FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 19, 1997
JEFFERSON BANKSHARES, INC.
(Exact name of registrant as specified in its charter)
Virginia 0-9101 54-1104491
(State of other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
123 East Main Street
Charlottesville, Virginia 22902
(Address of principal executive offices)
Registrant's telephone number, including area code: (804) 972-1100
Item 5. Other Events
On June 9, 1997, Jefferson Bankshares, Inc., a Virginia corporation (the
"Company") and Wachovia Corporation, a North Carolina corporation ("Wachovia"),
entered into an Agreement and Plan of Merger (the "Merger Agreement") pursuant
to which, subject to the terms and conditions specified therein, the Company
will merge, on a tax free basis, with and into Wachovia. The Merger Agreement
provides that each outstanding share of common stock, par value $2.50 per share,
of Registrant will be converted into .625 shares of common stock, par value
$5.00 per share, of Wachovia.
In connection with the Merger Agreement, the Company granted Wachovia an
option to purchase up to 2,770,000 shares of the common stock of the Company
pursuant to a Stock Option Agreement dated as of June 10, 1997. The option
becomes exercisable upon the occurrence of certain events, none of which has
occurred at the time of this filing.
Item 7. Financial Statements and Exhibits
(a) Financial Statements.
Not Applicable.
(b) Pro Forma Financial Information
Not Applicable.
(c) Exhibits.
(i) Agreement and Plan of Merger, dated as of June 9, 1997, by and
between Wachovia Corporation and Jefferson Bankshares, Inc.
(ii) Stock Option Agreement, dated as of June 10, 1997, by and
between Wachovia Corporation and Jefferson Bankshares, Inc.
(iii) Press release dated June 10, 1997, announcing the proposed
merger of Jefferson Bankshares, Inc. with and into Wachovia
Corporation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JEFFERSON BANKSHARES, INC.
(Registrant)
By: /s/ O. Kenton McCartney
-----------------------
O. Kenton McCartney
President and
Chief Executive Officer
Dated: June 19, 1997
EXHIBIT INDEX
Exhibit Page
10.1 Agreement and Plan of Merger, dated as of June 9, 1997,
by and between Wachovia Corporation and Jefferson
Bankshares, Inc.
10.2 Stock Option Agreement, dated as of June 10, 1997, by and
between Wachovia Corporation and Jefferson Bankshares, Inc.
99 Press release dated June 10, 1997, announcing the proposed
merger of Jefferson Bankshares, Inc. with and into Wachovia
Corporation.
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
dated as of June 9, 1997
by and between
Wachovia Corporation
and
Jefferson Bankshares, Inc.
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TABLE OF CONTENTS
Page
RECITALS................................................................1
ARTICLE I
Certain Definitions.....................................................1
1.01 Certain Definitions.......................................1
ARTICLE II
The Merger..............................................................6
2.01 The Merger................................................6
2.02 Effective Date and Effective Time.........................7
2.03 Plan of Merger............................................7
ARTICLE III
Consideration; Exchange Procedures......................................7
3.01 Merger Consideration......................................7
3.02 Rights as Stockholders; Stock Transfers...................7
3.03 Fractional Shares.........................................8
3.04 Exchange Procedures.......................................8
3.05 Anti-Dilution Provisions..................................9
3.06 Options...................................................9
ARTICLE IV
Actions Pending Acquisition............................................10
4.01 Forebearances of Jefferson...............................10
4.02 Forebearances of Wachovia................................12
ARTICLE V
Representations and Warranties.........................................13
5.01 Disclosure Schedules.....................................13
5.02 Standard.................................................13
5.03 Representations and Warranties of Jefferson..............13
5.04 Representations and Warranties of Wachovia...............23
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Page
ARTICLE VI
Covenants..............................................................26
6.01 Reasonable Best Efforts..................................26
6.02 Stockholder Approvals....................................26
6.03 Registration Statement...................................27
6.04 Press Releases...........................................28
6.05 Access; Information......................................28
6.06 Acquisition Proposals....................................28
6.07 Affiliate Agreements.....................................29
6.08 Takeover Laws............................................29
6.09 Certain Policies.........................................29
6.10 NYSE Listing.............................................30
6.11 Regulatory Applications..................................30
6.12 Indemnification..........................................30
6.13 Benefit Plans............................................31
6.14 Accountants' Letters.....................................32
6.15 Notification of Certain Matters..........................32
6.16 Directors................................................32
6.17 Dividend Reinvestment and Other Stock Plans..............33
6.18 Dividend Coordination....................................33
ARTICLE VII
Conditions to Consummation of the Merger...............................33
7.01 Conditions to Each Party's Obligation to Effect the
Merger...................................................33
7.02 Conditions to Obligation of Jefferson....................34
7.03 Conditions to Obligation of Wachovia.....................35
ARTICLE VIII
Termination............................................................35
8.01 Termination..............................................35
8.02 Effect of Termination and Abandonment....................36
ARTICLE IX
Miscellaneous..........................................................37
9.01 Survival.................................................37
9.02 Waiver; Amendment........................................37
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Page
9.03 Counterparts.............................................37
9.04 Governing Law............................................37
9.05 Expenses.................................................37
9.06 Notices..................................................37
9.07 Entire Understanding; No Third Party Beneficiaries.......39
9.08 Interpretation; Effect...................................39
EXHIBIT A Form of Stock Option Agreement
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AGREEMENT AND PLAN OF MERGER, dated as of June 9, 1997 (this
"Agreement") by and between Jefferson Bankshares, Inc. ("Jefferson") and
Wachovia Corporation ("Wachovia").
RECITALS
A. Jefferson Bankshares, Inc.. Jefferson is a Virginia corporation,
having its principal place of business in Charlottesville, Virginia.
B . Wachovia Corporation. Wachovia is a North Carolina corporation,
having its principal place of business in both Winston-Salem, North
Carolina and Atlanta, Georgia.
C. Stock Option Agreement. As an inducement to the willingness of
Wachovia to continue to pursue the transactions contemplated by this
Agreement, Jefferson expects (but is not obligated) to grant to Wachovia an
option pursuant to a stock option agreement, in substantially the form of
Exhibit A.
D. Intentions of the Parties. It is the intention of the parties to
this Agreement that the business combination contemplated hereby be treated
as a "reorganization" under Section 368 of the Internal Revenue Code of
1986 (the "Code").
E. Board Action. The respective Boards of Directors of each of
Wachovia and Jefferson have determined that it is in the best interests of
their respective companies and their stockholders to consummate the
strategic business combination transaction provided for herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein the
parties agree as follows:
ARTICLE I
Certain Definitions
1.01 Certain Definitions. The following terms are used in this
Agreement with the meanings set forth below:
"Acquisition Proposal" has the meaning set forth in Section 6.06.
"Agreement" means this Agreement, as amended or modified from time to
time in accordance with Section 9.02.
"Code" means the Internal Revenue Code of 1986, as amended.
"Compensation and Benefit Plans" has the meaning set forth in Section
5.03(m).
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"Corporation Commission" has the meaning set forth in Section 2.01(b).
"Costs" has the meaning set forth in Section 6.12(a).
"Disclosure Schedule" has the meaning set forth in Section 5.01.
"Effective Date" means the date on which the Effective Time occurs.
"Effective Time" means the effective time of the Merger, as provided
for in Section 2.02.
"Environmental Laws" means all applicable local, state and federal
environmental, health and safety laws and regulations, including, without
limitation, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation, and Liability Act, the Clean Water
Act, the Federal Clean Air Act, and the Occupational Safety and Health Act,
each as amended, regulations promulgated thereunder, and state
counterparts.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has the meaning set forth in Section 5.03(m).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Exchange Agent" has the meaning set forth in Section 3.04.
"Exchange Fund" has the meaning set forth in Section 3.04.
"Exchange Ratio" has the meaning set forth in Section 3.01.
"Governmental Authority" means any court, administrative agency or
commission or other federal, state or local governmental authority or
instrumentality.
"Indemnified Party" has the meaning set forth in Section 6.12(a).
"Insurance Amount" has the meaning set forth in Section 6.12(b).
"Insurance Policy" has the meaning set forth in Section 5.03(t).
"Jefferson" has the meaning set forth in the preamble to this
Agreement.
"Jefferson Affiliate" has the meaning set forth in Section 6.07(a).
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"Jefferson Board" means the Board of Directors of Jefferson.
"Jefferson By-Laws" means the Amended and Restated By-laws of
Jefferson.
"Jefferson Certificate" means the Amended and Restated Articles of
Incorporation of Jefferson.
"Jefferson Common Stock" means the common stock, par value $2.50 per
share, of Jefferson.
"Jefferson Meeting" has the meaning set forth in Section 6.02.
"Jefferson Preferred Stock" means the preferred stock, par value $10.00
per share, of Jefferson.
"Jefferson Stock" means, collectively, Jefferson Common Stock and
Jefferson Preferred Stock.
"Jefferson Stock Plan" has the meaning set forth in Section 3.06.
"Lien" means any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance.
"Material Adverse Effect" means, with respect to Wachovia, Jefferson or
the Surviving Corporation, any effect that (i) is material and adverse to
the financial position, results of operations or business of Wachovia and
its Subsidiaries taken as a whole, Jefferson and its Subsidiaries taken as
a whole, or the Surviving Corporation and its Subsidiaries taken as a
whole, respectively, or (ii) would materially impair the ability of either
Wachovia or Jefferson to perform its obligations under this Agreement or
otherwise materially threaten or materially impede the consummation of the
Merger and the other transactions contemplated by this Agreement; provided,
however, that Material Adverse Effect shall not be deemed to include the
impact of (a) changes in banking and similar laws of general applicability
or interpretations thereof by courts or governmental authorities, (b)
changes in generally accepted accounting principles or regulatory
accounting requirements applicable to banks and their holding companies
generally, (c) any modifications or changes to valuation policies and
practices in connection with the Merger or restructuring charges taken in
connection with the Merger, in each case in accordance with generally
accepted accounting principles, (d) effects of any action taken with the
prior written consent of Wachovia and (e) changes in conditions or
circumstances that affect the banking industry generally.
"Merger" has the meaning set forth in Section 2.01.
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"Merger Consideration" has the meaning set forth in Section 2.01.
"Multiemployer Plans" has the meaning set forth in Section 5.03(m).
"NASDAQ" means The Nasdaq Stock Market, Inc.'s National Market System.
"NCBCA" means the North Carolina Business Corporation Act.
"New Certificate" has the meaning set forth in Section 3.04.
"North Carolina Secretary" has the meaning set forth in Section
2.01(b).
"NYSE" means the New York Stock Exchange, Inc.
"Old Certificate" has the meaning set forth in Section 3.04.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means any individual, bank, corporation, partnership,
association, joint-stock Jefferson, business trust or unincorporated
organization.
"Pension Plan" has the meaning set forth in Section 5.03(m).
"Plans" has the meaning set forth in Section 5.03(m).
"Previously Disclosed" by a party shall mean information set forth in
its Disclosure Schedule.
"Proxy Statement" has the meaning set forth in Section 6.03.
"Registration Statement" has the meaning set forth in Section 6.03.
"Regulatory Authority" has the meaning set forth in Section 5.03(i).
"Representatives" means, with respect to any Person, such Person's
directors, officers, employees, legal or financial advisors or any
representatives of such legal or financial advisors.
"Rights" means, with respect to any Person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any person
any right to subscribe for or acquire, or any options, calls or commitments
relating to, or any stock appreciation right or other
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instrument the value of which is determined in whole or in part by
reference to the market price or value of, shares of capital stock of such
person.
"SEC" means the Securities and Exchange Commission.
"SEC Documents" has the meaning set forth in Section 5.03(g).
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Stock Option Agreement" has the meaning set forth in Recital C.
"Subsidiary" and "Significant Subsidiary" have the meanings ascribed to
them in Rule 1-02 of Regulation S-X of the SEC.
"Surviving Corporation" has the meaning set forth in Section 2.01.
"Takeover Laws" has the meaning set forth in Section 5.03 (o).
"Tax" and "Taxes" means all federal, state, local or foreign taxes,
charges, fees, levies or other assessments, however denominated, including,
without limitation, all net income, gross income, gross receipts, gains,
sales, use, ad valorem, goods and services, capital, production, transfer,
franchise, windfall profits, license, withholding, payroll, employment,
disability, employer health, excise, estimated, severance, stamp,
occupation, property, environmental, unemployment or other taxes, custom
duties, fees, assessments or charges of any kind whatsoever, together with
any interest and any penalties, additions to tax or additional amounts
imposed by any taxing authority whether arising before, on or after the
Effective Date.
"Tax Returns" means any return, amended return or other report
(including elections, declarations, disclosures, schedules, estimates and
information returns) required to be filed with respect to any Tax.
"Treasury Stock" shall mean shares of Jefferson Stock held by Jefferson
or any of its Subsidiaries or by Wachovia or any of its Subsidiaries, in
each case other than in a fiduciary capacity or as a result of debts
previously contracted in good faith.
"VSCA" means the Virginia Stock Corporation Act.
"Wachovia" has the meaning set forth in the preamble to this Agreement.
"Wachovia Average Stock Price" has the meaning set forth in Section
3.01.
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"Wachovia Board" means the Board of Directors of Wachovia.
"Wachovia Common Stock" means the common stock, par value $5.00 per
share, of Wachovia.
"Wachovia Preferred Stock" means the preferred stock, par value $5.00
per share, of Wachovia.
"Wachovia Stock" means, collectively, Wachovia Common Stock and
Wachovia Preferred Stock.
ARTICLE II
The Merger
2.01 The Merger. (a) At the Effective Time, Jefferson shall merge with
and into Wachovia (the "Merger"), the separate corporate existence of Jefferson
shall cease and Wachovia shall survive and continue to exist as a North Carolina
corporation (Wachovia, as the surviving corporation in the Merger, sometimes
being referred to herein as the "Surviving Corporation"). Wachovia may at any
time prior to the Effective Time change the method of effecting the combination
with Jefferson (including, without limitation, the provisions of this Article
II) if and to the extent it deems such change to be necessary or appropriate;
provided, however, that no such change shall (i) alter or change the amount or
kind of consideration to be issued to holders of Jefferson Stock as provided for
in this Agreement (the "Merger Consider ation"), (ii) adversely affect the tax
treatment of Jefferson's stockholders as a result of receiving the Merger
Consideration or (iii) materially impede or delay consummation of the
transactions contemplated by this Agreement.
(b) Subject to the satisfaction or waiver of the conditions set forth
in Article VII, the Merger shall become effective upon the occurrence of the
filing in the office of the Virginia State Corporation Commission (the
"Corporation Commission") of articles of merger in accordance with Section
13.1-725 of the VSCA and the filing in the Office of the Secretary of State of
the State of North Carolina (the "North Carolina Secretary") of articles of
merger in accordance with Section 55-11-05 of the NCBCA or such later date and
time as may be set forth in such articles and the issuance of certificates of
merger by the Corporation Commission and the North Carolina Secretary under the
VSCA and the NCBCA. The Merger shall have the effects prescribed in the NCBCA
and the VSCA.
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(c) Articles of Incorporation and By-Laws. The articles of
incorporation and by-laws of Wachovia immediately after the Merger shall be
those of Wachovia as in effect immediately prior to the Effective Time.
(d) Directors and Officers of Wachovia. The directors and officers of
Wachovia immediately after the Merger shall be the directors and officers of
Wachovia (except as provided in Section 6.16) immediately prior to the Effective
Time, until such time as their successors shall be duly elected and qualified.
2.02 Effective Date and Effective Time. Subject to the satisfaction or
waiver of the conditions set forth in Article VII, the parties shall cause the
effective date of the Merger (the "Effective Date") to occur on (i) the fifth
business day to occur after the last of the conditions set forth in Article VII
shall have been satisfied or waived in accordance with the terms of this
Agreement (or, at the election of Wachovia, on the last business day of the
month in which such day occurs) or (ii) such other date to which the parties may
agree in writing. The time on the Effective Date when the Merger shall become
effective is referred to as the "Effective Time."
2.03 Plan of Merger. At the request of Wachovia, Wachovia and Jefferson
shall enter into a separate plan of merger reflecting the terms hereof for
purposes of any filing requirement.
ARTICLE III
Consideration; Exchange Procedures
3.01 Merger Consideration. Subject to the provisions of this
Agreement, at the Effective Time, automatically by virtue of the Merger and
without any action on the part of any Person:
(a) Outstanding Jefferson Common Stock. Each share, excluding Treasury
Stock, of Jefferson Common Stock, issued and outstanding immediately prior
to the Effective Time shall become and be converted into 0.625 shares of
Wachovia Common Stock (the "Exchange Ratio"). The Exchange Ratio shall be
subject to adjustment as set forth in Section 3.05.
(b) Outstanding Wachovia Stock. Each share of Wachovia Stock issued
and outstanding immediately prior to the Effective Time shall remain issued
and outstanding and unaffected by the Merger.
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(c) Treasury Shares. Each share of Jefferson Stock held as Treasury
Stock immediately prior to the Effective Time shall be canceled and retired
at the Effective Time and no consideration shall be issued in exchange
therefor.
3.02 Rights as Stockholders; Stock Transfers. At the Effective Time,
holders of Jefferson Stock shall cease to be, and shall have no rights as,
stockholders of Jefferson, other than to receive any dividend or other
distribution with respect to such Jefferson Stock with a record date occurring
prior to the Effective Time and the consideration provided under this Article
III. After the Effective Time, there shall be no transfers on the stock transfer
books of Jefferson or the Surviving Corporation of shares of Jefferson Stock.
3.03 Fractional Shares. Notwithstanding any other provision hereof, no
fractional shares of Wachovia Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the Merger;
instead, Wachovia shall pay to each holder of Jefferson Common Stock who would
otherwise be entitled to a fractional share of Wachovia Common Stock (after
taking into account all Old Certificates delivered by such holder) an amount in
cash (without interest) determined by multiplying such fraction by the average
of the last sale prices of Wachovia Common Stock, as reported by the NYSE
Composite Transactions Reporting System (as reported in The Wall Street Journal
or, if not reported therein, in another authoritative source), for the five NYSE
trading days immediately preceding the Effective Date.
3.04 Exchange Procedures. (a) At or prior to the Effective Time,
Wachovia shall deposit, or shall cause to be deposited, with Wachovia Bank, N.A.
(in such capacity, the "Exchange Agent"), for the benefit of the holders of
certificates formerly representing shares of Jefferson Common Stock ("Old
Certificates"), for exchange in accordance with this Article III, certificates
representing the shares of Wachovia Common Stock ("New Certificates") and an
estimated amount of cash (such cash and New Certificates, together with any
dividends or distributions with a record date occurring after the Effective Date
with respect thereto (without any interest on any such cash, dividends or
distributions), being hereinafter referred to as the "Exchange Fund") to be paid
pursuant to this Article III in exchange for outstanding shares of Jefferson
Common Stock.
(b) As promptly as practicable after the Effective Date, Wachovia shall
send or cause to be sent to each former holder of record of shares of Jefferson
Common Stock immediately prior to the Effective Time transmittal materials for
use in exchanging such stockholder's Old Certificates for the consideration set
forth in this Article III. Wachovia shall cause the New Certificates into which
shares of a stockholder's Jefferson Common Stock are converted on the Effective
Date and/or any check in respect of any fractional share interests or dividends
or distributions which such person shall be entitled to receive to be delivered
to such stockholder upon delivery to the Exchange Agent of Old Certificates
representing such shares of Jefferson Common Stock (or indemnity reasonably
satisfactory to Wachovia and the Exchange Agent, if any of such certificates are
lost, stolen or destroyed) owned by such stockholder. No interest will
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be paid on any such cash to be paid in lieu of fractional share interests or in
respect of dividends or distributions which any such person shall be entitled to
receive pursuant to this Article III upon such delivery.
(c) Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to any former holder of Jefferson Stock for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(d) At the election of Wachovia, no dividends or other distributions
with respect to Wachovia Common Stock with a record date occurring after the
Effective Time shall be paid to the holder of any unsurrendered Old Certificate
representing shares of Jefferson Common Stock converted in the Merger into the
right to receive shares of such Wachovia Common Stock until the holder thereof
shall be entitled to receive New Certificates in exchange therefor in accordance
with the procedures set forth in this Section 3.04, and no such shares of
Jefferson Common Stock shall be eligible to vote until the holder of Old
Certificates is entitled to receive New Certificates in accordance with the
procedures set forth in this Section 3.04. After becoming so entitled in
accordance with this Section 3.04, the record holder thereof also shall be
entitled to receive any such dividends or other distributions, without any
interest thereon, which theretofore had become payable with respect to shares of
Wachovia Common Stock such holder had the right to receive upon surrender of the
Old Certificate.
(e) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of Jefferson for twelve months after the Effective Time shall be
paid to Wachovia. Any stockholders of Jefferson who have not theretofore
complied with this Article III shall thereafter look only to Wachovia for
payment of the shares of Wachovia Common Stock, cash in lieu of any fractional
shares and unpaid dividends and distributions on Wachovia Common Stock
deliverable in respect of each share of Jefferson Common Stock such stockholder
holds as determined pursuant to this Agreement, in each case, without any
interest thereon and Wachovia shall make such payment.
3.05 Anti-Dilution Provisions. In the event Wachovia changes (or
establishes a record date for changing) the number of shares of Wachovia Common
Stock issued and outstanding prior to the Effective Date as a result of a stock
split, stock dividend, recapitalization or similar transaction with respect to
the outstanding Wachovia Common Stock and the record date therefor shall be
prior to the Effective Date, the Exchange Ratio shall be proportionately
adjusted.
3.06 Options. At the Effective Time, each outstanding option to
purchase shares of Jefferson Common Stock under the Jefferson 1995 Long Term
Incentive Stock Plan (each, a "Jefferson Stock Option"), whether vested or
unvested, shall be converted into an option to acquire, on the same terms and
conditions as were applicable under such Jefferson Stock Option, the number of
shares of Wachovia Common Stock equal to (a) the number of shares of Jefferson
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Common Stock subject to the Jefferson Stock Option, multiplied by (b) the
Exchange Ratio (such product rounded down to the nearest whole number) (a
"Replacement Option"), at an exercise price per share (rounded up to the nearest
whole cent) equal to (y) the aggregate exercise price for the shares of
Jefferson Common Stock which were purchasable pursuant to such Jefferson Stock
Option divided by (z) the number of full shares of Wachovia Common Stock subject
to such Replacement Option in accordance with the foregoing. Notwithstanding the
foregoing, each Jefferson Stock Option which is intended to be an "incentive
stock option" (as defined in Section 422 of the Code) shall be adjusted in
accordance with the requirements of Section 424 of the Code. At or prior to the
Effective Time, Jefferson shall take all action necessary including obtaining
any necessary consents from Optionees, to permit the replacement of the
outstanding Jefferson Stock Options by Wachovia pursuant to this Section and to
permit Wachovia to assume (to the extent described below) the Jefferson 1995
Long Term Incentive Stock Plan. Jefferson shall further take all action
necessary to amend the Jefferson 1995 Long Term Incentive Stock Plan to
eliminate automatic grants or awards thereunder following the Effective Time. At
the Effective Time, Wachovia shall assume the Jefferson 1995 Long Term Incentive
Stock Plan; provided, that such assumption shall be only in respect of the
Replacement Options and that Wachovia shall have no obligation with respect to
any awards under the Jefferson 1995 Long Term Incentive Stock Plan other than
the Replacement Options and shall have no obligation to make any additional
grants or awards under such assumed plans.
ARTICLE IV
Actions Pending Acquisition
4.01 Forebearances of Jefferson. From the date hereof until the
Effective Time, except as expressly contemplated by this Agreement, without the
prior written consent of Wachovia, Jefferson will not, and will cause each of
its Subsidiaries not to:
(a) Ordinary Course. Conduct the business of Jefferson and its
Subsidiaries other than in the ordinary and usual course or fail to use
reasonable efforts to preserve intact their business organizations and
assets and maintain their rights, franchises and existing relations with
customers, suppliers, employees and business associates, or take any action
reasonably likely to have an adverse affect upon Jefferson's ability to
perform any of its material obligations under this Agreement.
(b) Capital Stock. Other than (i) pursuant to Rights Previously
Disclosed and outstanding on the date hereof, (ii) "open market purchase"
sales without any discount under the Jefferson Dividend Reinvestment Plan
and the Jefferson Employee Stock Purchase Plan and (iii) pursuant to the
Jefferson Deferred Compensation and Stock Purchase Plan for Non-Employee
Directors, (A) issue, sell or otherwise permit to become outstanding, or
authorize the creation of, any additional shares of Jefferson Stock or any
Rights, (B) enter into any agreement with
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respect to the foregoing, or (C) permit any additional shares of Jefferson
Stock to become subject to new grants of employee or director stock
options, other Rights or similar stockbased employee rights.
(c) Dividends, Etc. (a) Make, declare, pay or set aside for payment any
dividend (other than (A) quarterly cash dividends on Jefferson Stock in an
amount not to exceed $0.25 per share (the "Permitted Dividend Amount") with
record and payment dates consistent with past practice and (B) dividends
from wholly owned Subsidiaries to Jefferson or another wholly owned
Subsidiary of Jefferson) on or in respect of, or declare or make any
distribution on any shares of Jefferson Stock or (b) directly or indirectly
adjust, split, combine, redeem, reclassify, purchase or otherwise acquire,
any shares of its capital stock; provided, however, if Wachovia shall
increase its regular quarterly dividend to an amount in excess of $0.40 per
share, then the Permitted Amount may be increased by Jefferson at its
option for all future dividends in an amount proportionate to the increase
in the Wachovia dividend .
(d) Compensation; Employment Agreements; Etc. Enter into or amend or
renew any employment, consulting, severance or similar agreements or
arrangements with any director, officer or employee of Jefferson or its
Subsidiaries, or grant any salary or wage increase or increase any employee
benefit (including incentive or bonus payments), except (i) for normal
individual increases in compensation to employees in the ordinary course of
business consistent with past practice, (ii) for other changes that are
required by applicable law, (iii) to satisfy Previously Disclosed
contractual obligations existing as of the date hereof, or (iv) for grants
of awards to newly hired employees consistent with past practice.
(e) Benefit Plans. Enter into, establish, adopt or amend (except (i) as
may be required by applicable law or (ii) to satisfy Previously Disclosed
contractual obligations existing as of the date hereof) any pension,
retirement, stock option, stock purchase, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
(or similar arrangement) related thereto, in respect of any director,
officer or employee of Jefferson or its Subsidiaries, or take any action to
accelerate the vesting or exercisability of stock options, restricted stock
or other compensation or benefits payable thereunder.
(f) Dispositions. Except as Previously Disclosed, sell, transfer,
mortgage, encumber or otherwise dispose of or discontinue any of its
assets, deposits, business or properties except in the ordinary course of
business and in a transaction that is not material to it and its
Subsidiaries taken as a whole.
(g) Acquisitions. Except as Previously Disclosed, acquire (other than
by way of foreclosures or acquisitions of control in a bona fide fiduciary
capacity or in satisfaction of debts previously contracted in good faith,
in each case in the ordinary and usual course of business consistent with
past practice) all or any portion of, the assets, business, deposits or
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properties of any other entity except in the ordinary course of business
and in a transaction that is not material to it and its Subsidiaries taken
as a whole.
(h) Governing Documents. Amend the Jefferson Certificate, Jefferson
By-laws or the certificate of incorporation or by-laws (or similar
governing documents) of any of Jefferson's Subsidiaries.
(i) Accounting Methods. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be required
by generally accepted accounting principles.
(j) Contracts. Except in the ordinary course of business consistent
with past practice, enter into or terminate any material contract (as
defined in Section 5.03(k)) or amend or modify in any material respect any
of its existing material contracts.
(k) Claims. Except in the ordinary course of business consistent with
past practice, settle any claim, action or proceeding, except for any
claim, action or proceeding involving solely money damages in an amount,
individually or in the aggregate for all such settlements, that is not
material to Jefferson and its Subsidiaries, taken as a whole.
(l) Adverse Actions. (a) Take any action reasonably likely to prevent
or impede the Merger from qualifying as a reorganization within the meaning
of Section 368 of the Code; or (b) knowingly take any action that is
intended or is reasonably likely to result in (i) any of its
representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time at or prior to the
Effective Time, (ii) any of the conditions to the Merger set forth in
Article VII not being satisfied or (iii) a material violation of any
provision of this Agreement except, in each case, as may be required by
applicable law or regulation.
(m) Risk Management. Except as required by applicable law or
regulation, (i) implement or adopt any material change in its interest rate
and other risk management policies, procedures or practices; (ii) fail to
follow its existing policies or practices with respect to managing its
exposure to interest rate and other risk; or (iii) fail to use commer
cially reasonable means to avoid any material increase in its aggregate
exposure to interest rate risk.
(n) Indebtedness. Incur any indebtedness for borrowed money other
than in the ordinary course of business.
(o) Commitments. Agree or commit to do any of the foregoing.
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4.02 Forebearances of Wachovia. From the date hereof until the
Effective Time, except as expressly contemplated by this Agreement, without the
prior written consent of Jefferson, Wachovia will not, and will cause each of
its Subsidiaries not to:
(a) Extraordinary Dividends. Make, declare, pay or set aside for
payment any extraordinary dividend.
(b) Adverse Actions. (i) Take any action which would materially
adversely affect its ability to consummate the Merger; (ii) take any action
reasonably likely to prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368 of the Code; or (iii)
knowingly take any action that is intended or is reasonably likely to
result in (A) any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time at
or prior to the Effective Time, (B) any of the conditions to the Merger set
forth in Article VII not being satisfied; or (C) a material violation of
any provision of this Agreement except, in each case, as may be required by
applicable law.
ARTICLE V
Representations and Warranties
5.01 Disclosure Schedules. On or prior to the date hereof, Wachovia has
delivered to Jefferson a schedule and Jefferson has delivered to Wachovia a
schedule (respectively, its "Disclosure Schedule") setting forth, among other
things, items the disclosure of which is necessary or appropriate either in
response to an express disclosure requirement contained in a provision hereof or
as an exception to one or more representations or warranties contained in
Section 5.03 or 5.04 or to one or more of its covenants contained in Article IV;
provided, that (a) no such item is required to be set forth in a Disclosure
Schedule as an exception to a representation or warranty if its absence would
not be reasonably likely to result in the related representation or warranty
being deemed untrue or incorrect under the standard established by Section 5.02,
and (b) the mere inclusion of an item in a Disclosure Schedule as an exception
to a representation or warranty shall not be deemed an admission by a party that
such item represents a material exception or fact, event or circumstance or that
such item is reasonably likely to result in a Material Adverse Effect.
5.02 Standard. No representation or warranty of Jefferson or Wachovia
contained in Section 5.03 or 5.04 shall be deemed untrue or incorrect, and no
party hereto shall be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, event or circumstance unless such
fact, circumstance or event, individually or taken together with all other
facts, events or circumstances inconsistent with any representation or warranty
contained in Section 5.03 or 5.04 has had or is reasonably likely to have a
Material Adverse Effect.
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5.03 Representations and Warranties of Jefferson. Subject to Sections
5.01 and 5.02 and except as Previously Disclosed in a paragraph of its
Disclosure Schedule corresponding to the relevant paragraph below, Jefferson
hereby represents and warrants to Wachovia:
(a) Organization, Standing and Authority. Jefferson is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia. Jefferson is duly qualified to do business and is
in good standing in the states of the United States and any foreign
jurisdictions where its ownership or leasing of property or assets or the
conduct of its business requires it to be so qualified.
(b) Jefferson Stock. As of the date hereof, the authorized capital
stock of Jefferson consists solely of (i) 32,000,000 shares of Jefferson
Common Stock, of which 13,954,843 shares were outstanding as of the date
hereof and (ii) 1,000,000 shares of Jefferson Preferred Stock, of which no
shares were outstanding as of the date hereof. As of the date hereof, no
shares of Jefferson Common Stock and no shares of Jefferson Preferred Stock
were held in treasury by Jefferson or otherwise owned by Jefferson or its
Subsidiaries ("Treasury Stock"). The outstanding shares of Jefferson Stock
have been duly authorized and are validly issued and outstanding, fully
paid and nonassessable, and subject to no preemptive rights (and were not
issued in violation of any preemptive rights). As of the date hereof,
except as Previously Disclosed in its Disclosure Schedule, there are no
shares of Jefferson Stock authorized and reserved for issuance, Jefferson
does not have any Rights issued or outstanding with respect to Jefferson
Stock, and Jefferson does not have any commitment to authorize, issue or
sell any Jefferson Stock or Rights, except pursuant to this Agreement and
the Stock Option Agreement. The number of shares of Jefferson Common Stock
which are issuable and reserved for issuance upon exercise of Jefferson
Stock Options as of the date hereof are Previously Disclosed in Jefferson's
Disclosure Schedule.
(c) Subsidiaries. (i)(A) Jefferson has Previously Disclosed a list of
all of its Subsidiaries together with the jurisdiction of organization of
each such Subsidiary, (B) except as Previously Disclosed, it owns, directly
or indirectly, all the issued and outstanding equity securities of each of
its Subsidiaries, (C) no equity securities of any of its Subsidiaries are
or may become required to be issued (other than to it or its wholly-owned
Subsidiaries) by reason of any Right or otherwise, (D) there are no
contracts, commitments, understandings or arrangements by which any of such
Subsidiaries is or may be bound to sell or otherwise transfer any equity
securities of any such Subsidiaries (other than to it or its wholly-owned
Subsidiaries), (E) there are no contracts, commitments, understandings, or
arrangements relating to its rights to vote or to dispose of such
securities and (F) all the equity securities of each Subsidiary held by
Jefferson or its Subsidiaries are fully paid and nonassessable (except
pursuant to 12 U.S.C. ss.55) and are owned by Jefferson or its Subsidiaries
free and clear of any Liens.
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(ii) Jefferson does not own beneficially, directly or indirectly, any
equity securities or similar interests of any Person, or any interest in a
partnership or joint venture of any kind, other than its Subsidiaries.
(iii) Each of Jefferson's Subsidiaries has been duly organized and is
validly existing in good standing under the laws of the jurisdiction of its
organization, and is duly qualified to do business and in good standing in
the jurisdictions where its ownership or leasing of property or the conduct
of its business requires it to be so qualified.
(d) Corporate Power. Jefferson and each of its Subsidiaries has the
corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets; and Jefferson has the
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and the Stock Option Agreement and to
consummate the transactions contemplated hereby and thereby.
(e) Corporate Authority. Subject in the case of this Agreement to
receipt of the requisite approval of the agreement of merger set forth in
this Agreement by the holders of more than two-thirds of the outstanding
shares of Jefferson Common Stock entitled to vote thereon (which is the
only shareholder vote required thereon), this Agreement, the Stock Option
Agreement and the transactions contemplated hereby and thereby have been
authorized by all necessary corporate action of Jefferson and the Jefferson
Board prior to the date hereof. This Agreement is a valid and legally
binding obligation of Jefferson, enforceable in accordance with its terms
(except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar
laws of general applicability relating to or affecting creditors' rights or
by general equity principles). The Jefferson Board of Directors has
received the written opinion of Goldman, Sachs & Co. to the effect that as
of the date hereof the Exchange Ratio is fair to the holders of Jefferson
Common Stock.
(f) Regulatory Filings; No Defaults. (i) No consents or approvals of,
or filings or registrations with, any Governmental Authority or with any
third party are required to be made or obtained by Jefferson or any of its
Subsidiaries in connection with the execution, delivery or performance by
Jefferson of this Agreement or the Stock Option Agreement or to consummate
the Merger except for (A) the filing of a notice under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), (B)
filings of applications or notices with federal and Virginia banking
authorities, (C) filings with the SEC and state securities authorities, and
(D) the filing of articles of merger with the North Carolina Secretary
pursuant to the NCBCA and the Corporation Commission pursuant to the VSCA.
As of the date hereof, Jefferson is not aware of any reason why the
approvals set forth in Section 7.01(b) will not be received without the
imposition of a condition, restriction or requirement of the type described
in Section 7.01(b).
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(ii) Subject to receipt of the regulatory approvals referred to in the
preceding paragraph, and expiration of related waiting periods, and
required filings under federal and state securities laws, the execution,
delivery and performance of this Agreement and the Stock Option Agreement
and the consummation of the transactions contemplated hereby and thereby do
not and will not (A) constitute a breach or violation of, or a default
under, or give rise to any Lien, any acceleration of remedies or any right
of termination under, any law, rule or regulation or any judgment, decree,
order, governmental permit or license, or agreement, indenture or
instrument of Jefferson or of any of its Subsidiaries or to which Jefferson
or any of its Subsidiaries or properties is subject or bound, (B)
constitute a breach or violation of, or a default under, the Jefferson
Certificate or the Jefferson By-Laws, or (C) require any consent or
approval under any such law, rule, regulation, judgment, decree, order,
governmental permit or license, agreement, indenture or instrument.
(g) Financial Reports and SEC Documents; No Material Adverse Effect.
(i) Jefferson's Annual Reports on Form 10-K for the fiscal years ended
December 31, 1994, 1995 and 1996, and all other reports, registration
statements, definitive proxy statements or information statements filed or
to be filed by it or any of its Subsidiaries subsequent to December 31,
1994 under the Securities Act, or under Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act, in the form filed or to be filed (collectively,
Jefferson's "SEC Documents") with the SEC, as of the date filed, (A)
complied or will comply in all material respects as to form with the
applicable requirements under the Securities Act or the Exchange Act, as
the case may be, and (B) did not and will not contain any 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; and each of the
balance sheets contained in or incorporated by reference into any such SEC
Document (including the related notes and schedules thereto) fairly
presents, or will fairly present, the financial position of Jefferson and
its Subsidiaries as of its date, and each of the statements of income and
changes in stockholders' equity and cash flows or equivalent statements in
such SEC Documents (including any related notes and schedules thereto)
fairly presents, or will fairly present, the results of operations, changes
in stockholders' equity and changes in cash flows, as the case may be, of
Jefferson and its Subsidiaries for the periods to which they relate, in
each case in accordance with generally accepted accounting principles
consistently applied during the periods involved, except in each case as
may be noted therein, subject to normal year-end audit adjustments in the
case of unaudited statements.
(ii) Since December 31, 1996, Jefferson and its Subsidiaries have not
incurred any liability other than in the ordinary course of business
consistent with past practice.
(iii) Since December 31, 1996, (A) Jefferson and its Subsidiaries have
conducted their respective businesses in the ordinary and usual course
consistent with past practice (excluding the incurrence of expenses related
to this Agreement and the transactions contemplated hereby) and (B) no
event has occurred or circumstance arisen that, individually
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or taken together with all other facts, circumstances and events (described
in any paragraph of Section 5.03 or otherwise), is reasonably likely to
have a Material Adverse Effect with respect to Jefferson.
(h) Litigation. No litigation, claim or other proceeding before any
court or governmental agency is pending against Jefferson or any of its
Subsidiaries and, to Jefferson's knowledge, no such litigation, claim or other
proceeding has been threatened.
(i) Regulatory Matters. (i) Neither Jefferson nor any of its
Subsidiaries or properties is a party to or is subject to any order, decree,
agreement, memorandum of understanding or similar arrangement with, or a
commitment letter or similar submission to, or extraordinary supervisory letter
from, any federal or state governmental agency or authority charged with the
supervision or regulation of financial institutions or issuers of securities or
engaged in the insurance of deposits (including, without limitation, the Office
of the Comptroller of the Currency, the Federal Reserve Board and the FDIC) or
the supervision or regulation of it or any of its Subsidiaries (collectively,
the "Regulatory Authorities").
(ii) Neither it nor any of its Subsidiaries has been advised by
any Regulatory Authority that such Regulatory Authority is contemplating issuing
or requesting (or is considering the appropriateness of issuing or requesting)
any such order, decree, agreement, memorandum of understanding, commitment
letter, supervisory letter or similar submission.
(j) Compliance with Laws. Jefferson and each of its Subsidiaries:
(i) is in compliance with all applicable federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable thereto or to the employees conducting
such businesses, including, without limitation, the Equal Credit
Opportunity Act, the Fair Housing Act, the Community Reinvestment Act,
the Home Mortgage Disclosure Act and all other applicable fair lending
laws and other laws relating to discriminatory business practices;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations
with, all Governmental Authorities that are required in order to permit
them to own or lease their properties and to conduct their businesses
as presently conducted; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect and, to
Jefferson's knowledge, no suspension or cancellation of any of them is
threatened; and
(iii) has received, since December 31, 1996, no notification or
communication from any Governmental Authority (A) asserting that
Jefferson or any of its Subsidiaries is not in compliance with any of
the statutes, regulations, or ordinances which such Governmental
Authority enforces or (B) threatening to revoke any license, franchise,
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permit, or governmental authorization (nor, to Jefferson's knowledge,
do any grounds for any of the foregoing exist).
(k) Material Contracts; Defaults. Except for those agreements and other
documents filed as exhibits to its SEC Documents, neither it nor any of its
Subsidiaries is a party to, bound by or subject to any agreement, contract,
arrangement, commitment or understanding (whether written or oral) (i) that
is a "material contract" within the meaning of Item 601(b)(10) of the SEC's
Regulation S-K or (ii) that materially restricts the conduct of business by
it or any of its Subsidiaries. Neither it nor any of its Subsidiaries is in
default under any contract, agreement, commitment, arrangement, lease,
insurance policy or other instrument to which it is a party, by which its
respective assets, business, or operations may be bound or affected, or
under which it or its respective assets, business, or operations receives
benefits, and there has not occurred any event that, with the lapse of time
or the giving of notice or both, would constitute such a default.
(l) No Brokers. No action has been taken by Jefferson that would give
rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other like payment with respect to the
transactions contemplated by this Agreement, excluding a Previously
Disclosed fee to be paid to Goldman, Sachs & Co.
(m) Employee Benefit Plans. (i) Section 5.03(m)(i) of Jefferson's
Disclosure Schedule contains a complete and accurate list of all existing
bonus, incentive, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus,
stock purchase, restricted stock, stock option, severance, welfare and
fringe benefit plans, employment or severance agreements and all similar
practices, policies and arrangements in which any employee or former
employee (the "Employees"), consultant or former consultant (the
"Consultants") or director or former director (the "Directors") of
Jefferson or any of its Subsidiaries participates or to which any such
Employees, Consultants or Directors are a party (the "Compensation and
Benefit Plans"). Neither Jefferson nor any of its Subsidiaries has any
commitment to create any additional Compensation and Benefit Plan or to
modify or change any existing Compensation and Benefit Plan.
(ii) Each Compensation and Benefit Plan has been operated and
administered in all material respects in accordance with its terms and with
applicable law, including, but not limited to, ERISA, the Code, the
Securities Act, the Exchange Act, the Age Discrimination in Employment Act,
and any regulations or rules promulgated thereunder, and all filings,
disclosures and notices required by ERISA, the Code, the Securities Act,
the Exchange Act, the Age Discrimination in Employment Act or any other
applicable law have been timely made. Each Compensation and Benefit Plan
which is an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA (a "Pension Plan") and which is intended to be qualified
under Section 401(a) of the Code has received a favorable determination
letter (including a determination that the related trust under such
Compensation and Benefit Plan is
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exempt from tax under Section 501(a) of the Code) from the Internal Revenue
Service ("IRS") for "TRA" (as defined in Rev. Proc. 93-39), or will file
for such determination letter prior to the expiration of the remedial
amendment period for such Compensation and Benefit Plan, and Jefferson is
not aware of any circumstances likely to result in revocation of any such
favorable determination letter. There is no material pending or, to the
knowledge of Jefferson, threatened legal action, suit or claim relating to
the Compensation and Benefit Plans, other than routine claims for benefits.
Neither Jefferson nor any of its Subsidiaries has engaged in a transaction,
or omitted to take any action, with respect to any Compensation and Benefit
Plan that would reasonably be expected to subject Jefferson or any of its
Subsidiaries to a tax or penalty imposed by either Section 4975 of the Code
or Section 502 of ERISA, assuming for purposes of Section 4975 of the Code
that the taxable period of any such transaction expired as of the date
hereof.
(iii) No liability (other than for payment of premiums to the PBGC
which have been made or will be made on a timely basis) under Title IV of
ERISA has been or is expected to be incurred by Jefferson or any of its
Subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any of them, or any single-employer
plan of any entity (an "ERISA Affiliate") which is considered one employer
with Jefferson under Section 4001(a)(14) of ERISA or Section 414(b) or (c)
of the Code (an "ERISA Affiliate Plan"). None of Jefferson, any of its
Subsidiaries or any ERISA Affiliate has contributed, or has been obligated
to contribute, to a multiemployer plan under Subtitle E of Title IV of
ERISA at any time since September 26, 1980. No notice of a "reportable
event", within the meaning of Section 4043 of ERISA for which the 30-day
reporting requirement has not been waived, has been required to be filed
for any Compensation and Benefit Plan or by any ERISA Affiliate Plan within
the 12-month period ending on the date hereof, and to the knowledge of
Jefferson no such notice will be required to be filed as a result of the
transactions contemplated by this Agreement. The PBGC has not instituted
proceedings to terminate any Pension Plan or ERISA Affiliate Plan and, to
Jefferson's knowledge, no condition exists that presents a material risk
that such proceedings will be instituted. To the knowledge of Jefferson,
there is no pending investigation or enforcement action by the PBGC, the
Department of Labor (the "DOL") or IRS or any other governmental agency
with respect to any Compensation and Benefit Plan. Under each Pension Plan
and ERISA Affiliate Plan, as of the date of the most recent actuarial
valuation performed prior to the date of this Agreement, the actuarially
determined present value of all "benefit liabilities", within the meaning
of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in such actuarial valuation of such Pension
Plan or ERISA Affiliate Plan), did not exceed the then current value of the
assets of such Pension Plan or ERISA Affiliate Plan and since such date
there has been neither an adverse change in the financial condition of such
Pension Plan or ERISA Affiliate Plan nor any amendment or other change to
such Pension Plan or ERISA Affiliate Plan that would increase the amount of
benefits thereunder which reasonably could be expected to change such
result.
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(iv) All contributions required to be made under the terms of any
Compensation and Benefit Plan or ERISA Affiliate Plan or any employee
benefit arrangements under any collective bargaining agreement to which
Jefferson or any of its Subsidiaries is a party have been timely made or
have been reflected on Jefferson's financial statements. Neither any
Pension Plan nor any ERISA Affiliate Plan has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of
the Code or Section 302 of ERISA and all required payments to the PBGC with
respect to each Pension Plan or ERISA Affiliate Plan have been made on or
before their due dates. None of Jefferson, any of its Subsidiaries or any
ERISA Affiliate (x) has provided, or would reasonably be expected to be
required to provide, security to any Pension Plan or to any ERISA Affiliate
Plan pursuant to Section 401(a)(29) of the Code, and (y) has taken any
action, or omitted to take any action, that has resulted, or would
reasonably be expected to result, in the imposition of a lien under Section
412(n) of the Code or pursuant to ERISA.
(v) Neither Jefferson nor any of its Subsidiaries has any obligations
to provide retiree health and life insurance or other retiree death
benefits under any Compensation and Benefit Plan, other than benefits
mandated by Section 4980B of the Code, and each such Compensation and
Benefit Plan may be amended or terminated without incurring liability
thereunder. There has been no communication to Employees by Jefferson or
any of its Subsidiaries that would reasonably be expected to promise or
guarantee such Employees retiree health or life insurance or other retiree
death benefits on a permanent basis.
(vi) With respect to each Compensation and Benefit Plan, if applicable,
Jefferson has provided, or made available to Wachovia, true and complete
copies of existing: (A) Compensation and Benefit Plan documents and
amendments thereto; (B) trust instruments and insurance contracts; (C) two
most recent Forms 5500 filed with the IRS; (D) most recent actuarial report
and financial statement; (E) the most recent summary plan description; (F)
forms filed with the PBGC (other than for premium payments); (G) most
recent determination letter issued by the IRS; (H) any Form 5310 or Form
5330 filed with the IRS; and (I) most recent nondiscrimination tests
performed under ERISA and the Code (including 401(k) and 401(m) tests).
(vii) The consummation of the transactions contemplated by this
Agreement would not, directly or indirectly (including, without limitation,
as a result of any termination of employment prior to or following the
Effective Time) reasonably be expected to (A) entitle any Employee,
Consultant or Director to any payment (including severance pay or similar
compensation) or any increase in compensation, (B) result in the vesting or
acceleration of any benefits under any Compensation and Benefit Plan or (C)
result in any material increase in benefits payable under any Compensation
and Benefit Plan.
(viii) Neither Jefferson nor any of its Subsidiaries maintains any
compensation plans, programs or arrangements the payments under which would
not reasonably be expected to be
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deductible as a result of the limitations under Section 162(m) of the Code
and the regulations issued thereunder.
(ix) As a result, directly or indirectly, of the transactions
contemplated by this Agreement (including, without limitation, as a result
of any termination of employment prior to or following the Effective Time),
none of Wachovia, Jefferson or the Surviving Corporation, or any of their
respective Subsidiaries will be obligated to make a payment that would be
characterized as an "excess parachute payment" to an individual who is a
"disqualified individual" (as such terms are defined in Section 280G of the
Code), without regard to whether such payment is reasonable compensation
for personal services performed or to be performed in the future.
(n) Labor Matters. Neither Jefferson nor any of its Subsidiaries is a
party to or is bound by any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization,
nor is Jefferson or any of its Subsidiaries the subject of a proceeding
asserting that it or any such Subsidiary has committed an unfair labor
practice (within the meaning of the National Labor Relations Act) or
seeking to compel Jefferson or any such Subsidiary to bargain with any
labor organization as to wages or conditions of employment, nor is there
any strike or other labor dispute involving it or any of its Subsidi aries
pending or, to Jefferson's knowledge, threatened, nor is Jefferson aware of
any activity involving its or any of its Subsidiaries' employees seeking to
certify a collective bargaining unit or engaging in other organizational
activity.
(o) Takeover Laws; Dissenters Rights. Jefferson has taken all action
required to be taken by it in order to exempt this Agreement, the Stock
Option Agreement and the transactions contemplated hereby and thereby from,
and this Agreement, the Stock Option Agreement and the transactions
contemplated hereby and thereby are exempt from, the requirements of any
"moratorium", "control share", "fair price" "affiliate transaction",
"business combination" or other antitakeover laws and regulations of any
state (collectively, "Takeover Laws"), including, without limitation, the
Commonwealth of Virginia, and including, without limitation, Sections
13.1-725 through 13.1-728 of the VSCA (because a majority of Jefferson's
disinterested directors approved such transactions for such purposes prior
to any "determination date" with respect to Wachovia) and Sections
13.1-728.1 through 13.1-728.9 of the VSCA. Holders of Jefferson Common
Stock do not have dissenters rights in connection with the Merger.
(p) Environmental Matters. To the knowledge of Jefferson and its
Subsidiaries, neither the conduct nor operation of Jefferson or its
Subsidiaries nor any condition of any property presently or previously
owned, leased or operated by any of them (including, without limitation, in
a fiduciary or agency capacity), or on which any of them holds a Lien,
violates or violated Environmental Laws and no condition has existed or
event has occurred with respect to any of them or any such property that,
with notice or the passage of time, or both,
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is reasonably likely to result in liability under Environmental Laws.
Neither Jefferson nor any of its Subsidiaries has received any notice from
any person or entity that Jefferson or its Subsidiaries or the operation or
condition of any property ever owned, leased, operated, or held as
collateral or in a fiduciary capacity by any of them are or were in
violation of or otherwise are alleged to have liability under any
Environmental Law, including, but not limited to, responsibility (or
potential responsibility) for the cleanup or other remediation of any
pollutants, contaminants, or hazardous or toxic wastes, substances or
materials at, on, beneath, or originating from any such property.
(q) Tax Matters. All Tax Returns that are required to be filed by or
with respect to Jefferson and its Subsidiaries have been duly filed, (ii)
all Taxes shown to be due on the Tax Returns referred to in clause (i) have
been paid in full, (iii) the Tax Returns referred to in clause (i) have
been examined by the Internal Revenue Service or the appropriate state,
local or foreign taxing authority or the period for assessment of the Taxes
in respect of which such Tax Returns were required to be filed has expired,
(iv) all deficiencies asserted or assess ments made as a result of such
examinations have been paid in full, (v) no issues that have been raised by
the relevant taxing authority in connection with the examination of any of
the Tax Returns referred to in clause (i) are currently pending, and (vi)
no waivers of statutes of limitation have been given by or requested with
respect to any Taxes of Jefferson or its Subsidiaries. Jefferson has made
available to Wachovia true and correct copies of the United States federal
income Tax Returns filed by Jefferson and its Subsidiaries for each of the
three most recent fiscal years ended on or before December 31, 1995.
Neither Jefferson nor any of its Subsidiaries has any liability with
respect to income, franchise or similar Taxes that accrued on or before the
end of the most recent period covered by Jefferson's SEC Docu ments filed
on or prior to the date hereof in excess of the amounts accrued with
respect thereto that are reflected in the financial statements included in
Jefferson's SEC Documents filed prior to the date hereof. Neither Jefferson
nor any of its Subsidiaries has any reason to believe that any conditions
exist that might prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(r) Risk Management Instruments. All interest rate swaps, caps, floors,
option agreements, futures and forward contracts and other similar risk
management arrangements, whether entered into for Jefferson's own account,
or for the account of one or more of Jefferson's Subsidiaries or their
customers (all of which are listed on Jefferson's Disclosure Schedule),
were entered into (i) in accordance with prudent business practices and all
applicable laws, rules, regulations and regulatory policies and (ii) with
counterparties believed to be financially responsible at the time; and each
of them constitutes the valid and legally binding obligation of Jefferson
or one of its Subsidiaries, enforceable in accordance with its terms
(except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar
laws of general applicability relating to or affecting creditors' rights or
by general equity principles), and are in full force
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and effect. Neither Jefferson nor its Subsidiaries, nor to Jefferson's
knowledge any other party thereto, is in breach of any of its obligations
under any such agreement or arrangement.
(s) Books and Records. The books and records of Jefferson and its
Subsidiaries have been fully, properly and accurately maintained in all
material respects, and there are no material inaccuracies or discrepancies
of any kind contained or reflected therein, and they fairly present the
financial position of Jefferson and its Subsidiaries.
(t) Insurance. Jefferson's Disclosure Schedule sets forth all of the
insurance policies, binders, or bonds maintained by Jefferson or its
Subsidiaries ("Insurance Policies"). Jefferson and its Subsidiaries are
insured with reputable insurers against such risks and in such amounts as
the management of Jefferson reasonably has determined to be prudent in
accordance with industry practices. All the Insurance Policies are in full
force and effect; Jefferson and its Subsidiaries are not in material
default thereunder; and all claims thereunder have been filed in due and
timely fashion.
(u) Disclosure. The representations and warranties contained in this
Section 5.03 do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained in this Section 5.03 not misleading.
5.04 Representations and Warranties of Wachovia. Subject to Sections
5.01 and 5.02 and except as Previously Disclosed in a paragraph of its
Disclosure Schedule corresponding to the relevant paragraph below, Wachovia
hereby represents and warrants to Jefferson as follows:
(a) Organization, Standing and Authority. Wachovia is duly organized,
validly existing and in good standing under the laws of the State of North
Carolina. Wachovia is duly qualified to do business and is in good standing
in the states of the United States and foreign jurisdictions where its
ownership or leasing of property or assets or the conduct of its business
requires it to be so qualified. Wachovia has in effect all federal, state,
local, and foreign governmental authorizations necessary for it to own or
lease its properties and assets and to carry on its business as it is now
conducted.
(b) Wachovia Stock. (i) As of the date hereof, the authorized capital
stock of Wachovia consists solely of 500,000,000 shares of Wachovia Common
Stock, of which 159,802,330 shares were outstanding as of the date hereof
and 50,000,000 shares of Wachovia Preferred Stock, of which no shares were
outstanding as of the date hereof. As of the date hereof, except as set
forth in its Disclosure Schedule, Wachovia does not have any Rights issued
or outstanding with respect to Wachovia Stock, and Wachovia does not have
any commitment to authorize, issue or sell any Wachovia Stock or Rights,
except pursuant to this Agreement.
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(ii) The shares of Wachovia Common Stock to be issued in exchange for
shares of Jefferson Common Stock in the Merger, when issued in accordance
with the terms of this Agreement, will be duly authorized, validly issued,
fully paid and nonassessable.
(c) Subsidiaries. Each of Wachovia's Significant Subsidiaries has been
duly organized and is validly existing in good standing under the laws of
the jurisdiction of its organization, and is duly qualified to do business
and in good standing in the jurisdictions where its ownership or leasing of
property or the conduct of its business requires it to be so qualified and
it owns, directly or indirectly, all the issued and outstanding equity
securities of each of its Significant Subsidiaries.
(d) Corporate Power. Wachovia and each of its Significant Subsidiaries
has the corporate power and authority to carry on its business as it is now
being conducted and to own all its properties and assets; and Wachovia has
the corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby.
(e) Corporate Authority. This Agreement and the transactions
contemplated hereby have been authorized by all necessary corporate action
of Wachovia and its Board of Directors and does not require any vote of
stockholders. This Agreement is a valid and legally binding agreement of
Wachovia enforceable in accordance with its terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws of general applicability
relating to or affecting creditors' rights or by general equity
principles).
(f) Regulatory Approvals; No Defaults. No consents or approvals of, or
filings or registrations with, any court, administrative agency or
commission or other governmental authority or instrumentality or with any
third party are required to be made or obtained by Wachovia or any of its
Subsidiaries in connection with the execution, delivery or performance by
Wachovia of this Agreement or to consummate the Merger except for (A) the
filing of applications and notices, as applicable, with the federal and
state banking authorities; (B) approval of the listing on the NYSE of
Wachovia Common Stock to be issued in the Merger; (C) the filing and
declaration of effectiveness of the Registration Statement; (D) the filing
of articles of merger with the North Carolina Secretary pursuant to the
NCBCA and the Corporation Commission pursuant to the VSCA; (E) such filings
as are required to be made or approvals as are required to be obtained
under the securities or "Blue Sky" laws of various states in connection
with the issuance of Wachovia Stock in the Merger; and (F) receipt of the
approvals set forth in Section 7.01(b). As of the date hereof, Wachovia is
not aware of any reason why the approvals set forth in Section 7.01(b) will
not be received without the imposition of a condition, restriction or
requirement of the type described in Section 7.01(b).
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(ii) Subject to receipt of the regulatory approvals referred to in
the preceding paragraph and expiration of the related waiting periods, and
required filings under federal and state securities laws, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (A) constitute a
breach or violation of, or a default under, or give rise to any Lien, any
acceleration of remedies or any right of termination under, any law, rule
or regulation or any judgment, decree, order, governmental permit or
license, or agreement, indenture or instrument of Wachovia or of any of its
Subsidiaries or to which Wachovia or any of its Subsidiaries or properties
is subject or bound, (B) constitute a breach or violation of, or a default
under, the certificate of incorporation or by-laws (or similar governing
documents) of Wachovia or any of its Subsidiaries, or (C) require any
consent or approval under any such law, rule, regulation, judgment, decree,
order, governmental permit or license, agreement, indenture or instrument.
(g) Financial Reports and SEC Documents; Material Adverse Effect. (i)
Wachovia's SEC Documents, as of the date filed, (A) complied or will comply
in all material respects as to form with the applicable requirements under
the Securities Act or the Exchange Act, as the case may be, and (B) did not
and will not contain any 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; and each of the balance sheets contained in or
incorporated by reference into any such SEC Document (including the related
notes and schedules thereto) fairly presents, or will fairly present, the
financial position of Wachovia and its Subsidiaries as of its date, and
each of the statements of income and changes in stockholders' equity and
cash flows or equivalent statements in such SEC Documents (including any
related notes and schedules thereto) fairly presents, or will fairly
present, the results of operations, changes in stockholders' equity and
changes in cash flows, as the case may be, of Wachovia and its Subsidiaries
for the periods to which they relate, in each case in accordance with
generally accepted accounting principles consistently applied during the
periods involved, except in each case as may be noted therein, subject to
normal year-end audit adjustments in the case of unaudited statements.
(ii) Since December 31, 1996, no event has occurred or circumstance
arisen that, individually or taken together with all other facts,
circumstances and events (described in any paragraph of Section 5.04 or
otherwise), is reasonably likely to have a Material Adverse Effect with
respect to Wachovia.
(h) Litigation; Regulatory Action. (i) Other than as set forth in its
SEC Documents filed on or before the date hereof, no litigation, claim or
other proceeding before any Govern mental Authority is pending against
Wachovia or any of its Subsidiaries and, to the best of Wachovia's
knowledge, no such litigation, claim or other proceeding has been
threatened.
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(ii) Neither Wachovia nor any of its Subsidiaries or properties is a
party to or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter or
similar submission to, or extraordinary supervisory letter from a
Regulatory Authority, nor has Wachovia or any of its Subsidiaries been
advised by a Regulatory Authority that such agency is contemplating issuing
or requesting (or is considering the appropriateness of issuing or
requesting) any such order, decree, agreement, memorandum of understanding,
commitment letter, supervisory letter or similar submission.
(i) Compliance with Laws. Wachovia and each of its Subsidiaries:
(i) in the conduct of its business, is in compliance with all
applicable federal, state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees applicable
thereto or to the employees conducting such businesses, including,
without limitation, the Equal Credit Opportunity Act, the Fair Housing
Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act
and all other applicable fair lending laws and other laws relating to
discriminatory business practices; and
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations
with, all Governmental Authorities that are required in order to permit
them to conduct their businesses substantially as presently conducted;
all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect and, to the best of its
knowledge, no suspension or cancellation of any of them is threatened.
(j) No Brokers. No action has been taken by Wachovia that would give
rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other like payment with respect to the
transactions contemplated by this Agreement, excluding a fee to be paid to
Credit Suisse First Boston Corporation.
(k) Disclosure. The representations and warranties contained in this
Section 5.04 do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained in this Section 5.04 not misleading.
ARTICLE VI
Covenants
6.01 Reasonable Best Efforts. Subject to the terms and
conditions of this Agree ment, each of Jefferson and Wachovia agrees to use its
reasonable best efforts in good faith to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper
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or desirable, or advisable under applicable laws, so as to permit consummation
of the Merger as promptly as practicable and otherwise to enable consummation of
the transactions contemplated hereby and shall cooperate fully with the other
party hereto to that end.
6.02 Stockholder Approvals. Jefferson agrees to take, in accordance
with applicable law or NASDAQ rules and its articles of incorporation and
by-laws, all action necessary to convene an appropriate meeting of stockholders
of Jefferson to consider and vote upon the approval and adoption of this
Agreement and any other matters required to be approved by Jefferson's
stockholders for consummation of the Merger (including any adjournment or
postponement, the "Jefferson Meeting") as promptly as practicable after the
Registration Statement is declared effective. Except to the extent legally
required for the discharge by the Board of Directors of its fiduciary duties as
advised in writing by its counsel, the Jefferson Board shall recommend such
approval, and Jefferson shall take all reasonable, lawful action to solicit such
approval by its stockholders. At the request of Wachovia, Jefferson will utilize
a professional proxy solicitation firm to assist it in procuring the necessary
stockholder vote.
6.03 Registration Statement. (a) Wachovia agrees to prepare a
registration statement on Form S-4 (the "Registration Statement") to be filed by
Wachovia with the SEC in connection with the issuance of Wachovia Stock in the
Merger (including the proxy statement and prospectus and other proxy
solicitation materials of Jefferson constituting a part thereof (the "Proxy
Statement") and all related documents). Each of the parties hereto agrees to
cooperate, and to cause its Subsidiaries to cooperate, with the other, its
counsel and its accountants, in preparation of the Registration Statement and
the Proxy Statement; and provided that Jefferson and its Subsidiaries have
cooperated as required above, Wachovia agrees to file the Proxy Statement in
preliminary form with the SEC as promptly as reasonably practicable, and to file
the Registration Statement with the SEC as soon as reasonably practicable after
any SEC comments with respect to the preliminary Proxy Statement are resolved.
Each of Jefferson and Wachovia agrees to use all reasonable efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as reasonably practicable after filing thereof. Wachovia also agrees to
use all reasonable efforts to obtain all necessary state securities law or "Blue
Sky" permits and approvals required to carry out the transactions contemplated
by this Agreement. Jefferson agrees to furnish to Wachovia all information
concerning Jefferson, its Subsidiaries, officers, directors and stockholders as
may be reasonably requested in connection with the foregoing.
(b) Each of Jefferson and Wachovia agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it for
inclusion or incorporation by reference in (i) the Registration Statement will,
at the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and (ii) the
Proxy Statement and any amendment or supplement thereto will, at the date of
mailing to stockholders and at the time of
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the Jefferson Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading or any statement which, in the light of
the circumstances under which such statement is made, will be false or
misleading with respect to any material fact, or which will omit to state any
material fact necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier statement in the
Proxy Statement or any amendment or supplement thereto. Each of Jefferson and
Wachovia further agrees that if it shall become aware prior to the Effective
Date of any information furnished by it that would cause any of the statements
in the Proxy Statement to be false or misleading with respect to any material
fact, or to omit to state any material fact necessary to make the statements
therein not false or misleading, to promptly inform the other party thereof and
to take the necessary steps to correct the Proxy Statement.
(c) Wachovia agrees to advise Jefferson, promptly after Wachovia
receives notice thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, of the issuance of any
stop order or the suspension of the qualification of Wachovia Stock for offering
or sale in any jurisdiction, of the initiation or threat of any proceeding for
any such purpose, or of any request by the SEC for the amendment or supplement
of the Registration Statement or for additional information.
6.04 Press Releases. Each of Jefferson and Wachovia agrees that it will
not, without the prior approval of the other party, issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby, except as otherwise required by applicable law or
regulation or NYSE rules.
6.05 Access; Information. (a) Each of Jefferson and Wachovia agrees
that upon reasonable notice and subject to applicable laws relating to the
exchange of information, it shall afford the other party and the other party's
officers, employees, counsel, accountants and other authorized representatives,
such access during normal business hours throughout the period prior to the
Effective Time to the books, records (including, without limitation, tax returns
and work papers of independent auditors), properties, personnel and to such
other information as any party may reasonably request and, during such period,
it shall furnish promptly to such other party (i) a copy of each material
report, schedule and other document filed by it pursuant to the require ments of
federal or state securities or banking laws, and (ii) all other information
concerning the business, properties and personnel of it as the other may
reasonably request.
(b) Each agrees that it will not, and will cause its representatives
not to, use any informa tion obtained pursuant to this Section 6.05 (as well as
any other information obtained prior to the date hereof in connection with the
entering into of this Agreement) for any purpose unrelated to the consummation
of the transactions contemplated by this Agreement. Subject to the requirements
of law, each party will keep confidential, and will cause its representatives to
keep confidential, all information and documents obtained pursuant to this
Section 6.05 (as well as any
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other information obtained prior to the date hereof in connection with the
entering into of this Agreement) unless such information (i) was already known
to such party, (ii) becomes available to such party from other sources not known
by such party to be bound by a confidentiality obligation, (iii) is disclosed
with the prior written approval of the party to which such information pertains
or (iv) is or becomes readily ascertainable from published information or trade
sources. In the event that this Agreement is terminated or the transactions
contemplated by this Agreement shall otherwise fail to be consummated, each
party shall promptly cause all copies of documents or extracts thereof
containing information and data as to another party hereto to be returned to the
party which furnished the same. No investigation by either party of the business
and affairs of the other shall affect or be deemed to modify or waive any
representation, warranty, covenant or agreement in this Agreement, or the
conditions to either party's obligation to consummate the transactions
contemplated by this Agreement.
6.06 Acquisition Proposals. Jefferson agrees that neither it nor any of
its Subsidiaries nor any of the respective officers and directors of Jefferson
or its Subsidiaries shall, and Jefferson shall direct and use its reasonable
best efforts to cause its employees, agents and representatives (including,
without limitation, any investment banker, attorney or accountant retained by it
or any of its Subsidiaries) not to, initiate, solicit or encourage, directly or
indirectly, any enquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to stockholders of Jefferson) with
respect to a merger, consolidation or similar transaction involving, or any
purchase of all or any significant portion of the assets or any equity
securities of, Jefferson or its Significant Subsidiary (any such proposal or
offer being hereinafter referred to as an "Acquisition Proposal") or, except to
the extent legally required for the discharge by the board of directors of its
fiduciary duties as advised in writing by such board's counsel, engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal. It shall immediately cease and cause to be terminated any activities,
discussions or negotiations conducted prior to the date of this Agreement with
any parties other than Wachovia with respect to any of the foregoing and shall
use its reasonable best efforts to enforce any confidentiality or similar
agreement relating to an Acquisition Proposal. Jefferson shall promptly (within
24 hours) advise Wachovia following the receipt by Jefferson of any Acquisition
Proposal and the substance thereof (including the identity of the person making
such Acquisition Proposal), and advise Wachovia of any developments with respect
to such Acquisition Proposal immediately upon the occurrence thereof.
6.07 Affiliate Agreements. (a) Not later than the 15th day prior to the
mailing of the Proxy Statement, Jefferson shall deliver to Wachovia, a schedule
of each person that, to its knowledge, is or is reasonably likely to be, as of
the date of Jefferson Meeting, deemed to be an "affiliate" of it (each, a
"Jefferson Affiliate") as that term is used in Rule 145 under the Securities
Act.
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(b) Jefferson shall use its reasonable best efforts to cause each
person who may be deemed to be a Jefferson Affiliate to execute and deliver to
Wachovia on or before the date of mailing of the Proxy Statement an "affiliates
agreement" in form and substance reasonably satisfactory to Wachovia.
6.08 Takeover Laws. No party hereto shall take any action that would
cause the transactions contemplated by this Agreement or the Stock Option
Agreement to be subject to requirements imposed by any Takeover Law and each of
them shall take all necessary steps within its control to exempt (or ensure the
continued exemption of) the transactions contemplated by this Agreement from, or
if necessary challenge the validity or applicability of, any applicable Takeover
Law, as now or hereafter in effect.
6.09 Certain Policies. Prior to the Effective Date, Jefferson shall,
consistent with generally accepted accounting principles and on a basis mutually
satisfactory to it and Wachovia, modify and change its loan, litigation and real
estate valuation policies and practices (including loan classifications and
levels of reserves) so as to be applied on a basis that is consistent with those
of Wachovia; provided, however, that Jefferson shall not be obligated to take
any such action pursuant to this Section 6.09 unless and until Wachovia
acknowledges that all conditions to its obligation to consummate the Merger have
been satisfied.
6.10 NYSE Listing. Wachovia agrees to use its reasonable best efforts
to list, prior to the Effective Date, on the NYSE, subject to official notice of
issuance, the shares of Wachovia Common Stock to be issued to the holders of
Jefferson Common Stock in the Merger.
6.11 Regulatory Applications. (a) Wachovia and Jefferson and their
respective Subsidiaries shall cooperate and use their respective reasonable best
efforts to prepare all documentation, to effect all filings and to obtain all
permits, consents, approvals and authoriza tions of all third parties and
Governmental Authorities necessary to consummate the transactions contemplated
by this Agreement. Each of Wachovia and Jefferson shall have the right to review
in advance, and to the extent practicable each will consult with the other, in
each case subject to applicable laws relating to the exchange of information,
with respect to, all material written information submitted to any third party
or any Governmental Authority in connection with the transactions contemplated
by this Agreement. In exercising the foregoing right, each of the parties hereto
agrees to act reasonably and as promptly as practicable. Each party hereto
agrees that it will consult with the other party hereto with respect to the
obtaining of all material permits, consents, approvals and authorizations of all
third parties and Governmental Authorities necessary or advisable to consummate
the transactions contemplated by this Agreement and each party will keep the
other party appraised of the status of material matters relating to completion
of the transactions contemplated hereby.
(b) Each party agrees, upon request, to furnish the other party with
all information concerning itself, its Subsidiaries, directors, officers and
stockholders and such other matters as
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may be reasonably necessary or advisable in connection with any filing, notice
or application made by or on behalf of such other party or any of its
Subsidiaries to any third party or Governmental Authority.
6.12 Indemnification. (a) Following the Effective Date and for a period
of six years thereafter, Wachovia shall indemnify, defend and hold harmless the
present directors and officers of Jefferson and its Subsidiaries (each, an
"Indemnified Party") against all costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of actions or omissions occurring at or prior to the
Effective Time (including, without limitation, the transactions contemplated by
this Agreement) to the fullest extent that Jefferson is permitted to indemnify
(and advance expenses to) its directors and officers under the laws of the
Commonwealth of Virginia, the Jefferson Certificate and the Jefferson By-Laws as
in effect on the date hereof; provided that any determination required to be
made with respect to whether an officer's or director's conduct complies with
the standards set forth under Virginia law, the Jefferson Certificate and the
Jefferson By-Laws shall be made by independent counsel (which shall not be
counsel that provides material services to Wachovia) selected by Wachovia and
reasonably acceptable to such officer or director; and provided, further, that
in the absence of applicable Virginia judicial precedent to the contrary, such
counsel, in making such determination, shall presume such officer's or
director's conduct complied with such standard and Wachovia shall have the
burden to demonstrate that such officer's or director's conduct failed to comply
with such standard.
(b) For a period of three years from the Effective Time, Wachovia shall
use its reasonable best efforts to provide that portion of director's and
officer's liability insurance that serves to reimburse the present and former
officers and directors of Jefferson or any of its Subsidiaries (determined as of
the Effective Time) (as opposed to Jefferson) with respect to claims against
such directors and officers arising from facts or events which occurred before
the Effective Time, which insurance shall contain at least the same coverage and
amounts, and contain terms and conditions no less advantageous, as that coverage
currently provided by Jefferson; provided, however, that in no event shall
Wachovia be required to expend more than 200 percent of the current amount
expended by Jefferson (the "Insurance Amount") to maintain or procure such
directors and officers insurance coverage; provided, further, that if Wachovia
is unable to maintain or obtain the insurance called for by this Section
6.12(b), Wachovia shall use its reasonable best efforts to obtain as much
comparable insurance as is available for the Insurance Amount; provided,
further, that officers and directors of Jefferson or any Subsidiary may be
required to make application and provide customary representations and
warranties to Wachovia's insurance carrier for the purpose of obtaining such
insurance.
(c) Any Indemnified Party wishing to claim indemnification under
Section 6.12(a), upon learning of any claim, action, suit, proceeding or
investigation described above, shall promptly
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notify Wachovia thereof; provided that the failure so to notify shall not affect
the obligations of Wachovia under Section 6.12(a) unless and to the extent that
Wachovia is actually prejudiced as a result of such failure.
(d) If Wachovia or any of its successors or assigns shall consolidate
with or merge into any other entity and shall not be the continuing or surviving
entity of such consolidation or merger or shall transfer all or substantially
all of its assets to any entity, then and in each case, proper provision shall
be made so that the successors and assigns of Wachovia shall assume the
obligations set forth in this Section 6.12.
6.13 Benefit Plans. As soon as practicable following the Effective Time
(but in no event later than January 1, 1998 if the Effective Time occurs prior
to January 1, 1998) (i) Wachovia will provide employees of Jefferson who become
employees of Wachovia with employee benefit plans no less favorable in the
aggregate than those provided to similarly situated employees of Wachovia; (ii)
any such employees will receive credit for service with Jefferson or any of its
Subsidiaries or predecessors (to the extent service with such predecessors was
credited under the Jefferson Compensation and Benefit Plans as Previously
Disclosed) prior to the Effective Time for the purpose of determining
eligibility to participate, eligibility for benefits, benefit forms, and vesting
under Wachovia's employee benefit plans (including any prior periods of service
with Wachovia to the extent such affected employees have not previously received
payment of benefits in respect of, or credit for, such prior Wachovia service);
and (iii) Wachovia shall cause any and all pre-existing condition limitations
(to the extent such limitations did not apply to a pre-existing condition under
the Jefferson Compensation and Benefit Plans) and eligibility waiting periods
under group health plans to be waived with respect to such participants and
their eligible dependents; provided, however, that a maximum of 20 years of
service with Jefferson and its Subsidiaries and predecessors shall be recognized
for purposes of determining the annual defined dollar allowance under the
Wachovia Retirement Medical Plan; and provided, further, that any executive of
Jefferson who is a party to an executive severance agreement (or similar
arrangement) with Jefferson who becomes an employee of Wachovia or its
Subsidiaries and who terminates his or her employment with Wachovia and its
Subsidiaries within the thirty-day window period beginning one year following
the later of the "Change in Control Date" (as defined in such executive
severance agreement or similar arrangement as of the date hereof) or the
Effective Time shall not be eligible to participate or receive benefits under
the Wachovia Retirement Medical Plan. All discretionary awards and benefits
under any employee benefit plans of Wachovia shall be subject to the discretion
of the persons or committee administering such plans. Wachovia shall honor,
pursuant to the terms of the Jefferson Compensation and Benefit Plans Previously
Disclosed, all employee benefit obligations to current and former employees of
Jefferson under such Plans.
6.14 Accountants' Letters. Each of Jefferson and Wachovia shall use its
reasonable best efforts to cause to be delivered to the other party, and to
Wachovia's directors and officers who sign the Registration Statement, a letter
of KPMG Peat Marwick LLP and Ernst & Young,
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LLP, respectively, independent auditors, dated (i) the date on which the
Registration Statement shall become effective and (ii) a date shortly prior to
the Effective Date, and addressed to such other party, and such directors and
officers, in form and substance customary for "comfort" letters delivered by
independent accountants in accordance with Statement of Accounting Standards No.
72.
6.15 Notification of Certain Matters. Each of Jefferson and Wachovia
shall give prompt notice to the other of any fact, event or circumstance known
to it that (i) is reasonably likely, individually or taken together with all
other facts, events and circumstances known to it, to result in any Material
Adverse Effect with respect to it or (ii) would cause or constitute a material
breach of any of its representations, warranties, covenants or agreements
contained herein.
6.16 Directors. Wachovia agrees to cause one member of the Jefferson
Board on the date hereof (selected by Wachovia after consultation with
Jefferson) who is still a member of the Jefferson Board immediately prior to the
Effective Time and willing and eligible to serve to be elected or appointed as a
director of Wachovia at, or as promptly as practicable after, the Effective
Time.
6.17 Dividend Reinvestment and Other Stock Plans. Jefferson shall at or
prior to the Effective Time cause to be terminated any obligation to issue
shares of Jefferson Common Stock under its Dividend Reinvestment Plan and
Employee Stock Purchase Plan and any other plan or arrangement pursuant to which
it issues Jefferson Common Stock or rights thereto, except for its stock option
plans with respect to issued options Previously Disclosed and its Deferred
Compensation and Stock Purchase Plan for Non-Employee Directors as Previously
Disclosed.
6.18 Dividend Coordination. After August 30, 1997, the Board of
Directors of Jefferson shall cause its regular quarterly dividend record dates
and payment dates for Jefferson Common Stock to be the same as Wachovia's
regular quarterly dividend record dates and payment dates for Wachovia Common
Stock, and Jefferson shall not thereafter change its regular dividend payment
dates and record dates.
ARTICLE VII
Conditions to Consummation of the Merger
7.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each of Wachovia and Jefferson to consummate the Merger
is subject to the fulfillment or written waiver by Wachovia and Jefferson prior
to the Effective Time of each of the following conditions:
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(a) Stockholder Approval. This Agreement shall have been duly adopted
by the affirma tive vote of the holders of more than two-thirds of the
outstanding shares of Jefferson Common Stock entitled to vote thereon in
accordance with Section 13.1-718 of the VSCA, other applicable law and the
Jefferson Certificate and the Jefferson By-Laws.
(b) Regulatory Approvals. All regulatory approvals required to
consummate the trans actions contemplated hereby, shall have been obtained
and shall remain in full force and effect and all statutory waiting periods
in respect thereof shall have expired and no such approvals shall contain
any conditions, restrictions or requirements which the Wachovia Board
reasonably determines in good faith would (i) following the Effective Time,
have a Material Adverse Effect on the Surviving Corporation and its
Subsidiaries taken as a whole or (ii) reduce the benefits of the
transactions contemplated hereby to such a degree that Wachovia would not
have entered into this Agreement had such conditions, restrictions or
requirements been known at the date hereof.
(c) No Injunction. No Governmental Authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute,
rule, regulation, judgment, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and prohibits
consummation of the transactions contemplated by this Agreement.
(d) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
SEC.
(e) Blue Sky Approvals. All permits and other authorizations under
state securities laws necessary to consummate the transactions contemplated
hereby and to issue the shares of Wachovia Common Stock to be issued in the
Merger shall have been received and be in full force and effect.
(f) Listing. The shares of Wachovia Common Stock to be issued in the
Merger shall have been approved for listing on the NYSE, subject to
official notice of issuance.
7.02 Conditions to Obligation of Jefferson. The obligation of Jefferson
to consum mate the Merger is also subject to the fulfillment or written waiver
by Jefferson prior to the Effective Time of each of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Wachovia set forth in this Agreement shall be true and correct as of the
date of this Agreement and as of the Effective Date as though made on and
as of the Effective Date (except that representations and warranties that
by their terms speak as of the date of this Agreement or some other date
shall be true and correct as of such date), and Jefferson shall have
received a certificate, dated
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the Effective Date, signed on behalf of Wachovia by the Chief Executive
Officer and the Chief Financial Officer of Wachovia to such effect.
(b) Performance of Obligations of Wachovia. Wachovia shall have
performed in all material respects all obligations required to be performed
by them under this Agreement at or prior to the Effective Time, and
Jefferson shall have received a certificate, dated the Effective Date,
signed on behalf of Wachovia by the Chief Executive Officer and the Chief
Financial Officer of Wachovia to such effect.
(c) Opinion of Jefferson's Counsel. Jefferson shall have received an
opinion of McGuire, Woods, Battle & Boothe, L.L.P., counsel to Jefferson,
to the effect that, on the basis of facts, representations and assumptions
set forth in such opinion, (i) the Merger constitutes a "reorganization"
within the meaning of Section 368 of the Code and (ii) no gain or loss will
be recognized by stockholders of Jefferson who receive shares of Wachovia
Common Stock in exchange for shares of Jefferson Common Stock, except that
gain or loss may be recognized as to cash received in lieu of fractional
share interests. In rendering its opinion, McGuire, Woods, Battle & Boothe,
L.L.P. may require and rely upon representations contained in letters from
Jefferson and others.
(d) Accountants' Letters. Jefferson shall have received the letters
referred to in Section 6.14 from Ernst & Young, LLP, Wachovia's independent
auditors.
7.03 Conditions to Obligation of Wachovia. The obligation of Wachovia
to consummate the Merger is also subject to the fulfillment or written waiver by
Wachovia prior to the Effective Time of each of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Jefferson set forth in this Agreement shall be true and correct as of
the date of this Agreement and as of the Effective Date as though made on
and as of the Effective Date (except that representations and warranties
that by their terms speak as of the date of this Agreement or some other
date shall be true and correct as of such date) and Wachovia shall have
received a certificate, dated the Effective Date, signed on behalf of
Jefferson by the Chief Executive Officer and the Chief Financial Officer of
Jefferson to such effect.
(b) Performance of Obligations of Jefferson. Jefferson shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Effective Time, and Wachovia
shall have received a certificate, dated the Effective Date, signed on
behalf of Jefferson by the Chief Executive Officer and the Chief Financial
Officer of Jefferson to such effect.
(c) Opinion of Wachovia's Counsel. Wachovia shall have received an
opinion of Sullivan & Cromwell, special counsel to Wachovia, dated the
Effective Date, to the effect
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that, on the basis of facts, representations and assumptions set forth in
such opinion, the Merger constitutes a reorganization under Section 368 of
the Code. In rendering its opinion, Sullivan & Cromwell may require and
rely upon representations contained in letters from Wachovia and others.
(d) Accountants' Letters. Wachovia and its directors and officers who
sign the Registration Statement shall have received the letters referred to
in Section 6.14 from KPMG Peat Marwick LLP, Jefferson's independent
auditors.
ARTICLE VIII
Termination
8.01 Termination. This Agreement may be terminated, and the
Acquisition may be abandoned:
(a) Mutual Consent. At any time prior to the Effective Time, by the
mutual consent of Wachovia and Jefferson, if the Board of Directors of each
so determines by vote of a majority of the members of its entire Board.
(b) Breach. At any time prior to the Effective Time, by Wachovia or
Jefferson, if its Board of Directors so determines by vote of a majority of
the members of its entire Board, in the event of either: (i) a breach by
the other party of any representation or warranty contained herein (subject
to the standard set forth in Section 5.02), which breach cannot be or has
not been cured within 30 days after the giving of written notice to the
breaching party of such breach; or (ii) a breach by the other party of any
of the covenants or agreements contained herein, which breach cannot be or
has not been cured within 30 days after the giving of written notice to the
breaching party of such breach, provided that such breach (whether under
(i) or (ii)) would be reasonably likely, individually or in the aggregate
with other breaches, to result in a Material Adverse Effect.
(c) Delay. At any time prior to the Effective Time, by Wachovia or
Jefferson, if its Board of Directors so determines by vote of a majority of
the members of its entire Board, in the event that the Acquisition is not
consummated by June 30, 1998, except to the extent that the failure of the
Acquisition then to be consummated arises out of or results from the
knowing action or inaction of the party seeking to terminate pursuant to
this Section 8.01(c).
(d) No Approval. By Jefferson or Wachovia, if its Board of Directors so
determines by a vote of a majority of the members of its entire Board, in
the event (i) the approval of any Governmental Authority required for
consummation of the Merger and the other transactions contemplated by this
Agreement shall have been denied by final nonappealable action of such
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Governmental Authority or (ii) the stockholder approval required by Section
7.01(a) herein is not obtained at the Jefferson Meeting.
(e) Failure to Recommend, Etc. At any time prior to Jefferson Meeting,
by Wachovia if Jefferson Board shall have failed to make its recommendation
referred to in Section 6.02, withdrawn such recommendation or modified or
changed such recommendation in a manner adverse in any respect to the
interests of Wachovia.
(f) Failure to Execute and Deliver Stock Option Agreement. At any time
prior to June 12, 1997, by Wachovia if Jefferson shall not have executed
and delivered the Stock Option Agreement.
8.02 Effect of Termination and Abandonment. In the event of termination
of this Agreement and the abandonment of the Acquisition pursuant to this
Article VIII, no party to this Agreement shall have any liability or further
obligation to any other party hereunder except (i) as set forth in Section 9.01
and (ii) that termination will not relieve a breaching party from liability for
any willful breach of this Agreement giving rise to such termination. In the
event of the termination of this Agreement, Wachovia agrees that, until June 30,
1998, it will not, directly or indirectly, solicit to employ any person known by
it to be a current senior officer of Jefferson, so long as they are employed by
Jefferson, or directly or indirectly solicit or encourage any such officers or
employees to leave Jefferson's employ (other than pursuant to general
advertisements of employment in publications not specifically targeted at
Jefferson's employees), in either case, without obtaining the prior written
consent of Jefferson.
ARTICLE IX
Miscellaneous
9.01 Survival. No representations, warranties, agreements and covenants
contained in this Agreement shall survive the Effective Time (other than
Sections 6.12 and 6.16 and this Article IX which shall survive the Effective
Time) or the termination of this Agreement if this Agreement is terminated prior
to the Effective Time (other than Sections 6.03(b), 6.05, 8.02 and this Article
IX which shall survive such termination).
9.02 Waiver; Amendment. Prior to the Effective Time, any provision of
this Agree ment may be (i) waived by the party benefitted by the provision, or
(ii) amended or modified at any time, by an agreement in writing between the
parties hereto executed in the same manner as this Agreement, except that, after
the Jefferson Meeting, this Agreement may not be amended if it would violate the
VSCL.
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9.03 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
9.04 Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of North Carolina
applicable to contracts made and to be performed entirely within such State
(except to the extent that mandatory provisions of Federal law or of the NCBCA
or VSCL are applicable).
9.05 Expenses. Each party hereto will bear all expenses incurred by it
in connection with this Agreement and the transactions contemplated hereby,
except that printing expenses and SEC fees shall be shared equally between
Jefferson and Wachovia.
9.06 Notices. All notices, requests and other communications hereunder
to a party shall be in writing and shall be deemed given if personally
delivered, telecopied (with confirma tion) or mailed by registered or certified
mail (return receipt requested) to such party at its address set forth below or
such other address as such party may specify by notice to the parties hereto.
If to Jefferson, to:
Jefferson Bankshares, Inc.
123 East Main Street
Post Office Box 711
Charlottesville, Virginia 22901
Attention: Mr. O. Kenton McCartney,
President & Chief Executive Officer
Telephone: (804) 972-1106
Facsimile: (804) 972-1496
With a copy to:
Jefferson Bankshares, Inc.
123 East Main Street
Post Office Box 711
Charlottesville, Virginia 22901
Attention: William M. Watson, Jr., Esq.
Telephone: (804) 972-1113
Facsimile: (804) 972-1486
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With a copy to:
McGuire, Woods, Battle & Boothe, L.L.P.
418 East Jefferson Street
Post Office Box 1288
Charlottesville, Virginia 22902
Attention: Robert E. Stroud, Esq.
Telephone: (804) 977-2511
Facsimile: (804) 980-2272
If to Wachovia, to:
Wachovia Corporation
301 North Main Street
Winston-Salem, North Carolina 27101
Attention: Chairman of the Board
Telephone: (910)
Facsimile: (910) 770-5959
With a copy to:
Wachovia Corporation
301 North Main Street
Winston-Salem, North Carolina 27101
Attention: Kenneth W. McAllister
Telephone: (910) 732-5141
Facsimile: (910) 732-5959
With a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: H. Rodgin Cohen, Esq.
Mark J. Menting, Esq.
Telephone: (212) 558-4000
Facsimile: (212) 558-3588
9.07 Entire Understanding; No Third Party Beneficiaries. This
Agreement and any Stock Option Agreement entered into represent the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and thereby and this Agreement supersedes any and all other
oral or written agreements heretofore made (other than any such Stock Option
Agreement). Except for Section 6.13, nothing in this Agreement expressed or
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implied, is intended to confer upon any person, other than the parties hereto or
their respective successors, any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
9.08 Interpretation; Effect. When a reference is made in this
Agreement to Sections, Exhibits or Schedules, such reference shall be to a
Section of, or Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and are not part of this Agreement. Whenever the
words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
* * *
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
JEFFERSON BANKSHARES, INC.
By: /s/ O. Kenton McCartney
--------------------------
Name: O. Kenton McCartney
Title: President and CEO
WACHOVIA CORPORATION
By: /s/ L.M. Baker, Jr.
--------------------------
Name: L.M. Baker, Jr.
Title: President and Chief
Executive Officer
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EXECUTION COPY
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of June 10, 1997, between WACHOVIA
CORPORATION, a North Carolina corporation ("Grantee"), and JEFFERSON BANKSHARES,
INC., a Virginia corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger (the "Merger Agreement");
WHEREAS, as an inducement to the willingness of Wachovia Corporation to
continue to pursue the transactions contemplated by the Merger Agreement, Issuer
has agreed to grant Grantee the Option (as hereinafter defined); and
WHEREAS, the Board of Directors of Issuer has approved the grant of the
Option and the Merger Agreement prior to the date hereof;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to an
aggregate of 2,770,000 fully paid and nonassessable shares of the common stock,
par value $2.50 per share, of Issuer ("Common Stock") at a price per share equal
to the average of last reported sale prices per share of Common Stock as
reported on the NASDAQ National Market System on June 6 and 9, 1997; provided,
however, that in the event Issuer issues or agrees to issue any shares of Common
Stock at a price less than such average price per share (as adjusted pursuant to
subsection (b) of Section 5) (other than shares of Common Stock issued pursuant
to stock options granted under the 1995 Long Term Incentive Stock Plan prior to
June 9, 1997), such price shall be equal to such lesser price (such price, as
adjusted if applicable, the "Option Price"); provided, further, that in no event
shall the number of shares for which this Option is exercisable exceed 19.9% of
the issued and outstanding shares of Common Stock. The number of shares of
Common Stock that may be received upon the exercise of the Option and the Option
Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 5(a) hereof), the number of shares of Common Stock subject to the Option
shall be increased so that, after such issuance, such number together with any
shares of Common Stock previously issued pursuant hereto, equals 19.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section l(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer to issue shares in breach any provision of the Merger Agreement.
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2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, if, but only if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2) within
six (6) months following such Subsequent Triggering Event (or such later period
as provided in Section 10). Each of the following shall be an Exercise
Termination Event: (i) the Effective Time of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event except a
termination by Grantee pursuant to Section 8.01(b) or Section 8.01(e) of the
Merger Agreement or by Grantee or Issuer pursuant to Section 8.01(d)(ii) of the
Merger Agreement (each, a "Listed Termination"); or (iii) the passage of fifteen
(15) months (or such longer period as provided in Section 10) after termination
of the Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event or is a Listed Termination. The term "Holder" shall mean the
holder or holders of the Option. Notwithstanding anything to the contrary
contained herein, (i) the Option may not be exercised at any time when Grantee
shall be in breach of any of its covenants or agreements contained in the Merger
Agreement such that Issuer shall be entitled to terminate the Merger Agreement
pursuant to Section 8.01(b) thereof and (ii) this Agreement shall automatically
terminate upon the proper termination of the Merger Agreement by Issuer pursuant
to Section 8.01(b) thereof as a result of the material breach by Grantee of its
covenants or agreements contained in the Merger Agreement.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring on or after the date hereof:
(i) Issuer or its Significant Subsidiary (as defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange Commission (the
"SEC")) (the "Issuer Subsidiary"), without having received Grantee's prior
written consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as hereinafter defined) with any person (the term
"person" for purposes of this Agreement having the meaning assigned
thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), and the rules and regulations
thereunder) other than Grantee or any of its Subsidiaries (each a "Grantee
Subsidiary") or the Board of Directors of Issuer (the "Issuer Board")
shall have recommended that the shareholders of Issuer approve or accept
any Acquisition Transaction other than as contemplated by the Merger
Agreement. For purposes of this Agreement, (a) "Acquisition Transaction"
shall mean (x) a merger or consolidation, or any similar transaction,
involving Issuer or the Issuer Subsidiary (other than mergers,
consolidations or similar transactions involving solely Issuer and/or one
or more wholly-owned Subsidiaries of the Issuer, provided, any such
transaction is not entered into in violation of the terms of the Merger
Agreement), (y) a purchase, lease or other acquisition of all or any
substantial part of the assets or deposits of Issuer or the Issuer
Subsidiary, or (z) a purchase or other acquisition (including by way of
merger, consolidation, share exchange or otherwise) of securities
representing 15%
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or more of the voting power of Issuer or the Issuer Subsidiary and (b)
"Subsidiary" shall have the meaning set forth in Rule 12b-2 under the 1934
Act;
(ii) Any person other than the Grantee or any Grantee Subsidiary
shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 15% or more of the outstanding shares of Common
Stock (the term "beneficial ownership" for purposes of this Agreement
having the meaning assigned thereto in Section 13(d) of the 1934 Act, and
the rules and regulations thereunder);
(iii) The shareholders of Issuer shall have voted and failed to
approve the Merger Agreement and the Merger at a meeting which has been
held for that purpose or any adjournment or postponement thereof, or such
meeting shall not have been held in violation of the Merger Agreement or
shall have been cancelled prior to termination of the Merger Agreement if,
prior to such meeting (or if such meeting shall not have been held or
shall have been cancelled, prior to such termination), it shall have been
publicly announced that any person (other than Grantee or any of its
Subsidiaries) shall have made, or disclosed an intention to make, a
proposal to engage in an Acquisition Transaction;
(iv) The Issuer Board shall have withdrawn or modified (or publicly
announced its intention to withdraw or modify) in any manner adverse in
any respect to Grantee its recommendation that the shareholders of Issuer
approve the transactions contemplated by the Merger Agreement, or Issuer
or the Issuer Subsidiary shall have authorized, recommended, proposed (or
publicly announced its intention to authorize, recommend or propose) an
agreement to engage in an Acquisition Transaction with any person other
than Grantee or a Grantee Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary shall
have made a bona fide proposal to Issuer or its shareholders by public
announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
(vi) Any person other than Grantee or any Grantee Subsidiary shall
have filed with the SEC a registration statement or tender offer materials
with respect to a potential exchange or tender offer that would constitute
an Acquisition Transaction (or filed a preliminary proxy statement with
the SEC with respect to a potential vote by its shareholders to approve
the issuance of shares to be offered in such an exchange offer);
(vii) Issuer shall have willfully breached any covenant or
obligation contained in the Merger Agreement in anticipation of engaging
in an Acquisition Transaction, and following such breach Grantee would be
entitled to terminate the Merger Agreement (whether immediately or after
the giving of notice or passage of time or both); or
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(viii)Any person other than Grantee or any Grantee Subsidiary,
without Grantee's prior written consent, shall have filed an application
or notice with the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") or other federal or state bank regulatory or
antitrust authority, which application or notice has been accepted for
processing, for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 25% or more of the then outstanding
Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (z) of the second sentence thereof shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option (or any portion thereof), it shall send to Issuer a written notice (the
date of which being herein referred to as the "Notice Date") specifying (i) the
total number of shares it will purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 60 business
days from the Notice Date for the closing of such purchase (the "Closing Date");
provided, that if prior notification to or approval of the Federal Reserve Board
or any other regulatory or antitrust agency is required in connection with such
purchase, the Holder shall promptly file the required notice or application for
approval, shall promptly notify Issuer of such filing, and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall (i) pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer and (ii)
present and surrender this Agreement to Issuer at its principal executive
offices, provided that the failure or refusal of the Issuer to designate such a
bank account or accept surrender of this Agreement shall not preclude the Holder
from exercising the Option . In addition, at such closing, the Holder shall
deliver to Issuer a letter agreeing that Holder shall not offer to sell or
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otherwise dispose of such Option Shares in violation of applicable federal and
state law or of the provisions of this Agreement.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the registered
holder hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on file at
the principal office of Issuer and will be provided to the holder hereof
without charge upon receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act") in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions of this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference in the opinion of Counsel to the Holder,
in form and substance reasonably satisfactory to the Issuer; and (iii) the
legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
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3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all applicable premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), or the Change in Bank Control Act
of 1978, as amended, or any state or other federal banking law, prior approval
of or notice to the Federal Reserve Board or to any state or other federal
regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such information to the Federal Reserve Board or such state or other
federal regulatory authority as they may require) in order to permit the Holder
to exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and (iv) promptly to take all action provided herein to
protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Agreements and
related Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to adjustment from time to time
as provided in this Section 5. In the event of any change in Common Stock by
reason of a stock dividend, stock split, split-up, recapitalization, stock
combination, exchange of shares or similar transaction, the type and number of
shares or securities subject to the Option, and the Option Price therefor, shall
be adjusted appropriately, and proper provision shall be made in the agreements
governing such transaction so that Grantee shall receive, upon exercise of the
Option, the number and class of shares or other securities or property that
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Grantee would have received in respect of Common Stock if the Option had been
exercised immediately prior to such event, or the record date therefor, as
applicable. If any additional shares of Common Stock are issued after the date
of this Agreement (other than pursuant to an event described in the first
sentence of this Section 5), the number of shares of Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with any
shares of Common Stock previously issued pursuant hereto, equals 19.9% of the
number of shares of Common Stock then issued and outstanding, without giving
effect to any shares subject to or issued pursuant to the Option.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within twelve (12) months (or such later period as provided in Section
10) of such Subsequent Triggering Event (whether on its own behalf or on behalf
of any subsequent holder of this Option (or part thereof) or any of the shares
of Common Stock issued pursuant hereto), promptly prepare, file and keep current
a registration statement under the 1933 Act covering any shares issued and
issuable pursuant to this Option and shall use its reasonable best efforts to
cause such registration statement to become effective and remain current in
order to permit the sale or other disposition of any shares of Common Stock
issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee. Issuer will use
its reasonable best efforts to cause such registration statement promptly to
become effective and then to remain effective for such period not in excess of
180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such registrations. The
Issuer shall bear the costs of such registrations (including, but not limited
to, Issuer's attorneys' fees, printing costs and filing fees, except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto). The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering by Issuer of shares of Common Stock, and if in the
good faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the offer and sale
of the Option Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares otherwise to be
covered in the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the number of Option
Shares to be included in such offering for the account of the Holder shall
constitute at least 20% of the total number of shares to be sold by the Holder
and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then Issuer shall file a registration statement for the
balance as promptly as practicable thereafter as to which no reduction pursuant
to this Section 6 shall be permitted or occur and the Holder shall thereafter be
entitled to one additional registration and the twelve (12) month period
referred to in the first sentence of this section shall be increased to
twenty-four (24) months. Each such Holder shall provide all information
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the
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extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in such underwriting
agreements for Issuer. Upon receiving any request under this Section 6 from any
Holder, Issuer agrees to send a copy thereof to any other person known to Issuer
to be entitled to registration rights under this Section 6, in each case by
promptly mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies. Notwithstanding anything to the
contrary contained herein, in no event shall the number of registrations that
Issuer is obligated to effect be increased by reason of the fact that there
shall be more than one Holder as a result of any assignment or division of this
Agreement.
7. (a) At any time after the occurrence of a Repurchase Event (as defined
below) (i) at the request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer (or
any successor thereto) shall repurchase the Option from the Holder at a price
(the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii) at
the request of the owner of Option Shares from time to time (the "Owner"),
delivered prior to an Exercise Termination Event (or such later period as
provided in Section 10), Issuer (or any successor thereto) shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term "market/offer
price" shall mean the highest of (i) the price per share of Common Stock at
which a tender or exchange offer therefor has been made, (ii) the price per
share of Common Stock to be paid by any third party pursuant to an agreement
with Issuer, (iii) the highest closing price for shares of Common Stock within
the six-month period immediately preceding the date the Holder gives notice of
the required repurchase of this Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event of a sale
of all or any substantial part of Issuer's assets or deposits, the sum of the
net price paid in such sale for such assets or deposits and the current market
value of the remaining net assets of Issuer as determined by a nationally
recognized investment banking firm selected by the Holder or the Owner, as the
case may be, and reasonably acceptable to Issuer, divided by the number of
shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by the Holder or Owner, as the case may be, and reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. The Holder shall also represent and warrant that it has sole record
and beneficial ownership of such Option Shares and that such Option Shares are
then free and clear of all liens. As promptly as practicable, and in any event
within five business days after the surrender of the Option and/or certificates
representing Option Shares and the receipt
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of such notice or notices relating thereto, Issuer shall deliver or cause to be
delivered to the Holder the Option Repurchase Price and/or to the Owner the
Option Share Repurchase Price therefor or the portion thereof that Issuer is not
then prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business days after
the date on which Issuer is no longer so prohibited; provided, however, that if
Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its reasonable best efforts to obtain all required regulatory
and legal approvals and to file any required notices as promptly as practicable
in order to accomplish such repurchase), the Holder or Owner may revoke its
notice of repurchase of the Option and/or the Option Shares whether in whole or
to the extent of the prohibition, whereupon, in the latter case, Issuer shall
promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price and/or the Option Share Repurchase Price
that Issuer is not prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Holder, a new Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Agreement was
exercisable at the time of delivery of the notice of repurchase by a fraction,
the numerator of which is the Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which is the Option
Repurchase Price, and/or (B) to the Owner, a certificate for the Option Shares
it is then so prohibited from repurchasing. If an Exercise Termination Event
shall have occurred prior to the date of the notice by Issuer described in the
first sentence of this subsection (c), or shall be scheduled to occur at any
time before the expiration of a period ending on the thirtieth day after such
date, the Holder shall nonetheless have the right to exercise the Option until
the expiration of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be deemed
to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 50% or more of the then outstanding
Common Stock; or
(ii) the consummation of any Acquisition Transaction described in
Section 2(b)(i) hereof, except that the percentage referred to in clause
(z) shall be 50%.
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The Issuer's obligations under this Section 7 shall no longer apply if there are
more than 10 Holders of Option Shares.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or a Grantee Subsidiary, or engage in a plan of exchange with
any person, other than Grantee or a Grantee Subsidiary and Issuer shall not be
the continuing or surviving corporation of such consolidation or merger or the
acquirer in such plan of exchange, (ii) to permit any person, other than Grantee
or a Grantee Subsidiary, to merge into Issuer or be acquired by Issuer in a plan
of exchange and Issuer shall be the continuing or surviving or acquiring
corporation, but, in connection with such merger or plan of exchange, the then
outstanding shares of Common Stock shall be changed into or exchanged for stock
or other securities of any other person or cash or any other property or the
then outstanding shares of Common Stock shall after such merger or plan of
exchange represent less than 50% of the outstanding shares and share equivalents
of the merged or acquiring company, or (iii) to sell or otherwise transfer all
or a substantial part of its or the Issuer Subsidiary's assets or deposits to
any person, other than Grantee or a Grantee Subsidiary, then, and in each such
case, the agreement governing such transaction shall make proper provision so
that the Option shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged for,
an option (the "Substitute Option"), at the election of the Holder, of either
(x) the Acquiring Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving person of a consolidation or merger with Issuer (if other than
Issuer), (ii) the acquiring person in a plan of exchange in which Issuer
is acquired, (iii) the Issuer in a merger or plan of exchange in which
Issuer is the continuing or surviving or acquiring person, and (iv) the
transferee of all or a substantial part of Issuer's assets or deposits (or
the assets or deposits of the Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute
Option.
(iii) "Assigned Value" shall mean the market/offer price, as defined
in Section 7.
(iv) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by the person merging into
Issuer or by any company which controls or is controlled by such person,
as the Holder may elect.
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(c) The Substitute Option shall have the same terms as the Option,
provided that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option shall
also enter into an agreement with the then Holder or Holders of the Substitute
Option in substantially the same form as this Agreement (after giving effect for
such purpose to the provisions of Section 9), which agreement shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option was exercisable immediately prior to the
event described in the first sentence of Section 8(a) and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder. This Section 8 shall take precedence over the second sentence
of Section 5.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by
the number of shares of Substitute Common Stock for which the Substitute Option
may then be exercised, and at the request of the owner (the "Substitute Share
Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the
Substitute Option Issuer shall repurchase the Substitute Shares at a price (the
"Substitute Share Repurchase Price") equal to the Highest Closing Price
multiplied by the number of Substitute Shares so designated. The term "Highest
Closing Price" shall mean the highest closing price for shares of
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Substitute Common Stock within the six-month period immediately preceding the
date the Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective rights to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and/or certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable and in any event within five business days
after the surrender of the Substitute Option and/or certificates representing
Substitute Shares and the receipt of such notice or notices relating thereto,
the Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor or the
portion thereof which the Substitute Option Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify the Substitute
Option Holder and/or the Substitute Share Owner and thereafter deliver or cause
to be delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Option
Repurchase Price and/or the Substitute Share Repurchase Price, respectively,
which it is no longer prohibited from delivering, within five (5) business days
after the date on which the Substitute Option Issuer is no longer so prohibited;
provided, however, that if the Substitute Option Issuer is at any time after
delivery of a notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Substitute Option Holder and/or
the Substitute Share Owner, as appropriate, the Substitute Option Repurchase
Price and the Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its reasonable best efforts to receive all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder and/or Substitute
Share Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of prohibition, whereupon, in
the latter case, the Substitute Option Issuer shall promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that portion
of the Substitute Option Repurchase Price or the Substitute Share Repurchase
Price that the Substitute Option Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
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surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, and/or (B) to the Substitute Share Owner, a certificate for
the Substitute Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the notice
by the Substitute Option Issuer described in the first sentence of this
subsection (c), or shall be scheduled to occur at any time before the expiration
of a period ending on the thirtieth day after such date, the Substitute Option
Holder shall nevertheless have the right to exercise the Substitute Option until
the expiration of such 30-day period.
10. The 30-day, 6-month, 12-month, 18-month or 24-month periods for
exercise of certain rights under Sections 2, 6, 7, 9, 12 and 14 shall be
extended: (i) to the extent necessary to obtain all regulatory approvals for the
exercise of such rights (for so long as the Holder, Owner, Substitute Option
Holder or Substitute Share Owner, as the case may be, is using commercially
reasonable efforts to obtain such regulatory approvals), and for the expiration
of all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. (a) Issuer hereby represents and warrants to Grantee as follows:
(i) Issuer has corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Issuer Board
prior to the date hereof and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(ii) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant thereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
(b) Grantee hereby represents and warrants to Issuer as follows:
(i) Grantee has corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement by the Grantee and the performance of its obligations
hereunder by the Grantee have been duly and validly authorized by the Board of
Directors of Grantee and no other corporate proceedings on the part of the
Grantee
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are necessary to authorize this Agreement or for Grantee to perform its
obligations hereunder. This Agreement has been duly and validly executed and
delivered by Grantee.
(c) This Option is not being, and any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be, acquired with a
view to the public distribution thereof and will not be transferred or otherwise
disposed or except in a transaction registered or exempt from registration under
the 1933 Act.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event an Initial Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder; provided, however,
that until the date 15 days following the date on which the Federal Reserve
Board has approved an application by Grantee to acquire the shares of Common
Stock subject to the Option, Grantee may not assign its rights under the Option
except in (i) a widely dispersed public distribution, (ii) a private placement
in which no one party acquires the right to purchase in excess of 2% of the
voting shares of Issuer, (iii) an assignment to a single party (e.g., a broker
or investment banker) for the purpose of conducting a widely dispersed public
distribution on Grantee's behalf or (iv) any other manner approved by the
Federal Reserve Board. Any assignment hereunder shall be made in compliance with
all applicable laws.
13. Each of Grantee and Issuer will use its reasonable best efforts to
make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including, without limitation, applying to the
Federal Reserve Board under the BHCA for approval to acquire the shares issuable
hereunder, but Grantee shall not be obligated to apply to state banking
authorities for approval to acquire the shares of Common Stock issuable
hereunder until such time, if ever, as it deems appropriate to do so.
14. (a)(i) Notwithstanding any other provision of this Agreement, in no
event shall the Grantee's Total Profit (as hereinafter defined) exceed $25
million and, if it otherwise would exceed such amount, the Grantee, at its sole
election, shall either (a) reduce the number of shares of Common Stock subject
to this Option, (b) deliver to Issuer for cancellation Option Shares previously
purchased by Grantee, (c) pay cash to Issuer, or (d) do any combination thereof,
so that Grantee's actually realized Total Profit shall not exceed $25 million
after taking into account the foregoing actions.
(ii) Notwithstanding any other provision of this Agreement, this Option
may not be exercised for a number of shares as would, as of the date of
exercise, result in a Notional Total Profit (as defined below) of more than $25
million, provided that nothing in this sentence shall restrict any exercise of
the Option permitted hereby on any subsequent date.
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(iii) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount received by Grantee
pursuant to Issuer's repurchase of the Option (or any portion thereof) pursuant
to Section 7, (ii) (x) the amount received by Grantee pursuant to Issuer's
repurchase of Option Shares pursuant to Section 7, less (y) the Grantee's
purchase price for such Option Shares, (iii) (x) the net cash amounts received
by Grantee pursuant to the sale of Option Shares (or any other securities into
which such Option Shares are converted or exchanged) to any unaffiliated party,
less (y) the Grantee's purchase price of such Option Shares, (iv) any amounts
received by Grantee on the transfer of the Option (or any portion thereof) to
any unaffiliated party, and (v) any amount equivalent to the foregoing with
respect to the Substitute Option.
(iv) As used herein, the term "Notional Total Profit" with respect to any
number of shares as to which Grantee may propose to exercise this Option shall
be the Total Profit determined as of the date of such proposed exercise assuming
that this Option were exercised on such date for such number of shares and
assuming that such shares, together with all other Option Shares held by Grantee
and its affiliates as of such date, were sold for cash at the closing market
price for the Common Stock as of the close of business on the preceding trading
day (less customary brokerage commissions).
(b) (i) Grantee may, at any time following a Repurchase Event and prior to
the occurrence of an Exercise Termination Event (or such later period as
provided in Section 10), relinquish the Option (together with any Option Shares
issued to and then owned by Grantee) to Issuer in exchange for a cash fee equal
to the Surrender Price; provided, however, that Grantee may not exercise its
rights pursuant to this Section 14 (b) if Issuer has repurchased the Option (or
any portion thereof) or any Option Shares pursuant to Section 7. The "Surrender
Price" shall be equal to $15.0 million (i) plus, if applicable, Grantee's
purchase price with respect to any Option Shares and (ii) minus, if applicable,
the excess of (B) the net cash amounts, if any, received by Grantee pursuant to
the arms' length sale of Option Shares (or any other securities into which such
Option Shares were converted or exchanged) to any unaffiliated party, over (B)
Grantee's purchase price of such Option Shares.
(ii) Grantee may exercise its right to relinquish the Option and any
Option Shares pursuant to this Section 14(b) by surrendering to Issuer, at its
principal office, a copy of this Agreement together with certificates for Option
Shares, if any, accompanied by a written notice stating (i) that Grantee elects
to relinquish the Option and Option Shares, if any, in accordance with the
provisions of this Section 14(b) and (ii) the Surrender Price. The Surrender
Price shall be payable in immediately available funds on or before the second
business day following receipt of such notice by Issuer.
(iii) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Grantee in full, Issuer shall immediately so notify Grantee
and thereafter deliver or cause to be delivered, from time to time, to Grantee,
the portion of the Surrender Price that it is no longer prohibited from paying,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of surrender pursuant to paragraph (ii) of this Section
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<PAGE>
14(b) is prohibited under applicable law or regulation, or as a consequence of
administrative policy, from paying to Grantee the Surrender Price in full, (i)
Issuer shall (A) use its reasonable best efforts to obtain all required
regulatory and legal approvals and to file any required notices as promptly as
practicable in order to make such payments, (B) within five days of the
submission or receipt of any documents relating to any such regulatory and legal
approvals, provide Grantee with copies of the same, and (c) keep Grantee advised
of both the status of any such request for regulatory and legal approvals, as
well as any discussions with any relevant regulatory or other third party
reasonably related to the same and (ii) Grantee may revoke such notice of
surrender by delivery of a notice of revocation to Issuer and, upon delivery of
such notice of revocation, the Exercise Termination Date shall be extended to a
date six months from the date on which the Exercise Termination Date would have
occurred if not for the provisions of this Section 14(b)(iii) (during which
period Grantee may exercise any of its rights hereunder, including any and all
rights pursuant to this Section 14(b)).
15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief. In connection therewith both
parties waive the posting of any bond or similar requirement.
16. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section l(a) hereof (as adjusted pursuant to Section l(b) or Section
5 hereof), it is the express intention of Issuer to allow the Holder to acquire
or to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
18. This Agreement shall be governed by and construed in accordance with
the laws of the State of North Carolina, without regard to the conflict of law
principles thereof (except to the extent that mandatory provisions of Federal
law or of the VSCL are applicable).
19. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
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<PAGE>
20. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assignees.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assignees, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
JEFFERSON BANKSHARES, INC.
By: /s/ O. Kenton McCartney
--------------------------
Name: O. Kenton McCartney
Title: President and CEO
WACHOVIA CORPORATION
By: /s/ L.M. Baker, Jr.
--------------------------
Name: L.M. Baker, Jr.
Title: President and Chief
Executive Officer
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WACHOVIA
News Announcement
Wachovia Corporation
Atlanta, VA 30383
Winston-Salem, NC 27150
For Additional Information:
Donald W. Fulton, Jr., Jefferson Bankshares, 804-972-1115
Paul E. Mason, Wachovia, 910-732-6387
June 10, 1997
FOR RELEASE: Immediately
Wachovia, Jefferson Bankshares, Inc. Announce Merger
Jefferson Bankshares, Inc., the parent of Jefferson National Bank in
Charlottesville, Va, and Wachovia Corporation announced the signing of a
definitive agreement for a merger between the two companies. The agreement has
been approved by the boards of directors of both companies and is subject to the
approval of Jefferson Bankshares' shareholders and appropriate regulatory
agencies. The merger is expected to close by Oct. 31.
The agreement will be structured on a purchase accounting basis and
provides for a tax-free exchange of .625 share of Wachovia Corporation common
stock for each common share of Jefferson Bankshares. Jefferson Bankshares has
issued a stock option to Wachovia representing approximately 19.9 percent of
Jefferson's outstanding shares. Based on Wachovia Corporation's June 9 closing
stock price, the transaction would have a value of approximately $38.83 per
share, or an aggregate consideration of $542 million, based on Jefferson
Bankshares' 13.95 million common shares outstanding. The merger is expected to
have a positive impact on Wachovia's earnings in 1998.
Wachovia Chief Executive L. M. Baker, Jr. said, "For some time we have been
looking at strategic opportunities in attractive markets. Jefferson National is
a very strong, well-managed bank located in a number of vibrant Virginia
markets. We are excited about the opportunity to join forces with them."
O. Kenton McCartney, Chief Executive Officer of Jefferson Bankshares, said,
"With consolidation taking place throughout the banking industry, many community
banks are attempting to align themselves with institutions that can provide
customers the broadest array of products and services. Wachovia and Jefferson
National are compatible in culture and the desire to provide top-quality
service. This merger enables Jefferson National employees to continue to play
an important role in meeting the financial services needs of customers and
communities we serve."
-more-
Merger Agreement - Page 2
Following completion of the merger of Jefferson Bankshares and Wachovia,
Wachovia will file for regulatory approval to merge Jefferson National Bank into
Wachovia Bank, N.A., the principal banking subsidiary of Wachovia Corporation.
Jefferson Bankshares, headquartered in Charlottesville, Va, had assets of
$2.1 billion as of March 31, 1997, and is the fifth largest Virginia-based
banking company with 96 offices and 60 ATMs. Jefferson National Bank has the
No. 1 deposit share in Charlottesville with additional branch presence in the
Tidewater, Richmond, Fredericksburg and Shenandoah Valley areas of Virginia.
Wachovia Corporation is the 20th largest U.S. banking company with assets
of $47.5 billion at March 31. As of the same date, Wachovia had 473 banking
offices and 830 ATMs predominately in North Carolina, South Carolina and
Georgia. Wachovia opened its first Virginia banking office in Norfolk in 1996
and provides a complete line of middle-market corporate banking, municipal
finance, corporate trust, residential mortgage, private banking, sales finance
and statewide commercial mortgage services.
U. S. Banker magazine recently rated Wachovia the No. 1 bank in the country
for 1996 among banks with assets of more than $25 billion.
This announcement also is available on PR Newswire. Additional information on
Wachovia Corporation and its subsidiaries is available on the Internet at
http://www.wachovia.com.
