the
date of execution of the indenture or incurred afterward, except
. any obligations on account of Existing Subordinated Indebtedness and
. indebtedness as is by its terms expressly stated to be not superior in
payment right to the subordinated notes or to rank equal to the
subordinated notes and
. any deferrals, renewals or extensions of any such senior indebtedness.
(Section 101 of the subordinated indenture)
The payment of the principal and interest on the subordinated notes will, to
the extent described in the subordinated indenture, be subordinated in payment
right to the prior payment of all senior indebtedness. Unless otherwise
described in the prospectus supplement relating to the specific series of
subordinated notes, in certain events of insolvency, the payment of the
principal and interest on the subordinated notes, other than subordinated notes
that are also Existing Subordinated Indebtedness, will, to the extent described
in the subordinated indenture, also be effectively subordinated in payment
right to the prior payment of all Other Financial Obligations. Upon any payment
or distribution of assets to creditors under Wachovia's liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, or any bankruptcy, insolvency or similar proceedings, all senior
indebtedness holders will be entitled to receive payment in full of all amounts
due before the subordinated note holders will be entitled to receive any
payment in respect of the principal or interest on their securities. If upon
any such payment or asset distribution to creditors, there remains, after
giving effect to those subordination provisions in favor of senior indebtedness
holders, any amount of cash, property or securities available for payment or
distribution in respect of subordinated notes (defined in the subordinated
indenture as "Excess Proceeds") and if, at that time, any Entitled Persons (as
defined below) in respect of Other Financial Obligations have not received
payment of all amounts due on such Other Financial Obligations, then such
Excess Proceeds shall first be applied to pay these Other Financial Obligations
before any payment may be applied to the subordinated notes which are not
Existing Subordinated Indebtedness. In the event of the acceleration of the
maturity of any subordinated notes, all senior indebtedness holders will be
entitled to receive payment of all amounts due before the subordinated note
holders will be entitled to receive any payment upon the principal of or
interest on their subordinated notes. (Sections 1403, 1404 and 1413 of the
subordinated indenture)
By reason of such subordination in favor of senior indebtedness holders, in
the event of insolvency, Wachovia's creditors who are not senior indebtedness
holders or subordinated note holders may recover less, ratably, than senior
indebtedness holders and may recover more, ratably, than subordinated note
holders. By reason of subordinated note holders (other than Existing
Subordinated Indebtedness) to pay over any Excess Proceeds to Entitled Persons
in respect to Other Financial Obligations, in the event of insolvency, Existing
Subordinated Indebtedness holders may recover less, ratably, than Entitled
Persons in respect of Other Financial Obligations and may recover more,
ratably, than the subordinated note holders (other than Existing Subordinated
Indebtedness).
Unless otherwise specified in the prospectus supplement relating to the
particular subordinated notes series offered by it, "Existing Subordinated
Indebtedness" means subordinated notes issued under the subordinated indenture
prior to November 15, 1992. (Section 101 of the subordinated indenture)
25
Unless otherwise specified in the prospectus supplement relating to the
particular subordinated notes series offered by it, "Other Financial
Obligations" means all obligations of Wachovia to make payment under the terms
of financial instruments, such as
. securities contracts and foreign currency exchange contracts;
. 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
. similar financial instruments other than
. obligations on account of senior indebtedness; and
. obligations on account of indebtedness for money borrowed ranking equal or
subordinate to the subordinated notes. (Section 101 of the subordinated
indenture)
Unless otherwise described in the prospectus supplement relating to a
specific series of subordinated notes, "Entitled Persons" means any person who
is entitled to payment under the terms of Other Financial Obligations. (Section
101 of the subordinated indenture)
Wachovia's obligations under the subordinated notes shall rank equal in
right of payment with each other and with the Existing Subordinated
Indebtedness, subject, unless otherwise described in the prospectus supplement
relating to a specific series of subordinated notes, to the obligations of
subordinated note holders (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. (Section 1413 of the
subordinated indenture)
The relevant prospectus supplement may further describe the provisions, if
any, applicable to the subordination of the subordinated notes of a particular
series.
Defaults
The Senior Indenture
The senior indenture defines an "event of default" as
. default in any principal or premium payment on any senior note of that
series at maturity;
. default for 30 days in interest payment of any senior note of that series;
. failure to deposit any sinking fund payment when due in respect of that
series;
. Wachovia's failure for 60 days after notice in performing any other
covenants or warranties in the senior indenture (other than a covenant or
warranty solely for the benefit of other senior notes series);
26
. failure to pay when due any Wachovia indebtedness or First Union National
Bank indebtedness in excess of $5,000,000, or maturity acceleration of any
indebtedness exceeding that amount if acceleration results from a default
under the instrument giving rise to that indebtedness and is not annulled
within 30 days after due notice;
. Wachovia's or First Union National Bank's bankruptcy, insolvency or
reorganization; and
. any other event of default provided for senior notes of that series.
(Section 501)
The senior indenture provides that, if any event of default for senior notes
of any series outstanding occurs and is continuing, either the senior trustee
or the holders of not less than 25% in principal amount of the outstanding
senior notes of that series may declare the principal amount (or, if the notes
of that series are original issue discount notes, such principal amount portion
as the terms of that series specify) of all senior notes of that series to be
due and payable immediately. However, no such declaration is required upon
certain bankruptcy events. In addition, upon fulfillment of certain conditions,
this declaration may be annulled and past defaults waived by the holders of a
majority in principal amount of the outstanding senior notes of that series on
behalf of all senior note holders of that series. (Sections 502 and 513) In the
event of Wachovia's bankruptcy, insolvency or reorganization, senior note
holders' claims would fall under the broad equity power of a federal bankruptcy
court, and to that court's determination of the nature of those holders'
rights.
The senior indenture contains a provision entitling the senior trustee,
acting under the required standard of care, to be indemnified by the holders of
any outstanding senior note series before proceeding to exercise any right or
power under the senior indenture at the holders' request. (Section 603) The
holders of a majority in principal amount of outstanding senior notes 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 notes of such
series. The senior trustee, however, may decline to act if that direction is
contrary to law or the senior indenture or would involve the senior trustee in
personal liability. (Section 512)
Wachovia will file annually with the senior trustee a compliance certificate
as to all conditions and covenants in the senior indenture. (Section 1007)
The Subordinated Indenture
Subordinated notes principal payment may be accelerated only upon an event
of default. There is no acceleration right in the case of a default in the
payment of interest or principal prior to the maturity date or a default in
Wachovia performing any covenants in the subordinated indenture, unless a
specific series of subordinated notes provide otherwise, which will be
described in the relevant prospectus supplement.
The subordinated indenture defines an "event of default" as certain events
involving Wachovia's bankruptcy, insolvency or reorganization and any other
event of default provided for the subordinated notes of that series. (Section
501) The subordinated indenture defines a "default" to include
. any event of default;
. a default in any principal or premium payment of any subordinated debt
security of that series at maturity;
. default in any interest payment when due and continued for 30 days;
. a default in any required designation of funds as "available funds"; or
. default in the performance, or breach, of Wachovia's covenants in the
subordinated indenture or in the subordinated notes of that series and
continued for 90 days after written notice to
. Wachovia by the subordinated trustee; or
. Wachovia and the subordinated trustee by the holders of not less than
25% in aggregate principal amount of the outstanding subordinated notes
of that series. (Section 503)
27
If an event of default for subordinated notes 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 notes of that
series may accelerate the maturity of all outstanding subordinated notes of
such series. The holders of a majority in aggregate principal amount of the
outstanding subordinated notes of that series may waive an event of default
resulting in acceleration of the subordinated notes of such series, but only if
all events of default have been remedied and all payments due on the
subordinated notes of that series (other than those due as a result of
acceleration) have been made and certain other conditions have been met.
(Section 502) Subject to subordinated indenture provisions relating to the
subordinated trustee's duties, in case a default shall occur and be continuing,
the subordinated trustee will be under no obligation to exercise any of its
rights or powers under the subordinated indenture at the holders' request or
direction, unless such holders shall have offered to the subordinated trustee
reasonable indemnity. (Section 603) Subject to such indemnification provisions,
the holders of a majority in aggregate principal amount of the outstanding
subordinated notes 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) The holders of a majority in aggregate
principal amount of the outstanding subordinated notes of that series may waive
any past default under the subordinated indenture with respect to such series,
except a default in principal or interest payment or a default of a
subordinated indenture covenant which cannot be modified without the consent of
each outstanding subordinated note holder of the series affected. (Section 513)
In the event of Wachovia's bankruptcy, insolvency or reorganization,
subordinated note holders' claims would fall under the broad equity power of a
federal bankruptcy court, and to that court's determination of the nature of
those holders' rights.
Wachovia will file annually with the subordinated trustee a compliance
certificate as to all conditions and covenants in the subordinated indenture.
(Section 1007)
Modification and Waiver
Each indenture may be modified and amended by Wachovia and the relevant
trustee. Certain modifications and amendments require the consent of the
holders of at least a majority in aggregate principal amount of the outstanding
notes of each series issued under that indenture and affected by the
modification or amendment. No such modification or amendment may, without the
consent of the holder of each outstanding note issued under such indenture and
affected by it
. change the stated maturity of the principal, or any installment of
principal or interest, on any outstanding note;
. reduce any principal amount, premium or interest, on any outstanding note,
including in the case of an original issue discount note the amount
payable upon acceleration of the maturity of that note;
. change the place of payment where, or the coin or currency or currency
unit in which, any principal, premium or interest, on any outstanding note
is payable;
. impair the right to institute suit for the enforcement of any payment on
or after the stated maturity, or in the case of redemption, on or after
the redemption date;
. reduce the above-stated percentage of outstanding notes necessary to
modify or amend the applicable indenture; or
. modify the above requirements or reduce the percentage of aggregate
principal amount of outstanding notes of any series required to be held by
holders seeking to waive compliance with certain provisions of the
relevant indenture or seeking to waive certain defaults. (Section 902)
The holders of at least a majority in aggregate principal amount of the
outstanding notes of any series may on behalf of all outstanding note holders
of that series waive, insofar as that series is concerned, Wachovia's
compliance with certain restrictive provisions of the relevant indenture.
(Section 1008) The holders of at least a
28
majority in aggregate principal amount of the outstanding notes of any series
may on behalf of all outstanding note holders of that series waive any past
default under the relevant indenture with respect to that series, except a
default in the payment of the principal, or premium, if any, or interest on any
outstanding note of that series or in respect of an indenture covenant which
cannot be modified or amended without each outstanding note holder consenting.
(Section 513)
Certain modifications and amendments of each indenture may be made by
Wachovia and the relevant trustee without the outstanding note holders
consenting. (Section 901)
Each indenture provides that in determining whether the holders of the
requisite principal amount of the outstanding notes have given any request,
demand, authorization, direction, notice, consent or waiver under that
indenture or are present at a meeting of holders of outstanding notes for
quorum purposes
. the principal amount of an original issue discount note that shall be
deemed to be outstanding shall be the amount of the principal that would
be due and payable as of the date of such determination upon acceleration
of its maturity; and
. the principal amount of outstanding notes denominated in a foreign
currency or currency unit shall be the U.S. dollar equivalent, determined
on the date of original issuance of that outstanding note, of the
principal amount of that outstanding note or, in the case of an original
issue discount note, the U.S. dollar equivalent, determined on the date of
original issuance of such outstanding note, of the amount determined as
provided in the above bullet-point. (Section 101)
Consolidation, Merger and Sale of Assets
The indentures each provide that Wachovia may not consolidate with or merge
into any other corporation or transfer its properties and assets substantially
as an entirety to any person unless
. the corporation formed by the consolidation or into which Wachovia is
merged, or the person to which Wachovia's properties and assets are so
transferred, shall be a corporation organized and existing under the laws
of the U.S., any state or Washington, D.C. and shall expressly assume by
supplemental indenture the payment of any principal, premium or interest
on the notes, and the performance of Wachovia's other covenants under the
relevant indenture;
. immediately after giving effect to this 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
. certain other conditions are met. (Section 801)
Limitation on Disposition of First Union National Bank Stock
The indentures each contain Wachovia's covenant that, so long as any of the
debt securities issued under that indenture before August 1, 1990 are
outstanding, but subject to Wachovia's rights in connection with its
consolidation with or merger into another corporation or a sale of Wachovia's
assets, 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, First Union National
Bank voting stock, nor will it permit First Union National Bank to issue any
shares of, or securities convertible into, or options, warrants or rights to
subscribe for or purchase shares of, First Union National Bank voting stock,
unless
. any such sale, assignment, transfer, issuance, grant of a security
interest or other disposition is made for fair market value, as determined
by Wachovia's board; and
. Wachovia will own at least 80% of the issued and outstanding First Union
National Bank voting stock free and clear of any security interest after
giving effect to such transaction. (Section 1006)
The above covenant is not a covenant for the benefit of any series of notes
issued on or after August 1, 1990.
29
Restriction on Sale or Issuance of Voting Stock of Major Subsidiary Banks
With respect to the senior notes, the senior indenture contains Wachovia's
covenant that it will not, and will not permit any subsidiary to, sell, assign,
transfer, grant a security interest in, or otherwise dispose of, any shares of
voting stock, or any securities convertible into shares of voting stock, of any
"Major Subsidiary Bank" (as defined below) or any subsidiary owning, directly
or indirectly, any shares of voting stock of any Major Subsidiary Bank and that
it will not permit any Major Subsidiary Bank or any subsidiary owning, directly
or indirectly, any shares of voting stock of a Major Subsidiary Bank to issue
any shares of its voting stock or any securities convertible into shares of its
voting stock, except for sales, assignments, transfers or other dispositions
which
. are for the purpose of qualifying a person to serve as a director;
. are for fair market value, as determined by Wachovia's board, and, after
giving effect to such dispositions and to any potential dilution, Wachovia
will own not less than 80% of the shares of voting stock of such Major
Subsidiary Bank or any such subsidiary owning any shares of voting stock
of such Major Subsidiary Bank;
. are made
. in compliance with court or regulatory authority order; or
. in compliance with a condition imposed by any such court or authority
permitting Wachovia's acquisition of any other bank or entity; or
. in compliance with an undertaking made to such authority in connection
with such an acquisition; provided, in the case of the two preceding
bullet-points, the assets of the bank or entity being acquired and its
consolidated subsidiaries equal or exceed 75% of the assets of such
Major Subsidiary Bank or such subsidiary owning, directly or indirectly,
any shares of voting stock of a Major Subsidiary Bank and its respective
consolidated subsidiaries on the date of acquisition; or
. to Wachovia or any wholly-owned subsidiary.
Despite the above requirements, any Major Subsidiary Bank may be merged into
or consolidated with another banking institution organized under U.S. or state
law, if after giving effect to that merger or consolidation Wachovia or any
wholly-owned subsidiary owns at least 80% of the voting stock of the other
banking institution free and clear of any security interest and if, immediately
after the merger or consolidation, 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. (Section 1007) A "Major Subsidiary Bank" is
defined in each indenture to mean any subsidiary which is a bank and has total
assets equal to 25% or more of Wachovia's consolidated assets determined on the
date of the most recent audited financial statements of these entities. At
present, the Major Subsidiary Banks are First Union National Bank and Wachovia
Bank, N.A.
The above covenant is not a covenant for the benefit of any series of debt
securities issued before August 1, 1990, or, in the case of subordinated debt
securities including the subordinated notes, issued after November 15, 1992.
Trustees
Either or both of the trustees may resign or be removed with respect to one
or more series of notes and a successor trustee may be appointed to act with
respect to that series. (Section 610) In the event that two or more persons are
acting as trustee with respect to different series of notes, each such trustee
shall be a trustee of a trust under the relevant indenture separate and apart
from the trust administered by any other such trustee (Section 611), and any
action 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 notes for which
it is trustee.
In the normal course of business, Wachovia and its subsidiaries conduct
banking transactions with the trustees, and the trustees conduct banking
transactions with Wachovia and its subsidiaries.
Title
Wachovia, the trustees and any of their agents may treat the registered
owner of any note as the absolute owner of that security, whether or not that
note is overdue and despite any notice to the contrary, for any purpose. See
"Global Notes".
30
GLOBAL NOTES
Upon issuance, the notes will be represented by one or more fully registered
global notes. Each such global note will be deposited with, or on behalf of,
The Depository Trust Company ("DTC") or any successor, as depositary, and
registered in the name of Cede & Co. as DTC's nominee. Unless and until it is
exchanged in whole or in part for notes in definitive form, as described below,
no global note may be transferred except as a whole by DTC to a nominee of DTC.
Investors may elect to hold interests in the global notes through either DTC
(in the United States) or Clearstream Banking AG, societe anonyme, Luxembourg
(formerly Cedelbank), and Euroclear Bank S.A./N.V. (the "Euroclear operator"),
as operator of the Euroclear System, if they are participants in these systems,
or indirectly through organizations which are participants in these systems.
Clearstream and Euroclear will hold interests on behalf of their participants
through customers' securities accounts in Clearstream and Euroclear's names on
the books of their respective depositaries, which in turn will hold these
interests in customers' securities accounts in the depositaries' names on the
books of DTC . Citibank, N.A. will act as depositary for Clearstream and The
Chase Manhattan Bank will act as depositary for Euroclear.
No person that acquires a beneficial interest in notes issued in global form
will be entitled to receive a certificate representing that person's interest
in the notes except as mentioned herein or in the relevant prospectus
supplement. Unless and until definitive notes are issued under the limited
circumstances described below, all references to actions by holders of notes
issued in global form shall refer to actions taken by DTC upon instructions
from its participants, and all references to payments and notices to holders
shall refer to payments and notices to DTC or Cede & Co., as the registered
holder of these notes.
DTC has informed Wachovia that it is a limited-purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code, and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC holds securities that DTC participants deposit
with DTC. DTC also facilitates the settlement among DTC participants of
securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in DTC participants'
accounts, thereby eliminating the need for physical movement of certificates.
DTC participants include securities brokers and dealers, banks, trust companies
and clearing corporations, and may include other organizations. DTC is owned by
a number of its direct participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, LLC and the National Association of Securities
Dealers, Inc. Indirect access to the DTC system also is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly. The rules applicable to DTC and DTC participants are on file with
the Commission.
Persons that are not participants or indirect participants but desire to
purchase, sell or otherwise transfer ownership of, or other interests in, notes
may do so only through participants and indirect participants. Under a
book-entry format, holders may experience some delay in their receipt of
payments, as such payments will be forwarded by Wachovia's designated agent to
Cede & Co., as nominee for DTC. DTC will forward such payments to its
participants, who will then forward them to indirect participants or holders.
Holders will not be recognized by the relevant registrar, transfer agent,
trustee, depositary or warrant agent as registered holders of the notes
entitled to the benefits of Wachovia's articles or the applicable indenture,
deposit agreement or warrant agreement. Beneficial owners that are not
participants will be permitted to exercise their rights only indirectly through
and according to the procedures of participants and, if applicable, indirect
participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations as currently in effect, DTC will be required to make book-entry
transfers of notes among participants and to receive and transmit payments to
participants. DTC rules require participants and indirect participants with
which beneficial note owners have accounts to make book-entry transfers and
receive and transmit payments on behalf of their respective account holders.
31
Because DTC can act only on behalf of
. participants, who in turn act only on behalf of participants or indirect
participants and
. certain banks, trust companies and other persons approved by it,
the ability of a beneficial owner of notes issued in global form to pledge such
notes to persons or entities that do not participate in the DTC system may be
limited due to the unavailability of physical certificates for these notes.
DTC has advised Wachovia that DTC will take any action permitted to be taken
by a registered holder of any notes under the relevant indenture only at the
direction of one or more participants to whose accounts with DTC such notes are
credited.
Unless otherwise mentioned in the relevant prospectus supplement, a global
note will be exchangeable for the relevant definitive notes registered in the
names of persons other than DTC or its nominee only if
. DTC notifies Wachovia that it is unwilling or unable to continue as
depositary for that global note or if DTC ceases to be a clearing agency
registered under the Exchange Act when DTC is required to be so
registered;
. Wachovia executes and delivers to the relevant trustee an order complying
with the requirements of the relevant indenture that this global note
shall be so exchangeable; or
. there has occurred and is continuing a default in the payment of any
amount due in respect of the notes or an event of default or an event
that, with the giving of notice or lapse of time, or both, would
constitute an event of default with respect to these notes.
Any global note that is exchangeable under the preceding sentence will be
exchangeable for notes registered in such names as DTC directs.
Upon the occurrence of any event described in the above paragraph, DTC is
generally required to notify all participants of the availability of definitive
notes. Upon DTC surrendering the global note representing the notes and
delivery of instructions for re-registration, the trustee will reissue the
securities as definitive notes, and then will recognize the holders of such
definitive notes as registered holders of securities entitled to the benefits
of the relevant indenture.
Except as described above, the global note may not be transferred except as
a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another
nominee of DTC or to a successor depositary Wachovia appoints. Except as
described above, DTC may not sell, assign, transfer or otherwise convey any
beneficial interest in a global note evidencing all or part of any notes unless
the beneficial interest is in an amount equal to an authorized denomination for
these notes.
None of Wachovia, the trustees or any depositary, or any agent of any of
them, will have any responsibility or liability for any aspect of DTC's or any
participant's records relating to, or for payments made on account of,
beneficial interests in a global note, or for maintaining, supervising or
reviewing any records relating to such beneficial interests.
Secondary trading in notes and debentures of corporate issuers is generally
settled in clearing-house or next-day funds. In contrast, beneficial interests
in a global note, in some cases, may trade in the DTC's same-day funds
settlement system, in which secondary market trading activity in those
beneficial interests would be required by DTC to settle in immediately
available funds. There is no assurance as to the effect, if any, that
settlement in immediately available funds would have on trading activity in
such beneficial interests. Also, settlement for purchases of beneficial
interests in a global note upon the original issuance of this note may be
required to be made in immediately available funds.
32
Clearstream and Euroclear Clearance and Settlement Procedures
Clearstream and Euroclear
Clearstream and the Euroclear operator have informed Wachovia that
Clearstream and the Euroclear operator each hold securities for their customers
and facilitate the clearance and settlement of securities transactions by
electronic book-entry transfer between their respective account holders.
Clearstream and the Euroclear operator provide various services including
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Clearstream and the Euroclear
operator also deal with domestic securities markets in several countries
through established depositary and custodial relationships. Clearstream and the
Euroclear operator have established an electronic bridge between their two
systems across which their respective participants may settle trades with each
other.
Clearstream and the Euroclear operator customers are world-wide financial
institutions including underwriters, securities brokers and dealers, banks,
trust companies and clearing corporations. Indirect access to Clearstream and
the Euroclear operator is available to other institutions which clear through
or maintain a custodial relationship with an account holder of either system.
Distributions relating to notes held beneficially through Clearstream will
be credited to cash accounts of its participants in accordance with its rules
and procedures, to the extent received by Citibank, N.A. for Clearstream.
Securities clearance accounts and cash accounts with the Euroclear operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System, and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities
and cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear operator acts under the Terms and Conditions only on behalf of
Euroclear participants, and has no record of or relationship with persons
holding through Euroclear participants.
Distributions relating to notes held beneficially through Euroclear will be
credited to the cash accounts of Euroclear participants in accordance with the
Terms and Conditions, to the extent received by The Chase Manhattan Bank for
Euroclear.
Global Clearance and Settlement Procedures
Initial settlement for the notes will be made in immediately available
funds. Secondary market trading between the participants will occur in the
ordinary way in accordance with DTC's rules and will be settled in immediately
available funds using DTC's Same-Day Funds Settlement System. Secondary market
trading between Clearstream participants and/or Euroclear participants will
occur in the ordinary way in accordance with the applicable rules and operating
procedures of Clearstream and Euroclear and will be settled using the
procedures applicable to conventional eurobonds in immediately available funds.
Cross-market transfers between persons holding directly or indirectly
through DTC on the one hand, and directly or indirectly through Clearstream or
Euroclear participants, on the other, will be effected in DTC in accordance
with DTC's rules on behalf of the relevant European international clearing
system by its U.S. depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its rules
and procedures and within its established deadlines (European time). The
relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to its U.S. depositary to
take action to effect final settlement on its behalf by delivering or receiving
notes in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Clearstream
participants and Euroclear participants may not deliver instructions directly
to DTC.
Because of time-zone differences, credits of notes received in Clearstream
or Euroclear as a result of a transaction with a DTC participant will be made
during subsequent securities settlement processing and will be
33
credited the business day following the DTC settlement date. These credits or
any transactions in the notes settled during this processing will be reported
to the relevant Euroclear or Clearstream participants on that same business
day. Cash received in Clearstream or Euroclear as a result of sales of notes by
or through a Clearstream participant or a Euroclear participant to a DTC
participant will be received with value on the DTC settlement date but will be
available in the relevant Clearstream or Euroclear cash account only as of the
business day following settlement in DTC.
Although DTC, Clearstream and Euroclear have agreed to the above procedures
so as to facilitate transfers of notes among participants of DTC, Clearstream
and Euroclear, they are under no obligation to perform or continue to perform
these procedures and these procedures may be discontinued at any time.
Notices, Definitive Notes and Transfers
Notices to holders of the notes will be sent by mail to the registered
holders and, so long as the notes are listed on the Luxembourg Stock Exchange,
will be published in a daily newspaper of general circulation in Luxembourg. It
is expected that publication will be made in the Luxemburger Wort. Any such
notice shall be deemed to have been given on the date of this publication or,
if published more than once, on the date of the first publication.
In the event definitive notes are issued as described in the prospectus, the
holders of these notes will be able to receive payments and effect transfers at
the offices of Banque Internationale a Luxembourg S.A., Luxembourg or its
successor as paying agent in Luxembourg relating to the notes. Each indenture
provides for the replacement of a mutilated, lost, stolen or destroyed
definitive note, so long as the applicant furnishes to Wachovia and the
relevant trustee the security or indemnity required by them to save each of
them harmless and any evidence of ownership of the note as they may require.
Wachovia has appointed Banque Internationale a Luxembourg S.A. as a paying
agent in Luxembourg in relation to the notes, and as long as the notes are
listed on the Luxembourg Stock Exchange, Wachovia will maintain a paying agent
in Luxembourg and any change in the Luxembourg paying agent and transfer agent
will be published in Luxembourg in accordance with the first paragraph above
under this subheading.
As provided in each indenture and subject to certain limitations, the notes
are transferable, in whole or in part, upon surrender of the notes for
registration of transfer at the corporate trust office of the relevant trustee
in The City of New York, or, in the event definitive notes are issued and so
long as the notes are listed on the Luxembourg Stock Exchange, at the offices
of the paying agent in Luxembourg, duly endorsed by or accompanied by a written
instrument of transfer in form satisfactory to Wachovia and the securities
registrar, and thereupon one or more new notes, for the aggregate principal
amount being transferred, will be issued to the designated transferee, and a
new note for any amount not being transferred will be issued to the transferor.
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CONSIDERATIONS RELATING TO INDEXED NOTES
We use the term "indexed notes" to mean notes whose value is linked to an
underlying property or index. Indexed notes may present a high level of risk,
and those who invest in indexed notes may lose their entire investment. In
addition, the treatment of indexed notes for U.S. federal income tax purposes
is often unclear due to the absence of any authority specifically addressing
the issues presented by any particular indexed note. Thus, if you propose to
invest in indexed notes, you should independently evaluate the federal income
tax consequences of purchasing an indexed note that apply in your particular
circumstances. You should also read "United States Taxation" for a discussion
of U.S. tax matters.
Investors in Indexed Notes Could Lose Their Investment
The amount of principal and/or interest payable on an indexed note and the
cash value or physical settlement value of a physically settled note will be
determined by reference to the price, value or level of one or more securities,
currencies, commodities or other properties, any other financial, economic or
other measure or instrument, including the occurrence or non-occurrence of any
event or circumstance, and/or one or more indices or baskets of any of these
items. We refer to each of these as an "index". The direction and magnitude of
the change in the price, value or level of the relevant index will determine
the amount of principal and/or interest payable on the indexed note, and the
cash value or physical settlement value of a physically settled note. The terms
of a particular indexed note may or may not include a guaranteed return of a
percentage of the face amount at maturity or a minimum interest rate. Thus, if
you purchase an indexed note, you may lose all or a portion of the principal or
other amount you invest and may receive no interest on your investment.
The Issuer of a Security or Currency That Serves as an Index Could Take Actions
That May Adversely Affect an Indexed Note
The issuer of a security that serves as an index or part of an index for an
indexed note will have no involvement in the offer and sale of the indexed note
and no obligations to the holder of the indexed note. The issuer may take
actions, such as a merger or sale of assets, without regard to the interests of
the holder. Any of these actions could adversely affect the value of a note
indexed to that security or to an index of which that security is a component.
If the index for an indexed note includes a non-U.S. dollar currency or
other asset denominated in a non-U.S. dollar currency, the government that
issues that currency will also have no involvement in the offer and sale of the
indexed note and no obligations to the holder of the indexed note. That
government may take actions that could adversely affect the value of the note.
See "Considerations Relating to Notes Denominated or Payable in or Linked to a
Non-U.S. Dollar Currency--Government Policy Can Adversely Affect Currency
Exchange Rates and an Investment in a Non-U.S. Dollar Note" below for more
information about these kinds of government actions.
An Indexed Note May Be Linked to a Volatile Index, Which Could Hurt Your
Investment
Some indices are highly volatile, which means that their value may change
significantly, up or down, over a short period of time. The amount of principal
or interest that can be expected to become payable on an indexed note may vary
substantially from time to time. Because the amounts payable with respect to an
indexed note are generally calculated based on the value or level of the
relevant index on a specified date or over a limited period of time, volatility
in the index increases the risk that the return on the indexed note may be
adversely affected by a fluctuation in the level of the relevant index.
The volatility of an index may be affected by political or economic events,
including governmental actions, or by the activities of participants in the
relevant markets. Any of these events or activities could adversely affect the
value of an indexed note.
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An Index to Which a Note Is Linked Could Be Changed or Become Unavailable
Some indices compiled by us or our affiliates or third parties may consist
of or refer to several or many different securities, commodities or currencies
or other instruments or measures. The compiler of such an index typically
reserves the right to alter the composition of the index and the manner in
which the value or level of the index is calculated. An alteration may result
in a decrease in the value of or return on an indexed note that is linked to
the index. The indices for our indexed notes may include published indices of
this kind or customized indices developed by us or our affiliates in connection
with particular issues of indexed notes.
A published index may become unavailable, or a customized index may become
impossible to calculate in the normal manner, due to events such as war,
natural disasters, cessation of publication of the index or a suspension or
disruption of trading in one or more securities, commodities or currencies or
other instruments or measures on which the index is based. If an index becomes
unavailable or impossible to calculate in the normal manner, the terms of a
particular indexed note may allow us to delay determining the amount payable as
principal or interest on an indexed note, or we may use an alternative method
to determine the value of the unavailable index. Alternative methods of
valuation are generally intended to produce a value similar to the value
resulting from reference to the relevant index. However, it is unlikely that
any alternative method of valuation we use will produce a value identical to
the value that the actual index would produce. If we use an alternative method
of valuation for a note linked to an index of this kind, the value of the note,
or the rate of return on it, may be lower than it otherwise would be.
Some indexed notes are linked to indices that are not commonly used or that
have been developed only recently. The lack of a trading history may make it
difficult to anticipate the volatility or other risks associated with an
indexed note of this kind. In addition, trading in these indices or their
underlying stocks, commodities or currencies or other instruments or measures,
or options or futures contracts on these stocks, commodities or currencies or
other instruments or measures, may be limited, which could increase their
volatility and decrease the value of the related indexed notes or the rates of
return on them.
We May Engage in Hedging Activities that Could Adversely Affect an Indexed Note
In order to hedge an exposure on a particular indexed note, we may, directly
or through our affiliates, enter into transactions involving the securities,
commodities or currencies or other instruments or measures that underlie the
index for the note, or involving derivative instruments, such as swaps, options
or futures, on the index or any of its component items. By engaging in
transactions of this kind, we could adversely affect the value of an indexed
note. It is possible that we could achieve substantial returns from our hedging
transactions while the value of the indexed note may decline.
Information About Indices May Not Be Indicative of Future Performance
If we issue an indexed note, we may include historical information about the
relevant index in the relevant prospectus supplement. Any information about
indices that we may provide will be furnished as a matter of information only,
and you should not regard the information as indicative of the range of, or
trends in, fluctuations in the relevant index that may occur in the future.
We May Have Conflicts of Interest Regarding an Indexed Note
First Union Securities, Inc. and our other affiliates may have conflicts of
interest with respect to some indexed notes. First Union Securities, Inc. and
our other affiliates may engage in trading, including trading for hedging
purposes, for their proprietary accounts or for other accounts under their
management, in indexed notes and in the securities, commodities or currencies
or other instruments or measures on which the index is based or in other
derivative instruments related to the index or its component items. These
trading activities could adversely affect the value of indexed notes. We and
our affiliates may also issue or underwrite securities or
36
derivative instruments that are linked to the same index as one or more indexed
notes. By introducing competing products into the marketplace in this manner,
we could adversely affect the value of an indexed note.
First Union National Bank or another of our affiliates may serve as
calculation agent for the indexed notes and may have considerable discretion in
calculating the amounts payable in respect of the notes. To the extent that
First Union National Bank or another of our affiliates calculates or compiles a
particular index, it may also have considerable discretion in performing the
calculation or compilation of the index. Exercising discretion in this manner
could adversely affect the value of an indexed note based on the index or the
rate of return on the security.
37
CONSIDERATIONS RELATING TO NOTES DENOMINATED OR
PAYABLE IN OR LINKED TO A NON-U.S. DOLLAR CURRENCY
If you intend to invest in a non-U.S. dollar note -- e.g., a note whose
principal and/or interest is payable in a currency other than U.S. dollars or
that may be settled by delivery of or reference to a non-U.S. dollar currency
or property denominated in or otherwise linked to a non-U.S. dollar currency --
you should consult your own financial and legal advisors as to the currency
risks entailed by your investment. Notes of this kind may not be an appropriate
investment for investors who are unsophisticated with respect to non-U.S.
dollar currency transactions.
An Investment in a Non-U.S. Dollar Note Involves Currency-Related Risks
An investment in a non-U.S. dollar note entails significant risks that are
not associated with a similar investment in a note that is payable solely in
U.S. dollars and where settlement value is not otherwise based on a non-U.S.
dollar currency. These risks include the possibility of significant changes in
rates of exchange between the U.S. dollar and the various non-U.S. dollar
currencies or composite currencies and the possibility of the imposition or
modification of foreign exchange controls or other conditions by either the
United States or non-U.S. governments. These risks generally depend on factors
over which we have no control, such as economic and political events and the
supply of and demand for the relevant currencies in the global markets.
Changes in Currency Exchange Rates Can Be Volatile and Unpredictable
Rates of exchange between the U.S. dollar and many other currencies have
been highly volatile, and this volatility may continue and perhaps spread to
other currencies in the future. Fluctuations in currency exchange rates could
adversely affect an investment in a note denominated in, or where value is
otherwise linked to, a specified currency other than U.S. dollars. Depreciation
of the specified currency against the U.S. dollar could result in a decrease in
the U.S. dollar-equivalent value of payments on the note, including the
principal payable at maturity. That in turn could cause the market value of the
note to fall. Depreciation of the specified currency against the U.S. dollar
could result in a loss to the investor on a U.S. dollar basis.
Government Policy Can Adversely Affect Currency Exchange Rates and an
Investment in a Non-U.S. Dollar Note
Currency exchange rates can either float or be fixed by sovereign
governments. From time to time, governments use a variety of techniques, such
as intervention by a country's central bank or imposition of regulatory
controls or taxes, to affect the exchange rate of their currencies. Governments
may also issue a new currency to replace an existing currency or alter the
exchange rate or exchange characteristics by devaluation or revaluation of a
currency. Thus, a special risk in purchasing non-U.S. dollar notes is that
their yields or payouts could be significantly and unpredictably affected by
governmental actions. Even in the absence of governmental action directly
affecting currency exchange rates, political or economic developments in the
country issuing the specified currency for a non-U.S. dollar note or elsewhere
could lead to significant and sudden changes in the exchange rate between the
U.S. dollar and the specified currency. These changes could affect the value of
the note as participants in the global currency markets move to buy or sell the
specified currency or U.S. dollars in reaction to these developments.
Governments have imposed from time to time and may in the future impose
exchange controls or other conditions, including taxes, with respect to the
exchange or transfer of a specified currency that could affect exchange rates
as well as the availability of a specified currency for a note at its maturity
or on any other payment date. In addition, the ability of a holder to move
currency freely out of the country in which payment in the currency is received
or to convert the currency at a freely determined market rate could be limited
by governmental actions.
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Non-U.S. Dollar Notes May Permit Us to Make Payments in U.S. Dollars or Delay
Payment if We Are Unable to Obtain the Specified Currency
Notes payable in a currency other than U.S. dollars may provide that, if the
other currency is subject to convertibility, transferability, market disruption
or other conditions affecting its availability at or about the time when a
payment on the notes comes due because of circumstances beyond our control, we
will be entitled to make the payment in U.S. dollars or delay making the
payment. These circumstances could include the imposition of exchange controls
or our inability to obtain the other currency because of a disruption in the
currency markets. If we make payment in U.S. dollars, our exchange rate
determination may be based on limited information and would involve significant
discretion on the part of our foreign exchange agent. As a result, the value of
the payment in U.S. dollars an investor would receive on the payment date may
be less than the value of the payment the investor would have received in the
other currency if it had been available, or may be zero. In addition, a
government may impose extraordinary taxes on transfers of a currency. If that
happens, we will be entitled to deduct these taxes from any payment on
securities payable in that currency.
We Will Not Adjust Non-U.S. Dollar Notes to Compensate for Changes in Currency
Exchange Rates
Except as described above, we will not make any adjustment or change in the
terms of a non-U.S. dollar note in the event of any change in exchange rates
for the relevant currency, whether in the event of any devaluation, revaluation
or imposition of exchange or other regulatory controls or taxes or in the event
of other developments affecting that currency, the U.S. dollar or any other
currency. Consequently, investors in non-U.S. notes will bear the risk that
their investment may be adversely affected by these types of events.
In a Lawsuit for Payment on a Non-U.S. Dollar Note, an Investor May Bear
Currency Exchange Risk
Although Wachovia is a North Carolina corporation, the notes are governed by
New York law. Under Section 27 of the New York Judiciary Law, a state court in
the State of New York rendering a judgment on a security denominated in a
currency other than U.S. dollars would be required to render the judgment in
the specified currency; however, the judgment would be converted into U.S.
dollars at the exchange rate prevailing on the date of entry of the judgment.
Consequently, in a lawsuit for payment on a note denominated in a currency
other than U.S. dollars, investors would bear currency exchange risk until
judgment is entered, which could be a long time.
In courts outside of New York, investors may not be able to obtain judgment
in a specified currency other than U.S. dollars. For example, a judgment for
money in an action based on a non-U.S. dollar note in many other U.S. federal
or state courts ordinarily would be enforced in the United States only in U.S.
dollars. The date used to determine the rate of conversion of the currency in
which any particular note is denominated into U.S. dollars will depend upon
various factors, including which court renders the judgment.
Information About Exchange Rates May Not Be Indicative of Future Performance
If we issue a non-U.S. dollar note, we may include in the relevant
prospectus supplement a currency supplement that provides information about
historical exchange rates for the relevant non-U.S. dollar currency or
currencies. Any information about exchange rates that we may provide will be
furnished as a matter of information only, and you should not regard the
information as indicative of the range of, or trends in, fluctuations in
currency exchange rates that may occur in the future. That rate will likely
differ from the exchange rate used under the terms that apply to a particular
note.
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UNITED STATES TAXATION
This section describes the material United States federal income tax
consequences of owning the notes we are offering. It is the opinion of Sullivan
& Cromwell, counsel to Wachovia. It applies to you only if you hold your notes
as capital assets for tax purposes. This section does not apply to you if you
are a member of a class of holders subject to special rules, such as:
. a dealer in securities or currencies,
. a trader in securities that elects to use a mark-to-market method of
accounting for your securities holdings,
. a bank,
. a life insurance company,
. a tax-exempt organization,
. a person that owns notes that are a hedge or that are hedged against
interest rate or currency risks,
. a person that owns notes as part of a straddle or conversion transaction
for tax purposes, or
. a person whose functional currency for tax purposes is not the U.S.
dollar.
This section deals only with notes that are due to mature 30 years or less from
the date on which they are issued. The United States federal income tax
consequences of owning notes that are due to mature more than 30 years from
their date of issue will be discussed in an applicable prospectus supplement.
This section is based on the Internal Revenue Code of 1986, as amended, its
legislative history, existing and proposed regulations under the Internal
Revenue Code, published rulings and court decisions, all as currently in
effect. These laws are subject to change, possibly on a retroactive basis.
Please consult your own tax advisor concerning the consequences of owning
these notes in your particular circumstances under the Code and the laws of
any other taxing jurisdiction.
United States Holders
This subsection describes the tax consequences to a United States holder.
You are a United States holder if you are a beneficial owner of a note and you
are:
. a citizen or resident of the United States,
. a domestic corporation,
. an estate whose income is subject to United States federal income tax
regardless of its source, or
. a trust if a United States court can exercise primary supervision over the
trust's administration and one or more United States persons are
authorized to control all substantial decisions of the trust.
If you are not a United States holder, this subsection does not apply to you
and you should refer to "--United States Alien Holders" below.
Payments of Interest
Except as described below in the case of interest on a discount note that is
not qualified stated interest each as defined below under "-- Original Issue
Discount -- General", you will be taxed on any interest on your note, whether
payable in U.S. dollars or a foreign currency, including a composite currency
or basket of currencies
40
other than U.S. dollars, as ordinary income at the time you receive the
interest or when it accrues, depending on your method of accounting for tax
purposes.
Cash Basis Taxpayers. If you are a taxpayer that uses the cash receipts and
disbursements method of accounting for tax purposes and you receive an interest
payment that is denominated in, or determined by reference to, a foreign
currency, you must recognize income equal to the U.S. dollar value of the
interest payment, based on the exchange rate in effect on the date of receipt,
regardless of whether you actually convert the payment into U.S. dollars.
Accrual Basis Taxpayers. If you are a taxpayer that uses an accrual method
of accounting for tax purposes, you may determine the amount of income that you
recognize with respect to an interest payment denominated in, or determined by
reference to, a foreign currency by using one of two methods. Under the first
method, you will determine the amount of income accrued based on the average
exchange rate in effect during the interest accrual period or, with respect to
an accrual period that spans two taxable years, that part of the period within
the taxable year.
If you elect the second method, you would determine the amount of income
accrued on the basis of the exchange rate in effect on the last day of the
accrual period, or, in the case of an accrual period that spans two taxable
years, the exchange rate in effect on the last day of the part of the period
within the taxable year. Additionally, under this second method, if you receive
a payment of interest within five business days of the last day of your accrual
period or taxable year, you may instead translate the interest accrued into
U.S. dollars at the exchange rate in effect on the day that you actually
receive the interest payment. If you elect the second method it will apply to
all debt instruments that you hold at the beginning of the first taxable year
to which the election applies and to all debt instruments that you subsequently
acquire. You may not revoke this election without the consent of the Internal
Revenue Service.
When you actually receive an interest payment, including a payment
attributable to accrued but unpaid interest upon the sale or retirement of your
note, denominated in, or determined by reference to, a foreign currency for
which you accrued an amount of income, you will recognize ordinary income or
loss measured by the difference, if any, between the exchange rate that you
used to accrue interest income and the exchange rate in effect on the date of
receipt, regardless of whether you actually convert the payment into U.S.
dollars.
Original Issue Discount
General. If you own a note, other than a short-term note with a term of one
year or less, it will be treated as a discount note issued at an original issue
discount if the amount by which the note's stated redemption price at maturity
exceeds its issue price is more than a de minimis amount. Generally, a note's
issue price will be the first price at which a substantial amount of notes
included in the issue of which the note is a part is sold to persons other than
bond houses, brokers, or similar persons or organizations acting in the
capacity of underwriters, placement agents, or wholesalers. A note's stated
redemption price at maturity is the total of all payments provided by the note
that are not payments of qualified stated interest. Generally, an interest
payment on a note is qualified stated interest if it is one of a series of
stated interest payments on a note that are unconditionally payable at least
annually at a single fixed rate, with certain exceptions for lower rates paid
during some periods, applied to the outstanding principal amount of the note.
There are special rules for variable rate notes that are discussed under
"--Variable Rate Notes".
In general, your note is not a discount note if the amount by which its
stated redemption price at maturity exceeds its issue price is less than the de
minimis amount of 1/4 of 1 percent of its stated redemption price at maturity
multiplied by the number of complete years to its maturity. Your note will have
de minimis original issue discount if the amount of the excess is less than the
de minimis amount. If your note has de minimis original issue discount, you
must include the de minimis amount in income as stated principal payments are
made on the note, unless you make the election described below under
"--Election to Treat All Interest as Original
41
Issue Discount". You can determine the includible amount with respect to each
such payment by multiplying the total amount of your note's de minimis original
issue discount by a fraction equal to:
. the amount of the principal payment made
divided by:
. the stated principal amount of the note.
Generally, if your discount note matures more than one year from its date of
issue, you must include original issue discount in income before you receive
cash attributable to that income. The amount of OID that you must include in
income is calculated using a constant-yield method, and generally you will
include increasingly greater amounts of OID in income over the life of your
note. More specifically, you can calculate the amount of OID that you must
include in income by adding the daily portions of OID with respect to your
discount note for each day during the taxable year or portion of the taxable
year that you hold your discount note. You can determine the daily portion by
allocating to each day in any accrual period a pro rata portion of the OID
allocable to that accrual period. You may select an accrual period of any
length with respect to your discount note and you may vary the length of each
accrual period over the term of your discount note. However, no accrual period
may be longer than one year and each scheduled payment of interest or principal
on the discount note must occur on either the first or final day of an accrual
period.
You can determine the amount of OID allocable to an accrual period by:
. multiplying your discount note's adjusted issue price at the beginning of
the accrual period by your note's yield to maturity, and then
. subtracting from this figure the sum of the payments of qualified stated
interest on your note allocable to the accrual period.
You must determine the discount note's yield to maturity on the basis of
compounding at the close of each accrual period and adjusting for the length of
each accrual period. Further, you determine your discount note's adjusted issue
price at the beginning of any accrual period by:
. adding your discount note's issue price and any accrued OID for each prior
accrual period, and then
. subtracting any payments previously made on your discount note that were
not qualified stated interest payments.
If an interval between payments of qualified stated interest on your
discount note contains more than one accrual period, then, when you determine
the amount of OID allocable to an accrual period, you must allocate the amount
of qualified stated interest payable at the end of the interval, including any
qualified stated interest that is payable on the first day of the accrual
period immediately following the interval, pro rata to each accrual period in
the interval based on their relative lengths. In addition, you must increase
the adjusted issue price at the beginning of each accrual period in the
interval by the amount of any qualified stated interest that has accrued prior
to the first day of the accrual period but that is not payable until the end of
the interval. You may compute the amount of OID allocable to an initial short
accrual period by using any reasonable method if all other accrual periods,
other than a final short accrual period, are of equal length.
The amount of OID allocable to the final accrual period is equal to the
difference between:
. the amount payable at the maturity of your note, other than any payment of
qualified stated interest, and
. your note's adjusted issue price as of the beginning of the final accrual
period.
Acquisition Premium. If you purchase your note for an amount that is less
than or equal to the sum of all amounts, other than qualified stated interest,
payable on your note after the purchase date but is greater than the
42
amount of your note's adjusted issue price, as determined above under
"--General", the excess is acquisition premium. If you do not make the election
described below under "--Election to Treat All Interest as Original Issue
Discount", then you must reduce the daily portions of OID by a fraction equal
to:
. the excess of your adjusted basis in the note immediately after purchase
over the adjusted issue price of the note
divided by:
. the excess of the sum of all amounts payable, other than qualified stated
interest, on the note after the purchase date over the note's adjusted
issue price.
Pre-Issuance Accrued Interest. An election may be made to decrease the issue
price of your note by the amount of pre-issuance accrued interest if:
. a portion of the initial purchase price of your note is attributable to
pre-issuance accrued interest,
. the first stated interest payment on your note is to be made within one
year of your note's issue date, and
. the payment will equal or exceed the amount of pre-issuance accrued
interest.
If this election is made, a portion of the first stated interest payment
will be treated as a return of the excluded pre-issuance accrued interest and
not as an amount payable on your note.
Notes Subject to Contingencies Including Optional Redemption. Your note is
subject to a contingency if it provides for an alternative payment schedule or
schedules applicable upon the occurrence of a contingency or
contingencies, other than a remote or incidental contingency, whether such
contingency relates to payments of interest or of principal. In such a case,
you must determine the yield and maturity of your note by assuming that the
payments will be made according to the payment schedule most likely to occur
if:
. the timing and amounts of the payments that comprise each payment schedule
are known as of the issue date and
. one of such schedules is significantly more likely than not to occur.
If there is no single payment schedule that is significantly more likely than
not to occur, other than because of a mandatory sinking fund, you must include
income on your note in accordance with the general rules that govern contingent
payment obligations. These rules will be discussed in the applicable prospectus
supplement.
Notwithstanding the general rules for determining yield and maturity, if
your note is subject to contingencies, and either you or we have an
unconditional option or options that, if exercised, would require payments to
be made on the note under an alternative payment schedule or schedules, then:
. in the case of an option or options that we may exercise, we will be
deemed to exercise or not exercise an option or combination of options in
the manner that minimizes the yield on your note and
. in the case of an option or options that you may exercise, you will be
deemed to exercise or not exercise an option or combination of options in
the manner that maximizes the yield on your note.
If both you and we hold options described in the preceding sentence, those
rules will apply to each option in the order in which they may be exercised.
You may determine the yield on your note for the purposes of those calculations
by using any date on which your note may be redeemed or repurchased as the
maturity date and the amount payable on the date that you chose in accordance
with the terms of your note as the principal amount payable at maturity.
43
If a contingency, including the exercise of an option, actually occurs or
does not occur contrary to an assumption made according to the above rules
then, except to the extent that a portion of your note is repaid as a result of
this change in circumstances and solely to determine the amount and accrual of
OID, you must redetermine the yield and maturity of your note by treating your
note as having been retired and reissued on the date of the change in
circumstances for an amount equal to your note's adjusted issue price on that
date.
Election to Treat All Interest as Original Issue Discount. You may elect to
include in gross income all interest that accrues on your note using the
constant-yield method described above under "--General", with the modifications
described below. For purposes of this election, interest will include stated
interest, OID, de minimis original issue discount, market discount, de minimis
market discount and unstated interest, as adjusted by any amortizable bond
premium, described below under "--Notes Purchased at a Premium," or acquisition
premium.
If you make this election for your note, then, when you apply the
constant-yield method:
. the issue price of your note will equal your cost,
. the issue date of your note will be the date you acquired it, and
. no payments on your note will be treated as payments of qualified stated
interest.
Generally, this election will apply only to the note for which you make it;
however, if the note has amortizable bond premium, you will be deemed to have
made an election to apply amortizable bond premium against interest for all
debt instruments with amortizable bond premium, other than debt instruments the
interest on which is excludible from gross income, that you hold as of the
beginning of the taxable year to which the election applies or any taxable year
thereafter. Additionally, if you make this election for a market discount note,
you will be treated as having made the election discussed above under "--
Market Discount" to include market discount in income currently over the life
of all debt instruments that you currently own or later acquire. You may not
revoke any election to apply the constant-yield method to all interest on a
note or the deemed elections with respect to amortizable bond premium or market
discount notes without the consent of the Internal Revenue Service.
Variable Rate Notes. Your note will be a variable rate note if:
. your note's issue price does not exceed the total noncontingent principal
payments by more than the lesser of:
. .015 multiplied by the product of the total noncontingent principal
payments and the number of complete years to maturity from the issue
date, or
. 15 percent of the total noncontingent principal payments; and
. your note provides for stated interest, compounded or paid at least
annually, only at:
. one or more qualified floating rates,
. a single fixed rate and one or more qualified floating rates,
. a single objective rate, or
. a single fixed rate and a single objective rate that is a qualified
inverse floating rate.
Your note will have a variable rate that is a qualified floating rate if:
. variations in the value of the rate can reasonably be expected to measure
contemporaneous variations in the cost of newly borrowed funds in the
currency in which your note is denominated; or
. the rate is equal to such a rate multiplied by either:
. a fixed multiple that is greater than 0.65 but not more than 1.35 or
. a fixed multiple greater than 0.65 but not more than 1.35, increased or
decreased by a fixed rate; and
. the value of the rate on any date during the term of your note is set no
earlier than three months prior to the first day on which that value is in
effect and no later than one year following that first day.
44
If your note provides for two or more qualified floating rates that are
within 0.25 percentage points of each other on the issue date or can reasonably
be expected to have approximately the same values throughout the term of the
note, the qualified floating rates together constitute a single qualified
floating rate.
Your note will not have a qualified floating rate, however, if the rate is
subject to certain restrictions (including caps, floors, governors, or other
similar restrictions) unless such restrictions are fixed throughout the term of
the note or are not reasonably expected to significantly affect the yield on
the note.
Your note will have a variable rate that is a single objective rate if:
. the rate is not a qualified floating rate,
. the rate is determined using a single, fixed formula that is based on
objective financial or economic information that is not within the control
of or unique to the circumstances of the issuer or a related party, and
. the value of the rate on any date during the term of your note is set no
earlier than three months prior to the first day on which that value is in
effect and no later than one year following that first day.
Your note will not have a variable rate that is an objective rate, however,
if it is reasonably expected that the average value of the rate during the
first half of your note's term will be either significantly less than or
significantly greater than the average value of the rate during the final half
of your note's term.
An objective rate as described above is a qualified inverse floating rate
if:
. the rate is equal to a fixed rate minus a qualified floating rate and
. the variations in the rate can reasonably be expected to inversely reflect
contemporaneous variations in the cost of newly borrowed funds.
Your note will also have a single qualified floating rate or an objective
rate if interest on your note is stated at a fixed rate for an initial period
of one year or less followed by either a qualified floating rate or an
objective rate for a subsequent period, and either:
. the fixed rate and the qualified floating rate or objective rate have
values on the issue date of the note that do not differ by more than 0.25
percentage points or
. the value of the qualified floating rate or objective rate is intended to
approximate the fixed rate.
Commercial paper rate notes, prime rate notes, LIBOR notes, EURIBOR rate
notes, treasury rate notes, CMT rate notes, CD rate notes, and federal funds
rate notes generally will be treated as variable rate notes under these rules.
In general, if your variable rate note provides for stated interest at a
single qualified floating rate or objective rate, or one of those rates after a
single fixed rate for an initial period, all stated interest on your note is
qualified stated interest. In this case, the amount of OID, if any, is
determined by using, in the case of a qualified floating rate or qualified
inverse floating rate, the value as of the issue date of the qualified floating
rate or qualified inverse floating rate, or, for any other objective rate, a
fixed rate that reflects the yield reasonably expected for your note.
If your variable rate note does not provide for stated interest at a single
qualified floating rate or a single objective rate, and also does not provide
for interest payable at a fixed rate other than a single fixed rate for an
initial period, you generally must determine the interest and OID accruals on
your note by:
. determining a fixed rate substitute for each variable rate provided under
your variable rate note,
. constructing the equivalent fixed rate debt instrument, using the fixed
rate substitute described above,
. determining the amount of qualified stated interest and OID with respect
to the equivalent fixed rate debt instrument, and
. adjusting for actual variable rates during the applicable accrual period.
45
When you determine the fixed rate substitute for each variable rate provided
under the variable rate note, you generally will use the value of each variable
rate as of the issue date or, for an objective rate that is not a qualified
inverse floating rate, a rate that reflects the reasonably expected yield on
your note.
If your variable rate note provides for stated interest either at one or
more qualified floating rates or at a qualified inverse floating rate, and also
provides for stated interest at a single fixed rate other than at a single
fixed rate for an initial period, you generally must determine interest and OID
accruals by using the method described in the previous paragraph. However, your
variable rate note will be treated, for purposes of the first three steps of
the determination, as if your note had provided for a qualified floating rate,
or a qualified inverse floating rate, rather than the fixed rate. The qualified
floating rate, or qualified inverse floating rate, that replaces the fixed rate
must be such that the fair market value of your variable rate note as of the
issue date approximates the fair market value of an otherwise identical debt
instrument that provides for the qualified floating rate, or qualified inverse
floating rate, rather than the fixed rate.
Short-Term Notes. In general, if you are an individual or other cash basis
United States holder of a short-term note, you are not required to accrue OID,
as specially defined below for the purposes of this paragraph, for United
States federal income tax purposes unless you elect to do so (although it is
possible that you may be required to include any stated interest in income as
you receive it). If you are an accrual basis taxpayer, a taxpayer in a special
class, including, but not limited to, a regulated investment company, common
trust fund, or a certain type of pass-through entity, or a cash basis taxpayer
who so elects, you will be required to accrue OID on short-term notes on either
a straight-line basis or under the constant-yield method, based on daily
compounding. If you are not required and do not elect to include OID in income
currently, any gain you realize on the sale or retirement of your short-term
note will be ordinary income to the extent of the accrued OID, which will be
determined on a straight-line basis unless you make an election to accrue the
OID under the constant-yield method, through the date of sale or retirement.
However, if you are not required and do not elect to accrue OID on your
short-term notes, you will be required to defer deductions for interest on
borrowings allocable to your short-term notes in an amount not exceeding the
deferred income until the deferred income is realized.
When you determine the amount of OID subject to these rules, you must
include all interest payments on your short-term note, including stated
interest, in your short-term note's stated redemption price at maturity.
Foreign Currency Discount Notes. If your discount note is denominated in, or
determined by reference to, a foreign currency, you must determine OID for any
accrual period on your discount note in the foreign currency and then translate
the amount of OID into U.S. dollars in the same manner as stated interest
accrued by an accrual basis United States holder, as described under "-- United
States Holders -- Payments of Interest". You may recognize ordinary income or
loss when you receive an amount attributable to OID in connection with a
payment of interest or the sale or retirement of your note.
Notes Purchased at a Premium
If you purchase your note for an amount in excess of its principal amount,
you may elect to treat the excess as amortizable bond premium. If you make this
election, you will reduce the amount required to be included in your income
each year with respect to interest on your note by the amount of amortizable
bond premium allocable to that year, based on your note's yield to maturity. If
your note is denominated in, or determined by reference to, a foreign currency,
you will compute your amortizable bond premium in units of the foreign currency
and your amortizable bond premium will reduce your interest income in units of
the foreign currency. Gain or loss recognized that is attributable to changes
in exchange rates between the time your amortized bond premium offsets interest
income and the time of the acquisition of your note is generally taxable as
ordinary income or loss. If you make an election to amortize bond premium, it
will apply to all debt instruments, other than debt instruments the interest on
which is excludible from gross income, that you hold at the beginning of the
first taxable year to which the election applies or that you thereafter
acquire, and you may not revoke it without the consent of the Internal Revenue
Service. See also "-- Original Issue Discount -- Election to Treat All Interest
as Original Issue Discount".
46
Notes Purchased with Market Discount
You will be treated as if you purchased your note, other than a short-term
note, at a market discount, and your note will be a market discount note if in
the case of an initial purchaser, you purchase your note for less than its
issue price as determined above under " -- Original Issue Discount -- General"
and the difference between the note's stated redemption price at maturity or,
in the case of a discount note, the note's revised issue price, and the price
you paid for your note is equal to or greater than 1/4 of 1 percent of your
note's stated redemption price at maturity or revised issue price,
respectively, multiplied by the number of complete years to the note's
maturity. To determine the revised issue price of your note for these purposes,
you generally add any OID that has accrued on your note to its issue price.
If your note's stated redemption price at maturity or, in the case of a
discount note, its revised issue price, exceeds the price you paid for the note
by less than 1/4 of 1 percent multiplied by the number of complete years to the
note's maturity, the excess constitutes de minimis market discount, and the
rules discussed below are not applicable to you.
You must treat any gain you recognize on the maturity or disposition of your
market discount note as ordinary income to the extent of the accrued market
discount on your note. Alternatively, you may elect to include market discount
in income currently over the life of your note. If you make this election, it
will apply to all debt instruments with market discount that you acquire on or
after the first day of the first taxable year to which the election applies.
You may not revoke this election without the consent of the Internal Revenue
Service. If you own a market discount note and do not make this election, you
will generally be required to defer deductions for interest on borrowings
allocable to your note in an amount not exceeding the accrued market discount
on your note until the maturity or disposition of your note.
You will accrue market discount on your market discount note on a
straight-line basis unless you elect to accrue market discount using a
constant-yield method. If you make this election, it will apply only to the
note with respect to which it is made and you may not revoke it.
Purchase, Sale and Retirement of the Notes
Your tax basis in your note will generally be the U.S. dollar cost, as
defined below, of your note, adjusted by:
. adding any OID or market discount, de minimis original issue discount and
de minimis market discount previously included in income with respect to
your note, and then
. subtracting any payments on your note that are not qualified stated
interest payments and any amortizable bond premium applied to reduce
interest on your note.
If you purchase your note with foreign currency, the U.S. dollar cost of your
note will generally be the U.S. dollar value of the purchase price on the date
of purchase. However, if you are a cash basis taxpayer, or an accrual basis
taxpayer if you so elect, and your note is traded on an established securities
market, as defined in the applicable Treasury regulations, the U.S. dollar cost
of your note will be the U.S. dollar value of the purchase price on the
settlement date of your purchase.
You will generally recognize gain or loss on the sale or retirement of your
note equal to the difference between the amount you realize on the sale or
retirement and your tax basis in your note. If your note is sold or retired for
an amount in foreign currency, the amount you realize will be the U.S. dollar
value of such amount on:
. the date payment is received, if you are a cash basis taxpayer and the
notes are not traded on an established securities market, as defined in
the applicable Treasury regulations,
. the date of disposition, if you are an accrual basis taxpayer, or
. the settlement date for the sale, if you are a cash basis taxpayer, or an
accrual basis taxpayer that so elects, and the notes are traded on an
established securities market, as defined in the applicable Treasury
regulations.
You will recognize capital gain or loss when you sell or retire your note,
except to the extent:
. described above under "-- Original Issue Discount -- Short-Term Notes" or
"-- Market Discount",
47
. attributable to accrued but unpaid interest,
. the rules governing contingent payment obligations apply, or
. attributable to changes in exchange rates as described below.
Capital gain of a noncorporate United States holder is generally taxed at a
maximum rate of 20% where the property is held more than one year, and 18%
where the property is held for more than five years.
You must treat any portion of the gain or loss that you recognize on the
sale or retirement of a note as ordinary income or loss to the extent
attributable to changes in exchange rates. However, you take exchange gain or
loss into account only to the extent of the total gain or loss you realize on
the transaction.
Exchange of Amounts in Other Than U.S. Dollars
If you receive foreign currency as interest on your note or on the sale or
retirement of your note, your tax basis in the foreign currency will equal its
U.S. dollar value when the interest is received or at the time of the sale or
retirement. If you purchase foreign currency, you generally will have a tax
basis equal to the U.S. dollar value of the foreign currency on the date of
your purchase. If you sell or dispose of a foreign currency, including if you
use it to purchase notes or exchange it for U.S. dollars, any gain or loss
recognized generally will be ordinary income or loss.
Indexed Notes, Exchangeable Notes, and Contingent Payment Notes
The applicable prospectus supplement will discuss any special United States
federal income tax rules with respect to notes the payments on which are
determined by reference to any index, notes that are exchangeable at our option
or the option of the holder into securities of an issuer other than Wachovia or
into other property, and other notes that are subject to the rules governing
contingent payment obligations which are not subject to the rules governing
variable rate notes.
United States Alien Holders
This subsection describes the tax consequences to a United States alien
holder. You are a United States alien holder if you are the beneficial owner of
a note and are, for United States federal income tax purposes:
. a nonresident alien individual,
. a foreign corporation,
. a foreign partnership, or
. an estate or trust that in either case is not subject to United States
federal income tax on a net income basis on income or gain from a note.
If you are a United States holder, this subsection does not apply to you.
This discussion assumes that the note is not subject to the rules of Section
871(h)(4)(A) of the Internal Revenue Code, relating to interest payments that
are determined by reference to the income, profits, changes in the value of
property or other attributes of the debtor or a related party.
Under United States federal income and estate tax law, and subject to the
discussion of backup withholding below, if you are a United States alien holder
of a note:
. we and other U.S. payors generally will not be required to deduct United
States withholding tax from payments of principal, premium, if any, and
interest, including OID, to you if, in the case of payments of interest:
1.you do not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Company entitled to
vote,
48
2.you are not a controlled foreign corporation that is related to the
Company through stock ownership, and
3.the U.S. payor does not have actual knowledge or reason to know that you
are a United States person and:
a.you have furnished to the U.S. payor an Internal Revenue Service Form
W-8BEN or an acceptable substitute form upon which you certify, under
penalties of perjury, that you are a non-United States person,
b.in the case of payments made outside the United States to you at an
offshore account (generally, an account maintained by you at a bank or
other financial institution at any location outside the United
States), you have furnished to the U.S. payor documentation that
establishes your identity and your status as a non-United States
person,
c.the U.S. payor has received a withholding certificate (furnished on an
appropriate Internal Revenue Service Form W-8 or an acceptable
substitute form) from a person claiming to be:
i. a withholding foreign partnership (generally a foreign partnership
that has entered into an agreement with the Internal Revenue Service
to assume primary withholding responsibility with respect to
distributions and guaranteed payments it makes to its partners),
ii. a qualified intermediary (generally a non-United States financial
institution or clearing organization or a non-United States branch or
office of a United States financial institution or clearing
organization that is a party to a withholding agreement with the
Internal Revenue Service), or
iii. a U.S. branch of a non-United States bank or of a non-United
States insurance company,
and the withholding foreign partnership, qualified intermediary or
U.S. branch has received documentation upon which it may rely to treat
the payment as made to a non-United States person in accordance with
U.S. Treasury regulations (or, in the case of a qualified
intermediary, in accordance with its agreement with the Internal
Revenue Service),
d.the U.S. payor receives a statement from a securities clearing
organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business,
i.certifying to the U.S. payor under penalties of perjury that an
Internal Revenue Service Form W-8BEN or an acceptable substitute form
has been received from you by it or by a similar financial
institution between it and you, and
ii.to which is attached a copy of the Internal Revenue Service Form
W-8BEN or acceptable substitute form, or
e.the U.S. payor otherwise possesses documentation upon which it may
rely to treat the payment as made to a non-United States person in
accordance with U.S. Treasury regulations; and
. no deduction for any United States federal withholding tax will be made
from any gain that you realize on the sale or exchange of your note.
Further, a note held by an individual who at death is not a citizen or resident
of the United States will not be includible in the individual's gross estate
for United States federal estate tax purposes if:
. the decedent did not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company
entitled to vote at the time of death and
. the income on the note would not have been effectively connected with a
United States trade or business of the decedent at the same time.
49
Backup Withholding And Information Reporting
In general, if you are a noncorporate United States holder, we and other
payors are required to report to the Internal Revenue Service all payments of
principal, any premium and interest on your note, and the accrual of OID on a
discount note. In addition, we and other payors are required to report to the
Internal Revenue Service any payment of proceeds of the sale of your note
before maturity within the United States. Additionally, backup withholding will
apply to any payments, including payments of OID, if you fail to provide an
accurate taxpayer identification number, or you are notified by the Internal
Revenue Service that you have failed to report all interest and dividends
required to be shown on your federal income tax returns.
In general, if you are a United States alien holder, payments of principal,
premium or interest, including OID, made by us and other payors to you will not
be subject to backup withholding and information reporting, provided that the
certification requirements described above under "--United States Alien
Holders" are satisfied or you otherwise establish an exemption. However, we and
other payors are required to report payments of interest on your notes on
Internal Revenue Service Form 1042-S even if the payments are not otherwise
subject to information reporting requirements. In addition, payment of the
proceeds from the sale of notes effected at a United States office of a broker
will not be subject to backup withholding and information reporting provided
that:
. the broker does not have actual knowledge or reason to know that you are a
United States person and you have furnished to the broker:
. an appropriate Internal Revenue Service Form W-8 or an acceptable
substitute form upon which you certify, under penalties of perjury, that
you are not a United States person, or
. other documentation upon which it may rely to treat the payment as made
to a non-United States person in accordance with U.S. Treasury
regulations, or
. you otherwise establish an exemption.
If you fail to establish an exemption and the broker does not possess adequate
documentation of your status as a non-United States person, the payments may be
subject to information reporting and backup withholding. However, backup
withholding will not apply with respect to payments made to an offshore account
maintained by you unless the broker has actual knowledge that you are a United
States person.
In general, payment of the proceeds from the sale of notes effected at a
foreign office of a broker will not be subject to information reporting or
backup withholding. However, a sale effected at a foreign office of a broker
will be subject to information reporting and backup withholding if:
. the proceeds are transferred to an account maintained by you in the United
States,
. the payment of proceeds or the confirmation of the sale is mailed to you
at a United States address, or
. the sale has some other specified connection with the United States as
provided in U.S. Treasury regulations,
unless the broker does not have actual knowledge or reason to know that you are
a United States person and the documentation requirements described above
(relating to a sale of notes effected at a United States office of a broker)
are met or you otherwise establish an exemption.
In addition, payment of the proceeds from the sale of notes effected at a
foreign office of a broker will be subject to information reporting if the
broker is:
. a United States person,
. a controlled foreign corporation for United States tax purposes,
50
. a foreign person 50% or more of whose gross income is effectively
connected with the conduct of a United States trade or business for a
specified three-year period, or
. a foreign partnership, if at any time during its tax year:
. one or more of its partners are "U.S. persons", as defined in U.S.
Treasury regulations, who in the aggregate hold more than 50% of the
income or capital interest in the partnership, or
. such foreign partnership is engaged in the conduct of a United States
trade or business,
unless the broker does not have actual knowledge or reason to know that you are
a United States person and the documentation requirements described above
(relating to a sale of notes effected at a United States office of a broker)
are met or you otherwise establish an exemption. Backup withholding will apply
if the sale is subject to information reporting and the broker has actual
knowledge that you are a United States person.
EMPLOYEE RETIREMENT INCOME SECURITY ACT
A fiduciary of a pension, profit-sharing or other employee benefit plan
subject to the Employment Retirement Income Security Act of 1974, as amended
("ERISA"), should consider the fiduciary standards of ERISA in the context of
the plan's particular circumstances before authorizing an investment in the
notes. Among other factors, the fiduciary should consider whether the
investment would satisfy the prudence and diversification requirements of ERISA
and would be consistent with the documents and instruments governing the plan.
Section 406 of ERISA and Section 4975 of the Code prohibit an employee
benefit plan, as well as individual retirement accounts and Keogh plans subject
to Section 4975 of the Code, from engaging in certain transactions involving
"plan assets" with persons who are "parties in interest" under ERISA or
"disqualified persons" under the Code with respect to the plan. A violation of
these "prohibited transaction" rules may result in excise tax or other
liabilities under ERISA and Section 4975 of the Code for such persons, unless
exemptive relief is available under an applicable statutory or administrative
exemption. Therefore, a fiduciary of an employee benefit plan should also
consider whether an investment in the notes might constitute or give rise to a
prohibited transaction under ERISA and the Internal Revenue Code. Employee
benefit plans which are governmental plans (as defined in Section 3(32) of
ERISA), certain church plans (as defined in Section 3(33) of ERISA), and
foreign plans (as described in Section 4(b)(4) of ERISA) generally are not
subject to the requirements of ERISA or Section 4975 of the Code.
Wachovia Corporation and certain of its affiliates may each be considered a
party in interest or disqualified person with respect to many employee benefit
plans. This could be the case, for example, if one of these companies is a
service provider to a plan. Special caution should be exercised, therefore,
before notes are purchased by an employee benefit plan. In particular, the
fiduciary of the plan should consider whether exemptive relief is available
under an applicable administrative exemption. The Department of Labor has
issued five prohibited transaction class exemptions that could apply to exempt
the purchase, sale and holding of notes from the prohibited transaction
provisions of ERISA and the Code. Those class exemptions are Prohibited
Transaction Exemption 96-23 (for transactions determined by in-house asset
managers), Prohibited Transaction Exemption 95-60 (for certain transactions
involving insurance company general accounts), Prohibited Transaction Exemption
91-38 (for certain transactions involving bank investment funds), Prohibited
Transaction Exemption 90-1 (for certain transactions involving insurance
company separate accounts), and Prohibited Transaction Exemption 84-14 (for
certain transactions determined by independent qualified asset managers).
Due to the complexity of these rules and the penalties that may be imposed
upon persons involved in non-exempt prohibited transactions, it is particularly
important that fiduciaries or other persons considering the purchase of notes
on behalf of or with "plan assets" of any employee benefit plan consult with
their counsel regarding the consequences under ERISA and the Code of the
acquisition of debt securities and the availability of exemptive relief under
Prohibited Transaction Exemption 96-23, 95-60, 91-38, 90-1 or 84-14.
Each purchaser or holder of notes shall be deemed to have represented by its
purchase and holding thereof that either (a) it is not and will not be an
employee benefit plan subject to ERISA (or a governmental plan) and is not
purchasing such notes on behalf of or with "plan assets" of any such plan (or
assets of any governmental plan) or (b) its purchase and holding of the notes
is eligible for exemptive relief under Prohibited Transaction Exemption 96-23,
95-60, 91-38, 90-1 or 84-14 or otherwise will not result in a prohibited
transaction under ERISA or the Code (or with respect to any governmental, plan,
any similar applicable law or regulation).
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PLAN OF DISTRIBUTION
Unless otherwise indicated in any prospectus supplement, the U.S.
distribution agents shall be First Union Securities, Inc., an indirect,
wholly-owned subsidiary of Wachovia, and the European
distribution agents shall be . Wachovia conducts its investment banking,
institutional and capital markets businesses through its various bank,
broker-dealer and nonbank subsidiaries (including First Union Securities, Inc.)
under the trade name "Wachovia Securities". Any reference to "Wachovia
Securities" is not intended to be a reference to Wachovia Securities, Inc.,
member NASD/SIPC, a separate broker-dealer subsidiary of Wachovia and sister
affiliate of First Union Securities, Inc., which is not participating in this
offering. Under the terms of a Distribution Agreement, dated , 2001, among
Wachovia and these agents, Wachovia may sell notes to an agent, acting as
principal, for resale to one or more investors or other purchasers at varying
prices related to prevailing market prices at the time of resale, as determined
by any of these agents or, if so agreed, at a fixed offering price. A form of
Distribution Agreement has been filed as an exhibit to the registration
statement for this prospectus. Unless otherwise indicated in the relevant
prospectus supplement, any note sold to an agent as principal will be purchased
by that agent at a price equal to 100% of the principal amount of that note,
less a percentage not exceeding the maximum commission applicable to any agency
sale of a note of identical maturity, and, subject to the restriction noted in
the following sentence, may be resold by that Agent to investors and other
purchasers. An agent may offer the notes it has purchased as principal to other
dealers at a discount and, unless otherwise indicated in any prospectus
supplement, and the discount allowed to any dealer will not exceed the discount
to be received by that agent from Wachovia. After the initial public offering
of notes to be resold to investors and other purchasers, the public offering
price (in the case of notes to be resold on a fixed public offering price
basis), the concession and the discount may be changed.
Wachovia may also offer the notes on a continuing basis through the agents,
which have agreed to use their reasonable efforts to solicit offers to purchase
the notes, on an agency basis. When Wachovia has sold notes through an agent on
an agency basis, it will pay that agent a commission (or grant a discount) as
agreed by Wachovia and that agent in an amount from 0.125% to 1.0% of the
principal amount of each note sold through that agent. Any agent will have the
right, in its discretion reasonably exercised, without notice to Wachovia, to
reject any offer to purchase notes received by it in whole or in part.
Unless otherwise mentioned in the relevant prospectus supplement, the
obligations of any agents to purchase the notes will be subject to certain
conditions precedent, and each of the agents with respect to a sale of notes
will be obligated to purchase all of its notes if any are purchased.
Wachovia has reserved the right to sell notes directly to investors on its
own behalf in those jurisdictions where it is authorized to do so. No selling
commission will be payable nor will a selling discount be allowed on any sales
made directly by Wachovia.
Wachovia has reserved the right to withdraw, cancel or modify the offer made
by this prospectus without notice and may reject orders in whole or in part
whether placed directly with Wachovia or with an agent. No termination date has
been established for the offering of the notes.
The notes are a new issue of securities with no established trading market.
Wachovia has been advised by the agents that they intend to make a market in
the notes but are not obligated to do so and may discontinue market-making at
any time without notice. The agents may from time to time purchase and sell
notes in the secondary market, but no agent is obligated to do so. We can give
no assurance that the notes offered by this prospectus will be sold or that
there will be a secondary market for the notes (or liquidity in such secondary
market, if one develops).
52
We have applied to list on the Luxembourg Stock Exchange any notes to be
issued under this program during the twelve-month period after the date of this
prospectus. We may also list any notes on any additional securities exchanges
on which we and the agents agree in relation to each issuance. We may also
issue unlisted notes.
Unless otherwise indicated in any prospectus supplement, payment of the
purchase price of notes, other than notes denominated in a non-U.S. dollar
currency, will be required to be made in funds immediately available in The
City of New York. The notes will be in the Same Day Funds Settlement System at
DTC and, to the extent the secondary market trading in the notes is effected
through the facilities of such depositary, such trades will be settled in
immediately available funds. See "Global Notes" above.
In facilitating the sale of notes, agents may receive compensation from
Wachovia or from purchasers of notes for whom they may act as agents in the
form of discounts, concessions or commissions. Agents may sell notes to or
through dealers, and these dealers may receive compensation in the form of
discounts, concessions or commissions from the agents and/or commissions from
the purchasers for whom they may act as agents. Agents and dealers that
participate in the distribution of notes may be considered "underwriters", and
any discounts or commissions received by them from Wachovia and any profit on
the resale of notes by them may be considered underwriting discounts and
commissions under the Securities Act. Any such agent will be identified, and
any such compensation received from Wachovia will be described, in the
prospectus supplement relating to those notes. Wachovia has agreed to indemnify
the agents against and contribute toward certain liabilities, including
liabilities under the Securities Act. Wachovia has also agreed to reimburse the
agents for certain expenses.
If Wachovia offers and sells notes directly to a purchaser or purchasers in
respect of which this prospectus is delivered, purchasers involved in the
reoffer or resale of such notes, if these purchasers may be considered
underwriters as that term is defined in the Securities Act, will be named and
the terms of their reoffers or resales will be mentioned in the relevant
prospectus supplement. These purchasers may then reoffer and resell such notes
to the public or otherwise at varying prices to be determined by such
purchasers at the time of resale or as otherwise described in the relevant
prospectus supplement. Purchasers of notes directly from Wachovia may be
entitled under agreements that they may enter into with Wachovia to
indemnification by Wachovia against certain liabilities, including liabilities
under the Securities Act, and may engage in transactions with or perform
services for Wachovia in the ordinary course of their business or otherwise.
The agents may engage in over-allotment, stabilizing transactions, syndicate
covering transactions and penalty bids in accordance with Regulation M under
the Securities Exchange Act of 1934. Over-allotment involves syndicate sales in
excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the underlying security so
long as the stabilizing bids do not exceed a specified maximum. Syndicate
covering transactions involve purchases of the notes in the open market after
the distribution has been completed in order to cover syndicate short
positions. Penalty bids permit reclaiming a selling concession from a syndicate
member when the notes originally sold by such syndicate member are purchased in
a syndicate covering transaction to cover syndicate short positions. Such
stabilizing transactions, syndicate covering transactions and penalty bids may
stabilize, maintain or otherwise affect the market price of the notes, which
may be higher than it would otherwise be in the absence of such transactions.
The agents are not required to engage in these activities, and may end any of
these activities at any time.
The participation of First Union Securities, Inc. in the offer and sale of
the notes must comply with the requirements of Rule 2720 of the National
Association of Securities Dealers, Inc. regarding underwriting securities of an
"affiliate". No NASD member participating in offers and sales will execute a
transaction in the notes in a discretionary account without the prior specific
written approval of such member's customer.
53
From time to time the agents engage in transactions with Wachovia in the
ordinary course of business. The agents have performed investment banking
services for Wachovia in the last two years and have received fees for these
services. The agents and their associates may be customers of (including
borrowers from), engage in transactions with, and/or perform services for the
senior trustee and the subordinated trustee, in the ordinary course of
business.
In addition to offering notes through the agents as discussed above, other
medium-term notes that have terms substantially similar to the terms of the
notes offered by this prospectus (but constituting one or more separate series
of notes for purposes of the indentures) may in the future be offered,
concurrently with the offering of the notes, on a continuing basis by Wachovia
pursuant to the Distribution Agreement and directly to investors. Any of these
notes sold pursuant to the Distribution Agreement or sold by Wachovia directly
to investors will reduce the aggregate amount of notes which may be offered by
this prospectus.
Selling Restrictions Outside the United States
Wachovia has taken no action that would permit a public offering of the
notes or possession or distribution of this prospectus or any other offering
material in any jurisdiction outside the United States where action for that
purpose is required other than as described below. Accordingly, each agent has
represented, warranted and agreed, and each other agent will be required to
represent, warrant and agree, that it will comply with all applicable laws and
regulations in force in any jurisdiction in which it purchases, offers or sells
notes or possesses or distributes this prospectus or any other offering
material and will obtain any consent, approval or permission required by it for
the purchase, offer or sale by it of notes under the laws and regulations in
force in any jurisdiction to which it is subject or in which it makes such
purchases, offers or sales and Wachovia shall have no responsibility in
relation to this.
With regard to each note, the relevant purchaser will be required to comply
with those restrictions that Wachovia and the relevant purchaser shall agree
and as shall be set out in the relevant prospectus supplement.
United Kingdom
Each distribution agent has agreed, and each other distribution agent will
be required to agree, that:
. with respect to notes which have a maturity of one year or more and which
are to be admitted to the Official List of the UK Listing Authority, it
has not offered or sold and will not offer or sell any such notes to
persons in the United Kingdom prior to admission of such notes to listing
in accordance with Part IV of the Financial Services Act 1986 (the "Act"),
or (after the repeal of that Part) Part VI of the Financial Services and
Markets Act 2000 (the "FSMA"), except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments
(as principal or agent) for the purposes of their businesses or otherwise
in circumstances which have not resulted and will not result in an offer
to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995 or the Act or (after the repeal of
Part IV of the Act) the FSMA;
. with respect to notes which have a maturity of one year or more and which
are not to be admitted to the Official List of the UK Listing Authority,
it has not offered or sold and will not offer or sell any such notes to
persons in the United Kingdom prior to the expiry of a period of six
months from the issue date of such notes except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses
or otherwise in circumstances which have not resulted and will not result
in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995;
. it has complied and will comply with all applicable provisions of the Act
(and, after they come into force, all applicable provisions of the FSMA)
with respect to anything done by it in relation to such notes in, from or
otherwise involving the United Kingdom; and
54
. it has only issued or passed on and will only issue or pass on in the
United Kingdom, before the repeal of Section 57 of the Act, any document
received by it in connection with the issue of such notes, other than any
document which consists of or any part of listing particulars,
supplementary listing particulars or any other document required or
permitted to be published by listing rules under Part IV of the Act, to a
person who is of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996, or
is a person to whom such document may otherwise lawfully be issued or
passed on. After the repeal of Section 57 of the Act it will only
communicate or cause to be communicated any invitation or inducement to
engage in investment activity (within the meaning of Section 21 of the
FSMA) received by it in connection with the issue or sale of such notes in
circumstances in which Section 21(1) of the FSMA does not apply to
Wachovia.
Japan
The notes have not been, and will not be, registered under the Securities
and Exchange Law of Japan. Accordingly, each distribution agent has represented
and agreed, and each other distribution agent or dealer will be required to
represent and agree, that, in connection with the notes, it has not, directly
or indirectly, offered, sold or delivered and will not, directly or indirectly,
offer, sell or deliver any notes in Japan or to residents of Japan or for the
benefit of any Japanese person (which term as used herein means any person
resident in Japan including any corporation or other entity organized under the
laws of Japan) or to others for re-offering, resale or delivery, directly or
indirectly, in Japan or to, or for the benefit of, any resident of Japan or to
any Japanese person except in compliance with any applicable laws and
regulations of Japan taken as a whole. Each distribution agent agrees to
provide any necessary information on notes denominated or payable in Yen to
Wachovia (which shall not include the names of clients) so that Wachovia may
make any required reports to the Ministry of Finance through its designated
agent.
In connection with an issuance of notes denominated or payable in Yen,
Wachovia will be required to comply with all applicable laws, regulations and
guidelines, as amended from time to time, of the Japanese government and
regulatory authorities.
Germany
No selling prospectus (Verkausprospekt) within the meaning of the German
Securities Prospectus Act (Wertpapier-Verkaufsprospektgesetz) of December 13,
1990 (as amended) has been and will be registered or published within the
Federal Republic of Germany. The notes have not been offered or sold and will
not be offered or sold in the Federal Republic of Germany otherwise than in
accordance with the provisions of the Securities Prospectus Act.
France
This prospectus has not been submitted to the French Commission des
operations de bourse for approval and the notes have not and will not be
offered or sold, directly or indirectly, to to the public in France.
Accordingly, each distribution agent has agreed that it will only offer notes
in France to qualified investors, as defined under Article 6 of French
Ordinance No. 67-833 dated September 28, 1967 (as amended); provided, in this
case, that it shall have obtained a certificate from the investor providing an
acknowledgement that: (i) the offering is a private placement in France and no
prospectus has been submitted to the Commission des operations de bourse, (ii)
the investor is an "investisseur qualifie" within the meaning of Article 6 of
French Ordinance No. 67-833 dated September 28, 1967 (as amended), (iii) the
investor is investing for his own account, and (iv) the investor will not
resell the notes in violation of French securities laws and regulations.
Switzerland
Each agent has agreed, and each other agent will be required to agree, that
the issue of any notes denominated in Swiss francs or carrying a Swiss
franc-related element will be effected in compliance with the relevant
regulations of the Swiss National Bank, which currently require that such
issues have a maturity of more
55
than one year, to be effected through a bank domiciled in Switzerland that is
regulated under the Swiss Federal Law on Banks and Savings Banks of 1934 (as
amended) (which includes a branch or subsidiary located in Switzerland of a
foreign bank) or through a securities dealer which has been licensed as a
securities dealer under the Swiss Federal Law on Stock Exchanges and Securities
Trading of 1995 (except for issues of notes denominated in Swiss francs on a
syndicated basis, where only the lead manager need be a bank domiciled in
Switzerland). The relevant agent must report certain details of the relevant
transaction to the Swiss National Bank no later than the time of delivery of
the notes.
The Netherlands
Each agent has agreed, and each other agent will be required to agree, that
it has not and will not offer, sell, transfer or deliver in or from The
Netherlands any of the notes other than to banks, pension funds, insurance
companies, securities firms, investment institutions, central governments,
large international and supranational institutions and other similar entities,
including treasury departments and finance companies of large enterprises,
which trade or invest in securities in the conduct of a profession or trade.
VALIDITY OF THE NOTES
The validity of the notes will be passed upon for Wachovia by Ross E.
Jeffries, Jr., Esq., Senior Vice President and Assistant General Counsel of
Wachovia, and for the agents by Sullivan & Cromwell, 125 Broad Street, New
York, New York. Sullivan & Cromwell will rely upon the opinion of Mr. Jeffries
as to matters of North Carolina law, and Mr. Jeffries will rely upon the
opinion of Sullivan & Cromwell as to matters of New York law. The opinions of
Mr. Jeffries and Sullivan & Cromwell will be conditioned upon, and subject to
certain assumptions regarding, future action to be taken by Wachovia and the
trustees in connection with the issuance and sale of any particular note, the
specific terms of notes and other matters which may affect the validity of
notes but which cannot be ascertained on the date of such opinions. Mr.
Jeffries owns shares of Wachovia's common stock and holds options to purchase
additional shares of Wachovia's common stock. Sullivan & Cromwell regularly
performs legal services for Wachovia. Certain members of Sullivan & Cromwell
performing these legal services own shares of Wachovia's common stock.
EXPERTS
The consolidated balance sheets of Wachovia Corporation (formerly named
First Union Corporation) as of December 31, 2000 and 1999, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 2000,
included in Wachovia's 2000 Annual Report to Stockholders which is included in
Wachovia's Annual Report on Form 10-K for the year ended December 31, 2000, and
incorporated by reference in this prospectus, have been incorporated by
reference in this prospectus in reliance upon the report of KPMG LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The restated audited financial statements of Wachovia Corporation at
December 31, 2000 and 1999, and for each of the three years in the period ended
December 31, 2000, included in Wachovia Corporation's (formerly named First
Union Corporation) Current Report on Form 8-K dated August 30, 2001 and
incorporated by reference herein, have been incorporated by reference herein in
reliance upon the report of Ernst & Young LLP, independent auditors. The
restated audited financial statements referred to above are included in
reliance upon such report given on the authority of said firm as experts in
accounting and auditing.
GENERAL INFORMATION
Listing and Documents Available
We have applied to list on the Luxembourg Stock Exchange any notes to be
issued under this program during the twelve-month period after the date of this
prospectus. The Luxembourg Stock Exchange has allocated to the program the
number for listing purposes. The Amended and Restated Articles of
Incorporation and the By-Laws of Wachovia and a legal notice relating to the
issuance of the notes well be deposited prior to listing with the Registrar of
the District Court in Luxembourg (Greffier en Chef du Tribunal d'Arrondissement
de et a Luxembourg), where such documents may be examined and copies obtained
upon request. Copies of the above
56
documents together with this prospectus, any prospectus supplements, the
Distribution Agreement, the indentures and Wachovia's Annual Report on Form
10-K for the year ended December 31, 2000 as well as all other documents
incorporated by reference herein including future Annual Reports on Form 10-K
and Quarterly Reports on Form 10-Q, so long as the notes are listed on the
Luxembourg Stock Exchange, will be made available for inspection, and may be
obtained free of charge, at the main office of . will act as a
contact between the Luxembourg Stock Exchange and Wachovia or the holders of
the notes.
However, notes may be issued under the program which will not be listed on
the Luxembourg Stock Exchange or which will be listed on any other securities
exchange as Wachovia and the relevant agent(s) may agree.
Authorization
The program has been established and the notes will be issued pursuant to
authority granted by the Board of Directors of Wachovia on October 26, 2001 as
such authority may be supplemented from time to time.
Material Change
As of the date of this prospectus, other than as disclosed or contemplated
herein or in the documents incorporated by reference, to the best of Wachovia's
knowledge and belief, there has been no material adverse change in the
financial position of Wachovia on a consolidated basis since December 31, 2000.
See "Where You Can Find More Information" above.
Litigation
As of the date of this prospectus, other than as disclosed or contemplated
herein or in the documents incorporated by reference, to the best of Wachovia's
knowledge and belief, Wachovia is not a party to any legal or arbitration
proceedings (including any that are pending or threatened) which may have, or
have had, since December 31, 2000, a significant effect on Wachovia's
consolidated financial position or that are material in the context of the
program or the issue of the notes which could jeopardize Wachovia's ability to
discharge its obligation under the program or of the notes issued under the
program.
Clearance Systems
The notes have been accepted for clearance through the DTC, Euroclear and
Clearstream systems. The appropriate CUSIP, Common Code and ISIN for each
tranche of notes to be held through any of these systems will be contained in
the relevant prospectus supplement.
57
ISSUER
Wachovia Corporation
One First Union Center
Charlotte, North Carolina 28288-0013
United States of America
UNITED STATES REGISTRAR AND LONDON PAYING AGENT
DOMESTIC PAYING AGENT AND LONDON ISSUING AGENT
First Union National Bank Citibank, N.A.
One First Union Center P.O. Box 18055
Charlotte, North Carolina 28288-0600 5 Carmelite Street,
United States of America London EC4Y OPA
LUXEMBOURG PAYING AGENT,
LISTING AGENT
AND TRANSFER AGENT
Banque Internationale a Luxembourg S.A.
69, route d'Esch
L-2953 Luxembourg
LEGAL ADVISORS
To the Issuer To the Distribution Agents
As to United States Law: As to the United States Law:
Ross E. Jeffries, Jr., Esq. Sullivan & Cromwell
Senior Vice President and 125 Broad Street
Assistant General Counsel New York, New York 10004
Wachovia Corporation United States of America
One First Union Center
Charlotte, North Carolina 28288-0630
United States of America
--------------------------------------
No dealer, salesman or other person has been authorized to give any information
or to make any representation not contained in this prospectus or any
prospectus supplement and, if given or made, such information or representation
must not be relied upon as having been authorized by Wachovia or the agents.
This prospectus and any prospectus supplement do not constitute an offer to
sell or a solicitation of an offer to buy any securities other than the
securities described in the relevant prospectus supplement nor do they
constitute an offer to sell or a solicitation of an offer to buy the securities
in any jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. The delivery of this prospectus and any
prospectus supplement at any time does not imply that the information they
contain is correct as of any time subsequent to their respective dates.
-----------------
TABLE OF CONTENTS
Page
----
About This Prospectus................... 1
Where You Can Find More Information..... 2
Forward-Looking Statements.............. 3
Wachovia Corporation.................... 3
Use of Proceeds......................... 4
Consolidated Earnings Ratios............ 4
Regulatory Considerations............... 5
Description of the Notes We May Offer... 6
Global Notes............................ 31
Considerations Relating to Indexed Notes 35
Considerations Relating to Notes
Denominated or Payable in or Linked
to a Non-U.S. Dollar Currency......... 38
United States Taxation.................. 40
Employee Retirement Income Security Act. 51
Plan of Distribution.................... 52
Validity of the Notes................... 56
Experts................................. 56
General Information..................... 56
--------------------------------------
$4,000,000,000
Wachovia Corporation
(Formerly named
First Union Corporation)
Senior Global
Medium-Term Notes, Series E
and
Subordinated Global
Medium-Term Notes, Series F
-----------------
. , 2001
WACHOVIA SECURITIES
--------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses in connection with this offering, other than
underwriting discounts and commissions, are as follows:
Registration Statement filing fee $1,000,000
Trustees' fees and expenses...... 100,000
Legal fees and expenses.......... 125,000
Blue Sky fees and expenses....... 4,000
Accounting fees and expenses..... 15,000
Listing fees and expenses........ 75,000
Rating agency fees............... 250,000
Printing costs................... 125,000
Miscellaneous.................... 40,000
----------
Total......................... $1,734,000
==========
Item 15. Indemnification of Directors and Officers.
Sections 55-8-50 through 55-8-58 of the North Carolina Business Corporations
Act (the "NCBC Act") contain specific provisions relating to indemnification of
directors and officers of North Carolina corporations. In general, the statute
provides that (i) a corporation must indemnify a director or officer against
reasonable expenses who is wholly successful in his defense of a proceeding to
which he is a party because of his status as such, unless limited by the
articles of incorporation, and (ii) a corporation may indemnify a director or
officer if he is not wholly successful in such defense, if it is determined as
provided in the statute that the director or officer meets a certain standard
of conduct, provided when a director or officer is liable to the corporation or
liable on the basis of receiving a personal benefit, the corporation may not
indemnify him. The statute also permits a director or officer of a corporation
who is a party to a proceeding to apply to the courts for indemnification,
unless the articles of incorporation provide otherwise, and the court may order
indemnification under certain circumstances set forth in the statute. The
statute further provides that a corporation may in its articles of
incorporation or bylaws or by contract or resolution provide indemnification in
addition to that provided by the statute, subject to certain conditions set
forth in the statute.
Wachovia's bylaws provide for the indemnification of Wachovia's directors
and executive officers by Wachovia against liabilities arising out of his
status as such, excluding any liability relating to activities which were at
the time taken known or believed by such person to be clearly in conflict with
the best interests of Wachovia. Wachovia's articles of incorporation provide
for the elimination of the personal liability of each director of Wachovia, to
the fullest extent permitted by the provisions of the NCBC Act, as the same may
from time to time be in effect.
Wachovia maintains directors and officers liability insurance. In general,
the policy insures (i) Wachovia's directors and officers against loss by reason
of any of their wrongful acts, and/or (ii) Wachovia against loss arising from
claims against the directors and officers by reason of their wrongful acts, all
subject to the terms and conditions contained in the policy.
Under agreements which may be entered into by Wachovia, certain controlling
persons, directors and officers of Wachovia may be entitled to indemnification
by underwriters and agents who participate in the distribution of securities
covered by the registration statement against certain liabilities, including
liabilities under the Securities Act of 1933.
II-1
Item 16. Exhibits
Exhibit No. Exhibit
----------- -------
(1)(a) Form of Distribution Agreement.*
(4)(a) Senior Indenture. (Incorporated by reference to Exhibit (4) to Wachovia's Registration Statement
No. 2-98213.)
(4)(b) Supplemental Indenture, dated as of May 17, 1986, between Wachovia and Chemical Bank, as
Trustee. (Incorporated by reference to Exhibit (4)(a)(ii) to Amendment No. 1 to Wachovia's
Registration Statement No. 33-30122.)
(4)(c) Supplemental Indenture, dated as of July 1, 1988, between Wachovia and Chemical Bank, as
Trustee. (Incorporated by reference to Exhibit (4)(a)(iii) to Amendment No. 1 to Wachovia's
Registration Statement No. 33-30122.)
(4)(d) Supplemental Indenture, dated as of August 1, 1990, between Wachovia and Chemical Bank, as
Trustee. (Incorporated by reference to Exhibit (4)(a)(iv) to Wachovia's Registration Statement
No. 33-40456.)
(4)(e) Subordinated Indenture. (Incorporated by reference to Exhibit (4)(a) to Amendment No. 1 to
Wachovia's Registration Statement No. 33-1852.)
(4)(f) Supplemental Indenture, dated as of August 1, 1990, between Wachovia and The Bank of New
York, as Trustee. (Incorporated by reference to Exhibit (4)(b)(ii) to Wachovia's Registration
Statement No. 33-40456.)
(4)(g) Supplemental Indenture, dated as of November 15, 1992, between Wachovia and The Bank of
New York, as Trustee. (Incorporated by reference to Exhibit (4) to Wachovia's Current Report on
Form 8-K dated November 17, 1992.)
(4)(h) Form of Instrument of Resignation, Appointment and Acceptance, dated as of February 7, 1996,
among Wachovia, Harris Trust and Savings Bank and The Bank of New York (formerly Irving
Trust Company). (Incorporated by reference to Exhibit (4)(a) to Wachovia's Current Report on
Form 8-K dated February 7, 1996.)
(4)(i) Supplemental Indenture, dated as of February 7, 1996, between Wachovia and Harris Trust and
Savings Bank, as Trustee. (Incorporated by reference to Exhibit (4)(b) to Wachovia's Current
Report on Form 8-K dated February 7, 1996.)
(4)(j) Form of Instrument of Resignation, Appointment and Acceptance, dated as of July 7, 2000, among
Wachovia, The Bank of New York, as successor to Harris Trust and Savings Bank and Bank One
Trust Company, N.A. (Incorporated by reference to Exhibit (4)(a) to Wachovia's Current Report
on Form 8-K dated July 7, 2000.)
(4)(k) Supplemental Indenture, dated as of July 7, 2000, between Wachovia and Bank One Trust
Company, N.A., as Trustee. (Incorporated by reference to Exhibit (4)(b) to Wachovia's Current
Report on Form 8-K dated July 7, 2000.)
(4)(l) Form of senior debt securities (included in Exhibit 4(a)).
(4)(m) Form of subordinated debt securities (included in Exhibit 4(e)).
(5) Opinion of Ross E. Jeffries, Jr., Esq. as to the validity of the securities.
(8) Opinion of Sullivan & Cromwell re tax matters.
(12) Computations of Consolidated Ratios of Earnings to Fixed Charges. (Incorporated by reference to
Exhibit (12) to Wachovia's 2001 Second Quarter Report on Form 10-Q.)
(23)(a) Consent of Ross E. Jeffries Jr., Esq. (Included in Exhibit (5).)
(23)(b) Consent of KPMG LLP.
(23)(c) Consent of Ernst & Young LLP.
(23)(d) Consent of Sullivan & Cromwell (Included in Exhibit (8)).
(24) Power of Attorney. (Incorporated by reference to Exhibit (24) to Wachovia's Registration
Statement No. 333-72266.)
(25)(a) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Chase Manhattan
Bank (formerly Chemical Bank). (Incorporated by reference to Exhibit (25)(a) to Wachovia's
Registration Statement No. 333-72266.)
(25)(b) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Bank One Trust
Company, N.A. (Incorporated by reference to Exhibit (25)(b) to Wachovia's Registration
Statement No. 333-72266.)
--------
* To be filed by amendment.
II-2
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in the volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Exchange Act (and, where applicable, each filing of
an employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of Wachovia pursuant to the foregoing provisions or otherwise
(other than insurance), Wachovia has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than insurance or the payment by Wachovia of
expenses incurred or paid by a director, officer or controlling person
of Wachovia, in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, Wachovia will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy
as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Wachovia
Corporation certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Charlotte, State of North Carolina, as of the
29th day of October, 2001.
WACHOVIA CORPORATION
By:/s/ MARK C. TREANOR
_____________________________________
Name: Mark C. Treanor
Title: Executive Vice President,
Secretary and
General Counsel
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
Signature Capacity
--------- --------
/s/ L.M. BAKER, JR.* Chairman and Director
----------------------------
L.M. Baker, Jr.
/s/ G. KENNEDY THOMPSON* President and Chief Executive Officer and Director
----------------------------
G. Kennedy Thompson
/s/ ROBERT P. KELLY* Executive Vice President and Chief Financial Officer
----------------------------
Robert P. Kelly
/s/ DAVID M. JULIAN* Senior Vice President and Corporate Controller
---------------------------- (Principal Accounting Officer)
David M. Julian
/s/ F. DUANE ACKERMAN* Director
----------------------------
F. Duane Ackerman
/s/ JAMES S. BALLOUN* Director
----------------------------
James S. Balloun
/s/ ROBERT J. BROWN* Director
----------------------------
Robert J. Brown
/s/ PETER C. BROWNING* Director
----------------------------
Peter C. Browning
/s/ JOHN T. CASTEEN, III* Director
----------------------------
John T. Casteen, III
/s/ WILLIAM H. GOODWIN, JR.* Director
----------------------------
William H. Goodwin, Jr.
II-4
Signature Capacity
--------- --------
/s/ ROBERT A. INGRAM* Director
--------------------------
Robert A. Ingram
/s/ RADFORD D. LOVETT* Director
--------------------------
Radford D. Lovett
/s/ MACKEY J. MCDONALD* Director
--------------------------
Mackey J. McDonald
/s/ JOSEPH NEUBAUER* Director
--------------------------
Joseph Neubauer
/s/ LLOYD U. NOLAND, III* Director
--------------------------
Lloyd U. Noland, III
/s/ RUTH G. SHAW* Director
--------------------------
Ruth G. Shaw
/s/ LANTY L. SMITH* Director
--------------------------
Lanty L. Smith
/s/ JOHN C. WHITAKER, JR.* Director
--------------------------
John C. Whitaker, Jr.
/s/ DONA DAVIS YOUNG* Director
--------------------------
Dona Davis Young
/s/ MARK C. TREANOR
*By:
--------------------------
Mark C. Treanor,
Attorney-in-Fact
Dated: October 29, 2001
II-5
EXHIBIT INDEX
Exhibit No. Exhibit
----------- -------
(1)(a) Form of Distribution Agreement.*
(4)(a) Senior Indenture. (Incorporated by reference to Exhibit (4) to Wachovia's Registration Statement
No. 2-98213.)
(4)(b) Supplemental Indenture, dated as of May 17, 1986, between Wachovia and Chemical Bank, as
Trustee. (Incorporated by reference to Exhibit (4)(a)(ii) to Amendment No. 1 to Wachovia's
Registration Statement No. 33-30122.)
(4)(c) Supplemental Indenture, dated as of July 1, 1988, between Wachovia and Chemical Bank, as
Trustee. (Incorporated by reference to Exhibit (4)(a)(iii) to Amendment No. 1 to Wachovia's
Registration Statement No. 33-30122.)
(4)(d) Supplemental Indenture, dated as of August 1, 1990, between Wachovia and Chemical Bank, as
Trustee. (Incorporated by reference to Exhibit (4)(a)(iv) to Wachovia's Registration Statement
No. 33-40456.)
(4)(e) Subordinated Indenture. (Incorporated by reference to Exhibit (4)(a) to Amendment No. 1 to
Wachovia's Registration Statement No. 33-1852.)
(4)(f) Supplemental Indenture, dated as of August 1, 1990, between Wachovia and The Bank of New
York, as Trustee. (Incorporated by reference to Exhibit (4)(b)(ii) to Wachovia's Registration
Statement No. 33-40456.)
(4)(g) Supplemental Indenture, dated as of November 15, 1992, between Wachovia and The Bank of
New York, as Trustee. (Incorporated by reference to Exhibit (4) to Wachovia's Current Report on
Form 8-K dated November 17, 1992.)
(4)(h) Form of Instrument of Resignation, Appointment and Acceptance, dated as of February 7, 1996,
among Wachovia, Harris Trust and Savings Bank and The Bank of New York (formerly Irving
Trust Company). (Incorporated by reference to Exhibit (4)(a) to Wachovia's Current Report on
Form 8-K dated February 7, 1996.)
(4)(i) Supplemental Indenture, dated as of February 7, 1996, between Wachovia and Harris Trust and
Savings Bank, as Trustee. (Incorporated by reference to Exhibit (4)(b) to Wachovia's Current
Report on Form 8-K dated February 7, 1996.)
(4)(j) Form of Instrument of Resignation, Appointment and Acceptance, dated as of July 7, 2000, among
Wachovia, The Bank of New York, as successor to Harris Trust and Savings Bank and Bank One
Trust Company, N.A. (Incorporated by reference to Exhibit (4)(a) to Wachovia's Current Report
on Form 8-K dated July 7, 2000.)
(4)(k) Supplemental Indenture, dated as of July 7, 2000, between Wachovia and Bank One Trust
Company, N.A., as Trustee. (Incorporated by reference to Exhibit (4)(b) to Wachovia's Current
Report on Form 8-K dated July 7, 2000.)
(4)(l) Form of senior debt securities (included in Exhibit 4(a)).
(4)(m) Form of subordinated debt securities (included in Exhibit 4(e)).
(5) Opinion of Ross E. Jeffries, Jr., Esq. as to the validity of the securities.
(8) Opinion of Sullivan & Cromwell re tax matters.
(12) Computations of Consolidated Ratios of Earnings to Fixed Charges. (Incorporated by reference to
Exhibit (12) to Wachovia's 2001 Second Quarter Report on Form 10-Q.)
(23)(a) Consent of Ross E. Jeffries Jr., Esq. (Included in Exhibit (5).)
(23)(b) Consent of KPMG LLP.
(23)(c) Consent of Ernst & Young LLP.
(23)(d) Consent of Sullivan & Cromwell (Included in Exhibit (8)).
(24) Power of Attorney. (Incorporated by reference to Exhibit (24) to Wachovia's Registration
Statement No. 333-72266.)
(25)(a) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Chase Manhattan
Bank (formerly Chemical Bank). (Incorporated by reference to Exhibit (25)(a) to Wachovia's
Registration Statement No. 333-72266.)
(25)(b) Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of Bank One Trust
Company, N.A. (Incorporated by reference to Exhibit (25)(b) to Wachovia's Registration
Statement No. 333-72266.)
--------
* To be filed by amendment.