-----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, DU7Ur4RrYSWggeT4+Qe6GxB9vWeGVntbMIArylo7teJ9a56PhcHK6Q+Z950CZSQq dQxDhq9EelpMFuDfF99XGA== 0000950168-02-003490.txt : 20021118 0000950168-02-003490.hdr.sgml : 20021118 20021118172932 ACCESSION NUMBER: 0000950168-02-003490 CONFORMED SUBMISSION TYPE: S-11/A PUBLIC DOCUMENT COUNT: 20 FILED AS OF DATE: 20021118 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WACHOVIA PREFERRED FUNDING CORP CENTRAL INDEX KEY: 0001188382 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 561986430 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-11/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-99847 FILM NUMBER: 02831961 BUSINESS ADDRESS: STREET 1: 301 SOUTH COLLEGE ST CITY: CHARLOTTE STATE: NC ZIP: 28288 BUSINESS PHONE: 7043746558 MAIL ADDRESS: STREET 1: 301 S COLLEGE ST CITY: CHARLOTTE STATE: NC ZIP: 28288 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WACHOVIA CORP NEW CENTRAL INDEX KEY: 0000036995 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 560898180 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-11/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-99847-01 FILM NUMBER: 02831962 BUSINESS ADDRESS: STREET 1: ONE FIRST UNION CTR CITY: CHARLOTTE STATE: NC ZIP: 28288-0013 BUSINESS PHONE: 7043746565 MAIL ADDRESS: STREET 1: ONE FIRST UNION CENTER CITY: CHARLOTTE STATE: NC ZIP: 28288-0013 FORMER COMPANY: FORMER CONFORMED NAME: CAMERON FINANCIAL CORP DATE OF NAME CHANGE: 19750522 FORMER COMPANY: FORMER CONFORMED NAME: FIRST UNION NATIONAL BANCORP INC DATE OF NAME CHANGE: 19721115 FORMER COMPANY: FORMER CONFORMED NAME: FIRST UNION CORP DATE OF NAME CHANGE: 19920703 S-11/A 1 ds11a.htm WACHOVIA PREFERRED FUNDING CORP. Wachovia Preferred Funding Corp.
Table of Contents
As filed with the Securities and Exchange Commission on November 18, 2002
Registration Nos. 333-99847, 333-99847-01

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 2
TO
 
AMENDMENT NO. 2
TO
FORM S-3
 
FORM S-11
REGISTRATION STATEMENT
 
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
UNDER
THE SECURITIES ACT OF 1933
OF
 
OF
WACHOVIA CORPORATION
 
WACHOVIA PREFERRED FUNDING CORP.
(Formerly named First Union Corporation)
 
(Exact name of registrant as specified in its charter)
(Exact name of registrant as specified in its charter)

 
North Carolina
 
Delaware
(State or other jurisdiction of incorporation or organization)
56-0898180
(I.R.S. Employer Identification No.)

 
(State or other jurisdiction of incorporation or organization)
56-1986430
(I.R.S. Employer Identification No.)

One Wachovia Center
Charlotte, North Carolina 28288
(704) 374-6565
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
 
1620 East Roseville Parkway
Roseville, California 95661
(877) 867-7378
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
 

 
Ross E. Jeffries, Jr., Esq.
Senior Vice President and Assistant General Counsel
WACHOVIA CORPORATION
One Wachovia Center
Charlotte, North Carolina 28288-0630
(704) 374-6611
(Name, address, including zip code, and telephone number, including area code, of agent for service)
 

 
Copies to:
Mark J. Menting, Esq.
 
Kenneth L. Bachman, Esq.
Robert W. Downes, Esq.
 
Cleary, Gottlieb, Steen & Hamilton
Sullivan & Cromwell
 
2000 Pennsylvania Avenue
125 Broad Street
 
Washington, D.C. 20006
New York, New York 10004
 
(202) 974-1500
(212) 558-4000
   
 

Approximate date of commencement of proposed sale to the public:    As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    x
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    ¨
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.    ¨

CALCULATION OF REGISTRATION FEE









                      









Title of Securities Being Registered
 
Amount being Registered(1)(4)
    
Proposed Maximum Offering Price per Security(1)
  
Proposed Maximum Aggregate Offering Price
  
Amount of Registration Fee









    % Non-cumulative Exchangeable Perpetual Series A Preferred Securities, liquidation preference $25.00 per security, of Wachovia Preferred Funding Corp.
 
15,000,000 securities
    
$  25.00
  
$375,000,000
  
$34,500(2)(3)







   
Depositary Shares of Wachovia Corporation, each representing 1/6th of one share of Series G, Class A Preferred Stock of Wachovia Corporation
 
15,000,000 shares
    
$  25.00
  
$375,000,000
  







   
Series G, Class A Preferred Stock, liquidation preference $150.00 per share, of Wachovia Corporation
 
2,500,000 shares
    
$150.00
  
$375,000,000
  









                      









(1)
 
Estimated solely for the purpose of calculating the registration fee.
(2)
 
Pursuant to Rule 457(i), no separate fee is required to be paid for (i) the Depositary Shares of Wachovia Corporation into which the Series A Preferred Securities of Wachovia Preferred Funding Corp. are exchangeable and (ii) the Series G, Class A Preferred Stock represented by the Depositary Shares.
(3)
 
The registration fee has previously been paid.
(4)
 
This Registration Statement also relates to offers and sales of the Series A Preferred Securities of Wachovia Preferred Funding Corp. and the Depositary Shares of Wachovia Corporation into which the Series A Preferred Securities of Wachovia Preferred Funding Corp. are exchangeable in connection with market-making transactions by and through affiliates of the Registrants.
The Registrants hereby amend the Registration Statements on such date or dates as may be necessary to delay their effective dates until the Registrants shall file a further amendment which specifically states that the Registration Statements shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statements shall become effective on such date or dates as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.


Table of Contents

 
The information in this prospectus is not complete and may be amended. The selling shareholder may not sell these securities until the registration statement filed with the SEC is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION. PRELIMINARY PROSPECTUS
DATED NOVEMBER 18, 2002
 
15,000,000 Series A Preferred Securities
 
Wachovia Preferred Funding Corp.
LOGO
        % Non-cumulative Exchangeable
Perpetual Series A Preferred Securities
(Liquidation Preference $25.00 Per Security)
Automatically Exchangeable in Specified Circumstances into
Depositary Shares representing Preferred Stock of Wachovia Corporation
 
Terms of the Series A preferred securities include:
 
Dividends are:
 
payable quarterly only if declared, and
 
non-cumulative, which means that you will not receive them later if they are not declared in the applicable period.
 
Conditionally exchangeable, without your approval or any action on your part, for depositary shares with substantially equivalent terms as to dividends, liquidation preference and redemption of Wachovia Corporation, our indirect parent company, except that the depositary shares will:
 
not have any voting rights,
 
not have the right to elect independent directors,
 
not have the benefit of similar favorable covenants as the Series A preferred securities, and
 
not be listed on any securities exchange.
 
This exchange will be made only at the direction of the Office of the Comptroller of the Currency under the following specified circumstances:
 
Wachovia Bank, National Association, our indirect parent company, becomes undercapitalized under the OCC’s “prompt corrective action” regulations, or
 
the Bank is placed into conservatorship or receivership, or
 
the OCC, in its sole discretion, anticipates that the Bank may become undercapitalized in the near term, or takes supervisory action that limits the payment of dividends by us and in connection therewith directs an exchange.
 
Redeemable at our option on or after             , 2022, with the prior consent of the OCC.
 
Senior to our common stock and our Series C preferred securities but on a parity with our Series B and D preferred securities.
 
Entitled to 1/10th of one vote per security on all matters submitted to holders of our common stock.
We are qualified as a real estate investment trust, or REIT, for Federal income tax purposes.
 
Prior to this offering, there has been no public market for the Series A preferred securities. We have applied for the listing of the Series A preferred securities on the New York Stock Exchange under the symbol “WNA”. Trading in the Series A preferred securities is expected to commence not later than 30 days after the delivery of the Series A preferred securities. Consequently, there will be no trading market for the Series A preferred securities, at least in the short term.
 
See “Risk Factors” beginning on page 14 for a description of risk factors you should consider before you invest in these securities.
 
           The Series A preferred securities solely represent an interest in us and are not the obligation of, or guaranteed by, any other entity. These securities are not deposits or accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency.
 
Neither the Securities and Exchange Commission, the OCC, nor any other federal agency or state securities regulator has approved or disapproved these securities or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.
 
      
Per Series A Preferred Security

  
Total

Public offering price
    
$
25.00
  
$
375,000,000
Underwriting discounts and commissions1
    
$
0.00
  
$
0.00
Proceeds
    
$
25.00
  
$
375,000,000

1
Wachovia Preferred Funding Holding Corp. will pay all expenses and underwriting discounts and commissions. Underwriting discounts and commissions to be paid by Wachovia Preferred Funding Holding Corp. are $         per Series A preferred security, or $         in the aggregate. Prior to this offering, Wachovia Preferred Funding Holding Corp. will acquire 30,000,000 Series A preferred securities from us in exchange for a loan participation agreement entered into on             , 2002 between the Bank and Wachovia Preferred Funding Holding Corp. Wachovia Preferred Funding Holding Corp. will subsequently sell 15,000,000 Series A preferred securities to the public in this offering. Wachovia Preferred Funding Holding Corp. will not use the proceeds to purchase additional assets for contribution to us.
 
Although a statutory underwriter in connection with this offering, Wachovia Preferred Funding Holding Corp. will not sell the securities directly to the public. We, Wachovia and Wachovia Preferred Funding Holding Corp. will enter into an underwriting agreement with the underwriters for this offering. The underwriters will be obligated to purchase all of the Series A preferred securities offered in this offering if they purchase any Series A preferred securities.
 
We expect that the Series A preferred securities will be ready for delivery in book-entry form only through The Depository Trust Company on or about             , 2002.
 
Wachovia Securities
 
Prospectus dated             , 2002


Table of Contents
 
The following table of contents has been designed to help you find important information contained in this prospectus. We encourage you to read the entire prospectus.
 
“Wachovia Funding”, “we”, “our” and “us” refer to Wachovia Preferred Funding Corp. “Wachovia Preferred Holding” refers to Wachovia Preferred Funding Holding Corp., the “Bank” refers to Wachovia Bank, National Association, and “Wachovia” refers to Wachovia Corporation.
 
TABLE OF CONTENTS
 
    
Page

  
ii
  
1
  
14
  
25
  
29
  
30
  
31
  
32
  
52
  
53
  
59
  
74
  
76
  
77
  
77
  
86
  
91
  
94
  
97
  
98
  
100
  
110
  
112
  
114
  
114
  
114
  
115
  
117
  
F-1
  
F-22
 
FORWARD-LOOKING STATEMENTS
 
This prospectus contains or incorporates statements that are forward-looking statements. These statements can be identified by the use of forward-looking language such as “will likely result”, “may”, “are expected to”, “is anticipated”, “estimate”, “projected”, “intends to”, or other similar words. Wachovia Funding’s and Wachovia’s actual results, performance or achievements could be significantly different from the results expressed in or implied by these forward-looking statements. These statements are subject to certain risks and uncertainties, including but not limited to certain risks described in this prospectus or the documents incorporated by reference. When considering these forward-looking statements, you should keep in mind these risks, uncertainties and other cautionary statements made in this prospectus. You should not place undue reliance on any forward-looking statement, which speaks only as of the date made. You should refer to Wachovia Funding’s and Wachovia’s periodic and current reports filed with the SEC for specific risks which could cause actual results to be significantly different from those expressed or implied by these forward-looking statements.
 

ii


Table of Contents
PROSPECTUS SUMMARY
 
Before you decide to invest in the Series A preferred securities, conditionally exchangeable into the Wachovia depositary shares representing interests in Wachovia Series G, Class A preferred stock, you should carefully read the following summary, together with the more detailed information and financial statements and related notes contained elsewhere in this prospectus, especially the risks of investing in the Series A preferred securities discussed under “Risk Factors”.
 
You should refer to the Glossary on page 117 for the definitions of certain capitalized and industry and proprietary terms used in this prospectus.
 
General
 
Wachovia Preferred Funding Corp.
 
We are a Delaware corporation, formed in July 2002 and the survivor of a merger with First Union Real Estate Asset Company of Connecticut, which was formed in 1996. Our principal business objective is to hold and manage mortgage assets and other authorized investments that will generate net income for distribution to our shareholders. We are qualified as a real estate investment trust, or REIT, for Federal income tax purposes. As a REIT, we generally will not be required to pay Federal income tax on distributed income if we distribute at least 90% of our earnings to our shareholders and continue to meet a number of other requirements as discussed below.
 
Upon our merger, we were a direct subsidiary of the Bank and an indirect subsidiary of Wachovia. By the completion of this offering, we will be a direct subsidiary of Wachovia Preferred Holding as a result of the Bank transferring certain assets, including 99.85% of our common stock and 87.62% of our Series D preferred securities, to Wachovia Preferred Holding in exchange for additional shares of Wachovia Preferred Holding common stock.
 
Our principal executive offices are located at 1620 East Roseville Parkway, Roseville, California 95661, and our telephone number is (877) 867-7378.
 
Assets
 
All of the financial information in this section is presented on a pro forma basis to reflect the following:
 
 
Ÿ
$866 million of participation interests in home equity loans received by us as collateral for an intercompany loan to the Bank in October 2002; and
 
 
Ÿ
the issuance of three new series of preferred securities (Series A, B and C ) to Wachovia Preferred Holding in exchange for participations in commercial and commercial real estate loans prior to this offering. The commercial and commercial real estate loans were originated by the Bank and contributed to Wachovia Preferred Holding. We will issue the preferred securities to Wachovia Preferred Holding in exchange for participations in the loans prior to this offering.
 
At September 30, 2002, we had total assets of $12.5 billion, total liabilities of $607 million, and stockholders’ equity of $11.9 billion. As of such date,
 
 
Ÿ
$9.8 billion, or 78.7% of our assets, were comprised of participation interests in commercial real estate loans;
 
 
Ÿ
$866 million, or 6.9% of our assets, were comprised of an intercompany loan to the Bank secured by participation interests in home equity loans. The underlying home equity loans were originated by the Bank;

1


Table of Contents
 
 
Ÿ
$661 million, or 5.3% of our assets, were comprised of participation interests in commercial loans;
 
 
Ÿ
$605 million, or 4.8% of our assets, were comprised of interest rate swaps;
 
 
Ÿ
$303 million, or 2.4% of our assets, were comprised of cash and cash equivalents;
 
 
Ÿ
$205 million, or 1.6% of our assets, were comprised of participation interests in home equity loans;
 
 
Ÿ
$89 million, or 0.7% of our assets, were comprised of residential mortgage loans; and
 
 
Ÿ
$31 million, or 0.3% of our assets, were comprised of net other assets;
 
each before the allowance for loan losses.
 
In the past, we have purchased or accepted as capital contributions, loans and participation interests in loans both secured and not secured by real property along with other assets. We anticipate that we will acquire, or receive as capital contributions, interests in additional real estate secured loans from the Bank or its affiliates. Although we are permitted to do so, we have no present plans or intentions to purchase loans or loan participation interests from unaffiliated third parties.
 
Dividends
 
We currently expect to pay an aggregate amount of dividends with respect to the outstanding shares of our capital stock equal to substantially all of our REIT taxable income, which excludes capital gains. In order to remain qualified as a REIT, we must distribute annually at least 90% of our REIT taxable income to stockholders. Dividends will be authorized and declared at the discretion of our board of directors after considering our distributable funds, financial condition and capital needs, the impact of current and pending legislation and regulations, economic conditions, tax considerations, our continued qualification as a REIT, and other factors. Although there can be no assurances, we currently expect that both our cash available for distribution and our REIT taxable income will be in excess of amounts needed to pay dividends on the Series A preferred securities, at the dividend rate of     % per annum of the $25.00 liquidation preference per security, in the foreseeable future because:
 
 
Ÿ
substantially all of our mortgage assets and other authorized investments are interest-earning;
 
 
Ÿ
we do not anticipate incurring any indebtedness, although we may incur indebtedness that in an aggregate amount does not exceed 20% of our shareholders’ equity;
 
 
Ÿ
we expect that our interest-earning assets will continue to exceed the liquidation preference of all of our series of preferred stock;
 
 
Ÿ
the amount of loan servicing costs and management fees paid to the Bank are expected to be less than 4% of our income per year; and
 
 
Ÿ
we anticipate that, in addition to cash flows from operations, additional cash will be available from principal payments on our loan portfolio.
 
Management
 
Our board of directors is currently composed of one member who is also an employee of Wachovia and therefore not considered independent. Prior to this offering, we will elect three additional directors, two of whom will satisfy the definition of being “independent” as set forth in the corporate governance standards of the New York Stock Exchange, as amended from time to time. We refer to directors satisfying this NYSE independence definition as “Independent Directors”. We currently have two executive officers and approximately 15 additional officers. Our executive officers are also executive officers of Wachovia. All of our day-to-day activities and the servicing of the loans in our portfolio are administered, pursuant to participation and servicing agreements, by the Bank, which is our indirect parent company.

2


Table of Contents
 
Risk Factors
 
A purchase of our Series A preferred securities is subject to a number of risks described in more detail under “Risk Factors” beginning on page 14. These risks include, but are not limited to:
 
 
Ÿ
Dividends on the Series A preferred securities are not cumulative. Consequently, our board of directors may decide to declare less than a full dividend or no dividend on the Series A preferred securities for any quarterly period and you will not be entitled to receive that dividend whether or not funds are or subsequently become available.
 
 
Ÿ
The Series A preferred securities solely represent an interest in us and are not the obligation of, or guaranteed by, Wachovia, the Bank or any other entity. A decline in the performance and capital levels of the Bank or the placement by the Office of the Comptroller of the Currency, or the “OCC”, of the Bank into conservatorship or receivership could result in the automatic exchange of each Series A preferred security for one depositary share representing a one-sixth interest in one share of Wachovia Series G, Class A, preferred stock. Upon such an exchange, you would have an investment in Wachovia and not in us at a time when the Bank’s and, ultimately, Wachovia’s financial condition is deteriorating.
 
 
Ÿ
Based on our ownership immediately after the offering, the holders of our Series A preferred securities not affiliated with Wachovia will have the right to vote only 1.4% of all votes on matters on which all our shareholders are entitled to vote and the right to vote 50% of all votes on any matter which requires the holders of Series A preferred securities to vote separately as a single class.
 
 
Ÿ
Due to, among other things, certain changes in legislation, regulations or our capital structure, we could fail to qualify as a REIT. As a result of such loss of qualification, we would suffer adverse tax consequences.
 
 
Ÿ
Our close relationship with Wachovia and the Bank may create potential conflicts of interest. Wachovia and the Bank are involved in virtually every aspect of our existence.
 
 
Ÿ
We have no control over changes in interest rates and such changes could negatively impact our financial condition, results of operations, and ability to pay dividends.
 
 
Ÿ
The loans in our portfolio are subject to economic conditions that could negatively affect the value of the collateral securing such loans and/or the results of our operations.
 
 
Ÿ
We cannot assure you that we paid the Bank fair value for all of our assets because we have not obtained any third party valuation of all those assets. Nor can we assure you that we will acquire or dispose of assets in the future at their fair market value.
 
 
Ÿ
The exchange of our Series A preferred securities for depositary shares representing an interest in Wachovia Series G, Class A, preferred stock would most likely be a taxable event to you under the Code, and you would incur a gain or loss.
 
 
Ÿ
A decline in Wachovia’s financial condition following an exchange may restrict its ability to pay dividends and could result in a loss on your investment.
 
 
Ÿ
The holders of the depositary shares representing Wachovia Series G, Class A, preferred stock will:
 
 
Ÿ
not have voting rights;
 
 
Ÿ
not have the right to elect Independent Directors even if dividends are not authorized and declared by Wachovia’s board of directors;
 
 
Ÿ
not have the benefit of similar favorable covenants as the Series A preferred securities; and
 
 
Ÿ
not be listed on any securities exchange.

3


Table of Contents
 
Conflicts of Interest
 
Because our day-to-day business affairs are managed by the Bank, conflicts of interest will arise from time to time between us and the Bank. These conflicts of interest relate to, among other things:
 
 
Ÿ
the amount, type, and price of loan participation interests and other assets we acquire from or sell to the Bank;
 
 
Ÿ
the servicing of the underlying loans, particularly with respect to loans that are placed on non-accrual status;
 
 
Ÿ
the management of the cash collateral related to our interest rate swaps;
 
 
Ÿ
the amount of loan servicing costs and management fees paid to the Bank;
 
 
Ÿ
the treatment of new business opportunities identified by the Bank; and
 
 
Ÿ
the modification of the loan participation and servicing agreements.
 
We have adopted policies with a view to ensuring that all financial dealings between the Bank and us will be fair to both parties and consistent with market terms.
 
Wachovia Preferred Funding Holding Corp.
 
Wachovia Preferred Holding is a California corporation which by completion of this offering will own:
 
 
Ÿ
99,851,752 (or 99.85%) of our common stock;
 
 
Ÿ
15,000,000 (or 50%) of our outstanding Series A preferred securities;
 
 
Ÿ
40,000,000 (or 100%) of our outstanding Series B preferred securities;
 
 
Ÿ
4,254,413 (or 100%) of our outstanding Series C preferred securities; and
 
 
Ÿ
800 (or approximately 88%) of our outstanding Series D preferred securities.
 
By the completion of this offering, the Bank will own 99.95% of the outstanding shares of common stock of Wachovia Preferred Holding. Approximately two weeks prior to this offering, the Bank will contribute its ownership of us, consisting of 99.85% of our common stock and 87.62% of our Series D preferred securities, as well as commercial and commercial real estate loan participations to Wachovia Preferred Holding in exchange for Wachovia Preferred Holding common stock. Immediately thereafter, pursuant to an assignment of a participation agreement, Wachovia Preferred Holding will acquire from us 30,000,000 Series A, 40,000,000 Series B and 4,254,413 Series C preferred securities, with liquidation preferences of $25.00, $25.00 and $1,000 per security, respectively, in exchange for participation interests in certain commercial and commercial real estate loans. Subsequent to this exchange, Wachovia Preferred Holding will offer for sale 15,000,000 Series A preferred securities in this offering.
 
Although a statutory underwriter in connection with this offering, Wachovia Preferred Holding will not sell the Series A preferred securities directly to the public and will not have the rights and obligations of an underwriter under the underwriting agreement that we will enter into with the underwriters of this offering.
 
Wachovia Preferred Holding’s principal executive offices are located at 1620 East Roseville Parkway, Roseville, California 95661, and its telephone number is (877) 867-7378.
 
Wachovia Corporation
 
Wachovia was incorporated under the laws of North Carolina in 1967. Wachovia is registered as a financial holding company and a bank holding company under the Bank Holding Company Act of 1956, as amended, and is supervised and regulated by the Board of Governors of the Federal Reserve System. Wachovia’s banking and securities subsidiaries are supervised and regulated by various Federal and state

4


Table of Contents
banking and securities regulatory authorities. On September 1, 2001, the former Wachovia Corporation merged with and into First Union Corporation, and First Union Corporation changed its name to “Wachovia Corporation”.
 
Wachovia’s full-service banking subsidiaries provide a wide range of commercial and retail banking and trust services. Wachovia also provides a variety of other financial services through other subsidiaries, including mortgage banking, home equity lending, leasing, investment banking, insurance and securities brokerage services.
 
Wachovia is a separate and distinct legal entity from its banking and other subsidiaries. Dividends received by it from its subsidiaries are Wachovia’s principal source of funds to pay dividends on its common and preferred stock and to service its debt. Various Federal and state statutes and regulations limit the amount of dividends that Wachovia’s subsidiaries may pay to Wachovia without regulatory approval.
 
In 1985, the Supreme Court upheld regional interstate banking legislation. Since then, Wachovia has concentrated its efforts on building a large regional banking organization in what it perceives to be some of the better banking markets in the eastern United States. Since November 1985, Wachovia has completed over 90 banking-related acquisitions.
 
Wachovia continually evaluates its business operations and organizational structures to ensure they are aligned closely with its goal of maximizing performance in its core business lines. Therefore, Wachovia routinely explores acquisition opportunities, particularly in areas that would complement its core business lines, and frequently conducts due diligence activities in connection with possible acquisitions. As a result, acquisition discussions and, in some cases, negotiations frequently take place, and future acquisitions involving cash, debt or equity securities can be expected. When consistent with Wachovia’s overall business strategy, Wachovia also considers the potential disposition of certain of its assets, branches, subsidiaries or lines of business.
 
The principal executive offices of Wachovia are located at One Wachovia Center, Charlotte, North Carolina 28288, and its telephone number is (704) 374-6565.
 
Wachovia Bank, National Association
 
The Bank is a national banking association with its principal office in Charlotte, North Carolina, that offers a wide range of domestic and international retail and commercial banking and trust services. The Bank has offices in Connecticut, Florida, Georgia, Maryland, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Virginia and Washington, D.C., and in several foreign countries. On April 1, 2002, the former Wachovia Bank, National Association merged with and into First Union National Bank, and First Union National Bank changed its name to “Wachovia Bank, National Association”. The Bank’s business is subject to examination and regulation by United States Federal banking authorities. Based on deposits of $195.4 billion as of September 30, 2002, the Bank was the fifth largest bank in the United States. The Bank has numerous wholly-owned subsidiaries, none of which contributes over 30% of its consolidated net income. For more information see “Information Concerning the Bank”.
 
The principal executive offices of the Bank are located at One Wachovia Center, Charlotte, North Carolina 28288, and its telephone number is (704) 374-6565.

5


Table of Contents
 
Our Organizational Structure
 
Upon the completion of this offering, our legal and organizational structure will be as follows:
 
LOGO

(1)The remaining 12.38% of our Series D preferred securities is held by employees of Wachovia or its affiliates.
 
Conditional Exchange of Series A Preferred Securities
 
The Series A preferred securities will be exchanged automatically for depositary shares representing Series G, Class A preferred stock of Wachovia at the direction of the OCC if any of the following events occurs:
 
 
Ÿ
the Bank becomes undercapitalized under the OCC’s “prompt corrective action” regulations;
 
 
Ÿ
the Bank is placed into conservatorship or receivership; or
 
 
Ÿ
the OCC, in its sole discretion, anticipates that the Bank may become “undercapitalized” in the near term or takes supervisory action that limits the payment of dividends by us and in connection therewith directs an exchange.
 
In an exchange, you would receive one depositary share representing a one-sixth interest in one share of Wachovia Series G, Class A preferred stock with a liquidation preference of $25.00 per depositary share for each of our Series A preferred securities you own. The Wachovia Series G, Class A preferred stock will be non-cumulative, perpetual, non-voting preferred stock of Wachovia ranking equally upon issuance with the most senior preferred stock of Wachovia then outstanding. If a Conditional Exchange occurs you would own an investment in Wachovia and not in us at a time when the Bank’s and, ultimately, Wachovia’s financial condition is deteriorating or the Bank may have been placed into conservatorship or receivership. Please see “Where You Can Find More Information about Wachovia”.
 
Reasons for the Offering
 
The Series A preferred securities are being offered for sale to increase the Bank’s and Wachovia’s regulatory capital. The proceeds from the sale of the Series A preferred securities will be included as Tier 1 capital of the Bank and Wachovia under relevant regulatory capital guidelines.
 
Additionally, the Series A preferred securities will be included in other liabilities on the consolidated balance sheet of Wachovia.

6


Table of Contents
Selected Consolidated Financial Data
 
The following selected consolidated financial data for the three years ended December 31, 2001, are derived from our audited consolidated financial statements. The following selected consolidated financial data for the nine months ended September 30, 2002 and 2001, are derived from unaudited consolidated financial statements and reflect all adjustments, consisting only of normal recurring adjustments, that, in the opinion of our management, are necessary for a fair and consistent presentation of such data. Operating results for the nine months ended September 30, 2002, are not necessarily indicative of results expected for the entire year. This data should be read in conjunction with the consolidated financial statements, related notes, and other financial information beginning on page F-1 of this prospectus and Wachovia’s unaudited supplementary consolidating financial information as of and for the nine months ended September 30, 2002, and the years ended December 31, 2001 and 2000, which includes certain consolidated financial information for the Bank, beginning on Page F-22 of this prospectus.
 
    
Nine Months Ended
September 30,

    
Years Ended December 31,

 
(In thousands, except per share data)

  
2002

    
2001

    
2001

    
2000

    
1999

 
Income Statement Data
                                    
Net interest income
  
$
127,098
 
  
43,374
 
  
67,322
 
  
57,257
 
  
47,005
 
Provision for loan losses
  
 
7,033
 
  
6,290
 
  
5,262
 
  
3,602
 
  
1,034
 
Other income (loss)
  
 
68,356
 
  
—  
 
  
(95,890
)
  
395
 
  
96
 
Noninterest expense
  
 
6,597
 
  
1,013
 
  
2,394
 
  
2,207
 
  
3,078
 
Net income (loss)
  
$
305,936
 
  
23,446
 
  
(23,545
)
  
32,434
 
  
27,951
 
    


  

  

  

  

Balance Sheet Data
                                    
Cash and cash equivalents
  
$
1,169,380
 
  
327,057
 
  
957,454
 
  
183,223
 
  
196,397
 
Loans, net of unearned income
  
 
4,297,280
 
  
440,040
 
  
4,378,961
 
  
558,756
 
  
512,858
 
Allowance for loan losses
  
 
(37,335
)
  
(5,655
)
  
(37,158
)
  
(3,833
)
  
(1,285
)
Interest rate swaps
  
 
605,438
 
  
—  
 
  
573,620
 
  
—  
 
  
—  
 
Total assets
  
 
6,071,086
 
  
775,039
 
  
5,889,666
 
  
746,803
 
  
714,097
 
Collateral held on interest rate swaps
  
 
599,570
 
  
—  
 
  
570,340
 
  
—  
 
  
—  
 
Total liabilities
  
 
606,938
 
  
5,082
 
  
732,246
 
  
283
 
  
—  
 
Total stockholders’ equity
  
$
5,464,148
 
  
769,957
 
  
5,157,420
 
  
746,520
 
  
714,097
 
    


  

  

  

  

Selected Other Information
                                    
Nonperforming loans
  
$
16,425
 
  
2,882
 
  
5,024
 
  
2,684
 
  
3,733
 
Nonperforming loans as a % of total loans
  
 
0.38
%
  
0.65
 
  
0.11
 
  
0.48
 
  
0.73
 
Nonperforming loans as a % of total assets
  
 
0.27
 
  
0.37
 
  
0.09
 
  
0.36
 
  
0.52
 
Allowance for loan losses as a % of nonperforming loans
  
 
227.31
 
  
196.22
 
  
739.61
 
  
142.81
 
  
34.42
 
Allowance for loan losses as a % of total loans
  
 
0.87
%
  
1.29
 
  
0.85
 
  
0.69
 
  
0.25
 
    


  

  

  

  

7


Table of Contents
The Offering
 
Issuer
 
Wachovia Preferred Funding Corp., a Delaware corporation that will be an indirect subsidiary of Wachovia and the Bank and operates as a REIT for Federal income tax purposes.
Securities Offered
 
15,000,000   % Non-cumulative Exchangeable Perpetual Series A Preferred Securities.
Ranking
 
With respect to the payment of dividends and liquidation preference, the Series A preferred securities will rank equal to our Series B and D preferred securities and senior to our common stock and Series C preferred securities. Additional preferred stock ranking senior to the Series A preferred securities, which we refer to as “Senior Stock”, may not be issued without the approval of holders of at least two-thirds of the Series A preferred securities. Additional preferred stock ranking on a parity with the Series A preferred securities, which we refer to as “Parity Stock”, may be issued without your approval, but that issuance requires the approval of a majority of our Independent Directors.
Dividends

 
Dividends on the Series A preferred securities are payable at the rate of   % per annum of the liquidation preference of $25.00 per security, if, when, and as declared by our board of directors. If declared, dividends are payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year or, if any such day is not a business day, on the next business day, unless the next business day falls in a different calendar year, in which case the dividend will be paid on the preceding business day, commencing December 31, 2002. A business day is any day other than a Saturday, Sunday or bank holiday.
 
Dividends accrue in each quarterly period from the first day of such period, whether or not dividends are paid with respect to the preceding period. Dividends on the Series A preferred securities are not cumulative and, accordingly, if we do not declare a dividend or declare less than a full dividend on the Series A preferred securities for a quarterly dividend period, holders of the Series A preferred securities will have no right to receive a dividend or the full dividend, as the case may be, for that period, and we will have no obligation to pay a

8


Table of Contents
   
dividend for that period, whether or not dividends are declared and paid for any future period with respect to either the Series A preferred securities, other series of preferred securities or our common stock. If the full dividend is not paid on the Series A preferred securities for a quarterly dividend period, the payment of dividends on our common stock (100% of which will be owned collectively by Wachovia and Wachovia Preferred Holding) and other preferred securities ranking subordinate to the Series A preferred securities will be prohibited for that period and at least the following three quarterly dividend periods.
Liquidation Preference
 
The liquidation preference for each Series A preferred security is $25.00, plus an amount equal to any authorized, declared, but unpaid dividends, if any. The Bank through Wachovia Preferred Holding may cause us to liquidate, dissolve or wind up at any time.
Redemption
 
The Series A preferred securities are not redeemable prior to             , 2022, except upon the occurrence of a Special Event which may be a Tax Event, an Investment Company Act Event or a Regulatory Capital Event. On and after             , 2022, the Series A preferred securities may be redeemed for cash at our option, with the prior approval of the OCC, in whole or in part, at any time and from time to time, at a redemption price of $25.00 per security, plus authorized, declared, but unpaid dividends, if any. Upon the occurrence of a Special Event, we will have the right prior to             , 2022, with the prior approval of the OCC, to redeem the Series A preferred securities in whole, but not in part, at a redemption price of $25.00 per security, plus authorized, declared, but unpaid dividends, if any. The Series A preferred securities are not subject to any sinking fund or mandatory redemption and are not convertible into any of our other securities.
Conditional Exchange


 
Each Series A preferred security will automatically be exchanged at the direction of the OCC upon the occurrence of a Supervisory Event for one depositary share representing a one-sixth interest in one share of Wachovia Series G, Class A preferred stock. Each depositary share will represent a one-sixth interest in the Wachovia Series G, Class A preferred stock and will:
 
Ÿ       rank equal to the most senior preferred stock of Wachovia then outstanding;
 

9


Table of Contents
   
Ÿ       pay dividends at the rate of     % per annum of the liquidation preference of $25.00 per depositary share, if, when, and as declared by Wachovia’s board of directors;
 
Ÿ       have a liquidation preference of $25.00 per depositary share;
 
Ÿ       be non-cumulative and non-voting;
 
Ÿ       be redeemable on the same terms as the Series A preferred securities; and
 
Ÿ       be evidenced by a depositary receipt.
Voting Rights





 
Holders of the Series A preferred securities are entitled to 1/10th of one vote per security on all matters submitted to a vote of the holders of our common stock. Without the consent of holders of two-thirds of the Series A preferred securities, voting as a separate class, we will not:
 
Ÿ       amend, alter or repeal our certificate of incorporation in a manner that materially and adversely affects the terms of the Series A preferred securities;
 
Ÿ       effect a consolidation or merger with or into another entity other than an entity controlled by, or under common control with, the Bank unless certain conditions have been met; or
 
Ÿ       approve the issuance of any Senior Stock.
 
Holders of the Series A preferred securities, voting together as a class with the holders of any Parity Stock with the same voting rights, will also have the right to elect two directors in addition to the directors then in office if we fail to pay, or declare and set aside for payment, dividends on the Series A preferred securities for six quarters. The term of such additional directors will terminate when we pay for three consecutive quarters and pay or declare and set aside for payment for the fourth consecutive quarter dividends on the Series A preferred securities or, if earlier, upon the redemption of all Series A preferred securities or a Conditional Exchange.
 
Holders of depositary shares representing Wachovia Series G, Class A preferred stock will not have voting rights.

10


Table of Contents
Covenants

 
Our certificate of incorporation provides certain covenants in favor of the holders of the Series A preferred securities. Specifically we will not, except with the consent or affirmative vote of the holders of at least two thirds of the Series A preferred securities, voting as a separate class:
 
   
Ÿ       make or permit to be made any payment to the Bank or its affiliates relating to our indebtedness or beneficial interests in us when we are precluded, as described under “Dividends” above, from making payments in respect of our common stock and all other stock ranking subordinate to our Series A preferred securities, which we refer to as “Junior Stock”, or make such payment or permit such payment to be made in anticipation of any liquidation, dissolution or winding up;
 
Ÿ       at any time incur indebtedness in an aggregate amount exceeding 20% of our shareholders’ equity;
 
Ÿ       pay dividends on our common stock or other Junior Stock unless our funds from operations, or FFO, for the four prior fiscal quarters equals or exceeds 150% of the amount that would be required to pay full annual dividends on the Series A preferred securities as well as any other Parity Stock, except as may be necessary to maintain our status as a REIT;
 
Ÿ       make any payment of interest or principal with respect to our indebtedness to the Bank or its affiliates unless our FFO for the four prior fiscal quarters equals or exceeds 150% of the amount that would be required to pay full annual dividends on the Series A preferred securities as well as any other Parity Stock, except as may be necessary to maintain our status as a REIT;
 
Ÿ       amend or otherwise change our policy of reinvesting the proceeds of our assets in other interest-earning assets such that our FFO over any period of four fiscal quarters will be anticipated to equal or exceed 150% of the amount that would be required to pay full annual dividends on the Series A preferred securities as well as any other Parity Stock, except as may be necessary to maintain our status as a REIT;

11


Table of Contents
   
 
Ÿ       issue any additional shares of common stock to anyone other than the Bank or its affiliates; or
 
Ÿ       remove “Wachovia” from our name unless the name of either the Bank or Wachovia changes and we need to make a change to our name to be consistent with the new group name.
 
   
 
Wachovia’s articles of incorporation do not contain similar covenants regarding the Series G, Class A preferred stock.
Transfer Restrictions
 
Our certificate of incorporation prohibits any transfer of shares or securities that would result in more than 50% in value of our outstanding shares of capital stock being owned by five or fewer individuals, under the applicable attribution rules of the Code, or that would cause our shares of capital stock to be beneficially owned by fewer than 100 persons. This prohibition is necessary to maintain our status as a REIT. Any transfer of Series A preferred securities that would violate this prohibition will be null and void and the purported transferee will acquire no rights or economic interest in such Series A preferred securities.
Listing
 
We have applied for the listing of the Series A preferred securities on the New York Stock Exchange under the symbol “WNA”. Trading in the Series A preferred securities is expected to commence not later than 30 days after the date of delivery of the Series A preferred securities. Consequently, there will be no trading market for the Series A preferred securities, at least in the short term. We do not anticipate that the depositary shares representing interests in Wachovia Series G, Class A preferred stock to be issued in the event of a Conditional Exchange will be listed on any securities exchange or quotation system.
Use of Proceeds
 
Prior to this offering, Wachovia Preferred Holding will acquire from us 30,000,000 Series A, 40,000,000 Series B and 4,254,413 Series C preferred securities in exchange for participation interests, with an aggregate fair market value of $6.0 billion, in certain commercial and commercial real estate loans. Wachovia Preferred Holding intends to subsequently sell the 15,000,000 Series A preferred securities offered hereby indirectly to the public for cash consideration of $25.00 per security. Wachovia Preferred Holding will receive all proceeds from this offering and will pay all expenses of and underwriting discounts and commissions associated

12


Table of Contents
   
with this offering. Wachovia Preferred Holding intends to use the net proceeds from this offering for general corporate purposes.
   
The pro forma condensed consolidated financial information included under “Unaudited Pro Forma Condensed Consolidated Financial Information” reflects, on a pro forma basis as of and for the nine months ended September 30, 2002, the assets we will acquire in connection with the issuance of the Series A, Series B and Series C preferred securities.
Tax Consequences
 
As long as we qualify as a REIT, corporate holders of the Series A preferred securities will not be entitled to a dividends-received deduction for any income recognized from the Series A preferred securities.
   
Additionally, if the Series A preferred securities are exchanged for Wachovia Series G, Class A preferred stock, the exchange would most likely be a taxable event to holders of the Series A preferred securities.
 
See “Federal Income Tax Considerations”.
Settlement
 
We expect that delivery of the Series A preferred securities will be made to investors through the facilities of The Depository Trust Company on or about             , 2002.
ERISA Considerations
 
If you are a fiduciary of a pension, profit-sharing or other employee benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or Section 4975 of the Code, you should consider the requirements of ERISA and the Code in the context of the plan’s particular circumstances and ensure the availability of an applicable exemption before authorizing an investment in the Series A preferred securities (and the depositary shares representing the Wachovia Series G, Class A preferred stock into which the Series A preferred securities are exchangeable upon the occurrence of a Conditional Exchange). See “ERISA Considerations”.

13


Table of Contents
RISK FACTORS
 
You should consider carefully the following risks before purchasing our Series A preferred securities, conditionally exchangeable into depositary shares representing interests in Wachovia’s Series G, Class A preferred stock.
 
All of the financial information in this section is presented on a pro forma basis to reflect the following:
 
 
Ÿ
$866 million of participation interests in home equity loans received by us as collateral for an intercompany loan to the Bank in October 2002. The underlying home equity loans were originated by the Bank; and
 
 
Ÿ
the issuance of three new series of preferred securities (Series A, B and C) to Wachovia Preferred Holding in exchange for participations in commercial and commercial real estate loans prior to this offering. The commercial and commercial real estate loans were originated by the Bank and contributed to Wachovia Preferred Holding. We will issue the preferred securities to Wachovia Preferred Holding in exchange for participations in the loans prior to this offering.
 
Risks Relating to the Terms of the Series A Preferred Securities.
 
Dividends are not cumulative and you are not entitled to receive dividends unless authorized and declared by our board of directors.
 
Dividends on the Series A preferred securities are not cumulative. Consequently, if our board of directors does not declare a dividend on the Series A preferred securities for any quarterly period, you will not be entitled to receive that dividend whether or not funds are or subsequently become available. Our board of directors may determine that it would be in our best interests to pay less than the full amount of the stated dividends on the Series A preferred securities or no dividends for any quarter even though funds are available. Factors that would generally be considered by our board of directors in making this determination are the amount of our distributable funds, our financial condition and capital needs, the impact of current and pending legislation and regulations, economic conditions, tax considerations, and our continued qualification as a REIT. If we fail to pay, or declare and set aside for payment, dividends on the Series A preferred securities for six quarters, the holders of the Series A preferred securities, voting together as a class with the holders of other stock ranking on parity with our Series A preferred securities, which we refer to as “Parity Stock”, with the same voting rights, will have the right to elect two directors in addition to those already on the board.
 
The Series A preferred securities solely represent an interest in us and are not the obligation of, or guaranteed by, any other entity.
 
The Series A preferred securities do not constitute obligations or equity securities of Wachovia, the Bank, or any other entity, nor are our obligations with respect to the Series A preferred securities guaranteed by any other entity. In particular, none of Wachovia, the Bank, or any other entity guarantees that we will declare or pay any dividends nor are they obligated to provide additional capital or other support to us to enable us to pay dividends in the event our assets and results of operations are insufficient for such purpose. The Series A preferred securities are not exchangeable for Wachovia preferred stock except in connection with a Supervisory Event. No holder of Series A preferred securities will have the right to require us to exchange such holder’s Series A preferred securities for depositary shares of Wachovia.
 
A decline in the Bank’s capital levels may result in your Series A preferred securities being exchanged for depositary shares representing Wachovia preferred stock and such exchange is likely to occur at a time when the Bank’s and Wachovia’s financial condition has deteriorated.
 
The returns from your investment in the Series A preferred securities will be dependent to a significant extent on the performance and capital of the Bank. A decline in the performance and capital levels of the Bank

14


Table of Contents
or the placement by the OCC of the Bank into conservatorship or receivership could result in the automatic exchange of each Series A preferred security for one depositary share representing a one-sixth interest in one share of Wachovia Series G, Class A preferred stock, which would represent an investment in Wachovia and not in us. Under these circumstances:
 
 
Ÿ
you would become a preferred shareholder of Wachovia at a time when the Bank’s and, ultimately, Wachovia’s financial condition has deteriorated or when the Bank may have been placed into conservatorship or receivership and, accordingly, it is unlikely that Wachovia would be in a financial position to make any dividend payments on Wachovia preferred stock;
 
 
Ÿ
in the event of a liquidation of Wachovia, the claims of depositors and creditors of Wachovia would be entitled to priority in payment over the claims of holders of equity interests such as the depositary shares representing Wachovia Series G, Class A preferred stock, and, therefore, you may receive substantially less than you would receive had the Series A preferred securities not been exchanged for the depositary shares;
 
 
Ÿ
the exchange of the Series A preferred securities for depositary shares representing Wachovia Series G, Class A preferred stock would most likely be a taxable event to you under the Code, and in that event you would incur a gain or loss, as the case may be, measured by the difference between your basis in the Series A preferred securities and the fair market value of depositary shares representing Wachovia Series G, Class A preferred stock received in the exchange; and
 
 
Ÿ
although the terms of Wachovia Series G, Class A preferred stock are substantially similar to the terms of our Series A preferred securities, there are differences that you might deem to be important, such as the fact that holders of depositary shares representing Wachovia Series G, Class A preferred stock will not have any voting rights, any right to elect additional directors regardless of whether dividends are paid and will not benefit from any covenants. In addition, neither the Wachovia Series G, Class A preferred stock nor the depositary shares representing an interest in that stock will be listed on any securities exchange.
 
We may liquidate, dissolve or wind up at any time without your approval or consent.
 
Our certificate of incorporation provides that, subject to the terms of the capital stock we have outstanding at the time, we may liquidate, dissolve or wind up upon the affirmative vote of a majority of our Independent Directors. However, since the Series A preferred securities will not have voting rights as a separate class with respect to these matters, Wachovia Preferred Holding, which will be the holder of substantially all of our common stock, will have control over our liquidation, dissolution or winding up. Although Wachovia Preferred Holding has no present intention to cause such an event to occur, there can be no assurance that it will not cause us to liquidate, dissolve or wind up at any time or for any reason. If such an event were to occur, you may not be able to invest your liquidation proceeds in securities with a dividend yield comparable to that of the Series A preferred securities.
 
The holders of Series A preferred securities have limited voting rights.
 
Holders of Series A preferred securities are entitled to 1/10th of one vote per security on all matters to be voted on by all our shareholders. Immediately after the offering, Wachovia and its affiliates will have the right to vote 98.6% of all votes and the holders of Series A preferred securities not affiliated with Wachovia will have the right to vote 1.4% of all votes on any matter to be voted on by all our shareholders. In addition, each of Wachovia Preferred Holding and the holders of Series A preferred securities not affiliated with Wachovia will have the right to vote 50% of all votes on any matter which requires the holders of Series A preferred securities to vote separately as a single class. The consent or vote of the holders of at least two-thirds of the outstanding Series A preferred securities is required for an adoption of any matter on which the holders of Series A preferred securities have a right to vote separately as a single class. See “Description of the Series A Preferred Securities—Voting Rights”.

15


Table of Contents
 
We may redeem the Series A preferred securities upon the occurrence of a Special Event.
 
At any time following the occurrence of a Special Event, even if such Special Event occurs prior to             , 2022, we will have the right to redeem the Series A preferred securities in whole, subject to the prior written approval of the OCC. The occurrence of such a Special Event will not, however, give a shareholder any right to request that the Series A preferred securities be redeemed. There are three types of Special Events: Tax Events, Investment Company Events and Regulatory Capital Events.
 
 
Ÿ
A Tax Event occurs when we receive an opinion of counsel to the effect that, as a result of a judicial decision or administrative pronouncement, ruling, or other action or as a result of certain changes in the tax laws, regulations, or related interpretations, there is a significant risk that dividends with respect to our capital stock will not be fully deductible by us or we will be subject to additional taxes or governmental charges.
 
 
Ÿ
An Investment Company Event occurs when we receive an opinion of counsel to the effect that, as a result of certain changes in the applicable laws, regulations, or related interpretations, there is a significant risk that we will be considered an investment company under the Investment Company Act of 1940 (the “Investment Company Act”).
 
 
Ÿ
A Regulatory Capital Event occurs when, as a result of certain changes in the applicable laws, regulations, or related interpretations, there is a significant risk that our Series A preferred securities will no longer constitute Tier 1 capital of the Bank or Wachovia.
 
If we redeem the Series A preferred securities, you may not be able to invest your redemption proceeds in securities with a dividend yield comparable to that of the Series A preferred securities.
 
The Series A preferred securities will rank subordinate to claims of our creditors and on a parity with our Series B and D preferred securities and any other Parity Stock we may issue.
 
The Series A preferred securities will rank subordinate to all claims of our creditors. The Series A, B and D preferred securities will rank on parity with each other with respect to dividend rights and upon our liquidation, dissolution or winding up. In addition, we may issue additional Parity Stock at any time in the future without your consent or approval but upon the approval of a majority of our Independent Directors. Accordingly, if
 
 
Ÿ
we do not have funds legally available to pay full dividends on the Series A, B and D preferred securities and any other Parity Stock we may issue; or
 
 
Ÿ
in the event of our liquidation, dissolution or winding up, we do not have funds legally available to pay the full liquidation value of the Series A, B and D preferred securities and any other Parity Stock,
 
any funds that are legally available to pay such amounts will be paid pro rata to the Series A, B and D preferred securities and any other Parity Stock outstanding. See “Description of Other Wachovia Funding Capital Stock—Preferred Stock—Series B Preferred Securities” and “—Series D Preferred Securities”.
 
There has never been a market for the Series A preferred securities.
 
Prior to this offering, there has been no public market for the Series A preferred securities. We have applied for the listing of the Series A preferred securities on the New York Stock Exchange under the symbol “WNA”. Trading in the Series A preferred securities is expected to commence not later than 30 days after the date of delivery of the Series A preferred securities. Consequently, there will be no trading market for the Series A preferred securities, at least in the short term. We cannot assure you that an active and liquid trading market for the Series A preferred securities will develop or be sustained. If such a market were to develop, the prices at which the Series A preferred securities trade would depend on many factors, including prevailing

16


Table of Contents
interest rates, our operating results, and the market for similar securities. You may not be able to resell your Series A preferred securities at or above the initial price to the public or at all.
 
Risks Relating to Our Status as a REIT.
 
We would suffer adverse tax consequences if we fail to qualify as a REIT.
 
Although we currently conduct our operations so as to qualify as a REIT under the Code, we may not be able to continue to qualify as a REIT. Qualification as a REIT involves the application of highly technical and complex tax law provisions for which there are only limited judicial or administrative interpretations and involves the determination of various factual matters and circumstances not entirely within our control. No assurance can be given that new legislation or new regulations, administrative interpretations, or court decisions will not significantly change the tax laws in the future with respect to qualification as a REIT or the Federal income tax consequences of such qualification in a way that would materially and adversely affect our ability to operate. Any such new legislation, regulation, interpretation or decision could be the basis of a Tax Event that would permit us to redeem the Series A preferred securities. See “Description of the Series A Preferred Securities—Redemption”.
 
If we were to fail to qualify as a REIT, the dividends on our preferred stock, including the Series A preferred securities, would not be deductible by us for Federal income tax purposes, and we would likely become part of the consolidated group of which the Bank is a member. Consequently, the consolidated group would face a greater tax liability which could result in a reduction in the Bank’s net earnings after taxes. We would also become jointly and severally liable for the consolidated group’s United States Federal income tax liabilities. A reduction in the Bank’s net earnings after taxes could adversely affect the Bank’s ability to raise additional capital, as well as its ability to generate additional capital internally, and consequently its ability to add interest-earning assets to its portfolio.
 
If in any taxable year we fail to qualify as a REIT, unless we are entitled to relief under certain statutory provisions, we would also be disqualified from treatment as a REIT for the four taxable years following the year our qualification was lost. As a result, the amount of funds available for distribution to our shareholders would be reduced for the year or years involved.
 
As a REIT, we generally will be required each year to distribute as dividends to our shareholders at least 90% of our REIT taxable income, excluding capital gains. Failure to comply with this requirement would result in our earnings being subject to tax at regular corporate rates. In addition, we would be subject to a 4% non-deductible excise tax on the amount by which certain distributions considered as paid by us with respect to any calendar year are less than the sum of:
 
 
Ÿ
85% of our ordinary income for the calendar year;
 
 
Ÿ
95% of our capital gains net income for the calendar year; and
 
 
Ÿ
100% of undistributed taxable income from prior periods.
 
We currently intend to operate in a manner designed to qualify as a REIT. However, future economic, market, legal, tax, or other considerations may cause us to determine that it is in our best interests and the best interests of holders of our common stock and preferred stock to revoke our REIT election. As long as any Series A preferred securities are outstanding, any such determination by us may not be made without the approval of a majority of our Independent Directors.
 
If ownership of our capital stock becomes concentrated in a small number of individuals, we may fail to qualify as a REIT.
 
In order to maintain our qualification as a REIT under the Code, not more than 50% in value of our outstanding shares of capital stock may be owned, directly or constructively, by five or fewer individuals (as

17


Table of Contents
defined in the Code to include certain entities) at any time during the last half of a taxable year, and the shares of capital stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months (or during a proportionate part of a shorter taxable year, other than the first 12 months as a REIT). Therefore, our certificate of incorporation contains provisions restricting the ownership and transfer of our preferred securities.
 
Our certificate of incorporation provides that a transfer of shares that would otherwise result in more than 50% in value of our outstanding shares of capital stock being owned by five or fewer individuals, under the applicable attribution rules of the Code, or which would cause our shares of capital stock to be beneficially owned by fewer than 100 persons, will be null and void and the purported transferee will acquire no rights or economic interest in such shares.
 
These transfer restrictions imposed by us could impair the liquidity of the Series A preferred securities and thereby affect the secondary market for the Series A preferred securities.
 
Risks Associated with Our Business.
 
We are effectively controlled by Wachovia and our relationship with Wachovia and/or the Bank may create potential conflicts of interest.
 
All of our officers and certain of our directors are also either officers or directors of Wachovia or the Bank or their affiliates. After this offering, Wachovia, the Bank and Wachovia Preferred Holding will continue to control a substantial majority of our outstanding voting shares. In effect, Wachovia, the Bank and Wachovia Preferred Holding will have the right to elect all of our directors, including Independent Directors, except under limited circumstances if we fail to pay dividends.
 
The Bank may have interests that are not identical to our interests. Wachovia, the owner of the Bank’s common stock, may have investment goals and strategies that differ from those of the holders of the Series A preferred securities. Consequently, conflicts of interest between us, on one hand, and the Bank and/or Wachovia, on the other hand, may arise.
 
We are dependent on the officers and employees of Wachovia and the Bank for the selection, structuring and monitoring of the loans in our portfolio and our relationship with Wachovia and/or the Bank may create potential conflicts of interest.
 
Wachovia and the Bank are involved in virtually every aspect of our existence. The Bank administers our day-to-day activities under the terms of participation and servicing agreements between the Bank and us. We are dependent on the diligence and skill of the officers and employees of the Bank for the selection, structuring and monitoring of the loans in our portfolio and our other authorized investments.
 
This dependency and our close relationship with Wachovia and the Bank may create potential conflicts of interest. Specifically, such conflicts of interest may arise because the employees of Wachovia and the Bank (i) were directly involved in the decisions regarding the amount, type and price of loan participation interests and other assets acquired indirectly from the Bank prior to the offering, and (ii) will make decisions on the amount, type and price of future acquisitions of loan participation interests and other assets from the Bank as well as future dispositions of loan participation interests to the Bank or third parties.
 
We are dependent on the officers and employees of the Bank for the servicing of the loans in our portfolio and our relationship with the Bank may create potential conflicts of interest.
 
We are dependent on the Bank and others for the servicing of the loans in our portfolio. The Bank administers our day-to-day activities under the terms of participation and servicing agreements relating to our

18


Table of Contents
assets. These agreements contain terms which we believe are consistent with those resulting from arm’s length negotiations and contain the following fees:
 
(i) with respect to the commercial, commercial real estate and home equity loans, an annual service fee of 0.03% multiplied by the outstanding principal balance of each loan, and (ii) with respect to residential mortgages, $48.00 per loan. Additionally, we are subject to Wachovia’s management fee policy and thus reimburse Wachovia on a monthly basis for general overhead expenses.
 
Despite our belief that the terms of the loan participation and servicing agreements between the Bank and us reflect terms consistent with those negotiated on an arms-length basis, our dependency on the Bank’s officers and employees and our close relationship with the Bank may create potential conflicts of interest. Specifically, such conflicts of interest may arise because the employees of the Bank have the power to set the amount of the service fees paid to the Bank, modify the loan participation and servicing agreements, and make business decisions with respect to servicing of the underlying loans, particularly the loans that are placed on non-accrual status or are otherwise non-performing.
 
We are dependent on the officers and employees of the Bank for the management of the cash collateral related to the interest rate swaps and our relationship with the Bank may create potential conflicts of interest.
 
Wachovia and the Bank are involved in virtually every aspect of our existence. The Bank manages our cash collateral related to the interest rate swaps. We are dependent on the diligence, skill and discretion of the officers and employees of the Bank for the selection and monitoring of the investments made with our cash collateral. This dependency and our close relationship with Wachovia and the Bank may create potential conflicts of interest.
 
We are dependent on the officers and employees of the Bank for the identification and treatment of new business opportunities and our relationship with the Bank may create potential conflicts of interest.
 
Wachovia and the Bank are involved in virtually every aspect of our existence. The employees of the Bank identify any new business opportunities for us and the Bank decides whether such opportunities are directed to us or other affiliates. As a result, we are dependent on the diligence, skill and discretion of the officers and employees of the Bank for the identification and treatment of new business opportunities and this dependency and our close relationship with Wachovia and the Bank may create potential conflicts of interest.
 
Bank regulators may limit our ability to implement our business plan and may restrict our ability to pay dividends.
 
Because we are an indirect subsidiary of the Bank, bank regulatory authorities will have the right to examine us and our activities and, under certain circumstances, to impose restrictions on the Bank or us that could impact our ability to conduct business pursuant to our business plan and that could adversely effect our financial condition and results of operations.
 
 
Ÿ
If the OCC, which is the Bank’s primary regulator, determines that the Bank’s relationship with us results in an unsafe and unsound banking practice, the Bank’s regulators have the authority to:
 
 
Ÿ
restrict our ability to transfer assets;
 
 
Ÿ
restrict our ability to make distributions to our shareholders, including dividends to holders of the Series A preferred securities;
 
 
Ÿ
restrict our ability to redeem our preferred stock; or
 
 
Ÿ
require the Bank to sever its relationship with us or divest its ownership of us.

19


Table of Contents
 
 
Ÿ
If the OCC determines that the Bank is operating with an insufficient level of capital, or that the payment of dividends by either the Bank or its subsidiaries is under the then present circumstances an unsafe and unsound banking practice, the OCC could restrict our ability to pay dividends.
 
Certain of these actions by the OCC would likely result in our failure to qualify as a REIT.
 
If we lose our exemption under the Investment Company Act it could have a material adverse effect on us and would likely result in a redemption of the Series A preferred securities.
 
We believe that we are not, and intend to conduct our operations so as not to become, regulated as an investment company under the Investment Company Act. Under the Investment Company Act, a non-exempt entity that is an investment company is required to register with the SEC and is subject to extensive, restrictive and potentially adverse regulation relating to, among other things, operating methods, management, capital structure, dividends and transactions with affiliates. The Investment Company Act exempts entities that, directly or through majority-owned subsidiaries, are “primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate” (which we refer to as “Qualifying Interests”). Under current interpretations of the staff of the SEC, in order to qualify for this exemption, we, among other things, must maintain at least 55% of our assets in Qualifying Interests and also may be required to maintain an additional 25% in Qualifying Interests or other real estate-related assets. The assets that we may acquire therefore may be limited by the provisions of the Investment Company Act. We have established a policy of limiting authorized investments which are not Qualifying Interests to no more than 20% of the value of our total assets. The Investment Company Act does not treat cash and cash equivalents as either Qualifying Interests or other real estate-related assets.
 
Based on the criteria outlined above, we believe that, as of the time of this offering, our Qualifying Interests will be comprised of approximately 87% of the estimated fair market value of our total assets. As a result, we believe that we are not required to register as an investment company under the Investment Company Act. We do not intend, however, to seek an exemptive order, no-action letter or other form of interpretive guidance from the SEC or its staff on this position. If the SEC or its staff were to take a different position with respect to whether our assets constitute Qualifying Interests, we could be required either (a) to change the manner in which we conduct our operations to avoid being required to register as an investment company or (b) to register as an investment company, either of which could have a material adverse effect on us, the price of our securities and our ability to make payments in respect of the Series A preferred securities. Further, in order to ensure that we at all times continue to qualify for the above exemption from the Investment Company Act, we may be required at times to adopt less efficient methods of financing certain of our assets than would otherwise be the case and may be precluded from acquiring certain types of assets whose yield is somewhat higher than the yield on assets that could be purchased in a manner consistent with the exemption. The net effect of these factors may be to lower at times our net interest income. Finally, if we were an unregistered investment company, there would be a risk that we would be subject to monetary penalties and injunctive relief in an action brought by the SEC, that we would be unable to enforce contracts with third parties and that third parties could seek to obtain rescission of transactions undertaken during the period we were determined to be an unregistered investment company. In the event we are ever considered an investment company under the Investment Company Act as a result of an Investment Company Act Event, we would likely redeem the Series A preferred securities. See above under “—We may redeem the Series A preferred securities upon the occurrence of a Special Event”.
 
We have no control over changes in interest rates and such changes could negatively impact our financial condition, results of operations, and ability to pay dividends.
 
Our income consists primarily of interest payments on the loans in our portfolio. At September 30, 2002, 14% of the loans in our portfolio, as measured by the aggregate outstanding principal amount, bore

20


Table of Contents
interest at fixed rates and the remainder bore interest at adjustable rates. Adjustable-rate loans decrease the risks to a lender associated with changes in interest rates but involve other risks. As interest rates rise, the payment by the borrower rises to the extent permitted by the terms of the loan, and the increased payment increases the potential for default. At the same time, the marketability of the underlying property may be adversely affected by higher interest rates. In a declining interest rate environment, there may be an increase in prepayments on the loans in our portfolio as the borrowers refinance their mortgages at lower interest rates. Under these circumstances, we may find it more difficult to purchase additional participation interests with rates sufficient to support the payment of the dividends on the Series A preferred securities. A declining interest rate environment would adversely affect our ability to pay full, or even partial, dividends on the Series A preferred securities.
 
The loans in our portfolio are subject to economic conditions that could negatively affect the value of the collateral securing such loans and/or the results of our operations.
 
The value of the collateral underlying our loans and/or the results of our operations could be affected by various conditions in the economy, such as:
 
 
Ÿ
local and other economic conditions affecting real estate and other collateral values;
 
 
Ÿ
sudden or unexpected changes in economic conditions, including changes that might result from terrorist attacks and the United States’ response to such attacks;
 
 
Ÿ
the continued financial stability of a borrower and the borrower’s ability to make loan principal and interest payments, which may be adversely affected by job loss, recession, divorce, illness or personal bankruptcy;
 
 
Ÿ
the ability of tenants to make lease payments;
 
 
Ÿ
the ability of a property to attract and retain tenants, which may be affected by conditions such as an oversupply of space or a reduction in demand for rental space in the area, the attractiveness of properties to tenants, competition from other available space, and the ability of the owner to pay leasing commissions, provide adequate maintenance and insurance, pay tenant improvement costs, and make other tenant concessions;
 
 
Ÿ
interest rate levels and the availability of credit to refinance loans at or prior to maturity; and
 
 
Ÿ
increased operating costs, including energy costs, real estate taxes, and costs of compliance with environmental controls and regulations.
 
The loans in our portfolio are concentrated in five states, and adverse conditions in those states, in particular, could negatively impact our operations.
 
At September 30, 2002, 71% (as a percentage of loan principal balances) of the assets in our portfolio were located in Florida, North Carolina, Pennsylvania, New Jersey and Virginia. Because of the concentration of our interests in those states, in the event of adverse economic conditions in those states, we would likely experience higher rates of loss and delinquency on our loan portfolio than if the underlying loans were more geographically diversified. Additionally, the loans in our portfolio may be subject to a greater risk of default than other comparable loans in the event of adverse economic, political, or business developments or natural hazards that may affect Florida, North Carolina, Pennsylvania, New Jersey or Virginia, and the ability of property owners or commercial borrowers in those states to make payments of principal and interest on the underlying loans. In the event of any adverse development or natural disaster, our ability to pay dividends on the Series A preferred securities could be adversely affected.
 
Our acquisitions of participation interests in commercial and commercial mortgage loans subjects us to risks that are not present in our portfolio of residential mortgage loans, including the fact that some commercial loans are unsecured.
 
As of September 30, 2002, 84% of our assets, as measured by aggregate outstanding principal amount, consisted of participation interests in commercial and commercial real estate loans. Commercial and

21


Table of Contents
commercial real estate loans generally tend to have shorter maturities than residential mortgage loans and may not be fully amortizing, meaning that they may have a significant principal balance or “balloon” payment due on maturity. Commercial real estate properties tend to be unique and are more difficult to value than single-family residential real estate properties. They are also subject to relatively greater environmental risks and to the corresponding burdens and costs of compliance with environmental laws and regulations. In addition, some of our commercial loans are unsecured. Such unsecured loans are more likely than loans secured by real estate or personal property collateral to result in a loss upon a default.
 
We cannot assure you that we paid the Bank fair value for all of our assets because we have not obtained any third party valuation of all those assets. Nor can we assure you that we will acquire or dispose of assets in the future at their fair market value.
 
We have adopted policies with a view to ensuring that all financial dealings between the Bank and us will be fair to both parties and consistent with market terms. However, there has been no third party valuation of all our assets. In addition, it is not anticipated that third party valuations will be obtained in connection with future acquisitions or dispositions of assets even in circumstances where an affiliate of ours is selling the assets to us, or purchasing the assets from us. Accordingly, we cannot assure you that the purchase price we paid for all of our assets was equal to the fair value of those assets. Nor can we assure you that the consideration to be paid by us to, or received by us from, the Bank or any of our affiliates in connection with future acquisitions or dispositions of assets will be equal to the fair value of such assets.
 
We could incur losses as a result of environmental liabilities of properties underlying our assets through foreclosure action.
 
We may be forced to foreclose on an underlying commercial, commercial real estate or residential loan where the borrower has defaulted on its obligation to repay the loan. It is possible that we may be subject to environmental liabilities with respect to foreclosed property, particularly industrial and warehouse properties, which are generally subject to relatively greater environmental risks than non-commercial properties. The discovery of these liabilities and any associated costs for removal of hazardous substances, wastes, contaminants, or pollutants, could have a material adverse effect on the fair value of such loan and therefore we may not recover any or all of our investment in the underlying commercial, commercial real estate or residential loan.
 
We do not have insurance to cover our exposure to borrower defaults and bankruptcies and special hazard losses that are not covered by standard insurance.
 
Generally, neither we nor the Bank obtain credit enhancements such as borrower bankruptcy insurance or obtain special hazard insurance for the loans in our portfolio, other than standard hazard insurance typically required by the Bank, which relates only to individual loans. Without third party insurance, we are subject to risks of borrower defaults and bankruptcies and special hazard losses that are not covered by standard hazard insurance.
 
Delays in liquidating defaulted loans could occur which could cause our business to suffer.
 
Substantial delays could be encountered in connection with the liquidation of the collateral securing defaulted loans in our portfolio, with corresponding delays in our receipt of related proceeds. An action to foreclose on a mortgaged property or repossess and sell other collateral securing a loan is regulated by state statutes and rules. Any such action is subject to many of the delays and expenses of lawsuits, which may impede our ability to foreclose on or sell the collateral or to obtain proceeds sufficient to repay all amounts due on the related loan in our portfolio.

22


Table of Contents
 
We may invest in assets which involve new risks and need not maintain the current asset coverage.
 
Although our portfolio currently consists primarily of commercial, commercial real estate and residential loan interests, and we presently intend to reinvest proceeds of such interests in similar assets, we are not required to limit our investments to assets of the types currently in our portfolio. Assets such as mortgage-backed securities, equipment loans or real estate may involve different risks not described in this prospectus. Nevertheless, we will not invest in assets that are not REIT Qualified Assets if such investments would cause us to violate the requirements for taxation as a REIT. Moreover, while our policies will call for maintaining specified levels of funds from operations coverage as to expected dividend distributions, we are not required to maintain the levels of asset coverage that currently exist.
 
Risk Factors Applicable Only to Wachovia Depositary Shares Representing the Wachovia Series G,  Class A Preferred Stock Issued upon the Occurrence of a Conditional Exchange.
 
You may have adverse tax consequences as a result of a Conditional Exchange.
 
The exchange of our Series A preferred securities for depositary shares representing an interest in Wachovia Series G, Class A preferred stock would most likely be a taxable event to you under the Code, and you would incur a gain or loss, as the case may be, measured by the difference between your basis in our Series A preferred securities and the fair market value of the depositary shares.
 
A decline in Wachovia’s financial condition may restrict its ability to pay dividends and could result in a loss on your investment.
 
If Wachovia’s financial condition were to deteriorate, the holders of the depositary shares representing the Wachovia Series G, Class A preferred stock could suffer direct and materially adverse consequences, including suspension of the payment of non-cumulative dividends on the Wachovia Series G, Class A preferred stock and, if a liquidation, dissolution or winding up of Wachovia were to occur, loss by holders of depositary shares of all or part of their investment. See “Description of Wachovia Series G, Class A Preferred Stock”.
 
A Conditional Exchange may be based on the Bank’s receivership, which could lead to Wachovia’s receivership and would mean that others may have liquidation claims senior to yours.
 
A Supervisory Event triggering a Conditional Exchange will occur if the Bank is placed into conservatorship or receivership. The Bank’s conservatorship or receivership could lead to Wachovia being placed into conservatorship or receivership. In the event of Wachovia’s receivership, the claims of Wachovia’s secured, senior, general and subordinated creditors would be entitled to a priority of payment over the claims of holders of equity interests such as the Wachovia Series G, Class A preferred stock. As a result of such subordination, either if Wachovia were to be placed into receivership after a Conditional Exchange or if a Conditional Exchange were to occur after Wachovia’s receivership, the holders of the depositary shares would likely receive, if anything, substantially less than they would have received had our Series A preferred securities not been exchanged.
 
Upon the occurrence of a Conditional Exchange, the holders of the depositary shares will not have any voting rights, the right to elect Independent Directors nor have the benefit of the same favorable covenants as the Series A preferred securities.
 
Upon the occurrence of a Conditional Exchange, the holders of the depositary shares representing Wachovia Series G, Class A preferred stock will not have voting rights, the right to elect Independent Directors if dividends are not authorized and declared by Wachovia’s board of directors nor have the benefit of the same favorable covenants as the Series A preferred securities. Therefore, Wachovia may authorize and issue additional shares of preferred stock that may rank junior to, on parity with or senior to the Series G, Class A preferred stock as to dividend rights and rights upon liquidation, winding up, or dissolution without the consent of the holders of the Series G, Class A preferred stock.

23


Table of Contents
 
Wachovia is not obligated to pay, and is subject to certain limitations on the payment of, dividends on the Wachovia Series G, Class A preferred stock and dividends on these securities are not cumulative.
 
Dividends on the Wachovia Series G, Class A Preferred stock are not cumulative. Consequently, if Wachovia’s board of directors does not declare dividends on the Wachovia Series G, Class A preferred stock for any quarterly period, the holders of the Wachovia Series G, Class A preferred stock and the depositary shares represented thereby would not be entitled to any such dividend whether or not funds are or subsequently become available. Under an indenture between Wachovia and Wilmington Trust Company, as trustee, Wachovia has agreed not to pay any dividends on, or make a liquidation payment relating to, any of Wachovia’s common stock or preferred stock, including its Series G, Class A preferred stock, if, at that time, there is a default under the indenture or a related Wachovia guarantee or Wachovia has delayed interest payments on trust preferred securities issued under the indenture. Currently, there are $1.3 billion aggregate principal amount of trust preferred securities outstanding under such indenture.
 
The Wachovia board of directors may determine that it would be in Wachovia’s best interests to pay less than the full amount of the stated dividends on the Wachovia Series G, Class A preferred stock or no dividends for any quarter even if funds are available. Factors that would be considered by the Wachovia board of directors in making this determination are Wachovia’s financial condition and capital needs, the impact of current and pending legislation and regulations, economic conditions, tax considerations, and such other factors as the board of directors may deem relevant. In addition, as a bank holding company, Wachovia is subject to various general regulatory policies and requirements relating to the payment of dividends, including requirements to maintain adequate capital above regulatory minimums. The Federal Reserve Board is authorized to determine, under certain circumstances relating to the financial condition of a bank holding company, such as Wachovia, that the payment of dividends would be an unsound and unsafe practice and to prohibit payment thereof. See “Description of Wachovia Series G, Class A Preferred Stock—Dividends”.
 
There is no active trading market for the Wachovia Series G, Class A preferred stock or the depositary shares representing that stock and no such trading market may develop.
 
The Wachovia Series G, Class A preferred stock and the depositary shares representing that stock will be new issues of securities. Prior to this offering, there has been no public market for the Wachovia Series G, Class A preferred stock or the depositary shares. Wachovia does not intend to cause the listing or quotation of the Wachovia Series G, Class A preferred stock or the depositary shares representing an interest in that stock on the New York Stock Exchange or on any other national securities exchange or quotation system on which the Series A preferred securities are then listed or quoted. Consequently, it is unlikely that an active and liquid trading public market for the depositary shares or the underlying Wachovia Series G, Class A preferred stock will develop or be maintained. The lack of liquidity and an active trading market could adversely affect your ability to dispose of the depositary shares representing an interest in the Wachovia Series G, Class A preferred stock.

24


Table of Contents
INFORMATION CONCERNING THE BANK
 
General
 
The Bank is a national banking association organized under the laws of the United States and with its principal office in Charlotte, North Carolina. The Bank offers a wide range of domestic and international , retail and commercial banking and trust services. At September 30, 2002, the Bank operated 2,769 branches in Connecticut, Florida, Georgia, Maryland, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Virginia and Washington, D.C., and in several foreign countries. At September 30, 2002, the Bank had total assets of $312 billion, total liabilities of $280 billion and total shareholders’ equity of $32 billion. Prior to April 1, 2002, the Bank was named “First Union National Bank”. On April 1, 2002, the Bank merged with Wachovia Bank, National Association, and changed its name to “Wachovia Bank, National Association”. Presentation of certain financial information in this prospectus for periods prior to April 1, 2002, will be for First Union National Bank only.
 
The Series A preferred securities will be exchangeable, without your approval or any action on your part, for depositary shares representing interests in the Wachovia Series G, Class A preferred stock if the OCC so directs under the following circumstances, each of which is referred to as a Supervisory Event:
 
 
Ÿ
the Bank becomes undercapitalized under “prompt corrective action” regulations,
 
 
Ÿ
the Bank is placed into conservatorship or receivership, or
 
 
Ÿ
the OCC, in its sole discretion, anticipates that the Bank may become undercapitalized in the near term or takes supervisory action that limits the payment of dividends by us and in connection therewith directs an exchange.
 
The Series A preferred securities are exchangeable only for the depositary shares. Under no circumstances will you ever receive securities of the Bank upon the occurrence of a Supervisory Event or for any other reason.
 
Capital Adequacy
 
The OCC has issued regulations addressing the capital adequacy of national banks. Under these regulations, capital adequacy is measured by three different ratios: a ratio of total capital to risk-weighted assets; a ratio of Tier 1 capital to risk-weighted assets; and a “leverage” ratio of Tier 1 capital to balance sheet assets. For purposes of determining risk-weighted assets for the risk-based capital ratios, the book value of each of the bank’s on-balance sheet assets, and a portion of certain off-balance sheet items and exposures, are weighted from 0% to 100% based on broad categories. For instance, U.S. government debt obligations are generally risk weighted at 0%; residential real estate mortgage loans on one-to-four family dwellings are generally risk weighted at 50%; and commercial loans and most other assets are generally risk-weighted at 100%. Off-balance sheet items (including letters of credit, loan commitments, swaps and other derivatives) are converted into on-balance sheet “equivalent” amounts for risk-based capital purposes, then assigned a risk weight like other assets. Under amendments adopted in November 2001 and being phased in by year-end 2002, the capital risk weighting assigned to certain asset-backed securities may vary from 20% to 200% depending on credit rating. Subordinated residual interests retained in asset securitizations, credit enhancement and forms of “recourse” can result in higher capital charges. The sum of all risk-weighted assets are measured against “total capital” and “Tier 1 capital” to determine risk-based capital ratios. A bank’s leverage ratio represents Tier 1 capital divided by average total on-balance sheet assets, without recognizing off-balance sheet exposures or applying risk weights. As noted below, to be considered adequately capitalized, a national bank generally must maintain a total risk-based capital ratio of at least 8%, a Tier 1 risk-based ratio of at least 4%, and a Tier 1 leverage ratio of at least 4% (or 3% in exceptional cases).

25


Table of Contents
 
For purposes of these regulations, total capital is defined as the sum of Tier 1 capital and Tier 2 capital. Tier 1 capital generally includes common shareholders’ equity; non-cumulative perpetual preferred stock and related surplus; and qualifying minority interests in the equity accounts of consolidated subsidiaries (which may include such instruments as qualifying REIT preferred stock and trust preferred stock). Tier 2 capital generally includes (subject to certain limits and sub-limits): cumulative perpetual preferred stock; limited-life preferred stock; Dutch auction and money market preferred stock; hybrid capital instruments (including certain mandatory convertible notes); term subordinated debt; the bank’s allowance for loan and lease losses (up to a maximum of 1.25% of total risk-weighted assets); and up to 45% of the pretax net unrealized gains of available-for-sale equity securities investments. Tier 2 capital is permitted to count towards only one-half of total capital. In addition, limited-life instruments generally can represent not more than one-half of Tier 2 capital and are phased out of capital over the last five years before maturity. Deductions from Tier 1 capital include goodwill, certain other intangible assets, and deferred tax assets in excess of certain limits.
 
For national banks with large trading portfolios, a different method known as the Market Risk Measure is applied to determine the risk-based capital requirements for items booked in the trading account and for foreign exchange and commodity positions, wherever booked. Under the Market Risk Measure, capital requirements for these portfolios are based on value-at-risk calculations and certain other factors, and the result is combined into the bank’s total risk-based capital ratio. For purposes of the Market Risk Measure only, a portion of a bank’s total capital can consist of certain “Tier 3” capital instruments—subordinated two-year notes with “lock-in” clauses restricting payment of principal or interest (even at maturity) if the bank falls below required capital ratios.
 
Under the OCC’s “prompt corrective action” regulations, issued pursuant to the Federal Deposit Insurance Corporation Improvement Act of 1991, national banks are placed into one of five capital categories, as follows:
 
 
1.
“Well capitalized” banks:
 
 
Ÿ
have a total risk-based capital ratio of 10% or greater;
 
 
Ÿ
have a Tier 1 risk-based capital ratio of 6% or greater;
 
 
Ÿ
have a leverage ratio of 5% or greater; and
 
 
Ÿ
are not subject to any other OCC action directed at a specific level of capital.
 
 
2.
“Adequately capitalized” banks:
 
 
Ÿ
have a total risk-based capital ratio of 8% or greater;
 
 
Ÿ
have a Tier 1 risk-based capital ratio of 4% or greater;
 
 
Ÿ
have a leverage ratio of
 
 
(a)
4% or greater; or
 
 
(b)
3% or greater for certain exceptionally well managed and well run banks; and
 
 
Ÿ
do not meet the definition of well capitalized.
 
 
3.
“Undercapitalized” banks:
 
 
Ÿ
have a total risk-based capital that is less than 8%;
 
 
Ÿ
have a Tier 1 risk-based capital ratio that is less than 4%; or
 
 
Ÿ
have a leverage ratio of less than 4% or, if the bank is exceptionally well managed and well run, less than 3%.

26


Table of Contents
 
 
4.
“Significantly undercapitalized” banks:
 
 
Ÿ
have a total risk-based capital ratio that is less than 6%;
 
 
Ÿ
have a Tier 1 risk-based capital that is less than 3%; or
 
 
Ÿ
have a leverage ratio that is less than 3%.
 
 
5.
“Critically undercapitalized” banks:
 
 
Ÿ
have a ratio of tangible equity capital (Tier 1 capital plus cumulative preferred stock less certain intangible capital) that is equal to or less than 2%.
 
Under prompt corrective action provisions, if a national bank becomes “undercapitalized”, “significantly undercapitalized” or “critically undercapitalized”, the OCC may undertake (and, in some cases, may be compelled by statute to undertake) a variety of actions of increasing severity. Among other things, an undercapitalized bank must submit an acceptable capital restoration plan and is generally restricted from paying dividends, redeeming stock or making other capital distributions. Failure to achieve the goals of a capital restoration plan could subject a bank to penalties and to being considered “significantly undercapitalized”. A significantly undercapitalized bank is subject to a broad range of restrictions, including restrictions on growth, limits on activities, divestiture requirements, limits on interest rates paid on deposits, restrictions on transactions with affiliates, limits on executive compensation, and mandated changes in directors or management. Critically undercapitalized banks face even stricter measures, including possible receivership.
 
In addition, the OCC from time to time may impose higher specific capital requirements on any national bank that is perceived to have risks, exposures, asset concentrations, rapid growth or other circumstances warranting special attention. Failure to satisfy such a capital directive could subject a bank to civil money penalties, judicial enforcement and administrative remedies available to the OCC, as well as a finding that the bank is “undercapitalized”.
 
A national bank’s capital ratios are monitored through the quarterly reports of condition submitted by each national bank pursuant to 12 U.S.C. §181 (frequently referred to as “call reports”). These call reports are filed with the Federal Deposit Insurance Corporation.
 
Whether the Bank would ever be determined by the OCC to be “undercapitalized”, or at risk of becoming “undercapitalized” in the near term—thereby triggering the exchange of the Series A preferred securities into depositary shares representing Wachovia Series G, Class A preferred stock—could be influenced not only by the OCC’s capital adequacy regulations, but also by the regulator’s interpretations and judgment on other matters. For example, the OCC’s views on asset credit quality could potentially affect a bank’s capital status. Among other things, the OCC typically evaluates asset quality, loan loss reserves and procedures during periodic regulatory examinations of each national bank. If, following such an examination or otherwise, the OCC in its discretion were to require the Bank to significantly increase its reserves against credit losses (i.e., the allowance for loan and lease losses), this could potentially reduce the Bank’s retained earnings and regulatory capital. As noted above, a bank’s allowance for loan and lease losses is includible within Tier 2 capital only up to a limit, and is not includible at all in Tier 1 capital.
 
A bank’s regulatory capital status, and the risk of being deemed “undercapitalized” also could be affected by other developments or by future changes in regulatory capital and other standards. The Banking Supervision Committee of the Bank for International Settlements (the “Basel Committee”) has proposed for comment, and is continuing to study and revise, substantial changes to its 1988 “Basel Accord” on international bank capital adequacy. We and the Bank are unable to predict whether or when the Basel Committee’s proposed new capital accord may be finalized, how the new accord might be interpreted and implemented by the OCC, or what impact any such new standards might have on the Bank and its capital status.

27


Table of Contents
 
The following table presents the capital ratios reported to the OCC by the Bank, as well as those of Wachovia, the Bank’s parent company, compared to the standards for “adequately capitalized” and “well capitalized” status, as of the dates indicated.
 
                  
Regulatory Standards

    
The Bank

    
Wachovia

    
Adequately Capitalized

  
Well Capitalized

September 30, 2002
                       
Tier 1 capital
  
7.63
 
  
8.11
    
4.00
  
6.00
Total capital
  
12.12
 
  
12.02
    
8.00
  
10.00
Leverage
  
6.61
 
  
6.82
    
4.00
  
5.00
December 31, 2001
                       
Tier 1 capital
  
7.55
 
  
7.04
    
4.00
  
6.00
Total capital
  
11.68
 
  
11.08
    
8.00
  
10.00
Leverage
  
6.29
 
  
6.19
    
4.00
  
5.00
December 31, 2000
                       
Tier 1 capital
  
6.92
 
  
7.02
    
4.00
  
6.00
Total capital
  
10.73
 
  
11.19
    
8.00
  
10.00
Leverage
  
6.04
%
  
5.92
    
4.00
  
5.00
    

  
    
  
 
The Bank currently intends to maintain its capital ratios in excess of the “well capitalized” levels under the prompt corrective action regulations. However, there is no guarantee that the Bank’s capital ratios will be maintained in the future at their current or historical levels. Accordingly, there is no assurance that the Bank will not be deemed to be “undercapitalized” by the OCC in the future or that the Bank will not be placed in conservatorship or receivership in the future. Consequently, there can be no assurance that a Supervisory Event will not occur and that the Series A preferred securities will not be exchanged for depositary shares in the future. You should therefore carefully consider the description of the Wachovia Series G, Class A preferred stock set forth under the caption “Description of Wachovia Series G, Class A Preferred Stock” and the description of the depositary shares representing interests in that stock set forth under the caption “Description of Wachovia Depositary Shares” before investing in the Series A preferred securities.
 
Supplementary consolidating financial information for Wachovia, which includes certain financial information for the Bank as of and for the nine months ended September 30, 2002, and as of and for the years ended December 31, 2001 and 2000, is included in the prospectus beginning on page F-22. We will continue to provide annual unaudited financial information for the Bank on an ongoing basis in the reports we file under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We will also continue to provide in those reports current unaudited capital and capital ratio information. Additional information regarding the Bank can be obtained on Wachovia’s website, www.wachovia.com, but that information is not incorporated by reference in this prospectus.
 
Benefits to the Bank and Wachovia
 
The Bank has received confirmation from the OCC that proceeds from the public sale of Series A preferred securities will qualify as Tier 1 capital of the Bank under relevant regulatory capital guidelines. Those guidelines limit the inclusion of our Series A preferred securities, together with all other outstanding non-cumulative perpetual preferred securities, to 25% of the Bank’s Tier 1 capital, with the balance treated as Tier 2 capital of the Bank. The Bank and Wachovia expect that as of December 31, 2002, all of the proceeds from the public sale of Series A preferred securities will qualify as Tier 1 capital of the Bank and Wachovia. The increase in the Bank’s Tier 1 risk-based capital level that will result from the treatment of the Series A preferred securities as Tier 1 capital will enable the Bank to retain a higher base of interest-earning assets, resulting in incrementally higher related earnings.

28


Table of Contents
USE OF PROCEEDS
 
Prior to this offering, Wachovia Preferred Holding will acquire from us 30,000,000 Series A, 40,000,000 Series B and 4,254,413 Series C preferred securities with liquidation preferences of $25.00, $25.00, and $1,000 per security, respectively. Wachovia Preferred Holding will acquire these preferred securities in exchange for participation interests with an aggregate fair market value of $6.0 billion, calculated using a discounted cash-flow methodology, in certain commercial and commercial real estate loans originated by and acquired from the Bank. Wachovia Preferred Holding acquired these participation interests from the Bank in exchange for 2,400 newly issued shares of Wachovia Preferred Holding’s common stock valued at $6.0 billion. We intend to hold these participation interests as long-term investments.
 
Wachovia Preferred Holding, a statutory underwriter, will subsequently sell the 15,000,000 Series A preferred securities offered hereby through an underwriting syndicate to the public for cash consideration of $25.00 per security. We will not receive any of the proceeds from the sale of our Series A preferred securities owned by Wachovia Preferred Holding. The proceeds, before expenses and commissions, to be received by Wachovia Preferred Holding from the sale of the 15,000,000 Series A preferred securities are expected to be $375 million in the aggregate. Wachovia Preferred Holding intends to use the net proceeds from this offering for general corporate purposes and will not use the proceeds to purchase additional assets for contribution to us.
 
The Series A preferred securities are being offered for sale to increase the Bank’s and Wachovia’s regulatory capital. The proceeds from the sale of the Series A preferred securities will be included as Tier 1 capital of the Bank and Wachovia under relevant regulatory capital guidelines.
 
Wachovia Preferred Holding will pay all expenses and underwriting discounts and commissions involved with the offering to the public.
 
The depositary shares each representing a one-sixth interest in a share of Series G, Class A preferred stock of Wachovia will be made available, if ever, in connection with a Conditional Exchange of our Series A preferred securities at the direction of the OCC following a Supervisory Event. Wachovia will not receive any proceeds, directly or indirectly, from the subsequent exchange of the Series A preferred securities for the depositary shares.

29


Table of Contents
CAPITALIZATION
 
The following table sets forth our unaudited capitalization as of September 30, 2002, and as adjusted to reflect the issuance of our Series A, B and C preferred securities to Wachovia Preferred Holding.
 
    
September 30, 2002

(In thousands)

  
Actual

  
Pro Forma

Long-term debt
  
$
—  
  
—  
    

  
Stockholders’ equity
           
Preferred stock
           
Series A preferred securities, $0.01 par value, $25.00 liquidation preference, non-cumulative and conditionally exchangeable, 30,000,000 shares authorized, issued and outstanding(1)
  
 
—  
  
300
Series B preferred securities, $0.01 par value, $25.00 liquidation preference, non-cumulative and conditionally exchangeable, 40,000,000 shares authorized, issued and outstanding
  
 
—  
  
400
Series C preferred securities, $0.01 par value, $1,000 liquidation preference, cumulative, 5,000,000 shares authorized, 4,254,413 shares issued and outstanding
  
 
—  
  
43
Series D preferred securities, $0.01 par value, $1,000 liquidation preference, non-cumulative, 913 shares authorized, issued and outstanding
  
 
—  
  
—  
Common stock, $0.01 par value, 100,000,000 shares authorized, 99,999,900 shares issued and outstanding
  
 
1,000
  
1,000
Paid-in capital
  
 
5,086,474
  
11,519,802
Retained earnings
  
 
376,674
  
376,674
    

  
Total stockholders’ equity
  
 
5,464,148
  
11,898,219
    

  
Total capitalization
  
$
5,464,148
  
11,898,219
    

  

(1) Our Series A preferred securities are exchangeable, without the approval or any action on the part of the holder, for depositary shares representing one-sixth of a share of Series G, Class A preferred stock of Wachovia if such an exchange is directed by the OCC upon the occurrence of a Supervisory Event.
 
The following table sets forth the unaudited capitalization of Wachovia at September 30, 2002.
 
    
September 30,
2002

(In millions)

    
Long-term debt
  
$
39,758
    

Stockholders’ equity
      
Dividend Equalization Preferred shares, issued 97 million shares
  
 
2
Common stock, authorized 3 billion shares, issued 1.373 billion shares
  
 
4,577
Paid-in capital
  
 
18,233
Retained earnings
  
 
7,221
Accumulated other comprehensive income, net
  
 
2,072
    

Total stockholders’ equity
  
 
32,105
    

Total capitalization
  
$
71,863
    

30


Table of Contents
RATIOS OF EARNINGS TO FIXED CHARGES
 
The following table provides our consolidated ratio of earnings to fixed charges for the nine months ended September 30, 2002 and the year ended December 31, 2001. Data for the four years ended December 31, 2000, is not meaningful due to the immaterial amount of fixed charges in each of the four years.
 
    
Nine Months
Ended
September 30,

    
Year
Ended
December 31,

 
    
2002

    
2001

 
Pretax income (loss) from continuing operations
  
$
181,824
 
  
(36,224
)
Fixed charges, excluding capitalized interest
  
 
8,287
 
  
857
 
    


  

Earnings (loss)
  
$
190,111
 
  
(35,367
)
    


  

Interest
  
$
8,287
 
  
857
 
One-third of rents
  
 
  
 
  
—  
 
Capitalized interest
  
 
  
 
  
—  
 
    


  

Fixed charges
  
$
8,287
 
  
857
 
    


  

Consolidated ratios of earnings to fixed charges
  
 
22.94
x
  
n/m
 
    


  

n/m – not meaningful.
 
For purposes of computing the ratio in the table above, earnings represent income from continuing operations and fixed charges represent interest.
 
The following table provides Wachovia’s consolidated ratios of earnings to fixed charges and preferred stock dividends.
 
      
Nine Months Ended September 30,

  
Years Ended December 31,

      
2002

  
2001

  
2000

  
1999

  
1998

  
1997

Consolidated Ratios of Earnings to Fixed Charges and Preferred Stock Dividends
                               
Excluding interest on deposits
    
2.87x
  
1.61
  
1.13
  
2.29
  
2.13
  
2.50
Including interest on deposits
    
1.79x
  
1.27
  
1.06
  
1.62
  
1.51
  
1.57
      
  
  
  
  
  
 
For purposes of computing the ratios in the table above:
 
 
Ÿ
earnings represent income from continuing operations before extraordinary items and cumulative effect of a change in accounting principles, plus income taxes and fixed charges (excluding capitalized interest);
 
 
Ÿ
fixed charges, excluding interest on deposits, represent interest (including capitalized interest), one-third of rents and all amortization of debt issuance costs; and
 
 
Ÿ
fixed charges, including interest on deposits, represent all interest (including capitalized interest), one-third of rents and all amortization of debt issuance costs.
 
One-third of rents is used because it is the proportion deemed representative of the interest factor.

31


Table of Contents
BUSINESS
 
General
 
We are a Delaware corporation, formed in July 2002 and the survivor of a merger with First Union Real Estate Asset Company of Connecticut, which was formed in 1996. By the completion of this offering, we will be a direct subsidiary of Wachovia Preferred Holding and Wachovia and an indirect subsidiary of the Bank. Wachovia Preferred Holding will own 99.85% of our common stock and Wachovia will own the remaining .15%. The Bank will own 99.95% of the common stock of Wachovia Preferred Holding and Wachovia will own the remaining 0.05%. Wachovia Preferred Holding will own 87.62% of our Series D preferred securities, while the remaining 12.38% is owned by 113 employees of Wachovia or its affiliates.
 
After our merger with First Union Real Estate Asset Company of Connecticut, we issued and sold 913 shares of our Series D preferred securities to Wachovia Realty Management Corporation, an affiliate of Wachovia. In a series of related corporate reorganization transactions that occurred in July 2002, Wachovia Realty Management Corporation merged with and into its parent, Wachovia Realty Management Holding Company, Inc., a Delaware corporation, with the then holders of its preferred securities (113 employees of Wachovia or its affiliates ) receiving Series D preferred securities as merger consideration. Wachovia Realty Management Holding Company, Inc. in turn merged with and into its parent, Wachovia Management Company, Inc., a Delaware corporation. Wachovia Management Company, Inc. then liquidated and distributed all of its assets, including the Series D preferred securities, to the Bank. As a result of this series of related corporate reorganization transactions, 87.62% of our Series D preferred securities are now owned by the Bank and the remaining 12.38% by 113 employees of Wachovia or its affiliates. Upon our merger with First Union Real Estate Asset Company of Connecticut, we were a direct subsidiary of the Bank and an indirect subsidiary of Wachovia. By the completion of this offering, we will be a direct subsidiary of Wachovia Preferred Holding as a result of the Bank transferring certain interests in mortgage assets and other authorized investments through a loan participation agreement, 99.85% of our common stock and 87.62% of our Series D preferred securities to Wachovia Preferred Holding in exchange for additional shares of Wachovia Preferred Holding common stock.
 
One of our subsidiaries, Wachovia Real Estate Investment Corp. was formed as a Delaware corporation in 1996 and has operated as a REIT since its formation. Of the 645 shares of Wachovia Real Estate Investment Corp. common stock outstanding, we own 644 shares or 99.84% and the remaining 1 share is owned by Wachovia. Of the 667 shares of preferred stock outstanding, we own 529.3 shares, 131 shares are owned by employees of Wachovia or its affiliates and 6.7 shares are owned by Wachovia.
 
Our other subsidiary, Wachovia Preferred Realty, LLC (“WPR”), was formed as a Delaware limited liability company in October 2002. Under the REIT Modernization Act, which became effective on January 1, 2001, a REIT is permitted to own “taxable REIT subsidiaries” which are subject to taxation similar to corporations that do not qualify as REITs or for other special tax rules. Our ownership of WPR provides us with additional flexibility by allowing us to hold assets which earn non-qualifying REIT income while maintaining our REIT status. Following formation of WPR, we transferred our interest-rate swaps and related cash collateral, including those described below, to WPR. We are the sole member of WPR.
 
In December 2001, the Bank contributed received-fixed interest rate swaps, commercial loans and commercial real estate loans to us in exchange for shares of our common stock. The swaps had a notional amount of $4.25 billion and a fair value of $673 million. The commercial and commercial real estate loans had a book value of $4.0 billion. Prior to this transaction, our consolidated assets primarily consisted of home equity loans and residential mortgage loans.
 
All of the financial information and other data in this section is presented on a pro forma basis to reflect the following:
 
 
Ÿ
$866 million of participation interests in home equity loans received by us as collateral for an intercompany loan to the Bank in October 2002. The underlying home equity loans were originated by the Bank; and

32


Table of Contents
 
 
Ÿ
the issuance of three new series of preferred securities (Series A, B and C) to Wachovia Preferred Holding in exchange for participations in commercial and commercial real estate loans prior to this offering. The commercial and commercial real estate loans were originated by the Bank and contributed to Wachovia Preferred Holding. We will issue the preferred securities to Wachovia Preferred Holding in exchange for participations in the loans prior to this offering.
 
Our principal business objective is to acquire, hold, and manage mortgage assets and other authorized investments that will generate net income for distribution to our stockholders. At September 30, 2002, we had total assets of $12.5 billion, total liabilities of $607 million, and stockholders’ equity of $11.9 billion. As of such date,
 
 
Ÿ
$9.8 billion, or 78.7% of our assets, were comprised of participation interests in commercial real estate loans;
 
 
Ÿ
$866 million, or 6.9% of our assets, were comprised of an intercompany loan to the Bank secured by participation interests in home equity loans;
 
 
Ÿ
$661 million, or 5.3% of our assets, were comprised of participation interests in commercial loans;
 
 
Ÿ
$605 million, or 4.8% of our assets, were comprised of interest rate swaps;
 
 
Ÿ
$303 million, or 2.4% of our assets, were comprised of cash and cash equivalents;
 
 
Ÿ
$205 million, or 1.6% of our assets, were comprised of participation interests in home equity loans;
 
 
Ÿ
$89 million, or 0.7% of our assets, were comprised of residential mortgage loans; and
 
 
Ÿ
$31 million, or 0.3% of our assets, were comprised of net other assets;
 
each before the allowance for loan losses.
 
Additionally, unfunded commitments and letters of credit at September 30, 2002, were $1.5 billion and $216 million, respectively.
 
The weighted average yield earned on total interest-earning assets for the nine months ended September 30, 2002, was 3.31%.
 
Although we have the authority to acquire interests in an unlimited number of mortgage and other assets from unaffiliated third parties, the majority of our interests in mortgage and other assets acquired prior to this offering have been acquired from the Bank or an affiliate pursuant to loan participation agreements between the Bank or an affiliate and us. The remainder of our assets were acquired directly from the Bank. The Bank either originated the mortgage assets or acquired them as part of the acquisition of other financial institutions. We may also acquire from time to time mortgage-backed securities and a limited amount of additional non-mortgage related securities. We have no present plans or expectations with respect to purchases of mortgage assets or other assets from unaffiliated third parties.
 
The loans in our portfolio are serviced by the Bank pursuant to the terms of participation and servicing agreements between the Bank and us. The Bank has delegated servicing responsibility of the residential mortgage loans to third parties which are not affiliated with us or the Bank.
 
General Description of Mortgage Assets and Other Authorized Investments; Investment Policy
 
The Code requires us to invest at least 75% of the total value of our assets in real estate assets, which includes residential mortgage loans and commercial mortgage loans, including participation interests in residential or commercial mortgage loans, mortgage-backed securities eligible to be held by REITs, cash, cash equivalents, including receivables and government securities, and other real estate assets. We refer to these types of assets as “REIT Qualified Assets”. We may invest up to 25% of the value of a REIT’s total assets in non-mortgage-related securities as defined in the Investment Company Act. Under the Investment Company Act, the term “security” is defined broadly to include, among other things, any note, stock, treasury stock, debenture, evidence of indebtedness, or certificate of interest or participation in any profit sharing agreement or a group or index of securities. The Code also requires that the value of any one issuer’s securities, other

33


Table of Contents
than those securities included in the 75% test, may not exceed 5% by value of the total assets of the REIT. In addition, under the Code, the REIT may not own more than 10% of the voting securities or more than 10% of the value of the outstanding securities of any one issuer, other than those securities included in the 75% test and the securities of wholly-owned, qualified REIT subsidiaries. Generally, the Code designation for REIT Qualified Assets is less stringent than the Investment Company Act designation for Qualifying Interests, due to the ability under the Code to treat cash and cash equivalents as REIT Qualified Assets and a lower required ratio of REIT Qualified Assets to total assets.
 
All of the financial information and other data in the following discussion is presented on a pro forma basis to reflect the following:
 
 
Ÿ
$866 million of participation interests in home equity loans received by us as collateral for an intercompany loan to the Bank in October 2002. The underlying home equity loans were originated by the Bank; and
 
 
Ÿ
the issuance of three new series of preferred securities (Series A, B and C) to Wachovia Preferred Holding in exchange for participations in commercial and commercial real estate loans prior to this offering. The commercial and commercial real estate loans were originated by the Bank and contributed to Wachovia Preferred Holding. We will issue the preferred securities to Wachovia Preferred Holding in exchange for participations in the loans prior to this offering.
 
Under the Code, as of the time of this offering approximately 90% of our assets will be invested in REIT Qualified Assets and  approximately 10% will be invested in commercial loans and other assets that are not REIT Qualified Assets. We do not hold any securities nor do we intend to hold securities in any one issuer that exceed 5% of our total assets or more than 10% of the voting securities of any one issuer. Our assets will consist of the following as of the time of this offering:
 
    
Pro Forma

 
(Dollars in thousands)

  
Amount

    
Percentage of Assets

 
REIT Qualified Assets
               
Cash and cash equivalents
  
$
303,327
 
  
2.4
%
Participation interests
               
Commercial real estate loans
  
 
9,846,391
 
  
78.7
 
Home equity loans
  
 
205,305
 
  
1.6
 
Residential mortgage loans
  
 
88,668
 
  
0.7
 
Intercompany loan to Bank secured by participation interests in home equity loans
  
 
866,053
 
  
6.9
 
Allowance for loans losses
  
 
(101,230
)
  
(0.8
)
    


  

Total REIT Qualified Assets
  
 
11,208,514
 
  
89.6
 
    


  

Other Non-Qualified Assets
               
Commercial loans
  
 
660,549
 
  
5.3
 
Interest rate swaps
  
 
605,438
 
  
4.8
 
Accounts receivable-affiliates
  
 
22,274
 
  
0.2
 
Other assets and unearned income
  
 
8,382
 
  
0.1
 
    


  

Total other non-qualified assets
  
 
1,296,643
 
  
10.4
 
    


  

Total assets
  
$
12,505,157
 
  
100.0
%
    


  

 
REITs generally are subject to tax at the maximum corporate rate on income from foreclosure property less deductible expenses directly connected with the production of that income. Income from foreclosure property includes gain from the sale of foreclosure property and income from operating foreclosure property, but income that would be qualifying income for purposes of the 75% gross income test is not treated as income from foreclosure property. Qualifying income for purposes of the 75% gross income test includes, generally, rental income and gain from the sale of property not held as inventory or for sale in the ordinary course of a trade or business. In accordance with the terms of the commercial, commercial mortgage and

34


Table of Contents
residential mortgage participation and servicing agreements, we maintain the authority to decide whether to foreclose on collateral that secures a loan. In the event we determine a foreclosure proceeding is appropriate, we may direct the Bank to prosecute the foreclosure on our behalf. Upon sale or other disposition of foreclosure property, the Bank will remit to us the proceeds less the cost of holding and selling the foreclosure property.
 
Commercial and Commercial Real Estate Loans    
 
We own participation interests in commercial loans secured by non-real property such as industrial equipment, aircraft, livestock, furniture and fixtures, and inventory. Participation interests acquired in commercial real estate loans are secured by real property such as office buildings, multi-family properties of five units or more, industrial, warehouse and self-storage properties, office and industrial condominiums, retail space, strip shopping centers, mixed use commercial properties, mobile home parks, nursing homes, hotels and motels, churches, and farms. In addition, some of our commercial loans are unsecured. Such unsecured loans are more likely than loans secured by real estate or personal property collateral to result in a loss upon default. Commercial and commercial real estate loans also may not be fully amortizing. This means that the loans may have a significant principal balance or “balloon” payment due on maturity. Additionally, there is no requirement regarding the percentage of any commercial or commercial real estate property that must be leased at the time we acquire a participation interest in a commercial or commercial real estate loan secured by such property nor are commercial loans required to have third party guarantees.
 
Commercial properties, particularly industrial and warehouse properties, generally are subject to relatively greater environmental risks than non-commercial properties. This gives rise to increased costs of compliance with environmental laws and regulations. We may be affected by environmental liabilities related to the underlying real property which could exceed the value of the real property. Although the Bank has exercised and will continue to exercise due diligence to discover potential environmental liabilities prior to our acquisition of any participation in loans secured by such property, hazardous substances or wastes, contaminants, pollutants, or their sources may be discovered on properties during our ownership of the participation interests. There can be no assurance that we would not incur full recourse liability for the entire cost of any removal and clean-up on a property, that the cost of removal and clean-up would not exceed the value of the property, or that we could recoup any of the costs from any third party.
 
The credit quality of a commercial or commercial real estate loan may depend on, among other factors:
 
 
Ÿ
the existence and structure of underlying leases;
 
 
Ÿ
the physical condition of the property, including whether any maintenance has been deferred;
 
 
Ÿ
the creditworthiness of tenants;
 
 
Ÿ
the historical and anticipated level of vacancies;
 
 
Ÿ
rents on the property and on other comparable properties located in the same region;
 
 
Ÿ
potential or existing environmental risks;
 
 
Ÿ
the availability of credit to refinance the loan at or prior to maturity; and
 
 
Ÿ
the local and regional economic climate in general.
 
Foreclosures of defaulted commercial or commercial real estate loans generally are subject to a number of complicating factors, including environmental considerations, which are not generally present in foreclosures of residential mortgage loans.

35


Table of Contents
 
The following table sets forth certain information at September 30, 2002, with respect to the types of loans underlying the commercial and commercial real estate loan participations.
 
Type of Commercial Loans
 
    
Pro Forma

 
(Dollars in thousands)

  
Aggregate Principal Balance

    
Percentage by Aggregate Principal Balance

 
Type
               
Commercial loans
  
$
660,549
    
6.3
%
Commercial mortgage loans
  
 
9,846,391
    
93.7
 
    

    

Total
  
$
10,506,940
    
100.0
%
    

    

 
The following table shows data with respect to the collateral, if any, securing the loans underlying the commercial and commercial real estate loan participations and the weighted average maturity by primary collateral, if any, of the loans underlying the commercial and commercial real estate loan participations at September 30, 2002.
 
Commercial and Commercial Real Estate Loans by Primary Collateral and Maturity
 
    
Pro Forma

(Dollars in thousands)

  
Aggregate Principal Balance

    
Percentage by Aggregate Principal Balance

      
Weighted Average Months to Maturity

Collateral, if any
                      
Real estate
  
$
9,846,391
    
93.7
%
    
80
Receivables
  
 
49,329
    
0.5
 
    
13
Equipment/inventory
  
 
52,359
    
0.5
 
    
41
Assignments
  
 
42,682
    
0.4
 
    
34
Securities
  
 
12,054
    
0.1
 
    
22
Miscellaneous
  
 
6,040
    
0.1
 
    
59
Unsecured
  
 
498,085
    
4.7
 
    
19
    

    

      
Total
  
$
10,506,940
    
100.0
%
    
76
    

    

    
 
The following table shows data with respect to the geographic distribution of the loans underlying the commercial and commercial real estate loan participations at September 30, 2002.
 
Geographic Distribution of Commercial and Commercial Real Estate Loans
 
    
Pro Forma

 
(Dollars in thousands)

  
Number of Loans

  
Aggregate Principal Balance

    
Percentage by Aggregate Principal Balance

 
State
                    
Connecticut
  
101
  
$
242,058
    
2.3
%
Florida
  
722
  
 
1,997,197
    
19.0
 
Georgia
  
217
  
 
602,043
    
5.7
 
Maryland
  
78
  
 
272,271
    
2.6
 
New Jersey
  
371
  
 
1,240,761
    
11.8
 
New York
  
79
  
 
229,901
    
2.2
 
North Carolina
  
666
  
 
1,968,901
    
18.7
 
Ohio
  
19
  
 
124,758
    
1.2
 
Pennsylvania
  
456
  
 
1,364,944
    
13.0
 
South Carolina
  
169
  
 
497,072
    
4.7
 
Virginia
  
316
  
 
960,386
    
9.1
 
Other states, each less than 1% of aggregate principal balance
  
336
  
 
1,006,648
    
9.7
 
    
  

    

Total
  
3,530
  
$
10,506,940
    
100.0
%
    
  

    

36


Table of Contents
 
The following table shows data with respect to the principal balance of the loans underlying the commercial and commercial real estate loan participations at September 30, 2002.
 
Principal Balances of Commercial and Commercial Real Estate Loans
 
    
Pro Forma

 
(Dollars in thousands)

  
Number of Loans

  
Aggregate Principal Balance

    
Percentage by Aggregate Principal Balance

 
Principal Balance
                    
Less than $50,000
  
14
  
$
283
    
—  
%
$50,000 to $99,999
  
7
  
 
510
    
—  
 
$100,000 to $249,999
  
18
  
 
3,321
    
—  
 
$250,000 to $499,999
  
40
  
 
17,956
    
0.2
 
$500,000 to $999,999
  
1,039
  
 
759,713
    
7.2
 
$1,000,000 to $1,999,999
  
1,054
  
 
1,504,099
    
14.3
 
$2,000,000 to $2,999,999
  
395
  
 
962,966
    
9.2
 
$3,000,000 to $3,999,999
  
275
  
 
961,742
    
9.2
 
$4,000,000 to $4,999,999
  
179
  
 
804,438
    
7.7
 
$5,000,000 to $9,999,999
  
322
  
 
2,216,496
    
21.1
 
Greater than $10,000,000
  
187
  
 
3,275,416
    
31.1
 
    
  

    

Total
  
3,530
  
$
10,506,940
    
100.0
%
    
  

    

 
Some of the loans underlying our commercial and commercial real estate loan participations bear interest at fixed rates and some bear interest at variable rates based on indices such as LIBOR and the prime rate. The following tables show data with respect to interest rates of the loans underlying our commercial and commercial real estate loan participations at September 30, 2002.
 
Fixed and Variable Rate Commercial and Commercial Real Estate Loans
 
    
Pro Forma

 
(Dollars in thousands)

  
Number of Loans

  
Aggregate Principal Balance

    
Percentage by Aggregate Principal Balance

      
Weighted Average Interest Rate

 
Type
                             
Fixed rate
  
124
  
$
459,749
    
4.4
%
    
4.95
%
Variable rate
  
3,406
  
 
10,047,191
    
95.6
 
    
3.44
 
    
  

    

        
Total
  
3,530
  
$
10,506,940
    
100.0
%
    
3.51
%
    
  

    

    

37


Table of Contents
 
Interest Rate Distribution—Commercial and Commercial Real Estate Loans
 
    
Pro Forma

 
    
Fixed Rate

    
Variable Rate

 
(Dollars in thousands)

  
Number of Loans

  
Aggregate Principal Balance

    
Percentage by Aggregate Principal Balance

    
Number of Loans

  
Aggregate Principal Balance

    
Percentage by Aggregate Principal Balance

 
Interest Rate
                                         
Less than 2.00%
  
—  
  
$
—  
    
—  
%
  
8
  
$
40,595
    
0.4
%
2.00% to 2.99%
  
6
  
 
51,695
    
0.5
 
  
374
  
 
1,810,849
    
17.2
 
3.00% to 3.99%
  
32
  
 
179,731
    
1.7
 
  
2,152
  
 
6,667,226
    
63.5
 
4.00% to 4.99%
  
12
  
 
47,810
    
0.4
 
  
738
  
 
1,358,998
    
12.9
 
5.00% to 5.99%
  
8
  
 
19,149
    
0.2
 
  
93
  
 
123,035
    
1.2
 
6.00% to 6.99%
  
25
  
 
48,375
    
0.5
 
  
16
  
 
21,220
    
0.2
 
7.00% to 7.99%
  
29
  
 
79,807
    
0.8
 
  
15
  
 
18,044
    
0.2
 
8.00% to 8.99%
  
9
  
 
25,510
    
0.2
 
  
6
  
 
4,673
    
—  
 
9.00% and greater
  
3
  
 
7,672
    
0.1
 
  
4
  
 
2,551
    
—  
 
    
  

    

  
  

    

Total
  
124
  
$
459,749
    
4.4
%
  
3,406
  
$
10,047,191
    
95.6
%
    
  

    

  
  

    

 
The following table provides delinquency information for the underlying loans in the commercial and commercial real estate loan participations at September 30, 2002.
 
Commercial and Commercial Real Estate Loan Delinquencies
 
    
Pro Forma

 
    
Fixed Rate

    
Variable Rate

 
(Dollars in thousands)

  
Number of Loans

  
Aggregate Principal Balance

  
Percent of Total

    
Number of Loans

  
Aggregate Principal Balance

  
Percent of Total

 
Delinquencies
                                     
Current
  
124
  
$
459,749
  
4.4
%
  
3,262
  
$
9,711,476
  
92.4
%
1 to 30 days delinquent
  
—  
  
 
—  
  
—  
 
  
142
  
 
333,570
  
3.2
 
31 to 60 days delinquent
  
—  
  
 
—  
  
—  
 
  
2
  
 
2,145
  
—  
 
61 to 90 days delinquent
  
—  
  
 
—  
  
—  
 
  
—  
  
 
—  
  
—  
 
Over 90 days delinquent
  
—  
  
 
—  
  
—  
 
  
—  
  
 
—  
  
—  
 
    
  

  

  
  

  

Total
  
124
  
$
459,749
  
4.4
%
  
3,406
  
$
10,047,191
  
95.6
%
    
  

  

  
  

  

 
Home Equity Loans
 
We own participation interests in home equity loans secured by a first, second or third mortgage which primarily is on the borrowers’ residence. These loans typically are made for reasons such as home improvements, acquisition of furniture and fixtures, purchases of automobiles, and debt consolidation. Generally, second and third liens are repaid on an installment basis and income is accrued based on the outstanding balance of the loan. First liens are repaid on an amortizing basis. All of the loans currently underlying the home equity loan participations bear interest at fixed rates.

38


Table of Contents
 
The following table shows data with respect to the geographic distribution of the loans underlying the home equity loan participations at September 30, 2002, and includes $866 million of participation interests in home equity loans received as collateral for an intercompany loan to the Bank in October 2002.
 
Geographic Distribution of Home Equity Loans
 
    
Pro Forma

 
(Dollars in thousands)

  
Number of Loans

    
Aggregate Principal Balance

    
Percentage by Aggregate Principal Balance

 
State
                      
Connecticut
  
837
    
$
39,704
    
3.7
%
Delaware
  
369
    
 
12,426
    
1.2
 
Florida
  
2,620
    
 
86,954
    
8.1
 
Georgia
  
1,006
    
 
33,649
    
3.1
 
Illinois
  
225
    
 
11,286
    
1.1
 
Maryland
  
938
    
 
32,842
    
3.1
 
Missouri
  
226
    
 
10,271
    
1.0
 
New Jersey
  
4,555
    
 
206,438
    
19.3
 
New York
  
1,288
    
 
55,160
    
5.1
 
North Carolina
  
2,707
    
 
107,352
    
10.0
 
Ohio
  
462
    
 
18,598
    
1.7
 
Pennsylvania
  
6,843
    
 
235,566
    
22.0
 
South Carolina
  
648
    
 
26,106
    
2.4
 
Tennessee
  
292
    
 
13,058
    
1.2
 
Virginia
  
2,480
    
 
86,339
    
8.1
 
Other states, each less than 1% of aggregate principal balance
  
2,717
    
 
95,609
    
8.9
 
    
    

    

Total
  
28,213
    
$
1,071,358
    
100.0
%
    
    

    

 
Interest Rate Distribution—Home Equity Loans
 
    
Pro Forma

 
    
Fixed Rate

 
(Dollars in thousands)

  
Number of Loans

  
Aggregate Principal Balance

    
Percentage by Aggregate Principal Balance

 
Interest Rate
                    
5.00% to 5.99%
  
6
  
$
273
    
—  
%
6.00% to 6.99%
  
639
  
 
37,018
    
3.5
 
7.00% to 7.99%
  
9,726
  
 
421,082
    
39.3
 
8.00% to 8.99%
  
10,254
  
 
354,554
    
33.1
 
9.00% to 9.99%
  
2,899
  
 
99,904
    
9.3
 
10.00% to 10.99%
  
3,602
  
 
110,958
    
10.4
 
11.00% to 11.99%
  
455
  
 
26,721
    
2.5
 
12.00% to 12.99%
  
450
  
 
15,629
    
1.5
 
13.00% to 13.99%
  
112
  
 
3,515
    
0.3
 
14.00% to 14.99%
  
70
  
 
1,704
    
0.1
 
    
  

    

Total
  
28,213
  
$
1,071,358
    
100.0
%
    
  

    

 

39


Table of Contents
The home equity loans have a weighted average of 151 months to maturity and a weighted average interest rate of 8.60%.
 
The following table provides delinquency information for the underlying loans in the home equity loan participations at September 30, 2002, and includes $866 million of participation interests in home equity loans received as collateral for an intercompany loan to the Bank in October 2002.
 
Home Equity Loan Delinquencies
 
    
Pro Forma

 
    
Fixed Rate

 
(Dollars in thousands)

  
Number of Loans

  
Aggregate Principal Balance

  
Percent of Total

 
Delinquencies
                  
Current
  
27,791
  
$
1,047,344
  
97.8
%
1 to 30 days delinquent
  
184
  
 
9,423
  
0.9
 
31 to 60 days delinquent
  
78
  
 
4,620
  
0.4
 
61 to 90 days delinquent
  
37
  
 
2,367
  
0.2
 
Over 90 days delinquent
  
123
  
 
7,604
  
0.7
 
    
  

  

Total
  
28,213
  
$
1,071,358
  
100.0
%
    
  

  

 
Residential Mortgage Loans
 
We have acquired both conforming and non-conforming residential mortgage loans from the Bank. Conforming residential mortgage loans comply with the requirements for inclusion in a loan guarantee or purchase program sponsored by either the FHLMC or FNMA. Under current regulations, the maximum principal balance allowed on conforming residential mortgage loans ranges from $300,700 for one-unit residential loans to $578,150 for four-unit residential loans. Nonconforming residential mortgage loans are residential mortgage loans that do not qualify in one or more respects for purchase by FHLMC or FNMA under their standard programs. A majority of the non-conforming residential mortgage loans acquired by us to date are non-conforming because they have original principal balances which exceeded the requirements for FHLMC or FNMA programs, the original terms are shorter than the minimum requirements for FHLMC or FNMA programs at the time of origination, the original balances are less than the minimum requirements for FHLMC or FNMA programs, or generally because they vary in certain other respects from the requirements of such programs other than the requirements relating to creditworthiness of the mortgagors. A substantial portion of our non-conforming residential mortgage loans are expected to meet the requirements for sale to national private mortgage conduit programs or other investors in the secondary mortgage market. However, we have no intent to sell any of our residential mortgage loans.
 
Each residential mortgage loan is evidenced by a promissory note secured by a mortgage or deed of trust or other similar security instrument creating a first lien on one-to-four family residential property. Residential real estate properties underlying residential mortgage loans consist of single-family detached units, individual condominium units, two-to-four-family dwelling units, and townhouses.
 
Our portfolio of residential mortgage loans currently consists of both adjustable and fixed rate mortgage loans and we may purchase additional interests in both types of residential mortgage loans in the future, although the mix of variable and fixed rate mortgage loans may change. Fixed rate mortgage loans currently consist of the following fixed rate product types:
 
Fixed Rate Mortgage Loans:    A mortgage loan that bears interest at a fixed rate for the term of the loan. Such loans generally mature in 15, 20, 25 or 30 years.

40


Table of Contents
 
Government Fixed Rate Loans:    A fixed rate mortgage loan originated under a specific governmental agency program, for example, the Federal Housing Authority or the Veterans Administration. Such loans generally mature in 15 or 30 years and may be guaranteed by a government agency.
 
Balloon Mortgage Loans:    A fixed rate mortgage loan having original or modified terms to maturity for a specified period, which is typically 5, 7, 10 or 15 years, at which time the full outstanding principal balance on the loan will be due and payable. Such loans provide for level monthly payments of principal and interest based on a longer amortization schedule, generally 30 years. Some of these loans may have a conditional refinancing option at the balloon maturity, which provides that, in lieu of repayment in full, the loan may be modified to a then-current market interest rate for the remaining unamortized term. None of the residential balloon mortgage loans in the portfolio have yet reached the balloon maturity.
 
Adjustable rate mortgage loans, or ARMs, currently consist of the following adjustable rate product types:
 
Conventional:
 
One-year Adjustable Rate Loans:    A loan with interest adjustments in 12-month intervals. Payment frequencies may include biweekly, semimonthly, or monthly. Such loans may have yearly and lifetime caps on the amount the interest rate may change at an interval. The interest rate change calculation is typically tied to a Treasury index rate. Typically, the interest rate is based on the weekly average yield on United States Treasury securities adjusted to a constant maturity of one year plus the margin stated in the note, subject to rounding and any caps.
 
3/1 Adjustable Rate Loans:    A one-year ARM that is fixed for the first three years of the loan. After the initial three-year period, the interest adjusts in 12-month intervals with caps on the initial change and each subsequent annual change and may be subject to a maximum cap on lifetime changes. Typically, the interest is based on the same Treasury security as the one-year ARM and is calculated using the margin and caps stated in the note.
 
5/1 Adjustable Rate Loans:    A one-year ARM that is fixed for the first five years of the loan. After the initial five-year period, the interest adjusts in 12-month intervals with caps on the initial change and each subsequent annual change and may be subject to a maximum cap on lifetime changes. Typically, the interest is based on the same Treasury security as the one-year ARM and is calculated using the margin and caps stated in the note.
 
7/1 Adjustable Rate Loans:    A one-year ARM that is fixed for the first seven years of the loan. After the initial seven-year period, the interest adjusts in 12-month intervals with caps on the initial change and each subsequent annual change and may be subject to a maximum cap on lifetime changes. Typically, the interest is based on the same Treasury security as the one-year ARM and is calculated using the margin and caps stated in the note.
 
10/1 Adjustable Rate Loans:    A one-year ARM that is fixed for the first ten years of the loan. After the initial 10-year period, the interest adjusts in 12-month intervals with caps on the initial change and each subsequent annual change and may be subject to a maximum cap on lifetime changes. Typically, the interest is based on the same Treasury security as the one-year ARM and is calculated using the margin and caps stated in the note.
 
Government:    An adjustable rate loan originated under a specific government agency program. Generally, the interest rate adjusts in 12-month intervals, and is based on specific requirements for date of index and calculations.

41


Table of Contents
 
Type of Residential Mortgage Loans
 
    
Pro Forma

 
(Dollars in thousands)

  
Number
of Loans

  
Aggregate Principal Balance

  
Percentage by Aggregate Principal Balance

      
Weighted Average Months to Maturity

  
Weighted Average Interest Rate

 
Type
                                
Conventional
                                
Fixed rate
                                
First lien
  
330
  
$
49,487
  
            55.8
%
    
199
  
7.14
%
Adjustable rate
                                
First lien
  
274
  
 
39,181
  
44.2
 
    
207
  
6.15
 
    
  

  

             
Total
  
604
  
$
88,668
  
100.0
%
    
202
  
6.70
%
    
  

  

    
  

 
The following table sets forth data with respect to the geographic distribution of the residential mortgage loans in our portfolio at September 30, 2002.
 
Geographic Distribution of Residential Mortgage Loans
 
    
Pro Forma

 
(Dollars in thousands)

  
Number of Loans

  
Aggregate Principal Balance

    
Percentage by Aggregate Principal Balance

 
State
                    
Arizona
  
2
  
$
445
    
0.5
%
California
  
2
  
 
512
    
0.6
 
Colorado
  
1
  
 
256
    
0.3
 
Connecticut
  
546
  
 
72,294
    
81.5
 
Florida
  
9
  
 
5,431
    
6.1
 
Georgia
  
3
  
 
501
    
0.6
 
Illinois
  
2
  
 
439
    
0.5
 
Maryland
  
2
  
 
615
    
0.7
 
Massachusetts
  
4
  
 
556
    
0.6
 
New Jersey
  
2
  
 
607
    
0.7
 
New Mexico
  
1
  
 
445
    
0.5
 
New York
  
8
  
 
902
    
1.0
 
North Carolina
  
5
  
 
1,104
    
1.2
 
Oklahoma
  
1
  
 
523
    
0.6
 
Pennsylvania
  
2
  
 
426
    
0.5
 
South Carolina
  
2
  
 
486
    
0.5
 
Texas
  
7
  
 
1,838
    
2.1
 
Vermont
  
1
  
 
163
    
0.2
 
Virginia
  
2
  
 
509
    
0.6
 
Washington
  
2
  
 
616
    
0.7
 
    
  

    

Total
  
604
  
$
88,668
    
100.0
%
    
  

    

42


Table of Contents
 
The following table shows data with respect to the principal balance of the loans in our residential mortgage loan portfolio at September 30, 2002.
 
Principal Balances of Residential Mortgage Loans
 
    
Pro Forma

 
 
(Dollars in thousands)

  
Number of Loans

  
Aggregate Principal Balance

    
Percentage by Aggregate Principal Balance

 
Principal Balance
          
Less than $25,000
  
88
  
$
1,125
    
1.3
%
$25,000 to $49,999
  
101
  
 
3,721
    
4.2
 
$50,000 to $74,999
  
84
  
 
5,266
    
5.9
 
$75,000 to $99,999
  
69
  
 
5,923
    
6.7
 
$100,000 to $249,999
  
156
  
 
27,105
    
30.6
 
$250,000 to $499,999
  
87
  
 
28,753
    
32.4
 
$500,000 to $749,999
  
13
  
 
7,845
    
8.8
 
$750,000 to $999,999
  
3
  
 
2,679
    
3.0
 
$1,000,000 to $1,499,999
  
1
  
 
1,497
    
1.7
 
$1,500,000 to $1,999,999
  
1
  
 
1,761
    
2.0
 
Greater than $2,000,000
  
1
  
 
2,993
    
3.4
 
    
  

    

Total
  
604
  
$
88,668
    
100.0
%
    
  

    

 
Of the residential mortgage loans in our portfolio, approximately 55.8% by principal balance bear interest at fixed rates and 44.2% at variable rates. The following table contains additional data with respect to the interest rates of such fixed and variable rate residential mortgage loans at September 30, 2002.
 
Interest Rate Distribution—Residential Mortgage Loans
 
    
Pro Forma

 
    
Fixed Rate

    
Variable Rate

 
(Dollars in thousands)

  
Number of Loans

  
Aggregate Principal Balance

    
Percentage by Aggregate Principal Balance

    
Number of Loans

  
Aggregate Principal Balance

    
Percentage by Aggregate Principal Balance

 
Interest Rate
                                         
Under 6.00%
  
33
  
$
3,074
    
3.5
%
  
86
  
$
15,773
    
17.8
%
6.00% to 6.99%
  
110
  
 
20,488
    
23.1
 
  
145
  
 
15,800
    
17.8
 
7.00% to 7.99%
  
84
  
 
18,769
    
21.2
 
  
33
  
 
6,390
    
7.2
 
8.00% to 8.99%
  
64
  
 
5,415
    
6.1
 
  
10
  
 
1,218
    
1.4
 
9.00% to 9.99%
  
28
  
 
1,438
    
1.6
 
  
—  
  
 
—  
    
—  
 
10.00% to 10.99%
  
8
  
 
247
    
0.3
 
  
—  
  
 
—  
    
—  
 
11.00% to 11.99%
  
2
  
 
47
    
—  
 
  
—  
  
 
—  
    
—  
 
12.00% to 12.99%
  
  
 
    
—  
 
  
—  
  
 
—  
    
—  
 
13.00% to 13.99%
  
1
  
 
9
    
—  
 
  
—  
  
 
—  
    
—  
 
    
  

    

  
  

    

Total
  
330
  
$
49,487
    
55.8
%
  
274
  
$
39,181
    
44.2
%
    
  

    

  
  

    

 
“Gross Margin” with respect to a residential mortgage loan that is an adjustable rate residential mortgage loan means the applicable fixed rate that, when added to the applicable index, results in the current interest rate paid by the borrower of such residential mortgage loan without taking into account any interest

43


Table of Contents
rate caps or minimum interest rates. The following table sets forth certain additional data with respect to the gross margin on residential mortgage loans at September 30, 2002.
 
Gross Margin of Adjustable Rate Residential Mortgage Loans
 
    
Pro Forma

 
(Dollars in thousands)

  
Number of Loans

  
Aggregate Principal Balance

    
Percentage by Aggregate Principal Balance

 
Gross Margin
                    
Greater than 3.00%
  
274
  
$
39,181
    
44.2
%
    
  

    

 
The following table provides certain delinquency and other information for the loans in our residential mortgage portfolio at September 30, 2002.
 
Residential Mortgage Loan Delinquencies
 
    
Pro Forma

 
(Dollars in thousands)

  
Number of Loans

  
Aggregate Principal Balance

  
Percent of Total

 
Delinquencies
                  
Current
  
561
  
$
84,320
  
95.1
%
1 to 30 days delinquent
  
31
  
 
3,030
  
3.4
 
31 to 60 days delinquent
  
7
  
 
863
  
1.0
 
61 to 90 days delinquent
  
1
  
 
132
  
0.1
 
Over 90 days delinquent
  
4
  
 
323
  
0.4
 
    
  

  

Total
  
604
  
$
88,668
  
100.0
%
    
  

  

 
Interest Rate Swaps
 
In December 2001, the Bank contributed receive-fixed interest rate swaps with a notional amount of $4.25 billion and a fair value of $673 million to us in exchange for 89 shares of our common stock. After the contribution, we entered into pay-fixed interest rate swaps with a notional amount of $4.25 billion that serve as an off-setting economic hedge of the contributed swaps. All interest rate swaps are entered into with the same unaffiliated third party. The receive-fixed swaps are financial derivatives contracts under which we have agreed to receive specified fixed rates on the notional amounts of the contracts in exchange for payment of floating rates on the notional amounts of the contracts to the counterparties. The pay-fixed swaps are financial derivatives contracts under which we have agreed to pay specified fixed rates on the notional amounts of the contracts in exchange for the receipt of floating rates on the notional amounts of the contracts from the counterparties. Although the pay-fixed interest rate swaps are considered an economic hedge, we expect volatility of unrealized gains and losses as a result of certain interest rate fluctuations due to a difference in fixed rates between the receive-fixed and pay-fixed interest rate swaps. Realized and unrealized gains and losses are recorded immediately in earnings as a net gain or loss on interest rate swaps. At any point in time, the fair value of the interest rate swaps is based on then-prevailing interest rates on that day compared to the fixed interest rates associated with the interest rate swaps. As a result of the difference in the fixed rates of the receive-fixed and pay-fixed interest rate swaps of 7.41% and 5.69%, respectively, our net position will always be reflected as an asset on our consolidated balance sheet.
 
Because the $4.25 billion of receive-fixed interest rate swaps reprice using the same index as the $4.25 billion of pay-fixed interest rate swaps, we have no index basis risk related to the swaps.
 
At September 30, 2002, our total credit risk, as represented by the fair value of all derivatives in a gain position, amounted to $1.2 billion. Credit risk is reduced significantly by entering into master netting

44


Table of Contents
agreements. The net fair value is the most relevant measure of credit risk when there is a master netting agreement. As our swap transactions are with one counterparty and there is a legally enforceable master netting agreement between the parties, the exposure to our counterparty represents the net of the gain and loss positions with that counterparty, which was $605 million as of September 30, 2002 all of which is substantially collateralized by cash.
 
None of the swaps are used for the purpose of hedging, but the swaps introduce no interest rate risk to us because the floating rate components of the swaps offset each other. The net effect of the swaps is to lock in a gain on which we will receive cash over the duration of the instruments.
 
We use collateral arrangements, credit approvals, limits and monitoring procedures to manage credit risk for derivatives. Collateral for dealer transactions is delivered by either party when the credit risk associated with a particular transaction, or group of transactions to the extent netting exists, exceeds defined thresholds of credit risk. Thresholds are determined based on the strength of the individual counterparty.
 
At September 30, 2002, our receive-fixed interest rate swaps with a notional amount of $4.25 billion had a weighted average maturity of 9.50 years, weighted average receive rate of 7.41% and weighted average pay rate of 1.82%. Our pay-fixed interest rate swaps with a notional amount of $4.25 billion had a weighted average maturity of 9.50 years, weighted average receive rate of 1.82% and weighted average pay rate of 5.69% at September 30, 2002. All of the interest rate swaps have variable pay or receive rates based on three- or six-month LIBOR, and they are the pay or receive rates in effect at September 30, 2002.
 
Dividend Policy
 
We expect to distribute annually an aggregate amount of dividends with respect to our outstanding capital stock equal to approximately 100% of our REIT taxable income, which excludes capital gains. In order to remain qualified as a REIT, we are required to distribute annually at least 90% of our REIT taxable income to our shareholders.
 
Dividends will be authorized and declared at the discretion of our board of directors. Factors that would generally be considered by our board of directors in making this determination are our distributable funds, financial condition and capital needs, the impact of current and pending legislation and regulations, economic conditions, tax considerations, and our continued qualification as a REIT. We currently expect that both our cash available for distribution and our REIT taxable income will be in excess of the amounts needed to pay dividends on all outstanding Series A, Series B and Series D preferred securities, even in the event of a significant drop in interest rate levels because:
 
 
Ÿ
substantially all of our mortgage assets and other authorized investments are interest-bearing;
 
 
Ÿ
we do not anticipate incurring any indebtedness, although we may incur indebtedness that in an aggregate amount does not exceed 20% of our shareholders’ equity;
 
 
Ÿ
we expect that our interest-earning assets will continue to exceed the liquidation preference of our preferred stock;
 
 
Ÿ
the amount of loan servicing costs and management fees paid to the Bank are expected to be less than 4% of our income per year; and
 
 
Ÿ
we anticipate that, in addition to cash flows from operations, additional cash will be available from principal payments on our loan portfolio.
 
Accordingly, we expect that we will, after paying the dividends on all classes of preferred securities, pay dividends to holders of shares of our common stock in an amount sufficient to comply with applicable requirements regarding qualification as a REIT. There are, however, certain limitations that restrict our ability to pay dividends on our common stock which are more fully described in this prospectus under the heading “Description of Other Wachovia Funding Capital Stock—Preferred Stock”.

45


Table of Contents
 
Under certain circumstances, including any determination that the Bank’s relationship to us results in an unsafe and unsound banking practice, the OCC will have the authority to issue an order that restricts our ability to make dividend payments to our shareholders, including holders of the Series A preferred securities. Banking capital adequacy rules limit the total dividend payments made by a consolidated banking entity to be the sum of earnings for the current year and prior two years less dividends paid during the same periods. Any dividends paid in excess of this amount can only be made with the approval of the Bank’s regulator. This could have a material adverse effect on the financial condition of the Bank due to our size and the Bank’s reliance on our payment of dividends on our common stock.
 
Conflicts of Interest and Related Management Policies and Programs
 
General    
 
In administering our loan portfolio and other authorized investments pursuant to the participation and servicing agreements, the Bank has a high degree of autonomy. The Bank has, however, adopted certain policies to guide our administration with respect to the acquisition and disposition of assets, use of capital and leverage, credit risk management, and certain other activities. These policies, which are discussed below, may be amended or revised from time to time at the discretion of our board of directors and, in certain circumstances subject to the approval of a majority of our Independent Directors, but without a vote of our shareholders, including holders of the Series A preferred securities.
 
Underwriting Standards.    Described below are underwriting standards used by the Bank or its affiliates, as applicable, to originate loans that have been or may be transferred to us from the Bank or its affiliates. We do not have lending operations. The Bank or its applicable affiliates perform all of these lending and underwriting operations.
 
Commercial and Commercial Real Estate Loans
 
“Real estate loans” are loans secured by real estate and for which the primary source of repayment is based on the quality and sufficiency of a stream of rental income from the property. The income stream from a real estate loan either amortizes the loan or permits the property’s sale or refinance. The Bank makes the following types of real estate loans:
 
 
Ÿ
office (including multi-tenant, single tenant and condominiums);
 
 
Ÿ
retail;
 
 
Ÿ
apartments;
 
 
Ÿ
commercial development;
 
 
Ÿ
warehouse/industrial (including self-storage facilities);
 
 
Ÿ
continuing care retirement communities;
 
 
Ÿ
senior living facilities;
 
 
Ÿ
lodging;
 
 
Ÿ
loans to residential builders for the purpose of developing residential home sites or construction; and
 
 
Ÿ
commercial and industrial real estate loans (where the primary source of repayment is based on the financial strength of the business operations or the borrower instead of the income stream from the real estate).
 
The Bank analyzes the borrower’s creditworthiness, repayment capacity, and adequacy of the real property provided as collateral. For each product type listed above, the Bank utilizes underwriting guidelines

46


Table of Contents
for loan-to-value, debt service coverage and amortization. These guidelines are adjusted based upon the overall market conditions or local market-specific requirements. The Bank also takes into account the following factors when underwriting real estate loans:
 
 
Ÿ
preference to lend to existing customers;
 
 
Ÿ
the risk and return to the Bank on the use of its capital;
 
 
Ÿ
preference to lend within its existing market in its franchise;
 
 
Ÿ
secondary sources of repayment, including guarantees;
 
 
Ÿ
the amount of borrower equity;
 
 
Ÿ
preference for loan terms of three years or less;
 
 
Ÿ
exposure limits per customer and project;
 
 
Ÿ
knowledge of the repayment sources, including permanent loan conditions, interest rate sensitivity and property values;
 
 
Ÿ
need for property type diversification in its portfolio; and
 
 
Ÿ
preference against financing projects with speculative market risk.
 
Home Equity Loans
 
The Bank and Wachovia Bank of Delaware, National Association (a subsidiary of Wachovia and our affiliate, which we refer to as “Wachovia Delaware”), originates and underwrites, or purchases and re-underwrites, home equity loans secured by a first, second or third mortgage primarily on the borrower’s residence. The underwriting process is intended to assess both the prospective borrower’s ability to repay and the adequacy of the real property security as collateral for the loan. Factors analyzed in determining the borrower’s ability to repay the loan include:
 
 
Ÿ
income;
 
 
Ÿ
credit history (including credit scores and credit bureau information); and
 
 
Ÿ
debt-to-income ratio.
 
Factors analyzed in determining the adequacy of the real property security include:
 
 
Ÿ
Loan-to-Value Ratio;
 
 
Ÿ
appraisals; and
 
 
Ÿ
homeowners insurance.
 
Residential Mortgage Loans
 
Wachovia Mortgage Corporation, a subsidiary of Wachovia and an affiliate of the Bank and us, which we refer to as “Wachovia Mortgage”, originates and underwrites, or purchases and re-underwrites, consumer first mortgage loans. These loans typically are used to acquire or re-finance customers’ primary residences. Wachovia Mortgage’s underwriting criteria are focused primarily on secondary market guidelines. The underwriting process is intended to assess both the prospective borrower’s ability to repay and the adequacy of the real property security as collateral for the loan. Factors analyzed in determining the borrower’s ability to repay the loan include:
 
 
Ÿ
stability of income;
 
 
Ÿ
credit history (including credit scores and credit bureau information); and
 
 
Ÿ
debt-to-income ratio.

47


Table of Contents
 
Factors analyzed in determining the adequacy of the real property security include:
 
 
Ÿ
Loan-to-Value Ratio;
 
 
Ÿ
appraisals; and
 
 
Ÿ
homeowners and title insurance.
 
Asset Acquisition and Disposition Policies.    It is our policy to purchase, or accept as capital contributions, loans or participation interests in loans from the Bank or its affiliates that generally are:
 
 
Ÿ
performing, meaning they have no more than two payments past due, if any;
 
 
Ÿ
in accrual status; and
 
 
Ÿ
secured by real property such that they are REIT Qualified Assets.
 
Our policy also allows for investment in loans or assets which are not REIT Qualified Assets up to but not exceeding the statutory limitations imposed on organizations that qualify as a REIT under the Code. In the past, we have purchased or accepted as capital contributions loans and participation interests in loans both secured and not secured by real property along with other assets. We anticipate that we will acquire, or receive as capital contributions, interests in additional real estate secured loans from the Bank or its affiliates. We may use any proceeds received in connection with the repayment or disposition of loan participation interests in our portfolio to acquire additional loans. Although we are not precluded from purchasing additional types of loans, loan participation interests or other assets, we anticipate that participation interests in additional loans acquired by us will be of the types described above under the heading “—General Description of Mortgage Assets and Other Authorized Investments; Investment Policy”. Although we are permitted to do so, we have no present plans or intentions to purchase loans or loan participation interests from unaffiliated third parties. In addition, we will not invest in assets that are not REIT Qualified Assets if such investments would cause us to violate the requirements for taxation as a REIT under the Code.
 
We may from time to time acquire a limited amount of other authorized investments. Although we currently do not intend to acquire any mortgage-backed securities representing interests in or obligations backed by pools of mortgage loans that are secured by single-family residential, multi-family or commercial real estate properties located throughout the United States, we are not restricted from doing so. We do not intend to acquire any interest-only or principal-only mortgage-backed securities. At September 30, 2002, we did not hold any mortgage-backed securities.
 
We currently anticipate that the Bank or its affiliates will continue to act as servicer of any additional loans that we acquire through purchase or participation interests. We anticipate that any servicing arrangement that we enter into in the future with the Bank or its affiliates will contain fees and other terms that most likely will be substantially equivalent to but may be more favorable to us than those that would be contained in servicing arrangements entered into with unaffiliated third parties.
 
In accordance with the terms of the commercial, commercial real estate and residential loan participation and servicing agreements, we maintain the authority to decide whether to foreclose on collateral that secures a loan. In the event we determine a foreclosure proceeding is appropriate, we may direct the Bank to prosecute the foreclosure on our behalf. Upon sale or other disposition of foreclosure property, the Bank will remit to us the proceeds less the cost of holding and selling the foreclosure property.
 
Credit Risk Management Policies.    For a description of our credit risk management policies, see below under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Governance and Administration”.
 

48


Table of Contents
Conflict of Interest Policies.    Because of the nature of our relationship with the Bank or its affiliates, it is likely that conflicts of interest will arise with respect to certain transactions, including, without limitation, our acquisition of participation interests in loans from, or disposition of participation interests in loans to, the Bank, foreclosure on defaulted loans, management of the cash collateral related to the interest rate swaps and the modification of either the participation or servicing agreements. It is our policy that the terms of any financial dealings with the Bank will be consistent with those available from third parties in the lending industry.
 
Conflicts of interest among us and the Bank or its affiliates may also arise in connection with making decisions that bear upon the credit arrangements that the Bank or its affiliates may have with a borrower under a loan. Conflicts also could arise in connection with actions taken by us or the Bank or its affiliates. It is our intention that any agreements and transactions between us on the one hand, and the Bank or its affiliates on the other hand, including, without limitation, any loan participation agreements, be fair to all parties and consistent with market terms for such types of transactions. The requirement in our certificate of incorporation that certain of our actions be approved by a majority of our Independent Directors also is intended to ensure fair dealings among us and the Bank or its affiliates. There can be no assurance, however, that any such agreement or transaction will be on terms as favorable to us as could have been obtained from unaffiliated third parties.
 
There are no provisions in our certificate of incorporation limiting any of our officers, directors, shareholders, or affiliates from having any direct or indirect pecuniary interest in any asset to be acquired or disposed of by us or in any transaction in which we have an interest or from engaging in acquiring, holding, and managing our assets. As described in this prospectus, it is expected that the Bank will have direct interests in transactions with us including, without limitation, the sale of assets to us; however, none of our officers or directors will have any interests in such mortgage assets.
 
Other Policies.    We intend to operate in a manner that will not subject us to regulation under the Investment Company Act. Therefore, we do not intend to:
 
 
Ÿ
invest in the securities of other issuers for the purpose of exercising control over such issuers;
 
 
Ÿ
underwrite securities of other issuers;
 
 
Ÿ
actively trade in loans or other investments;
 
 
Ÿ
offer securities in exchange for property; or
 
 
Ÿ
make loans to third parties, including our officers, directors or other affiliates.
 
The Investment Company Act exempts entities that, directly or through majority-owned subsidiaries, are “primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate”. We refer to these interests as “Qualifying Interests”. Under current interpretations by the staff of the SEC, in order to qualify for this exemption, we, among other things, must maintain at least 55% of our assets in Qualifying Interests and also may be required to maintain an additional 25% in Qualifying Interests or other real estate-related assets. The assets that we may acquire therefore may be limited by the provisions of the Investment Company Act. We have established a policy of limiting authorized investments which are not Qualifying Interests to no more than 20% of the value of our total assets.
 
We may, under certain circumstances, purchase the Series A preferred securities and other shares of capital stock in the open market or otherwise. We have no present intention of repurchasing any of our shares of capital stock, and any such action would be taken only in conformity with applicable Federal and state laws and regulations and the requirements for qualifying as a REIT.
 
We intend to distribute to our shareholders, in accordance with the Exchange Act, annual reports containing consolidated financial statements prepared in accordance with accounting principles generally

49


Table of Contents
accepted in the United States of America and certified by our independent auditors. Our certificate of incorporation provides that we will maintain our status as a reporting company under the Exchange Act for so long as any of the Series A preferred securities are outstanding and held by unaffiliated shareholders.
 
We currently make investments and operate our business in such a manner consistent with the requirements of the Code to qualify as a REIT. However, future economic, market, legal, tax, or other considerations may cause our board of directors, subject to approval by a majority of our Independent Directors, to determine that it is in our best interest and the best interest of our shareholders to revoke our REIT status. The Code prohibits us from electing REIT status for the four taxable years following the year of such revocation.
 
Servicing
 
The loans in our portfolio are serviced by the Bank or its affiliates pursuant to the terms of participation and servicing agreements between the Bank and its affiliates and us. The Bank has delegated servicing responsibility of the residential mortgage loans to third parties that are not affiliated with us or the Bank or its affiliates.
 
We pay the Bank a monthly loan servicing fee for its services under the terms of the loan participation and servicing agreements. The amount and terms of the fee are determined by mutual agreement of the Bank and us from time to time during the terms of the participation and servicing agreements.
 
We paid the Bank total servicing fees of $0.4 million, $1.2 million and $1.8 million for the years ended December 31, 2001, 2000, and 1999, respectively. Total servicing fees paid to the Bank for the nine months ended September 30, 2002, were $0.7 million. For 2002, the annual servicing fee with respect to the commercial real estate, commercial, and home equity loans is equal to the outstanding principal balance of each loan multiplied by a fee of 0.03% and the annual servicing fee with respect to residential mortgages is equal to $48 per loan.
 
The participation and servicing agreements require the Bank to service the loans in our portfolio in a manner substantially the same as for similar work performed by the Bank for transactions on its own behalf. The Bank or its affiliates collect and remit principal and interest payments, maintain perfected collateral positions, and submit and pursue insurance claims. The Bank and its affiliates also provide accounting and reporting services required by us for our participation interests and loans. We also may direct the Bank to dispose of any loans that become classified as non-performing, placed in a non-performing status, or are renegotiated due to the financial deterioration of the borrower. The Bank is required to pay all expenses related to the performance of its duties under the participation and servicing agreements, including any payment to its affiliates or third parties for servicing the loans.
 
In accordance with the terms of the commercial, commercial real estate and residential loan participation and servicing agreements, we maintain the authority to decide whether to foreclose on collateral that secures a loan. In the event we determine a foreclosure proceeding is appropriate, we may direct the Bank to prosecute the foreclosure on our behalf. Upon sale or other disposition of foreclosure property, the Bank will remit to us the proceeds less the cost of holding and selling the foreclosure property.
 
Competition
 
In order to qualify as a REIT under the Code, we can only be a passive investor in real estate loans and certain other assets. Thus, we will not originate loans. We anticipate that we will continue to possess interests in mortgage and other loans in addition to those in the current portfolio and that substantially all of these

50


Table of Contents
loans will be owned by the Bank, although we may purchase loans from unaffiliated third parties. Accordingly, while the Bank competes with mortgage conduit programs, investment banking firms, savings and loan associations, banks, thrift and loan associations, finance companies, mortgage bankers, or insurance companies in acquiring and originating loans, we do not. Because we will not originate loans and do not anticipate purchasing loans from unaffiliated third parties, we do not expect to compete with other REITs holding similar assets.
 
Regulatory Considerations
 
As a financial holding company and a bank holding company under the Bank Holding Company Act, Wachovia is regulated, supervised and examined by the Federal Reserve Board. For a discussion of the material elements of the regulatory framework applicable to financial holding companies, bank holding companies and their subsidiaries and specific information relevant to Wachovia, please refer to Wachovia’s annual report on Form 10-K for the fiscal year ended December 31, 2001, and any subsequent reports Wachovia files with the SEC, which are incorporated by reference in this prospectus. This regulatory framework is intended primarily for the protection of depositors and the Federal deposit insurance funds and not for the protection of security holders. As a result of this regulatory framework, Wachovia’s earnings are affected by actions of the Federal Reserve Board, the OCC, which regulates its banking subsidiaries such as the Bank, the Federal Deposit Insurance Corporation, which insures the deposits of Wachovia’s banking subsidiaries within certain limits, and the SEC, which regulates the activities of certain subsidiaries engaged in the securities business.
 
Wachovia’s earnings are also affected by general economic conditions, its management policies and legislative action.
 
In addition, there are numerous governmental requirements and regulations that affect Wachovia’s business activities. A change in applicable statutes, regulations or regulatory policy may have a material effect on Wachovia’s business.
 
Depository institutions, like Wachovia’s bank subsidiaries, are also affected by various Federal laws, including those relating to consumer protection and similar matters. Wachovia also has other financial services subsidiaries regulated, supervised and examined by the Federal Reserve Board, as well as other relevant state and Federal regulatory agencies and self-regulatory organizations. Wachovia’s non-bank subsidiaries may be subject to other laws and regulations of the Federal government or the various states in which they are authorized to do business.
 
Legal Proceedings
 
We are not the subject of any litigation. We, Wachovia and the Bank are not currently involved in nor, to our knowledge, currently threatened with any material litigation with respect to the assets included in our portfolio, other than routine litigation arising in the ordinary course of business.
 
Employees
 
We have 2 executive officers, each of whom is described further below under “Management,” and approximately 15 additional non-executive officers. Our executive officers are also executive officers of Wachovia. We do not anticipate that we will require any additional employees because employees of the Bank and its affiliates are servicing the loans under the participation and servicing agreements. All of our officers are also officers or employees of Wachovia and/or the Bank. We maintain corporate records and audited financial statements that are separate from those of the Bank. Except as borrowers under home equity or residential mortgage loans, none of our officers, employees or directors will have any direct or indirect pecuniary interest in any mortgage asset to be acquired or disposed of by us or in any transaction in which we have an interest or will engage in acquiring, holding, and managing mortgage assets. However, 113 employees of Wachovia or its affiliates, including certain of the executive officers and non-executive officers discussed above, own one Series D preferred security each.

51


Table of Contents
SELECTED CONSOLIDATED FINANCIAL DATA
 
The following selected consolidated financial data for the three years ended December 31, 2001, are derived from our audited consolidated financial statements. The following selected consolidated financial data for the two years ended December 31, 1998 and for the nine months ended September 30, 2002 and 2001, are derived from unaudited consolidated financial statements and reflect all adjustments, consisting only of normal recurring adjustments, that, in the opinion of our management, are necessary for a fair and consistent presentation of such data. Operating results for the nine months ended September 30, 2002, are not necessarily indicative of results expected for the entire year. This data should be read in conjunction with the consolidated financial statements, related notes, and other financial information beginning on page F-1 of this prospectus and Wachovia’s unaudited supplementary consolidating financial information as of and for the nine months ended September 30, 2002, and the years ended December 31, 2001 and 2000, which includes certain consolidated financial information for the Bank, beginning on Page F-22 of this prospectus.
 
    
Nine Months Ended
September 30,

    
Years Ended December 31,

 
(In thousands, except per share data)

  
2002

    
2001

    
2001

    
2000

    
1999

    
1998

    
1997

 
Income Statement Data
                                                  
Net interest income
  
$
127,098
 
  
43,374
 
  
67,322
 
  
57,257
 
  
47,005
 
  
47,520
 
  
47,370
 
Provision for loan losses
  
 
7,033
 
  
6,290
 
  
5,262
 
  
3,602
 
  
1,034
 
  
1,099
 
  
(228
)
Other income (loss)
  
 
68,356
 
  
—  
 
  
(95,890
)
  
395
 
  
96
 
  
(172
)
  
669
 
Noninterest expense
  
 
6,597
 
  
1,013
 
  
2,394
 
  
2,207
 
  
3,078
 
  
3,083
 
  
2,953
 
Net income (loss)
  
$
305,936
 
  
23,446
 
  
(23,545
)
  
32,434
 
  
27,951
 
  
28,057
 
  
29,458
 
    


  

  

  

  

  

  

Balance Sheet Data
                                                  
Cash and cash equivalents
  
$
1,169,380
 
  
327,057
 
  
957,454
 
  
183,223
 
  
196,397
 
  
97,978
 
  
187,992
 
Loans, net of unearned income
  
 
4,297,280
 
  
440,040
 
  
4,378,961
 
  
558,756
 
  
512,858
 
  
586,616
 
  
483,904
 
Allowance for loan losses
  
 
(37,335
)
  
(5,655
)
  
(37,158
)
  
(3,833
)
  
(1,285
)
  
(849
)
  
(541
)
Interest rate swaps
  
 
605,438
 
  
—  
 
  
573,620
 
  
—  
 
  
—  
 
  
—  
 
  
—  
 
Total assets
  
 
6,071,086
 
  
775,039
 
  
5,889,666
 
  
746,803
 
  
714,097
 
  
686,269
 
  
690,241
 
Collateral held on interest rate swaps
  
 
599,570
 
  
—  
 
  
570,340
 
  
—  
 
  
—  
 
  
—  
 
  
—  
 
Total liabilities
  
 
606,938
 
  
5,082
 
  
732,246
 
  
283
 
  
—  
 
  
115
 
  
32,144
 
Total stockholders’ equity
  
$
5,464,148
 
  
769,957
 
  
5,157,420
 
  
746,520
 
  
714,097
 
  
686,154
 
  
658,097
 
    


  

  

  

  

  

  

Selected Other Information
                                                  
Nonperforming loans
  
$
16,425
 
  
2,882
 
  
5,024
 
  
2,684
 
  
3,733
 
  
2,910
 
  
6,603
 
Nonperforming loans as a % of total loans
  
 
0.38
%
  
0.65
 
  
0.11
 
  
0.48
 
  
0.73
 
  
0.50
 
  
1.36
 
Nonperforming loans as a % of total assets
  
 
0.27
 
  
0.37
 
  
0.09
 
  
0.36
 
  
0.52
 
  
0.42
 
  
0.96
 
Allowance for loan losses as a % of nonperforming loans
  
 
227.31
 
  
196.22
 
  
739.61
 
  
142.81
 
  
34.42
 
  
29.18
 
  
8.19
 
Allowance for loan losses as a % of total loans
  
 
0.87
%
  
1.29
 
  
0.85
 
  
0.69
 
  
0.25
 
  
0.14
 
  
0.11
 
    


  

  

  

  

  

  

52


Table of Contents
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
 
The unaudited pro forma condensed consolidated financial information includes our historical consolidated balance sheet as of September 30, 2002, and our historical consolidated statements of income for the nine months ended September 30, 2002, and the year ended December 31, 2001, each giving effect to the issuance of our Series A, Series B and Series C preferred securities in exchange for loan participations, as if such transactions had occurred at the beginning of the period presented.
 
These unaudited pro forma results include management’s best estimate of the impact of the issuance of the Series A, Series B and Series C preferred securities in exchange for loan participations and the issuance of our Series D preferred securities. The unaudited pro forma condensed consolidated financial information may not be indicative of the financial position or results of operations that actually would have occurred had the transactions been consummated during the period or as of the date indicated, or which will be attained in the future. The unaudited pro forma condensed consolidated financial information should be read in conjunction with our historical consolidated financial statements, which appear elsewhere in this prospectus.

53


Table of Contents
WACHOVIA PREFERRED FUNDING CORP.
AND SUBSIDIARY
PRO FORMA COMBINED BALANCE SHEET
(Unaudited)
 
The following unaudited pro forma combined balance sheet combines our historical consolidated balance sheet as of September 30, 2002, with the transactions described in the accompanying note to the pro forma condensed consolidated financial information, including the issuance of our Series A, B and C preferred securities to Wachovia Preferred Holding.
 
    
September 30, 2002

 
(In thousands)

  
Wachovia
Funding

    
Pro Forma
Adjustments

    
Wachovia
Funding
Combined

 
ASSETS
                      
Cash and cash equivalents
  
$
1,169,380
 
  
(866,053
)
  
303,327
 
Loans
  
 
4,302,947
 
  
6,497,966
 
  
10,800,913
 
Intercompany loan to Bank secured by participation interests in home equity loans
  
 
—  
 
  
866,053
 
  
866,053
 
    


  

  

Total loans
  
 
4,302,947
 
  
7,364,019
 
  
11,666,966
 
Unearned income
  
 
(5,667
)
  
—  
 
  
(5,667
)
    


  

  

Loans, net of unearned income
  
 
4,297,280
 
  
7,364,019
 
  
11,661,299
 
Allowance for loan losses
  
 
(37,335
)
  
(63,895
)
  
(101,230
)
    


  

  

Loans, net
  
 
4,259,945
 
  
7,300,124
 
  
11,560,069
 
    


  

  

Interest rate swaps
  
 
605,438
 
  
—  
 
  
605,438
 
Accounts receivable—affiliates
  
 
22,274
 
  
—  
 
  
22,274
 
Other assets
  
 
14,049
 
  
—  
 
  
14,049
 
    


  

  

Total assets
  
$
6,071,086
 
  
6,434,071
 
  
12,505,157
 
    


  

  

LIABILITIES AND STOCKHOLDERS’ EQUITY
                      
Liabilities
                      
Collateral held on interest rate swaps
  
 
599,570
 
  
—  
 
  
599,570
 
Other liabilities
  
 
7,368
 
  
—  
 
  
7,368
 
    


  

  

Total liabilities
  
 
606,938
 
  
—  
 
  
606,938
 
    


  

  

Stockholders’ equity
                      
Preferred stock
                      
Series A preferred securities, $0.01 par value, $25.00 liquidation preference, non-cumulative and conditionally exchangeable, 30,000,000 shares authorized, issued and outstanding
  
 
—  
 
  
300
 
  
300
 
Series B preferred securities, $0.01 par value, $25.00 liquidation preference, non-cumulative and conditionally exchangeable, 40,000,000 shares authorized, issued and outstanding
  
 
—  
 
  
400
 
  
400
 
Series C preferred securities, $0.01 par value, $1,000 liquidation preference, cumulative, 5,000,000 shares authorized, 4,254,413 shares issued and outstanding
  
 
—  
 
  
43
 
  
43
 
Series D preferred securities, $0.01 par value, $1,000 liquidation preference, non-cumulative, 913 shares authorized, issued and outstanding
  
 
—  
 
  
—  
 
  
—  
 
Common stock, $.01 par value, 100,000,000 shares authorized, 99,999,900 shares issued and outstanding
  
 
1,000
 
  
—  
 
  
1,000
 
Paid-in capital
  
 
5,086,474
 
  
6,433,328
 
  
11,519,802
 
Retained earnings
  
 
376,674
 
  
—  
 
  
376,674
 
    


  

  

Total stockholders’ equity
  
 
5,464,148
 
  
6,434,071
 
  
11,898,219
 
    


  

  

Total liabilities and stockholders’ equity
  
$
6,071,086
 
  
6,434,071
 
  
12,505,157
 
    


  

  

 
See accompanying note to pro forma condensed consolidated financial information.

54


Table of Contents
WACHOVIA PREFERRED FUNDING CORP.
AND SUBSIDIARY
PRO FORMA COMBINED STATEMENT OF INCOME
(Unaudited)
 
The following unaudited pro forma combined statement of income combines our historical consolidated statement of income for the nine months ended September 30, 2002, with the transactions described in the accompanying note to the pro forma condensed consolidated financial information.
 
    
Nine Months Ended September 30, 2002

(In thousands, except per share data and average shares)

  
Wachovia Funding

    
Pro Forma
Adjustments

    
Wachovia
Funding
Combined

INTEREST INCOME
  
$
135,385
 
  
220,326
 
  
355,711
INTEREST EXPENSE
  
 
8,287
 
  
—  
 
  
8,287
    


  

  
Net interest income
  
 
127,098
 
  
220,326
 
  
347,424
Provision for loan losses
  
 
7,033
 
  
—  
 
  
7,033
    


  

  
Net interest income after provision for loan losses
  
 
120,065
 
  
220,326
 
  
340,391
    


  

  
OTHER INCOME
                    
Gain on interest rate swaps
  
 
68,352
 
  
—  
 
  
68,352
Other income
  
 
4
 
  
—  
 
  
4
    


  

  
Total other income
  
 
68,356
 
  
—  
 
  
68,356
    


  

  
NONINTEREST EXPENSE
                    
Loan servicing costs
  
 
1,082
 
  
1,357
 
  
2,439
Management fees
  
 
4,371
 
  
5,482
 
  
9,853
Other
  
 
1,144
 
  
—  
 
  
1,144
    


  

  
Total noninterest expense
  
 
6,597
 
  
6,839
 
  
13,436
    


  

  
Income before income tax expense (benefit)
  
 
181,824
 
  
213,487
 
  
395,311
Income tax expense (benefit)
  
 
(124,112
)
  
148,035
 
  
23,923
    


  

  
Net income
  
 
305,936
 
  
65,452
 
  
371,388
Dividends on preferred securities
  
 
—  
 
  
152,397
 
  
152,397
    


  

  
Net income available to common stockholders
  
$
305,936
 
  
(86,945
)
  
218,991
    


  

  
PER COMMON SHARE DATA
                    
Basic earnings
  
$
3.06
 
  
—  
 
  
2.19
Diluted earnings
  
$
3.06
 
  
—  
 
  
2.19
AVERAGE SHARES
                    
Basic
  
 
99,999,900
 
  
—  
 
  
99,999,900
Diluted
  
 
99,999,900
 
  
—  
 
  
99,999,900
    


  

  
 
See accompanying note to pro forma condensed consolidated financial information.

55


Table of Contents
WACHOVIA PREFERRED FUNDING CORP.
AND SUBSIDIARY
PRO FORMA COMBINED STATEMENT OF INCOME (LOSS)
(Unaudited)
 
The following unaudited pro forma combined statement of income (loss) combines our historical consolidated statement of income (loss) for the year ended December 31, 2001, with the transactions described in the accompanying note to the pro forma condensed consolidated financial information.
 
    
Year Ended December 31, 2001

 
(In thousands, except per share data and average shares)

  
Wachovia Funding

    
Pro Forma
Adjustments

    
Wachovia
Funding
Combined

 
INTEREST INCOME
  
$
68,179
 
  
216,053
 
  
284,232
 
INTEREST EXPENSE
  
 
857
 
  
—  
 
  
857
 
    


  

  

Net interest income
  
 
67,322
 
  
216,053
 
  
283,375
 
Provision for loan losses
  
 
5,262
 
  
—  
 
  
5,262
 
    


  

  

Net interest income after provision for loan losses
  
 
62,060
 
  
216,053
 
  
278,113
 
    


  

  

OTHER INCOME
                      
Loss on interest rate swaps
  
 
(95,890
)
  
—  
 
  
(95,890
)
    


  

  

Total other income
  
 
(95,890
)
  
—  
 
  
(95,890
)
    


  

  

NONINTEREST EXPENSE
                      
Loan servicing costs
  
 
602
 
  
1,293
 
  
1,895
 
Other
  
 
1,792
 
  
—  
 
  
1,792
 
    


  

  

Total noninterest expense
  
 
2,394
 
  
1,293
 
  
3,687
 
    


  

  

Income (loss) before income tax benefit
  
 
(36,224
)
  
214,760
 
  
178,536
 
Income tax benefit
  
 
(12,679
)
  
(20,883
)
  
(33,562
)
    


  

  

Net income (loss)
  
 
(23,545
)
  
235,643
 
  
212,098
 
Dividends on preferred securities
  
 
—  
 
  
203,196
 
  
203,196
 
    


  

  

Net income (loss) available to common stockholders
  
$
(23,545
)
  
32,447
 
  
8,902
 
    


  

  

PER COMMON SHARE DATA
                      
Basic earnings
  
$
(1.07
)
  
—  
 
  
0.41
 
Diluted earnings
  
$
(1.07
)
  
—  
 
  
0.41
 
AVERAGE SHARES
                      
Basic
  
 
21,925,904
 
  
—  
 
  
21,925,904
 
Diluted
  
 
21,925,904
 
  
—  
 
  
21,925,904
 
    


  

  

 
See accompanying note to pro forma condensed consolidated financial information.

56


Table of Contents
WACHOVIA PREFERRED FUNDING CORP.
AND SUBSIDIARY
NOTE TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
September 30, 2002 and December 31, 2001
 
NOTE 1:    DESCRIPTION OF PRO FORMA ADJUSTMENTS
 
The pro forma adjustments assume the issuance of Series A and Series B preferred securities with a $25.00 liquidation preference and Series C preferred securities with a $1,000 liquidation preference, to Wachovia Preferred Holding.
 
It has been assumed that Wachovia Preferred Holding will pay $25.00 per Series A and Series B preferred security and $1,000 per Series C preferred security. Wachovia Preferred Holding's payment for the three Series of preferred securities will be in the form of additional participation interests in commercial and commercial real estate loans. We intend to hold these participation interests as long-term investments.
 
This pro forma condensed consolidated financial information assumes that Wachovia Preferred Holding receives all 30,000,000 Series A preferred securities, all 40,000,000 Series B preferred securities and 4,254,413 Series C preferred securities in exchange for commercial and commercial real estate loan participation interests, which have a book value of approximately $6.5 billion and a fair market value of approximately $6.0 billion.
 
Wachovia Preferred Holding, a statutory underwriter, will sell 15,000,000 Series A preferred securities through underwriters to the public for cash consideration of $25.00 per preferred security. We will not receive any proceeds from the sale of our Series A preferred securities owned by Wachovia Preferred Holding. The proceeds, before expenses and commissions to be received by Wachovia Preferred Holding from the sale of 15,000,000 Series A preferred securities, are expected to be $375 million. Wachovia Preferred Holding will pay all expenses and underwriting discounts and commissions related to the public offering of the preferred securities.
 
Pro forma combined balance sheet adjustments include: (i) cash of $866 million loaned to the Bank and secured by participation interests in home equity loans; and (ii) participation interests in commercial and commercial real estate loans with a book value of $6.5 billion, received by us in exchange for the issuance to Wachovia Preferred Holding of $750 million, $1.0 billion and $4.3 billion in Series A, Series B and Series C preferred securities, respectively, and a related increase in paid-in capital of $430 million reflecting the excess of the book value of the loan participations over the fair market value of the loan participations or the liquidation preference of the Series A, Series B and Series C preferred securities. The adjustments also include an additional allowance for loan losses of $64 million related to the participation interests in home equity loans and commercial and commercial real estate loans referred to in (i) and (ii).
 
Pro forma combined statement of income adjustments include interest income of $220 million and $216 million for the nine months ended September 30, 2002, and the year ended December 31, 2001, respectively, representing the interest assumed to be earned on the $866 million loan to the Bank secured by participation interests in home equity loans net of loan servicing costs and management fees and the $6.5 billion participation interests in commercial and commercial real estate loans contributed, and $6.8 million and $1.3 million of loan servicing costs and management fees for the nine months ended September 30, 2002, and the year ended December 31, 2001, respectively, representing additional estimated expenses that would have been incurred on the $6.5 billion in commercial and commercial real estate loans contributed, and dividends on preferred securities of $152 million and $203 million for the nine months ended September 30, 2002, and the year ended December 31, 2001, respectively. Management fees represent reimbursement to Wachovia for general overhead expenses paid on our behalf that are charged by Wachovia to affiliates that have over $10

57


Table of Contents
million in assets and over $2 million in estimated noninterest expense. In 2001, we did not meet the second of these criteria and were not charged a management fee, accordingly, we did not include a pro forma adjustment for management fees for 2001. We expect to meet these criteria in 2002 and as a result, we included a pro forma adjustment for management fees for 2002. The income and expense adjustments were estimated on the received and contributed loan participations as if they had been outstanding during each period, unless the underlying loans were originated during the respective period. In cases where the underlying loans were originated during either period, we estimated income from the date of origination to the end of the respective period. Approximately $2.6 billion of the commercial and commercial real estate loan participations contributed were from a recent merger where no origination data was available for early 2001, therefore no income was estimated for those loan participations for 2001. Income on these loan participations was $73 million for the nine months ended September 30, 2002, and resulted in pro forma adjustments of $586,000 and $2.4 million of loan servicing costs and management fees, respectively. The weighted average yield for 2001 was 6% compared with 4% for the nine months ended September 30, 2002, which offsets income not included for 2001. The impact of these items results in similar interest income in both periods in the accompanying pro forma combined statements of income. For the nine months ended September 30, 2002, an income tax benefit of $124 million associated with our change in tax status from a taxable corporation to a REIT has been eliminated. In addition, for the nine months ended September 30, 2002, and the year ended December 31, 2001, an income tax expense (benefit) of $24 million and ($34) million, respectively, is provided to the extent of the income or loss of our taxable REIT subsidiary, Wachovia Preferred Realty, LLC (“WPR”). Because WPR’s assets consist primarily of our interest rate swap assets, our income tax expense (benefit) is based on our income from these assets. No income tax expense is provided on the remainder of our income due to our status as a REIT.
 
The interest income estimates are equal to the actual interest income earned on the loan to the Bank secured by home equity loan participations net of loan servicing costs and management fees, and commercial and commercial real estate loan participations for the nine months ended September 30, 2002, and the year ended December 31, 2001 (except as noted above). Loan servicing costs and management fees represent estimates based on actual costs for the nine months ended September 30, 2002, and the year ended December 31, 2001.

58


Table of Contents
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Selected Consolidated Financial Data” and our audited and unaudited consolidated financial statements and related notes included elsewhere in this prospectus. In addition to historical information, the discussion in this prospectus contains certain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated by these forward-looking statements due to factors including, but not limited to, those factors set forth under “Risk Factors” and elsewhere in this prospectus. See also “Forward-Looking Statements”.
 
The financial information presented in this section is derived from our historical consolidated financial statements and has not been adjusted for the effect of the issuance of our four series of preferred securities or the related contributions of loan participations.
 
For the tax year ending December 31, 2002, we will be taxed as a REIT, and we intend to comply with the relevant provisions of the Code to be taxed as a REIT. Accordingly, with the exception of the income of our taxable REIT subsidiary, WPR, we will not be subject to Federal income tax on net income currently distributed to shareholders to the extent we meet these provisions, including distributing the majority of our earnings to shareholders and satisfying certain asset, income and stock ownership tests. As a result of our change in tax status from a taxable corporation to a REIT, our net deferred tax liability as of December 31, 2001, was written off as a benefit to income tax expense in January 2002. Due to the establishment of WPR in October 2002, a deferred tax expense will be recorded to establish the initial deferred tax liability on the book versus tax basis differences of the assets contributed to WPR. In addition, we will incur Federal income tax to the extent of the earnings of WPR.
 
Critical Accounting Policies
 
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. We have identified the allowance for loan losses as a significant policy that involves a significant amount of judgment and requires use of estimates that are difficult to validate by reference to outside sources, which is discussed below. We also identified the accounting for nonperforming assets and derivatives as policies that impact our business.
 
Allowance for Loan Losses
 
The allowance for loan losses is maintained at a level that we believe is adequate to cover probable losses inherent in the loan portfolio as of the respective dates of the consolidated financial statements. We employ a variety of techniques as well as our judgment in assessing the adequacy of the allowance. Our methodology for assessing the adequacy of the allowance is comprised of both an allocated and an unallocated component. The allocated component of the allowance for commercial loans is based principally on current loan grades and historical loss rates. For residential loans, it is based on loan payment status and historical loss rates. The unallocated component of the allowance represents the results of analyses that estimate probable losses inherent in the portfolio that are not fully captured in the allocated allowance. These analyses include industry concentrations, model imprecision and the estimated impact of current economic conditions on historical loss rates. We continuously monitor trends in the loan portfolio including trends in the levels of past due, criticized and nonperforming loans. The trends in these factors are used to evaluate the reasonableness of the unallocated component.
 
We believe we have developed appropriate policies and processes in the determination of an allowance for loan losses reflective of our assessment of credit risk after careful consideration of known relevant facts and trends. In developing this assessment, we must rely on estimates and exercise judgment regarding matters where the ultimate outcome is unknown. Depending on changes in circumstances, future assessments of credit risk may yield materially different results that may result in increases or decreases in the allowance for loan losses.

59


Table of Contents
 
Nonperforming Assets
 
Nonperforming assets consist of underlying loans that no longer accrue interest. The accrual of interest is generally discontinued on loans, except residential loans, that become 90 days past due as to principal or  interest unless collection of both principal and interest is assured by way of collateralization, guarantees or other security. Generally, loans past due 180 days or more are classified as nonaccrual regardless of security. Home equity loans that become 120 days past due are generally charged to the allowance for loan losses. When borrowers demonstrate over an extended period the ability to repay a loan in accordance with the contractual terms of a loan classified as nonaccrual, the loan is returned to accrual status. When loans or participation interests in loans are obtained from the Bank, the underlying loans are performing at the date of purchase.
 
The participation and servicing agreements require the Bank to service loan portfolios in a manner substantially the same as for similar work performed by the Bank for transactions on its own behalf. The Bank collects and remits principal and interest payments, maintains perfected collateral positions, and submits and pursues insurance claims. The Bank also provides to us accounting and reporting services required by our participations. We also may direct the Bank to dispose of any underlying loan that becomes classified as nonaccrual, is placed in a nonperforming status, or is renegotiated due to the financial deterioration of the borrower. The Bank is required to pay all expenses related to the performance of its duties under the participation and servicing agreements. In accordance with the terms of the commercial, commercial real estate and residential loan participation and servicing agreements, we maintain the authority to decide whether to foreclose on collateral that secures a loan. In the event we determine a foreclosure proceeding is appropriate, we may direct the Bank to prosecute the foreclosure on our behalf. Upon sale or other disposition of foreclosure property, the Bank will remit to us the proceeds less the cost of holding and selling the foreclosure property.
 
Derivatives
 
We account for derivative financial instruments in accordance with Statement of Financial Accounting Standards (referred to as “SFAS”) No. 133, Accounting for Derivative Instruments and Hedging Activities, as subsequently amended by SFAS 137 and SFAS 138, which establishes accounting and reporting standards for derivatives and hedging activities. Under SFAS 133, all of our derivatives (currently consisting of interest rate swaps) are recorded at fair value in the balance sheet. When we have more than one transaction with a counterparty and there is a legally enforceable master netting agreement between the parties, the net of the gain and loss positions are recorded as an asset or liability on our consolidated balance sheet. Realized and unrealized gains and losses are recorded as a net gain or loss on interest rate swaps on our consolidated statement of operations.
 
In December 2001, the Bank contributed receive-fixed interest rate swaps with a notional amount of $4.25 billion and a fair value of $673 million to us in exchange for common stock. The unaffiliated counterparty to the receive-fixed interest rate swaps provided cash collateral to us. We pay interest to the counterparty on the collateral at a short-term market rate. We also invest the cash in overnight eurodollar investments and earn a short-term market rate. After the contribution of the receive-fixed interest rate swaps, we entered into pay-fixed interest rate swaps with a notional amount of $4.25 billion that serve as an economic hedge of the contributed swaps. All interest rate swaps are transacted with the same unaffiliated third party. Prior to the time that we entered into the pay-fixed interest rate swaps, we realized a decrease in fair value of $95.6 million in the receive-fixed interest rate swaps as a result of changes in then-prevailing interest rates.
 
At September 30, 2002, receive-fixed interest rate swaps with a notional amount of $4.25 billion had a weighted average maturity of 9.5 years, weighted average receive rate of 7.41% and weighted average pay rate of 1.82%. Pay-fixed interest rate swaps with a notional amount of $4.25 billion had a weighted average maturity of 9.5 years, weighted average receive rate of 1.82% and weighted average pay rate of 5.69% at September 30, 2002. All of the interest rate swaps have variable pay or receive rates based on three- or six-month LIBOR, and they are the pay or receive rates in effect at September 30, 2002.

60


Table of Contents
 
Although the pay-fixed interest rate swaps are considered an economic hedge, we expect volatility of unrealized gains and losses as a result of certain interest rate fluctuations due to a difference in fixed rates between the receive-fixed and pay-fixed interest rate swaps. At any point in time, the fair value of the interest rate swaps is based on then-prevailing interest rates on that day compared to the fixed interest rates associated with the interest rate swaps. As a result of the difference in the fixed rates of the receive-fixed and pay-fixed interest rate swaps of 7.41% and 5.69%, respectively, our net position will always be reflected as an asset on our consolidated balance sheet. At September 30, 2002, our net position was an asset of $605 million.
 
Results of Operations
 
For purposes of this discussion, the term “residential loans” includes home equity loans and residential mortgages and the term “commercial loans” includes commercial and commercial real estate loans. See Table 1 in “— Accounting and Regulatory Matters” for certain performance and dividend payout ratios for the nine months ended September 30, 2002 and 2001, and for the two years ended December 31, 2001.
 
2002 to 2001 Nine Month Comparison
 
Interest Income.    Interest income increased $92.0 million from the first nine months of 2001, or 212%, to $135.4 million in the first nine months of 2002. Interest on commercial loans increased to $101.1 million in the first nine months of 2002 from zero in the first nine months of 2001 representing nine months of interest in 2002 on commercial loans contributed to us by the Bank in December 2001. Interest on residential loans decreased $11.9 million, or 34%, to $23.1 million in the first nine months of 2002 from $35.0 million in the first nine months of 2001 as a result of a decrease in residential loan balances and a declining interest rate environment. Interest income on cash invested in overnight eurodollar investments increased $2.8 million, or 33%, in the first nine months of 2002 to $11.2 million from the first nine months of 2001 due to cash investment balances increasing from loan collections and cash received in December 2001 as collateral for interest rate swaps.
 
The average balances, interest income and rates related to interest-earning assets for the nine months ended September 30, 2002 and 2001, are presented below.
 
    
Nine Months Ended
September 30, 2002

      
Nine Months Ended
September 30, 2001

 
(In thousands)

  
Average
Balance

  
Interest Income

  
Rate

      
Average Balance

  
Interest Income

  
Rate

 
Loan participations
                                       
Commercial and commercial real estate loans
  
$
4,082,323
  
101,102
  
3.31
%
    
$
—  
  
—  
  
%
Home equity loans
  
 
244,783
  
18,058
  
9.86
 
    
 
371,575
  
27,460
  
9.90
 
    

  
           

  
      
Total loan participations
  
 
4,327,106
  
119,160
  
3.68
 
    
 
371,575
  
27,460
  
9.90
 
    

  
           

  
      
Residential mortgages
  
 
100,532
  
5,038
  
6.68
 
    
 
133,585
  
7,507
  
7.49
 
Interest-bearing deposits in banks
  
 
1,047,483
  
11,187
  
1.43
 
    
 
253,011
  
8,407
  
4.44
 
    

  
           

  
      
Total interest-earning assets
  
$
5,475,121
  
135,385
  
3.31
%
    
$
758,171
  
43,374
  
7.65
%
    

  
  

    

  
  

 
Interest Expense.    Interest expense increased to $8.3 million in the first nine months of 2002 from zero in the first nine months of 2001 representing interest paid on cash collateral received related to interest rate swaps that were contributed in December 2001. Interest is paid based on a short-term market rate.
 
Gain on Interest Rate Swaps.    The gain on interest rate swaps was $68.4 million in the first nine months of 2002 compared with zero in the first nine months of 2001 representing the net increase in fair value of interest rate swaps. The receive-fixed interest rate swaps were contributed to us by the Bank in December 2001 and the pay-fixed interest rate swaps were entered into by us shortly thereafter as an economic hedge. See “—Critical Accounting Policies—Derivatives” above for more information.

61


Table of Contents
 
Loan Servicing Costs.    Loan servicing costs increased $0.7 million, or 151%, to $1.1 million in the first nine months of 2002 from $0.4 million in the first nine months of 2001 due to higher average loans from the commercial loan contribution in December 2001 and an increase in fees paid for residential loan servicing. The loans are serviced by the Bank pursuant to our participation and servicing agreements. For commercial loans, the fee is equal to the average outstanding principal balance of each loan multiplied by 0.03%.
 
Management Fees.    Management fees were $4.4 million in the first nine months of 2002 compared with zero in the first nine months of 2001. Management fees represent reimbursements to Wachovia for general overhead expenses paid on our behalf, plus a 10% markup to represent an arm’s length fee. The management fee is charged by Wachovia to affiliates that have over $10 million in assets and over $2 million in estimated annual noninterest expense. In 2001, we did not meet the second of those criteria and were not charged a management fee. We anticipate that we will meet both of these criteria in the future, and accordingly, we will continue to incur management fee expense.
 
Other Expense.    Other expense increased $0.6 million, or 97%, to $1.1 million in the first nine months of 2002. Foreclosure expense increased $0.7 million due to additional costs associated with foreclosures related to a declining residential portfolio. Additionally, 2001 included $0.3 million for net losses on loan sales, of which there were none in the first nine months of 2002.
 
Income Tax Expense.    Income tax expense decreased $136.7 million to a benefit of $124.1 million in the first nine months of 2002 from the first nine months of 2001 as a result of a change in tax status from a taxable corporation to a REIT in 2002. The benefit of $124.1 million in the first nine months of 2002 relates to the reversal of the net deferred tax liability as of December 31, 2001 in January 2002 on our becoming a REIT.
 
2001 to 2000 Twelve Month Comparison
 
Interest Income.    Interest income increased $10.9 million from 2000, or 19%, to $68.2 million in 2001. Interest income on commercial loans increased to $12.5 million in 2001 from zero in 2000 representing one month of interest in 2001 on commercial loans that were contributed by the Bank in December 2001. Interest income on residential loans increased $4.5 million, or 11.3%, from 2000 to $44.8 million in 2001 as a result of a full year of interest on $400 million in higher yielding home equity loans purchased from the Bank in August 2000. Interest income on cash invested in overnight eurodollar investments decreased $6.1 million, or 35.7%, from 2000 to $10.9 million in 2001 due to the lower interest rate environment.
 
The average balances, interest income and rates related to interest-earning assets for the two years ended December 31, 2001, are presented below.
 
    
Year Ended
December 31, 2001

    
Year Ended
December 31, 2000

 
(In thousands)

  
Average
Balance

  
Interest
Income

  
Rate

    
Average Balance

  
Interest
Income

  
Rate

 
Loan participations
                                     
Commercial and commercial real estate loans
  
$
338,233
  
12,456
  
3.68
%
  
$
—  
  
—  
  
—  
%
Home equity loans
  
 
352,778
  
35,098
  
9.95
 
  
 
174,750
  
20,659
  
11.82
 
    

  
         

  
      
Total loan participations
  
 
691,011
  
47,554
  
6.88
 
  
 
174,750
  
20,659
  
11.82
 
    

  
         

  
      
Residential mortgages
  
 
131,756
  
9,714
  
7.37
 
  
 
276,777
  
19,621
  
7.09
 
Interest-bearing deposits in banks
  
 
269,689
  
10,911
  
4.05
 
  
 
273,008
  
16,977
  
6.22
 
    

  
         

  
      
Total interest-earning assets
  
$
1,092,456
  
68,179
  
6.24
%
  
$
724,535
  
57,257
  
7.90
%
    

  
  

  

  
  

62


Table of Contents
 
The dollar amount of change in interest income related to our interest-earning assets for the two years ended December 31, 2001, is presented below.
 
    
2001 Compared to 2000

    
2000 Compared to 1999

 
    
Interest Income Variance

    
Variance
Attributable to (a)

    
Interest Income
Variance

    
Variance Attributable to (a)

 
(In thousands)

     
Rate

    
Volume

       
Rate

    
Volume

 
Earning Assets
                                           
Commercial and commercial real estate loans
  
$
12,456
 
  
6,228
 
  
6,228
 
  
—  
 
  
—  
 
  
—  
 
Home equity loans
  
 
14,439
 
  
(4,940
)
  
19,379
 
  
15,822
 
  
3,576
 
  
12,246
 
Residential mortgages
  
 
(9,907
)
  
579
 
  
(10,486
)
  
(13,662
)
  
(202
)
  
(13,460
)
Interest-bearing deposits in banks
  
 
(6,066
)
  
(5,896
)
  
(170
)
  
8,037
 
  
2,918
 
  
5,119
 
    


  

  

  

  

  

Total earning assets
  
$
10,922
 
  
(4,029
)
  
14,951
 
  
10,197
 
  
6,292
 
  
3,905
 
    


  

  

  

  

  


(a)
Changes attributable to rate/volume are allocated to both rate and volume on an equal basis.
 
Interest Expense.    Interest expense increased to $0.9 million in 2001 from zero in 2000 representing approximately one month of interest paid on cash collateral received related to interest rate swaps that were contributed in December 2001. Interest is paid based on a short-term market rate.
 
Loss on Interest Rate Swaps.    The loss on interest rate swaps was $95.9 million in 2001 representing the decrease in fair value of the receive-fixed interest rate swaps contributed to us by the Bank in December 2001 between the time the contribution was made and the time we entered into pay-fixed interest rate swaps that serve as an economic hedge of the contributed receive-fixed interest rate swaps. See “—Critical Accounting Policies—Derivatives” above for more information.
 
Loan Servicing Costs.    Loan servicing costs decreased $0.8 million, or 57%, to $0.6 million in 2001 from $1.4 million in 2000 due to the Bank entering into a lower cost sub-servicing agreement in February 2001. The loans are serviced by the Bank pursuant to our participation and servicing agreements. For commercial loans, the fee is equal to the average outstanding principal balance of each loan multiplied by 0.03%.
 
Management Fees.    Management fees were zero in 2001 compared with $0.8 million in 2000. As described above, in 2001 we did not meet the second of Wachovia’s criteria for assessment of a management fee.
 
Other Income.    Other income decreased to zero in 2001 from $0.4 million in 2000 due to 2000 including $0.5 million net gains on loan sales of which there were none in 2001.
 
Other Expense.    Other expense increased to $1.8 million in 2001 from zero in 2000 primarily due to $0.4 million in increased foreclosure expense, $0.4 million in losses on loan sales, and $1 million paid to the Bank in consideration for the Bank providing a guaranty of our obligations under the receive-fixed interest rate swaps before we entered into the pay-fixed interest rate swaps. The guaranty fee is equal to 0.03% multiplied by the absolute value of the net notional amount of the interest rate swaps.
 
2000 to 1999 Twelve Month Comparison
 
Interest Income.    Interest income increased $10.2 million from 1999, or 22%, to $57.3 million in 2000. Interest income on residential loans increased $2.2 million, or 5.7%, from 1999 to $40.3 million in 2000 due to four months of interest on $400 million of a participation interest in higher yielding home equity loans purchased from the Bank in August 2000, slightly offset by lower residential mortgage loan balances and a declining interest rate environment. Interest income on cash invested in overnight eurodollar investments increased $8 million in 2000 to $17 million from 1999 due to higher cash investment balances.

63


Table of Contents
 
The average balances, interest income and rates related to interest-earning assets for the two years ended December 31, 2000, are presented below.
 
    
Year Ended
December 31, 2000

    
Year Ended
December 31, 1999

 
(In thousands)

  
Average
Balance

  
Interest Income

  
Rate

    
Average Balance

  
Interest Income

  
Rate

 
Loan participations
                                     
Commercial and commercial real estate loans
  
$
—  
  
—  
  
—  
%
  
$
—  
  
—  
  
—  
%
Home equity loans
  
 
174,750
  
20,659
  
11.82
 
  
 
55,496
  
4,837
  
8.72
 
    

  
  

  

  
  

Total loan participations
  
 
174,750
  
20,659
  
11.82
 
  
 
55,496
  
4,837
  
8.72
 
    

  
  

  

  
  

Residential mortgages
  
 
276,777
  
19,621
  
7.09
 
  
 
465,924
  
33,283
  
7.14
 
Interest-bearing deposits in banks
  
 
273,008
  
16,977
  
6.22
 
  
 
181,202
  
8,940
  
4.93
 
    

  
         

  
  

Total interest-earning assets
  
$
724,535
  
57,257
  
7.90
%
  
$
702,622
  
47,060
  
6.70
%
    

  
  

  

  
  

 
Loan Servicing Costs.     Loan servicing costs decreased $0.5 million, or 27%, to $1.4 million in 2000 from $1.9 million in 1999 due to lower average loan balances. The loans are serviced by the Bank pursuant to our servicing agreement. For residential mortgages and home equity loans, the fee was equal to the average outstanding principal balance of each loan multiplied by 0.38%.
 
Management Fees.    Management fees decreased $0.2 million from 1999, or 22%, to $0.8 million in 2000 as a result of lower fees assessed by Wachovia.
 
Other Income.    Other income increased $0.3 million in 2000 from 1999 representing gains on loan sales.
 
Balance Sheet Analysis
 
September 30, 2002 to September 30, 2001
 
At September 30, 2002, total assets were $6.1 billion compared with $775 million at September 30, 2001. As of September 30, 2002, $4.0 billion, or 66% of our assets, consisted of a 100% participation interest in commercial loans, and $205 million, or 3.4% of our assets, consisted of a 100% participation interest in home equity loans, before the allowance for loan losses.
 
Loans.    Net loans increased $3.8 billion to $4.3 billion at September 30, 2002, compared with September 30, 2001, due to a $4.0 billion increase in commercial loans contributed to us by the Bank in December 2001 partially offset by decreased residential loans.
 
Allowance for Loan Losses.     The allowance for loan losses increased $31.7 million from September 30, 2001, to $37.3 million at September 30, 2002, as a result of allowance transferred with the commercial loans contributed to us by the Bank in December 2001. The allowance was 1.0% of loans at September 30, 2002, and 1.3% at September 30, 2001. See Table 2 in “— Accounting and Regulatory Matters” for additional information.
 
Interest Rate Swaps.    Interest rate swaps increased to $605 million at September 30, 2002, from zero at September 30, 2001, which represents fair value of our net position in interest rate swaps.
 
Accounts Receivable-Affiliates.    Accounts receivable from affiliates increased to $22.3 million at September 30, 2002, from September 30, 2001, as a result of intercompany transactions related to income tax allocations for the 2001 tax year which represent receivables for taxes paid prior to our becoming a REIT.
 
Other Assets.    Other assets increased $2.4 million, or 21%, to $14 million at September 30, 2002, from $11.7 million at September 30, 2001, due to a $6.6 million increase in interest receivables and a $1.2 million increase in foreclosed property, offset by a $5.3 million decrease in loans held for sale.

64


Table of Contents
 
Collateral Held on Interest Rate Swaps.    Collateral held on interest rate swaps increased to $599.6 million at September 30, 2002, from zero at September 30, 2001. As part of the receive-fixed interest rate swaps contributed to us by the Bank in December 2001, the unaffiliated counterparty to the swaps provided collateral that we hold. The cash collateral is recorded at fair value.
 
Other Liabilities.    Other liabilities increased to $7.4 million at September 30, 2002, from $89 thousand at September 30, 2001, due to the increase in minority interests after the sale of a 1% interest in our subsidiary’s common stock to Wachovia in exchange for cash in December 2001.
 
December 31, 2001 to December 31, 2000
 
At December 31, 2001, total assets were $5.9 billion compared with $746.8 million at December 31, 2000. As of December 31, 2001, $4 billion, or 68% of our assets, consisted of a 100% participation interest in commercial loans and $286 million, or 5% of our assets, consisted of a 100% participation interest in home equity loans, before the allowance for loan losses.
 
Loans.    Net loans were $4.3 billion at December 31, 2001, up $3.8 billion from December 31, 2000, due to the December 2001 contribution to us of $4 billion of commercial loans by the Bank offset by a $156.8 million decrease in residential loans.
 
Commercial loan maturities on a historical and pro forma basis for the year ended December 31, 2001 are presented below.
 
    
December 31, 2001

    
Commercial and Commercial Real Estate

(In thousands)

  
Actual

  
Pro Forma

Fixed Rate
           
1 year or less
  
$
—  
  
40,280
1-5 years
  
 
37,833
  
130,196
After 5 years
  
 
30,570
  
342,935
    

  
Total fixed rate
  
 
68,403
  
513,411
    

  
Adjustable Rate
           
1 year or less
  
 
401,889
  
603,154
1-5 years
  
 
2,575,536
  
4,063,069
After 5 years
  
 
944,528
  
3,970,651
    

  
Total adjustable rate
  
 
3,921,953
  
8,636,874
    

  
Total
  
$
3,990,356
  
9,150,285
    

  
 
Allowance for Loan Losses.    The allowance for loan losses increased $33.3 million December 31, 2000 to $37.2 million at December 31, 2001, as a result of the allowance transferred with the commercial loans contributed to us by the Bank in December 2001. The allowance was 0.9% of loans at December 31, 2001, and 0.7% at December 31, 2000. See Table 2 in “—Accounting and Regulatory Matters” for additional information on allowance for loan losses.
 
Interest Rate Swaps.    Interest rate swaps increased to $573.6 million at December 31, 2001, from zero at December 31, 2000, from the contribution of the receive-fixed interest rate swaps to us by the Bank in December 2001. Interest rate swaps are recorded at fair value. Subsequent to the contribution, we entered into pay-fixed interest rate swaps that serve as an economic hedge to the receive-fixed interest rate swaps.
 
Other Assets.    Other assets increased $9.3 million to $16.8 million at December 31, 2001, from $7.5 million at December 31, 2000, due to a $9.6 million increase in interest receivable, related to the contribution of commercial loans in December 2001, offset by a $0.7 million decrease in consumer interest receivable due to lower consumer loan balances.

65


Table of Contents
 
Collateral Held on Interest Rate Swaps.    Collateral held on interest rate swaps increased to $570.3 million at December 31, 2001, from zero at December 31, 2000. As part of the receive-fixed interest rate swaps contributed to us by the Bank in December 2001, the unaffiliated counterparty to the swaps provided collateral that we hold. The cash collateral is recorded at fair value.
 
Other Liabilities.    Other liabilities increased $7.5 million at December 31, 2001, from $0.1 million at December 31, 2000, due to the increase in minority interests after the sale of a 1% interest in our subsidiary’s common stock to Wachovia in exchange for cash in December 2001.
 
Commitments
 
Our commercial loan portfolio includes unfunded loan commitments and standby and commercial letters of credit that are provided in the normal course of business. For commercial customers, loan commitments generally take the form of revolving credit arrangements to finance customers’ working capital requirements. These instruments are not recorded on the balance sheet until funds are advanced under the commitment. For lending commitments, the contractual amount of a commitment represents the maximum potential credit risk if the entire commitment is funded and the borrower does not perform according to the terms of the contract. A large majority of these commitments expire without being funded, and accordingly, total contractual amounts are not representative of our actual future credit exposure or liquidity requirements. The “—Risk Governance and Administration—Credit Risk Management” section below describes how the Bank, which originates and services the loans, manages credit risk when extending credit.
 
Loan commitments and letters of credit create credit risk in the event that the counterparty draws on the commitment and subsequently fails to perform under the terms of the lending agreement. This risk is incorporated into an overall evaluation of credit risk and to the extent necessary, reserves are recorded on these commitments. Uncertainties around the timing and amount of funding under these commitments may create liquidity risk. The “—Risk Governance and Administration—Liquidity Risk Management” section below describes the way we manage liquidity and fund these commitments, to the extent funding is required. At September 30, 2002, commitments to extend credit and letters of credit were $1.5 billion and $216 million, respectively. At December 31, 2001, commitments to extend credit and letters of credit were $1.2 billion and $39 million, respectively.
 
Liquidity and Capital Resources
 
Our internal sources of liquidity generally include cash generated from our operations and principal repaid on loans. In addition, any necessary liquidity could be obtained by drawing on the line of credit that we have with the Bank. Under the terms of that facility, we can borrow up to $2.0 billion under a revolving demand note at a rate of interest equal to the Federal funds rate. Further, we could issue additional common or preferred stock, subject to any pre-approval rights of our shareholders. We believe that our existing sources of liquidity are sufficient to meet our funding needs.
 
Risk Governance and Administration
 
Credit Risk Management
 
Credit risk is the risk of loss due to adverse changes in a borrower’s ability to meet its financial obligations under agreed upon terms. We incur credit risk by investing in lending and lending-related assets. The nature and amount of credit risk depends on the types of transactions pursued, the structure of those transactions and the parties involved. Credit risk is central to the profit strategy in lending. Since our assets are primarily participation interests in loans originated by the Bank, the following is a discussion of the Bank’s credit risk management strategies.
 
Credit risk is managed through a combination of policies and procedures and risk-taking or commitment authorities that are tracked and regularly updated in a centralized database. All credit authorities

66


Table of Contents
are delegated through the independent risk management organization. Most officers who are authorized to incur credit exposure are in the risk management organization and are independent of the officers who are responsible for generating new business.
 
The maximum level of credit exposure to individual commercial borrowers is limited by policy guidelines, or “house limits”. These limits are based on the default probabilities associated with the credit facilities extended to each borrower or related group of borrowers. Concentration risk is managed through geographic and industry diversification, country limits and loan quality factors.
 
Commercial Credit.    All commercial loans are assigned internal risk ratings reflecting the probability of the borrower defaulting on any obligation, the probability of a default on any particular Wachovia credit facility and the probable loss in the event of a default.
 
Commercial credit extensions are also evaluated using a Risk Adjusted Return on Capital model that considers pricing, internal risk ratings, loan structure and tenor, among other variables. This produces a risk/return analysis, enabling the efficient use of economic capital attributable to credit risk. Economic capital is allocated to all credit commitments, whether fully funded or not. The same credit processes and checks and balances are used for unfunded commitments as well as for funded exposures.
 
Economic capital for all credit risk assets is calculated by the portfolio management group within the risk management organization. As part of their annual capital level review, this group analyzes factors that are used to determine the amount of economic capital needed to support credit risk in the loan portfolio.
 
Credit Risk Review is an independent unit that performs risk process reviews and evaluates a representative sample of credit extensions after the fact. Credit Risk Review has the authority to change internal risk ratings and is responsible for assessing the adequacy of credit underwriting and servicing practices. This unit reports directly to the Credit and Finance Committee of the Wachovia board of directors.
 
Credit approvals are based, among other things, on the financial strength of the borrower, assessment of the borrower’s management, industry sector trends, the type of exposure, the transaction structure and the general economic outlook. There are two processes for approving credit risk exposures. The first involves standard approval structures for use in retail, certain small business lending and most trading activities. The second, and more prevalent approach, involves individual approval of exposures consistent with the authority delegated to officers experienced in the industries and loan structures over which they have responsibility.
 
In commercial lending, servicing of credit exposure may be as often as weekly for certain types of asset-based lending, to annually for certain term loans. Some term loans having characteristics similar to retail loans are monitored for delinquencies only. In general, quarterly servicing is normal for all significant exposures. The internal risk ratings are confirmed with each major servicing event. In addition portfolio modeling is employed to verify default probabilities and to estimate losses.
 
Borrower exposures may be designated as “watch list” accounts when warranted by either environmental factors or individual company performance. Such accounts are subjected to additional quarterly reviews by the business line management, risk management and credit risk review staff and our chief risk management officer in order to adequately assess the borrower’s credit status and to take appropriate action. In addition projections of both nonperforming assets and losses for future quarters are performed monthly. This process is considered essential to the effective management of our credit risk.
 
The Bank has also established special teams composed of skilled and experienced lenders to manage problem credits. These teams handle commercial recoveries, workouts and problem loan sales.
 
Commercial credit checks and balances, the independence of risk management functions and specialized processes are all designed to avoid problems where possible and to recognize and address problems early in the cycle when they do occur.

67


Table of Contents
 
Retail Credit.    In retail lending, the Bank manages credit risk from a portfolio view rather than by specific borrower as in commercial lending. The risk management division, working with the line of business, determines the appropriate risk/return profile for each portfolio, utilizing a variety of tools including quantitative models and scorecards tailored to meet the Bank’s specific needs.
 
By incorporating these models and policies into computer programs or “decisioning engines”, much of the underwriting is automated. Once a line of credit or other retail loan is extended, it is included in the overall portfolio, which is continuously monitored for changes in delinquency trends and other asset quality indicators. Delinquency action on individual credits is taken monthly or as needed if collection efforts are necessary. The independent credit risk review unit also has a retail component to ensure adequacy and timeliness of retail credit processes.
 
Concentration of Credit Risk
 
Concentration of credit risk generally arises with respect to our participation interests when a significant number of underlying loans have borrowers that engage in similar business activities or activities in the same geographical region. Concentration of credit risk indicates the relative sensitivity of performance to both positive and negative developments affecting a particular industry.
 
Interest Rate Risk Management
 
Interest rate risk is the sensitivity of earnings to changes in interest rates. Our income consists primarily of interest income on our variable rate loans. If there is a further decline in market interest rates, we may experience a reduction in interest income on our loan portfolio and a corresponding decrease in funds available to be distributed to our stockholders. The reduction in interest income may result from downward adjustments of the indices upon which the interest rates on loans are based and from prepayments of loans with fixed interest rates, resulting in reinvestment of the proceeds in lower yielding assets. In December 2001, the Bank contributed receive-fixed interest rate swaps to us in exchange for common stock. Subsequent to the contribution, we entered into pay-fixed interest rate swaps that serve as an economic hedge to the receive-fixed interest rate swaps. Currently, we do not expect to enter into additional derivative transactions.
 
At September 30, 2002, approximately 6.9% of the loans in our portfolio had fixed interest rates. Such loans tend to increase our interest rate risk. Management monitors the rate sensitivity of assets acquired. Our methods for evaluating interest rate risk include an analysis of interest-rate sensitivity “gap”, which is defined as the difference between interest-earning assets and interest-bearing liabilities maturing or repricing within a given time period. A gap is considered positive when the amount of interest-rate-sensitive assets exceeds the amount of interest-rate-sensitive liabilities. A gap is considered negative when the amount of interest-rate-sensitive liabilities exceeds interest-rate-sensitive assets.
 
During a period of rising interest rates, a negative gap would tend to adversely affect net interest income, while a positive gap would tend to result in an increase in interest income. During a period of falling interest rates, a negative gap would tend to result in an increase in net interest income, while a positive gap would tend to affect net interest income adversely. Because different types of assets and liabilities with the same or similar maturities may react differently to changes in overall market rates or conditions, changes in interest rates may affect net interest income positively or negatively even if an institution is perfectly matched in each maturity category.
 
As of September 30, 2002, $5.1 billion, or 85% of our assets, were variable rate and could be expected to reprice with changes in interest rates. As of September 30, 2002, our liabilities were $607 million, or 10% of our assets, while stockholders’ equity was $5.5 billion, or 90% of our assets. This positive gap between our assets and liabilities indicates that an increase in interest rates would result in an increase in net interest income and a decrease in interest rates would result in a decrease in net interest income.

68


Table of Contents
 
Our rate-sensitive assets and liabilities at September 30, 2002, are presented below. Assets that immediately reprice are placed in the overnight column. The fair value of the $336 million of fixed rate loans and loan participations was approximately $337 million at September 30, 2002. The fair value of the $4.0 billion of variable rate loans and loan participations approximated their book value at September 20, 2002.
 
(In thousands)

  
Overnight

  
Within One Year

  
One to Three Years

  
Three to Five Years

  
Over Five Years

  
Total

Rate-sensitive assets
                               
Interest bearing deposits in banks
  
$
1,154,451
  
            —  
  
—  
  
—  
  
—  
  
1,154,451
Loans and loan participations:
                               
Fixed rate
  
 
—  
  
41,217
  
1,697
  
14,075
  
278,939
  
335,928
Variable rate
  
 
966,059
  
2,983,750
  
11,543
  
—  
  
—  
  
3,961,352
    

  
  
  
  
  
Total rate-sensitive assets
  
$
2,120,510
  
3,024,967
  
13,240
  
14,075
  
278,939
  
5,451,731
    

  
  
  
  
  
Total rate-sensitive liabilities
  
$
599,570
  
—  
  
—  
  
—  
  
—  
  
—  
    

  
  
  
  
  
 
At September 30, 2002, our position in interest rate swaps was an asset of $1.2 billion and a liability of $579 million, which is recorded on our balance sheet at fair value. The following table presents interest rate swap maturities.
 
    
1 Year
or Less

    
1-2 Years

  
2-5 Years

  
5-10
Years

  
After 10 Years

  
Total

Interest Rate Swap Assets
                                 
Notional amount
  
$
—  
 
  
—  
  
150,000
  
4,100,000
  
—  
  
4,250,000
Weighted average receive rate (a)
  
 
—  
%
  
—  
  
6.10
  
7.46
  
—  
  
7.41
Weighted average pay rate (a)
  
 
—  
%
  
—  
  
1.74
  
1.82
  
—  
  
1.82
Interest Rate Swap Liabilities
                                 
Notional amount
  
$
—  
 
  
—  
  
150,000
  
4,100,000
  
—  
  
4,250,000
Weighted average receive rate (a)
  
 
—  
%
  
—  
  
1.74
  
1.82
  
—  
  
1.82
Weighted average pay rate (a)
  
 
—  
%
  
—  
  
4.84
  
5.72
  
—  
  
5.69
    


  
  
  
  
  

(a)
All of the interest rate swaps have variable pay or receive rates based on one- to six-month LIBOR, and they are the pay or receive rates in effect at September 30, 2002.
 
Market Risk Management
 
Market risk is the risk of loss from adverse changes in market prices and interest rates. Market risk arises primarily from interest rate risk inherent in lending, investing in marketable securities, deposit taking and borrowing activities.
 
At September 30, 2002, our receive-fixed interest rate swaps with a notional amount of $4.25 billion had a weighted average maturity of 9.50 years, weighted average receive rate of 7.41% and weighted average pay rate of 1.82%. Our pay-fixed interest rate swaps with a notional amount of $4.25 billion had a weighted average maturity of 9.50 years, weighted average receive rate of 1.82% and weighted average pay rate of 5.69% at September 30, 2002. All of the interest rate swaps have variable pay or receive rates based on three- or six-month LIBOR, and they are the pay or receive rates in effect at September 30, 2002.
 
Due to the difference in fixed rates in our interest rate swaps, volatility is expected given certain interest rate fluctuations. If market rates were to decrease 100 basis points or 200 basis points, we would realize short-term net gains on our interest rate swaps of $28 million or $57 million, respectively. If market rates were to increase 100 basis points or 200 basis points, we would realize short-term net losses on our interest rate swaps of $26 million or $50 million, respectively. These short-term fluctuations will eventually offset over the life of the interest rate swaps, with no change in cash flow occurring for the net positions. The changes in value of the net swap positions were calculated under the assumption there was a parallel shift in the LIBOR curve using 100 basis point and 200 basis point shifts, respectively.

69


Table of Contents
 
Liquidity Risk Management
 
Liquidity risk involves the risk of being unable to fund assets with the appropriate duration and rate-based liability, as well as the risk of not being able to meet unexpected cash needs. Liquidity planning and management are necessary to ensure we maintain the ability to fund operations cost-effectively and to meet current and future potential obligations. In managing liquidity, we take into account various legal limitations placed on us.
 
Our principal liquidity needs are to pay operating expenses and dividends, fund commitments under our loans, and acquire additional participation interests as the underlying loans mature or prepay. Operating expenses and dividends are expected to be funded through cash generated by operations, while funding commitments and the acquisition of additional participation interests in loans is intended to be funded with the proceeds obtained from repayment of principal balances by individual borrowers. We do not have and do not anticipate having any material capital expenditures.
 
To the extent that our board of directors determines that additional funding is required, we may raise funds through additional equity offerings, debt financings, or retention of cash flow, or a combination of these methods. However, any cash flow retention must be consistent with the provisions of the Code requiring the distribution by a REIT of at least 90% of its REIT taxable income, excluding capital gains, and must take into account taxes that would be imposed on undistributed income.
 
At September 30, 2002, our liabilities consist of cash collateral held on the receive-fixed interest rate swaps that we have invested in eurodollar investments. Our certificate of incorporation does not contain any limitation on the amount or percentage of debt, funded or otherwise, we may incur, except the incurrence of debt for borrowed money or our guarantee of debt for borrowed money in excess of amounts borrowed or guaranteed.
 
Transactions with Related Parties
 
We are subject to certain income and expense allocations from affiliated parties for various services received. In addition, we enter into transactions with affiliated parties in the normal course of business. The nature of the transactions with affiliated parties is discussed below. Further information, including amounts involved, is presented in Note 5 of our consolidated financial statements.
 
Affiliates of Wachovia service our loans on our behalf. We are also subject to Wachovia’s management fee policy and therefore reimburse Wachovia for general overhead expenses paid on our behalf. We did not meet Wachovia’s criteria for being assessed a fee in 2001, and therefore no fee was charged. We also have a swap servicing and fee arrangement with the Bank, whereby the Bank provides operations, back office, book entry, record keeping and valuation services related to our interest rate swaps, for which we pay a fee to the Bank.
 
Interest-bearing and noninterest-bearing deposits with the Bank are our primary cash management vehicle. In addition, we have certain eurodollar investments with the Bank. In 2001, we entered into certain loan participations with affiliates and are allocated a portion of all income associated with these loans.
 
The Bank acts as our collateral custodian in connection with collateral pledged to us related to our interest rate swaps. For this service, we pay the Bank a fee based on the value of the collateral. In addition, the Bank is permitted to rehypothecate and use as its own the collateral held by the Bank as our custodian. The Bank pays us a fee based on the value of the collateral involved for this right. The Bank also provides a guaranty of our obligations under the interest rate swaps, for which we pay a monthly fee based on the absolute value of the net notional amount of the interest rate swaps.

70


Table of Contents
 
Accounting and Regulatory Matters
 
The following information addresses new or proposed accounting pronouncements related to our industry as well as legislation that has had a significant impact on our industry.
 
Derivatives and Hedging.    In 1998 the Financial Accounting Standards Board issued SFAS 133, Accounting for Derivative Instruments and Hedging Activities, which was subsequently amended by SFAS 137 and SFAS 138. These standards establish the accounting and reporting model for derivatives and hedging activities. SFAS 133 requires that all derivatives be recognized as assets or liabilities on the balance sheet and that these instruments be measured at fair value through adjustments to either other comprehensive income or to current earnings, depending on the purpose for which the derivative is held.
 
Regulatory Matters.    On July 30, 2002, President Bush signed the Sarbanes-Oxley Act of 2002 into law. The intent of this law is to reform specific matters pertaining to public accounting oversight, auditor independence and corporate responsibility. Requirements in the act will affect certain of Wachovia’s corporate governance policies and certain of Wachovia’s business lines, such as securities analysis. We do not believe we will need to make material modifications to our corporate governance policies in response to the act or do we believe the act will negatively affect our financial condition or results of operations.
 
Various legislative and regulatory proposals concerning the financial services industry are pending in Congress, the legislatures in states in which we conduct operations and before various regulatory agencies that supervise our operations. Given the uncertainty of the legislative and regulatory process, we cannot assess the impact of any such legislation or regulations on our financial condition or results of operations.
 
Table 1
 
Performance and Dividend Payout Ratios
 
    
Nine Months Ended
September 30,

  
Years Ended
December 31,

    
2002

    
2001

  
2001

    
2000

Ratios
                       
Return on assets
  
5.12
%
  
3.08
  
(0.71
)
  
3.83
Return on stockholders’ equity
  
5.76
 
  
3.09
  
(0.80
)
  
3.83
Stockholders’ equity to assets
  
88.80
 
  
99.65
  
88.96
 
  
97.82
Dividend payout ratio
  
—  
%
  
0.04
  
—  
 
  
0.03
    

  
  

  

71


Table of Contents
 
Table 2
 
Loan Losses and Recoveries and Past Due Loans
 
    
Nine Months Ended
September 30,

    
Years Ended
December 31,

 
(In thousands)

  
2002

    
2001

    
2001

    
2000

 
Allowance for Loan Losses
                             
Balance, beginning of period
  
$
37,158
 
  
3,833
 
  
3,833
 
  
1,285
 
Provision for loan losses
  
 
7,033
 
  
6,290
 
  
5,262
 
  
3,602
 
Allowance relating to loans contributed from the Bank
  
 
—  
 
  
—  
 
  
33,681
 
  
—  
 
Allowance related to loans transferred or sold
  
 
(2,005
)
  
(482
)
  
(515
)
  
(673
)
Net charge-offs
  
 
(4,851
)
  
(3,986
)
  
(5,103
)
  
(381
)
    


  

  

  

Balance, end of period
  
$
37,335
 
  
5,655
 
  
37,158
 
  
3,833
 
    


  

  

  

Loan Losses
                             
Commercial and commercial real estate loans
  
$
—  
 
  
—  
 
  
—  
 
  
—  
 
Residential mortgages
  
 
—  
 
  
—  
 
  
—  
 
  
36
 
Home equity
  
 
5,168
 
  
4,012
 
  
5,155
 
  
386
 
    


  

  

  

Total loan losses
  
 
5,168
 
  
4,012
 
  
5,155
 
  
422
 
    


  

  

  

Loan Recoveries
                             
Commercial and commercial real estate loans
  
 
—  
 
  
—  
 
  
—  
 
  
—  
 
Residential mortgages
  
 
—  
 
  
—  
 
  
—  
 
  
39
 
Home equity
  
 
317
 
  
26
 
  
52
 
  
2
 
    


  

  

  

Total loan recoveries
  
 
317
 
  
26
 
  
52
 
  
41
 
    


  

  

  

Net charge-offs
  
$
4,851
 
  
3,986
 
  
5,103
 
  
381
 
    


  

  

  

Total net charge-offs as % of average loans, net
  
 
0.15
%
  
1.05
 
  
0.62
 
  
0.08
 
    


  

  

  

Accruing loans past due 90 days
  
$
3,945
 
  
6,511
 
  
3,419
 
  
6,504
 
    


  

  

  

 
As of September 30, 2002, we did not have serious doubts as to the ability of our borrowers to comply with their current loan repayment terms.
 
Allocation of the Allowance for Loan Losses
 
   
September 30, 2002

    
September 30,

    
December 31,

 
   
Actual

    
Pro Forma(a)

    
2001

    
2001

    
2000

 
(In millions)

 
Amt.

  
Loans % of Total Loans

    
Amt.

  
Loans % of Total Loans

    
Amt.

 
Loans % of Total Loans

    
Amt.

 
Loans % of Total Loans

    
Amt.

 
Loans % of Total Loans

 
Commercial and commercial real estate loans
 
$
23,970
  
93
%
  
$
62,824
  
90
%
  
$
—  
 
—  
%
  
$
22,651
 
91
%
  
$
—  
 
—  
%
Residential mortgages
 
 
59
  
2
 
  
 
59
  
1
 
  
 
161
 
28
 
  
 
87
 
2
 
  
 
218
 
25
 
Home equity loans
 
 
2,165
  
5
 
  
 
11,295
  
9
 
  
 
3,405
 
72
 
  
 
2,068
 
7
 
  
 
2,708
 
75
 
Unallocated
 
 
11,141
  
—  
 
  
 
27,052
  
—  
 
  
 
2,089
 
—  
 
  
 
12,352
 
—  
 
  
 
907
 
—  
 
   

  

  

  

  

 

  

 

  

 

Total
 
$
37,335
  
100
%
  
$
101,230
  
100
%
  
$
5,655
 
100
%
  
$
37,158
 
100
%
  
$
3,833
 
100
%
   

  

  

  

  

 

  

 

  

 


(a)
The pro forma amounts reflect the following:

72


Table of Contents
 
 
Ÿ
$866 million of participation interests in home equity loans received by us as collateral for an intercompany loan to the Bank in October 2002. The underlying home equity loans were originated by the Bank; and
 
 
Ÿ
the issuance of three new series of preferred securities (Series A, B and C ) to Wachovia Preferred Holding in exchange for participations in commercial and commercial real estate loans prior to this offering. The commercial and commercial real estate loans were originated by the Bank and contributed to Wachovia Preferred Holding. We will issue the preferred securities to Wachovia Preferred Holding in exchange for participations in the loans prior to this offering.

73


Table of Contents
MANAGEMENT
 
Directors and Executive Officers
 
We currently have two executive officers. Our executive officers are also executive officers of Wachovia. We estimate that our executive officers will devote less than 5% of their time to managing our business. Executive officers of Wachovia are generally elected to their offices for one-year terms at a Wachovia board meeting in April of each year. The names of our executive officers, their ages, their positions with Wachovia, and their business experience during the past five years, are as follows:
 
G. Kennedy Thompson (51).    Chief Executive Officer of Wachovia, since April 2000, and President, since December 1999. Previously, Chairman of Wachovia, from March 2001 to September 2001; Vice Chairman, from October 1998 to December 1999; and Executive Vice President, from November 1996 to October 1998. Also, a director of Wachovia.
 
Robert P. Kelly (48).    Senior Executive Vice President and Chief Financial Officer of Wachovia since September 2001. Previously, Executive Vice President and Chief Financial Officer of Wachovia, from November 2000 to September 2001; and Vice Chairman-Group Office from February 2000 to July 2000, Vice Chairman-Retail Banking from 1997 to February 2000, and Vice Chairman from 1996 to 1997, all of Toronto Dominion Bank.
 
None of our executive officers owns any shares of our capital stock.
 
Directors
 
Presently, our board of directors is composed of one member, Robert L. Andersen. Mr. Andersen is an employee of Wachovia where he has been Senior Vice President and Deputy General Counsel since March 2000. Prior to March 2000, Mr. Andersen was Senior Vice President and Assistant General Counsel of Wachovia. Mr. Andersen does not own any shares of our capital stock.
 
Prior to the offering of the Series A preferred securities, we will elect three additional directors, two of which shall be Independent Directors, as discussed below under “—Independent Directors”.
 
Each of our directors will serve until their successors are duly elected and qualified. There is no current intention to further alter the number of directors comprising our board of directors after the sale of the Series A preferred securities in this offering.
 
Independent Directors
 
Our certificate of incorporation requires that, so long as any Series A preferred securities are outstanding, certain actions by us must be approved by a majority of our Independent Directors satisfying the definition of being “independent” as set forth in the corporate governance standards of the New York Stock Exchange. The actions requiring Independent Director approval are described in more detail under the heading “Description of the Series A Preferred Securities—Independent Directors”. In addition, although not restricted from doing so, our board of directors does not currently intend to approve the following transactions without the approval of a majority of our Independent Directors:
 
 
Ÿ
the modification of the general distribution policy or the authorization or declaration of any distribution in respect of shares of our common stock for any year if, after taking into account any such proposed distribution, total distributions on our preferred securities and our shares of common stock would exceed an amount equal to the sum of 105% of our REIT taxable income, excluding capital gains, for such year plus our net capital gains for that year; and

74


Table of Contents
 
 
Ÿ
the redemption of any of our shares of common stock.
 
If we fail to pay, or declare and set aside for payment, dividends on the Series A preferred securities and any Parity Stock for six quarters, the number of our directors will be increased by two and holders of the Series A preferred securities, voting together as a class with the holders of any Parity Stock with the same voting rights, will have the right to elect such additional directors.
 
Audit Committee
 
Upon completion of this offering, we will establish an audit committee consisting solely of Independent Directors.
 
The primary purpose of the audit committee will be to assist our board of directors in its oversight of internal controls, the financial statements and the audit process. To that end, the audit committee shall:
 
 
Ÿ
retain and terminate our independent certified public accountants;
 
 
Ÿ
review reports prepared by management and the independent certified public accountants on systems of internal control and the audit and compliance process; and
 
 
Ÿ
review the financial statements, which are prepared by management and audited by the independent certified public accountants.
 
Limitations on Liability of Directors and Officers
 
Section 145 of the Delaware General Corporation Law (the “DGCL”) provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed actions, suits or proceedings in which such person is made a party by reason of such person being or having been a director, officer, employee or agent of the corporation, subject to certain limitations. The statute provides that it is not exclusive of other rights to which those seeking indemnification may be entitled under any by-law, agreement, vote of shareholders or disinterested directors or otherwise.
 
Section 102 (b)(7) of the DGCL permits a corporation to provide in its charter that a director of the corporation shall not be personally liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability:
 
 
Ÿ
for any breach of the director’s duty of loyalty to the corporation or its shareholders;
 
 
Ÿ
for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
 
 
Ÿ
for payments of unlawful dividends or unlawful stock purchases or redemptions; or
 
 
Ÿ
for any transaction from which the director derived an improper personal benefit.
 
Our by-laws provide for the indemnification of our directors and executive officers by us against liabilities arising out of his or her status as such, excluding any liability relating to activities which were at the time taken known or believed by such person to be clearly in conflict with our best interests. Our certificate of incorporation provides for the elimination of the personal liability of each of our directors, to the fullest extent permitted by the provisions of the DGCL, as the same may from time to time be in effect.
 
We maintain directors and officers liability insurance. In general, the policy insures:
 
 
Ÿ
our directors and officers against loss by reason of any of their wrongful acts; and
 
 
Ÿ
Wachovia Funding against loss arising from claims against the directors and officers by reason of their wrongful acts, all subject to the terms and conditions contained in the policy.

75


Table of Contents
 
Our current director and executive officers are also executive officers or employees of Wachovia and one of our executive officers is also a director of Wachovia. In addition, some of our directors and executive officers are customers of Wachovia’s affiliated financial and lending institutions and have transactions with such affiliates in the ordinary course of business. Transactions with directors and executive officers have been on substantially the same terms, including interest rates and collateral on loans, as those prevailing at the time for comparable transactions with third parties and do not involve more than the normal risk of collectibility or present other unfavorable features. We may hold a participation interest in some of these loans.
 
The Bank administers our day-to-day activities under the terms of participation and servicing agreements between the Bank and us. These agreements reflect what we believe to be terms consistent with those resulting from arms-length negotiations and contain the following fees: (a) with respect to the commercial, commercial real estate and home equity loans an annual service fee of 0.03% multiplied by the outstanding principal balance of each loan, and (b) with respect to residential mortgages, $48.00 per loan. Additionally we are subject to Wachovia’s management fee policy and thus reimburse Wachovia on a monthly basis for general overhead expenses. We are dependent on the Bank and others for servicing the loans in our portfolio. All of our officers and certain directors are also either officers and/or directors of Wachovia or the Bank or their affiliates.
 
We also have a swap servicing and fee arrangement with the Bank, whereby the Bank provides operations, back office, book entry, record keeping and valuation services related to our interest rate swaps, for which we pay a fee to the Bank. In addition, the Bank acts as our collateral custodian in connection with collateral pledged to us in relation to our interest rate swaps. For this service, we pay the Bank a fee based on the value of the collateral. In addition, the Bank is permitted to rehypothecate and use as its own the collateral held by the Bank as our custodian. The Bank pays us a fee based on the value of the collateral involved for this right. The Bank also provides a guaranty of our obligations under the interest rate swaps, for which we pay a monthly fee based on the absolute value of the net notional amount of the interest rate swaps.
 
Interest-bearing and noninterest-bearing deposits with the Bank are our primary cash management vehicle. In addition, we have certain eurodollar investments with the Bank. In 2001, we entered into certain loan participations with affiliates and are allocated a portion of all income associated with these loans.
 
After this offering, Wachovia, the Bank and Wachovia Preferred Holding will continue to control a substantial majority of our outstanding voting shares.

76


Table of Contents
BENEFICIAL OWNERSHIP OF OUR CAPITAL STOCK
 
By the completion of this offering, we will have 99,999,900 shares of common stock issued and outstanding. The following table sets forth, as of the time of this offering, the expected number of shares and percentage of ownership beneficially owned by all persons known by us to own more than five percent of the shares of our common stock.
 
Name and Address of Beneficial Owner

    
Number of Shares of Common Stock Beneficially Owned

  
Percentage of Class

 
Wachovia Preferred Funding Holding Corp.
1620 East Roseville Parkway
Roseville, California 95661
    
99,851,752

  
99.85

%

 
In addition to the foregoing, by completion of this offering, Wachovia Preferred Holding will own:
 
 
Ÿ
15,000,000 (or 50%) of our outstanding Series A preferred securities;
 
 
Ÿ
40,000,000 (or 100%) of our outstanding Series B preferred securities;
 
 
Ÿ
4,254,413 (or 100%) of our outstanding Series C preferred securities; and
 
 
Ÿ
800 (or approximately 88%) of our outstanding Series D preferred securities.
 
Wachovia Preferred Holding may choose to sell its remaining 15,000,000 Series A preferred securities to the public in the near future.
 
None of our directors or executive officers owns any of our common stock. Each Series A, B, and C preferred security will have 1/10th of a vote per share. The Series D preferred securities are non-voting. Certain of our executive officers each own one of the Series D preferred securities.
 
DESCRIPTION OF THE SERIES A PREFERRED SECURITIES
 
The following summary describes the material terms and provisions of the Series A preferred securities. This description is qualified in its entirety by reference to the terms and provisions of our certificate of incorporation. Our certificate of incorporation has been filed with the SEC as an exhibit to the registration statement that we filed in connection with this offering. Please see “Where You Can Find More Information About Wachovia Funding” for information on how to obtain a copy of our certificate of incorporation.
 
General
 
The Series A preferred securities are validly issued, fully paid and non-assessable. The holders of the Series A preferred securities will have no preemptive rights with respect to any of our capital stock or any of our other securities convertible into or carrying rights or options to purchase any such capital stock. The Series A preferred securities are perpetual and will not be convertible into our common stock or any other class or series of our securities and will not be subject to any sinking fund or other obligation for its repurchase or retirement.
 
The Bank will be the transfer agent, registrar and dividend disbursement agent for the Series A preferred securities. The registrar for our Series A preferred securities will send notices to shareholders of any meetings at which holders of the Series A preferred securities have the right to elect directors or to vote on any other matter.
 
The Series A preferred securities are not obligations of, or guaranteed by, the Bank, Wachovia Preferred Holding, Wachovia or any of their respective affiliates or any other entity. The Series A preferred securities solely represent an interest in us and do not represent an interest in any of the foregoing entities.

77


Table of Contents
 
Dividends
 
Holders of Series A preferred securities will be entitled to receive, if, when, and as authorized and declared by our board of directors out of our legally available funds, non-cumulative cash dividends at the rate of     % per annum of the initial liquidation preference, which is $25.00 per security. Dividends on the Series A preferred securities will be payable, if authorized and declared, quarterly in arrears on March 31, June 30, September 30, and December 31 of each year or, if any such day is not a business day, on the next business day without interest, unless the next business day falls in a different calendar year, in which case the dividend will be paid on the preceding business day, commencing on December 31, 2002. We refer to each such quarter of a calendar year as a “dividend period”. Quarterly dividend periods will commence on a dividend payment date, and end on the day preceding the immediately following dividend payment date; provided, however, that the first dividend period will commence on and include the original issue date of the Series A preferred securities and will end on and include December 31, 2002. The record date for the payment of dividends, if declared, will be the fifteenth day of the month in which the relevant dividend payment occurs or, if any such day is not a business day, the next day that is a business day. Dividends payable on the Series A preferred securities for any period greater or less than a full dividend period will be computed on the basis of twelve 30-day months, a 360-day year, and the actual number of days elapsed in the period; provided, however, that in the event of a Conditional Exchange, any authorized, declared, but unpaid dividends on the Series A preferred securities as of the time of exchange will be deemed to be authorized, declared, but unpaid dividends on the depositary shares representing the Wachovia Series G, Class A preferred stock into which the Series A preferred securities are exchanged. No interest will be paid on any dividend payment of Series A preferred securities or depositary shares of Wachovia Series G, Class A preferred stock.
 
The right of holders of Series A preferred securities to receive dividends is non-cumulative. If our board of directors does not declare a dividend on the Series A preferred securities or declares less than a full dividend in respect of any dividend period, you will have no right to receive any dividend or a full dividend, as the case may be, for that dividend period, and we will have no obligation to pay a dividend or to pay full dividends for that dividend period, whether or not dividends are declared and paid for any future dividend period with respect either to the Series A preferred securities, other series of preferred securities or the common stock. If we fail to pay, or declare and set aside for payment, dividends on the Series A preferred securities and any Parity Stock for six dividend periods, holders of the Series A preferred securities, voting together as a class with the holders of other Parity Stock with the same voting rights, will be entitled to elect two directors in addition to the directors then in office. These voting rights are described in more detail below under the heading “—Voting Rights”.
 
Payment of dividends on the Series A preferred securities will be subject to the rights of holders of any securities ranking senior to the Series A preferred securities as to dividend rights. If full dividends on the Series A preferred securities for any dividend period have not been declared and paid, or a sum sufficient for such payment has not been set apart for such payment, no dividends will be declared or paid or set aside for payment and no other distribution will be declared or made or set aside for payment upon our common stock, Series C preferred securities or other stock ranking subordinate to our Series A preferred securities, which we collectively refer to as Junior Stock, nor will any Junior Stock be redeemed, purchased, or otherwise acquired for any consideration, nor will any monies be paid to or made available for a sinking fund for the redemption of any such securities by us, except by conversion into or exchange for other Junior Stock, until such time as dividends on all outstanding Series A preferred securities have been:
 
 
Ÿ
declared and paid for three consecutive dividend periods; and
 
 
Ÿ
declared and paid or declared and a sum sufficient for such payment has been set apart for payment for the fourth consecutive dividend period.

78


Table of Contents
When dividends are not paid in full on, or a sum sufficient for such full payment is not set apart for, the Series A preferred securities and any Parity Stock, all dividends declared upon the Series A preferred securities and any Parity Stock will be declared pro rata. Thus, the amount of dividends declared per Series A preferred security and such other Parity Stock will in all cases bear to each other the same ratio that (a) full dividends per Series A preferred security for the then-current dividend period, which will not include any accumulation in respect of unpaid dividends for prior dividend periods, and (b) full dividends, including required or permitted accumulations, if any, on such other capital stock, bear to each other.
 
Under certain circumstances, if the OCC determines that the Bank is operating with an insufficient level of capital or is engaged in, or its relationship with us results in, an unsafe and unsound banking practice, the OCC could restrict our ability to pay dividends, including dividends to the holders of the Series A preferred securities. See “Business—Dividend Policy”.
 
Conditional Exchange
 
Each Series A preferred security will be exchanged automatically for one newly issued depositary share representing a one-sixth interest in one share of Wachovia Series G, Class A preferred stock if the OCC so directs in writing upon or after the occurrence of a Supervisory Event. A Supervisory Event will occur when:
 
 
Ÿ
the Bank becomes undercapitalized under the OCC’s “prompt corrective action” regulations;
 
 
Ÿ
the Bank is placed into conservatorship or receivership; or
 
 
Ÿ
the OCC, in its sole discretion, anticipates the Bank becoming “undercapitalized” in the near term or takes supervisory action that limits the payment of dividends by us and in connection therewith directs an exchange.
 
If the OCC so directs upon the occurrence of a Supervisory Event, each holder of Series A preferred securities will be unconditionally obligated to surrender to Wachovia any certificates representing the Series A preferred securities owned by such holder, and Wachovia will be unconditionally obligated to issue to such holder in exchange for each such Series A preferred security a depositary receipt representing a depositary share of Wachovia Series G, Class A preferred stock on a share-for-share basis. Any Series A preferred securities purchased or redeemed by us prior to the time of exchange will not be deemed outstanding and will not be subject to Conditional Exchange.
 
The exchange will occur as of 8:00 a.m. Eastern Time on the date for such exchange set forth in the applicable OCC directive, or, if such date is not set forth in the directive, as of 8:00 a.m. on the earliest possible date such exchange could occur consistent with the directive, as evidenced by the issuance by Wachovia of a press release prior to such time. As of the time of exchange, all of the Series A preferred securities will be deemed cancelled without any further action by us, all rights of the holders of Series A preferred securities as our shareholders will cease, and such persons will be, for all purposes, the holders of depositary shares representing Wachovia Series G, Class A preferred stock.
 
We will mail notice of the issuance of an OCC directive after the occurrence of a Supervisory Event to each holder of Series A preferred securities within 30 days, and Wachovia will deliver to each such holder depositary receipts for depositary shares representing the Wachovia Series G, Class A preferred stock upon surrender of certificates for the Series A preferred securities. Until such replacement certificates are delivered or in the event such replacement certificates are not delivered, any certificates previously representing Series A preferred securities will be deemed for all purposes to represent depositary shares of Wachovia Series G, Class A preferred stock. All corporate action necessary for Wachovia to issue the depositary shares and the Wachovia Series G, Class A preferred stock as of the time of exchange will be completed prior to or upon completion of this offering. Accordingly, once the OCC directs a Conditional Exchange after the occurrence of a Supervisory Event, no action will be required to be taken by holders of Series A preferred securities, by Wachovia, by the Bank (other than to inform the OCC), or by us in order to effect the automatic exchange as of the time of exchange.

79


Table of Contents
 
Holders of Series A preferred securities, by purchasing such securities, whether in this offering or in the secondary market after this offering, will be deemed to have agreed to be bound by the unconditional obligation to exchange such Series A preferred securities for depositary shares representing the Wachovia Series G, Class A preferred stock upon the OCC’s direction after the occurrence of a Supervisory Event. Our certificate of incorporation provides that the holders of Series A preferred securities will be unconditionally obligated to surrender such preferred securities. In accordance with an Exchange Agreement, dated             , 2002, among Wachovia, the Bank and us, Wachovia is unconditionally obligated to issue depositary shares representing the Wachovia Series G, Class A preferred stock in exchange for our Series A preferred securities upon the OCC’s direction after the occurrence of a Supervisory Event.
 
Holders of Series A preferred securities cannot exchange their Series A preferred securities for depositary shares representing the Wachovia Series G, Class A preferred stock voluntarily. Absent an OCC directive after the occurrence of a Supervisory Event, no exchange of the Series A preferred securities for depositary shares representing the Wachovia Series G, Class A preferred stock will occur. Upon the issuance of an OCC directive on or after the occurrence of a Supervisory Event, the depositary shares representing the Wachovia Series G, Class A preferred stock to be issued as part of the automatic exchange would constitute a newly issued series of preferred stock of Wachovia and would have substantially similar terms and provisions with respect to dividends, liquidation, and redemption as the Series A preferred securities, except that the depositary shares representing Wachovia Series G, Class A preferred stock will not:
 
 
Ÿ
be listed on any national securities exchange or national quotation system;
 
 
Ÿ
have any voting rights, except as required by law;
 
 
Ÿ
be redeemable upon the occurrence of an Investment Company Event or a Tax Event;
 
 
Ÿ
have any right to elect Independent Directors if dividends are missed; or
 
 
Ÿ
be subject to a Conditional Exchange.
 
Any authorized, declared, but unpaid dividends on Series A preferred securities as of the time of exchange would be deemed to be authorized, declared, but unpaid dividends on the depositary shares representing Wachovia Series G, Class A preferred stock. Wachovia Series G, Class A preferred stock would rank on an equal basis in terms of dividend payment and liquidation preference with any then-outstanding preferred stock of Wachovia. Wachovia has registered the depositary shares representing Wachovia Series G, Class A preferred stock with the SEC pursuant to this prospectus. Absent an OCC directive after the occurrence of a Supervisory Event, however, Wachovia will not issue any depositary shares representing the Wachovia Series G, Class A preferred stock, although Wachovia will be able to issue preferred stock in classes or series other than Wachovia Series G, Class A preferred stock. Since the depositary shares representing Wachovia Series G, Class A preferred stock will not be listed, it is highly unlikely that an active public market for the depositary shares representing Wachovia Series G, Class A preferred stock would develop or be maintained.
 
Absent the occurrence of a Conditional Exchange, holders of Series A preferred securities will have no dividend, liquidation preference, or other rights with respect to any security of the Bank, Wachovia Preferred Holding or Wachovia; such rights as are conferred by the Series A preferred securities exist solely as to us.
 
Rank
 
The Series A preferred securities will rank senior to our shares of common stock and to all of our other Junior Stock. We may also issue stock ranking senior to our Series A preferred stock as to dividend rights and rights upon liquidation, winding up, or dissolution, which we refer to as “Senior Stock”. As of the date of this prospectus, there are no shares of Senior Stock authorized, issued, or outstanding. Our Series B and D preferred securities will constitute Parity Stock with respect to the Series A preferred securities.
 
Our board of directors has the power to create and issue Junior Stock without any approval or consent of the holders of Series A preferred securities. So long as any Series A preferred securities remain outstanding, we may not issue Senior Stock without the approval of the holders of at least two-thirds of the outstanding

80


Table of Contents
Series A preferred securities. So long as any Series A preferred securities remain outstanding, additional shares of Parity Stock may be issued without your approval, but such issuance requires the approval of a majority of our Independent Directors.
 
Voting Rights
 
Holders of Series A preferred securities are entitled to 1/10th of one vote per security on all matters to be voted on by shareholders, voting as a single class with the holders of our common stock and the holders of any other class of securities entitled to vote as a single class with the holders of our common stock.
 
If we fail to pay, or declare and set aside for payment, full dividends on the Series A preferred securities for six dividend periods, the authorized number of our directors will be increased by two. Subject to compliance with any requirement for regulatory approval of, or non-objection to, persons serving as directors, the holders of Series A preferred securities, voting together as a single and separate class with the holders of any other Parity Stock upon which the same voting rights as those of the Series A preferred securities have been conferred and are irrevocable, will have the right to elect two directors in addition to the directors then in office at our next annual meeting of shareholders. This right will continue at each subsequent annual meeting until we declare and pay dividends for three consecutive periods and pay or declare and set aside for payment dividends for the fourth consecutive dividend period.
 
The term of such additional directors will terminate, and the total number of directors will be decreased by two, at the first annual meeting of shareholders after we declare and pay dividends for three consecutive periods and declare and pay or set aside for payment dividends on the Series A preferred securities for the fourth consecutive dividend period or, if earlier, upon the redemption of all Series A preferred securities or upon a Conditional Exchange. After the term of such additional directors terminates, the holders of the Series A preferred securities will not be able to elect additional directors unless dividends on the Series A preferred securities and any other Parity Stock have again not been paid or declared and set aside for payment for six future dividend periods.
 
Any additional director elected by the holders of Series A preferred securities may only be removed by the vote of the holders of record of the outstanding Series A preferred securities and any Parity Stock entitled to vote, voting together as a single and separate class, at a meeting of our shareholders called for that purpose. As long as dividends on the Series A preferred securities have not been paid for six dividend periods, (a) any vacancy created by the removal of any such director may be filled only by the vote of the holders of the outstanding Series A preferred securities and any other Parity Stock entitled to vote, voting together as a single and separate class, at the same meeting at which such removal is considered, and (b) any other vacancy in the office of any such director as a result of the director’s death or resignation or for any other reason may be filled by an instrument in writing signed by any such remaining director and filed with us.
 
So long as any Series A preferred security is outstanding, we will not, without the consent or vote of the holders of at least two-thirds of the outstanding Series A preferred securities, voting separately as a single class:
 
 
Ÿ
amend, alter, or repeal or otherwise change any provision of our certificate of incorporation, including the terms of the Series A preferred securities, if such amendment, alteration, repeal, or change would materially and adversely affect the preferences, conversion, or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications, or terms or conditions of redemption of the Series A preferred securities;
 
 
Ÿ
authorize, create, or increase the authorized amount of or issue any class or series of any of our equity securities, or any warrants, options, or other rights exercisable for or convertible or exchangeable into any class or series of any of our equity securities, ranking senior to the Series A preferred securities, either as to dividend rights or rights on our liquidation, dissolution, or winding up; or
 

81


Table of Contents
 
Ÿ
effect our consolidation, conversion, or merger with or into, or a share exchange with, another entity except that we may consolidate or merge with or into, or enter into a share exchange with, another entity if:
 
 
Ÿ
such entity is an entity that is controlled by or under common control with the Bank;
 
 
Ÿ
such entity is a corporation, business trust, limited liability company or other entity organized under the laws of the United States or a political subdivision of the United States that is not regulated as an investment company under the Investment Company Act and that, according to an opinion of counsel rendered by a firm experienced in such matters, is a REIT for United States Federal income tax purposes;
 
 
Ÿ
such other entity expressly assumes all of our obligations and commitments pursuant to such consolidation, merger, or share exchange;
 
 
Ÿ
the outstanding Series A preferred securities are exchanged for or converted into securities of the surviving entity having preferences, limitations, and relative voting and other rights substantially identical to those of the Series A preferred securities, including limitations on personal liability of the shareholders;
 
 
Ÿ
after giving effect to such merger, consolidation, or share exchange, no breach, or event which, with the giving of notice or passage of time or both, could become a breach by us of obligations under our certificate of incorporation, will have occurred and be continuing; and
 
 
Ÿ
we have received written notice from each of the rating agencies rating the Series A preferred securities, and delivered a copy of such written notice to the transfer agent, confirming that such merger, consolidation, or share exchange will not result in a reduction of the rating assigned by any of such rating agencies to the Series A preferred securities or the preferred interests of any surviving corporation, trust, or entity issued in replacement of the Series A preferred securities.
 
As a condition to effecting any merger, consolidation, or share exchange described above, we will mail to the holders of record of the Series A preferred securities a notice of such merger, consolidation or share exchange. The notice will be mailed at least 15 days prior to such transaction becoming effective and will contain a description of such transaction together with a certificate of one of our executive officers stating that such transaction complies with the requirements set forth in our certificate of incorporation and that all conditions precedent provided therein relating to such transaction have been fulfilled.
 
The creation or issuance of Parity Stock or Junior Stock, or an amendment to our certificate of incorporation that increases the number of authorized preferred stock, Series A preferred securities, Junior Stock, or Parity Stock, will not be deemed to be a material and adverse change requiring a vote of the holders of Series A preferred securities. However, the issuance of any Parity Stock requires the approval of a majority of our Independent Directors.
 
Our certificate of incorporation provides certain covenants in favor of the holders of the Series A preferred securities. Except with the consent or affirmative vote of the holders of at least two-thirds of the Series A preferred securities, voting as a separate class, we agree not to:
 
 
Ÿ
make or permit to be made any payment to the Bank or its affiliates relating to our indebtedness or beneficial interests in us when we are precluded, as described under “—Dividends” above, from making payments in respect of our common stock or other Junior Stock, or make such payment or permit such payment to be made in anticipation of any liquidation, dissolution, or winding up;
 
 
Ÿ
incur indebtedness, including any guarantees of indebtedness, at any time other than indebtedness in an aggregate amount not exceeding 20% of our shareholders’ equity as determined in accordance with accounting principles generally accepted in the United States;
 

82


Table of Contents
 
Ÿ
pay dividends on our common stock or other Junior Stock unless our FFO for the four prior fiscal quarters equals or exceeds 150% of the amount that would be required to pay full annual dividends on the Series A preferred securities as well as any other Parity Stock, except as may be necessary to maintain our status as a REIT;
 
 
Ÿ
make any payment of interest or principal with respect to our indebtedness to the Bank or its affiliates unless FFO for the four prior fiscal quarters equals or exceeds 150% of the amount that would be required to pay full annual dividends on the Series A preferred securities as well as any other Parity Stock, except as may be necessary to maintain our status as a REIT;
 
 
Ÿ
amend or otherwise change our policy of reinvesting the proceeds of our assets in other interest-earning assets such that our FFO over any period of four fiscal quarters will be anticipated to equal or exceed 150% of the amount that would be required to pay full annual dividends on the Series A preferred securities as well as any other Parity Stock, except as may be necessary to maintain our status as a REIT;
 
 
Ÿ
issue any additional shares of our common stock in an amount that would result in the Bank or its affiliates owning less than 100% of the outstanding shares of common stock; or
 
 
Ÿ
remove “Wachovia” from our name unless the name of either Wachovia or the Bank changes and we change our name to be consistent with the new name of either Wachovia or the Bank.
 
Wachovia’s articles of incorporation do not contain similar covenants regarding the Wachovia Series G, Class A preferred stock following an exchange of our Series A preferred securities. Therefore, following a Conditional Exchange, you would no longer have any voting rights, except as provided by North Carolina law. See below under “Description of Wachovia Series G, Class A Preferred Stock—Voting Rights”.
 
Redemption
 
Except upon the occurrence of a Special Event, which may be a Tax Event, an Investment Company Act Event, or a Regulatory Capital Event, the Series A preferred securities will not be redeemable prior to                     , 2022. On or after such date, we may redeem the Series A preferred securities for cash, in whole or in part, at any time and from time to time at our option with the prior approval of the OCC at the redemption price of $25.00 per security, plus authorized, declared, but unpaid dividends to the date of redemption, without interest, from funds legally available for such purpose.
 
After                     , 2022, our board of directors may determine that it should redeem fewer than all the outstanding Series A preferred securities. In that event, the Series A preferred securities to be redeemed will be determined by lot, pro rata, or by such other method as the board of directors in its sole discretion determines to be equitable. The method selected by the board of directors must satisfy any applicable requirements of the New York Stock Exchange or any securities exchange on which the Series A preferred securities are then listed.
 
Prior to                     , 2022, upon the occurrence of a Special Event, with the prior approval of the OCC, we have the right to redeem the outstanding Series A preferred securities, in whole, but not in part, at a redemption price of $25.00 per security, plus all authorized, declared, but unpaid dividends to the date of redemption, without interest, from funds legally available for such purpose.
 
A Special Event means:
 
 
Ÿ
a Tax Event;
 
 
Ÿ
an Investment Company Event; or
 
 
Ÿ
a Regulatory Capital Event.
 
“Tax Event” means our determination, based on the receipt by us of an opinion of counsel, rendered by a law firm experienced in such matters, in form and substance satisfactory to us, which states that there is a

83


Table of Contents
significant risk that dividends paid or to be paid by us with respect to our capital stock are not or will not be fully deductible by us for United States Federal income tax purposes or that we are or will be subject to additional taxes, duties, or other governmental charges, in an amount we reasonably determine to be significant as a result of:
 
 
Ÿ
any amendment to, clarification of, or change in, the laws, treaties, or related regulations of the United States or any of its political subdivisions or their taxing authorities affecting taxation; or
 
 
Ÿ
any judicial decision, official administrative pronouncement, published or private ruling, technical advice memorandum, Chief Counsel Advice, as such term is defined in the Code, regulatory procedure, notice, or official announcement, which we refer to collectively as “Administrative Actions”;
 
which amendment, clarification, or change is effective, or such official pronouncement or decision is announced, on or after the date of issuance of the Series A preferred securities.
 
“Investment Company Act Event” means our determination, based on the receipt by us of an opinion of counsel, rendered by a law firm experienced in such matters, in form and substance satisfactory to us, which states that there is a significant risk that we are or will be considered an “investment company” that is required to be registered under the Investment Company Act, as a result of the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency, or regulatory authority.
 
“Regulatory Capital Event” means our determination, based on the receipt by us of an opinion of counsel, rendered by a law firm experienced in such matters, in form and substance satisfactory to us, which states that there is a significant risk that the Series A preferred securities will no longer constitute Tier 1 capital of the Bank or Wachovia for purposes of the capital adequacy guidelines or policies of the OCC or the Federal Reserve Board, or their respective successor as the Bank’s and Wachovia’s, respectively, primary Federal banking regulator, as a result of:
 
 
Ÿ
any amendments to, clarification of, or change in applicable laws or related regulations or official interpretations or policies; or
 
 
Ÿ
any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations.
 
Dividends will cease to accrue on the Series A preferred securities called for redemption on and as of the date fixed for redemption, and such Series A preferred securities will be deemed to cease to be outstanding, provided that the redemption price, including any authorized, declared, but unpaid dividends to the date fixed for redemption, without interest, has been duly paid or provision has been made for such payment.
 
Notice of any redemption will be mailed at least 30 days, but not more than 60 days, prior to any redemption date to each holder of Series A preferred securities to be redeemed at such holder’s registered address.
 
Our ability to redeem any Series A preferred security is subject to compliance with applicable regulatory requirements, including the prior approval of the OCC, relating to the redemption of capital instruments. Under current policies of the OCC, such approval would be granted only if the redemption were to be made out of the proceeds of the issuance of another capital instrument or if the OCC were to determine that the conditions and circumstances of Wachovia and the Bank warrant the reduction of a source of permanent capital.
 
Rights upon Liquidation
 
In the event we voluntarily or involuntarily liquidate, dissolve, or wind up, the holders of Series A preferred securities at the time outstanding will be entitled to receive liquidating distributions in the amount of $25.00 per security, plus any authorized, declared, but unpaid dividends to the date of liquidation, out of our assets legally available for distribution to shareholders, before any distribution of assets is made to holders of Junior Stock and subject to the rights of the holders of any class or series of Senior Stock upon liquidation and the rights of general creditors.
 

84


Table of Contents
After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Series A preferred securities will have no right or claim to any of our remaining assets. In the event that, upon any such voluntary or involuntary liquidation, dissolution, or winding up, the available assets are insufficient to pay the amount of the liquidation distributions on all outstanding Series A preferred securities and the corresponding amounts payable on any other Parity Stock, then the holders of Series A preferred securities and any other Parity Stock will share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled.
 
For such purposes, our consolidation or merger with or into any other entity, the consolidation or merger of any other entity with or into us, or the sale of all or substantially all of our property or business, will not be deemed to constitute our liquidation, dissolution, or winding up. However, Wachovia Preferred Holding, as the holder of substantially all of our shares of common stock, will have the ability to cause us to liquidate, dissolve or wind up at any time and for any reason without the consent or approval of the holders of the Series A preferred securities.
 
Independent Director Approval
 
Our certificate of incorporation requires that, so long as any Series A preferred security is outstanding, certain actions by us are to be approved by a majority of our Independent Directors. In addition, any members of our board of directors elected by holders of preferred stock, including the Series A preferred securities, will be deemed to be Independent Directors for purposes of approving actions requiring the approval of a majority of the Independent Directors.
 
The actions which may not be taken without the approval of a majority of our Independent Directors include:
 
 
Ÿ
the issuance of additional Parity Stock;
 
 
Ÿ
the termination, amendment or modification of, or the election not to renew, the participation and servicing agreements or the subcontracting of any duties under these agreements to third parties unaffiliated with the Bank;
 
 
Ÿ
a change in our policy of limiting authorized investments which are not Qualifying Interests to no more than 20% of the value of our total assets or a change in the investment policy that would be inconsistent with an exemption under the Investment Company Act;
 
 
Ÿ
any consolidation, conversion, or merger or share exchange that is not tax-free to holders of the Series A preferred securities unless such transaction is required to be approved by a two-thirds vote of the holders of Series A preferred securities;
 
 
Ÿ
the determination to revoke our REIT status or any amendment to the REIT-related transfer restrictions on our securities; or
 
 
Ÿ
Wachovia Funding’s dissolution, liquidation, or termination prior to                     , 2022.
 
Our certificate of incorporation requires that, in assessing the benefits to us of any proposed action requiring their consent, the Independent Directors take into account the interests of holders of both common stock and the preferred securities, including holders of the Series A preferred securities. Our certificate of incorporation provides that in considering the interests of the holders of preferred securities, including the holders of the Series A preferred securities, the Independent Directors owe the same duties which the Independent Directors owe to the holders of common stock.
 
Restrictions on Ownership and Transfer
 
For information regarding restrictions on ownership of the Series A preferred securities, see “Description of Other Wachovia Funding Capital Stock—Restrictions on Ownership and Transfer”.

85


Table of Contents
DESCRIPTION OF OTHER WACHOVIA FUNDING CAPITAL STOCK
 
The following summary describes the material terms and provisions of our authorized capital stock. This description is qualified in its entirety to the applicable provisions of the Delaware corporate law and our certificate of incorporation and by-laws. Our certificate of incorporation and by-laws have been filed with the SEC as an exhibit to the registration statement which we filed in connection with this offering. Please see “Where You Can Find More Information about Wachovia Funding” for information on how to obtain a copy of these documents.
 
We have two types of authorized capital stock: common stock and preferred securities. Currently only our common stock and Series D preferred securities are outstanding. Our Series B and C preferred securities will be issued concurrently with this offering of our Series A preferred securities.
 
Common Stock
 
General.    All outstanding shares of common stock are fully paid and non-assessable. There is no established trading market for our common stock. Wachovia Preferred Holding owns 99.85% of our common stock and Wachovia owns the remaining. Holders of common stock have no preemptive rights. There are no redemption or sinking fund provisions with respect to the common stock.
 
Voting.    Holders of common stock are entitled to one vote per share on all matters to be voted on by shareholders. There are no cumulative voting rights. As the holder of substantially all of our common stock, Wachovia Preferred Holding, and the Bank indirectly, will be able, subject to the rights of the holders of preferred securities, to elect and remove directors, amend our certificate of incorporation, and approve other actions requiring shareholder approval.
 
Dividends.    The holders of common stock are entitled to receive such dividends, if any, as may be declared from time to time by our board of directors, subject to any preferential dividend rights of holders of any outstanding preferred securities. In order to remain qualified as a REIT, we must distribute annually at least 90% of our annual REIT Taxable Income to shareholders.
 
Liquidation Rights.    Upon our dissolution or liquidation, holders of common stock will be entitled to receive all of our assets which are available for distribution to our shareholders, subject to any preferential rights of holders of then outstanding preferred securities.
 
Preferred Securities
 
Series B Preferred Securities
 
General.    The Series B preferred securities rank senior to our common stock and our Series C preferred securities as to dividends and in liquidation and rank on parity with our Series A preferred securities and Series D preferred securities. Holders of the Series B preferred securities have no preemptive rights with respect to any shares of our capital stock.
 
Voting.    Holders of the Series B preferred securities are entitled to 1/10th of one vote per security on all matters to be voted on by shareholders, voting as a single class with the holders of our common stock and the holders of any other class of securities entitled to vote as a single class with the holders of our common stock.
 
Dividends.    The holders of Series B preferred securities are entitled to receive dividends at the rate equal to three-month LIBOR plus 1.83% per annum per security. Should all or a portion of the Series B preferred securities be transferred to a non-affiliate of Wachovia, through an initial public offering, private placement or otherwise, such dividend rate will change to a fixed dividend rate equal to the then applicable dividend rate on the Series B preferred securities. Dividends on the Series B preferred securities are not

86


Table of Contents
cumulative and, accordingly, if we do not declare a dividend or declare less than a full dividend on the Series B preferred securities for a quarterly dividend period, holders of the Series B preferred securities will have no right to receive a dividend or the full dividend, as the case may be, for that period, and we will have no obligation to pay a dividend for that period, whether or not dividends are declared and paid for any future period with respect to either the Series B preferred securities or our common stock. Payment of dividends on the Series B preferred securities will be subject to the rights of holders of any securities ranking senior to the Series B preferred securities as to dividend rights.
 
Conditional Exchange.    Each Series B preferred security will be exchanged automatically for one newly issued depositary share representing a one-eighth interest in one share of Series H, Class A Wachovia preferred stock if the OCC so directs in writing upon or after the occurrence of a Supervisory Event.
 
Redemption.    Except upon the occurrence of a Special Event, which may be a Tax Event, an Investment Company Act Event, or a Regulatory Capital Event, the Series B preferred securities will not be redeemable prior to the fifth anniversary of the initial issuance of the Series B preferred securities. On or after such date, we may redeem the Series B preferred securities for cash, in whole or in part, at any time and from time to time at our option with the prior approval of the OCC at the redemption price of $25.00 per security, plus authorized, declared, but unpaid dividends to the date of redemption.
 
Liquidation Rights.    In the event we voluntarily or involuntarily liquidate, dissolve, or wind up, the holders of Series B preferred securities at the time outstanding will be entitled to receive liquidating distributions in the amount of $25.00 per security, plus any authorized, declared and unpaid dividends for the then-current dividend period to the date of liquidation, out of our assets legally available for distribution to shareholders, before any distribution of assets is made to holders of Junior Stock and subject to the rights of the holders of any class or series of Senior Stock upon liquidation and the rights of general creditors. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Series B preferred securities will have no right or claim to any of our remaining assets. In the event that, upon any such voluntary or involuntary liquidation, dissolution, or winding up, the available assets are insufficient to pay the amount of the liquidation distributions on all outstanding Series B preferred securities and the corresponding amounts payable on any other Parity Stock, then the holders of Series B preferred securities and any other Parity Stock will share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled.
 
Series C Preferred Securities
 
General.    The Series C preferred securities rank senior to our common stock as to dividends and in liquidation and rank subordinate to our Series A, Series B and Series D preferred securities. Holders of the Series C preferred securities have no preemptive rights with respect to any shares of our capital stock.
 
Voting.    Holders of the Series C preferred securities are entitled to 1/10th of one vote per security on all matters to be voted on by shareholders, voting as a single class with the holders of our common stock and the holders of any other class of securities entitled to vote as a single class with the holders of our common stock.
 
Dividends.    The holders of Series C preferred securities are entitled to receive dividends at the rate equal to three-month LIBOR plus 0.85% per annum per security during the first seven years after the initial issuance of Series C preferred securities. After the seventh anniversary of the initial issuance of Series C preferred securities, the holders of Series C preferred securities will be entitled to receive dividends at the rate equal to three-month LIBOR plus 2.25% per annum per security. Notwithstanding the previous two sentences, should all or a portion of the Series C preferred securities be transferred to a non-affiliate of Wachovia, through an initial public offering, private placement or otherwise, such dividend rate will change to a fixed dividend rate equal to the then applicable dividend rate on the Series C preferred securities. Dividends on the Series C preferred securities are cumulative and, accordingly, even if we do not declare a dividend or declare

87


Table of Contents
less than a full dividend on the Series C preferred securities for a quarterly dividend period, holders of the Series C preferred securities will have the right to receive the full dividend, for each period, whether past or current, whether or not dividends are declared and paid for any future period with respect to our Series C preferred securities or common stock. Payment of dividends on the Series C preferred securities will be subject to the rights of holders of any securities ranking senior to the Series C preferred securities as to dividend rights.
 
Redemption.    Except upon the occurrence of a Tax Event or an Investment Company Act Event, the Series C preferred securities will not be redeemable prior to the seventh anniversary of their initial issuance. On or after such date, we may redeem the Series C preferred securities for cash, in whole or in part, at any time and from time to time at our option with the prior approval of the OCC at the redemption price of $1,000 per security, plus authorized, declared and unpaid dividends, including any accumulation in respect of any unpaid dividends, to the date of redemption.
 
Liquidation Rights.    In the event we voluntarily or involuntarily liquidate, dissolve, or wind up, the holders of Series C preferred securities at the time outstanding will be entitled to receive liquidating distributions in the amount of $1,000 per security, plus any authorized, declared and unpaid dividends, including any accumulation in respect of any unpaid dividends, to the date of liquidation, out of our assets legally available for distribution to shareholders, before any distribution of assets is made to holders of any stock ranking subordinate to our Series C preferred securities and subject to the rights of the holders of any class or series of stock ranking senior to our Series C preferred securities upon liquidation and the rights of general creditors. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Series C preferred securities will have no right or claim to any of our remaining assets. In the event that, upon any such voluntary or involuntary liquidation, dissolution, or winding up, the available assets are insufficient to pay the amount of the liquidation distributions on all outstanding Series C preferred securities and the corresponding amounts payable on any other stock ranking on parity with our Series C preferred securities, then the holders of Series C preferred securities and any other stock ranking on parity with our Series C preferred securities will share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled.
 
Series D Preferred Securities
 
General.    The Series D preferred securities rank senior to our common stock and our Series C preferred securities as to dividends and in liquidation and rank on parity with our Series A and Series B preferred securities. Holders of the Series D preferred securities have no preemptive rights with respect to any shares of our capital stock. The Series D preferred securities are not convertible or exchangeable into any of our other securities.
 
Voting.    Holders of the Series D preferred securities are not entitled to vote at shareholder meetings and are not entitled to notice of such meetings, except where specifically required by law.
 
Dividends.    The holders of Series D preferred securities are entitled to receive dividends in the amount of 8.5% per annum per security. Dividends on the Series D preferred securities are not cumulative and, accordingly, if we do not declare a dividend or declare less than a full dividend on the Series D preferred securities for a dividend period, holders of the Series D preferred securities will have no right to receive a dividend or the full dividend, as the case may be, for that period, and we will have no obligation to pay a dividend for that period, whether or not dividends are declared and paid for any future period with respect to either the Series D preferred securities or our common stock.
 
Liquidation Rights.    In the event we voluntarily or involuntarily liquidate, dissolve, or wind up, the holders of Series D preferred securities at the time outstanding will be entitled to receive liquidating distributions in the amount of $1,000 per security, plus any authorized, declared and unpaid dividends for the then-current dividend period to the date of liquidation, out of our assets legally available for distribution to shareholders, before any distribution of assets is made to holders of Junior Stock and subject to the rights of the holders of any class or series of Senior Stock upon liquidation and the rights of general creditors. After

88


Table of Contents
payment of the full amount of the liquidating distributions to which they are entitled, the holders of Series D preferred securities will have no right or claim to any of our remaining assets. In the event that, upon any such voluntary or involuntary liquidation, dissolution, or winding up, the available assets are insufficient to pay the amount of the liquidation distributions on all outstanding Series D preferred securities and the corresponding amounts payable on any other Parity Stock, then the holders of Series D preferred securities and any other Parity Stock will share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled.
 
Redemption.    We can redeem the Series D preferred securities in whole or in part at any time at $1,000 per security plus authorized, declared and unpaid dividends.
 
Ability to Issue Additional Preferred Securities
 
In addition to our Series A preferred securities and Series B, C and D preferred securities, our certificate of incorporation authorizes our board of directors to issue, in the aggregate, up to 75,001,000 shares of preferred securities from time to time in one or more series with such designations, preferences, conversion, or other rights, restrictions, limitations as to dividends or other distributions, qualifications, and terms and conditions of redemption as are determined by our board of directors without shareholder approval. The specific terms of a particular class or series of preferred securities that is issued, if any, will be described in an amendment to our certificate of incorporation relating to that class or series. As of the date of this prospectus, we have no present plans to issue any other shares of preferred securities.
 
We believe that the power of the board of directors to issue additional authorized but unissued preferred securities and to classify or reclassify unissued preferred securities and cause us to issue such classified or reclassified preferred securities will provide us with increased flexibility in structuring possible future financings and acquisitions and in meeting other needs which might arise. The additional preferred securities will be available for issuance without further action by our shareholders, unless such action is required by applicable law or the rules of the New York Stock Exchange, except that as long as any Series A, B or C preferred security remains outstanding:
 
 
Ÿ
additional preferred securities ranking senior to the Series A, B or C preferred securities may not be issued without the approval of the holders of at least two-thirds of the Series A, Series B or Series C preferred securities, respectively, each voting as a separate class; and
 
 
Ÿ
additional preferred securities ranking on a parity with the Series A, B or C preferred securities, may not be issued without the approval of the Independent Directors.
 
Restrictions on Ownership and Transfer
 
To qualify as a REIT under the Code:
 
 
Ÿ
no more than 50% of the value of our outstanding shares of capital stock may be owned, directly or indirectly, by five or fewer individuals during the last half of a taxable year, other than the first year. This is known as the “Five or Fewer Test”; and
 
 
Ÿ
our capital stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year or during a proportionate part of a shorter taxable year, other than the first year. This is known as the “One Hundred Persons Test”.
 
Neither the collective ownership by Wachovia Preferred Holding and Wachovia of 100% of our outstanding common stock nor the ownership by Wachovia Preferred Holding of 100% of the Series B and C preferred securities will adversely affect our REIT qualification because each shareholder of Wachovia, whose capital stock is widely held, counts as a separate beneficial owner of us for purposes of the Five or Fewer Test. Further, the certificate of designation for the Series D preferred securities contains restrictions on the transfer of these preferred securities that are intended to ensure compliance with the One Hundred Persons Test. We may deny any proposed transfer of Series D preferred securities that, in our reasonable judgment, may adversely impact our ability to maintain our status as a REIT.

89


Table of Contents
 
Our certificate of incorporation provides that a transfer of shares that would otherwise result in more than 50% in value of our outstanding shares of capital stock being owned by five or fewer individuals, under the applicable attribution rules of the Code, or which would cause the shares of our capital stock to be beneficially owned by fewer than 100 persons, will be null and void and the purported transferee will acquire no rights or economic interest in such shares. In addition, if our board of directors determines in good faith that a transfer of shares of capital stock has taken place in violation of the preceding sentence or any person intends to acquire or has attempted to acquire beneficial ownership of any Series A preferred securities in violation of the preceding sentence, our board of directors may take such action as it may deem advisable to refuse to give effect to or to prevent such transfer of shares, including, but not limited to, refusing to give effect to such transfer on our books, and/or instituting proceedings to enjoin such transfer.
 
All persons who own, directly or by virtue of the applicable attribution rules of the Code, more than 2% of the outstanding preferred securities of any series must give a written notice to us containing the information specified in our certificate of incorporation by January 31 of each year. In addition, each shareholder shall upon demand be required to disclose to us such information as we may request, in good faith, in order to determine our status as a REIT or to comply with Treasury Regulations promulgated under the REIT provisions of the Code.
 
There are no ownership limitations of Wachovia Series G, Class A preferred stock following an exchange of our Series A preferred securities upon the occurrence of a Supervisory Event.
 
Anti-Takeover Effects of Delaware Laws
 
Some provisions of Delaware law could make the following more difficult:
 
 
Ÿ
the acquisition of us by means of a tender offer;
 
 
Ÿ
the acquisition of us by means of a proxy contest or otherwise; or
 
 
Ÿ
the removal of our incumbent officers and directors.
 
These provisions are designed to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection give us the potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us, and that the benefits of this increased protection outweigh the disadvantages of discouraging those proposals, because negotiation of those proposals could result in an improvement of their terms.
 
More specifically, under Section 203 of the DGCL, certain “business combinations” (defined generally to include mergers or consolidations between the Delaware corporation and an interested stockholder and transactions with an interested stockholder involving the assets or stock of the corporation or its majority-owned subsidiaries and transactions which increase the interested stockholder’s percentage ownership of stock) between a publicly held Delaware corporation and an “interested stockholder” (defined generally as those stockholders who become beneficial owners of 15% or more of a Delaware corporation’s voting stock or their affiliates) are prohibited for a three-year period following the date that such stockholder becomes an interested stockholder, unless
 
 
Ÿ
the corporation has elected in its certificate of incorporation not to be so governed;
 
 
Ÿ
either the business combination or the proposed transaction which resulted in the person becoming an interested stockholder was approved by the board of directors of the corporation before the other party to the business combination became an interested stockholder;
 
 
Ÿ
upon consummation of the transaction that made it an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the commencement of the transaction (excluding voting stock owned by officers who are also directors or held in employee benefit plans in which the employees do not have a confidential right to tender or vote stock held by the plan); or

90


Table of Contents
 
 
Ÿ
the business combination was approved by the board of directors of the corporation and also ratified by two-thirds of the voting stock (excluding the stock owned by the interested stockholder).
 
Under certain circumstances, Section 203 makes it more difficult for a person who would be an interested stockholder to effect various business combinations with a corporation for a three-year period, although the stockholders may elect to exclude a corporation from the restrictions imposed thereunder. Our certificate of incorporation does not exclude us from restrictions imposed under Section 203. The provisions of Section 203 may encourage companies interested in acquiring us to negotiate in advance with our board of directors, since the restrictions contained in Section 203 would be avoided if a majority of the directors then in office approved either the business combination or the transaction which results in the stockholder becoming an interested stockholder. Such provisions also may have the effect of preventing changes in our management. It is possible that such provisions could make it more difficult to accomplish transactions which stockholders may otherwise deem to be in their best interests.
 
DESCRIPTION OF WACHOVIA SERIES G, CLASS A PREFERRED STOCK
 
The following summary describes the material terms and provisions of the Wachovia Series G, Class A preferred stock. This description is qualified in its entirety by reference to the terms and provisions of Wachovia’s articles of incorporation and articles of amendment. Wachovia’s articles of incorporation and articles of amendment have been filed with the SEC by Wachovia as exhibits to the registration statement in connection with this offering. Please see “Where You Can Find More Information about Wachovia” for information on how to obtain copies of these documents.
 
General
 
The Wachovia Series G, Class A preferred stock, if and when issued, will be represented by depositary shares of Wachovia, each representing one-sixth of a share of Wachovia Series G, Class A preferred stock. If and when issued, Wachovia’s depositary shares will be validly issued, fully paid, and non-assessable. The holders of the Wachovia Series G, Class A preferred stock will have no preemptive rights with respect to any shares of Wachovia’s capital stock or any of its other securities convertible into or carrying rights or options to purchase any such capital stock. The Wachovia Series G, Class A preferred stock is perpetual and will not be convertible into shares of Wachovia common stock or any other class or series of its capital stock, and will not be subject to any sinking fund or other obligation for their repurchase or retirement.
 
Rank
 
The Wachovia Series G, Class A preferred stock would rank senior to its common stock and to any other securities which Wachovia may issue in the future that are subordinate to the Wachovia Series G, Class A the preferred stock. As of the date of this prospectus, there are no shares of securities that would rank senior to the Wachovia Series G, Class A preferred stock authorized, issued or outstanding. Wachovia may authorize and issue additional shares of preferred stock that may rank junior to, on parity with or senior to the Series G, Class A preferred stock as to dividend rights and rights upon liquidation, winding up, or dissolution without the consent of the holders of the Series G, Class A preferred stock. Wachovia has also authorized, but not issued, 5,000,000 shares of Series H, Class A preferred stock. The Series H, Class A preferred stock would rank on parity with the Series G, Class A preferred stock and may be issued in exchange for our Series B preferred securities in the event that the OCC so directs upon or after the occurrence of a Supervisory Event.
 
Dividends
 
Holders of the Wachovia Series G, Class A preferred stock will be entitled to receive, if, when, and as declared by its board of directors out of legally available assets, non-cumulative cash dividends at the rate of         % per annum of the liquidation preference, which is $150.00 per share of the Wachovia Series G, Class A preferred stock. Holders of depositary shares will receive one-sixth of any such dividend and one-sixth of any

91


Table of Contents
such liquidation preference. If authorized and declared, dividends on the Wachovia Series G, Class A preferred stock will be payable quarterly in arrears on March 31, June 30, September 30, and December 31 of each year or, if any such day is not a business day, on the next business day without interest, unless the next business day falls in a different calendar year, in which case the dividend will be paid on the preceding business day. Wachovia refers to each such quarter of a calendar year as a “dividend period”. Dividends in each quarterly period will accrue from the first day of such period. The record date for payment of dividends on the Series G, Class A preferred stock and Wachovia’s depositary shares will be the 15th calendar day of the last calendar month of the applicable dividend period. Upon an exchange of depositary shares representing the Wachovia Series G, Class A preferred stock for our Series A preferred securities, any authorized, declared and unpaid dividends for the most recent quarter on our Series A preferred securities as of the time of the exchange will be deemed to be authorized, declared and unpaid dividends for the most recent quarter on the depositary shares representing the Wachovia Series G, Class A preferred stock. No interest will be paid on any dividend payment of depositary shares representing the Wachovia Series G, Class A preferred stock.
 
The right of holders of the Wachovia Series G, Class A preferred stock to receive dividends is non-cumulative. If Wachovia’s board of directors does not declare a dividend on the Wachovia Series G, Class A preferred stock or declares less than a full dividend in respect of any dividend period, the holders of the Wachovia Series G, Class A preferred stock will have no right to receive any dividend or a full dividend, as the case may be, for that dividend period, and Wachovia will have no obligation to pay a dividend or to pay full dividends for that dividend period, whether or not dividends are declared and paid for any future dividend period with respect to the Wachovia Series G, Class A preferred stock or Wachovia’s common stock or any other class or series of Wachovia’s preferred stock.
 
Unless full dividend payments on the Series G, Class A preferred stock have been declared and paid for the immediately preceding dividend period:
 
 
Ÿ
no cash dividend or distribution may be paid by Wachovia on stock junior to the Series G, Class A preferred stock, other than distributions or dividends payable in such junior stock
 
 
Ÿ
no such junior stock may be redeemed by Wachovia for any consideration and
 
 
Ÿ
no monies shall be paid by Wachovia or made available for a sinking fund for the redemption of such junior stock.
 
Under an indenture between Wachovia and Wilmington Trust Company, as trustee, Wachovia has agreed not to pay any dividends on, or make a liquidation payment relating to, any of Wachovia’s common stock or preferred stock, including its Series G, Class A preferred stock, if, at that time, there is a default under the indenture or a related Wachovia guarantee or Wachovia has delayed interest payments on trust preferred securities issued under the indenture. Currently, there are $1.3 billion aggregate principal amount of trust preferred securities outstanding under such indenture.
 
Wachovia is subject to various general regulatory policies and requirements relating to the payment of dividends, including requirements to maintain adequate capital above regulatory minimums. The Federal Reserve Board is authorized to determine, under certain circumstances relating to the financial condition of a bank holding company, such as Wachovia, that the payment of dividends would be an unsafe or unsound practice and to prohibit payment thereof.
 
Redemption
 
Except for certain limited circumstances described below, the Wachovia Series G, Class A preferred stock will not be redeemable prior to                     , 2022. On or after such date, Wachovia may redeem the Wachovia Series G, Class A preferred stock for cash, in whole or in part, at any time and from time to time at its option at the redemption price of $150.00 per share, plus authorized, declared and unpaid dividends for the current dividend period, if any, to the date of redemption. Prior to                     , 2022, the Series G, Class A preferred stock may be redeemed in whole, but not in part, at the redemption price of $150.00 per share, plus authorized, declared and unpaid dividends for the current dividend period, if any, to the date of redemption, at Wachovia’s discretion in the event that Wachovia receives a letter or opinion of counsel which states that there is a significant risk that the Series G, Class A preferred stock will no longer constitute Tier 1 capital of Wachovia for purposes of the capital adequacy guidelines or policies of the Federal Reserve as a result of any

92


Table of Contents
changes in applicable laws, related regulations, official interpretations or policies, any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations. For redemptions after                 , 2022, if Wachovia’s board of directors determines that Wachovia should redeem fewer than all of the outstanding Wachovia Series G, Class A preferred stock, the securities to be redeemed will be determined by lot, pro rata, or by such other method as Wachovia’s board of directors in its sole discretion determines to be equitable.
 
Dividends will cease to accrue on the Wachovia Series G, Class A preferred stock called for redemption on and as of the date fixed for redemption and such Wachovia Series G, Class A preferred stock will be deemed to cease to be outstanding, provided, that the redemption price, including any authorized and declared but unpaid dividends for the current dividend period, if any, to the date fixed for redemption, has been duly paid or provision has been made for such payment.
 
Notice of any redemption will be mailed at least 30 days, but not more than 60 days, prior to any redemption date to each holder of the Wachovia Series G, Class A preferred stock to be redeemed at such holder’s registered address.
 
Rights upon Liquidation
 
In the event Wachovia voluntarily or involuntarily liquidates, dissolves, or winds up, the holders of the Wachovia Series G, Class A preferred stock at the time outstanding will be entitled to receive liquidating distributions in the amount of $150.00 per share, or $25.00 per depositary share representing a one-sixth interest in the Wachovia Series G, Class A preferred stock, plus any authorized, declared, and unpaid dividends for the then-current dividend period to the date of liquidation, out of Wachovia’s assets legally available for distribution to its shareholders, before any distribution of assets is made to holders of Wachovia’s common stock or any securities ranking junior to the Wachovia Series G, Class A preferred stock and subject to the rights of the holders of any class or series of securities ranking senior to or on a parity with the Wachovia Series G, Class A preferred stock upon liquidation and the rights of its depositors and or series of securities ranking senior to or on a parity with the Wachovia Series G, Class A preferred stock upon liquidation and the rights of its depositors and creditors.
 
After payment of the full amount of the liquidating distributions to which they are entitled, the holders of the Wachovia Series G, Class A preferred stock will have no right or claim to any of Wachovia’s remaining assets. In the event that, upon any such voluntary or involuntary liquidation, dissolution, or winding up, Wachovia’s available assets are insufficient to pay the amount of the liquidation distributions on all outstanding Wachovia Series G, Class A preferred stock and the corresponding amounts payable on any other securities of equal ranking, then the holders of the Wachovia Series G, Class A preferred stock and any other securities of equal ranking will share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled.
 
For such purposes, Wachovia’s consolidation or merger with or into any other entity, the consolidation or merger of any other entity with or into it, or the sale of all or substantially all of Wachovia’s property or business, will not be deemed to constitute its liquidation, dissolution, or winding up.
 
Under an indenture between Wachovia and Wilmington Trust Company, as trustee, Wachovia has agreed not to pay any dividends on, or make a liquidation payment relating to, any of Wachovia’s common stock or preferred stock, including its Class A preferred stock, if, at that time, there is a default under the indenture or a related Wachovia guarantee or Wachovia has delayed interest payments on trust preferred securities issued under the indenture. Currently, there are $1.3 billion aggregate principal amount of trust preferred securities outstanding under such indenture.
 
Voting Rights
 
Holders of the Wachovia Series G, Class A preferred stock will not have any voting rights, except as required by law, and will not be entitled to elect any directors.

93


Table of Contents
 
North Carolina law attaches mandatory voting rights to classes or series of shares that are affected by certain amendments to the articles of incorporation, whether made by filing articles of amendment or by a merger or share exchange. The holders of the outstanding shares of a class or series are entitled to vote as a separate voting group on any amendment that would:
 
 
Ÿ
change the aggregate number of authorized shares of that class or series;
 
 
Ÿ
effect an exchange or reclassification of any shares of that class or series into shares of another class or series;
 
 
Ÿ
effect an exchange (or create a right of exchange) or reclassification of any shares of another class or series into shares of that class or series;
 
 
Ÿ
change the designation, rights, preferences, or limitations of any shares of that class or series;
 
 
Ÿ
change any shares of that class or series into a different number of shares of the same class or series;
 
 
Ÿ
create a new class or series of shares having rights or preferences with respect to distributions or to dissolution that are prior, superior, or substantially equal to the shares of that class or series;
 
 
Ÿ
increase the rights, preferences or number of authorized shares of any class or series that, after giving effect to the amendment, would have rights or preferences with respect to distributions or to dissolution that are prior, superior, or substantially equal to the shares of that class or series;
 
 
Ÿ
limit or deny an existing preemptive right of any shares of that class or series;
 
 
Ÿ
cancel or otherwise affect rights to distributions or dividends that have accumulated but not yet been declared on any shares of that class or series; or
 
 
Ÿ
change the corporation into a nonprofit corporation or a cooperative organization.
 
These mandatory voting rights apply regardless of whether the change is favorable or unfavorable to the affected shares. A mandatory voting right is also given to a class or series of shares for approval of a share dividend payable in the shares of that class or series or the shares of another class or series.
 
Conditional Exchange
 
For a description on how an exchange of our Series A preferred securities into depositary shares representing the Wachovia Series G, Class A preferred stock would occur upon a Supervisory Event, you should read “Description of the Series A Preferred Securities—Conditional Exchange” above.
 
DESCRIPTION OF WACHOVIA DEPOSITARY SHARES
 
The following summary describes the material terms and provisions of the depositary shares. This description is qualified in its entirety by reference to the terms and provisions of the deposit agreement, the form of depositary receipts, which contain the terms and provisions of the depositary shares, and Wachovia’s articles of incorporation and articles of amendment, each of which has been filed with the SEC by Wachovia as an exhibit to the registration statement in connection with this offering. Please see “Where You Can Find More Information about Wachovia” for information on how to obtain copies of these documents. Copies of these documents are also available for inspection at the offices of the depositary.
 
General
 
Each Wachovia depositary share will represent a one-sixth interest in one share of Wachovia Series G, Class A preferred stock. The depositary shares will be evidenced by depositary receipts. The shares of Wachovia Series G, Class A preferred stock underlying the depositary shares will, upon an exchange as a

94


Table of Contents
result of a Supervisory Event, be deposited with the Bank, as depositary, under a deposit agreement between Wachovia, the depositary and all holders from time to time of depositary receipts issued by the depositary thereunder. Wachovia does not intend to list or quote the depositary shares or the Wachovia Series G, Class A preferred stock on any national securities exchange or national quotation system. Accordingly, there will be no public trading market for the depositary shares or the Wachovia Series G, Class A preferred stock.
 
Subject to the terms of the deposit agreement, each owner of six depositary shares will be entitled, through the depositary, to all the rights, preferences and privileges of a share of the Wachovia Series G, Class A preferred stock. Owners of a single depositary share, representing a one-sixth interest in the Wachovia Series G, Class A preferred stock, will be subject to all of the limitations of the fractional share represented thereby, which are summarized above under “Description of Wachovia Series G, Class A Preferred Stock”.
 
The depositary will act as transfer agent and registrar and paying agent with respect to the depositary shares.
 
The depositary’s office at which the depositary receipts will be administered is located at One Wachovia Center, Charlotte, North Carolina 28288.
 
You may hold depositary shares either directly or indirectly through your broker or other financial institution. If you hold depositary shares directly, by having depositary shares registered in your name on the books of the depositary, you are a depositary receipt holder. If you hold the depositary shares through your broker or financial institution nominee, you must rely on the procedures of such broker or financial institution to assert the rights of a depositary receipt holder described in this section. You should consult with your broker or financial institution to find out what those procedures are.
 
Issuance of Depositary Receipts
 
Automatically upon a Supervisory Event, Wachovia will issue the shares of Wachovia Series G, Class A preferred stock, and Wachovia will deposit such shares of the Wachovia Series G, Class A preferred stock with the depositary, which will then issue and deliver the depositary receipts to Wachovia. Wachovia will, in turn, deliver the depositary receipts to the holders of Series A preferred securities as of the date of a Conditional Exchange. Depositary receipts will be issued evidencing only whole depositary shares. Upon the occurrence of a Conditional Exchange, each Series A preferred security will be exchanged for one depositary receipt. See “Description of the Series A Preferred Securities—Conditional Exchange”.
 
Dividends and Other Distributions
 
The depositary will distribute all cash dividends, dividends paid in depositary shares representing fully paid and non-assessable shares of Wachovia Series G, Class A preferred stock or other cash distributions received in respect of the Wachovia Series G, Class A preferred stock to the record holders of depositary shares representing such Wachovia Series G, Class A preferred stock in proportion to the numbers of such depositary shares owned by such holders on the relevant record date. In the event of a distribution other than in cash, the depositary will distribute property received by it to the record holders of depositary shares entitled thereto, unless the depositary determines that it is not feasible to make such distribution, in which case the depositary may, after consultation with Wachovia, sell such property and distribute the net proceeds from such sale to such holders.
 
Redemption of Depositary Shares
 
If the Wachovia Series G, Class A preferred stock underlying the depositary shares are redeemed, the depositary shares will be redeemed with the proceeds received by the depositary resulting from the redemption, in whole or in part, of such Wachovia Series G, Class A preferred stock held by the depositary. The redemption price per depositary share will be equal to the applicable fraction of the redemption price per share payable with respect to such Wachovia Series G, Class A preferred stock. If less than all the depositary shares are to be redeemed, the depositary shares to be redeemed will be selected by lot or pro rata, in Wachovia’s sole discretion.

95


Table of Contents
 
After the date fixed for redemption (which will be the same date as the redemption date, if any, for the Wachovia Series G, Class A preferred stock), the depositary shares so called for redemption will no longer be deemed to be outstanding and all rights of the holders of the depositary shares will cease, except the right to receive the moneys payable upon such redemption and any money or other property to which the holders of such depositary shares were entitled upon such redemption upon surrender to the depositary of the depositary receipts evidencing such depositary shares.
 
Amendment of the Deposit Agreement
 
The form of depositary receipt evidencing the depositary shares and any provision of the deposit agreement may at any time be amended by agreement between Wachovia and the depositary. However, any amendment which materially and adversely alters the rights of the holders of depositary receipts will not be effective unless such amendment has been approved by the holders of at least a majority of the depositary shares then outstanding. Every holder of an outstanding depositary receipt at the time any amendment becomes effective will be deemed, by continuing to hold such depositary receipt, to consent and agree to such amendment and to be bound by the deposit agreement as amended thereby.
 
Charges of Depositary
 
Wachovia will pay the charges of the depositary in connection with the initial deposit of the Wachovia Series G, Class A preferred stock following a Conditional Exchange, and any redemption of the Wachovia Series G, Class A preferred stock. Holders of depositary shares will pay all other transfer and other taxes and governmental charges and, in addition, such other charges as are expressly provided in the deposit agreement to be for their accounts. All other charges and expenses of the depositary and of any registrar incident to the performance of their respective obligations arising from the depositary arrangements will be paid by Wachovia only after prior consultation and agreement between the depositary and Wachovia and consent by Wachovia to the incurrence of such expenses.
 
Miscellaneous
 
The depositary will forward to the holders of depositary shares all reports and communications from Wachovia which Wachovia would be required to furnish to the holders of the Wachovia Series G, Class A preferred stock.
 
Neither the depositary nor Wachovia will be liable if it is prevented or delayed by law or any circumstances beyond its control in performing its obligations under the deposit agreement. The obligations of Wachovia and the depositary under the deposit agreement will be limited to performance in good faith of their duties thereunder, and they will not be obligated to prosecute or defend any legal proceedings in respect of any depositary shares or the Wachovia Series G, Class A preferred stock unless satisfactory indemnity is furnished. They may rely upon written advice of counsel or independent accountants, or information provided by persons presenting Wachovia Series G, Class A preferred stock for deposit, holders of depositary shares or other persons believed to be competent and on documents believed to be genuine.
 
Resignation and Removal of Depositary; Termination of the Deposit Agreement
 
The depositary may resign at any time by delivering to Wachovia notice of its election to do so, and Wachovia may at any time remove the depositary, with any such resignation or removal taking effect upon the appointment of a successor depositary and its acceptance of such appointment. Such successor depositary will be appointed by Wachovia within 60 days after delivery of the notice of resignation or removal. Upon termination of the deposit agreement, the depositary will discontinue the transfer of depositary receipts, will suspend the distribution of dividends to the holders thereof and will not give any further notices (other than notice of such termination) or perform any further acts under the deposit agreement, except that the depositary will continue

96


Table of Contents
to collect dividends and other distributions pertaining to the Wachovia Series G, Class A preferred stock, will sell rights, preferences or privileges as provided in the deposit agreement and will continue to deliver Wachovia Series G, Class A preferred stock certificates together with such dividends and distributions and the net proceeds of any sales of rights, preferences, privileges, or other property in exchange for depositary receipts surrendered. At any time after the expiration of three years from the date of termination, the depositary may sell the Wachovia Series G, Class A preferred stock and hold the proceeds of such sale, without interest, for the benefit of the holders of depositary receipts who have not then surrendered their depositary receipts. After making such sale, the depositary will be discharged from all obligations under the deposit agreement except to account for such proceeds.
 
DESCRIPTION OF OTHER WACHOVIA CAPITAL STOCK
 
You should read the description of the capital stock of Wachovia, under the heading “Description of First Union Capital Stock”, in its registration statement on Form S-4, as amended (Registration Statement File No. 333-59616), filed with the SEC on June 27, 2001, which description is incorporated in this prospectus by reference.

97


Table of Contents
GLOBAL SECURITIES
 
The Series A preferred securities will be issued in the form of one or more global certificates, or “global securities”, registered in the name of a depositary or its nominee. The depositary will be The Depository Trust Company, commonly referred to as DTC. DTC has informed us that its nominee will be Cede & Co. Accordingly, we expect Cede & Co. to be the initial registered holder of all Series A preferred securities that are issued in global form. You can hold Series A preferred securities only directly through DTC if you are a participant, or indirectly through a direct participant in DTC. DTC participants include securities brokers and dealers, banks, trust companies and clearing corporations, and may include other organizations. Indirect access to the DTC system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly, and who are referred to as indirect participants. The rules applicable to DTC and DTC participants are on file with the SEC.
 
No person that acquires a beneficial interest in those Series A preferred securities will be entitled to receive a certificate representing that person’s interest in the Series A preferred securities except as mentioned herein. Unless and until definitive securities are issued under the limited circumstances described below, all references to actions by holders of Series A preferred securities issued in global form shall refer to actions taken by DTC upon instructions from its participants, and all references to payments and notices to holders shall refer to payments and notices to DTC or Cede & Co., as the registered holder of these Series A preferred securities.
 
DTC has informed us that it is a limited-purpose trust company organized under the New York Banking Law, a “Banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that DTC participants deposit with DTC. DTC also facilitates the settlement among DTC participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in DTC participants’ accounts, thereby eliminating the need for physical movement of certificates. DTC is owned by a number of its direct participants and by the New York Stock Exchange, Inc., the American Stock Exchange, LLC and the National Association of Securities Dealers, Inc.
 
Persons that are not participants or indirect participants but desire to purchase, sell or otherwise transfer ownership of, or other interests in, Series A preferred securities may do so only through participants and indirect participants in DTC. Under a book-entry format, holders may experience some delay in their receipt of payments, as such payments will be forwarded by a designated agent to Cede & Co., as nominee for DTC. DTC will forward such payments to its participants, who will then forward them to indirect participants or holders. Holders will not be recognized by the transfer agent as registered holders of the Series A preferred securities. Beneficial owners that are not participants will be permitted to exercise their rights only indirectly through and according to the procedures of participants and, if applicable, indirect participants.
 
Under the rules, regulations and procedures creating and affecting DTC and its operations as currently in effect, DTC will be required to make book-entry transfers of Series A preferred securities among participants and to receive and transmit payments to participants. DTC rules require participants and indirect participants with which beneficial securities owners have accounts to make book-entry transfers and receive and transmit payments on behalf of their respective account holders.
 
Because DTC can act only on behalf of
 
 
Ÿ
participants, who in turn act only on behalf of participants or indirect participants, and
 
 
Ÿ
certain banks, trust companies and other persons approved by it,
 
the ability of a beneficial owner of Series A preferred securities issued in global form to pledge such securities to persons or entities that do not participate in the DTC system may be limited due to the unavailability of physical certificates for these securities.

98


Table of Contents
 
DTC has advised us that DTC will take any action permitted to be taken by a registered holder of any securities under our certificate of incorporation only at the direction of one or more participants to whose accounts with DTC such securities are credited.
 
A global security will be exchangeable for the relevant definitive securities registered in the names of persons other than DTC or its nominee only if
 
 
Ÿ
DTC notifies us that it is unwilling or unable to continue as depositary for the Series A preferred securities or if DTC ceases to be a clearing agency registered under the Exchange Act when DTC is required to be so registered,
 
 
Ÿ
we execute and deliver to the transfer agent an order complying with the requirements of our certificate of incorporation that this global security shall be so exchangeable, or
 
 
Ÿ
there has occurred and is continuing a default in the payment of any amount due in respect of the Series A preferred securities.
 
Any global security that is exchangeable under the preceding sentence will be exchangeable for the Series A preferred securities registered in such names as DTC directs.
 
Upon the occurrence of any event described in the above paragraph, DTC is generally required to notify all participants of the availability of definitive securities. Upon DTC surrendering the global security representing the Series A preferred securities and delivery of instructions for re-registration, the transfer agent will reissue the Series A preferred securities as definitive securities, and then such persons will recognize the holders of such definitive securities as registered holders of Series A preferred securities entitled to the benefits of our certificate of incorporation.
 
Except as described above, the global security may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or to a successor depositary we appoint. Except as described above, DTC may not sell, assign, transfer or otherwise convey any beneficial interest in a global security evidencing all or part of any securities unless the beneficial interest is in an amount equal to an authorized denomination for these securities.
 
We, the transfer agent, and any of our or its agents, will have no responsibility or liability for any aspect of DTC’s or any participant’s records relating to, or for payments made on account of, beneficial interests in a global security, or for maintaining, supervising or reviewing any records relating to such beneficial interests.
 
Beneficial interests in a global security, in some cases, may trade in the DTC’s same-day funds settlement system, in which secondary market trading activity in those beneficial interests would be required by DTC to settle in immediately available funds. There is no assurance as to the effect, if any, that settlement in immediately available funds would have on trading activity in such beneficial interests. Also, settlement for purchases of beneficial interests in a global security upon the original issuance of the Series A preferred securities may be required to be made in immediately available funds.

99


Table of Contents
FEDERAL INCOME TAX CONSIDERATIONS
 
The following discussion summarizes our taxation and the material Federal income tax consequences to holders of our Series A preferred securities. Because the tax treatment of a holder of our Series A preferred securities will vary depending upon the holder’s particular situation, you should consult your own tax advisors regarding the tax consequences to you of acquiring, owning and selling our Series A preferred securities. This discussion addresses only holders that hold preferred stock as capital assets and does not deal with all aspects of taxation that may be relevant to particular holders in light of their personal investment or tax circumstances. This section also does not deal with all aspects of taxation that may be relevant to certain types of holders to which special provisions of the Federal income tax laws apply, including:
 
 
Ÿ
dealers in securities or currencies;
 
 
Ÿ
traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;
 
 
Ÿ
banks;
 
 
Ÿ
tax-exempt organizations;
 
 
Ÿ
certain insurance companies;
 
 
Ÿ
persons liable for the alternative minimum tax;
 
 
Ÿ
persons that hold securities that are a hedge, that are hedged against currency risks or that are part of a straddle or conversion transaction; and
 
 
Ÿ
persons whose functional currency is not the United States dollar.
 
This summary is based on the Code, its legislative history, existing and proposed regulations under the Code, published rulings and court decisions. This summary describes the provisions of these sources of law only as they are currently in effect. All of these sources of law may change at any time, and any change in the law may apply retroactively.
 
We urge you to consult with your own tax advisors regarding the tax consequences to you of acquiring, owning and selling preferred stock, including the United States Federal, state, local and foreign tax consequences of acquiring, owning and selling common stock in your particular circumstances and potential changes in applicable laws.
 
Our Taxation as a REIT
 
In the opinion of Sullivan & Cromwell, commencing with our taxable year ending December 31, 2002, we have been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code, and our proposed method of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT under the Code. Investors should be aware, however, that opinions of counsel are not binding upon the Internal Revenue Service or any court.
 
In providing its opinion, Sullivan & Cromwell is relying as to certain factual matters upon the statements and representations contained in certificates provided to Sullivan & Cromwell by us and our subsidiary, Wachovia Real Estate Investment Corp.
 
Our qualification as a REIT will depend upon the continuing satisfaction by us and, given our current ownership interest in Wachovia Real Estate Investment Corp., by Wachovia Real Estate Investment Corp., of the requirements of the Code relating to qualification for REIT status. Some of these requirements depend upon actual operating results, distribution levels, diversity of stock ownership, asset composition, source of income and recordkeeping. Accordingly, while we intend to continue to qualify to be taxed as a REIT, our actual results and those of Wachovia Real Estate Investment Corp.’s operations for any particular year might not satisfy these requirements. Sullivan & Cromwell will not monitor our compliance or that of Wachovia Real Estate Investment Corp. with the requirements for REIT qualification on an ongoing basis.

100


Table of Contents
 
The sections of the Code applicable to REITs are highly technical and complex. The following discussion summarizes material aspects of these sections of the Code.
 
As a REIT, we generally will not have to pay Federal corporate income taxes on our net income that we currently distribute to shareholders. This treatment substantially eliminates the “double taxation” at the corporate and shareholder levels that generally results from investment in a regular corporation.
 
However, we will have to pay Federal income tax as follows:
 
 
Ÿ
First, we will have to pay tax at regular corporate rates on any undistributed real estate investment trust taxable income, including undistributed net capital gains.
 
 
Ÿ
Second, under certain circumstances, we may have to pay the alternative minimum tax on our items of tax preference.
 
 
Ÿ
Third, if we have (a) net income from the sale or other disposition of “foreclosure property”, as defined in the Code, which is held primarily for sale to customers in the ordinary course of business, or (b) other non-qualifying income from foreclosure property, we will have to pay tax at the highest corporate rate on that income.
 
 
Ÿ
Fourth, if we have net income from “prohibited transactions”, as defined in the Code, we will have to pay a 100% tax on that income. Prohibited transactions are, in general, certain sales or other dispositions of property, other than foreclosure property, held primarily for sale to customers in the ordinary course of business.
 
 
Ÿ
Fifth, if we should fail to satisfy the 75% gross income test or the 95% gross income test, as discussed below under “—Requirements for Qualification—Income Tests”, but have nonetheless maintained our qualification as a REIT because we have satisfied some other requirements, we will have to pay a 100% tax on an amount equal to (a) the gross income attributable to the greater of (i) 75% of our gross income over the amount of gross income that is qualifying income for purposes of the 75% test, and (ii) 90% of our gross income (95% for taxable years ending before January 1, 2001) over the amount of gross income that is qualifying income for purposes of the 95% test, multiplied by (b) a fraction intended to reflect our profitability.
 
 
Ÿ
Sixth, if we should fail to distribute during each calendar year at least the sum of (a) 85% of our real estate investment trust ordinary income for that year, (b) 95% of our real estate investment trust capital gain net income for that year, and (c) any undistributed taxable income from prior periods, we will have to pay a 4% excise tax on the excess of that required distribution over the amounts actually distributed.
 
 
Ÿ
Seventh, if we acquire any asset from a C corporation in certain transactions in which we must adopt the basis of the asset or any other property in the hands of the C corporation as the basis of the asset in our hands, and we recognize gain on the disposition of that asset during the 10-year period beginning on the date on which we acquire that asset, then we will have to pay tax on the built-in gain at the highest regular corporate rate. A C corporation means generally a corporation that has to pay full corporate-level tax.
 
 
Ÿ
Eighth, if we receive certain non-arms length income from a taxable REIT subsidiary (as defined under “—Requirements for Qualification—Asset Tests”), or as a result of services provided by a taxable REIT subsidiary to our tenants, we will be subject to a 100% tax on the amount of our non-arms length income.
 
Requirements for Qualification
 
The Code defines a REIT as a corporation, trust or association:
 
 
Ÿ
which is managed by one or more trustees or directors;

101


Table of Contents
 
 
Ÿ
the beneficial ownership of which is evidenced by transferable shares, or by transferable certificates of beneficial interest;
 
 
Ÿ
which would otherwise be taxable as a domestic corporation, but for Sections 856 through 859 of the Code;
 
 
Ÿ
which is neither a financial institution nor an insurance company to which certain provisions of the Code apply;
 
 
Ÿ
the beneficial ownership of which is held by 100 or more persons;
 
 
Ÿ
during the last half of each taxable year, not more than 50% in value of the outstanding stock of which is owned, directly or constructively, by five or fewer individuals, as defined in the Code to include certain entities; and
 
 
Ÿ
which meets certain other tests, described below, regarding the nature of its income and assets.
 
The Code provides that the conditions described in the first through fourth bullet points above must be met during the entire taxable year and that the condition described in the fifth bullet point above must be met during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of less than 12 months, other than the first 12 months.
 
We have satisfied the conditions described in the first through fifth bullet points of the first paragraph of this section and believe that we have also satisfied the condition described in the sixth bullet point of the preceding paragraph. In addition, our certificate of incorporation provides for restrictions regarding the transfer of our shares. These restrictions are intended to assist us in continuing to satisfy the share ownership requirements described in the fifth and sixth bullet points of the preceding paragraph. The ownership and transfer restrictions pertaining to the shares are described above in this prospectus under the heading “Description of Other Wachovia Funding Capital Stock—Restrictions on Ownership and Transfer”.
 
Income Tests.    In order to maintain our qualification as a REIT, we annually must satisfy two gross income requirements.
 
 
Ÿ
First, we must derive at least 75% of our gross income, excluding gross income from prohibited transactions, for each taxable year directly or indirectly from investments relating to real property or mortgages on real property, including interest on loans secured by real estate and “rents from real property”, as defined in the Code, or from certain types of temporary investments.
 
 
Ÿ
Second, at least 95% of our gross income, excluding gross income from prohibited transactions, for each taxable year must be derived from real property investments as described in the preceding bullet point, dividends, interest and gain from the sale or disposition of stock or securities, or from any combination of these types of source.
 
As of the date of this prospectus, we do not own any rental income generating property nor do we have any plans to acquire any such property.
 
The term “interest” generally does not include any amount received or accrued, directly or indirectly, if the determination of that amount depends in whole or in part on the income or profits of any person. However, an amount received or accrued generally will not be wholly excluded from the term interest solely because it is based on a fixed percentage or percentages of receipts or sales.
 
If we fail to satisfy one or both of the 75% or 95% gross income tests for any taxable year, we may nevertheless qualify as a REIT for that year if we satisfy the requirements of other provisions of the Code that allow relief from disqualification as a REIT. These relief provisions will generally be available if:
 
 
Ÿ
our failure to meet the income tests was due to reasonable cause and not due to willful neglect;
 
 
Ÿ
we attach a schedule of the sources of our income to our Federal income tax return; and
 
 
Ÿ
any incorrect information on the schedule was not due to fraud with intent to evade tax.

102


Table of Contents
 
We might not be entitled to the benefit of these relief provisions, however. As discussed in “—Requirements for Qualification—Annual Distribution Requirements” below, even if these relief provisions apply, we would have to pay a tax on the excess income.
 
Asset Tests.    At the close of each quarter of our taxable year, we must also satisfy three tests relating to the nature of our assets.
 
 
Ÿ
First, at least 75% of the value of our total assets must be represented by real estate assets, including (a) stock issued by another REIT, (b) for a period of one year from the date of our receipt of proceeds of an offering of our shares of beneficial interest or publicly offered debt with a term of at least five years, stock or debt instruments purchased with these proceeds, and (c) cash, cash items and government securities.
 
 
Ÿ
Second, not more than 25% of the value of our total assets may be represented by securities other than those in the 75% asset class.
 
 
Ÿ
Third, not more than 20% of the value of our total assets may constitute securities issued by taxable REIT subsidiaries and of the investments included in the 25% asset class, the value of any one issuer’s securities, other than securities issued by another REIT or by a taxable REIT subsidiary, owned by us may not exceed 5% of the value of our total assets. Moreover, we may not own more than 10% of the vote or value of the outstanding securities of any one issuer, except for issuers that are REITs, qualified REIT subsidiaries or taxable REIT subsidiaries, or debt instruments that are considered straight debt under a safe harbor provision of the Code. For these purposes, a taxable REIT subsidiary is any corporation in which we own an interest that joins with us in making an election to be treated as a “taxable REIT subsidiary” and certain subsidiaries of a taxable REIT subsidiary, if the subsidiaries do not engage in certain activities.
 
Since November 25, 1996, we have owned more than 10% of the voting securities of Wachovia Real Estate Investment Corp. Our ownership interest in Wachovia Real Estate Investment Corp. will not cause us to fail to satisfy the asset tests for REIT status so long as Wachovia Real Estate Investment Corp. qualifies as a REIT for its first taxable year and each subsequent taxable year. We believe that Wachovia Real Estate Investment Corp. will qualify as a REIT.
 
Since October 7, 2002, we have also owned more than 10% of the voting securities of Wachovia Preferred Realty, LLC (“WPR”). Our ownership interest in WPR will not cause us to fail to satisfy the asset tests for REIT status so long as WPR qualifies as a taxable REIT subsidiary for its taxable year ending in 2002 and each subsequent year. We believe that WPR will qualify as a taxable REIT subsidiary.
 
Annual Distribution Requirements.    In order to qualify as a REIT, we are required to distribute dividends, other than capital gain dividends, to our shareholders in an amount at least equal to (a) the sum of (i) 90% of our “real estate investment trust taxable income”, computed without regard to the dividends paid deduction and our net capital gain, and (ii) 90% of the net after-tax income, if any, from foreclosure property, minus (b) the sum of certain items of non-cash income.
 
In addition, if we dispose of any asset within 10 years of acquiring it, we will be required to distribute at least 90% of the after-tax built-in gain, if any, recognized on the disposition of the asset.
 
These distributions must be paid in the taxable year to which they relate, or in the following taxable year if declared before we timely file our tax return for the year to which they relate and if paid on or before the first regular dividend payment after the declaration.
 
To the extent that we do not distribute or are not treated as having distributed all of our net capital gain or distribute or are treated as having distributed at least 90%, but less than 100%, of our real estate investment trust taxable income, as adjusted, we will have to pay tax on those amounts at regular ordinary

103


Table of Contents
and capital gain corporate tax rates. Furthermore, if we fail to distribute during each calendar year at least the sum of (a) 85% of our ordinary income for that year, (b) 95% of our capital gain net income for that year, and (c) any undistributed taxable income from prior periods, we would have to pay a 4% excise tax on the excess of the required distribution over the amounts that are actually distributed or are taxed at regular ordinary and capital gain corporate rates.
 
We intend to satisfy the annual distribution requirements.
 
From time to time, we may not have sufficient cash or other liquid assets to meet the 90% distribution requirement due to timing differences between (a) when we actually receive income and when we actually pay deductible expenses, and (b) when we include the income and deduct the expenses in arriving at our taxable income. If timing differences of this kind occur, in order to meet the 90% distribution requirement, we may find it necessary to arrange for short-term, or possibly long-term, borrowings or to pay dividends in respect of our common stock in the form of taxable stock dividends.
 
Under certain circumstances, we may be able to rectify a failure to meet the distribution requirement for a year by paying “deficiency dividends” to shareholders in a later year, which may be included in our deduction for dividends paid for the earlier year. Thus, we may be able to avoid being taxed on amounts distributed as deficiency dividends; however, we will be required to pay interest based upon the amount of any deduction taken for deficiency dividends.
 
Failure to Qualify as a REIT
 
If we fail to qualify for taxation as a REIT in any taxable year, and the relief provisions do not apply, we will have to pay tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates. In addition, we might be taxed as a member of the consolidated group that includes Wachovia and the Bank. We will not be able to deduct distributions to shareholders in any year in which we fail to qualify, nor will we be required to make distributions to shareholders. In this event, to the extent of current and accumulated earnings and profits, all distributions to shareholders will be taxable to the shareholders as ordinary income and corporate distributees may be eligible for the dividends received deduction if they satisfy the relevant provisions of the Code. Unless entitled to relief under specific statutory provisions, we will also be disqualified from taxation as a REIT for the four taxable years following the year during which qualification was lost. We might not be entitled to the statutory relief described in this paragraph in all circumstances.
 
Taxation of Holders of Preferred Stock
 
U.S. Shareholders
 
As used in this section, the term “U.S. shareholder” means a holder of common stock who, for United States Federal income tax purposes, is:
 
 
Ÿ
a citizen or resident of the United States;
 
 
Ÿ
a domestic corporation;
 
 
Ÿ
an estate whose income is subject to United States Federal income taxation regardless of its source; or
 
 
Ÿ
a trust if a U.S. court can exercise primary supervision over the trust’s administration and one or more United States persons have authority to control all substantial decisions of the trust.
 
As long as we qualify as a REIT, distributions made by us out of our current or accumulated earnings and profits, and not designated as capital gain dividends, will constitute dividends taxable to our taxable U.S. shareholders as ordinary income. Distributions of this kind will not be eligible for the dividends received deduction in the case of U.S. shareholders that are corporations. Distributions made by us that we properly

104


Table of Contents
designate as capital gain dividends will be taxable to U.S. shareholders as gain from the sale of a capital asset held for more than one year, to the extent that they do not exceed our actual net capital gain for the taxable year, without regard to the period for which a U.S. shareholder has held his shares. Thus, with certain limitations, capital gain dividends received by an individual U.S. shareholder may be eligible for reduced rates of taxation. U.S. shareholders that are corporations may, however, be required to treat up to 20% of certain capital gain dividends as ordinary income. Because we do not expect, however, to recognize substantial capital gains, we expect most of our dividends to be ordinary income.
 
To the extent that we make distributions, not designated as capital gain dividends, in excess of our current and accumulated earnings and profits, these distributions will be treated first as a tax-free return of capital to each U.S. shareholder. Thus, these distributions will reduce the adjusted basis which the U.S. shareholder has in his shares for tax purposes by the amount of the distribution, but not below zero. Distributions in excess of a U.S. shareholder’s adjusted basis in his shares will be taxable as capital gains, provided that the shares have been held as a capital asset. For purposes of determining the portion of distributions on separate classes of shares that will be treated as dividends for Federal income tax purposes, current and accumulated earnings and profits will be allocated to distributions resulting from priority rights of preferred shares before being allocated to other distributions.
 
Dividends authorized by us in October, November or December of any year and payable to a shareholder of record on a specified date in any of these months will be treated as both paid by us and received by the shareholder on December 31 of that year, provided that we actually pay the dividend on or before January 31 of the following calendar year. Shareholders may not include in their own income tax returns any of our net operating losses or capital losses.
 
U.S. shareholders holding shares at the close of our taxable year will be required to include, in computing their long-term capital gains for the taxable year in which the last day of our taxable year falls, the amount that we designate in a written notice mailed to our shareholders. We may not designate amounts in excess of our undistributed net capital gain for the taxable year. Each U.S. shareholder required to include the designated amount in determining the shareholder’s long-term capital gains will be deemed to have paid, in the taxable year of the inclusion, the tax paid by us in respect of the undistributed net capital gains. U.S. shareholders to whom these rules apply will be allowed a credit or a refund, as the case may be, for the tax they are deemed to have paid. U.S. shareholders will increase their basis in their shares by the difference between the amount of the includible gains and the tax deemed paid by the shareholder in respect of these gains.
 
Distributions made by us and gain arising from a U.S. shareholder’s sale or exchange of shares will not be treated as passive activity income. As a result, U.S. shareholders generally will not be able to apply any passive losses against that income or gain.
 
When a U.S. shareholder sells or otherwise disposes of shares, the shareholder will recognize gain or loss for Federal income tax purposes in an amount equal to the difference between (a) the amount of cash and the fair market value of any property received on the sale or other disposition, and (b) the holder’s adjusted basis in the shares for tax purposes. This gain or loss will be capital gain or loss if the U.S. shareholder has held the shares as a capital asset. The gain or loss will be long-term gain or loss if the U.S. shareholder has held the shares for more than one year. Capital gain of an individual U.S. shareholder is generally taxed at a maximum rate of 20% where the property is held for more than one year, and 18% where the property is held for more than 5 years. In general, any loss recognized by a U.S. shareholder when the shareholder sells or otherwise disposes of shares of ours that the shareholder has held for six months or less, after applying certain holding period rules, will be treated as a long-term capital loss, to the extent of distributions received by the shareholder from us which were required to be treated as long-term capital gains.
 
Backup Withholding.    We will report to our U.S. shareholders and the IRS the amount of dividends paid during each calendar year, and the amount of tax withheld, if any. Under the backup withholding rules,

105


Table of Contents
backup withholding may apply to a shareholder with respect to dividends paid unless the holder (a) is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact, or (b) provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding, and otherwise complies with applicable requirements of the backup withholding rules. The IRS may also impose penalties on a U.S. shareholder that does not provide us with his correct taxpayer identification number. A shareholder may credit any amount paid as backup withholding against the shareholder’s income tax liability. In addition, we may be required to withhold a portion of capital gain distributions, if any, to shareholders who fail to certify their non-foreign status to us.
 
Taxation of Tax-Exempt Shareholders.    The IRS has ruled that amounts distributed as dividends by a REIT generally do not constitute unrelated business taxable income when received by a tax-exempt entity. Based on that ruling, provided that a tax-exempt shareholder is not one of the types of entity described in the next paragraph and has not held its shares as “debt financed property” within the meaning of the Code, and the shares are not otherwise used in a trade or business, the dividend income from shares will not be unrelated business taxable income to a tax-exempt shareholder. Similarly, income from the sale of shares will not constitute unrelated business taxable income unless the tax-exempt shareholder has held the shares as “debt financed property” within the meaning of the Code or has used the shares in a trade or business.
 
Income from an investment in our shares will constitute unrelated business taxable income for tax-exempt shareholders that are social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal services plans exempt from Federal income taxation under the applicable subsections of Section 501(c) of the Code, unless the organization is able to properly deduct amounts set aside or placed in reserve for certain purposes so as to offset the income generated by our shares. Prospective investors of the types described in the preceding sentence should consult their own tax advisors concerning these “set aside” and reserve requirements.
 
Notwithstanding the foregoing, however, a portion of the dividends paid by a “pension-held REIT” will be treated as unrelated business taxable income to any trust which:
 
 
Ÿ
is described in Section 401(a) of the Code;
 
 
Ÿ
is tax exempt under Section 501(a) of the Code; and
 
 
Ÿ
holds more than 10% (by value) of the equity interests in the REIT.
 
Tax-exempt pension, profit-sharing and stock bonus funds that are described in Section 401(a) of the Code are referred to below as “qualified trusts”. A REIT is a “pension-held REIT” if:
 
 
Ÿ
it would not have qualified as a REIT but for the fact that Section 856(h)(3) of the Code provides that stock owned by qualified trusts will be treated, for purposes of the “not closely held” requirement, as owned by the beneficiaries of the trust (rather than by the trust itself); and
 
 
Ÿ
either (a) at least one qualified trust holds more than 25% by value of the interests in the REIT, or (b) one or more qualified trusts, each of which owns more than 10% by value of the interests in the REIT, hold in the aggregate more than 50% by value of the interests in the REIT.
 
The percentage of any REIT dividend treated as unrelated business taxable income to a qualifying trust is equal to the ratio of (a) the gross income of the REIT from unrelated trades or businesses, determined as though the REIT were a qualified trust, less direct expenses related to this gross income, to (b) the total gross income of the REIT, less direct expenses related to the total gross income. A de minimis exception applies where this percentage is less than 5% for any year. We do not expect to be classified as a pension-held REIT.
 
The rules described above under the heading “U.S. shareholders” concerning the inclusion of our designated undistributed net capital gains in the income of our shareholders will apply to tax-exempt entities. Thus, tax-exempt entities will be allowed a credit or refund of the tax deemed paid by these entities in respect of the includible gains.

106


Table of Contents
 
Non-U.S. Shareholders
 
The rules governing U.S. Federal income taxation of nonresident alien individuals, foreign corporations, foreign partnerships and estates or trusts that in either case are not subject to United States Federal income tax on a net income basis, which we call “non-U.S. shareholders”, are complex. The following discussion is only a limited summary of these rules. Prospective non-U.S. shareholders should consult with their own tax advisors to determine the impact of U.S. Federal, state and local income tax laws with regard to an investment in Series A preferred securities, including any reporting requirements.
 
Ordinary Dividends.    Distributions, other than distributions that are treated as attributable to gain from sales or exchanges by us of U.S. real property interests, as discussed below, and other than distributions designated by us as capital gain dividends, will be treated as ordinary income to the extent that they are made out of our current or accumulated earnings and profits. A withholding tax equal to 30% of the gross amount of the distribution will ordinarily apply to distributions of this kind to non-U.S. shareholders, unless an applicable tax treaty reduces that tax. However, if income from the investment in the shares is treated as effectively connected with the non-U.S. shareholder’s conduct of a U.S. trade or business or is attributable to a permanent establishment that the non-U.S. shareholder maintains in the U.S., if that is required by an applicable income tax treaty as a condition for subjecting the non-U.S. shareholder to U.S. taxation on a net income basis, tax at graduated rates will generally apply to the non-U.S. shareholder in the same manner as U.S. shareholders are taxed with respect to dividends, and the 30% branch profits tax may also apply if the shareholder is a foreign corporation. We expect to withhold U.S. tax at the rate of 30% on the gross amount of any dividends, other than dividends treated as attributable to gain from sales or exchanges of U.S. real property interests and capital gain dividends, paid to a non-U.S. shareholder, unless (a) a lower treaty rate applies and the required form evidencing eligibility for that reduced rate is filed with us or the appropriate withholding agent, or (b) the non-U.S. shareholder files an IRS Form W-8 ECI or a successor form with us or the appropriate withholding agent claiming that the distributions are effectively connected with the non-U.S. shareholder’s conduct of a U.S. trade or business.
 
Distributions to a non-U.S. shareholder that are designated by us at the time of distribution as capital gain dividends which are not attributable to or treated as attributable to the disposition by us of a U.S. real property interest generally will not be subject to U.S. Federal income taxation, except as described below.
 
Return of Capital.    Distributions in excess of our current and accumulated earnings and profits, which are not treated as attributable to the gain from our disposition of a U.S. real property interest, will not be taxable to a non-U.S. shareholder to the extent that they do not exceed the adjusted basis of the non-U.S. shareholder’s shares. Distributions of this kind will instead reduce the adjusted basis of the shares. To the extent that distributions of this kind exceed the adjusted basis of a non-U.S. shareholder’s shares, they will give rise to tax liability if the non-U.S. shareholder otherwise would have to pay tax on any gain from the sale or disposition of our shares, as described below. If it cannot be determined at the time a distribution is made whether the distribution will be in excess of current and accumulated earnings and profits, withholding will apply to the distribution at the rate applicable to dividends. However, the non-U.S. shareholder may seek a refund of these amounts from the IRS if it is subsequently determined that the distribution was, in fact, in excess of our current accumulated earnings and profits.
 
Capital Gain Dividends.    For any year in which we qualify as a REIT, distributions that are attributable to gain from sales or exchanges by us of U.S. real property interests (which, unlike the definition of real estate assets for REIT qualification purposes, does not include interest on many loans secured by real property) will be taxed to a non-U.S. shareholder under the provisions of the Foreign Investment in Real Property Tax Act of 1980, as amended. Under this statute, these distributions are taxed to a non-U.S. shareholder as if the gain were effectively connected with a U.S. business. Thus, non-U.S. shareholders will be taxed on the distributions at the normal capital gain rates applicable to U.S. shareholders, subject to any applicable alternative minimum tax and special alternative minimum tax in the case of individuals. We are required by applicable Treasury regulations under this statute to withhold 35% of any distribution that we could designate as a capital gain

107


Table of Contents
dividend. However, if we designate as a capital gain dividend a distribution made before the day we actually effect the designation, then although the distribution may be taxable to a non-U.S. shareholder, withholding does not apply to the distribution under this statute. Rather, we must effect the 35% withholding from distributions made on and after the date of the designation, until the distributions so withheld equal the amount of the prior distribution designated as a capital gain dividend. The non-U.S. shareholder may credit the amount withheld against its U.S. tax liability.
 
Sales of Shares.    Gain recognized by a non-U.S. shareholder upon a sale or exchange of common stock generally will not be taxed under the Foreign Investment in Real Property Tax Act if we are a “domestically controlled REIT”, defined generally as a REIT, less than 50% in value of whose stock is and was held directly or indirectly by foreign persons at all times during a specified testing period. We believe that we are and will continue to be a domestically controlled REIT, and, therefore, that taxation under this statute generally will not apply to the sale of our shares. However, gain to which this statute does not apply will be taxable to a non- U.S. shareholder if investment in the shares is treated as effectively connected with the non-U.S. shareholder’s U.S. trade or business or is attributable to a permanent establishment that the non-U.S. shareholder maintains in the U.S. if that is required by an applicable income tax treaty as a condition for subjecting the non-U.S. shareholder to U.S. taxation on a net income basis. In this case, the same treatment will apply to the non-U.S. shareholder as to U.S. shareholders with respect to the gain. In addition, gain to which the Foreign Investment in Real Property Tax Act does not apply will be taxable to a non-U.S. shareholder if the non-U.S. shareholder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and has a “tax home” in the United States, or maintains an office or a fixed place of business in the United States to which the gain is attributable. In this case, a 30% tax will apply to the nonresident alien individual’s capital gains. A similar rule will apply to capital gain dividends to which this statute does not apply.
 
If we were not a domestically controlled REIT, tax under the Foreign Investment in Real Property Tax Act would apply to a non-U.S. shareholder’s sale of shares only if the selling non-U.S. shareholder owned more than 5% of the class of shares sold at any time during a specified period. This period is generally the shorter of the period that the non-U.S. shareholder owned the shares sold or the five-year period ending on the date when the shareholder disposed of the shares. If tax under this statute applies to the gain on the sale of shares, the same treatment would apply to the non-U.S. shareholder as to U.S. shareholders with respect to the gain, subject to any applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals.
 
Federal Estate Taxes
 
Preferred shares held by a non-U.S. shareholder at the time of death will be included in the shareholder’s gross estate for United States Federal estate tax purposes, unless an applicable estate tax treaty provides otherwise.
 
Backup Withholding and Information Reporting
 
If you are a non-U.S. shareholder, you are generally exempt from backup withholding and information reporting requirements with respect to:
 
 
Ÿ
dividend payments and
 
 
Ÿ
the payment of the proceeds from the sale of preferred shares effected at a United States office of a broker,
 
as long as:
 
 
Ÿ
the income associated with these payments is otherwise exempt from United States Federal income tax; and

108


Table of Contents
 
 
Ÿ
the payor or broker does not have actual knowledge or reason to know that you are a United States person and you have furnished to the payor or broker:
 
 
Ÿ
a valid IRS Form W-8BEN or an acceptable substitute form upon which you certify, under penalties of perjury, that you are a non-United States person, or
 
 
Ÿ
other documentation upon which it may rely to treat the payments as made to a non-United States person in accordance with U.S. Treasury regulations; or
 
 
Ÿ
you otherwise establish an exemption.
 
Payment of the proceeds from the sale of preferred shares effected at a foreign office of a broker generally will not be subject to information reporting or backup withholding. However, a sale of preferred shares that is effected at a foreign office of a broker will be subject to information reporting and backup withholding if:
 
 
Ÿ
the proceeds are transferred to an account maintained by you in the United States;
 
 
Ÿ
the payment of proceeds or the confirmation of the sale is mailed to you at a United States address; or
 
 
Ÿ
the sale has some other specified connection with the United States as provided in U.S. Treasury regulations;
 
unless the broker does not have actual knowledge or reason to know that you are a United States person and the documentation requirements described above are met or you otherwise establish an exemption.
 
In addition, a sale of preferred shares will be subject to information reporting if it is effected at a foreign office of a broker that is:
 
 
Ÿ
a United States person;
 
 
Ÿ
a controlled foreign corporation for United States tax purposes;
 
 
Ÿ
a foreign person 50% or more of whose gross income is effectively connected with the conduct of a United States trade or business for a specified three-year period; or
 
 
Ÿ
a foreign partnership, if at any time during its tax year:
 
 
Ÿ
one or more of its partners are “U.S. persons”, as defined in U.S. Treasury regulations, who in the aggregate hold more than 50% of the income or capital interest in the partnership; or
 
 
Ÿ
such foreign partnership is engaged in the conduct of a United States trade or business;
 
unless the broker does not have actual knowledge or reason to know that you are a United States person and the documentation requirements described above are met or you otherwise establish an exemption. Backup withholding will apply if the sale is subject to information reporting and the broker has actual knowledge that you are a United States person.
 
You generally may obtain a refund of any amounts withheld under the backup withholding rules that exceed your income tax liability by filing a refund claim with the IRS.
 
Other Tax Consequences
 
State or local taxation may apply to us and our shareholders in various state or local jurisdictions, including those in which we or they transact business or reside. The state and local tax treatment of us and our shareholders may not conform to the Federal income tax consequences discussed above. Consequently, prospective shareholders should consult their own tax advisors regarding the effect of state and local tax laws on an investment in us.

109


Table of Contents
ERISA CONSIDERATIONS
 
The fiduciary standards of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), should be considered by the fiduciary of a pension, profit-sharing or other employee benefit plan subject to Title I of ERISA (an “ERISA Plan”) in the context of the ERISA Plan’s particular circumstances before authorizing an investment in the Series A preferred securities (and the depositary shares representing the Wachovia Series G, Class A preferred stock into which the Series A preferred securities are exchangeable upon the occurrence of a Conditional Exchange). Among other factors, the fiduciary should consider whether such an investment is in accordance with the documents governing the ERISA Plan and whether an investment is appropriate for the ERISA Plan in view of its overall investment policy and the composition and diversification of its portfolio.
 
Section 406 of ERISA and Section 4975 of the Code prohibit ERISA Plans, as well as individual retirement accounts, self-employment retirement plans and other pension and profit-sharing plans subject to Section 4975 of the Code (together with ERISA Plans, the “Plans”) from engaging in certain transactions involving “plan assets” with persons who are “parties in interest” under ERISA or “disqualified persons” under the Code with respect to the Plan. Therefore, fiduciaries of ERISA Plans and persons making investment decisions for other Plans should also consider whether an investment in the Series A preferred securities (and the depositary shares representing the Wachovia Series G, Class A preferred stock into which the Series A preferred securities are exchangeable upon the occurrence of a Conditional Exchange) might constitute or give rise to a prohibited transaction under ERISA and the Code. We and Wachovia may each be considered a party in interest or disqualified person with respect to a Plan to the extent we or certain of our affiliates are engaged in businesses which provide services to such Plan. If so, the acquisition and holding by such Plan of the Series A preferred securities (or the depositary shares representing the Wachovia Series G, Class A preferred stock into which the Series A preferred securities are exchangeable upon the occurrence of a Conditional Exchange) could be a prohibited transaction.
 
There are five prohibited transaction class exemptions (“PTCEs”) issued by the Department of Labor which could exempt the acquisition and holding of the Series A preferred securities (or the depositary shares representing the Wachovia Series G, Class A preferred stock into which the Series A preferred securities are exchangeable upon the occurrence of a Conditional Exchange) from the prohibited transaction provisions of ERISA and the Code—PTCE 84-14, for certain transactions determined by qualified professional asset managers, PTCE 90-1, for certain transactions involving insurance company pooled separate accounts, PTCE 91-38, for certain transactions involving bank collective investment funds, PTCE 95-60 for certain transactions involving insurance company general accounts, and PTCE 96-23, for certain transactions determined by in-house asset managers.
 
Under a regulation issued by the U.S. Department of Labor (referred to as the “Plan Asset Regulation”), which governs what constitutes the assets of a Plan, our assets will not be treated as assets of a Plan if the Series A preferred securities are “publicly-offered securities”. This will be the case under the Plan Asset Regulation if the Series A preferred securities are:
 
 
Ÿ
widely held (that is, owned by 100 or more investors independent of us and of each other);
 
 
Ÿ
freely transferable; and
 
 
Ÿ
sold as part of an offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”) and then timely registered under Section 12(b) or 12(g) of the Exchange Act.
 
We expect (although no assurances can be given) that (a) the Series A preferred securities will be held by at least 100 independent investors at the conclusion of the offering, (b) there are no restrictions imposed on the transfer of the Series A preferred securities and the Series A preferred securities will be sold as part of an offering pursuant to an effective registration statement under the Securities Act, and (c) the Series A preferred securities will be timely registered under the Exchange Act. Based on the foregoing, it is expected that the Series A preferred securities will meet the requirements for “publicly-offered securities”.

110


Table of Contents
 
The Plan Asset Regulation provides an additional exception for “operating companies” (i.e., an entity that is primarily engaged, directly or through one or more majority owned subsidiaries, in the production or sale of a product or service other than the investment of capital). Assuming that Wachovia qualifies as an “operating company” at the time of the exchange, a Plan’s ownership of the depositary shares representing the Wachovia Series G, Class A preferred stock would not cause the assets of Wachovia to be treated as assets of the Plan.
 
Regardless of whether our assets or Wachovia’s assets are deemed to be “plan assets” of Plans investing in the securities, the acquisition and holding of the Series A preferred securities (or the depositary shares representing the Wachovia Series G, Class A preferred stock) with “plan assets” could itself result in a prohibited transaction. Accordingly, each purchaser and transferee of the Series A preferred securities (and each holder of the depositary shares representing the Wachovia Series G, Class A preferred stock upon the occurrence of a Conditional Exchange) is deemed to represent that either the Series A preferred securities (and the depositary shares representing the Wachovia Series G, Class A preferred stock) are not acquired with assets of a Plan, or that the acquisition and holding of the Series A preferred securities (or the depositary shares representing the Wachovia Series G, Class A preferred stock upon the occurrence of a Conditional Exchange) is eligible for the relief available under PTCE 84-14, PTCE 90-1, PTCE 91-38, PTCE 95-60 or PTCE 96-23.
 
Due to the complexity of these rules and the penalties imposed upon persons involved in prohibited transactions, it is important that a Plan considering an investment in the Series A preferred securities (and the depositary shares representing the Wachovia Series G, Class A preferred stock into which the Series A preferred securities are exchangeable upon the occurrence of a Conditional Exchange) consult with its counsel regarding the consequences under ERISA and the Code of such investment. Plans that are governmental plans (as defined in Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA) generally are not subject to the requirements of ERISA or the prohibited transaction provisions of Section 4975 of the Code; however, any such plan subject to Federal, state or local law substantially similar to the foregoing provisions will be deemed to represent its acquisition and holding of the Series A preferred securities (and the depositary shares representing the Wachovia Series G, Class A preferred stock into which the Series A preferred securities are exchangeable upon the occurrence of a Conditional Exchange) is not prohibited or is eligible for exemptive relief.

111


Table of Contents
UNDERWRITING
 
Subject to the terms and conditions stated in our loan participation agreement with Wachovia Preferred Holding dated the date of this prospectus, Wachovia Preferred Holding has agreed to acquire from us and agreed to exchange all of the Series A preferred securities offered by this prospectus for $25.00 per Series A preferred security. The consideration to be exchanged by Wachovia Preferred Holding for the Series A preferred securities will be in the form of additional participation interests in certain commercial and commercial real estate loans.
 
It is intended that, subsequent to the exchange of the Series A preferred securities with us and subject to the terms and conditions stated in the proposed underwriting agreement, each underwriter named in the table below, which we refer to as an “Underwriter” and collectively as the “Underwriters”, will severally agree to purchase, and Wachovia Preferred Holding will agree to sell the number of Series A preferred securities set forth opposite the name of such underwriter.
 
Name

    
Number of Series A Preferred Securities

Wachovia Securities, Inc.
      
      
Total
    
15,000,000
      
 
The underwriting agreement will provide that the obligation of the several Underwriters to purchase the Series A preferred securities is subject to certain legal matters by counsel and to certain other conditions. The Underwriters will be obligated to purchase all of the Series A preferred securities if they purchase any Series A preferred securities. Although a statutory underwriter in connection with this offering, Wachovia Preferred Holding will not sell the securities directly to the public and will not have the rights and obligations of an Underwriter under the underwriting agreement.
 
The Underwriters, for whom Wachovia Securities, Inc. is acting as representative, intend to offer some of the Series A preferred securities directly to the public at the public offering price of $25.00 per security and some of the Series A preferred securities to certain dealers at the public offering price less a concession not in excess of $         per preferred security. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $         per Series A preferred securities to certain brokers and dealers. After the initial offering of the Series A preferred securities to the public, the public offering price and other selling terms may be changed by the representative.
 
The Underwriters fees will constitute an amount equal to     % of the initial public offering price. The amount is calculated based on a management fee equal to     % of the initial public offering price, or $         per $25.00 security, an underwriting fee equal to     % of the initial public offering price, or $         per $25.00 security, and a selling concession equal to     % of the initial public offering price, or $         per $25.00 security. Additional expenses associated with the offering of the Series A preferred securities are estimated to be $        . These additional expenses include legal and accounting fees and expenses, Underwriters’ legal fees expenses, rating agencies’ fees, printing expenses, and the SEC registration fee. The fees and expenses as well as the underwriting commissions and discounts will be paid by Wachovia Preferred Holding.
 
Wachovia Securities, Inc. is an affiliate of ours and of Wachovia Preferred Holding.
 
Certain of the Underwriters and their affiliates have in the past provided, and may in the future provide, investment banking services to Wachovia, the Bank, or their affiliates in the ordinary course of business.
 
Wachovia Preferred Holding, which will own 99.85% of our shares of common stock, is affiliated with us. The Bank owns 99.95% of Wachovia Preferred Holding’s common stock. Thus, the Bank may be deemed to beneficially own the Series A preferred securities being offered to the public even though Wachovia Preferred Holding will be the sole record owner. As described in more detail under “Business” in this

112


Table of Contents
prospectus, we acquired, and in the future will acquire, assets from the Bank and its affiliates and have made arrangements with the Bank and its affiliates for the servicing of the loans in our portfolio.
 
In connection with the offering to the public, the Underwriters may purchase and sell the Series A preferred securities in the open market. These transactions may include syndicate covering transactions and stabilizing transactions. Stabilizing transactions consist of certain bids or purchases of the Series A preferred securities made for the purpose of preventing or retarding a decline in the market price of the Series A preferred securities while the offering is in progress. Syndicate covering transactions involve purchases of the Series A preferred securities in the open market after the distribution has been completed to cover syndicate short positions. Short sales involve the sale by the Underwriters of a greater number of securities than they are required to purchase in the offering. The Underwriters will not have an overallotment option with respect to the distribution of the Series A preferred securities, and any short position of the Underwriters will be a “naked” short position. A naked short position may be created if the Underwriters are concerned that there may be downward pressure on the price of the securities in the open market after pricing that could adversely affect investors who purchase in the offering. The Underwriters must close out any naked short position by purchasing securities in the open market. Similar to other purchase transactions, the Underwriters’ purchases to cover short sales may have the effect of raising or maintaining the market price of the Series A preferred securities or preventing or retarding a decline in the market price of the Series A preferred securities.
 
The representative, on behalf of the Underwriters, also may impose a penalty bid. Penalty bids permit the Underwriters to reclaim a selling concession from a syndicate member when the representative, in covering syndicate short positions or making stabilizing purchases, repurchases Series A preferred securities originally sold by that syndicate member.
 
Any of these activities may cause the price of the Series A preferred securities to be higher than the price that otherwise would exist in the open market in the absence of such transactions. These transactions may be effected in the over-the-counter market or otherwise and, if commenced, may be discontinued at any time.
 
We and Wachovia Preferred Holding will agree to 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 in respect of any of those liabilities.
 
We have applied to list the Series A preferred securities on the New York Stock Exchange under the symbol “WNA”. Trading in the Series A preferred securities is expected to commence not later than 30 days after the date of delivery of the Series A preferred securities. Consequently, there will be no trading market for the Series A preferred securities, at least in the short term. Prior to the offering to the public, there has been no public market for the Series A preferred securities. Consequently, the initial offering price per security of the Series A preferred securities was determined by Wachovia Preferred Holding and us and the initial public offering price for the Series A preferred securities was determined by negotiations between Wachovia Preferred Holding and Wachovia Securities, Inc. There can be no assurance, however, that the prices at which the Series A preferred securities will sell in the public market after the initial public offering will not be lower than the price at which they are sold by the Underwriters or that an active trading market in the Series A preferred securities will develop and continue after the offering to the public.
 
The participation of Wachovia Securities, Inc. in the offer and sale of the Series A preferred securities must comply with the requirements of Rule 2720 of the National Association of Securities Dealers, Inc. regarding underwriting securities of an “affiliate”. Wachovia Securities, Inc. will not execute a transaction in the Series A preferred securities in a discretionary account without the prior specific written approval of such member’s customer.
 
This prospectus, together with any applicable prospectus supplement may also be used by any broker-dealer affiliate of Wachovia Funding in connection with offers and sales of the Series A preferred securities or

113


Table of Contents
depositary shares representing one-sixth of a share of Wachovia Series G, Class A preferred stock in market-making transactions, including block positioning and block trades, at negotiated prices related to prevailing market prices at the time of sale. Any of Wachovia Funding’s broker-dealer affiliates, including, without limitation, Wachovia Securities, Inc., may act as principal or agent in such transactions. None of Wachovia Funding’s broker-dealer affiliates have any obligation to make a market in any of the Series A preferred securities or depositary shares and any such affiliate may discontinue any market-making activities at any time without notice, at its sole discretion. Broker-dealers purchasing the Series A preferred securities or the depositary shares from affiliates of Wachovia Funding or Wachovia, respectively, including Wachovia Securities, may be deemed to be underwriters as that term is defined in the Securities Act and subject to applicable prospectus delivery requirements.
 
EXPERTS
 
The consolidated financial statements of Wachovia Funding as of December 31, 2001 and 2000, and for each of the years in the three-year period ended December 31, 2001, have been included herein in reliance upon the report of KPMG LLP, independent accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.
 
The consolidated financial statements of Wachovia as of December 31, 2001 and 2000, and for each of the years in the three-year period ended December 31, 2001, have been incorporated by reference herein in reliance upon the report of KPMG LLP, independent accountants, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
 
The restated audited financial statements of former Wachovia Corporation at December 31, 2000 and 1999, and for each of the three years in the period ended December 31, 2000, included in Wachovia’s Current Report on Form 8-K dated June 5, 2002 and incorporated by reference herein, have been incorporated by reference herein in reliance upon the report of Ernst & Young LLP, independent auditors. The restated audited financial statements referred to above are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
 
VALIDITY OF SECURITIES
 
The validity of our Series A preferred securities and the depositary shares representing an interest in shares of Wachovia Series G, Class A preferred stock will be passed upon for us and Wachovia by Ross E. Jeffries, Jr., Esq., Senior Vice President and Assistant General Counsel of Wachovia, and by Sullivan & Cromwell, New York, New York. Sullivan & Cromwell will rely upon the opinion of Mr. Jeffries as to matters of North Carolina law, and Mr. Jeffries will rely upon the opinion of Sullivan & Cromwell as to matters of New York law. Mr. Jeffries owns shares of Wachovia’s common stock and holds options to purchase additional shares of Wachovia’s common stock. Sullivan & Cromwell regularly performs legal services for Wachovia. Certain members of Sullivan & Cromwell performing these legal services own shares of Wachovia’s common stock. The validity of our Series A preferred securities and the depositary shares representing an interest in shares of Wachovia Series G, Class A preferred stock will be passed upon for the underwriters by Cleary, Gottlieb, Steen & Hamilton.
 
WHERE YOU CAN FIND MORE INFORMATION ABOUT WACHOVIA FUNDING
 
We have filed with the SEC a registration statement on Form S-11 under the Securities Act, with respect to our Series A preferred securities. This prospectus, which forms a part of that registration statement, does not contain all the information set forth in the registration statement, certain portions of which have been omitted as permitted by the rules and regulations of the SEC. Statements contained in this prospectus as to the content of any contract or other document are not necessarily complete, and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference. We refer you to the registration statement and its exhibits for further information regarding us and the Series A preferred securities offered by this prospectus.

114


Table of Contents
 
The registration statement and its exhibits which were filed by us with the SEC can be inspected at, and copies can be obtained from, the SEC’s public reference room, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Such material may also be accessed electronically by means of the SEC’s home page on the Internet at http://www.sec.gov.
 
While we are a reporting company, we intend to file with the SEC and furnish to our shareholders annual reports containing audited consolidated financial statements certified by independent auditors and file with the SEC quarterly reports containing unaudited consolidated financial statements for the first three quarters of each fiscal year.
 
WHERE YOU CAN FIND MORE INFORMATION ABOUT WACHOVIA
 
Wachovia has filed with the SEC a registration statement on Form S-3 under the Securities Act, with respect to the depositary shares representing an interest in the Wachovia Series G, Class A preferred stock. This prospectus, which forms a part of that registration statement, does not contain all the information set forth in the registration statement, certain portions of which have been omitted as permitted by the rules and regulations of the SEC. Statements contained in this prospectus as to the content of any contract or other document are not necessarily complete, and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference. Wachovia refers you to the registration statement and its exhibits for further information regarding Wachovia and the depositary shares representing an interest in the Wachovia Series G, Class A preferred stock.
 
Wachovia files annual quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document that Wachovia files at the SEC’s public reference room in Washington, D.C. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. In addition, Wachovia’s SEC filings are available to the public at the SEC’s web site at http://www.sec.gov. You can also inspect reports, proxy statements and other information about Wachovia at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York.
 
The SEC allows Wachovia to “incorporate by reference” into this prospectus the information in documents that Wachovia files with it. This means that Wachovia can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be a part of this prospectus and should be read with the same care. When Wachovia updates the information contained in documents that have been incorporated by reference by making future filings with the SEC, the information incorporated by reference in this prospectus is considered to be automatically updated and superseded. In other words, in the case of a conflict or inconsistency between information with respect to Wachovia contained in this prospectus and information incorporated by reference into this prospectus, you should rely on the information contained in the document that was filed later. Wachovia incorporates by reference the documents listed below and any documents it files with the SEC in the future under Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act until this offering is completed:
 
 
Ÿ
Description of Wachovia’s capital stock under the heading “Description of First Union Capital Stock” contained in the Registration Statement on Form S-4, as amended (Registration Statement File No. 333-59616), as filed with the SEC on June 27, 2001;
 
 
Ÿ
Annual Report on Form 10-K for the year ended December 31, 2001;
 
 
Ÿ
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2002, June 30, 2002 and September 30, 2002; and
 
 
Ÿ
Current Reports on Form 8-K dated January 23, 2002, April 18, 2002, June 5, 2002, July 18, 2002, August 13, 2002, August 20, 2002 and October 16, 2002.
 

115


Table of Contents
You may request a copy of these filings, other than an exhibit to a filing unless that exhibit is specifically incorporated by reference into that filing, at no cost, by writing to or telephoning Wachovia at the following address:
 
Corporate Relations
Wachovia Corporation
One Wachovia Center
301 South College Street
Charlotte, North Carolina 28288-0206
(704) 374-6782

116


Table of Contents
 
“Code” means the Internal Revenue Code of 1986, as amended.
 
“commercial loan” means a loan for commercial, financial, or industrial purposes, whether secured or unsecured, single-payment or installment.
 
“commercial mortgage loan” means a whole loan secured by a mortgage or deed of trust on a multi-family residential or commercial real estate property.
 
“Conditional Exchange” means the exchange of our Series A preferred securities for depositary shares representing Wachovia Series G, Class A preferred stock upon the issuance of an OCC directive after the occurrence of a Supervisory Event.
 
“dividend payment date” means each quarterly date upon which dividends are paid by us to the holders of the Series A preferred securities.
 
“dividend period” means any quarterly dividend period.
 
“FFO” means funds from operations on a consolidated basis and is equal to net income, plus depreciation of real or personal property used to generate income, less any gain on the sale of real estate plus any loss on the sale of real estate, all as calculated according to accounting principles generally accepted in the United States.
 
“home equity loan” means a fixed-rate, closed-end loan secured by residential real estate that can be in a first or second lien position.
 
“Investment Company Act Event” means our determination, based on the receipt by us of an opinion of counsel, rendered by a law firm experienced in such matters, in form and substance satisfactory to us, which states that there is a significant risk that we are or will be considered an “investment company” that is required to be registered under the Investment Company Act, as a result of the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency, or regulatory authority.
 
“LIBOR” means the London Interbank Offered Rate, which is the short-term rate of interest for United States dollar deposits overseas and is sometimes used as an index upon which loan interest rates are based.
 
“Loan-to-Value Ratio” means, with respect to any mortgage loan, the ratio (expressed as a percentage) of the original principal amount of such mortgage loan to the lesser of (a) the appraised value at origination of the mortgaged property underlying such mortgage loan and (b) if the mortgage loan was made to finance the acquisition of property, the purchase price of the mortgaged property.
 
“mortgage-backed securities” means securities either issued or guaranteed by agencies of the Federal government or government sponsored agencies or that are rated by at least one nationally recognized independent rating organization and that represent interests in or obligations backed by pools of mortgage loans.
 
“mortgage loans” means whole loans secured by single-family, one-to-four-unit, residential, multi-family residential, or commercial real estate properties.
 
“One Hundred Persons Test” means the Code requirement that our capital stock be owned by 100 or more persons during at least 335 days of a taxable year or during a proportionate part of a shorter taxable year, other than the first 12 months.

117


Table of Contents
 
“other authorized investments” means non-mortgage-related securities authorized by Section 856(c)(5)(B) of the Code, in an amount which will not exceed 20% of the value of our total assets. Non-mortgage-related security is defined in the Investment Company Act. Under the Investment Company Act, the term “security” means, in part, any note, stock, treasury stock, debenture, evidence of indebtedness, or certificate of interest or participation in any profit sharing agreement or a group or index of securities.
 
“Portfolio” means the current portfolio of mortgage loans and other loans held by us.
 
“Regulatory Capital Event” means our determination, based on the receipt by us of an opinion of counsel, rendered by a law firm experienced in such matters, in form and substance satisfactory to us, which states that there is a significant risk that the Series A preferred securities will no longer constitute Tier 1 capital of the Bank or Wachovia for purposes of the capital adequacy guidelines or policies of the OCC or the Federal Reserve, or their respective successor as the Bank’s and Wachovia’s, respectively, primary federal banking regulator, as a result of:
 
 
Ÿ
any amendments to, clarification of, or change in applicable laws or related regulations or official interpretations or policies, or
 
 
Ÿ
any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations.
 
“REIT” means a real estate investment trust as defined pursuant to Sections 856 through 860 of the Code, or any successor provisions of the Code, and the applicable Treasury regulations.
 
“REIT taxable income” means the taxable income of a REIT, which generally is computed in the same fashion as the taxable income of any corporation, except that (a) certain deductions are not available, such as the deduction for dividends received, (b) it may deduct dividends paid (or deemed paid) during the taxable year, (c) net capital gains and losses are excluded, and (d) certain other adjustments are made.
 
“residential mortgage loan” means a whole loan secured by a mortgage or deed of trust on a residential real estate property.
 
“Special Event” means
 
 
Ÿ
a Tax Event;
 
 
Ÿ
an Investment Company Event; or
 
 
Ÿ
a Regulatory Capital Event.
 
“Supervisory Event” means the occurrence of one of the following:
 
 
Ÿ
the Bank becomes undercapitalized under the OCC’s “prompt corrective action” regulations;
 
 
Ÿ
the Bank is placed into conservatorship or receivership; or
 
 
Ÿ
the OCC, in its sole discretion, anticipates the Bank becoming “undercapitalized” in the near term or takes supervisory action that limits the payment of dividends by us and in connection therewith directs an exchange.
 
“Tax Event” means our determination, based on the receipt by us of an opinion of counsel, rendered by a law firm experienced in such matters, in form and substance satisfactory to us, which states that there is a significant risk that dividends paid or to be paid by us with respect to our capital stock are not or will not be fully deductible by us for United States Federal income tax purposes or that we are or will be subject to additional taxes, duties, or other governmental charges, in an amount we reasonably determine to be significant as a result of:
 
 
Ÿ
any amendment to, clarification of, or change in, the laws, treaties, or related regulations of the United States or any of its political subdivisions or their taxing authorities affecting taxation, or

118


Table of Contents
 
 
Ÿ
any judicial decision, official administrative pronouncement, published or private ruling, technical advice memorandum, Chief Counsel Advice, as such term is defined in the Code, regulatory procedure, notice, or official announcement, which we refer to collectively as “Administrative Actions”,
 
which amendment, clarification, or change is effective, or such official pronouncement or decision is announced, on or after the date of issuance of the Series A preferred securities.

119


Table of Contents
 
WACHOVIA PREFERRED FUNDING CORP. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
    
Page

Audited Consolidated Financial Statements
    
Independent Auditors’ Report
  
F-3
Consolidated Balance Sheets as of December 31, 2001 and 2000
  
F-4
Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999
  
F-5
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2001, 2000 and 1999
  
F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999
  
F-7
Notes to Consolidated Financial Statements
  
F-8
Unaudited Consolidated Financial Statements
    
Consolidated Balance Sheets as of September 30, 2002 and 2001
  
F-17
Consolidated Statements of Income for the nine months ended September 30, 2002 and 2001
  
F-18
Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended September 30, 2002 and 2001
  
F-19
Consolidated Statements of Cash Flows for the nine months ended September 30, 2002 and 2001
  
F-20
Notes to Consolidated Financial Statements
  
F-21
Wachovia Corporation and Subsidiaries—Supplementary Consolidating Financial Information
  
F-22
Independent Auditors’ Report on Supplementary Consolidating Financial Information
  
F-23
Supplementary Consolidating Balance Sheets
    
September 30, 2002
  
F-24
December 31, 2001
  
F-25
December 31, 2000
  
F-26
Supplementary Consolidating Statements of Income
    
Nine Months Ended September 30, 2002
  
F-27
Nine Months Ended September 30, 2001
  
F-28
Year Ended December 31, 2001
  
F-29
Year Ended December 31, 2000
  
F-30
Supplementary Consolidating Statements of Changes in Stockholders’ Equity
    
Nine Months Ended September 30, 2002
  
F-31
Nine Months Ended September 30, 2001
  
F-32
Year Ended December 31, 2001
  
F-33
Year Ended December 31, 2000
  
F-34
Supplementary Consolidating Statements of Changes in Cash Flows
    
Nine Months Ended September 30, 2002
  
F-35
Nine Months Ended September 30, 2001
  
F-36
Year Ended December 31, 2001
  
F-37
Year Ended December 31, 2000
  
F-38

F-1


Table of Contents
 
WACHOVIA PREFERRED FUNDING CORP.
AND SUBSIDIARY
 
Consolidated Financial Statements
 
December 31, 2001, 2000 and 1999
(With Independent Auditors’ Report Thereon)

F-2


Table of Contents
 
INDEPENDENT AUDITORS’ REPORT
 
Board of Directors
Wachovia Preferred Funding Corp.
 
We have audited the accompanying consolidated balance sheets of Wachovia Preferred Funding Corp. (a subsidiary of Wachovia Bank, National Association, which is a wholly-owned subsidiary of Wachovia Corporation) and subsidiary as of December 31, 2001 and 2000 and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 2001. These consolidated financial statements are the responsibility of Wachovia Preferred Funding Corp.’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
 
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Wachovia Preferred Funding Corp. and subsidiary as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America.
 
KPMG LLP
Charlotte, North Carolina
 
August 26, 2002

F-3


Table of Contents
 
WACHOVIA PREFERRED FUNDING CORP.
AND SUBSIDIARY
 
CONSOLIDATED BALANCE SHEETS
 
December 31, 2001 and 2000
 
(In thousands, except share data)

  
2001

    
2000

 
ASSETS
               
Cash and cash equivalents
  
$
957,454
 
  
183,223
 
Loans, net of unearned income
  
 
4,378,961
 
  
558,756
 
Allowance for loan losses
  
 
(37,158
)
  
(3,833
)
    


  

Loans, net
  
 
4,341,803
 
  
554,923
 
    


  

Current income taxes receivable
  
 
—  
 
  
7
 
Deferred income tax assets
  
 
—  
 
  
1,196
 
Interest rate swaps
  
 
573,620
 
  
—  
 
Other assets
  
 
16,789
 
  
7,454
 
    


  

Total assets
  
$
5,889,666
 
  
746,803
 
    


  

LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Liabilities
               
Collateral held on interest rate swaps
  
 
570,340
 
  
—  
 
Current income taxes payable
  
 
20,784
 
  
—  
 
Deferred income tax liabilities
  
 
124,112
 
  
—  
 
Accounts payable—affiliates
  
 
9,359
 
  
176
 
Other liabilities
  
 
7,651
 
  
107
 
    


  

Total liabilities
  
 
732,246
 
  
283
 
    


  

Stockholders’ equity
               
Common stock, $0.01 par value, 100,000,000 shares authorized, 99,999,900 and 14,814,800 shares issued and outstanding in 2001 and 2000, respectively
  
 
1,000
 
  
148
 
Paid-in capital
  
 
5,085,674
 
  
652,069
 
Retained earnings
  
 
70,746
 
  
94,303
 
    


  

Total stockholders’ equity
  
 
5,157,420
 
  
746,520
 
    


  

Total liabilities and stockholders’ equity
  
$
5,889,666
 
  
746,803
 
    


  

 
See accompanying notes to consolidated financial statements.

F-4


Table of Contents
 
WACHOVIA PREFERRED FUNDING CORP.
AND SUBSIDIARY
 
CONSOLIDATED STATEMENTS OF OPERATIONS
 
Years Ended December 31, 2001, 2000 and 1999
 
(In thousands, except per share data and average shares)

  
2001

    
2000

  
1999

INTEREST INCOME
  
$
68,179
 
  
57,257
  
47,060
INTEREST EXPENSE
  
 
857
 
  
—  
  
55
    


  
  
Net interest income
  
 
67,322
 
  
57,257
  
47,005
Provision for loan losses
  
 
5,262
 
  
3,602
  
1,034
    


  
  
Net interest income after provision for loan losses
  
 
62,060
 
  
53,655
  
45,971
    


  
  
OTHER INCOME
                  
Loss on interest rate swaps
  
 
(95,890
)
  
—  
  
—  
Other income
  
 
—  
 
  
395
  
96
    


  
  
Total other income
  
 
(95,890
)
  
395
  
96
    


  
  
NONINTEREST EXPENSE
                  
Loan servicing costs
  
 
602
 
  
1,383
  
1,890
Management fees
  
 
—  
 
  
824
  
1,059
Other
  
 
1,792
 
  
—  
  
129
    


  
  
Total noninterest expense
  
 
2,394
 
  
2,207
  
3,078
    


  
  
Income (loss) before income tax expense (benefit)
  
 
(36,224
)
  
51,843
  
42,989
Income tax expense (benefit)
  
 
(12,679
)
  
19,409
  
15,038
    


  
  
Net income (loss)
  
$
(23,545
)
  
32,434
  
27,951
    


  
  
PER COMMON SHARE DATA
                  
Basic earnings (loss)
  
$
(1.07
)
  
2.19
  
1.89
Diluted earnings (loss)
  
$
(1.07
)
  
2.19
  
1.89
AVERAGE SHARES
                  
Basic
  
 
21,925,904
 
  
14,814,800
  
14,814,800
Diluted
  
 
21,925,904
 
  
14,814,800
  
14,814,800
    


  
  
 
See accompanying notes to consolidated financial statements.

F-5


Table of Contents
 
WACHOVIA PREFERRED FUNDING CORP.
AND SUBSIDIARY
 
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
 
Years Ended December 31, 2001, 2000 and 1999
 
    
Common
Stock

  
Paid-in
Capital

  
Retained
Earnings

        
(In thousands)

           
Total

 
Balance, December 31, 1998
  
$
148
  
652,069
  
33,937
 
  
686,154
 
Net income
  
 
—  
  
—  
  
27,951
 
  
27,951
 
Cash dividends paid
  
 
—  
  
—  
  
(8
)
  
(8
)
    

  
  

  

Balance, December 31, 1999
  
 
148
  
652,069
  
61,880
 
  
714,097
 
Net income
  
 
—  
  
—  
  
32,434
 
  
32,434
 
Cash dividends paid
  
 
—  
  
—  
  
(11
)
  
(11
)
    

  
  

  

Balance, December 31, 2000
  
 
148
  
652,069
  
94,303
 
  
746,520
 
Net loss
  
 
—  
  
—  
  
(23,545
)
  
(23,545
)
Issuance of common stock in exchange for loans and interest rate swaps, net of deferred income tax liability of $177,029
  
 
852
  
4,433,605
  
—  
 
  
4,434,457
 
Cash dividends paid
  
 
—  
  
—  
  
(12
)
  
(12
)
    

  
  

  

Balance, December 31, 2001
  
$
1,000
  
5,085,674
  
70,746
 
  
5,157,420
 
    

  
  

  

 
See accompanying notes to consolidated financial statements.

F-6


Table of Contents
 
WACHOVIA PREFERRED FUNDING CORP.
AND SUBSIDIARY
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Years Ended December 31, 2001, 2000 and 1999
 
(In thousands)

  
2001

    
2000

    
1999

 
OPERATING ACTIVITIES
                      
Net income (loss)
  
$
(23,545
)
  
32,434
 
  
27,951
 
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities
                      
Provision for loan losses
  
 
5,262
 
  
3,602
 
  
1,034
 
Current income taxes, net
  
 
20,791
 
  
(7
)
  
(2,225
)
Deferred income tax benefits
  
 
(51,721
)
  
(799
)
  
(107
)
Loss on interest rate swaps
  
 
95,890
 
  
—  
 
  
—  
 
Interest rate swaps and other assets, net
  
 
(5,876
)
  
(1,724
)
  
(1,271
)
Accounts payable—affiliates and other liabilities, net
  
 
16,727
 
  
283
 
  
(115
)
    


  

  

Net cash provided by operating activities
  
 
57,528
 
  
33,789
 
  
25,267
 
    


  

  

INVESTING ACTIVITIES
                      
(Increase) decrease in loans, net
  
 
146,375
 
  
(46,952
)
  
73,160
 
    


  

  

Net cash provided (used) by investing activities
  
 
146,375
 
  
(46,952
)
  
73,160
 
    


  

  

FINANCING ACTIVITIES
                      
Increase (decrease) in cash realized from
                      
Collateral held on interest rate swaps
  
 
570,340
 
  
—  
 
  
—  
 
Cash dividends paid
  
 
(12
)
  
(11
)
  
(8
)
    


  

  

Net cash provided (used) by financing activities
  
 
570,328
 
  
(11
)
  
(8
)
    


  

  

Increase (decrease) in cash and cash equivalents
  
 
774,231
 
  
(13,174
)
  
98,419
 
Cash and cash equivalents, beginning of year
  
 
183,223
 
  
196,397
 
  
97,978
 
    


  

  

Cash and cash equivalents, end of year
  
$
957,454
 
  
183,223
 
  
196,397
 
    


  

  

CASH PAID FOR
                      
Interest
  
$
857
 
  
—  
 
  
55
 
Taxes
  
 
18,250
 
  
17,733
 
  
19,548
 
NONCASH ITEMS
                      
Commercial loans, net contributed in exchange for common stock, net of deferred income tax asset of $14,573
  
 
3,953,090
 
  
—  
 
  
—  
 
Receive-fixed interest rate swaps contributed in exchange for common stock, net of deferred income tax liability of $191,602
  
$
481,367
 
  
—  
 
  
—  
 
    


  

  

 
See accompanying notes to consolidated financial statements.

F-7


Table of Contents
 
WACHOVIA PREFERRED FUNDING CORP.
AND SUBSIDIARY
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
December 31, 2001, 2000 and 1999
 
NOTE 1:    SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
 
General
 
Wachovia Preferred Funding Corp. (known prior to July 2002 as First Union Real Estate Asset Company of Connecticut) and its subsidiary (the Company), is a subsidiary of Wachovia Bank, National Association, formerly named First Union National Bank (the Parent Company), which is a wholly-owned subsidiary of Wachovia Corporation, formerly named First Union Corporation (Wachovia). The Company and its subsidiary invest in a variety of financial assets derived from lending and lending-related activities.
 
The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States of America. The more significant of these policies used in preparing the consolidated financial statements are described in this summary. Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and to the disclosure of contingent assets and liabilities used to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.
 
Consolidation
 
The consolidated financial statements include the accounts of the Company and its subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.
 
Cash and Cash Equivalents
 
Cash and cash equivalents include cash and due from banks and interest-bearing bank balances. Generally, both cash and cash equivalents have maturities of three months or less, and accordingly, the carrying amount of these instruments is deemed to be a reasonable estimate of fair value.
 
Loans
 
Loans are recorded at the principal balance outstanding, net of unearned income. Interest income is recognized on an accrual basis. Loan origination fees and direct costs as well as unearned premiums and discounts are amortized as an adjustment to the yield over the term of the loan.
 
A loan is considered to be impaired when based on current information, it is probable the Company will not receive all amounts due in accordance with the contractual terms of a loan agreement. Impaired loans are measured based on either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. A loan is also considered impaired if its terms are modified in a troubled debt restructuring.
 
When the ultimate collectibility of the principal balance of an impaired loan is in doubt, all cash receipts are applied to principal. Once the recorded principal balance has been reduced to zero, future cash receipts are applied to interest income, to the extent any interest has been foregone, and then they are recorded as recoveries of any amounts previously charged off.
 
The accrual of interest is generally discontinued on loans, except consumer loans, that become 90 days past due as to principal or interest unless collection of both principal and interest is assured by way of collateralization, guarantees or other security. Generally, loans past due 180 days or more are placed on nonaccrual status regardless of security. Consumer loans that become 120 days past due are generally charged to

F-8


Table of Contents

WACHOVIA PREFERRED FUNDING CORP.
AND SUBSIDIARY
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 

the allowance for loan losses. When borrowers demonstrate over an extended period the ability to repay a loan in accordance with the contractual terms of a loan classified as nonaccrual, the loan is returned to accrual status.
 
On December 3, 2001, the Parent Company contributed commercial loans with a book value of $4.0 billion and a fair value of $3.7 billion to the Company in exchange for the issuance of common stock with a fair value of $3.7 billion and a related increase in paid-in capital of $300 million. The Parent Company and the Company are under common control and therefore the contributed commercial loans were recorded by the Company at their book value of $4.0 billion. The excess of the book value of the loans over the fair market value of the loans was recorded as an increase in paid-in capital.
 
Allowance For Loan Losses
 
The allowance for loan losses is maintained at a level that the Company believes is adequate to absorb probable losses. The Company employs a variety of tools as well as seasoned judgment in assessing the adequacy of the allowance. The Company’s methodology for assessing the adequacy of the allowance establishes both an allocated and an unallocated component. The allocated component of the allowance for commercial loans is based principally on current loan grades and historical loss rates. For consumer loans, it is based on loan payment status and historical loss rates.
 
The unallocated component of the allowance represents the results of analyses that estimate probable losses inherent in the portfolio that are not fully captured in the allocated allowance. These analyses include industry concentrations, model imprecision and the estimated impact of current economic conditions on historical loss rates. The Company continuously monitors trends in loan portfolio qualitative and quantitative factors, including trends in the levels of past due, criticized and nonperforming loans. The trends in these factors are used to evaluate the reasonableness of the unallocated component.
 
The Company believes it has developed appropriate policies and processes in the determination of an allowance for loan losses reflective of the Company’s assessment of credit risk after careful consideration of known relevant facts. In developing this assessment, the Company must necessarily rely on estimates and exercise judgments regarding matters where the ultimate outcome is unknown. Depending on changes in circumstances, future assessments of credit risk may yield materially different results, which may require increases or decreases in the allowance for loan losses at that time.
 
Comprehensive Income
 
The Company has no comprehensive income other than net income.
 
Derivative Financial Instruments
 
The Company accounts for derivative financial instruments in accordance with Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as subsequently amended by SFAS 137 and SFAS 138, which establishes accounting and reporting standards for derivatives and hedging activities. Under SFAS 133, all derivatives (currently consisting of interest rate swaps) are recorded at fair value in the balance sheet. Realized and unrealized gains and losses are included as a gain (loss) on interest rate swaps.
 
On December 4, 2001, the Parent Company contributed receive-fixed interest rate swaps with a notional amount of $4.25 billion and a fair value of $673 million to the Company in exchange for common stock. After the contribution, the Company entered into pay-fixed interest rate swaps with a notional amount of $4.25 billion that serve as an economic hedge of the contributed swaps. All interest rate swaps are transacted with an unaffiliated third party.
 
At December 31, 2001, receive-fixed interest rate swaps with a notional amount of $4.25 billion had a weighted average maturity of 10.24 years, weighted average receive rate of 7.41 percent and weighted average

F-9


Table of Contents

WACHOVIA PREFERRED FUNDING CORP.
AND SUBSIDIARY
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 

pay rate of 1.93 percent. Pay-fixed interest rate swaps with a notional amount of $4.25 billion had a weighted average maturity of 10.24 years, weighted average receive rate of 1.88 percent and weighted average pay rate of 5.69 percent at December 31, 2001. All of the interest rate swaps have variable pay or receive rates based on three- or six-month LIBOR, and they are the pay or receive rates in effect at December 31, 2001.
 
Collateral
 
Amounts recorded as collateral represent cash pledged to the Company by an unaffiliated counterparty to the interest rate swaps. Interest is paid at a market rate and is accounted for on an accrual basis.
 
Income Taxes
 
The Company’s subsidiary, Wachovia Real Estate Investment Corp. (WREIC), is taxed as a real estate investment trust (REIT) and as such files its own separate federal income tax return. The Company calculates its provision for income tax expense (benefit) on a separate return basis, which is in accordance with Wachovia’s policy on the allocation of income taxes. Through the year ended December 31, 2001, the Company filed as part of Wachovia’s consolidated federal income tax return. Current federal income taxes are calculated for each consolidated subsidiary having taxable income and paid to Wachovia. Tax benefits, when applicable, are calculated for each consolidated subsidiary having a taxable loss, and they are remitted by Wachovia to the extent that tax benefits are realized from filing a consolidated federal income tax return. State income tax laws do not generally permit consolidated income tax returns; accordingly, applicable state income tax returns are filed for each of the companies.
 
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
 
For the tax year ending December 31, 2002, the Company will be taxed as a REIT and intends to comply with the relevant provisions of the Internal Revenue Code to be taxed as a REIT. Accordingly, the Company will not be subject to federal income tax to the extent it meets these provisions, including distributing the majority of its earnings to stockholders and as long as certain asset, income and stock ownership tests are met. As a result of the Company’s change in tax status from a taxable corporation to a REIT, the Company’s net deferred tax liability as of December 31, 2001, was written off as a benefit to income tax expense in January 2002. In addition, since the Company will be filing its own separate federal income tax return for the tax year 2002 and forward, it will no longer be part of Wachovia’s federal consolidated income tax return or be subject to the allocation of the tax liability (benefit) of the consolidated group.
 
NOTE 2:    LOANS
 
(In thousands)

  
2001

  
2000

COMMERCIAL
           
Commercial and commercial real estate
  
$
3,990,356
  
—  
CONSUMER
           
Real estate—mortgage
  
 
110,258
  
141,147
Home equity loans
  
 
286,385
  
417,706
    

  
Total loans
  
 
4,386,999
  
558,853
Unearned income
  
 
8,038
  
97
    

  
Total loans, net of unearned income
  
$
4,378,961
  
558,756
    

  

F-10


Table of Contents

WACHOVIA PREFERRED FUNDING CORP.
AND SUBSIDIARY
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 

 
At December 31, 2001 and 2000, nonaccrual loans amounted to $5.0 million and $2.7 million, respectively. In 2001, 2000 and 1999, $141,000, $285,000 and $168,000, respectively, in gross interest income would have been recorded if all nonaccrual and restructured loans had been performing in accordance with their original terms and if they had been outstanding throughout the entire period, or since origination if held for part of the period. Interest collected on these loans and included in interest income in 2001, 2000 and 1999 amounted to $70,000, $68,000 and $100,000, respectively. Nonaccrual loans greater than $1 million are reviewed for impairment. At December 31, 2001 and 2000, all nonaccrual loans were each less than $1 million, and therefore, were not reviewed for impairment. Consequently, there were no impaired loans at December 31, 2001 and 2000.
 
NOTE 3:    ALLOWANCE FOR LOAN LOSSES
 
(In thousands)

  
2001

    
2000

    
1999

 
Balance, beginning of year
  
$
3,833
 
  
1,285
 
  
192
 
Provision for loan losses
  
 
5,262
 
  
3,602
 
  
1,034
 
Allowance related to loans contributed from the Parent Company
  
 
33,681
 
  
—  
 
  
—  
 
Allowance related to loans transferred or sold
  
 
(515
)
  
(673
)
  
—  
 
    


  

  

Subtotal
  
 
42,261
 
  
4,214
 
  
1,226
 
    


  

  

Loan losses
  
 
5,155
 
  
422
 
  
(59
)
Loan recoveries
  
 
52
 
  
41
 
  
—  
 
    


  

  

Loan losses, net
  
 
5,103
 
  
381
 
  
(59
)
    


  

  

Balance, end of year
  
$
37,158
 
  
3,833
 
  
1,285
 
    


  

  

 
NOTE 4:    COMMON STOCK RECAPITALIZATION
 
In July 2002, the par value of the Company’s common stock was changed from $1.00 to $0.01 per share. Each shareholder received 148,148 shares for each share held prior to the recapitalization. As a result of this recapitalization, common stock, paid-in capital, share and per share information for each period presented has been restated.
 
NOTE 5:    INCOME TAX EXPENSE (BENEFIT)
 
The provision for income tax expense (benefit) for each of the years in the three-year period ended December 31, 2001, is presented below.
 
(In thousands)

  
2001

    
2000

    
1999

 
CURRENT INCOME TAX EXPENSE
                      
Federal
  
$
39,042
 
  
19,889
 
  
15,145
 
State
  
 
—  
 
  
319
 
  
—  
 
    


  

  

Total
  
 
39,042
 
  
20,208
 
  
15,145
 
    


  

  

DEFERRED INCOME TAX BENEFIT
                      
Federal
  
 
(51,721
)
  
(799
)
  
(107
)
State
  
 
—  
 
  
—  
 
  
—  
 
    


  

  

Total
  
 
(51,721
)
  
(799
)
  
(107
)
    


  

  

Total
  
$
(12,679
)
  
19,409
 
  
15,038
 
    


  

  

F-11


Table of Contents

WACHOVIA PREFERRED FUNDING CORP.
AND SUBSIDIARY
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 

 
The reconciliation of federal income tax rates and amounts with the effective income tax rates and amounts for each of the years in the three-year period ended December 31, 2001, is presented below.
 
    
2001

    
2000

    
1999

 
(In thousands)

  
Amount

    
Percent of
Pre-tax
Income

    
Amount

  
Percent of
Pre-tax
Income

    
Amount

    
Percent of
Pre-tax
Income

 
Income (loss) before income tax expense (benefit)
  
$
(36,224
)
         
$
51,843
         
$
42,989
 
      
    


         

         


      
Tax at federal income tax rate
  
$
(12,678
)
  
(35.0
)%
  
$
18,145
  
35.0
%
  
$
15,046
 
  
35.0
%
Reasons for differences in federal income tax rate and effective tax rate
                                             
State income taxes, net
  
 
—  
 
  
—  
 
  
 
207
  
0.4
 
  
 
—  
 
  
—  
 
Other
  
 
(1
)
  
—  
 
  
 
1,057
  
2.0
 
  
 
(8
)
  
—  
 
    


  

  

  

  


  

Total
  
$
(12,679
)
  
(35.0
)%
  
$
19,409
  
37.4
%
  
$
15,038
 
  
35.0
%
    


  

  

  

  


  

 
The sources and tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities for each of the years in the three-year period ended December 31, 2001, are presented below.
 
(In thousands)

  
2001

    
2000

  
1999

DEFERRED INCOME TAX ASSETS
                  
Provision for losses, net
  
$
13,005
 
  
1,342
  
366
Deferred loan fees
  
 
2,785
 
  
—  
  
—  
Loans
  
 
1,991
 
  
—  
  
83
    


  
  
Total deferred income tax assets
  
 
17,781
 
  
1,342
  
449
    


  
  
DEFERRED INCOME TAX LIABILITIES
                  
Interest rate swap contracts
  
 
141,799
 
  
—  
  
—  
Other
  
 
94
 
  
146
  
52
    


  
  
Total deferred income tax liabilities
  
 
141,893
 
  
146
  
52
    


  
  
Net deferred income tax (liabilities) assets
  
$
(124,112
)
  
1,196
  
397
    


  
  
 
A portion of the current year change in the net deferred tax liability relates to temporary differences on assets contributed to the Company by the Parent Company in 2001. The net increase to the deferred tax liability as a result of these asset contributions in 2001 is $177 million and has been recorded in the consolidated statements of changes in stockholders' equity as a component of paid-in capital.
 
The realization of net deferred tax assets may be based on utilization of carrybacks to prior taxable periods, anticipation of future taxable income in certain periods and the utilization of tax planning strategies. Management has determined that it is more likely than not that the net deferred tax asset can be supported by carrybacks to federal taxable income in the five-year federal carryback period and by expected future taxable income which will exceed amounts necessary to fully realize remaining deferred tax assets resulting from the scheduling of temporary differences.

F-12


Table of Contents

WACHOVIA PREFERRED FUNDING CORP.
AND SUBSIDIARY
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 

 
For the tax year ending December 31, 2002, the Company will be taxed as a REIT and intends to comply with the relevant provisions of the Internal Revenue Code to be taxed as a REIT. Accordingly, the Company will not be subject to federal income tax to the extent it meets these provisions, including distributing the majority of its earnings to stockholders and as long as certain asset, income and stock ownership tests are met. As a result of the Company’s change in tax status from a taxable corporation to a REIT, the Company’s net deferred tax liability as of December 31, 2001, was written off as a benefit to income tax expense in January 2002. In addition, since the Company will be filing its own separate federal income tax return for the tax year 2002 and forward, it will no longer be part of Wachovia’s federal consolidated income tax return or be subject to the allocation of the tax liability (benefit) of the consolidated group.
 
The Internal Revenue Service (the IRS) is currently examining First Union Corporation’s federal income tax returns for the years 1997 through 1999. In addition, in November 2001, the IRS issued reports related to the examination of First Union Corporation’s 1994 through 1996 federal income tax returns. Although the amount of any ultimate liability with respect to such examinations cannot be determined, in the opinion of management, any such liability will not have a material impact on the Company’s financial position or results of operations. In 1999, the IRS examination of First Union Corporation’s federal income tax returns for the years 1991 through 1993 was settled with no significant impact on the Company’s financial position or results of operations.
 
NOTE 6:    TRANSACTIONS WITH AFFILIATED PARTIES
 
The Company, as a subsidiary, is subject to certain income and expense allocations from affiliated parties for various services received. In addition, the Company enters into transactions with affiliated parties in the normal course of business. The principal items related to transactions with affiliated parties included in the accompanying consolidated balance sheets and consolidated statements of operations are described below. Due to the nature of common ownership of the Company and the affiliated parties by Wachovia, the following transactions could differ from those conducted with unaffiliated parties.
 
Loan servicing costs paid to affiliates were $383,000 in 2001, $1.2 million in 2000 and $1.8 million in 1999. The Company is subject to Wachovia’s management fee policy and therefore reimburses Wachovia for general overhead expenses paid on behalf of the Company by Wachovia. These overhead expenses include general accounting, tax accounting, legal, and balance sheet management services, along with officer salaries. Affiliates with greater than $10 million in assets and $2 million in estimated annualized expenses are assessed a management fee; if an affiliate does not meet both of these criteria, no management fee is allocated. If an affiliate qualifies for an allocation, the affiliate is assessed management fees based on its relative percentage of total consolidated assets and non-interest expense. We believe this allocation method represents a reasonable basis for allocating general overhead expenses. These expenses amounted to $824,000 in 2000 and $1.1 million in 1999. The Company did not meet the criteria for being assessed a management fee in 2001, and therefore no fee was charged.
 
At December 31, 2001 and 2000, noninterest-bearing cash deposits due from the Parent Company included in cash and cash equivalents were $161.4 million and $20.4 million, respectively. The Company also has interest-bearing cash deposits with the Parent Company. These cash deposits are the primary cash management vehicle of the Company. Excess funds are placed with the Parent Company; shortages of funds are borrowed from the Parent Company. Such cash deposits due from the Parent Company were $570 million (see collateral related to the interest rate swaps discussed below) at December 31, 2001, and $24.0 million at December 31, 2000. The related interest receivable was $857,000 at December 31, 2001. The related interest income for 2001, 2000 and 1999 was $4.1 million, $2.9 million and $1.1 million, respectively.
 
At December 31, 2001 and 2000, eurodollar investments due from an affiliate of the Parent Company included in cash and cash equivalents were $226 million and $139 million, respectively, and the related interest receivable was $11,000 and $76,000, respectively. Interest income earned on eurodollar investments included in interest income was $6.8 million in 2001, $14.1 million in 2000 and $7.9 million in 1999.

F-13


Table of Contents

WACHOVIA PREFERRED FUNDING CORP.
AND SUBSIDIARY
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 

In addition to the funding provided by the deposits as noted above, intercompany payables and receivables are often used to record intercompany transactions in which cash cannot be settled on the same business day. These intercompany transactions are settled for cash within 30 days and no interest is charged due to the short-lived nature of the transaction. At December 31, 2001 and 2000, the Company had a net accounts payable due to affiliates of $9.4 million and $176,000, respectively. The average balance of amounts outstanding was a net receivable of $324,000 in 2001 and a net payable of $336,000 in 2000.
 
In 2001, the Company had loan participations with affiliates. The Company is allocated a portion of all income associated with these loans. The participations consist of commercial and consumer loans. Net loan participations were $4.0 billion at December 31, 2001, and the related interest receivable was $9.4 million. Interest income on loan participations was $12.5 million in 2001.
 
The Company has a swap servicing and fee agreement with the Parent Company, dated December 4, 2001, whereby the Parent Company provides operational, back office, book entry, record keeping and valuation services related to the Company’s interest rate swaps. In consideration of these services, the Company pays the Parent Company 0.015 percent multiplied by the net amount actually paid under the interest rate swaps on the swaps’ payment date. Amounts paid under this agreement were less than $1,000 in 2001, and were included in interest expense.
 
The Parent Company acts as collateral custodian for the Company in connection with collateral pledged to the Company related to the interest rate swaps. For this service, the Company pays the Parent Company a fee equal to the sum of 0.05 percent multiplied by the fair market value of noncash collateral and 0.05 percent multiplied by the amount of cash collateral. Amounts paid under this agreement were $21,000 in 2001. In addition, the Parent Company is permitted to rehypothecate and use as its own the collateral held by the Parent Company as custodian for the Company. The Parent Company pays the Company a fee equal to the sum of 0.05 percent multiplied by the fair market value of the noncash collateral the Parent Company holds as custodian and the amount of cash collateral held multiplied by a market rate of interest. The collateral agreement with the counterparty allows the Company to repledge the collateral free of any right of redemption or other right of the counterparty in such collateral without any obligation on the Company’s part to maintain possession or control of equivalent collateral. Pursuant to the rehypothecation agreement, the Company has deposited cash collateral of $570 million with the Parent Company. Amounts paid under this agreement were $857,000 in 2001, and were included in interest income.
 
The Parent Company also provides a guaranty of the Company’s obligations under the interest rate swaps. In consideration, the Company pays the Parent Company a monthly fee in arrears equal to 0.03 percent multiplied by the absolute value of the net notional amount of the interest rate swaps. Amounts paid under this agreement were $975,000 in 2001, and were included in other noninterest expense.
 
NOTE 7:    COMMITMENTS AND OTHER MATTERS
 
The Company’s commercial loan portfolio includes unfunded loan commitments and standby and commercial letters of credit that are provided in the normal course of business. For commercial customers, loan commitments generally take the form of revolving credit arrangements to finance customers’ working capital requirements. These instruments are not recorded on the balance sheet until funds are advanced under the commitment. For lending commitments, the contractual amount of a commitment represents the maximum potential credit risk if the entire commitment is funded and the borrower does not perform according to the terms

F-14


Table of Contents

WACHOVIA PREFERRED FUNDING CORP.
AND SUBSIDIARY
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 

of the contract. A large majority of these commitments expire without being funded, and accordingly, total contractual amounts are not representative of actual future credit exposure or liquidity requirements.
 
Loan commitments and letters of credit create credit risk in the event that the counterparty draws on the commitment and subsequently fails to perform under the terms of the lending agreement. This risk is incorporated into an overall evaluation of credit risk, and to the extent necessary, reserves are recorded on these commitments. Uncertainties around the timing and amount of funding under these commitments may create liquidity risk.
The estimated fair value of commitments to extend credit at December 31, 2001, was $1.4 million. The contract or notional amount of commitments to extend credit at December 31, 2001, was $1.2 billion. The estimated fair value of standby and commercial letters of credit at December 31, 2001, was less than $1,000. The contract or notional amount of standby and commercial letters of credit at December 31, 2001, was $39 million. The fair value of commitments to extend credit and letters of credit is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the current creditworthiness of the counterparties.
 
The Company and its subsidiary are not the subject of any litigation. The Company (including its subsidiary), Wachovia and the Parent Company are not currently involved in nor, to their knowledge, currently threatened with, any material litigation with respect to the assets included in the Company’s portfolio, other than routine litigation arising in the ordinary course of business.
 
NOTE 8:    CARRYING AMOUNTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
 
Information about the fair value of on-balance sheet financial instruments at December 31, 2001 and 2000, is presented below.
 
    
2001

  
2000

(In thousands)

  
Carrying
Amount

  
Estimated
Fair Value

  
Carrying
Amount

  
Estimated
Fair Value

FINANCIAL ASSETS
                     
Cash and cash equivalents
  
$
957,454
  
957,454
  
183,223
  
183,223
Loans, net of unearned income and allowance for loan losses
  
 
4,341,803
  
4,037,965
  
554,923
  
556,311
Interest rate swaps
  
 
573,620
  
573,620
  
—  
  
—  
Other assets
  
$
16,789
  
16,789
  
7,454
  
7,454
    

  
  
  
FINANCIAL LIABILITIES
                     
Collateral held on interest rate swaps
  
 
570,340
  
570,340
  
—  
  
—  
Accounts payable—affiliates and other liabilities
  
$
17,010
  
17,010
  
283
  
283
    

  
  
  
 
The fair values of loans are calculated by discounting estimated cash flows through expected maturity dates using estimated market yields that reflect the credit and interest rate risks inherent in each category of loans and prepayment assumptions. Estimated fair values for the commercial loan portfolio were based on weighted average discount rates ranging from 3.60 percent to 7.65 percent and 6.97 percent to 8.54 percent at December 31, 2001 and 2000, respectively, and for the consumer portfolio from 5.39 percent to 10.40 percent and 7.00 percent to 9.67 percent, respectively.

F-15


Table of Contents
 
WACHOVIA PREFERRED FUNDING CORP.
AND SUBSIDIARY
 
Consolidated Financial Statements
 
As of and For the Nine Months Ended September 30, 2002 and 2001
(Unaudited)

F-16


Table of Contents
 
WACHOVIA PREFERRED FUNDING CORP.
AND SUBSIDIARY
 
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
September 30, 2002 and 2001
 
(In thousands, except share data)

  
2002

    
2001

 
ASSETS
               
Cash and cash equivalents
  
$
1,169,380
 
  
327,057
 
Loans, net of unearned income
  
 
4,297,280
 
  
440,040
 
Allowance for loan losses
  
 
(37,335
)
  
(5,655
)
    


  

Loans, net
  
 
4,259,945
 
  
434,385
 
    


  

Deferred income tax assets
  
 
—  
 
  
1,847
 
Interest rate swaps
  
 
605,438
 
  
—  
 
Accounts receivable—affiliates
  
 
22,274
 
  
93
 
Other assets
  
 
14,049
 
  
11,657
 
    


  

Total assets
  
$
6,071,086
 
  
775,039
 
    


  

LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Liabilities
               
Collateral held on interest rate swaps
  
 
599,570
 
  
—  
 
Current income taxes payable
  
 
—  
 
  
4,993
 
Other liabilities
  
 
7,368
 
  
89
 
    


  

Total liabilities
  
 
606,938
 
  
5,082
 
    


  

Stockholders’ equity
               
Preferred Stock
               
Series A preferred securities, $0.01 par value, $25.00 liquidation preference, non-cumulative and conditionally exchangeable, 30,000,000 shares authorized, none issued
  
 
—  
 
  
—  
 
Series B preferred securities, $0.01 par value, $25.00 liquidation preference, non-cumulative and conditionally exchangeable, 40,000,000 shares authorized, none issued
  
 
—  
 
  
—  
 
Series C preferred securities, $0.01 par value, $1,000 liquidation preference, cumulative, 5,000,000 shares authorized, none issued
  
 
—  
 
  
—  
 
Series D preferred securities, $0.01 par value, $1,000 liquidation preference, non-cumulative, 913 shares authorized, issued and outstanding in 2002, none issued in 2001
  
 
—  
 
  
—  
 
Common stock, $0.01 par value, 100,000,000 shares authorized, 99,999,900 shares issued and outstanding in 2002 and 14,814,800 shares in 2001
  
 
1,000
 
  
148
 
Paid-in capital
  
 
5,086,474
 
  
652,069
 
Retained earnings
  
 
376,674
 
  
117,740
 
    


  

Total stockholders’ equity
  
 
5,464,148
 
  
769,957
 
    


  

Total liabilities and stockholders’ equity
  
$
6,071,086
 
  
775,039
 
    


  

 
See accompanying notes to consolidated financial statements.

F-17


Table of Contents
 
WACHOVIA PREFERRED FUNDING CORP.
AND SUBSIDIARY
 
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
Nine Months Ended September 30, 2002 and 2001
 
(In thousands, except per share data and average shares)

  
2002

    
2001

INTEREST INCOME
  
$
135,385
 
  
43,374
INTEREST EXPENSE
  
 
8,287
 
  
—  
    


  
Net interest income
  
 
127,098
 
  
43,374
Provision for loan losses
  
 
7,033
 
  
6,290
    


  
Net interest income after provision for loan losses
  
 
120,065
 
  
37,084
    


  
OTHER INCOME
             
Gain on interest rate swaps
  
 
68,352
 
  
—  
Other income
  
 
4
 
  
—  
    


  
Total other income
  
 
68,356
 
  
—  
    


  
NONINTEREST EXPENSE
             
Loan servicing costs
  
 
1,082
 
  
431
Management fees
  
 
4,371
 
  
—  
Other
  
 
1,144
 
  
582
    


  
Total noninterest expense
  
 
6,597
 
  
1,013
    


  
Income before income tax expense (benefit)
  
 
181,824
 
  
36,071
Income tax expense (benefit)
  
 
(124,112
)
  
12,625
    


  
Net income
  
$
305,936
 
  
23,446
    


  
PER COMMON SHARE DATA
             
Basic earnings
  
$
3.06
 
  
1.58
Diluted earnings
  
$
3.06
 
  
1.58
AVERAGE SHARES
             
Basic
  
 
99,999,900
 
  
14,814,800
Diluted
  
 
99,999,900
 
  
14,814,800
    


  
 
See accompanying notes to consolidated financial statements.

F-18


Table of Contents
 
WACHOVIA PREFERRED FUNDING CORP.
AND SUBSIDIARY
 
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
 
Nine Months Ended September 30, 2002 and 2001
 
    
Preferred Stock

  
Common Stock

  
Paid-in
Capital

  
Retained
Earnings

        
(In thousands)

              
Total

 
Balance, December 31, 2001
  
$
—  
  
1,000
  
5,085,674
  
70,746
 
  
5,157,420
 
Net income
  
 
—  
  
—  
  
—  
  
305,936
 
  
305,936
 
Issuance of Series D preferred securities
  
 
—  
  
—  
  
800
  
—  
 
  
800
 
Cash dividends paid
  
 
—  
  
—  
  
—  
  
(8
)
  
(8
)
    

  
  
  

  

Balance, September 30, 2002
  
$
—  
  
1,000
  
5,086,474
  
376,674
 
  
5,464,148
 
    

  
  
  

  

         
Common
Stock

  
Paid-in
Capital

  
Retained
Earnings

        
(In thousands)

              
Total

 
Balance, December 31, 2000
  
$
—  
  
148
  
652,069
  
94,303
 
  
746,520
 
Net income
  
 
—  
  
—  
  
—  
  
23,446
 
  
23,446
 
Cash dividends paid
  
 
—  
  
—  
  
—  
  
(9
)
  
(9
)
    

  
  
  

  

Balance, September 30, 2001
  
$
—  
  
148
  
652,069
  
117,740
 
  
769,957
 
    

  
  
  

  

 
See accompanying notes to consolidated financial statements.

F-19


Table of Contents
WACHOVIA PREFERRED FUNDING CORP.
AND SUBSIDIARY
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine Months Ended September 30, 2002 and 2001
 
(In thousands)

  
2002

    
2001

 
OPERATING ACTIVITIES
               
Net income
  
$
305,936
 
  
23,446
 
Adjustments to reconcile net income to net cash provided (used) by operating activities
               
Provision for loan losses
  
 
7,033
 
  
6,290
 
Current income taxes, net
  
 
(20,784
)
  
5,000
 
Deferred income taxes, net
  
 
(124,112
)
  
(651
)
Interest rate swaps, net
  
 
(31,818
)
  
—  
 
Accounts receivable—affiliates and other assets, net
  
 
(19,534
)
  
(4,296
)
Accounts payable—affiliates and other liabilities, net
  
 
(9,642
)
  
(194
)
    


  

Net cash provided by operating activities
  
 
107,079
 
  
29,595
 
    


  

INVESTING ACTIVITIES
               
Decrease in loans, net
  
 
74,825
 
  
114,248
 
    


  

Net cash provided by investing activities
  
 
74,825
 
  
114,248
 
    


  

FINANCING ACTIVITIES
               
Increase (decrease) in cash realized from
               
Collateral held on interest rate swaps
  
 
29,230
 
  
—  
 
Issuance of preferred stock
  
 
800
 
  
—  
 
Cash dividends paid
  
 
(8
)
  
(9
)
    


  

Net cash used by financing activities
  
 
30,022
 
  
(9
)
    


  

Increase in cash and cash equivalents
  
 
211,926
 
  
143,834
 
Cash and cash equivalents, beginning of period
  
 
957,454
 
  
183,223
 
    


  

Cash and cash equivalents, end of period
  
$
1,169,380
 
  
327,057
 
    


  

 
See accompanying notes to consolidated financial statements.

F-20


Table of Contents
 
WACHOVIA PREFERRED FUNDING CORP.
AND SUBSIDIARY
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
September 30, 2002 and 2001
 
NOTE 1:    FINANCIAL STATEMENTS
 
Wachovia Preferred Funding Corp. (known prior to July 2002 as First Union Real Estate Asset Company of Connecticut) is a subsidiary of Wachovia Bank, National Association, formerly named First Union National Bank and its subsidiaries, which is a wholly-owned subsidiary of Wachovia Corporation.
 
The unaudited consolidated financial statements of Wachovia Preferred Funding Corp. include, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for fair presentation of such financial statements for the periods indicated in accordance with accounting principles generally accepted in the United States of America.
 
NOTE 2:    INCOME TAX EXPENSE (BENEFIT)
 
For the tax year ending December 31, 2002, the Company will be taxed as a REIT and intends to comply with the relevant provisions of the Internal Revenue Code to be taxed as a REIT. Accordingly, with the exception of the income of its newly-formed taxable REIT subsidiary, Wachovia Preferred Realty, LLC (“WPR”), the Company will not be subject to Federal income tax on net income currently distributed to stockholders to the extent it meets these provisions, including distributing the majority of its earnings to stockholders and satisfying certain asset, income and stock ownership tests. As a result of the Company’s change in tax status from a taxable corporation to a REIT, the Company’s net deferred tax liability as of December 31, 2001, was written off as a benefit to income tax expense in January 2002. Due to the establishment of WPR in October 2002, a deferred tax expense will be recorded to establish the initial deferred tax liability on the book versus tax basis differences of the assets contributed to the subsidiary. In addition, the Company will incur Federal income tax to the extent of the earnings of WPR. Since the Company will be filing its own separate Federal income tax return for the year 2002 and forward, it will no longer be part of Wachovia’s Federal consolidated income tax return or be subject to the allocation of the tax liability (benefit) of the consolidated group.
 
NOTE 3:    PREFERRED SECURITIES AND COMMON STOCK RECAPITALIZATION
 
In 2002, the Company issued 913 shares of Series D preferred securities, $0.01 par value and $1,000 liquidation preference per security, to the Bank and 113 employees of Wachovia or its affiliates for cash.
At the same time, the par value of the Company’s common stock was changed from $1.00 to $0.01 per share. Each shareholder received 148,148 shares for each share held prior to the recapitalization. As a result of this recapitalization, common stock and paid-in capital for each period presented, has been restated to reflect this change.

F-21


Table of Contents
 
WACHOVIA CORPORATION AND SUBSIDIARIES
 
Supplementary Consolidating Financial Information
 
As of and For the Nine Months Ended September 30, 2002 and 2001 and
the Years Ended December 31, 2001 and 2000
(Unaudited)

F-22


Table of Contents
 
INDEPENDENT AUDITORS’ REPORT ON SUPPLEMENTARY
CONSOLIDATING FINANCIAL INFORMATION
 
The Board of Directors
Wachovia Corporation
 
We have audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated financial statements of Wachovia Corporation and subsidiaries as of December 31, 2001 and 2000, and for each of the years in the three-year period ended December 31, 2001, and have issued our report thereon dated January 23, 2002. Our unqualified audit report on the consolidated financial statements of Wachovia Corporation and subsidiaries dated January 23, 2002, refers to the fact that effective July 1, 2001, Wachovia Corporation adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations and certain provisions of SFAS No. 142, Goodwill and Other Intangible Assets as required for goodwill and intangible assets resulting from business combinations consummated after June 30, 2001.
 
Our audits were made for the purpose of forming an opinion on the consolidated financial statements of Wachovia Corporation and subsidiaries taken as a whole. The accompanying supplementary consolidating financial information as of and for the years ended December 31, 2001 and 2000, is presented for purposes of additional analysis of the consolidated financial statements rather than to present the financial position, results of operations and cash flows of the individual companies. The supplementary consolidating financial information has been subjected to the auditing procedures applied in the audits of the consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the consolidated financial statements taken as a whole.
 
/s/  KPMG LLP
Charlotte, North Carolina
January 23, 2002

F-23


Table of Contents
 
WACHOVIA CORPORATION AND SUBSIDIARIES
 
Supplementary Consolidating Balance Sheet
(Unaudited)
 
    
September 30, 2002

 
(In millions)

  
The Bank

    
Other Subsidiaries and Eliminations

    
Wachovia Consolidated

 
ASSETS
                      
Cash and due from banks
  
$
13,236
 
  
(1,306
)
  
11,930
 
Interest-bearing bank balances
  
 
688
 
  
2,873
 
  
3,561
 
Federal funds sold and securities purchased under resale agreements
  
 
3,858
 
  
3,274
 
  
7,132
 
    


  

  

Total cash and cash equivalents
  
 
17,782
 
  
4,841
 
  
22,623
 
Trading account assets
  
 
26,499
 
  
9,403
 
  
35,902
 
Securities
  
 
68,147
 
  
3,924
 
  
72,071
 
Loans, net of unearned income
  
 
163,767
 
  
(6,225
)
  
157,542
 
Allowance for loan losses
  
 
(2,823
)
  
(24
)
  
(2,847
)
    


  

  

Loans, net
  
 
160,944
 
  
(6,249
)
  
154,695
 
Premises and equipment
  
 
3,186
 
  
2,236
 
  
5,422
 
Due from customers on acceptances
  
 
1,080
 
  
—  
 
  
1,080
 
Goodwill
  
 
9,421
 
  
1,389
 
  
10,810
 
Intangible assets
  
 
1,869
 
  
(194
)
  
1,675
 
Other assets
  
 
23,008
 
  
6,594
 
  
29,602
 
    


  

  

Total assets
  
$
311,936
 
  
21,944
 
  
333,880
 
    


  

  

LIABILITIES AND STOCKHOLDERS' EQUITY
                      
Deposits
                      
Noninterest-bearing deposits
  
 
32,759
 
  
11,427
 
  
44,186
 
Interest-bearing deposits
  
 
162,602
 
  
(19,003
)
  
143,599
 
    


  

  

Total deposits
  
 
195,361
 
  
(7,576
)
  
187,785
 
Short-term borrowings
  
 
28,578
 
  
12,568
 
  
41,146
 
Bank acceptances outstanding
  
 
1,093
 
  
—  
 
  
1,093
 
Trading account liabilities
  
 
19,670
 
  
(1,910
)
  
17,760
 
Other liabilities
  
 
13,830
 
  
403
 
  
14,233
 
Long-term debt
  
 
21,865
 
  
17,893
 
  
39,758
 
    


  

  

Total liabilities
  
 
280,397
 
  
21,378
 
  
301,775
 
    


  

  

STOCKHOLDERS' EQUITY
                      
Preferred stock
  
 
—  
 
  
2
 
  
2
 
Common stock
  
 
455
 
  
4,122
 
  
4,577
 
Paid-in capital
  
 
24,930
 
  
(6,697
)
  
18,233
 
Retained earnings
  
 
4,071
 
  
3,150
 
  
7,221
 
Accumulated other comprehensive income, net
  
 
2,083
 
  
(11
)
  
2,072
 
    


  

  

Total stockholders' equity
  
 
31,539
 
  
566
 
  
32,105
 
    


  

  

Total liabilities and stockholders' equity
  
$
311,936
 
  
21,944
 
  
333,880
 
    


  

  

F-24


Table of Contents
 
WACHOVIA CORPORATION AND SUBSIDIARIES
 
Supplementary Consolidating Balance Sheet
 
    
December 31, 2001

 
(In millions)

  
FUNB(a)

    
WBNA(a)

    
Combined

    
Other
Subsidiaries
and
Eliminations

    
Wachovia
Consolidated

 
ASSETS
                                    
Cash and due from banks
  
$
10,660
 
  
3,765
 
  
14,425
 
  
(508
)
  
13,917
 
Interest-bearing bank balances
  
 
6,638
 
  
651
 
  
7,289
 
  
(414
)
  
6,875
 
Federal funds sold and securities purchased
under resale agreements
  
 
5,188
 
  
167
 
  
5,355
 
  
8,564
 
  
13,919
 
    


  

  

  

  

Total cash and cash equivalents
  
 
22,486
 
  
4,583
 
  
27,069
 
  
7,642
 
  
34,711
 
Trading account assets
  
 
19,071
 
  
722
 
  
19,793
 
  
5,593
 
  
25,386
 
Securities
  
 
47,596
 
  
7,419
 
  
55,015
 
  
3,452
 
  
58,467
 
Loans, net of unearned income
  
 
123,754
 
  
46,997
 
  
170,751
 
  
(6,950
)
  
163,801
 
Allowance for loan losses
  
 
(2,222
)
  
(756
)
  
(2,978
)
  
(17
)
  
(2,995
)
    


  

  

  

  

Loans, net
  
 
121,532
 
  
46,241
 
  
167,773
 
  
(6,967
)
  
160,806
 
Premises and equipment
  
 
2,628
 
  
921
 
  
3,549
 
  
2,170
 
  
5,719
 
Due from customers on acceptances
  
 
732
 
  
13
 
  
745
 
  
—  
 
  
745
 
Goodwill
  
 
2,253
 
  
6,973
 
  
9,226
 
  
1,390
 
  
10,616
 
Intangible assets
  
 
336
 
  
2,018
 
  
2,354
 
  
(198
)
  
2,156
 
Other assets
  
 
16,151
 
  
2,665
 
  
18,816
 
  
13,030
 
  
31,846
 
    


  

  

  

  

Total assets
  
$
232,785
 
  
71,555
 
  
304,340
 
  
26,112
 
  
330,452
 
    


  

  

  

  

LIABILITIES AND STOCKHOLDERS' EQUITY
                                    
Deposits
                                    
Noninterest-bearing deposits
  
 
24,578
 
  
9,947
 
  
34,525
 
  
8,939
 
  
43,464
 
Interest-bearing deposits
  
 
123,171
 
  
36,364
 
  
159,535
 
  
(15,546
)
  
143,989
 
    


  

  

  

  

Total deposits
  
 
147,749
 
  
46,311
 
  
194,060
 
  
(6,607
)
  
187,453
 
Short-term borrowings
  
 
27,762
 
  
3,812
 
  
31,574
 
  
12,811
 
  
44,385
 
Bank acceptances outstanding
  
 
749
 
  
13
 
  
762
 
  
—  
 
  
762
 
Trading account liabilities
  
 
15,559
 
  
634
 
  
16,193
 
  
(4,756
)
  
11,437
 
Other liabilities
  
 
10,172
 
  
1,453
 
  
11,625
 
  
4,602
 
  
16,227
 
Long-term debt
  
 
14,661
 
  
5,661
 
  
20,322
 
  
21,411
 
  
41,733
 
    


  

  

  

  

Total liabilities
  
 
216,652
 
  
57,884
 
  
274,536
 
  
27,461
 
  
301,997
 
    


  

  

  

  

STOCKHOLDERS' EQUITY
                                    
Preferred stock
  
 
161
 
  
—  
 
  
161
 
  
(144
)
  
17
 
Common stock
  
 
455
 
  
53
 
  
508
 
  
4,031
 
  
4,539
 
Paid-in capital
  
 
13,302
 
  
13,345
 
  
26,647
 
  
(8,736
)
  
17,911
 
Retained earnings
  
 
1,847
 
  
210
 
  
2,057
 
  
3,494
 
  
5,551
 
Accumulated other comprehensive income, net
  
 
368
 
  
63
 
  
431
 
  
6
 
  
437
 
    


  

  

  

  

Total stockholders' equity
  
 
16,133
 
  
13,671
 
  
29,804
 
  
(1,349
)
  
28,455
 
    


  

  

  

  

Total liabilities and stockholders' equity
  
$
232,785
 
  
71,555
 
  
304,340
 
  
26,112
 
  
330,452
 
    


  

  

  

  


(a)
 
"FUNB" refers to First Union National Bank, "WBNA" refers to the former Wachovia Bank, National Association.
 
See accompanying Independent Auditors’ Report on Supplementary Consolidating Financial Information.

F-25


Table of Contents
 
WACHOVIA CORPORATION AND SUBSIDIARIES
 
Supplementary Consolidating Balance Sheet
 
    
December 31, 2000

 
(In millions)

  
FUNB(a)

    
Other Subsidiaries and Eliminations

    
Wachovia Consolidated

 
ASSETS
                      
Cash and due from banks
  
$
10,052
 
  
(146
)
  
9,906
 
Interest-bearing bank balances
  
 
3,207
 
  
32
 
  
3,239
 
Federal funds sold and securities purchased
under resale agreements
  
 
6,010
 
  
5,230
 
  
11,240
 
    


  

  

Total cash and cash equivalents
  
 
19,269
 
  
5,116
 
  
24,385
 
Trading account assets
  
 
16,578
 
  
5,052
 
  
21,630
 
Securities
  
 
47,713
 
  
1,533
 
  
49,246
 
Loans, net of unearned income
  
 
131,252
 
  
(7,492
)
  
123,760
 
Allowance for loan losses
  
 
(1,706
)
  
(16
)
  
(1,722
)
    


  

  

Loans, net
  
 
129,546
 
  
(7,508
)
  
122,038
 
Premises and equipment
  
 
2,849
 
  
2,175
 
  
5,024
 
Due from customers on acceptances
  
 
873
 
  
1
 
  
874
 
Goodwill
  
 
2,414
 
  
1,067
 
  
3,481
 
Intangible assets
  
 
377
 
  
(194
)
  
183
 
Other assets
  
 
12,218
 
  
15,091
 
  
27,309
 
    


  

  

Total assets
  
$
231,837
 
  
22,333
 
  
254,170
 
    


  

  

LIABILITIES AND STOCKHOLDERS' EQUITY
                      
Deposits
                      
Noninterest-bearing deposits
  
 
21,074
 
  
9,241
 
  
30,315
 
Interest-bearing deposits
  
 
125,892
 
  
(13,539
)
  
112,353
 
    


  

  

Total deposits
  
 
146,966
 
  
(4,298
)
  
142,668
 
Short-term borrowings
  
 
36,990
 
  
2,456
 
  
39,446
 
Bank acceptances outstanding
  
 
879
 
  
1
 
  
880
 
Trading account liabilities
  
 
9,919
 
  
(2,444
)
  
7,475
 
Other liabilities
  
 
8,310
 
  
4,235
 
  
12,545
 
Long-term debt
  
 
13,569
 
  
22,240
 
  
35,809
 
    


  

  

Total liabilities
  
 
216,633
 
  
22,190
 
  
238,823
 
    


  

  

STOCKHOLDERS' EQUITY
                      
Preferred stock
  
 
161
 
  
(161
)
  
—  
 
Common stock
  
 
455
 
  
2,812
 
  
3,267
 
Paid-in capital
  
 
13,306
 
  
(7,034
)
  
6,272
 
Retained earnings
  
 
1,467
 
  
4,554
 
  
6,021
 
Accumulated other comprehensive income, net
  
 
(185
)
  
(28
)
  
(213
)
    


  

  

Total stockholders' equity
  
 
15,204
 
  
143
 
  
15,347
 
    


  

  

Total liabilities and stockholders' equity
  
$
231,837
 
  
22,333
 
  
254,170
 
    


  

  


(a)
 
"FUNB" refers to First Union National Bank.
 
See accompanying Independent Auditors’ Report on Supplementary Consolidating Financial Information.

F-26


Table of Contents
 
WACHOVIA CORPORATION AND SUBSIDIARIES
 
Supplementary Consolidating Statement of Income
(Unaudited)
 
    
Nine Months Ended September 30, 2002

 
(In millions)

  
The Bank

      
Other Subsidiaries and Eliminations

    
Wachovia Consolidated

 
INTEREST INCOME
                        
Interest and fees on loans
  
$
7,966
 
    
(208
)
  
7,758
 
Interest and dividends on securities
  
 
2,579
 
    
118
 
  
2,697
 
Trading account interest
  
 
293
 
    
214
 
  
507
 
Other interest income
  
 
191
 
    
556
 
  
747
 
    


    

  

Total interest income
  
 
11,029
 
    
680
 
  
11,709
 
    


    

  

INTEREST EXPENSE
                        
Interest on deposits
  
 
2,648
 
    
(50
)
  
2,598
 
Interest on borrowings
  
 
1,184
 
    
574
 
  
1,758
 
    


    

  

Total interest expense
  
 
3,832
 
    
524
 
  
4,356
 
    


    

  

Net interest income
  
 
7,197
 
    
156
 
  
7,353
 
Provision for loan losses
  
 
1,137
 
    
34
 
  
1,171
 
    


    

  

Net interest income after provision for loan losses
  
 
6,060
 
    
122
 
  
6,182
 
    


    

  

FEE AND OTHER INCOME
                        
Service charges and fees
  
 
1,498
 
    
488
 
  
1,986
 
Commissions
  
 
586
 
    
817
 
  
1,403
 
Fiduciary and asset management fees
  
 
497
 
    
873
 
  
1,370
 
Principal investing
  
 
(130
)
    
(31
)
  
(161
)
Other income
  
 
2,011
 
    
(582
)
  
1,429
 
    


    

  

Total fee and other income
  
 
4,462
 
    
1,565
 
  
6,027
 
    


    

  

NONINTEREST EXPENSE
                        
Salaries and employee benefits
  
 
3,104
 
    
1,812
 
  
4,916
 
Occupancy and equipment
  
 
999
 
    
276
 
  
1,275
 
Goodwill and other intangible amortization
  
 
477
 
    
4
 
  
481
 
Sundry expense
  
 
2,483
 
    
(515
)
  
1,968
 
    


    

  

Total noninterest expense
  
 
7,063
 
    
1,577
 
  
8,640
 
    


    

  

Income before income taxes
  
 
3,459
 
    
110
 
  
3,569
 
Income taxes
  
 
816
 
    
69
 
  
885
 
    


    

  

Net income
  
 
2,643
 
    
41
 
  
2,684
 
Dividends on preferred stock
  
 
—  
 
    
15
 
  
15
 
    


    

  

Net income available to common stockholders
  
$
2,643
 
    
26
 
  
2,669
 
    


    

  

F-27


Table of Contents
 
WACHOVIA CORPORATION AND SUBSIDIARIES
 
Supplementary Consolidating Statement of Income
(Unaudited)
 
    
Nine Months Ended September 30, 2001

 
(In millions)

  
 

FUNB(a)

 

  
WBNA(a)

 

  
Combined

 

  
Other Subsidiaries and Eliminations

    

  
Wachovia Consolidated

  

INTEREST INCOME
                                    
Interest and fees on loans
  
$
7,602
 
  
3,112
 
  
10,714
 
  
(3,147
)
  
7,567
 
Interest and dividends on securities
  
 
2,501
 
  
370
 
  
2,871
 
  
(213
)
  
2,658
 
Trading account interest
  
 
415
 
  
3
 
  
418
 
  
176
 
  
594
 
Other interest income
  
 
252
 
  
32
 
  
284
 
  
686
 
  
970
 
    


  

  

  

  

Total interest income
  
 
10,770
 
  
3,517
 
  
14,287
 
  
(2,498
)
  
11,789
 
    


  

  

  

  

INTEREST EXPENSE
                                    
Interest on deposits
  
 
3,665
 
  
1,156
 
  
4,821
 
  
(1,193
)
  
3,628
 
Interest on borrowings
  
 
2,019
 
  
528
 
  
2,547
 
  
271
 
  
2,818
 
    


  

  

  

  

Total interest expense
  
 
5,684
 
  
1,684
 
  
7,368
 
  
(922
)
  
6,446
 
    


  

  

  

  

Net interest income
  
 
5,086
 
  
1,833
 
  
6,919
 
  
(1,576
)
  
5,343
 
Provision for loan losses
  
 
1,395
 
  
629
 
  
2,024
 
  
(458
)
  
1,566
 
    


  

  

  

  

Net interest income after provision for
loan losses
  
 
3,691
 
  
1,204
 
  
4,895
 
  
(1,118
)
  
3,777
 
    


  

  

  

  

FEE AND OTHER INCOME
                                    
Service charges and fees
  
 
1,040
 
  
367
 
  
1,407
 
  
88
 
  
1,495
 
Commissions
  
 
518
 
  
80
 
  
598
 
  
522
 
  
1,120
 
Fiduciary and asset management fees
  
 
408
 
  
164
 
  
572
 
  
593
 
  
1,165
 
Principal investing
  
 
(260
)
  
(4
)
  
(264
)
  
(422
)
  
(686
)
Other income
  
 
1,382
 
  
872
 
  
2,254
 
  
(1,112
)
  
1,142
 
    


  

  

  

  

Total fee and other income
  
 
3,088
 
  
1,479
 
  
4,567
 
  
(331
)
  
4,236
 
    


  

  

  

  

NONINTEREST EXPENSE
                                    
Salaries and employee benefits
  
 
2,354
 
  
848
 
  
3,202
 
  
945
 
  
4,147
 
Occupancy and equipment
  
 
847
 
  
238
 
  
1,085
 
  
67
 
  
1,152
 
Goodwill and other intangible amortization
  
 
181
 
  
100
 
  
281
 
  
(9
)
  
272
 
Sundry expense
  
 
1,815
 
  
829
 
  
2,644
 
  
(1,414
)
  
1,230
 
    


  

  

  

  

Total noninterest expense
  
 
5,197
 
  
2,015
 
  
7,212
 
  
(411
)
  
6,801
 
    


  

  

  

  

Income before income taxes
  
 
1,582
 
  
668
 
  
2,250
 
  
(1,038
)
  
1,212
 
Income taxes
  
 
588
 
  
235
 
  
823
 
  
(494
)
  
329
 
    


  

  

  

  

Net income
  
$
994
 
  
433
 
  
1,427
 
  
(544
)
  
883
 
    


  

  

  

  


(a)
 
"FUNB" refers to First Union National Bank, "WBNA" refers to the former Wachovia Bank, National Association.

F-28


Table of Contents
 
WACHOVIA CORPORATION AND SUBSIDIARIES
 
Supplementary Consolidating Statement of Income
 
    
Year Ended December 31, 2001

 
(In millions)

  
 

FUNB(a)

 

  
WBNA(a)

 

  
Combined

 

  
Other Subsidiaries and Eliminations

    

  
Wachovia Consolidated

  

INTEREST INCOME
                                    
Interest and fees on loans
  
$
9,856
 
  
3,905
 
  
13,761
 
  
(3,224
)
  
10,537
 
Interest and dividends on securities
  
 
3,254
 
  
450
 
  
3,704
 
  
(170
)
  
3,534
 
Trading account interest
  
 
505
 
  
3
 
  
508
 
  
252
 
  
760
 
Other interest income
  
 
311
 
  
43
 
  
354
 
  
915
 
  
1,269
 
    


  

  

  

  

Total interest income
  
 
13,926
 
  
4,401
 
  
18,327
 
  
(2,227
)
  
16,100
 
    


  

  

  

  

INTEREST EXPENSE
                                    
Interest on deposits
  
 
4,600
 
  
1,361
 
  
5,961
 
  
(1,217
)
  
4,744
 
Interest on borrowings
  
 
2,461
 
  
616
 
  
3,077
 
  
504
 
  
3,581
 
    


  

  

  

  

Total interest expense
  
 
7,061
 
  
1,977
 
  
9,038
 
  
(713
)
  
8,325
 
    


  

  

  

  

Net interest income
  
 
6,865
 
  
2,424
 
  
9,289
 
  
(1,514
)
  
7,775
 
Provision for loan losses
  
 
1,767
 
  
638
 
  
2,405
 
  
(458
)
  
1,947
 
    


  

  

  

  

Net interest income after provision for
loan losses
  
 
5,098
 
  
1,786
 
  
6,884
 
  
(1,056
)
  
5,828
 
    


  

  

  

  

FEE AND OTHER INCOME
                                    
Service charges and fees
  
 
1,476
 
  
495
 
  
1,971
 
  
196
 
  
2,167
 
Commissions
  
 
577
 
  
142
 
  
719
 
  
849
 
  
1,568
 
Fiduciary and asset management fees
  
 
564
 
  
213
 
  
777
 
  
866
 
  
1,643
 
Principal investing
  
 
(351
)
  
(4
)
  
(355
)
  
(352
)
  
(707
)
Other income
  
 
1,872
 
  
967
 
  
2,839
 
  
(1,214
)
  
1,625
 
    


  

  

  

  

Total fee and other income
  
 
4,138
 
  
1,813
 
  
5,951
 
  
345
 
  
6,296
 
    


  

  

  

  

NONINTEREST EXPENSE
                                    
Salaries and employee benefits
  
 
3,146
 
  
1,098
 
  
4,244
 
  
1,566
 
  
5,810
 
Occupancy and equipment
  
 
1,123
 
  
303
 
  
1,426
 
  
183
 
  
1,609
 
Goodwill and other intangible amortization
  
 
240
 
  
272
 
  
512
 
  
11
 
  
523
 
Sundry expense
  
 
2,528
 
  
929
 
  
3,457
 
  
(1,568
)
  
1,889
 
    


  

  

  

  

Total noninterest expense
  
 
7,037
 
  
2,602
 
  
9,639
 
  
192
 
  
9,831
 
    


  

  

  

  

Income before income taxes
  
 
2,199
 
  
997
 
  
3,196
 
  
(903
)
  
2,293
 
Income taxes
  
 
564
 
  
350
 
  
914
 
  
(240
)
  
674
 
    


  

  

  

  

Net income
  
 
1,635
 
  
647
 
  
2,282
 
  
(663
)
  
1,619
 
Dividends on preferred stock
  
 
—  
 
  
—  
 
  
—  
 
  
6
 
  
6
 
    


  

  

  

  

Net income available to common stockholders
  
$
1,635
 
  
647
 
  
2,282
 
  
(669
)
  
1,613
 
    


  

  

  

  


(a)
 
"FUNB" refers to First Union National Bank, "WBNA" refers to the former Wachovia Bank, National Association.
 
See accompanying Independent Auditors’ Report on Supplementary Consolidating Financial Information.

F-29


Table of Contents
 
WACHOVIA CORPORATION AND SUBSIDIARIES
 
Supplementary Consolidating Statement of Income
 
    
Year Ended December 31, 2000

 
(In millions)

  
 

FUNB(a)

 

  
Other Subsidiaries and Eliminations

    

  
Wachovia Consolidated

  

INTEREST INCOME
                      
Interest and fees on loans
  
$
11,840
 
  
(594
)
  
11,246
 
Interest and dividends on securities
  
 
3,784
 
  
119
 
  
3,903
 
Trading account interest
  
 
417
 
  
403
 
  
820
 
Other interest income
  
 
225
 
  
1,340
 
  
1,565
 
    


  

  

Total interest income
  
 
16,266
 
  
1,268
 
  
17,534
 
    


  

  

INTEREST EXPENSE
                      
Interest on deposits
  
 
5,471
 
  
(202
)
  
5,269
 
Interest on borrowings
  
 
3,357
 
  
1,471
 
  
4,828
 
    


  

  

Total interest expense
  
 
8,828
 
  
1,269
 
  
10,097
 
    


  

  

Net interest income
  
 
7,438
 
  
(1
)
  
7,437
 
Provision for loan losses
  
 
1,057
 
  
679
 
  
1,736
 
    


  

  

Net interest income after provision for loan losses
  
 
6,381
 
  
(680
)
  
5,701
 
    


  

  

FEE AND OTHER INCOME
                      
Service charges and fees
  
 
1,290
 
  
630
 
  
1,920
 
Fiduciary and asset management fees
  
 
1,017
 
  
494
 
  
1,511
 
Other income
  
 
1,620
 
  
1,661
 
  
3,281
 
    


  

  

Total fee and other income
  
 
3,927
 
  
2,785
 
  
6,712
 
    


  

  

NONINTEREST EXPENSE
                      
Salaries and employee benefits
  
 
3,132
 
  
2,527
 
  
5,659
 
Occupancy and equipment
  
 
1,130
 
  
362
 
  
1,492
 
Sundry expense
  
 
5,559
 
  
(1,000
)
  
4,559
 
    


  

  

Total noninterest expense
  
 
9,821
 
  
1,889
 
  
11,710
 
    


  

  

Income before income taxes and cumulative effect of a change in accounting principle
  
 
487
 
  
216
 
  
703
 
Income taxes
  
 
428
 
  
137
 
  
565
 
    


  

  

Income before cumulative effect of a change in accounting principle
  
 
59
 
  
79
 
  
138
 
Cumulative effect of a change in the accounting for beneficial interests, net of income taxes
  
 
(46
)
  
—  
 
  
(46
)
    


  

  

Net income
  
$
13
 
  
79
 
  
92
 
    


  

  


(a)
 
"FUNB" refers to First Union National Bank.
 
See accompanying Independent Auditors’ Report on Supplementary Consolidating Financial Information.

F-30


Table of Contents
 
WACHOVIA CORPORATION AND SUBSIDIARIES
 
Supplementary Consolidating Statement of Changes in Stockholders’ Equity
(Unaudited)
 
    
Nine Months Ended September 30, 2002

 
(In millions)

  
The Bank

    
Other Subsidiaries and Eliminations

    
Wachovia Consolidated

 
PREFERRED STOCK
                      
Balance, December 31, 2001
  
$
161
 
  
(144
)
  
17
 
Changes incident to business combinations
  
 
(161
)
  
161
 
  
—  
 
Cash dividends
  
 
—  
 
  
(15
)
  
(15
)
    


  

  

Balance, September 30, 2002
  
 
—  
 
  
2
 
  
2
 
    


  

  

COMMON STOCK
                      
Balance, December 31, 2001
  
 
455
 
  
4,084
 
  
4,539
 
Common stock issued for
                      
Stock options and restricted stock
  
 
—  
 
  
33
 
  
33
 
Acquisitions
  
 
—  
 
  
5
 
  
5
 
    


  

  

Balance, September 30, 2002
  
 
455
 
  
4,122
 
  
4,577
 
    


  

  

PAID-IN CAPITAL
                      
Balance, December 31, 2001
  
 
13,302
 
  
4,609
 
  
17,911
 
Common stock issued for
                      
Stock options and restricted stock
  
 
—  
 
  
199
 
  
199
 
Acquisitions
  
 
11,628
 
  
(11,582
)
  
46
 
Deferred compensation, net
  
 
—  
 
  
77
 
  
77
 
    


  

  

Balance, September 30, 2002
  
 
24,930
 
  
(6,697
)
  
18,233
 
    


  

  

RETAINED EARNINGS
                      
Balance, December 31, 2001
  
 
1,847
 
  
3,704
 
  
5,551
 
Net income
  
 
2,643
 
  
41
 
  
2,684
 
Changes incident to business combinations
  
 
210
 
  
(210
)
  
—  
 
Cash dividends
  
 
(629
)
  
(385
)
  
(1,014
)
    


  

  

Balance, September 30, 2002
  
 
4,071
 
  
3,150
 
  
7,221
 
    


  

  

ACCUMULATED OTHER COMPREHENSIVE
INCOME, NET
                      
Balance, December 31, 2001
  
 
368
 
  
69
 
  
437
 
Net unrealized gain on debt and equity securities, net
of reclassification adjustment and net unrealized
gain on derivative financial instruments
  
 
1,715
 
  
(80
)
  
1,635
 
    


  

  

Balance, September 30, 2002
  
 
2,083
 
  
(11
)
  
2,072
 
    


  

  

Total Stockholders’ Equity
September 30, 2002
  
$
31,539
 
  
566
 
  
32,105
 
    


  

  

F-31


Table of Contents
 
WACHOVIA CORPORATION AND SUBSIDIARIES
 
Supplementary Consolidating Statement of Changes in Stockholders’ Equity
(Unaudited)
 
    
Nine Months Ended September 30, 2001

 
(In millions)

  
FUNB(a)

    
WBNA(a)

    
Combined

    
Other Subsidiaries and Eliminations

    
Wachovia Consolidated

 
PREFERRED STOCK
                                    
Balance, December 31, 2000
and September 30, 2001
  
$
161
 
  
—  
 
  
161
 
  
(161
)
  
—  
 
    


  

  

  

  

COMMON STOCK
                                    
Balance, December 31, 2000
  
 
455
 
  
51
 
  
506
 
  
2,761
 
  
3,267
 
Purchases of common stock
  
 
—  
 
  
—  
 
  
—  
 
  
(102
)
  
(102
)
Common stock issued for
                                    
Stock options and restricted stock
  
 
—  
 
  
—  
 
  
—  
 
  
10
 
  
10
 
Dividend reinvestment plan
  
 
—  
 
  
—  
 
  
—  
 
  
4
 
  
4
 
Acquisitions
  
 
—  
 
  
—  
 
  
—  
 
  
1,358
 
  
1,358
 
Other
  
 
—  
 
  
2
 
  
2
 
  
(2
)
  
—  
 
    


  

  

  

  

Balance, September 30, 2001
  
 
455
 
  
53
 
  
508
 
  
4,029
 
  
4,537
 
    


  

  

  

  

PAID-IN CAPITAL
                                    
Balance, December 31, 2000
  
 
13,306
 
  
2,305
 
  
15,611
 
  
(9,339
)
  
6,272
 
Purchases of common stock
  
 
—  
 
  
—  
 
  
—  
 
  
(125
)
  
(125
)
Common stock issued for
                                    
Stock options and restricted stock
  
 
—  
 
  
—  
 
  
—  
 
  
76
 
  
76
 
Dividend reinvestment plan
  
 
—  
 
  
—  
 
  
—  
 
  
39
 
  
39
 
Acquisitions
  
 
—  
 
  
—  
 
  
—  
 
  
11,640
 
  
11,640
 
Changes incident to business combinations
  
 
(4
)
  
11,014
 
  
11,010
 
  
(11,010
)
  
—  
 
Deferred compensation, net
  
 
—  
 
  
—  
 
  
—  
 
  
(67
)
  
(67
)
    


  

  

  

  

Balance, September 30, 2001
  
 
13,302
 
  
 13,319 
 
  
26,621
 
  
(8,786
)
  
17,835
 
    


  

  

  

  

RETAINED EARNINGS
                                    
Balance, December 31, 2000
  
 
1,467
 
  
4,192
 
  
5,659
 
  
362
 
  
6,021
 
Net income
  
 
994
 
  
433
 
  
1,427
 
  
(544
)
  
883
 
Purchases of common stock
  
 
—  
 
  
—  
 
  
—  
 
  
(1,057
)
  
(1,057
)
Changes incident to business combinations
  
 
(5
)
  
(4,629
)
  
(4,634
)
  
4,634
 
  
—  
 
Cash dividends
  
 
(1,250
)
  
—  
 
  
(1,250
)
  
542
 
  
(708
)
    


  

  

  

  

Balance, September 30, 2001
  
 
1,206
 
  
(4
)
  
1,202
 
  
3,937
 
  
5,139
 
    


  

  

  

  

ACCUMULATED OTHER COMPREHENSIVE
INCOME, NET
                                    
Balance, December 31, 2000
  
 
(185
)
  
31
 
  
(154
)
  
(59
)
  
(213
)
Net unrealized gain on debt and equity securities, net of reclassification adjustment and net unrealized gain on derivative financial instruments
  
 
1,140
 
  
35
 
  
1,175
 
  
33
 
  
1,208
 
    


  

  

  

  

Balance, September 30, 2001
  
 
955
 
  
66
 
  
1,021
 
  
(26
)
  
995
 
    


  

  

  

  

Total Stockholders’ Equity
September 30, 2001
  
$
16,079
 
  
13,434
 
  
29,513
 
  
(1,007
)
  
28,506
 
    


  

  

  

  


(a)
 
“FUNB” refers to First Union National Bank, “WBNA” refers to the former Wachovia Bank, National Association.

F-32


Table of Contents
 
WACHOVIA CORPORATION AND SUBSIDIARIES
 
Supplementary Consolidating Statement of Changes in Stockholders’ Equity
 
    
Year Ended December 31, 2001

 
(In millions)

  
FUNB(a)

    
WBNA(a)

    
Combined

    
Other Subsidiaries and Eliminations

    
Wachovia Consolidated

 
PREFERRED STOCK
                                    
Balance, December 31, 2000
  
$
161
 
  
—  
 
  
161
 
  
(161
)
  
—  
 
Preferred shares issued
  
 
—  
 
  
—  
 
  
—  
 
  
23
 
  
23
 
Cash dividends
  
 
—  
 
  
—  
 
  
—  
 
  
(6
)
  
(6
)
    


  

  

  

  

Balance, December 31, 2001
  
 
161
 
  
—  
 
  
161
 
  
(144
)
  
17
 
    


  

  

  

  

COMMON STOCK
                                    
Balance, December 31, 2000
  
 
455
 
  
51
 
  
506
 
  
2,761
 
  
3,267
 
Purchases of common stock
  
 
—  
 
  
—  
 
  
—  
 
  
(103
)
  
(103
)
Common stock issued for
                                    
Stock options and restricted stock
  
 
—  
 
  
—  
 
  
—  
 
  
11
 
  
11
 
Dividend reinvestment plan
  
 
—  
 
  
—  
 
  
—  
 
  
6
 
  
6
 
Acquisitions
  
 
—  
 
  
—  
 
  
—  
 
  
1,358
 
  
1,358
 
Other
  
 
—  
 
  
2
 
  
2
 
  
(2
)
  
—  
 
    


  

  

  

  

Balance, December 31, 2001
  
 
455
 
  
53
 
  
508
 
  
4,031
 
  
4,539
 
    


  

  

  

  

PAID-IN CAPITAL
                                    
Balance, December 31, 2000
  
 
13,306
 
  
2,305
 
  
15,611
 
  
(9,339
)
  
6,272
 
Purchases of common stock
  
 
—  
 
  
—  
 
  
—  
 
  
(124
)
  
(124
)
Common stock issued for
                                    
Stock options and restricted stock
  
 
—  
 
  
—  
 
  
—  
 
  
81
 
  
81
 
Dividend reinvestment plan
  
 
—  
 
  
—  
 
  
—  
 
  
52
 
  
52
 
Acquisitions
  
 
—  
 
  
—  
 
  
—  
 
  
11,453
 
  
11,453
 
Stock options issued in acquisition
  
 
—  
 
  
—  
 
  
—  
 
  
187
 
  
187
 
Changes incident to business combinations
  
 
(4
)
  
11,040
 
  
11,036
 
  
(11,036
)
  
—  
 
Deferred compensation, net
  
 
—  
 
  
—  
 
  
—  
 
  
(10
)
  
(10
)
    


  

  

  

  

Balance, December 31, 2001
  
 
13,302
 
  
 13,345 
 
  
26,647
 
  
(8,736
)
  
17,911
 
    


  

  

  

  

RETAINED EARNINGS
                                    
Balance, December 31, 2000
  
 
1,467
 
  
4,192
 
  
5,659
 
  
362
 
  
6,021
 
Net income
  
 
1,635
 
  
647
 
  
2,282
 
  
(663
)
  
1,619
 
Purchases of common stock
  
 
—  
 
  
—  
 
  
—  
 
  
(1,057
)
  
(1,057
)
Changes incident to business combinations
  
 
(5
)
  
(4,629
)
  
(4,634
)
  
4,634
 
  
—  
 
Cash dividends
  
 
(1,250
)
  
—  
 
  
(1,250
)
  
218
 
  
(1,032
)
    


  

  

  

  

Balance, December 31, 2001
  
 
1,847
 
  
210
 
  
2,057
 
  
3,494
 
  
5,551
 
    


  

  

  

  

ACCUMULATED OTHER COMPREHENSIVE
INCOME, NET
                                    
Balance, December 31, 2000
  
 
(185
)
  
31
 
  
(154
)
  
(59
)
  
(213
)
Net unrealized gain on debt and equity securities, net of reclassification adjustment and net unrealized gain on derivative financial instruments
  
 
553
 
  
32
 
  
585
 
  
65
 
  
650
 
    


  

  

  

  

Balance, December 31, 2001
  
 
368
 
  
63
 
  
431
 
  
6
 
  
437
 
    


  

  

  

  

Total Stockholders’ Equity
December 31, 2001
  
$
16,133
 
  
13,671
 
  
29,804
 
  
(1,349
)
  
28,455
 
    


  

  

  

  


(a)
 
“FUNB” refers to First Union National Bank, “WBNA” refers to the former Wachovia Bank, National Association.
 
See accompanying Independent Auditors’ Report on Supplementary Consolidating Financial Information.

F-33


Table of Contents
WACHOVIA CORPORATION AND SUBSIDIARIES
 
Supplementary Consolidating Statement of Changes in Stockholders’ Equity
 
    
Year Ended December 31, 2000

 
(In millions)

  
FUNB(a)

    
Other Subsidiaries and Eliminations

    
Wachovia Consolidated

 
PREFERRED STOCK
                      
Balance, December 31, 1999 and December 31, 2000
  
$
161
 
  
(161
)
  
—  
 
    


  

  

COMMON STOCK
                      
Balance, December 31, 1999
  
 
455
 
  
2,839
 
  
3,294
 
Purchases of common stock
  
 
—  
 
  
(63
)
  
(63
)
Common stock issued for
                      
Stock options and restricted stock
  
 
—  
 
  
23
 
  
23
 
Dividend reinvestment plan
  
 
—  
 
  
9
 
  
9
 
Acquisitions
  
 
—  
 
  
4
 
  
4
 
    


  

  

Balance, December 31, 2000
  
 
455
 
  
2,812
 
  
3,267
 
    


  

  

PAID-IN CAPITAL
                      
Balance, December 31, 1999
  
 
13,306
 
  
(7,326
)
  
5,980
 
Purchases of common stock
  
 
—  
 
  
(79
)
  
(79
)
Common stock issued for
                      
Stock options and restricted stock
  
 
—  
 
  
131
 
  
131
 
Dividend reinvestment plan
  
 
—  
 
  
68
 
  
68
 
Acquisitions
  
 
—  
 
  
30
 
  
30
 
Deferred compensation, net
  
 
—  
 
  
142
 
  
142
 
    


  

  

Balance, December 31, 2000
  
 
13,306
 
  
(7,034
)
  
6,272
 
    


  

  

RETAINED EARNINGS
                      
Balance, December 31, 1999
  
 
4,188
 
  
4,177
 
  
8,365
 
Net income
  
 
13
 
  
79
 
  
92
 
Purchases of common stock
  
 
—  
 
  
(548
)
  
(548
)
Changes incident to business combinations
  
 
(234
)
  
234
 
  
—  
 
Cash dividends
  
 
(2,500
)
  
612
 
  
(1,888
)
    


  

  

Balance, December 31, 2000
  
 
1,467
 
  
4,554
 
  
6,021
 
    


  

  

ACCUMULATED OTHER COMPREHENSIVE INCOME, NET
                      
Balance, December 31, 1999
  
 
(975
)
  
45
 
  
(930
)
Net unrealized gain on debt and equity securities, net of reclassification adjustment
  
 
790
 
  
(73
)
  
717
 
    


  

  

Balance, December 31, 2000
  
 
(185
)
  
(28
)
  
(213
)
    


  

  

Total Stockholders’ Equity
December 31, 2000
  
$
15,204
 
  
143
 
  
15,347
 
    


  

  


(a)
 
“FUNB” refers to First Union National Bank.
 
See accompanying Independent Auditors’ Report on Supplementary Consolidating Financial Information.

F-34


Table of Contents
WACHOVIA CORPORATION AND SUBSIDIARIES
 
Supplementary Consolidating Statement of Cash Flows
(Unaudited)
 
    
Nine Months Ended September 30, 2002

 
(In millions)

  
The Bank

    
Other Subsidiaries and Eliminations

    
Wachovia Consolidated

 
OPERATING ACTIVITIES
                      
Net income
  
$
2,643
 
  
41
 
  
2,684
 
Adjustments to reconcile net income to net cash provided (used) by operating activities
                      
Accretion and amortization of securities discounts and premiums, net
  
 
15
 
  
1
 
  
16
 
Provision for loan losses
  
 
1,137
 
  
34
 
  
1,171
 
Securitization gains
  
 
92
 
  
(334
)
  
(242
)
Gain on sale of mortgage servicing rights
  
 
—  
 
  
(47
)
  
(47
)
Securities transactions
  
 
(193
)
  
70
 
  
(123
)
Depreciation, goodwill and other amortization
  
 
1,476
 
  
(245
)
  
1,231
 
Trading account assets, net
  
 
(6,706
)
  
(3,810
)
  
(10,516
)
Mortgage loans held for resale
  
 
(53
)
  
—  
 
  
(53
)
(Gain) loss on sales of premises and equipment
  
 
6
 
  
(3
)
  
3
 
Other assets, net
  
 
(9,971
)
  
7,650
 
  
(2,321
)
Trading account liabilities, net
  
 
3,477
 
  
2,846
 
  
6,323
 
Other liabilities, net
  
 
2,655
 
  
(4,188
)
  
(1,533
)
    


  

  

Net cash provided (used) by operating activities
  
 
(5,422
)
  
2,015
 
  
(3,407
)
    


  

  

INVESTING ACTIVITIES
                      
Increase (decrease) in cash realized from
                      
Sales of securities
  
 
21,352
 
  
1,657
 
  
23,009
 
Maturities of securities
  
 
8,816
 
  
1,561
 
  
10,377
 
Purchases of securities
  
 
(35,722
)
  
(2,947
)
  
(38,669
)
Origination of loans, net
  
 
3,565
 
  
(610
)
  
2,955
 
Sales of premises and equipment
  
 
116
 
  
—  
 
  
116
 
Purchases of premises and equipment
  
 
(758
)
  
399
 
  
(359
)
Goodwill and other intangible assets, net
  
 
(187
)
  
44
 
  
(143
)
Purchase of bank-owned separate account life insurance
  
 
(147
)
  
—  
 
  
(147
)
    


  

  

Net cash provided (used) by investing activities
  
 
(2,965
)
  
104
 
  
(2,861
)
    


  

  

FINANCING ACTIVITIES
                      
Increase (decrease) in cash realized from
                      
Purchases (sales) of deposits, net
  
 
1,301
 
  
(969
)
  
332
 
Securities sold under repurchase agreements and other short-term borrowings, net
  
 
(1,471
)
  
(1,768
)
  
(3,239
)
Issuances of long-term debt
  
 
717
 
  
—  
 
  
717
 
Payments of long-term debt
  
 
(818
)
  
(1,874
)
  
(2,692
)
Issuances of common stock
  
 
—  
 
  
91
 
  
91
 
Cash dividends paid
  
 
(629
)
  
(400
)
  
(1,029
)
    


  

  

Net cash used by financing activities
  
 
(900
)
  
(4,920
)
  
(5,820
)
    


  

  

Decrease in cash and cash equivalents
  
 
(9,287
)
  
(2,801
)
  
(12,088
)
Cash and cash equivalents, beginning of year
  
 
27,069
 
  
7,642
 
  
34,711
 
    


  

  

Cash and cash equivalents, end of year
  
$
17,782
 
  
4,841
 
  
22,623
 
    


  

  

NONCASH ITEMS
                      
Transfer to securities from loans
  
$
4,070
 
  
—  
 
  
4,070
 
Transfer to securities from other assets
  
 
2,246
 
  
—  
 
  
2,246
 
Transfer to other assets from loans, net
  
$
1,851
 
  
—  
 
  
1,851
 
    


  

  

F-35


Table of Contents
WACHOVIA CORPORATION AND SUBSIDIARIES
 
Consolidating Statement of Cash Flows
(Unaudited)
 
    
Nine Months Ended September 30, 2001

 
(In millions)

  
FUNB(a)

    
WBNA(a)

    
Combined

      
Other Subsidiaries and Eliminations

      
Wachovia Consolidated

 
OPERATING ACTIVITIES
                                        
Net income
  
$
994
 
  
433
 
  
1,427
 
    
(544
)
    
883
 
Adjustments to reconcile net income to net cash provided (used) by operating activities
                                        
Accretion and amortization of securities discounts and premiums, net
  
 
147
 
  
—  
 
  
147
 
    
1
 
    
148
 
Provision for loan losses
  
 
1,395
 
  
629
 
  
2,024
 
    
(458
)
    
1,566
 
Securitization gains
  
 
(40
)
  
—  
 
  
(40
)
    
(104
)
    
(144
)
Gain on sale of mortgage servicing rights
  
 
—  
 
  
—  
 
  
—  
 
    
(56
)
    
(56
)
Securities transactions
  
 
(10
)
  
(87
)
  
(97
)
    
148
 
    
51
 
Depreciation, goodwill and other amortization
  
 
1,028
 
  
338
 
  
1,366
 
    
(475
)
    
891
 
Trading account assets, net
  
 
(3,976
)
  
(346
)
  
(4,322
)
    
123
 
    
(4,199
)
Mortgage loans held for resale
  
 
(577
)
  
—  
 
  
(577
)
    
—  
 
    
(577
)
(Gain) loss on sales of premises and equipment
  
 
9
 
  
(3
)
  
6
 
    
—  
 
    
6
 
Other assets, net
  
 
(4,384
)
  
(567
)
  
(4,951
)
    
3,913
 
    
(1,038
)
Trading account liabilities, net
  
 
4,685
 
  
291
 
  
4,976
 
    
(2,367
)
    
2,609
 
Other liabilities, net
  
 
1,997
 
  
610
 
  
2,607
 
    
(523
)
    
2,084
 
    


  

  

    

    

Net cash provided (used) by operating activities
  
 
1,268
 
  
1,298
 
  
2,566
 
    
(342
)
    
2,224
 
    


  

  

    

    

INVESTING ACTIVITIES
                                        
Increase (decrease) in cash realized from
                                        
Sales of securities
  
 
6,120
 
  
2,490
 
  
8,610
 
    
1,104
 
    
9,714
 
Maturities of securities
  
 
5,046
 
  
—  
 
  
5,046
 
    
65
 
    
5,111
 
Purchases of securities
  
 
(8,908
)
  
—  
 
  
(8,908
)
    
(2,934
)
    
(11,842
)
Origination of loans, net
  
 
2,329
 
  
2,438
 
  
4,767
 
    
(3,194
)
    
1,573
 
Sales of premises and equipment
  
 
65
 
  
—  
 
  
65
 
    
—  
 
    
65
 
Purchases of premises and equipment
  
 
(790
)
  
(338
)
  
(1,128
)
    
819
 
    
(309
)
Goodwill and other intangible assets, net
  
 
(21
)
  
(1,892
)
  
(1,913
)
    
1,827
 
    
(86
)
Purchase of bank-owned separate account life insurance
  
 
(81
)
  
—  
 
  
(81
)
    
—  
 
    
(81
)
Cash equivalents acquired, net of purchases of banking organizations
  
 
—  
 
  
—  
 
  
—  
 
    
3,591
 
    
3,591
 
    


  

  

    

    

Net cash provided by investing activities
  
 
3,760
 
  
2,698
 
  
6,458
 
    
1,278
 
    
7,736
 
    


  

  

    

    

FINANCING ACTIVITIES
                                        
Increase (decrease) in cash realized from
                                        
Purchases (sales) of deposits, net
  
 
(6,206
)
  
(47
)
  
(6,253
)
    
988
 
    
(5,265
)
Securities sold under repurchase agreements and other short-term borrowings, net
  
 
(1,959
)
  
(3,348
)
  
(5,307
)
    
2,056
 
    
(3,251
)
Issuances of long-term debt
  
 
6,664
 
  
—  
 
  
6,664
 
    
898
 
    
7,562
 
Payments of long-term debt
  
 
(5,698
)
  
(284
)
  
(5,982
)
    
(3,817
)
    
(9,799
)
Sales of common stock
  
 
—  
 
  
—  
 
  
—  
 
    
(67
)
    
(67
)
Purchases of common stock
  
 
—  
 
  
—  
 
  
—  
 
    
(1,284
)
    
(1,284
)
Cash dividends paid
  
 
(1,250
)
  
—  
 
  
(1,250
)
    
542
 
    
(708
)
    


  

  

    

    

Net cash used by financing activities
  
 
(8,449
)
  
(3,679
)
  
(12,128
)
    
(684
)
    
(12,812
)
    


  

  

    

    

Increase (decrease) in cash and cash equivalents
  
 
(3,421
)
  
317
 
  
(3,104
)
    
252
 
    
(2,852
)
Cash and cash equivalents, beginning of year
  
 
19,269
 
  
4,326
 
  
23,595
 
    
790
 
    
24,385
 
    


  

  

    

    

Cash and cash equivalents, end of period
  
$
15,848
 
  
4,643
 
  
20,491
 
    
1,042
 
    
21,533
 
    


  

  

    

    

NONCASH ITEMS
                                        
Transfer to securities from loans
  
$
95
 
  
—  
 
  
95
 
    
—  
 
    
95
 
Transfer to securities from other assets
  
 
908
 
  
—  
 
  
908
 
    
—  
 
    
908
 
Transfer to other assets from trading account assets
  
 
201
 
  
—  
 
  
201
 
    
—  
 
    
201
 
Transfer to other assets from loans, net
  
 
1,651
 
  
—  
 
  
1,651
 
    
—  
 
    
1,651
 
Issuance of common stock for purchase accounting merger
  
$
—  
 
  
—  
 
  
—  
 
    
12,998
 
    
12,998
 
    


  

  

    

    


(a)
 
“FUNB” refers to First Union National Bank, “WBNA” refers to the former Wachovia Bank, National Association.

F-36


Table of Contents
WACHOVIA CORPORATION AND SUBSIDIARIES
 
Supplementary Consolidating Statement of Cash Flows
 
    
Year Ended December 31, 2001

 
(In millions)

  
FUNB(a)

    
WBNA(a)

    
Combined

      
Other Subsidiaries and Eliminations

      
Wachovia Consolidated

 
OPERATING ACTIVITIES
                                        
Net income
  
$
1,635
 
  
647
 
  
2,282
 
    
(663
)
    
1,619
 
Adjustments to reconcile net income to net cash provided (used) by operating activities
                                        
Cumulative effect of a change in accounting principle
  
 
3
 
  
—  
 
  
3
 
    
(3
)
    
—  
 
Accretion and amortization of securities discounts and premiums, net
  
 
177
 
  
—  
 
  
177
 
    
1
 
    
178
 
Provision for loan losses
  
 
1,767
 
  
638
 
  
2,405
 
    
(458
)
    
1,947
 
Securitization gains
  
 
(20
)
  
—  
 
  
(20
)
    
(262
)
    
(282
)
Gain on sale of mortgage servicing rights
  
 
—  
 
  
—  
 
  
—  
 
    
(86
)
    
(86
)
Securities transactions
  
 
(38
)
  
(87
)
  
(125
)
    
192
 
    
67
 
Depreciation, goodwill and other amortization
  
 
1,363
 
  
575
 
  
1,938
 
    
(549
)
    
1,389
 
Deferred income taxes
  
 
58
 
  
—  
 
  
58
 
    
(22
)
    
36
 
Trading account assets, net
  
 
(2,694
)
  
(347
)
  
(3,041
)
    
219
 
    
(2,822
)
Mortgage loans held for resale
  
 
(1,311
)
  
—  
 
  
(1,311
)
    
—  
 
    
(1,311
)
(Gain) loss on sales of premises and equipment
  
 
11
 
  
(3
)
  
8
 
    
(3
)
    
5
 
Other assets, net
  
 
(1,383
)
  
(23
)
  
(1,406
)
    
2,843
 
    
1,437
 
Trading account liabilities, net
  
 
5,640
 
  
308
 
  
5,948
 
    
(1,986
)
    
3,962
 
Other liabilities, net
  
 
697
 
  
500
 
  
1,197
 
    
(49
)
    
1,148
 
    


  

  

    

    

Net cash provided (used) by operating activities
  
 
5,905
 
  
2,208
 
  
8,113
 
    
(826
)
    
7,287
 
    


  

  

    

    

INVESTING ACTIVITIES
                                        
Increase (decrease) in cash realized from
                                        
Sales of securities
  
 
11,818
 
  
1,045
 
  
12,863
 
    
643
 
    
13,506
 
Maturities of securities
  
 
8,746
 
  
—  
 
  
8,746
 
    
80
 
    
8,826
 
Purchases of securities
  
 
(15,990
)
  
—  
 
  
(15,990
)
    
(2,639
)
    
(18,629
)
Origination of loans, net
  
 
1,599
 
  
4,873
 
  
6,472
 
    
(2,349
)
    
4,123
 
Sales of premises and equipment
  
 
155
 
  
—  
 
  
155
 
    
—  
 
    
155
 
Purchases of premises and equipment
  
 
(1,068
)
  
(408
)
  
(1,476
)
    
953
 
    
(523
)
Goodwill and other intangible assets, net
  
 
(38
)
  
(1,929
)
  
(1,967
)
    
1,852
 
    
(115
)
Purchase of bank-owned separate account life insurance
  
 
(284
)
  
—  
 
  
(284
)
    
—  
 
    
(284
)
Cash equivalents acquired, net of purchase acquisitions
  
 
—  
 
  
—  
 
  
—  
 
    
3,591
 
    
3,591
 
    


  

  

    

    

Net cash provided by investing activities
  
 
4,938
 
  
3,581
 
  
8,519
 
    
2,131
 
    
10,650
 
    


  

  

    

    

FINANCING ACTIVITIES
                                        
Increase (decrease) in cash realized from
                                        
Purchases of deposits, net
  
 
783
 
  
120
 
  
903
 
    
736
 
    
1,639
 
Securities sold under repurchase agreements and other short-term borrowings, net
  
 
(8,137
)
  
(5,332
)
  
(13,469
)
    
10,300
 
    
(3,169
)
Issuances of long-term debt
  
 
7,435
 
  
—  
 
  
7,435
 
    
1,903
 
    
9,338
 
Payments of long-term debt
  
 
(6,457
)
  
(320
)
  
(6,777
)
    
(6,299
)
    
(13,076
)
Issuances of preferred shares
  
 
—  
 
  
—  
 
  
—  
 
    
23
 
    
23
 
Issuances of common stock
  
 
—  
 
  
—  
 
  
—  
 
    
(44
)
    
(44
)
Purchases of common stock
  
 
—  
 
  
—  
 
  
—  
 
    
(1,284
)
    
(1,284
)
Cash dividends paid
  
 
(1,250
)
  
—  
 
  
(1,250
)
    
212
 
    
(1,038
)
    


  

  

    

    

Net cash provided (used) by financing activities
  
 
(7,626
)
  
(5,532
)
  
(13,158
)
    
5,547
 
    
(7,611
)
    


  

  

    

    

Increase in cash and cash equivalents
  
 
3,217
 
  
257
 
  
3,474
 
    
6,852
 
    
10,326
 
Cash and cash equivalents, beginning of year
  
 
19,269
 
  
4,326
 
  
23,595
 
    
790
 
    
24,385
 
    


  

  

    

    

Cash and cash equivalents, end of year
  
$
22,486
 
  
4,583
 
  
27,069
 
    
7,642
 
    
34,711
 
    


  

  

    

    

CASH PAID FOR
                                        
Interest
  
$
7,609
 
  
1,778
 
  
9,387
 
    
(635
)
    
8,752
 
Income taxes
  
 
672
 
  
—  
 
  
672
 
    
—  
 
    
672
 
NONCASH ITEMS
                                        
Transfer to securities from loans
  
 
3,025
 
  
—  
 
  
3,025
 
    
—  
 
    
3,025
 
Transfer to securities from other assets
  
 
908
 
  
—  
 
  
908
 
    
—  
 
    
908
 
Transfer to other assets from trading account assets
  
 
201
 
  
—  
 
  
201
 
    
—  
 
    
201
 
Transfer to other assets from loans, net
  
 
1,643
 
  
—  
 
  
1,643
 
    
—  
 
    
1,643
 
Issuance of common stock for purchase accounting merger
  
$
—  
 
  
—  
 
  
—  
 
    
12,998
 
    
12,998
 
    


  

  

    

    


(a) “FUNB” refers to First Union National Bank, “WBNA” refers to the former Wachovia Bank, National Association.
 
See accompanying Independent Auditors’ Report on Supplementary Consolidating Financial Information.

F-37


Table of Contents
WACHOVIA CORPORATION AND SUBSIDIARIES
 
Supplementary Consolidating Statement of Cash Flows
 
    
Year Ended December 31, 2000

 
(In millions)

  
FUNB(a)

      
Other Subsidiaries and Eliminations

      
Wachovia Consolidated

 
OPERATING ACTIVITIES
                          
Net income
  
$
13
 
    
79
 
    
92
 
Adjustments to reconcile net income to net cash provided (used) by operating activities
                          
Cumulative effect of a change in accounting principle
  
 
46
 
    
—  
 
    
46
 
Accretion and amortization of securities discounts and premiums, net
  
 
261
 
    
3
 
    
264
 
Provision for loan losses
  
 
1,057
 
    
679
 
    
1,736
 
Securitization gains
  
 
(265
)
    
—  
 
    
(265
)
Loss on sale of mortgage servicing rights
  
 
—  
 
    
2
 
    
2
 
Securities transactions
  
 
1,121
 
    
4
 
    
1,125
 
Depreciation, goodwill and other amortization
  
 
1,146
 
    
107
 
    
1,253
 
Goodwill impairments
  
 
1,754
 
    
—  
 
    
1,754
 
Deferred income taxes
  
 
85
 
    
6
 
    
91
 
Trading account assets, net
  
 
(7,890
)
    
1,206
 
    
(6,684
)
Mortgage loans held for resale
  
 
381
 
    
—  
 
    
381
 
Gain on sales of premises and equipment
  
 
(18
)
    
—  
 
    
(18
)
Gain on sales of credit card and mortgage servicing portfolios
  
 
(969
)
    
(39
)
    
(1,008
)
Other assets, net
  
 
8,112
 
    
(6,728
)
    
1,384
 
Trading account liabilities, net
  
 
4,223
 
    
(317
)
    
3,906
 
Other liabilities, net
  
 
1,498
 
    
2,340
 
    
3,838
 
    


    

    

Net cash provided (used) by operating activities
  
 
10,555
 
    
(2,658
)
    
7,897
 
    


    

    

INVESTING ACTIVITIES
                          
Increase (decrease) in cash realized from
                          
Sales of securities
  
 
15,355
 
    
1,033
 
    
16,388
 
Maturities of securities
  
 
3,345
 
    
68
 
    
3,413
 
Purchases of securities
  
 
(7,386
)
    
(975
)
    
(8,361
)
Origination of loans, net
  
 
(11,614
)
    
2,280
 
    
(9,334
)
Sales of premises and equipment
  
 
377
 
    
21
 
    
398
 
Purchases of premises and equipment
  
 
(865
)
    
(19
)
    
(884
)
Goodwill and other intangible assets, net
  
 
177
 
    
(217
)
    
(40
)
Purchase of bank-owned separate account life insurance
  
 
(135
)
    
—  
 
    
(135
)
Cash equivalents acquired, net of purchase acquisitions
  
 
—  
 
    
3
 
    
3
 
    


    

    

Net cash provided (used) by investing activities
  
 
(746
)
    
2,194
 
    
1,448
 
    


    

    

FINANCING ACTIVITIES
                          
Increase (decrease) in cash realized from
                          
Purchases (sales) of deposits, net
  
 
2,332
 
    
(711
)
    
1,621
 
Securities sold under repurchase agreements and other short-term borrowings, net
  
 
(5,365
)
    
(5,296
)
    
(10,661
)
Issuances of long-term debt
  
 
14,672
 
    
2,819
 
    
17,491
 
Payments of long-term debt
  
 
(12,949
)
    
(713
)
    
(13,662
)
Issuances of common stock
  
 
—  
 
    
152
 
    
152
 
Purchases of common stock
  
 
—  
 
    
(690
)
    
(690
)
Cash dividends paid
  
 
(2,500
)
    
612
 
    
(1,888
)
    


    

    

Net cash used by financing activities
  
 
(3,810
)
    
(3,827
)
    
(7,637
)
    


    

    

Increase (decrease) in cash and cash equivalents
  
 
5,999
 
    
(4,291
)
    
1,708
 
Cash and cash equivalents, beginning of year
  
 
13,270
 
    
9,407
 
    
22,677
 
    


    

    

Cash and cash equivalents, end of year
  
$
19,269
 
    
5,116
 
    
24,385
 
    


    

    

CASH PAID FOR
                          
Interest
  
$
8,587
 
    
1,172
 
    
9,759
 
Income taxes
  
 
76
 
    
127
 
    
203
 
NONCASH ITEMS
                          
Transfer to securities from loans
  
 
9,342
 
    
—  
 
    
9,342
 
Transfer to other assets from securities
  
 
1,335
 
    
—  
 
    
1,335
 
Transfer to other assets from loans, net
  
 
7,901
 
    
—  
 
    
7,901
 
Issuance of common stock for purchase accounting merger
  
$
—  
 
    
34
 
    
34
 
    


    

    


(a)
 
“FUNB” refers to First Union National Bank.
 
See accompanying Independent Auditors’ Report on Supplementary Consolidating Financial Information.

F-38


Table of Contents

 
No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the securities offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.
 
Through and including     , 2002 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
 

 
TABLE OF CONTENTS
 
    
Page

Forward-Looking Statements
  
ii
Prospectus Summary
  
1
Risk Factors
  
14
Information Concerning the Bank
  
25
Use of Proceeds
  
29
Capitalization
  
30
Ratios of Earnings to Fixed Charges
  
31
Business
  
32
Selected Consolidated Financial Data
  
52
Unaudited Pro Forma Condensed Consolidated Financial Information
  
53
Management’s Discussion and Analysis of Financial Condition and Results of Operations
  
59
Management
  
74
Certain Relationships and Related Party Transactions
  
76
Beneficial Ownership of Our Capital Stock
  
77
Description of the Series A Preferred Securities
  
77
Description of Other Wachovia Funding Capital Stock
  
86
Description of Wachovia Series G, Class A Preferred Stock
  
91
Description of Wachovia Depositary Shares
  
94
Description of Other Wachovia Capital Stock
  
97
Global Securities
  
98
Federal Income Tax Considerations
  
100
ERISA Considerations
  
110
Underwriting
  
112
Experts
  
114
Validity of Securities
  
114
Where You Can Find More Information about Wachovia Funding
  
114
Where You Can Find More Information about Wachovia
  
115
Glossary
  
117
Wachovia Preferred Funding Corp. and Subsidiary Index to Consolidated Financial Statements
  
F-1
Wachovia Corporation and Subsidiaries Supplementary Consolidating Financial Information
  
F-22
 


 
15,000,000
Series A Preferred Securities
 
Wachovia Preferred Funding Corp.
 
LOGO
 

 
Wachovia Securities
 
 
 
    , 2002
 


Table of Contents
 
PART II OF REGISTRATION STATEMENT OF FORM S-11 OF WACHOVIA PREFERRED FUNDING CORP.
 
INFORMATION NOT REQUIRED IN PROSPECTUS
 
Item 31.    Other Expenses Of Issuance And Distribution.
 
The estimated expenses in connection with this offering, other than underwriting discounts and commissions, are as follows:
 
Registration Statement filing fee
  
$
34,500
Depositary’s fees and expenses
  
 
0
Legal fees and expenses
  
 
780,000
Blue Sky fees and expenses
  
 
0
Accounting fees and expenses
  
 
75,000
Listing fees and expenses
  
 
150,000
Rating agency fees
  
 
0
Printing costs
  
 
200,000
Miscellaneous
  
 
10,500
    

Total
  
$
1,250,000
    

 
Item 32.    Sales to Special Parties.
 
See response to Item 33 below.
 
Item 33.    Recent Sales of Unregistered Securities.
 
In connection with a series of corporate transactions that occurred in July 2002, (i) the Registrant issued and sold 913 shares of its Series D preferred securities, liquidation preference $1,000, to Wachovia Realty Management Corporation, a Delaware corporation and affiliate of Wachovia Corporation, for a purchase price of $913,000, and (ii) 99,851,752 and 148,148 shares of the Registrant’s common stock, par value $0.01 per share, were issued to Wachovia Bank, National Association, and Wachovia Corporation, respectively, as part of the merger of First Union Real Estate Asset Company of Connecticut, a Virginia corporation and affiliate of Wachovia Corporation, with and into the Registrant in consideration of Wachovia Bank, National Association’s and Wachovia Corporation’s common stock of First Union Real Estate Asset Company of Connecticut. Each of these issuances and sales was made in a private placement exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”). The Series D preferred securities are not convertible or exchangeable into any other security and the Registrant does not anticipate that the Series D securities will be registered under the Securities Act. The Registrant plans to use the proceeds from the issuance and sale of the common stock and Series D preferred securities for general corporate purposes.
 
Prior to this offering of the Registrant’s Series A preferred securities, liquidation preference $25.00 per security, Wachovia Preferred Funding Holding Corp., the Registrant’s holding company, will acquire (i) 30,000,000 of the Registrant’s Series A preferred securities, (ii) 40,000,000 of the Registrant’s Series B preferred securities, liquidation preference $25.00 per security, and (iii) 4,254,413 of the Registrant’s Series C preferred securities, liquidation preference $1,000 per security. The Series A, B and C preferred securities will be acquired by Wachovia Preferred Funding Holding Corp. in exchange for participations in commercial and commercial real estate loans with an aggregate fair market value of $6.0 billion. This issuance of the Registrant’s Series A (those not registered pursuant to this Registration Statement), B and C preferred securities will be made in a private placement exempt from registration pursuant to Section 4(2) of the Securities Act. The Series A and B preferred securities are conditionally exchangeable, upon certain regulatory events, into preferred stock (or depositary shares representing such stock) of Wachovia Corporation.

S-11-II-1


Table of Contents
 
Item 34.    Indemnification of Directors and Officers.
 
Section 145 of the Delaware General Corporation Law (“DGCL”) provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed actions, suits or proceedings in which such person is made a party by reason of such person being or having been a director, officer, employee or agent of the corporation, subject to certain limitations. The statute provides that it is not exclusive of other rights to which those seeking indemnification may be entitled under any by-law, agreement, vote of shareholders or disinterested directors or otherwise.
 
Section 102(b)(7) of the DGCL permits a corporation to provide in its charter that a director of the corporation shall not be personally liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability:
 
 
 
for any breach of the director’s duty of loyalty to the corporation or its shareholders;
 
 
 
for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
 
 
 
for payments of unlawful dividends or unlawful stock purchases or redemptions; or
 
 
 
for any transaction from which the director derived an improper personal benefit.
 
Wachovia Funding’s by-laws provide for the indemnification of Wachovia Funding’s directors and executive officers by Wachovia Funding against liabilities arising out of his status as such. Wachovia Funding’s certificate of incorporation provides for the elimination of the personal liability of each director of Wachovia Funding, to the fullest extent permitted by the provisions of the DGCL, as the same may from time to time be in effect.
 
Wachovia Funding maintains directors and officers liability insurance. In general, the policy insures (i) Wachovia Funding’s directors and officers against loss by reason of any of their wrongful acts, and/or (ii) Wachovia Funding against loss arising from claims against the directors and officers by reason of their wrongful acts, all subject to the terms and conditions contained in the policy.
 
Under agreements which may be entered into by Wachovia Funding, certain controlling persons, directors and officers of Wachovia Funding may be entitled to indemnification by underwriters and agents who participate in the distribution of securities covered by the registration statement against certain liabilities, including liabilities under the Securities Act.
 
Item 35.    Treatment of Proceeds From Stock Being Registered.
 
Not applicable.
 
Item 36.    Financial Statements and Exhibits.
 
(a) Financial Statements
 
See page F-1 of the Prospectus for an index to financial statements of the Registrant included as part of the Prospectus.
 
(b) Exhibits
 
See Exhibit Index below.
 
Item 37.    Undertakings.
 
(a)    The undersigned Registrant hereby undertakes:

S-11-II-2


Table of Contents
 
(1)    To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
 
   (i) To include any prospectus required by Section 10(a)(3) of the Securities Act;
 
 (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
 
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
 
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement.
 
(2)    That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
 
(3)    To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
 
(4)    That, for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
 
(5)    To provide to the underwriters, at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
 
(b)    Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of Wachovia Funding pursuant to the foregoing provisions or otherwise (other than insurance), Wachovia Funding has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than insurance or the payment by Wachovia Funding of expenses incurred or paid by a director, officer or controlling person of Wachovia Funding, in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, Wachovia Funding will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
 

S-11-II-3


Table of Contents
 
SIGNATURES
 
Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-11 and has duly caused this Amendment No. 2 to Registration Statement No. 333-99847 to be signed on its behalf by the undersigned, thereunto duly authorized, in Charlotte, North Carolina, on the 18th day of November, 2002.
 
WACHOVIA PREFERRED FUNDING CORP.
By:
 
/s/    ROSS E. JEFFRIES, JR.

Name:
Title:
 
    Ross E. Jeffries, Jr.
    Senior Vice President and
    Assistant General Counsel
 
Pursuant to the requirements of the Securities Act, this Amendment No. 2 to Registration Statement No. 333-99847 has been signed by the following persons in the capacities and on the date indicated.
 
Name

  
Title

G. KENNEDY THOMPSON*

G. Kennedy Thompson
  
President and Chief Executive Officer
ROBERT P. KELLY*

Robert P. Kelly
  
Senior Executive Vice President and
Chief Financial Officer
DAVID M. JULIAN*

David M. Julian
  
Senior Vice President and Corporate Controller
(Principal Accounting Officer)
ROBERT L. ANDERSEN*

Robert L. Andersen
  
Director
 
By
 
    /s/  Ross E. Jeffries, Jr., Attorney-in-fact

   
Ross E. Jeffries, Jr., Attorney-in-fact
 
Dated: November 18, 2002

S-11-II-4


Table of Contents
 
EXHIBIT INDEX
 
Exhibit

    
Description

1
 
  
Form of Underwriting Agreement.
3
(a)
  
Certificate of Incorporation.*
3
(b)
  
Form of Certificates of Designations for Series A, B, C and D preferred securities.
3
(c)
  
Form of By-Laws.
4
 
  
Specimen of certificate representing Series A preferred securities.
5
 
  
Opinion of Ross E. Jeffries, Jr., Esq. relating to Series A preferred securities.*
8
 
  
Opinion of Sullivan & Cromwell relating to certain tax matters.
10
(a)
  
Form of Loan Participation Agreement and Agreement for Contribution between Wachovia Bank and Wachovia Preferred Funding Holding Corp.
10
(b)
  
Form of Loan Participation Assignment Agreement between Wachovia Preferred Funding Holding Corp. and Wachovia Preferred Funding Corp.
10
(c)
  
Form of Exchange Agreement between Wachovia Corporation, Wachovia Bank and Wachovia Preferred Funding Corp.
10
(d)
  
Promissory Note, dated as of September 1, 2002, between Wachovia Bank and Wachovia Preferred Funding Corp.
12
 
  
Computations of Ratios of Earnings to Fixed Charges.*
23
(a)
  
Consent of KPMG LLP.
23
(b)
  
Consent of Ross E. Jeffries, Jr., Esq. (Included in Exhibit 5.)*
23
(c)
  
Consent of Sullivan & Cromwell. (Included in Exhibit 8.)
24
 
  
Power of Attorney.*

*
 
Previously filed.

S-11-II-5


Table of Contents
 
PART II OF REGISTRATION STATEMENT OF FORM S-3 OF WACHOVIA CORPORATION
 
INFORMATION NOT REQUIRED IN PROSPECTUS
 
Item 14.    Other Expenses of Issuance and Distribution.
 
The estimated expenses in connection with this offering, other than underwriting discounts and commissions, are as follows:
 
Registration Statement filing fee
  
$
      0
Depositary’s fees and expenses
  
 
5,000
Legal fees and expenses
  
 
0
Blue Sky fees and expenses
  
 
0
Accounting fees and expenses
  
 
0
Listing fees and expenses
  
 
0
Rating agency fees
  
 
0
Printing costs
  
 
0
Miscellaneous
  
 
5,000
    

Total
  
$
10,000
    

 
Item 15.    Indemnification of Directors and Officers.
 
Sections 55-8-50 through 55-8-58 of the North Carolina Business Corporations Act (the “NCBC Act”) contain specific provisions relating to indemnification of directors and officers of North Carolina corporations. In general, the statute provides that (i) a corporation must indemnify a director or officer against reasonable expenses who is wholly successful in his defense of a proceeding to which he is a party because of his status as such, unless limited by the certificate of incorporation, and (ii) a corporation may indemnify a director or officer if he is not wholly successful in such defense, if it is determined as provided in the statute that the director or officer meets a certain standard of conduct, provided when a director or officer is liable to the corporation or liable on the basis of receiving a personal benefit, the corporation may not indemnify him. The statute also permits a director or officer of a corporation who is a party to a proceeding to apply to the courts for indemnification, unless the certificate of incorporation provides otherwise, and the court may order indemnification under certain circumstances set forth in the statute. The statute further provides that a corporation may in its certificate of incorporation or by-laws or by contract or resolution provide indemnification in addition to that provided by the statute, subject to certain conditions set forth in the statute.
 
Wachovia’s by-laws provide for the indemnification of Wachovia’s directors and executive officers by Wachovia against liabilities arising out of his status as such, excluding any liability relating to activities which were at the time taken known or believed by such person to be clearly in conflict with the best interests of Wachovia. Wachovia’s certificate of incorporation provides for the elimination of the personal liability of each director of Wachovia, to the fullest extent permitted by the provisions of the NCBC Act, as the same may from time to time be in effect.
 
Wachovia maintains directors and officers liability insurance. In general, the policy insures (i) Wachovia’s directors and officers against loss by reason of any of their wrongful acts, and/or (ii) Wachovia against loss arising from claims against the directors and officers by reason of their wrongful acts, all subject to the terms and conditions contained in the policy.
 
Under agreements which may be entered into by Wachovia, certain controlling persons, directors and officers of Wachovia may be entitled to indemnification by underwriters and agents who participate in the distribution of securities covered by the registration statement against certain liabilities, including liabilities under the Securities Act of 1933 as amended (the “Securities Act”).

S-3-II-1


Table of Contents
 
Item 16.    Exhibits.
 
See Exhibit Index below.
 
Item 17.    Undertakings.
 
(a)    The undersigned Registrant hereby undertakes:
 
(1)    To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
 
   (i) To include any prospectus required by Section 10(a)(3) of the Securities Act;
 
 (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
 
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
 
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) that are incorporated by reference in the registration statement.
 
(2)    That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
 
(3)    To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
 
(4)    That, for purposes of determining any liability under the Securities Act, each filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
 
(5)    That, for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
 
(b)    Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of Wachovia pursuant to the foregoing provisions or otherwise (other than insurance), Wachovia has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the

S-3-II-2


Table of Contents
event that a claim for indemnification against such liabilities (other than insurance or the payment by Wachovia of expenses incurred or paid by a director, officer or controlling person of Wachovia, in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, Wachovia will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

S-3-II-3


Table of Contents
SIGNATURES
 
Pursuant to the requirements of the Securities Act of 1933, Wachovia Corporation certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to Registration Statement No. 333-99847-01 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Charlotte, State of North Carolina, as of the 18th day of November, 2002.
 
WACHOVIA CORPORATION
By:
 
/s/    MARK C. TREANOR

Name:
 
    Mark C. Treanor
  Title:
 
    Senior Executive Vice President, Secretary
   
    and General Counsel
 
Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 2 to Registration Statement No. 333-99847-01 has been signed by the following persons in the capacities and on the date indicated.
 
Name

  
Capacity

    L.M. BAKER, JR.*        

L.M. Baker, Jr.
  
Chairman and Director
     G. KENNEDY THOMPSON*        

G. Kennedy Thompson
  
President and Chief Executive Officer and Director
    ROBERT P. KELLY*        

Robert P. Kelly
  
Senior Executive Vice President and Chief Financial Officer
    DAVID M. JULIAN*        

David M. Julian
  
Senior Vice President and Corporate Controller (Principal Accounting Officer)
    F. DUANE ACKERMAN*        

F. Duane Ackerman
  
Director
    JOHN D. BAKER, II*        

John D. Baker, II
  
Director
    JAMES S. BALLOUN*        

James S. Balloun
  
Director
    ROBERT J. BROWN*        

Robert J. Brown
  
Director
    PETER C. BROWNING*        

Peter C. Browning
  
Director
    JOHN T. CASTEEN, III*        

John T. Casteen, III
  
Director
    WILLIAM H. GOODWIN, JR.*        

William H. Goodwin, Jr.
  
Director

S-3-II-4


Table of Contents
Name

  
Capacity

    ROBERT A. INGRAM*        

Robert A. Ingram
  
Director
    MACKEY J. MCDONALD*        

Mackey J. McDonald
  
Director
    JOSEPH NEUBAUER*        

Joseph Neubauer
  
Director
    LLOYD U. NOLAND, III*        

  
Director
Lloyd U. Noland, III
    
    RUTH G. SHAW*        

Ruth G. Shaw
  
Director
    LANTY L. SMITH*        

Lanty L. Smith
  
Director
    JOHN C. WHITAKER, JR.*        

John C. Whitaker, Jr.
  
Director
    DONA DAVIS YOUNG*        

Dona Davis Young
  
Director
* By    /s/    MARK C. TREANOR, Attorney-in-fact

Mark C. Treanor, Attorney-in-fact
    
 
Dated: November 18, 2002

S-3-II-5


Table of Contents
 
EXHIBIT INDEX
 
Exhibit

    
Description

1
 
  
Form of Underwriting Agreement.
3
(a)
  
Restated Articles of Incorporation. (Incorporated by reference to Exhibit 3(a) to Wachovia Corporation’s 2001 Annual Report on Form 10-K.)
3
(b)
  
Form of Articles of Amendment.
3
(c)
  
By-laws of Wachovia Corporation, as amended. (Incorporated by reference to Exhibit 3(b) to Wachovia Corporation’s 2001 Annual Report on Form 10-K.)
4
(a)
  
Specimen of certificate representing Series G, Class A preferred stock.
4
(b)
  
Specimen of depositary receipt representing  1/6th of a share of Series G, Class A preferred stock. (Included in Exhibit 4(c)).
4
(c)
  
Form of Deposit Agreement between Wachovia Corporation and Wachovia Bank, National Association.
5
 
  
Opinion of Ross E. Jeffries, Jr., Esq., relating to depositary shares and Series G, Class A preferred stock.*
10
 
  
Form of Exchange Agreement between Wachovia Corporation, Wachovia Bank, National Association and Wachovia Preferred Funding Corp.
12
 
  
Computations of Consolidated Ratios of Earnings to Fixed Charges and Preferred Stock Dividends.*
23
(a)
  
Consent of KPMG LLP.
23
(b)
  
Consent of Ernst & Young LLP.
23
(c)
  
Consent of Ross E. Jeffries, Jr., Esq. (Included in Exhibit 5.)*
24
 
  
Power of Attorney.*

*
 
Previously filed.

S-3-II-6
EX-1 3 dex1.htm UNDERWRITING AGREEMENT Underwriting Agreement
Exhibit 1
 
WACHOVIA PREFERRED FUNDING CORP.
 
[            ]% NONCUMULATIVE EXCHANGEABLE PERPETUAL
PREFERRED SECURITIES, SERIES A
(liquidation preference $25.00 per preferred security) exchangeable
in specified circumstances into
Noncumulative Preferred Stock
of Wachovia Corporation
 
UNDERWRITING AGREEMENT
 
[            ], 2002
 
Wachovia Securities, Inc.
One Wachovia Center
Charlotte, North Carolina 28288
 
As Representative of the Underwriters named in Schedule I hereto
 
Ladies and Gentlemen:
 
Wachovia Preferred Funding Holding Corp., a corporation organized under the laws of the State of California (“Holding”) and a wholly-owned subsidiary of Wachovia Bank, National Association (the “Bank”), proposes to sell to the underwriters named in Schedule I hereto (the “Underwriters,” provided that if such underwriter and the Representative are one and the same person, then any reference to the term “Representative” shall be construed accordingly), for whom you are acting as Representative, 15,000,000 shares of [            ]% noncumulative exchangeable perpetual preferred securities, Series A (liquidation preference $25.00 per preferred security) (the “Securities”) of Wachovia Preferred Funding Corp., a corporation organized under the laws of the State of Delaware (the “Company”).
 
Upon the occurrence of a Supervisory Event (as defined in the Prospectus (as defined below)) and at the direction of the Office of the Comptroller of the Currency (the “OCC”), the Securities will be exchanged on a one for one basis for depositary shares (the “Depositary Shares”) representing Series G [            ]% noncumulative preferred stock, Class A (liquidation preference $150.00 per share (the “Wachovia Securities”)) of Wachovia Corporation, a corporation organized under the laws of the State of North Carolina (“Wachovia”). Each Depositary Share will represent a one-sixth interest in one Wachovia Security and will be issued pursuant to a Deposit Agreement among Wachovia, the Bank and the holders from time to time of the depository receipts (the “Depositary Receipts”) issued by the Bank, as Depository, and evidencing the Depositary Shares (the “Deposit Agreement”). Wachovia, Holding and the Company are hereinafter collectively referred to as the “Wachovia Parties.”
 
SECTION 1.    Representations and Warranties.    Wachovia, Holding and the Company jointly and severally represent and warrant to each Underwriter that:
 
 
(a)    Compliance
 
with Registration Requirements.
 
 
(i)
 
The registration statement (File Nos. 333-99847 and 333-99847-01) on Form S-11 and Form S-3, respectively (collectively, the “registration statement”), including a prospectus that shall be used in connection with the sale of the Securities, has been filed by Wachovia and the Company (each, a “Registrant”) with the Securities and Exchange Commission (the “Commission”), in the form heretofore delivered to the Representative. The registration statement, as it may have been amended prior to the date of this Agreement, has become effective under the Securities Act of

1


 
1933, as amended (the “Securities Act”) and no stop order suspending the effectiveness of the registration statement has been issued under the Securities Act and no proceedings for that purpose have been instituted or are pending, or to the knowledge of either Registrant, are contemplated by the Commission. The registration statement, including any final prospectus filed under Rule 424(b) under the Securities Act and the documents incorporated by reference in the prospectus contained in the registration statement as of the time it became effective, each as amended to the date of this Agreement, is hereinafter referred to as the “Registration Statement”; the prospectus included in the registration statement as initially declared effective by the Commission is hereinafter referred to as the “Preliminary Prospectus”; and the final prospectus, in the form first filed under Rule 424(b) under the Securities Act, is hereinafter referred to as the “Prospectus.” Any reference herein to the Registration Statement, the Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein which were filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on or before the date of this Agreement, and any reference herein to the terms “amend” or “amendment” with respect to the Registration Statement, the Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the filing of any document under the Exchange Act deemed to be incorporated therein by reference after the date of this Agreement.
 
 
(ii)
 
The Preliminary Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the Securities Act and the rules and regulations of the Commission thereunder, and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, that they make no representations or warranties as to the information contained in or omitted from the Preliminary Prospectus in reliance upon and in conformity with information furnished in writing to the Registrants by or on behalf of any Underwriter through the Representative expressly for use therein.
 
 
(iii)
 
The Registration Statement, at the time it became effective, and any amendments thereof filed prior to the date hereof, as of their respective effective dates, conformed in all material respects to the requirements of the Securities Act and the rules and regulations of the Commission thereunder; the Registration Statement and the Prospectus, and any amendments thereof and supplements thereto, will conform in all material respects to the requirements of the Securities Act and the respective rules and regulations of the Commission thereunder, and no such document, as of their respective effective date and, in the case of the Prospectus and any amendments thereof or supplements thereto, as of the Closing Date (as hereinafter defined), included or will include any untrue statement of a material fact or omitted or will omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, provided that they make no representations or warranties as to the information contained in or omitted from the Prospectus or any amendment thereof in reliance upon and in conformity with information furnished in writing to the Registrants by or on behalf of any Underwriter specifically for use in connection with the preparation of the Prospectus or any amendment thereof.
 
 
(b)
 
Good Standing of the Wachovia Parties.
 
 
(i)
 
Each of the Wachovia Parties and the Bank has been duly incorporated, is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation and has all power and authority (corporate and other) necessary to own or hold its material properties and to conduct its business substantially in the manner in which it presently conducts such business.
 
 
(ii)
 
The organization of the Company and its subsidiaries and their proposed method of operation will enable the Company to meet the requirements for qualification and taxation as a real estate investment trust under the Internal Revenue Code of 1986, as amended.
 

2


 
(iii)
 
Neither the Bank nor any of its subsidiaries (including the Company) is party to or otherwise the subject of any consent decree, memorandum of understanding, written commitment or other written supervisory agreement with the OCC, or any other Federal or state authority or agency charged with the supervision or insurance of the Bank and its subsidiaries.
 
 
(c)
 
Authorization of the Securities.    The Securities have been duly authorized, issued and delivered by the Company and are fully paid and non-assessable; the Securities and all other capital stock of the Company conform in all material respects to the descriptions thereof in the Prospectus; the issuance of the Securities is not subject to preemptive or other similar rights; the Securities are directly owned by Holding free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity; and upon the delivery of and payment for the Securities on the Closing Date hereunder the several Underwriters will acquire valid and unencumbered title to the Securities to be delivered by Holding.
 
 
(d)
 
The Wachovia Securities and Depositary Shares.    The Wachovia Securities have been duly authorized and reserved for issuance and when issued and delivered upon the occurrence of a Supervisory Event will be validly issued, fully paid and non-assessable and will not be issued in violation of the preemptive or other similar rights of any securityholder of Wachovia; the capital stock of Wachovia conforms in all material respects to the description thereof in the Prospectus; upon issuance by the Depositary of Depositary Receipts evidencing Depositary Shares against the deposit of Wachovia Securities in respect thereof in accordance with the provisions of the Deposit Agreement, such Depositary Receipts will be duly and validly issued and the persons in whose names the Depositary Receipts are registered will be entitled to the rights specified therein and in the Deposit Agreement; and the Deposit Agreement and the Depositary Shares conform in all material respects to the descriptions thereof in the Prospectus.
 
 
(e)
 
Authorization and Execution of Agreements; No Breach.    This Agreement, the Deposit Agreement and the Assignment Agreement dated ·, 2002 between Holding and the Company (the “Assignment Agreement”) have been duly authorized, executed and delivered by, and are valid, binding and enforceable obligations of, each of the Wachovia Parties that is a party thereto. The execution, delivery and performance of this Agreement, the Deposit Agreement and the Assignment Agreement by the Wachovia Parties, the issuance and delivery of the Securities by the Company and the Wachovia Securities by Wachovia, and compliance with the provisions hereof and thereof by the Wachovia Parties will not constitute a breach of or default under: (i) the corporate charter or by-laws of any Wachovia Party, (ii) any material agreement, indenture or other instrument relating to indebtedness for money borrowed to which any Wachovia Party is a party, or, (iii) to the best of any Wachovia Party’s knowledge, any law, order, rule, regulation or decree of any court, governmental agency or authority located in the United States having jurisdiction over any of the Wachovia Parties or any of their subsidiaries or any property of any Wachovia Party, which breach or default would be reasonably likely to have a material adverse effect on any Wachovia Party and its subsidiaries taken as a whole.
 
 
(f)
 
No Further Approvals.    No consent, authorization or order of, or filing or registration with, any court or governmental agency or authority is required for the execution, delivery and performance of this Agreement, including the sale of the Securities and the deposit by Wachovia of the Wachovia Securities with the Bank against issuance of the Depositary Receipts, except such as have been made or obtained or will be made or obtained on or before the Closing Date under the Securities Act and under applicable OCC rules and regulations and such as may be required under the blue sky laws of any jurisdiction in connection with the purchase and distribution of the Securities by the Underwriters in the manner contemplated herein and in the Prospectus.
 
 
(g)
 
Investment Company Act.    Neither Registrant is or, after giving effect to the offering and sale of the Securities as described in the Prospectus, will be an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
 
 
(h)
 
No Dividend Payment.    With respect to each subsidiary of the Company or the Bank, as applicable, which is material to the consolidated assets or consolidated revenues of the Company or the Bank, as

3


 
applicable (in each case, a “Material Subsidiary”), no Material Subsidiary is currently prohibited, directly or indirectly, from (i) paying any dividends to the Company or the Bank, as the case may be, (ii) making any other distribution on such subsidiary’s capital stock, (iii) repaying to the Company or the Bank, as the case may be, any loans or advances to such subsidiary from the Company or the Bank, as the case may be, or (iv) transferring any of such subsidiary’s property or assets to the Company or the Bank or, in the case of a subsidiary of the Bank, to any other subsidiary of the Bank, except in each case as described in or contemplated by the Prospectus.
 
SECTION 2.    Purchase and Sale.    Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, Holding agrees to sell to each Underwriter, and each Underwriter agrees, severally and not jointly, to purchase from Holding, at the purchase price of $25.00 per Security, the amount of Securities set forth opposite such Underwriter’s name in Schedule I hereto. Holding agrees to pay the Underwriters the fees described in the Prospectus under “Underwriting” in an aggregate amount equal to $[            ] per Security on the Closing Date.
 
SECTION 3.    Delivery and Payment.    Delivery of and payment for the Securities shall be made at 10:00 AM, New York City time, on [            ], 2002, which date and time may be postponed by agreement between the Representative and Holding (such date and time of delivery of and payment for the Securities being herein called the “Closing Date”). Delivery of the Securities shall be made to the Representative for the respective accounts of the several Underwriters against payment by the several Underwriters through the Representative of the purchase price thereof to or upon the order of Holding in the manner and type of funds specified by Holding. Certificates for the Securities shall be registered in such names and in such denominations as the Representative may request not less than one full business day in advance of the Closing Date.
 
Holding agrees to have the Securities available for inspection, checking and packaging in New York, New York, on the business day prior to the Closing Date.
 
SECTION 4.    Offering by Underwriters.    It is understood that the several Underwriters propose to offer the Securities for sale as set forth in the Prospectus.
 
SECTION 5.    Agreements.    Each of the Wachovia Parties jointly and severally agrees with the each Underwriter that:
 
 
(a)
 
The Registrants will cause the Prospectus to be filed, or transmitted for filing, with the Commission pursuant to Rule 424 under the Securities Act and will promptly advise the Representative when the Prospectus has been so filed or transmitted for filing, and, prior to the termination of the offering of the Securities to which such Prospectus relates, also will promptly advise the Representative (i) when any amendment to the Registration Statement has become effective or any supplement to the Prospectus has been so filed or transmitted for filing, (ii) of any request by the Commission for any amendment of the Registration Statement or the Prospectus or for any additional information, (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the institution or threatening of any proceeding for that purpose, and (iv) of the receipt by Wachovia or the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. The Registrants will use their reasonable best efforts to prevent the issuance of any such stop order and, if issued, to obtain as soon as reasonably possible the withdrawal thereof. For so long as a prospectus relating to the Securities is required to be delivered under the Securities Act, the Registrants will not file or transmit for filing any amendment to the Registration Statement or the Prospectus which relates to the Securities unless the Registrants have furnished you or counsel for the Underwriters a copy for your review prior to filing or transmission for filing.
 
 
(b)
 
If, at any time when a prospectus relating to the Securities is required to be delivered under the Securities Act, any event occurs as a result of which the Prospectus as then amended or supplemented

4


 
would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or if it shall be necessary to amend or supplement the Prospectus in connection with the sale of the Securities to comply with the Securities Act or the rules and regulations of the Commission thereunder, promptly after becoming aware thereof, the Registrants will notify the Representative or counsel for the Underwriters and, upon their or its reasonable request, prepare and file or transmit for filing with the Commission an amendment or supplement which will correct such statement or omission or effect such compliance.
 
 
(c)
 
During the period when the Prospectus is required to be delivered under the Securities Act or the Exchange Act, the Registrants will file or cause to be filed all documents required to be filed with the Commission pursuant to the Exchange Act within the time periods required by the Exchange Act.
 
 
(d)
 
The Registrants will make generally available to their security holders and to the Representative as soon as practicable, but not later than 45 days after the end of the 12-month period beginning at the end of the fiscal quarter of the Registrants during which the filing, or transmission for filing, of the Prospectus pursuant to Rule 424 under the Act occurs (except not later than 90 days after the end of such period if such quarter is the last fiscal quarter), an earnings statement (which need not be audited) of each Registrant and their respective subsidiaries, covering such 12-month period, which will satisfy the provisions of Section 11(a) and Rule 158 of the Securities Act.
 
 
(e)
 
The Registrants will use their best efforts to furnish in New York City to each of the Underwriters prior to 10:00 a.m., New York City time, on the New York business day next succeeding the date of this Agreement and from time to time, as many copies of the Prospectus, the Preliminary Prospectus and all amendments of such documents as may be reasonably requested.
 
 
(f)
 
Holding will pay all expenses incident to the performance of the Wachovia Parties of their obligations under this Agreement, and will pay the expenses of preparing, printing or reproduction and filing all documents relating to the offering and mailing and delivering such to Underwriters and dealers, any filing fee incident to any required review by the National Association of Securities Dealers, Inc. of the terms of the sale of the Securities, all expenses in connection with the registration of the Securities under the Exchange Act and the listing of the Securities on the New York Stock Exchange, all expenses in connection with the qualification of the Securities for offering and sale under state securities laws (including the fees and disbursements of counsel to the Underwriters in connection with such qualification and the preparation of the Blue Sky and legal investment surveys), any taxes payable in connection with the sale and delivery of the Securities by Holding to the Underwriters, and any fees charged for rating the Securities.
 
 
(g)
 
The Registrants will use their reasonable best efforts to arrange for the qualification of the Securities for sale under the laws of such jurisdictions as the Representative may designate and to maintain such qualifications in effect so long as required for the distribution of the Securities; provided that the Wachovia Parties shall not be required to qualify to do business in any jurisdiction where they are not now qualified or to take any action which would subject them to general or unlimited service of process in any jurisdiction where they are not now so subject.
 
SECTION 6.    Conditions to the Obligations of the Underwriters.    The obligations of the Underwriters to purchase the Securities shall be subject to the accuracy in all material respects of the representations and warranties on the part of the Wachovia Parties contained herein as of the date hereof and the Closing Date, to the accuracy in all material respects of the statements of the Wachovia Parties made in any certificates pursuant to the provisions hereof, to the performance in all material respects by the Wachovia Parties of their obligations hereunder and to the following additional conditions:
 
 
(a)
 
Effectiveness of Registration Statement.    No stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted and be pending or have been threatened as of the Closing Date; and all requests for additional information on the part of the Commission shall have been complied with.

5


 
 
(b)
 
Certificates.    Each of the Wachovia Parties shall have furnished to the Representative a certificate, dated the Closing Date, signed by the principal financial or accounting officer of each Wachovia Party, to the effect that, to the best of his/her knowledge after reasonable investigation:
 
 
(i)
 
The representations and warranties of such Wachovia Party in this Agreement are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date and such Wachovia Party has complied with all the agreements and satisfied all the conditions herein on its part to be performed or satisfied at or prior to the Closing Date, in all material respects;
 
 
(ii)
 
No stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted and are pending or have been threatened as of such date;
 
 
(iii)
 
Since the date of the most recent financial statements included in the Prospectus, there has been no material adverse change in the financial position, results of operations, cash flows or prospects relating thereto of such Wachovia Party together with its subsidiaries taken as a whole, except as set forth in or contemplated by the Prospectus; and
 
 
(iv)
 
Since the date of this Agreement, no downgrading has occurred in the rating accorded to the Securities or as described in Section 6(h).
 
 
(c)
 
Opinion of Counsel of Wachovia.    The Representative shall have received a written opinion of counsel from Ross E. Jeffries, Esq., Senior Vice President and Assistant General Counsel of Wachovia, dated as of the Closing Date and addressed to the Underwriters in form and substance satisfactory to counsel for the Underwriters (substantially in the form of Exhibit A hereto).
 
As to matters governed by New York law, Mr. Jeffries may rely upon the opinion of Sullivan and Cromwell delivered pursuant to Section 6(d).
 
 
(d)
 
Opinion of Counsel for the Wachovia Parties.    The Representative shall have received written opinions from Sullivan and Cromwell, counsel for the Wachovia Parties, dated as of the Closing Date and addressed to the Underwriters in form and substance satisfactory to counsel for the Underwriters (substantially in the form of Exhibit B-1 and Exhibit B-2 hereto).
 
As to matters governed by North Carolina law, Sullivan & Cromwell may rely upon the opinion of Ross E. Jeffries, Esq., Senior Vice President and Assistant General Counsel of Wachovia, delivered pursuant to Section 6(c).
 
 
(e)
 
Opinion of Counsel for the Underwriters.    The Representative shall have received from Cleary, Gottlieb, Steen & Hamilton, counsel for the Underwriters, such opinion or opinions, dated as of the Closing Date and addressed to the Underwriters, with respect to the issuance and sale of the Securities, the Registration Statement, the Prospectus and other related matters as the Representative may reasonably require, and the Wachovia Parties shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters.
 
 
(f)
 
Accountant’s Comfort Letters.    The Representative shall have received from KPMG LLP and Ernst & Young LLP, independent accountants for the Wachovia Parties, letters, dated as of the date hereof and, in the case of KPMG LLP, as of the Closing Date, in form and substance satisfactory to the Representative (substantially in the form of Exhibit C, Exhibit D-1 and Exhibit D-2 hereto) containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectus.

6


 
 
(g)
 
Material Adverse Change.    Subsequent to the date hereof, there shall not have occurred any change, or any development involving a prospective change, in or affecting the financial position, long-term debt, stockholders’ equity or results of operations of any Wachovia Party together with its consolidated subsidiaries, taken as a whole, which the Representative concludes, after consultation with the Wachovia Parties, in the judgment of the Representative is so material and adverse as to make it impractical or inadvisable to proceed with the public offering or the delivery of the Securities as contemplated by the Prospectus.
 
 
(h)
 
Maintenance of Rating.    At the Closing Date, the Securities shall be rated not less than [            ] by Moody’s Investors Service, Inc. and not less than [            ] by Standard & Poors Rating Services. Subsequent to the execution of this Agreement, there shall not have been any decrease in the rating of Securities to below such ratings by any “nationally recognized statistical rating organization” (as defined for purposes of Rule 436(g) under the Securities Act) and neither rating agency shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of Wachovia’s unsecured debt securities or preferred stock.
 
 
(i)
 
Approval of Listing.    The Securities shall have been listed and admitted and authorized for trading on the New York Stock Exchange, and satisfactory evidence of such actions shall have been provided to the Representative.
 
 
(j)
 
Additional Documents.    The Wachovia Parties shall have furnished to the Representative such further information, certificates and documents as they may reasonably request prior to the Closing Date.
 
If any of the conditions specified in this Section 6 shall not have been fulfilled in all material respects when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be in all material respects reasonably satisfactory in form and substance to the Representative and their counsel, this Agreement and all obligations of the Underwriters hereunder may be canceled at, or at any time prior to, the Closing Date by the Representative. Notice of such cancellation shall be given to the Wachovia Parties in writing or by telephone or telegraph confirmed in writing.
 
SECTION 7.    Indemnification and Contribution.
 
 
(a)
 
The Wachovia Parties jointly and severally agree to indemnify and hold harmless each Underwriter and each person who controls any Underwriter within the meaning of either the Securities Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement or in any amendment thereof filed prior to the date hereof, or in the Registration Statement or the Prospectus, or in any amendment thereof or supplement thereto, or in the Preliminary Prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that (i) the Wachovia Parties will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Wachovia Parties by or on behalf of any Underwriter through the Representative specifically for use in the Prospectus or any supplement thereto or the Preliminary Prospectus, and (ii) such indemnity with respect to the Preliminary Prospectus shall not inure to the benefit of any Underwriter (or any person controlling such Underwriter) from whom the person asserting any such loss, claim, damage or liability purchased the Securities which are the subject thereof if such person was not sent or given a copy of the Prospectus (or the Prospectus as amended or supplemented),

7


 
excluding documents incorporated therein by reference, at or prior to the confirmation of the sale of such Securities to such person in any case where such delivery is required by the Securities Act and the untrue statement or omission of a material fact contained in the Preliminary Prospectus was corrected in the Prospectus (or the Prospectus as amended or supplemented). This indemnity agreement will be in addition to any liability which the Wachovia Parties may otherwise have.
 
 
(b)
 
Each Underwriter severally agrees to indemnify and hold harmless each Wachovia Party, each of their directors, each of their officers who signs the Registration Statement, and each person who controls each Wachovia Party within the meaning of either the Securities Act or the Exchange Act, to the same extent as the foregoing indemnity from the Wachovia Parties to each Underwriter, but only with reference to written information furnished to the Wachovia Parties by or on behalf of such Underwriter through the Representative specifically for use in the Prospectus or any supplement thereto or the Preliminary Prospectus. This indemnity agreement will be in addition to any liability which any Underwriter may otherwise have.
 
 
(c)
 
Promptly after receipt by an indemnified party under Section 7(a) or (b) of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party will not relieve the indemnifying party from any liability which it may have to any indemnified party otherwise than under Section 7(a) or (b). In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein, and to the extent that it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof, with counsel satisfactory to such indemnified party; provided that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assert such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of its election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under Section 7(a) or (b) for any legal or other expenses subsequently incurred by such indemnified party (other than reasonable costs of investigation) in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in connection with the assertion of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate national counsel, approved by the Representative, representing the indemnified parties who are parties to such action), (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action or (iii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party; and except that, if clause (i) or (iii) is applicable, such liability shall be only in respect of the counsel referred to in such clause (i) or (iii).
 
 
(d)
 
If the indemnification provided for in this Section 7 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Wachovia Parties on the one hand and the Underwriters of the Securities on the other from the offering of the Securities. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to

8


 
give the notice required under subsection (c) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Wachovia Parties on the one hand and the Underwriters of the Securities on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Wachovia Parties on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering of the Securities (before deducting expenses) received by the Wachovia Parties bear to the total underwriting discounts and commissions received by the Underwriters. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Wachovia Parties on the one hand or the Underwriters on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Wachovia Parties and the Underwriters agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the applicable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The obligations of the Underwriters of Securities in this subsection (d) to contribute are several in proportion to their respective underwriting obligations with respect to the Securities and not joint.
 
SECTION 8.    Termination.    This Agreement shall be subject to termination in the absolute discretion of the Representative, by notice given to Holding prior to delivery of and payment for the Securities, if prior to such time (i) trading in securities generally on the New York Stock Exchange shall have been suspended or materially limited, (ii) a general moratorium on commercial banking activities in New York shall have been declared by either Federal or New York State authorities, (iii) there shall have occurred a material disruption in commercial banking or securities settlement or clearance services in the United States, or (iv) there shall have occurred any material outbreak or escalation of hostilities or other calamity or crisis the effect of which on the financial markets of the United States, such as to make it, in the reasonable judgment of the Representative, impracticable or inadvisable to proceed with the public offering or the delivery of the Securities as contemplated by the Prospectus.
 
SECTION 9.    Substituted Underwriters.    If, on the Closing Date, any one or more of the Underwriters shall fail or refuse to purchase Securities that it or they have agreed to purchase hereunder on such date, and the aggregate number of Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate number of the Securities to be purchased on the Closing Date, the other Underwriters shall be obligated severally in the proportions that the number of Securities set forth opposite their respective names in Schedule I bears to the aggregate number of Securities set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as the Underwriters may agree, to purchase the Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on the Closing Date; provided that in no event shall the number of Securities that any Underwriter has agreed to purchase pursuant to Section 2 above be increased pursuant to this Section 9 by an amount in excess of

9


one-ninth of such number of Securities without the written consent of such Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Securities and the aggregate number of Securities with respect to which such default occurs is more than one-tenth of the aggregate number of Securities to be purchased on the Closing Date, and arrangements satisfactory to the Underwriters and the Wachovia Parties for the purchase of such Securities are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter or the Wachovia Parties. In such case either the Underwriters or the Wachovia Parties shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and in the Prospectus or in any other documents or arrangements may be effected. Any action taken under this Section 9 shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement.
 
SECTION 10.    Certain Liabilities Upon Termination.    If this Agreement shall be terminated pursuant to Section 8 hereof, the Wachovia Parties shall not then be under any liability to any Underwriter except as provided in Sections 5(g) and 7 hereof; but, if for any other reason, any Securities are not delivered by or on behalf of the Company as provided herein, Holding will reimburse the Underwriters through you for all actual out-of-pocket expenses approved in writing by you, including fees and disbursements of counsel, reasonably incurred by the Underwriters in making preparations for the purchase, sale and delivery of the Securities not so delivered, but the Wachovia Parties shall then be under no further liability to any Underwriter in respect of the Securities not so delivered except as provided in Sections 5(g) and 7 hereof.
 
SECTION 11.    Representations and Indemnities to Survive.    The respective agreements, representations, warranties, indemnities and other statements of the Wachovia Parties or their respective officers and of the Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or the Wachovia Parties or any of the officers, directors or controlling persons referred to in Section 7 hereof, and will survive delivery of and payment for the Securities. The provisions of Sections 5(g), 7, 9, 13, 14 and 15 hereof shall survive the termination or cancellation of this Agreement.
 
SECTION 12.    Notices.    All communications hereunder will be in writing and effective only on receipt, and:
 
 
(i)
 
if sent to the Underwriters, will be mailed, delivered or telefaxed to:
 
Wachovia Securities, Inc.
One Wachovia Center
Charlotte, North Carolina 28288
Attention: [            ]
Facsimile: (704) 374-[            ]
 
With a copy to:
 
Cleary, Gottlieb, Steen and Hamilton
2000 Pennsylvania Ave, N.W.
Washington D.C. 20006
Attention: Kenneth Bachman, Esq.
Facsimile: (202) 974-1999
 
 
(ii)
 
if sent to a Wachovia Party, will be mailed, delivered or telefaxed to such Wachovia Party at:
 
One Wachovia Center
Charlotte, North Carolina 28288
Attention: Ross Jeffries
Facsimile: (704) 715-4496
 

10


With a copy to:
 
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Attention: Robert Downes, Esq.
Facsimile: (212) 558-3588
 
SECTION 13.    Successors.    This Agreement will inure to the benefit of and be binding upon the parties hereto (including any Underwriter or Underwriters added pursuant to Section 9 hereof) and their respective successors, heirs, executors, administrators and the officers and directors and controlling persons referred to in Section 7 hereof, and no other person will have any right or obligation hereunder.
 
SECTION 14.    Applicable Law.    This Agreement will be governed by and construed in accordance with the laws of the State of New York.
 
SECTION 15.    Counterparts; Notices.    This Agreement may be signed in any number of counterparts, each of which shall be deemed an original, which taken together shall constitute one and the same instrument.
 
SECTION 16.    Action by Underwriters.    Any action under this Agreement taken by the Underwriters jointly or by the firm signing below on behalf of you as the Representative will be binding upon all the Underwriters.

11


 
If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement between the Wachovia Parties and the Underwriters.
 
Very truly yours,
 
WACHOVIA CORPORATION
By:
   
   
   
Name:
Title:
 
WACHOVIA PREFERRED FUNDING HOLDING CORP.
By:
   
   
   
Name:
Title:
 
WACHOVIA PREFERRED FUNDING CORP.
By:
   
   
   
Name:
Title:
 
 
 
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
 
WACHOVIA SECURITIES, INC.
By:
   
   
   
Name:
Title:

12


 
SCHEDULE I
 
Underwriters

  
Number of Securities

 
Wachovia Securities, Inc.
      
[                                                          ]
  
[                                 
]
[                                                          ]
  
[                                 
]
[                                                          ]
  
[                                 
]
        
Total
      
    

    
[        ]
 
    

1


 
EXHIBIT A
 
FORM OF WACHOVIA LEGAL OPINION
LETTERHEAD OF ROSS E. JEFFRIES, JR.
 
 
(i)
 
Each of Wachovia and the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is chartered or organized, with corporate power and authority under such laws to own its material properties and to conduct its business substantially in the manner in which it presently conducts such business.
 
 
(ii)
 
To my knowledge, there is no pending or threatened action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving any Wachovia Party or its or their property of a character required to be disclosed in the Registration Statement that is not adequately disclosed in the Prospectus.
 
 
(iii)
 
To my knowledge, none of Wachovia and the Company is in violation or default of (a) any provision of their respective articles, certificate, charter or bylaws, as the case may be, (b) any material agreement, indenture or other instrument relating to indebtedness for money borrowed known to me to which Wachovia or the Company is a party, or (c) any statute, law, rule, regulation, judgment, order or decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over Wachovia or the Company or any of its or their respective properties, as applicable, except, in the case of clauses (b) and (c) above, where such violation or default could not reasonably be expected, either individually or in the aggregate with all other violations and defaults referred to in this paragraph (if any), to have a material adverse effect on Wachovia or the Company, together with their respective subsidiaries, taken as a whole. To my knowledge, Holding is not in violation or default of any material agreement, indenture or other instrument relating to indebtedness for money borrowed known to me which Holding is a party, except where such violation or default could not be reasonably expected, either individually or in the aggregate with all other violations and defaults referred to herein, to have a material adverse effect on Holding, together with its subsidiaries, taken as a whole.
 
 
(iv)
 
The Underwriting Agreement, the Deposit Agreement and the Assignment Agreement have each been duly authorized, executed and delivered by, and each of the Deposit Agreement and the Assignment Agreement are valid and binding obligations of, each of the applicable Wachovia Parties that is a party thereto, enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles. The execution, delivery and performance of the Underwriting Agreement, the Deposit Agreement and the Assignment Agreement by each of Wachovia and the Company, the issuance and delivery of the Securities by the Company and the Wachovia Securities by Wachovia, and compliance with the provisions hereof and thereof by each of Wachovia and the Company will not constitute a breach of or default under: (a) any provision of their respective articles, certificate, charter or bylaws, as the case may be, (b) any material agreement, indenture or other instrument relating to indebtedness for money borrowed known to me to which Wachovia or the Company is a party, or (c) to my knowledge, any law, order, rule, regulation or decree of any court, governmental agency or authority located in the United States having jurisdiction over Wachovia or the Company or any of their subsidiaries or any property of any Wachovia Party, which breach or default could not reasonably be expected, either individually or in the aggregate, to have a material adverse effect on Wachovia or the Company, together with their respective subsidiaries, taken as a whole. The execution and performance of the Underwriting Agreement and the Assignment Agreement by Holding, and compliance with the provisions thereof by Holding will not constitute a breach of or default under any material agreement, indenture or other instrument relating to indebtedness for money borrowed known to me to which Holding is a party, which breach or default could not reasonably be expected, either individually or in the aggregate, to have a material adverse effect on Holding, together with its subsidiaries, taken as a whole.

A-1


 
 
(v)
 
No regulatory consent, authorizations, approvals or filings are required to be obtained or made by Holding, the Company or Wachovia under the Federal laws of the United States or the laws of the State of North Carolina (a) for the issuance and sale of the Securities, or (b) for the entry by Holding, the Company, and Wachovia into the Underwriting Agreement, the Deposit Agreement or the Assignment Agreement, as the case may be, and the consummation of the transactions contemplated therein, other than such regulatory consents, authorizations or filings as have been made or obtained; provided, however, that for purposes of this paragraph (v), I express no opinion with respect to state securities laws, other antifraud laws or fraudulent transfer laws.
 
 
(vi)
 
The Registration Statement has become effective under the Act and the Prospectus was filed on ·, 2002 pursuant to Rule 424(b) under the Securities Act; to the best of my knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are pending or threatened under the Securities Act; each part of the Registration Statement, when such part became effective (including those documents incorporated by reference), any amendments thereof filed prior to the date hereof, as of their respective effective dates, and the Registration Statement and the Prospectus appeared on their face to be appropriately responsive, in all material respects relevant to the offering of the Securities, to the requirements of the Act and the respective rules and regulations of the Commission thereunder; I have no reason to believe that, insofar as relevant to the offering of the Securities, any part of the Registration Statement, when such part became effective, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or that, as of the date and time of delivery of this letter, the Prospectus contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; the Company’s and Wachovia’s authorized equity capitalization are as set forth in the Prospectus and Registration Statement; and the statements in the Prospectus under the captions “Description of the Series A Preferred Securities”, “Description of Wachovia Depositary Shares”, and “Description of Other Wachovia Funding Capital Stock” constitute a fair summary of the matters therein described. For purposes of this paragraph, I am expressing no opinion as to (a) the financial statements or other financial data contained in any part of the Registration Statement or the Prospectus, (b) any statements or omissions made in reliance upon or in conformity with information furnished in writing to any Wachovia Party by the Representative on behalf of the Underwriters for use therein, (c) any statements, omissions or information relating to the matters set forth under the caption “Federal Income Tax Considerations” or “ERISA Considerations” in the Prospectus, or (d) any statements, omissions or information relating to non-U.S. matters or information contained in the Prospectus.
 
 
(vii)
 
The Securities have been duly authorized and validly issued by the Company and are fully paid and nonassessable; the issuance of the Securities is not subject to preemptive or other similar rights; the Securities are directly owned by Holding free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity; and upon the delivery of and payment for the Securities on the Closing Date in accordance with the Agreement, the Underwriters will acquire valid and unencumbered title to the Securities to be delivered by Holding.
 
 
(viii)
 
The Wachovia Securities have been duly authorized and validly reserved for issuance upon the occurrence of a Conditional Exchange (as defined in the Prospectus), and upon the occurrence of such a Conditional Exchange, may be validly issued, fully paid and non-assessable and will not be issued in violation of the preemptive or other similar rights of any securityholder of Wachovia, and may be freely deposited by Wachovia with the Depositary against issuance of Depositary Receipts evidencing Depositary Shares; and upon issuance by the Depositary of Depositary Receipts evidencing Depositary Shares against the deposit of Wachovia Securities in respect thereof in accordance with the provisions of the Deposit Agreement, such Depositary Receipts will be duly and validly issued and the persons in

A-2


 
whose names the Depositary Receipts are registered will be entitled to the rights specified therein and in the Deposit Agreement.
 
 
(ix)
 
All of the outstanding shares of capital stock of each of the Bank, Holding, the Company and the Company’s subsidiaries, have been duly and validly authorized and issued and are fully paid and nonassessable, and except as otherwise set forth in the Prospectus and the Registration Statement, are owned by the applicable Wachovia Party either directly or through wholly-owned subsidiaries free and clear of any perfected security interest and any other security interest, claim, lien or encumbrance.
 
 
(x)
 
To my knowledge, none of the Wachovia Parties nor the Bank is party to or otherwise the subject of any consent decree, memorandum of understanding, written commitment or other written supervisory agreement with any federal or state bank regulatory authority or agency in the United States charged with their supervision or insurance.

A-3


EXHIBIT B
FORM OF LEGAL OPINION
SULLIVAN & CROMWELL
 
 
 
1.
 
The Company has been duly incorporated and is an existing corporation in good standing under the laws of the State of Delaware.
 
 
2.
 
Wachovia has been duly incorporated and is an existing corporation in good standing under the laws of the State of North Carolina.
 
 
3.
 
Holding has been duly incorporated and is an existing corporation in good standing under the laws of the State of California.
 
 
4.
 
The Series A Preferred Securities have been duly authorized and validly issued and are fully paid and nonassessable.
 
 
5.
 
The Wachovia Preferred Stock initially issuable upon a Conditional Exchange of the Series A Preferred Securities have been duly authorized and reserved for issuance upon such Conditional Exchange and, when issued upon such Conditional Exchange, will be validly issued, fully paid and nonassessable.
 
 
6.
 
The Underwriting Agreement has been duly authorized, executed and delivered by the Company, Wachovia and Holding.
 
 
7.
 
Neither the Company, Wachovia nor Holding is, or after giving effect to the offering and sale of the Series A Preferred Securities will be, an “investment company”, as defined in the Investment Company Act of 1940, as amended.
 
 
8.
 
The Registration Statement, as of its effective date, and the Prospectus, as of the date of the Prospectus, appeared on their face to be appropriately responsive in all material respects to the requirements of the Act and the applicable rules and regulations of the Commission thereunder. Further, nothing that came to such counsel’s attention in the course of its review has caused such counsel to believe that the Registration Statement, as of its effective date, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus, as of the date of the Prospectus, contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The limitations inherent in the independent verification of factual matters and the character of determinations involved in the registration process are such, however, that such counsel does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement or the Prospectus except for those made under the captions “Description of the Series A Preferred Securities”, “Description of Other Wachovia Funding Capital Stock” and “ERISA Considerations” insofar as they relate to provisions of documents therein described. Also, such counsel does not express any opinion or belief as to the financial statements or other financial data contained in the Registration Statement or the Prospectus.
 
In connection with the opinion set forth in paragraph (7) above, such counsel has relied upon a certificate of [Wachovia], acting through its [Executive Vice President], as to the activities and assets of the Company, Wachovia and Holding and certain of their subsidiaries.
 
The foregoing opinion is limited to the Federal laws of the United States, the laws of the State of New York, the General Corporation Law of the State of Delaware and the laws of the State of California, and such counsel is expressing no opinion as to the effect of the laws of any other jurisdiction. With respect to all matters of North Carolina law, such counsel has relied upon the opinion, dated December ·, 2002, of Ross E. Jeffries, Jr., Senior Vice President and Assistant General Counsel of Wachovia, delivered pursuant to Section 6(c) of the Underwriting Agreement, and such counsel’s opinion is subject to the same assumptions, qualifications and limitations with respect to such matters as are contained in such opinion of Mr. Jeffries. Also, such counsel has relied as to certain matters on information obtained from public officials, officers of the Company, Wachovia and

B-1


Holding and other sources believed by it to be responsible, and has assumed that the certificates representing the Series A Preferred Securities and the Wachovia Preferred Stock conform to the specimens thereof examined by it, that the certificates representing the Series A Preferred Securities have been duly countersigned by a transfer agent and duly registered with a registrar of the Series A Preferred Securities, that the certificates representing the Wachovia Preferred Stock will be duly countersigned by a transfer agent and will be duly registered with a registrar of the Wachovia Preferred Stock, and that the signatures on all documents examined by such counsel are genuine, assumptions which such counsel has not independently verified.
 

B-2
EX-3.B 4 dex3b.htm CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHT Certificate of Designations, Preferences and Right
 
Exhibit 3(b)
 
WACHOVIA PREFERRED FUNDING CORP.
 
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
·% NON-CUMULATIVE SERIES A PREFERRED SECURITIES
 
Wachovia Preferred Funding Corp., a corporation organized under the laws of the State of Delaware (the “Company”), pursuant to Section 151 of the Delaware General Corporation Law,
 
DOES HEREBY CERTIFY:
 
FIRST, that the Company is duly incorporated and is in good standing under the laws of the State of Delaware; and
 
SECOND, that pursuant to the authority vested in the Board of Directors of the Company (the “Board of Directors”) by Article FOUR of the Company’s Certificate of Incorporation, the Board of Directors duly adopted, by the unanimous written consent of its directors as of ·, 2002, the following resolutions:
 
NOW THEREFORE, BE IT RESOLVED, that out of the total 75,001,000 shares of the Company’s preferred stock, par value $0.01 per share (the “Preferred Stock”), authorized by Article FOUR of the Company’s Certificate of Incorporation, the Board of Directors shall and hereby does provide for the designation of a series of 30,000,000 shares of Preferred Stock which shall be issued in a single series to be known as “·% Non-cumulative Series A Preferred Securities” (the “Series A Preferred Securities”). The Series A Preferred Securities shall have, to the extent that such powers, preferences and rights and such qualifications, limitations and restrictions are not otherwise set forth in the Company’s Certificate of Incorporation, the powers, preferences and rights and qualifications, limitations and restrictions set forth below:
 
Section 1.    Defined Terms.    As used herein, the following terms have the meanings specified below:
 
“Affiliate” of any specified Person shall mean (i) any other Person which, directly or indirectly, is in Control of, is controlled by or is under common Control with such specified Person, or (ii) any other Person who is a director or executive officer (A) of such specified Person, (B) of any subsidiary of such specified Person, or (C) of any Person described in clause (i) above.
 
“Beneficial Ownership” means the ownership of securities either directly or constructively through the application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The terms “Beneficial Owner”, “Beneficially Owns” and “Beneficially Owned” shall have correlative meanings.
 
“Business Day” means any day other than a Saturday, a Sunday or a day on which banks located in the City of New York, New York or Charlotte, North Carolina generally are authorized or required by law or regulation to close.
 
“Code” means the United States Internal Revenue Code of 1986, as amended from time to time.
 
“Common Stock” means the common stock, par value $0.01 per share, of the Company.
 
“Conditional Exchange” shall have the meaning set forth in Section 3(a).
 
“Control” means the power, direct or indirect, to direct or cause the direction of the management and policies of any Person whether by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

1


 
“Depositary Company” shall have the meaning set forth in Section 6(c).
 
“Depositary Share” means a depositary share representing a one-sixth interest in one share of Wachovia Preferred Stock.
 
“Dividend Payment” shall have the meaning set forth in Section 2(a).
 
“Dividend Payment Date” shall have the meaning set forth in Section 2(a).
 
“Dividend Period” shall have the meaning set forth in Section 2(a).
 
“Dividend Record Date” shall have the meaning set forth in Section 2(a).
 
“Exchange Agreement” means the Exchange Agreement, of even date herewith, between the Company and Wachovia.
 
“Federal Reserve Board” means the United States Board of Governors of the Federal Reserve System.
 
“FFO” means funds from operations on a consolidated basis and is equal to net income plus depreciation of real or personal property used to generate income, less any gain on the sale of real estate plus any loss on the sale of real estate, all as calculated according to GAAP.
 
“GAAP” means United States generally accepted accounting principles.
 
“Indebtedness” means all indebtedness for borrowed money and any guarantees of indebtedness for borrowed money.
 
“Independent Director” means a director of the Company who satisfies the definition of being “independent” as set forth in the Corporate Governance Standards of the New York Stock Exchange, as amended from time to time.
 
“Initial Dividend Period” shall have the meaning set forth in Section 2(a).
 
“Investment Company Act” means the Investment Company Act of 1940, as amended.
 
“Investment Company Act Event” means a determination by the Company, based on the receipt by the Company of an opinion of counsel, rendered by a law firm experienced in such matters, in form and substance satisfactory to the Company, which states that there is a significant risk that the Company is or will be considered an “investment company” that is required to be registered under the Investment Company Act, as a result of the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency, or regulatory authority.
 
“Junior Securities” means the Common Stock and all other classes and series of securities of the Company which rank below the Series A Preferred Securities as to dividend rights and rights upon liquidation, winding up, or dissolution, including, without limitation, the Series C Preferred Securities.
 
“OCC” means the United States Office of the Comptroller of the Currency.
 
“Parity Securities” means any outstanding class or series of preferred stock of the Company ranking, in accordance to its terms, as to dividends and upon voluntary or involuntary liquidation, dissolution or winding-up of affairs of the Company on parity with the Series A Preferred Securities, including, without limitation, (i) the Series B Preferred Securities and (ii) the Series D Preferred Securities.
 

2


“Permitted Indebtedness” means Indebtedness incurred by the Company in an aggregate amount not to exceed 20% of the Company’s stockholders’ equity as determined in accordance with GAAP.
 
“Person” means an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity or any government or agency or political subdivision thereof and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended; provided, however, that it does not include an underwriter which participates in a public offering of the Series A Preferred Securities for a period of 25 days following the purchase by such underwriter of such securities.
 
“Redemption Date” shall have the meaning set forth in Section 6(c).
 
“Redemption Price” shall have the meaning set forth in Section 6(b).
 
“Regulatory Capital Event” means a determination by the Company, based on the receipt by the Company of an opinion or letter of counsel, rendered by a law firm experienced in such matters, in form and substance satisfactory to the Company, which states that there is a significant risk that the Series A Preferred Securities will no longer constitute Tier 1 capital of Wachovia Bank or Wachovia for purposes of the capital adequacy regulations or guidelines or policies of the OCC or the Federal Reserve Board, or their respective successor or successors as Wachovia Bank’s and Wachovia’s, respectively, primary Federal banking regulator, as a result of (i) any amendment to, clarification of, or change in applicable laws or related regulations, guidelines, policies or official interpretations thereof, or (ii) any official administrative pronouncement or judicial decision interpreting or applying such laws or related regulations, guidelines, policies or official interpretations thereof.
 
“REIT” means a real estate investment trust within the meaning of the Code.
 
“Series A Certificate” means this Certificate of Designations, Preferences and Rights of ·% Non-Cumulative Series A Preferred Securities.
 
“Series B Preferred Securities” means the Floating Rate Non-Cumulative Series B Preferred Securities, par value $0.01 per share, of the Company.
 
“Series C Preferred Securities” means the Floating Rate Cumulative Series C Preferred Securities, par value $0.01 per share, of the Company.
 
“Series D Preferred Securities” means the 8.5% Non-Cumulative Series D Preferred Securities, par value $0.01 per share, of the Company.
 
“Supervisory Event” means the occurrence of one of the following: (i) Wachovia Bank becomes “undercapitalized” under prompt corrective action regulations, (ii) Wachovia Bank is placed into conservatorship or receivership, or (iii) the OCC, in its sole discretion, anticipates Wachovia Bank becoming “undercapitalized” in the near term or takes supervisory action that limits the payment of dividends by the Company and in connection therewith directs an exchange of the Series A Preferred Securities for the Wachovia Preferred Stock.
 
“Tax Event” means a determination by the Company, based on the receipt by the Company of an opinion of counsel, rendered by a law firm experienced in such matters, in form and substance satisfactory to the Company, which states that there is a significant risk that dividends paid or to be paid by the Company with respect to its capital stock are not or will not be fully deductible by the Company for United States Federal income tax purposes, or that the Company is or will be subject to additional taxes, duties, or other governmental charges, in an amount the Company reasonably determines to be significant as a result of (i) any amendment to, clarification

3


of, or change in, the laws, treaties, or related regulations of the United States or any of its political subdivision or their taxing authorities affecting taxation, or (ii) any judicial decision, official administrative pronouncement, published or private ruling, technical advice memorandum, Chief Counsel Advice, as such term is defined in the Code, regulatory procedure, notice, or official announcement, which amendment, clarification, or change is effective, or such official pronouncement or decision is announced, on or after the date of issuance of the Series A Preferred Securities.
 
“Transfer” means any sale, transfer, gift, assignment, devise or other disposition of the Series A Preferred Securities, including, but not limited to, (i) the granting of any option or entering into any agreement for the sale, transfer or other disposition of such securities, or (ii) the sale, transfer, assignment or other disposition of any securities or rights convertible into or exchangeable for Series A Preferred Securities, whether voluntary or involuntary, whether of record or beneficially and whether by operation of law or otherwise.
 
“Wachovia” means Wachovia Corporation, a corporation organized under the laws of the State of North Carolina, and its successor and assigns.
 
“Wachovia Bank” means Wachovia Bank, National Association, a national banking association, and its successors and assigns.
 
“Wachovia Holding” means Wachovia Preferred Holding Corp., a corporation organized under the laws of the State of California.
 
“Wachovia Preferred Stock” means the Series G, Class A Preferred Stock, no par value per share and having a liquidation preference of $150.00 per share, of Wachovia.
 
Section 2.    Dividends.    (a) The dividend rate for the Series A Preferred Securities shall be ·% per share per annum of the initial liquidation preference of $25.00 per share, accruing from the date of its issuance to and including the last day of March, the last day of June, the last day of September or the last day of December, whichever occurs first after such issuance (such period being the “Initial Dividend Period”) and then for each dividend payment period thereafter, commencing on April 1, July 1, October 1 or January 1, as the case may be, of each year and ending on and including the day next preceding the first day of the next quarterly period (each such period, including the Initial Dividend Period, being a “Dividend Period”), payable to holders of record of the Series A Preferred Securities on the respective record dates fixed for such purpose by the Board of Directors in advance of payment of such dividend, which shall be the 15th calendar day of the last calendar month of the applicable Dividend Period (each such date, a “Dividend Record Date”). If such Dividend Record Date is not a Business Day then the Dividend Record Date for the applicable Dividend Period shall be the first Business Day immediately following the 15th calendar day of the last calendar month of the applicable Dividend Period. Until no longer outstanding, the holders of the Series A Preferred Securities shall be entitled to receive such cash dividends, and the Company shall be bound to pay the same, but only as, if and when declared by the Board of Directors, out of funds legally available for the payment thereof (each such payment, a “Dividend Payment”), on March 31, June 30, September 30 and December 31 of each year (each a “Dividend Payment Date”) for the respective Dividend Period ending on such date. If a Dividend Payment Date is not a Business Day, the Dividend Payment due on such Dividend Payment Date shall be paid, without interest, on the first Business Day immediately following such Dividend Payment Date, except if such Business Day falls in a different calendar year than such Dividend Payment Date, such Dividend Payment shall be paid on the last Business Date immediately preceding such Dividend Payment Date. The amount of dividends payable for the Initial Dividend Period or any period shorter than a full Dividend Period shall be computed on the basis of a 360-day year having 30-day months and the actual number of days elapsed in the period; provided, however, that in the event of a Conditional Exchange, any authorized, declared, but unpaid dividends on the Series A Preferred Securities as of the time of such Conditional Exchange shall be deemed to be authorized, declared, but unpaid dividends on the Depositary Shares.

4


 
 
(b)
 
Dividends shall be non-cumulative. If the Board of Directors fails to declare a dividend or declares less than a full dividend on the Series A Preferred Securities for a Dividend Period, then holders of the Series A Preferred Securities shall have no right to receive any dividend or a full dividend, as the case may be, for that Dividend Period, and the Company shall have no obligation to pay a dividend or to pay a full dividend, as the case may be, for that Dividend Period, whether or not dividends are declared and paid for any future Dividend Period, with respect to either the Series A Preferred Securities, other series of preferred stock of the Company, or the Common Stock.
 
 
(c)
 
Holders of Series A Preferred Securities shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full dividends for each Dividend Period, as herein provided, on the Series A Preferred Securities. No interest, or sum of money in lieu of interest, shall be payable in respect of any Dividend Payment or Dividend Payments or failure to make any Dividend Payment or Dividend Payments.
 
 
(d)
 
If full dividends on the Series A Preferred Securities for any Dividend Period have not been declared and paid, or a sum sufficient for such payment has not been set apart for such payment, no dividends shall be declared or paid or set aside for payment and no other distribution shall be declared or made or set aside for payment upon any shares of Junior Securities, nor shall any shares of Junior Securities be redeemed, purchased, or otherwise acquired for any consideration, nor shall any monies be paid to or made available for a sinking fund for the redemption of any such securities by the Company, except by conversion into or exchange for other Junior Securities, until such time when dividends on all outstanding Series A Preferred Securities have been (i) declared and paid for three consecutive Dividend Periods, and (ii) declared and paid or declared and a sum sufficient for such payment has been set apart for payment for the fourth consecutive Dividend Period. Payment of dividends on the Series A Preferred Securities shall be subject to the rights of holders of any securities ranking senior to the Series A Preferred Securities as to dividend rights.
 
 
(e)
 
When dividends are not paid in full on, or a sum sufficient for such full payment is not set apart for, the Series A Preferred Securities and any Parity Securities, all dividends declared upon the Series A Preferred Securities and any Parity Securities shall be declared pro rata so that the amount of dividends declared per each share of Series A Preferred Securities and per each share of such other Parity Security shall in all cases bear to each other the same ratio that (i) full dividends per each share of Series A Preferred Security for the then-current Dividend Period, not including any accumulation in respect of unpaid dividends for prior Dividend Periods, and (ii) full dividends, including required or permitted accumulations, if any, on each share of such Parity Security, bear to each other.
 
Section 3.    Conditional Exchange.    (a) If the OCC so directs upon the occurrence of a Supervisory Event, each Series A Preferred Security then outstanding shall be exchanged automatically for one newly issued Depositary Share (a “Conditional Exchange”).
 
 
(b)
 
Upon the occurrence of a Conditional Exchange, each holder of Series A Preferred Securities shall be unconditionally obligated to surrender to Wachovia any certificates representing the Series A Preferred Securities owned by such holder on the date and time provided in Section 3(c), and Wachovia shall be unconditionally obligated to issue to such holder, in exchange for each such Series A Preferred Security surrendered, a Depositary Share on a share-for-share basis pursuant to the Exchange Agreement. Any Series A Preferred Securities purchased or redeemed by the Company prior to the time of exchange shall not be deemed outstanding and shall not be subject to the Conditional Exchange.
 
 
(c)
 
The Conditional Exchange shall occur as of 8:00 a.m. Eastern Time on the date for such exchange set forth in the applicable OCC directive, or, if such date is not set forth in the directive, as of 8:00 a.m. Eastern Time on the earliest possible date such exchange could occur consistent with the directive, as

5


 
evidenced by the issuance by Wachovia of a press release prior to such time. As of the time of the Conditional Exchange, all of the Series A Preferred Securities shall be cancelled and will cease to be outstanding without any further action by the Company or the holders thereof, all rights of the holders of Series A Preferred Securities as the Company’s stockholders shall cease, and such persons shall be, for all purposes, solely holders of Depositary Shares.
 
 
(d)
 
Within 30 days of the occurrence of a Supervisory Event and in connection therewith, the issuance by the OCC of a directive requiring a Conditional Exchange, the Company shall cause to be mailed a notice to each of the holders of record of the Series A Preferred Securities setting forth (i) the occurrence of a Supervisory Event and directive requiring a Conditional Exchange and (ii) instructions where such holders of record shall deliver the certificates representing the Series A Preferred Securities in exchange for Depositary Shares. Wachovia shall, pursuant to the Exchange Agreement, deliver to each such holder of record of the Series A Preferred Securities Depositary Shares upon surrender of the certificates representing the Series A Preferred Securities. Any such notice to the holders of record of the Series A Preferred Securities shall be addressed to each such holder at his last known address shown on the records of the Company and the time of mailing of such notice shall be deemed to be the time of the giving thereof. Until replacement certificates representative of Depositary Shares are delivered or in the event such replacement certificates are not delivered, any certificates previously representing Series A Preferred Securities shall be deemed for all purposes to represent Depositary Shares.
 
 
(e)
 
In the event of any merger, consolidation, or other business combination of Wachovia with or into any entity (i) in which Wachovia is not the surviving entity, all references to Wachovia Preferred Stock hereunder shall thereafter be deemed to refer to a class of equity securities of such surviving entity having preferences, limitations, and relative voting and other rights substantially identical to those of the Wachovia Preferred Stock immediately prior to the consummation of such transaction, or (ii) in which Wachovia is the surviving entity, but as a result of which Wachovia becomes the direct or indirect subsidiary of another entity, (A) Wachovia may assign the Exchange Agreement to such other entity as part of such merger, and (B) all references to Wachovia Preferred Stock hereunder and thereunder shall thereafter be deemed to refer to a class of equity securities of the such other entity having preferences, limitations, and relative voting and other rights substantially identical to those of the Wachovia Preferred Stock immediately prior to the consummation of such transaction.
 
Section 4.    Liquidation Preference.    (a) The amount payable on the Series A Preferred Securities in the event of any voluntary or involuntary liquidation, dissolution, or winding-up of affairs of the Company shall be $25.00 per share, plus authorized, declared, but unpaid dividends up to the date of such liquidation, dissolution, or winding-up of affairs of the Company, and no more before any distribution shall be made to the holders of any shares of Junior Securities, subject to the rights of holders of any securities ranking senior to the Series A Preferred Securities as to rights upon liquidation, winding up, or dissolution and subject to the rights of general creditors. The holders of Series A Preferred Securities shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution, or winding-up of affairs of the Company other than what is expressly provided for in this Section 4(a).
 
 
(b)
 
If the amounts available for distribution in respect of the Series A Preferred Securities and any Parity Securities are not sufficient to satisfy the full liquidation rights of all of the outstanding Series A Preferred Securities and any Parity Securities, then the holders of the Series A Preferred Securities and any Parity Securities shall share ratably in any such distribution of assets in proportion to the full respective liquidation preference to which they are entitled.
 
 
(c)
 
The sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a dissolution, liquidation or winding up of the Company, nor shall the merger or consolidation of the Company into

6


 
or with any other corporation or association or the merger or consolidation of any other corporation or association into or with the Company be deemed to be a dissolution, liquidation or winding up of the Company.
 
Section 5.    Voting Rights.    (a) The holders of the Series A Preferred Securities shall be entitled to 1/10th of one vote per Series A Preferred Security on all matters to be voted on by the holders of Common Stock. The holders of the Series A Preferred Securities shall vote as a single class with (i) the holders of Common Stock and (ii) the holders of any other class of securities of the Company entitled, by the terms of such securities, to vote as a single class with the holders of Common Stock.
 
 
(b)
 
If full dividends on the Series A Preferred Securities have not been paid, or declared and set aside for payment, for six Dividend Periods, the number of the Company’s directors shall be increased by two. Subject to compliance with any requirement for regulatory approval of, or non-objection to, persons serving as directors, the holders of Series A Preferred Securities, voting together as a single and separate class with the holders of any Parity Securities having the same voting rights as those of the Series A Preferred Securities, shall have the right to elect two directors in addition to the directors then in office at the Company’s next annual meeting of stockholders. The right to elect such additional directors shall continue as set forth herein at each subsequent annual meeting until such time when dividends on all outstanding Series A Preferred Securities have been (i) declared and paid for three consecutive Dividend Periods, and (ii) declared and paid or declared and a sum sufficient for such payment has been set apart for payment for the fourth consecutive Dividend Period. The term of such additional directors shall terminate, and the total number of directors shall be decreased by two upon the first annual meeting of stockholders after such time when dividends on all outstanding Series A Preferred Securities have been (i) declared and paid for three consecutive Dividend Periods, and (ii) declared and paid or declared and a sum sufficient for such payment has been set apart for payment for the fourth consecutive Dividend Period or, if earlier, upon the redemption of all Series A Preferred Securities or a Conditional Exchange. After the term of such additional directors terminates as set forth herein, the holders of the Series A Preferred Securities shall not be permitted to elect any additional directors in the manner provided for in this Section 5(b) unless dividends on the Series A Preferred Securities and the holders of any Parity Securities have again not been paid, or declared and set aside for payment, for six future Dividend Periods. Any such additional director elected by the holders of Series A Preferred Securities may only be removed by the vote of the holders of record of the then outstanding Series A Preferred Securities and the holders of any Parity Securities entitled to vote, voting together as a single and separate class with the holders of any Parity Securities having the same voting rights as those of the Series A Preferred Securities at a meeting of the Company’s stockholders called for that purpose. For so long as the right provided by this Section 5(b) to elect additional directors is effective, (i) any vacancy created by the removal of any such director may be filled only by the vote of the holders of the outstanding Series A Preferred Securities and the holders of any Parity Securities entitled to vote, voting together as a single and separate class with the holders of any Parity Securities having the same voting rights as those of the Series A Preferred Securities at the same meeting at which such removal is considered, and (ii) any other vacancy in the office of any such director as a result of the director’s death or resignation or for any other reason may be filled by an instrument in writing signed by any such remaining director and filed with the Company.
 
 
(c)
 
For so long as any Series A Preferred Securities are outstanding, the Company shall not, without the consent or vote of the holders of at least two-thirds of the then outstanding Series A Preferred Securities, voting separately as a single class, (i) amend, alter, or repeal or otherwise change any provision of the Company’s Certificate of Incorporation or this Series A Certificate if such amendment, alteration, repeal, or change would materially and adversely affect the preferences, conversion, or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications, or terms or conditions of redemption of the Series A Preferred Securities, (ii) authorize, create, or increase the authorized amount of or issue any class or series of any of the Company’s equity securities, or any

7


 
warrants, options, or other rights exercisable for or convertible or exchangeable into any class or series of any of the Company’s equity securities, ranking senior to the Series A Preferred Securities, either as to dividend rights or rights on the Company’s liquidation, dissolution, or winding up, and (iii) effect its consolidation, conversion, or merger with or into, or a share exchange with, another entity, provided, that the Company may consolidate or merge with or into, or enter into a share exchange with, another entity without the consent of the holders of the Series A Preferred Securities if (A) such entity is an entity that is controlled by or under common control with Wachovia, (B) such entity is a corporation, business trust, limited liability company, or other entity organized under the laws of the United States or a political subdivision thereof that is not regulated as an “investment company” under the Investment Company Act and that, according to an opinion of counsel rendered by a firm experienced in such matters, is a REIT, (C) such other entity expressly assumes all of the Company’s obligations and commitments pursuant to such consolidation, merger, or share exchange, (D) the outstanding Series A Preferred Securities are exchanged for or converted into shares of the surviving entity having preferences, limitations, and relative voting and other rights substantially identical to those of the Series A Preferred Securities, including limitations on personal liability of the stockholders, (E) after giving effect to such merger, consolidation, or share exchange, no breach, or event which, with the giving of notice or passage of time or both, could become a breach, by the Company of obligations under its Certificate of Incorporation or this Series A Certificate shall have occurred and be continuing, and (F) the Company has received written notice from each of the rating agencies rating the Series A Preferred Securities, and delivered a copy thereof to the transfer agent, confirming that such merger, consolidation or share exchange will not result in a reduction of the rating assigned by any of such rating agencies to the Series A Preferred Securities or the preferred interests of any surviving corporation, trust, or entity issued in replacement of the Series A Preferred Security.
 
 
(d)
 
As a condition to effecting any merger, consolidation, or share exchange described in the proviso to clause (iii) of paragraph (c) above, the Company shall cause to be mailed to the holders of record of the Series A Preferred Securities a notice of such merger, consolidation or share exchange, such notice to be addressed to each such holder at his last known address shown on the records of the Company, and the time of mailing such notice shall be deemed to be the time of the giving thereof, at least 15 days prior to such transaction becoming effective and describing such merger, consolidation, or share exchange, together with a certificate of one of the Company’s executive officers stating that such merger, consolidation, or share exchange complies with the requirements of the proviso to clause (iii) of paragraph (c) above and that all conditions precedent provided for in the proviso to clause (iii) of paragraph (c) above relating to such transaction have been complied with.
 
 
(e)
 
For so long as the Series A Preferred Securities are outstanding, except with the consent or affirmative vote of the holders of at least two-thirds of the Series A Preferred Securities, voting as a separate class, the Company shall not (i) make or permit to be made any payment to Wachovia Bank, or its Affiliates, relating to the Company’s Indebtedness or stock when the Company is otherwise precluded from making payments in respect of its Junior Securities, or make or permit such payment to be made in anticipation of any liquidation, dissolution, or winding up, (ii) incur Indebtedness at any time other than Permitted Indebtedness, (iii) pay dividends on the Company’s Junior Securities unless the Company’s FFO for the four prior fiscal quarters equals or exceeds 150% of the amount that would be required to pay full annual dividends on the Series A Preferred Securities as well as any Parity Securities, except as may be necessary to maintain the Company’s status as a REIT, (iv) make any payment of interest or principal with respect to the Company’s Indebtedness to Wachovia Bank or its Affiliates unless FFO for the four prior fiscal quarters equals or exceeds 150% of the amount that would be required to pay full annual dividends on the Series A Preferred Securities as well as any Parity Securities, except as may be necessary to maintain the Company’s status as a REIT, (v) amend or otherwise change the Company’s policy of reinvesting the proceeds of its assets in other interest-earning assets such that the Company’s FFO over any period of four fiscal quarters shall be anticipated to equal or exceed 150% of the amount that would be required to pay full annual dividends on the

8


 
Series A Preferred Securities as well as any Parity Securities, except as may be necessary to maintain the Company’s status as a REIT, (vi) issue any additional shares of the Company’s Common Stock in an amount that would result in Wachovia Holdings and Wachovia or their respective Affiliates owning less than 100% of the outstanding shares of Common Stock, or (vii) remove “Wachovia” from the Company’s name unless the name of either Wachovia or Wachovia Bank changes and such name change is consistent with the new name of either Wachovia or Wachovia Bank.
 
 
(f)
 
The holders of the Series A Preferred Securities shall have no other voting rights except as expressly provided for in this Series A Certificate or as otherwise required by law.
 
Section 6.    Redemption.    (a) The Series A Preferred Securities shall not be redeemable by the Company prior to ·, 2022, except upon the occurrence of a Tax Event, an Investment Company Act Event, or a Regulatory Capital Event.
 
 
(b)
 
Prior to ·, 2022, upon or after the occurrence of a Tax Event, an Investment Company Act Event, or a Regulatory Capital Event and with the prior approval of the OCC, the Company, at the option of the Board of Directors, may redeem the outstanding Series A Preferred Securities, in whole, but not in part, at a price equal to $25.00 per share of Class A Preferred Securities, plus authorized, declared, but unpaid dividends to the Redemption Date, without interest, on shares redeemed (collectively, the “Redemption Price”) from funds legally available for such purpose. On or after ·, 2022, the Company may redeem the Series A Preferred Securities for cash, with the prior approval of the OCC, in whole or in part, at any time and from time to time for the Redemption Price from funds legally available for such purpose. In the event the Company redeems fewer than all the outstanding Series A Preferred Securities, the shares to be redeemed shall be determined by lot, pro rata, or by such other method as the Board of Directors in its sole discretion determines; provided, however, that the method selected by the Board of Directors must satisfy any applicable requirements of any securities exchange on which the Series A Preferred Securities are then listed.
 
 
(c)
 
Not more than 60 days and not less than 30 days prior to the date established for such redemption by the Board of Directors (the “Redemption Date”), notice of the proposed redemption shall be mailed to the holders of record of the Series A Preferred Securities to be redeemed, such notice to be addressed to each such stockholder at his last known address shown on the records of the Company, and the time of mailing such notice shall be deemed to be the time of the giving thereof. On or after the Redemption Date, the Series A Preferred Securities called for redemption shall automatically, and without further action on the part of the holder thereof, be deemed to have been redeemed and the former holder thereof shall thereupon only be entitled to receive payment of the Redemption Price. If such notice of redemption shall have been given as aforesaid, and if on or before the Redemption Date the funds necessary for the redemption shall have been set aside so as to be available therefore, then the dividends thereon shall cease to accrue after the Redemption Date and all rights with respect to the Series A Preferred Securities so called for redemption shall forthwith after such Redemption Date cease, except the right of the holders to receive the Redemption Price, without interest. If such notice of redemption of all or any part of the Series A Preferred Securities shall have been mailed as aforesaid and the Company shall thereafter deposit money for the payment of the Redemption Price pursuant thereto with any bank or trust company (the “Depositary Company”), including any Affiliate of the Company, selected by the Board of Directors for that purpose, to be applied to such redemption, then from and after the making of such deposit, such Series A Preferred Securities shall not be deemed to be outstanding for any purpose, and the rights of the holders thereof shall be limited to the rights to receive payment of the Redemption Price, without interest but including any declared, but unpaid, dividends to the Redemption Date, from the Depositary Company, if applicable, upon endorsement, if required, and surrender of the certificates therefore. The Company shall be entitled to receive, from time to time, from the Depositary Company, the interest, if any, allowed on such moneys deposited with it, and the holders of any Series A Preferred Securities so redeemed shall have no claim to any

9


 
such interest. Any moneys so deposited and remaining unclaimed at the end of three years from the Redemption Date shall, if thereafter requested by resolution of the Board of Directors, be repaid to the Company, and in the event of such repayment to the Company, such holders of record of the Series A Preferred Securities so redeemed which shall not have made claim against such moneys prior to such repayment to the Company shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of the Series A Preferred Securities and so repaid to the Company, but shall in no event be entitled to any interest.
 
 
(d)
 
Subject to the provisions herein, the Board of Directors shall have authority to prescribe from time to time the manner in which the Series A Preferred Securities shall be redeemed.
 
 
(e)
 
Nothing contained herein shall limit any legal right of the Company to purchase any shares of the Series A Preferred Securities.
 
Section 7.    Conversion.    The holders of the Series A Preferred Securities shall not have any rights to convert such Series A Preferred Securities into shares of any other class of capital stock of the Company.
 
Section 8.    Rank.    Notwithstanding anything set forth in the Certificate of Incorporation of the Company or this Series A Certificate to the contrary, the Board of Directors, without the vote of the holders of the Series A Preferred Securities, may authorize and issue additional shares of Junior Securities. For so long as any Series A Preferred Securities remain outstanding, the Company may not, without the consent or approval of the holders of at least two-thirds of the outstanding Series A Preferred Securities, issue any series of stock ranking senior to the Series A Preferred Securities as to dividends and upon voluntary or involuntary liquidation, dissolution or winding-up of affairs of the Company.
 
Section 9.    Independent Directors.    (a) For so long as any Series A Preferred Securities remain outstanding, except with the approval of a majority of the Independent Directors then in office, the Company shall not (i) authorize and issue any additional preferred stock ranking on parity with the Series A Preferred Securities as to dividends and upon voluntary or involuntary liquidation, dissolution or winding-up of affairs of the Company; (ii) terminate, amend, modify or elect not to renew any participation and/or servicing agreements or subcontract any of its duties under such agreements to any Persons who are not Affiliates of Wachovia Bank; (iii) amend or otherwise change the Company’s policy of limiting authorized investments which are not mortgages or other liens on and interests in real estate to no more than 20% of the value of the Company’s total assets or amend or otherwise change the Company’s investment policy if such amendment or change would be inconsistent with an exemption under the Investment Company Act; (iv) effect its consolidation, conversion, or merger with or into, or a share exchange with, another entity that is not tax-free to the holders of the Series A Preferred Securities, except to the extent such consolidation, conversion, or merger with or into, or a share exchange with, another entity is required to be approved pursuant to Section 5(c); (v) revoke its REIT status or amend, alter or repeal any REIT-related restrictions on transfer and ownership with respect to any class or series of securities of the Company; (vi) effect its dissolution, liquidation, or termination prior to ·, 2022; or (vii) amend, alter or repeal this Section 9.
 
 
(b)
 
Any members of the Board of Directors elected pursuant to Section 5(b), shall be deemed to be Independent Directors for the purposes of the voting provisions of Section 9(a).
 
 
(c)
 
In assessing the benefits to the Corporation of any proposed action requiring their consent, the Independent Directors shall take into account the interests of holders of both the Common Stock and the preferred stock of the Company, including, without limitation, the holders of the Series A Preferred Securities. In considering the interests of the holders of the preferred stock of the Company, including, without limitation, holders of this Series A Preferred Securities, the Independent Directors shall owe the same duties that the Independent Directors owe to holders of the Common Stock.

10


 
Section 10.    Restrictions on Ownership and Transfer.    (a) Any Transfer that, if effective, would result in the Series A Preferred Securities, Series B Preferred Securities, Series C Preferred Securities and Series D Preferred Securities, collectively, being Beneficially Owned by less than one hundred Persons, determined without reference to any rules of attribution, (i) shall be null and void ab initio as to the Transfer of such Series A Preferred Securities which would be otherwise Beneficially Owned by the transferee thereof, and (ii) such intended transferee shall acquire no rights whatsoever in such Series A Preferred Securities.
 
 
(b)
 
Any Transfer that, if effective, would result in the Company being “closely held” within the meaning of Section 856(h) of the Code, (i) shall be null and void ab initio as to the Transfer of such Series A Preferred Securities which would cause the Company to be “closely held” within the meaning of Section 856(h) of the Code, and (ii) the intended transferee thereof shall acquire no rights in such Series A Preferred Securities.
 
(c)
 
If the Board of Directors or its properly authorized designees shall at any time determine in good faith that a Transfer has taken place in violation of paragraphs (a) and/or (b) of this Section 10 or that a Person intends to acquire or has attempted to acquire Beneficial Ownership of any Series A Preferred Securities in violation of paragraphs (a) and/or (b) of this Section 10, the Board of Directors or its properly authorized designees shall take such action as it or they deem advisable to refuse to give effect or to prevent such Transfer (or any Transfer related to such intent), including, but not limited to, (i) refusing to give effect to such Transfer on the books of the Company, and/or (ii) instituting proceedings to enjoin such Transfer.
 
 
(d)
 
Any Person who acquires or attempts to acquire Beneficial Ownership of Series A Preferred Securities in violation of paragraphs (a) and/or (b) of this Section 10 shall immediately give written notice to the Company of such event.
 
 
(e)
 
Every Beneficial Owner of more than 2.0% of the outstanding Series A Preferred Securities shall, within 30 days after January 1 of each year, give written notice to the Company stating the name and address of such Beneficial Owner, the number of Series A Preferred Securities Beneficially Owned, and a description of how such securities are held. Each such Beneficial Owner shall provide to the Company such additional information as the Company may request in order to determine the effect, if any, of such Beneficial Ownership on the Company’s status as a REIT.
 
 
(f)
 
Each Person who is a Beneficial Owner of Series A Preferred Securities and each Person, including the holder of record who is holding Series A Preferred Securities for a Beneficial Owner shall provide to the Company such information as the Company shall request, in good faith, in order to determine the Company’s status as a REIT or to comply with regulations promulgated under the REIT provisions of the Code.
 
Section 11.    Repurchase.    Subject to the limitations imposed in this Series A Certificate, the Company may purchase and sell Series A Preferred Securities from time to time to such extent, in such manner, and upon such terms as the Board of Directors may determine; provided, however, that the Company shall not use any of its funds for any such purchase when there are reasonable grounds to believe that the Company is, or by such purchase would be, rendered insolvent.

11


 
IN WITNESS WHEREOF, Wachovia Preferred Funding Corp. has caused this certificate to be signed by Thomas J. Wurtz, its Executive Vice President, and attested by Robert L. Andersen, its Assistant Secretary, this · day of November, 2002.
 
WACHOVIA PREFERRED FUNDING CORP.
 
By:
   
 

Name:
 
Thomas J. Wurtz
Title:
 
Executive Vice President
 
 
ATTEST:
 
By:
   
 

Name:
 
Robert L. Andersen
Title:
 
Assistant Secretary

12


 
WACHOVIA PREFERRED FUNDING CORP.
 
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
FLOATING RATE NON-CUMULATIVE SERIES B PREFERRED SECURITIES
 
Wachovia Preferred Funding Corp., a corporation organized under the laws of the State of Delaware (the “Company”), pursuant to Section 151 of the Delaware General Corporation Law,
 
DOES HEREBY CERTIFY:
 
FIRST, that the Company is duly incorporated and is in good standing under the laws of the State of Delaware; and
 
SECOND, that pursuant to the authority vested in the Board of Directors of the Company (the “Board of Directors”) by Article FOUR of the Company’s Certificate of Incorporation, the Board of Directors duly adopted, by the unanimous written consent of its directors as of ·, 2002, the following resolutions:
 
NOW THEREFORE, BE IT RESOLVED, that out of the total 75,001,000 shares of the Company’s preferred stock, par value $0.01 per share (the “Preferred Stock”), authorized by Article FOUR of the Company’s Certificate of Incorporation, the Board of Directors shall and hereby does provide for the designation of a series of 40,000,000 shares of Preferred Stock which shall be issued in a single series to be known as “Floating Rate Non-cumulative Series B Preferred Securities” (the “Series B Preferred Securities”). The Series B Preferred Securities shall have, to the extent that such powers, preferences and rights and such qualifications, limitations and restrictions are not otherwise set forth in the Company’s Certificate of Incorporation, the powers, preferences and rights and qualifications, limitations and restrictions set forth below:
 
Section 1.    Defined Terms.     As used herein, the following terms have the meanings specified below:
 
“Affiliate” of any specified Person shall mean (i) any other Person which, directly or indirectly, is in Control of, is controlled by or is under common Control with such specified Person, or (ii) any other Person who is a director or executive officer (A) of such specified Person, (B) of any subsidiary of such specified Person, or (C) of any Person described in clause (i) above.
 
“Applicable Rate” means, with respect to distributions on each Dividend Period, (i) a rate per annum equal to Three-Month LIBOR plus 1.83%, or (ii) upon the occurrence of an initial Fixed Rate Event and thereafter, a fixed rate equal to the Assigned Fixed Rate.
 
“Assigned Fixed Rate” means the fixed rate equal to the Applicable Rate on the date of the occurrence of the initial Fixed Rate Event.
 
“Beneficial Ownership” means the ownership of securities either directly or constructively through the application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The terms “Beneficial Owner”, “Beneficially Owns” and “Beneficially Owned” shall have correlative meanings.
 
“Business Day” means any day other than a Saturday, a Sunday or a day on which banks located in the City of New York, New York or Charlotte, North Carolina generally are authorized or required by law or regulation to close.
 
“Code” means the United States Internal Revenue Code of 1986, as amended from time to time.

12


 
“Common Stock” means the common stock, par value $0.01 per share, of the Company.
 
“Conditional Exchange” shall have the meaning set forth in Section 3(a).
 
“Control” means the power, direct or indirect, to direct or cause the direction of the management and policies of any Person whether by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
 
“Depositary Company” shall have the meaning set forth in Section 6(d).
 
“Depositary Share” means a depositary share representing a one-sixth interest in one share of Wachovia Preferred Stock.
 
“Dividend Payment” shall have the meaning set forth in Section 2(a).
 
“Dividend Payment Date” shall have the meaning set forth in Section 2(a).
 
“Dividend Period” shall have the meaning set forth in Section 2(a).
 
“Dividend Record Date” shall have the meaning set forth in Section 2(a).
 
“Exchange Agreement” means the Exchange Agreement, of even date herewith, between the Company and Wachovia.
 
“Federal Reserve Board” means the United States Board of Governors of the Federal Reserve System.
 
“FFO” means funds from operations on a consolidated basis and is equal to net income plus depreciation of real or personal property used to generate income, less any gain on the sale of real estate plus any loss on the sale of real estate, all as calculated according to GAAP.
 
“Fixed Rate Event” means any Transfer with respect to all or a portion of the Series B Preferred Securities, subsequent to the initial issuance of the Series B Preferred Securities, through an initial public offering, private placement or otherwise, to any Person who is not an Affiliate of Wachovia.
 
“GAAP” means United States generally accepted accounting principles.
 
“Indebtedness” means all indebtedness for borrowed money and any guarantees of indebtedness for borrowed money.
 
“Independent Director” means a director of the Company who satisfies the definition of being “independent” as set forth in the Corporate Governance Standards of the New York Stock Exchange, as amended from time to time.
 
“Initial Dividend Period” shall have the meaning set forth in Section 2(a).
 
“Investment Company Act” means the Investment Company Act of 1940, as amended.
 
“Investment Company Act Event” means a determination by the Company, based on the receipt by the Company of an opinion of counsel, rendered by a law firm experienced in such matters, in form and substance satisfactory to the Company, which states that there is a significant risk that the Company is or will be considered an “investment company” that is required to be registered under the Investment Company Act, as a result of the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency, or regulatory authority.

13


 
“Junior Securities” means the Common Stock and all other classes and series of securities of the Company which rank below the Series B Preferred Securities as to dividend rights and rights upon liquidation, winding up, or dissolution, including, without limitation, the Series C Preferred Securities.
 
“LIBOR Business Day” means any day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealings in foreign exchange and foreign currency deposits) in London and New York.
 
“LIBOR Determination Date” means, as to each Dividend Period, commencing with the Initial Dividend Period, the date that is two LIBOR Business Days prior to the first day of such Dividend Period.
 
“OCC” means the United States Office of the Comptroller of the Currency.
 
“Parity Securities” means any outstanding class or series of preferred stock of the Company ranking, in accordance to its terms, as to dividends and upon voluntary or involuntary liquidation, dissolution or winding-up of affairs of the Company on parity with the Series B Preferred Securities, including, without limitation, (i) the Series A Preferred Securities and (ii) the Series D Preferred Securities.
 
“Permitted Indebtedness” means Indebtedness incurred by the Company in an aggregate amount not to exceed 20% of the Company’s stockholders’ equity as determined in accordance with GAAP.
 
“Person” means an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity or any government or agency or political subdivision thereof and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended; provided, however, that it does not include an underwriter which participates in a public offering of the Series B Preferred Securities for a period of 25 days following the purchase by such underwriter of such securities.
 
“Redemption Date” shall have the meaning set forth in Section 6(d).
 
“Redemption Price” shall have the meaning set forth in Section 6(a).
 
“Regulatory Capital Event” means a determination by the Company, based on the receipt by the Company of an opinion or letter of counsel, rendered by a law firm experienced in such matters, in form and substance satisfactory to the Company, which states that there is a significant risk that the Series B Preferred Securities will no longer constitute Tier 1 capital of Wachovia Bank or Wachovia for purposes of the capital adequacy regulations or guidelines or policies of the OCC or the Federal Reserve Board, or their respective successor or successors as Wachovia Bank’s and Wachovia’s, respectively, primary Federal banking regulator, as a result of (i) any amendments to, clarification of, or change in applicable laws or related regulations, guidelines, policies or official interpretations thereof, or (ii) any official administrative pronouncement or judicial decision interpreting or applying such laws or related regulations, guidelines, policies or official interpretations thereof.
 
“REIT” means a real estate investment trust within the meaning of the Code.
 
“Series A Preferred Securities” means the ·% Non-Cumulative Series A Preferred Securities, par value $0.01 per share, of the Company.
 
“Series B Certificate” means this Certificate of Designations, Preferences and Rights of Floating Rate Non-Cumulative Series B Preferred Securities.

14


 
“Series C Preferred Securities” means the Floating Rate Cumulative Series C Preferred Securities, par value $0.01 per share, of the Company.
 
“Series D Preferred Securities” means the 8.5% Non-Cumulative Series D Preferred Securities, par value $0.01 per share, of the Company.
 
“Supervisory Event” means the occurrence of one of the following: (i) Wachovia Bank becomes “undercapitalized” under prompt corrective action regulations, (ii) Wachovia Bank is placed into conservatorship or receivership, or (iii) the OCC, in its sole discretion, anticipates Wachovia Bank becoming “undercapitalized” in the near term or takes supervisory action that limits the payment of dividends by the Company and in connection therewith directs an exchange of the Series B Preferred Securities for the Wachovia Preferred Stock.
 
“Tax Event” means a determination by the Company, based on the receipt by the Company of an opinion of counsel, rendered by a law firm experienced in such matters, in form and substance satisfactory to the Company, which states that there is a significant risk that dividends paid or to be paid by the Company with respect to its capital stock are not or will not be fully deductible by the Company for United States Federal income tax purposes, or that the Company is or will be subject to additional taxes, duties, or other governmental charges, in an amount the Company reasonably determines to be significant as a result of (i) any amendment to, clarification of, or change in, the laws, treaties, or related regulations of the United States or any of its political subdivisions or their taxing authorities affecting taxation, or (ii) any judicial decision, official administrative pronouncement, published or private ruling, technical advice memorandum, Chief Counsel Advice, as such term is defined in the Code, regulatory procedure, notice, or official announcement, which amendment, clarification, or change is effective, or such official pronouncement or decision is announced, on or after the date of issuance of the Series B Preferred Securities.
 
“Three-Month LIBOR” means, with respect to any LIBOR Determination Date, a rate determined on the basis of the offered rates for three-month U.S. dollar deposits of not less than a principal amount equal to that which is representative for a single transaction in such market at such time, commencing on the second LIBOR Business Day immediately following such LIBOR Determination Date, which appears on US LIBOR Telerate Page 3750 as of approximately 11:00 a.m., London time, on such LIBOR Determination Date.
 
If on any LIBOR Determination Date no rate appears on US LIBOR Telerate Page 3750 as of approximately 11:00 a.m., London time, the Company shall on such LIBOR Determination Date require four major reference banks in the London interbank market selected by the Company to provide the Company with a quotation of the rate at which three-month deposits in U.S. dollars, commencing on the second LIBOR Business Day immediately following such LIBOR Determination Date, are offered by them to prime banks in the London interbank market as of approximately 11:00 a.m., London time, on such LIBOR Determination Date and in a principal amount equal to that which is representative for a single transaction in such market at such time. If at least two such quotations are provided, Three-Month LIBOR for such LIBOR Determination Date will be the arithmetic mean of such quotations as calculated by the Company. If fewer than two quotations are provided, Three-Month LIBOR for such LIBOR Determination Date will be the arithmetic mean of the rates quoted as of approximately 11:00 a.m., London time, on such LIBOR Determination Date by three major banks in the London inter-bank market selected by the Company for loans in U.S. dollars to leading European banks, having a three-month maturity commencing on the second LIBOR Business Day immediately following such LIBOR Determination Date and in a principal amount equal to that which is representative for a single transaction in such market at such time; provided, however, that, if the banks selected as aforesaid by the Company are not quoting as mentioned in this sentence, Three-Month LIBOR for such LIBOR Determination Date will be the Three-Month LIBOR determined with respect to the immediately preceding Dividend Period.
 
“Transfer” means any sale, transfer, gift, assignment, devise or other disposition of the Series B Preferred Securities, including, but not limited to, (i) the granting of any option or entering into any agreement for the sale,

15


transfer or other disposition of such securities, or (ii) the sale, transfer, assignment or other disposition of any securities or rights convertible into or exchangeable for Series B Preferred Securities, whether voluntary or involuntary, whether of record or beneficially and whether by operation of law or otherwise.
 
“Wachovia” means Wachovia Corporation, a corporation organized under the laws of the State of North Carolina, and its successors and assigns.
 
“Wachovia Bank” means Wachovia Bank, National Association, a national banking association, and its successors and assigns.
 
“Wachovia Holding” means Wachovia Preferred Holding Corp., a corporation organized under the laws of the State of California.
 
“Wachovia Preferred Stock” means the Series ·, Class · Preferred Stock, no par value per share and having a liquidation preference of $150.00 per share, of Wachovia.
 
Section 2.    Dividends.    (a) The dividend rate for the Series B Preferred Securities shall be the Applicable Rate, accruing from the date of its issuance to and including the last day of March, the last day of June, the last day of September or the last day of December, whichever occurs first after such issuance (such period being the “Initial Dividend Period”) and then for each dividend payment period thereafter, commencing on April 1, July 1, October 1 or January 1, as the case may be, of each year and ending on and including the day next preceding the first day of the next quarterly period (each such period, including the Initial Dividend Period, being a “Dividend Period”), payable to holders of record of the Series B Preferred Securities on the respective record dates fixed for such purpose by the Board of Directors in advance of payment of such dividend, which shall be the 15th calendar day of the last calendar month of the applicable Dividend Period (each such date, a “Dividend Record Date”). If such Dividend Record Date is not a Business Day then the Dividend Record Date for the applicable Dividend Period shall be the first Business Day immediately following the 15th calendar day of the last calendar month of the applicable Dividend Period. Until no longer outstanding, the holders of the Series B Preferred Securities shall be entitled to receive such cash dividends, and the Company shall be bound to pay the same, but only as, if and when declared by the Board of Directors, out of funds legally available for the payment thereof (each such payment, a “Dividend Payment”), on March 31, June 30, September 30 and December 31 of each year (each, a “Dividend Payment Date”) for the respective Dividend Period ending on such date. If a Dividend Payment Date is not a Business Day, the Dividend Payment due on such Dividend Payment Date shall be paid, without interest, on the first Business Day immediately following such Dividend Payment Date, except if such Business Day falls in a different calendar year than such Dividend Payment Date, such Dividend Payment shall be paid on the last Business Date immediately preceding such Dividend Payment Date. The amount of dividends payable for the Initial Dividend Period or any period shorter than a full Dividend Period shall be computed on the basis of a 360-day year having 30-day months and the actual number of days elapsed in the period; provided, however, that in the event of a Conditional Exchange, any authorized, declared, but unpaid dividends on the Series B Preferred Securities as of the time of such Conditional Exchange shall be deemed to be authorized, declared, but unpaid dividends on the Depositary Shares.
 
 
(b)
 
Dividends shall be non-cumulative. If the Board of Directors fails to declare a dividend or declares less than a full dividend on the Series B Preferred Securities for a Dividend Period, then holders of the Series B Preferred Securities shall have no right to receive any dividend or a full dividend, as the case may be, for that Dividend Period, and the Company shall have no obligation to pay a dividend or to pay a full dividend, as the case may be, for that Dividend Period, whether or not dividends are declared and paid for any future Dividend Period, with respect to either the Series B Preferred Securities, other series of preferred stock of the Company, or the Common Stock.
 
 
(c)
 
Holders of Series B Preferred Securities shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full dividends for each Dividend Period, as herein provided, on the

16


 
Series B Preferred Securities. No interest, or sum of money in lieu of interest, shall be payable in respect of any Dividend Payment or Dividend Payments or failure to make any Dividend Payment or Dividend Payments.
 
 
(d)
 
If full dividends on the Series B Preferred Securities for any Dividend Period have not been declared and paid, or a sum sufficient for such payment has not been set apart for such payment, no dividends shall be declared or paid or set aside for payment and no other distribution shall be declared or made or set aside for payment upon any shares of Junior Securities, nor shall any shares of Junior Securities be redeemed, purchased, or otherwise acquired for any consideration, nor shall any monies be paid to or made available for a sinking fund for the redemption of any such securities by the Company, except by conversion into or exchange for other Junior Securities, until such time when dividends on all outstanding Series B Preferred Securities have been (i) declared and paid for three consecutive Dividend Periods, and (ii) declared and paid or declared and a sum sufficient for such payment has been set apart for payment for the fourth consecutive Dividend Period. Payment of dividends on the Series B Preferred Securities shall be subject to the rights of holders of any securities ranking senior to the Series B Preferred Securities as to dividend rights.
 
 
(e)
 
When dividends are not paid in full on, or a sum sufficient for such full payment is not set apart for, the Series B Preferred Securities and any Parity Securities, all dividends declared upon the Series B Preferred Securities and any Parity Securities shall be declared pro rata so that the amount of dividends declared per each share of Series B Preferred Securities and per each share of such other Parity Security shall in all cases bear to each other the same ratio that (i) full dividends per each share of Series B Preferred Security for the then-current Dividend Period, not including any accumulation in respect of unpaid dividends for prior Dividend Periods, and (ii) full dividends, including required or permitted accumulations, if any, on each share of such Parity Security, bear to each other.
 
Section 3.    Conditional Exchange.    (a) If the OCC so directs upon the occurrence of a Supervisory Event, each Series B Preferred Security then outstanding shall be exchanged automatically for one newly issued Depositary Share (a “Conditional Exchange”).
 
 
(b)
 
Upon the occurrence of a Conditional Exchange, each holder of Series B Preferred Securities shall be unconditionally obligated to surrender to Wachovia any certificates representing the Series B Preferred Securities owned by such holder on the date and time provided in Section 3(c), and Wachovia shall be unconditionally obligated to issue to such holder, in exchange for each such Series B Preferred Security surrendered, a Depositary Share on a share-for-share basis pursuant to the Exchange Agreement. Any Series B Preferred Securities purchased or redeemed by the Company prior to the time of exchange shall not be deemed outstanding and shall not be subject to the Conditional Exchange.
 
 
(c)
 
The Conditional Exchange shall occur as of 8:00 a.m. Eastern Time on the date for such exchange set forth in the applicable OCC directive, or, if such date is not set forth in the directive, as of 8:00 a.m. Eastern Time on the earliest possible date such exchange could occur consistent with the directive, as evidenced by the issuance by Wachovia of a press release prior to such time. As of the time of the Conditional Exchange, all of the Series B Preferred Securities shall be cancelled and will cease to be outstanding without any further action by the Company or the holders thereof, all rights of the holders of Series B Preferred Securities as the Company’s stockholders shall cease, and such persons shall be, for all purposes, solely holders of Depositary Shares.
 
 
(d)
 
Within 30 days of the occurrence of a Supervisory Event and in connection therewith, the issuance by the OCC of a directive requiring a Conditional Exchange, the Company shall cause to be mailed a notice to each of the holders of record of the Series B Preferred Securities setting forth (i) the occurrence of a Supervisory Event and directive requiring a Conditional Exchange and (ii) instructions where such holders of record shall deliver the certificates representing the Series B Preferred Securities

17


 
in exchange for Depositary Shares. Wachovia shall, pursuant to the Exchange Agreement, deliver to each such holder of record of the Series B Preferred Securities Depositary Shares upon surrender of the certificates representing the Series B Preferred Securities. Any such notice to the holders of record of the Series B Preferred Securities shall be addressed to each such holder at his last known address shown on the records of the Company and the time of mailing of such notice shall be deemed to be the time of the giving thereof. Until replacement certificates representative of Depositary Shares are delivered or in the event such replacement certificates are not delivered, any certificates previously representing Series B Preferred Securities shall be deemed for all purposes to represent Depositary Shares.
 
Section 4.    Liquidation Preference.    (a) The amount payable on the Series B Preferred Securities in the event of any voluntary or involuntary liquidation, dissolution, or winding-up of affairs of the Company shall be $25.00 per share, plus authorized, declared, but unpaid dividends up to the date of such liquidation, dissolution, or winding-up of affairs of the Company, and no more before any distribution shall be made to the holders of any shares of Junior Securities, subject to the rights of holders of any securities ranking senior to the Series B Preferred Securities as to rights upon liquidation, winding up, or dissolution and subject to the rights of general creditors. The holders of Series B Preferred Securities shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution, or winding-up of affairs of the Company other than what is expressly provided for in this Section 4(a).
 
 
(b)
 
If the amounts available for distribution in respect of the Series B Preferred Securities and any Parity Securities are not sufficient to satisfy the full liquidation rights of all of the outstanding Series B Preferred Securities and any Parity Securities, then the holders of the Series B Preferred Securities and any Parity Securities shall share ratably in any such distribution of assets in proportion to the full respective liquidation preference to which they are entitled.
 
 
(c)
 
The sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a dissolution, liquidation or winding up of the Company, nor shall the merger or consolidation of the Company into or with any other corporation or association or the merger or consolidation of any other corporation or association into or with the Company be deemed to be a dissolution, liquidation or winding up of the Company.
 
Section 5.    Voting Rights.    (a) The holders of the Series B Preferred Securities shall be entitled to 1/10th of one vote per Series B Preferred Security on all matters to be voted on by the holders of Common Stock. The holders of the Series B Preferred Securities shall vote as a single class with (i) the holders of Common Stock and (ii) the holders of any other class of securities of the Company entitled, by the terms of such securities, to vote as a single class with the holders of Common Stock.
 
 
(b)
 
If full dividends on the Series B Preferred Securities have not been paid, or declared and set aside for payment, for six Dividend Periods, the number of the Company’s directors shall be increased by two. Subject to compliance with any requirement for regulatory approval of, or non-objection to, persons serving as directors, the holders of Series B Preferred Securities, voting together as a single and separate class with the holders of any Parity Securities having the same voting rights as those of the Series B Preferred Securities, shall have the right to elect two directors in addition to the directors then in office at the Company’s next annual meeting of stockholders. The right to elect such additional directors shall continue as set forth herein at each subsequent annual meeting until such time when dividends on all outstanding Series B Preferred Securities have been (i) declared and paid for three consecutive Dividend Periods, and (ii) declared and paid or declared and a sum sufficient for such payment has been set apart for payment for the fourth consecutive Dividend Period. The term of such additional directors shall terminate, and the total number of directors shall be decreased by two upon the first annual meeting of stockholders after such time when dividends on all outstanding Series B Preferred Securities have been (i) declared and paid for three consecutive Dividend Periods, and (ii)

18


 
declared and paid or declared and a sum sufficient for such payment has been set apart for payment for the fourth consecutive Dividend Period or, if earlier, upon the redemption of all Series B Preferred Securities or a Conditional Exchange. After the term of such additional directors terminates as set forth herein, the holders of the Series B Preferred Securities shall not be permitted to elect any additional directors in the manner provided for in this Section 5(b) unless dividends on the Series B Preferred Securities and the holders of any Parity Securities have again not been paid, or declared and set aside for payment, for six future Dividend Periods. Any such additional director elected by the holders of Series B Preferred Securities may only be removed by the vote of the holders of record of the then outstanding Series B Preferred Securities and the holders of any Parity Securities entitled to vote, voting together as a single and separate class with the holders of any Parity Securities having the same voting rights as those of the Series B Preferred Securities at a meeting of the Company’s stockholders called for that purpose. For so long as the right provided by this Section 5(b) to elect additional directors is effective, (i) any vacancy created by the removal of any such director may be filled only by the vote of the holders of the outstanding Series B Preferred Securities and the holders of any Parity Securities entitled to vote, voting together as a single and separate class with the holders of any Parity Securities having the same voting rights as those of the Series B Preferred Securities at the same meeting at which such removal is considered, and (ii) any other vacancy in the office of any such director as a result of the director’s death or resignation or for any other reason may be filled by an instrument in writing signed by any such remaining director and filed with the Company.
 
 
(c)
 
For so long as any Series B Preferred Securities are outstanding, the Company shall not, without the consent or vote of the holders of at least two-thirds of the then outstanding Series B Preferred Securities, voting separately as a single class, (i) amend, alter, or repeal or otherwise change any provision of the Company’s Certificate of Incorporation or this Series B Certificate if such amendment, alteration, repeal, or change would materially and adversely affect the preferences, conversion, or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications, or terms or conditions of redemption of the Series B Preferred Securities, (ii) authorize, create, or increase the authorized amount of or issue any class or series of any of the Company’s equity securities, or any warrants, options, or other rights exercisable for or convertible or exchangeable into any class or series of any of the Company’s equity securities, ranking senior to the Series B Preferred Securities, either as to dividend rights or rights on the Company’s liquidation, dissolution, or winding up, and (iii) effect its consolidation, conversion, or merger with or into, or a share exchange with, another entity, provided, that the Company may consolidate or merge with or into, or enter into a share exchange with, another entity without the consent of the holders of the Series B Preferred Securities if (A) such entity is an entity that is controlled by or under common control with Wachovia, (B) such entity is a corporation, business trust, limited liability company, or other entity organized under the laws of the United States or a political subdivision thereof that is not regulated as an “investment company” under the Investment Company Act and that, according to an opinion of counsel rendered by a firm experienced in such matters, is a REIT, (C) such other entity expressly assumes all of the Company’s obligations and commitments pursuant to such consolidation, merger, or share exchange, (D) the outstanding Series B Preferred Securities are exchanged for or converted into shares of the surviving entity having preferences, limitations, and relative voting and other rights substantially identical to those of the Series B Preferred Securities, including limitations on personal liability of the stockholders, (E) after giving effect to such merger, consolidation, or share exchange, no breach, or event which, with the giving of notice or passage of time or both, could become a breach, by the Company of obligations under its Certificate of Incorporation or this Series B Certificate shall have occurred and be continuing, and (F) the Company has received written notice from each of the rating agencies rating the Series B Preferred Securities, and delivered a copy thereof to the transfer agent, confirming that such merger, consolidation or share exchange will not result in a reduction of the rating assigned by any of such rating agencies to the Series B Preferred Securities or the preferred interests of any surviving corporation, trust, or entity issued in replacement of the Series B Preferred Security.

19


 
 
(d)
 
As a condition to effecting any merger, consolidation, or share exchange described in the proviso to clause (iii) of paragraph (c) above, the Company shall cause to be mailed to the holders of record of the Series B Preferred Securities a notice of such merger, consolidation or share exchange, such notice to be addressed to each such holder at his last known address shown on the records of the Company, and the time of mailing such notice shall be deemed to be the time of the giving thereof, at least 15 days prior to such transaction becoming effective and describing such merger, consolidation, or share exchange, together with a certificate of one of the Company’s executive officers stating that such merger, consolidation, or share exchange complies with the requirements of the proviso to clause (iii) of paragraph (c) above and that all conditions precedent provided for in the proviso to clause (iii) of paragraph (c) above relating to such transaction have been complied with.
 
 
(e)
 
For so long as the Series B Preferred Securities are outstanding, except with the consent or affirmative vote of the holders of at least two-thirds of the Series B Preferred Securities, voting as a separate class, the Company shall not (i) make or permit to be made any payment to Wachovia Bank, or its Affiliates, relating to the Company’s Indebtedness or stock when the Company is otherwise precluded from making payments in respect of its Junior Securities, or make or permit such payment to be made in anticipation of any liquidation, dissolution, or winding up, (ii) incur Indebtedness at any time other than Permitted Indebtedness, (iii) pay dividends on the Company’s Junior Securities unless the Company’s FFO for the four prior fiscal quarters equals or exceeds 150% of the amount that would be required to pay full annual dividends on the Series B Preferred Securities as well as any Parity Securities, except as may be necessary to maintain the Company’s status as a REIT, (iv) make any payment of interest or principal with respect to the Company’s Indebtedness to Wachovia Bank or its Affiliates unless FFO for the four prior fiscal quarters equals or exceeds 150% of the amount that would be required to pay full annual dividends on the Series B Preferred Securities as well as any Parity Securities, except as may be necessary to maintain the Company’s status as a REIT, (v) amend or otherwise change the Company’s policy of reinvesting the proceeds of its assets in other interest-earning assets such that the Company’s FFO over any period of four fiscal quarters shall be anticipated to equal or exceed 150% of the amount that would be required to pay full annual dividends on the Series B Preferred Securities as well as any Parity Securities, except as may be necessary to maintain the Company’s status as a REIT, (vi) issue any additional shares of the Company’s Common Stock in an amount that would result in Wachovia Holdings and Wachovia or their respective Affiliates owning less than 100% of the outstanding shares of Common Stock, or (vii) remove “Wachovia” from the Company’s name unless the name of either Wachovia or Wachovia Bank changes and such name change is consistent with the new name.
 
 
(f)
 
The holders of the Series B Preferred Securities shall have no other voting rights except as expressly provided for in this Series B Certificate or as otherwise required by law.
 
Section 6.    Redemption.    (a) The Series B Preferred Securities shall not be redeemable by the Company prior to the fifth anniversary of the initial issuance of the Series B Preferred Securities, except upon the occurrence of a Tax Event, an Investment Company Act Event, or a Regulatory Capital Event and with the prior approval of the OCC. On or after the fifth anniversary of the initial issuance of the Series B Preferred Securities, the Company may, with the prior approval of the OCC, redeem the Series B Preferred Securities for cash, in whole or in part, at a price equal to $25.00 per share of Series B Preferred Securities, plus authorized, declared, but unpaid dividends to the Redemption Date, without interest, on shares redeemed (collectively, the “Redemption Price”) from funds legally available for such purpose.
 
 
(b)
 
On or after the fifth anniversary of the initial issuance of the Series B Preferred Securities, the Company, at the option of the Board of Directors, may at any time redeem fewer than all the outstanding Series B Preferred Securities. In that event, the shares to be redeemed shall be determined by lot, pro rata, or by such other method as the Board of Directors in its sole discretion determines to be equitable.

20


 
 
(c)
 
Prior to the fifth anniversary of the initial issuance of the Series B Preferred Securities, but only upon or after the occurrence of a Tax Event, an Investment Company Act Event, or a Regulatory Capital Event, the Company, at the option of the Board of Directors, may redeem the outstanding Series B Preferred Securities, in whole, but not in part, for the Redemption Price from funds legally available for such purpose.
 
 
(d)
 
Not more than 60 days and not less than 30 days prior to the date established for such redemption by the Board of Directors (the “Redemption Date”), notice of the proposed redemption shall be mailed to the holders of record of the Series B Preferred Securities to be redeemed, such notice to be addressed to each such stockholder at his last known address shown on the records of the Company, and the time of mailing such notice shall be deemed to be the time of the giving thereof. On or after the Redemption Date, the Series B Preferred Securities called for redemption shall automatically, and without further action on the part of the holder thereof, be deemed to have been redeemed and the former holder thereof shall thereupon only be entitled to receive payment of the Redemption Price. If such notice of redemption shall have been given as aforesaid, and if on or before the Redemption Date the funds necessary for the redemption shall have been set aside so as to be available therefore, then the dividends thereon shall cease to accrue after the Redemption Date and all rights with respect to the Series B Preferred Securities so called for redemption shall forthwith after such Redemption Date cease, except the right of the holders to receive the Redemption Price, without interest. If such notice of redemption of all or any part of the Series B Preferred Securities shall have been mailed as aforesaid and the Company shall thereafter deposit money for the payment of the Redemption Price pursuant thereto with any bank or trust company (the “Depositary Company”), including any Affiliate of the Company, selected by the Board of Directors for that purpose, to be applied to such redemption, then from and after the making of such deposit, such Series B Preferred Securities shall not be deemed to be outstanding for any purpose, and the rights of the holders thereof shall be limited to the rights to receive payment of the Redemption Price, without interest but including any declared, but unpaid, dividends to the Redemption Date, from the Depositary Company, if applicable, upon endorsement, if required, and surrender of the certificates therefore. The Company shall be entitled to receive, from time to time, from the Depositary Company, the interest, if any, allowed on such moneys deposited with it, and the holders of any Series B Preferred Securities so redeemed shall have no claim to any such interest. Any moneys so deposited and remaining unclaimed at the end of three years from the Redemption Date shall, if thereafter requested by resolution of the Board of Directors, be repaid to the Company, and in the event of such repayment to the Company, such holders of record of the Series B Preferred Securities so redeemed which shall not have made claim against such moneys prior to such repayment to the Company shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of the Series B Preferred Securities and so repaid to the Company, but shall in no event be entitled to any interest.
 
 
(e)
 
Subject to the provisions herein, the Board of Directors shall have authority to prescribe from time to time the manner in which the Series B Preferred Securities shall be redeemed.
 
 
(f)
 
Nothing contained herein shall limit any legal right of the Company to purchase any shares of the Series B Preferred Securities.
 
Section 7.    Conversion.    The holders of the Series B Preferred Securities shall not have any rights to convert such Series B Preferred Securities into shares of any other class of capital stock of the Company.
 
Section 8.    Rank.    Notwithstanding anything set forth in the Certificate of Incorporation of the Company or this Series B Certificate to the contrary, the Board of Directors, without the vote of the holders of the Series B Preferred Securities, may authorize and issue additional shares of Junior Securities. For so long as any Series B Preferred Securities remain outstanding, the Company may not, without the consent or approval of the holders of at least two-thirds of the outstanding Series B Preferred Securities, issue any series of stock ranking senior to the Series B Preferred Securities as to dividends and upon voluntary or involuntary liquidation, dissolution or winding-up of affairs of the Company.

21


 
Section 9.    Independent Directors.    (a) For so long as any Series B Preferred Securities remain outstanding, except with the approval of a majority of the Independent Directors then in office, the Company shall not (i) authorize and issue any additional preferred stock ranking on parity with the Series B Preferred Securities as to dividends and upon voluntary or involuntary liquidation, dissolution or winding-up of affairs of the Company; (ii) terminate, amend, modify or elect not to renew any participation and/or servicing agreements or subcontract any of its duties under such agreements to any Persons who are not Affiliates of Wachovia Bank; (iii) amend or otherwise change the Company’s policy of limiting authorized investments which are not mortgages or other liens on and interests in real estate to no more than 20% of the value of the Company’s total assets or amend or otherwise change the Company’s investment policy if such amendment or change would be inconsistent with an exemption under the Investment Company Act; (iv) effect its consolidation, conversion, or merger with or into, or a share exchange with, another entity that is not tax-free to the holders of the Series B Preferred Securities, except to the extent such consolidation, conversion, or merger with or into, or a share exchange with, another entity is required to be approved pursuant to Section 5(c); (v) revoke its REIT status or amend, alter or repeal any REIT-related restrictions on transfer and ownership with respect to any class or series of securities of the Company; (vi) effect its dissolution, liquidation, or termination prior to ·, 2022; or (vii) amend, alter or repeal this Section 9.
 
 
(b)
 
Any members of the Board of Directors elected pursuant to Section 5(b), shall be deemed to be Independent Directors for the purposes of the voting provisions of Section 9(a).
 
 
(c)
 
In assessing the benefits to the Corporation of any proposed action requiring their consent, the Independent Directors shall take into account the interests of holders of both the Common Stock and the preferred stock of the Company, including, without limitation, the holders of the Series B Preferred Securities. In considering the interests of the holders of the preferred stock of the Company, including, without limitation, holders of this Series B Preferred Securities, the Independent Directors shall owe the same duties that the Independent Directors owe to holders of the Common Stock.
 
 
Section 10.    Restrictions on Ownership and Transfer.    (a) Any Transfer that, if effective, would result in the Series A Preferred Securities, Series B Preferred Securities, Series C Preferred Securities and Series D Preferred Securities, collectively, being Beneficially Owned by less than one hundred Persons, determined without reference to any rules of attribution, (i) shall be null and void ab initio as to the Transfer of such Series B Preferred Securities which would be otherwise Beneficially Owned by the transferee thereof, and (ii) such intended transferee shall acquire no rights whatsoever in such Series B Preferred Securities.
 
 
(b)
 
Any Transfer that, if effective, would result in the Company being “closely held” within the meaning of Section 856(h) of the Code, (i) shall be null and void ab initio as to the Transfer of such Series B Preferred Securities which would cause the Company to be “closely held” within the meaning of Section 856(h) of the Code, and (ii) the intended transferee thereof shall acquire no rights in such Series B Preferred Securities.
 
 
(c)
 
If the Board of Directors or its properly authorized designees shall at any time determine in good faith that a Transfer has taken place in violation of paragraphs (a) and/or (b) of this Section 10 or that a Person intends to acquire or has attempted to acquire Beneficial Ownership of any Series B Preferred Securities in violation of paragraphs (a) and/or (b) of this Section 10, the Board of Directors or its properly authorized designees shall take such action as it or they deem advisable to refuse to give effect or to prevent such Transfer (or any Transfer related to such intent), including, but not limited to, (i) refusing to give effect to such Transfer on the books of the Company, and/or (ii) instituting proceedings to enjoin such Transfer.
 
 
(d)
 
Any Person who acquires or attempts to acquire Beneficial Ownership of Series B Preferred Securities in violation of paragraphs (a) and/or (b) of this Section 10 shall immediately give written notice to the Company of such event.

22


 
 
(e)
 
Every Beneficial Owner of more than 2.0% of the outstanding Series B Preferred Securities shall, within 30 days after January 1 of each year, give written notice to the Company stating the name and address of such Beneficial Owner, the number of Series B Preferred Securities Beneficially Owned, and a description of how such securities are held. Each such Beneficial Owner shall provide to the Company such additional information as the Company may request in order to determine the effect, if any, of such Beneficial Ownership on the Company’s status as a REIT.
 
 
(f)
 
Each Person who is a Beneficial Owner of Series B Preferred Securities and each Person, including the holder of record who is holding Series B Preferred Securities for a Beneficial Owner shall provide to the Company such information as the Company shall request, in good faith, in order to determine the Company’s status as a REIT or to comply with regulations promulgated under the REIT provisions of the Code.
 
Section 11.    Repurchase.    Subject to the limitations imposed in this Series B Certificate, the Company may purchase and sell Series B Preferred Securities from time to time to such extent, in such manner, and upon such terms as the Board of Directors may determine; provided, however, that the Company shall not use any of its funds for any such purchase when there are reasonable grounds to believe that the Company is, or by such purchase would be, rendered insolvent.
 
IN WITNESS WHEREOF, Wachovia Preferred Funding Corp. has caused this certificate to be signed by Thomas J. Wurtz, its Executive Vice President, and attested by Robert L. Andersen, its Assistant Secretary, this · day of November, 2002.
 
WACHOVIA PREFERRED FUNDING CORP.
 
By:
   
 

Name:
 
Thomas J. Wurtz
Title:
 
Executive Vice President
 
 
ATTEST:
 
By:
 
 

Name:
 
Robert L. Andersen
Title:
 
Assistant Secretary

23


 
WACHOVIA PREFERRED FUNDING CORP.
 
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
FLOATING RATE CUMULATIVE SERIES C PREFERRED SECURITIES
 
Wachovia Preferred Funding Corp., a corporation organized under the laws of the State of Delaware (the “Company”), pursuant to Section 151 of the Delaware General Corporation Law,
 
DOES HEREBY CERTIFY:
 
FIRST, that the Company is duly incorporated and is in good standing under the laws of the State of Delaware; and
 
SECOND, that pursuant to the authority vested in the Board of Directors of the Company (the “Board of Directors”) by Article FOUR of the Company’s Certificate of Incorporation, the Board of Directors duly adopted, by the unanimous written consent of its directors as of ·, 2002, the following resolutions:
 
NOW THEREFORE, BE IT RESOLVED, that out of the total 75,001,000 shares of the Company’s preferred stock, par value $0.01 per share (the “Preferred Stock”), authorized by Article FOUR of the Company’s Certificate of Incorporation, the Board of Directors shall and hereby does provide for the designation of a series of 5,000,000 shares of Preferred Stock which shall be issued in a single series to be known as “Floating Rate Cumulative Series C Preferred Securities” (the “Series C Preferred Securities”). The Series C Preferred Securities shall have, to the extent that such powers, preferences and rights and such qualifications, limitations and restrictions are not otherwise set forth in the Company’s Certificate of Incorporation, the powers, preferences and rights and qualifications, limitations and restrictions set forth below:
 
Section 1.    Defined Terms.    As used herein, the following terms have the meanings specified below:
 
“Affiliate” of any specified Person shall mean (i) any other Person which, directly or indirectly, is in Control of, is controlled by or is under common Control with such specified Person, or (ii) any other Person who is a director or executive officer (A) of such specified Person, (B) of any subsidiary of such specified Person, or (C) of any Person described in clause (i) above.
 
“Applicable Rate” means, with respect to distributions on each Dividend Period, a rate per annum equal to (i) Three-Month LIBOR plus 0.85% from the initial date of issuance of the Series C Preferred Securities until and including the seventh anniversary of the initial date of issuance of the Series C Preferred Securities and (ii) Three-Month LIBOR plus 2.25% after the seventh anniversary of the initial date of issuance of the Series C Preferred Securities; provided, however, that upon the occurrence of an initial Fixed Rate Event and thereafter, the Applicable Rate shall be a fixed rate equal to the Assigned Fixed Rate.
 
“Assigned Fixed Rate” means the fixed rate equal to the Applicable Rate on the date of the occurrence of the initial Fixed Rate Event.
 
“Beneficial Ownership” means the ownership of securities either directly or constructively through the application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The terms “Beneficial Owner”, “Beneficially Owns” and “Beneficially Owned” shall have correlative meanings.
 
“Business Day” means any day other than a Saturday, a Sunday or a day on which banks located in the City of New York, New York or Charlotte, North Carolina generally are authorized or required by law or regulation to close.
 
“Code” means the United States Internal Revenue Code of 1986, as amended from time to time.

24


 
“Common Stock” means the common stock, par value $0.01 per share, of the Company.
 
“Control” means the power, direct or indirect, to direct or cause the direction of the management and policies of any Person whether by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
 
“Depositary Company” shall have the meaning set forth in Section 6(d).
 
“Dividend Payment” shall have the meaning set forth in Section 2(a).
 
“Dividend Payment Date” shall have the meaning set forth in Section 2(a).
 
“Dividend Period” shall have the meaning set forth in Section 2(a).
 
“Dividend Record Date” shall have the meaning set forth in Section 2(a).
 
“FFO” means funds from operations on a consolidated basis and is equal to net income plus depreciation of real or personal property used to generate income, less any gain on the sale of real estate plus any loss on the sale of real estate, all as calculated according to GAAP.
 
“Fixed Rate Event” means any Transfer with respect to all or a portion of the Series C Preferred Securities, subsequent to the initial issuance of the Series C Preferred Securities, through an initial public offering, private placement or otherwise, to any Person who is not an Affiliate of Wachovia.
 
“GAAP” means United States generally accepted accounting principles.
 
“Indebtedness” means all indebtedness for borrowed money and any guarantees of indebtedness for borrowed money.
 
“Initial Dividend Period” shall have the meaning set forth in Section 2(a).
 
“Investment Company Act” means the Investment Company Act of 1940, as amended.
 
“Investment Company Act Event” means a determination by the Company, based on the receipt by the Company of an opinion of counsel, rendered by a law firm experienced in such matters, in form and substance satisfactory to the Company, which states that there is a significant risk that the Company is or will be considered an “investment company” that is required to be registered under the Investment Company Act, as a result of the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency, or regulatory authority.
 
“Junior Securities” means the Common Stock and all other classes and series of securities of the Company which rank below the Series C Preferred Securities as to dividend rights and rights upon liquidation, winding up, or dissolution.
 
“LIBOR Business Day” means any day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealings in foreign exchange and foreign currency deposits) in London and New York.
 
“LIBOR Determination Date” means, as to each Dividend Period, commencing with the Initial Dividend Period, the date that is two LIBOR Business Days prior to the first day of such Dividend Period.
 
“OCC” means the United States Office of the Comptroller of the Currency.

25


 
“Parity Securities” means any outstanding class or series of preferred stock of the Company ranking, in accordance to its terms, as to dividends and upon voluntary or involuntary liquidation, dissolution or winding-up of affairs of the Company on parity with the Series C Preferred Securities.
 
“Permitted Indebtedness” means Indebtedness incurred by the Company in an aggregate amount not to exceed 20% of the Company’s stockholders’ equity as determined in accordance with GAAP.
 
“Person” means an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity or any government or agency or political subdivision thereof and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended; provided, however, that it does not include an underwriter which participates in a public offering of the Series C Preferred Securities for a period of 25 days following the purchase by such underwriter of such securities.
 
“Redemption Date” shall have the meaning set forth in Section 6(d).
 
“Redemption Price” shall have the meaning set forth in Section 6(a).
 
“REIT” means a real estate investment trust within the meaning of the Code.
 
“Series A Preferred Securities” means the ·% Non-Cumulative Series A Preferred Securities, par value $0.01 per share, of the Company.
 
“Series B Preferred Securities” means the Floating Rate Non-Cumulative Series B Preferred Securities, par value $0.01 per share, of the Company.
 
“Series C Certificate” means this Certificate of Designations, Preferences and Rights of Floating Rate Cumulative Series C Preferred Securities.
 
“Series D Preferred Securities” means the 8.5% Non-Cumulative Series D Preferred Securities, par value $0.01 per share, of the Company.
 
“Tax Event” means a determination by the Company, based on the receipt by the Company of an opinion of counsel, rendered by a law firm experienced in such matters, in form and substance satisfactory to the Company, which states that there is a significant risk that dividends paid or to be paid by the Company with respect to its capital stock are not or will not be fully deductible by the Company for United States Federal income tax purposes, or that the Company is or will be subject to additional taxes, duties, or other governmental charges, in an amount the Company reasonably determines to be significant as a result of (i) any amendment to, clarification of, or change in, the laws, treaties, or related regulations of the United States or any of its political subdivisions or their taxing authorities affecting taxation, or (ii) any judicial decision, official administrative pronouncement, published or private ruling, technical advice memorandum, Chief Counsel Advice, as such term is defined in the Code, regulatory procedure, notice, or official announcement, which amendment, clarification, or change is effective, or such official pronouncement or decision is announced, on or after the date of issuance of the Series C Preferred Securities.
 
“Three-Month LIBOR” means, with respect to any LIBOR Determination Date, a rate determined on the basis of the offered rates for three-month U.S. dollar deposits of not less than a principal amount equal to that which is representative for a single transaction in such market at such time, commencing on the second LIBOR Business Day immediately following such LIBOR Determination Date, which appears on US LIBOR Telerate Page 3750 as of approximately 11:00 a.m., London time, on such LIBOR Determination Date.

26


 
If on any LIBOR Determination Date no rate appears on US LIBOR Telerate Page 3750 as of approximately 11:00 a.m., London time, the Company shall on such LIBOR Determination Date require four major reference banks in the London interbank market selected by the Company to provide the Company with a quotation of the rate at which three-month deposits in U.S. dollars, commencing on the second LIBOR Business Day immediately following such LIBOR Determination Date, are offered by them to prime banks in the London interbank market as of approximately 11:00 a.m., London time, on such LIBOR Determination Date and in a principal amount equal to that which is representative for a single transaction in such market at such time. If at least two such quotations are provided, Three-Month LIBOR for such LIBOR Determination Date will be the arithmetic mean of such quotations as calculated by the Company. If fewer than two quotations are provided, Three-Month LIBOR for such LIBOR Determination Date will be the arithmetic mean of the rates quoted as of approximately 11:00 a.m., London time, on such LIBOR Determination Date by three major banks in the London inter-bank market selected by the Company for loans in U.S. dollars to leading European banks, having a three-month maturity commencing on the second LIBOR Business Day immediately following such LIBOR Determination Date and in a principal amount equal to that which is representative for a single transaction in such market at such time; provided, however, that, if the banks selected as aforesaid by the Company are not quoting as mentioned in this sentence, Three-Month LIBOR for such LIBOR Determination Date will be the Three-Month LIBOR determined with respect to the immediately preceding Dividend Period.
 
“Transfer” means any sale, transfer, gift, assignment, devise or other disposition of the Series C Preferred Securities, including, but not limited to, (i) the granting of any option or entering into any agreement for the sale, transfer or other disposition of such securities, or (ii) the sale, transfer, assignment or other disposition of any securities or rights convertible into or exchangeable for Series C Preferred Securities, whether voluntary or involuntary, whether of record or beneficially and whether by operation of law or otherwise.
 
“Wachovia” means Wachovia Corporation, a corporation organized under the laws of the State of North Carolina, and its successors and assigns.
 
“Wachovia Bank” means Wachovia Bank, National Association, a national banking association, and its successors and assigns.
 
“Wachovia Holding” means Wachovia Preferred Holding Corp., a corporation organized under the laws of the State of California.
 
Section 2.    Dividends.    (a) The dividend rate for the Series C Preferred Securities shall be the Applicable Rate, accruing from the date of its issuance to and including the last day of March, the last day of June, the last day of September or the last day of December, whichever occurs first after such issuance (such period being the “Initial Dividend Period”) and then for each dividend payment period thereafter, commencing on April 1, July 1, October 1 or January 1, as the case may be, of each year and ending on and including the day next preceding the first day of the next quarterly period (each such period, including the Initial Dividend Period, being a “Dividend Period”), payable to holders of record of the Series C Preferred Securities on the respective record dates fixed for such purpose by the Board of Directors in advance of payment of such dividend, which shall be the 15th calendar day of the last calendar month of the applicable Dividend Period (each such date, a “Dividend Record Date”). If such Dividend Record Date is not a Business Day then the Dividend Record Date for the applicable Dividend Period shall be the first Business Day immediately following the 15th calendar day of the last calendar month of the applicable Dividend Period. Until no longer outstanding, the holders of the Series C Preferred Securities shall be entitled to receive such cash dividends, and the Company shall be bound to pay the same, but only as, if and when declared by the Board of Directors, out of funds legally available for the payment thereof (each such payment, a “Dividend Payment”), on March 31, June 30, September 30 and December 31 of each year (each, a “Dividend Payment Date”) for the respective Dividend Period ending on such date. If a Dividend Payment Date is not a Business Day, the Dividend Payment due on such Dividend Payment Date shall be paid, without interest, on the first Business Day immediately following such Dividend Payment Date, except if such Business Day falls in a different calendar year than such Dividend Payment Date, such Dividend Payment shall be paid on the last

27


Business Date immediately preceding such Dividend Payment Date. The amount of dividends payable for the Initial Dividend Period or any period shorter than a full Dividend Period shall be computed on the basis of a 360-day year having 30-day months and the actual number of days elapsed in the period.
 
 
(b)
 
Dividends shall be cumulative. Unpaid dividends on the Series C Preferred Securities for any past Dividend Period may be declared and paid at any time, without reference to any regularly scheduled Dividend Payment Date, to holders of record on such Dividend Record Date as may be fixed by the Board of Directors. No interest, or sum of money in lieu of interest, shall be payable in respect of any Dividend Payment or Dividend Payments on the Series C Preferred Securities which may be in arrears.
 
 
(c)
 
Holders of Series C Preferred Securities shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full dividends for each Dividend Period, including any accumulation in respect of any unpaid dividends, as herein provided, on the Series C Preferred Securities. If full dividends, including any accumulation in respect of any unpaid dividends, on the Series C Preferred Securities for any Dividend Period have not been declared and paid, or a sum sufficient for such payment has not been set apart for such payment, no dividends shall be declared or paid or set aside for payment and no other distribution shall be declared or made or set aside for payment upon any shares of Junior Securities, nor shall any shares of Junior Securities be redeemed, purchased, or otherwise acquired for any consideration, nor shall any monies be paid to or made available for a sinking fund for the redemption of any such securities by the Company, except by conversion into or exchange for other Junior Securities, until such time when dividends, including any accumulation in respect of any unpaid dividends, on all outstanding Series C Preferred Securities have been (i) declared and paid for three consecutive Dividend Periods, and (ii) declared and paid or declared and a sum sufficient for such payment has been set apart for payment for the fourth consecutive Dividend Period. Payment of dividends on the Series C Preferred Securities shall be subject to the rights of holders of any securities ranking senior to the Series C Preferred Securities as to dividend rights.
 
 
(d)
 
When dividends are not paid in full on, or a sum sufficient for such full payment is not set apart for, the Series C Preferred Securities and any Parity Securities, all dividends declared upon the Series C Preferred Securities and any Parity Securities shall be declared pro rata so that the amount of dividends declared per each share of Series C Preferred Securities and per each share of such other Parity Security shall in all cases bear to each other the same ratio that (i) full dividends per each share of Series C Preferred Security for the then-current Dividend Period, including any accumulation in respect of unpaid dividends for prior Dividend Periods, and (ii) full dividends, including required or permitted accumulations, if any, on each share of such Parity Security, bear to each other.
 
Section 3.    No Exchange.    The holders of the Series C Preferred Securities have no right to exchange their Series C Preferred Securities for any other securities.
 
Section 4.    Liquidation Preference.    (a) The amount payable on the Series C Preferred Securities in the event of any voluntary or involuntary liquidation, dissolution, or winding-up of affairs of the Company shall be $1,000 per share, plus authorized, declared and unpaid dividends, including any accumulation in respect of any unpaid dividends, up to the date of such liquidation, dissolution, or winding-up of affairs of the Company, and no more before any distribution shall be made to the holders of any shares of Junior Securities, subject to the rights of holders of any securities ranking senior to the Series C Preferred Securities as to rights upon liquidation, winding up, or dissolution and subject to the rights of general creditors. The holders of Series C Preferred Securities shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution, or winding-up of affairs of the Company other than what is expressly provided for in this Section 4(a).
 
 
(b)
 
If the amounts available for distribution in respect of the Series C Preferred Securities and any Parity Securities are not sufficient to satisfy the full liquidation rights of all of the outstanding Series C

28


 
Preferred Securities and any Parity Securities, then the holders of the Series C Preferred Securities and any Parity Securities shall share ratably in any such distribution of assets in proportion to the full respective liquidation preference to which they are entitled.
 
 
(c)    The
 
sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a dissolution, liquidation or winding up of the Company, nor shall the merger or consolidation of the Company into or with any other corporation or association or the merger or consolidation of any other corporation or association into or with the Company be deemed to be a dissolution, liquidation or winding up of the Company.
 
Section 5.    Voting Rights.    (a) The holders of the Series C Preferred Securities shall be entitled to 1/10th of one vote per Series C Preferred Security on all matters to be voted on by the holders of Common Stock. The holders of the Series C Preferred Securities shall vote as a single class with (i) the holders of Common Stock and (ii) the holders of any other class of securities of the Company entitled, by the terms of such securities, to vote as a single class with the holders of Common Stock.
 
 
(b)
 
For so long as any Series C Preferred Securities are outstanding, the Company shall not, without the consent or vote of the holders of at least two-thirds of the then outstanding Series C Preferred Securities, voting separately as a single class, (i) amend, alter, or repeal or otherwise change any provision of the Company’s Certificate of Incorporation or this Series C Certificate if such amendment, alteration, repeal, or change would materially and adversely affect the preferences, conversion, or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications, or terms or conditions of redemption of the Series C Preferred Securities, (ii) authorize, create, or increase the authorized amount of or issue any class or series of any of the Company’s equity securities, or any warrants, options, or other rights exercisable for or convertible or exchangeable into any class or series of any of the Company’s equity securities, ranking senior to the Series C Preferred Securities, either as to dividend rights or rights on the Company’s liquidation, dissolution, or winding up, and (iii) effect its consolidation, conversion, or merger with or into, or a share exchange with, another entity, provided, that the Company may consolidate or merge with or into, or enter into a share exchange with, another entity without the consent of the holders of the Series C Preferred Securities if (A) such entity is an entity that is controlled by or under common control with Wachovia, (B) such entity is a corporation, business trust, limited liability company, or other entity organized under the laws of the United States or a political subdivision thereof that is not regulated as an “investment company” under the Investment Company Act and that, according to an opinion of counsel rendered by a firm experienced in such matters, is a REIT, (C) such other entity expressly assumes all of the Company’s obligations and commitments pursuant to such consolidation, merger, or share exchange, (D) the outstanding Series C Preferred Securities are exchanged for or converted into shares of the surviving entity having preferences, limitations, and relative voting and other rights substantially identical to those of the Series C Preferred Securities, including limitations on personal liability of the stockholders, (E) after giving effect to such merger, consolidation, or share exchange, no breach, or event which, with the giving of notice or passage of time or both, could become a breach, by the Company of obligations under its Certificate of Incorporation or this Series C Certificate shall have occurred and be continuing, and (F) the Company has received written notice from each of the rating agencies rating the Series C Preferred Securities, and delivered a copy thereof to the transfer agent, confirming that such merger, consolidation or share exchange will not result in a reduction of the rating assigned by any of such rating agencies to the Series C Preferred Securities or the preferred interests of any surviving corporation, trust, or entity issued in replacement of the Series C Preferred Security.
 
 
(c)
 
As a condition to effecting any merger, consolidation, or share exchange described in the proviso to clause (iii) of paragraph (b) above, the Company shall cause to be mailed to the holders of record of the Series C Preferred Securities a notice of such merger, consolidation or share exchange, such notice to

29


 
be addressed to each such holder at his last known address shown on the records of the Company, and the time of mailing such notice shall be deemed to be the time of the giving thereof, at least 15 days prior to such transaction becoming effective and describing such merger, consolidation, or share exchange, together with a certificate of one of the Company’s executive officers stating that such merger, consolidation, or share exchange complies with the requirements of the proviso to clause (iii) of paragraph (b) above and that all conditions precedent provided for in the proviso to clause (iii) of paragraph (b) above relating to such transaction have been complied with.
 
(d)
 
For so long as the Series C Preferred Securities are outstanding, except with the consent or affirmative vote of the holders of at least two-thirds of the Series C Preferred Securities, voting as a separate class, the Company shall not (i) make or permit to be made any payment to Wachovia Bank, or its Affiliates, relating to the Company’s Indebtedness or stock when the Company is otherwise precluded from making payments in respect of its Junior Securities, or make or permit such payment to be made in anticipation of any liquidation, dissolution, or winding up, (ii) incur Indebtedness at any time other than Permitted Indebtedness, (iii) pay dividends on the Company’s Junior Securities unless the Company’s FFO for the four prior fiscal quarters equals or exceeds 150% of the amount that would be required to pay full annual dividends and any accumulation in respect of any unpaid dividends for past Dividend Periods on the Series C Preferred Securities as well as any Parity Securities, except as may be necessary to maintain the Company’s status as a REIT, (iv) make any payment of interest or principal with respect to the Company’s Indebtedness to Wachovia Bank or its Affiliates unless FFO for the four prior fiscal quarters equals or exceeds 150% of the amount that would be required to pay full annual dividends and any accumulation in respect of any unpaid dividends for past Dividend Periods on the Series C Preferred Securities as well as any Parity Securities, except as may be necessary to maintain the Company’s status as a REIT, (v) amend or otherwise change the Company’s policy of reinvesting the proceeds of its assets in other interest-earning assets such that the Company’s FFO over any period of four fiscal quarters shall be anticipated to equal or exceed 150% of the amount that would be required to pay full annual dividends and any accumulation in respect of any unpaid dividends for past Dividend Periods on the Series C Preferred Securities as well as any Parity Securities, except as may be necessary to maintain the Company’s status as a REIT, (vi) issue any additional shares of the Company’s Common Stock in an amount that would result in Wachovia Holdings and Wachovia or their respective Affiliates owning less than 100% of the outstanding shares of Common Stock, or (vii) remove “Wachovia” from the Company’s name unless the name of either Wachovia or Wachovia Bank changes and such name change is consistent with the new name.
 
 
(e)
 
The holders of the Series C Preferred Securities shall have no other voting rights except as expressly provided for in this Series C Certificate or as otherwise required by law.
Section 6.    Redemption.    (a) The Series C Preferred Securities shall not be redeemable by the Company prior to the seventh anniversary of the initial issuance of the Series C Preferred Securities, except upon the occurrence of a Tax Event or an Investment Company Act Event and with the prior approval of the OCC. On or after the seventh anniversary of the initial issuance of the Series C Preferred Securities, the Company may, with the prior approval of the OCC, redeem the Series C Preferred Securities for cash, in whole or in part, at any time and from time to time, at a price equal to $1,000 per share of Series C Preferred Securities, plus authorized, declared and unpaid dividends, including any accumulation in respect of any unpaid dividends, to the Redemption Date, without interest, on shares redeemed (collectively, the “Redemption Price”) from funds legally available for such purpose.
 
(b)
 
On or after the seventh anniversary of the initial issuance of the Series C Preferred Securities, the Company, at the option of the Board of Directors, may at any time redeem fewer than all the outstanding Series C Preferred Securities. In that event, the shares to be redeemed shall be determined by lot, pro rata, or by such other method as the Board of Directors in its sole discretion determines to be equitable.

30


 
(c)
 
Prior to the seventh anniversary of the initial issuance of the Series C Preferred Securities, but only upon or after the occurrence of a Tax Event or an Investment Company Act Event, the Company, at the option of the Board of Directors, may redeem the outstanding Series C Preferred Securities, in whole, but not in part, for the Redemption Price from funds legally available for such purpose.
 
 
(d)
 
Not more than 60 days and not less than 30 days prior to the date established for such redemption by the Board of Directors (the “Redemption Date”), notice of the proposed redemption shall be mailed to the holders of record of the Series C Preferred Securities to be redeemed, such notice to be addressed to each such stockholder at his last known address shown on the records of the Company, and the time of mailing such notice shall be deemed to be the time of the giving thereof. On or after the Redemption Date, the Series C Preferred Securities called for redemption shall automatically, and without further action on the part of the holder thereof, be deemed to have been redeemed and the former holder thereof shall thereupon only be entitled to receive payment of the Redemption Price. If such notice of redemption shall have been given as aforesaid, and if on or before the Redemption Date the funds necessary for the redemption shall have been set aside so as to be available therefore, then the dividends thereon shall cease to accrue after the Redemption Date and all rights with respect to the Series C Preferred Securities so called for redemption shall forthwith after such Redemption Date cease, except the right of the holders to receive the Redemption Price, without interest. If such notice of redemption of all or any part of the Series C Preferred Securities shall have been mailed as aforesaid and the Company shall thereafter deposit money for the payment of the Redemption Price pursuant thereto with any bank or trust company (the “Depositary Company”), including any Affiliate of the Company, selected by the Board of Directors for that purpose, to be applied to such redemption, then from and after the making of such deposit, such Series C Preferred Securities shall not be deemed to be outstanding for any purpose, and the rights of the holders thereof shall be limited to the rights to receive payment of the Redemption Price, without interest but including any declared and unpaid, dividends to the Redemption Date, from the Depositary Company, if applicable, upon endorsement, if required, and surrender of the certificates therefore. The Company shall be entitled to receive, from time to time, from the Depositary Company, the interest, if any, allowed on such moneys deposited with it, and the holders of any Series C Preferred Securities so redeemed shall have no claim to any such interest. Any moneys so deposited and remaining unclaimed at the end of three years from the Redemption Date shall, if thereafter requested by resolution of the Board of Directors, be repaid to the Company, and in the event of such repayment to the Company, such holders of record of the Series C Preferred Securities so redeemed which shall not have made claim against such moneys prior to such repayment to the Company shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as stated above for the redemption of the Series C Preferred Securities and so repaid to the Company, but shall in no event be entitled to any interest.
 
 
(e)
 
Subject to the provisions herein, the Board of Directors shall have authority to prescribe from time to time the manner in which the Series C Preferred Securities shall be redeemed.
 
 
(f)
 
Nothing contained herein shall limit any legal right of the Company to purchase any shares of the Series C Preferred Securities.
 
Section 7.    Conversion.    The holders of the Series C Preferred Securities shall not have any rights to convert such Series C Preferred Securities into shares of any other class of capital stock of the Company.
 
Section 8.    Rank.    Notwithstanding anything set forth in the Certificate of Incorporation of the Company or this Certificate to the contrary, the Board of Directors, without the vote of the holders of the Series C Preferred Securities, may authorize and issue additional shares of Junior Securities. For so long as any Series C Preferred Securities remain outstanding, the Company may not, without the consent or approval of the holders of at least two-thirds of the outstanding Series C Preferred Securities, issue any series of stock ranking senior to or on parity with the Series C Preferred Securities as to dividends and upon voluntary or involuntary liquidation, dissolution or winding-up of affairs of the Company.

31


 
Section 9.    Restrictions on Ownership and Transfer.    (a) Any Transfer that, if effective, would result in the Series A Preferred Securities, Series B Preferred Securities, Series C Preferred Securities and Series D Preferred Securities, collectively, being Beneficially Owned by less than one hundred Persons, determined without reference to any rules of attribution, (i) shall be null and void ab initio as to the Transfer of such Series C Preferred Securities which would be otherwise Beneficially Owned by the transferee thereof, and (ii) such intended transferee shall acquire no rights whatsoever in such Series C Preferred Securities.
 
 
(b)
 
Any Transfer that, if effective, would result in the Company being “closely held” within the meaning of Section 856(h) of the Code, (i) shall be null and void ab initio as to the Transfer of such Series C Preferred Securities which would cause the Company to be “closely held” within the meaning of Section 856(h) of the Code, and (ii) the intended transferee thereof shall acquire no rights in such Series C Preferred Securities.
 
 
(c)
 
If the Board of Directors or its properly authorized designees shall at any time determine in good faith that a Transfer has taken place in violation of paragraphs (a) and/or (b) of this Section 9 or that a Person intends to acquire or has attempted to acquire Beneficial Ownership of any Series C Preferred Securities in violation of paragraphs (a) and/or (b) of this Section 9, the Board of Directors or its properly authorized designees shall take such action as it or they deem advisable to refuse to give effect or to prevent such Transfer (or any Transfer related to such intent), including, but not limited to, (i) refusing to give effect to such Transfer on the books of the Company, and/or (ii) instituting proceedings to enjoin such Transfer.
 
 
(d)
 
Any Person who acquires or attempts to acquire Beneficial Ownership of Series C Preferred Securities in violation of paragraphs (a) and/or (b) of this Section 9 shall immediately give written notice to the Company of such event.
 
 
(e)
 
Every Beneficial Owner of more than 2.0% of the outstanding Series C Preferred Securities shall, within 30 days after January 1 of each year, give written notice to the Company stating the name and address of such Beneficial Owner, the number of Series C Preferred Securities Beneficially Owned, and a description of how such securities are held. Each such Beneficial Owner shall provide to the Company such additional information as the Company may request in order to determine the effect, if any, of such Beneficial Ownership on the Company’s status as a REIT.
 
 
(f)
 
Each Person who is a Beneficial Owner of Series C Preferred Securities and each Person, including the holder of record who is holding Series C Preferred Securities for a Beneficial Owner shall provide to the Company such information as the Company shall request, in good faith, in order to determine the Company’s status as a REIT or to comply with regulations promulgated under the REIT provisions of the Code.
 
Section 10.    Repurchase.    Subject to the limitations imposed in this Series C Certificate, the Company may purchase and sell Series C Preferred Securities from time to time to such extent, in such manner, and upon such terms as the Board of Directors may determine; provided, however, that the Company shall not use any of its funds for any such purchase when there are reasonable grounds to believe that the Company is, or by such purchase would be, rendered insolvent.

32


 
IN WITNESS WHEREOF, Wachovia Preferred Funding Corp. has caused this certificate to be signed by Thomas J. Wurtz, its Executive Vice President, and attested by Robert L. Andersen, its Assistant Secretary, this · day of November, 2002.
 
WACHOVIA PREFERRED FUNDING CORP.
 
By:
   
 

Name:
 
Thomas J. Wurtz
Title:
 
Executive Vice President
 
 
ATTEST:
 
By:
   
 

Name:
 
Robert L. Andersen
Title:
 
Assistant Secretary

33


WACHOVIA PREFERRED FUNDING CORP.
 
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
8.5% NON-CUMULATIVE SERIES D PREFERRED STOCK
 
Wachovia Preferred Funding Corp., a corporation organized under the laws of the State of Delaware (the “Company”), pursuant to Section 151 of the Delaware General Corporation Law (the “DGCL”),
 
DOES HEREBY CERTIFY:
FIRST, that the Company is duly incorporated and is in good standing under the was of the State of Delaware; and
 
SECOND, that pursuant to the authority vested in the Board of Directors of the Company by Article FOURTH of the Company’s Certificate of Incorporation, the Board of Directors of the Company duly adopted, by the unanimous written consent of its directors as of August 1, 2002, the following resolutions:
 
NOW THEREFORE, BE IT RESOLVED, that out of the total 75,001,000 shares of the Company’s preferred stock, par value $0.01 per share (the “Preferred Stock”), authorized by Article FOURTH of the Company’s Certificate of Incorporation, the Board of Directors shall and hereby does provide for the designation of a series of 913 shares of Preferred Stock which shall be issued in a single series to be known as “8.5% Non-cumulative Series D Preferred Stock” (the “Series D Preferred Stock”). The shares of the Series D Preferred Stock shall have, to the extent that such powers, preferences and rights and such qualifications, limitations and restrictions are not otherwise set forth in the Company’s Certificate of Incorporation, the powers, preferences and rights and qualifications, limitations and restrictions set forth below:
 
Section 1.    Dividends.    (a) The dividend rate for the Series D Preferred Stock shall be $85.00 per share per annum, accruing from the date of its issuance to and including the last day of June or the last day of December, whichever occurs first after such issuance (the “Initial Dividend Period”) and for each dividend payment period thereafter, commencing on July 1 and January 1, as the case may be, of each year and ending on and including the day next preceding the first day of the next such dividend payment period (including the Initial Dividend Period, each a “Dividend Period”), payable to holders of record thereof on the respective record dates (each, a “Dividend Record Date”) fixed for such purpose by the Board of Directors in advance of payment of such dividend. Until no longer outstanding, the holders of the Series D Preferred Stock shall be entitled to receive such cash dividends, and the Company shall be bound to pay the same, but only as, if and when declared by the Board of Directors, out of funds legally available for the payment thereof, on the 15th day of July and the last business day of December of each year (each, a “Dividend Payment Date”) for the Dividend Periods ending June 30 and December 31, respectively.
 

34


 
(b) Dividends shall be non-cumulative. If the Board fails to declare a dividend on the Series D Preferred Stock for a Dividend Period, then holders of the Series D Preferred Stock will have no right to receive a dividend for that Dividend Period, and the Company shall have no obligation to pay a dividend for that Dividend Period, whether or not dividends are declared and paid for any future Dividend Period, with respect to either the Series D Preferred Stock, other series of Preferred Stock, or the common stock, par value $0.01 per share, of the Company (the “Common Stock”).
 
(c) The amount of dividends per share of the Series D Preferred Stock payable for each Dividend Period (other than the Initial Dividend Period) shall be $42.50 (each, a “Dividend Payment”). The amount of dividends payable for the Initial Dividend Period or any period shorter than a full Dividend Period shall be computed on the basis a 360-day year having 30-day months and the actual number of days elapsed in the period.
 
(d) Holders of shares of the Series D Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full dividends for each Dividend Period, as herein provided, on the Series D Preferred Stock. No interest, or sum of money in lieu of interest, shall be payable in respect of any Dividend Payment or Dividend Payments or failure to make any Dividend Payment or Dividend Payments.
 
(e) Notwithstanding anything set forth in the Certificate of Incorporation of the Company or this Certificate of Designations, Preferences and Rights to the contrary, the Board of Directors may declare, out of funds legally available for payment thereof, a dividend to the holders of Common Stock or any other series of Preferred Stock at any time and regardless of whether or not (i) any Dividend Payment or Dividend Payments were made on the Series D Preferred Stock for any Dividend Period or Dividend Periods or (ii) such dividend is declared prior to the then next succeeding Dividend Payment Date.
 
Section 2.    Liquidation Preference.    (a) The amount payable on the Series D Preferred Stock in the event of any voluntary or involuntary liquidation, dissolution, or winding-up of affairs of the Company shall be $1,000 per share and no more before any distribution shall be made to the holders of any shares of Common Stock or any other series of Preferred Stock stated to be junior in liquidation preference to the Series D Preferred Stock. The holders of Series D Preferred Stock shall not be entitled to any further payments in the event of any voluntary or involuntary liquidation, dissolution, or winding-up of affairs of the Company other than what is expressly provided for in this Section 2(a).
 
(b) If the amounts available for distribution in respect of the Series D Preferred Stock and any other outstanding series of Preferred Stock ranking, upon liquidation, on a parity with the Series D Preferred Stock, upon voluntary or involuntary liquidation, dissolution or winding-up of affairs of the Company are not sufficient to satisfy the full liquidation rights of all of the outstanding Series D Preferred Stock and such other series of Preferred Stock, then the holders of the Series D Preferred Stock and

35


such other series of Preferred Stock shall share ratably in any such distribution of assets in proportion to the full respective liquidation preference to which they are entitled.
 
(c) The sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a dissolution, liquidation or winding up of the Company, nor shall the merger or consolidation of the Company into or with any other corporation or association or the merger or consolidation of any other corporation or association into or with the Company be deemed to be a dissolution, liquidation or winding up of the Company.
 
Section 3.    Voting Rights.    The Series D Preferred Stock shall have no voting rights, except as expressly required by law.
 
Section 4.    Redemption.    (a) The Series D Preferred Stock shall be redeemable by the Company at any time at $1,000 per share plus declared, but unpaid, dividends to the Redemption Date (as defined below) on shares redeemed (the “Redemption Price”) with funds legally available for such purpose. The Company, at the option of the Board of Directors, may at any time redeem the whole, or from time to time may redeem any part, of the Series D Preferred Stock at such time or times by paying the Redemption Price, in cash, to the holders thereof.
 
(b) Not more than 60 days and not less than 10 days prior to the date established for such redemption (the “Redemption Date”), notice of the proposed redemption shall be mailed to the holders of record of the Series D Preferred Stock to be redeemed, such notice to be addressed to each such shareholder at his last known address shown on the records of the Company, and the time of mailing such notice shall be deemed to be the time of the giving thereof. On or after the Redemption Date, the Series D Preferred Stock called for redemption shall automatically, and without further action on the part of the holder thereof, be deemed to have been redeemed and the former holder thereof shall thereupon be entitled to receive payment of the Redemption Price. If such notice of redemption shall have been given as aforesaid, and if on or before the Redemption Date the funds necessary for the redemption shall have been set aside so as to be and continue available therefor, then the dividends thereon shall cease to accrue after the Redemption Date and all rights with respect to the shares so called for redemption shall forthwith after such Redemption Date cease, except only the right of the holders to receive the Redemption Price, without interest. If such notice of redemption of all or any part of the Series D Preferred Stock shall have been mailed as aforesaid and the Company shall thereafter deposit money for the payment of the Redemption Price pursuant thereto with any bank or trust company (the “Depositary”), including any Affiliate (as defined below) of the Company, selected by the Board of Directors for that purpose, to be applied to such redemption, then from and after the making of such deposit, such shares shall not be deemed to be outstanding for any purpose, and the rights of the holders thereof shall be limited to the rights to receive payment of the Redemption Price, without interest but including any declared, but unpaid, dividends to the Redemption Date, from the Depositary, if applicable, upon endorsement, if required, and surrender of the certificates

36


therefor. The Company shall be entitled to receive, from time to time, from the Depositary, the interest, if any, allowed on such moneys deposited with it, and the holders of any shares so redeemed shall have no claim to any such interest. Any moneys so deposited and remaining unclaimed at the end of three years from the Redemption Date shall, if thereafter requested by resolution of the Board of Directors, be repaid to the Company, and in the event of such repayment to the Company, such holders of record of the shares so called for redemption as shall not have made claim against such moneys prior to such repayment to the Company shall be deemed to be unsecured creditors of the Company for an amount equivalent to the amount deposited as above stated for the redemption of such shares and so repaid to the Company, but shall in no event be entitled to any interest. As used herein, “Affiliate” of any specified person shall mean (i) any other Person (as defined below) which, directly or indirectly, is in control of, is controlled by or is under common control with such specified person or (ii) any other person who is a director or executive officer (A) of such specified Person, (B) of any subsidiary of such specified Person, or (C) of any Person described in clause (i) above. For purposes of this definition, control of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing. “Person” shall mean an individual, corporation, partnership, estate, trust, association, private foundation, joint stock company, or other entity.
 
(c) Subject to the provisions hereof, the Board of Directors shall have authority to prescribe from time to time the manner in which the Series D Preferred Stock shall be redeemed.
 
(d) Nothing contained herein shall limit any legal right of the Company to purchase any shares of the Series D Preferred Stock.
 
Section 5.    Conversion.    The holders of this Series D Preferred Stock shall not have any rights to convert such shares into shares of any other class of capital stock of the Company.
 
Section 6.    Rank; Additional Stock.    Notwithstanding anything set forth in the Certificate of Incorporation of the Company or this Certificate of Designations, Preferences and Rights to the contrary, the Board of Directors, without the vote of the holders of the Series D Preferred Stock, may authorize and issue additional shares of Common Stock and/or other series of Preferred Stock ranking, as to dividends and upon liquidation, junior to, senior to or on parity with the Series D Preferred Stock.
 
Section 7.    Transfer Restrictions.    The Series D Preferred Stock is transferable by any holder thereof, subject to applicable securities laws; provided however, that the Company shall have a right of first refusal regarding any such proposed transfer; and provided further however, that the Company may deny any proposed transfer of the Series D Preferred Stock which, in the reasonable judgment of the Company, may adversely impact the ability of the Company to maintain its status as a corporation qualified for treatment as a “Real Estate Investment Trust” under relevant tax laws and regulations.

37


Section 8.    Repurchase.    Subject to the limitations imposed herein, the Company may purchase and sell Series D Preferred Stock from time to time to such extent, in such manner, and upon such terms as the Board of Directors may determine; provided however, that the Company shall not use any of its funds for any such purchase when there are reasonable grounds to believe that the Company is, or by such purchase would be, rendered insolvent.
 
Section 9.    Form.    The Series D Preferred Stock shall be issued and sold in uncertificated form.

38


IN WITNESS WHEREOF, Wachovia Preferred Funding Corp. has caused this certificate to be signed by Pat Shevlin, its Senior Vice President, and attested by Robert L. Andersen, its Secretary, this 1st day of August, 2002.
 
WACHOVIA PREFERRED FUNDING CORP.
 
By:
 
/s/    PAT SHEVLIN

   
Name:    Pat Shevlin
Title:    Senior Vice President
 
ATTEST:
By:
 
/s/    ROBERT L. ANDERSEN

   
Name:    Robert L. Andersen
Title:    Secretary
 

39
EX-3.C 5 dex3c.htm FORM OF BY-LAWS Form of By-Laws
Exhibit 3(c)
 
WACHOVIA PREFERRED FUNDING CORP.
 
BY-LAWS
 
ARTICLE I
 
Stockholders
 
Section 1.1.    Annual Meetings.    An annual meeting of stockholders shall be held for the election of directors at such date, time and place either within or without the State of Delaware as may be designated by the Board of Directors from time to time. Any other proper business may be transacted at such annual meeting.
 
Section 1.2.    Special Meetings.    Special meetings of stockholders may be called at any time by the Chairman of the Board, if any, the Vice Chairman of the Board, if any, the President, the Secretary or the Board of Directors, to be held at such date, time and place either within or without the State of Delaware as may be stated in the notice of the meeting. A special meeting of stockholders shall be called by the Secretary upon the written request, stating the purpose of the meeting, of stockholders who together own of record a majority of the outstanding shares of each class of stock entitled to vote at such meeting.
 
Section 1.3.    Notice of Meetings.    Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the Corporation.
 
Section 1.4.    Adjournments.    Any meeting of stockholders, annual or special, may be adjourned from time to time, to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
 
Section 1.5.    Quorum.    At each meeting of stockholders, except where otherwise provided by law or the certificate of incorporation, including any amendments thereto and any Certificates of Designations, Preferences and Rights establishing any class or series of the Corporation’s capital stock (collectively, the “Certificate of Incorporation”), of the Corporation or these By-laws, the holders of a majority of the outstanding shares of stock entitled to vote on a matter at the meeting, present in person or represented by proxy, shall constitute a quorum. For purposes of the foregoing, where a separate vote by class or classes is required for any matter, the holders of a majority of the outstanding shares of such class or classes, present in person or represented by proxy, shall constitute a quorum to take action with respect to that vote on that matter. Two or more classes or series of stock shall be considered a single class if the holders thereof are entitled to vote together as a single class at the meeting. In the absence of a quorum of the holders of any class of stock entitled to vote on a matter, the holders of such class so present or represented may, by majority vote, adjourn the meeting of such class from time to time in the manner provided by Section 1.4 of these By-laws until a quorum of such class shall be so present or represented.
 
Section 1.6.    Organization.    Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in the absence of the Chairman of the Board by the Vice Chairman of the Board, if any, or in the absence of the Vice Chairman of the Board by the President, or in the absence of the President by a Vice


President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary an Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary and any Assistant Secretary, the chairman of the meeting may appoint any person to act as secretary of the meeting.
 
The order of business at each such meeting shall be as determined by the chairman of the meeting. The chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts and things as are necessary or desirable for the proper conduct of the meeting, including, without limitation, the establishment of procedures for the maintenance of order and safety, limitations on the time allotted to questions or comments on the affairs of the Corporation, restrictions on entry to such meeting after the time prescribed for the commencement thereof and the opening and closing of the voting polls.
 
Section 1.7.    Voting; Proxies.    Unless otherwise provided in the Certificate of Incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power upon the matter in question. If the Certificate of Incorporation provides for more or less than one vote for any share on any matter, every reference in these By-laws to a majority or other proportion of stock shall refer to such majority or other proportion of the votes of such stock. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power, regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation. Voting at meetings of stockholders need not be by written ballot and need not be conducted by inspectors unless the holders of a majority of the outstanding shares of all classes of stock entitled to vote thereon present in person or represented by proxy at such meeting shall so determine. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. In all other matters, unless otherwise provided by law or by the Certificate of Incorporation or these By-laws, the affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Where a separate vote by class or classes is required, the affirmative vote of the holders of a majority of the shares of such class or classes present in person or represented by proxy at the meeting shall be the act of such class or classes, except as otherwise provided by law or by the Certificate of Incorporation or these By-laws.
 
Section 1.8.    Fixing Date for Determination of Stockholders of Record.    In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
 
In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board

2


of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.
 
In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
 
Section 1.9.    List of Stockholders Entitled to Vote.    The Secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present.
 
Section 1.10.    Consent of Stockholders in Lieu of Meeting.    Unless otherwise provided in the Certificate of Incorporation or by law, any action required by law to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to (i) its registered office in the State of Delaware by hand or by certified mail or registered mail, return receipt requested, (ii) its principal place of business, or (iii) an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the earliest dated consent delivered in the manner required by this by-law to the Corporation, written consents signed by a sufficient number of holders to take action are delivered to the Corporation by delivery to (a) its registered office in the State of Delaware by hand or by certified or registered mail, return receipt requested, (b) its principal place of business, or (c) an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of stockholders to take the action were delivered to the Corporation as provided in this Section 1.10.

3


 
Section 1.11.    Advance Notice of Stockholder Proposals.    At any annual or special meeting of stockholders, proposals by stockholders and persons nominated for election as directors by stockholders shall be considered only if advance notice thereof has been timely given as provided herein and such proposals or nominations are otherwise proper for consideration under applicable law and the Certificate of Incorporation and By-laws of the Corporation. Notice of any proposal to be presented by any stockholder or of the name of any person to be nominated by any stockholder for election as a director of the Corporation at any meeting of stockholders shall be delivered to the Secretary of the Corporation at its principal executive office not less than 60 nor more than 90 days prior to the date of the meeting; provided, however, that if the date of the meeting is first publicly announced or disclosed (in a public filing or otherwise) less than 70 days prior to the date of the meeting, such advance notice shall be given not more than ten days after such date is first so announced or disclosed. Public notice shall be deemed to have been given more than 70 days in advance of the annual meeting if the Corporation shall have previously disclosed, in these By-laws or otherwise, that the annual meeting in each year is to be held on a determinable date, unless and until the Board determines to hold the meeting on a different date. Any stockholder who gives notice of any such proposal shall deliver therewith the text of the proposal to be presented and a brief written statement of the reasons why such stockholder favors the proposal and setting forth such stockholder’s name and address, the number and class of all shares of each class of stock of the Corporation beneficially owned by such stockholder and any material interest of such stockholder in the proposal (other than as a stockholder). Any stockholder desiring to nominate any person for election as a director of the Corporation shall deliver with such notice a statement in writing setting forth the name of the person to be nominated, the number and class of all shares of each class of stock of the Corporation beneficially owned by such person, the information regarding such person required by paragraphs (a), (e) and (f) of Item 401 of Regulation S-K adopted by the Securities and Exchange Commission (or the corresponding provisions of any regulation subsequently adopted by the Securities and Exchange Commission applicable to the Corporation), such person’s signed consent to serve as a director of the Corporation if elected, such stockholder’s name and address and the number and class of all shares of each class of stock of the Corporation beneficially owned by such stockholder. As used herein, shares “beneficially owned” shall mean all shares as to which such person, together with such person’s affiliates and associates (as defined in Rule 12b-2 under the Securities Exchange Act of 1934), may be deemed to beneficially own pursuant to Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as well as all shares as to which such person, together with such person’s affiliates and associates, has the right to become the beneficial owner pursuant to any agreement or understanding, or upon the exercise of warrants, options or rights to convert or exchange (whether such rights are exercisable immediately or only after the passage of time or the occurrence of conditions). The person presiding at the meeting, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall determine whether such notice has been duly given and shall direct that proposals and nominees not be considered if such notice has not been given.
 
ARTICLE II
 
Board of Directors
 
Section 2.1.    Powers; Number; Qualifications.    The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, except as may be otherwise provided by law or in the Certificate of Incorporation. The Board of Directors shall consist of one or more members, the number thereof to be determined from time to time by the Board. Directors need not be stockholders.
 
Section 2.2.    Election; Term of Office; Resignation; Removal; Vacancies.    Each director shall hold office until his or her successor is duly elected and qualified or until his or her earlier resignation or removal. Any director may resign at any time upon written notice to the Board of Directors or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. Whenever the holders of any class or series of stock are entitled to elect one or

4


more directors by the Certificate of Incorporation, the provisions of the preceding sentence shall apply, in respect to the removal without cause of a director or directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole. Unless otherwise provided in the Certificate of Incorporation or these By-laws, vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class or from any other cause may be filled by a majority of the directors then in office, although less than a quorum, or by the sole remaining director. Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by the sole remaining director so elected. Any director elected or appointed to fill a vacancy shall hold office until his or her successor is duly elected and qualified or until his or her earlier resignation or removal.
 
Section 2.3.    Regular Meetings.    Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware and at such times as the Board may from time to time determine, and if so determined notice thereof need not be given.
 
Section 2.4.    Special Meetings.    Special meetings of the Board of Directors may be held at any time or place within or without the State of Delaware whenever called by the Chairman of the Board, if any, by the Vice Chairman of the Board, if any, by the President, the Secretary or by any two directors. Reasonable notice thereof shall be given by the person or persons calling the meeting.
 
Section 2.5.    Participation in Meetings by Conference Telephone Permitted.    Members of the Board of Directors, or any committee designated by the Board, may participate in a meeting of the Board or of such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this by-law shall constitute presence in person at such meeting.
 
Section 2.6.    Quorum; Vote Required for Action.    At all meetings of the Board of Directors one-third of the entire Board shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board unless the Certificate of Incorporation or these By-laws shall require a vote of a greater number. In case at any meeting of the Board a quorum shall not be present, the members of the Board present may adjourn the meeting from time to time until a quorum shall be present.
 
Section 2.7.    Organization.    Meetings of the Board of Directors shall be presided over by the Chairman of the Board, if any, or in the absence of the Chairman of the Board by the Vice Chairman of the Board, if any, or in the absence of the Vice Chairman of the Board by the President, or in their absence by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary an Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary and any Assistant Secretary the chairman of the meeting may appoint any person to act as secretary of the meeting.
 
Section 2.8.    Action by Directors Without a Meeting.    Unless otherwise restricted by the Certificate of Incorporation or these By-laws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or of such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee.
 
Section 2.9.    Compensation of Directors.    The Board of Directors shall have the authority to fix the compensation of directors.

5


 
ARTICLE III
 
Committees
 
Section 3.1.    Committees.    The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors or in these By-laws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to the following matters: (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by law to be submitted to stockholders for approval, (ii) adopting, amending or repealing these By-laws or (iii) removing or indemnifying directors.
 
Section 3.2.    Committee Rules.    Unless the Board of Directors otherwise provides, each committee designated by the Board may adopt, amend and repeal rules for the conduct of its business. In the absence of a provision by the Board or a provision in the rules of such committee to the contrary, a majority of the entire authorized number of members of such committee shall constitute a quorum for the transaction of business, the vote of a majority of the members present at a meeting at the time of such vote if a quorum is then present shall be the act of such committee, and in other respects each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article II of these By-laws.
 
ARTICLE IV
 
Officers
 
Section 4.1.    Officers; Election.    As soon as practicable after the annual meeting of stockholders in each year, the Board of Directors shall elect a President and a Secretary, and it may, if it so determines, elect from among its members a Chairman of the Board and a Vice Chairman of the Board. The Board may also elect one or more Vice Presidents, one or more Assistant Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers and such other officers as the Board may deem desirable or appropriate and may give any of them such further designations or alternate titles as it considers desirable. Any number of offices may be held by the same person unless the Certificate of Incorporation or these By-laws otherwise provide.
 
Section 4.2.    Term of Office; Resignation; Removal; Vacancies.    Unless otherwise provided in the resolution of the Board of Directors electing any officer, each officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any officer may resign at any time upon written notice to the Board or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. The Board may remove any officer with or without cause at any time. Any such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation, but the election of an officer shall not of itself create contractual rights. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled by the Board at any regular or special meeting.
 
Section 4.3.    Powers and Duties.    The officers of the Corporation shall have such powers and duties in the management of the Corporation as shall be stated in these By-laws or in a resolution of the Board of Directors

6


which is not inconsistent with these By-laws and, to the extent not so stated, as generally pertain to their respective offices, subject to the control of the Board. The Secretary shall have the duty to record the proceedings of the meetings of the stockholders, the Board of Directors and any committees in a book to be kept for that purpose. The Board may require any officer, agent or employee to give security for the faithful performance of his or her duties.
 
ARTICLE V
 
Stock
 
Section 5.1.    Stock Certificates and Uncertificated Shares.    The shares of stock in the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of the Corporation’s stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate theretofore issued until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board, every holder of stock represented by certificates, and upon request every holder of uncertificated shares, shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman or Vice Chairman of the Board, if any, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, representing the number of shares of stock registered in certificate form owned by such holder. If such certificate is manually signed by one officer or manually countersigned by a transfer agent or by a registrar, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.
 
If the Corporation is authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided by law, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated shares, the Corporation shall send to the registered owner thereof a written notice containing the information required by law to be set forth or stated on certificates or a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
 
Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated shares and the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical.
 
Section 5.2.    Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates.    The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

7


 
ARTICLE VI
 
Miscellaneous
 
Section 6.1.    Fiscal Year.    The fiscal year of the Corporation shall be determined by the Board of Directors.
 
Section 6.2.    Seal.    The Corporation may have a corporate seal which shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors. The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.
 
Section 6.3.    Waiver of Notice of Meetings of Stockholders, Directors and Committees.    Whenever notice is required to be given by law or under any provision of the Certificate of Incorporation or these By-laws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any written waiver of notice unless so required by the Certificate of Incorporation or these By-laws.
 
Section 6.4.    Indemnification of Directors, Officers and Employees.    The Corporation shall indemnify to the full extent permitted by law any person made or threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person or such person’s testator or intestate is or was a director, officer or employee of the Corporation or serves or served at the request of the Corporation any other enterprise as a director, officer or employee. Expenses, including attorneys’ fees, incurred by any such person in defending any such action, suit or proceeding shall be paid or reimbursed by the Corporation promptly upon receipt by it of an undertaking of such person to repay such expenses if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation. The rights provided to any person by this by-law shall be enforceable against the Corporation by such person who shall be presumed to have relied upon it in serving or continuing to serve as a director, officer or employee as provided above. No amendment of this by-law shall impair the rights of any person arising at any time with respect to events occurring prior to such amendment. For purposes of this Section 6.4 the term “Corporation” shall include any predecessor of the Corporation and any constituent corporation (including any constituent of a constituent) absorbed by the Corporation in a consolidation or merger; the term “other enterprise” shall include any corporation, partnership, joint venture, trust or employee benefit plan; service “at the request of the Corporation” shall include service as a director, officer or employee of the Corporation which imposes duties on, or involves services by, such director, officer or employee with respect to an employee benefit plan, its participants or beneficiaries; any excise taxes assessed on a person with respect to an employee benefit plan shall be deemed to be indemnifiable expenses; and action by a person with respect to an employee benefit plan which such person reasonably believes to be in the interest of the participants and beneficiaries of such plan shall be deemed to be action not opposed to the best interests of the Corporation.
 
Section 6.5.    Interested Directors; Quorum.    No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or her or their votes are counted for such purpose, if: (i) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee thereof, and the Board or committee thereof in good faith authorizes the contract or

8


transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum, (ii) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders, or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.
 
Section 6.6.    Form of Records.    Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect the same.
 
Section 6.7.    Amendment of By-laws.    These By-laws may be amended or repealed, and new By-laws adopted, by the Board of Directors, but the stockholders entitled to vote may adopt additional By-laws and may amend or repeal any by-law whether or not adopted by them.

9
EX-4 6 dex4.htm SPECIMEN STOCK CERTIFICATE Specimen Stock Certificate
Exhibit 4
 
Number:             
  
                         Shares
    
SEE REVERSE FOR
    
IMPORTANT NOTICE
    
ON TRANSFER RESTRICTIONS
    
AND OTHER INFORMATION
    
CUSIP                     
 
WACHOVIA PREFERRED FUNDING CORP.
a Corporation Organized Under the Laws of the State of Delaware
 
THIS CERTIFIES THAT                                          **Specimen**                                     
 
is the owner of                                                       fully paid and non-assessable shares of ·% Non-cumulative Series A Preferred Securities, par value $0.01 per share, of
 
Wachovia Preferred Funding Corp.
 
(the “Corporation”) transferable on the books of the Corporation by the holder hereof in person or by its duly authorized attorney, upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Certificate of Incorporation and the By-laws of the Corporation and any amendments thereto. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar.
 
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed on its behalf by its duly authorized officers.
 
DATED                             ,             
 
Countersigned and Registered:
        
                    Transfer Agent
                    and Registrar
 
(SEAL)

  
 

                    President                     
By:                                                    
      
 

Secretary


IMPORTANT NOTICE
 
The Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional, or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
 
The shares represented by this certificate are subject to restrictions on Transfer and Beneficial Ownership for the purpose of the Corporation’s maintenance of its status as a REIT under the Code. Any Transfer that, if effective, would result in the Corporation’s Series A Preferred Securities, Series B Preferred Securities, Series C Preferred Securities and Series D Preferred Securities, collectively, being Beneficially Owned by less than 100 Persons, determined without reference to any rules of attribution, (i) shall be null and void ab initio as to the Transfer of such Series A Preferred Securities which would be otherwise Beneficially Owned by the transferee thereof, and (ii) such intended transferee shall acquire no rights whatsoever in such Series A Preferred Securities. Any Transfer that, if effective, would result in the Corporation being “closely held” within the meaning of Section 856(h) of the Code, (i) shall be null and void ab initio as to the Transfer of such Series A Preferred Securities which would cause the Corporation to be “closely held” within the meaning of Section 856(h) of the Code, and (ii) the intended transferee thereof shall acquire no rights in such Series A Preferred Securities. If the Board of Directors or its properly authorized designees shall at any time determine in good faith that the restrictions on Transfer stated above have been violated or that a Person intends to acquire or has attempted to acquire Beneficial Ownership of any Series A Preferred Securities in violation of the restrictions on Transfer stated above, the Board of Directors or its properly authorized designees shall take such action as it or they deem advisable to refuse to give effect or to prevent such Transfer (or any Transfer related to such intent). Any Person who acquires or attempts to acquire Beneficial Ownership of Series A Preferred Securities in violation of the restrictions on Transfer stated above shall immediately give written notice to the Corporation of such event. All capitalized terms used in this legend have the meanings defined in the Certificate of Incorporation of the Corporation, as the same may be amended from time to time, a copy of which, including the restrictions on transfer and ownership, will be furnished to each stockholder of the Corporation on request and without charge.
 
The shares represented by this certificate are subject to the terms of a certain Exchange Agreement, dated November ·, 2002, requiring their exchange in certain circumstances for certain depositary shares representing interests in certain preferred shares of Wachovia Corporation. The Corporation will mail to the stockholder a copy of such agreement, without charge, upon a written request therefor.
 
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLE
NOR DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY
AS A CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE.


 
The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
 
TEN COM — as tenants in common
TEN ENT  — as tenants by the entireties
JT TEN     — as joint tenants with right of survivorship and not as tenants in common
 
UNIF GIFT MIN ACT —                                  Custodian                                  
                                            (Custodian)                                  (Minor)
 
                                             under Uniform Gifts to Minors Act                                  
                                                                                                                   (State)
 
Additional abbreviations by also be used though not in the above list.
 
FOR VALUE RECEIVED,                                  hereby sell, assign and transfer unto
 

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
 

(PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE)
 
                                              (                                ) shares represented by this Certificate and do hereby irrevocably constitute and appoint                                               Attorney to transfer the said shares on the books of the Corporation, with full power of substitution in the premises.
 
Dated:                                                                  
  
 

In presence of:                                                      
  
NOTICE: The signature to this assignment must correspond with the name as written upon the face of the certificate in every particular, without alteration or enlargement or any change whatever.
EX-8 7 dex8.htm OPINION OF SULLIVAN AND CROMWELL Opinion of Sullivan and Cromwell
Exhibit 8
 
Sullivan & Cromwell
125 Broad St.
New York, New York 10004
 
November 18, 2002
 
Wachovia Preferred Funding Corp.,
1620 East Roseville Parkway,
Roseville, California 95661.
 
Ladies and Gentleman:
 
We have acted as counsel to Wachovia Preferred Funding Corp. (the “Company”) in connection with the registration, under the Securities Act of 1933, as amended (the “Securities Act”), of 15,000,000 shares of Series A Preferred Securities of the Company, with a liquidation preference of $25 per share, under the registration statement on Form S-11 (the “Registration Statement”) filed by the Company on or about the date hereof with the Securities and Exchange Commission.
 
In rendering this opinion, we have reviewed such documents as we have considered necessary or appropriate. In addition, we have, without independent investigation, relied as to certain factual matters upon the statements and representations contained in the letters provided to us by the Company and by Wachovia Real Estate Investment Corp. (the “Subsidiary”), each dated November 18, 2002, (together, the “Certificates”).
 
In rendering this opinion we have also assumed, with your approval, that (i) the statements and representations made in the Certificates are true and correct and (ii) the Certificates have been executed by appropriate and authorized officers of the Company and the Subsidiary. To the extent the statements and representations in the Certificates require the application of legal concepts to factual matters, we have explained such legal concepts to the Company and the Subsidiary in order to permit the Company and the Subsidiary to take such legal concepts into account in making such factual statements and representations in the Certificates.
 
Based on the foregoing and in reliance thereon and subject thereto and on an analysis of the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations thereunder, judicial authority and current administrative rulings and such other laws and facts as we have deemed relevant and necessary, we hereby confirm our opinion that the Company has been organized in conformity with the requirements for qualification as a REIT under the Code, and its proposed method of operation will enable it to satisfy the requirements for qualification and taxation as a REIT. This opinion represents our legal judgment, but it has no binding effect or official status of any kind, and no assurance can be given that contrary positions may not be taken by the Internal Revenue Service or a court.
 
The Company’s qualification as a REIT will depend upon the continuing satisfaction by the Company and, given the Company’s current ownership interest in the Subsidiary, by the Subsidiary, of the requirements of the Code relating to qualification for REIT status, which requirements include those that are dependent upon actual operating results, distribution levels, diversity of stock ownership, asset composition, source of income and record keeping. We do not undertake to monitor whether either the Company or the Subsidiary actually has satisfied or will satisfy the various REIT qualification tests.
 
Furthermore, we hereby confirm to you that, in our opinion, insofar as they purport to describe provisions of United States Federal income tax law, the statements set forth under the caption “Federal Income Tax Considerations” in the Prospectus included in the Registration Statement is accurate in all material respects.
 
We hereby consent to the filing with the Securities and Exchange Commission of this letter as an exhibit to the Registration Statement of which the Prospectus is a part and the reference to us under the caption “Federal Income Tax Considerations”. In giving such consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act.
 
Very truly yours,
 
/s/    SULLIVAN & CROMWELL

EX-10.A 8 dex10a.htm LOAN PART. AGREEMENT Loan Part. Agreement
Exhibit 10(a)
 
LOAN PARTICIPATION AGREEMENT AND AGREEMENT FOR CONTRIBUTION
 
This LOAN PARTICIPATION AGREEMENT AND AGREEMENT FOR CONTRIBUTION (this “Agreement”), is made and entered into as of November ·, 2002 (the “Effective Date”), by and between Wachovia Bank, National Association, a national banking association (“Bank”), and Wachovia Preferred Funding Holding Corp., a corporation organized under the laws of the State of California (“Participant”).
 
Recitals
 
WHEREAS, Bank owns and holds certain commercial, commercial real estate loan and mortgage obligations set forth on Schedule A attached hereto (collectively, the “Loans”);
 
WHEREAS, Bank desires to contribute, assign, and transfer to Participant (i) the Participation Interest (as defined below), (ii) the Transferred Amount (as defined below), (iii) 99,851,752 shares of Wachovia Preferred Funding Corp.’s, a corporation organized under the laws of the State of Delaware (“WPFC”), common stock, $0.01 par value per share (the “WPFC Common Stock”) owned by Bank, and (iv) 800 shares of WPFC’s 8.5% Non-cumulative Series D Preferred Stock, $0.01 par value per share (the “Series D Preferred Stock”) owned by Bank (collectively, the “Transferred Interests”) in exchange for · newly issued shares of Participant’s common stock, no par value (the “Common Stock”); and
 
WHEREAS, Participant desires to accept the contribution, assignment and transfer of the Transferred Interests in exchange for issuing · shares of Common Stock to Bank.
 
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:
 
Section 1.    Definitions.    Unless the context requires otherwise, capitalized terms used and not otherwise defined in this Agreement, including the Recitals hereto, shall have the respective meanings set forth below:
 
 
(i)
 
“ALTA” means the American Land Title Association, or any successor thereto.
 
 
(ii)
 
“Borrower or Borrowers” means to the person or persons that are obligated as borrowers under the Loan Documents.
 
 
(iii)
 
“Collateral” means property of whatever nature or kind pledged to Bank to secure payment of any of the Loans.
 
 
(iv)
 
“Collections” means all moneys, from whatever source derived, received by Bank from time to time on account of, or in respect of, or relating to, any Loan or as proceeds of the Collateral.
 
 
(v)
 
“Loan Documents” means those documents executed by any Borrowers, or any third party obligor in respect of any Loan or Loans or evidencing or relating to any Borrower’s or such third party’s obligations in respect of the Loan or Loans or any security interest or Collateral relating to such Loan or Loans, including without limitation, promissory notes, credit agreements, guarantees, security agreements, mortgages, deeds of trust, or letters of credit.
 
 
(vi)
 
“Participation Interest” means a 100% participation interest in the principal, interest and Unfunded Commitments of the Loans outstanding on the Effective Date and in all related Collateral and Loan Documents.
 
 
(vii)
 
“Participant’s Share” means Participant’s share of any funds received by Bank in respect of any Loan or Loans pro rated according to Participant’s Participation Interest.
 
 
(viii)  “Policies
 
and Procedures” means the written policies and procedures of Bank as set forth in portions of Bank’s policies and procedures manuals as of the Effective Date that govern generally, its credit polices, underwriting policies, loan closing policies, collection policies and booking and billing procedures applicable to the Loans, as amended from time to time.

1


 
(ix)
 
“Transferred Amount” means $·.
 
 
(x)
 
“Unfunded Commitments” means the obligations of Bank under any of the Loan Documents to fund Loans that as of the date hereof are not funded.
 
Section 2.    Contribution of Participation Interest and WPFC Stock.
 
(a)    Bank hereby contributes, assigns and transfers to Participant and Participant hereby accepts such contribution, assignment and transfer of, (i) the Participation Interest, (ii) 99,851,752 shares of WPFC Common Stock owned by Bank, and (iii) 800 shares of Series D Preferred Stock owned by Bank according to the terms and conditions set forth herein.
 
(b)    Bank hereby agrees to pay to Participant the Transferred Amount on the Effective Date.
 
Section 3.    Payment.    In consideration for receipt of the Transferred Interests, Participant does hereby issue and convey to Bank · shares of Common Stock, delivery of which is hereby acknowledged by Bank.
 
Section 4.    Representations and Warranties of Bank.    Bank hereby makes the following representations and warranties to Participant:
 
 
(i)
 
Bank is a national banking association legally and properly organized and validly existing and is in good standing under the laws of the United States and is licensed, qualified and in good standing in each state where a Loan is located if the laws of such state require licensing or qualification in order to conduct business of the type conducted by Bank, and in any event, Bank is in compliance with the laws of any such state to the extent necessary to ensure the enforceability of the related Loan in accordance with its terms;
 
 
(ii)
 
Bank has the power and authority, and has taken all necessary and proper action to enter into and perform this Agreement and to consummate the transactions contemplated hereby;
 
 
(iii)    this
 
Agreement, together with any other document or instrument related to the transfer of the Transferred Interests to Participant, have been duly authorized, executed and delivered by Bank and, assuming the due authorization, execution and delivery of this Agreement and such other documents by Participant, constitute the valid and binding obligation of Bank enforceable against it in accordance with their terms, except as limited by laws affecting the enforcement of creditor’s rights or equitable principles generally;
 
 
(iv)
 
the execution, performance and delivery of this Agreement does not conflict with, or result in a breach of or default under, Bank’s charter or by-laws, any agreement or instrument to which Bank is a party, or any federal, state or local law, regulation, ruling or interpretation to which Bank is subject;
 
 
(v)
 
each share of (A) WPFC Common Stock, and (B) Series D Preferred Stock transferred to Participant hereunder is (1) duly authorized, duly issued, fully paid, and non-assessable, and (2) free and clear of all claims, liens, charges or encumbrances of any type;
 
 
(vi)
 
there is no litigation, administrative action, arbitration, proceeding or investigation pending or, to the best knowledge of Bank, threatened against Bank in any federal, state or local court, or before any administrative agency or arbitrator, or before any other tribunal duly authorized to resolve disputes which would have a material adverse effect on the Participation Interest taken as a whole;
 
 
(vii)
 
no consent, approval, authorization or order of, or registration or filing with, or notice to any court or governmental agency or body is required for the execution, delivery and performance by Bank of or compliance by Bank with this Agreement or consummation of the transactions contemplated by this Agreement, or if required, such approval has been obtained;
 
 
(viii)  Bank
 
is the sole owner of the Loans, free and clear of claims, liens, charges and encumbrances of any type, except Participant’s Participation Interest granted hereunder;

2


 
(ix)
 
each Loan has been closed, advanced, booked, administered and serviced by Bank in accordance with the Policies and Procedures;
 
 
(x)
 
except as would not have a material adverse effect on the Participation Interest taken as a whole, each Loan Document executed is genuine, was duly authorized, executed and delivered and is the legal, valid and binding obligation of Bank, and to the best of Bank’s knowledge, the counterparty thereto, enforceable in accordance with its terms, except as such enforcement may be limited (A) by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally, (B) by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law), or (C) to the extent that certain of the remedial provisions of the Loan Documents may be limited by applicable law, provided, however, that such limitations do not make the remedies provided for in the Loan Documents inadequate for the practical realization of the benefits of the security intended to be afforded thereby;
 
 
(xi)
 
except as would not have a material adverse effect on the Participation Interest taken as a whole, all recordable instruments included in the Loan Documents have been duly recorded in all places necessary to perfect valid security interests or mortgage liens, as the case may be, and the Loan Documents create valid, existing, enforceable, and perfected first or second liens on the Collateral;
 
 
(xii)
 
all costs, fees and expenses incurred in underwriting, closing and funding, except for funding of Unfunded Commitments, any Loan and recording any instruments have been paid or are not assessable against Participant;
 
 
(xiii)  
 
all applicable federal, state and local laws, regulations, rulings and interpretations applicable to the making and servicing of any Loan have been complied with;
 
 
(xiv)
 
as of the Effective Date, none of the Loans are in non-accrual status;
 
 
(xv)
 
except as would not have a material adverse effect on the Participation Interest taken as a whole, to the best of Bank’s knowledge, none of the Loan Documents is subject to any valid set-off, abatement, diminution, counterclaim or defense, including, without limitation, a defense of usury, or any right of recession, and no such set-off, abatement, diminution, counterclaim or defense, including a defense of usury, or right of rescission, has been asserted with respect thereto;
 
 
(xvi)
 
the information set forth on Schedule A attached hereto with respect to the Loans is true and correct in all material respects as of the date or dates respecting which the information is furnished and the amount of each Loan set forth on Schedule A is due and owing, as of the Effective Date, to Bank from the Borrowers named in the Loan Document;
 
 
(xvii) neither
 
this Agreement nor any information, statement, tape, diskette, report, or other document furnished or to be furnished pursuant to this Agreement or in connection with the transactions contemplated hereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading;
 
 
(xviii)
 
except as would not have a material adverse effect on the Participation Interest taken as a whole, each Loan that is secured by real property (A) is covered by an ALTA lender’s title insurance policy and each such title insurance policy is issued by a title insurer acceptable to Bank and qualified to do business in the jurisdiction where the Collateral is located, insuring Bank and its successors and assigns, as to the first priority lien of such Loan in the original principal amount of such Loan, subject only to any loss by reason of the invalidity or unenforceability of the lien resulting from the provisions of such Loan providing for adjustment to the interest rate and monthly payment, (B) where required by state law or regulation, each Borrower under such Loan has been given the opportunity to choose the carrier of the required mortgage title insurance, (C) such lender’s title insurance policy affirmatively insures ingress and egress, and against encroachments by or upon the Collateral or any interest therein, (D) Bank and its successors and assigns, are the sole insureds of

3


 
such lender’s title insurance policy, and such lender’s title insurance policy is valid and remains in full force and effect and will be in force and effect upon the consummation of the transactions contemplated by this Agreement, and (E) no claims have been made under such lender’s title insurance policy and, neither Bank nor, to the best of its knowledge, any other prior holder of such related Loan, has done, by act or omission, anything which would impair the coverage of such lender’s title insurance policy, including without limitation, no unlawful fee, commission, kickback or other unlawful compensation or value of any kind has been or will be received, retained or realized by any attorney, firm or other person or entity, and no such unlawful items have been received, retained or realized by Bank; and
 
 
(xix)
 
except as would not have a material adverse effect on the Participation Interest taken as a whole, there is no default, breach, violation or event which would permit acceleration existing under the Loans or the Loan Documents and no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event which would permit acceleration, and Bank has not waived any default, breach, violation or event which would permit acceleration.
 
Section 5.    Representations and Warranties of Participant.    Participant hereby makes the following representations and warranties to Bank:
 
 
(i)
 
Participant is a corporation duly organized, validly existing and in good standing under the laws of the State of California;
 
 
(ii)
 
Participant has the power and authority, and has taken all necessary and proper action to enter into and perform this Agreement and to consummate the transactions contemplated hereby;
 
 
(iii)
 
this Agreement, together with any other document or instrument related to the transfer of the Common Stock, have been duly authorized, executed and delivered by Participant and, assuming the due authorization, execution and delivery of this Agreement by Bank constitute the valid and binding obligation of Participant enforceable against it in accordance with their terms, except as limited by laws affecting the enforcement of creditor’s rights or equitable principles generally;
 
 
(iv)
 
the execution, performance and delivery of this Agreement does not conflict with, or result in a breach of or default under, Participant’s articles of incorporation or by-laws, any agreement or instrument to which Participant is a party, or any federal, state or local law, regulation, ruling or interpretation to which Participant is subject;
 
 
(v)
 
no consent, approval, authorization or order of, or registration or filing with, or notice to any court or governmental agency or body is required for the execution, delivery and performance by Participant of or compliance by Participant with this Agreement or the consummation of the transactions contemplated by this Agreement, or if required, such approval has been obtained;
 
 
(vi)
 
each share of Common Stock issued to Bank hereunder is (A) duly authorized, duly issued, fully paid, and non-assessable, and (B) free and clear of all claims, liens, charges or encumbrances of any type;
 
 
(vii)
 
Participant has reviewed the Policies and Procedures and Loan Documents, and conducted such other portfolio analysis and due diligence examination as it has deemed to be necessary and appropriate in connection with entering into this Agreement;
 
 
(viii)  (A)
 
Participant does not consider the acceptance of its participation hereunder to constitute the “purchase” or “sale” of a “security” within the meaning of the Securities Act of 1933, the Securities Exchange Act of 1934 or Rule 10b-5 promulgated thereunder, the Trust Indenture Act of 1939, the securities laws of the State of North Carolina, any other applicable securities statute or law, or any rule or regulation under any of the foregoing, (B) Participant acknowledges that it has no expectation to derive profits from the efforts of Bank or any third party in respect of the acquisition of Participation Interest, (C) this participation constitutes a commercial transaction by Participant with Bank regarding the obligations of the Borrowers under the Loan Documents and does not represent a

4


 
common joint venture with Bank or an “investment” (as the term is commonly understood) in Bank or any Borrower, (D) Participant is accepting the Participation Interest for its own account in respect of a commercial transaction made in the ordinary course of its commercial business and not with a view to or in connection with any subdivision, resale, or distribution thereof (except as provided herein), and (E) Participant is engaged in the business of entering into commercial transactions (including transactions of the nature contemplated herein), can bear the economic risk related to its Participation Interest in the Loans, and has had access to all information deemed necessary by it in making its decision whether or not to participate in the Loans; and
 
 
(ix)
 
Participant represents and warrants that (A) it has independently reviewed the Loan Documents, (B) Participant has conducted and will continue to conduct, to the extent it deems appropriate or necessary, an independent investigation of each Borrower, including, without limitation, an investigation relating to the creditworthiness of each Borrower, and (C) Participant has not relied, and will not rely upon Bank for any such investigation or assessment of risk.
 
Section 6.    Risk of Loss, Loan Documents, Perfection.    Except as otherwise provided for herein, Participant shall bear all risk of loss of the outstanding principal and interest, fees or other payments due in respect of the Loans and of the Collateral, without recourse to Bank and Bank shall have no obligation to reacquire Participant’s Participation Interest in any Loan or Loans.
 
Section 7.    Bank’s Obligations to Participant.
 
(a)    Bank shall distribute, if and when Collections are received on or after the Effective Date, Participant’s Share to Participant; provided, however, that to the extent Collections received by Bank on or after the Effective Date represent payment of principal, interest, fees or proceeds of Collateral on any Loan in respect of any period or partial period before the Effective Date, payment to Participant shall be appropriately adjusted to reflect the period of time during which Participant held a Participation Interest in such Loan. Participant’s Share of Collections shall be remitted by deposit to Participant’s designated account titled in Participant’s name at Bank or otherwise, as Participant shall instruct Bank in writing. Funds due Participant from Bank hereunder shall be paid on the day of receipt if received before 2PM, or if received after 2PM the following day. If Bank fails to pay Participant as required, Bank shall, beginning the day after such unpaid funds are due, pay to Participant interest on the past due amount at a rate per annum equal to the effective federal funds rate as published in The Wall Street Journal (Eastern Edition) each day such funds remain unpaid. Except as expressly provided herein, Bank does not assume any other responsibility to Participant in regard to Collections.
 
(b)    If Bank should for any reason make any payment to Participant in anticipation of the receipt of funds in respect of any Loan and such funds are not duly received by Bank on the date such payment is due, or such payment proves to be in excess of the amount due to Participant, as applicable, then Participant shall, upon request of Bank, return to Bank forthwith any such amounts plus interest thereon from the day such amounts, as applicable, were transferred by Bank to Participant up to, but not including, the day such amounts, as applicable, are returned by Participant at a rate per annum equal to the effective federal funds rate as published in The Wall Street Journal (Eastern Edition) on such transfer date.
 
(c)    If Bank is required at any time to return, pursuant to any bankruptcy, insolvency, liquidation or reorganization law, or otherwise, any portion of the payments made by any Borrower or any other entity obligated with respect to any Loan or otherwise received by Bank, Participant shall, on demand of Bank, return forthwith to Bank any such amounts received by Participant, but without interest thereon, unless Bank is required to pay interest on such amounts to the person recovering such payment, in which case with interest thereon, computed at the same rate that Bank is required to pay in relation to such return of payment by Bank.
 
Section 8.    Foreclosure.    For so long as Participant owns any Participation Interest, Bank shall notify Participant as soon as possible, but in no event later that fifteen business days after the occurrence of an event of default on any Loan for which Participant owns a Participation Interest. Bank acknowledges and agrees that

5


Participant shall have the sole right and authority to decide whether to institute and prosecute foreclosure proceedings on the Collateral that secures such Loan. If Participant chooses to institute such foreclosure proceedings, Participant may, in its sole and absolute discretion, choose to either (i) prosecute such foreclosure directly on its own behalf, or (ii) select Bank, as holder of legal title to such Loan, to prosecute such foreclosure on Participant’s behalf; provided, however, that Participant must approve all actions taken with respect to, and shall retain complete control over, such prosecution and Bank shall have no discretion over such prosecution, including, but not limited to, the manner in which such prosecution is handled or whether to terminate such prosecution at any time.
 
Section 9.    Loan Advances.    Bank shall notify Participant three business days prior to making an advance of additional funds under a Loan; provided, however, that such advances shall be limited to the amount of the outstanding Commitment related to such Loan at the time of such advance. Participant shall pay to Bank, at the time of such advance, the amount of the advance. In the event Participant fails to pay such amount as required hereby, the unpaid amount shall bear interest at a rate per annum equal to the effective federal funds rate as published in The Wall Street Journal (Eastern Edition) for the date such payment is due.
 
Section 10.    Setoffs; Other Business; Records.
 
(a)    Bank shall have no obligation to make any claim on, or assert any lien upon, or assert any setoff against, any property held by Bank, other than the Collateral, and if Bank elects to do so, Bank may, in its sole discretion, apply the same against obligations of the related Borrower other than its obligations in respect of any Loan. Participant shall have no interest in any property now or hereafter in the possession or control of Bank or its agents which may become Collateral by reason of a general description contained in any Loan Document or by reason of any right of setoff, counterclaim, banker’s lien or otherwise; provided, however, except that if such property or the proceeds thereof shall be applied in reduction of the amounts due and owing under a Loan, only Participant shall then be entitled to its share thereof.
 
(b)    Bank and its affiliates may enter into loans with, accept deposits from, make loans or otherwise extend credit to, accept collateral and generally engage in any kind of loan financing, banking or trust or other business with any Borrower and its respective affiliates and receive payment on such loans or extensions of credit and otherwise act with respect thereto freely and without accountability in the same manner as if this Participation Agreement and the Loans were not in effect.
 
(c)    Bank shall at all times keep proper books and records in accordance with generally accepted accounting principles consistently applied, reflecting all transactions in connection with the Loans. All such records shall be accessible for inspection by Participant at all reasonable times during Bank’s business hours.
 
Section 11.    Obligation to Cure Defaults.
 
(a)    It is understood and agreed that the representations and warranties set forth herein shall survive the contribution of the Participation Interest to Participant and shall inure to the benefit of Participant notwithstanding any restrictive or qualified endorsement on any Loan or assignment of a Loan or the examination or failure to examine any Loan Document. Upon discovery by Bank or Participant of a breach of any of the foregoing representations and warranties which has a material adverse affect on the Participation Interest taken as a whole, the party discovering such breach shall give prompt written notice of such breach to the other.
 
(b)    Bank shall, promptly after discovery of such a breach of any such representation or warranty, notify Participant of such breach and the details thereof. Within sixty days of the earlier of (i) notice by Bank pursuant to the immediately preceding sentence, or (ii) notice by Participant to Bank of any breach of a representation or warranty with respect to a Participation Interest, Bank shall use its reasonable best efforts to promptly cure such breach in all material respects. If such breach can ultimately be cured but is not reasonably expected to be cured within the sixty-day period, Bank shall have such additional time as is reasonably determined by Participant, not to exceed one hundred and twenty days, to cure or correct such breach; provided, however, that Bank has commenced curing or correcting such breach and is diligently pursuing the same. If such breach cannot be or has

6


not been cured, Bank shall, upon the expiration of the cure period described above, at Participant’s option and subject to the provisions of this Section 11, repurchase such Participation Interest, including the outstanding principal balance of the Participation Interest plus all accrued interest on such Participation Interest.
 
(c)    Except for the indemnities provided to Participant by Bank and this Section 11, Bank shall have no further liability to Participant for any inability to Collect a Loan.
 
Section 12.    Indemnification.
 
(a)    In addition to the repurchase obligations set forth in Section 11, Bank agrees to indemnify Participant and hold Participant harmless, on demand, for and against any and all claims, demands, liabilities, obligations, losses, damages, penalties, actions, forfeitures, judgments, suits, costs, expenses or disbursements (including fees and disbursements of counsel and arbitration and arbitrator’s fees) of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against Participant in any way relating to or arising out of (i) the material breach by Bank of any of the representations and warranties contained in this Agreement or (ii) the intentional misconduct or gross negligence of Bank.
 
(b)    Participant agrees to indemnify Bank for and against any and all claims, demands, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements (including fees and disbursements of counsel and arbitration and arbitrator’s fees) of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against Bank in any way relating to or arising out of the Loan and Loan Documents that are not reimbursed or otherwise paid to or recovered by Bank pursuant to the Loan Documents; provided, however, that Participant shall not be liable for any of the foregoing to the extent they arise from Bank’s gross negligence or intentional misconduct. Should Bank be sued or threatened by suit by any receiver or trustee in bankruptcy or by any Borrower as a debtor-in-possession on account of any alleged preference, voidable transfer or fraudulent conveyance alleged to have been received as the result of any transaction in respect of which Participant has participated with Bank hereunder, or if any claim, suit or action shall be asserted against Bank relating to such transactions, then in such event, any money paid by Bank in satisfaction or compromise of such suit, action or demand, any money required to be returned by Bank to such Borrower or its estate and any costs or fees associated therewith shall be reimbursed to Bank by Participant upon demand by Bank.
 
(c)    If any indemnity furnished to Bank or Participant hereunder shall become impaired, such party may require additional indemnity and not commence or continue to do the acts indemnified against until such additional indemnity is given.
 
(d)    These indemnities contained in this Agreement shall survive termination of this Agreement.
 
Section 13.    Extensions of Credit.    As long as any obligations of any Borrower to Bank remain outstanding under any Loan, Participant shall not make any loan, extension of credit or other accommodation to or for the benefit of such Borrower or purchase or extend credit upon any instrument in respect of which such Borrower may be liable in any capacity without Bank’s prior written consent.
 
Section 14.    Setoffs by Participant.    Participant agrees that if it should receive through the exercise of any right of counterclaim, setoff, banker’s lien or otherwise, any amount in respect of Loans, other than from Bank, that Participant will remit all such funds to Bank to distribute in accordance with the terms of this Agreement.
 
Section 15.    Information.    Bank agrees to make available to Participant upon request available credit information on each Borrower on a continuing basis, such credit information to include: (i) accrual status of the Loans, (ii) financial statements of the Borrowers in the possession of Bank, and (iii) all other credit information received by Bank pursuant to the Loan Documents.
 

7


Section 16.    No Interest in Other Financings.    Except as expressly provided for herein, Participant shall have no interest, by virtue of this Agreement or Participant’s rights hereunder, in (i) any present or future loans or other financing transactions by Bank to, on behalf of, or with any Borrower other than the Loans, (ii) any present or future guaranties by or for the account of any Borrower which are not contemplated in the Loan Documents, (iii) any present or future offset exercised by Bank in respect of such other financing, or (iv) any present or future property taken as security for any such other financing.
 
Section 17.    Participant’s Ownership.    It is the intention of Participant and Bank that Participant has a Participation Interest in the Loans and Collateral as evidenced by the Loan Documents and that this Agreement shall have the same force and effect as if separate assignments of the Participation Interest in each Loan and respective Collateral were executed and delivered by Bank and as if a separate endorsement were made to the promissory note for each Loan to reflect that Participant owns an undivided interest in such Loan. If there is an amendment to bankruptcy law, or if there is a ruling of a court of competent jurisdiction, to the effect that the holding of a Participation Interest is an extension of credit, Bank shall take such additional steps as Participant may reasonably require, at Participant’s expense, to assure Participant’s legal rights as an owner of interests in the Loans.
 
Section 18.    Miscellaneous Provisions.
 
(a)    This document contains the entire agreement among the parties in regard to the subject matter hereof and supersedes any and all prior agreements or understandings.
 
(b)    This Agreement shall remain in full force and effect until all of Participant’s Participation Interest in the Loans, including, without limitation, the underlying Collateral, are liquidated or discharged completely. The indemnities provided for in this Agreement shall survive any such termination of this Agreement for a period of one year.
 
(c)    All notices and other communications hereunder shall be in writing, addressed as follows:
 
If to Bank:
 
Wachovia Bank, National Association
301 South College Street
Charlotte, NC 28288
 
If to Participant:
 
Wachovia Preferred Funding Holding Corp.
1620 East Roseville Parkway
Roseville, CA 95661
 
Any notice to be delivered to a party hereto will be effective upon delivery by registered or certified mail, return receipt requested, or guaranteed delivery service such as Federal Express or Express Mail, or by telecopy or facsimile machine. Change of address may be made by giving written notice of the change of address to the other party hereto.
 
(d)    This Agreement shall be governed by and construed in accordance with the laws of North Carolina, without giving effect to the choice of law principles thereof.
 
(e)    This Agreement may be executed, acknowledged, and delivered in any number of counterparts. Each such counterpart shall constitute an original but all of such counterparts taken together shall constitute one agreement.
 
(f)    This Agreement may be amended, modified or supplemented only by a written instrument executed by the parties hereto. The invalidity, illegality or unenforceability of one or more of the provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of this Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

8


 
(g)    The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement.
 
(h)    This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns, except as such assignments are prohibited herein. Neither party hereto shall assign all or any part of the rights or obligations arising hereunder without the prior written consent of the other party; provided, however, that each of the parties hereto may, without such consent, assign all or any of the rights and obligations arising under this Agreement to (i) a subsidiary, parent or subsidiary of a parent of such party, or (ii) any successor (by merger or otherwise) to all or substantially all of the assets and liabilities of such party; and further, provided, that such assignee or successor shall enter into a written agreement in form and content acceptable to all parties hereto agreeing to be bound by the terms hereof.
 
(i)    None of the provisions of this Agreement shall inure to the benefit of any Borrower or any person other than Participant and Bank and their respective successors and permitted assigns. Borrowers and any person other than Participant and Bank and their respective successors and permitted assigns shall not be entitled to rely upon or raise as a defense, in any manner whatsoever, the failure of Participant or Bank to comply with the provisions of this Agreement or to enforce their rights hereunder. Neither Participant nor Bank shall incur any liability to any Borrower or any other person for any act or omission of the other.
 
(j)    The parties hereto agree to execute any additional documents, obtain permissions, meet any requirements or perform any other acts necessary to assure the intent of this Agreement is fully performed.
 
(k)    Nothing herein contained confers on either party any interest in or subjects either party to any liability on account of the assets or liabilities of the other, except for Participant’s Participation Interest.
 
[Remainder of this page left intentionally blank.]
 

9


 
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
 
WACHOVIA BANK, NATIONAL ASSOCIATION
By:
 
   
Name:                                                                                    
Title:                                                                                      
 
WACHOVIA PREFERRED FUNDING HOLDING CORP.
By:
 
   
Name:                                                                                    
Title:                                                                                      

10
EX-10.B 9 dex10b.htm FORM OF LOAN PART. AGRMNT Form of Loan Part. Agrmnt
Exhibit 10(b)
 
ASSIGNMENT AGREEMENT
 
This ASSIGNMENT AGREEMENT (this “Agreement”) is made and entered into as of November ·, 2002 (the “Effective Date”) by and between Wachovia Preferred Funding Holding Corp., a corporation organized under the laws of the State of California (“Participant”), and Wachovia Preferred Funding Corp., a corporation organized under the laws of the State of Delaware (“Assignee”).
 
Recitals
 
WHEREAS, Participant and Wachovia Bank, National Association, a national banking association (“Bank”), entered into a certain Participation Agreement and Agreement for Contribution, of even date herewith (the “Participation Agreement”), pursuant to which Participant is the holder of a 100% participation interest in certain commercial and commercial mortgage real estate loans as set forth therein (the “Participation Interest”);
 
WHEREAS, Participant now desires to contribute, assign, and transfer all of its right, title, and interest in the Participation Interest, together with all of Participant’s rights and obligations under the Participation Agreement to Assignee in exchange for (i) 30,000,000 shares of Assignee’s ·% Non-cumulative Exchangeable Perpetual Series A Preferred Securities, par value $0.01 per share (the “Series A Preferred Securities”), (ii) 40,000,000 shares of Assignee’s Floating Rate Non-cumulative Series B Preferred Securities, par value $0.01 per share (the “Series B Preferred Securities”), and (iii) 4,254,413 shares of Assignee’s Floating Rate Cumulative Series C Preferred Securities, par value $0.01 per share (the “Series C Preferred Securities”, together with the Series A Preferred Securities and the Series B Preferred Securities, collectively, the “Consideration”); and
 
WHEREAS, Assignee desires to accept the contribution, assignment and transfer of all of Participant’s right, title, and interest in the Participation Interest as a capital contribution and assume the rights and obligations of Participant under the Participation Agreement in exchange for the Consideration.
 
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:
 
Section 1.    Assignment and Assumption.
 
(a)    Participant does hereby contribute, assign, and transfer to Assignee (i) all of its right, title and interest in and to the Participation Interest, subject to the terms and conditions of the Participation Agreement, and (ii) all of Participant’s rights and obligations under the Participation Agreement, including, but not limited to, the right to receive the Transferred Amount (as defined in the Participation Agreement) from the Bank (collectively, the “Assigned Interests”).
 
(b)    Assignee does hereby (i) accept the contribution, assignment, and transfer of the Participation Interest, subject to the terms and conditions of the Participation Agreement, (ii) assume all the rights and obligations of Participant under the Participation Agreement, and (iii) make or affirm, as applicable, on its own behalf the representations and warranties of Participant under the Participation Agreement for the benefit of Bank.
 
(c)    The parties hereto acknowledge and agree that (i) the assignment of the Assigned Interests shall be effective as of the Effective Date, and (ii) Assignee shall be entitled to all payments in respect of the Participation Interest pursuant to the Participation Agreement as of the Effective Date.
 
(d)    The parties hereto further acknowledge and agree that Assignee shall benefit from Participant’s rights under the Participation Agreement and be entitled to enforce the Participation Agreement as if it were a party thereto.

1


 
Section 2.    Payment.    As consideration for receipt of the Assigned Interests, Assignee does hereby issue and convey to Participant the Consideration, delivery of which is acknowledged by Participant.
 
Section 3.    No Recourse.    Except as otherwise provided herein, the assignment of the Assigned Interests is without recourse to Participant. Participant makes no warranties with respect to the value, quality, or collectability of the Participation Interest or the Loans (as defined in the Participation Agreement) underlying such Participation Interest. In the event any of the Loans are in default or subsequently default and are not collected or incur costs, Assignee shall bear all losses attributable to Participant under the Participation Agreement.
 
Section 4.    Representations of Participant.    Participant hereby represents and warrants to Assignee as follows:
 
 
(i)
 
Participant is a corporation duly organized, validly existing and in good standing under the laws of the State of California;
 
 
(ii)
 
Participant has the power and authority, and has taken all necessary and proper corporate action to enter into and perform its obligations under this Agreement and to consummate the transactions contemplated hereby;
 
 
(iii)
 
this Agreement has been duly authorized, executed and delivered by Participant and, assuming the due authorization, execution and delivery of this Agreement by Assignee, constitutes the valid and binding obligation of Participant enforceable against it in accordance with its terms, except as limited by laws affecting the enforcement of creditor’s rights or equitable principles generally;
 
 
(iv)
 
Participant is the owner of the Participation Interest and has requisite power and authority to contribute, assign, and transfer all its rights and interests in the Participation Interest and the Participation Agreement;
 
 
(v)
 
the execution, performance and delivery of this Agreement does not conflict with, or result in a breach of or default under, Participant’s articles of incorporation or by-laws, any agreement or instrument to which Participant is a party, or any federal, state or local law, regulation, ruling or interpretation to which Participant is subject;
 
 
(vi)
 
the Participation Interest is conveyed to Assignee free and clear of all liens, claims, or encumbrances but subject to the Participation Agreement;
 
 
(vii)  except
 
as would not have material adverse effect on the Participation Interest taken as a whole, Participant does not believe, nor does it have any reason to believe, that any of the Loans underlying the Participation Interest are in default as of the Effective Date.
 
Section 5.    Representations of Assignee.    Assignee hereby represents and warrants to Participant as follows:
 
 
(i)
 
Assignee is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware;
 
 
(ii)
 
Assignee has the power and authority, and has taken all necessary and proper corporate action to enter into and perform its obligations under this Agreement and to consummate the transactions contemplated hereby;
 
 
(iii)
 
this Agreement has been duly authorized, executed and delivered by Assignee and, assuming the due authorization, execution and delivery of this Agreement by Participant, constitutes the valid and binding obligation of Assignee enforceable against it in accordance with its terms, except as limited by laws affecting the enforcement of creditor’s rights or equitable principles generally;
 
 
(iv)
 
the execution, performance and delivery of this Agreement does not conflict with, or result in a breach of or default under, Assignee’s certificate of incorporation, any other agreement or instrument to which Assignee is a party, or any federal, state or local law, regulation, ruling or interpretation to which Assignee is subject; and

2


 
 
(v)
 
each share of (1) the Series A Preferred Stock, (2) the Series B Preferred Stock, and (3) the Series C Preferred Stock issued to Participant hereunder is duly authorized, duly issued, fully paid and non-assessable and upon execution hereof will be owned by Participant free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim.
 
Section 6.    Additional Covenants.
 
(a)    If through inadvertence or otherwise, Participant receives funds to which Assignee is entitled under the Participation Agreement, Participant shall hold such funds in trust for Assignee and shall as soon as practical pay such funds to Assignee.
 
Section 7.    Indemnification and Reimbursement.
 
(a)    Assignee agrees to indemnify Participant for and against any and all claims, demands, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature, including reasonable fees and disbursements of counsel, arbitration fees and arbitrator fees (collectively, the “Losses”), which may be imposed on, incurred by, or asserted against Participant in any way relating to or arising out of the Assigned Interests; provided, however, that this indemnity shall not apply in case of any Losses caused by Participant’s failure to observe and perform any or all of its duties, obligations, covenants, warranties or representations contained in this Agreement or by Participant’s gross negligence or willful misconduct.
 
(b)    In the event that Participant is sued or threatened by suit by any receiver or trustee in bankruptcy or by any borrower as a debtor-in-possession on account of any alleged preference, voidable transfer or fraudulent conveyance alleged to have been received under any of the Loans underlying the Participation Interest, or if any claim, suit or action shall be asserted against Participant relating to such Loans, any money paid by Participant in satisfaction or compromise of such suit, action or demand, any money required to be returned by Participant to such borrower or its estate and any costs or fees associated therewith shall be reimbursed to Participant by Assignee.
 
Section 8.    Miscellaneous Provisions.
 
(a)    Assignee may assign the Assigned Interests, or any portion thereof, only with the prior written consent of Participant.
 
(b)    Nothing contained herein confers on Assignee or Participant any interest in or subjects Assignee or Participant to any liability on account of the assets or liabilities of the other, except for Assignee’s interest in the Assigned Interests.
 
(c)    This Agreement and its enforcement shall be governed by, and interpreted in accordance with, the laws of the State of New York, without regard to the conflicts of laws principles thereof.
 
(d)    This Agreement may be amended, modified or supplemented only by a written instrument executed by the parties hereto. The invalidity, illegality or unenforceability of one or more of the provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of this Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.
 

3


(e)    This Agreement may be executed in two or more counterparts, each of which will constitute an original and all of which, when taken together, will constitute one agreement.
 
(f)    This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns, except as such assignments are prohibited herein.
 
(g)    The parties hereto agree to execute any additional documents, obtain permissions, meet any requirements or perform any other acts necessary to assure the intent of this Agreement is fully performed.
 
[Remainder of this page left intentionally blank.]

4


 
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
 
WACHOVIA PREFERRED FUNDING HOLDING CORP.
By:
 
   
Name:                                                                                    
Title:                                                                                      
 
WACHOVIA PREFERRED FUNDING CORP.
By:
 
   
Name:                                                                                    
Title:                                                                                      

5
EX-10.C 10 dex10c.htm FORM OF EXCHANGE AGREEMENT Form of Exchange Agreement
Exhibit 10(c)
 
WACHOVIA PREFERRED FUNDING CORP.
SERIES A PREFERRED SECURITIES
 
EXCHANGE AGREEMENT
 
THIS EXCHANGE AGREEMENT (this “Agreement”) is entered into as of ·, 2002, among WACHOVIA PREFERRED FUNDING CORP., a Delaware corporation (“WPFC”), WACHOVIA CORPORATION, a North Carolina corporation (“Wachovia”), and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association (“Wachovia Bank”), as depositary hereunder.
 
Recitals
 
WHEREAS, WPFC intends to issue 30,000,000 shares of ·% non-cumulative Series A preferred stock with liquidation preference of $25.00 per share (each, a “Series A Preferred Security”).
 
WHEREAS, each Series A Preferred Security will be conditionally exchangeable into one newly issued depositary share (each, a “Depositary Share”) representing a one-sixth interest in one share of the Series G, Class A Preferred Stock, no par value per share and having a liquidation preference of $150.00 per share, of Wachovia (the “Wachovia Preferred Stock”).
 
WHEREAS, the parties hereto desire to ensure that in the event of the occurrence of circumstances requiring the exchange of the Series A Preferred Securities into the Depositary Shares, the holders of the Series A Preferred Securities will be contractually bound to tender their Series A Preferred Securities to Wachovia for exchange, and that in the same such event Wachovia will be contractually bound unconditionally to make available Depositary Shares sufficient for exchange of the Series A Preferred Securities, and to effect the exchange of all outstanding Series A Preferred Securities into Depositary Shares.
 
Agreement
 
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
 
Section 1.    Exchange of the Series A Preferred Securities.    If at any time after the issuance and sale of the Series A Preferred Securities, the Office of the Comptroller of the Currency (the “OCC”) directs in writing that the Series A Preferred Securities be exchanged into the relevant Wachovia Preferred Stock, because (i) Wachovia Bank is undercapitalized under the prompt corrective action regulations, (ii) Wachovia Bank is placed into conservatorship or receivership, or (iii) the OCC, in its sole discretion, anticipates Wachovia Bank becoming “undercapitalized” in the near term or takes supervisory action that limits the payment of dividends by WPFC, then
 
 
(a)
 
the holders of the Series A Preferred Securities shall immediately, in accordance with procedures set forth in the Certificate of Designations, Preferences and Rights of Series A Preferred Securities, exchange the Series A Preferred Securities for the relevant Depositary Shares, on a one share for one share basis, by delivering all certificates representing the Series A Preferred Securities, if any, to Wachovia, properly endorsed for transfer;
 
 
(b)
 
Wachovia shall immediately and unconditionally issue the required number of shares of the Wachovia Preferred Stock and deposit such shares with Wachovia Bank;
 
 
(c)
 
upon receipt of the shares of the Wachovia Preferred Stock from Wachovia, Wachovia Bank shall issue the relevant Depositary Shares and deliver to Wachovia receipts evidencing such Depositary Shares and, in turn, Wachovia shall deliver such receipts to the holders of the Series A Preferred Securities; and
 


 
(d)
 
upon the occurrence of the exchange, all of the Series A Preferred Securities shall be cancelled and shall cease to be outstanding without any further action by WPFC or the holders thereof, all rights of the holders of the Series A Preferred Securities as WPFC’s stockholders shall cease, and such persons shall be, for all purposes, solely holders of the Depositary Shares.
 
Until certificates representing Depositary Shares are delivered or in the event such replacement certificates are not delivered, any certificates previously representing the Series A Preferred Securities shall be deemed for all purposes to represent Depositary Shares.
 
Section 2.    Legend.    The certificates evidencing the Series A Preferred Securities, if any, shall bear the following legend in conspicuous type:
 
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF A CERTAIN EXCHANGE AGREEMENT, DATED             , 2002, REQUIRING THEIR EXCHANGE IN CERTAIN CIRCUMSTANCES INTO CERTAIN PREFERRED SHARES OF WACHOVIA CORPORATION. THE ISSUER WILL MAIL TO THE SHAREHOLDER A COPY OF SUCH AGREEMENT, WITHOUT CHARGE, WITHIN FIVE DAYS AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR.
 
Section 3.    Counterparts.    This Agreement may be executed in any number of counterparts, each of which shall be an original as against any party whose signature appears thereon and all of which together shall constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as signatories.

2


 
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
 
WACHOVIA PREFERRED FUNDING CORP.
By:
 
 

   
Name:
Title:
 
WACHOVIA CORPORATION
By:
 
 

   
Name:
Title:
 
WACHOVIA BANK, N.A.
By:
 
 

   
Name:
Title:

3
EX-10.D 11 dex10d.htm PROMISSORY NOTE Promissory Note
Exhibit 10(d)
 
PROMISSORY NOTE
 
Effective as of September 1, 2002, for value received, the undersigned corporation promises to pay Wachovia Bank, National Association, on demand, such principal amounts from time to time outstanding hereunder up to the sum of Two Billion and No/100 Dollars ($2,000,000,000.00) at Charlotte, North Carolina, with interest payable monthly at the prior month’s average federal funds rate. Interest will be computed based on actual number of days outstanding divided by actual number of days in the month.
 
The undersigned waives demand, protest and notice of dishonor.
 
WITNESS the hand and seal of the undersigned.
 
       
Wachovia Preferred Funding Corp.
ATTEST:
       
   
/s/    David M. Julian        

     
By:
 
/s/    Gary R. Sessions        

   
David M. Julian
Senior Vice President
         
Gary R. Sessions
Vice President
EX-23.A 12 dex23a.htm CONSENT OF INDEPENDENT AUDITORS (FORM S-11) Consent of Independent Auditors (Form S-11)
Exhibit 23(a)
 
CONSENT OF INDEPENDENT AUDITORS
 
Board of Directors
Wachovia Preferred Funding Corp.
 
We consent to the use of our report dated August 26, 2002, included herein and to the reference to our firm under the heading “Experts” in the Registration Statement.
 
 
/s/    KPMG LLP
 
Charlotte, North Carolina
November 18, 2002
EX-1 13 dex11.htm UNDERWRITING AGREEMENT Underwriting Agreement
Exhibit 1
 
WACHOVIA PREFERRED FUNDING CORP.
 
[            ]% NONCUMULATIVE EXCHANGEABLE PERPETUAL
PREFERRED SECURITIES, SERIES A
(liquidation preference $25.00 per preferred security) exchangeable
in specified circumstances into
Noncumulative Preferred Stock
of Wachovia Corporation
 
UNDERWRITING AGREEMENT
 
[            ], 2002
 
Wachovia Securities, Inc.
One Wachovia Center
Charlotte, North Carolina 28288
 
As Representative of the Underwriters named in Schedule I hereto
 
Ladies and Gentlemen:
 
Wachovia Preferred Funding Holding Corp., a corporation organized under the laws of the State of California (“Holding”) and a wholly-owned subsidiary of Wachovia Bank, National Association (the “Bank”), proposes to sell to the underwriters named in Schedule I hereto (the “Underwriters,” provided that if such underwriter and the Representative are one and the same person, then any reference to the term “Representative” shall be construed accordingly), for whom you are acting as Representative, 15,000,000 shares of [            ]% noncumulative exchangeable perpetual preferred securities, Series A (liquidation preference $25.00 per preferred security) (the “Securities”) of Wachovia Preferred Funding Corp., a corporation organized under the laws of the State of Delaware (the “Company”).
 
Upon the occurrence of a Supervisory Event (as defined in the Prospectus (as defined below)) and at the direction of the Office of the Comptroller of the Currency (the “OCC”), the Securities will be exchanged on a one for one basis for depositary shares (the “Depositary Shares”) representing Series G [            ]% noncumulative preferred stock, Class A (liquidation preference $150.00 per share (the “Wachovia Securities”)) of Wachovia Corporation, a corporation organized under the laws of the State of North Carolina (“Wachovia”). Each Depositary Share will represent a one-sixth interest in one Wachovia Security and will be issued pursuant to a Deposit Agreement among Wachovia, the Bank and the holders from time to time of the depository receipts (the “Depositary Receipts”) issued by the Bank, as Depository, and evidencing the Depositary Shares (the “Deposit Agreement”). Wachovia, Holding and the Company are hereinafter collectively referred to as the “Wachovia Parties.”
 
SECTION 1.    Representations and Warranties.    Wachovia, Holding and the Company jointly and severally represent and warrant to each Underwriter that:
 
 
(a)    Compliance
 
with Registration Requirements.
 
 
(i)
 
The registration statement (File Nos. 333-99847 and 333-99847-01) on Form S-11 and Form S-3, respectively (collectively, the “registration statement”), including a prospectus that shall be used in connection with the sale of the Securities, has been filed by Wachovia and the Company (each, a “Registrant”) with the Securities and Exchange Commission (the “Commission”), in the form heretofore delivered to the Representative. The registration statement, as it may have been amended prior to the date of this Agreement, has become effective under the Securities Act of

1


 
1933, as amended (the “Securities Act”) and no stop order suspending the effectiveness of the registration statement has been issued under the Securities Act and no proceedings for that purpose have been instituted or are pending, or to the knowledge of either Registrant, are contemplated by the Commission. The registration statement, including any final prospectus filed under Rule 424(b) under the Securities Act and the documents incorporated by reference in the prospectus contained in the registration statement as of the time it became effective, each as amended to the date of this Agreement, is hereinafter referred to as the “Registration Statement”; the prospectus included in the registration statement as initially declared effective by the Commission is hereinafter referred to as the “Preliminary Prospectus”; and the final prospectus, in the form first filed under Rule 424(b) under the Securities Act, is hereinafter referred to as the “Prospectus.” Any reference herein to the Registration Statement, the Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein which were filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on or before the date of this Agreement, and any reference herein to the terms “amend” or “amendment” with respect to the Registration Statement, the Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the filing of any document under the Exchange Act deemed to be incorporated therein by reference after the date of this Agreement.
 
 
(ii)
 
The Preliminary Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the Securities Act and the rules and regulations of the Commission thereunder, and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, that they make no representations or warranties as to the information contained in or omitted from the Preliminary Prospectus in reliance upon and in conformity with information furnished in writing to the Registrants by or on behalf of any Underwriter through the Representative expressly for use therein.
 
 
(iii)
 
The Registration Statement, at the time it became effective, and any amendments thereof filed prior to the date hereof, as of their respective effective dates, conformed in all material respects to the requirements of the Securities Act and the rules and regulations of the Commission thereunder; the Registration Statement and the Prospectus, and any amendments thereof and supplements thereto, will conform in all material respects to the requirements of the Securities Act and the respective rules and regulations of the Commission thereunder, and no such document, as of their respective effective date and, in the case of the Prospectus and any amendments thereof or supplements thereto, as of the Closing Date (as hereinafter defined), included or will include any untrue statement of a material fact or omitted or will omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, provided that they make no representations or warranties as to the information contained in or omitted from the Prospectus or any amendment thereof in reliance upon and in conformity with information furnished in writing to the Registrants by or on behalf of any Underwriter specifically for use in connection with the preparation of the Prospectus or any amendment thereof.
 
 
(b)
 
Good Standing of the Wachovia Parties.
 
 
(i)
 
Each of the Wachovia Parties and the Bank has been duly incorporated, is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation and has all power and authority (corporate and other) necessary to own or hold its material properties and to conduct its business substantially in the manner in which it presently conducts such business.
 
 
(ii)
 
The organization of the Company and its subsidiaries and their proposed method of operation will enable the Company to meet the requirements for qualification and taxation as a real estate investment trust under the Internal Revenue Code of 1986, as amended.
 

2


 
(iii)
 
Neither the Bank nor any of its subsidiaries (including the Company) is party to or otherwise the subject of any consent decree, memorandum of understanding, written commitment or other written supervisory agreement with the OCC, or any other Federal or state authority or agency charged with the supervision or insurance of the Bank and its subsidiaries.
 
 
(c)
 
Authorization of the Securities.    The Securities have been duly authorized, issued and delivered by the Company and are fully paid and non-assessable; the Securities and all other capital stock of the Company conform in all material respects to the descriptions thereof in the Prospectus; the issuance of the Securities is not subject to preemptive or other similar rights; the Securities are directly owned by Holding free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity; and upon the delivery of and payment for the Securities on the Closing Date hereunder the several Underwriters will acquire valid and unencumbered title to the Securities to be delivered by Holding.
 
 
(d)
 
The Wachovia Securities and Depositary Shares.    The Wachovia Securities have been duly authorized and reserved for issuance and when issued and delivered upon the occurrence of a Supervisory Event will be validly issued, fully paid and non-assessable and will not be issued in violation of the preemptive or other similar rights of any securityholder of Wachovia; the capital stock of Wachovia conforms in all material respects to the description thereof in the Prospectus; upon issuance by the Depositary of Depositary Receipts evidencing Depositary Shares against the deposit of Wachovia Securities in respect thereof in accordance with the provisions of the Deposit Agreement, such Depositary Receipts will be duly and validly issued and the persons in whose names the Depositary Receipts are registered will be entitled to the rights specified therein and in the Deposit Agreement; and the Deposit Agreement and the Depositary Shares conform in all material respects to the descriptions thereof in the Prospectus.
 
 
(e)
 
Authorization and Execution of Agreements; No Breach.    This Agreement, the Deposit Agreement and the Assignment Agreement dated ·, 2002 between Holding and the Company (the “Assignment Agreement”) have been duly authorized, executed and delivered by, and are valid, binding and enforceable obligations of, each of the Wachovia Parties that is a party thereto. The execution, delivery and performance of this Agreement, the Deposit Agreement and the Assignment Agreement by the Wachovia Parties, the issuance and delivery of the Securities by the Company and the Wachovia Securities by Wachovia, and compliance with the provisions hereof and thereof by the Wachovia Parties will not constitute a breach of or default under: (i) the corporate charter or by-laws of any Wachovia Party, (ii) any material agreement, indenture or other instrument relating to indebtedness for money borrowed to which any Wachovia Party is a party, or, (iii) to the best of any Wachovia Party’s knowledge, any law, order, rule, regulation or decree of any court, governmental agency or authority located in the United States having jurisdiction over any of the Wachovia Parties or any of their subsidiaries or any property of any Wachovia Party, which breach or default would be reasonably likely to have a material adverse effect on any Wachovia Party and its subsidiaries taken as a whole.
 
 
(f)
 
No Further Approvals.    No consent, authorization or order of, or filing or registration with, any court or governmental agency or authority is required for the execution, delivery and performance of this Agreement, including the sale of the Securities and the deposit by Wachovia of the Wachovia Securities with the Bank against issuance of the Depositary Receipts, except such as have been made or obtained or will be made or obtained on or before the Closing Date under the Securities Act and under applicable OCC rules and regulations and such as may be required under the blue sky laws of any jurisdiction in connection with the purchase and distribution of the Securities by the Underwriters in the manner contemplated herein and in the Prospectus.
 
 
(g)
 
Investment Company Act.    Neither Registrant is or, after giving effect to the offering and sale of the Securities as described in the Prospectus, will be an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
 
 
(h)
 
No Dividend Payment.    With respect to each subsidiary of the Company or the Bank, as applicable, which is material to the consolidated assets or consolidated revenues of the Company or the Bank, as

3


 
applicable (in each case, a “Material Subsidiary”), no Material Subsidiary is currently prohibited, directly or indirectly, from (i) paying any dividends to the Company or the Bank, as the case may be, (ii) making any other distribution on such subsidiary’s capital stock, (iii) repaying to the Company or the Bank, as the case may be, any loans or advances to such subsidiary from the Company or the Bank, as the case may be, or (iv) transferring any of such subsidiary’s property or assets to the Company or the Bank or, in the case of a subsidiary of the Bank, to any other subsidiary of the Bank, except in each case as described in or contemplated by the Prospectus.
 
SECTION 2.    Purchase and Sale.    Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, Holding agrees to sell to each Underwriter, and each Underwriter agrees, severally and not jointly, to purchase from Holding, at the purchase price of $25.00 per Security, the amount of Securities set forth opposite such Underwriter’s name in Schedule I hereto. Holding agrees to pay the Underwriters the fees described in the Prospectus under “Underwriting” in an aggregate amount equal to $[            ] per Security on the Closing Date.
 
SECTION 3.    Delivery and Payment.    Delivery of and payment for the Securities shall be made at 10:00 AM, New York City time, on [            ], 2002, which date and time may be postponed by agreement between the Representative and Holding (such date and time of delivery of and payment for the Securities being herein called the “Closing Date”). Delivery of the Securities shall be made to the Representative for the respective accounts of the several Underwriters against payment by the several Underwriters through the Representative of the purchase price thereof to or upon the order of Holding in the manner and type of funds specified by Holding. Certificates for the Securities shall be registered in such names and in such denominations as the Representative may request not less than one full business day in advance of the Closing Date.
 
Holding agrees to have the Securities available for inspection, checking and packaging in New York, New York, on the business day prior to the Closing Date.
 
SECTION 4.    Offering by Underwriters.    It is understood that the several Underwriters propose to offer the Securities for sale as set forth in the Prospectus.
 
SECTION 5.    Agreements.    Each of the Wachovia Parties jointly and severally agrees with the each Underwriter that:
 
 
(a)
 
The Registrants will cause the Prospectus to be filed, or transmitted for filing, with the Commission pursuant to Rule 424 under the Securities Act and will promptly advise the Representative when the Prospectus has been so filed or transmitted for filing, and, prior to the termination of the offering of the Securities to which such Prospectus relates, also will promptly advise the Representative (i) when any amendment to the Registration Statement has become effective or any supplement to the Prospectus has been so filed or transmitted for filing, (ii) of any request by the Commission for any amendment of the Registration Statement or the Prospectus or for any additional information, (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the institution or threatening of any proceeding for that purpose, and (iv) of the receipt by Wachovia or the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. The Registrants will use their reasonable best efforts to prevent the issuance of any such stop order and, if issued, to obtain as soon as reasonably possible the withdrawal thereof. For so long as a prospectus relating to the Securities is required to be delivered under the Securities Act, the Registrants will not file or transmit for filing any amendment to the Registration Statement or the Prospectus which relates to the Securities unless the Registrants have furnished you or counsel for the Underwriters a copy for your review prior to filing or transmission for filing.
 
 
(b)
 
If, at any time when a prospectus relating to the Securities is required to be delivered under the Securities Act, any event occurs as a result of which the Prospectus as then amended or supplemented

4


 
would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or if it shall be necessary to amend or supplement the Prospectus in connection with the sale of the Securities to comply with the Securities Act or the rules and regulations of the Commission thereunder, promptly after becoming aware thereof, the Registrants will notify the Representative or counsel for the Underwriters and, upon their or its reasonable request, prepare and file or transmit for filing with the Commission an amendment or supplement which will correct such statement or omission or effect such compliance.
 
 
(c)
 
During the period when the Prospectus is required to be delivered under the Securities Act or the Exchange Act, the Registrants will file or cause to be filed all documents required to be filed with the Commission pursuant to the Exchange Act within the time periods required by the Exchange Act.
 
 
(d)
 
The Registrants will make generally available to their security holders and to the Representative as soon as practicable, but not later than 45 days after the end of the 12-month period beginning at the end of the fiscal quarter of the Registrants during which the filing, or transmission for filing, of the Prospectus pursuant to Rule 424 under the Act occurs (except not later than 90 days after the end of such period if such quarter is the last fiscal quarter), an earnings statement (which need not be audited) of each Registrant and their respective subsidiaries, covering such 12-month period, which will satisfy the provisions of Section 11(a) and Rule 158 of the Securities Act.
 
 
(e)
 
The Registrants will use their best efforts to furnish in New York City to each of the Underwriters prior to 10:00 a.m., New York City time, on the New York business day next succeeding the date of this Agreement and from time to time, as many copies of the Prospectus, the Preliminary Prospectus and all amendments of such documents as may be reasonably requested.
 
 
(f)
 
Holding will pay all expenses incident to the performance of the Wachovia Parties of their obligations under this Agreement, and will pay the expenses of preparing, printing or reproduction and filing all documents relating to the offering and mailing and delivering such to Underwriters and dealers, any filing fee incident to any required review by the National Association of Securities Dealers, Inc. of the terms of the sale of the Securities, all expenses in connection with the registration of the Securities under the Exchange Act and the listing of the Securities on the New York Stock Exchange, all expenses in connection with the qualification of the Securities for offering and sale under state securities laws (including the fees and disbursements of counsel to the Underwriters in connection with such qualification and the preparation of the Blue Sky and legal investment surveys), any taxes payable in connection with the sale and delivery of the Securities by Holding to the Underwriters, and any fees charged for rating the Securities.
 
 
(g)
 
The Registrants will use their reasonable best efforts to arrange for the qualification of the Securities for sale under the laws of such jurisdictions as the Representative may designate and to maintain such qualifications in effect so long as required for the distribution of the Securities; provided that the Wachovia Parties shall not be required to qualify to do business in any jurisdiction where they are not now qualified or to take any action which would subject them to general or unlimited service of process in any jurisdiction where they are not now so subject.
 
SECTION 6.    Conditions to the Obligations of the Underwriters.    The obligations of the Underwriters to purchase the Securities shall be subject to the accuracy in all material respects of the representations and warranties on the part of the Wachovia Parties contained herein as of the date hereof and the Closing Date, to the accuracy in all material respects of the statements of the Wachovia Parties made in any certificates pursuant to the provisions hereof, to the performance in all material respects by the Wachovia Parties of their obligations hereunder and to the following additional conditions:
 
 
(a)
 
Effectiveness of Registration Statement.    No stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted and be pending or have been threatened as of the Closing Date; and all requests for additional information on the part of the Commission shall have been complied with.

5


 
 
(b)
 
Certificates.    Each of the Wachovia Parties shall have furnished to the Representative a certificate, dated the Closing Date, signed by the principal financial or accounting officer of each Wachovia Party, to the effect that, to the best of his/her knowledge after reasonable investigation:
 
 
(i)
 
The representations and warranties of such Wachovia Party in this Agreement are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date and such Wachovia Party has complied with all the agreements and satisfied all the conditions herein on its part to be performed or satisfied at or prior to the Closing Date, in all material respects;
 
 
(ii)
 
No stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted and are pending or have been threatened as of such date;
 
 
(iii)
 
Since the date of the most recent financial statements included in the Prospectus, there has been no material adverse change in the financial position, results of operations, cash flows or prospects relating thereto of such Wachovia Party together with its subsidiaries taken as a whole, except as set forth in or contemplated by the Prospectus; and
 
 
(iv)
 
Since the date of this Agreement, no downgrading has occurred in the rating accorded to the Securities or as described in Section 6(h).
 
 
(c)
 
Opinion of Counsel of Wachovia.    The Representative shall have received a written opinion of counsel from Ross E. Jeffries, Esq., Senior Vice President and Assistant General Counsel of Wachovia, dated as of the Closing Date and addressed to the Underwriters in form and substance satisfactory to counsel for the Underwriters (substantially in the form of Exhibit A hereto).
 
As to matters governed by New York law, Mr. Jeffries may rely upon the opinion of Sullivan and Cromwell delivered pursuant to Section 6(d).
 
 
(d)
 
Opinion of Counsel for the Wachovia Parties.    The Representative shall have received written opinions from Sullivan and Cromwell, counsel for the Wachovia Parties, dated as of the Closing Date and addressed to the Underwriters in form and substance satisfactory to counsel for the Underwriters (substantially in the form of Exhibit B-1 and Exhibit B-2 hereto).
 
As to matters governed by North Carolina law, Sullivan & Cromwell may rely upon the opinion of Ross E. Jeffries, Esq., Senior Vice President and Assistant General Counsel of Wachovia, delivered pursuant to Section 6(c).
 
 
(e)
 
Opinion of Counsel for the Underwriters.    The Representative shall have received from Cleary, Gottlieb, Steen & Hamilton, counsel for the Underwriters, such opinion or opinions, dated as of the Closing Date and addressed to the Underwriters, with respect to the issuance and sale of the Securities, the Registration Statement, the Prospectus and other related matters as the Representative may reasonably require, and the Wachovia Parties shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters.
 
 
(f)
 
Accountant’s Comfort Letters.    The Representative shall have received from KPMG LLP and Ernst & Young LLP, independent accountants for the Wachovia Parties, letters, dated as of the date hereof and, in the case of KPMG LLP, as of the Closing Date, in form and substance satisfactory to the Representative (substantially in the form of Exhibit C, Exhibit D-1 and Exhibit D-2 hereto) containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectus.

6


 
 
(g)
 
Material Adverse Change.    Subsequent to the date hereof, there shall not have occurred any change, or any development involving a prospective change, in or affecting the financial position, long-term debt, stockholders’ equity or results of operations of any Wachovia Party together with its consolidated subsidiaries, taken as a whole, which the Representative concludes, after consultation with the Wachovia Parties, in the judgment of the Representative is so material and adverse as to make it impractical or inadvisable to proceed with the public offering or the delivery of the Securities as contemplated by the Prospectus.
 
 
(h)
 
Maintenance of Rating.    At the Closing Date, the Securities shall be rated not less than [            ] by Moody’s Investors Service, Inc. and not less than [            ] by Standard & Poors Rating Services. Subsequent to the execution of this Agreement, there shall not have been any decrease in the rating of Securities to below such ratings by any “nationally recognized statistical rating organization” (as defined for purposes of Rule 436(g) under the Securities Act) and neither rating agency shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of Wachovia’s unsecured debt securities or preferred stock.
 
 
(i)
 
Approval of Listing.    The Securities shall have been listed and admitted and authorized for trading on the New York Stock Exchange, and satisfactory evidence of such actions shall have been provided to the Representative.
 
 
(j)
 
Additional Documents.    The Wachovia Parties shall have furnished to the Representative such further information, certificates and documents as they may reasonably request prior to the Closing Date.
 
If any of the conditions specified in this Section 6 shall not have been fulfilled in all material respects when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be in all material respects reasonably satisfactory in form and substance to the Representative and their counsel, this Agreement and all obligations of the Underwriters hereunder may be canceled at, or at any time prior to, the Closing Date by the Representative. Notice of such cancellation shall be given to the Wachovia Parties in writing or by telephone or telegraph confirmed in writing.
 
SECTION 7.    Indemnification and Contribution.
 
 
(a)
 
The Wachovia Parties jointly and severally agree to indemnify and hold harmless each Underwriter and each person who controls any Underwriter within the meaning of either the Securities Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement or in any amendment thereof filed prior to the date hereof, or in the Registration Statement or the Prospectus, or in any amendment thereof or supplement thereto, or in the Preliminary Prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that (i) the Wachovia Parties will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Wachovia Parties by or on behalf of any Underwriter through the Representative specifically for use in the Prospectus or any supplement thereto or the Preliminary Prospectus, and (ii) such indemnity with respect to the Preliminary Prospectus shall not inure to the benefit of any Underwriter (or any person controlling such Underwriter) from whom the person asserting any such loss, claim, damage or liability purchased the Securities which are the subject thereof if such person was not sent or given a copy of the Prospectus (or the Prospectus as amended or supplemented),

7


 
excluding documents incorporated therein by reference, at or prior to the confirmation of the sale of such Securities to such person in any case where such delivery is required by the Securities Act and the untrue statement or omission of a material fact contained in the Preliminary Prospectus was corrected in the Prospectus (or the Prospectus as amended or supplemented). This indemnity agreement will be in addition to any liability which the Wachovia Parties may otherwise have.
 
 
(b)
 
Each Underwriter severally agrees to indemnify and hold harmless each Wachovia Party, each of their directors, each of their officers who signs the Registration Statement, and each person who controls each Wachovia Party within the meaning of either the Securities Act or the Exchange Act, to the same extent as the foregoing indemnity from the Wachovia Parties to each Underwriter, but only with reference to written information furnished to the Wachovia Parties by or on behalf of such Underwriter through the Representative specifically for use in the Prospectus or any supplement thereto or the Preliminary Prospectus. This indemnity agreement will be in addition to any liability which any Underwriter may otherwise have.
 
 
(c)
 
Promptly after receipt by an indemnified party under Section 7(a) or (b) of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party will not relieve the indemnifying party from any liability which it may have to any indemnified party otherwise than under Section 7(a) or (b). In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein, and to the extent that it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof, with counsel satisfactory to such indemnified party; provided that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assert such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of its election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under Section 7(a) or (b) for any legal or other expenses subsequently incurred by such indemnified party (other than reasonable costs of investigation) in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in connection with the assertion of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate national counsel, approved by the Representative, representing the indemnified parties who are parties to such action), (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action or (iii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party; and except that, if clause (i) or (iii) is applicable, such liability shall be only in respect of the counsel referred to in such clause (i) or (iii).
 
 
(d)
 
If the indemnification provided for in this Section 7 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Wachovia Parties on the one hand and the Underwriters of the Securities on the other from the offering of the Securities. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to

8


 
give the notice required under subsection (c) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Wachovia Parties on the one hand and the Underwriters of the Securities on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Wachovia Parties on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering of the Securities (before deducting expenses) received by the Wachovia Parties bear to the total underwriting discounts and commissions received by the Underwriters. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Wachovia Parties on the one hand or the Underwriters on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Wachovia Parties and the Underwriters agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the applicable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The obligations of the Underwriters of Securities in this subsection (d) to contribute are several in proportion to their respective underwriting obligations with respect to the Securities and not joint.
 
SECTION 8.    Termination.    This Agreement shall be subject to termination in the absolute discretion of the Representative, by notice given to Holding prior to delivery of and payment for the Securities, if prior to such time (i) trading in securities generally on the New York Stock Exchange shall have been suspended or materially limited, (ii) a general moratorium on commercial banking activities in New York shall have been declared by either Federal or New York State authorities, (iii) there shall have occurred a material disruption in commercial banking or securities settlement or clearance services in the United States, or (iv) there shall have occurred any material outbreak or escalation of hostilities or other calamity or crisis the effect of which on the financial markets of the United States, such as to make it, in the reasonable judgment of the Representative, impracticable or inadvisable to proceed with the public offering or the delivery of the Securities as contemplated by the Prospectus.
 
SECTION 9.    Substituted Underwriters.    If, on the Closing Date, any one or more of the Underwriters shall fail or refuse to purchase Securities that it or they have agreed to purchase hereunder on such date, and the aggregate number of Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate number of the Securities to be purchased on the Closing Date, the other Underwriters shall be obligated severally in the proportions that the number of Securities set forth opposite their respective names in Schedule I bears to the aggregate number of Securities set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as the Underwriters may agree, to purchase the Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on the Closing Date; provided that in no event shall the number of Securities that any Underwriter has agreed to purchase pursuant to Section 2 above be increased pursuant to this Section 9 by an amount in excess of

9


one-ninth of such number of Securities without the written consent of such Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Securities and the aggregate number of Securities with respect to which such default occurs is more than one-tenth of the aggregate number of Securities to be purchased on the Closing Date, and arrangements satisfactory to the Underwriters and the Wachovia Parties for the purchase of such Securities are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter or the Wachovia Parties. In such case either the Underwriters or the Wachovia Parties shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and in the Prospectus or in any other documents or arrangements may be effected. Any action taken under this Section 9 shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement.
 
SECTION 10.    Certain Liabilities Upon Termination.    If this Agreement shall be terminated pursuant to Section 8 hereof, the Wachovia Parties shall not then be under any liability to any Underwriter except as provided in Sections 5(g) and 7 hereof; but, if for any other reason, any Securities are not delivered by or on behalf of the Company as provided herein, Holding will reimburse the Underwriters through you for all actual out-of-pocket expenses approved in writing by you, including fees and disbursements of counsel, reasonably incurred by the Underwriters in making preparations for the purchase, sale and delivery of the Securities not so delivered, but the Wachovia Parties shall then be under no further liability to any Underwriter in respect of the Securities not so delivered except as provided in Sections 5(g) and 7 hereof.
 
SECTION 11.    Representations and Indemnities to Survive.    The respective agreements, representations, warranties, indemnities and other statements of the Wachovia Parties or their respective officers and of the Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or the Wachovia Parties or any of the officers, directors or controlling persons referred to in Section 7 hereof, and will survive delivery of and payment for the Securities. The provisions of Sections 5(g), 7, 9, 13, 14 and 15 hereof shall survive the termination or cancellation of this Agreement.
 
SECTION 12.    Notices.    All communications hereunder will be in writing and effective only on receipt, and:
 
 
(i)
 
if sent to the Underwriters, will be mailed, delivered or telefaxed to:
 
Wachovia Securities, Inc.
One Wachovia Center
Charlotte, North Carolina 28288
Attention: [            ]
Facsimile: (704) 374-[            ]
 
With a copy to:
 
Cleary, Gottlieb, Steen and Hamilton
2000 Pennsylvania Ave, N.W.
Washington D.C. 20006
Attention: Kenneth Bachman, Esq.
Facsimile: (202) 974-1999
 
 
(ii)
 
if sent to a Wachovia Party, will be mailed, delivered or telefaxed to such Wachovia Party at:
 
One Wachovia Center
Charlotte, North Carolina 28288
Attention: Ross Jeffries
Facsimile: (704) 715-4496
 

10


With a copy to:
 
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Attention: Robert Downes, Esq.
Facsimile: (212) 558-3588
 
SECTION 13.    Successors.    This Agreement will inure to the benefit of and be binding upon the parties hereto (including any Underwriter or Underwriters added pursuant to Section 9 hereof) and their respective successors, heirs, executors, administrators and the officers and directors and controlling persons referred to in Section 7 hereof, and no other person will have any right or obligation hereunder.
 
SECTION 14.    Applicable Law.    This Agreement will be governed by and construed in accordance with the laws of the State of New York.
 
SECTION 15.    Counterparts; Notices.    This Agreement may be signed in any number of counterparts, each of which shall be deemed an original, which taken together shall constitute one and the same instrument.
 
SECTION 16.    Action by Underwriters.    Any action under this Agreement taken by the Underwriters jointly or by the firm signing below on behalf of you as the Representative will be binding upon all the Underwriters.

11


 
If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement between the Wachovia Parties and the Underwriters.
 
Very truly yours,
 
WACHOVIA CORPORATION
By:
   
   
   
Name:
Title:
 
WACHOVIA PREFERRED FUNDING HOLDING CORP.
By:
   
   
   
Name:
Title:
 
WACHOVIA PREFERRED FUNDING CORP.
By:
   
   
   
Name:
Title:
 
 
 
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
 
WACHOVIA SECURITIES, INC.
By:
   
   
   
Name:
Title:

12


 
SCHEDULE I
 
Underwriters

  
Number of Securities

 
Wachovia Securities, Inc.
      
[                                                          ]
  
[                                 
]
[                                                          ]
  
[                                 
]
[                                                          ]
  
[                                 
]
        
Total
      
    

    
[        ]
 
    

1


 
EXHIBIT A
 
FORM OF WACHOVIA LEGAL OPINION
LETTERHEAD OF ROSS E. JEFFRIES, JR.
 
 
(i)
 
Each of Wachovia and the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is chartered or organized, with corporate power and authority under such laws to own its material properties and to conduct its business substantially in the manner in which it presently conducts such business.
 
 
(ii)
 
To my knowledge, there is no pending or threatened action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving any Wachovia Party or its or their property of a character required to be disclosed in the Registration Statement that is not adequately disclosed in the Prospectus.
 
 
(iii)
 
To my knowledge, none of Wachovia and the Company is in violation or default of (a) any provision of their respective articles, certificate, charter or bylaws, as the case may be, (b) any material agreement, indenture or other instrument relating to indebtedness for money borrowed known to me to which Wachovia or the Company is a party, or (c) any statute, law, rule, regulation, judgment, order or decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over Wachovia or the Company or any of its or their respective properties, as applicable, except, in the case of clauses (b) and (c) above, where such violation or default could not reasonably be expected, either individually or in the aggregate with all other violations and defaults referred to in this paragraph (if any), to have a material adverse effect on Wachovia or the Company, together with their respective subsidiaries, taken as a whole. To my knowledge, Holding is not in violation or default of any material agreement, indenture or other instrument relating to indebtedness for money borrowed known to me which Holding is a party, except where such violation or default could not be reasonably expected, either individually or in the aggregate with all other violations and defaults referred to herein, to have a material adverse effect on Holding, together with its subsidiaries, taken as a whole.
 
 
(iv)
 
The Underwriting Agreement, the Deposit Agreement and the Assignment Agreement have each been duly authorized, executed and delivered by, and each of the Deposit Agreement and the Assignment Agreement are valid and binding obligations of, each of the applicable Wachovia Parties that is a party thereto, enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles. The execution, delivery and performance of the Underwriting Agreement, the Deposit Agreement and the Assignment Agreement by each of Wachovia and the Company, the issuance and delivery of the Securities by the Company and the Wachovia Securities by Wachovia, and compliance with the provisions hereof and thereof by each of Wachovia and the Company will not constitute a breach of or default under: (a) any provision of their respective articles, certificate, charter or bylaws, as the case may be, (b) any material agreement, indenture or other instrument relating to indebtedness for money borrowed known to me to which Wachovia or the Company is a party, or (c) to my knowledge, any law, order, rule, regulation or decree of any court, governmental agency or authority located in the United States having jurisdiction over Wachovia or the Company or any of their subsidiaries or any property of any Wachovia Party, which breach or default could not reasonably be expected, either individually or in the aggregate, to have a material adverse effect on Wachovia or the Company, together with their respective subsidiaries, taken as a whole. The execution and performance of the Underwriting Agreement and the Assignment Agreement by Holding, and compliance with the provisions thereof by Holding will not constitute a breach of or default under any material agreement, indenture or other instrument relating to indebtedness for money borrowed known to me to which Holding is a party, which breach or default could not reasonably be expected, either individually or in the aggregate, to have a material adverse effect on Holding, together with its subsidiaries, taken as a whole.

A-1


 
 
(v)
 
No regulatory consent, authorizations, approvals or filings are required to be obtained or made by Holding, the Company or Wachovia under the Federal laws of the United States or the laws of the State of North Carolina (a) for the issuance and sale of the Securities, or (b) for the entry by Holding, the Company, and Wachovia into the Underwriting Agreement, the Deposit Agreement or the Assignment Agreement, as the case may be, and the consummation of the transactions contemplated therein, other than such regulatory consents, authorizations or filings as have been made or obtained; provided, however, that for purposes of this paragraph (v), I express no opinion with respect to state securities laws, other antifraud laws or fraudulent transfer laws.
 
 
(vi)
 
The Registration Statement has become effective under the Act and the Prospectus was filed on ·, 2002 pursuant to Rule 424(b) under the Securities Act; to the best of my knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are pending or threatened under the Securities Act; each part of the Registration Statement, when such part became effective (including those documents incorporated by reference), any amendments thereof filed prior to the date hereof, as of their respective effective dates, and the Registration Statement and the Prospectus appeared on their face to be appropriately responsive, in all material respects relevant to the offering of the Securities, to the requirements of the Act and the respective rules and regulations of the Commission thereunder; I have no reason to believe that, insofar as relevant to the offering of the Securities, any part of the Registration Statement, when such part became effective, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or that, as of the date and time of delivery of this letter, the Prospectus contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; the Company’s and Wachovia’s authorized equity capitalization are as set forth in the Prospectus and Registration Statement; and the statements in the Prospectus under the captions “Description of the Series A Preferred Securities”, “Description of Wachovia Depositary Shares”, and “Description of Other Wachovia Funding Capital Stock” constitute a fair summary of the matters therein described. For purposes of this paragraph, I am expressing no opinion as to (a) the financial statements or other financial data contained in any part of the Registration Statement or the Prospectus, (b) any statements or omissions made in reliance upon or in conformity with information furnished in writing to any Wachovia Party by the Representative on behalf of the Underwriters for use therein, (c) any statements, omissions or information relating to the matters set forth under the caption “Federal Income Tax Considerations” or “ERISA Considerations” in the Prospectus, or (d) any statements, omissions or information relating to non-U.S. matters or information contained in the Prospectus.
 
 
(vii)
 
The Securities have been duly authorized and validly issued by the Company and are fully paid and nonassessable; the issuance of the Securities is not subject to preemptive or other similar rights; the Securities are directly owned by Holding free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity; and upon the delivery of and payment for the Securities on the Closing Date in accordance with the Agreement, the Underwriters will acquire valid and unencumbered title to the Securities to be delivered by Holding.
 
 
(viii)
 
The Wachovia Securities have been duly authorized and validly reserved for issuance upon the occurrence of a Conditional Exchange (as defined in the Prospectus), and upon the occurrence of such a Conditional Exchange, may be validly issued, fully paid and non-assessable and will not be issued in violation of the preemptive or other similar rights of any securityholder of Wachovia, and may be freely deposited by Wachovia with the Depositary against issuance of Depositary Receipts evidencing Depositary Shares; and upon issuance by the Depositary of Depositary Receipts evidencing Depositary Shares against the deposit of Wachovia Securities in respect thereof in accordance with the provisions of the Deposit Agreement, such Depositary Receipts will be duly and validly issued and the persons in

A-2


 
whose names the Depositary Receipts are registered will be entitled to the rights specified therein and in the Deposit Agreement.
 
 
(ix)
 
All of the outstanding shares of capital stock of each of the Bank, Holding, the Company and the Company’s subsidiaries, have been duly and validly authorized and issued and are fully paid and nonassessable, and except as otherwise set forth in the Prospectus and the Registration Statement, are owned by the applicable Wachovia Party either directly or through wholly-owned subsidiaries free and clear of any perfected security interest and any other security interest, claim, lien or encumbrance.
 
 
(x)
 
To my knowledge, none of the Wachovia Parties nor the Bank is party to or otherwise the subject of any consent decree, memorandum of understanding, written commitment or other written supervisory agreement with any federal or state bank regulatory authority or agency in the United States charged with their supervision or insurance.

A-3


EXHIBIT B
FORM OF LEGAL OPINION
SULLIVAN & CROMWELL
 
 
 
1.
 
The Company has been duly incorporated and is an existing corporation in good standing under the laws of the State of Delaware.
 
 
2.
 
Wachovia has been duly incorporated and is an existing corporation in good standing under the laws of the State of North Carolina.
 
 
3.
 
Holding has been duly incorporated and is an existing corporation in good standing under the laws of the State of California.
 
 
4.
 
The Series A Preferred Securities have been duly authorized and validly issued and are fully paid and nonassessable.
 
 
5.
 
The Wachovia Preferred Stock initially issuable upon a Conditional Exchange of the Series A Preferred Securities have been duly authorized and reserved for issuance upon such Conditional Exchange and, when issued upon such Conditional Exchange, will be validly issued, fully paid and nonassessable.
 
 
6.
 
The Underwriting Agreement has been duly authorized, executed and delivered by the Company, Wachovia and Holding.
 
 
7.
 
Neither the Company, Wachovia nor Holding is, or after giving effect to the offering and sale of the Series A Preferred Securities will be, an “investment company”, as defined in the Investment Company Act of 1940, as amended.
 
 
8.
 
The Registration Statement, as of its effective date, and the Prospectus, as of the date of the Prospectus, appeared on their face to be appropriately responsive in all material respects to the requirements of the Act and the applicable rules and regulations of the Commission thereunder. Further, nothing that came to such counsel’s attention in the course of its review has caused such counsel to believe that the Registration Statement, as of its effective date, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus, as of the date of the Prospectus, contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The limitations inherent in the independent verification of factual matters and the character of determinations involved in the registration process are such, however, that such counsel does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement or the Prospectus except for those made under the captions “Description of the Series A Preferred Securities”, “Description of Other Wachovia Funding Capital Stock” and “ERISA Considerations” insofar as they relate to provisions of documents therein described. Also, such counsel does not express any opinion or belief as to the financial statements or other financial data contained in the Registration Statement or the Prospectus.
 
In connection with the opinion set forth in paragraph (7) above, such counsel has relied upon a certificate of [Wachovia], acting through its [Executive Vice President], as to the activities and assets of the Company, Wachovia and Holding and certain of their subsidiaries.
 
The foregoing opinion is limited to the Federal laws of the United States, the laws of the State of New York, the General Corporation Law of the State of Delaware and the laws of the State of California, and such counsel is expressing no opinion as to the effect of the laws of any other jurisdiction. With respect to all matters of North Carolina law, such counsel has relied upon the opinion, dated December ·, 2002, of Ross E. Jeffries, Jr., Senior Vice President and Assistant General Counsel of Wachovia, delivered pursuant to Section 6(c) of the Underwriting Agreement, and such counsel’s opinion is subject to the same assumptions, qualifications and limitations with respect to such matters as are contained in such opinion of Mr. Jeffries. Also, such counsel has relied as to certain matters on information obtained from public officials, officers of the Company, Wachovia and

B-1


Holding and other sources believed by it to be responsible, and has assumed that the certificates representing the Series A Preferred Securities and the Wachovia Preferred Stock conform to the specimens thereof examined by it, that the certificates representing the Series A Preferred Securities have been duly countersigned by a transfer agent and duly registered with a registrar of the Series A Preferred Securities, that the certificates representing the Wachovia Preferred Stock will be duly countersigned by a transfer agent and will be duly registered with a registrar of the Wachovia Preferred Stock, and that the signatures on all documents examined by such counsel are genuine, assumptions which such counsel has not independently verified.
 

B-2
EX-3.B 14 dex3b1.htm FORM OF ARTICLES OF AMENDMENT Form of Articles of Amendment
Exhibit 3(b)
 
ARTICLES OF AMENDMENT
OF
WACHOVIA CORPORATION
 
The undersigned corporation hereby submits these Articles of Amendment for the purpose of amending its Articles of Incorporation to fix the preferences, limitations and relative rights of a new series of its class of Class A Preferred Stock:
 
 
1.
 
The name of the corporation is WACHOVIA CORPORATION.
 
 
2.
 
The following text will be added to Article IV of the restated articles of incorporation of the corporation to set forth the terms of the corporation’s Series G, Class A Preferred Stock by adding a new section (F) to such Article:
 
“(F) Series G, Class A Preferred Stock
 
1.    Designation.    The designation of the series of Class A Preferred Stock created by this Section F of Article IV shall be Series G, Class A Preferred Stock, with no par value and with a liquidation preference of $150.00 per share (hereinafter referred to as the “Series G Preferred Stock”), and the number of shares constituting such series shall be 5,000,000, which number may be increased or decreased (but not below the number of shares then outstanding) from time to time by the Board of Directors of the Corporation. The Series G Preferred Stock shall rank prior to the common stock of the Corporation, $3.33 1/3 par value per share (the “Common Stock”), and on a parity with each series of the Corporation’s Parity Stock with respect to the payment of dividends and the distribution of assets in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation as expressly provided for herein.
 
2.    Defined Terms.    As used in this Section F of Article IV, the following terms have the meanings specified below:
 
“Affiliate” of any specified Person shall mean (i) any other Person which, directly or indirectly, is in Control of, is controlled by or is under common Control with such specified Person, or (ii) any other Person who is a director or executive officer (A) of such specified Person, (B) of any subsidiary of such specified Person, or (C) of any Person described in clause (i) above.
 
“Business Day” means any day other than a Saturday, a Sunday or a day on which banks located in the City of New York, New York or Charlotte, North Carolina generally are authorized or required by law or regulation to close.
 
“Class A Preferred Stock” means the Corporation’s class A preferred stock, no par value, of which 40,000,000 shares are authorized as of the date hereof.
 
“Common Stock” shall have the meaning set forth in Section 1 of Section F of Article IV.
 
“Conditional Exchange” shall mean the exchange of one Depositary Share for each share of WPFC Series A Preferred Securities following the occurrence of a Supervisory Event.
 
“Control” means the power, direct or indirect, to direct or cause the direction of the management and policies of any Person whether by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
 
“Corporation” means Wachovia Corporation, a North Carolina corporation, together with its successors and assigns.
 
“Depositary Company” shall have the meaning set forth in Section 5(c) of Section F of Article IV.

1


 
“Depositary Share” means a depositary share representing a one-sixth interest in one share of Series G Preferred Stock.
 
“Dividend Payment” shall have the meaning set forth in Section 3(a) of Section F of Article IV.
 
“Dividend Payment Date” shall have the meaning set forth in Section 3(a) of Section F of Article IV.
 
“Dividend Period” shall have the meaning set forth in Section 3(a) of Section F of Article IV.
 
“Dividend Record Date” shall have the meaning set forth in Section 3(a) of Section F of Article IV.
 
“Federal Reserve Board” means the United States Board of Governors of the Federal Reserve System.
 
“Initial Dividend Period” shall have the meaning set forth in Section 3(a) of Section F of Article IV.
 
“Junior Stock” means the Common Stock and all other classes and series of securities of the Corporation that rank below the Series G Preferred Stock as to dividend rights and rights upon liquidation, winding up, or dissolution.
 
“OCC” means the United States Office of the Comptroller of the Currency.
 
“Parity Stock” means any outstanding class or series of Preferred Stock or Class A Preferred Stock of the Corporation ranking, in accordance to its terms, as to dividends and upon voluntary or involuntary liquidation, dissolution or winding-up of affairs of the Corporation on parity with the Series G Preferred Stock.
 
“Person” means an individual, corporation, partnership, estate, trust (or portion thereof), association, private foundation, joint stock company or other entity or any government or agency or political subdivision thereof and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
 
“Preferred Stock” means the Corporation’s preferred stock, no par value, of which 10,000,000 shares are authorized as of the date hereof.
 
“Redemption Date” shall have the meaning set forth in Section 5(c) of Section F of Article IV.
 
“Redemption Price” shall have the meaning set forth in Section 5(b) of Section F of Article IV.
 
“Regulatory Capital Event” means a determination by the Corporation, based on the receipt by the Corporation of an opinion or letter of counsel, rendered by a law firm experienced in such matters, in form and substance satisfactory to the Corporation, which states that there is a significant risk that the Series G Preferred Stock will no longer constitute Tier 1 capital of the Corporation for purposes of the capital adequacy regulations or guidelines or policies of the OCC or the Federal Reserve Board, or their respective successor or successors as Wachovia Bank or the Corporation’s primary Federal banking regulators, respectively, as a result of (i) any amendment to, clarification of, or change in applicable laws or related regulations, guidelines, policies or official interpretations thereof, or (ii) any official administrative pronouncement or judicial decision interpreting or applying such laws or related regulations, guidelines, policies or official interpretations thereof.
 
“Series G Preferred Stock” shall have the meaning set forth in Section 1 of Section F of Article IV.
 
“Supervisory Event” means the occurrence of one of the following: (i) Wachovia Bank becomes “undercapitalized” under the OCC’s prompt corrective action regulations, (ii) Wachovia Bank is placed into conservatorship or receivership, or (iii) the OCC, in its sole discretion, anticipates Wachovia Bank becoming “undercapitalized” in the near term or takes supervisory action that limits the payment of dividends by WPFC and in connection therewith directs an exchange of the WPFC Series A Preferred Securities for the Series G Preferred Stock.
 
“Wachovia Bank” means Wachovia Bank, National Association, a national banking association, together with its successors and assigns.

2


 
“WPFC” means Wachovia Preferred Funding Corp., a Delaware corporation.
 
“WPFC Series A Preferred Securities” means the ·% Non-cumulative Series A Preferred Securities, par value $0.01, liquidation preference $25.00 per share, of WPFC.
 
3.    Dividends.    (a)    The dividend rate for the Series G Preferred Stock shall be ·% per share per annum of the initial liquidation preference of $150.00 per share, accruing from the effective date of the Conditional Exchange to and including the last day of March, the last day of June, the last day of September or the last day of December, whichever occurs first, after issuance of the Series G Preferred Stock following the Conditional Exchange (such period being the “Initial Dividend Period”) and then for each quarterly period thereafter, commencing on April 1, July 1, October 1 or January 1, as the case may be, of each year and ending on and including the day next preceding the first day of the next such quarterly period (each such period, including the Initial Dividend Period, being a “Dividend Period”), payable to holders of record of the Series G Preferred Stock on the respective record dates fixed for such purpose by the Board of Directors in advance of payment of such dividend, which shall be the 15th calendar day of the last calendar month of the applicable Dividend Period (each such date, a “Dividend Record Date”). If such Dividend Record Date is not a Business Day, then the Dividend Record Date for the applicable Dividend Period shall be the first Business Day immediately following the 15th calendar day of the last calendar month of the applicable Dividend Period, except if such Business Day falls in the calendar month following the last calendar month of the applicable Dividend Period, the Dividend Record Date shall be the last Business Date immediately preceding the 15th calendar day of the last calendar month of the applicable Dividend Period. Until no longer outstanding, the holders of the Series G Preferred Stock shall be entitled to receive such cash dividends, and the Corporation shall be bound to pay the same, but only as, if and when declared by the Board of Directors, out of funds legally available for the payment thereof (each such payment, a “Dividend Payment”), on March 31, June 30, September 30 and December 31 of each year (each a “Dividend Payment Date”) for the respective Dividend Period ending on such date; provided, however, that the Dividend Payment for the Initial Dividend Period shall include any unpaid dividends accrued from the payment date of the last dividend paid prior to such date on the WPFC Series A Preferred Securities. If a Dividend Payment Date is not a Business Day, the Dividend Payment due on such Dividend Payment Date shall be paid on the first Business Day immediately following such Dividend Payment Date, except if such Business Day falls in a different calendar year than such Dividend Payment Date, such Dividend Payment shall be paid on the last Business Date immediately preceding such Dividend Payment Date. The amount of dividends payable for the Initial Dividend Period or any period shorter than a full Dividend Period shall be computed on the basis of a 360-day year having 30-day months and the actual number of days elapsed in the period.
 
(b)    Dividends shall be non-cumulative. If the Board of Directors fails to or chooses not to declare a dividend on the Series G Preferred Stock for a Dividend Period, then holders of the Series G Preferred Stock shall have no right to receive a dividend for that Dividend Period, and the Corporation shall have no obligation to pay a dividend for that Dividend Period, whether or not dividends are declared and paid for any future Dividend Period, with respect to either the Series G Preferred Stock, other series of preferred stock of the Corporation, or the Common Stock.
 
(c)    Holders of Series G Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full dividends for each Dividend Period, as herein provided, on the Series G Preferred Stock. No interest, or sum of money in lieu of interest, shall be payable in respect of any Dividend Payment or Dividend Payments or failure to make any Dividend Payment or Dividend Payments.
 
(d)    Unless full dividend payments on the Series G Preferred Stock have been declared and paid or declared and a sum sufficient for such payment has been set apart for payment for the immediately preceding Dividend Period, no dividends shall be declared or paid or set aside for payment and no other distribution shall be declared or made or set aside for payment upon any shares of Junior Stock, nor shall shares of Junior Stock be redeemed, purchased, or otherwise acquired for any consideration, nor shall any monies be paid to or made available for a sinking fund for the redemption of any such securities by the Corporation, except by conversion into or exchange for other Junior Stock.

3


 
4.    Liquidation Preference.    (a)    The amount payable on the Series G Preferred Stock in the event of any voluntary or involuntary liquidation, dissolution, or winding-up of affairs of the Corporation shall be $150.00 per share, plus authorized, declared but unpaid dividends up to the date of such liquidation, dissolution, or winding-up of affairs of the Corporation, and no more before any distribution shall be made to the holders of any shares of Junior Stock. The holders of Series G Preferred Stock shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution, or winding-up of affairs of the Corporation other than what is expressly provided for in this Section 4(a).
 
(b)    If the amounts available for distribution in respect of the Series G Preferred Stock and any Parity Stock are not sufficient to satisfy the full liquidation rights of all of the outstanding Series G Preferred Stock and any Parity Stock, then the holders of the Series G Preferred Stock and any Parity Stock shall share ratably in any such distribution of assets in proportion to the full respective liquidation preference to which they are entitled.
 
(c)    The sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Corporation shall not be deemed a dissolution, liquidation or winding up of the Corporation, nor shall the merger, consolidation or any other business combination transaction of the Corporation into or with any other corporation or Person or the merger, consolidation or any other business combination transaction of any other corporation or Person into or with the Corporation be deemed to be a dissolution, liquidation or winding up of the Corporation.
 
5.    Redemption.    (a)    The Series G Preferred Stock shall not be redeemable by the Corporation prior to ·, 2022, except upon the occurrence of a Regulatory Capital Event.
 
(b)    Prior to ·, 2022, upon the occurrence of a Regulatory Capital Event and with the prior approval of the OCC, the Corporation, at the option of the Board of Directors, may redeem the outstanding Series G Preferred Stock, in whole, but not in part, at a price equal to $150.00 per share of Series G Preferred Stock, plus authorized, declared but unpaid dividends to the Redemption Date, without interest, on shares redeemed (collectively, the “Redemption Price”) from funds legally available for such purpose. On or after ·, 2022, the Corporation may redeem the Series G Preferred Stock for cash, with the prior approval of the OCC, in whole or in part, at any time and from time to time for the Redemption Price from funds legally available for such purpose. In the event the Corporation redeems fewer than all the outstanding Series A Preferred Securities, the shares to be redeemed shall be determined by lot, pro rata, or by such other method as the Board of Directors in its sole discretion determines.
 
(c)    Not more than 60 days and not less than 30 days prior to the date established for such redemption by the Board of Directors (the “Redemption Date”), notice of the proposed redemption shall be mailed to the holders of record of the Series G Preferred Stock to be redeemed, such notice to be addressed to each such stockholder at his last known address shown on the records of the Corporation, and the time of mailing such notice shall be deemed to be the time of the giving thereof. On or after the Redemption Date, the Series G Preferred Stock called for redemption shall automatically, and without further action on the part of the holder thereof, be deemed to have been redeemed and the former holder thereof shall thereupon only be entitled to receive payment of the Redemption Price. If such notice of redemption shall have been given as aforesaid, and if on or before the Redemption Date the funds necessary for the redemption shall have been set aside so as to be available therefore, then the dividends thereon shall cease to accrue after the Redemption Date and all rights with respect to the Series G Preferred Stock so called for redemption shall forthwith after such Redemption Date cease, except the right of the holders to receive the Redemption Price, without interest. If such notice of redemption of all or any part of the Series G Preferred Stock shall have been mailed as aforesaid and the Corporation shall thereafter deposit money for the payment of the Redemption Price pursuant thereto with any bank or trust company (the “Depositary Company”), including any Affiliate of the Corporation, selected by the Board of Directors for that purpose, to be applied to such redemption, then from and after the making of such deposit, such Series G Preferred Stock shall not be deemed to be outstanding for any purpose, and the rights of the holders thereof shall be limited to the rights to receive payment of the Redemption Price, without interest but including any declared, authorized, but

4


unpaid, dividends to the Redemption Date, from the Depositary Company, if applicable, upon endorsement, if required, and surrender of the certificates therefore. The Corporation shall be entitled to receive, from time to time, from the Depositary Company, the interest, if any, allowed on such moneys deposited with it, and the holders of any Series G Preferred Stock so redeemed shall have no claim to any such interest. Any moneys so deposited and remaining unclaimed at the end of three years from the Redemption Date shall, if thereafter requested by resolution of the Board of Directors, be repaid to the Corporation, and in the event of such repayment to the Corporation, such holders of record of the Series G Preferred Stock so redeemed which shall not have made claim against such moneys prior to such repayment to the Corporation shall be deemed to be unsecured creditors of the Corporation for an amount equivalent to the amount deposited as stated above for the redemption of the Series G Preferred Stock and so repaid to the Corporation, but shall in no event be entitled to any interest.
 
(d)    Subject to the provisions herein, the Board of Directors shall have authority to prescribe from time to time the manner in which the Series G Preferred Stock shall be redeemed.
 
(e)    Nothing contained herein shall limit any legal right of the Corporation to purchase any shares of the Series G Preferred Stock.
 
6.    Conversion.    The holders of the Series G Preferred Stock shall not have any rights to convert such Series G Preferred Stock into shares of any other class of capital stock of the Corporation.
 
7.    Rank.    Notwithstanding anything set forth in the Articles of Incorporation of the Corporation or these Articles of Amendment to the contrary, the Board of Directors, without the vote of the holders of the Series G Preferred Stock, may authorize and issue additional shares of Junior Stock, Parity Stock or any class or series of stock ranking senior to Series G Preferred Stock as to dividends and upon voluntary or involuntary liquidation, dissolution or winding-up of affairs of the Corporation.
 
8.    Repurchase.    Subject to the limitations imposed herein, the Corporation may purchase and sell Series G Preferred Stock from time to time to such extent, in such manner, and upon such terms as the Board of Directors may determine; provided however, that the Corporation shall not use any of its funds for any such purchase when there are reasonable grounds to believe that the Corporation is, or by such purchase would be, rendered insolvent.
 
9.    Voting Rights.    The holders of Series G Preferred Stock will have no voting rights except as expressly provided by applicable law.
 
10.    Unissued or Reacquired Shares.    Shares of Series G Preferred Stock not issued or which have been issued and converted, redeemed or otherwise purchased or acquired by the Corporation shall be restored to the status of authorized but unissued shares of Class A Preferred Stock without designation as to series.
 
11.    No Sinking Fund.    Shares of Series G Preferred Stock are not subject to the operation of a sinking fund.”
 
12.    The amendments to the articles of incorporation contained herein do not require shareholder approval pursuant to Section 55-6-02 of the North Carolina Business Corporation Act, and the amendments to the articles of incorporation were duly adopted by the board of directors on August 20, 2002.
 
This the · day of November, 2002.
 
WACHOVIA CORPORATION
By:
 
 

Name:
Title:
 
Ross E. Jeffries, Jr.
Senior Vice President

5
EX-4.A 15 dex4a.htm SPECIMEN OF CERT. SERIES G, CLASS A PRF. STOCK Specimen of Cert. Series G, Class A Prf. Stock
Exhibit 4(a)
 
Number:             
  
                         Shares
    
SEE REVERSE FOR
    
IMPORTANT NOTICE
    
ON TRANSFER RESTRICTIONS
    
AND OTHER INFORMATION
    
CUSIP                     
 
WACHOVIA CORPORATION
a Corporation Organized Under the Laws of the State of North Carolina
 
THIS CERTIFIES THAT                                          **Specimen**                                     
 
is the owner of                                                       fully paid and non-assessable shares of Series G, Class A Preferred Stock, no par value and a liquidation preference of $150.00 per share, of
 
Wachovia Corporation
 
(the “Corporation”) transferable on the books of the Corporation by the holder hereof in person or by its duly authorized attorney, upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Articles of Incorporation and the By-laws of the Corporation and any amendments thereto. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar.
 
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed on its behalf by its duly authorized officers.
 
DATED                             ,             
 
Countersigned and Registered:
        
                    Transfer Agent
                    and Registrar
 
(SEAL)

  
 

                    President                     
By:                                                    
      
 

Secretary
 


 
IMPORTANT NOTICE
 
The Corporation will furnish to any shareholder, on request, without charge and in writing, a full statement of the powers, designations and any preferences, conversion and other rights, restrictions, limitations as to dividends and other distributions, qualifications, and terms and conditions of redemption of the stock of each class which the Corporation has authority to issue and, if the Corporation is authorized to issue any preferred or special class in series, (i) the differences in the relative rights and preferences between the shares of each series to the extent set, and (ii) the authority of the Board of Directors to set such rights and preferences of subsequent series. The foregoing summary does not purport to be complete and is subject to and qualified in its entirety by reference to the Articles of Incorporation of the Corporation, as amended from time to time, a copy of which will be sent without charge to each shareholder who so requests. Such request must be made to the Secretary of the Corporation at its principal office or to the Transfer Agent.
 
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN
OR DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY
AS A CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE.


 
The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
 
TEN COM — as tenants in common
TEN ENT  — as tenants by the entireties
JT TEN     — as joint tenants with right of survivorship and not as tenants in common
 
UNIF GIFT MIN ACT —                                  Custodian                                  
                                            (Custodian)                                  (Minor)
 
                                             under Uniform Gifts to Minors Act                                  
                                                                                                                   (State)
 
Additional abbreviations by also be used though not in the above list.
 
FOR VALUE RECEIVED,                                  hereby sell, assign and transfer unto
 

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
 

(PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE)
 
                                              (                                ) shares represented by this Certificate and do hereby irrevocably constitute and appoint                                               Attorney to transfer the said shares on the books of the Corporation, with full power of substitution in the premises.
 
Dated:                                                                  
  
 

In presence of:                                                      
  
NOTICE: The signature to this assignment must correspond with the name as written upon the face of the certificate in every particular, without alteration or enlargement or any change whatever.
EX-4.C 16 dex4c.htm FORM OF DEPOSIT AGREEMENT Form of Deposit Agreement
Exhibit 4(c)
 
WACHOVIA CORPORATION,
 
WACHOVIA BANK, NATIONAL ASSOCIATION,
AS DEPOSITARY,
 
AND
 
THE HOLDERS FROM TIME TO TIME OF
THE RECEIPTS EVIDENCING THE DEPOSITARY SHARES
DESCRIBED HEREIN.
 

 
DEPOSIT AGREEMENT
 

 
Dated as of November ·, 2002
 


DEPOSIT AGREEMENT
dated as of November ·, 2002
 
among
 
WACHOVIA CORPORATION,
a North Carolina corporation,
 
WACHOVIA BANK, NATIONAL ASSOCIATION,
a national banking association, as Depositary,
 
AND THE HOLDERS FROM TIME TO TIME OF
THE RECEIPTS EVIDENCING THE DEPOSITARY SHARES
DESCRIBED HEREIN
 
WHEREAS, it is desired to provide, as hereinafter set forth in this Deposit Agreement, for the deposit of shares of Series G, Class A Preferred Stock, liquidation preference $150.00 per share, of the Company with the Depositary for the purposes set forth in this Deposit Agreement and for the issuance hereunder of Receipts by the Depositary evidencing Depositary Shares in respect of the Stock so deposited (capitalized terms used herein shall have the meaning assigned to them in Article I below).
 
NOW, THEREFORE, in consideration of the promises contained herein and such other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows:
 
ARTICLE I
 
DEFINITIONS
 
The following definitions shall for all purposes, unless otherwise indicated, apply to the respective terms used in this Deposit Agreement and the Receipts:
 
“Amendment” shall mean the articles of amendment to the Articles of Incorporation, as amended, of the Company filed with the Secretary of State of the State of North Carolina establishing the Stock as a series of preferred stock of the Company.
 
“Company” shall mean Wachovia Corporation, a North Carolina corporation, and its successors.
 
“Deposit Agreement” shall mean this Deposit Agreement, as amended or supplemented from time to time in accordance with the terms hereof.
 
“Depositary” shall mean Wachovia Bank, National Association, a national banking association, and any successor Depositary hereunder.
 
“Depositary Shares” shall mean the Depositary Shares, each representing a one-sixth (1/6th) interest in one share of Stock, which shall be evidenced by Receipts.
 
“Depositary’s Agent” shall mean an agent appointed by the Depositary pursuant to Section 7.05 of this Deposit Agreement.
 
“Depositary’s Office” shall mean the principal office of the Depositary at which at any particular time its depositary business shall be administered.
 
“NASD” shall have the meaning assigned to it in Section 2.06 of this Deposit Agreement.


 
“Receipt” shall mean one of the depositary receipts, whether in definitive or temporary form, issued hereunder by the Depositary, each representing any number of whole Depositary Shares.
 
“record holder” with respect to a Receipt shall mean the individual, entity or person in whose name a Receipt is registered on the books of the Depositary or any register of any Registrar maintained for such purpose at a given time.
 
“Redemption Date” shall have the meaning assigned to it in Section 2.03 of this Deposit Agreement.
 
“Registrar” shall mean any bank or trust company that shall be appointed by the Depositary to register ownership and transfers of Receipts as herein provided and which may include the Depositary.
 
“Securities Act” shall mean the Securities Act of 1933, as amended.
 
“Stock” shall mean the Company’s Series G, Class A Preferred Stock, no par value and a liquidation preference of $150.00 per share.
 
ARTICLE II
 
FORM OF RECEIPTS; DEPOSIT OF STOCK; EXECUTION AND DELIVERY,
TRANSFER, SURRENDER AND REDEMPTION OF RECEIPTS
 
Section 2.01.    Form and Transfer of Receipts.    The beneficial owners of Depositary Shares shall be entitled to receive Receipts in physical, certificated form as herein provided.
 
Definitive Receipts shall be engraved or printed or lithographed on steel-engraved borders and shall be substantially in the form annexed hereto as Exhibit A, with appropriate insertions, modifications and omissions, as hereinafter provided. Pending the preparation of definitive Receipts, the Depositary, upon the written order of the Company delivered in compliance with Section 2.02, shall execute and deliver temporary Receipts which shall be printed, lithographed, typewritten, mimeographed or otherwise substantially of the tenor of the definitive Receipts in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the persons executing such Receipts may determine, as evidenced by their execution of such Receipts. After the preparation of definitive Receipts, the temporary Receipts shall be exchangeable for definitive Receipts upon surrender of the temporary Receipts at the Depositary’s Office, without charge to the holders. Upon surrender for cancellation of any one or more temporary Receipts, the Depositary shall execute and deliver in exchange therefor definitive Receipts representing the same number of Depositary Shares as represented by the surrendered temporary Receipt or Receipts registered in the name (and only the name) of the holder of the temporary Receipt. Such exchange shall be made at the Company’s expense and without any charge therefor to the holder. Until so exchanged, the temporary Receipts shall in all respects be entitled to the same benefits under this Deposit Agreement and with respect to the Stock, as definitive Receipts.
 
Receipts shall be executed by the Depositary by the manual signature of a duly authorized officer of the Depositary; provided, that such signature may be a facsimile if a Registrar for the Receipts (other than the Depositary) shall have been appointed and such Receipts are countersigned by manual signature of a duly authorized officer of the Registrar. No Receipt shall be entitled to any benefits under this Deposit Agreement or be valid or obligatory for any purpose unless it shall have been (i) executed manually by a duly authorized officer of the Depositary or (ii) executed by manual or facsimile signature of a duly authorized officer of the Depositary and countersigned manually by a duly authorized officer of a Registrar for the Receipts (other than the Depositary, if any). The Depositary shall record on its books each Receipt so signed and delivered as hereinafter provided. The manual or facsimile signatures on the Receipts of individuals who were at any time proper officers

2


of the Depositary or the Registrar, as the case may be, shall constitute adequate signatures hereunder, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the delivery of such Receipts or did not hold such offices on the date of delivery of such Receipts.
 
Receipts shall be in denominations of any number of whole Depositary Shares.
 
Receipts may be endorsed with or have incorporated in the text thereof such legends or recitals or changes not inconsistent with the provisions of this Deposit Agreement as may be required by the Depositary and approved by the Company or required to comply with any applicable law or regulation or with the rules and regulations of any securities exchange upon which shares of Stock, the Depositary Shares or the Receipts may be listed or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Receipts are subject.
 
Subject to any limitations set forth in a Receipt or in this Deposit Agreement, title to Depositary Shares evidenced by a Receipt which is properly endorsed, or accompanied by a properly executed instrument of transfer, shall be transferable by delivery of such Receipt with the same effect as if such Receipt were a negotiable instrument; provided, however, that until transfer of a Receipt shall be registered on the books of the Registrar, on behalf of the Depositary, as provided in Section 2.04, the Depositary may, notwithstanding any notice to the contrary, treat the record holder as the absolute owner thereof for the purpose of determining the person entitled to distributions of dividends or other distributions with respect to the Stock or to any notice provided for in this Deposit Agreement and for all other purposes.
 
The Depositary shall not lend any shares of Stock deposited hereunder.
 
Section 2.02.    Deposit of Stock; Execution and Delivery of Receipts in Respect Thereof.    Subject to the terms and conditions of this Deposit Agreement, the Company may from time to time deposit shares of Stock with the Depositary under this Deposit Agreement by delivery to the Depositary of a certificate or certificates representing the shares of Stock to be deposited. Such certificate or certificates representing the shares of Stock shall be (i) properly endorsed or, if required by the Depositary, accompanied by a duly executed instrument of transfer or endorsement, in form satisfactory to the Depositary, together with all such certifications as may be required by the Depositary in accordance with the provisions of this Deposit Agreement, and (ii) accompanied by a written order of the Company directing the Depositary to execute and deliver to the person or persons named in such order a Receipt or Receipts evidencing in the aggregate the number of Depositary Shares representing interests in such deposited shares of Stock.
 
All shares of Stock deposited by the Company with the Depositary shall be held by the Depositary at the Depositary’s Office or at such other place or places as the Depositary shall determine.
 
Upon receipt by the Depositary of a certificate or certificates representing shares of Stock deposited with the Depositary by the Company in accordance with the provisions of this Section 2.02, together with the other documents required as above specified, and upon recordation of the shares of Stock so deposited on the books of the Company in the name of the Depositary, the Depositary shall execute and deliver, to the person or persons named in the written order delivered to the Depositary, a Receipt or Receipts, evidencing in the aggregate the number of Depositary Shares representing interests in the shares of Stock so deposited. Such Receipt or Receipts shall be registered by the Depositary or the Registrar in such name or names as may be requested by the person or persons named in the written order. The Depositary shall execute and deliver such Receipts at the Depositary’s Office or such other offices, if any, as such person may designate. Delivery at other offices shall be at the risk and expense of the person requesting such delivery.
 
Other than in the case of splits, combinations or other reclassifications affecting the Stock, or in the case of dividends or other distributions in the form of shares of Stock, if any, there shall be deposited with the Depositary hereunder not more than [5,000,000] shares of Stock.

3


 
Section 2.03.    Redemption of Stock.    Whenever the Company shall elect to redeem shares of Stock in accordance with the provisions of the Amendment, it shall (unless otherwise agreed in writing with the Depositary) mail notice to the Depositary of such redemption, by first class mail, postage prepaid, not less than 40 nor more than 70 days prior to the date fixed for the redemption of the shares of Stock in accordance with the provisions of the Amendment. On the date of such redemption, provided that the Company shall then have paid in full to the Depositary the redemption price required pursuant to the Amendment and sufficient to redeem the shares of Stock to be redeemed, the Depositary shall redeem the Depositary Shares representing interests in such shares of Stock. The Depositary shall mail notice of such redemption, and the simultaneous redemption of the number of Depositary Shares representing interests in the shares of Stock to be redeemed, by first-class mail, postage prepaid, not less than 30 and not more than 60 days prior to the date fixed for redemption of such shares of Stock and Depositary Shares (the “Redemption Date”), to the record holders of the Receipts evidencing the Depositary Shares to be so redeemed on the record date fixed pursuant to Section 4.04 hereof, at the addresses of such holders as they appear on the records of the Depositary; provided, however, that neither failure to mail any such notice to one or more such holders nor any defect in any notice or in the mailing thereof to one or more such holders shall affect the validity of the proceedings for redemption of any Depositary Shares as to other holders. Each such notice of redemption shall state: (i) the Redemption Date; (ii) the number of Depositary Shares to be redeemed and, if less than all the Depositary Shares held by any such holder are to be redeemed, the number of such Depositary Shares held by such holder to be so redeemed and the method by which the Depositary Shares will be chosen for redemption; (iii) the redemption price (including any authorized, declared, but unpaid dividends on the Redemption Date); (iv) the place or places where Receipts evidencing Depositary Shares are to be surrendered for payment of the redemption price; (v) that dividends in respect of the shares of Stock to be redeemed, which are represented by the Depositary Shares to be redeemed, will cease to accrue at the close of business on such Redemption Date; and (vi) if the date from and after which the shares of Stock and Depositary Shares shall no longer be deemed to be outstanding is a date other than the Redemption Date, such other date. In case less than all the outstanding Depositary Shares are to be redeemed, the Depositary Shares to be so redeemed shall be selected by lot or pro rata as may be determined by the Company.
 
Notice having been mailed by the Depositary as aforesaid, from and after (a) the Redemption Date (unless the Company shall have failed to redeem the shares of Stock to be redeemed by it as set forth in the Company’s notice provided for in the preceding paragraph), or (b) such earlier date (if applicable) upon which the Company deposits the redemption price (including any authorized, declared, but unpaid dividends on the Redemption Date) with the paying agent for the holders of the shares of Stock (regardless of whether such shares are actually surrendered for cancellation), all dividends in respect of the shares of Stock so called for redemption shall cease to accrue, the Depositary Shares being redeemed from such proceeds shall be deemed no longer to be outstanding, all rights of the holders of Receipts evidencing such Depositary Shares (except the right to receive the redemption price) shall, to the extent of such Depositary Shares, cease and terminate and, upon surrender in accordance with such notice of the Receipts evidencing any such Depositary Shares called for redemption (properly endorsed or assigned for transfer, if the Depositary shall so require), such Depositary Shares shall be redeemed by the Depositary at a redemption price per Depositary Share equal to 1/6th of the redemption price per share paid in respect of the shares of Stock plus authorized, declared, but unpaid dividends on the Redemption Date.
 
If less than all the Depositary Shares evidenced by a Receipt are called for redemption, the Depositary will deliver to the holder of such Receipt upon its surrender to the Depositary, together with the payment of the redemption price, a new Receipt evidencing such number of Depositary Shares as were evidenced by such prior Receipt and not called for redemption; provided, however, that such replacement Receipt shall be issued only in denominations of whole Depositary Shares and cash will be payable in respect of fractional interests.
 
Section 2.04.    Registration of Transfer of Receipts.    Subject to the terms and conditions of this Deposit Agreement, the Registrar, on behalf of the Depositary, shall register on its books transfers of Receipts from time to time upon notice to the Registrar by the Depositary of the surrender of a Receipt for transfer by the holder in person or by duly authorized attorney, which Receipt in each case must be properly endorsed or accompanied by

4


a properly executed instrument of transfer. Upon surrender of a properly endorsed Receipt or Receipt accompanied by an instrument of transfer, the Depositary shall execute a new Receipt or Receipts evidencing the same aggregate number of Depositary Shares as those evidenced by the Receipt or Receipts surrendered and deliver such new Receipt or Receipts to or upon the order of the transferee named in the endorsement or instrument of transfer.
 
Section 2.05.    Split-Ups and Combinations of Receipts; Surrender of Receipts.    Upon surrender of a Receipt or Receipts at the Depositary’s Office or at such other offices as it may designate for the purpose of effecting a split-up or combination of such Receipt or Receipts, the Depositary shall execute and deliver a new Receipt or Receipts to the holder thereof or to such holder’s order in the denominations requested, evidencing the aggregate number of Depositary Shares evidenced by the Receipt or Receipts surrendered. The Depositary shall give prompt notice of such action and the certificate numbers to the Registrar for the purpose of recording such split-up or consolidation.
 
Section 2.06.    Limitations on Execution and Delivery, Transfer, Surrender and Exchange of Receipts.    As a condition precedent to the execution and delivery, registration of transfer, split-up, combination, surrender or exchange of any Receipt, the Depositary, any of the Depositary’s Agents or the Company may require (i) payment to it of a sum sufficient for the payment (or, in the event that the Depositary or the Company shall have made such payment, the reimbursement to it) of any charges or expenses payable by the holder of a Receipt pursuant to Section 5.07, (ii) the production of evidence satisfactory to it as to the identity and genuineness of any signature and/or (iii) compliance with the rules and regulations of any governmental body, any stock exchange or any applicable self regulatory body, including without limitation, the National Association of Securities Dealers, Inc. (the “NASD”) or such other regulations, if any, as the Depositary or the Company may establish consistent with the provisions of this Deposit Agreement.
 
The delivery of Receipts against the shares of Stock deposited with the Depositary may be suspended, the registration of transfer of Receipts may be refused and the registration of transfer, surrender or exchange of outstanding Receipts may be suspended (i) during any period when the register of stockholders of the Company is closed or (ii) if any such action is deemed necessary by the Depositary, any of the Depositary’s Agents or the Company at any time or from time to time because of any requirement of law or of any government, governmental body or commission, stock exchange or the NASD or under any provision of this Deposit Agreement.
 
Section 2.07.    Lost Receipts, Etc.    If any mutilated Receipt is surrendered to the Depositary, the Depositary shall execute and deliver in exchange therefor a new Receipt of like form and tenor in exchange and substitution for such mutilated Receipt. In case any Receipt shall be destroyed, lost or stolen, then, in the absence of notice to the Depositary that such Receipt has been acquired by a bona fide purchaser, the Depositary shall execute and deliver a Receipt to the holder thereof of like form and tenor in exchange and substitution for such destroyed, lost or stolen Receipt, upon (i) the filing by the holder thereof with the Depositary of evidence satisfactory to the Depositary and the Company of such destruction or loss or theft of such Receipt, of the authenticity thereof and of such holder’s ownership thereof and (ii) the holder’s furnishing the Depositary with indemnification satisfactory to such Depositary and the Company.
 
Section 2.08.    Cancellation and Destruction of Surrendered Receipts.    All Receipts surrendered to the Depositary or any Depositary’s Agent shall be canceled by the Depositary. Except as prohibited by applicable law or regulation, the Depositary is authorized to destroy all Receipts so canceled.
 
Section 2.09.    Stock Purchase Plans.    The Depositary shall take such action as shall be necessary or appropriate to permit the record holders of Receipts to participate in any dividend reinvestment or other stock purchase plan sponsored by the Company that permits the participation by such holders on such terms and conditions as the Company may determine.

5


 
ARTICLE III
 
CERTAIN OBLIGATIONS OF THE HOLDERS
OF RECEIPTS AND THE COMPANY
 
Section 3.01.    Filing Proofs, Certificates and Other Information.    Any holder of a Receipt may be required from time to time to file such proof of residence, or other matters or other information, to obtain such guaranties of signature, to execute such certificates and to make such customary representations and warranties consistent with the terms of the Stock as the Depositary or the Company may deem necessary or proper. The Depositary or the Company may withhold the delivery, or delay the registration of transfer, redemption or exchange, of any Receipt or the distribution of any dividend or other distribution or the sale of any rights or of the proceeds thereof until such proof or other information is filed or such certificates are executed or such representations and warranties are made.
 
Section 3.02.    Payment of Taxes or Other Governmental Charges.    Holders of Receipts shall be obligated to make payments to the Depositary of certain charges and expenses as provided in Section 5.07, or provide evidence satisfactory to the Depositary that such charges and expenses have been paid. Registration of transfer of any Receipt and delivery of all money or other property, if any, represented by the Depositary Shares evidenced by such Receipt may be refused until any such payment due is made, and any dividends, interest payments or other distributions may be withheld or all or any part of the shares of Stock or other property represented by the Depositary Shares evidenced by such Receipt and not theretofore sold may be sold for the account of the holder thereof (after attempting by reasonable means to notify such holder prior to such sale), and such dividends, interest payments or other distributions or the proceeds of any such sale may be applied to any payment of such charges or expenses, the holder of such Receipt remaining liable for any deficiency.
 
Section 3.03.    Warranty as to Stock.    The Company hereby represents and warrants to the Depositary that the Stock, when issued, will be validly issued, fully paid and nonassessable. Such representation and warranty shall survive the deposit of shares of Stock and the issuance of Receipts.
 
Section 3.04.    Warranty as to Receipts.    The Depositary hereby represents and warrants that the Receipts, when issued, will be legal, valid and binding obligations of the Depositary, enforceable against the Depositary in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium and other laws affecting creditors’ rights generally and by general equity principles. Such representation and warranty shall survive the deposit of shares of Stock and the issuance of the Receipts.
 
ARTICLE IV
 
THE DEPOSITED SECURITIES; NOTICES
 
Section 4.01.    Cash Distributions.    Whenever the Depositary shall receive any cash dividend or other cash distribution with respect to the Stock, the Depositary shall, subject to Section 3.02, distribute to record holders of Receipts on the record date fixed pursuant to Section 4.04 the pro rata portion, as nearly as practicable, of such dividend or distribution applicable to the number of Depositary Shares evidenced by the Receipts held by such holders; provided, however, that in case the Company or the Depositary shall be required to withhold and shall withhold any monies from any cash dividend or other cash distribution in respect of the Stock on account of taxes, the distribution in respect of Depositary Shares shall be reduced accordingly. The Depositary shall distribute or make available for distribution, as the case may be, only such amount, however, as can be distributed without attributing to any holder of a Receipt a fraction of one cent, and any balance not so distributable shall be held by the Depositary (without liability for interest thereon) and shall be added to and be treated as part of the next succeeding distribution to record holders of Receipts.

6


 
Section 4.02.    Distributions Other Than Cash.    Whenever the Depositary shall receive any property (including securities) for distribution in a form other than cash with respect to the Stock, the Depositary shall, subject to Section 3.02, distribute to record holders of Receipts on the record date fixed pursuant to Section 4.04 the pro rata portion, as nearly as practicable, of such property (including securities) received by it applicable to the number of Depositary Shares evidenced by the Receipts held by such holders, in any manner that the Depositary may deem equitable and practicable for accomplishing such distribution. If in the opinion of the Depositary such distribution cannot be made proportionately among such record holders, or if for any other reason (including any requirement that the Company or the Depositary withhold an amount on account of taxes) the Depositary deems, after consultation with the Company, such distribution not to be feasible, the Depositary may, with the approval of the Company, adopt such method as it deems equitable and practicable for the purpose of effecting such distribution, including the sale of the property thus received, or any part thereof. The net proceeds of any such sale shall, subject to Section 3.02, be distributed or made available for distribution, as the case may be, by the Depositary to record holders of Receipts in accordance with the provisions of Section 4.01 for a distribution received in cash. The Depositary shall have the right, prior to making any distribution of such securities, to require the Company to provide an opinion of counsel stating that such securities have been registered under the Securities Act or do not need to be so registered.
 
Section 4.03.    Subscription Rights, Preferences or Privileges.    If the Company shall at any time offer or cause to be offered to the persons in whose names the shares of Stock are recorded on the books of the Company any rights, preferences or privileges to subscribe for or to purchase any securities or any rights, preferences or privileges of any other nature, such rights, preferences or privileges shall in each such instance be made available by the Depositary to the record holders of Receipts, pro rata in proportion to the number of the shares of Stock represented by each such Receipt, in such manner as the Depositary may determine, either by the issue to such record holders of warrants representing such rights, preferences or privileges or by such other method as may be approved by the Depositary in its discretion with the approval of the Company; provided, however, that (i) if at the time of issue or offer of any such rights, preferences or privileges the Depositary determines that it is not lawful or (after consultation with the Company) not feasible to make such rights, preferences or privileges available to holders of Receipts by the issue of warrants or otherwise, or (ii) if instructed by holders of Receipts (and to the extent so instructed by such holders) who do not desire to exercise such rights, preferences or privileges, then the Depositary, in its discretion (with the approval of the Company, in any case where the Depositary has determined that it is not feasible to make such rights, preferences or privileges available), may, if applicable laws or the terms of such rights, preferences or privileges permit such transfer, sell such rights, preferences or privileges at public or private sale, at such place or places and upon such terms as it may deem proper. The net proceeds of any such sales shall be distributed by the Depositary to the record holders of Receipts entitled thereto as provided by Section 4.01 in the case of a distribution received in cash. The Depositary shall have the right, prior to making any distribution of such rights, preferences or privileges, to require the Company to provide an opinion of counsel stating that such rights, preferences or privileges have been registered under the Securities Act or do not need to be so registered.
 
If registration under the Securities Act of the securities to which any rights, preferences or privileges relate is required in order for holders of Receipts to be offered or sold the securities to which such rights, preferences or privileges relate, the Company agrees with the Depositary that it will file promptly a registration statement pursuant to the Securities Act with respect to such rights, preferences or privileges and securities and use its reasonable best efforts and take all steps available to it to cause such registration statement to become effective sufficiently in advance of the expiration of such rights, preferences or privileges to enable such holders to exercise such rights, preferences or privileges. In no event shall the Depositary make available to the holders of Receipts any right, preference or privilege to subscribe for or to purchase any security unless and until such registration statement shall have become effective, or unless the offering and sale of such securities to holders are exempt from registration under the Securities Act.
 
If any other action under the laws of any jurisdiction or any governmental or administrative authorization, consent or permit is required in order for such rights, preferences or privileges to be made available to holders of

7


Receipts, the Company agrees with the Depositary that the Company will use its reasonable best efforts to take such action or obtain such authorization, consent or permit sufficiently in advance of the expiration of such rights, preferences or privileges to enable such holders to exercise such rights, preferences or privileges.
 
Section 4.04.    Notice of Dividends, Etc.; Fixing of Record Date for Holders of Receipts.    (i) Whenever any cash dividend or other cash distribution shall become payable or any distribution of property (including securities) other than cash shall be made, (ii) if rights, preferences or privileges shall at any time be offered with respect to Stock, (iii) whenever the Depositary shall receive notice of (a) any meeting at which holders of shares of Stock are entitled to vote or of which holders of shares of Stock are entitled to notice, or (b) any election on the part of the Company to redeem any shares of Stock, or (iv) whenever the Depositary and the Company shall decide it is appropriate, the Depositary shall, in each such instance, fix a record date (which shall be the same date as the record date fixed by the Company with respect to the Stock) for the determination of the holders of Receipts who shall be entitled hereunder to receive a distribution in respect of such dividend, distribution, rights, preferences or privileges or the net proceeds of the sale thereof, or to give instructions for the exercise of voting rights at any such meeting, or who should be entitled to receive notice of such meeting or for any other appropriate reasons.
 
Section 4.05.    Voting Rights.    Upon receipt of notice of any meeting at which the holders of shares of Stock are entitled to vote, the Depositary shall, as soon as practicable thereafter, mail to the record holders of Receipts a notice which shall contain (i) such information as is contained in such notice of meeting and (ii) a statement that the holders may, subject to any applicable restrictions, authorize the Depositary to exercise the voting rights pertaining to the number of shares of Stock represented by their respective Depositary Shares (including authority to give a discretionary proxy to a person designated by the Company) and a brief statement as to the manner in which such authorization may be given. The Depositary shall endeavor, insofar as practicable, to vote or cause to be voted, in accordance with the authorization referred to above, the votes relating to the shares of Stock (or portion thereof) represented by the Depositary Shares evidenced by all Receipts as to which such authorization has been received. The Company hereby agrees to take all such action as it deems necessary in order to enable the Depositary to vote such shares of Stock or cause such shares of Stock to be voted. In the absence of authorization from the holder of a Receipt, the Depositary will abstain from voting (but, at its discretion, not from appearing at any meeting with respect to the Stock unless directed to the contrary by the record holders of all the Receipts) to the extent of the shares of Stock (or portion thereof) represented by the Depositary Shares evidenced by such Receipt.
 
Section 4.06.    Changes Affecting Deposited Securities and Reclassifications, Recapitalizations, Etc.    Upon any change in par or stated value, split-up, combination or any other reclassification of the Stock, or upon any recapitalization, reorganization, merger, amalgamation or consolidation to which the Company is a party or sale of all or substantially all of the Company’s assets, the Depositary may with the approval of, and shall upon the instructions of, the Company, and (in either case) in such manner as to retain as nearly as possible the percentage ownership interest in Stock of holders of the Receipts immediately prior to such event, (i) make such adjustments in (a) the fraction of an interest in one share of Stock represented by one Depositary Share and (b) the ratio of the redemption price per Depositary Share to the redemption price of a share of Stock, in each case as it may deem necessary to reflect the effects of such change in par or stated value, split-up, combination or other reclassification of Stock, or of such recapitalization, reorganization, merger, amalgamation or consolidation or sale, and (ii) treat any securities which shall be received by the Depositary in exchange for or upon conversion of or in respect of the shares of Stock as new deposited securities so received in exchange for or upon conversion of or in respect of the shares of Stock. In any such case the Depositary may in its discretion, with the approval of the Company, execute and deliver additional Receipts, or may call for surrender of all outstanding Receipts to be exchanged for new Receipts specifically describing such new deposited securities.
 
Anything to the contrary herein or in the Receipt notwithstanding, record holders of Receipts shall have the right from and after the effective date or any such change in par or stated value, split-up, combination or other reclassification of the Stock or any such recapitalization, reorganization, merger, amalgamation, consolidation or

8


sale, to the extent that holders of shares of Stock had the right, prior to or on the applicable effective date, to convert, exchange or surrender shares of Stock into or for other stock, securities, property or cash, to surrender such Receipts to the Depositary with instructions to convert, exchange or surrender the shares of Stock represented thereby only into or for, as the case may be, the kind and amount of shares of stock and other securities and property and cash into which the shares of Stock represented by such Receipts has been converted or for which such shares of Stock might have been exchanged or surrendered immediately prior to the effective date of such transaction.
 
Section 4.07.    Inspection of Reports.    The Depositary shall make available for inspection by record holders of Receipts at the Depositary’s Office, and at such other places as it may from time to time deem advisable, any reports and communications received from the Company which are received by the Depositary as the holder of shares of Stock.
 
Section 4.08.    List of Receipt Holders.    Promptly, upon request by the Company, the Depositary shall furnish to it a list, as of a specified date, of the names and addresses of all record holders, and the number of shares of Stock represented by the Receipts held by such holders.
 
ARTICLE V
 
THE DEPOSITARY, THE DEPOSITARY’S AGENTS,
THE REGISTRAR AND THE COMPANY
 
Section 5.01.    Maintenance of Offices, Agencies and Transfer Books by the Depositary; Registrar.    Upon execution of this Deposit Agreement, the Depositary shall maintain, at the Depositary’s Office, facilities for the execution and delivery, registration and registration of transfer, surrender and exchange of Receipts, and at the offices of the Depositary’s Agents, if any, facilities for the delivery, registration of transfer, surrender and exchange of Receipts, all in accordance with the provisions of this Deposit Agreement.
 
The Depositary shall, with the approval of the Company, appoint a Registrar for registration of such Receipts or Depositary Shares in accordance with any requirements of any applicable stock exchange in which the Receipts or the Depositary Shares may be listed. Such Registrar (which may be the Depositary if so permitted by the requirements of such exchange) may be removed and a substitute Registrar appointed by the Depositary upon the request or with the approval of the Company. If the Receipts, the Depositary Shares or the shares of Stock are listed on one or more other stock exchanges, the Depositary will, at the request of the Company, arrange such facilities for the delivery, registration, registration of transfer, surrender and exchange of such Receipts, such Depositary Shares or such shares of Stock as may be required by law or applicable stock exchange regulation.
 
The Registrar shall maintain books at the Depositary’s Office (or at such other place as shall be approved by the Company and of which the holders of Receipts shall have reasonable notice) for the registration of transfer of Receipts, which books at all reasonable times shall be open for inspection by the record holders of Receipts; provided, that the exercise of such right shall be governed by the provisions of Section 55-16-02 of the North Carolina Business Corporation Act, as amended, or any successor provision thereto, anything herein to the contrary notwithstanding.
 
The Depositary may cause the Registrar to close the books with respect to the Receipts, at any time or from time to time, when the register of stockholders of the Company is closed with respect to the Stock or when such action is deemed necessary or advisable by the Depositary, any Depositary’s Agent or the Company because of any requirement of law or of any government, governmental body or commission, stock exchange or any applicable self-regulatory body, including, without limitation, the NASD.
 

9


Section 5.02.    Prevention or Delay by the Depositary, the Depositary’s Agents, the Registrar or the Company.    Neither the Depositary nor any Depositary’s Agent nor any Registrar nor the Company shall incur any liability to any holder of any Receipt if by reason of any provision of any present or future law, or regulation thereunder, of the United States of America or of any other governmental authority or, in the case of the Depositary, the Depositary’s Agent or the Registrar, by reason of any provision, present or future, of the Company’s Articles of Incorporation, as amended (including the Amendment), or by reason of any act of God or war, the Depositary, the Depositary’s Agent, the Registrar or the Company shall be prevented or forbidden from doing or performing any act or thing which the terms of this Deposit Agreement provide shall be done or performed; nor shall the Depositary, any Depositary’s Agent, any Registrar or the Company incur any liability or be subject to any obligation (i) by reason of any nonperformance or delay, caused as aforesaid, in the performance of any act or thing which the terms of this Deposit Agreement provide shall or may be done or performed, or (ii) by reason of any exercise of, or failure to exercise, any discretion provided for in this Deposit Agreement, except in the event of the gross negligence or willful misconduct of the party charged with such exercise or failure to exercise.
 
Section 5.03.    Obligations of the Depositary, the Depositary’s Agents, the Registrar and the Company.    Neither the Depositary nor any Depositary’s Agent nor any Registrar nor the Company assumes any obligation or shall be subject to any liability under this Deposit Agreement to holders of Receipts other than for its gross negligence or willful misconduct.
 
Neither the Depositary nor any Depositary’s Agent nor any Registrar nor the Company shall be under any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of the Stock, the Depositary Shares or the Receipts which in its opinion may involve it in expense or liability unless indemnity to such party against all expense and liability be furnished as often as required.
 
Neither the Depositary nor any Depositary’s Agent nor any Registrar nor the Company shall be liable to any party hereto for any action or any failure to act by it in reliance upon the written advice of legal counsel or accountants, or information from any person presenting shares of Stock for deposit or any holder of a Receipt. The Depositary, any Depositary’s Agent, any Registrar and the Company may each rely and shall each be protected in acting upon any written notice, request, direction or other document believed by it to be genuine and to have been signed or presented by the party or parties specified in this Deposit Agreement.
 
The Depositary shall not be responsible for any failure to carry out any authorization to vote any of the shares of Stock of for the manner or effect of any such vote made, as long as such action or inaction is in good faith and does not result from the gross negligence or willful misconduct of the Depositary. The Depositary undertakes and shall cause any Registrar to undertake, to perform such duties and only such duties as are specifically set forth in this Deposit Agreement using its reasonable best efforts and in good faith. The parties hereto acknowledge that no implied covenants or obligations shall be read into this Deposit Agreement against the Depositary or any Registrar or against the Company with respect to the Depositary and any Registrar. The Depositary will indemnify the Company against any liability that may arise out of acts performed or omitted by the Depositary or any Depositary’s Agent due to its or their gross negligence or bad faith. The Depositary, any Depositary’s Agent, any Registrar and the Company may own and deal in any class of securities of the Company and its affiliates and in Receipts subject to the provisions of applicable law. The Depositary may also act as transfer agent or registrar of any of the securities of the Company and its affiliates.
 
Section 5.04.    Resignation and Removal of the Depositary; Appointment of Successor Depositary.    The Depositary may at any time resign as Depositary hereunder by notice of its election so to do delivered to the Company, such resignation to take effect upon the appointment of a successor Depositary and its acceptance of such appointment as hereinafter provided.

10


 
The Depositary may at any time be removed by the Company by notice of such removal delivered to the Depositary, such removal to take effect upon the appointment of a successor Depositary and its acceptance of such appointment as hereinafter provided.
 
In case the Depositary acting hereunder shall at any time resign or be removed, the Company shall, within 60 days after the delivery of the notice of resignation or removal, as the case may be, appoint a successor Depositary, which shall be a bank or trust company having its principal office in the United States of America and having a combined capital and surplus of at least $50,000,000. Every successor Depositary shall execute and deliver to its predecessor and to the Company an instrument in writing accepting its appointment hereunder and agreeing to become a party to this Deposit Agreement, and thereupon such successor Depositary, without any further act or deed, shall become fully vested with all the rights, powers, duties and obligations of its predecessor and for all purposes shall be the Depositary under this Deposit Agreement, and such predecessor, upon payment of all sums due it and on the written request of the Company, shall execute and deliver an instrument transferring to such successor all rights and powers of such predecessor hereunder, shall duly assign, transfer and deliver all right, title and interest in all shares of Stock deposited with such predecessor and any monies or property held hereunder to such successor and shall deliver to such successor a list of the record holders of all outstanding Receipts. Any successor Depositary shall promptly mail notice of its appointment to the record holders of Receipts.
 
Any corporation or other entity into or with which the Depositary may be merged, consolidated or converted, or to which the Depositary may sell all or substantially all its assets, shall be the successor of such Depositary without the execution or filing of any document or any further act. Such successor Depositary may authenticate the Receipts in the name of the predecessor Depositary or in the name of the successor Depositary.
 
Section 5.05.    Corporate Notices and Reports.    The Company agrees that it will deliver to the Depositary and the Depositary will, promptly after receipt thereof, transmit to the record holders of Receipts, in each case at the address furnished to it pursuant to Section 4.08, all notices and reports (including without limitation financial statements) required by law, the rules of any national securities exchange upon which the shares of Stock, the Depositary Shares or the Receipts are listed or by the Company’s Articles of Incorporation, as amended (including the Amendment), to be furnished by the Company to holders of shares of Stock. Such transmission will be at the Company’s expense and the Company will provide the Depositary with such number of copies of such documents as the Depositary may reasonably request.
 
Section 5.06.    Indemnification by the Company.    The Company shall indemnify the Depositary, any Depositary’s Agent and any Registrar against, and hold each of them harmless from, any loss, liability or expense (including the reasonable costs and expenses of defending itself) which may arise out of (i) acts performed or omitted in connection with this Deposit Agreement and the Receipts (a) by the Depositary, any Registrar or any of their respective agents (including any Depositary’s Agent), except for any liability arising out of gross negligence or willful misconduct on the respective parts of any such person or persons, or (b) by the Company or any of its agents, or (ii) the offer, sale or registration of the Receipts or shares of Stock pursuant to the provisions hereof. The obligations of the Company set forth in this Section 5.06 shall survive any succession of any Depositary, Registrar or Depositary’s Agent.
 
Section 5.07.    Charges and Expenses.    The Company shall pay all charges of the Depositary in connection with the initial deposit of shares of Stock and the initial issuance of the Depositary Shares, and redemption of shares of Stock at the option of the Company. All other transfer and other taxes and governmental charges shall be at the expense of holders of Receipts. The Depositary may refuse to effect any transfer of a Receipt or any withdrawal of shares of Stock evidenced thereby until all such taxes and charges with respect to such Receipt or shares of Stock are paid by the holder thereof. If, at the request of a holder of Receipts, the Depositary incurs charges or expenses for which it is not otherwise liable hereunder, such holder will be liable for such charges and expenses.

11


 
All other charges and expenses of the Depositary and any Depositary’s Agent hereunder and of any Registrar (including, in each case, reasonable fees and expenses of counsel) incident to the performance of their respective obligations hereunder will be payable by the Company only after prior consultation and agreement between the Depositary and the Company and consent by the Company to the incurrence of such expenses, which consent shall not be unreasonably withheld. The Depositary shall present any statement for charges and expenses to the Company promptly, unless the Company shall agree otherwise.
 
ARTICLE VI
 
AMENDMENT AND TERMINATION
 
SECTION 6.01.    Amendment.    The form of the Receipts and any provisions of this Deposit Agreement may at any time and from time to time be amended by agreement between the Company and the Depositary in any respect which they may deem necessary or desirable; provided, however, that no such amendment which shall materially and adversely alter the rights of the holders of Receipts shall be effective unless such amendment shall have been approved by the record holders of Receipts representing at least a majority of the Depositary Shares then outstanding. Every holder of an outstanding Receipt at the time any such amendment becomes effective shall be deemed, by continuing to hold such Receipt, to consent and agree to such amendment and to be bound by the Deposit Agreement as amended thereby.
 
Section 6.02.    Termination.    This Deposit Agreement may be terminated by the Company or the Depositary only if (i) all outstanding Depositary Shares shall have been redeemed pursuant to Section 2.03, or (ii) there shall have been made a final distribution in respect of the Stock in connection with any liquidation, dissolution or winding up of the Company and such distribution shall have been distributed to the record holders of Receipts pursuant to Section 4.01 or 4.02, as applicable.
 
Whenever the Deposit Agreement has been terminated pursuant to (ii) above, the Depositary will mail notice of such termination to the record holders of all Receipts then outstanding at least 30 days prior to the date fixed in that notice for termination of the Deposit Agreement. If any Depositary Shares remain outstanding after the date of termination, the Depositary thereafter will discontinue the transfer of Depositary Shares, will suspend the distribution of dividends to the owners thereof, and will not give any further notices (other than notice of such termination) or perform any further acts under this Deposit Agreement, except that the Depositary will continue (i) to collect dividends on the outstanding shares of Stock and any other distributions with respect thereto, (ii) to deliver or cause to be delivered shares of Stock, together with such dividends and distributions, or principal and interest, and the net proceeds of any sales of rights, preferences, privileges or other property (other than real property) in exchange for Depositary Shares surrendered. At any time after the expiration of three years from the date of termination, the Depositary may sell the shares of Stock then held by it at a public or private sale, at such place or places and upon such terms as it deems proper and may thereafter hold the net proceeds of such sale, without liability for interest, for the pro rata benefit of the owners of the Depositary Shares which have not theretofore been surrendered. Subject to applicable escheat laws, any monies set aside by the Company in respect of any payment with respect to the shares of Stock represented by the Depositary Shares, or dividends thereon, and unclaimed at the end of three years from the date upon which such payment is due and payable shall revert to the general funds of the Company, after which reversion the holders of Receipts evidencing such Depositary Shares shall look only to the general funds of the Company for payment thereof.
 
Upon the termination of this Deposit Agreement, the parties hereto shall be discharged from all obligations under this Deposit Agreement except for their respective obligations under Sections 5.03, 5.06 and 5.07.

12


 
ARTICLE VII
 
MISCELLANEOUS
 
Section 7.01.    Counterparts.    This Deposit Agreement may be executed in any number of counterparts, and by each of the parties hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed an original, but all such counterparts taken together shall constitute one and the same instrument.
 
Section 7.02.    Exclusive Benefit of Parties.    This Deposit Agreement is for the exclusive benefit of the parties hereto, and their respective successors hereunder, and shall not be deemed to give any legal or equitable right, remedy or claim to any other person whatsoever.
 
Section 7.03.    Invalidity of Provisions.    In case any one or more of the provisions contained in this Deposit Agreement or in the Receipts should be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein or therein shall in no way be affected, prejudiced or modified thereby.
 
Section 7.04.    Notices.    Any and all notices to be given to the Company hereunder or under the Receipts shall be in writing and shall be deemed to have been duly given if personally delivered or sent by mail or telegram, telecopy or telex confirmed by letter, addressed to the Company at One Wachovia Center, Charlotte, North Carolina 28288, telephone: (704) 374-2046, telecopy: (704) 374-2250, Attention: Treasurer, or at any other address and to the attention of any other person of which the Company shall have notified the Depositary in writing.
 
Any and all notices to be given to the Depositary hereunder or under the Receipts shall be in writing and shall be deemed to have been duly given if personally delivered or sent by mail or by telegram, telecopy or telex confirmed by letter, addressed to the Depositary at the Depositary’s Office, at One Wachovia Center, Charlotte, North Carolina 28288, telephone (704) 590-7453, telecopy (704) 590-4652, Attention: Missy Sullivan or telephone (704) 590-7446, telecopy (704) 590-4652, Attention: Sherrie Garrett, or at any other address and to the attention of any other person of which the Depositary shall have notified the Company in writing.
 
Any and all notices to be given to any record holder of a Receipt hereunder or under the Receipts shall be in writing and shall be deemed to have been duly given if personally delivered or sent by mail or by telegram, telecopy or telex confirmed by letter, addressed to such record holder at the address of such record holder as it appears on the books of the Depositary, or if such holder shall have filed with the Depositary a written request that notices intended for such holder be mailed to some other address, at the address designated in such request.
 
Delivery of a notice sent by mail or by telegram, telecopy or telex shall be deemed to be effected at the time when a duly addressed letter containing the same (or a confirmation thereof in the case of a telegram or telex message) is deposited, postage prepaid, in a post office letter box. The Depositary or the Company may, however, act upon any telegram or telecopy message received by it from the other or from any holder of a Receipt, notwithstanding that such telegram or telecopy message shall not subsequently be confirmed by letter or as aforesaid.
 
Section 7.05.    Depositary’s Agents.    The Depositary may from time to time appoint any Depositary’s Agent to act in any respect for the Depositary for the purposes of this Deposit Agreement and may at any time appoint additional Depositary’s Agents and vary or terminate the appointment of such Depositary’s Agents. The Depositary will promptly notify the Company of any such action.
 
Section 7.06.    Holders of Receipts are Parties.    By acceptance of delivery of the Receipts, any holder from time to time of such Receipt shall be deemed to have agreed to become a party to this Deposit Agreement

13


and to be bound by all of the terms and conditions hereof and of the Receipts to the same extent as though such person executed this Deposit Agreement.
 
Section 7.07.    Governing Law.    THIS DEPOSIT AGREEMENT AND THE RECEIPTS AND ALL RIGHTS HEREUNDER AND THEREUNDER AND PROVISIONS HEREOF AND THEREOF SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH CAROLINA (WITHOUT REFERENCE TO APPLICABLE CONFLICTS OF LAW PROVISIONS).
 
Section 7.08.    Inspection of Deposit Agreement.    Copies of this Deposit Agreement shall be filed with the Depositary and the Depositary’s Agents and shall be open to inspection during business hours at the Depositary’s Office and the respective offices of the Depositary’s Agents, if any, by any holder of a Receipt.
 
Section 7.09.    Headings.    The headings of articles and sections in this Deposit Agreement and in the form of the Receipt set forth in Exhibit A hereto have been inserted for convenience only and are not to be regarded as a part of this Deposit Agreement or the Receipts or to have any bearing upon the meaning or interpretation of any provision contained herein or in the Receipts.
 
IN WITNESS WHEREOF, the Company and the Depositary have duly executed this Deposit Agreement as of the day and year first above set forth, and all holders of Receipts shall become parties hereto by and upon acceptance by them of delivery of Receipts issued in accordance with the terms hereof.
 
WACHOVIA CORPORATION
By:
 
 

   
Authorized Officer
 
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Depositary
By:
 
 

   
Authorized Officer

14


Exhibit A
 
FORM OF RECEIPT
 
TEMPORARY RECEIPT EXCHANGEABLE FOR
 
CERTIFICATE FOR
ENGRAVED RECEIPT WHEN READY FOR DELIVERY
 
 

   
DEPOSITARY SHARES
TRANSFERABLE
 
CUSIP                               
DEPOSITARY RECEIPT
   
   
SEE REVERSE FOR
CERTAIN DEFINITIONS
 
DEPOSITARY RECEIPT FOR DEPOSITARY SHARES,
EACH DEPOSITARY SHARE REPRESENTING A ONE-SIXTH (1/6TH) INTEREST
IN ONE SHARE OF SERIES G, CLASS A PREFERRED STOCK
 
WACHOVIA CORPORATION
A North Carolina Corporation
 
WACHOVIA BANK, NATIONAL ASSOCIATION, as Depositary (the “Depositary”), hereby certifies that
 
is the registered owner of                                  DEPOSITARY SHARES (“Depositary Shares”), each Depositary Share representing a one-sixth (1/6th) interest in one share of Series G, Class A Preferred Stock, no par value (the “Stock”), of Wachovia Corporation, a North Carolina corporation (the “Corporation”), on deposit with the Depositary, subject to the terms and entitled to the benefits of the Deposit Agreement dated as of November ·, 2002 (the “Deposit Agreement”), among the Corporation, the Depositary and the holders from time to time of Depositary Receipts evidencing the Depositary Shares. By accepting this Depositary Receipt, the holder hereof becomes a party to and agrees to be bound by all the terms and conditions of the Deposit Agreement. This Depositary Receipt shall not be valid or obligatory for any purpose or be entitled to any benefits under the Deposit Agreement unless it shall have been executed by the Depositary by the manual signature of a duly authorized officer or, if executed in facsimile by the Depositary, countersigned by a Registrar in respect of the Depositary Receipts by a duly authorized officer thereof.
 
Dated: ·
 
WACHOVIA BANK, NATIONAL ASSOCIATION
Depository and Registrar
 
By:
 
 

   
Authorized Officer

15


WACHOVIA CORPORATION
 
WACHOVIA CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH HOLDER OF A RECEIPT WHO SO REQUESTS A COPY OR SUMMARY OF THE DEPOSIT AGREEMENT AND A COPY OR SUMMARY OF THE PORTIONS OF THE ARTICLES OF INCORPORATION ESTABLISHING THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS APPLICABLE TO SHARES OF EACH CLASS AND THE VARIATIONS IN RIGHTS, PREFERENCES AND LIMITATIONS DETERMINED FOR EACH SERIES (AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DETERMINE VARIATIONS FOR FUTURE SERIES) WHICH THE CORPORATION IS AUTHORIZED TO ISSUE, INCLUDING THE SERIES G, CLASS A PREFERRED STOCK. ANY SUCH REQUEST SHOULD BE ADDRESSED TO WACHOVIA CORPORATION, ONE WACHOVIA CENTER, CHARLOTTE, NORTH CAROLINA 28288, ATTENTION:                                .
 
ABBREVIATIONS
 
The following abbreviations, when used in the inscription on the face of this Depositary Receipt, shall be construed as though they were written out in full according to applicable laws or regulations:
 
TEN COM — as tenants in common
TEN ENT  — as tenants by the entireties
JT TEN      — as joint tenants with right of survivorship and not as tenants in common
 
UNIF GIFT MIN ACT—                          Custodian                                      
                                          (Cust)                               (Minor)
 
                                  under Uniform Gifts to Minors Act                         
                                                                                                    (State)
 
UNIF TRF MIN ACT —                          Custodian                                      
                                          (Cust)                               (Minor)
 
                                  (until age              ) under Uniform Transfers to Minors Act
 

    
                                          (State)
 
Additional abbreviations may also be
used though not in the above list.

16
EX-10 17 dex10.htm FORM OF EXCHANGE AGREEMENT Form of Exchange Agreement
Exhibit 10
 
WACHOVIA PREFERRED FUNDING CORP.
SERIES A PREFERRED SECURITIES
 
EXCHANGE AGREEMENT
 
THIS EXCHANGE AGREEMENT (this “Agreement”) is entered into as of ·, 2002, among WACHOVIA PREFERRED FUNDING CORP., a Delaware corporation (“WPFC”), WACHOVIA CORPORATION, a North Carolina corporation (“Wachovia”), and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association (“Wachovia Bank”), as depositary hereunder.
 
Recitals
 
WHEREAS, WPFC intends to issue 30,000,000 shares of ·% non-cumulative Series A preferred stock with liquidation preference of $25.00 per share (each, a “Series A Preferred Security”).
 
WHEREAS, each Series A Preferred Security will be conditionally exchangeable into one newly issued depositary share (each, a “Depositary Share”) representing a one-sixth interest in one share of the Series G, Class A Preferred Stock, no par value per share and having a liquidation preference of $150.00 per share, of Wachovia (the “Wachovia Preferred Stock”).
 
WHEREAS, the parties hereto desire to ensure that in the event of the occurrence of circumstances requiring the exchange of the Series A Preferred Securities into the Depositary Shares, the holders of the Series A Preferred Securities will be contractually bound to tender their Series A Preferred Securities to Wachovia for exchange, and that in the same such event Wachovia will be contractually bound unconditionally to make available Depositary Shares sufficient for exchange of the Series A Preferred Securities, and to effect the exchange of all outstanding Series A Preferred Securities into Depositary Shares.
 
Agreement
 
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
 
Section 1.    Exchange of the Series A Preferred Securities.    If at any time after the issuance and sale of the Series A Preferred Securities, the Office of the Comptroller of the Currency (the “OCC”) directs in writing that the Series A Preferred Securities be exchanged into the relevant Wachovia Preferred Stock, because (i) Wachovia Bank is undercapitalized under the prompt corrective action regulations, (ii) Wachovia Bank is placed into conservatorship or receivership, or (iii) the OCC, in its sole discretion, anticipates Wachovia Bank becoming “undercapitalized” in the near term or takes supervisory action that limits the payment of dividends by WPFC, then
 
 
(a)
 
the holders of the Series A Preferred Securities shall immediately, in accordance with procedures set forth in the Certificate of Designations, Preferences and Rights of Series A Preferred Securities, exchange the Series A Preferred Securities for the relevant Depositary Shares, on a one share for one share basis, by delivering all certificates representing the Series A Preferred Securities, if any, to Wachovia, properly endorsed for transfer;
 
 
(b)
 
Wachovia shall immediately and unconditionally issue the required number of shares of the Wachovia Preferred Stock and deposit such shares with Wachovia Bank;
 
 
(c)
 
upon receipt of the shares of the Wachovia Preferred Stock from Wachovia, Wachovia Bank shall issue the relevant Depositary Shares and deliver to Wachovia receipts evidencing such Depositary Shares and, in turn, Wachovia shall deliver such receipts to the holders of the Series A Preferred Securities; and


 
 
(d)
 
upon the occurrence of the exchange, all of the Series A Preferred Securities shall be cancelled and shall cease to be outstanding without any further action by WPFC or the holders thereof, all rights of the holders of the Series A Preferred Securities as WPFC’s stockholders shall cease, and such persons shall be, for all purposes, solely holders of the Depositary Shares.
 
Until certificates representing Depositary Shares are delivered or in the event such replacement certificates are not delivered, any certificates previously representing the Series A Preferred Securities shall be deemed for all purposes to represent Depositary Shares.
 
Section 2.    Legend.    The certificates evidencing the Series A Preferred Securities, if any, shall bear the following legend in conspicuous type:
 
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF A CERTAIN EXCHANGE AGREEMENT, DATED             , 2002, REQUIRING THEIR EXCHANGE IN CERTAIN CIRCUMSTANCES INTO CERTAIN PREFERRED SHARES OF WACHOVIA CORPORATION. THE ISSUER WILL MAIL TO THE SHAREHOLDER A COPY OF SUCH AGREEMENT, WITHOUT CHARGE, WITHIN FIVE DAYS AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR.
 
Section 3.    Successors; Assigns.
 
 
(a)
 
The parties hereto hereby acknowledge and agree that, for so long as any shares of the Series A Preferred Securities remain outstanding, the relative rights, duties and obligations of each party to this Agreement shall be unaffected by, and shall remain in full force and effect notwithstanding any merger, consolidation or other business combination of Wachovia or Wachovia Bank with or into any entity. Subsequent to any such merger, consolidation or other business combination in which Wachovia is not the surviving entity (the “Surviving Entity”), all references to Wachovia Preferred Stock hereunder shall thereafter be deemed to refer to a class of equity securities of the Surviving Entity having preferences, limitations, and relative voting and other rights substantially identical to those of the Wachovia Preferred Stock immediately prior to the consummation of such transaction.
 
 
(b)
 
In the event of any merger, consolidation, or other business combination of Wachovia with or into any entity in which Wachovia is the surviving entity, but as a result of which Wachovia becomes the direct or indirect subsidiary of another entity (the “Ultimate Parent”), (i) Wachovia hereby agrees to assign this Agreement to the Ultimate Parent as part of such merger, consolidation or other business combination, and (ii) all references to Wachovia Preferred Stock hereunder shall thereafter be deemed to refer to a class of equity securities of the Ultimate Parent having preferences, limitations, and relative voting and other rights substantially identical to those of the Wachovia Preferred Stock immediately prior to the consummation of such transaction.
 
 
Section 4.    Counterparts.    This Agreement may be executed in any number of counterparts, each of which shall be an original as against any party whose signature appears thereon and all of which together shall constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as signatories.
 


 
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
 
WACHOVIA PREFERRED FUNDING CORP.
By:
 
 

   
Name:
Title:
 
WACHOVIA CORPORATION
By:
 
 

   
Name:
Title:
 
WACHOVIA BANK, N.A.
By:
 
 

   
Name:
Title:
 
EX-23.A 18 dex23a1.htm CONSENT OF KPMG Consent of KPMG
 
Exhibit 23(a)
 
CONSENT OF INDEPENDENT AUDITORS
 
Board of Directors
Wachovia Corporation
 
We consent to the use of our reports dated January 23, 2002, included or incorporated by reference herein and to the reference to our firm under the heading “Experts” in the Registration Statement.
 
Our report, included in Wachovia Corporation’s Annual Report on Form 10-K for the year ended December 31, 2001 and incorporated by reference herein, refers to the fact that effective July 1, 2001, Wachovia Corporation adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations and certain provisions of SFAS No. 142, Goodwill and Other Intangible Assets as required for goodwill and intangible assets resulting from business combinations consummated after June 30, 2001.
 
 
/s/    KPMG LLP
 
Charlotte, North Carolina
November 18, 2002
EX-23.B 19 dex23b.htm CONSENT OF ERNST AND YOUNG Consent of Ernst and Young
 
Exhibit 23(b)
 
CONSENT OF INDEPENDENT AUDITORS
 
We consent to the reference to our firm under the caption “Experts” and to the incorporation by reference in the Registration Statement on Form S-3 and related Prospectus of Wachovia Corporation (formerly named First Union Corporation) for the registration of Series G, Class A Preferred Stock and to the incorporation of our report dated January 17, 2001 (except Note A, as to which the date is August 24, 2001) with respect to the restated audited financial statements of Wachovia Corporation for each of the three years in the period ended December 31, 2000 included in Wachovia Corporation’s (formerly named First Union Corporation) Current Report on Form 8-K dated June 5, 2002, filed with the Securities and Exchange Commission.
 
/s/    ERNST & YOUNG LLP
 
Greensboro, North Carolina
November 18, 2002
GRAPHIC 21 g44622g08c91.jpg GRAPHIC begin 644 g44622g08c91.jpg M_]C_X``02D9)1@`!`@$`8`!@``#_[0S*4&AO=&]S:&]P(#,N,``X0DE-`^T` M`````!``8`````$``0!@`````0`!.$))300-```````$````'CA"24T$&0`` M````!````!XX0DE-`_,```````D```````````$`.$))300*```````!```X M0DE-)Q````````H``0`````````".$))30/U``````!(`"]F9@`!`&QF9@`& M```````!`"]F9@`!`*&9F@`&```````!`#(````!`%H````&```````!`#4` M```!`"T````&```````!.$))30/X``````!P``#_____________________ M________`^@`````_____________________________P/H`````/______ M______________________\#Z`````#_____________________________ M`^@``#A"24T$"```````$`````$```)````"0``````X0DE-!!X```````0` M````.$))300:``````!M````!@`````````````!-@```>`````&`&<`,``X M`&,`.0`Q`````0`````````````````````````!``````````````'@```! M-@`````````````````````````````````````````````X0DE-!!$````` M``$!`#A"24T$%```````!`````(X0DE-!`P`````"BT````!````<````$@` M``%0``!>@```"A$`&``!_]C_X``02D9)1@`!`@$`2`!(``#_[@`.061O8F4` M9(`````!_]L`A``,"`@("0@,"0D,$0L*"Q$5#PP,#Q48$Q,5$Q,8$0P,#`P, M#!$,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,`0T+"PT.#1`.#A`4#@X. M%!0.#@X.%!$,#`P,#!$1#`P,#`P,$0P,#`P,#`P,#`P,#`P,#`P,#`P,#`P, M#`P,#`S_P``1"`!(`'`#`2(``A$!`Q$!_]T`!``'_\0!/P```04!`0$!`0$` M`````````P`!`@0%!@<("0H+`0`!!0$!`0$!`0`````````!``(#!`4&!P@) M"@L0``$$`0,"!`(%!P8(!0,,,P$``A$#!"$2,05!46$3(G&!,@84D:&Q0B,D M%5+!8C,T)E\K.$P]-U MX_-&)Y2DA;25Q-3D]*6UQ=7E]59F=H:6IK;&UN;V-T=79W>'EZ>WQ]?G]Q$` M`@(!`@0$`P0%!@<'!@4U`0`"$0,A,1($05%A<2(3!3*!D12AL4(CP5+1\#,D M8N%R@I)#4Q5C+RLX3#TW7C\T:4 MI(6TE<34Y/2EM<75Y?569G:&EJ:VQM;F]B7I[?'_]H`#`,!``(1 M`Q$`/P#TYF2Y[&O;186N`(^AP=?](G]>S_06?]#_`-*)\7^BT_U&_D"*DI#Z M]G^@L_Z'_I1869F/R\A[GXUV+Z+GTM%X:/4#'N;]HIV/L_06?F>IZ:Z-9W4> MGWY5[;*BP-#=IW$@S,]FN24XKG-:TN<0UK07.<=``!+G._JJE;U&RMUC6LQW MD$^F3D,9(&W9ZK+?TE=C_=[?S%J8V)?E7Y-#*WUG%>*WOOK?779+=V_$L>S] M9I_P;G_O_P#!^F]YO^;UD@[,>1QIXQ_P?\EJ2G(JZBRRX,=Z+6.T:\9%;SNT MV5[&_2=9N_,5M7/^;]LSLQY&H,:SS_HE/]BYG[U?WN_\@DIN=%_H9_KN5]5> MG8UF-CFNPM+MQ=[9(@_$-5I)2DDDDE*22224_P#_T/4,7^BT_P!1OY`BH6+_ M`$6G^HW\@14E*0+<[$I>:[;`UXU(,]T=8'5B!GODQ[6_D24WK\ZE['C'RVT6 M$R'EA?IMV_0]GYR@W-(:T'/J<1NDFH^XDGTYVV-]M;/W?IKF^H.RWN%->)=; M5++&7X^2W'.X;O4KMES+/2_D-]3UD!IZ@?4)HSF_HR0+,RCWN$-KJK]'=Z3G M,<_?9^C_`)O_`$B2GJVY]@<"_.QRW20*'@_G;]?M#OI>Q2HSVM>3D9M5K-H` M:RIS#ND^_<;+?S-K=JY&W[=N>ZO'ZAJ&L.W-QV[FL#F->QDO95>^=UCOT6]7 MS_P1)3U]-]5[-]3@]LQ(\0B*AT4 M@X9C7WN5])2DDDDE*22224__T?4,7^BT_P!1OY`BK(Q.L8^;T]W[-M<;,5_V M>TNQ[7;;&-8Y[/2?]F<[VV,=OW;%.C-S00Z[U+&`N):,5['$$-]-C7>JYC75 MN]1S_;^D_P#/B4ZB#8<4._2^GO\`Y43'S469M;FR66L,D;75NG0Q/M:[Z2R. MK/8_++P#`K$RT@Z;C]%P#DE-DLQ\;,MOHK.4I0X!I;N>\D6?X-WZ/^O_`,'[UR]N=9O=Z5I: MUX:6LLQ+2ZL.9N^DSV/=O]_O_P"*3?;;B`?680^MY!9BW&'#?2PC5_O9D,]] M=O\`@TE/4C/:3'[-L`GZ6[%CEK?^Y?\`*W_];_XM3HRZK;=EF$<=D$FVQU!$ M@C:V*;K7^_\`JKDZ\RY]FT7L,-!+'8MK7$!U;'6C<6M^E9[O\&QG]16,+(]8 MO9:]K[='M#:;*@&$;/\`#_G>HRQR2GLJ_2VS5MVG]V(_Z*FJ72!&`SXN_P"J MSZ3FJ6S*_TK/\P_^E$E)DD'9E?Z M5G^8?_2B9XRVM+O48=HF-A$Q_P!<24__TN]HZSLK+#]GBFN`?M+=Q<"RJIEC M-OZ'U7OV>YWZ.S]&BCK,O?#:#2QQ!M&0P^QH+G6N;^9M8Q[WM>I5=-]3%KC) MN87MW%S?3GW0]K=:G>RK\S_P3U'I['0[?OK]_\`X&@9&?C/(?=1C/O`8'M= MDU@B6.N>W<1_@G[&?\(RSUE<^P"UH_>_W[&_X% M"L9C8UP%V;;O@D@LJ,AP-;=SFXV[V?F^_P#KI*15WX)+'6TXU5!>ZMUWKL(# M@&/K:W]]UN]_L^FS9_PB+C837]0OM)JLP7TT'&J:WZ+IN-USG_G^NUU/_;*' MNPMH'VVW7OZ56IXW?T7:C8^9A4V/_3.>UP:`YX),R_[[-6Z2?ZP@D[[&DNU)/( M8WZ,[$E-RJJNE@KJ:&,'#1QKJAYF6W%H?;L=<]K7.914`;+"P;_3I82W<]RC M5?9E#?3[*)(WG5[H]OL9]%C?^,_[:0ASUZ-WO9_I57Q^D=3IO8]_6 M,BZEA(]%[*M6'Z+'V,K98Y[8_GOYU3.33NW_`&7+9Z@#SL:X#4N9[F5O]MGL MWV?UU9I97L_[-N MYNS:[W8[O=^B8OF=))3],T=/R*#7Z;W!E4!M0L`9H'-U8S';]+=[E2ZJ7G+] MX`=L;HTDCEWB&KYS224^[96*YTOH87V6']*WUWTM+0QS?S';=VE=?T/^%5224_4'[+Z>!`H8!,P!WU_\DG9TW`9 M8VUM#!8S5K@-1_K*^7DDE/U4DOE5))3_`/_9`#A"24T$(0``````50````$! M````#P!!`&0`;P!B`&4`(`!0`&@`;P!T`&\``#`1$``A$!`Q$! M_]T`!``\_\0`I0`!``("`P$!`0````````````<(!@D$!0H#`@L!`0$!`0`` M```````````````!`@,0```&`P```@0%#`X*`00#``(#!`4&!P`!"!()$1,4 M%=065A<8(=.457:6UK7&=DQ022T=;;7V)D*,E$S M=[AQ)441`0$!``("`@,``P$````````!$2$2,5%!`F&!H7&Q(C+_V@`,`P$` M`A$#$0`_`/?Q@,!@,!@,!@,!@,!@,!@,#5SV'_2TG^Y%F_WUVP*JX#`8#`8# M`8#`8#`8#`8#`8#`8#`8#`N5Q7_'R5_UMJ,O9RM>N4C]!: M=(E)#L9A@O0$`-;WO>M:WO`C)IZ*HU]<8DT,MI0YU=)ZS*Y%"FY`[$JEDK84 M`UY:UYCZSO+:=I0@MZWA'ZDM:WO`^C" M^LTI8V631QS1/<>D32W/K"\MJ@M6W.[,[HR7!KA4`-*,#O81E MCUO7U-X';8&(I9[#%TU=JX1R9G4SMA8VV2O,4)6%#>FUA=U*A(VNJM%K?K"D MBM0E&$(M_P"OP^GT:$'>PR[`8#`8#`8#`N5Q7_'R5_5T-54JE@U M3-:\;:ECHA#,'UR6H4+Y&VI2M3'EB)K'K8A!%H80A.6 M`P&`P&`P.`ZM;<^-;DRNZ,AP:7A`L:W-`I#XTZYN<$YB1:C4`^IXR%*8X0!Z M_P!81;P-`#-QGU3$8?73G&7!]0S;F_H^04;2RD:58<(GF^QY'*F&46L>D(-` MH7`5CL1(<,0OVM$R,&QZV$OUF\F.G:?Q//6AO2<%M^*1GGZ*="(Z]KN$T23& MA5\W2MWKS:1GLU%.J]*:*/+1(0)U$5+F#(N;! MD:`U!*?MK'8PURV:FV+:5[./^<0U6<=['@](V=`H>CZ$;DC?6G"X61`^)K#V M^1Y`W1)"V=31^FU;TG]J9G=H/V00!N:!@&6G).VU`VH`$6%N;/'RF=;%>U5E M1IYM$'>T!OD)[/DVJQ@DIDE@M#U/^3I7-&Z/11%:1*Y45-O7QY4O]Y;5O6A. M*%@3&"5!V'Q:T3C?T_=W,O05?2;IE)623I&;EM7*%.QN&R6/#EBN32>QVN;) M44K6Q27O+:]I#9%\5W8I5F^"%]V'0BYFN[DE MB)U;/T-89=9G6.AF!#DHJ!P3,#E#0MCA/%KM*W5H2J%*TLG:]_0B?;.,7LRLF`P&`P&!@^\;C\P/IB"2+H*SK875VI35M8#[H-(0XNN*F@U4-FT\%8DK2= M,E3FAA6E:L$A6.C:(T_02T1>RO&,)*Z/A$+K>91^$UY$(O`H9'8*Q-\?B,+8 M&F+1AB;R5CMHE"SL#&D0M38C*U]0)1!0`!_U:P*^X#`8#`8'Y&,!8!&&""`L M`1#&,8M!```=;$(0A"WH(0A#KT[WOZFM8%':^Z[F-Q0O5N5#1QDVJ!39&H$T M/.IX:WS]Y:D\M11%VL1'7Q4%V*#SU0@&O('3V-*88-(7K_1&K,XMY6$ M)Z`I4]]E,9)LR(F/L+1/CC)6T+J3LYM1181)08 M86N=W9N2G#3IR=F&G#(-+"'9A1@`C+Z=^KZ;Y]0Q.*SI5;T%+B$U`Z'1B0!? M$QK:Z)6(T1$A7A.)V9[*V1D\.P.BH_12=L'^Q5#*W]3!E]/JZ]*T`QSIOK)X MN"`-U@NJUJ;VZ'*Y&WE/ZM2^(1.31ZEN$;Z\29R1:T,D_P!'J![,+#H?B,+T M(9?.,&E/:'.4;K&QK726,SRR/5@SMSQ($D4&)U>3R)`9M+$A-C?X21K$$Q<- MZ(;7'6]-:@7B'[3HHLT8!EW'V8^I8<-#F?$H]7T(J.&VRML1RL:-`.*0 M2K2M0H2O<*'ZE[C;8UMX$YI;H>,2-:-1LHKT#*%K8SPRI=T_SXUQU#*W6W82 MU,+E(W.')%KF[E-PQ3%G#HQRB!R%8$AP22Q(6((A-IQ0%NPC#O16]"#Z1E]) M2ALSBEAQ=EFL'D#5*HG(D85[(_LJLIWY`O#WZ('-/XF(5@6_P&`P&`P&`P&`P&`P&`P- M7/8?]+2?[D6;_?7;`JK@,!@,!@?,XDE02:G4%%GD'EC)/(.`$TDXDT.P&%&E MCT(!A9@!;T(.];UO6_1O`I'SUS1:?-<<+IR!63#S:1;9D[R6.*W:'NBNSV*. M/KZ:_.,$`J'(!15P,VH4&@*?#TPC`%FB]*`8M`&"-6R\YRB.->7NZQB3[@SBL:]12NXQ-H]N9R1B1.@' MA4G0I71``\DI88L%Z1[3!%H&@:>EEF_:_AP"_+2?6R#-+2S6RT"F#I770M;V M$YNL1.51P]#T8\[=W]YA;/IU$K8UT2\>RDA0SQ:7:UXAF)MB%C#M^%CZXY*< M*^M*>S4J61]S9'RF*LJB$$.<2`ZR.)+:GC2V-LJFXEB.1FC3^[T!#W.\G=T[BPKY"F-3GMXS/6B0>`.S]F;& M/;$[9G#Z+>$YBND<>GF[$BZ:7%]?BZQDR$$:R_'KP^+PZJ6[;5BL(8#`8#`N5Q7_ M`!\E?W([_AELP-DV`P&`P&`P&`P&`P&`P&`P&`P&`P&`P&`P&`P/_]3V<^7M M^0+P]^B!S3^)B%8%O\!@,!@,!@,!@,!@,!@,#5SV'_2TG^Y%F_WUVP*JX#`8 M#`8#`8#`8#`8#`8#`8#`8#`8#`N5Q7_'R5_WY`O#WZ('-/XF(5@6_P&`P&`P&`P&` MP&`P&`P->W3U7V!,+))=HS%71Y;0QIK2"6(RRA$Z4DJG(9I/I&:#?C`$X.]_ M4_UX%=?F%N+^K]__`'$CZ_@/F%N+^K]__<2/K^`^86XOZOW_`/<2/K^!"44> M6*=739/.<.D,M";?F%N+^K]_P#W$CZ_@/F%N+^K]_\`W$CZ_@/F%N+^K]__ M`'$CZ_@/F%N+^K]__<2/K^`^86XOZOW_`/<2/K^`^86XOZOW_P#<2/K^`^86 MXOZOW_\`<2/K^`^86XOZOW_]Q(^OX#YA;B_J_?\`]Q(^OX#YA;B_J_?_`-Q( M^OX#YA;B_J_?_P!Q(^OX#YA;B_J_?_W$CZ_@/F%N+^K]_P#W$CZ_@/F%N+^K M]_\`W$CZ_@/F%N+^K]__`'$CZ_@/F%N+^K]__<2/K^!:3E.MIU"YC(U\JC+D MQHU<:VD3J%H"PEG*?>B`[U(-@,'OQ^J*$+_^-8%[\!@,!@,!@,!@,!@,!@,! M@,!@,!@,!@,!@,!@?__6]G/E[?D"\/?H@G^5>49(\<6N:E"8-9:EE; M;D9[].9A!`2A)`KU"4/YIG(-(>?AS'W8=VC6?(78\SZ/A M=@&2"[=2.K)\]*;#!8@$TJF$+MPO2$2M8UV6Q..CC?'X3RO6DK$HBE!"K^UFDT(1#<%7.\W(.+%O80HGFK%$,+1&@$`.P MJB%M<*#1;UL0-E*"_1OQ:%K07"P&`P&`P&`P&`P&`P&`P&`P&`P&`P&`P&`P M&`P&`P&`P&`P&`P&`P&`P&`P&`P/_]#V<^7M^0+P]^B!S3^)B%8%O\!@,!@, M!@,!@,!@,!@,!@,!@,"G]4_EE=>__C_E?_<;FP+'6'/HQ5<$E]E392Y(8?!( MZ[2N4+FB.R26N*%@8T9K@ZKDT;B#2^R=X$C1$#-$2B1J3]@#O80;]&!7&8=V M\S0-95R24SEP;@6S$ZVG;*X@A\N7LT:AEQ3..5Q5LHLEX;V54WUNQSJPY8A9 M4*EX,2%;6"/$9LM.C6GIPZ07F)\BISK9TZ6>H8T%-QN?3"2OCW")XWLC_&:K MLM=2UD.M9+S8UL-K?$VXF_<75)HZ%R6&/*A$2G).TXMPU02M174=.](K[(;J ME<9DZ'5)(D\.G^Y75=HU@)AF9GO`2R(F);0AT.<%,B9$Z$!R].22/:,E8E$9 MO6E!?I":7631QB*=CWE^9VHIA8U$F>Q.#DD2>Z8XD"J&I?G$)QP!(V<@*$[Q M*3-!)UZH?[+]COT!$M&]'5;T+4#+>]?.#\EJ^1I?>;#))Y$I)6Y;NPG$IU3= M)T"6<-K&J41EX1+"CDBX(/9S@CV'Q:,`8``35IQ;Q.`VG2Y'MT+1E.)C;I23 MMP+;SSCDQ*X:/0_:`HSE"%,VOC.XJ1EJS M@)T+FB5GC*0')DZ\T)2<\PP1:)0M)`<+6O06,X`1>C8@ZV'Y0R2.N9I!#:_L MK@_P!B MTC7..WIITWMBI2AN]0D5)%/[6:68((RS/V(M:W]3 M`^BQY9VYN]\.#JVH6CPI1^]%BY*E;O`M-)(1B]N/-`F\*L]06`K?B]!@QAT' MT[%KTAB[99];/2^5M;1/H:Y.4%E2*#31"BDK.H5Q6:.+4TOC?%)`04L$8TR) M:SOJ-24C/T!084I+$$.]"U@8;??0U3M;P.PP&`P&`P&`P& M`P&`P&`P&`P&`P&`P&`P&`P&`P&`P/_1]G/E[?D"\/?H@8^/>5N@SSX\\KSG.#\@WJ"\6AZJM*-S+1M#Y._?\` M)V)1[PT9MN`[(G`!JD;7M$N#E4SY54<@1AI8UK,66K]8T&O/KTZA44A0AW7"GEJ/O M'=L32R'*[%$Y12UK-.#%6YMD["R-H6QH7S5]86Z#DVM!Y-(F1(! M(->F1RU,U'*AI8ZW;.#H9#Y9$I?>D+0NI79T)>&25S[H&SF%%((,Z+YR[:O_ M`)-C_,3G0=FRDR1G()'SU%UL:2R9*VE(@;.4HVU-L@O;9I6K#,I=Y?DL5\9< M7\TQ&24OIUY)656I>XU8-5+);SS?B"%TW.*9E4>L6M4$A8%X&N1"GITP0BTJ M5#;Y>U-RHP*KU0Q#"``^4'*@2^6NXKBKP34H3W,OBA[34JB+O!A=S\,QKC-? M1DH2H9:N:OHR0Y?%$4O9H\F\6TZA`U(?_P#)`N5!Q.:_*`6\Z7"TVBR_1F&C M2'2?WK&F2G38^2]L3_PWSIR:;!%ZA(?LI5!7&=40LG#@@,)$2H5RI<5L&U'C M7*`BKDCR,Y!RW;'/MD,UJU@W&TVUU"QR!SKRMUL)F4W;Z^\NF3<,RH_;\E$!))WM!X`N00R:.>2DYMT.@<>D# MD3FY1^1I)$PN[7I:TJ2/2K*<$@1/;WE`R^Q9K?4I!/Z!?6V[)M=S\MC<\HA: MO1'E=&\Q5[S]-IC)1M,T2EK[&KEXA"AZBRA&4A%I%('YM&I3;>1K48<2YO)\ ML6S8;U;7Q5W5:Z%7O$28]!KQGM.N#UU5#4[K%>>B+-.`2U[VO#:'QA1$GYFYTK^C)8]PV4N-=I5C&GET.BA4.%, M6LM8<:WRN;-:70$*^T7\DWVF3.RAJ'#1"?:G:M>,/I"UWS@0/Y;1'[Y&;X;@/G`@?RVB/WR,WPW`?.!`_EM M$?OD9OAN`^<"!_+:(_?(S?#!W>`P&`P&`P&`P&`P&`P&`P&`P M&`P&`P&`P&`P/__3]G/E[?D"\/?H@@U[*]M[$[)V>9%(C3XX7NO/-DZ/&'D&<6#;-C?-Q(&&T*IZ_1)*ZH]K?83UBU([N. MKFO8RJ%4BH;>\R<><`T-N<]\PMDXP<*0HOJ@BR) MS9\AC=-)YU<3='8*P0]\F=KR=PAZ\<+:$:N*[E3;")*CV)V2LK>H5M#*H1&F M:6*#3-[#K[H\Q4R15)V6JY\@]N$'T#7W8R%DZ,21>'/]2M-S\F5\RRIY8WS; M@N?=HFEZ?Y"6WM0W!O+V_P#NURVDT$H@M6(,0JGS<8.FH>12&Z:YM5IM>I(9 MQF1+&/:*MQ*+7F78,23+ZU=8,..399&V5MDB](M6JR7,YK,:4`?VPG1W^RZ# M.Y3YMM+1%CB:_GS60^.J^%-S%2O0%5>T&K8E/G;: M1MVLYU]E?E*F61R7NCPZKF@;RG)>4QZ4I`SI6U6K`:867L1H7=Y8ZI@G9=:S MJ:UJ%[CZ:&VE9%).Z[VV(/Q09;`%9+>OD4*D#$OEL0E<87%+TZUJ<->N3+"1 MA$(G8/V(@T9<6>9;U?-^@Z$@MJ68"1PNS>INK*$EKG/JPAL0ANVBI&",&U(U M5S.X3&HB6KN>32%^-`O;5.UZ=6F+*V20BWZ=G!L&:_.%I-V0=!G$U7;:5ZYY MH^5=!R>)N.H.CDYD$AEHR.K7YI>&8:SK4BD(]Z4% M:$$'7MYL"V1\UV=951M$XYWF]%VMQ0*=@M-%4S\U+*JZJW")8UK3US6^3YA3 MH5U83`2Q2()Z-CR=!MIYIOEOZ7J1BN>/QE?'(?,5+BI@RA>^1A M]%+(BG4[3-,T2&1=V=BFM!(-EF#*0+]IG=($/@6I4JC0R`!/>`P&`P+E<5_Q M\E?W([_AELP-DV`P&`P&`P&`P&`P&`P&`P&`P&`P&`P&`P&`P/_5]G/E[?D" M\/?H@D6OV>P^'ZNOJX!L=VEZ M3;6,SFWNR31HB=JFQ:F7IM'`T$0RMGI332M&@"/6]A]/IUK>O_K@59,XKYB; MHT\LQT!:T4?6]-A[0>=GK324_P`_**4()H;.U)YQFB2B`K&DLHU.+T)?8`B( MV'1>]ZP(RZ!\M#EKIRT7&YK*06$*:/+/734M5Q.S97%VI455TFW+(2O&TM"X MI`>L:UYIF@[&$17A-V:$`5(2SP!WFO+OYR)5]#`;BK-9(GU$;/5]PUDP6Q.6 M2L7Z16G'SHM8\L2PUM=T[2=[ M,"`U:Y2-];@IEY90"4YC28-``LM-O1>@QJZ?+PY>Z-=KNED_:98X.?2$!KN` MV&Z,$_D+42XQ2LY3&9W`O%$[FA24,E?DKM(U:Y80L=E*0*D\S M8AF'*A",,$+>]>@(3K'RQ^0ZGD4(DT=ADJ'!9K:7PF%[6*3Q;V>:8 M?L)$,\KKDHZ/SB,&L,_&SV,IH57+TXK0FGC=%',K$U1JDS-':=-&I/B6RL2( MD.B=EA5Z2EB4Z.%KT[#IV;RY*:K]_H1EI:5S"LXO25\R7I(V$HK%F[D4J6RU ML1R#=TB2M*/4C&0F5G'EA1>T/,+MKF/D.A7ZEFIIYSFUPLW=U]OE+ZK*, M!3L$M9NAY$ZI(J^O\M94Z4\J#HE"YI4,C6SDOIY:8LTT]N2I];P,RZ$ON53: M4^8DMDUNO;F3.O*MY_L2IZ@.;HN]5R]`F<4ELEE"6/,BF(."TZ/+Y$LTC$K] MN"L5G/H$8U9QX6@",)17][]00FU8365=I&%!%V!-Y:$EFB(QK1/2U:7S! M9#OH:5QT\U";)$[;3Z]I+0E*6)0C;([MMV)R+,)&(.PZ2K/,3ZN3=6QR(2FZ M&J=TV^="^9S52Y*KJB(J#6"NN6:W;)ISO/=K*\9620OCK8+DXC)`$C92=_)) MT2A(VH%ZS84,Z"[MM;LKR_.\*XG\V9K2T@I'@VV*R`3'(,VS74FE=[1%!:93 M>SU\FVC3)R=M85!C7L]V<8^4H-2*UQ@PG@+#U7=:6F=!Z25DP]Y))G5O.4>J M6JU;>\Q]`O')+,6D,94DCBR0.;7'UB^(1]8K?DY:A420J$WA)]9K9H?2&BWF M3K&[.?N#N@^8&*6Q9IZ)XAOIAINOWFW9)%(XCG%'R2U6XF)^KGCL1+*K8Y-M MB/9ZH01"#.H;YC_`$A*K?XK:&^4O3K7UVL5.II#&RFB MCDUU%S25VG9Z-S,L"`G-2<,QJF70>'A2$S.`.#6B8"D@GQ:BT4J3-QX1/'_- M([Z45A:\S9HVWV'.F7BZT+KGL#)KP@!7+%Y1WJ^5U,U0%Q:V-`EDNBF2I6T] MS.9Y,H6NJP;*8Y>M`AV>3L)AE%Y.4KZ,\L>=:Z!@/5D/7WOU8NC=LM%31\E7 M&H0MH*+ND2:E8HLW(DCA/FM:_F-3B8R:0DGKQ!:C$P'="=L(4^2>9WT9T1S+ MW)&R+O5J7%KX59KF@\GC$>@<0L)!)$EL/4!M$M@;XFWK1Q2,N;"E++-0+CW2 M1,Z53H\+DD5B_P!G"9;"Z5VUD(C,/32>/1**O"J5!3%)]DK$I1:GQ&HA)_0$J.O>74CD2Q,\5O5M% M!5OFC0CEJ*]))X55;TV65SC,:S=I%+Y7I,5&BX2WY`O#WZ('-/XF(5@6_P&`P M&`P&`P&`P&`P&!T$K_BM)/\`@#Q_!RG`T78#`8#`8#`8#`8#`8#`8#`8#`8# M`8#`8%RN*_X^2O[D=_PRV8&R;`8#`8#`8#`8#`8#`8#`8#`8#`8#`8#`8#`8 M'__0]G/E[?D"\/?H@P[V$6O3_IUO`JC]"^KOM]/OWTCOX+8# MZ%]7?;Z??OI'?P6P'T+ZN^WT^_?2._@M@/H7U=]OI]^^D=_!;`\A_9WG+\\\ MR^=15'%R24O*GD.`*CJWY`O#WZ('-/XF(5@6_P&`P&`P&`P&`P&`P&`P&`P&!UKR@ M4.K.ZMB1WGKNG$M?[8HITF[E.JYLSE M]D0*Q/:CFG9*DF0!O=Y4NHU2=2K5*RDQ@#RM!/"H#UXQZ<6\[,#]9#U'(TFTW1\,L>XQ&(:S.[@U,Q)"(*D#V!%_F$=V)N'8U7+PI:Z_P!;L11;!".46_/E%75<@=*P MIJ:6LTPA?."8])"4,XM5RBY3,PISB0!-$8J/+TJ4)26Y:%=.;_-R9^ANG*_H MQ/6[/#$%IO$D9(Q&Y'.B$?03"@:N7*LZAC%FS6H%#60J;ZKL!JF#XR-[FG4' MIPN#&1OUQHEQB=`'+>O->]@ZFM'F1@J1OGBGR4T#0\$ MO"+.[W6#DQH$;)6]_ER-R:8P^>\1HMJDK>(1IHG%42T!&"CS?;#CU!55;$CH M2-JI))W#H(5NL"5SNZ+,U'*>=)I60K3>,(;D7F&%3&W*,I7G2'F M2&83B][&J&XP6BQ3&'F4PHIB(0JR+"C4@9R&W;JGFCQ7%@M3PQ'^@]J4(UJ4 MT8Q$*?6DA/EE=R<\U*^VBS31[FA"*DVM^7VY,&.K+)EL$KQQCM5--X+HG*); M%8N\-*":*:JD+8\(VOQB4K@.J%,G"8L6I4QP0G/_`#8>.ZP3.@IJ\6XW.T8= M+89YW&&^@KBDTEK=;2+!6$PL?4_;(M#GKXLIV>#W/%WL@TX?JG!M>T@T@CQG MEEB#]2?S7^/HL#(B/,ZY%.:V=X,ESR@QTJ:R&T= M5K4W2TDX]/U;A2V-$CKU.3T?#7>-&'+M`*),:E:TP0&U.:L"$F7=/-*PL"NR7-D^/,9,C;T%E4S(VE5M-L9B M90@T(P(2E"8PT(%+\U_E1Q65(HCKA+GJ$VE85_P4^S!QQ0S0B#IN:*97W1;$ MMDZ]W&E5A88^S)P(CM$DC/3+BUQ"D!)[%KY&Z0W=;OB-4%>D)/+&X*2V@/I>1:;]AW M?+O:2#H.U.C:861<3=.>?+FG=>2`<3TZR2(,\>8%21/$5,MF"MN:4#1.IBE$ M:M`R>KTJ+1>`_01IQ`4&!>K`8#`8#`8#`8#`8#`8#`8#`8#`8#`8#`8#`8#` M8#`__]/V<^7M^0+P]^B!S3^)B%8%O\!@,!@,!@,!@,!@,!@,!@,!@,"H$U_+ MZYI_1`[A_'/Y>V!,=UTC`.A8,LK&U$CP]UT]*"=R^&()$]1UFGK.`)@5,.G& MF!:W+I)`WH)GJW5D/.VV/*7Q)%Y*E&8VC=+OCZ:RH52I]CFF]_/6-Z,TQ:+:%'H@ M.#)N4*IETMDU@O"NROG"?JU45"T3UMMFQ&>85M7R]2PN+TS5*^M\E2H"1*`D.*HXZH)QJ[YG'N*NDB@*ZQ%EL2]KD,NE; MLKLBQ%[PLDZJ3V0\*G@;M,5&I96+86Y4\6+*GMVFTWM*$1B MM)9)K)4.:]2*<.6Z]A+,RH=K?&6VMK4D(2A*`2#6@X<]X!Y=LZ<7C.9S"Y,^ MF=)PE3!KRA@K3M)OJZQDJFNRZA%*'JL6F8H(058Q%6)R6`B2)D1#VF;DQ`25 M(#""3`!&\R\K?E*?-B]OE*2UG18_MMLMLVDRFY+!43&Q079%:Q@T_63V5JGH M][DCDLA5+Q1I1GFG:,;&]@1DI-D@*]&PZN3>5+RM+SW%2^JKJ4'NJJZU2X9% MT3=#ZW?1-JUC=]QD``C7$`(2S.U:;C;R:67H.B%#8`!'JB3#2C`R)I\L+DIL M5(%ITNCW=PE:9OL1'!(_/?#U'VEL+E;5C M7BL3H&U[6*4J)0=9UMR-QV>#6CO0YB(\7LY*5IQ>B&TJ#:[D3FO;9 MU(+`6NSK9=A+':6NTKIE+SY)V^?.&Y(!1/&&3U`WI65V2NVU>GA.F")>)288 M>,T/B7Y67'I26&>SQVU$,B@+HTJXW8C1T%>;!:B=A9JR;*825ZILQAL!LFJR MLSJM9DS2I8C%NT"L17MYP!NHS%PPSBF_+\YWH3H*Q^FZR23QBM*WC'@=EG[L M"1J(Q-`NKPXOJ8F01(:G3$Y%QAR=E(F39I(ALI2@TE&(DDXXLP+MX#`8#`8# M`8#`8#`8#`8#`8#`8#`8#`8#`8#`8#`8'__4]G/E[?D"\/?H@RIU=`R>1A"Y+PA"_/&@ATL4:UK6G!1K6M:T9Z-:U MK`Z'WLZ_;-P^S5/US`>]G7[9N'V:I^N8#WLZ_;-P^S5/US`Z<]*0I?VR5*`; M.DC,SOD?:7PP9@W1N8Y,MCSE(6E&LV/9Q"!Z7Q)L.4E!WH)IB`@0M;V6'T!W M'O9U^V;A]FJ?KF`][.OVS+79+&ASK6K4G9![+>3W*=(7D^+H26@S7A5"-5` M"GW]0>PX'2F]0]MT.QE6E"#GJZP,'LVY`=4K22^&.%C M)X\6L*,<#&MZW@9)@,!@,!@,#1=*_P"-,D_X^\?PBIP.@P&!QEB@21(J5`2J5HTR M8]0!$CT2)6K$24(P*5*%0B5;X4ICJDM2H]!0%@"3%.@[]2$S8 M@:'-:ZWE9F%V(Q3:.H),D+6,K>ZN[JRM9[:;2#DNG)8E;B#%"C MV-,H4)PFB]!?AUL0@%Z%O7B$'7U<#`Z8N6"WU7D=LZO%ZA;&I.C-7-X'!/I` M[$IRG%P:]"<&L1AAZ'9RIL.]7H?_`,P!\6OJ86RSBL]%(&$"9,M&]M`$:P8R MD:L3DC"F5F%C$686F/V=HH\8#`;#O0=[WK>MZWA&#:MN,&VBTU.C2OSB\O$+ M=YR3(&UJ$MA*5N9GE&QJ6M?)B#A)$TA-5K-#+2>'8ME`$(6P_L="+G&I%1+T M+D1I4W+4B]-L0@:4(E!*HC8P;]`PZ-(&87L0=_Z=>GTZPBG&N]*()EZZ'.OQ MU8U+7=B#GAS>'.,Z$P(+;=RW0UGC"A:VN#BHV!U`SG[*6@)&AUH/I,-`'T[U M-:ZU<`AY9U0#3$SLVJ`$%&*#QD+DIP"2"1"`:<:(LT6BRBA@%H0M^C0=ZWK? M^C*R@2Z.HZSHUSKMCD1$KE#]:)[ON*,5>1\N2E%I50@A$%,H M&8:$)!X@BUO0!;T+>MZ^IA'S&_,98@@,>6DL8PGC``;BC`(8$IQJ=2,(1':V M(*=02,`]Z^H`8!!WZ-ZWK`YP%:4Q0:D`I3C5IP%FGI0'%B4$EG>+U)AI&A;, M+`;X-^'>]:T+T;]'^C`BF"W;";#L&TJRCXW'WY`O#WZ('-/XF( M5@6_P(6Z2IXKH?G6_*`/D*Z(DWG2MIT\=+&P!AKE&"K-@S["C)"WEDJT!IBY ME`][4E!">2+9A6M:,!O]EH->8N$KYKAMBHN2Q+)2M.;4ZAO7R=0-(E6!3>%4'`@?ET3Q MFF]`2%[7P5B6U]9W1]U6'9$`L.S6Z7O)?4MZ]*7=9/*">#E1QBAL\YY1K;Z3 M)&QW?%13FC$RA5IVI,M$0I2A]./_`"U)SRCTI(+/CENG(*8<(ZPQ9EI]HD4P M%>Q!B757EN M]%=$2GJC9-]-H()>,6M%DBK&_2RSRD:5IL2J^?(''ZTE4'0B709)$:JF]1O, MQ:WAN)$Y*ETB.1[3)?7N:YR#'<=L\:V_9Z*OX;1L9B)L2A%`OE7-;P]2 MTMI?4+A[TB2AE0FHWEGD3*!N)21!.H`M0)4CSM>$(?;TJ?0MB4^MSRS1CYBM M)/?5C63.ZWB-BZD;=");6\[-LQU:Y75\F8Z6>:UD4%]BVW;!)FE4L>E@D99A MA328):-6<$M1O7J1LSA4JK/+TZ-C$!E<'0LT3K)XEW&3I23M,&64MNBWBTP7 M9))^2Y2`3"G&[K661P-Q3L*AQ$6>L3)P>JT2,D`-:8M^T_J;W/@JQI;3_0R' M:")0:72.R:WMGG2$`5MZV/5I,:RBT<:EC@I&UH#(^B-LA8UJ4ZTI.2>1M,(D MX[8CO$$IB=N8S2?\@3]MG"`VLX/#'IC1<5V]1KL\/#P7$B9I95AG^]3E;X1& ME#?)4S>^NA:HU2J2GIS2%+F+9(B@A$:%A/M[]L^X"Y^N.@PW"FM-G86M+-5M M8/;%[BDC<\E:7LU;,\5DR,2%JC["E1A2.#.'03AA,/4E[#ZTY4:$Q4\>A+&OFN$;F@D_01UXTY[1.5CVQ-#D68Y$-;JZP1O>`1DQ:$+>)E^$*_X?4X6<[]&LK+!87!.@)]94NCE9K^D'J:$'3J+3!QBSG=XVQ8QG,.S8U%VHXN.2I.N=MMZ!O); MFWV_PHM'"]8'";,JNY/`E\%\KW#5CO$XZ^W#*HNV0<$SW8S6='I\-KNQWLMI MG*UG.B32J;'EL;7YQ":Y.:QQ>U)Z[U.M@3!`$IB]ILOPL?8G"L%EUM[<;VPX'S MTP,D?AX[)EZY$V,;4A)W*'-]&M":`9A@Q!$([8C3-BQ$^UV1 ML7]` MWI*%,-J:/R(:X,18T[.V&R"P+:L@;4()B5<2,!@0C#O0P!%H,(&YVIQU.H$W3"Q95=')MDRIAK%/*[).2/-N M.N;SFPF7O@=RB2>STK#S#B(;!&@ITG,V7%@( M'O:=H;EJCT`W^P^IO`D7RU?-)YW\U.#W'9_,S38B6NZBM,0![,2D^C6MA=NZ5EHM].6ROH]H8Y M!=*&LYVLJ!ADZT#;&WNT4T6=3H`T2%Q,&66@8W*6`2$JSA""$I.,8M[UK7IP M-7B>9^9JKEE!F1F)6O\`$!XD%-'(&\*L)8S$>C3%[?H,NZN7^9*XV# MTTPTRCL0NJ&]OYX=Z4>*Q+I=BF19[5:O/2V\HZR"L5N5@E#A)ZY<9J)&N5NJ M9.4-M4H#FU+O38X/(16JL'S@BTSN=!6EJ2U`68)CX-0=@1'K;N&-7E![ M3CE`R2W)U8/.CJ>97KO6+R3)):@AM[P&`P&!HNE?\:9)_Q]X_A%3@=!@859+T\1JO9Q(X^-L+>X]$I"^M M8GE"J@1.;*K4I31IO",):H@?HWZ="U@GEK:YU[UG%AT\NO: MPTL34Q&O*J43VYHY`JZDS$_LBQRD,H1QP4*>)E:*QLE#DX?V9Q M0$ZDPX!R<,UN_7G$]/\`WW3D98+-D;M'+,*15*]5*S2XDEBCJE:$%VLR5]K] MV;""9:+3BVN3[%L MJF8]7:^'E*Y6ELVL&U4NEQ#RT$29N:CV*+%%E*%II#N#QDFA++'H[>P@:=;^ MD(4AW18<[;^<9'.F6.HT%F<^WE;LM9X?&58#'9TJZ0KD1+9"7%]GZG36:C:6 MX`E!#GK1)YRXO9:OT>L"E:M^LF_Y2VT^8YSVOA$WL!S1V7%&"#5Q";64ZD\* M$D7OT*L)]^*\7L]5]3U/H_;,FM])^L;`B^O:H/LK=0DN;EN1?'Q5389IMA!NOM7. MDBP94;`Q"]^A?-.NFW>QZULH*$9P!)`KO:=>'*QES52$/F+/8^1X79"J/-[C MT3.:/MVYF^+1.%OCY7[$S54ZO:-2^RU$HG38^,T05[;BDHSP.IZ@L\PPT)8P M%[*W-:Z\Y\,Q0=WK(V_/;I9K>7N'1CCNH.B7YDAL7\<@VY3=U:T,C=&1S=YS MI`?&F\;X$LMO4@+<-:2&B",WT%>U-.OKVEEC[WI1^9W9O7H@)@%#TH]4/P@$U.M2C%>F8 M#-.>)!TLP(I'\0(_&+!E!J=V;R&]\4)*UT^$R5.4C)6+RM'D.,<5I0_MF]"- M*WO7I#L(MU,YSY0[1-G=*W!5%,WR:Z5,WQRQ7-/(YG`01QW3FQ*K5JQ8!*>P M3A7,MEN,G:FY*2V16_3X#BQ!].]:].ZS>.&?8#`V;<7_`-%S]]WSI_R[ M%L"W6`P&`P&`P&!342,EW\P@I>NT(U17O&IZ.,;V+T@0DW'=J$KU07*P&`P&`P&`P&`P&`P&`P&`P*=>8<0`[@CM,[ MTB+4MG*U^/[4K*WH*IJ?XW5TG?XZ^-QV]"VE=F%];4RU&>']F0J(+,!O0@ZW M@?_0LI8/_JJ\K]\\@AZL[WC& M)M(!3*)%F'#]4F+9'U.SM:??@3M6P``6$+H>0]Y%\WX+I#H:INTV]EE$I=^@ M3Y/74NIJ[[7:HE)Z^%7\-:2'3W;&GROEZ%=M[;58#"G1M*6`\.M!$,GU8MAO M4^@AS-\E[`_O_P"A?^J>`^@AS-\E[`_O_P"A?^J>`^@AS-\E[`_O_P"A?^J> M`^@AS-\E[`_O_P"A?^J>`^@AS-\E[`_O_P"A?^J>`^@AS-\E[`_O_P"A?^J> M`^@AS-\E[`_O_P"A?^J>`^@AS-\E[`_O_P"A?^J>`^@AS-\E[`_O_P"A?^J> M`^@AS-\E[`_O_P"A?^J>`^@AS-\E[`_O_P"A?^J>`^@AS-\E[`_O_P"A?^J> M!K>=&M$QN;BR-H#2FYG7JVM`4>K5KSRT3>H,2)0'+G`]4O6F@()#H1IYIAQF M_P!D,0A;WO8<#`QB:Q@N;1&2P\]V=F)/)V5Q8E3LQ::=NZ)(Z)C$:LQO]^-3 MXTA4B3&B#K9Z0\(?%Z?#Z=:WH*Z0CCBLH1SE(>8B7R:/T$D,/>X$:_/AL/*G M:")/0GE2!F22".PR/IE:9E=9&XK4.UR58(E2O.].QE"T5IB]KN_**W'RYJO> M(I8D3=K7O)Q(M)PJ)RE[NH=*NT\JSJ0:FYF@):0PFIR6Y"G1(&E,$\):;7K_ M`%6O3O6MBUN8O:\<.WWY?U::-VY%69W?M_LOA]7ZSZG_P_89,7 MM?XD0CB6J"+),LW3W.C'(=DJ+H`P&K8IN+DW"IAX(:;9($0(>!R&^Z2@VL"F M,5C:`.`Q&A1Z#O0-7$[7,1B1Y:M/(H+$8(U63=C01$JRLRF`2)`\5O\`&5_J MNUG!4ZR.$R)2KJ]4U*FU(X+U!J$Y.C3+2-GCT(\P/HUJ8O:NZD?EZ59)RY,2 MX6/<914JH**K(L:D)+8:F<.,#V+W'2["N8F0R*I&FLVY MH.>O2%`:PJ/9Q#](!:T6:Q9]O:W?.%12Z`40DJ:W5,-DX212IF*;(W% MHS&X\5`'=ZO MJ]*,.P`/`<`HH(!;OQRB1O\`+II=KB4IAR"86R2WR"G7*@6E8-]B*IR@U1/< M]76&^1")C6090B-"\.R[V^RII`*2*)VJC(& M].0;93HM,&6IWY`O#WZ('-/XF(5@6_P&`P&`P&`P&`P&`P&`P*+NO% MGO-T\7!8N]3\3O6^I]K4&*/5>L^-1?K/5^L]'B\(?3Z/3Z-?Z,#K M_H/?VG_R*_G;@/H/?VG_`,BOYVX#Z#W]I_\`(K^=N`^@]_:?_(K^=N`^@]_: M?_(K^=N`^@]_:?\`R*_G;@/H/?VG_P`BOYVX#Z#W]I_\BOYVX&MSRQ[(J_S/ MJEN2W:KF/Q=8ZDZ;M_GG1`F\F3;DK97RMJ7PVR$R@MS8A(&^R8+(VUV`B]4> M!`<>U*$34,!6O"+8C!!UK6][UK85*\K"31;S0.)ZM[! MC3Q\UZB\VQN2.ZTMS4@]E]F]XN?C\'NSQ^/UFO3X_1X= M>CT["7$#K*! MVD7)KXJNE'IFG,Y?($0T_.T_`C+-)$CHS1*6Z4)V=R,T8M*-+)_V;TB`+8]> M'85FY?\`/9YXLMVM^"]'MR6AY]5_1/0G/,/=8&99?0%3=&*^9(BGFMIS2E)U M$*A:SUX6:-#$O5,2A'MP3$C*`2:N&/>P@D/GK\SPOJF"PN726&H>*K8X6^F1 M7/7C>5:[H`TWY^F&CBXS-8.CJXX<%B*E6XJ%89&Y*TR(DPLI.H"2,XK9@<9] M\XN2,MW6[38*?KE8.!>93R3PA$)(HM.3M[).XYU1"VB=-L^3NJ"L9$U-\R:6 MI\(*0LAYQ:)X/"9HIP!Z`A&&RZINY>3KUN67\_5'=D7G5MP=CDLF?8JS)G[U M1T>AXS)%;.EBRKG`MJ>?]C5;)4>DO`UJ0+SG6F/=+ M>9]6_74:KN@N?O+4D%"1N6WLPO-I62?)EG3`7EPK!>[15@JTPR',Z5O8A(G1 M2<<>06\+4I!1@P&>/87%:O-C\OU\:X>\,O0)+LBGG1IO(D8]VUG(.CDT4L.(`,0VHME3?57QJ6RJ(,R"NEEJJ80Z?%=+(C6I3(RTNS M&XM2684(80K97G,<5PF+4M+8F]6E<#5?-\TO0\"45M1=UNY#JX78D>Y!&)FS M;,KTI7-8DNA42>7%J,CI#P=(C6TU,VEJ!EJ1I@GAQ\RGAUKDUB0]3T%&3)#5 MK;<;I+$;>QS5W)-*YX;6IVOI%#G)JC*UKLI^IAO>TQDI;(V>[.+%ZS85A!(@ M#"$(EAOG-^6=8K4E>(!U(QS5(K,=_5DQ6O;@?W4M!'(&P6?*9"L8FNO%3VWP M^'P*4MKD]/1Z@8&S_`8%0/,)_(%[A_1`Z6_$Q-<#__TO8[ MPI)XU%?+[X;72>0L<<0FPZWZ M=!#O?^C6\"WZ*3QIR>WJ,MTA8U\DC9;<=(H^B=D"I[8"G@@:IH->FDA08O:R MW1,6(Q,(\LO1Y>MB!XM:].!^FR21U[$4!F?V5W&;LQ"-:D-)T;KTE[-*&#T^(.]:#NL#'6:7Q.1)WI7'Y1'7U+&W9Q8)"I9 MGMMCD2D\MK=FLL\`E*8_99Q`1AV,(=;U@?.)S6&SUI"_066 MQF:,0CMIPO43?FJ1M(E`22%`B`N+.J6(]G!3J2S-A\?BT`P(O1Z!:WL.VA4%*T2Y$K*`H2K$:I.,PA2E M4D&!&68`0@#`+6];WK>!^5#BWHU"!(K7(TJIU4&I&M,H4DD*')40C4N)Z9`2 M:,)BQ02WHSCQ@+T(022ACWKPA%O0=&";PLSX[Z&@6E6_;/4_[-OUO_`,/V6!S$DGC2]N8WA#(6-:TR?V/XM.B1 MV0*&Z0^\$IBY![C7$J!IG;VY$2,XGV<1GK2@[&'TAUO>!SFQS;7I`D=6=P0N MS6O)"H0N38K3KT"U./\`^!Z18E,-3J"1^CZ@@"V'?_UP.ODLJC$+9E4BF,C8 M8G'T(DX%K[)7AO8F9&-6H*2)0JG-T4)42<2E6>`HO0QZV,P80Z].]ZU@<.53 MJ$04EN43:8Q6'$.Z[W8TGRJ0M$>)='+V<]9[O;C'=8D`M7>R)C#?4E;$9ZLL M0O1X0[WH,JP.O*=FI0YKF0AS;SGEL1MSBY-!2U,8YM[>\&N)#2N7(`&;5)$; MH)*=H&Q;+'X0[#`QLV91`A[U&3I5&R9((PDG4?-?&PM[V:H(` MJ(*TTC5:7[,/3&!,`'U?I$6+0M>G6];P,DP&!JR\Z_J\'%WE;]E7DD=!-,M( MJ)YKJMU1!VBG`BS+@,3U="'%L!]4Q0JCCW+"W88`ZWX4R`T8O0``A:#QJ?\` MI-]0;BO276O(;PY>!MN"JXS=<-1*C#/4@EE/OPXS(TC6#0O5!<)!%K)*4J-; M#L1A#"'>MZ]7O0@_H\8'FK_]K2[)_6_E.3NK*NCMB$`-6O_I0WC*R*C["Y M.E[5(FEO89E!^C:U&\-*]&AP(_F=L597#G$66P[+K^!O%@/!4>@;3,YE'8NYS9_/7-;80QQ%`^. M2%5)'@YR>T2<"9&`XX1ZP@O0?$:7H0?EAMNJ93-I56D8LVO9'8\%)3*)O7[# M-(V[S:')UFP!1GRJ*-[DH?8\2J$8'18E9!(1[%KP[WZ=8'6@O2DC)#/HB7<5 M5F2NJ6<^0VC&`6%$AR&MF!,A3N:E\GS*%WVY0YG3MJHI0-2XE)B0$&`,V+01 M:WL.F1=,B[RVIF^'\Y#6K)/2CUTTD MZ*?9;&4H;Y1IX9:"@$?:65,K5;?6I-ZI8K&WG[5$)D(9](/(FGX[%ELN@_8D M)BL97]\\4]SP6)O'+,@EBZ(*^'X.37M?U@]2<'4T>^."&4,#,U"=78*%L-]I M3*!DI@!4@+3!>'RY_+IF/E\)YA7;;T(QVISZ"87)**9@[E13?%[8KI#;@8=V[ M7,;:?-G5<^F39&GX^DCFY4\CYMD0%<%31=T.Z]2I).<[Q0Y4A>#5:)-I0N-+ M6I@(RBA(30D)Q\B=-/J3[XJ2X>F$[\[=I]MQ_NR*V/6-,.M62;G*V6601IU% MN#B<;PL10\F>ZXW[O2+MJ6Y2D)7JQ[]<(96B0DZ8>3##3>VG'K*KI[4L2B,D MK'G:`O5,V=R?`.@C8.\\JB((I2?<[SN?RPE!2EPJJ!PV-55UZTULZU[W3SEW/!VJ,<]2)72$-FM%UE9<$DS M/$*6F/2TLU%#KC?[37/[H8WOJ9D0*4R1*C92TA'JQ!W^_P#U[8XDD2I6T=/K MBXI""?,O<^UVV5K;3U9DI1VVRI[D88"Q%+OB^W)6V**/2 ML#M8M4F$:,,#++[\C5\Z"Y`X&Y;E'3L)9I%P=3IU4PJ^XOSC*HU9J-U9DU0Q MBO;8J-YC73[')JBGT=KJKCVUW1K'B5Q.3N+QMS6,P36UI)1AZ#,!@5`\PG\@ M7N']$#I;\3$UP/_3WK2'FM]Z+XV\H!9`JGM"17%2G/\`RQ8M26B092COSE#% MA\:Y]*L%FO>$6I(UKD\EN1\\1Z'JVYW=I4X.%:U\Q@0K! M/;>C"S*84F2$Z,2J49H@S3RU>1>K.;NCK6ELAK:-US5%T+&^;O2A%$:`8]J( MHK_,;7%A>$[>< M9Z@;84!<6U$OR;88W0/+W9WS!8<.O&G"[+K=DM:V)0^5 MDOKM_C39=$5?I%"RIA*XFB(;8^\KG<9:/TH@*U20HD0DX42AE">9W4O.JVL* MQC5JQ1C>.P92F=+5K>*\J0_LZ<4N'E^`0FG[KL2O=7I%N;1RZ(W1%4[`]K$3 MR@W)&=B;7IVCAR-2^$+@MC+*>\P=W=N@9BZK;TEZI-WOP!(J5JA1-.376JG# ME2O97Q+/.G7R-MST3&ES;$ZQ M_M16[.ML-K;5J(?[( M:8Q%[]MU;)D$EJ.+3IVI)MM3!`_"2'H'B6FXY MR7;U'V-,H5774SKSIS3:%?&UT[LB_E*2MTEG=03V114RY)/8$+@M%MZ;4!<" M7'VQ\*0-[J4D&+CD86*Z0J:7R[J[R^[4BE7F2MMINT+M76//T2N`(%M>P MF<X3S8^Z@EBA6Z*)GS%!YHD,U*ALZ4MUM` MYJ.]7X7,*4,IO?RT+QMWFUO=V""R!KN5?>_<+]5E)R-YJY;"*LK#H?K!7UI% MGB4N+S\:FNMYPL;*>8VP@49,6:;G:6>ZE7I:MN:D`;/J&A79$%\O:4U^D:X? M!.F(I2*0.31VIDL=J5C>6"NGF85XV0-CLEO%[J0DNCT:DB& MF].Y+5KB6M/,"B2?G'M>]"Z3:;VKVYGRF8[V[4DV'`K9L"AI)8D2IT?%DBA% M_K;17I9^\L%BURMZ8EZX+4U$G/CQ[`L]H?$-+W2/EQL48GLK>^;%MXS$%?]%=$NO94/C+TS3"HGE?-D="6`PZ;3'M MU8D@UPW$#`[I%@BC]A*E-1OS$X]TKR49/U5A3&BBN;DT3OI=/)!4K&]Q^QF; M=\K$2JPN;^UKGOFQ0SEWDDW2]*5I%XO!)RU> MA_@Z9ODQYY1Z9(!<2'19@>D;`8&+R^$0NPF8<_J;U@48X`I"EHK74IE\8J&KXY+&[J_S` M6EOE##`(HSR)"U).X^D&!(V(WMO:4[DE;TK"G+1%D@-"6!(6$G6M%AT'0;#\ M!@5`\O;\@7A[]$#FG\3$*P+?X&GKS+N"['ZYFD!44_(I-!GR9P4%`W'/EB^% M'5Q&.=U-W5+=,S6(6)P&KL4R\1+:Q+(B9K,D`UFFJ#0NZM(`M(>6&,UAQ9>= M*]G6ATS%&V42RI*V8^O#*+IB12ZL66<63:G=W0U;=!W^Z_&ME*$W-E,1J15^ M`R)IY0X&OFC7%0G,1MZ=N2&N@0%.&33 M_P`LFZYWR90\*U,IWOH*N2^AJJA[W,;.C[\B@7.MQ=!-MYP1NN.5G,+Y*Y?; M%80.E8#&12"(KP.#A*2!GN2I[83'`*@+LT74/9,6\O\`F-1N%A,L2Z9^9%\@ ME#/SJQ5N0Q4W+6VCV2!5^>X--2Q9KA)\58[5:%+^D1)DSB:A9%B=N.4K34HC M!A3B)<<=:S!=1RVVTUM*(#`^W:@N!EKB>]+O5AV)6%Q8_XR1@$WR%L*WH\H`S-H M'(A4B,%Z]*;K0;EO)M[&Z9[\E8^LNE:1A=`GVWRO"G:HX3$G.2.BEVJ1'<]H M-['/'XX?T0.EOQ,37`_]3TR4CW-6O*_*WE-U;.8G.GUPZ&YRY!AK(] M1+4.6MT5530?,'/<<<),TN)I4V?T#&R5"U$V*F]"B&H$H4EK!-R%R#/ M6#S9ZE=EEI(':D[WAJN`S!37<4*D951J`W!/D_=LI\N;4<@ZB+6Q)4K+ZWIU MC1->E4E,8DVD3J4NV+V0HXX(<[FWK7I2[O+4L_IC4.K$?4C*N[TB]=U^Y'`A MM9.MD\^]%]#4K24.E"Y=/W).U(7]76K(B>509'[.-0H4'$JRBQ`$`((IWS6G M5GI<3_;U?W%=MX.-^SRGDG/E-\SR2O.B*]/JBD8#:]EQ2WZEE=ARED#.HP@? M#5Z1?'9$YL$H:GY@6H!ITBU2)`$VS+S&U:UZL9FA-+W!%(Q3G9_%/*DQNF1Q M^DYC!I&]]2S_`)4VWML8B;?TO%++0-;_`%UU5&#-2)0U';8]//M7NES4(%37 M@?%U\VVFVF"7]9ZFE>DD];T8_+&5+8#A7*=MA=I(XWT,X\TV7*H(_J'O:841 MIZ9MHGB5+5VDNFB)G%N)@=F@5(TH2IU3V!(J^I+F"9TBDAHI+V+>//%)UI*K M&-(DD!@!5]IE+^GG,G0028(DL]"W1EK/(;6UHD:9,]/:M$02Y!(.]=L)SKI? M?==0JZ7CHJ2P&U#(9(GE]K=SIZ#JZ\>'ZJFBKX6\>ZY9%I98;4#^_M M/25#RKH>HYJ"1+>@T\"01]^@T$>B5!"EU*=&QQ;Q$K$I`#2#3`^MH>:6L653 M?4GH_GN[C%E>65!:HKVR)]"V)GJVS7"3]5EA;1.XZI6Q);=]T5[4D8A-43J MR>?(%$YK>\%@!9JDG,3MH(T@AC3*D\EKB,(8\_R*52..MYYNS6QO`D!"I6D)1*@K5!_-7@-DQQF>X;SGTJJ6658T5KWG)JD47AL$3])[F M%0* MS7!4S%8'&G:8OUC];I;(]TQA@E<=M&4D2X1;K#CTSAI2UL>FO3.H M&BV]!5)1#"5JM\PZK+.O2J>>SZ_MRL;#M^A&J^(TRVXPQV%.R8D_3UJ55JM9 MARI>O<;+JL]A.32U$TZ)\=TTXW-,8M*)FV(GA MN8R(Y#E,5)D+BO[D55\W2%QF?(5L=MM+0X,[5:;K:11A-+4G(P MJ5`8\)*4\H?9M&"*.3J3@RSB+K^>]66-T=[^A!D"K>*M?-\QI)H>4#"1.%4` MO&HB[&3.DU7Q>Q+`85[HO$H`,)9/NT2#6Q)!D'^ITN5AL3P*@7M^0+P]^B!S3^)B%8%O\"BG0G:.J6Z$J;GAIB]=NDCL MB+I)RHY?:5I"F(P&;UNG6WPN;P*6V:]P*^)%,9N\\%'+C:/L ME@DOJ78QF))DY9NDKLA]J+.:AFGA]&#S>K(45'TY8\KY9KUC>^?:55W.SQ=D MZA>)$V3Q!%.G;YY>L-B72ARYKBBB(+FN44`XN#*,IL>/?"5>D*4@:U`C2RPQ ME@\[!_)4WLU65R]&XB[U$LM9B:#HQT([3.+OC]3W?;?Y?4NC444"M4J$)9R31!X91+?.!G,4,C1!W+$84&)WSK]JM)29T0 M\(FAE2\:=>VJQIC2O7Z#>-@, M!@,!@,!@1?;=TU71$4W-;RFYE:$JUU<3_04F3FF;T'858#)NM^GMZ!!&IXXKHU<6:$5B3V/,;YUO M-FU4FUHA;7U32%,^5]ST7XQ:.(7SI+)WX8-C3JXFU'A"?H-=GF*?^NOQGWK' MZ1*-+?()8-;W8PSJQK@7OLEG5LWG6;NY-!5O5]8EDRMZ=)@]NDB8&HKXON*I M4H+C"I.`I"02A,.3"#9%%V>+UMW,Q5Y'F5KB<<7<+LC/6,;9DJ%L9447HJWP ML<@96%J3;)"C:X<@MV,)P%$%>H3E+20?L/2#0@O1@,!@,!@,!@,!@,!@,!@, M!@4V\Q18G14OD#FDO<(Z MD1H>7BQ/[@ZPYD=4<)BK;<;E!P^]GTY$U)790DUH\`C#-"">X%&?+!O^R+LY M\B591&8S8QAL$NV(V_5#:3/'WQA47^JFT]=F*83.)M,&E1*KI94HD8G..N*H M9LJ,.=R#]JMFJL#."'#R\ZQJ6]^4V6+PU/3%:(9"WWU64,K.UF.UFH5B>*)E:VL;*>I*ML.$NK30ULV'8Z-[BZNSXJY15S>V^OI8JF8$):/ MVM+&73P`,(;]A?>(4AR]:$"W-8Q6;"LA5]2JK>H%PE4=D43/E\^86^#2.I[2 MD48>T[&_-,^B:6&1HY`)P1I71G.86T&RR#FQ*%.$'692'EX45(!HI33D3BN`^NDD(]U-K:Z*=NC@L) M4'"4##)KJEG"Q&HUP3WV,P=X MK>I!.T_K%6CA@W1Q:%&W&/FC;1:,0B&4%AV*B*[@]9S"L:T8D,%:YFAD`79R M2%J7AXY]GB"U&N<5/$9DWWA"8W7-NHY4B,D">Q(5#DSBEB3!*2W8]7I MT2QC3PL-;QC_`&Y&I6'J"A@/.,,$$:O7E]\4R-'7*!\YHJAS25,G)200I5&R M1[:TQ%@MMM`(7F>/1LF+%:K43)AZ=1+?62#QN(_$K--.&'M)NC MOSF(Z;GAJ"&2N4P6PHJQFR)G7APZ*&R>O@*S7 MRMUMU+`%B]ZK*N*LK>8L"MZ8$$-:E[RW%PVK7]V1`,:D>UI#5O11?[600$L) M93\GV96WJ#"E;11Z MLQQIX(%'M>EJ)PK-U/.6LBX@TI<28 M&.6O4_(CY7<:Y\OB"QF15/3,%9+,:B;@8I`\5M#8I4Z+421R-^M>8)CH>2[, MC&J.(7%.3UMR5M"A6-661*2H;1L;;7NC9!"H@G4.$(E#2 MD:'F)T"DAL.415QDR%*SS5&ST)<"B-^^6HQR1A3NKNS'JMJP.R0L.'$Z>Y'\ MOJ$O;Y4%+Q>JVV=2BIH">SUI'B=/\VDCS(VRK:;A"(*E65Z6MD<)<2VM*4U2 MF9HZV&&;#M&@(-$6&O,I+BA[3,F%4=?4UYN)<7QI;2F@5GPZ%*+%3( MS%+>]N1Z1EFL.1*%3(N/**(4'%`1G[3+E2),I#$N'OZ&)K^E_P"83_\`OUTM M@6_P&!4#R]OR!>'OT0.:?Q,0K`M_@0C9T^YVB4PK=#<,JJ%AGJM4\N=2IK!< MXDCE8UJ,I"WOKA`2WXP+L6J+"ZI4J@Y!Z!B&J)(WO8CBP""O\*O/RZ+J8H%N M+S#EV5M_8#+$K9B,><4U?DNEV$R0#JZQ!_=HB^(TSN^2IVEC M0Y%!+T>WK0D!%$ROSRSH6!08$&B#5)`79B%-\Y#0_&F!5528VV91= M8W:D<0@T%$AE4+E8-K5Z'WNS->T[Y%Y*6IV:<5ZPU(LT9XA:'H7IV',>.>J" MD2!@:I!1U/OC9%&\;3%VYXK2%N:"-M1AVU!C8P(UK*>G9V\:@6S-DIPEE['O MQ>CT_5P)@P&`P&`P,;F$RB%>19_G,_E4;@T*BK6K?)1,)@^-D9BT;94!6SES MN_R!Z5(FEG:T1(=C-4*#BRBPZ](A:U@4P^D%>_10SFWD>OBX77II@TQW6'1< M4DK/$5991Y&E"JD*"/4Q"SKF+4)1"VC?'95#X@>`TII22F+=#P]_A$!?SX>0/UEJ M8_#7`?XA/`OY\/('ZRU,?AK@/\0G@7\^'D#]9:F/PUP'^(3P+^?#R!^LM3'X M:X#_`!">!?SX>0/UEJ8_#7`?XA/`OY\/('ZRU,?AK@/\0G@7\^'D#]9:F/PU MP'^(3P+^?#R!^LM3'X:X#_$)X%_/AY`_66IC\-!?SX>0/UEJ8_#7`^9GF$<-#\!;-UI0$U<3C`E)X_6=H12U)8K,'Z=%A10 M^MW*52E;ZPWPEAV4C'H1QA9>O2886$01FN,F?;=@PA-\2)Y7/'57RB+V@ZN= ME1A^K:=]-VI!Y"DD=;1AKK*7MK1/XC1E;RMF32%T6OR!H6RMX1-J9$G.8P+S MG$/_UMZROR^)IV=S)Y.-E1I_@;0+FWE?GF2QASDQ[LVR&OK#/^AW9#=9L?): MXO)4-HMZ2*TPZLRR$/AK6Q.2AV1N(U1:YK0'I@VYI:BM-CN;H^^6A=7[O,[" M8Z,JVHFI_4R-,Q1VH:K`]21W#+#VYL-5)Y8\6+;DT4Z"@*.+4HDS*!0I_8;+ M1A0NM/+OZ&H2^+\NFF+`J=(Y3I9VG+XZ?*E4T5IK7L/K2^ZKO&NW;H6(I&$; M=I/QR5%7V.Q%4TKUCD[,KDG($C MRVSXW(K4=4AT6M*3.=SRL^;M"QTFDMKNJ/5MZAR),5B1D-11J9&D"&:7\N>1P*Y*)ME\;*5;FVL[NZCM MY-648,>WF+TRV7S!XC%F*NZ'6O<*:1)H\RR*,*)&L\*./)0NSRKVD1D@\&L# M..@>-+@M+MJDNF((ZUS7NJO.VO8!5GL:QW:&9*2SJEL=$8I<%91Z- M.V!GXIV->V.I^B5R$!BI.K"X7"_(=D\O3#K&2S*30UX:K\N%U MLZ(QN.'+W55&3'J33V4R#;O,G2+1J0NJ5]=9D$Y*B=?C"Y,>@&I"WQ8V!;$# M4$"\I^77<=8//&WSO3:K_BKQ+(^IK$@Z*N-2EYDUBV/U"Z6RC5J)1(9"T1%/ M%H'`H';KBC"RITCH)]>2TCF:J1Z0DI!A!$ZX3D%_^97TS:K;6;'!4<03P=8@ MN24Q*P(RZ7.TRWC&\:)E%!,4J^;\F+OU..\TLMI?9I/*)7539_&1B&N<< M@4V1];-US&H)=\:TANR@-28X],[^@!!(<"M?*2L*!2'R_%2A90[K'N18!#(^ MYMI+I=45W"K,A-HM4Y>+NJ!%6#O6B"6RBZX@B%&9,VRO>FW29.B,4:>$1:YI M<0R&K?*`:H2EYK*/9J2CKW4K+U>]3"<0YJ<#I.;?%TN]?+*=OB+;51=F&X3: MF6ZN429(>L4HSDP-`"E,"`G03`K7,/)5O5^XS5+]*Q::M1.40V'2^FKIAMN/;BYGJUL;$H9T!S:^($\:-MV:VPCJB+29SE\(A[E&8I;.VM"*,QYS"H6LB(U8<$EBA^;EP5R5J= M@GNSZZ.FDS:60I"L.(`I-##WSR=W'7/K-3,,34-'3T7EC2WC.0FA;'H#3-;P MDTXK"QCK6D&PQ10H4,JJ<0)P>5"PXE4[B=Y"J5[+,/T,:@.]Z&\KRW;H;[2; MQ**'=X79O9<7Z9>J)>I3=L"K)VBH_+^KCC>30TZ3U!\59Q'7B)V)`]V!'U3? M^UJ%9WJ#M)%>@.903=7OEU2U!T'T/95@V`VJ8?;"[GZ;1=1%E:I5/&"X>?G6 M&NL9GK:KED67N4:858H.C`NC3D_3-J5B&I$G]WEKW(A:%TTW*M4M\L:Y6UAE MR,2.]I9TLZ,JJ:R61M,CNB5P@ZO=R9QW+G*0.36RQZ,JS@-7M^0+P]^B!S3^)B%8%O\"FU M]\;1F^[YYROITF3]$Y#SB_#>H]\54Y;:]O"52\LSZ\11QDZ56E5*H-+U4;0$ MO;(X$.;6M(3%GE$)G-,@CU(G3DE82^LK2W*XN=%TSLB2R8)`%`),!F3CUI`,]PVL#II'Y-<2FO+U M9I`O(<`V_11L>F6,1]GDDE43-_:F=O;G>7+&ML95LG<$:4I M.I?U[2R$)61O<'8TO9YY2(A.C`<,6B"22O`4`,@P&`P&!^1C`6`1A@@@``(A MC&,6@@``.MB$(0A;UH(0ZUZ=[W]36L"C2[L)PMEQ<(CQ/!$_0SBB6*FAYO)R M>3XKR5!G)&J4-SH0HMY(WO"FXI(P+4IQ2AB@2)]VG<$PD#NX,)@O7@#M(;QR M@=Y3'[7ZHG:SJ.X(XX$OD4^,3$1%J'J1\++"$"ND*!3N3['XTX(S`[&ED$C7 MRV;)]FF%@?=)A`3%A=/`8#`8#`8#`8#`8#`8#`8#`8#`8#`8#`__U_9SY>WY M`O#WZ('-/XF(5@6_P&`P&`P&`P&`P&`P&`P&`P&`P&`P&`P&!4#A[^AB:_I? M^83_`/OUTM@6_P`!@5`\O;\@7A[]$#FG\3$*P+?X#`8#`8#`8#`J)8_7\49I MB]4]243D'3-^L9FD3_6M6JFK3#63BI;PN2#Y_K9=E!%?4BG.1'%*PH'-4;*G M!`/US0RN@O"4(,'*Y1GU]#$\=R3UKL-@4F>O1\H58-Z8.6V0C2A.K2H+&,<` M-T[ZH=$8R?5J#I9IOAJ[P%*"8_"66`9IH]Z`6$0Q!#L* M]F]Q\KIF6M)"OMMO:FFW?:SH*H>HY-&0U8THI\R58;*7Y$[QM$NA$'-L:4-3 M*0_/A3:RJ7!W;RB50Q+DGK@[0SLSE\-JBH\JYHFNMG4T2UT5!&K;F\/BV<'H MANB^,MA34W+"75TBK26)9(`)AFZC2,.U#KM&3K8\"SF!$N[SJWYY-\_ER<2J MVBHBCG*V+H6*2.!#/&G-0\)FA5(9,A9U$2CBY\''EXT"%>O3KUY*(\U.2844 M8,(8E&.K:"F5S/=`1B>^][2CQDI3.+0GBTT`P#<8*7&#)RQM5@'QPFO'^20C MXZ-87EL0.JEP:C%I8%1)0_$'06'P,5A$UCEBQ1EFT16*E\;D*42UI6+6AY8% M1Z<)YJ;8SF>0M[4](1>N(%KP*$Y0]ZUZ?1Z-ZWL,JP,!C-I5Y,YC95?1:7LK MY-J==HXQV?&$*KUCO"767Q-JG,82/J000C3"?8D]I5R86O$`PDWZ@O$$80AG MV`P&`P&`P&`P&`P&!__0]G/E[?D"\/?H@6J?%/V&,RF"!^<.(^F:QB:N;:RPV1 MQ+7OCTR1AEKR\(TC8L1^N3KU*HDH@8QF@"()6P,18I_`Y1()=$XS-HC(I57Z MIL0SR,L4D9G>00E:])#%[.CES,WK5#C&U3LA*$>F+6%DC/)#L8-"#K>\#+L! M@,!@:O)=TY<#3*Y.U(7]`6B;)"]-Z,L3"SF"+2HG)2F3@$8-&(9@@E%ZUL6] M[WO_`$[P,>^E7=7RB;_O>9/@6`^E7=7RB;_O>9/@6`^E7=7RB;_O>9/@6`^E M7=7RB;_O>9/@6`^E7=7RB;_O>9/@6`^E7=7RB;_O>9/@6`^E7=7RB;_O>9/@ M6`^E7=7RB;_O>9/@6!A,`NFP:Q8E\;A[JE0-+E-K+L)60>UMZ\9DIMRQI5:T MY6A/6)SC@$N4UFC@H+)UO128LT))00E@`'09M]*NZOE$W_>\R?`L!]*NZOE$ MW_>\R?`L#":TNFP:CKF`53!G5*VPJL83%:]A[!FWTJ[J^43?][S)\"P'TJ[J^43?][S)\"P M'TJ[J^43?][S)\"P'TJ[J^43?][S)\"P'TJ[J^43?][S)\"P'TJ[J^43?][S M)\"P'TJ[J^43?][S)\"P,5G%\V?8<1D$(DDD7`8).VGM+ON,+'&"/VT*GT:/ M+;9=!ET[65U.]2T,*-"B$L6N3HH4*5`@"/4GFB,-&,8MBV%O\!@,"!N MG:X,MVBY]6H:5T>J";,8Y*RGOZ*5O3;6EP+6XYO9"5" MUL,!''+T.Z9+K>B`[VI)#3Q,O*3NQ?6<7K"-61"53'+N:CN5K/W+)[9SJJIN ML2^N4/0L/2TDYR&,S=UM(ZKJU>G2$-FY$=&SUI3*R+#3TX-'(R`SZ^_*OL>2 M]()KHYRLI/2$>*E$]D*EB;+4M=O>EBDKTB7NQ+:_J&TD+>]^MLVO/7.OYRZ3?G3D*EM6FB"X;MF?R:@8O.&RR+`LC3C'"O9%EE/DH1J?`6] MNYIFFTH2@S8PEZ`%2)7Y=76+[>'6EC5K8=9\RMG1U)]D0!X4U=:MO2EFGMJ6 MJC%$^6^A7.E7:!1%DH*[ZIAA*44OD\+E*E;*U:?P#*UL0%90=Y2?EGS5@E'( MKO9D1I]I@]$R#H*>O].0F^;TFL.B5BS];2\KK!]K=3(X!!&V1M<6L6MWEV+; M#F6+M4?!(_5(TBTU,)R#$79O2@/\+0G(&&WC`8#`8#`8 M#`8#`8#`_]'V<^7M^0+P]^B!S3^)B%8%O\!@,!@:HD'&M_PWL6Q.E(PIJ*3L M>YU?]RP%N?9Y-8?+)?++P*1Z?E1:EI M^+:\2]U7A>/NWG;K:\X;!(_S;?`JS?&J(VS'G^2&618M/KFZP)97Y3+4M]IS M*C8W/5CJJ:FZ4;B;7CR!'$Y02Y&:6'DC1)-""2.+^?IS0+)?:>Q#6%8^6=U3 MT)<#`X,5BSRQ0CKBS+*?IO`6IT-GD>CIL3>H\V2$Q&J9VP"MJ).*$>2J.&H, M\`7-P&`P&!H]L#^/DV^ZZ2?PRMP,1P&!QE@U1214:B3EJUI:8\:1(^(NE?2F1LEZ=2N(:/!'GWVU$H)4#+ M"242XI0G#`:;ZO53*R^2W564;?E$)/G4,%8ONA2Z-D"42AL22)S$6RNC\B2@ M0>-0N)&Y-C,I/*_:!F#3)S3@`&`H>]#*B;G3LBE^BJU(G[/*XS&%Z.,JI?,X M8]RU@&_5]'TKDYH-NTM]6J**;&S939L\2@W0"2BC`^,0?3KTBRRXD`SI7G\I M@:I29<-?:CSW)0PQK=M29M$C5RXPDI25&`&!.WL#\>E/+.+2#T$\PDP!@0[` M,(MC+Z8@FZIKMRMI#7C0Z1=QC!E5S.T'BQ_C[%4;8P)81)2XX\H5S"M5DO.T M*$PM28K<_0%"CVE$68+Q:'ZL9Q99Y4:.\Q>.-R/2-D-1-BA5%#0,1FSS?6@5$Z'KT$#%Z`[F MKU_/PM.V]2"!K@'-Z%$_* M2D1AAH0A"J.+*_\`F,&MU,OI#-P=Q0:!R2E8?6K,EO*2W2T/.RG-T&-O4R(U[&P.AC.YJ)_&RVUT`R.`VIUV@@#%O0A!]'IT,.]C+Z2"1XNTE:0RID]L8FQG1-K MD\KG0K:W7L25E;GE&H6C'Z-)"%A!AW@"<7L1,J*Z+ZG@O0%AW+"((8UO3949 M%@'C\(!F!#XQ%LLS5 MG\(8#`V;<7_T7/WW?.G_`"[%L"W6`P&!33S`>FY+QUR=9G0\2BT3F+Y"'"MV MQ(RSB4+X=%=?.#:4+K43N]OS8RORQ,WQ_P"-_MQH`D!]:6G$#UI?I\>@H!%/ M-,OJ0O4>9BZ)IMX,CE)]UW=9A<2MR6/3W9D8XHO)31Y*SEN/$5P<*:M=W*3D M3LQJG)4G**`:C.\Y/4,SFNZEYL0R2UK\H&GZ]CDWZ*/(4P0R^D%@^*,7^;_<<-C]NRD^L>;&E@;.[[8X5J202B_PQ MB'H)C2,0O.92"1=`S^>-M?P6N&^Q15HR-+`44X''DJGE6;LM<[5TU&9\\PE^C+&Z#J=!) M)TG;F18GT3ZUQ:!&G^,Y7M"TA+O4/FCK^9[^Z%JI=4Z68,=*\E6!T1'O<$B] MOD]@R6MX1\?Y)#%Q#.2[J*U);F-Q;SC#WIM*2'MIIJU`L7GD*&Q.&`Q;S8)# M(EG-\:4`Y08'FZ7BSU*6;/G092BJ+5CU:7-3==EPKGZ70!ML=AG-[RJ$W!M[ M!&FMSD0D3PQ*6,L:\8U+@VA@DE\Z9P:T_3#.PPVA'JQ>=$=YDOD+=[S/CBQI M>JA\P^:\2M(9VE1164/L11SR&-3'.$99R+1NB'LI.#9Q`TZTX,SLGNVYZLF- MUM#F_4Q'II7=_P#EA5A:`WNRW*7TW$8WTXNC+#9SU$TSA'Z_>J];S7-V4D)5 M3L856%]8DD.@S^\._9W==7-;];M^LL=@1$?Y;G M]:)CX`Q3=;&(X+A>C^P: M%>HBTQ8[FZ3,Z&,K6ES,D9BV4.QN@2M7\5Y$@:ZSI)0J8/0M*:76=J4&S%6T2KPAF%O=' M^:(WVJYNU8U\YJZO1JFYS0PDSEJ=+%K@VML$XJD1[.*8*'T*PLZ632?6NSFB M"GV>W)XSK8?09M.H&&76->?F@(I;9C=%JVVSLB:Z&6()UWS(KK`00FJU?;]7 MUVQ6'7;BP2U$LMHR2\&2>26)($PDBD4:ED<"T;]!BDE`>$K2B[>_-V-AQ M87I.,Q.8I"M<+O#S<6)V0QM75+M8+DVS64$MALYK!ACC%9Z)5U#TNR2]HD4\ MCD@8F*K&6LN:V>M'Z%.II)*:4J7=>B&)@."[7>(3?S[`) M)!NBH-U<032+C`PU:TSZPN'WFO'#=%-=K6-%I;+H/)F">LB>1#V!W20O;NO3 M)G4(&XV!_'R;?==)/X96X&(X#`8&LN=>6W#I3H(A)-)`B\1B8(\F-3[> M'*Z^X<(/M)@#EB1&<8G"`W0C!G,.RM$1\L:P$<&-MS]MT(=2KJD5TLDQ&C6>QIU+=MR?-(5S?ZXL9Y`!"">' M8MAQB]OQ\IK36./D;1.1K)5THJ./,31!G=D&N M/2NREQ/6,YAB]2#V4>TJO:<`=Z+]8:Q.W,938_'DN?9>TN$#E,-98W'^2K"Y MM:RI3P=C MG%D6[(;4B]CQUC7*%;8%YL=DLPB+R(2@+:[+6PAV8B2!"(4AUL(2CM%Z,("$ M;#MS*D!GY+G+;:7.]AEK:Q9T]5*[Z=)NT1,N=M@I"\7^B9F^1.K.XOCM)WH; MT@$R:7FKUBS9SBN4F;V!-K01[&\6(%1>6]/6SFFP*!)G-;N#L^1%/6L:LM:R MS<$E,@B>V#;12)9.4HDCLT)PM"@\\E*WM:1,F]H6'JC#1&#,T:Q>W.K73CF9 MQFUU\WV.>T54AAU0L%MD3.!ELQYR*2/]U,;2U2M2W%#:0-:A$C4-`3@"5IP' M+MGF^N\&]^G";Q4!NGEXO3VNZ1;'.=Q@^-7+([WF4*D1S+*5-@UVZWTVH"Y) M'$002I%$`13;LW)S5@BT>USHE2E)C30!T6(EAV\)QY;YML:E[`M2>SV5P1]. MLJ$T9#]-<+8GMI(:-4?$G&'MRS9[NXJ_:_?B)S&::'196B1@`$'I#Z<%NR1= MK*R8#`V;<7_T7/WW?.G_`"[%L"W6`P&!$EYT55G2=8OU-W3&3)C6\G61I>^Q MPN02>,>\%40E++-(Z(;O#WE@?BBT$FCR-3LLM4`L_P!3ZLT)A0A@$$II$B9` ME3(49!:9&B3DI$JM>D0Q;WOZN][P"5"B0Z/"B1I4 M>E2H]D8]_5WO>`6(43B1[*X(TJY- MZY*H]G6)RE1'M")22M1G^J/`,OUR18G+.*%Z/$6:`(@[T(.MZ#Y^[&W;C[WV MWH=NVTI:'WI[(G]X^Q$F*#2D?MOJ_:?92C59H@E^+P!$:/>M>D6_2'Y`TM1; MD<\EMC>6[J$^DA[J!$F"Y'I0[*%I,D/6*DB%&E5.)A9S@I3IB23UQI0/5E&K#BP!,4F%E_L0B'L6]!^IK MZF!]%21*N)VG6IDZQ/LP@[9"HDM03LU,>6I3&[*-",&S$ZDD!@!>CT@&'0M> MC>M;P/FL;F]P]E]O0HUWL*PAQ1>V)B5/L;@F\7LRY+ZX`_9UB?QB\!H/0,'I MWZ-Z].!\T;2U-QZ]4WMC>A5.JC2MT4HT29*>Y*@@T6%2O.(+`8L4!+UX=#,V M(6@_4]/HP.PP&`P&`P&`P&`P/__3]:7-[!Y@5%\\4+22R@./)`LIVEZNJQ4_ M$]J70VE/:FOH.Q1(]W*;M\`N&T!;D:T;."3Z\_U6A^'U@_1XMA,_QU[Z_-IY M`_7AN?\`R]L!\=>^OS:>0/UX;G_R]L!\=>^OS:>0/UX;G_R]L!\=>^OS:>0/ MUX;G_P`O;`?'7OK\VGD#]>&Y_P#+VP'QU[Z_-IY`_7AN?_+VP'QU[Z_-IY`_ M7AN?_+VP'QU[Z_-IY`_7AN?_`"]L!\=>^OS:>0/UX;G_`,O;`?'7OK\VGD#] M>&Y_\O;`?'7OK\VGD#]>&Y_\O;`?'7OK\VGD#]>&Y_\`+VP'QU[Z_-IY`_7A MN?\`R]L#75)S7<^2R$Z0(6UL?SGQV->VUF=53ZT-SN8O4#0QZC;@D<3?UD7D\:K2;26/OZ M!$RN*EL=X]'7!Y0'Z02)K>F584)2A"`TL],:$10A:UX1>$82SS&LZJ^O+ICW M-CGU;8;E-YXQ5W4T-U-:\EC=64)3SJ73[56/+79-?/4+K@8VQ(^NR'V54 MH.(5"V'TED'$[WDUJ_6;B:GWS!%;+'Y"[`I@3BXL'3<1YI]SIK$()]Y.TX8$ M+\P25(XJX<204F$%R**/3'!+]4+>]Z.'K7U6IU_/PP.7>8NLD]2H"ZW@+PP7 M!-6?IDE(F.DD>/;J\/YR8E[C))*)W=XP[-DI]<,HD3>B$V``L%L99PTX0Z,V MU>O/X8_6_8-JHB(-,IJZ.$S(:O+-=>J95'`"BT=9YK)XY)6?3^Z#.;(;M;'I M$-N&<4E)2^EK&$>M"**WO8P-+]9_4E1_S(D+G7%D3EXI9]8UL"C_`#3)D[07 M,&QV;7-FZC;`ND(1DLR8$6;61.+Q.IQJ4_P!G+V'80C,WLK34Z\SE9VC^ MC-713TMMQ/"536FC#]8;&C:FQ[*E),L^;LY2@5ND6>DS8W$.K4^.J`\E`:`G M>C@`"/?H$+98*EF7%=.5WN_ND^?:FZ$-O-:R2J;V45+I##VUCAYE;E5A'K9. M:)#5;6G'&%>9,_1R:(7E.E8UHH2].8HXJ4-A8MN!)Q9?A/-3 MB$#0FG7\NR1]PV:KB5#RDWE]8U`Z+E$7(S,;C&$DQ(?=" MCKN>F4N#2XQB3/$1?$8U*3>B%A!#TQG:*."$'K2=@'L`-BV#52S+B<<(8#`8 M#`V;<7_T7/WW?.G_`"[%L"W6`P&`P&`P&`P&`P&`P&`P&`P&`P&`P&`P&`P/ M_]3W\8#`8#`8#`8#`8#`8#`8#`T>V!_'R;?==)/X96X&(X#`8#`Q&>P:-V9# M9'`)BF7KHK+6M0RR%`VOT@C*IP:5>M!6MVWJ+NC,^)DB\C6R5`"5)>E"<8R3 M/$48,`@CLGFZF2J34\Z&1-4XTTJ9OB\.&OKV'7H+MW?E'Y?#W-!;28R_$B1G(#[!CEKJ-*K;N18M5 M6-$D9J!@F"MT5V`T;++$=HP116P,.U]N-]!'EKXN-T5#7 M3L4U-+Y/)"W'D6A;B=_2+[1:"F*QDYUNVQ9O8AF$"& M(0ML.U=N+B_G$2=,D#!WDE*DIQSY^(2I;-M9(GU3;R>`O6C-:*+T$;?:([*\O*G'ZNY+"JQT]UPKEA--,\A7GSFTI4F>(9 M2#HT*89$MI'F?*`-&FIH:M(4#@EUI6WE&"V#QZ$,`YBS[7Y6%YVI^24I"G:* M26SY?:1BZ6N3^T+YF]/DC7Q5B5MS.@0PQ`^R5U>'QT:FLQL-4`-4&AWZY89H M!91>@`#4MWX<>,)X>EG$_P!ULAF):\#L3(6ZK390 M97+#1FAM=*#C;FTH,M+(K<*%;_.V"*(").6B@;=+79<<:O`Q%MWM'K-@'Z0?L<&WVP&X>.FN<1[ MFF!P5Y'#*]YXFK;(T3(?(+$4OZI@98^NC+3&&&>-\R036/;;VUT-TG6!7F'I M=$$%E>@L'AU%E\[\IA@O,-$UH\0%^@M?HHXZ5A!G:MX,>C=Y&84R0Y^=]O[R MV;1JWA0AL(8#`8#`V;<7_T7/WW?.G_ M`"[%L"W6`P&`P&`P&`P&`P&`P&`P&`P&`P&`P&`P&`P/_]7W\8#`8#`8#`8# M`8#`8#`8#`T>V!_'R;?==)/X96X&(X#`8#`8#`8#`8#`8#`8#`8#`8#`8#`V M;<7_`-%S]]WSI_R[%L"W6`P&`P&`P&`P&`P&`P&`P&`P&`P&`P&`P&`P/__9 ` end GRAPHIC 22 g44622g29x82.jpg GRAPHIC begin 644 g44622g29x82.jpg M_]C_X``02D9)1@`!`@$`8`!@``#_[0]>4&AO=&]S:&]P(#,N,``X0DE-`^T` M`````!``8`````$``0!@`````0`!.$))300-```````$````'CA"24T$&0`` M````!````!XX0DE-`_,```````D```````````$`.$))300*```````!```X M0DE-)Q````````H``0`````````".$))30/U``````!(`"]F9@`!`&QF9@`& M```````!`"]F9@`!`*&9F@`&```````!`#(````!`%H````&```````!`#4` M```!`"T````&```````!.$))30/X``````!P``#_____________________ M________`^@`````_____________________________P/H`````/______ M______________________\#Z`````#_____________________________ M`^@``#A"24T$"```````$`````$```)````"0``````X0DE-!!X```````0` M````.$))300:``````!M````!@``````````````8@```(T````&`&<`,@`Y M`'@`.``R`````0`````````````````````````!``````````````"-```` M8@`````````````````````````````````````````````X0DE-!!$````` M``$!`#A"24T$%```````!`````(X0DE-!`P`````#,(````!````<````$X` M``%0``!F8```#*8`&``!_]C_X``02D9)1@`!`@$`2`!(``#_[@`.061O8F4` M9(`````!_]L`A``,"`@("0@,"0D,$0L*"Q$5#PP,#Q48$Q,5$Q,8$0P,#`P, M#!$,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,`0T+"PT.#1`.#A`4#@X. M%!0.#@X.%!$,#`P,#!$1#`P,#`P,$0P,#`P,#`P,#`P,#`P,#`P,#`P,#`P, M#`P,#`S_P``1"`!.`'`#`2(``A$!`Q$!_]T`!``'_\0!/P```04!`0$!`0$` M`````````P`!`@0%!@<("0H+`0`!!0$!`0$!`0`````````!``(#!`4&!P@) M"@L0``$$`0,"!`(%!P8(!0,,,P$``A$#!"$2,05!46$3(G&!,@84D:&Q0B,D M%5+!8C,T)E\K.$P]-U MX_-&)Y2DA;25Q-3D]*6UQ=7E]59F=H:6IK;&UN;V-T=79W>'EZ>WQ]?G]Q$` M`@(!`@0$`P0%!@<'!@4U`0`"$0,A,1($05%A<2(3!3*!D12AL4(CP5+1\#,D M8N%R@I)#4Q5C+RLX3#TW7C\T:4 MI(6TE<34Y/2EM<75Y?569G:&EJ:VQM;F]B7I[?'_]H`#`,!``(1 M`Q$`/P#U5))))2EYM_C1_P"5L'_PN_\`ZM>DKS;_`!H_\K8/_A=__5J?E?YT M>18>9_FSYAXQ))):#14DDDDI22222GM_\5G].ZE_Q5/_`%5R]%7G7^*S^G=2 M_P"*I_ZJY>BK.YG^=E]/R;_+_P`W%2222A97_]#U5))))2EYK_C2N6D$7X'3L@']_$8P_Y^+]G?\`]),W*Z'=M&3TZS%,^^W` MO=^&'U#[35_F9-*OV?W?L:=`_I?:YR2TZ^C,S7;.C9E>?=$G#>/LV5H"YVRB MYSJ,C8UN[]!E(C?J^ZD[>J9+,.SMB5#[1DR>&NKK@?\`?)X1U-?1W?\`%60<[J4$']%3Q_6N7HRX/_%QU#)S?\` M^,7&P[^JXAR4:UH6+F/YLZ6XV/T?H=NC^OT!T?1%%C)_JOR_L]7^<]76="P65 MF[&PK^JUC0V^NRRH'Q?5T9S[&_\`7!A5N#*K&M#&7LZW8ZG(]3;[7W?KWJJ. M-U3IQK#.DWLZ(]P`=38TLUKLOIF5T8.$"S[34*R[\ZW[)UAU.= MM_XJ^U0O^KO26$BGKM3R.S\:WG^M3ZK/\U$LZ7U%K/M#L=]E;QO^T5_IJW3^ M=]IH-M3_`/MQ5"0##C!\#HHSS>2]*CX'U?\`3:V3G9@U[(C_`'^+B_YGMO6? MXO.GT8>;G&K,9F>I56"&5V5[=KK.?7`W;]_YJ[E<-_B\(.9FP9_1U_\`5/7< MJ,SE/U2W/['5Y*9G@A(@`F]!_>4DDD@V7__2]522224I<#_C"ZMU'IW5<48- MWH^KCDO=LK>Z6O.W:^VNQU?TW?S:[Y4L[HO2.HV-MS\*C*L8-K'W5M>0V9VM M+PY/Q3$97(<0[+,D3*-`\)[OD5OUD^L=Q)?U/)U[,?L'_@08L^Y]N18+/" MPBS_`,_-L7JO_-3ZL?\`E3A_]L5_^02_YJ?5C_RIP_\`MBO_`,@@>:QG>%^= M)'+3&TWF?\7/4\_.S,YN78+13566'8QA]SK=^YU3*W/^@WZ:[M4\'H_2>G.> M_`PZ,1U@`>::VL+@/HAVP-_>5Q5LDHRD3$<([,^.'!$1NZ4DDDF+W__3T/K6 MS.Z!UO#N=GY[NAY+FFVH9-Q[_@U@X5EE'U0] M'&I?E8KFUW=>R=SF/;C[66686/59MR',_9WI45W5_JOV?U/1M_T8>MECOK#T MX]";F,ZQ6YKF#..038TA[VL'VO\`6&U,C)JO_F\;[/Z_O2,8D<,CT(A(^'Z4 MO[RN*6X'6YQ_8'J*?K)G=7ZYD]*Z*VFJG`D96=D-=:"\'T_2Q\:JS&_PC7_I MGW_F?S:L#-^L5?6&=+O;B^G=C6W4YK&60ZRM^.STK,4V_H-M=]G_`&IM];^< M_1^G;4N;^JMKL?ZP=1R>ETG,HR2?MF&US6Y&-;ZENX-?>:,/*Q_7]?8^K)]7 MT_3WUKIWW]8LRZ\NS&MIQZ@6T8#',=;=8X>ZW,M8XX>/3CU>IZ-7VE_K6_\` M#?9Z5'(1!J/#PUWUXO\`T9=$DCU7=_\`-ZRO\`0_HOH_SB!T7ZZY^5C]1S^I-QZ,/I1VW-I:]UECCO8QM!?8UC M=]K6-KW_`+_YBP/JI=T2K)ZH>L8^'D%SW64C)?0"UX=:78U?V_T/IN]OJT_H MO](A_5\83^C==Q\X^ET_(LJWYE7O;COW..'NIBNV_P#6/0V?9FV?];K]ZD(Q M7/:O355M^GPK`H]G^#QK-C/\`2+*/UYZMD](OZG@XM+;.G.%?4L*W>Y[),#)INK+? M4Q_WV/IKLJ]*Y6_JGE]2Q/J[1CU8#NH,K#_LV5C65MIM:7OE]7Z=TO;AW/ZB6M%NVUH8XN M%3Y9ZK][/=[/]NZZ+6QZ7I^I77NC_`+4/J1'M\9'I M,:)LZ;_)%!X^`'7BT%#7^\]9U?J=W2ND/R'M&3G068]-33^EN(<:ZZZ=S[-O MM]2WW_S-=MB']5^NLZ]T>K.AK;Q->36R8;:V-VW=^98US+JO^#L6/U/)NNZ[ MB_MK#R\7#+'LZ<<6RQ]GK1OR;KV=+WV;G8_Z+'9ZC_T?VO\`TGZOB_4V^^OK MV=?T#&LNZ58U@R,6QX;;63N-)WW[&/>RYN0UOZ;?Z#_TB:(0,"+''\VXK^XN M,I"0-'@^78W_`'G_V3A"24T$(0``````50````$!````#P!!`&0`;P!B`&4` M(`!0`&@`;P!T`&\`VS_P!G:]XQ!AJWXJN&D(:0 MAI"&D(:0AI"&D(^A3V`/=A4S^U]Q_P`491K$G.G^8-U^:8^A1&Q.4/L);/G' MOI5Q-#JJHLR&D(:0AI"/_]"_QI"&D(:0AI"*`G\Q'[R23?NCJG]%+M;1Y'^P M=/\`:7O?$9#YR>VS_P!G:]XQ!AJWXJN&D(:0AI"&D(:0AI"&D(^A3V`/=A4S M^U]Q_P`491K$G.G^8-U^:8^A1&Q.4/L);/G'OI5Q-#JJHLR&D(:0AI"/_]&_ MQI"&D(:0AI"*`G\Q'[R23?NCJG]%+M;1Y'^P=/\`:7O?$9#YR>VS_P!G:]XQ M!AJWXJN&D(:0AI"&D(:0AI"&D(^A3V`/=A4S^U]Q_P`491K$G.G^8-U^:8^A M1&Q.4/L);/G'OI5Q-#JJHLR&D(:0AI"/_]*_QI"&D(:0AI"*+??IH:\K1[AL MOD%9TS:]BL*.M*O9U;W!:[E\N:$KNG81K3VM0Y1]G<$9#B0C<$YPR!#P:$H\ ML60X",.:##0*FVUK`.63,A*<2((QK0GF.;6F`5E(`L63<"SCIXQG(N'#5Q,72V51"::XL.$RE ME<0J<]FPG;T=<50];;C3`JJ*!YL">\A2=FW:!LZ8UQKOQTH:0AI"&D(:0CS$ M#>O=592!K0K')6[J"PL2#][I$'SGFQLV[51Z3=CO; MV+-GJE^)IP^\F+[G8LA\N@/;BJF)3J+2.%2IIE]L>E(S+61SCD@;?'V(_N2' MT@S/"5&XH_&-RPE05U"P]0@T`P\0B#G.-.<%535NN[E4T=0V[3*:9DM"@I)D MTD&2DD@R((,C@01&MN5--44FBK=3U;"VJA+CLTK24J$W%$320")@@B8Q!!B7 M[58Q8T-(0TA#2$?_T[_&D(:0AI"&D(HM]^F^;RJ[N&R^/UGKNJPGAG*P-4%: M9R,CR_N#1@1BD.1"ST.(L"'C/$(QX%9-1HC1U5FX^EK>2=I##25;);R4A6SP M]74(KYC6.K*:7!U)7`#8"^X1MGNE1&WP>_&T<=T'<#$C MW!;=*CF;AU1!"!2H#-&F+QFQBEJT(`]50!Y"HR+&1A&$8A"%YW_U[8&,;2[6 MV]?735+R!X!PU+6U(=`R2Z)2CO\`W[OCV%T:HZY'544S*SX3G"4N3/2<\^F< MX_<-J=NJZ^FEM#;E9&TV4*.?!MA;7IRKLNNQKE7Q<*WBBKL7JWU$UHA\!B+9 MYF0(0,YP`GB'&!\3;MKD*_1ETD MFOLK]O?/RE*LNMS/2IA\E0`ZD/#P#KR1'VL;=N!N52[9#8-:[UZ_2N#8A<5- M>/!5>V9"LO2DU(TYM"HK64Q>0PW"L].9GQ*<]T:PE%&'>,R24:,'P7S%M=K6 MFFU=1/VFM*21Q4\1IS*)JX3S(6EL8N=&"`2 MVKAN(G@.*RZ4*1.1Q!4F0)S2!(_C/LCHVKSLAW*7\=*I4E/Z*RG-K*)!,'%( MH+-Z2AKD]YRPM)6D?7E#`+',P-\W*P+@$?(+FQBJM3?B-M-(7*?3%K54NC#B MNS0W/K"!VU#QJ;/@BD=3\U.6&C''J2OOSEVO2%%)IK:E*T)4#(I=K7T5%$6ES()%E,\R&-Q1L48&$U+XW&.34-M-\YU\S7";96+I+452+B!P&D] M8#B1Q%RZ0"M0GLE$AT]=.8-^9I[K5:;M6C]..)"VS5-+NEW?0<06J6H+=,A" M@.R]44U,@A25MAY.$:SD/?-O:"(5\9VDQ5FIMH/2Y;\S.5HHM*IFM*3],*)< MD@45BT$V[1/I@:EC((I"I(. M4N*$R>!I[W']^]EJCU,MW?[A#@J3!''-S%9\HAK$,S)@#<9Q'(:X,#``)1A> M,EX"FP$O/]C`>.=6-1Z$T90)":;3%$".E32%J_O+"E>/''ICRZO6NK:Y154: MCK#/H2ZI"?[J"E/YL(N[]BR82Z?=N*J9;.I3(YK*G:7VQZ4DTM>W.1R!R\!8 MC^VH?2#R\*ECBL\&W(R4Y74,%TR"@`#P"$.,9)YP4M-1:[N5-1T[;5,EIF2$ M)"4B;229)2`!,DDR&)),:CY4U-15Z*MU15OK=J%..S4M14HR<4!-1))D``)G M``")?M5C%C0TA#2$-(1__]2_QI"&D(:0AI"*6?>MV2;C-RF_F;3:H(S!WN.M MD'K.)*SY+>5$5HXA?D483.RA,1'[/LN&R!:EPA?4P@JR4IB,PP8BP&B,*-`# M5O*?5MBL.C*2DNE0\A]3SJQEIZAT92LI!*FFEI!FDX$A0VD2()S)S/TO>KWJ MZJJK:PTIE+32#F?8:.8)!EE==0HB2AB!([`9@@<`Q?L6=Q>2(5CD;6D$94+: M`9CF:*XJVF)Z$H/'(!&-M62&P'94-0`(A%E)R#CA8!GXG''#4QK>23XN(A&R(8GE?K'@/5+E`VEEL$JDXAU0`ZD,%U:CU!*5$]48F\]M MN(5*M*2;BMT[%$UN!8&HC554==TZDV"\9%@9!)UIQB@888EW/)#RY M%S"QPQF#73\1^FJ8*%LLE8^X-G$R,@^Z"Z9>X#XHJ'4VMN7>BG"QJ;5%0*L? M(T]OK5.'P!56U1,DX'8\1AMC(F-GV5U0/KP&@Y5>,C(%@U%+MSTRSB,)E(,Y M"4J14I4GU8;19+QCJ9(>Y+(T)@\X"80,`U,;6T59 M[1HE-MJ=1!C5>L:=04;A5M)S,D)*0W1O*1];4&YC)453CA!2E3#-/C/DI[3] MN?M8W M58/C\.3AYX:NME6NK`PVP+9;:^WM)D."HT2PD#;PUAQ@>)+B$^(1.G1HN]ON M/FXW&AKG%3/&2*Q!43_F(+;Q\:D+5XS&[67L;;F[(85$SH>QJBM>%@2X7)W= MS;KLI18-*(00`PK2WC4$!:$JT0A?&3@<3C2\?"/`<<,Z\>HYP:=MK@I[W1U- M+43D0%4[X'NL/N&7A*0.J/23RNO533KK+;<*5ZB`GF5QF,/#QV6T@^#,9=,: M%D_:.WP1-280Z1"G`E%'82#6F[KMJ[2F"NQ@W)B`09'W M4I.82,Q*>!ZHN>=E*KYC3/;^K:M9^F8TDMCMSS361>529 MY$!"L%I2H24E0Q`V3&$C&J^4J4(T/;4HJ6'DAQ[MLNM/MGXU6ZZRMQM4MARK M.50*3)0($L.J^BR8:0AI"&D(_]6_QI"&D(:0AI"*`G\Q'[R23?NCJG]%+M;1 MY'^P=/\`:7O?$9#YR>VS_P!G:]XQ!TB7+6U42N;EBIO6I\Y$0L1*#DJH@0@" M+$(E00,LTO(@#R'.0YQQQG.-6ZM"'$E#B0I!Z")C\D58E:D*"D*(4.D8&.I: M_P![>\F"^&9(9N,NH+[PC1_Q-]VE M5@6G%%UI4^@M.9VU3GL*3$O38X1^&UJKGW=;JVH:@7OL<.&Z:S!PP0E)L,Z\"E$T8-U;Z)Q&,:/G,2B:"/\NVH"!CP0=[>CQI_E76 M5%KJ[(*Z^9%J-31K35.94S)0MHA#E-A@=H5^DK*.S/;-RSLU)I2DM_+]*+1I MC.C.U5(4PM]TX<=VJ[?UYR<\LR`VGL,MH$DGC!_VI[9-I;_F,VU`+FW#6BA+ MZI[=8#=(]ME(_&'C)2QJCR/([LLB/G")_P`NX>EH>%428(6$W#D'J)ZI_$3? MGUNTNG+6BB;Q`6X.([XP".&GQ%*Y']*,T\P^5/B``C.][_`!'=<=5/QN*48Q?7Y'EQ=7[+/L!UQ^U]F_P#6SMJ5,>@6 MWYI7TKL?VX_!S_\`GG0_SE=_\A51*WKE&GH:0AI"&D(__]:_QI"&D(:0AI"* M6'>QVUPRW=^TWFT3M51@U.NO_NC&24K`2#3X=M]VY7`@I(F#(/O1R]L*"C35)6A^6+R4-!X^)]\NEH' M8>$PA72%`R(X'DG9;I%&MW5!#P,/01I*;QSG.!XSD613)C0CC[+5/?M15512($A3L!-%2A/D M\*GDLI'0%.D>"(D_K5#+SC]DL-.Q5+,R^\365)5Y7$?F@$]:6@?#'"MNWC<= M^RDZ;779TWM&4F]0(7B;2)S?U",@T0191-9:Y0:G:&X'('`$R4!*G'Z+:0D'PF0FH^$S)Z3$4N-UN5WJ#572N=?J#TK4 M52\`G@!X!(#JC;]3;WMR-01U-`VF=%S6K$W$(*@MUB9;9J\@D>.!P&6)3M"] MI8U'R^TAJK.J\65I52KY5`X;D^LK1(JET9\ MP\$?CM>Y5V_^#W6GIZ^R_P#IZMINI9$\"4(>2H-JZEM9%@R(4"`8Z-:=X&TZ M;@"&VML$OJ]Z-R6-3)MLUHGBC63.``'F?91=:&]>TI4*5-+4CS'0F?_`)H;_H?'%=5W MX7;.X2JR\ST!)V)K*!UDC$8%5,]6`R$\0D3ENXQ[+[/:(5X1F,F^?:FZDN*K M*=+A47N0BZHDL1V223W5/+]NS$!J`//#(LF&/C9%R?'S'G>2W,EG/FTXH MR\EQI7Y,JS/W)]41U_\`"SJE!2:77>FWDJ5(2=KT$#H*@[;T!,_UC+KEC%PS MM"LC9'-D4(9F>:PRQ&Y'+[#\/,:]=&1:D(49)<`5-(DH*&($S)SKSXO>&D(: M0AI"/__7O\:0AI"&D(:0B@)_,1^\DDW[HZI_12[6T>1_L'3_`&E[WQ&0^,08:M^*KAI"&D(:0AI"&D(:0AI"/H4]@#W85,_M?[[;G*8@K2VM\(4A4\JD!3RE"4BE8*C(R,^T`,Z)35S%/())K,2P%([NEH6%'HW%8Q6[*P5U#HPD;F)!9!FK3JK]S#1IA%F9H&FZA3;B&BX4AII2EK=4IU:R5%K8H%"% M=C*E)5C9";^FR:"7J-=V=KG'&$N-J=#8)=<2E"6TI;0D!(W-1`PY& M[0^[RVNY#M8L*K+,W(V7`-Q5,V`E=%]I5L15:";RBO96F=545$O:Y96\IBA[ M4A>@+D*T*5K*/"4B0Y\46(X6!R;F;IBVZ$U%17&@L-._8ZID@,NEXMH<00%R M*'4+!*`20PT?9U4[H:E9L%OTUH=I>HJ]I MIPMNJ?(9#P&1!"7DE3BI@IQ`"9*4#F`'7TTUK.I=OE=J'63J+!0NNH#C:607 M2R3G6"II02VF1!P)*II![))E"[=G<RZ`,+I!WZN9B*.22"2%R2.; MXE97(DQ7#I<(]"G3I<-TJ2I50`EXYA)U:%25D0P@+--KW7&A;EH:MHZ:M>2\ MR^UF2XD$)*A@M$B29H)&/2E23A,@3O1FM+?K.DJZBD94T\R[E4VH@J"3BA>& M$E@'#H*5#&0)]'NP[FU5[<;AA&U^#0J5;C-U]BK6A%'*.KI>RMAK5E\+\6VJ MK`F3ZH`RPE*J:@B6XP8!0>2AP%8H+(1#"IS]=-\O[C?;75ZAK*MNATVP%%50 MZ%&>7`AM"1F<(/9P(!5V4DK&6/EJ#7-OLMRI;%24KE;J!X@)8;*1+-B"XM79 M0".UTD)[1`2HNG?7N/VM53)KEW&[&W,B#QUF4+E;CM\O=AO`R/+&4N/I4J6(0HME6P8Q\[IJN]6&WOW.]:54*5"9DT[Z7\IZ.(%-LE*9X M%:0X$[3A&I-Q/=W7;::`H;<[.-ITWQ7798JWNI=H,W^H">**[.!%1VG709DC6%:YIA6J4Z<=^J!LNY.*WGX(25%SJD`)Y=XIQE/", M(V1=UA-O>8YK8T8V[R:MJ/J]8L2V9;\_LR"(V6*!;HRKE;FH]#DYP[.*9H:2 M2#5AN,%$IRE0!\XN4>`]O5O+E6DGJ2AJ+XV_=Z@`M,-M.%2YK"`,VZ"HS"1B M201+9'5TMK\:I:JJUBS+8M3!(=><=;"4225G#:0!(J.``(,]L>?3W\%\ MGV-BFV-===;5L^XB[_==NVHFV]UV]2$28I^C.EAEDU+J4SE-SXQEM.,P)+5,@Y9Y M52YVW7%1J1VK^ZEB-50L+RJ?>=^KMJ5*95(&0)0M<@4N`:5E-D M[K%<_NO\H"SI]>ITZKIG;,&N)G0TZHE$Y3"=LP<""`4R.:4C+QF>:O%OJ-.* MTS4-W8N\/(MUM("I3D5;)$8@@D*F,LYB?9>XK??;FWVV:?J7&RVR+-=[Y=U< M?K)=`;%@:XIS>61C:GR6$/2-1@I5&&Z+I7`TY4X+.F@"B1G*A&@*`/EBMCT= M;+W;;IB5(7+LQLI+.YZT MLKS"T\:M&NI$VR-(_/2N.(`H7!+TP$JLOJ$U*,I0$D81AP+ATQ@&*0Z>Y5MZ MGME3=[5JJG-&RI27"MEU)24I"C,'HRD&8G^68CPK]S,UW/3+XJWDI4 M@)=;4%!2BD2(Z,SAE5CU M&?ABQZ!^KJ&.)6T/U=Z>YG2O##',G#K$O!'!M!=TV@MPF]:[ME<4+.326J25 MH8M.#GA"HC]K.L3$2DLQEC20)!!Q*Z%N1H\%8`:KPYHT:M67TR$_$4A3(7BTI9ZG!MP&12DI,RK")VC7MHO&I[IIBG$GZ<'(O M,,KI1@ZE(ZT'9BJK;#.)H)Z`HF* MY?8:(MG0Y;8]D,[F%]997I`I.PY6S9#0OA]>0%X0J,%HO0T4`AQ>?.,VW3[=3>Z!93J"[LHI\R2,&6E!;KB2,O@G*M1ZVUC#&+!>X2+J@AV]=JG:E&8C:# M?444A5U[G(7-+)^SE-*Z@@J`)"7'&PTX7D([*E(#CDD MOIFA1SD%694IH`%6\6Y-7"LHDT]GKBHJ;;674!I:NTE*N&W-3*I+2,@( M3),Y*).S*,(="WKFY)NI>>6RL[JT/-KX&16P@I(;!!WAEVS$6Y;]F M52P*F;*DMZNS.T5(GA[XAG9KX8$*)?'W=O/:ES&6GX]=S<)`4LRB2HB`C4K5 M!X"20#,&$.X*+ M96"I9#(%,GDL`BC%M[NMHB<9DKRN0MRY7)FF,ID1;F$TO)B9=DPD9AP@=4R^ M>4:L_-#5CO\`$$U:E4M0I3R4A"'%JJ6%+6A()`0I9442,BF1`$Y"DN:0RH'&- M=*INNFAS532*TE.Y_P`;0GC_`%IT?&?6$@.\++EP/:R3RF4IRCN4]LU$>6:J MI.J96[^#K5P?JS6YP%$M\2>;$=G/+,-NV.!.W#6]D6]V/NY)7U1%N"R?.MF) M7%O:6207@1AYBCI@"(6B4S$1T715MQY6:UH[<":M3X("< M2H)2RM:0-I*D)4D#IG(1*1_+42..KMB]@15"X(A2>,;B9@KD[,`0"W1O(D$. M@66)P7)<\I_A70II4%$'"QRF#1'%ASG)(\!KSGVP^C6%%4K0?J[E"@(5T'*M MS,`>L9@2.C,#TB)YR1>95I2LIT+'';K5E2>D9D-Y21U&1`/FD=!C@?O6,$FO M;N[;1*FH1*L?[FC]?U0E7FQPOF7Q-P^U:93=N5O+@DYE;.FB,<4A?E)YV`$( M&]4%3S8P,><3/E.]3V?EEJ:Y7E01:EOO$9MBQP4-D)!P45J'#`&*E#++`1$> M9[+]VYBZ=M]H25W-#+0.7:@\5:P5$8IR)/$)."4G-&Z_YB/9J]LQM>=QFEBU MS)-*X=XI'+<=6#!I#DWA;G1)FIK4`J)&#PBZ+R`!+.>HX#-%A2VXQR@3"SKR M>1^J6G17:&NI"Z1]*U,A6(,P>,S+I"TS6!LPUV8C!BHDDFS+<:0,S<:$1:DIDBQ8#`XRH,QF!Z]HZ32"7-$6VH#G^Y5 M45"QM,YBE95L[IE7$4,07'B1NB)OHBKJM5*;UC<&"C_;I882=@E(U+J=O>O# M(DX$(:`.TQ#;W^S"P]R[8MS#`'IPZL##.80<;]D?`8^.?B@SR"^'/P?!G M^C5I'A`I-E=HJ5N2U:M`SU;%BU#EXDM,IXN>$28)9AB@!8J M0T59::X7!ZZ79M?W7),B1V,ZI@))BY-87>HH:!JV MVMQ/\?KU\&G!5ED2.VZ3B0EI$U3`/:RID2H"*K7<+VI[C]@%A[<]\U8T;!]O M335(JNKT0Z_NUQNT+O.X0T*D3;+K#4GU#3AQ.+.B[5Z-??\``5$.Y^#\J!A, M79"9HO1&H[%K2AOND+A=WJYRIXSOQE.&,K;B@2AL!Y_NEG,WB"@2RB2,*#UC MI^]:0K++JJAM35&W3\)OXM\OS<0"`MPEEGO4#*Y@0LSS&:\;3?\`]&Z+_P#0 M#_Z!^-_[>?9S]9OJUXQ/Z<^O_5]`?9+S\>C]:?K_`/\`!>?AT.I_F.;PW^)K M.WW%O'WT^Y63_?%^MQ.QU?I;N,?_3O\:0B$'LT^MG<\\L_>(7'Y?_`'?]V^3_`%+_`#/^4^D- M6WS3]&Y?>D>HV.\]W_4\OP9(JWEIZ1KKN/7+W=_TW/(\.>/$OCWWU$^6GN^[ M?_#_`#*]8IKZK_3OXC]#^G=<[-_*2\>D>NF-G=;J-_S?*\_@QQNW\TK3W'J= M[;WN\O<\[R?,XL0!=NSWD-=?,/F6V>JOFUZY,'FI]!?G7\JZ&KIUQ["5^_Z. M=_N=Q7<^=Y'@G%0:,]MJ+=[\;O>[Z>]\WR_#*/#[L_M:V=ZK>9EF^?WS9\_I M_+3Z#_&/Z^AKERV]FK?WGH[7H^W=/>^=U>[''F%[15^YW[O?[-X=UYO7[D?M M-_=KQ_V7?,7'F[YS^I4)]BC]4?QG[YX;7&D]O'_6'9U_V8[*VJ>TGM2]K/YQC?OE_+?Y=R]C3_5;\P_EG+J+: MC]0ZD]6;JO4?>]'IW['_`#/-G$FL'KO3_K'>3ZY[KI]#_:_Y?AC4??+]K^=_ M,/SE#/.CR^\G:[\O?I+\X??..O3Y0^S%'O[KG<=[W[O>>#R?!'FK,R^Y^I?XY].:]%S^8[7V,[?2-]' M^IY/[..BW_+YW[8-G<;B_P#!U^?&4=E/VOH+ZM^L8/(WU0]29[YF_P#+/]OK M:ZW-CV8K-_N_WC?[QONOA>Y'WY8>TE)N;_R&YN.=[\'W8VON?]X_:WK_`/)/ MWN2O:-_#%'M*?K1^>/ROCKS=/>PMN[G]'U]Z+L_=?,\CS8]&_>VMP[[8KU)Z M3M_>?/\`+\Z.XNQ5Z^;A/)?\+6^8WO(/G@GVA?U<_O?E_)J(\X/0[)Z7L'=> MJ]W]V\[X,2GE3Z7>/1=I[SUEO?O'F_"B8_N!^PYNV]2_9ZM?S#]4?4UV^<_O MWXI^6]'56Z*]K]-=[ZAN]YN;AV_\`#SI1B&PW MW<>U_P!5O97K[R^^9/+]'^"?3OYQ^E?$:[6LO;K4/>>L7.]WN\.WS?)\S+'6 MTE[%V'N_0&^[W>[&SSO*\^<45]QOF-GR^^8FOVC?,;^VK^[]!?BO]?4UL"Q> M@_+;Y]%[KH_Q=?N1E&]>F_);@])[SI_P]7NQG5B^>=C[/E?A^".W6^M:+QH[SO]OR?P/#$LW?`^5H3Y7V;J M8\T?*KY]L?Y[_7_^[][X:K;E'LO.ST]_NN^W6MW]G%A\T]ZT[?0F>][K>X_YC>'^E\*45;_VD ,]QW_`/X&[]+\&/_9 ` end
-----END PRIVACY-ENHANCED MESSAGE-----