-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UTEvwa6fXoxyIaqY47qHl3K38iYEqVgsULkRBJxHKqgZ6XLVVeltBPk8QOEEAdLC yBZZjS93hIjWJGLyeFDAxA== 0000950130-96-001838.txt : 19960520 0000950130-96-001838.hdr.sgml : 19960520 ACCESSION NUMBER: 0000950130-96-001838 CONFORMED SUBMISSION TYPE: 424B2 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960517 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHERN NATIONAL CORP /NC/ CENTRAL INDEX KEY: 0000092230 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 560939887 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B2 SEC ACT: 1933 Act SEC FILE NUMBER: 333-02899 FILM NUMBER: 96569503 BUSINESS ADDRESS: STREET 1: 500 N CHESTNUT ST CITY: LUMBERTON STATE: NC ZIP: 28358 BUSINESS PHONE: 9196712000 MAIL ADDRESS: STREET 1: 500 NORTH CHESTNUT STREET CITY: LUMBERTON STATE: NC ZIP: 28358 424B2 1 PROSPECTUS SUPPLEMENT ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT IS SUBJECT TO COMPLETION + +PURSUANT TO RULE 424 UNDER THE SECURITIES ACT OF 1933. A REGISTRATION + +STATEMENT RELATING TO THESE SECURITIES HAS BEEN DECLARED EFFECTIVE BY THE + +SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 415 UNDER THE SECURITIES + +ACT OF 1933. A FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS WILL BE DELIVERED + +TO PURCHASERS OF THESE SECURITIES. THIS PROSPECTUS SUPPLEMENT AND THE + +PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN + +OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN + +WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO + +REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS SUPPLEMENT DATED MAY 15, 1996 PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED MAY 10, 1996) $250,000,000 SOUTHERN NATIONAL CORPORATION % SUBORDINATED NOTES DUE 2003 ----------- Interest on the Subordinated Notes offered hereby (the "Subordinated Notes") is payable semi-annually on and of each year, beginning , 1996. The Subordinated Notes are not redeemable prior to maturity and will mature on , 2003. The Subordinated Notes are unsecured and subordinated to all present and future senior indebtedness of the Company. Payment of principal of the Subordinated Notes may be accelerated only in the case of the bankruptcy of the Company. There is no right of acceleration in the case of a default in the payment of interest on the Subordinated Notes or in the performance of any covenant or agreement of the Company with respect to the Subordinated Notes. See "Subordinated Debt Securities--Limited Rights of Acceleration" and "-- Events of Default" in the accompanying Prospectus. The Subordinated Notes will be issued only in fully registered form and will be represented by one or more Global Securities registered in the name of a nominee of The Depository Trust Company, as Depositary (the "Depositary"). Beneficial interests in the Subordinated Notes will be shown on, and transfers thereof will be effected only through, the records maintained by the Depositary's participants. Owners of beneficial interests in the Global Securities will be entitled to physical delivery of Subordinated Notes in certificated form equal in principal amount to their respective beneficial interests only under limited circumstances. The Subordinated Notes will trade in the Depositary's Same-Day Funds Settlement System until maturity, and secondary market trading activity for the Subordinated Notes will therefore settle in immediately available funds. All payments of principal and interest will be made by the Company in immediately available funds. See "Description of the Debt Securities--Global Securities," "Description of Subordinated Notes-- Global Securities" and "--Same-Day Settlement and Payment." ----------- THE SUBORDINATED NOTES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO PUBLIC(1) DISCOUNT(2) COMPANY(1)(3) - ------------------------------------------------------------------------------- Per Subordinated Note.................... % % % - ------------------------------------------------------------------------------- Total.................................... $ $ $
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (1) Plus accrued interest, if any, from May , 1996. (2) The Company has agreed to indemnify the several Underwriters against certain liabilities under the Securities Act of 1933, as amended. See "Underwriting." (3) Before deducting expenses payable by the Company estimated at $675,000. ----------- The Subordinated Notes are offered by the several Underwriters, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of certain legal matters by counsel for the Underwriters and certain other conditions. The Underwriters reserve the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. It is expected that the Subordinated Notes will be ready for delivery in book-entry form only through the facilities of The Depository Trust Company in New York, New York on or about May , 1996, against payment therefor in immediately available funds. ----------- MERRILL LYNCH & CO. ALEX. BROWN & SONS INCORPORATED DEAN WITTER REYNOLDS INC. ----------- The date of this Prospectus Supplement is May , 1996. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SUBORDINATED NOTES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. ---------------- INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following reports filed by the Company with the Securities and Exchange Commission (File No. 1-10853) under Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are hereby incorporated by reference in the Prospectus as supplemented by this Prospectus Supplement: (i) Annual Report on Form 10-K for the year ended December 31, 1995; (ii) Quarterly Report on Form 10-Q for the quarter ended March 31, 1996; (iii) Current Report on Form 8-K filed with the Commission on April 15, 1996; and (iv) Current Report on Form 8-K filed with the Commission on May 3, 1996. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and prior to the termination of the offering of the Subordinated Notes are hereby incorporated by reference into the Prospectus as supplemented by this Prospectus Supplement and shall be deemed a part hereof from the date of filing of such documents. Any statement contained in the Prospectus, in this Prospectus Supplement or in a document incorporated or deemed to be incorporated by reference therein or herein shall be deemed to be modified or superseded for purposes of the Registration Statement (as defined in the Prospectus) and the Prospectus as supplemented by this Prospectus Supplement to the extent that a statement contained in the Prospectus, in this Prospectus Supplement or in any subsequently filed document which also is or is deemed to be incorporated by reference in the Prospectus as supplemented by this Prospectus Supplement modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of the Registration Statement, the Prospectus or this Prospectus Supplement. The Company will provide without charge to each person to whom a copy of this Prospectus as supplemented by this Prospectus Supplement is delivered, upon the written or oral request of such person, a copy of any or all of the documents incorporated by reference in the Prospectus as supplemented by this Prospectus Supplement, except for certain exhibits to such documents. Written requests should be sent to Investor Relations, Southern National Corporation, 223 West Nash Street, Wilson, North Carolina 27893. Telephone requests may be directed to (919) 246-4219. S-2 THE COMPANY Southern National Corporation (the "Company") is a multi-bank holding company headquartered in Winston-Salem, North Carolina. It conducts its operations in North Carolina, South Carolina and Virginia primarily through its commercial banking subsidiaries, which operate 437 banking offices, and, to a lesser extent, through its other subsidiaries. Substantially all of the Company's loans are to businesses and individuals in the Carolinas and Virginia. The Company's principal subsidiaries are Branch Banking and Trust Company ("BB&T-NC"); BB&T Financial Corporation of South Carolina, which in turn owns all the outstanding shares of Branch Banking and Trust Company of South Carolina ("BB&T-SC"); and BB&T Financial Corporation of Virginia, which in turn owns all the outstanding shares of Commerce Bank ("Commerce"), located in Virginia Beach, Virginia. At March 31, 1996, the Company had assets of $20.1 billion, deposits of $15.2 billion, loans of $14.1 billion and shareholders' equity of $1.6 billion and ranked thirty-fifth among bank holding companies in the United States in terms of assets and thirty-fourth in terms of deposits. BB&T-NC, the Company's largest subsidiary, is the oldest bank in North Carolina. At March 31, 1996, BB&T-NC had assets of $15.7 billion, deposits of $12.1 billion, loans of $10.9 billion and shareholders' equity of $1.1 billion and ranked fourth among banks in North Carolina in terms of assets and in terms of deposits. BB&T-NC focuses on providing a wide range of banking services in its local market for retail commercial customers, including small and mid-size businesses, public agencies and local governments, trust customers and individuals. BB&T-NC has numerous additional subsidiaries which engage in leasing, investment, insurance and other activities. BB&T-SC serves South Carolina through 103 banking offices and focuses on providing a wide range of banking services in its local market for retail and commercial customers, including small and mid-size businesses, public agencies, local governments, trust customers and individuals. BB&T-SC's subsidiaries include BB&T Investment Services of South Carolina, Inc., which is licensed as a general broker/dealer of securities and is currently engaged in retailing of mutual funds, U.S. Government securities, municipal securities, fixed and variable insurance annuity products and unit investment trusts. At March 31, 1996, BB&T-SC had assets of $3.8 billion, deposits of $3.0 billion, loans of $2.7 billion and shareholders' equity of $351.5 million and ranked second among banks in South Carolina in terms of assets and in terms of deposits. Commerce operates 21 banking offices in the Hampton Roads region of southeastern Virginia. Commerce offers a full range of commercial and retail banking services and provides the Company with a strong initial presence in a Virginia market contiguous with the Company's North Carolina market. At March 31, 1996, Commerce had assets of $742.5 million, deposits of $671.3 million, loans of $517.8 million and shareholders' equity of $60.9 million and ranked ninth among banks in Virginia in terms of assets and in terms of deposits. USE OF PROCEEDS The net proceeds from the sale of the Subordinated Notes will be approximately $247.8 million (assuming an offering price of 100%), after deducting the underwriting discount and estimated offering expenses. The Company currently intends to use the net proceeds from the offering for general corporate purposes, including investments in, or extensions of credit to, its banking and other subsidiaries and stock repurchases. See "Recent Developments--Other Developments" for a discussion of the Company's planned acquisition of Regional Acceptance Corporation, which specializes in indirect financing of consumer purchases of used automobiles, and the Company's possible use of a portion of the net proceeds from this offering to fund such lending. Other general corporate purposes for which net proceeds may be used include investments at the holding company level, possible acquisitions and the reduction of other indebtedness of the Company. Pending such use, the net proceeds may be temporarily invested or used to reduce short-term indebtedness. The precise amounts and timing of the application of proceeds will depend upon the funding requirements of the Company and its subsidiaries and the availability of other funds. Based upon the historical and anticipated future growth of the Company and the financial needs of the Company and its subsidiaries, the Company may engage in additional financings of a character and amount to be determined as the need arises. S-3 CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES The following are the Company's consolidated ratios of earnings to fixed charges for the periods indicated:
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, -------------- ---------------------------- 1996 1995 1995 1994 1993 1992 1991 ------ ------ ---- ---- ---- ---- ---- Earnings to fixed charges: Excluding interest on deposits... 3.02x .72x 2.02x 3.46x 3.28x 4.12x 2.90x Including interest on deposits... 1.54 .91 1.32 1.61 1.38 1.39 1.22
For purposes of computing these ratios, earnings represent income from continuing operations before extraordinary items and cumulative effects of changes in accounting principles plus income taxes and fixed charges (excluding capitalized interest). Fixed charges, excluding interest on deposits, represent interest (other than on deposits, but including capitalized interest), one-third (the proportion representative of the interest factor) of rents and all amortization of debt issuance costs. Fixed charges, including interest on deposits, represent all interest, one-third (the proportion representative of the interest factor) of rents and all amortization of debt issuance costs. S-4 SELECTED CONSOLIDATED FINANCIAL DATA The following table sets forth certain consolidated financial data of the Company for the five years ended December 31, 1995, and the three months ended March 31, 1996 and March 31, 1995. The information is qualified in its entirety by the detailed information and consolidated financial statements included in the documents incorporated herein by reference. See "Incorporation of Certain Documents by Reference" in this Prospectus Supplement and the accompanying Prospectus.
AS OF OR FOR THE THREE MONTHS ENDED MARCH 31, AS OF OR FOR THE YEAR ENDED DECEMBER 31, -------------------- ------------------------------------------------ 1996 1995 1995 1994 1993 1992 1991 --------- --------- -------- -------- -------- -------- -------- (DOLLARS IN MILLIONS) SUMMARY OF OPERATIONS: Interest income........ $ 384 $ 369 $ 1,548 $ 1,318 $ 1,200 $ 1,208 $ 1,243 Interest expense....... 190 186 807 581 506 590 743 --------- --------- -------- -------- -------- -------- -------- Net interest income.... 194 183 742 737 694 618 500 Provisions for loan and lease losses.......... 11 7 31 18 53 63 76 --------- --------- -------- -------- -------- -------- -------- Net interest income after provision for loan and lease losses................ 183 176 710 719 640 555 424 Noninterest income..... 68 37 226 226 220 186 178 Noninterest expense.... 147 229 672 583 663 510 435 --------- --------- -------- -------- -------- -------- -------- Income (loss) before income taxes.......... 104 (17) 264 362 197 231 167 Provision for income taxes................. 34 (4) 86 125 77 84 52 --------- --------- -------- -------- -------- -------- -------- Income (loss) before cumulative effect of changes in accounting principles............ 70 (12) 178 237 120 147 116 Less: cumulative effect of changes in accounting principles, net of income taxes... -- -- -- -- 34 -- -- --------- --------- -------- -------- -------- -------- -------- Net income (loss)...... $ 70 $ (12) $ 178 $ 237 $ 86 $ 147 $ 116 ========= ========= ======== ======== ======== ======== ======== SELECTED PERIOD END BALANCES: Total assets........... $ 20,174 $ 19,893 $ 20,493 $ 19,855 $ 18,858 $ 15,967 $ 14,436 Earning assets......... 18,908 18,676 19,237 18,687 17,653 14,838 13,372 Securities............. 4,835 5,228 5,355 5,425 5,225 4,208 3,585 Loans and leases(1).... 13,884 13,199 13,640 12,936 12,064 10,384 9,657 Deposits............... 15,163 14,531 14,684 14,314 14,595 13,044 12,166 Long-term debt......... 1,603 902 1,384 911 837 423 417 Shareholders' equity... 1,563 1,495 1,674 1,496 1,399 1,267 1,025 SELECTED FINANCIAL RATIOS: PROFITABILITY RATIOS: Return on average assets................ 1.40% (.25)% .88% 1.25% .50% .96% .84% Return on average common shareholders' equity................ 17.86 16.14 11.56 16.88 6.19 12.63 12.45 Net interest margin.... 4.28 4.14 4.05 4.29 4.50 4.49 4.12 Efficiency............. 54.27 58.79 55.76 58.72 63.62 60.74 62.87 CAPITAL RATIOS: Equity to assets (period end).......... 7.8% 7.5% 8.2% 7.5% 7.4% 7.9% 7.1% Tier 1 capital......... 12.1 11.5 13.0 12.3 11.4 13.1 N/A Total capital.......... 13.4 12.7 14.3 13.6 13.1 15.5 N/A Leverage............... 7.6 7.3 7.8 7.8 7.2 8.2 N/A LOAN QUALITY RATIOS: Nonaccrual loans and leases as a percentage of total loans and leases................ .46% .36% .45% .36% .50% .87% 1.27% Nonperforming assets as a percentage of: Total assets.......... .36 .30 .33 .30 .45 .98 1.33 Loans and leases plus foreclosed property.. .51 .45 .49 .45 .70 1.50 1.94 Net charge-offs as a percentage of average loans and leases...... .22 .14 .23 .13 .31 .46 .60 Allowance for loan and lease losses as a percentage of loans and leases............ 1.25 1.30 1.25 1.31 1.38 1.30 1.20 Ratio of allowance for loan and lease losses to: Net charge-offs....... 5.76x 9.45x 5.56x 10.36x 4.88x 2.87x 2.13x Nonaccrual loans and leases............... 2.70 3.60 2.80 3.65 2.74 1.49 .94
- -------- (1) Loans and leases are net of unearned income and the allowance for losses. Amounts include loans held for sale. S-5 Earnings for 1995 were reduced by $76.3 million in net nonrecurring charges. Excluding nonrecurring items, the Company would have had net income of $254.5 million. This represents a $17.6 million or 7.4% increase over earnings from the prior year. Recurring earnings for 1995 provided returns of 1.26% on average assets and 16.65% on average common shareholders' equity. The Company recorded charges for the cumulative effect of changes in accounting principles in 1993. The amount of the charges, net of income taxes, was $34.3 million. Net income after giving effect to the changes in accounting principles in 1993 was $85.8 million. RECENT DEVELOPMENTS FIRST QUARTER FINANCIAL RESULTS The Company reported net income of $69.6 million for the quarter ended March 31, 1996 compared to a net loss of $12.3 million recorded in the first quarter of 1995. The first quarter 1995 loss included $70.5 million in nonrecurring charges on an after-tax basis resulting from the merger between the Company and BB&T Financial Corporation, the former parent of BB&T-NC and BB&T-SC. Excluding nonrecurring charges, net income in the first quarter of 1996 increased 19.6% over the prior year period. The increase in net income excluding nonrecurring charges reflected a 5.9% increase in net interest income and a 19.2% increase in noninterest income, while noninterest expenses increased 0.7%. Returns on average assets and average common equity in the first quarter of 1996 were 1.40% and 17.86%, respectively. The Company's net interest income was $201.7 million for the first quarter of 1996 compared to $190.3 million in the first quarter of 1995. The Company's net interest income increased as a result of an increase of 1.2% in average earning assets and a higher net interest margin. Total interest income was $391.9 million for the first quarter of 1996, an increase of $15.8 million from $376.1 million in the comparable 1995 period. Total interest expense was $190.1 million in the first quarter of 1996 compared to $185.8 million in the first quarter of 1995, an increase of $4.3 million. During the first quarter of 1996, average earning assets were $18.9 billion compared to $18.6 billion for the first quarter of 1995. Average interest-bearing liabilities during the first quarter of 1996 were $16.3 billion compared to $16.4 billion during the first quarter of 1995, a decrease of 0.2%. The net interest margin in the first quarter of 1996 improved to 4.28% from 4.14% in the first quarter of 1995. The Company's provision for loan and lease losses was $10.5 million in the first quarter of 1996 compared to $7.0 million in the first quarter of 1995. Net charge-offs in the first quarter of 1996 were 0.22% of average loans and leases compared to 0.14% in the first quarter of 1995 and 0.35% in the fourth quarter of 1995. The Company's allowance for loan and lease losses was 1.25% of total loans and leases and 2.7 times nonaccrual loans and leases at the end of the first quarter of 1996, compared to 1.30% and 3.6 times, respectively, at the end of the first quarter of 1995. Nonperforming assets were $72.4 million, or 0.36% of total assets, at March 31, 1996 compared to $60.4 million, or 0.30% of total assets, at March 31, 1995. On a recurring basis, total noninterest income increased 19.2% in the first quarter of 1996 to $67.7 million from $56.8 million in the first quarter of 1995. Service charges on deposits, the primary component of noninterest income, were $25.2 million for the first quarter of 1996, an increase of 18.5% over the comparable 1995 period. Other nondeposit fees and commissions were $16.9 million in the first quarter of 1996 compared to $15.8 million in the first quarter of 1995, an increase of 7.1%. Income from mortgage banking activities in the first quarter of 1996 was $9.3 million, an increase of 66.4% over $5.6 million in the comparable 1995 period. On a recurring basis, total noninterest expense increased 0.7% in the first quarter of 1996 to $146.9 million from $146.0 million in the first quarter of 1995. OTHER DEVELOPMENTS Agreement to Acquire Regional Acceptance Corporation. The Company has entered into an Agreement and Plan of Reorganization with Regional Acceptance Corporation ("Regional"), dated as of March 29, 1996 (the "Agreement"), which provides for the Company to acquire Regional in a transaction in which the shareholders of Regional will receive .3929 shares of the Company's common stock for each share of Regional common stock. The exchange ratio is subject to adjustment in the event the average per share price of the S-6 Company's common stock during a specified 10-day period prior to the closing is less than $24 or greater than $32. The Company expects to issue approximately 6,040,000 shares in the transaction, which is valued at approximately $167 million based on the market price of the Company's common stock on the day preceding the date of the Agreement. The transaction will be accounted for as a pooling of interests. In connection with the Agreement, Regional granted the Company an option to purchase a number of shares of Regional common stock up to 19.9% of the currently outstanding shares at $10.21 per share, exercisable only in certain events if the transaction is not completed. The transaction has been approved by the boards of directors of the Company and Regional and is subject to the approval of regulators and the shareholders of Regional and other customary closing conditions. The transaction is expected to be completed during the third quarter of 1996. Regional specializes in indirect financing for consumer purchases of mid- model and late-model used automobiles. Founded in 1978, Regional has 27 branch offices in North Carolina, South Carolina, Tennessee and Virginia. Upon completion of the transaction, Regional will continue to operate under its name as a wholly owned subsidiary of the Company. The Company intends to use a portion of the net proceeds from this offering to fund Regional's lending business. Pending consummation of the transaction, net proceeds intended for this purpose will be advanced to other subsidiaries of the Company. Preferred Stock Redemption and Common Stock Repurchases. On February 28, 1996, the Company called for redemption 733,869 shares of its 6 3/4% Cumulative Convertible Preferred Stock, Series A (the "Preferred Stock"), representing all of the outstanding shares of the Preferred Stock. All such shares of the Preferred Stock were converted into 4,334,692 shares of the Company's common stock prior to the redemption date, March 29, 1996, and no whole shares of the Preferred Stock were redeemed by the Company. In connection with the redemption of the Company's Preferred Stock, the Company completed the repurchase of 4,334,817 shares of its common stock in February 1996. These repurchases were in addition to the Company's plan, announced in April 1995, to repurchase up to 5,000,000 shares of common stock over the next two to three years. Approximately 2,300,000 shares have been repurchased pursuant to this plan. DESCRIPTION OF SUBORDINATED NOTES The following description of the particular terms of the Subordinated Notes offered hereby supplements, and to the extent inconsistent therewith replaces, the description of the general terms and provisions of the Debt Securities and the specific terms and conditions of the Subordinated Debt Securities set forth in the accompanying Prospectus, to which description reference is hereby made. Capitalized terms used and not defined herein have the meanings set forth in the accompanying Prospectus. The Subordinated Notes will be limited to $250,000,000 aggregate principal amount, will be direct, unsecured, subordinated obligations of the Company and will mature on , 2003. Interest at the annual rate set forth on the cover page of this Prospectus Supplement will accrue from , 1996 or from the most recent Interest Payment Date to which interest has been paid or provided for, payable semiannually on and of each year beginning , 1996 to the persons in whose names the Subordinated Notes are registered at the close of business on or , as the case may be, next preceding such Interest Payment Date. The Subordinated Notes are not redeemable at the option of the Company prior to maturity and do not provide for any sinking fund. The Subordinated Notes constitute a single series and are to be issued under the Subordinated Indenture described in the accompanying Prospectus. GLOBAL SECURITIES The Subordinated Notes initially will be issued as book-entry notes. See "Description of the Debt Securities--Global Securities." The Subordinated Notes will be issued in denominations of $1,000 and integral multiples thereof. S-7 Upon issuance, all Subordinated Notes will be represented by Global Securities. Global Securities representing the Subordinated Notes will be deposited with, or on behalf of, the Depositary, and registered in the name of a nominee of the Depositary. Subordinated Notes will not be exchangeable for certificated notes, provided that if the Depositary is at any time unwilling or unable to continue as Depositary and a successor Depositary is not appointed by the Company within 90 days, the Company will issue certificated notes in exchange for the Global Securities. In addition, the Company at any time and in its sole discretion may determine not to have book-entry notes represented by Global Securities, and, in such event, will issue certificated notes in exchange therefor. A further description of the Depositary's procedures with respect to Global Securities representing book-entry notes is set forth in the accompanying Prospectus under "Description of the Debt Securities--Global Securities." The Depositary has confirmed to the Company, the Underwriters and the Subordinated Trustee that it intends to follow such procedures. SUBORDINATION As described in the accompanying Prospectus, the Subordinated Notes are subordinate and subject in right of payment to the prior payment in full of all existing and future Senior Indebtedness of the Company. See "Subordinated Debt Securities--Subordination" in the accompanying Prospectus. The Subordinated Indenture does not limit or prohibit the incurrence of additional Senior Indebtedness. As described in the accompanying Prospectus, payment of the principal of the Subordinated Notes may be accelerated in the case of certain events involving the bankruptcy, insolvency or reorganization of the Company. There is no right of acceleration in the case of a default by the Company in the performance of any covenant or agreement in the Subordinated Notes or the Subordinated Indenture, including the failure to pay principal of or interest on the Subordinated Notes when due. See "Subordinated Debt Securities--Limited Rights of Acceleration" and "--Events of Default" in the accompanying Prospectus. SAME-DAY SETTLEMENT AND PAYMENT Settlement for the Subordinated Notes will be made by the Underwriters in immediately available funds. As long as the Subordinated Notes are represented by Global Securities, all payments of principal and interest will be made by the Company in immediately available funds, provided the Depositary makes its Same-Day Funds Settlement System available to the Company. Secondary trading in long-term notes and debentures of corporate issuers is generally settled in clearing house or next-day funds. In contrast, as long as the Subordinated Notes are represented by Global Securities registered in the name of the Depositary or its nominee, the Subordinated Notes will trade in the Depositary's Same-Day Funds Settlement System, and secondary market trading activity in the Subordinated Notes will therefore be required by the Depositary to settle in immediately available funds. No assurance can be given as to the effect, if any, of settlement in immediately available funds on trading activity in the Subordinated Notes. Any certificate for the Subordinated Notes will bear the following legend: "This Subordinated Note is not a savings or deposit account or other obligation of a bank and is not insured by the Federal Deposit Insurance Corporation or any other governmental agency." BB&T-NC will serve as the Paying Agent with respect to the Subordinated Notes. TRUSTEE State Street Bank and Trust Company, a Massachusetts trust corporation, will serve as the Trustee with respect to the Subordinated Notes. S-8 UNDERWRITING Subject to the terms and conditions set forth in an underwriting agreement (the "Underwriting Agreement") among the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Alex. Brown & Sons Incorporated and Dean Witter Reynolds Inc. (the "Underwriters"), the Company has agreed to sell to each of the Underwriters, and the Underwriters have severally agreed to purchase, the respective principal amounts of the Subordinated Notes set forth opposite their names below. The Underwriting Agreement provides that the obligations of the Underwriters are subject to certain conditions precedent and that the Underwriters will be obligated to purchase all of the Subordinated Notes if any are purchased.
PRINCIPAL UNDERWRITER AMOUNT ----------- ------------ Merrill Lynch, Pierce, Fenner & Smith Incorporated.................................................. $ Alex. Brown & Sons Incorporated................................ Dean Witter Reynolds Inc....................................... ------------ Total..................................................... $250,000,000 ============
The Underwriters have advised the Company that they propose initially to offer the Subordinated Notes to the public at the public offering price set forth on the cover page of this Prospectus Supplement, and to certain dealers at such price less a concession not in excess of % of the principal amount. The Underwriters may allow, and such dealers may reallow, a discount not in excess of % of the principal amount of the Subordinated Notes to certain other dealers. After the initial public offering, the public offering price, concession and discount may be changed. The Underwriting Agreement provides that the Company will indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or contribute to payments the Underwriters may be required to make with respect thereto. The Subordinated Notes will not be listed on any securities exchange. The Company has been advised by the several Underwriters that the several Underwriters currently intend to make a market in the Subordinated Notes, as permitted by applicable laws and regulations. The several Underwriters are not obligated, however, to make a market in the Subordinated Notes and any such market-making may be discontinued at any time at the sole discretion of the several Underwriters. Accordingly, no assurance can be given as to the liquidity of, or trading markets for, the Subordinated Notes. The Underwriters and their respective affiliates may be customers of, engage in transactions with and perform services for the Company and its subsidiaries in the ordinary course of business. VALIDITY OF SUBORDINATED NOTES The validity of the Subordinated Notes will be passed upon for the Company by Womble Carlyle Sandridge & Rice, PLLC, Charlotte, North Carolina, and for the Underwriters by Gibson, Dunn & Crutcher LLP, New York, New York. Gibson, Dunn & Crutcher LLP will rely on the opinion of Womble Carlyle Sandridge & Rice, PLLC, as to matters of North Carolina law, and Womble Carlyle Sandridge & Rice, PLLC will rely on the opinion of Gibson, Dunn & Crutcher LLP as to matters of New York law. EXPERTS The consolidated financial statements and schedule included in the Company's 1995 Annual Report on Form 10-K incorporated by reference in the Prospectus as supplemented by this Prospectus Supplement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are incorporated by reference herein upon the authority of said firm as experts in giving said reports. S-9 PROSPECTUS SOUTHERN NATIONAL CORPORATION DEBT SECURITIES Southern National Corporation (the "Company" or "SNC") may offer from time to time pursuant hereto up to $1,000,000,000 aggregate principal amount (or, at the option of the Company if so specified in the applicable prospectus supplement or prospectus supplements to this Prospectus (each, a "Prospectus Supplement"), the equivalent thereof in any other currency or currency unit such as the European Currency Unit), of its unsecured debt securities (the "Debt Securities") consisting of unsecured senior debt securities (the "Senior Debt Securities") and/or unsecured subordinated debt securities (the "Subordinated Debt Securities"). The Debt Securities may be offered as separate series in amounts, at maturities, at prices and on terms to be determined at the time of sale as set forth in a Prospectus Supplement or Prospectus Supplements. Although the aggregate initial offering price of the Debt Securities is limited as set forth above, the respective indentures pursuant to which the Senior Debt Securities and the Subordinated Debt Securities are to be issued do not contain any limitation on the aggregate principal amount of the debt securities covered thereby. The Senior Debt Securities when issued will rank on a parity with all other unsecured and unsubordinated indebtedness of the Company, and the Subordinated Debt Securities when issued will be subordinated as described herein under "Subordinated Debt Securities--Subordination". When a particular series of Debt Securities is offered, a Prospectus Supplement or Prospectus Supplements will be delivered setting forth the terms of such Debt Securities, including the specific designation, aggregate principal amount, the currency or currency unit in which payments are to be made, denominations, maturity, premium, if any, rate (which may be fixed or variable) and time of payment of interest, if any, terms for redemption at the option of the Company or the holder, if any, terms for sinking fund payments, if any, subordination terms, if any, and any other terms of such Debt Securities or otherwise in connection with the offering and sale of the Debt Securities in respect of which the Prospectus Supplement or Prospectus Supplements are being delivered. In addition, the Prospectus Supplement or Prospectus Supplements will set forth the initial public offering price, the names of any underwriters or agents, the principal amounts, if any, to be purchased by underwriters, the compensation of such underwriters and agents, if any, and the net proceeds to the Company. The Debt Securities may be issued in definitive or permanent global form. The Company may sell Debt Securities to or through underwriters acting as principals for their own account or as agents, and also may sell Debt Securities directly to other purchasers or through agents designated from time to time. If the Company, directly or through agents, solicits offers to purchase the Debt Securities, the Company reserves the sole right to accept and, together with its agents, to reject in whole or in part any proposed purchase of Debt Securities. See "Plan of Distribution". Any underwriters, dealers or agents participating in the offering may be deemed "underwriters" within the meaning of the Securities Act of 1933 (as amended, the "Securities Act"). See "Plan of Distribution" for possible indemnification arrangements for underwriters, agents and their controlling persons. This Prospectus may not be used to consummate the sale of Debt Securities unless accompanied by a Prospectus Supplement. THE DEBT SECURITIES WILL BE UNSECURED OBLIGATIONS OF THE COMPANY AND WILL NOT BE OBLIGATIONS OF A BANK INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE DATE OF THIS PROSPECTUS IS MAY 10, 1996. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934 (as amended, the "Exchange Act") and, in accordance therewith, files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy statements and other information filed by the Company can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's Regional Offices in New York (Seven World Trade Center, 13th Floor, New York, New York 10048) and Chicago (Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661), and copies of such materials can be obtained from the Public Reference Section of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Company's Common Stock, $5 par value per share, is listed and traded on the New York Stock Exchange, Inc. (the "NYSE"). Reports, proxy statements and other information of the Company can also be inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005. This Prospectus does not contain all of the information set forth in the Registration Statement on Form S-3 of which this Prospectus is a part (together with all amendments and exhibits thereto, the "Registration Statement"), which the Company has filed with the Commission under the Securities Act, certain portions of which have been omitted pursuant to the rules and regulations of the Commission, and to which reference is hereby made for further information. Statements contained herein concerning the provisions of documents are necessarily summaries of such documents, and each statement is qualified in its entirety by reference to the copy of the applicable document filed with the Commission. Copies of the Registration Statement and the exhibits thereto are on file at the offices of the Commission and may be obtained upon payment of the fee prescribed by the Commission, or may be examined without charge at the public reference facilities of the Commission described above. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following reports filed by the Company with the Commission (File No. 1- 10853) under Section 13(a) or 15(d) of the Exchange Act are hereby incorporated by reference in this Prospectus: (i)Annual Report on Form 10-K for the year ended December 31, 1995; and (ii) Current Reports on Form 8-K filed with the Commission on April 15, 1996 and May 3, 1996, respectively. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and prior to the termination of the offering of any Debt Securities are hereby incorporated by reference into this Prospectus and shall be deemed a part hereof from the date of filing of such documents. Any statement contained herein, in any Prospectus Supplement or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of the Registration Statement and this Prospectus to the extent that a statement contained herein, in any Prospectus Supplement or in any subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of the Registration Statement, this Prospectus or any Prospectus Supplement. THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM A COPY OF THIS PROSPECTUS IS DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN, EXCEPT FOR CERTAIN EXHIBITS TO SUCH DOCUMENTS. WRITTEN REQUESTS SHOULD BE SENT TO INVESTOR RELATIONS, SOUTHERN NATIONAL CORPORATION, 223 WEST NASH STREET, WILSON, NORTH CAROLINA 27893. TELEPHONE REQUESTS MAY BE DIRECTED TO (919) 246- 4219. 2 THE COMPANY The Company is a multi-bank holding company headquartered in Winston-Salem, North Carolina. It conducts its operations in North Carolina, South Carolina and Virginia primarily through its commercial banking subsidiaries and, to a lesser extent, through its other subsidiaries. Substantially all of the Company's loans are to businesses and individuals in the Carolinas and Virginia. The Company has no material amount of foreign loans and no loans that can be defined as highly-leveraged transactions. The principal assets of the Company are all of the outstanding shares of common and preferred stock of Branch Banking and Trust Company ("BB&T-NC"); BB&T Financial Corporation of South Carolina ("BB&T Financial-SC"), which in turn owns all the outstanding shares of Branch Banking and Trust Company of South Carolina ("BB&T-SC"); and BB&T Financial Corporation of Virginia, which in turn owns all the outstanding shares of Commerce Bank ("Commerce"), located in Virginia Beach, Virginia. At December 31, 1995, the Company had assets of $20.5 billion, deposits of $14.7 billion, loans of $13.8 billion and shareholders' equity of $1.7 billion. At December 31, 1995, the Company ranked thirty-fifth among bank holding companies in the United States in terms of assets and thirty-fourth in terms of deposits. The Company and BB&T Financial Corporation (the former parent of BB&T-NC and BB&T-SC) consummated a merger-of-equals transaction on February 28, 1995, and the combined bank holding company operates 317 banking offices throughout North Carolina, South Carolina and Virginia. BB&T-NC, the Company's largest subsidiary, is the oldest bank in North Carolina. At December 31, 1995, BB&T- NC had assets of $16.0 billion, deposits of $11.5 billion, loans of $10.6 billion and shareholders' equity of $1.1 billion. At December 31, 1995, BB&T- NC ranked fourth among banks in North Carolina in terms of assets and in terms of deposits. BB&T-NC focuses on providing a wide range of banking services in its local market for retail and commercial customers, including small and mid- size businesses, public agencies and local governments, trust customers and individuals. BB&T Leasing Corp., a wholly owned subsidiary of BB&T-NC, offers lease financing to commercial businesses and municipal governments. BB&T Investment Services, Inc., a wholly owned subsidiary of BB&T-NC, offers customers investment alternatives, including discount brokerage services, fixed-rate and variable-rate annuities, mutual funds and municipal and other government bonds. BB&T-NC has numerous additional subsidiaries, including BB&T Insurance Services, Inc., which offers credit life, credit accident and health, life, and property and casualty insurance on an agency basis; Goddard Technology Corporation, which engages in the design and production of imaging and security devices and programs; and Prime Rate Premium Finance Corporation, Inc., which provides insurance premium financing and services to customers in Virginia and the Carolinas. BB&T-SC serves South Carolina through 103 banking offices. BB&T-SC focuses on providing a wide range of banking services in its local market for retail and commercial customers, including small and mid-size businesses, public agencies, local governments, trust customers and individuals. BB&T-SC's subsidiaries include BB&T Investment Services of South Carolina, Inc., which is licensed as a general broker/dealer of securities and is currently engaged in retailing of mutual funds, U.S. Government securities, municipal securities, fixed and variable insurance annuity products and unit investment trusts. At December 31, 1995, BB&T-SC had assets of $3.8 billion, deposits of $2.9 billion, loans of $2.7 billion and shareholders' equity of $360.3 million. At December 31, 1995, BB&T-SC ranked second among banks in South Carolina in terms of assets and in terms of deposits. Commerce was acquired by the Company on January 10, 1995 and operates 21 banking offices in the Hampton Roads region of southeastern Virginia. Commerce offers a full range of commercial and retail banking services and provides the Company with a strong initial presence in a Virginia market contiguous with the Company's North Carolina market. At December 31, 1995, Commerce had assets of $737.5 million, deposits of $669.0 million, loans of $505.8 million and shareholders' equity of $60.7 million. At December 31, 1995, Commerce ranked ninth among banks in Virginia in terms of assets and in terms of deposits. 3 USE OF PROCEEDS The Company currently intends to use the net proceeds from the sale of any Debt Securities for general corporate purposes, which may include the reduction of other indebtedness of the Company, investments at the holding company level, investments in, or extensions of credit to, its banking and other subsidiaries, possible acquisitions, stock repurchases and such other purposes as may be stated in any Prospectus Supplement. Pending such use, the net proceeds may be temporarily invested or used to reduce short-term indebtedness. The precise amounts and timing of the application of proceeds will depend upon the funding requirements of the Company and its subsidiaries and the availability of other funds. Except as may be described in any Prospectus Supplement, specific allocations of the proceeds to such purposes will not have been made at the date of such Prospectus Supplement. If the Company elects at the time of issuance of Debt Securities to make a different use of the proceeds other than as set forth herein, such use will be described in the applicable Prospectus Supplement. Based upon the historical and anticipated future growth of the Company and the financial needs of the Company and its subsidiaries, the Company may engage in additional financings of a character and amount to be determined as the need arises. CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES The following are the Company's consolidated ratios of earnings to fixed charges for the periods indicated:
YEAR ENDED DECEMBER 31, ---------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- Earnings to fixed charges: Excluding interest on deposits.................. 2.02x 3.46x 3.28x 4.12x 2.90x Including interest on deposits.................. 1.32 1.61 1.38 1.39 1.22
For purposes of computing these ratios, earnings represent income from continuing operations before extraordinary items and cumulative effects of changes in accounting principles plus income taxes and fixed charges (excluding capitalized interest). Fixed charges, excluding interest on deposits, represent interest (other than on deposits, but including capitalized interest), one-third (the proportion representative of the interest factor) of rents and all amortization of debt issuance costs. Fixed charges, including interest on deposits, represent all interest, one-third (the proportion representative of the interest factor) of rents and all amortization of debt issuance costs. CERTAIN REGULATORY CONSIDERATIONS GENERAL As a bank holding company, the Company is subject to regulation under the Bank Holding Company Act of 1956 (as amended, the "BHCA") and its examination and reporting requirements. Under the BHCA, bank holding companies may not directly or indirectly acquire the ownership or control of more than five percent of the voting shares or substantially all of the assets of any company, including a bank, without the prior approval of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"). In addition, subject to certain exceptions, bank holding companies are generally prohibited under the BHCA from engaging in nonbanking activities, unless such activities are so closely related to banking or managing and controlling banks as to be a proper incident thereto. In addition, BB&T-NC, BB&T-SC and Commerce (collectively, the "Banks") are extensively regulated under state and federal law. As state-chartered commercial banks, the Banks are subject to regulation, supervision and examination by state banking authorities in their respective home states, including the North Carolina Commissioner, in the case of BB&T-NC, the South Carolina Commissioner, in the case of BB&T-SC, and the Virginia State Corporation Commission, Bureau of Financial Institutions, in the case of Commerce. As federally-insured, nonmember banks, each of the Banks is also subject to regulation, supervision and examination by the Federal Deposit Insurance Corporation (the "FDIC"). 4 The earnings of the Company's subsidiaries, and therefore the earnings of the Company, are affected by general economic conditions, management policies and the legislative and governmental actions of various regulatory authorities, including those referred to above. In addition, there are numerous governmental requirements and regulations which affect the activities of the Company and its subsidiaries. The following description summarizes some of the state and federal laws to which the Company and the Banks are subject. To the extent statutory or regulatory provisions or proposals are described, the description is qualified in its entirety by reference to the particular statutory or regulatory provisions or proposals. PAYMENT OF DIVIDENDS The Company is a legal entity separate and distinct from its banking and other subsidiaries. A major portion of the revenues of the Company result from amounts paid as dividends to the Company by its bank subsidiaries. The Company's banking subsidiaries are subject to state laws and regulations that limit the amount of dividends they can pay. The Company does not expect that these laws and regulations will materially impact the ability of its banking subsidiaries to pay dividends. During the year ended December 31, 1995, the Banks paid $97.9 million in cash dividends to the Company. During the first quarter of 1996, the Banks paid $161.0 million in cash dividends to the Company, including $125.0 million paid as a special dividend to the Company in order to finance repurchases of the Company's Common Stock. In addition, both the Company and the Banks are subject to various general regulatory policies and requirements relating to the payment of dividends, including requirements to maintain adequate capital above regulatory minimums. The appropriate federal or state regulatory authority is authorized to determine under certain circumstances relating to the financial condition of a bank or bank holding company that the payment of dividends would be an unsafe or unsound practice and to prohibit payment thereof. The Federal Reserve Board, which regulates the activities of the Company and BB&T Financial-SC, has indicated that dividends should generally be paid only out of current operating earnings. CAPITAL The Company. The minimum requirement for a bank holding company's ratio of capital to risk-weighted assets (including certain off-balance-sheet activities, such as standby letters of credit) is eight percent. At least half of the total capital is to be composed of common equity, retained earnings and qualifying perpetual preferred stock, less certain intangibles ("Tier 1 capital"). The remainder may consist of subordinated debt, qualifying preferred stock and a limited amount of the loan loss allowance ("Tier 2 capital" and, together with Tier 1 capital, "total capital"). At December 31, 1995, the Company's Tier 1 and total capital ratios were 13.0 percent and 14.3 percent, respectively. In addition, the Federal Reserve Board has established minimum leverage ratio requirements for bank holding companies. These requirements provide for a minimum leverage ratio of Tier 1 capital to adjusted average quarterly assets ("leverage ratio") equal to 3 percent for bank holding companies that meet certain specified criteria, including that they have the highest regulatory rating. All other bank holding companies will generally be required to maintain a leverage ratio of at least 4 to 5 percent. The Company's leverage ratio at December 31, 1995, was 7.8 percent. The requirements also provide that bank holding companies experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets. Furthermore, the requirements indicate that the Federal Reserve Board will continue to consider a "tangible Tier 1 leverage ratio" (deducting all intangibles) in evaluating proposals for expansion or new activity. The Banks. The FDIC has adopted minimum risk-based and leverage ratio guidelines to which the Banks are subject. Under the risk-based capital requirements of the FDIC, each of the Banks is required to maintain a minimum ratio of total capital (Tier 1 plus Tier 2 capital) to total risk-adjusted assets (which include the credit risk equivalents of certain off-balance sheet items) of 8 percent, of which half (4 percent) must be Tier 1 capital. 5 In addition, the FDIC requires a minimum leverage ratio (Tier 1 capital to average total consolidated assets) of 3 percent. These risk-based capital and leverage ratios are minimum supervisory ratios generally applicable to banks that meet certain specified criteria, including that they have one of the two highest regulatory ratings. Banking institutions not meeting these criteria are expected to operate with capital positions well above the minimum ratios. In addition, the FDIC may set capital requirements for a particular bank that are higher than the minimum ratios when circumstances warrant. The FDIC's risk-based capital standards explicitly identify concentrations of credit risk and the risk arising from non-traditional activities, as well as an institution's ability to manage these risks, as important factors to be taken into account by the agency in assessing an institution's overall capital adequacy. The capital regulations also provide that an institution's exposure to a decline in the economic value of its capital due to changes in interest rates be considered by the agency as a factor in evaluating a bank's capital adequacy. The banking agencies issued for comment a proposed joint policy statement that describes the process the banking agencies will use to measure and assess the exposure of a bank's net economic value to changes in interest rates. The agencies may, ultimately, establish an explicit capital charge for interest rate risk. Under federal banking laws, failure to meet the minimum regulatory capital requirements could subject a banking institution to a variety of enforcement remedies available to federal regulatory authorities, including, in the most severe cases, the termination of deposit insurance by the FDIC and placing the institution into conservatorship or receivership. The capital ratios of each of the Banks exceeded all minimum regulatory capital requirements as of December 31, 1995. As of December 31, 1995, the ratio of total capital to total risk-adjusted assets for BB&T-NC, BB&T-SC and Commerce were 11.6%, 15.3% and 12.5%, respectively, and the Banks' leverage ratios (Tier 1 capital to average total consolidated assets) were 6.4%, 9.0% and 8.2%, respectively. FIRREA The Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), among other things, imposes liability on an institution the deposits of which are insured by the FDIC, such as the Banks, for certain potential obligations to the FDIC incurred in connection with other FDIC- insured institutions under common control with such institution. Under Federal Reserve Board policy, the Company is expected to act as a source of financial strength to each of the Banks and to commit resources to support each of such subsidiaries. This support may be required at times when, absent such Federal Reserve Board policy, the Company may not find itself able to provide it. Any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary banks. In the event of a bank holding company's bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a priority of payment. PROMPT CORRECTIVE ACTION UNDER FDICIA The prompt corrective action provisions of the Federal Deposit Insurance Company Improvement Act of 1991 ("FDICIA") significantly expanded the regulatory and enforcement powers of federal banking regulators, including the FDIC. Among other things, FDICIA establishes additional capital standards for insured depository institutions and requires specific enforcement actions by the appropriate federal regulatory agencies against institutions that fail to meet these standards. The extent of these powers depends upon whether the institutions in question are "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized" or "critically undercapitalized." 6 The FDIC's regulations establish specific actions that are permitted or, in certain cases, required to be taken by regulators with respect to institutions falling within one of the three undercapitalized categories. Depending on the level of an institution's capital, the agency's corrective powers can include: requiring a capital restoration plan; placing limits on asset growth and restrictions on activities; requiring the institution to issue additional stock (including voting stock) or to be acquired; placing restrictions on transactions with affiliates; restricting the interest rate the institution may pay on deposits; ordering a new election for the institution's board of directors; requiring that certain senior executive officers or directors be dismissed; prohibiting the institution from accepting deposits from correspondent banks; requiring the institution to divest certain subsidiaries; prohibiting the payment of principal or interest on subordinated debt; prohibiting the holding company from making capital distributions without prior regulatory approval; and, in the most severe cases, appointing a receiver for the institution. A bank that is undercapitalized is required to submit a capital restoration plan, and such a plan will not be accepted unless, among other things, the bank holding company guarantees the capital plan, up to a certain specified amount. Under certain circumstances, a "well capitalized," "adequately capitalized" or "undercapitalized" institution may be required to comply with restrictions applicable to the next lowest capital category. As of December 31, 1995, the Company and each of the Banks were classified as "well capitalized." CONSERVATORSHIP AND RECEIVERSHIP POWERS OF THE FEDERAL AND STATE BANKING AGENCIES The federal banking agencies have broad enforcement powers over depository institutions, including the power to terminate deposit insurance, impose substantial fines and other civil penalties and to appoint a conservator or receiver. Certain federal statutes to which the Company and its subsidiaries are subject also contain criminal penalties. In addition to the grounds discussed under "Prompt Corrective Action Under FDICIA," the FDIC may appoint itself as conservator or receiver for each of the Banks if any one or more of a number of circumstances exist, including, without limitation, the fact that the bank is undercapitalized and has no reasonable prospect of becoming adequately capitalized; fails to become adequately capitalized when required to do so; fails to submit a timely and acceptable capital restoration plan; or materially fails to implement an accepted capital restoration plan. State regulatory authorities have broad enforcement powers over state banking institutions chartered in each of their states including powers to impose fines and other civil penalties and to appoint a conservator (with the approval of the Governor in the case of North Carolina) in order to conserve the assets of any such institution for the benefit of depositors and other creditors thereof. The state statutes to which the Company and its subsidiaries are subject also contain criminal penalties. In addition, the North Carolina Commissioner has the authority to take possession of a state bank in certain circumstances, including, among other things, when it appears that such bank has violated its charter or any applicable laws or is conducting its business in an unauthorized or unsafe manner, or is in an unsafe or unsound condition to transact its business or has an impairment of its capital stock. A conservator has the authority, under the direction of the applicable state authority to take possession of the books, records and assets of a bank and to exercise all powers of such state authority in order to preserve the assets of such bank. The FDIC may provide federal assistance to a "troubled institution" without placing the institution into conservatorship or receivership. In such a case, preexisting debtholders and shareholders may be required to make substantial concessions and, insofar as practical, the FDIC will succeed to their interests in proportion to the amount of federal assistance provided. INSOLVENCY, LIQUIDATION OR OTHER DEFAULT BY THE BANKS In the event of the liquidation or other resolution of any federally-insured depository institution, such as each of the Banks, the claims of depositors of such an institution (including claims by the FDIC as subrogee of insured depositors) and administrative expenses of the receiver are entitled to priority in payment over the claims of any other senior or general creditors of the institution, other than secured creditors. A substantial majority of the liabilities of each of the Banks are deposits or secured liabilities. 7 A depository institution insured by the FDIC can be held liable for any loss incurred by, or reasonably expected to be incurred by, the FDIC in connection with (i) the default of a commonly-controlled depository institution or (ii) any assistance provided by the FDIC to a commonly-controlled depository institution in danger of default. However, such liability to the FDIC would be subordinated in right of payment to deposit liabilities and to most secured, senior, general or subordinated obligations, other than obligations owed to any affiliate of the depository institution (with certain exceptions) and any obligations to shareholders of such depository institution in their capacity as such. As conservator or receiver for an insured depository institution, and in order to promote the orderly administration of the institution's affairs, the FDIC may disaffirm or repudiate any contract or lease to which such institution is a party. The FDIC as conservator or receiver is also permitted to enforce most types of contracts pursuant to their terms notwithstanding any acceleration provisions therein, and may transfer to a new obligor any of the institution's assets and liabilities, without approval or consent of the institution's creditors. Pursuant to FDICIA, the FDIC is also authorized to settle all uninsured and unsecured claims in the insolvency of an insured bank by making a final settlement payment at a percentage rate reflecting an average of the FDIC's receivership recovery experience and constituting full payment and disposition of the FDIC's obligations to such uninsured and unsecured claimants. Should a state regulatory authority elect to take possession of any bank for the purpose of liquidation, administrative claims and claims of depositors are entitled to priority in payment over the claims of creditors. Each of the state authorities may appoint the FDIC as its agent for the purpose of liquidation of a bank, provided that the liabilities of such bank to its depositors are insured by the FDIC. If the FDIC or state regulatory agency were appointed receiver of a bank, the amount paid on claims in respect of the bank's obligations to its creditors would depend upon, among other factors, the amount of assets in the receivership and the relative priority of the claim. DEPOSIT INSURANCE ASSESSMENTS The deposits of each of the Banks are insured by the FDIC, up to applicable limits. Most of the deposits of the Banks are subject to deposit premium assessments of the Bank Insurance Fund ("BIF") of the FDIC. In addition, approximately 40 percent of the Banks' deposits (which are related to the acquisition of thrift deposits) is subject to assessments by the Savings Association Insurance Fund ("SAIF") of the FDIC. Under the FDIC's risk-based insurance system, BIF-assessed deposits are currently subject to premiums of between $.00 and $.27 per $100 of deposits, depending upon the institution's capital position and other supervisory factors. The current premiums reflect a reduction, effective January 1, 1996, from a range of $.04 to $.31 per $100 of deposits. The rate applicable to the BIF-assessed deposits of each of the Banks is currently $.00 per $100 of eligible deposits, with a minimum semiannual assessment of $1,000. The range of premiums applicable to SAIF- assessed deposits is between $.23 and $.31 per $100 of deposits, and the assessment rate for each of the Banks' SAIF-assessed deposits is $.23 per $100 of eligible deposits. Proposed budget reconciliation legislation that contains provisions to recapitalize the SAIF was passed by both houses of Congress and reconciled in conference committee. However, the President vetoed the proposed budget reconciliation legislation on December 6, 1995, for reasons unrelated to the SAIF recapitalization issue. The vetoed legislation included provisions for a one-time special assessment, as determined by the FDIC, on SAIF-assessable deposits of insured depository institutions in an amount adequate to cause the SAIF to achieve its specific designated reserve ratio of 1.25 percent (which would have called for a special assessment in the range of $.80 per $100 of SAIF-assessable deposits). Under the vetoed legislation, the special assessment would have been applied to the amount of SAIF-assessable deposits held as of March 31, 1995. (The actual cut-off date in any final legislation cannot be determined with certainty at this time.) The SAIF-assessable deposits of BB&T-NC and BB&T-SC as of 8 March 31, 1995 totaled approximately $4.1 billion and $1.5 billion, respectively. Under the vetoed legislation, BB&T-NC would have received a 20 percent discount on the assessment, because the bank's SAIF-assessable deposits were less than 50 percent of its total assessable deposits as of June 30, 1995. The pre-tax impact on the Company of a one-time assessment of the type included in the vetoed legislation would not be expected to exceed $41 million. The Company expects to record this expense following the enactment of any such legislation. In the event that the SAIF is recapitalized pursuant to any such legislation, it is expected that future assessment rates applicable to SAIF-assessable deposits would be reduced. The vetoed legislation contains additional provisions that, among other things, would require BIF-member institutions to share pro rata in the obligations of SAIF members for certain government bonds. Although the SAIF-recapitalization provisions discussed in the preceding paragraphs were included in legislation that was vetoed and therefore have not been enacted into law, similar provisions are still being discussed and may be included in other proposed legislation. The final form of the proposed legislation, including whether the legislation will contain some or all of the provisions discussed above, cannot be determined with certainty at this time. Similarly, the date of passage of the final form of any such legislation, or whether this or any such legislation will be passed during this session of Congress, cannot be determined with certainty at this time. Under the federal banking laws, a federally-insured institution is prohibited from paying interest on its capital notes or debentures (if such interest is required to be paid only out of net profits) or distributing any of its capital assets while it remains in default in the payment of any assessment due to the FDIC. SAFETY AND SOUNDNESS STANDARDS Effective August 9, 1995, the federal banking agencies published final agency guidelines that establish safety and soundness standards addressing operational and managerial, including compensation matters for certain insured financial institutions, as required by FDICIA. Banks failing to meet these standards are required to submit compliance plans to their appropriate federal regulators. On this same date, the agencies issued for comment proposed guidelines regarding asset quality and earnings standards for insured institutions. INTERSTATE BANKING AND BRANCHING LEGISLATION The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ("IBBEA") authorizes interstate acquisitions of banks and bank holding companies without geographic limitation. In addition, beginning June 1, 1997, IBBEA authorizes a bank to merge with a bank in another state as long as neither of the states has opted out of interstate branching between the date of enactment of IBBEA and May 31, 1997. IBBEA further provides that states may enact laws permitting interstate bank merger transactions prior to June 1, 1997. A bank may establish and operate a de novo branch in a state in which the bank does not maintain a branch if that state expressly permits de novo branching. Once a bank has established branches in a state through an interstate merger transaction, the bank may establish and acquire additional branches at any location in the state where any bank involved in the interstate merger transaction could have established or acquired branches under applicable federal or state law. A bank that has established a branch in a state through de novo branching may establish and acquire additional branches in such state in the same manner and to the same extent as a bank having a branch in such state as a result of an interstate merger. If a state opts out of interstate branching within the specified time period, no bank in any other state may establish a branch in the opting out state, whether through an acquisition or de novo. The North Carolina law permits de novo branching on a reciprocal basis until June 1, 1997, and unrestricted de novo branching thereafter. Virginia has enacted an early opt-in law permitting interstate bank merger transactions effective July 1, 1995. The Virginia law permits de novo branching on a reciprocal basis. At this time, South Carolina has not enacted an early opt-in law. 9 DESCRIPTION OF THE DEBT SECURITIES The Debt Securities will constitute either Senior Debt Securities or Subordinated Debt Securities. The Senior Debt Securities will be issued under a senior indenture (the "Senior Indenture"), between the Company and , as senior trustee (the "Senior Trustee"). The Subordinated Debt Securities will be issued under a subordinated indenture (the "Subordinated Indenture"), between the Company and , as subordinated trustee (the "Subordinated Trustee"). The Senior Indenture and the Subordinated Indenture collectively are referred to as the "Indentures" and the Senior Trustee and the Subordinated Trustee collectively are referred to as the "Trustee." In the event of the resignation or removal of the Trustee prior to the issuance of a particular series of Debt Securities, the trustee for such series of Debt Securities will be identified in the Prospectus Supplement for such series, and all references to "Trustee" shall be deemed to mean the trustee so identified. No Trustee shall be responsible for the acts, obligations, liabilities or responsibilities of any other trustee. The following summaries of certain provisions of the Indentures do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all the provisions of the Indentures, including the definitions therein of certain terms. Wherever particular sections or defined terms of the Indentures are referred to, it is intended that such sections or definitions shall be incorporated herein by reference. The following sets forth certain terms and provisions of the Debt Securities to which any Prospectus Supplement may relate. The particular terms of the Debt Securities offered by any Prospectus Supplement (the "Offered Securities") and the extent, if any, to which such general provisions may apply to the Debt Securities so offered, will be described in the Prospectus Supplement relating to such Offered Securities. GENERAL The Indentures do not limit the aggregate principal amount of Debt Securities that may be issued thereunder and provide that Debt Securities may be issued from time to time in one or more series. The Debt Securities will be direct, unsecured obligations of the Company and will not be obligations of a bank insured by the FDIC or any other government agency. Neither the Indentures nor the Debt Securities will limit or otherwise restrict the amount of other indebtedness that may be incurred or other securities that may be issued by the Company or any of its subsidiaries. Reference is made to the Prospectus Supplement relating to the particular series of Offered Securities for the following terms of such Offered Securities: (1) the title; (2) any limit on the aggregate principal amount; (3) whether such Offered Securities are Senior Debt Securities or Subordinated Debt Securities; (4) the price or prices (expressed as a percentage of the aggregate principal amount thereof) at which such Offered Securities will be issued; (5) the date or dates on which such Offered Securities will mature; (6) the rate or rates (which may be fixed or floating) per year at which such Offered Securities will bear interest, if any, or the method of determining the same; (7) the date from which such interest, if any, on such Offered Securities will accrue, the dates on which such interest, if any, will be payable, the date on which payment of such interest, if any, will commence and the Regular Record Dates for such Interest Payment Dates, if any; (8) the extent to which any of such Offered Securities will be issuable in the form of one or more temporary or permanent Global Securities, and if so, the identity of the Depositary for such Global Securities, or the manner in which any interest payable on temporary or permanent Global Securities will be paid; (9) the dates, if any, on which, and the price or prices at which, such Offered Securities will, pursuant to any mandatory sinking fund provisions, or may, pursuant to any optional sinking fund or to any purchase fund provisions, be redeemed by the Company, and the other detailed terms and provisions of such sinking and/or purchase funds; (10) the date, if any, after which, and the price or prices at which, such Offered Securities may, pursuant to an optional redemption provision, be redeemed at the option of the Company or of the holder thereof and the other detailed terms and provisions of such optional redemption; (11) the denomination or denominations in which such Offered Securities are authorized to be issued; (12) whether such Offered Securities will be issued as Registered Securities, Bearer Securities, or both and any limitations on the issuance of such Bearer Securities (including exchange for Registered Securities of the same series); (13) information with respect to book-entry procedures; (14) each office or agency where, 10 subject to the terms of the applicable Indenture, such Offered Securities may be presented for registration of transfer or exchange; and (15) any other terms of such Offered Securities (which will not be inconsistent with the provisions of the applicable Indenture). Debt Securities may be issued as Original Issue Discount Securities to be sold at a substantial discount below their principal amount. Special federal income tax and other considerations relating thereto will be described in the applicable Prospectus Supplement. The Debt Securities may be issuable as Registered Securities, Bearer Securities or both. Unless otherwise indicated in the applicable Prospectus Supplement, each series of Debt Securities will be issued as Registered Securities. Debt Securities issued as Bearer Securities shall have interest coupons attached, unless issued as zero coupon securities. Unless otherwise indicated in the applicable Prospectus Supplement, Registered Securities will be issued only in denominations of $1,000 or integral multiples thereof and Bearer Securities will be issued only in denominations of $5,000 or integral multiples thereof. Bearer Securities shall not be offered, sold, resold or delivered in connection with their original issuance in the United States or to any United States person (as defined below) other than to offices located outside the United States of certain United States financial institutions. "United States person" means any citizen or resident of the United States, any corporation, partnership or other entity created or organized in or under the laws of the United States or any estate or trust the income of which is subject to United States federal income taxation regardless of its source, and "United States" means the United States of America (including the States and the District of Columbia) and its possessions. Purchasers of Bearer Securities will be subject to certification procedures and may be affected by certain limitations under United States tax laws. Such procedures and limitations will be described in the Prospectus Supplement relating to the offering of the Bearer Securities. The applicable Prospectus Supplement will include a description of the requirements for certification of ownership by non-United States persons that will apply prior to (1) the issuance of Bearer Securities or (2) the payment of interest that occurs prior to the issuance of Bearer Securities. Unless otherwise indicated in the applicable Prospectus Supplement, Registered Securities of any series (other than a Global Security, except as set forth below) will be exchangeable into an equal aggregate principal amount of Registered Securities of the same series, tenor and terms of different authorized denominations and Bearer Securities may be exchanged for Registered Securities on the terms set forth in the applicable Prospectus Supplement. In no event will Registered Securities be exchangeable for Bearer Securities. Unless otherwise indicated in the applicable Prospectus Supplement, Debt Securities may be presented for exchange, and Registered Securities (other than a Global Security) may be presented for registration of transfer, at the offices of the appropriate Trustee. The Company also may designate in the applicable Prospectus Supplement the corporate trust department of BB&T-NC as an office where the transfer of the Registered Securities may be registered. No service charge will be made for any registration of transfer or exchange of the Debt Securities, but the Company may require payment sufficient to cover any tax or other governmental charge payable in connection therewith. PAYMENT AND PAYING AGENT Unless otherwise indicated in the applicable Prospectus Supplement, payment of principal of and any premium and interest on Registered Securities will be made at the office of the appropriate Trustee, except that at the option of the Company interest may be paid by mailing a check to the address of the person entitled thereto as it appears on the Security Register (Section 3.02 of the Senior Indenture; Section 4.02 of the Subordinated Indenture). The Company also may designate in the applicable Prospectus Supplement the corporate trust department of BB&T-NC, as an office where principal and any premium and interest on Registered Securities may be paid. Paying Agents will be named in the Prospectus Supplement and may be terminated at any time. 11 Unless otherwise indicated in the applicable Prospectus Supplement, payment of principal of and any premium and interest on Bearer Securities will be made, subject to applicable laws and regulations, at such paying agencies outside the United States as the Company may designate from time to time. Any such payment may be made, at the option of the holder, by check or by transfer to an account maintained by the payee with a bank located outside the United States. Unless otherwise indicated in the applicable Prospectus Supplement, payment of interest on Bearer Securities will be made only against surrender of the coupon relating to the relevant Interest Payment Date. No payment with respect to any Bearer Security will be made at any office or agency of the Company in the United States or by check mailed to any address in the United States or by transfer to an account maintained with a bank located in the United States. GLOBAL SECURITIES The Debt Securities of a series may be issued in whole or in part in the form of one or more Global Securities that will be deposited with, or on behalf of, a depositary (the "Depositary") identified in the Prospectus Supplement relating to such series. Global Securities may be issued in either registered or bearer form and in either temporary or permanent form. Unless and until it is exchanged in whole or in part for the individual certificates evidencing the Debt Securities represented thereby, a Global Security may not be transferred except as a whole by the Depositary for such Global Security to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by such Depositary or any such nominee to a successor of such Depositary or a nominee of such successor. The specific terms of the depositary arrangement with respect to a series of Debt Securities will be described in the Prospectus Supplement relating to such series. The Company anticipates that the following provisions will apply to all depositary arrangements although no assurance can be given that such will be the case. Upon the issuance of a Global Security, the Depositary for such Global Security or its nominee will credit, on its book-entry registration and transfer system, the respective principal amounts of the Debt Securities represented by such Global Security to the accounts of institutions that have accounts with such Depositary ("participants"). The accounts to be credited shall be designated by the underwriters or agents of such Debt Securities or by the Company if such Debt Securities are offered and sold directly by the Company. Ownership of beneficial interests in a Global Security will be limited to participants or persons that may hold interests through participants. Ownership of such beneficial interests will be shown on, and the transfer of that ownership will be effected only through, records maintained by the Depositary or its nominee for such Global Security (with respect to interests of participants) and the records of participants (with respect to persons other than participants). The laws of some states require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and such laws may impair the ability to transfer beneficial interests in a Global Security. So long as the Depositary for a Global Security, or its nominee, is the owner of such Global Security, such Depositary or such nominee, as the case may be, will be considered the sole owner or holder of the Debt Securities represented by such Global Security for all purposes under the Indenture governing such Debt Securities. Except as set forth below, owners of beneficial interest in a Global Security registered in their names will not receive or be entitled to receive physical delivery of Debt Securities of such series in definitive form and will not be considered the owners or holders thereof under the Indenture governing such Debt Securities. Payments of principal of and any premium and interest on Debt Securities registered in the name of or held by a Depositary or its nominee will be made to the Depositary or its nominee, as the case may be, as the registered owner or the holder of the Global Security representing such Debt Securities. None of the Company, the Trustee for such Debt Securities or any Paying Agent or the registrar for such Debt Securities will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Security for such Debt Securities or for maintaining, supervising or reviewing any records relating to or payments made on account of beneficial ownership interests in a Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. 12 The Company expects that the Depositary for Debt Securities of a series, upon receipt of any payment of principal, premium or interest in respect of a permanent Global Security, immediately will credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Security as shown on the records of such Depositary or its nominee. The Company also expects that payments by participants to owners of beneficial interests in such Global Security held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such participants. If the Depositary for a series of Debt Securities is at any time unwilling, unable or ineligible to continue as Depositary and a successor Depositary is not appointed by the Company within 90 days, the Company will issue Debt Securities of such series in definitive form in exchange for the Global Security or Securities representing the Debt Securities of such series. In addition, the Company at any time and in its sole discretion, subject to any limitations described in the Prospectus Supplement relating to such Debt Securities, may determine not to have any Debt Securities of a series represented by one or more Global Securities and, in such event, will issue Debt Securities of such series in definitive form in exchange for the Global Security or Securities representing such Debt Securities. Further, if the Company so specifies with respect to the Debt Securities of a series, an owner of a beneficial interest in a Global Security representing Debt Securities of such series may receive, on terms acceptable to the Company and the Depositary for such Global Security, Debt Securities of such series in definitive form in exchange for such beneficial interest, subject to any limitations described in the Prospectus Supplement relating to such Debt Securities. In any such instance, an owner of a beneficial interest in a Global Security will be entitled to physical delivery in definitive form of Debt Securities of the series represented by such Global Security equal in principal amount to such beneficial interest and to have such Debt Securities registered in its name (if the Debt Securities of such series are issuable as Registered Securities). Debt Securities of such series so issued in definitive form will be issued (a) as Registered Securities in denominations, unless otherwise specified by the Company, of $1,000 or integral multiples thereof if the Debt Securities of such series are issuable as Registered Securities, (b) as Bearer Securities in denominations, unless otherwise specified by the Company, of $5,000 or integral multiples thereof if the Debt Securities of such series are issuable as Bearer Securities or (c) as either Registered or Bearer Securities, if the Debt Securities of such series are issuable in either form. CERTAIN COVENANTS OF THE COMPANY Limitation on Certain Dispositions and on Merger and Sale of Assets. Except as described below under "Consolidation, Merger, Sale, Conveyance and Lease," each Indenture prohibits the sale or other disposition by the Company of shares of, or securities convertible into, or options, warrants or rights to subscribe for or purchase shares of, Voting Stock of a Principal Constituent Bank, the merger or consolidation of a Principal Constituent Bank with any other corporation (unless the surviving corporation is the Company or a Controlled Subsidiary), and the lease, sale or transfer of all or substantially all the assets of a Principal Constituent Bank to any corporation or Person, except to the Company or a Controlled Subsidiary or a Person that, upon such lease, sale or transfer, will become the Company or a Controlled Subsidiary. The Indentures, however, do not prohibit any such sale, assignment, transfer or disposition of securities, any such merger or consolidation or any such lease, sale or transfer of properties and assets if required (i) by law or (ii) as a condition imposed by law to the acquisition by the Company or any Controlled Subsidiary, directly or indirectly, of any Person if, thereafter, (a) such person would be a Controlled Subsidiary; (b) the Consolidated Net Banking Assets of the Company would not be decreased; and (c) BB&T-NC would still be a Controlled Subsidiary (Section 3.06 of the Senior Indenture; Section 4.06 of the Subordinated Indenture). "Controlled Subsidiary" means any Subsidiary of which more than 80% of the aggregate voting power of the outstanding shares of the Voting Stock is at the time owned directly or indirectly by the Company or by one or more Controlled Subsidiaries or by the Company and one or more Controlled Subsidiaries, after giving effect to the issuance to any Person other than the Company or any Controlled Subsidiary of Voting Stock of the Subsidiary issuable on exercise of options, warrants or rights to subscribe for such Voting Stock or on conversion of securities convertible into such Voting Stock. "Principal 13 Constituent Bank" means BB&T-NC and, at any time, any other bank subsidiary the total assets of which (as set forth in the most recent statement of condition of such bank subsidiary) equal more than 30% of the total assets of all bank subsidiaries as determined from the most recent statements of condition of the bank subsidiaries. Limitation on Creation of Liens. Each Indenture provides that the Company will not create, assume, incur or suffer to exist any pledge, encumbrance or lien, as security for indebtedness for borrowed money, upon any shares of, or securities convertible into, or options, warrants or rights to subscribe for or purchase shares of, Voting Stock of a Principal Constituent Bank now or hereafter owned by the Company, directly or indirectly, if, treating the pledge, encumbrance or lien as a transfer to the secured party, the Principal Constituent Bank would not be a Controlled Subsidiary (Section 3.07 of the Senior Indenture; Section 4.07 of the Subordinated Indenture). No Other Restrictive Covenants. Neither of the Indentures restricts the Company from incurring, assuming or becoming liable for any type of debt nor from creating, assuming, incurring or permitting to exist any mortgage, pledge, encumbrance, lien or charge on its property (except the Voting Stock of a Principal Constituent Bank). In addition, the Indentures do not require the Company to maintain any financial ratios or specified levels of net worth or liquidity and do not contain any other provisions which would provide protection to holders of the Debt Securities due to a sudden or dramatic decline in the credit quality of such Debt Securities caused by a change in control, recapitalization or other capital restructuring of the Company. MODIFICATION OF THE INDENTURES; WAIVER OF COVENANTS Each Indenture contains provisions permitting the Company and the Trustee to modify the Indenture with the consent of the holders of not less than a majority in aggregate principal amount of the outstanding Debt Securities of each series affected thereby, except that, without the consent of the holder of each Debt Security affected thereby, no such modification may, among other things: (a) change the stated maturity date of the principal of or any premium, or any installment of interest on, any Outstanding Security; (b) reduce the principal amount of, or any premium or interest on, any Outstanding Security; (c) reduce the amount of principal of an Original Issue Discount Security payable upon acceleration of the maturity thereof; (d) change the place of payment of principal of, or any premium or interest on, any Outstanding Security; (e) impair the right to institute suit for the enforcement of any payment on or with respect to any Outstanding Security; (f) reduce the percentage in principal amount of Outstanding Securities of any series the consent of whose holders is required for modification or amendment of the Indenture or for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults and their consequences; or (g) in the case of the Subordinated Indenture, make any change in the subordination provisions that adversely affects the rights of any holder of Subordinated Debt Securities. Prior to any acceleration of the Debt Securities of any series, the holders of a majority in aggregate principal amount of the outstanding Debt Securities of such series may waive any past default or Event of Default under the applicable Indenture, except a default under a covenant that cannot be modified without the consent of each holder of a Debt Security of the series affected thereby (Section 4.07(b) of the Senior Indenture; Section 5.07(b) of the Subordinated Indenture). In addition, the holders of a majority in aggregate principal amount of the outstanding Debt Securities of any series may rescind a declaration of acceleration of the Debt Securities of any series before any judgment has been obtained if (i) the Company pays the Trustee certain amounts due the Trustee plus all matured installments of principal of and any premium and interest on the Debt Securities of such series (other than installments due by acceleration) and interest on the overdue installments to the extent provided in the applicable Indenture and (ii) all other defaults with respect to Debt Securities of that series under the applicable Indenture have been cured or waived (Section 4.01 of the Senior Indenture; Section 5.01 of the Subordinated Indenture). CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE Each Indenture provides that the Company may not consolidate with or merge into another corporation, or convey, transfer or lease its properties and assets substantially as an entirety to any Person unless: (a) the successor is organized under the laws of any domestic jurisdiction and assumes the Company's obligations on 14 the Debt Securities and under the applicable Indenture; (b) after giving effect to the transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, has occurred and is continuing; and (c) certain other conditions are met (Section 9.01 of the Senior Indenture; Section 10.01 of the Subordinated Indenture). In that event, the successor will be substituted for the Company and except in the case of a lease, the Company will be relieved of its obligations under the applicable Indenture and the Debt Securities of each series (Section 9.02 of the Senior Indenture; Section 10.02 of the Subordinated Indenture). THE TRUSTEE The Company will have no material relationship with the Trustee other than as Trustee. Any Principal Constituent Bank may transact business with the Trustee in the ordinary course. The Indenture, under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), is deemed to contain certain limitations on the right of the Trustee, as a creditor of the Company, to obtain payment of claims in certain cases or to realize on certain property received in respect of any such claim, as security or otherwise. The Trustee will be permitted to engage in transactions with the Company, provided that such transactions do not result in a material relationship between the Company and the Trustee. The occurrence of a default under either Indenture with respect to Subordinated Debt Securities or Senior Debt Securities could create a conflicting interest for the Trustee under the Trust Indenture Act. If the default has not been cured or waived within 90 days after the Trustee has or acquires a conflicting interest, the Trustee generally is required by the Trust Indenture Act to eliminate such conflicting interest or resign as Trustee with respect to the Senior Debt Securities or the Subordinated Debt Securities. In the event of the Trustee's resignation, the Company promptly will appoint a successor trustee with respect to the affected securities. SENIOR DEBT SECURITIES The Senior Debt Securities will be direct, unsecured obligations of the Company and will rank equally and ratably with all outstanding unsecured and unsubordinated indebtedness of the Company. EVENTS OF DEFAULT The Senior Indenture defines an Event of Default with respect to any particular series of Senior Debt Securities as being any one of the following events unless it is either inapplicable to a particular series or specifically deleted or modified for the Senior Debt Securities of such series: (a) default for 30 days in the payment of any interest upon any of the Senior Debt Securities of that series; (b) default in the payment of the principal of or any premium on any of the Senior Debt Securities of that series when due; (c) default in the payment of any sinking fund installment or analogous obligation with respect to any of the Senior Debt Securities of that series when due; (d) a default or event of default under any instrument under which there may be issued or borrowed, or by which there may be secured or evidenced, any indebtedness of the Company (other than the Senior Debt Securities of such series or indebtedness to a Subsidiary) or any Subsidiary (other than indebtedness of any Subsidiary owing to the Company or to another Subsidiary) shall happen and not less than $1,000,000 of such indebtedness shall be past due, or become due by acceleration, and such indebtedness or acceleration is not discharged or rescinded within 15 days after notice by the Senior Trustee or holders of at least 25% in aggregate principal amount of the outstanding Senior Debt Securities of that series (calculated in accordance with the formula set forth in such series in the case of a series of Senior Debt Securities issued as Original Issue Discount Securities); (e) final judgment(s) or order(s) for the payment of money in excess of $1,000,000 is entered against the Company or one or more Principal Constituent Banks and within 90 days of entry is not discharged or the execution thereof is not stayed pending appeal, or within 90 days after the expiration of the stay the judgment(s) or order(s) is not discharged; (f) default in the observance or performance of any other covenant or agreement in the Senior Debt Securities of such series or the Senior Indenture for 90 days after notice by the Senior Trustee or holders of at least 25% in aggregate principal amount of the outstanding Senior Debt Securities of the series (calculated in accordance with the formula set forth in such series in the case of a series of Senior Debt Securities issued at an Original Issue Discount); or (g) certain events of bankruptcy, insolvency or reorganization of the Company or a Principal Constituent Bank (Section 4.01). 15 In case an Event of Default with respect to the Senior Debt Securities of any series shall occur and be continuing, the Senior Trustee or the holders of not less than 25% in aggregate principal amount (in the case of a series of Senior Debt Securities issued at an Original Issue Discount, calculated in accordance with the formula set forth in such series) of all the outstanding Senior Debt Securities of such series may declare the principal (or in the case of a series of Senior Debt Securities issued at an Original Issue Discount, the amount calculated in accordance with the formula set forth in such series of Senior Debt Securities) of all the securities of such series to be immediately due and payable (Section 4.01). The Senior Indenture provides that the Senior Trustee, within 90 days after the occurrence of a default with respect to Senior Debt Securities of any series under the Senior Indenture, shall mail to the holders of the Senior Debt Securities of such series notice of all uncured defaults known to it that have not been waived (the term defaults to include events specified above which, after notice or lapse of time or both, would become an Event of Default); provided that, except in the case of default in the payment of principal of or any premium or interest on any of the Senior Debt Securities of that series or in the making of any sinking fund payment or analogous obligation with respect to the Senior Debt Securities of such series, the Senior Trustee may withhold such notice if it in good faith determines that withholding such notice is in the interest of the holders of the securities of that series (Section 4.08). Subject to the provisions of the Senior Indenture relating to the duties of the Senior Trustee in case an Event of Default shall occur and be continuing, the Senior Trustee is under no obligation to exercise any of the rights or powers vested in it under the Senior Indenture at the request, order or direction of any of the holders of the Senior Debt Securities, unless such holders offer to the Senior Trustee reasonable security or indemnity (Section 5.02(d)). Subject to certain limitations contained in the Senior Indenture (including among other limitations that the Senior Trustee will not be exposed to personal liability), the holders of a majority in aggregate principal amount of the outstanding Senior Debt Securities of all series affected (voting as one class) have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Senior Trustee, or exercising any trust or power conferred on the Senior Trustee (Section 4.07). No holder of any Senior Debt Security of any series will have any right to institute any proceeding with respect to the Senior Indenture or for any remedy thereunder, unless such holder previously shall have given to the Senior Trustee written notice of a continuing Event of Default with respect to Senior Debt Securities of that series and unless also the holders of not less than 25% in aggregate principal amount (in the case of a series of Senior Debt Securities issued at an Original Issue Discount, calculated in accordance with the formula set forth in such series) of the outstanding Senior Debt Securities of that series shall have made written request, and offered reasonable indemnity, to the Senior Trustee to institute such proceeding as trustee, and the Senior Trustee shall not have received from the holders of a majority in principal amount of the outstanding Senior Debt Securities of that series a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days (Section 4.04). However, the holder of any Senior Debt Security will have an absolute right to receive payment of the principal of and any premium and interest, if any, on such Senior Debt Security on or after the due dates expressed in such Senior Debt Security and to institute suit for the enforcement of any such payment (Section 4.04). The Company is obligated to furnish annually to the Senior Trustee a statement as to the performance by the Company of its obligations under the Senior Indenture and as to any default in such obligations (Section 3.04). DEFEASANCE The Company may terminate certain of its obligations under the Senior Indenture with respect to the Senior Debt Securities of any series on the terms and subject to the conditions contained in the Senior Indenture, by (a) depositing irrevocably with the Senior Trustee as trust funds in trust (i) U.S. dollars or U.S. Government Obligations (as defined below) in an amount which through the payment of interest, principal and premium, if any, in respect thereof in accordance with their terms will provide (without any reinvestment of such interest, principal or premium), not later than one business day before the due date of any payment, money or (ii) a combination of money and U.S. Government Obligations sufficient to pay the principal of and any premium and 16 interest on the Senior Debt Securities of such series as such are due and (b) satisfying certain other conditions precedent specified in the Senior Indenture. Such deposit and termination are conditioned among other things upon the Company's delivery of an opinion of independent counsel that the holders of the Senior Debt Securities of such series will have no federal income tax consequences as a result of such deposit and termination. Such termination will not relieve the Company of its obligation to pay when due the principal of and premium and interest on the Senior Debt Securities of such series if the Senior Debt Securities of such series are not paid from the money or U.S. Government Obligations held by the Senior Trustee for payment thereof (Section 13.05). "U.S. Government Obligations" means securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit are pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, under clause (i) or (ii) are not callable or redeemable at the option of the issuer thereof. SUBORDINATED DEBT SECURITIES The Subordinated Debt Securities will be direct, unsecured obligations of the Company and will rank equally and ratably with all outstanding subordinated indebtedness of the Company. The Subordinated Debt Securities will have a minimum weighted maturity of at least five years. SUBORDINATION The obligation of the Company to make any payment of principal, premium or interest on the Subordinated Debt Securities, to the extent set forth in the Subordinated Indenture, will be subordinate and junior in right of payment to the prior payment in full of all existing and future Senior Indebtedness (as defined). Upon any distribution of assets of the Company upon any dissolution, winding up, liquidation or reorganization of the Company, the holders of Senior Indebtedness are entitled to receive payment in full of principal and any premium and interest before the holders of the Subordinated Debt Securities are entitled to receive any payment on account of the principal of and any premium or interest on the Subordinated Debt Securities, except holders of the Subordinated Debt Securities, in a reorganization or readjustment of the Company, may receive securities of the Company or any other corporation subordinated to both Senior Indebtedness and any securities received in the reorganization or readjustment by holders of Senior Indebtedness (except to the extent that any securities so received are by their terms expressly not superior in right of payment to the Subordinated Debt Securities) (Section 3.03). The dissolution, winding up, liquidation or reorganization of the Company following a conveyance, transfer or lease of its properties and assets substantially as an entirety in compliance with the terms described above under "Consolidation, Merger, Sale, Conveyance and Lease" will not be deemed to be a dissolution, winding up, liquidation or reorganization for this purpose (Section 3.03(d)). In addition, the Company may not pay principal of, or any premium or interest on, the Subordinated Debt Securities and may not acquire any Subordinated Debt Securities for cash or property other than capital stock of the Company if: (1) a default on Senior Indebtedness occurs and is continuing that permits holders of such Senior Indebtedness to accelerate its maturity; and (2) such default is the subject of judicial proceedings or the Company receives written notice of such default from a representative of all holders of such Senior Indebtedness. If the Company receives any such notice, a similar notice received within 360 days thereafter relating to the same default on the same issue of Senior Indebtedness shall not be effective for such purpose. The Company may resume payments on the Subordinated Debt Securities and may acquire them when: (i) such default is cured or waived or shall have ceased to exist, or the Senior Indebtedness to which such default relates shall have been paid in full in cash or cash equivalent; or (ii) if such default is not the subject of judicial proceedings, 120 days pass after such written notice is received by the Company (Section 3.02(b)). By reason of this subordination, in the event of the Company's insolvency, holders of Senior Indebtedness may receive more, ratably, and holders of the Subordinated Debt Securities may receive less, ratably, than other creditors of the Company. However, such subordination will not prevent the occurrence of any Event of Default (Section 3.12). 17 The Subordinated Indenture does not restrict the incurrence of additional Senior Indebtedness. "Senior Indebtedness" means the principal of, and premium, if any, on (a) all obligations of the Company for money borrowed, whether outstanding on the date of execution of the Subordinated Indenture or thereafter created, except (i) such indebtedness as is by its terms expressly stated to be junior in right of payment to the Subordinated Debt Securities and (ii) such indebtedness as is by its terms expressly stated to rank pari passu in right of payment with the Subordinated Debt Securities, and (b) any deferrals, renewals or extensions of any such Senior Indebtedness. LIMITED RIGHTS OF ACCELERATION Unless otherwise specified in the Prospectus Supplement relating to any series of Subordinated Debt Securities, payment of principal of the Subordinated Debt Securities may be accelerated only in the case of an "Acceleration Event" which is defined in the Indenture as any of the bankruptcy, insolvency or reorganization events with respect to the Company that constitute an Event of Default (as defined below). There is no right of acceleration in the case of a default in the payment of principal of or any premium or interest on the Subordinated Debt Securities or the performance of any other covenant of the Company in the Subordinated Indenture. EVENTS OF DEFAULT The Subordinated Indenture defines an Event of Default with respect to any particular series of Subordinated Debt Securities as being any one of the following events unless it is either inapplicable to a particular series or specifically deleted or modified for the Subordinated Debt Securities of such series: (a) default for 30 days in the payment of any interest on any of the Subordinated Debt Securities of that series; (b) default in the payment of the principal of or any premium on any of the Subordinated Debt Securities of that series when due; (c) default in the payment of any sinking fund installment or analogous obligation with respect to that series when due; (d) a default or event of default under any instrument under which there may be issued or borrowed, or by which there may be secured or evidenced, any indebtedness of the Company (other than the Subordinated Debt Securities of such series or indebtedness to a Subsidiary) or of any Subsidiary (other than indebtedness of any Subsidiary owing to the Company or to another Subsidiary) shall happen and not less than $1,000,000 of such indebtedness shall be past due, or become due by acceleration, and such indebtedness or acceleration is not discharged or rescinded within 15 days after notice by the Subordinated Trustee or holders of at least 25% in aggregate principal amount (in the case of a series of Subordinated Debt Securities issued at an Original Issue Discount, calculated in accordance with the formula set forth in such series) of the outstanding Subordinated Debt Securities of that series; (e) final judgment(s) or order(s) for the payment of money in excess of $1,000,000 is entered against the Company or one or more Principal Constituent Banks and within 90 days of entry is not discharged, or the execution thereof is not stayed pending appeal, or within 90 days after the expiration of the stay, the judgment(s) or order(s) is not discharged; (f) default in the observance or performance of any other covenant or agreement in the Subordinated Debt Securities of such series or the Subordinated Indenture for 90 days after notice by the Subordinated Trustee or holders of at least 25% in aggregate principal amount (in the case of a series of Subordinated Debt Securities issued at an Original Issue Discount, calculated in accordance with the formula set forth in such series) of the outstanding Subordinated Debt Securities of the series; or (g) certain events of bankruptcy, insolvency or reorganization of the Company or a Principal Constituent Bank (Section 5.01). Rights of acceleration in case an Event of Default occurs are limited. See "Limited Rights of Acceleration." In case an Acceleration Event shall have occurred and be continuing, the Subordinated Trustee or the holders of not less than 25% in aggregate principal amount (in the case of a series of Subordinated Debt Securities issued at an Original Issue Discount, calculated in accordance with the formula set forth in such series) of the outstanding Subordinated Debt Securities of such series may declare the principal (or, in the case of a series of Subordinated Debt Securities issued at an Original Issue Discount, the amount calculated in accordance with the formulas set forth in such series of Subordinated Debt Securities) of all the securities of such series to be immediately due and payable (Section 5.01). The Subordinated Indenture provides that the Subordinated 18 Trustee, within 90 days after the occurrence of a default with respect to Subordinated Debt Securities of any series under the Subordinated Indenture, shall mail to the holders of the Subordinated Debt Securities of such series notice of all uncured defaults known to it that have not been waived (the term defaults to include events specified above which, after notice or lapse of time or both, would become an Event of Default); provided that, except in the case of default in the payment of principal of or any premium or interest on any of the Subordinated Debt Securities of that series or in the making of any sinking fund payment or analogous obligation with respect to the Subordinated Debt Securities of such series, the Subordinated Trustee may withhold such notice if it in good faith determines that withholding such notice is in the interest of the holders of the Subordinated Debt Securities of that series (Section 5.08). Subject to the provisions of the Subordinated Indenture relating to the duties of the Subordinated Trustee in case an Event of Default shall occur and be continuing, the Subordinated Trustee is under no obligation to exercise any of the rights or powers vested in it under the Subordinated Indenture at the request, order or direction of any of the holders of the Subordinated Debt Securities, unless such holder offers to the Subordinated Trustee reasonable security or indemnity (Section 6.02(d)). Subject to certain limitations contained in the Subordinated Indenture (including among other limitations that the Subordinated Trustee will not be exposed to personal liability), the holders of a majority in aggregate principal amount of the outstanding Subordinated Debt Securities of all series affected (voting as one class) 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 5.07). No holder of any Subordinated Debt Security of any series will have any right to institute any proceeding with respect to the Subordinated Indenture or for any remedy thereunder unless such holder previously shall have given to the Subordinated Trustee written notice of a continuing Event of Default with respect to Subordinated Debt Securities of that series and unless also the holders of not less than 25% in aggregate principal amount (in the case of a series of Subordinated Debt Securities issued at an Original Issue Discount, calculated in accordance with the formula set forth in such series) of the outstanding Subordinated Debt Securities of that series shall have made written request, and offered reasonable indemnity, to the Subordinated Trustee to institute such proceeding as trustee, and the Subordinated Trustee shall not have received from the holders of a majority in principal amount of the outstanding Subordinated Debt Securities of that series a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days (Section 5.04). However, the holder of any Subordinated Debt Security will have an absolute right to receive payment of the principal of and any premium and interest on such Subordinated Debt Security on or after the due dates expressed in such Subordinated Debt Security and to institute suit for the enforcement of any such payment (Section 5.04). The Company is obligated to furnish to the Subordinated Trustee annually a statement as to the performance by the Company of its obligations under the Subordinated Indenture and as to any default in such obligations (Section 4.04). VALIDITY OF OFFERED SECURITIES The validity of any Offered Securities will be passed upon for the Company by Womble Carlyle Sandridge & Rice, PLLC, Charlotte, North Carolina, and for any underwriters or agents by Gibson, Dunn & Crutcher LLP, New York, New York. Gibson, Dunn & Crutcher LLP will rely upon the opinion of Womble Carlyle Sandridge & Rice, PLLC as to matters of North Carolina law, and Womble Carlyle Sandridge & Rice, PLLC will rely upon the opinion of Gibson, Dunn & Crutcher LLP as to matters of New York law. EXPERTS The consolidated financial statements and schedule included in the Company's 1995 Annual Report on Form 10-K incorporated by reference in this Prospectus have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are incorporated by reference herein upon the authority of said firm as experts in giving said reports. 19 PLAN OF DISTRIBUTION The Company may offer and sell Debt Securities to or through underwriters to be designated from time to time, and also may offer and sell Debt Securities directly to other purchasers or through agents. The distribution of the Debt Securities may be effected from time to time in one or more transactions at a fixed price or prices, which may be changed, or at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. The Debt Securities will be new issues of securities with no established trading market. It has not presently been established whether the underwriters, if any, of the Debt Securities will make a market in the Debt Securities. If a market in the Debt Securities is made by any such underwriters, such market making may be discontinued at any time without notice. No assurance can be given as to the liquidity of the trading market for the Debt Securities. In connection with the sale of Debt Securities, underwriters may receive compensation from the Company or from purchasers of Debt Securities for whom they may act as agents in the form of discounts, concessions or commissions. Underwriters may sell Debt Securities to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agents. Underwriters, dealers and agents that participate in the distribution of Debt Securities may be deemed to be underwriters, and any discounts or commissions received by them from the Company and any profit on the resale of Debt Securities by them may be deemed to be underwriting discounts and commissions under the Securities Act. Any such underwriter or agent will be identified, and any such compensation received from the Company will be described, in the applicable Prospectus Supplement(s) relating to such Debt Securities. Unless otherwise indicated in the applicable Prospectus Supplement(s), the obligations of any such underwriters to purchase the Debt Securities will be subject to certain conditions precedent, and each of the underwriters with respect to a sale of Debt Securities will be obligated to purchase all of its Debt Securities if any are purchased. Unless otherwise indicated in the applicable Prospectus Supplement(s), any such agent involved in the offer and sale of the Debt Securities in respect of which this Prospectus is being delivered will be acting on a best efforts basis for the period of its appointment. Under agreements which may be entered into by the Company, underwriters, agents and their controlling persons who participate in the distribution of Debt Securities may be entitled to indemnification by the Company against certain liabilities, including liabilities under the Securities Act. If so indicated in the applicable Prospectus Supplement(s) relating to any Offered Securities, the Company will authorize dealers or other persons acting as the Company's agents to solicit offers by certain institutions to purchase any Offered Securities from the Company pursuant to contracts providing for payment and delivery on a future date. Institutions with which such contracts may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions and others, but in all cases such institutions must be approved by the Company. The obligations of any purchaser under any such contract will be subject to the condition that the purchase of any Offered Securities shall not at the time of delivery be prohibited under the laws of the jurisdiction to which such purchaser is subject. The underwriters and such other agents will not have any responsibility in respect of the validity or performance of such contracts. Underwriters or agents and their associates may be customers of (including borrowers from), engage in transactions with, and/or perform services for, the Company and its subsidiaries, the Senior Trustee and the Subordinated Trustee, in the ordinary course of business. 20 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. --------------- TABLE OF CONTENTS PROSPECTUS SUPPLEMENT
PAGE ---- Incorporation of Certain Documents by Reference............................ S-2 The Company................................................................ S-3 Use of Proceeds............................................................ S-3 Consolidated Ratios of Earnings to Fixed Charges........................... S-4 Selected Consolidated Financial Data....................................... S-5 Recent Developments........................................................ S-6 Description of Subordinated Notes.......................................... S-7 Underwriting............................................................... S-9 Validity of Subordinated Notes............................................. S-9 Experts.................................................................... S-9 PROSPECTUS Available Information...................................................... 2 Incorporation of Certain Documents by Reference............................ 2 The Company................................................................ 3 Use of Proceeds............................................................ 4 Consolidated Ratios of Earnings to Fixed Charges........................... 4 Certain Regulatory Considerations.......................................... 4 Description of the Debt Securities......................................... 10 Senior Debt Securities..................................................... 15 Subordinated Debt Securities............................................... 17 Validity of Offered Securities............................................. 19 Experts.................................................................... 19 Plan of Distribution....................................................... 20
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- $250,000,000 SOUTHERN NATIONAL CORPORATION % SUBORDINATED NOTES DUE 2003 --------------- PROSPECTUS SUPPLEMENT --------------- MERRILL LYNCH & CO. ALEX. BROWN & SONS INCORPORATED DEAN WITTER REYNOLDS INC. MAY , 1996 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----