<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 18, 1995
REGISTRATION NO. 33-63387
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO.1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FIRST UNION CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
NORTH CAROLINA 6711 56-0898180
(State or other jurisdiction (Primary standard industrial (I.R.S. employer
of incorporation or organization) classification code number) identification number)
</TABLE>
ONE FIRST UNION CENTER
CHARLOTTE, NORTH CAROLINA 28288-0013
(704) 374-6565
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
MARION A. COWELL, JR., ESQ.
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
FIRST UNION CORPORATION
ONE FIRST UNION CENTER
CHARLOTTE, NORTH CAROLINA 28288-0013
(704) 374-6828
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPY TO:
EDWARD C. WINSLOW III, ESQ.
BROOKS, PIERCE, MCLENDON,
HUMPHREY & LEONARD, L.L.P.
P.O. BOX 26000
GREENSBORO, NORTH CAROLINA 27420-6000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As promptly as practicable after the effective date of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
<PAGE>
FIRST UNION CORPORATION PROSPECTUS
CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING THE LOCATION IN THE PROSPECTUS OF THE RESPONSES
TO THE ITEMS OF PART I OF FORM S-4.
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<CAPTION>
FORM S-4 ITEM LOCATION IN PROSPECTUS
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1. Forepart of Registration Statement and Outside Front Cover Page of
Prospectus.............................................................. Outside front cover page; facing page
2. Inside Front and Outside Back Cover Pages of Prospectus................. AVAILABLE INFORMATION; TABLE OF CONTENTS
3. Risk Factors, Ratio of Earnings to Fixed Charges and Other
Information............................................................. SUMMARY; THE MERGERS; PRO FORMA FINANCIAL
INFORMATION; ANNEX C
4. Terms of the Transaction................................................ SUMMARY; GENERAL INFORMATION; THE MERGERS;
DESCRIPTION OF FUNC CAPITAL STOCK; CERTAIN
DIFFERENCES IN THE RIGHTS OF RSFC AND FUNC
STOCKHOLDERS; ANNEX A
5. Pro Forma Financial Information......................................... INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE; PRO FORMA FINANCIAL INFORMATION
6. Material Contacts with the Company Being Acquired....................... THE MERGERS; ADDITIONAL MATTERS
7. Additional Information Required for Reoffering by Persons and Parties
Deemed to Be Underwriters............................................... *
8. Interests of Named Experts and Counsel.................................. LEGAL OPINIONS; EXPERTS
9. Disclosure of Commission Position on Indemnification for Securities Act
Liabilities............................................................. *
10. Information with Respect to S-3 Registrants............................. INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE; SUMMARY; RECENT DEVELOPMENTS; PRO
FORMA FINANCIAL INFORMATION; FUNC
11. Incorporation of Certain Information by Reference....................... INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE
12. Information with Respect to S-2 or S-3 Registrants...................... *
13. Incorporation of Certain Information by Reference....................... *
14. Information with Respect to Registrants Other Than S-3 or
S-2 Registrants......................................................... *
15. Information with Respect to S-3 Companies............................... INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE; SUMMARY; RECENT DEVELOPMENTS; RSFC
16. Information with Respect to S-2 or S-3 Companies........................ *
17. Information with Respect to Companies Other Than S-2 or
S-3 Companies........................................................... *
18. Information if Proxies, Consents or Authorizations are to be
Solicited............................................................... INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE; SUMMARY; GENERAL INFORMATION; THE
MERGERS
19. Information if Proxies, Consents or Authorizations are not to be
Solicited, or in an Exchange Offer...................................... *
</TABLE>
* Not applicable.
<PAGE>
RS FINANCIAL CORP.
219 FAYETTEVILLE STREET MALL
RALEIGH, NORTH CAROLINA 27601
(919) 833-7511
October 20, 1995
Dear Stockholder:
On behalf of the Board of Directors, I want to extend to you a cordial
invitation to attend a Special Meeting of Stockholders of RS Financial Corp.
("RSFC"). The meeting will be held at 5:00 p.m., Raleigh time, on November 20,
1995, at the executive offices of RSFC and Raleigh Federal Savings Bank
("Raleigh Federal"), 219 Fayetteville Street Mall, Raleigh, North Carolina.
The purpose of the meeting is to vote on a proposal to approve the
Agreement and Plan of Mergers, dated as of May 30, 1995 (the "Merger
Agreement"), by and among RSFC, Raleigh Federal, First Union Corporation
("FUNC") and First Union National Bank of North Carolina ("FUNB-NC"), pursuant
to which RSFC would merge with and into FUNC (the "Corporate Merger") and
Raleigh Federal would merge with and into FUNB-NC (the "Bank Merger" and
together with the Corporate Merger, the "Mergers"). FUNC is the ninth largest
bank holding company in the nation, based on assets of $86.8 billion at
September 30, 1995.
On June 19, 1995, FUNC announced that it had entered into an agreement to
acquire First Fidelity Bancorporation, a bank holding company based in Newark,
New Jersey and Philadelphia, Pennsylvania. Certain information relating to this
transaction is set forth in the accompanying Prospectus/Proxy Statement under
"SUMMARY", "RECENT DEVELOPMENTS" and "PRO FORMA FINANCIAL INFORMATION".
Upon consummation of the Corporate Merger, each outstanding share of RSFC
common stock (excluding dissenters' shares and certain shares held by RSFC or
FUNC) would be converted into the right to receive a number of shares of FUNC
common stock equal to $40.25 divided by the average closing price of FUNC common
stock on the New York Stock Exchange (the "NYSE") Composite Transactions tape
(the "NYSE Tape") for the ten trading days immediately prior to the effective
date of the Corporate Merger in a transaction that is generally tax-free for
federal income tax purposes, all as more fully discussed in the accompanying
Prospectus/Proxy Statement. The common stock of FUNC is actively traded and is
listed on the NYSE. The last reported sale price of FUNC common stock on the
NYSE Tape on October 17, 1995, was $53.375 per share.
Consummation of the Mergers is subject to certain conditions, including
approval of the Merger Agreement by RSFC stockholders and approval of the
Mergers by various regulatory agencies. Approval of the Merger Agreement
requires the affirmative vote of at least a majority of the votes entitled to be
cast at the meeting by the holders of RSFC common stock.
The accompanying Notice of Special Meeting and Prospectus/Proxy Statement
contain information about the Mergers. I urge you to review carefully such
information and the information in FUNC's 1994 Annual Report on Form 10-K, 1995
First and Second Quarter Reports on Form 10-Q, 1995 Annual Meeting Proxy
Statement and 1995 Current Reports on Form 8-K, copies of which are available as
indicated in the accompanying Prospectus/Proxy Statement under "AVAILABLE
INFORMATION".
THE BOARD OF DIRECTORS OF RSFC HAS UNANIMOUSLY ADOPTED THE MERGER AGREEMENT
AND RECOMMENDS THAT THE STOCKHOLDERS OF RSFC APPROVE THE MERGER AGREEMENT. A
FAILURE TO VOTE, EITHER BY NOT RETURNING THE ENCLOSED PROXY OR BY CHECKING THE
"ABSTAIN" BOX THEREON, WILL HAVE THE SAME EFFECT AS A VOTE "AGAINST" APPROVAL OF
THE MERGER AGREEMENT. EVEN IF YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE
COMPLETE THE ENCLOSED PROXY, SIGN AND DATE IT AND MAIL IT PROMPTLY IN THE
ENCLOSED POSTAGE-PAID, RETURN ADDRESSED ENVELOPE.
Yours very truly,
(Signature of Stanley E. Wright)
STANLEY E. WRIGHT
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
<PAGE>
RS FINANCIAL CORP.
219 FAYETTEVILLE STREET MALL
RALEIGH, NORTH CAROLINA 27601
(919) 833-7511
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 20, 1995
October 20, 1995
Dear Stockholder:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of RS
Financial Corp. ("RSFC") will be held at 5:00 p.m., Raleigh time, on November
20, 1995, at the executive offices of RSFC and Raleigh Federal Savings Bank
("Raleigh Federal"), 219 Fayetteville Street Mall, Raleigh, North Carolina (the
"Special Meeting"), for the following purpose:
To consider and vote upon a proposal to approve the Agreement and Plan of
Mergers, dated as of May 30, 1995 (the "Merger Agreement"), by and among
RSFC, Raleigh Federal, First Union Corporation ("FUNC") and First Union
National Bank of North Carolina ("FUNB-NC"), pursuant to which (i) RSFC
would merge with and into FUNC (the "Corporate Merger") and Raleigh Federal
would merge with and into FUNB-NC (the "Bank Merger" and together with the
Corporate Merger, the "Mergers"), and (ii) each outstanding share of RSFC
common stock (excluding dissenters' shares and certain shares held by RSFC
or FUNC) would be converted into the right to receive a number of shares of
FUNC common stock equal to $40.25 divided by the average closing price of
FUNC common stock on the New York Stock Exchange Composite Transactions tape
for the ten trading days immediately prior to the effective date of the
Corporate Merger, all on and subject to the terms and conditions contained
in the Merger Agreement.
A copy of the Merger Agreement is set forth in ANNEX A to the accompanying
Prospectus/Proxy Statement.
The Board of Directors of RSFC has fixed October 17, 1995, as the record
date for the determination of stockholders entitled to notice of and to vote at
the Special Meeting, and accordingly, only holders of record of RSFC common
stock at the close of business on that date will be entitled to notice of and to
vote at the Special Meeting.
Approval of the Merger Agreement requires the affirmative vote of at least
a majority of the votes entitled to be cast at the Special Meeting by the
holders of RSFC common stock.
Each holder of RSFC common stock who is entitled to vote on approval of the
Merger Agreement has the right to dissent from such approval and to demand
payment of the "fair value" of such holder's RSFC common stock in cash if the
Merger Agreement is approved and the Corporate Merger is consummated. The right
of any such holder of RSFC common stock to receive such payment is contingent
upon strict compliance with the requirements set forth in the applicable
provisions of the North Carolina Business Corporation Act, the full text of
which provisions is set forth in ANNEX C to the accompanying Prospectus/Proxy
Statement and a summary of which is set forth under "THE MERGERS -- Dissenters'
Rights".
THE BOARD OF DIRECTORS OF RSFC UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
By Order of the Board of Directors of
RS FINANCIAL CORP.
ANGIE C. STEWART
SECRETARY
BECAUSE THE AFFIRMATIVE VOTE OF AT LEAST A MAJORITY OF THE VOTES ENTITLED TO BE
CAST IS REQUIRED TO APPROVE THE MERGER AGREEMENT, STOCKHOLDERS ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF A
STOCKHOLDER RECEIVES MORE THAN ONE PROXY FOR ANY REASON, EACH PROXY SHOULD BE
COMPLETED AND RETURNED. YOUR COOPERATION WILL BE APPRECIATED. YOUR PROXY WILL BE
VOTED WITH RESPECT TO THE MATTERS IDENTIFIED THEREON IN ACCORDANCE WITH ANY
SPECIFICATIONS ON THE PROXY. YOUR PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS
EXERCISE IN THE MANNER DESCRIBED IN THE ATTACHED PROSPECTUS/PROXY STATEMENT. ANY
STOCKHOLDER PRESENT AT THE SPECIAL MEETING, INCLUDING ANY ADJOURNMENTS OR
POSTPONEMENTS THEREOF, MAY REVOKE SUCH HOLDER'S PROXY AND VOTE IN PERSON ON EACH
MATTER BROUGHT BEFORE THE SPECIAL MEETING. A FAILURE TO VOTE, EITHER BY NOT
RETURNING THE ENCLOSED PROXY OR BY CHECKING THE "ABSTAIN" BOX THEREON, WILL HAVE
THE SAME EFFECT AS A VOTE "AGAINST" APPROVAL OF THE MERGER AGREEMENT.
<PAGE>
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<S> <C>
PROSPECTUS PROXY STATEMENT
FIRST UNION CORPORATION RS FINANCIAL CORP.
</TABLE>
This Prospectus/Proxy Statement is being furnished by RS Financial Corp., a
North Carolina corporation ("RSFC"), to the holders of RSFC common stock, par
value $1.00 per share ("RSFC Common Stock"), as a proxy statement in connection
with the solicitation of proxies by the Board of Directors of RSFC (the "RSFC
Board") for use at a Special Meeting of Stockholders of RSFC to be held at 5:00
p.m., Raleigh time, on November 20, 1995, at the executive offices of RSFC and
Raleigh Federal Savings Bank ("Raleigh Federal"), 219 Fayetteville Street Mall,
Raleigh, North Carolina (the "Special Meeting"), and at any adjournments or
postponements thereof.
This Prospectus/Proxy Statement, the accompanying Notice of Special Meeting
and form of proxy are first being mailed to the stockholders of RSFC on or about
October 20, 1995.
The purpose of the Special Meeting is to consider and vote upon a proposal
to approve the Agreement and Plan of Mergers, dated as of May 30, 1995 (the
"Merger Agreement"), among RSFC, Raleigh Federal, First Union Corporation, a
North Carolina corporation ("FUNC"), and First Union National Bank of North
Carolina, a national banking association ("FUNB-NC"), pursuant to which RSFC
would merge with and into FUNC (the "Corporate Merger") and Raleigh Federal
would merge with and into FUNB-NC (the "Bank Merger", and together with the
Corporate Merger, the "Mergers"), all on and subject to the terms and conditions
contained therein. See "SUMMARY", "THE MERGERS" and ANNEX A to this
Prospectus/Proxy Statement.
Upon consummation of the Corporate Merger, each outstanding share of RSFC
Common Stock (excluding shares with respect to which dissenters' rights have
been perfected and certain shares held by RSFC or FUNC) would be converted into
the right to receive a number of shares of FUNC common stock, par value
$3.33 1/3 per share (together with the appropriate number of FUNC Rights (as
hereinafter defined) attached thereto, "FUNC Common Stock"), equal to the result
obtained by dividing (i) $40.25 by (ii) the average closing price (the "Average
Closing Price") of FUNC Common Stock on the NYSE Tape (as hereinafter defined)
for the ten trading days immediately prior to the Effective Date (as hereinafter
defined) (such result, the "Exchange Ratio").
This document also constitutes a prospectus of FUNC relating to the shares
(the "FUNC Common Shares") of FUNC Common Stock that are issuable upon
consummation of the Corporate Merger. See "DESCRIPTION OF FUNC CAPITAL STOCK"
and "CERTAIN DIFFERENCES IN THE RIGHTS OF RSFC AND FUNC STOCKHOLDERS".
Based on the (i) 2,804,780 shares of RSFC Common Stock outstanding on the
Record Date (as hereinafter defined), (ii) 190,131 shares of RSFC Common Stock
issuable upon the exercise of all outstanding employee stock options to purchase
such shares on such date (assuming all such options are so exercisable), and
(iii) an Exchange Ratio equal to .7541, based on the closing price of FUNC
Common Stock on the NYSE Tape on October 17, 1995 ($53.375), as if such closing
price were the Average Closing Price, approximately 2,258,462 FUNC Common Shares
would be issuable upon consummation of the Corporate Merger. The actual Exchange
Ratio and the actual number of FUNC Common Shares to be issued will depend on
the Average Closing Price (which will not be known until shortly before the
Effective Date). As a result, the actual Exchange Ratio may be higher or lower
than .7541.
On June 19, 1995, FUNC announced that it had entered into an agreement to
acquire First Fidelity Bancorporation ("FFB"), a bank holding company based in
Newark, New Jersey and Philadelphia, Pennsylvania. In addition, since January 1,
1994, FUNC has completed, or currently has pending, a total of ten acquisitions
that have been or will be accounted for on a purchase accounting basis (the
"Purchase Acquisitions"), which are reflected in certain of the pro forma
financial information presented herein, including the acquisitions of RSFC,
American Savings of Florida, F.S.B. ("American Savings"), United Financial
Corporation of South Carolina, Inc. ("United Financial"), Virginia-based
Columbia First Bank, a Federal Savings Bank ("Columbia"), and Tennessee-based
Brentwood National Bank ("Brentwood"), which were pending at June 30, 1995, or
announced between July 1, 1995 and the date of this Prospectus/Proxy Statement.
See "SUMMARY -- Comparison of Certain Unaudited Per Share Data" and
" -- Selected Financial Data", "RECENT DEVELOPMENTS" and "PRO FORMA FINANCIAL
INFORMATION".
FUNC Common Stock is listed and traded on the New York Stock Exchange
("NYSE"), and RSFC Common Stock is listed and traded on the Nasdaq National
Market. On May 30, 1995, the last business day prior to public announcement of
the execution of the Merger Agreement, the last reported sale price per share of
FUNC Common Stock on the NYSE Composite Transactions tape (the "NYSE Tape") and
the last sale price of RSFC Common Stock on the Nasdaq National Market were
$48.00 and $34.75, respectively. On October 17, 1995, such prices were $53.375
and $38.875, respectively.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS/PROXY STATEMENT IS OCTOBER 20, 1995.
<PAGE>
AVAILABLE INFORMATION
FUNC, FFB and RSFC are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (the "Exchange Act"), and, in accordance therewith, file reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by FUNC, FFB and RSFC can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's Regional Offices in New York (7 World Trade
Center, 13th Floor, New York, New York 10048) and Chicago (Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60621) and copies of such
materials can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Since the
FUNC Common Stock and FFB common stock are listed on the NYSE, reports, proxy
statements and other information relating to FUNC and FFB can also be inspected
at the offices of the NYSE, 20 Broad Street, New York, New York 10005.
This Prospectus/Proxy Statement does not contain all of the information set
forth in the Registration Statement on Form S-4 (No. 33-63387), of which this
Prospectus/Proxy Statement is a part, and the exhibits thereto (together with
any amendments or supplements thereto, the "Registration Statement"), which has
been filed by FUNC with the Commission under the Securities Act of 1933, as
amended, and the rules and regulations thereunder (the "Securities Act"),
certain portions of which have been omitted pursuant to the rules and
regulations of the Commission and to which portions reference is hereby made for
further information.
THIS PROSPECTUS/PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. A COPY OF SUCH DOCUMENTS IS
AVAILABLE WITHOUT CHARGE (OTHER THAN CERTAIN EXHIBITS TO SUCH DOCUMENTS) TO EACH
PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROSPECTUS/PROXY STATEMENT
IS DELIVERED, UPON WRITTEN OR ORAL REQUEST TO: FIRST UNION CORPORATION, INVESTOR
RELATIONS, TWO FIRST UNION CENTER, CHARLOTTE, NORTH CAROLINA 28288-0206
(TELEPHONE NUMBER (704) 374-6782) AS TO FUNC DOCUMENTS; AND TO: RS FINANCIAL
CORP., CORPORATE SECRETARY, 219 FAYETTEVILLE STREET MALL, RALEIGH, NORTH
CAROLINA 27601 (TELEPHONE NUMBER (919) 833-7511) AS TO RSFC DOCUMENTS. IN ORDER
TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY SUCH REQUEST SHOULD BE MADE BY
NOVEMBER 13, 1995.
All information contained or incorporated by reference in this
Prospectus/Proxy Statement with respect to FUNC and FFB was supplied by FUNC,
and all information contained or incorporated by reference in this
Prospectus/Proxy Statement with respect to RSFC was supplied by RSFC.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus/Proxy Statement
and, if given or made, such information or representations must not be relied
upon as having been authorized by FUNC or RSFC. Neither the delivery of this
Prospectus/Proxy Statement nor any distribution of the FUNC Common Shares shall,
under any circumstances, create any implication that there has been no change in
the affairs of FUNC, FFB or RSFC since the date hereof or that the information
contained herein is correct as of any time subsequent to its date. This
Prospectus/Proxy Statement does not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the FUNC Common Shares
or an offer to sell or solicitation of an offer to buy such securities in any
circumstances in which such an offer or solicitation is not lawful.
The Commissioner of Insurance of the State of North Carolina (the
"Commissioner") has not approved or disapproved this offering nor has the
Commissioner passed upon the accuracy or adequacy of this Prospectus/Proxy
Statement.
THE FUNC COMMON SHARES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR
OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.
2
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by FUNC (File No.
1-10000) and by RSFC (File No. 0-17409) under Section 13(a) or 15(d) of the
Exchange Act are hereby incorporated by reference in this Prospectus/Proxy
Statement:
FUNC documents:
(i) FUNC's Annual Report on Form 10-K for the year ended December 31,
1994;
(ii) FUNC's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1995 (as amended by Form 10-Q/A No. 1 dated May 16,
1995), and June 30, 1995; and
(iii) FUNC's Current Reports on Form 8-K filed June 19, 1995, June 20,
1995, June 21, 1995, June 30, 1995, and August 30, 1995.
RSFC documents:
(i) RSFC's Annual Report on Form 10-K for the year ended December 31,
1994;
(ii) RSFC's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1995, and June 30, 1995; and
(iii) RSFC's Current Reports on Form 8-K filed March 17, 1995, April
4, 1995, and June 2, 1995.
All documents filed by FUNC or RSFC pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the earlier
of the date of the Special Meeting or the termination of the Merger Agreement
are hereby incorporated by reference into this Prospectus/Proxy Statement and
shall be deemed a part hereof from the date of filing of such documents.
Any statement contained herein, in any supplement hereto or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of the Registration Statement and this
Prospectus/Proxy Statement to the extent that a statement contained herein, in
any supplement hereto or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Registration
Statement, this Prospectus/Proxy Statement or any supplement hereto.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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AVAILABLE INFORMATION.................................................................................................. 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................................................................ 3
SUMMARY................................................................................................................ 6
RECENT DEVELOPMENTS.................................................................................................... 19
Certain Financial Data for the Three and Nine Months Ended September 30, 1995........................................ 19
FFB Merger........................................................................................................... 19
1995 and 1996 Earnings Estimates..................................................................................... 20
GENERAL INFORMATION.................................................................................................... 21
General.............................................................................................................. 21
Record Date; Vote Required; Revocation of Proxies.................................................................... 22
THE MERGERS............................................................................................................ 22
General; Exchange Ratio.............................................................................................. 22
Effective Date....................................................................................................... 23
Exchange of RSFC Certificates........................................................................................ 23
Background and Reasons............................................................................................... 24
Opinion of Financial Advisor......................................................................................... 25
Interests of Certain Persons......................................................................................... 29
Certain Federal Income Tax Consequences.............................................................................. 31
Business Pending Consummation........................................................................................ 32
Regulatory Approvals................................................................................................. 32
Conditions to Consummation; Termination.............................................................................. 33
Waiver; Amendment.................................................................................................... 34
Accounting Treatment................................................................................................. 34
Expenses; Termination Fee............................................................................................ 34
Dissenters' Rights................................................................................................... 35
Market Prices........................................................................................................ 37
Dividends............................................................................................................ 38
PRO FORMA FINANCIAL INFORMATION........................................................................................ 39
RSFC................................................................................................................... 44
General.............................................................................................................. 44
History and Business................................................................................................. 44
FUNC................................................................................................................... 46
General.............................................................................................................. 46
History and Business................................................................................................. 46
Certain Regulatory Considerations.................................................................................... 47
DESCRIPTION OF FUNC CAPITAL STOCK...................................................................................... 50
Authorized Capital................................................................................................... 50
FUNC Common Stock.................................................................................................... 50
FUNC Preferred Stock................................................................................................. 51
FUNC Class A Preferred Stock......................................................................................... 51
Rights Plan.......................................................................................................... 52
Other Provisions..................................................................................................... 53
CERTAIN DIFFERENCES IN THE RIGHTS OF RSFC AND FUNC STOCKHOLDERS........................................................ 54
General.............................................................................................................. 54
Authorized Capital................................................................................................... 54
Amendment to Articles of Incorporation or Bylaws..................................................................... 54
Size and Classification of Board of Directors........................................................................ 55
Removal of Directors................................................................................................. 55
Director Exculpation................................................................................................. 55
Director Conflict of Interest Transactions........................................................................... 55
</TABLE>
4
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<TABLE>
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PAGE
<S> <C>
Stockholder Meetings................................................................................................. 56
Director Nominations................................................................................................. 56
Stockholder Proposals................................................................................................ 56
Stockholder Protection Rights Plan................................................................................... 57
Stockholder Inspection Rights; Stockholder Lists..................................................................... 57
Required Stockholder Vote for Certain Actions........................................................................ 57
Anti-Takeover Provisions............................................................................................. 58
Dissenters' Rights................................................................................................... 59
Dividends and Other Distributions.................................................................................... 60
Voluntary Dissolution................................................................................................ 60
RESALE OF FUNC COMMON SHARES........................................................................................... 60
ADDITIONAL MATTERS..................................................................................................... 60
VALIDITY OF FUNC COMMON SHARES......................................................................................... 60
EXPERTS................................................................................................................ 60
ANNEX A -- AGREEMENT AND PLAN OF MERGERS............................................................................... A-1
ANNEX B -- OPINION OF TRIDENT FINANCIAL CORPORATION.................................................................... B-1
ANNEX C -- SECTIONS OF THE NORTH CAROLINA BUSINESS CORPORATION ACT RELATING TO
DISSENTERS' RIGHTS........................................................................................ C-1
</TABLE>
5
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY OF CERTAIN INFORMATION RELATING TO THE MERGERS IS NOT
INTENDED TO BE A SUMMARY OF ALL MATERIAL INFORMATION RELATING TO THE MERGERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION
CONTAINED ELSEWHERE IN THIS PROSPECTUS/PROXY STATEMENT, INCLUDING THE ANNEXES
HERETO, AND IN THE DOCUMENTS INCORPORATED BY REFERENCE IN THIS PROSPECTUS/PROXY
STATEMENT. A COPY OF THE MERGER AGREEMENT IS SET FORTH IN ANNEX A TO THIS
PROSPECTUS/PROXY STATEMENT AND REFERENCE IS MADE THERETO FOR A COMPLETE
DESCRIPTION OF THE TERMS OF THE MERGERS. STOCKHOLDERS ARE URGED TO READ
CAREFULLY THIS ENTIRE PROSPECTUS/PROXY STATEMENT, INCLUDING THE ANNEXES HERETO.
AS USED IN THIS PROSPECTUS/PROXY STATEMENT, THE TERMS "FUNC", "FUNB-NC", "FFB",
"RSFC" AND "RALEIGH FEDERAL" REFER TO SUCH ORGANIZATIONS, RESPECTIVELY, AND
UNLESS THE CONTEXT OTHERWISE REQUIRES, TO THEIR RESPECTIVE CONSOLIDATED
SUBSIDIARIES.
PARTIES TO THE MERGERS
FUNC
FUNC is a North Carolina-based, multi-bank holding company registered under
the Bank Holding Company Act of 1956, as amended, and the rules and regulations
thereunder ("BHCA"). FUNC provides a wide range of commercial and retail banking
services and trust services in North Carolina, Florida, South Carolina, Georgia,
Tennessee, Virginia, Maryland and Washington, D.C. FUNC also provides various
other financial services, including mortgage banking, home equity lending,
leasing, investment banking, insurance and securities brokerage services,
through other subsidiaries. As of June 30, 1995, and for the six months then
ended, FUNC reported assets of $83.1 billion, net loans of $60.0 billion,
deposits of $58.8 billion, stockholders' equity of $5.7 billion and net income
applicable to common stockholders of $479 million, and as of such date FUNC
operated through approximately 1,500 offices in 37 states and three foreign
countries. FUNC is the ninth largest bank holding company in the United States,
based on assets at June 30, 1995. The principal executive offices of FUNC are
located at One First Union Center, Charlotte, North Carolina 28288-0013, and its
telephone number is (704) 374-6565.
On June 18, 1995, FUNC entered into an Agreement and Plan of Merger (the
"FFB Merger Agreement"), pursuant to which FUNC would acquire FFB by means of a
merger (the "FFB Merger") of FFB with and into a wholly-owned subsidiary of
FUNC. As of June 30, 1995, FFB had assets of approximately $35.4 billion. The
FFB Merger will be accounted for as a pooling of interests. In addition, since
January 1, 1994, FUNC has completed, or currently has pending, the Purchase
Acquisitions, which are reflected in certain of the pro forma financial
information presented herein, including the acquisitions of RSFC, American
Savings, United Financial, Columbia and Brentwood, which were pending at June
30, 1995, or announced between July 1, 1995 and the date of this
Prospectus/Proxy Statement. As of June 30, 1995, RSFC, American Savings, United
Financial, Columbia and Brentwood had aggregate assets of $8.0 billion.
FUNC is continually evaluating acquisition opportunities and frequently
conducts due diligence activities in connection with possible acquisitions. As a
result, acquisition discussions and, in some cases, negotiations frequently take
place and future acquisitions involving cash, debt or equity securities can be
expected. Acquisitions typically involve the payment of a premium over book and
market values, and therefore, some dilution of FUNC's book value and net income
per common share may occur in connection with any future transactions.
See " -- Comparison of Certain Unaudited Per Share Data", " -- Selected
Financial Data", "RECENT DEVELOPMENTS", "PRO FORMA FINANCIAL INFORMATION" and
"FUNC -- History and Business".
FUNB-NC
FUNC is the parent corporation of FUNB-NC, a national banking association
that provides a wide range of commercial and retail banking services and trust
services in North Carolina. As of June 30, 1995, and for the six months then
ended, FUNB-NC's call report reflected assets of $24.7 billion, net loans of
$17.8 billion, deposits of $16.7 billion, stockholder's equity of $1.4 billion
and net income of $83 million, and as of such date FUNB-NC operated through 254
banking offices in North Carolina.
RSFC AND RALEIGH FEDERAL
RSFC is a savings and loan holding company registered under the Home
Owners' Loan Act of 1933, as amended ("HOLA"). RSFC is the parent corporation of
Raleigh Federal, a federally chartered savings bank that provides commercial and
retail banking services in North Carolina. As of June 30, 1995, and for the six
months then ended, RSFC reported assets of $808 million, net loans of $534
million, deposits of $636 million, stockholder's equity of $72 million and net
income of $3 million, and as of such date RSFC operated through 31 offices in
North Carolina. The principal executive offices of RSFC are
6
<PAGE>
located at 219 Fayetteville Street Mall, Raleigh, North Carolina 27601, and its
telephone number is (919) 833-7511. See "RECENT DEVELOPMENTS" and "RSFC".
SPECIAL MEETING; RECORD DATE
The Special Meeting will be held on Novmeber 20, 1995, at 5:00 p.m.,
Raleigh time, at the executive offices of RSFC and Raleigh Federal, 219
Fayetteville Street Mall, Raleigh, North Carolina. At the Special Meeting,
stockholders will consider and vote upon a proposal to approve the Merger
Agreement.
The RSFC Board has fixed October 17, 1995, as the record date for
determining stockholders entitled to notice of and to vote at the Special
Meeting (the "Record Date"). As of such date, there were 2,804,780 shares of
RSFC Common Stock outstanding and entitled to be voted at the Special Meeting.
See "GENERAL INFORMATION".
THE MERGERS; EXCHANGE RATIO
Under the terms of the Merger Agreement, RSFC would merge with and into
FUNC and Raleigh Federal would merge with and into FUNB-NC. Upon consummation of
the Corporate Merger, each outstanding share of RSFC Common Stock (excluding any
shares held by stockholders who perfect their dissenters' rights of appraisal
("Dissenting Shares") and any shares of stock held by FUNC or RSFC, other than
in a fiduciary capacity or in satisfaction of a debt previously contracted
(together with the Dissenting Shares, "Excluded Shares")) would be converted
into the right to receive a number of shares of FUNC Common Stock equal to the
result obtained by dividing (i) $40.25 by (ii) the Average Closing Price (such
result being the Exchange Ratio).
For purposes of certain pro forma computations in this Prospectus/Proxy
Statement, a .8235 Exchange Ratio has been calculated using the closing price
per share of FUNC Common Stock on the NYSE Tape on July 31, 1995 ($48.875), as
if such closing price were the Average Closing Price. The actual Exchange Ratio
will depend on the Average Closing Price and may be greater or less than .8235.
The pro forma information would be different if the Average Closing Price
results in an Exchange Ratio different from .8235.
On the day following consummation of the Corporate Merger, or as soon
thereafter as FUNB-NC may deem appropriate, the Bank Merger will be consummated.
See "THE MERGERS -- General; Exchange Ratio", " -- Dissenters' Rights",
"DESCRIPTION OF FUNC CAPITAL STOCK" and "CERTAIN DIFFERENCES IN THE RIGHTS OF
RSFC AND FUNC STOCKHOLDERS".
VOTE REQUIRED
Approval of the Merger Agreement requires the affirmative vote of at least
a majority of the votes entitled to be cast at the Special Meeting by the
holders of RSFC Common Stock.
The directors and executive officers of RSFC (including certain of their
related interests) beneficially owned, as of the Record Date, and are entitled
to vote at the Special Meeting, 252,450 shares of RSFC Common Stock, which
represents 9.0 percent of the outstanding shares of RSFC Common Stock entitled
to be voted at the Special Meeting. Assuming that the directors and executive
officers of RSFC vote their shares of RSFC Common Stock in favor of approval of
the Merger Agreement, approval of the Merger Agreement will require the
affirmative vote of the holders of an additional 41.1 percent of the outstanding
shares of RSFC Common Stock entitled to be voted at the Special Meeting in order
for the Merger Agreement to be approved at the Special Meeting.
See "GENERAL INFORMATION -- Record Date; Vote Required; Revocation of
Proxies".
A FAILURE TO VOTE, EITHER BY NOT RETURNING THE ENCLOSED PROXY OR BY
CHECKING THE "ABSTAIN" BOX THEREON, WILL HAVE THE SAME EFFECT AS A VOTE
"AGAINST" APPROVAL OF THE MERGER AGREEMENT.
EFFECTIVE DATE
Subject to the conditions to the obligations of the parties to effect the
Mergers, the Corporate Merger will become effective on such date (the "Effective
Date") as FUNC notifies RSFC in writing not less than five days prior thereto,
provided such date is not more than 30 days after such conditions have been
satisfied or waived. Subject to the foregoing, it is
7
<PAGE>
currently anticipated that the Mergers will be consummated in the first quarter
of 1996. If the Corporate Merger is consummated in such quarter, or in any other
quarter, RSFC stockholders should not assume or expect that the Effective Date
will precede the record date for the dividend on FUNC Common Stock for that
quarter, so as to enable such stockholders to receive such dividend. See "THE
MERGERS -- Exchange of RSFC Certificates" and " -- Conditions to Consummation;
Termination".
RECOMMENDATION OF THE RSFC BOARD
THE RSFC BOARD HAS ADOPTED THE MERGER AGREEMENT BY UNANIMOUS VOTE, BELIEVES
IT IS IN THE BEST INTERESTS OF RSFC AND ITS STOCKHOLDERS AND RECOMMENDS ITS
APPROVAL BY RSFC STOCKHOLDERS. SEE "THE MERGERS -- BACKGROUND AND REASONS;
RSFC".
OPINION OF FINANCIAL ADVISOR
Trident Financial Corporation ("Trident") has advised the RSFC Board that,
in its opinion, the consideration for each share of RSFC Common Stock set forth
in the Merger Agreement is fair, from a financial point of view, to the holders
of RSFC Common Stock. The full text of the Trident opinion, dated as of the date
of this Prospectus/Proxy Statement, which describes the procedures followed,
assumptions made, limitations on the review undertaken and other matters in
connection with rendering such opinion, is set forth in ANNEX B to this
Prospectus/Proxy Statement and should be read in its entirety by RSFC
stockholders. See "THE MERGERS -- Opinion of Financial Advisor".
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of RSFC's management and the RSFC Board may be deemed to
have interests in the Mergers in addition to their interests as stockholders of
RSFC generally. These include, among other things, provisions in the Merger
Agreement relating to indemnification, directors' and officers' liability
insurance, and certain other benefits.
FUNC has agreed to assume RSFC's and Raleigh Federal's obligations under
employment agreements and special termination agreements with the
following executive officers: Stanley E. Wright, Bobby T. Parker, George
A. Snead and Rex D. Williams. Pursuant to such employment agreements and
special termination agreements, each of Messrs. Wright, Parker, Snead
and Williams would receive certain payments if his employment were
terminated at any time during the term of his agreement following a
"Change in Control" (as such term is defined in such employment
agreements and special termination agreements). In addition, each of the
above named executive officers, in addition to other Raleigh Federal
employees, has outstanding options to purchase shares of RSFC Common
Stock which would become immediately exercisable in full in the event of
a "Change in Control" (as defined in the RSFC Option Plans (as
hereinafter defined)). FUNC has agreed to make additional cash payments
to Messrs. Wright, Parker, Snead and Williams to compensate them for
certain taxes that may become due as a result of payments received under
the employment and special termination agreements, to compensate for (i)
the imposition of excise taxes, if any, under Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), on "golden
parachute payments", and (ii) the imposition of tax on certain options
not qualifying as incentive stock options at ordinary income tax rates
to the extent such tax exceeds the tax which would be imposed at
long-term capital gain income tax rates under the Code. As of the Record
Date, the aggregate estimated amount of the foregoing benefits that may
be received by Messrs. Wright, Parker, Snead and Williams, including the
value of all outstanding RSFC stock options (based upon the per option
share value of $40.25 (the value to be received pursuant to the Exchange
Ratio) less the option exercise price of RSFC Common Stock) held by such
persons and certain amounts payable solely on termination of employment,
would be $3,416,000, $864,000, $552,000, and $485,000, respectively, and
$5,317,000 as a group.
FUNB-NC has agreed to continue Messrs. Wright's, Parker's, Snead's and
Williams' employment following consummation of the Mergers, until March 31,
1996, and in order to assure continuity following consummation of the Mergers,
FUNB-NC and certain of such executive officers are currently discussing the
potential for their continued employment with FUNB-NC following such
consummation.
In connection with the Mergers, FUNB-NC has agreed to cause one member of
the RSFC Board to be elected to the FUNB-NC Board of Directors following
consummation of the Mergers.
See "THE MERGERS -- Interests of Certain Persons".
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Consummation of the Mergers is conditioned on receipt by FUNC and RSFC of
an opinion of Sullivan & Cromwell, special counsel for FUNC, dated as of the
Effective Date, to the effect that no gain or loss will be recognized for
federal
8
<PAGE>
income tax purposes by stockholders of RSFC who receive FUNC Common Shares in
exchange for their shares of RSFC Common Stock, except that gain or loss may be
recognized as to cash received in lieu of fractional share interests, or, in the
case of any holders of RSFC Common Stock who perfect their dissenters' rights,
cash received upon exercise of such rights. See "THE MERGERS -- Certain Federal
Income Tax Consequences" and " -- Dissenters' Rights".
BECAUSE CERTAIN TAX CONSEQUENCES MAY VARY DEPENDING UPON THE PARTICULAR
CIRCUMSTANCES OF EACH RSFC STOCKHOLDER, IT IS RECOMMENDED THAT RSFC STOCKHOLDERS
CONSULT THEIR TAX ADVISERS CONCERNING THE FEDERAL (AND ANY STATE AND LOCAL) TAX
CONSEQUENCES OF THE CORPORATE MERGER IN THEIR PARTICULAR CIRCUMSTANCES.
DISSENTERS' RIGHTS
Holders of RSFC Common Stock entitled to vote on approval of the Merger
Agreement have the right to dissent from such approval, and upon consummation of
the Corporate Merger and the satisfaction of certain specified procedures, to
receive the fair value of such holders' shares of RSFC Common Stock in cash, in
accordance with the applicable provisions of the North Carolina Business
Corporation Act ("NCBCA"). The procedures to be followed by dissenting
stockholders are summarized under "THE MERGERS -- Dissenters' Rights". A copy of
the applicable provisions of the NCBCA is set forth in ANNEX C to this
Prospectus/Proxy Statement. FAILURE TO FOLLOW SUCH PROVISIONS PRECISELY MAY
RESULT IN LOSS OF SUCH DISSENTERS' RIGHTS.
In general, any dissenting stockholder who perfects such holder's statutory
dissenters' right to be paid in cash the fair value of such holder's RSFC Common
Stock will recognize gain or loss for federal income tax purposes upon receipt
of such cash. See "THE MERGERS -- Certain Federal Income Tax Consequences".
RESALE OF FUNC COMMON SHARES
The FUNC Common Shares will be freely transferable by the holders of such
shares, except for those shares held by those holders who may be deemed to be
"affiliates" (generally including directors, certain executive officers and ten
percent or more stockholders) of RSFC or FUNC under applicable federal
securities laws. See "RESALE OF FUNC COMMON SHARES".
BUSINESS PENDING CONSUMMATION
Each of RSFC and Raleigh Federal has agreed in the Merger Agreement not to
take certain actions relating to its operation pending consummation of the
Mergers, without the prior written consent of FUNC, except as otherwise
permitted by the Merger Agreement. These actions include, without limitation:
(i) paying any dividends, other than dividends payable on RSFC Common Stock at a
quarterly rate not to exceed $.15 per share, or redeeming or otherwise acquiring
any shares of its capital stock, or issuing any additional shares of its capital
stock (other than upon exercise of outstanding options) or giving any person the
right to acquire any such shares; (ii) incurring any indebtedness for borrowed
money or becoming liable for the obligations of any other entity other than in
the ordinary course of business; (iii) increasing the rate of compensation
(other than in the ordinary course of business) or paying any bonus to any of
its directors, officers or employees (excluding the bonus retention plan
established by RSFC on behalf of Raleigh Federal employees employed as of April
1, 1995, who remain employees of Raleigh Federal on the Effective Date); (iv)
entering into or modifying any employment agreements or employee benefit plans;
(v) disposing of any material portion of its assets or acquiring any portion of
the business or property of any other entity which is material to it; (vi)
changing its lending, investment, liability management or other material banking
policies; (vii) settling any claim, action or proceeding involving material
money damages or restrictions upon the operations of RSFC; (viii) taking any
other action not in the ordinary course of business; or (ix) entering into,
terminating or materially changing any material contract, agreement or lease.
Each of RSFC and Raleigh Federal also has agreed that it will use its best
efforts to modify its loan, litigation and other reserve and real estate
valuation policies and practices (including loan classifications and levels of
reserves) so as to be consistent with those policies and practices applied by
FUNC, provided certain conditions are met.
See "THE MERGERS -- Business Pending Consummation".
REGULATORY APPROVALS
The Mergers are subject to the prior approval of the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board") and the Comptroller of
the Currency (the "OCC") and to prior notice to the Office of Thrift Supervision
(the
9
<PAGE>
"OTS"). Applications have been filed with the Federal Reserve Board and the OCC
for such approvals. There can be no assurance that the necessary regulatory
approvals will be obtained or as to the timing or conditions of such approvals.
The required notice was filed with the OTS and the OTS has notified the OCC that
the OTS has no supervisory objection to the Bank Merger. See "THE
MERGERS -- Regulatory Approvals".
CONDITIONS TO CONSUMMATION; TERMINATION
Consummation of the Mergers is subject, among other things, to: (i)
approval of the Merger Agreement by the requisite vote of the stockholders of
RSFC; (ii) receipt of the regulatory approvals referred to above without any
restrictions or conditions which would so materially adversely impact the
economic or business benefits to FUNC of the transactions contemplated by the
Merger Agreement so as to render inadvisable the consummation of the Mergers;
(iii) no court or governmental or regulatory authority having taken any action
which prohibits the Mergers; (iv) receipt by FUNC and RSFC of the opinion of
Sullivan & Cromwell, dated as of the Effective Date, as to certain federal
income tax consequences of the Corporate Merger; (v) receipt by FUNC of a letter
from RSFC's independent auditors, dated as of or shortly prior to the Effective
Date, with respect to RSFC's consolidated financial position and results of
operations; and (vi) the FUNC Common Shares having been approved for listing on
the NYSE, subject to official notice of issuance.
The Merger Agreement may be terminated by mutual agreement of the Board of
Directors of FUNC and the RSFC Board. The Merger Agreement may also be
terminated by the Board of Directors of either FUNC or RSFC if the Corporate
Merger does not occur on or before April 1, 1996, or if certain conditions set
forth in the Merger Agreement are not met.
See "THE MERGERS -- Conditions to Consummation; Termination" and
" -- Expenses; Termination Fee".
EXPENSES; TERMINATION FEE
All expenses incurred by or on behalf of the parties in connection with the
Merger Agreement and the transactions contemplated thereby shall be borne by the
party incurring the same, except that printing expenses will be shared equally
by FUNC and RSFC.
FUNC shall be entitled to a fee of $5.9 million (the "Termination Fee")
following the occurrence of a Purchase Event (as hereinafter defined), provided
FUNC shall have sent written notice of such entitlement within 90 days after its
awareness of such occurrence. FUNC's right to receive the Termination Fee shall
terminate if any of the following occurs prior to a Purchase Event; (i) the
Effective Date; (ii) termination of the Merger Agreement in accordance with its
terms if such termination occurs prior to the occurrence of a Preliminary
Purchase Event (as hereinafter defined), except for termination by FUNC due to a
knowing breach by RSFC; (iii) termination of the Merger Agreement following the
occurrence of a Preliminary Purchase Event and the passage of 18 months after
such termination; or (iv) termination of the Merger Agreement by FUNC due to a
knowing breach by RSFC and the passage of 18 months after such termination.
See "THE MERGERS -- Expenses; Termination Fee".
ACCOUNTING TREATMENT
It is intended that the Corporate Merger and the other pending Purchase
Acquisitions will be accounted for as purchases under generally accepted
accounting principles, and that the FFB Merger will be accounted for as a
pooling of interests under generally accepted accounting principles. See "THE
MERGER -- Accounting Treatment" and "PRO FORMA FINANCIAL INFORMATION".
CERTAIN DIFFERENCES IN THE RIGHTS OF RSFC AND FUNC STOCKHOLDERS
The rights of stockholders of RSFC are currently determined by reference to
the NCBCA and by RSFC's Articles of Incorporation (as amended, the "RSFC
Articles") and Bylaws. On the Effective Date, stockholders of RSFC will become
stockholders of FUNC, and their rights as stockholders of FUNC will be
determined by reference to the NCBCA and by FUNC's Articles of Incorporation (as
amended, the "FUNC Articles") and Bylaws. See "DESCRIPTION OF FUNC CAPITAL
STOCK" and "CERTAIN DIFFERENCES IN THE RIGHTS OF RSFC AND FUNC STOCKHOLDERS".
COMPARISON OF CERTAIN UNAUDITED PER SHARE DATA
The following unaudited information, adjusted for any stock dividends and
stock splits, reflects, where applicable, certain comparative per share data
related to book value, cash dividends paid, income and market value: (i) on a
historical basis for FUNC and RSFC; (ii) on a pro forma combined basis per share
of FUNC Common Stock reflecting consummation of
10
<PAGE>
(a) the Corporate Merger, (b) the Purchase Acquisitions (including the Corporate
Merger), and (c) the Purchase Acquisitions (including the Corporate Merger) and
the FFB Merger; and (iii) on an equivalent pro forma basis per share of RSFC
Common Stock reflecting consummation of (x) the Corporate Merger, (y) the
Purchase Acquisitions (including the Corporate Merger), and (z) the Purchase
Acquisitions (including the Corporate Merger) and the FFB Merger. Such pro forma
information has been prepared (1) assuming a .8235 Exchange Ratio, (2) giving
effect to the Corporate Merger and the other Purchase Acquisitions on a purchase
accounting basis, and (3) giving effect to the FFB Merger on a pooling of
interests accounting basis. See "THE MERGERS -- Accounting Treatment".
The .8235 Exchange Ratio used in the pro forma information is based on the
last reported sale price per share of FUNC Common Stock on the NYSE Tape on July
31, 1995, which was $48.875 per share. The actual Exchange Ratio will depend on
the Average Closing Price (which will not be known until shortly before the
Effective Date) and may be higher or lower than .8235. The pro forma information
would be different if the Average Closing Price results in an Exchange Ratio
different from .8235. Set forth on the cover page of this Prospectus/Proxy
Statement is the last reported sale price per share of FUNC Common Stock on the
NYSE Tape on the most recent practicable date before the mailing hereof.
Stockholders are urged to obtain current quotations of the market price per
share of FUNC Common Stock.
Pro forma financial information for the Purchase Acquisitions (including
the Corporate Merger) assumes such acquisitions were consummated on January 1,
1994, and, except as otherwise indicated, reflects information from such date to
their respective consummation dates (or to June 30, 1995, with respect to the
Purchase Acquisitions (including the Corporate Merger) pending as of June 30,
1995, or announced between July 1, 1995 and the date of this Prospectus/Proxy
Statement). Pro forma financial information with respect to the FFB Merger
assumes such merger was consummated as of the beginning of each of the periods
indicated.
Since purchase accounting does not require restatement of results for prior
periods following consummation of the Corporate Merger or any of the other
Purchase Acquisitions, consummation of the Corporate Merger or any of the other
Purchase Acquisitions will not affect FUNC's historical results for the periods
indicated. Pro forma financial information is intended to show how the Purchase
Acquisitions (including the Corporate Merger) and the FFB Merger might have
affected historical financial statements if the Purchase Acquisitions (including
the Corporate Merger) and the FFB Merger had been consummated at an earlier
time. The pro forma combined selected financial information does not purport to
be indicative of the results that actually would have been realized had the
Purchase Acquisitions (including the Corporate Merger) and the FFB Merger taken
place at the beginning of the applicable periods indicated, or is it indicative
of the combined financial position or results of operations for future periods.
The information shown below should be read in conjunction with the
historical financial statements of FUNC, FFB and RSFC, including the respective
notes thereto, the unaudited pro forma financial information appearing elsewhere
in this Prospectus/Proxy Statement, including the notes thereto, and the
documents incorporated herein by reference. See "AVAILABLE INFORMATION",
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE", and "PRO FORMA FINANCIAL
INFORMATION".
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
<S> <C> <C>
BOOK VALUE PER SHARE:
Historical per share of:
FUNC Common Stock............................................................................... $33.39 30.66
RSFC Common Stock............................................................................... 25.82 23.34
Pro forma combined per share of FUNC Common Stock (1):
FUNC and RSFC................................................................................... 33.36 30.64
FUNC and the Purchase Acquisitions (including the Corporate Merger)............................. 33.91 30.49
FUNC, the Purchase Acquisitions (including the Corporate Merger) and the FFB Merger............. 30.82 28.11
Equivalent pro forma per share of RSFC Common Stock (2):
FUNC and RSFC................................................................................... 27.47 25.23
FUNC and the Purchase Acquisitions (including the Corporate Merger)............................. 27.92 25.11
FUNC, the Purchase Acquisitions (including the Corporate Merger) and the FFB Merger............. $25.38 23.15
</TABLE>
(1) The pro forma combined book value per share of FUNC Common Stock amounts
represent the sum of the pro forma combined stockholders' equity amounts,
divided by pro forma combined period-end number of shares outstanding.
(2) The equivalent pro forma book value per share of RSFC Common Stock amounts
represent the pro forma combined book value per share of FUNC Common Stock
amounts multiplied by the .8235 Exchange Ratio.
11
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED
ENDED DECEMBER 31,
JUNE 30, 1995 1994 1993 1992
<S> <C> <C> <C> <C>
CASH DIVIDENDS PAID PER SHARE:
Historical per share of:
FUNC Common Stock................................................................... $ .92 1.72 1.50 1.28
RSFC Common Stock................................................................... .30 .54 .44 .20
Pro forma combined per share of FUNC Common Stock (3):
FUNC and RSFC....................................................................... .92 1.74 -- --
FUNC, the Purchase Acquisitions (including the Corporate Merger) and the
FFB Merger........................................................................ .84 1.56 1.30 1.00
Equivalent pro forma per share of RSFC Common Stock (4):
FUNC and RSFC....................................................................... .76 1.43 -- --
FUNC, the Purchase Acquisitions (including the Corporate Merger) and the
FFB Merger........................................................................ $ .69 1.28 1.07 .82
</TABLE>
(3) The pro forma combined cash dividends paid per share of FUNC Common Stock
amounts represent pro forma combined cash dividends paid on common stock
outstanding, divided by pro forma combined average number of common shares
outstanding, rounded to the nearest cent.
(4) The equivalent pro forma cash dividends paid per share of RSFC Common Stock
amounts represent pro forma combined per share of FUNC Common Stock amounts
multiplied by the .8235 Exchange Ratio, rounded up to the nearest cent. The
current annualized dividend rate per share for FUNC Common Stock, based upon
the most recently declared quarterly dividend rate of $.52 per share payable
on December 15, 1995, would be $2.08. On an equivalent pro forma basis, such
current annualized FUNC dividend per share of RSFC Common Stock would be
$1.72, based on the .8235 Exchange Ratio, rounded to the nearest cent.
Future FUNC and RSFC dividends are dependent upon their respective earnings
and financial conditions, government regulations and policies and other
factors. See "THE MERGERS -- Exchange of RSFC Certificates", " -- Business
Pending Consummation" and " -- Dividends".
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEARS ENDED
JUNE 30, DECEMBER 31,
1995 1994 1993 1992
<S> <C> <C> <C> <C>
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS (AFTER FUNC REDEMPTION PREMIUM):
Historical per share of:
FUNC Common Stock..................................................................... $ 2.77 4.98 4.73 2.23
RSFC Common Stock (primary)........................................................... 1.02 1.99 1.68 1.29
RSFC Common Stock (fully-diluted)..................................................... 1.01 1.98 1.67 1.29
Pro forma combined per share of FUNC Common Stock (5):
FUNC and RSFC......................................................................... 2.76 4.97 -- --
FUNC and the Purchase Acquisitions (including the Corporate Merger)................... 2.32 4.82 -- --
FUNC, the Purchase Acquisitions (including the Corporate Merger) and the FFB Merger... 2.22 4.48 4.30 2.53
Equivalent pro forma per share of RSFC Common Stock (6):
FUNC and RSFC......................................................................... 2.27 4.09 -- --
FUNC and the Purchase Acquisitions (including the Corporate Merger)................... 1.91 3.97 -- --
FUNC, the Purchase Acquisitions (including the Corporate Merger) and the FFB Merger... $ 1.83 3.69 3.54 2.08
</TABLE>
(5) The pro forma combined income per share of FUNC Common Stock amounts
represent pro forma combined net income (after FUNC redemption premium on
preferred stock) applicable to holders of FUNC Common Stock, divided by pro
forma combined average number of shares of FUNC Common Stock outstanding.
(6) The equivalent pro forma income per share of RSFC Common Stock amounts
represent pro forma combined income per share of FUNC Common Stock amounts
multiplied by the .8235 Exchange Ratio.
12
<PAGE>
<TABLE>
<CAPTION>
HISTORICAL
FUNC RSFC EQUIVALENT PRO FORMA
COMMON STOCK COMMON STOCK PER SHARE OF RSFC COMMON STOCK (7)
<S> <C> <C> <C>
MARKET VALUE PER SHARE:
May 30, 1995........................................... $ 48.00 34.75 39.50
October 17, 1995....................................... $ 53.375 38.875 43.875
</TABLE>
(7) Equivalent pro forma market values per share of RSFC Common Stock represent
the historical market values per share of FUNC Common Stock multiplied by
the .8235 Exchange Ratio, rounded down to the nearest one-eighth. The FUNC
and RSFC historical market values per share represent the last reported sale
prices per share of FUNC Common Stock and RSFC Common Stock on the NYSE Tape
and the Nasdaq National Market, respectively: (i) on May 30, 1995, the last
business day preceding public announcement of the execution of the Merger
Agreement; and (ii) on October 17, 1995. See "THE MERGERS -- Market Prices"
and Notes (3) and (4) to "PRO FORMA FINANCIAL INFORMATION".
Because the market price of FUNC Common Stock is subject to fluctuation,
the market value of the shares of FUNC Common Stock that holders of RSFC Common
Stock would receive upon consummation of the Corporate Merger may increase or
decrease prior to and after the receipt of such shares. RSFC stockholders are
urged to obtain current market quotations for FUNC Common Stock.
SELECTED FINANCIAL DATA
The following tables set forth certain unaudited historical consolidated
selected financial information for FUNC and RSFC and certain unaudited pro forma
combined selected financial data, reflecting consummation of (i) the Corporate
Merger, (ii) the Purchase Acquisitions (including the Corporate Merger), and
(iii) the Purchase Acquisitions (including the Corporate Merger) and the FFB
Merger. Such information has been prepared (a) assuming the .8235 Exchange
Ratio, (b) giving effect to the Corporate Merger and the other Purchase
Acquisitions on a purchase accounting basis, and (c) giving effect to the FFB
Merger on a pooling of interests accounting basis. See "THE
MERGERS -- Accounting Treatment". This information should be read in conjunction
with the historical financial statements of FUNC, FFB and RSFC, including the
respective notes thereto, the unaudited pro forma financial information
appearing elsewhere in this Prospectus/Proxy Statement, including the notes
thereto, and the other documents incorporated herein by reference. See
"AVAILABLE INFORMATION", "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and
"PRO FORMA FINANCIAL INFORMATION". Interim unaudited historical data of FUNC and
RSFC reflect, in the respective opinions of management, all adjustments
(consisting only of normal recurring adjustments) necessary to a fair
presentation of such data.
The .8235 Exchange Ratio used in the pro forma information is based on the
last reported sale price per share of FUNC Common Stock on the NYSE Tape on July
31, 1995, which was $48.875 per share. The actual Exchange Ratio will depend on
the Average Closing Price (which will not be known until shortly before the
Effective Date) and may be higher or lower than .8235. The pro forma information
would be different if the Average Closing Price results in an Exchange Ratio
different from .8235. Set forth on the cover page of this Prospectus/Proxy
Statement is the last reported sale price per share of FUNC Common Stock on the
NYSE Tape on the most recent practicable date before the mailing hereof.
Stockholders are urged to obtain current quotations of the market price per
share of FUNC Common Stock.
Pro forma financial information for the Purchase Acquisitions (including
the Corporate Merger) assumes such acquisitions were consummated on January 1,
1994, and except as otherwise indicated, reflects information from such date to
their respective consummation dates (or to June 30, 1995, with respect to the
Purchase Acquisitions (including the Corporate Merger) pending as of June 30,
1995, or announced between July 1, 1995 and the date of this Prospectus/Proxy
Statement). Pro forma financial information with respect to the FFB Merger
assumes such merger was consummated as of the beginning of each of the periods
indicated.
Since purchase accounting does not require restatement of results for prior
periods following consummation of the Corporate Merger or any of the other
Purchase Acquisitions, consummation of the Corporate Merger or any of the other
Purchase Acquisitions will not affect FUNC's historical results for the periods
indicated. Pro forma financial information is intended to show how the Purchase
Acquisitions (including the Corporate Merger) and the FFB Merger might have
affected historical financial statements if the Purchase Acquisitions (including
the Corporate Merger) and the FFB Merger had been consummated at an earlier
time. The pro forma combined selected financial information does not purport to
be indicative of the results that actually would have been realized had the
Purchase Acquisitions (including the Corporate Merger) and the FFB Merger taken
place at the beginning of the applicable periods indicated, nor is it indicative
of the combined financial position or results of operations for future periods.
13
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
1995 1994 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
FUNC (HISTORICAL)
CONSOLIDATED SUMMARIES OF INCOME
(In thousands except per share data)
Interest income..................................... $ 3,000,417 2,397,814 5,094,661 4,556,332 4,479,385 4,647,440
Interest expense.................................... 1,406,547 919,916 2,060,946 1,790,439 2,020,968 2,742,996
Net interest income................................. 1,593,870 1,477,898 3,033,715 2,765,893 2,458,417 1,904,444
Provision for loan losses........................... 76,500 50,000 100,000 221,753 414,708 648,284
Net interest income after provision for loan
losses............................................ 1,517,370 1,427,898 2,933,715 2,544,140 2,043,709 1,256,160
Securities available for sale transactions.......... 4,878 1,365 (11,507) 25,767 34,402 --
Investment security transactions.................... 1,450 1,309 4,006 7,435 (2,881) 155,048
Noninterest income.................................. 628,042 551,792 1,166,470 1,165,086 1,032,651 914,511
Noninterest expense................................. 1,399,441 1,291,061 2,677,228 2,521,647 2,526,678 1,905,918
Income before income taxes.......................... 752,299 691,303 1,415,456 1,220,781 581,203 419,801
Income taxes........................................ 266,254 239,224 490,076 403,260 196,152 71,070
Net income.......................................... 486,045 452,079 925,380 817,521 385,051 348,731
Dividends on preferred stock........................ 7,029 11,927 25,353 24,900 31,979 34,570
Net income applicable to common stockholders before
redemption premium................................ 479,016 440,152 900,027 792,621 353,072 314,161
Redemption premium on preferred stock............... -- -- 41,355 -- -- --
Net income applicable to common stockholders after
redemption premium................................ $ 479,016 440,152 858,672 792,621 353,072 314,161
PER COMMON SHARE DATA
Net income before redemption premium................ $ 2.77 2.59 5.22 4.73 2.23 2.24
Net income after redemption premium................. 2.77 2.59 4.98 4.73 2.23 2.24
Cash dividends...................................... .92 .80 1.72 1.50 1.28 1.12
Book value.......................................... 33.39 29.54 30.66 28.90 25.25 23.23
CASH DIVIDENDS PAID ON COMMON STOCK
(In thousands)...................................... 158,418 135,520 297,902 243,845 167,601 126,029
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
(In thousands)
Assets.............................................. 83,101,612 72,604,401 77,313,505 70,786,969 63,828,031 59,273,177
Loans, net of unearned income....................... 60,020,507 48,925,495 54,029,752 46,876,177 41,923,767 41,383,580
Deposits............................................ 58,842,024 53,772,260 58,958,273 53,742,411 49,150,965 47,176,223
Long-term debt...................................... 5,376,283 3,129,444 3,428,514 3,061,944 3,151,260 2,630,930
Preferred stockholders' equity...................... -- 284,041 -- 284,041 297,215 397,356
Common stockholders' equity......................... 5,736,847 5,104,540 5,397,517 4,923,584 4,161,948 3,463,441
Total stockholders' equity.......................... $ 5,736,847 5,388,581 5,397,517 5,207,625 4,459,163 3,860,797
Preferred shares outstanding........................ -- 6,318 -- 6,318 6,846 10,851
Common shares outstanding........................... 171,837 172,797 176,034 170,338 164,849 149,112
CONSOLIDATED AVERAGE BALANCE SHEET ITEMS
(In thousands)
Assets.............................................. $78,881,692 71,088,849 72,670,694 68,101,222 61,145,974 55,095,439
Loans, net of unearned income....................... 56,153,699 46,775,003 49,055,215 43,631,410 41,270,991 37,314,358
Deposits............................................ 57,464,423 52,147,743 53,244,751 50,248,848 47,173,706 40,482,433
Long-term debt...................................... 4,264,879 3,143,570 3,213,607 3,006,560 2,789,653 2,187,595
Common stockholders' equity*........................ 5,611,065 5,062,377 5,282,412 4,550,048 3,889,256 3,131,716
Total stockholders' equity*......................... $ 5,611,065 5,346,417 5,554,390 4,839,397 4,213,896 3,467,437
Common shares outstanding........................... 172,745 169,689 172,543 167,692 158,683 140,003
CONSOLIDATED PERCENTAGES
Net income applicable to common stockholders before
redemption premium to average common stockholders'
equity............................................ 17.22%** 17.53** 17.04 17.42 9.08 10.03
Net income applicable to common stockholders after
redemption premium to average common stockholders'
equity............................................ 17.22** 17.53** 16.26 17.42 9.08 10.03
Net income to:
Average total stockholders' equity................ 17.47** 17.05** 16.66 16.89 9.14 10.06
Average assets.................................... 1.24** 1.28** 1.27 1.20 .63 .63
Average stockholders' equity to average assets...... 6.96 7.01 7.52 7.11 6.89 6.29
Allowance for loan losses to:
Net loans......................................... 1.61 2.06 1.81 2.18 2.24 2.06
Nonaccrual and restructured loans................. 222 192 245 147 96 72
Nonperforming assets.............................. 170 152 175 111 70 50
Net charge-offs to average net loans................ .38** .27** .33 .58 .86 1.48
Nonperforming assets to loans, net and foreclosed
properties........................................ .95 1.35 1.03 1.95 3.19 4.10
Capital ratios:***
Tier 1 capital.................................... 6.86 9.30 7.76 9.14 9.22 7.56
Total capital..................................... 11.58 14.68 12.94 14.64 14.31 11.76
Leverage.......................................... 5.74 6.67 6.12 6.13 6.55 5.31
Net interest margin................................. 4.61%** 4.78** 4.77 4.78 4.77 4.08
<CAPTION>
1990
<S> <C>
FUNC (HISTORICAL)
CONSOLIDATED SUMMARIES OF INCOME
(In thousands except per share data)
Interest income..................................... 4,829,520
Interest expense.................................... 3,094,334
Net interest income................................. 1,735,186
Provision for loan losses........................... 425,409
Net interest income after provision for loan
losses............................................ 1,309,777
Securities available for sale transactions.......... --
Investment security transactions.................... 7,884
Noninterest income.................................. 690,672
Noninterest expense................................. 1,680,973
Income before income taxes.......................... 327,360
Income taxes........................................ 64,993
Net income.......................................... 262,367
Dividends on preferred stock........................ 33,868
Net income applicable to common stockholders before
redemption premium................................ 228,499
Redemption premium on preferred stock............... --
Net income applicable to common stockholders after
redemption premium................................ 228,499
PER COMMON SHARE DATA
Net income before redemption premium................ 1.68
Net income after redemption premium................. 1.68
Cash dividends...................................... 1.08
Book value.......................................... 21.81
CASH DIVIDENDS PAID ON COMMON STOCK
(In thousands)...................................... 116,696
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
(In thousands)
Assets.............................................. 54,588,410
Loans, net of unearned income....................... 36,050,719
Deposits............................................ 38,194,268
Long-term debt...................................... 1,850,860
Preferred stockholders' equity...................... 317,011
Common stockholders' equity......................... 2,983,361
Total stockholders' equity.......................... 3,300,372
Preferred shares outstanding........................ 7,293
Common shares outstanding........................... 136,777
CONSOLIDATED AVERAGE BALANCE SHEET ITEMS
(In thousands)
Assets.............................................. 52,124,595
Loans, net of unearned income....................... 35,877,585
Deposits............................................ 36,209,083
Long-term debt...................................... 1,587,497
Common stockholders' equity*........................ 2,937,441
Total stockholders' equity*......................... 3,244,473
Common shares outstanding........................... 135,622
CONSOLIDATED PERCENTAGES
Net income applicable to common stockholders before
redemption premium to average common stockholders'
equity............................................ 7.78
Net income applicable to common stockholders after
redemption premium to average common stockholders'
equity............................................ 7.78
Net income to:
Average total stockholders' equity................ 8.09
Average assets.................................... .50
Average stockholders' equity to average assets...... 6.22
Allowance for loan losses to:
Net loans......................................... 1.95
Nonaccrual and restructured loans................. 77
Nonperforming assets.............................. 56
Net charge-offs to average net loans................ .68
Nonperforming assets to loans, net and foreclosed
properties........................................ 3.42
Capital ratios:***
Tier 1 capital.................................... 6.53
Total capital..................................... 10.83
Leverage.......................................... 4.90
Net interest margin................................. 3.99
</TABLE>
* Average common stockholders' equity and total stockholders' equity exclude
net unrealized losses on debt and equity securities in 1995 and 1994.
** Annualized.
*** Risk-based capital ratio guidelines require a minimum ratio of Tier 1
capital to risk-weighted assets of four percent and total capital to
risk-weighted assets of eight percent. The minimum leverage ratio of Tier 1
capital to adjusted average quarterly assets is from three to five percent.
Capital ratios are not restated for pooling of interests acquisitions. The
capital ratios for FUNC and for RSFC are based on risk-weighted assets
pursuant to the requirements of their respective primary federal regulators,
which requirements differ in certain respects.
14
<PAGE>
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
RSFC (HISTORICAL)
CONSOLIDATED SUMMARIES OF OPERATIONS
(In thousands)
Interest income..................................................... $ 30,365 53,468 52,065 60,184 70,450
Interest expense.................................................... 17,296 27,121 27,418 34,668 47,815
Net interest income................................................. 13,069 26,347 24,647 25,516 22,635
Provision for loan losses........................................... 250 400 625 1,881 1,925
Net interest income after provision for loan losses................. 12,819 25,947 24,022 23,635 20,710
Security and loan transactions...................................... 279 (162) 376 2,114 (18)
Noninterest income.................................................. 2,005 4,124 4,004 3,562 3,373
Noninterest expense................................................. 10,171 20,242 20,118 22,295 18,150
Income (loss) before income taxes (benefit)......................... 4,932 9,667 8,284 7,016 5,915
Income taxes (benefit).............................................. 1,966 3,766 3,059 2,972 3,058
Net income (loss)................................................... $ 2,966 5,901 5,225 4,044 2,857
PER COMMON SHARE DATA
Net income (loss) -- primary........................................ $ 1.02 1.99 1.68 1.29 .90
Net income (loss) -- fully-diluted.................................. 1.01 1.98 1.67 1.29 .90
Cash dividends...................................................... .30 .54 .44 .20 --
Book value.......................................................... 25.82 23.34 23.25 21.84 20.62
CASH DIVIDENDS PAID ON COMMON STOCK
(In thousands)...................................................... 838 1,556 1,342 624 --
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
(In thousands)
Assets.............................................................. $ 807,690 787,176 709,797 731,916 773,930
Loans, net of unearned income....................................... 534,451 508,495 510,203 555,598 604,157
Deposits............................................................ 635,846 624,566 623,002 639,537 671,496
Long-term debt...................................................... 92,137 93,414 15,801 21,830 34,627
Common stockholders' equity......................................... 72,409 65,707 68,093 67,748 64,931
Total stockholder's equity.......................................... $ 72,409 65,707 68,093 67,748 64,931
Common shares outstanding........................................... 2,805 2,815 2,929 3,102 3,148
CONSOLIDATED AVERAGE BALANCE SHEET ITEMS
(In thousands)
Assets.............................................................. $ 798,805 745,590 717,946 751,857 777,740
Loans, net of unearned income....................................... 534,451 501,570 520,924 582,831 621,940
Deposits............................................................ 613,834 611,102 625,063 653,101 677,606
Long-term debt...................................................... 110,292 59,618 20,236 24,219 28,555
Common stockholders' equity......................................... 70,568 69,009 67,902 66,651 64,151
Total stockholders' equity.......................................... $ 70,568 69,009 67,902 66,651 64,151
Common shares outstanding -- primary................................ 2,904 2,962 3,116 3,128 3,189
Common shares outstanding -- fully-diluted.......................... 2,929 2,974 3,134 3,128 3,189
CONSOLIDATED PERCENTAGES
Net income (loss) applicable to common stockholders to
average common stockholders' equity............................... 8.47%* 8.87* 7.64 6.07 4.47
Net income (loss) to:
Average stockholders' equity...................................... 8.47* 8.87* 7.64 6.07 4.47
Average assets.................................................... .74 .79 .72 .54 .37
Average stockholders' equity to average assets...................... 8.83 9.26 9.46 8.86 8.24
Allowance for loan losses to:
Net loans......................................................... .54 .57 .94 .89 .71
Nonaccrual and restructured loans................................. 104 94 117 70 31
Nonperforming assets.............................................. 28 27 29 24 13
Net charge-offs to average net loans................................ .01* .02* .15 .21 .49
Nonperforming assets to loans, net and foreclosed properties........ 1.92 2.08 3.20 3.69 5.38
Capital ratios:**
Tier 1 capital.................................................... 7.97 7.78 8.43 8.09 6.84
Total capital..................................................... 7.97 7.78 8.43 8.09 6.84
Leverage.......................................................... 15.64% 16.34 16.39 15.53 10.99
<CAPTION>
1990
<S> <C>
RSFC (HISTORICAL)
CONSOLIDATED SUMMARIES OF OPERATIONS
(In thousands)
Interest income..................................................... 74,364
Interest expense.................................................... 52,898
Net interest income................................................. 21,466
Provision for loan losses........................................... 6,255
Net interest income after provision for loan losses................. 15,211
Security and loan transactions...................................... 386
Noninterest income.................................................. 3,640
Noninterest expense................................................. 20,217
Income (loss) before income taxes (benefit)......................... (980)
Income taxes (benefit).............................................. 124
Net income (loss)................................................... (1,104)
PER COMMON SHARE DATA
Net income (loss) -- primary........................................ (.33)
Net income (loss) -- fully-diluted.................................. (.33)
Cash dividends...................................................... --
Book value.......................................................... 19.37
CASH DIVIDENDS PAID ON COMMON STOCK
(In thousands)...................................................... --
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
(In thousands)
Assets.............................................................. 776,963
Loans, net of unearned income....................................... 646,426
Deposits............................................................ 666,936
Long-term debt...................................................... 44,482
Common stockholders' equity......................................... 62,769
Total stockholder's equity.......................................... 62,769
Common shares outstanding........................................... 3,240
CONSOLIDATED AVERAGE BALANCE SHEET ITEMS
(In thousands)
Assets.............................................................. 786,917
Loans, net of unearned income....................................... 643,818
Deposits............................................................ 667,404
Long-term debt...................................................... 40,934
Common stockholders' equity......................................... 65,709
Total stockholders' equity.......................................... 65,709
Common shares outstanding -- primary................................ 3,364
Common shares outstanding -- fully-diluted.......................... 3,364
CONSOLIDATED PERCENTAGES
Net income (loss) applicable to common stockholders to
average common stockholders' equity............................... (1.72)
Net income (loss) to:
Average stockholders' equity...................................... (1.72)
Average assets.................................................... (.14)
Average stockholders' equity to average assets...................... 8.35
Allowance for loan losses to:
Net loans......................................................... .68
Nonaccrual and restructured loans................................. 30
Nonperforming assets.............................................. 17
Net charge-offs to average net loans................................ .43
Nonperforming assets to loans, net and foreclosed properties........ 4.92
Capital ratios:**
Tier 1 capital.................................................... 6.35
Total capital..................................................... 6.35
Leverage.......................................................... 10.06
</TABLE>
* Annualized.
** The capital ratios for RSFC and for FUNC are based on risk-weighted assets
pursuant to the requirements of their respective primary federal regulators,
which requirements differ in certain respects.
15
<PAGE>
FUNC AND RSFC
PRO FORMA COMBINED SELECTED FINANCIAL DATA*
<TABLE>
<CAPTION>
AS OF AND FOR
SIX MONTHS ENDED THE YEAR ENDED
JUNE 30, 1995 DECEMBER 31, 1994
<S> <C> <C>
CONSOLIDATED SUMMARIES OF INCOME
(In thousands)
Interest income....................................................................... $ 3,026,787 5,142,527
Interest expense...................................................................... 1,423,843 2,088,067
Net interest income................................................................... 1,602,944 3,054,460
Provision for loan losses............................................................. 76,750 100,400
Net interest income after provision for loan losses................................... 1,526,194 2,954,060
Securities available for sale transactions............................................ 5,157 (11,669)
Investment security transactions...................................................... 1,450 4,006
Noninterest income.................................................................... 630,047 1,170,594
Noninterest expense................................................................... 1,412,081 2,702,712
Income before income taxes............................................................ 750,767 1,414,279
Income taxes.......................................................................... 266,276 490,834
Net income............................................................................ 484,491 923,445
Dividends on preferred stock.......................................................... 7,029 25,353
Net income applicable to common stockholders before redemption premium................ 477,462 898,092
Redemption premium on preferred stock................................................. -- 41,355
Net income applicable to common stockholders after redemption premium................. $ 477,462 856,737
PER COMMON SHARE DATA
Net income applicable to common stockholders before redemption premium................ $ 2.76 5.20
Net income applicable to common stockholders after redemption premium................. 2.76 4.97
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
(In thousands)
Assets................................................................................ 83,840,781 78,039,326
Loans, net of unearned income......................................................... 60,554,958 54,538,247
Deposits.............................................................................. 59,477,870 59,582,839
Long-term debt........................................................................ 5,468,420 3,521,928
Common stockholders' equity........................................................... 5,732,699 5,393,802
Total stockholders' equity............................................................ $ 5,732,699 5,393,802
CONSOLIDATED PERCENTAGES
Allowance for loan losses to:
Net loans.......................................................................... 1.61% 1.80
Nonperforming assets............................................................... 168 173
Net charge-offs to average net loans.................................................. .38** .33
Nonperforming assets to loans, net and foreclosed properties.......................... .95% 1.04
</TABLE>
* See "PRO FORMA FINANCIAL INFORMATION".
** Annualized.
16
<PAGE>
FUNC AND THE PURCHASE ACQUISITIONS (INCLUDING RSFC)
PRO FORMA COMBINED SELECTED FINANCIAL DATA*
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31, 1994
<S> <C> <C>
CONSOLIDATED SUMMARIES OF INCOME
(In thousands)
Interest income....................................................................... $ 3,337,895 5,800,981
Interest expense...................................................................... 1,647,243 2,514,910
Net interest income................................................................... 1,690,652 3,286,071
Provision for loan losses............................................................. 80,630 101,643
Net interest income after provision for loan losses................................... 1,610,022 3,184,428
Securities available for sale transactions............................................ 1,199 (8,860)
Investment security transactions...................................................... 1,450 4,006
Noninterest income.................................................................... 657,381 1,221,488
Noninterest expense................................................................... 1,598,868 3,000,398
Income before income taxes............................................................ 671,184 1,400,664
Income taxes.......................................................................... 247,535 487,660
Net income............................................................................ 423,649 913,004
Dividends on preferred stock.......................................................... 7,029 25,353
Net income applicable to common stockholders before redemption premium................ 416,620 887,651
Redemption premium on preferred stock................................................. -- 41,355
Net income applicable to common stockholders after redemption premium................. $ 416,620 846,296
PER COMMON SHARE DATA
Net income applicable to common stockholders before redemption premium................ $ 2.32 5.06
Net income applicable to common stockholders after redemption premium................. 2.32 4.82
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
(In thousands)
Assets................................................................................ 90,879,217 88,423,716
Loans, net of unearned income......................................................... 65,589,948 62,217,003
Deposits.............................................................................. 64,166,837 67,055,831
Long-term debt........................................................................ 5,624,112 4,524,214
Stockholders' equity.................................................................. $ 6,050,144 5,458,336
CONSOLIDATED PERCENTAGES
Allowance for loan losses to:
Net loans.......................................................................... 1.55% 1.68
Nonperforming assets............................................................... 153 140
Net charge-offs to average net loans.................................................. .36** .30
Nonperforming assets to loans, net and foreclosed properties.......................... 1.01% 1.20
</TABLE>
* See "PRO FORMA FINANCIAL INFORMATION".
** Annualized.
17
<PAGE>
FUNC, THE PURCHASE ACQUISITIONS (INCLUDING RSFC) AND FFB
PRO FORMA COMBINED SELECTED FINANCIAL DATA*
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(DOLLARS IN THOUSANDS, JUNE 30, YEARS ENDED DECEMBER 31,
EXCEPT PER SHARE DATA) 1995 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income.................... $ 4,493,006 3,434,281 7,937,133 6,601,528 6,608,666 7,031,400 7,549,088
Interest expense................... 2,112,573 1,254,749 3,246,946 2,481,952 2,941,680 4,070,885 4,806,471
Net interest income................ 2,380,433 2,179,532 4,690,187 4,119,576 3,666,986 2,960,515 2,742,617
Provision for loan losses.......... 100,630 94,000 180,643 369,753 642,708 946,284 923,409
Net interest income after provision
for loan losses.................. 2,279,803 2,085,532 4,509,544 3,749,823 3,024,278 2,014,231 1,819,208
Securities available for sale
transactions..................... 15,242 10,173 8,860 25,767 34,402 -- --
Investment security transactions... 1,450 1,309 4,006 14,452 1,944 208,614 32,271
Noninterest income................. 864,592 738,949 1,620,712 1,541,569 1,360,202 1,254,635 1,028,755
Noninterest expense................ 2,135,961 1,816,102 4,070,027 3,536,346 3,443,524 2,777,665 2,564,124
Income before income taxes......... 1,025,126 1,019,861 2,073,095 1,795,265 977,302 699,815 316,110
Income taxes....................... 373,284 347,323 709,028 578,912 278,514 129,843 59,868
Net income......................... 651,842 672,538 1,364,067 1,216,353 698,788 569,972 256,242
Dividends on preferred stock....... 17,350 22,204 46,020 45,553 53,040 51,746 47,151
Net income applicable to common
stockholders before redemption
premium.......................... 634,492 650,334 1,318,047 1,170,800 645,748 518,226 209,091
Redemption premium on preferred
stock............................ -- -- 41,355 -- -- -- --
Net income applicable to common
stockholders after redemption
premium.......................... $ 634,492 650,334 1,276,692 1,170,800 645,748 518,226 209,091
PRO FORMA PER COMMON SHARE DATA
Net income applicable to common
stockholders before redemption
premium........................ $ 2.22 2.32 4.63 4.30 2.53 2.34 .97
Net income applicable to common
stockholders after redemption
premium........................ 2.22 2.32 4.48 4.30 2.53 2.34 .97
CONSOLIDATED PERIOD-END BALANCE
SHEET ITEMS
(In thousands)
Assets........................... 126,240,998 106,512,707 124,639,412 104,549,554 95,308,328 89,488,406 83,698,754
Loans, net of unearned income.... 89,589,095 70,533,561 86,018,244 68,263,088 60,301,462 58,725,097 54,581,023
Deposits......................... 92,985,760 81,214,406 95,962,683 81,885,433 76,155,800 72,394,773 61,274,378
Long-term debt................... 6,300,862 3,942,321 5,337,837 3,675,002 3,732,768 3,549,815 2,967,847
Stockholders' equity............. $ 8,989,461 8,208,885 8,335,311 7,946,053 6,716,813 5,805,579 4,782,825
CONSOLIDATED PERCENTAGES
Allowance for loan losses to:
Net loans...................... 1.76% 2.27 1.91 2.38 2.57 2.49 2.31
Nonperforming assets........... 168 147 153 115 76 55 58
Net charge-offs to average net
loans.......................... .39** .36** .37 .78 1.03 1.53 1.05
Nonperforming assets to loans,
net and foreclosed
properties..................... 1.05% 1.53 1.25 2.06 3.36 4.45 3.91
</TABLE>
* See "PRO FORMA FINANCIAL INFORMATION".
** Annualized.
18
<PAGE>
RECENT DEVELOPMENTS
CERTAIN FINANCIAL DATA FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995
FUNC
FUNC's earnings applicable to common stockholders were $255 million in the
third quarter of 1995, up from $249 million in the second quarter of 1995 and
$235 million in the third quarter a year ago. On a per common share basis,
earnings increased to $1.50, compared with $1.45 in the second quarter of 1995
and $1.35 in the third quarter a year ago.
FUNC had a return on average assets of 1.16 percent and a return on
average common stockholders' equity of 17.71 percent in the third quarter of
1995, compared with 1.25 percent and 17.71 percent, respectively, in the second
quarter of 1995, and 1.31 percent and 17.29 percent, respectively, in the third
quarter of 1994.
In the first nine months ended September 30, 1995, net income applicable to
common stockholders was $734 million, or $4.27 per share, compared with $675
million, or $3.94 per share, in the first nine months of 1994.
Tax-equivalent net interest income increased to $860 million from $836
million in the second quarter of 1995 and $799 million in the third quarter of
1994.
Nonperforming assets were $562 million, or .91 percent of loans and
foreclosed properties, at September 30, 1995, compared with $569 million, or .95
percent, at June 30, 1995, and $654 million, or 1.26 percent, at September 30,
1994. Annualized net charge-offs as a percentage of average net loans were .32
percent in the third quarter of 1995, compared with .44 percent in the second
quarter of 1995 and .38 percent in the third quarter of 1994. The loan loss
provision was $49 million in the third quarter of 1995, compared with $44
million in the second quarter of 1995 and $25 million in the third quarter of
1994.
Net loans at September 30, 1995, were $61.8 billion, compared with $60.0
billion at the end of the second quarter of 1995 and $51.6 billion a year ago.
Deposits were $59.8 billion at September 30, 1995, compared with $53.7 billion a
year ago. Total stockholders' equity was $5.7 billion at September 30, 1995,
compared with $5.6 billion a year ago. At September 30, 1995, FUNC had assets of
$86.8 billion.
See "FUNC -- Certain Regulatory Considerations; FDIC INSURANCE
ASSESSMENTS".
RSFC
RSFC's earnings were $1.24 million for the third quarter of 1995, down from
$1.41 million in the quarter ended September 30, 1994. Earnings per common share
were $.42 for the quarter, compared with $.48 in the third quarter of 1994. For
the nine months ended September 30, 1995, net income was $4.21 million, or $1.43
per share on a fully diluted basis, compared with $4.25 million, or $1.42 per
share, for the comparable period in 1994.
For the nine months ended September 30, 1995, RSFC's return on average
assets was .70 percent and its return on average stockholders' equity was 7.90
percent. For the first nine months of 1994, returns on average assets and
average stockholders' equity were .77 percent and 8.43 percent, respectively.
The decline in RSFC's earnings for the quarter and nine months ended
September 30, 1995, is principally attributable to a slight decrease in net
interest income and to certain expenses related to and in anticipation of the
Mergers.
Nonperforming assets were $10.2 million, or 1.30 percent of consolidated
assets at September 30, 1995, compared with $10.7 million at December 31, 1994.
Net loans at September 30, 1995, were $544 million, compared with $502
million at December 31, 1994. Deposits were $642 million at September 30, 1995,
compared with $625 million at December 31, 1994. Total stockholders' equity was
$73.2 million at September 30, 1995, compared with $65.7 million at December 31,
1994. At September 30, 1995, RSFC had assets of $786 million.
FFB MERGER
On June 18, 1995, FUNC entered into the FFB Merger Agreement, which
provides, among other things, for (i) the merger of FFB with and into a
wholly-owned subsidiary of FUNC, (ii) the exchange of each outstanding share of
FFB common stock for 1.35 shares of FUNC Common Stock, subject to possible
increase in certain circumstances, and (iii) the exchange of each share of the
three outstanding series of FFB preferred stock for one share of one of three
corresponding
19
<PAGE>
new series of FUNC's Class A Preferred Stock having substantially identical
terms as the relevant series of FFB preferred stock, all subject to the terms
and conditions contained in the the FFB Merger Agreement.
In connection with the execution of the FFB Merger Agreement, FFB granted
an option to FUNC to purchase, under certain circumstances, up to 19.9 percent
of the outstanding shares of FFB common stock at a per share exercise price
equal to $59.00, and FUNC granted an option to FFB to purchase, under certain
circumstances, up to 19.9 percent of the outstanding shares of FUNC Common Stock
at a per share exercise price equal to $45.625.
Also, in connection with the execution of the FFB Merger Agreement, Banco
Santander, S.A. ("Santander"), the owner of approximately 30 percent of the
outstanding shares of FFB common stock, agreed, among other things, to vote the
FFB shares held by it in favor of the FFB Merger Agreement. Following
consummation of the FFB Merger, Santander is expected to own approximately 11
percent of the outstanding shares of FUNC Common Stock. The required FUNC and
FFB stockholder approvals with respect to the FFB Merger were obtained on
October 3, 1995.
The FFB Merger, which will be accounted for as a pooling of interests, is
expected to be consummated on or before January 1, 1996, subject to the receipt
of regulatory approvals and to other conditions set forth in the FFB Merger
Agreement. No assurance can be given that the FFB Merger will be consummated or
as to the timing of such consummation.
Based on the $47.625 closing price of FUNC Common Stock on the NYSE Tape on
June 16, 1995, the transaction would be valued at approximately $5.4 billion and
represent a purchase price of $64.29 for each share of FFB common stock.
Prior to consummation of the FFB Merger, FFB and FUNC may purchase up to
5.5 million shares of FFB common stock or 7.4 million shares of FUNC Common
Stock, or some combination of the two. Approximately 105 million shares of FUNC
Common Stock are expected to be issued in the FFB Merger (net of the foregoing
purchases). From June 19, 1995 to the date of this Prospectus/Proxy Statement,
8.4 million shares of FUNC Common Stock have been purchased by FUNC at a cost of
$411 million, 2.9 million shares of FFB common stock have been purchased by FUNC
at a cost of $181 million, and 250,000 shares of FFB series B convertible
preferred stock have been purchased by FUNC at a cost of $12 million. The shares
of FUNC Common Stock purchased by FUNC include shares purchased in connection
with certain of the Purchase Acquisitions. See Notes (3) and (4) to "PRO FORMA
FINANCIAL INFORMATION".
Following consummation of the FFB Merger, the current Chairman and Chief
Executive Officer of FFB, Anthony P. Terracciano, will join Edward E.
Crutchfield and John R. Georgius in an "Office of the Chairman" of FUNC. Mr.
Crutchfield will continue to serve as Chairman and Chief Executive Officer, Mr.
Georgius, the current President of FUNC, will serve as Vice Chairman and Mr.
Terracciano will serve as President of FUNC. Additionally, six FFB directors,
including Mr. Terracciano and a representative of Santander, will join the FUNC
Board of Directors following consummation of the FFB Merger.
See "PRO FORMA FINANCIAL INFORMATION".
1995 AND 1996 EARNINGS ESTIMATES
FUNC estimates stand-alone earnings for 1995 and 1996 of approximately
$5.75 and $6.55 in net income per share of FUNC Common Stock, respectively.
These estimates are based on several assumptions, including FUNC management's
expectations for its existing markets and for the Purchase Acquisitions
(including the Corporate Merger), in addition to certain other purchase
accounting acquisitions that were completed in 1994. See Note (4) to "PRO FORMA
FINANCIAL INFORMATION".
FUNC also estimates post-FFB Merger net income per share of FUNC Common
Stock of approximately $5.29 for 1995, and approximately $6.31 for 1996. These
estimates exclude a currently estimated after-tax FFB Merger-related charge of
approximately $270 million, or $.97 per share of FUNC Common Stock, which will
be recorded in the appropriate period based on the consummation date of the FFB
Merger. The FUNC estimates of post-FFB Merger earnings for 1995 and 1996 are
based, in part, on estimated stand-alone earnings for FFB for 1995 and 1996 of
approximately $5.45 and $5.90, respectively, in fully-diluted net income per
share of FFB common stock. As is the case with the FUNC stand-alone estimates,
the estimates for FFB are based on several assumptions, including expectations
for its existing markets. The FUNC post-FFB Merger estimates are based on
several assumptions in addition to the assumptions referred to above with
respect to the stand-alone earnings estimates for FUNC and FFB, including,
without limitation, the following:
(Bullet) The FFB Merger will be consummated on or before January 1, 1996.
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<PAGE>
(Bullet) FUNC will have average shares of FUNC Common Stock outstanding of
approximately 279 million in 1995 and 284 million in 1996,
including an estimated 105 million shares to be issued in the FFB
Merger (net of the purchases referred to above under " -- FFB
Merger").
(Bullet) Before-tax expense savings relating to the FFB Merger of
approximately $16 million in 1995 and $106 million in 1996, or
approximately $10 million and $64 million, respectively, after
tax. These estimates assume that approximately five percent of
combined FUNC/FFB's pre-FFB Merger annual expenses, are eliminated
within 18 months of the effective date of the FFB Merger.
(Bullet) Before-tax revenue enhancements relating to the FFB Merger of
approximately $79 million in 1996, or approximately $48 million
after tax. These estimates are primarily based on an analysis of
fee income generating products currently offered by FUNC which
either are not offered by FFB or are offered on a more limited
basis by FFB.
(Bullet) Before-tax earnings resulting from excess capital generated by the
FFB Merger of approximately $25 million in 1996, or approximately
$15 million after tax. These estimates assume that all tangible
common equity generated by the FFB Merger in excess of 5.50
percent is converted into assets which earn a 100 basis points
before-tax spread, or a 60 basis points after-tax spread.
The estimated $270 million FFB Merger-related charge is summarized below:
<TABLE>
<S> <C>
(In millions, after tax)
Severance and change in control related obligations........................................... $ 105
Fixed asset write-downs and vacant space accrual.............................................. 40
Accelerated disposition of owned real estate.................................................. 30
Service contract terminations................................................................. 30
Professional fees............................................................................. 30
Other......................................................................................... 35
Total......................................................................................... $ 270
</TABLE>
The FFB Merger-related charge includes approximately $65 million in
non-cash charges. Cash payments included in the FFB Merger-related charge are
expected to be completed by the end of the second quarter of 1996. The "Other"
category includes FFB Merger-related amounts, none of which exceeds $8 million.
The amounts included in the $270 million FFB Merger-related charge are subject
to change prior to the consummation date for the FFB Merger. The estimates
include assumptions about the timing and number of employees that will be
voluntarily or involuntarily terminated. Changes in those assumptions could
result in a change in the FFB Merger-related charge.
Like all estimates of the type indicated above, there are many factors,
such as changes in economic or competitive conditions, changes in legislation or
regulation, or the failure of any of the underlying assumptions to be correct,
that are beyond FUNC's and FFB's control. These factors could affect actual
results. As a result, and because of the subjective aspect of any estimate,
there are likely to be differences between such estimates and the actual
results, which could be material. These estimates are necessarily speculative in
nature and no assurance can be given that these estimates will be realized.
GENERAL INFORMATION
GENERAL
This Prospectus/Proxy Statement is being furnished by RSFC to its
stockholders as a Proxy Statement in connection with the solicitation of proxies
by the RSFC Board for use at the Special Meeting to be held on November 20,
1995, and any adjournments or postponements thereof, to consider and vote upon a
proposal to approve the Merger Agreement.
This document is also furnished by FUNC to the holders of RSFC Common Stock
as a prospectus in connection with the issuance by FUNC of the FUNC Common
Shares upon consummation of the Corporate Merger.
Directors, officers and employees of RSFC and FUNC may solicit proxies from
RSFC stockholders, either personally or by telephone, telegraph or other forms
of communication. Such persons will receive no additional compensation for such
services. RSFC may retain a firm to assist in soliciting proxies and to send
proxy materials to brokerage houses and other custodians, nominees and
fiduciaries for transmittal to their principals, at a cost not expected to
exceed $7,500, plus out-of-pocket expenses. All expenses associated with the
solicitation of proxies in the form enclosed will be borne by the party
incurring the same, except for printing expenses, which will be shared equally
between FUNC and RSFC.
21
<PAGE>
THE RSFC BOARD HAS UNANIMOUSLY ADOPTED THE MERGER AGREEMENT, BELIEVES THE
MERGER AGREEMENT IS IN THE BEST INTERESTS OF RSFC AND ITS STOCKHOLDERS AND IS
FAIR TO THE STOCKHOLDERS, AND RECOMMENDS APPROVAL OF THE MERGER AGREEMENT BY
RSFC STOCKHOLDERS. SEE "THE MERGER -- BACKGROUND AND REASONS; RSFC".
RECORD DATE; VOTE REQUIRED; REVOCATION OF PROXIES
The RSFC Board has fixed October 17, 1995, as the Record Date for
determining stockholders entitled to notice of and to vote at the Special
Meeting, and accordingly, only holders of RSFC Common Stock of record at the
close of business on that day will be entitled to notice of and to vote at the
Special Meeting. The number of shares of RSFC Common Stock outstanding on the
Record Date was 2,804,780, each of such shares being entitled to one vote. The
presence, in person or by proxy, of at least a majority of the total number of
outstanding shares is necessary to constitute a quorum at the Special Meeting.
Abstentions and broker non-votes (I.E., proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owners or other persons as to certain proposals on which such beneficial owners
or persons are entitled to vote their shares but with respect to which the
brokers or nominees have no discretionary power to vote without such
instructions) will be treated as shares present at the Special Meeting for
purposes of determining the presence of a quorum. Approval of the Merger
Agreement requires the affirmative vote of at least a majority of the votes
entitled to be cast at the Special Meeting by the holders of RSFC Common Stock.
Therefore, abstentions and broker non-votes will have the same effect as votes
against approval of the Merger Agreement.
The directors and executive officers of RSFC (including certain of their
related interests) beneficially owned, as of the Record Date, and are entitled
to vote at the Special Meeting 252,450 shares of RSFC Common Stock, which
represents 9.0 percent of the outstanding shares of RSFC Common Stock entitled
to be voted at the Special Meeting. Assuming that the directors and executive
officers of RSFC vote their shares of RSFC Common Stock in favor of approval of
the Merger Agreement, approval of the Merger Agreement will require the
affirmative vote of the holders of an additional 41.1 percent of the outstanding
shares of RSFC Common Stock entitled to be voted at the Special Meeting in order
for the Merger Agreement to be approved at the Special Meeting.
After having been submitted, the enclosed proxy may be revoked by the
person giving it, at any time before it is exercised, by: (i) submitting written
notice of revocation of such proxy to the Secretary of RSFC; (ii) submitting a
proxy having a later date; or (iii) appearing at the Special Meeting and
requesting a return of the proxy. All shares represented by valid proxies will
be exercised in the manner specified thereon. If no specification is made, such
shares will be voted in favor of approval of the Merger Agreement and otherwise
in the discretion of the proxyholders in accordance with their best judgement as
to any other matters which may come before the Special Meeting, including among
other things, a motion to adjourn or postpone the Special Meeting to another
time and/or place for the purpose of soliciting additional proxies or otherwise;
PROVIDED, HOWEVER, that no proxy which is voted against the proposal to adopt
the Merger Agreement will be voted in favor of any such adjournment or
postponement.
THE MERGERS
THE FOLLOWING INFORMATION RELATING TO THE MERGERS IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION CONTAINED ELSEWHERE IN
THIS PROSPECTUS/PROXY STATEMENT, INCLUDING THE ANNEXES HERETO, AND IN THE
DOCUMENTS INCORPORATED HEREIN BY REFERENCE. A COPY OF THE MERGER AGREEMENT IS
SET FORTH IN ANNEX A TO THIS PROSPECTUS/PROXY STATEMENT AND REFERENCE IS MADE
THERETO FOR A COMPLETE DESCRIPTION OF THE TERMS OF THE MERGERS. STOCKHOLDERS OF
RSFC ARE URGED TO READ THE MERGER AGREEMENT CAREFULLY.
GENERAL; EXCHANGE RATIO
Under the terms of the Merger Agreement, RSFC would merge with and into
FUNC and Raleigh Federal would merge with and into FUNB-NC. Upon consummation of
the Corporate Merger, each outstanding share of RSFC Common Stock (excluding any
Excluded Shares) would be converted, by virtue of the Corporate Merger,
automatically and without any action on the part of the holder thereof, into the
right to receive a number of shares of FUNC Common Stock equal to the Exchange
Ratio (I.E. the the result obtained by dividing (i) $40.25 by (ii) the Average
Closing Price). Each holder of RSFC Common Stock who would otherwise be entitled
to a fractional share of FUNC Common Stock will receive cash in lieu thereof in
an amount determined by multiplying (a) the last reported sale price per share
of FUNC Common Stock on the NYSE Tape on the last trading day prior to the
Effective Date by (b) the fraction of a share of FUNC Common Stock to which such
holder would otherwise be entitled.
22
<PAGE>
For purposes of certain pro forma computations in this Prospectus/Proxy
Statement, a .8235 Exchange Ratio has been calculated using the closing price
per share of FUNC Common Stock on the NYSE Tape on July 31, 1995 ($48.875), as
if such closing price were the Average Closing Price. The actual Exchange Ratio
will depend on the Average Closing Price and may be greater or less than .8235.
The pro forma information would be different if the Average Closing Price
results in an Exchange Ratio different from .8235.
On the day following consummation of the Corporate Merger, or as soon
thereafter as FUNB-NC may deem appropriate, the Bank Merger will be consummated.
EFFECTIVE DATE
Subject to the conditions to the obligations of the parties to effect the
Mergers and to certain other conditions set forth in the Merger Agreement, the
Effective Date will occur on such date as FUNC notifies RSFC in writing not less
than five days prior thereto, provided such date is not more than 30 days after
such conditions have been satisfied or waived. Subject to the foregoing, it is
currently anticipated that the Mergers will be consummated in the first quarter
of 1996. If the Corporate Merger is consummated in such quarter, or in any other
quarter, RSFC stockholders should not assume or expect that the Effective Date
will precede the record date for the dividend on FUNC Common Stock for that
quarter, so as to enable such stockholders to receive such dividend. The Board
of Directors of either FUNC or RSFC may terminate the Merger Agreement if the
Effective Date does not occur on or before April 1, 1996. See " -- Exchange of
RSFC Certificates" and " -- Conditions to Consummation; Termination".
EXCHANGE OF RSFC CERTIFICATES
As promptly as practicable after the Effective Date, FUNC will send or
cause to be sent to each holder of record of RSFC Common Stock as of the
Effective Date, transmittal materials for use in exchanging all of such holder's
certificates representing RSFC Common Stock for a certificate or certificates
representing the FUNC Common Shares to which such holder is entitled and a check
for such holder's fractional share interest and any dividends to which such
holder is entitled, as appropriate. The transmittal materials will contain
information and instructions with respect to the surrender and exchange of such
certificates.
RSFC STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE
THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.
Upon surrender of all of the certificates for RSFC Common Stock registered
in the name of a holder of such certificates (or indemnity satisfactory to FUNC
and the exchange agent selected by FUNC if any of such certificates are lost,
stolen or destroyed), together with a properly completed letter of transmittal,
such exchange agent will mail to such holder a certificate or certificates
representing the number of FUNC Common Shares to which such holder is entitled,
together with all undelivered dividends or distributions in respect of such
shares and, where applicable, a check for any fractional share interest (in each
case, without interest).
All FUNC Common Shares issued to the holders of RSFC Common Stock pursuant
to the Corporate Merger will be deemed issued as of the Effective Date. After
the Effective Date, former holders of record of RSFC Common Stock (other than
holders of Dissenters' Shares) will be entitled to vote at any meeting of
holders of FUNC Common Stock the number of FUNC Common Shares into which their
shares of RSFC Common Stock have been converted, regardless of whether they have
surrendered their RSFC Common Stock certificates. FUNC dividends having a record
date on or after the Effective Date will include dividends on all FUNC Common
Shares issued in the Corporate Merger, but no dividend or other distribution
payable to the holders of record of FUNC Common Shares at or as of any time
after the Effective Date will be distributed to the holder of any RSFC Common
Stock certificates until such holder physically surrenders all such certificates
as described above. Promptly after such surrender, all undelivered dividends and
other distributions and, where applicable, a check for any fractional share
interest, will be delivered to such holder, in each case, without interest. FUNC
dividends having a record date before the Effective Date (which record date may,
in FUNC's sole discretion, be the day immediately preceding the Effective Date
or any other day prior to the Effective Date) will not include dividends on the
FUNC Common Shares issued in the Corporate Merger. After the Effective Date, the
stock transfer books of RSFC will be closed, and there will be no transfers on
the transfer books of RSFC of the shares of RSFC Common Stock that were
outstanding immediately prior to the Effective Date.
The Merger Agreement provides that RSFC will use its best efforts to obtain
on or before the date hereof from each person who may be deemed to be an
"affiliate" (as defined in the Securities Act) an agreement restricting the
disposition of
23
<PAGE>
such affiliate's shares of RSFC Common Stock. The Merger Agreement further
provides that shares of RSFC Common Stock held by an affiliate of RSFC will not
be exchanged for FUNC Common Shares until FUNC receives such an agreement.
BACKGROUND AND REASONS
RSFC
On March 9, 1995, RSFC received an unsolicited offer from First Citizens
BancShares, Inc. ("First Citizens") to acquire RSFC for a combination of cash
and First Citizens' Class A common stock. First Citizens valued the offer at
$30.50 per share of RSFC Common Stock. In connection with its offer, First
Citizens and certain other related parties (the "First Citizens Group") filed a
Schedule 13D with the Commission describing First Citizens' offer to acquire
RSFC and the First Citizens Group's intent to purchase additional shares of RSFC
Common Stock. At the time of the filing, the First Citizens Group owned 7.18
percent of the outstanding RSFC Common Stock. The First Citizens offer was to
expire on March 27, 1995. Substantial publicity resulted from First Citizens'
unsolicited actions.
After receiving First Citizens' offer, the RSFC Board engaged Trident to
assist it in evaluating and analyzing First Citizens' offer and other
alternatives and opportunities available to RSFC, including, in addition to the
possibility of a combination with another company, the possibility of remaining
independent and adhering to RSFC's then-current business plan. On March 11,
1995, RSFC received a written indication of interest from FUNC for an
acquisition of the outstanding shares of RSFC Common Stock in exchange for
shares of FUNC Common Stock having a then-current market value of $34.00 per
share of RSFC Common Stock. Additionally, five other banking corporations
contacted RSFC after First Citizens' offer to indicate their interest in
acquiring RSFC. On March 17, 1995, First Citizens amended its Schedule 13D to
indicate that the First Citizens Group had purchased additional shares of RSFC
Common Stock and as of March 17, 1995, owned 9.5 percent of the outstanding RSFC
Common Stock.
Trident met with the RSFC Board on March 15 and 23, 1995 to present
analyses of RSFC's sale-of-control value and its potential for growth and
profitability should RSFC decide to remain independent. Trident also presented
its analyses of First Citizens' offer valued at $30.50 per share of RSFC Common
Stock and the FUNC indication of interest valued at $34.00 per share of RSFC
Common Stock. Trident advised the RSFC Board that it had estimated RSFC's
sale-of-control value to be between $33.00 and $39.00 per share of RSFC Common
Stock, and based on its valuation and in its opinion, First Citizens' offer was
financially inadequate, but the FUNC expression of interest was within the range
of the fair market value of RSFC. Trident further advised the RSFC Board that
based on its analysis of RSFC's potential growth and profitability, it would be
difficult for RSFC to remain independent and continue to increase stockholder
value beyond RSFC's current sale-of-control value over the long term. The RSFC
Board discussed with Trident the possibility that First Citizens' public
disclosure of its offer could increase the likelihood of significant stockholder
dissatisfaction should RSFC choose to remain independent. After discussing
Trident's analyses and opinions, and based on Trident's advice, the RSFC Board
decided to reject First Citizens' offer because it did not reflect RSFC's fair
market value and to continue to assess RSFC's options and alternatives,
including the possibility of an acquisition of RSFC. To that end, the RSFC Board
directed Trident to communicate with prospective acquirors, including First
Citizens and FUNC, as part of the process of exploring strategic alternatives.
RSFC issued a press release and sent a letter to its stockholders about its
decisions to reject First Citizens' offer and to evaluate other alternatives
open to RSFC that could be in the best interests of RSFC stockholders.
From March 27 through April 24, 1995, Trident contacted potential
acquirors, sent out information books about RSFC, and responded to requests for
additional information. In response, seven companies indicated an interest in
exploring the possibility of entering into a transaction with RSFC. Of these,
five submitted proposals to acquire RSFC. At a meeting of the RSFC Board on
April 28, 1995, Trident presented comparative analyses of these proposals. Three
proposals were within the $33.00-$39.00 per share of RSFC Common Stock valuation
range identified by Trident earlier; one was below the range; and one was above
the range. Two companies chose not to submit proposals. Trident advised the RSFC
Board that, in its opinion, the process undertaken by the RSFC Board had yielded
proposals which represented the highest values acquirors would pay for RSFC at
the present time. Two proposals, one of which was FUNC's, were substantially
more favorable to RSFC's stockholders from a financial point of view than the
other three. FUNC's proposal to acquire all of the RSFC Common Stock for the
fixed price of $40.25 per share in FUNC Common Stock was above the range. The
other company proposed a share exchange having a then-current market value of
$38.57 per share of RSFC Common Stock.
The RSFC Board discussed the elements of, and the differences between,
these two proposals and the implications for RSFC's stockholders. It concluded,
after considering the analyses, opinions and advice of Trident, that the process
of evaluating other options had been open, thorough and competitive and had
resulted in two proposals that would produce stockholder values that exceed
those RSFC was reasonably likely to produce on its own if it were to remain
independent and successfully
24
<PAGE>
implement its business plan. The RSFC Board decided that it was in the best
interests of RSFC and its stockholders to continue negotiations with the
companies submitting these proposals. The RSFC Board directed its advisors to
determine whether FUNC and the other company were willing to adjust the values
offered in their proposals and to clarify certain issues in the proposals,
including employee retention, branch closings and the effect of a
change-in-control transaction on management's compensation and benefits. Both
companies subsequently clarified and revised their proposals.
On May 18, 1995, Trident presented to the RSFC Board a comprehensive report
on FUNC and the other company, comparing, among other things, each company's
financial condition, dividend rate, liquidity, asset quality, operating results
and ratios. Trident reported that FUNC and the other company were strong and
profitable companies with high dividends, actively-traded common stock and
aggressive growth, and likely would be survivors in the consolidation trend in
the financial institutions industry. Trident also presented to the RSFC Board a
comparison of the revised proposals. FUNC's proposal remained at a fixed price
with the value of $40.25 per share of RSFC Common Stock. The other company
increased the value of its fixed exchange ratio offer to $39.785 per share of
RSFC Common Stock based on then-current market values. Trident advised the RSFC
Board that both proposals were fair to RSFC's stockholders from a financial
point of view. Trident also advised the RSFC Board about the risks associated
with both the fixed price and the fixed exchange ratio aspects of the proposals.
The RSFC Board discussed the implications for RSFC's stockholders in a fixed
price versus a fixed exchange ratio transaction and also discussed the
differences in the two proposals in respect of employee retention,
organizational structure, branch closings, severance, employee benefits,
management compensation, indemnification and continued service of directors. The
FUNC proposal was for a nominally higher price. Additionally, the proposal's
fixed price provided for less risk of a decrease in value than the fixed
exchange ratio proposal. The FUNC pro forma dividends, according to Trident's
analysis, were higher. Because there was less branch overlap with FUNC than with
the other company, there was greater likelihood of continued employment for more
RSFC employees in a merger with FUNC. FUNC's proposal also offered greater
benefits for employees who might not be retained after the acquisition.
Based on these analyses, in-depth comparisons of the two proposals and
Trident's opinion that FUNC's proposal is fair to RSFC stockholders from a
financial point of view, the RSFC Board formed the judgment that the best
interests of RSFC's stockholders and other constituencies would be best served
by accepting the FUNC proposal and it directed that a mutually acceptable
agreement be negotiated with FUNC.
FOR THE REASONS SET FORTH ABOVE, THE RSFC BOARD HAS UNANIMOUSLY APPROVED
THE MERGER AGREEMENT AS ADVISABLE AND IN THE BEST INTERESTS OF RSFC AND RSFC
STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF RSFC VOTE "FOR"
THE APPROVAL OF THE MERGER AGREEMENT.
FUNC
FUNC believes that it is advantageous to build a multi-state banking
organization. The economies of banking favor such an organization as a way of
gaining efficiency and spreading costs over a large base, as well as providing
diversification. To further its objective to build a multi-state banking
organization, FUNC has heretofore concentrated its efforts on what it perceives
to be some of the better banking markets in the eastern region of the United
States and on advantageous ways of entering or expanding its presence in those
markets. FUNC believes that joining with RSFC is an excellent way to
significantly expand FUNC's presence in the Raleigh, North Carolina market.
FUNC is continually evaluating acquisition opportunities and frequently
conducts due diligence activities in connection with possible acquisitions. As a
result, acquisition discussions and, in some cases, negotiations frequently take
place and future acquisitions involving cash, debt or equity securities can be
expected. Acquisitions typically involve the payment of a premium over book and
market values, and therefore, some dilution of FUNC's book value and net income
per common share may occur in connection with any future transactions. See
"RECENT DEVELOPMENTS", "PRO FORMA FINANCIAL INFORMATION" and "FUNC -- History
and Business".
OPINION OF FINANCIAL ADVISOR
RSFC has retained Trident to act as its financial advisor and to render a
fairness opinion in connection with the Mergers. As part of its engagement,
Trident performed a valuation analysis of RSFC in an acquisition context. On
March 23, 1995, Trident presented its valuation report (the "Valuation Report")
to the RSFC Board.
On May 30, 1995, Trident met with the RSFC Board to review the proposed
terms of the Merger Agreement. At that time, Trident presented a report to the
RSFC Board summarizing the financial terms of the Mergers and updated market
information with respect to thrift mergers and acquisitions. Trident also
compared FUNC's offer to the valuation of RSFC set
25
<PAGE>
forth in the Valuation Report and analyzed the advantages and disadvantages of
the Mergers from a financial point of view. Trident further reported on its
financial analysis and onsite due diligence examination of FUNC (the "Due
Diligence Report"). In addition, Trident rendered its written opinion to the
RSFC Board to the effect that, as of that date, the consideration to be received
by RSFC stockholders pursuant to the Merger Agreement was fair to them from a
financial point of view.
Trident delivered its updated written opinion to the RSFC Board as of the
date of this Prospectus/Proxy Statement stating that, as of such date, the
consideration to be received by the stockholders of RSFC in the Mergers is fair
to them from a financial point of view. Trident has consented to the inclusion
of such opinion and the related disclosure in this Prospectus/Proxy Statement.
TRIDENT'S OPINION IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL
POINT OF VIEW, OF THE CONSIDERATION TO BE RECEIVED BY RSFC STOCKHOLDERS BASED
ON CONDITIONS AS THEY EXISTED AND COULD BE EVALUATED AS OF THE DATE OF THE
OPINION. TRIDENT'S OPINION DOES NOT CONSTITUTE A RECOMMENDATION TO ANY RSFC
STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE SPECIAL MEETING, NOR
DOES TRIDENT'S OPINION ADDRESS THE UNDERLYING BUSINESS DECISION TO EFFECT THE
MERGERS. THIS SUMMARY OF TRIDENT'S OPINION IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION, WHICH IS ATTACHED TO THIS
PROSPECTUS/PROXY STATEMENT AS ANNEX B. STOCKHOLDERS ARE URGED TO READ
TRIDENT'S OPINION IN ITS ENTIRETY FOR A DESCRIPTION OF THE ASSUMPTIONS MADE AND
MATTERS CONSIDERED AND THE LIMITS ON THE REVIEW UNDERTAKEN IN RENDERING SUCH
OPINION.
In connection with rendering its opinion, Trident reviewed and analyzed,
among other things, the following: (i) the Merger Agreement and the Registration
Statement; (ii) certain publicly available information concerning RSFC,
including the audited financial statements of RSFC for each of the years in the
three-year period ended December 31, 1994 and the unaudited financial statements
of RSFC for the six months ended June 30, 1995; (iii) certain publicly available
information concerning FUNC, including the audited financial statements of FUNC
for each of the years in the three-year period ended December 31, 1994 and the
unaudited financial statements of FUNC for the six months ended June 30, 1995;
(iv) certain other internal information, primarily financial in nature,
concerning the business and operations of RSFC and FUNC furnished to Trident by
RSFC and FUNC for purposes of Trident's analysis; (v) certain information with
respect to the pricing and trading of RSFC Common Stock; (vi) certain
information with respect to the pricing and trading of FUNC Common Stock; (vii)
certain publicly available information with respect to other companies that
Trident believed to be comparable to RSFC and FUNC and the trading markets for
such other companies' securities; and (viii) certain publicly available
information concerning the nature and terms of other transactions that Trident
considered relevant to its inquiry. Trident also met with certain officers and
employees of RSFC and FUNC to discuss the foregoing, as well as other matters
which it believed relevant to its inquiry.
In its review and analysis, and in arriving at its opinion, Trident assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to it or that was publicly available and did not attempt
independently to verify any such information. The financial information provided
to Trident by RSFC was of the type normally produced by the management of RSFC
and reviewed by the RSFC Board at its regular meetings and the RSFC Board had no
reason to believe that Trident's reliance thereon was unreasonable. The RSFC
Board, however, did not specifically review the information, projections,
assumptions and other information provided by management to Trident for accuracy
and completeness. Trident did not conduct a physical inspection of the
properties or facilities of RSFC or FUNC, nor did it make or obtain any
independent evaluations or appraisals of any of such properties or facilities.
While the RSFC Board has carefully reviewed Trident's opinion, the RSFC Board
has relied upon the expertise of Trident in preparing the opinion and
determining the methodologies and appropriateness of assumptions used in
rendering its opinion and, accordingly, did not undertake to independently
review the methodologies and appropriateness of the assumptions used by Trident
in reaching its determination as to the fairness of the Mergers from a financial
point of view.
In conducting its analyses and arriving at its opinion as expressed herein,
Trident considered such financial and other factors as it deemed appropriate
under the circumstances including, among others, the following: (i) the
historical and current financial condition and results of operations of RSFC and
FUNC, including interest income, interest expense, net interest income, net
interest margin, interest sensitivity, non-interest expense, earnings,
dividends, book value, return on assets, return on equity, capitalization, the
amount and type of non-performing assets and the reserve for loan losses; (ii)
the business prospects of RSFC and FUNC; (iii) the economies in RSFC's and
FUNC's market areas; (iv) the historical and current market for RSFC Common
Stock and FUNC Common Stock and for the equity securities of certain other
companies that
26
<PAGE>
Trident believed to be comparable to RSFC and FUNC; and (v) the nature and terms
of certain other acquisition transactions that Trident believed to be relevant.
Trident also took into account its assessment of general economic, market,
financial and regulatory conditions and trends, as well as its knowledge of the
financial institutions industry, its experience in connection with similar
transactions, and its knowledge of securities valuation generally. Trident's
opinion necessarily was based upon conditions in existence and subject to
evaluation on the respective dates of its opinion. Trident's opinion is, in any
event, limited to the fairness, from a financial point of view, of the
consideration to be received by the holders of RSFC Common Stock in the Mergers
and does not address RSFC's underlying business decision to effect the Mergers.
Trident met with the RSFC Board at various times between March 15, 1995 and
May 30, 1995 to present analysis contained in a series of reports which serve as
the basis for Trident's opinion. Two key reports presented by Trident were the
Valuation Report, dated March 23, 1995, and the Due Diligence Report, dated May
30, 1995. The following is a brief summary of the Valuation Report presented by
Trident to the RSFC Board on March 23, 1995:
FINANCIAL PROJECTIONS. With input from RSFC's management, Trident prepared
six-year financial projections for RSFC beginning at December 31, 1994 and
assuming three different growth scenarios: (i) an aggressive growth scenario in
which RSFC's assets grow 11 percent in 1995 and six percent annually thereafter;
(ii) a moderate growth scenario in which RSFC's assets grow at a four percent
annual rate; and (iii) a scenario in which RSFC's assets do not grow. These
financial projections were used to estimate RSFC's valuation in an acquisition
context at various future dates. Trident expressed its concern that the
aggressive growth scenario might not be achievable.
VALUATION OF RSFC. Trident estimated the fair market value of RSFC in an
acquisition context. In valuing RSFC, Trident considered three different
approaches to value: the asset approach, the income approach and the market
approach.
The asset approach considers the market value of a company's assets and
liabilities, as well as any intangible value the company may have. Trident
estimated RSFC's net asset value by adjusting the carrying value of its assets
and liabilities to reflect current market values (rather than liquidation
values). In addition, the net asset value of RSFC was adjusted downward based on
an estimate of the impact of recapturing RSFC's bad debt reserve for tax
purposes and estimated transaction and other costs. Finally, Trident increased
RSFC's net asset value for the assumed exercise of outstanding options to
purchase RSFC Common Stock. Based on the adjustments discussed above, Trident
estimated RSFC's fully-diluted net asset value to be approximately $60 million
or $19.98 per share. After determining RSFC's net asset value, Trident added an
intangible premium to reflect the estimated value of its customer relationships.
According to the asset approach, the total value of RSFC is the sum of its net
asset value and its intangible value. Based on intangible ("core deposit")
premiums observed in the market for thrift acquisitions, as well as Trident's
knowledge of RSFC, Trident applied premiums equal to seven percent and ten
percent of core deposits to RSFC's estimated fully-diluted net asset value.
Using the asset approach, Trident established a reference range of $34.25 to
$39.75 per share of RSFC Common Stock.
Trident also used an income approach in its valuation of RSFC by
discounting RSFC's projected future earnings. Trident projected RSFC's earnings
for the six-year period beginning March 31, 1995, based on certain assumptions,
including annual asset growth of four percent, gradually increasing interest
rates, merger cost-savings of 25 percent, 35 percent and 50 percent as a result
of an assumed acquisition of RSFC, and a 36 percent tax rate. The projected
earnings were discounted to the present at rates of 14 percent, 15 percent and
16 percent. The discount rates chosen were estimates of the required rates of
return for holders or prospective holders of shares of financial institutions
similar to RSFC, based on a number of factors including prevailing interest
rates, the pricing ratios of publicly traded financial institutions, the
financial condition and operating results of RSFC, as well as Trident's general
knowledge of valuation, the securities markets, and acquisition values in other
mergers of financial institutions. Using the income approach, Trident
established a reference range of $32.50 to $40.00 per share of RSFC Common
Stock.
In the market approach, Trident analyzed certain median pricing ratios
(E.G., price to book value, price to tangible book value, price to reported
earnings, price to market price, and the premium paid over tangible book value
as a percentage of core deposits) resulting from selected completed thrift
merger transactions, as well as recently announced pending transactions. In
applying the market approach, Trident considered the pricing ratios for the
following groups of thrift merger transactions: (i) all pending thrift merger
transactions (53 transactions); (ii) all pending thrift mergers announced during
the 90 days prior to March 17, 1995 (the date of the market data) (17
transactions); (iii) all pending thrift mergers involving thrifts located in the
Southeast (eight transactions); (iv) all pending thrift mergers involving
thrifts located in the State of North Carolina (two transactions); (v) all
pending thrift mergers in which the aggregate consideration was between $80
million and $120 million (five transactions); (vi) all pending thrift mergers in
which the target thrift had assets between $500 million and $1 billion (eight
transactions); (vii) all pending thrift mergers in which the target thrift had a
return on assets of between .75 percent and 1.00 percent (11 transactions);
(viii) all pending thrift mergers in which the target thrift had a return on
equity of
27
<PAGE>
between eight percent and ten percent (ten transactions); (ix) all pending
thrift mergers in which the target thrift had a tangible equity ratio of between
seven percent and ten percent of assets (21 transactions); and (x) all pending
thrift mergers in which the target thrift had a nonperforming assets to assets
ratio of between 1.00 percent and 1.50 percent (eight transactions). Trident
also considered the pricing ratios for nine thrift merger transactions announced
since January 1993 in which the target thrift was of similar size and capital
structure as RSFC, and in which the target thrift had similar profitability and
asset quality. Trident then performed a comparison of a number of financial
ratios for RSFC to those of the target thrift institutions. Based on RSFC's
financial condition and results of operations, as well as other factors,
relative to the groups of thrift mergers noted above, Trident chose ranges of
pricing ratios to apply to shares of RSFC Common Stock. Trident chose price to
book value ratios of 150 percent to 170 percent, resulting in per share values
of $35.00 to $39.50; price to tangible book value ratios of 155 percent to 175
percent, resulting in per share values of $34.50 to $39.00; price to earnings
ratios of 16.5 to 19.0 times earnings, resulting in per share values of $33.00
to $38.00; price to assets ratios of 12 percent to 13 percent, resulting in per
share values of $33.50 to $37.00; and premiums over tangible book value as a
percentage of core deposits of six percent to nine percent, resulting in per
share values of $34.00 to $40.00. Based on these derived ranges of value,
Trident established a reference range of $33.00 to $39.00 per share of RSFC
Common Stock using the market approach.
Trident then reviewed the results from the three approaches, and after
consideration of all relevant facts, reconciled the acquisition values generated
by each approach and determined a final range of $33.00 to $39.00 per share of
RSFC Common Stock for the acquisition value of RSFC. Trident did not apply
specific weights to the three individual approaches, but rather applied its
judgment and experience in determining the final range of value for RSFC.
POTENTIALLY INTERESTED PARTIES. Trident presented the RSFC Board with
information on 13 financial institutions that might be interested in an
affiliation with RSFC ("Potentially Interested Parties"). The Potentially
Interested Parties were categorized into three tiers based on Trident's
perceived level of interest from each party and the party's ability to
consummate a transaction. For each of the Potentially Interested Parties,
Trident presented summary historical financial information, stock pricing
information and ratios, merger and acquisition histories, and a map showing the
markets in North Carolina served by each party and its overlap with RSFC's
markets.
The following is a brief summary of the Due Diligence Report on FUNC
presented to the RSFC Board on May 30, 1995:
SUMMARY OF PROPOSED TRANSACTION. Trident presented a summary of the
financial terms of the Mergers. Trident also compared the pricing ratios for the
Mergers with the median pricing ratios for selected groups of pending thrift
mergers and acquisitions. Trident discussed the advantages and disadvantages of
the Mergers from a financial point of view.
REVIEW OF DUE DILIGENCE EXAMINATION OF FUNC. Trident presented a summary of
its on-site due diligence examination of FUNC. FUNC's historical balance sheets
and income statements were presented, along with a variety of financial ratios
that analyzed FUNC's financial condition and operating results through March 31,
1995. Trident discussed FUNC's strengths and weaknesses, peer group comparisons,
profitability, dividends, financial condition, loan portfolio composition, asset
quality, loan loss reserve coverage, asset classifications, its use of
derivatives, foreign lending and investments, its subsidiary activities, FUNC's
business strategy, growth and the impact of its pending acquisitions, FUNC's
previous mergers and acquisitions and its subsidiary banks, as well as recent
bank analysts' reports on FUNC, and other issues. Trident reported that during
its investigation, Trident did not discover any conditions that would prevent it
from rendering its fairness opinion to the RSFC Board. As discussed above,
Trident relied, without independent verification, upon the accuracy and
completeness of all of the financial and other information provided by FUNC.
FUNC'S STOCK PRICING. Trident examined the pricing of FUNC Common Stock as
of May 26, 1995 in relation to other regional commercial banks, commercial banks
of a similar size and all actively-traded commercial banks.
The summaries of Trident's Valuation Report, Due Diligence Report and
opinion set forth above reflects all the material analysis, factors and
assumptions considered by Trident and the material valuation methodologies used
by Trident in arriving at its opinion as to fairness described above. The
preparation of a fairness opinion is a complex process and is not necessarily
susceptible to partial or summary description. Trident believes that its
analyses and the summary set forth above must be considered as a whole and that
selecting portions of its analyses, without considering all of the analyses, or
all of the above summary, without considering all factors and analyses, would
create an incomplete view of the processes underlying the analyses set forth in
Trident's reports and its opinion. Therefore, the ranges of valuations resulting
from any single analysis described above should not be taken to be Trident's
view of the actual value of RSFC or the combined company. In performing its
analyses, Trident made numerous assumptions with respect to industry
performance, general business and economic
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<PAGE>
conditions and other matters, many of which are beyond the control of RSFC or
FUNC. The results of the specific analyses performed by Trident may differ from
RSFC's actual values or actual future results as a result of changing economic
conditions, changes in company strategy and policies, as well as a number of
other factors. Such individual analyses were prepared to provide valuation
guidance solely as part of Trident's overall valuation analysis and the
determination of the fairness of the consideration to be received by RSFC's
stockholders, and were provided to the RSFC Board in connection with the
delivery of Trident's opinion. The analyses do not purport to be appraisals or
to reflect the prices at which a company might actually be sold or the prices at
which any securities may trade at the present time or at any time in the future.
In addition, as described above, Trident's opinion and presentations to the RSFC
Board were among the many factors taken into consideration by the RSFC Board in
making its determination to approve the Merger Agreement.
Trident, as part of its investment banking business, is continually engaged
in the valuation of businesses and their securities in connection with mergers
and acquisitions, negotiated underwriting, and valuations for corporate and
other purposes. Trident has extensive experience with the valuation of financial
institutions. The RSFC Board selected Trident as its financial advisor because
of its previous experience with Trident, because Trident is a nationally
recognized investment banking firm specializing in financial institutions and
because of its substantial experience in transactions similar to the Mergers.
Trident is not affiliated with either RSFC or FUNC.
For its services as financial advisor, RSFC paid Trident a retainer of
$5,000, a fee of $10,000 upon the delivery of the Valuation Report, and a fee of
$50,000 upon execution of the Merger Agreement. An additional fee equal to .65
percent of the aggregate value of the Mergers (and therefore contingent upon
such value), less the $65,000 already paid, will be payable to Trident upon
consummation of the Mergers (a balance due of approximately $720,000). RSFC has
also agreed to reimburse Trident for its reasonable out-of-pocket expenses and
to indemnify Trident against certain liabilities, including certain liabilities
under federal securities laws.
INTERESTS OF CERTAIN PERSONS
GENERAL.
Certain members of RSFC's management and the RSFC Board have interests in
the Mergers that are in addition to any interests they have as stockholders of
RSFC generally. These interests include, among others, provisions in the Merger
Agreement relating the indemnification of RSFC's directors and officers,
directors' and officers' liability insurance, the election of one member of the
RSFC Board to the FUNB-NC Board of Directors, and certain severance and other
employee benefits, as described below.
EMPLOYMENT AGREEMENTS AND SPECIAL TERMINATION AGREEMENTS.
RSFC and Raleigh Federal each have employment agreements with Stanley E.
Wright, the President, Treasurer and Chief Executive Officer of RSFC and Raleigh
Federal. In addition, RSFC and Raleigh Federal have special termination
agreements with each of the following executive officers: Bobby T. Parker,
George A. Snead and Rex D. Williams. FUNC has agreed to honor such employment
agreements and special termination agreements.
Both of Mr. Wright's employment agreements provide that if his employment
is terminated or if he elects to terminate his employment at any time during the
term of the agreements following a "Change in Control" (as defined in such
employment agreements), Mr. Wright would receive (i) a sum equal to 36 times the
highest monthly salary paid under the employment agreements, and (ii) continued
coverage substantially identical to RSFC's and Raleigh Federal's life, health
and disability coverage from the date of termination until the earlier of Mr.
Wright's employment with another employer or upon the expiration of the greater
of 36 months or the term of the employment agreements. The special termination
agreements for Messrs. Parker, Snead and Williams provide that upon the
occurrence of a "Change in Control" (as defined in the special
termination agreements), if at any time during the term of such
officer's special termination agreement, the officer's employment is
terminated either voluntarily or involuntarily, such officer shall be
entitled to receive (i) a sum equal to three times an amount equal to
his then-current annual salary plus bonuses and any other cash
compensation paid to or accrued on his behalf (including the amount of
any benefits received pursuant to any RSFC or Raleigh Federal benefit
plans) during the prior 12-month period; (ii) an Accelerated Retirement
Benefit (as defined in the special termination agreements) which is the
greater of (a) 50 percent of a benefit calculated pursuant to Raleigh
Federal's qualified pension plan assuming the officer had attained age
65 and worked from his date of hire to age 65, or (b) the officer's
retirement benefit payable under Raleigh Federal's qualified pension
plan, plus any benefit payable from any qualified or non-qualified
retirement programs maintained by Raleigh Federal at the officer's
actual age upon severance of employment; and (iii) continued coverage
substantially identical to Raleigh Federal's life, health, and
disability coverage from the date of
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<PAGE>
termination until the earlier of such officer's employment by another
employer or the expiration of 36 months from the date of the officer's
termination. The Mergers will constitute a "Change in Control" for
purposes of the employment and special termination agreements. FUNC has
agreed to make additional cash payments to Messrs. Wright, Parker, Snead
and Williams to compensate for certain taxes that may become due as a
result of payments received under the employment and special termination
agreements, specifically to compensate for (1) the imposition of excise
taxes, if any, under Section 4999 of the Code on "golden parachute
payments", and (2) the imposition of tax on certain options not
qualifying as incentive stock options at ordinary income tax rates to
the extent such tax exceeds the tax which would be imposed at long-term
capital gain income tax rates under the Code. If Messrs. Wright, Parker,
Snead and Williams are employed by RSFC at the Effective Date, FUNC has
agreed to continue each such officer's employment until March 31, 1996.
FUNC also has agreed that upon consummation of the Mergers, Mr. Wright
will be eligible to retire as an FUNC employee, with such benefits as
are generally provided to FUNC retirees at such time. As of the record date,
the estimated payments required to be made to Messrs. Wright, Parker, Snead
and Williams pursuant to their respective employment and special
termination agreements would be $1,165,000, $317,000, $333,000, and
$334,000, respectively, and $2,149,000 as a group. RSFC and Raleigh Federal
have a one-year special termination agreement with another officer that FUNC
has agreed to honor according to its terms.
In order to assure continuity following consummation of
the Mergers, FUNB-NC may offer employment opportunities to several executive
officers of RSFC and Raleigh Federal. FUNB-NC and certain of such executive
officers are currently discussing the potential for their continued employment
with FUNB-NC following consummation of the Mergers.
EMPLOYEE STOCK OPTIONS
Pursuant to the Merger Agreement, upon consummation of the Corporate
Merger, FUNC has agreed to assume all outstanding options to purchase shares of
RSFC Common Stock granted pursuant to option plans maintained by RSFC ("RSFC
Option Plans") in accordance with the terms of the RSFC Option Plans, except
that the shares acquired upon exercise shall be shares of FUNC Common Stock. The
number of shares covered by each option outstanding under the RSFC Option Plans
would be equal to the number of shares of RSFC Common Stock covered thereby
multiplied by the Exchange Ratio and rounded to the nearest whole share, and the
option exercise price would be appropriately adjusted. Pursuant to the RSFC
Option Plans, all options outstanding become immediately exercisable in full in
the event of a "Change in Control" (as defined in the RSFC Option Plans).
Consummation of the Corporate Merger will constitute a "Change in Control" for
purposes of the RSFC Option Plans.
The following table sets forth with respect to Messrs. Wright, Parker,
Snead and Williams (i) the number of shares of RSFC Common Stock covered by
options held by such persons, (ii) the number of shares of RSFC Common Stock
covered by options held by such persons that are currently exercisable, (iii)
the number of shares of RSFC Common Stock covered by options held by such
persons that will become exercisable upon consummation of the Corporate Merger,
(iv) the weighted average exercise price for such exercisable options held by
such persons, and (v) the aggregate value of such exercisable options based upon
the per option share value of $40.25 (the value of FUNC Common Stock to be
received pursuant to the Exchange Ratio) less the applicable option exercise
price.
<TABLE>
<CAPTION>
OPTIONS WEIGHTED
EXERCISABLE UPON AVERAGE
OPTIONS CONSUMMATION OF EXERCISE PRICE
CURRENTLY THE CORPORATE PER EXERCISABLE
OPTIONS HELD EXERCISABLE MERGER OPTION
<S> <C> <C> <C> <C>
Stanley E. Wright............................. 75,081 41,143 33,938 $ 10.27
Bobby T. Parker............................... 20,250 15,947 4,303 13.26
George A. Snead............................... 10,700 4,144 6,556 19.74
Rex D. Williams............................... 7,500 4,429 3,071 20.08
Executive Officers as a group (four
persons).................................... 113,531 65,663 47,868 $ 13.41
<CAPTION>
AGGREGATE VALUE
OF EXERCISABLE
OPTIONS
<S> <C>
Stanley E. Wright............................. $ 2,250,928
Bobby T. Parker............................... 546,548
George A. Snead............................... 219,457
Rex D. Williams............................... 151,275
Executive Officers as a group (four
persons).................................... $ 3,168,208
</TABLE>
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE
The Merger Agreement provides that for the six-year period following the
Effective Date, FUNC will indemnify the directors, officers and employees of
RSFC holding such positions on or prior to the date of the Merger Agreement,
against certain liabilities to the extent such persons were indemnified under
the NCBCA and the RSFC Articles and Bylaws as in effect on the date of the
Merger Agreement.
In addition, FUNC agreed in the Merger Agreement to use its reasonable best
efforts to maintain RSFC's existing directors' and officers' liability insurance
policy for persons who were covered by such insurance maintained by RSFC on
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the date of the Merger Agreement for a period of three years after the Effective
Date at an annual cost not to exceed 150 percent of RSFC's annual premium
payment on RSFC's current policy.
OTHER BENEFITS RESULTING FROM THE MERGERS.
In connection with the Mergers, FUNC has agreed to cause FUNB-NC to place
current members of the RSFC Board interested in serving on local FUNB-NC
advisory boards on a local FUNB-NC advisory board appropriate to each such
director's place of residence, provided such directors otherwise satisfy the
criteria for advisory board membership. In addition, FUNC has agreed to cause
one member of the RSFC Board to be elected to the FUNB-NC Board of Directors.
At the time the RSFC Board was involved in the process of exploring RSFC's
strategic options, it instituted a bonus payment plan for all persons who were
employees of Raleigh Federal (except for senior management) on April 1, 1995,
who elected to remain employed by Raleigh Federal should it be acquired by
another company (the "Bonus Retention Plan"). The Bonus Retention Plan provides
that employees who are still employed at the time that any merger is consummated
are eligible to receive a bonus payment equal to two months' salary. RSFC
estimates the maximum cost of the Bonus Retention Plan will be approximately
$1,000,000. FUNC has agreed to honor the Bonus Retention Plan and has agreed
that the bonus payments received pursuant to the Bonus Retention Plan are in
addition to any other severance benefits provided to employees of Raleigh
Federal and RSFC. FUNC has agreed to pay severance benefits to displaced RSFC
and Raleigh Federal employees in accordance with its severance policies for FUNC
employees. In addition, displaced RSFC and Raleigh Federal employees will be
given consideration for vacant positions within FUNC, and FUNC has agreed to
retain an independent outplacement consulting firm to assist with internal and
external placements consistent with displacement assistance provided to all FUNC
employees. Any employee of RSFC or Raleigh Federal who becomes employed by FUNC
following the Mergers will generally be entitled to participate in FUNC's
pension, benefit and similar plans on substantially the same terms and
conditions as employees of FUNC, giving effect for eligibility and vesting of
benefits (but not for accrual of benefits), to years of service with RSFC or
Raleigh Federal as if such service were with FUNC.
RSFC has continued to provide certain retirement benefits to approximately
12 retirees pursuant to retirement agreements between Raleigh Federal and each
retiree. FUNC has agreed to work with such retirees to continue their agreements
or to provide them with comparable benefits.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS A DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF
THE CORPORATE MERGER. THE DISCUSSION IS INCLUDED FOR GENERAL INFORMATION
PURPOSES ONLY AND MAY NOT APPLY TO SPECIAL SITUATIONS, SUCH AS RSFC
STOCKHOLDERS, IF ANY, WHO RECEIVED THEIR RSFC COMMON STOCK UPON THE EXERCISE OF
EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, THAT HOLD THEIR RSFC COMMON
STOCK AS PART OF A "STRADDLE" OR "CONVERSION TRANSACTION", OR THAT ARE INSURANCE
COMPANIES, SECURITIES DEALERS, FINANCIAL INSTITUTIONS OR FOREIGN PERSONS.
Sullivan & Cromwell, special counsel for FUNC, has advised FUNC and RSFC
that, in its opinion:
(i) No gain or loss will be recognized for federal income tax
purposes by RSFC stockholders upon the exchange in the Corporate Merger of
shares of RSFC Common Stock solely for FUNC Common Shares (except with
respect to cash received in lieu of a fractional share interest in FUNC
Common Stock).
(ii) The basis of FUNC Common Shares received in the Corporate Merger
by RSFC stockholders (including the basis of any fractional share interest
in FUNC Common Stock) will be the same as the basis of the shares of RSFC
Common Stock surrendered in exchange therefor.
(iii) The holding period of the FUNC Common Shares received in the
Corporate Merger by a RSFC stockholder (including the holding period of any
fractional share interest in FUNC Common Stock) will include the holding
period during which the shares of RSFC Common Stock surrendered in exchange
therefor were held by the RSFC stockholder, provided such shares of RSFC
Common Stock were held as capital assets.
(iv) Cash received by a holder of RSFC Common Stock in lieu of a
fractional share interest in FUNC Common Stock will be treated as received
for such fractional share interest and, provided the fractional share would
have constituted a capital asset in the hands of such holder, the holder
should in general recognize capital gain or loss in an amount equal to the
difference between the amount of cash received and the portion of the
adjusted tax basis in the RSFC Common Stock allocable to the fractional
share interest.
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(v) RSFC stockholders that hold their RSFC Common Stock as a capital
asset and that dissent from the Corporate Merger and receive cash in
exchange for their RSFC Common Stock should in general recognize capital
gain or loss in an amount equal to the difference between the amount of
cash received (less any amount constituting interest) and the RSFC
stockholder's basis in the RSFC Common Stock surrendered therefor. Special
rules may apply to dissenting RSFC stockholders that actually or
constructively (pursuant to Section 318 of the Code) own either shares of
RSFC as to which dissenters' rights are not being exercised or shares of
FUNC. Any amount constituting interest would be taxable as ordinary income.
In contrast to the treatment described above in (i), (ii) and (iii), RSFC
stockholders that hold their shares of RSFC Common Stock as a capital asset and
that dispose of such shares prior to the Effective Date will generally recognize
capital gain or loss in an amount equal to the difference between the amount
realized upon the disposition and the basis in such shares. Such capital gain or
loss will generally be long-term capital gain or loss if the RSFC stockholder is
deemed to have held such shares for more than one year, and otherwise will be
short-term capital gain or loss.
In addition, consummation of the Mergers is conditioned, among other
things, on receipt by FUNC and RSFC of an opinion of Sullivan & Cromwell, dated
as of the Effective Date, to the effect that (i) the Corporate Merger
constitutes a reorganization under Section 368 of the Code, and (ii) no gain or
loss will be recognized by RSFC stockholders who receive FUNC Common Shares in
exchange for their shares of RSFC Common Stock, except that gain or loss may be
recognized as to cash received in lieu of fractional share interests. The tax
opinions of Sullivan & Cromwell summarized above are or will be based, among
other things, on representations relating to certain facts and circumstances of,
and the intentions of the parties to, the Corporate Merger.
BECAUSE CERTAIN TAX CONSEQUENCES OF THE CORPORATE MERGER MAY VARY DEPENDING
UPON THE PARTICULAR CIRCUMSTANCES OF EACH STOCKHOLDER AND OTHER FACTORS, EACH
STOCKHOLDER OF RSFC IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISER TO
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF THE CORPORATE MERGER
(INCLUDING THE APPLICATION AND EFFECT OF STATE AND LOCAL INCOME AND OTHER TAX
LAWS).
BUSINESS PENDING CONSUMMATION
Each of RSFC and Raleigh Federal has agreed in the Merger Agreement not to
take certain actions relating to the operation of each of them pending
consummation of the Mergers, without the prior approval of FUNC, except as
otherwise permitted in the Merger Agreement. These actions include, without
limitation: (i) paying any dividends, other than dividends on RSFC Common Stock
at a quarterly rate not to exceed $.15 per share, or redeeming or otherwise
acquiring any shares of its capital stock, or issuing any additional shares of
its capital stock or giving any person the right to acquire any such shares
(other than upon the exercise of outstanding options); (ii) incurring any
indebtedness for borrowed money or becoming liable for the obligations of any
other entity other than in the ordinary course of business; (iii) increasing the
rate of compensation (other than in the ordinary course of business) or paying
any bonus to any of its directors, officers or employees (excluding the Bonus
Retention Plan); (iv) entering into or modifying any employment agreements or
employee benefit plans; (v) disposing of any material portion of its assets or
acquiring any portion of the business or property of any other entity which is
material to RSFC; (vi) changing its lending, investment, liability management or
other material banking policies; (vii) settling any claims involving any
liability for material money damages or restrictions on the operations of RSFC;
(viii) entering into, terminating or changing any material agreements, except
for those agreements that are terminated by RSFC without penalty upon not more
than 30 days' prior written notice; or (ix) taking any other action not in the
ordinary course of business.
The Merger Agreement also provides that, consistent with generally accepted
accounting principles, each of RSFC and Raleigh Federal will use its best
efforts to modify its loan, litigation, and other reserve and real estate
valuation policies and practices (including loan classifications and levels of
reserves) so as to be consistent on a mutually satisfactory basis with those of
FUNC, provided that RSFC and Raleigh Federal shall not be obligated to take any
such action until all regulatory approvals described below under " -- Regulatory
Approvals" have been obtained and RSFC and Raleigh Federal are reasonably
satisfied that the Mergers will be promptly consummated in accordance with the
Merger Agreement.
REGULATORY APPROVALS
Consummation of the Corporate Merger is subject to receipt of the prior
approval by the Federal Reserve Board under the BHCA. Consummation of the Bank
Merger is subject to receipt of the prior approval by the OCC under both the
Bank Merger Act ("BMA") and Section 5(d)(3) of the Federal Deposit Insurance Act
("FDI Act") and is subject to prior notice to
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the OTS under various OTS regulations. The BMA requires that the relevant
regulatory agency take into consideration, among other factors, the financial
and managerial resources and future prospects of the institutions and the
convenience and needs of the communities to be served. The BMA prohibits the OCC
from approving the Bank Merger (i) if such transaction would result in a
monopoly or be in furtherance of any combination or conspiracy to monopolize or
to attempt to monopolize the business of banking in any part of the United
States, or (ii) if the effect of such transaction in any section of the country
may be substantially to lessen competition or to tend to create a monopoly, or
if it would in any other manner be a restraint of trade, unless the relevant
regulatory agency finds that the anti-competitive effects of such merger are
clearly outweighed by the public interest and by the probable effect of the
transaction in meeting the convenience and needs of the communities to be
served. Under the BHCA, the Federal Reserve Board considers whether the proposed
transaction can reasonably be expected to produce benefits to the public, such
as greater convenience, increased competition, or gains in efficiency, that
outweigh possible adverse effects, such as undue concentration of resources,
decreased or unfair competition, conflicts of interests, or unsound banking
practices. The relevant regulatory agency has the authority to deny an
application if it concludes that the combined organization would have an
inadequate capital position or if the acquiring organization does not meet the
requirements of the Community Reinvestment Act of 1977. Under the BMA and the
FDI Act, the Bank Merger may not be consummated until the 15th day following the
dates of each of the requisite approvals, during which periods the U.S.
Department of Justice may comment adversely on the transaction (which has the
effect of extending the waiting period to the 30th day following approval) or
challenge such merger on antitrust grounds. The commencement of an antitrust
action would stay the effectiveness of such an approval unless a court
specifically orders otherwise.
An application pursuant to the BMA and the FDI Act has been filed with the
OCC; and an application pursuant to the BHCA has been filed with the Federal
Reserve Board. The required notice was filed with the OTS and the OTS has
notified the OCC that the OTS has no supervisory objection to the Bank Merger.
THE CORPORATE MERGER AND THE BANK MERGER CANNOT PROCEED IN THE ABSENCE OF
THE REQUISITE REGULATORY APPROVALS. THERE CAN BE NO ASSURANCE THAT SUCH
REGULATORY APPROVALS WILL BE OBTAINED, AND, IF THE CORPORATE MERGER AND THE BANK
MERGER ARE APPROVED, THERE CAN BE NO ASSURANCE AS TO THE DATE OF ANY SUCH
APPROVAL. THERE CAN ALSO BE NO ASSURANCE THAT ANY SUCH APPROVALS WILL NOT
CONTAIN A CONDITION OR REQUIREMENT WHICH CAUSES SUCH APPROVALS TO FAIL TO
SATISFY THE CONDITIONS SET FORTH IN THE MERGER AGREEMENT AND DESCRIBED BELOW
UNDER " -- CONDITIONS TO CONSUMMATION; TERMINATION". THERE CAN LIKEWISE BE NO
ASSURANCE THAT THE U.S. DEPARTMENT OF JUSTICE OR A STATE ATTORNEY GENERAL WILL
NOT CHALLENGE THE CORPORATE MERGER OR THE BANK MERGER OR, IF SUCH A CHALLENGE IS
MADE, AS TO THE RESULT THEREOF.
CONDITIONS TO CONSUMMATION; TERMINATION
Consummation of the Mergers is subject, among other things, to: (i)
approval of the Merger Agreement by the requisite vote of the stockholders of
RSFC; (ii) receipt of the regulatory approvals referred to above without any
restrictions or conditions which, in the opinion of FUNC, would so materially
adversely impact the economic or business benefits to FUNC of the transactions
contemplated by the Merger Agreement so as to render inadvisable the
consummation of the Mergers; (iii) no court or governmental or regulatory
authority having taken any action which enjoins or prohibits the Mergers; (iv)
receipt by FUNC and RSFC of the opinion of Sullivan & Cromwell, dated as of the
Effective Date, as to certain federal income tax consequences of the Corporate
Merger; and (v) the FUNC Common Shares having been approved for listing on the
NYSE, subject to official notice of issuance.
Consummation of the Mergers is also subject to the satisfaction or waiver
of various other conditions specified in the Merger Agreement, including, among
others: (i) the delivery by RSFC and FUNC, each to the other, of (a) opinions of
their respective counsel, and (b) certificates executed by certain of their
respective executive officers as to compliance with the Merger Agreement; (ii)
the accuracy of the representations and warranties, and compliance in all
material respects with the agreements and covenants, of the parties to the
Merger Agreement; (iii) the receipt by FUNC of a letter from RSFC's independent
certified public accountants, dated as of or shortly prior to the Effective
Date, with respect to RSFC's financial position and results of operations; and
(iv) the receipt by FUNC of an agreement from each "affiliate" of RSFC
restricting the sale of FUNC Common Shares received by such affiliate in the
Corporate Merger. See "RESALE OF FUNC COMMON SHARES".
The Merger Agreement provides that, whether before or after the Special
Meeting and notwithstanding the approval of the Merger Agreement by the
stockholders of RSFC, the Merger Agreement may be terminated and the Mergers
abandoned at any time prior to the Effective Date: (i) by mutual consent of FUNC
and RSFC; or (ii) by either the Board of Directors of FUNC or the RSFC Board (a)
if the stockholders of RSFC fail to approve the Merger Agreement, (b) in the
event of a
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material breach by the other party of any representation, warranty, or covenant
contained in the Merger Agreement, which breach is not cured after 30 days'
written notice thereof is given to the party committing such breach, or (c) if
the Corporate Merger is not consummated on or before April 1, 1996. See
" -- Expenses; Termination Fee".
WAIVER; AMENDMENT
Prior to the Effective Date, any provision of the Merger Agreement may be:
(i) waived by the party benefitted by the provision; or (ii) amended or modified
at any time (including the structure of the transaction) by an agreement in
writing among the parties thereto approved by their respective Boards of
Directors and executed in the same manner as the Merger Agreement, provided that
after approval by the stockholders of RSFC, the consideration to be received by
the stockholders of RSFC may not thereby be decreased.
ACCOUNTING TREATMENT
It is expected that the purchase method of accounting will be used to
reflect the Corporate Merger upon consummation. As required by generally
accepted accounting principles, under purchase accounting, the assets and
liabilities of RSFC as of the Effective Date will be recorded at their
respective fair market values and added to those of FUNC. Financial statements
of FUNC issued after consummation of the Corporate Merger would reflect such
values. Financial statements of FUNC issued before consummation of the Corporate
Merger would not be restated retroactively to reflect the acquired company's
historical financial position or results of operations. The unaudited pro forma
financial information contained in this Prospectus/Proxy Statement has been
prepared using the purchase accounting basis to account for the Corporate
Merger.
It is expected that the pooling of interests method of accounting will be
used to reflect the FFB Merger. As required by generally accepted accounting
principles, under pooling of interests accounting, as of the effective date of
the FFB Merger, the assets and liabilities of FFB would be added to those of
FUNC at their recorded book values and the stockholders' equity accounts of FUNC
and FFB would be combined on FUNC's consolidated balance sheet. On a pooling of
interests accounting basis, income and other financial statements of FUNC issued
after consummation of the FFB Merger would be restated retroactively to reflect
the consolidated combined financial position and results of operations of FUNC
and FFB as if the FFB Merger had taken place prior to the periods covered by
such financial statements. The unaudited pro forma financial information
contained in this Prospectus/Proxy Statement has been prepared using the pooling
of interests accounting basis to account for the FFB Merger.
See "PRO FORMA FINANCIAL INFORMATION".
EXPENSES; TERMINATION FEE
All expenses incurred by or on behalf of the parties in connection with the
Merger Agreement and the transactions contemplated thereby shall be borne by the
party incurring the same, except that printing expenses will be shared equally
by FUNC and RSFC.
FUNC shall be entitled to the Termination Fee of $5.9 million from RSFC
following the occurrence of a Purchase Event (as hereinafter defined) provided
FUNC shall have sent written notice of such entitlement within 90 days after its
awareness of such occurrence. FUNC's right to receive the Termination Fee shall
terminate if any of the following occurs prior to a Purchase Event: (i) the
Effective Date; (ii) termination of the Merger Agreement in accordance with its
terms if such termination occurs prior to the occurrence of a Preliminary
Purchase Event (as hereinafter defined), except termination by FUNC due to a
knowing breach by RSFC; (iii) termination of the Merger Agreement following the
occurrence of a Preliminary Purchase Event and the passage of 18 months after
such termination; or (iv) termination of the Merger Agreement by FUNC due to a
knowing breach by RSFC and the passage of 18 months after such termination.
A Preliminary Purchase Event refers to any of the following events or
transactions occurring after the date of the Merger Agreement:
(i) RSFC, without having received FUNC's prior written consent, shall
have entered into an agreement to engage in any Acquisition Transaction (as
hereinafter defined) with any person other than FUNC, or the RSFC Board
shall have recommended that the stockholders of RSFC approve or accept any
Acquisition Transaction with any person other than FUNC. For purposes of
the Merger Agreement, "Acquisition Transaction" means (a) a merger or
consolidation, or any similar transaction, involving RSFC, (b) a purchase,
lease or other acquisition of all or substantially all of the assets or
deposits of RSFC, (c) a purchase or other acquisition (including by way of
merger, consolidation, share exchange or
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otherwise) of securities representing 20 percent or more of the voting
power of RSFC; provided that the term "Acquisition Transaction" does not
include any internal merger or consolidation involving only RSFC;
(ii)(a) any person (other than FUNC) shall have acquired beneficial
ownership or the right to acquire beneficial ownership of 20 percent or
more of the outstanding shares of RSFC Common Stock, or (b) any group,
other than a group of which FUNC is a member, shall have been formed that
beneficially owns 20 percent or more of the shares of RSFC Common Stock
then outstanding;
(iii) any person other than FUNC shall have made a bona fide proposal
to RSFC or its stockholders, by public announcement or written
communication that is or becomes the subject of public disclosure, to
engage in an Acquisition Transaction (including, without limitation, any
situation in which any person other than FUNC shall have commenced (as such
term is defined in Rule 14d-2 under the Exchange Act) or shall have filed a
registration statement under the Securities Act, with respect to a tender
offer or exchange offer to purchase any shares of RSFC Common Stock such
that, upon consummation of such offer, such person would own or control 20
percent or more of the then outstanding shares of RSFC Common Stock (such
an offering referred to herein as a "Tender Offer" or an "Exchange Offer",
respectively));
(iv) after a proposal is made by a third party to RSFC or its
stockholders to engage in an Acquisition Transaction, or such third party
states its intention to RSFC to make such a proposal if the Merger
Agreement terminates, RSFC shall have knowingly breached any
representation, covenant or obligation contained in the Merger Agreement
and such breach would entitle FUNC to terminate the Merger Agreement
(without regard to the cure period provided for in the Merger Agreement
unless such cure is promptly effected without jeopardizing consummation of
the Corporate Merger); or
(v) the holders of shares of RSFC Common Stock shall not have approved
the Merger Agreement at the Special Meeting or the Special Meeting shall
not have been held or shall have been canceled prior to termination of the
Merger Agreement, in each case after any person (other than FUNC) shall
have (a) made, or disclosed an intention to make, a bona fide proposal to
engage in an Acquisition Transaction, or (b) commenced a Tender Offer or
filed a registration statement under the Securities Act, with respect to an
Exchange Offer.
The term "Purchase Event" shall mean either of the following events or
transactions occurring after the date of the Merger Agreement:
(i) the acquisition by any person, other than FUNC, alone or together
with such person's affiliates and associates, or any group, of beneficial
ownership of 25 percent or more of the outstanding shares of RSFC Common
Stock; or
(ii) the occurrence of a Preliminary Purchase Event described in (x)
clause (i) above, except that the percentage referred thereof shall be 25
percent, or (y) clause (v) above.
See ANNEX A.
DISSENTERS' RIGHTS
Holders of RSFC Common Stock entitled to vote on approval of the Merger
Agreement will be entitled to have the fair value of each such holder's shares
of RSFC Common Stock immediately prior to consummation of the Corporate Merger
paid to such holder in cash, together with interest, if any, by complying with
the provisions of Article 13 of the NCBCA ("Article 13"). Under Article 13, the
determination of the fair value of a dissenter's shares would exclude any
appreciation or depreciation in the value of such shares in anticipation of the
Corporate Merger, unless such exclusion would be inequitable.
A holder of RSFC Common Stock who desires to exercise such holder's
dissenters' rights must satisfy all of the following conditions. A written
notice of such holder's intent to demand payment for such holder's RSFC Common
Stock must be received by RSFC before the taking of the vote on approval of the
Merger Agreement and such holder must not vote in favor of the Merger Agreement
at the Special Meeting. Voting against, abstaining from voting or failing to
vote on approval of the Merger Agreement will not constitute written notice of
an intent to demand payment within the meaning of Article 13. Voting for
approval of the Merger Agreement, or delivering a proxy in connection with the
Special Meeting (unless the proxy specifies a vote against, or abstaining from
voting on, approval of the Merger Agreement), will constitute a waiver of such
holder's dissenters' rights and will nullify any written notice of an intent to
demand payment submitted by such holder.
A holder of record of RSFC Common Stock may assert dissenters' rights as to
less than all of the shares registered in such holder's name only if such holder
dissents with respect to all shares beneficially owned by any one person and
notifies
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RSFC in writing of the name and address of each person on whose behalf such
holder is asserting dissenters' rights. The rights of a partial dissenter under
Article 13 are determined as if the shares as to which the holder dissents and
the holder's other shares were registered in the names of different
stockholders.
A beneficial holder of RSFC Common Stock may assert dissenters' rights as
to shares held on such holder's behalf only if such holder: (i) submits to RSFC
the record holder's written consent to the dissent not later than the time the
beneficial holder asserts dissenters' rights; and (ii) does so with respect to
all shares of which such holder is the beneficial holder.
If the Corporate Merger is consummated, FUNC will, within ten days after
the Effective Date, deliver a dissenters' notice to all holders who satisfied
the foregoing requirements, which will: (i) state where payment demand is to be
sent and where and when certificates for Dissenting Shares are to be deposited;
(ii) supply a form for demanding payment; (iii) set a date by which FUNC must
receive the payment demand, which date may not be less than 30 nor more than 60
days after the date the dissenters' notice is mailed; and (iv) be accompanied by
a copy of Article 13.
A stockholder sent a dissenters' notice must demand payment and deposit the
certificates representing such holder's Dissenting Shares in accordance with the
dissenters' notice. A stockholder who demands payment and deposits such holder's
shares as described in the dissenters' notice retains all other rights as a
holder of RSFC Common Stock, except to the extent such rights are cancelled or
modified by the consummation of the Corporate Merger. A stockholder who does not
demand payment and deposit his share certificates where required, each by the
date set forth in the dissenters' notice, is not entitled to payment for such
holder's shares under Article 13.
As soon as the Corporate Merger is consummated, or upon receipt of a
payment demand, FUNC shall offer to pay each dissenter who complied with Article
13 the amount that FUNC estimates to be the fair value of the dissenter's
shares, plus accrued interest, and shall pay such amount to each dissenter who
agrees in writing to accept it in full satisfaction of such dissenter's demand.
The offer of payment by FUNC must be accompanied by: (i) FUNC's balance sheet as
of the end of a fiscal year ended not more than 16 months before the date of the
offer of payment, an income statement for that year, a statement of cash flows
for that year and the latest available interim financial statements, if any;
(ii) a statement of FUNC's estimate of the fair value of the Dissenting Shares;
(iii) an explanation of how the interest was calculated; (iv) a statement of the
dissenter's right to demand payment as described below; and (v) a copy of
Article 13.
A dissenter may notify FUNC in writing of the dissenter's own estimate of
the fair value of the Dissenting Shares and the amount of interest due and
demand payment of such estimate, or reject FUNC's offer and demand payment of
the fair value of the Dissenting Shares and interest due, if (i) the dissenter
believes the amount offered by FUNC is less than the fair value of the
Dissenting Shares or that the interest due is incorrectly calculated, or (ii)
FUNC fails to make payment to a dissenter who accepts FUNC's offer within 30
days after such acceptance. A dissenter waives such right to demand payment, and
shall be deemed to have withdrawn his dissent and demand for payment, unless the
dissenter notifies FUNC of such demand under (i) above, within 30 days after
FUNC offers payment, or under (ii) above, within 30 days after FUNC fails to
perform timely.
If any such demand for payment remains unsettled, within 60 days after the
date of the payment demand, the dissenter may petition the court to determine
the fair value of the dissenting shares and any accrued interest. Upon service
on it of the petition filed with the court, FUNC shall pay the dissenter the
amount offered by FUNC. If the dissenter does not commence the proceeding within
the 60-day period, the dissenter will have an additional 30 days to either (i)
accept in writing the amount offered by FUNC, at which time FUNC will pay such
amount to the dissenter in full satisfaction of his demand, or (ii) withdraw his
demand for payment and resume the status of a nondissenting stockholder. A
dissenter who takes no action within such 30-day period shall be deemed to have
withdrawn his dissent and demand for payment. Each dissenter made a party to
such proceeding is entitled to a judgment for the amount, if any, by which the
court finds that the fair value of the Dissenting Shares, plus interest, exceeds
the amount paid by FUNC. The court will determine all costs of the proceeding,
including the reasonable compensation and expenses of appraisers appointed by
the court and assess the costs as it finds equitable.
THE FOREGOING IS ONLY A SUMMARY OF THE RIGHTS OF A DISSENTING HOLDER OF
RSFC COMMON STOCK. ANY HOLDER OF RSFC COMMON STOCK WHO INTENDS TO DISSENT SHOULD
CAREFULLY REVIEW THE TEXT OF THE APPLICABLE PROVISIONS OF THE NCBCA SET FORTH IN
ANNEX C TO THIS PROSPECTUS/PROXY STATEMENT AND SHOULD ALSO CONSULT WITH SUCH
HOLDER'S ATTORNEY. THE FAILURE OF A HOLDER OF RSFC COMMON STOCK TO FOLLOW
PRECISELY THE PROCEDURES SUMMARIZED ABOVE AND SET FORTH IN ANNEX C MAY RESULT IN
LOSS OF DISSENTERS' RIGHTS. NO FURTHER NOTICE OF THE EVENTS GIVING RISE TO
DISSENTERS' RIGHTS OR ANY STEPS ASSOCIATED THEREWITH WILL BE FURNISHED TO
HOLDERS OF RSFC COMMON STOCK, EXCEPT AS INDICATED ABOVE OR OTHERWISE REQUIRED BY
LAW.
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In general, any dissenting stockholder who perfects such holder's right to
be paid the fair value of such holder's RSFC Common Stock in cash will recognize
taxable gain or loss for federal income tax purposes upon receipt of such cash.
See " -- Certain Federal Income Tax Consequences".
MARKET PRICES
The following table sets forth (i) the high and low last reported sale
prices per share of FUNC Common Stock on the NYSE Tape (trading symbol, FTU) and
of RSFC Common Stock on the Nasdaq National Market (trading symbol, RFBK), with
respect to each quarterly period since January 1, 1993, and (ii) the equivalent
pro forma market values per share of RSFC Common Stock, based on the .8235
Exchange Ratio. The .8235 Exchange Ratio is based on the closing price per share
of FUNC Common Stock on the NYSE Tape on July 31, 1995 ($48.875), as if such
closing price were the Average Closing Price. The actual Exchange Ratio will
depend on the Average Closing Price and may be greater or less than .8235. The
pro forma information presented would be different if the Average Closing Price
results in an Exchange Ratio different from .8235.
<TABLE>
<CAPTION>
FUNC RSFC
COMMON STOCK COMMON STOCK
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
1993
First quarter........................................ $ 50 7/8 42 1/4 20 1/2 16 1/2
Second quarter....................................... 51 1/2 40 20 3/4 18 1/2
Third quarter........................................ 49 5/8 43 1/2 22 1/4 19 1/4
Fourth quarter....................................... 48 1/8 37 7/8 21 1/2 19 1/2
1994
First quarter........................................ 43 3/4 39 3/4 20 3/4 18 1/2
Second quarter....................................... 47 5/8 41 1/4 24 18 1/4
Third quarter........................................ 47 1/4 43 1/4 24 1/4 21 1/2
Fourth quarter....................................... 45 1/4 39 3/8 23 3/4 21 1/4
1995
First quarter........................................ 45 1/8 41 3/8 32 1/2 22 3/4
Second quarter....................................... 49 3/4 42 7/8 38 1/2 31 1/2
Third quarter........................................ 51 3/8 45 1/4 39 38
Fourth quarter (through October 17, 1995)............ $ 53 7/8 51 39 38 3/4
<CAPTION>
EQUIVALENT PRO FORMA
PER SHARE OF RSFC
COMMON STOCK (1)
HIGH LOW
<S> <C> <C> <C>
1993
First quarter........................................ 41 7/8 34 3/4
Second quarter....................................... 42 3/8 32 7/8
Third quarter........................................ 40 3/4 35 3/4
Fourth quarter....................................... 39 5/8 31 1/8
1994
First quarter........................................ 36 32 5/8
Second quarter....................................... 39 1/8 33 7/8
Third quarter........................................ 38 7/8 35 1/2
Fourth quarter....................................... 37 1/4 32 3/8
1995
First quarter........................................ 37 1/8 34
Second quarter....................................... 40 7/8 35 1/4
Third quarter........................................ 42 1/4 37 1/4
Fourth quarter (through October 17, 1995)............ 44 1/4 41 7/8
</TABLE>
(1) Equivalent pro forma market values per share of RSFC Common Stock amounts
represent the high and low last reported sales prices per share of FUNC
Common Stock multiplied by the .8235 Exchange Ratio, rounded down to the
nearest one-eighth. See Notes (3) and (4) to "PRO FORMA FINANCIAL
INFORMATION".
On May 30, 1995, the last business day prior to public announcement of the
execution of the Merger Agreement, the last reported sale prices per share of
FUNC Common Stock on the NYSE Tape and of RSFC Common Stock on the Nasdaq
National Market were $48.00 and $34.75, respectively. On October 17, 1995, such
prices were $53.375 and $38.875, respectively.
The Merger Agreement provides for the filing of a listing application with
the NYSE covering the FUNC Common Shares. It is a condition to consummation of
the Corporate Merger that the FUNC Common Shares be authorized for listing on
the NYSE effective upon official notice of issuance. See " -- Conditions to
Consummation; Termination".
37
<PAGE>
DIVIDENDS
The following table sets forth the cash dividends paid on FUNC Common Stock
and RSFC Common Stock with respect to each calendar quarter since January 1,
1993, and the equivalent pro forma cash dividends paid per share of RSFC Common
Stock, based on the .8235 Exchange Ratio. The .8235 Exchange Ratio is based on
the closing price per share of FUNC Common Stock on the NYSE Tape on July 31,
1995 ($48.875), as if such closing price were the Average Closing Price. The
actual Exchange Ratio will depend on the Average Closing Price and may be
greater or less than .8235. The pro forma information presented would be
different if the Average Closing Price results in an Exchange Ratio different
from .8235.
<TABLE>
<CAPTION>
EQUIVALENT PRO FORMA
FUNC RSFC PER SHARE OF RSFC
COMMON STOCK COMMON STOCK COMMON STOCK (1)
<S> <C> <C> <C>
1993
First quarter................................................ $.35 .10 .29
Second quarter............................................... .35 .10 .29
Third quarter................................................ .40 .12 .33
Fourth quarter............................................... .40 .12 .33
1994
First quarter................................................ .40 .12 .33
Second quarter............................................... .40 .12 .33
Third quarter................................................ .46 .15 .38
Fourth quarter............................................... .46 .15 .38
1995
First quarter................................................ .46 .15 .38
Second quarter............................................... .46 .15 .38
Third quarter................................................ .52 .15 .43
Fourth quarter............................................... $.52 .15 .43
</TABLE>
(1) Equivalent pro forma cash dividends paid per share of RSFC Common Stock
amounts represent FUNC historical dividend rates per share multiplied by the
.8235 Exchange Ratio, rounded up to the nearest cent. The current annualized
dividend rate per share for FUNC Common Stock, based upon the most recently
declared quarterly dividend of $.52 per share payable on December 15, 1995,
would be $2.08. On an equivalent pro forma basis, such current annualized
FUNC dividend per share of RSFC Common Stock would be $1.72, based on the
.8235 Exchange Ratio, rounded up to the nearest cent. Future FUNC and RSFC
dividends are dependent upon their respective earnings and financial
condition, government regulations and policies and other factors.
See "FUNC -- Certain Regulatory Considerations; PAYMENTS OF DIVIDENDS" and
"DESCRIPTION OF FUNC CAPITAL STOCK".
38
<PAGE>
PRO FORMA FINANCIAL INFORMATION
PRO FORMA COMBINED CONDENSED BALANCE SHEET
(FUNC, THE PURCHASE ACQUISITIONS (INCLUDING THE CORPORATE MERGER) AND FFB)
JUNE 30, 1995
(UNAUDITED)
The following unaudited pro forma combined condensed balance sheet combines
the consolidated historical balance sheets of FUNC, the companies involved in
certain of the Purchase Acquisitions (including RSFC) and FFB, assuming the
companies had been combined as of June 30, 1995, on a purchase accounting basis
with respect to the Purchase Acquisitions (including the Corporate Merger)
pending at June 30, 1995, or announced between July 1, 1995 and the date of this
Prospectus/Proxy Statement, and on a pooling of interests accounting basis with
respect to the FFB Merger.
<TABLE>
<CAPTION>
PURCHASE PRO FORMA PRO FORMA PRO FORMA
(IN THOUSANDS) FUNC ACQUISITIONS ADJUSTMENTS COMBINED FFB ADJUSTMENTS
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks..................... $ 3,191,431 84,413 (595,981) 2,679,863 1,750,833 --
Interest-bearing balances................... 446,712 67,273 -- 513,985 455,033 --
Federal funds sold and securities purchased
under resale agreements................... 2,052,236 8,275 -- 2,060,511 703,375 --
Total cash and cash equivalents........... 5,690,379 159,961 (595,981) 5,254,359 2,909,241 --
Trading account assets...................... 1,559,021 -- -- 1,559,021 100,529 --
Securities available for sale............... 7,353,926 381,101 -- 7,735,027 2,409,976 --
Investment securities....................... 3,583,906 1,577,325 (28,790) 5,132,441 3,877,896 --
Loans, net of unearned income............... 60,020,507 5,575,914 (6,473) 65,589,948 23,999,147 --
Allowance for loan losses................. (969,122) (45,706) -- (1,014,828) (565,450) --
Loans, net................................ 59,051,385 5,530,208 (6,473) 64,575,120 23,433,697 --
Premises and equipment...................... 1,881,947 59,022 (14,645) 1,926,324 428,328 --
Due from customers on acceptances........... 383,289 -- -- 383,289 161,355 --
Mortgage servicing rights................... 101,024 12,694 8,792 122,510 47,101 --
Credit card premium......................... 51,005 -- -- 51,005 -- --
Other intangible assets..................... 1,395,368 70,814 412,390 1,878,572 809,040 --
Other assets................................ 2,050,362 210,032 1,155 2,261,549 1,184,618 --
Total assets.............................. $83,101,612 8,001,157 (223,552) 90,879,217 35,361,781 --
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing....................... 10,854,459 115,570 -- 10,970,029 5,195,045 --
Interest-bearing.......................... 47,987,565 5,209,243 -- 53,196,808 23,623,878 --
Total deposits.......................... 58,842,024 5,324,813 -- 64,166,837 28,818,923 --
Short-term borrowings....................... 11,012,715 1,750,452 -- 12,763,167 2,020,966 --
Bank acceptances outstanding................ 383,289 -- -- 383,289 161,355 --
Other liabilities........................... 1,750,454 144,846 (3,632) 1,891,668 744,470 --
Long-term debt.............................. 5,376,283 247,829 -- 5,624,112 676,750 --
Total liabilities....................... 77,364,765 7,467,940 (3,632) 84,829,073 32,422,464 --
STOCKHOLDERS' EQUITY
Preferred stock............................. -- -- -- -- 219,219 --
Common stock................................ 572,790 16,907 4,973 594,670 81,999 271,939
Paid-in capital............................. 1,260,261 390,804 (99,387) 1,551,678 1,255,143 (437,293)
Retained earnings........................... 3,912,179 128,674 (128,674) 3,912,179 1,556,804 --
Less: Treasury stock........................ -- (3,329) 3,329 -- (165,354) 165,354
Unrealized gain (loss) on debt and equity
securities................................ (8,383) 161 (161) (8,383) (8,494) --
Total stockholders' equity.............. 5,736,847 533,217 (219,920) 6,050,144 2,939,317 --
Total liabilities and stockholders'
equity................................ $83,101,612 8,001,157 (223,552) 90,879,217 35,361,781 --
<CAPTION>
PRO FORMA
(IN THOUSANDS) COMBINED
<S> <C>
ASSETS
Cash and due from banks..................... 4,430,696
Interest-bearing balances................... 969,018
Federal funds sold and securities purchased
under resale agreements................... 2,763,886
Total cash and cash equivalents........... 8,163,600
Trading account assets...................... 1,659,550
Securities available for sale............... 10,145,003
Investment securities....................... 9,010,337
Loans, net of unearned income............... 89,589,095
Allowance for loan losses................. (1,580,278)
Loans, net................................ 88,008,817
Premises and equipment...................... 2,354,652
Due from customers on acceptances........... 544,644
Mortgage servicing rights................... 169,611
Credit card premium......................... 51,005
Other intangible assets..................... 2,687,612
Other assets................................ 3,446,167
Total assets.............................. 126,240,998
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing....................... 16,165,074
Interest-bearing.......................... 76,820,686
Total deposits.......................... 92,985,760
Short-term borrowings....................... 14,784,133
Bank acceptances outstanding................ 544,644
Other liabilities........................... 2,636,138
Long-term debt.............................. 6,300,862
Total liabilities....................... 117,251,537
STOCKHOLDERS' EQUITY
Preferred stock............................. 219,219
Common stock................................ 948,608
Paid-in capital............................. 2,369,528
Retained earnings........................... 5,468,983
Less: Treasury stock........................ --
Unrealized gain (loss) on debt and equity
securities................................ (16,877)
Total stockholders' equity.............. 8,989,461
Total liabilities and stockholders'
equity................................ 126,240,998
</TABLE>
See accompanying notes to pro forma financial information.
39
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
(FUNC AND THE PURCHASE ACQUISITIONS (INCLUDING THE CORPORATE MERGER))
(UNAUDITED)
The following unaudited pro forma combined condensed statements of income
present the combined statements of income of FUNC and the companies involved in
the Purchase Acquisitions (including RSFC) assuming the companies had been
combined for each period presented on a purchase accounting basis (effective as
of January 1, 1994).
<TABLE>
<CAPTION>
PURCHASE PRO FORMA PRO FORMA
(IN THOUSANDS, EXCEPT PER SHARE DATA) FUNC ACQUISITIONS ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
SIX MONTHS ENDED JUNE 30, 1995
Interest income.............................................................. $3,000,417 377,671 (40,193) 3,337,895
Interest expense............................................................. 1,406,547 240,696 -- 1,647,243
Net interest income.......................................................... 1,593,870 136,975 (40,193) 1,690,652
Provision for loan losses.................................................... 76,500 4,130 -- 80,630
Net interest income after provision for loan losses.......................... 1,517,370 132,845 (40,193) 1,610,022
Securities available for sale transactions................................... 4,878 (3,679) -- 1,199
Investment security transactions............................................. 1,450 -- -- 1,450
Noninterest income........................................................... 628,042 29,339 -- 657,381
Noninterest expense.......................................................... 1,399,441 179,316 20,111 1,598,868
Income before income taxes................................................... 752,299 (20,811) (60,304) 671,184
Income taxes................................................................. 266,254 990 (19,709) 247,535
Net income................................................................... 486,045 (21,801) (40,595) 423,649
Dividends on preferred stock................................................. 7,029 -- -- 7,029
Net income applicable to common stockholders................................. $ 479,016 (21,801) (40,595) 416,620
Pro forma per common share data
Net income available to common stockholders................................ $ 2.77 2.32
Average common shares (in thousands)....................................... 172,745 179,310
<CAPTION>
PURCHASE PRO FORMA PRO FORMA
(IN THOUSANDS, EXCEPT PER SHARE DATA) FUNC ACQUISITIONS ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994
Interest income.............................................................. $5,094,661 786,606 (80,286) 5,800,981
Interest expense............................................................. 2,060,946 453,964 -- 2,514,910
Net interest income.......................................................... 3,033,715 332,642 (80,286) 3,286,071
Provision for loan losses.................................................... 100,000 1,643 -- 101,643
Net interest income after provision for loan losses.......................... 2,933,715 330,999 (80,286) 3,184,428
Securities available for sale transactions................................... (11,507) 2,647 -- (8,860 )
Investment security transactions............................................. 4,006 -- -- 4,006
Noninterest income........................................................... 1,166,470 55,018 -- 1,221,488
Noninterest expense.......................................................... 2,677,228 270,493 52,677 3,000,398
Income before income taxes................................................... 1,415,456 118,171 (132,963) 1,400,664
Income taxes................................................................. 490,076 38,119 (40,535) 487,660
Net income................................................................... 925,380 80,052 (92,428) 913,004
Dividends on preferred stock................................................. 25,353 -- -- 25,353
Net income applicable to common stockholders before redemption premium....... 900,027 80,052 (92,428) 887,651
Redemption premium on preferred stock........................................ 41,355 -- -- 41,355
Net income applicable to common stockholders after redemption premium........ $ 858,672 80,052 (92,428) 846,296
Pro forma per common share data
Net income available to common stockholders before redemption premium...... $ 5.22 5.06
Net income available to common stockholders after redemption premium....... $ 4.98 4.82
Average common shares (in thousands)....................................... 172,543 175,554
</TABLE>
See accompanying notes to pro forma financial information.
40
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
(FUNC, THE PURCHASE ACQUISITIONS (INCLUDING THE CORPORATE MERGER) AND FFB)
(UNAUDITED)
The following unaudited pro forma combined condensed statements of income
present the combined statements of income of FUNC, the companies involved in the
Purchase Acquisitions (including RSFC) and FFB, assuming the companies had been
combined for each period presented on a purchase accounting basis with respect
to the Purchase Acquisitions (including the Corporate Merger) (for the six
months ended June 30, 1995, and the year ended December 31, 1994, only) and on a
pooling of interests accounting basis with respect to the FFB Merger.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(DOLLARS IN THOUSANDS, JUNE 30, YEARS ENDED DECEMBER 31,
EXCEPT PER SHARE DATA) 1995 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income............................... $4,493,006 3,434,281 7,937,133 6,601,528 6,608,666 7,031,400 7,549,088
Interest expense.............................. 2,112,573 1,254,749 3,246,946 2,481,952 2,941,680 4,070,885 4,806,471
Net interest income........................... 2,380,433 2,179,532 4,690,187 4,119,576 3,666,986 2,960,515 2,742,617
Provision for loan losses..................... 100,630 94,000 180,643 369,753 642,708 946,284 923,409
Net interest income after provision for loan
losses...................................... 2,279,803 2,085,532 4,509,544 3,749,823 3,024,278 2,014,231 1,819,208
Securities available for sale transactions.... 15,242 10,173 8,860 25,767 34,402 -- --
Investment security transactions.............. 1,450 1,309 4,006 14,452 1,944 208,614 32,271
Noninterest income............................ 864,592 738,949 1,620,712 1,541,569 1,360,202 1,254,635 1,028,755
Noninterest expense........................... 2,135,961 1,816,102 4,070,027 3,536,346 3,443,524 2,777,665 2,564,124
Income before income taxes.................... 1,025,126 1,019,861 2,073,095 1,795,265 977,302 699,815 316,110
Income taxes.................................. 373,284 347,323 709,028 578,912 278,514 129,843 59,868
Net income.................................... 651,842 672,538 1,364,067 1,216,353 698,788 569,972 256,242
Dividends on preferred stock.................. 17,350 22,204 46,020 45,553 53,040 51,746 47,151
Net income applicable to common stockholders
before redemption premium................... 634,492 650,334 1,318,047 1,170,800 645,748 518,226 209,091
Redemption premium on preferred stock......... -- -- 41,355 -- -- -- --
Net income applicable to common stockholders
after redemption premium.................... $ 634,492 650,334 1,276,692 1,170,800 645,748 518,226 209,091
Pro forma per common share data
Net income applicable to common stockholders
before redemption premium................. $ 2.22 2.32 4.63 4.30 2.53 2.34 .97
Net income applicable to common stockholders
after redemption premium.................. $ 2.22 2.32 4.48 4.30 2.53 2.34 .97
Average common shares (in thousands).......... 285,492 280,153 284,673 272,439 255,384 221,469 215,529
FUNC historical per common
share data
Net income applicable to
common stockholders before
redemption premium...................... $ 2.77 2.59 5.22 4.73 2.23 2.24 1.68
Net income applicable to common
stockholders after redemption premium... $ 2.77 2.59 4.98 4.73 2.23 2.24 1.68
Average common shares (in thousands).......... 172,745 169,689 172,543 167,692 158,683 140,003 135,622
</TABLE>
See accompanying notes to pro forma financial information.
41
<PAGE>
NOTES TO PRO FORMA FINANCIAL INFORMATION
(1) The pro forma information presented is not necessarily indicative of the
results of operations or the combined financial position that would have
resulted had the Purchase Acquisitions (including the Corporate Merger) and
the FFB Merger been consummated at the beginning of the applicable periods
indicated, nor is it necessarily indicative of the results of operations in
future periods or the future financial position of the combined entities.
Consummation of the FFB Merger or any of the pending Purchase Acquisitions
(including the Corporate Merger) is not contingent upon consummation of any
other of such acquisitions. Consummation of one or all of the pending
Purchase Acquisitions (including the Corporate Merger) prior to consummation
of the FFB Merger would not materially impact the results of operations of
FUNC. Pro forma financial information for the Purchase Acquisitions
(including the Corporate Merger) assumes such acquisitions were consummated
on January 1, 1994, and, except as otherwise indicated, reflects information
from such date to their respective consummation dates (or to June 30, 1995,
with respect to the Purchase Acquisitions (including the Corporate Merger)
pending as of June 30, 1995, or announced between July 1, 1995 and the date
of this Prospectus/Proxy Statement). Pro forma financial information with
respect to the FFB Merger assumes such merger was consummated as of the
beginning of each of the periods indicated.
(2) In addition to the pro forma assumptions indicated below with respect to the
Purchase Acquisitions (including the Corporate Merger), pro forma
assumptions related to the Corporate Merger include (i) a .8235 Exchange
Ratio based on a July 31, 1995 FUNC Common Stock closing price of $48.875;
(ii) the issuance of 2.5 million shares of FUNC Common Stock; (iii) the
repurchase of such shares in the open market at a cost of $126 million; and
(iv) an increase in goodwill and deposit base premium of $59 million and $12
million, respectively. The actual Exchange Ratio will depend on the Average
Closing Price (which will not be known until shortly before the Effective
Date) and may be higher or lower than .8235. The pro forma information would
be different if the Average Closing Price results in an Exchange Ratio
different from .8235. Set forth on the cover page of this Prospectus/Proxy
Statement is the last reported sale price per share of FUNC Common Stock on
the NYSE Tape on the most recent practicable date before the mailing hereof.
Stockholders are urged to obtain current quotations of the market price of
FUNC Common Stock.
(3) It is assumed that the FFB Merger will be accounted for on a pooling of
interests accounting basis, and accordingly, the related pro forma
adjustments herein reflect, where applicable, an exchange ratio of (i) 1.35
shares of FUNC Common Stock for each of the 81,998,930 shares of FFB common
stock (less 3,345,884 treasury shares) which were outstanding at June 30,
1995; and (ii) one share of one of three corresponding new series of FUNC
Class A Preferred Stock for each share of the related three series of FFB
preferred stock outstanding at June 30, 1995, one series of which includes
4,368,848 shares of convertible preferred stock, which were then convertible
into 3,408,138 shares of FFB common stock. The three new series of FUNC
Class A Preferred Stock will have substantially identical terms as the
related series of FFB preferred stock to be exchanged therefor. The 1.35
exchange ratio is subject to possible increase under certain circumstances.
As a result, information was adjusted for the FFB Merger by the (i) addition
of 106,181,612 shares of FUNC Common Stock amounting to $353,938,000; (ii)
elimination of 81,998,930 shares of FFB common stock amounting to
$81,999,000; (iii) cancellation of 3,345,884 treasury shares of FFB at a
cost of $165,354,000; and (iv) recordation of the remaining net amount of
$437,293,000 as a reduction in paid-in capital at June 30, 1995.
The pro forma financial information presented herein does not give effect to
the possible purchase by FUNC and/or FFB of up to 5.5 million shares of FFB
common stock or 7.4 million shares of FUNC Common Stock, or some combination
of the two (the "FFB Acquisition Shares"), prior to consummation of the FFB
Merger. As of the date of this Prospectus/Proxy Statement, FUNC has
purchased 2.9 million shares of FFB common stock at a cost of $181 million,
and 250,000 shares of FFB convertible preferred stock at a cost of $12
million.
As of June 30, 1995, FUNC and FFB had 14,441,144 and 6,788,278 shares of
common stock reserved for issuance, respectively, (excluding, as to FUNC,
shares reserved for issuance in connection with the FFB Merger, the Purchase
Acquisitions then pending (including the Corporate Merger), or upon exercise
of the rights attached to shares of FUNC Common Stock), which are not
included in the pro forma financial information presented herein.
For the six months ended June 30, 1995, FFB had net income applicable to
common stockholders of $217,872,000.
(4) During the period from January 1, 1994 through the date of this
Prospectus/Proxy Statement, FUNC completed or had pending at August 14,
1995, the following Purchase Acquisitions: (i) the acquisition of
BancFlorida Financial Corporation (completed in August 1994) with assets of
$1.6 billion for 3.6 million shares of FUNC Common Stock valued at $161
million, (ii) the acquisitions of First Florida Savings Bank, FSB (completed
in April 1995), Ameribanc Investors
42
<PAGE>
Group (completed in April 1995), Coral Gables Fedcorp, Inc. (completed in
May 1995), and Home Federal Savings Bank of Rome, Georgia (completed in
August 1995), at an aggregate cost of $623 million in cash, and (iii) the
acquisitions of American Savings (completed in July 1995), United Financial
(completed on October 5, 1995), and RSFC, Columbia and Brentwood (each of
which was pending at August 14, 1995 and is currently pending) for an
estimated 16.5 million shares of FUNC Common Stock valued at an estimated
$785 million.
In addition to the foregoing Purchase Acquisitions, during 1994, FUNC
completed the following purchase accounting acquisitions: (i) the December
1994 purchase of a DE MINIMUS amount of loans, and the purchase of deposits
from Chase Manhattan Bank of Florida, N.A. ("Chase") and Great Western
Federal Savings Bank ("Great Western"), which in the aggregate amounted to
$1.8 billion, at an aggregate cost of approximately $137 million, and (ii)
the purchase of deposits of Jacksonville Federal Savings Association,
Citizens Federal Savings Association, Cobb Federal Savings Association and
Hollywood Federal Savings Association from the Resolution Trust Corporation
("RTC") in the aggregate amount of $640 million, at an aggregate cost of $68
million. Purchases of deposits from Chase, Great Western and the RTC do not
constitute a sufficient continuity of operations, and moreover, additional
financial data is not available to develop meaningful and reliable pro forma
income statement information with respect to such acquisitions. Accordingly,
the pro forma financial information presented herein includes such
acquisitions at their recorded costs and does not include any pro forma
adjustments related thereto.
Goodwill and deposit base premium of approximately $701 million and $378
million, respectively, are currently expected to result from the Purchase
Acquisitions (including the Corporate Merger).
In connection with the Purchase Acquisitions (including the Corporate
Merger) in which the consideration involved or will involve the issuance of
FUNC Common Stock, the pro forma financial information presented herein
includes actual and estimated repurchases of FUNC Common Stock that in the
aggregate are estimated to amount to 20.5 million shares at an estimated
cost of $932 million. During 1994, FUNC purchased 4.9 million shares of FUNC
Common Stock at a cost of $212 million; during the first six months of 1995,
5.7 million shares at a cost of $249 million; and from July 1, 1995 to the
date of this Prospectus/Proxy Statement, 9.9 million shares at a cost of
$471 million.
In April 1995, the FUNC Board of Directors authorized the purchase of up to
15 million shares of FUNC Common Stock, which is in addition to the possible
purchase of the FFB Acquisition Shares. As of the date of this
Prospectus/Proxy Statement, FUNC has remaining authority to purchase up to
4.3 million shares of FUNC Common Stock, in addition to the FFB Acquisition
Shares.
(5) The pro forma adjustment amounts related to the unaudited pro forma combined
condensed statements of income reflect a 5.84 percent and 4.08 percent cost
of funds for the six months ended June 30, 1995, and the year ended December
31, 1994, respectively, a six-to-ten year straight-line life related to
investment securities, a nine-year straight-line life related to loans, a
ten-year straight-line life related to premises and equipment and mortgage
servicing rights, a ten-year sum-of-the-years digits method related to
deposit base premium, and a 25-year straight-line life related to goodwill.
For the six months ended June 30, 1995, and the year ended December 31,
1994, these adjustments resulted in: reductions in interest income, net
interest income and net interest income after provision for loan losses of
$40,193,000 and $80,286,000, respectively; increases in noninterest expense
of $20,111,000 and $52,677,000, respectively; reductions in income before
income taxes of $60,304,000 and $132,963,000, respectively; reductions in
income taxes of $19,709,000 and $40,535,000, respectively; and reductions in
net income applicable to common stockholders of $40,595,000 and $92,428,000,
respectively.
43
<PAGE>
The components of the pro forma adjustments related to interest income and
noninterest expense for the six months ended June 30, 1995, and the year
ended December 31, 1994, are as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
(IN THOUSANDS) JUNE 30, 1995 DECEMBER 31, 1994
<S> <C> <C>
Interest income
Interest and fees on loans........................................................ $ (2,237) 350
Interest and dividends on investment securities................................... (2,578) (19,999)
Interest-bearing bank balances.................................................... (35,378) (60,637)
Total interest income........................................................ (40,193) (80,286)
Noninterest expense
Equipment rentals, depreciation and maintenance................................... (1,125) (3,190)
Mortgage servicing amortization................................................... 2,088 5,437
Other amortization
Goodwill....................................................................... 10,585 27,225
Deposit base premium........................................................... 8,563 23,205
Total noninterest expense.................................................... 20,111 52,677
Income before income taxes.......................................................... $(60,304) (132,963)
</TABLE>
(6) Income per share data has been computed based on the combined historical net
income applicable to common stockholders of FUNC, FFB and the companies
involved in the Purchase Acquisitions (including the Corporate Merger) using
the historical weighted average shares outstanding of FUNC Common Stock and
the weighted average outstanding shares, adjusted to equivalent shares of
FUNC Common Stock, as of the earliest applicable period presented.
(7) Certain insignificant reclassifications have been included herein to conform
statement presentations. Transactions conducted in the ordinary course of
business between the companies are immaterial, and accordingly, have not
been eliminated.
(8) The unaudited pro forma financial information does not include any FFB
Merger-related expenses or any material expenses related to the Purchase
Acquisitions (including the Corporate Merger). A currently estimated
after-tax FFB Merger-related charge of approximately $270 million, or $.97
per share of FUNC Common Stock, is expected to be recorded in the
appropriate period based on the consummation date of the FFB Merger. See
"RECENT DEVELOPMENTS -- 1995 and 1996 Earnings Estimates".
(9) As indicated by the foregoing unaudited pro forma financial information and
based solely on the foregoing assumptions, consummation of the FFB Merger
and the Purchase Acquisitions (including the Corporate Merger) would have
diluted FUNC's historical net income per common share (after redemption
premium) for the six months ended June 30, 1995 and the year ended December
31, 1994, by 20 percent and 10 percent, respectively. It should not
necessarily be assumed, however, that the foregoing data will represent
actual dilution with respect to the FFB Merger or the Purchase Acquisitions
(including the Corporate Merger).
RSFC
GENERAL
Financial and other information relating to RSFC, including information
about RSFC's directors and executive officers, is set forth in RSFC's 1994
Annual Report on Form 10-K, 1995 First and Second Quarter Reports on Form 10-Q,
1995 Annual Meeting Proxy Statement and 1995 Current Reports on Form 8-K, copies
of which may be obtained from RSFC as indicated under "AVAILABLE INFORMATION".
HISTORY AND BUSINESS
RSFC was incorporated under the laws of North Carolina in 1989 and is a
non-diversified savings and loan holding company within the meaning of HOLA.
RSFC currently has no operations and conducts no business of its own other than
through Raleigh Federal. RSFC's and Raleigh Federal's corporate offices are
located at 219 Fayetteville Street Mall, Raleigh, North Carolina.
44
<PAGE>
Raleigh Federal was originally chartered in 1905 as a North Carolina mutual
savings and loan association. It converted to a federally chartered mutual
savings and loan association in 1978, changed to a federally chartered mutual
savings bank in 1986 and completed its conversion to a federally chartered stock
savings bank on July 6, 1987. Raleigh Federal has been a member of the Federal
Home Loan Bank ("FHLB") system since 1933. Its deposit accounts are insured by
the Savings Association Insurance Fund ("SAIF") of the Federal Deposit Insurance
Corporation ("FDIC"). Raleigh Federal is subject to comprehensive regulation,
examination and supervision by the OTS. Such regulation is intended primarily
for the protection of depositors.
Raleigh Federal is a diversified financial institution primarily engaged in
the business of obtaining savings deposits from the general public and investing
such funds in residential and commercial mortgages, construction, consumer and
commercial business loans. It also invests in interest-bearing bank deposits,
federal funds, U.S. Government and agency obligations, mortgage-backed and
related securities and other investments as permitted by applicable laws and
regulations. The primary sources of funds for Raleigh Federal's lending and
investing activities are principal and interest payments on loans, savings
deposits, earnings on investments, sales of loans, FHLB advances and other
borrowings. Raleigh Federal's earnings are largely dependent upon the difference
between interest income earned on its loan and investment portfolios and
interest expense paid on its savings deposits and borrowings. Fees paid by its
customers are also an important component of Raleigh Federal's income.
Raleigh Federal has two wholly-owned subsidiaries, the 1905 Corporation
("1905") and Builders Acceptance Corporation ("BAC"). 1905 offers tax-deferred
annuities through a third-party marketing company. The sole purpose of BAC is to
qualify as a REMIC. Under a REMIC, mortgage assets can be restructured in the
form of a sale for tax purposes, but as a financing for accounting purposes. At
June 30, 1995, cash of $270,000 and mortgage-backed securities with an aggregate
unpaid balance of $9.2 million were pledged as collateral for the notes payable
which had an outstanding balance of $8.3 million.
At June 30, 1995, RSFC had assets of $808 million, deposits of $636 million
and stockholders' equity of $72 million. Raleigh Federal conducts its operations
primarily in central and eastern North Carolina through 31 full-service offices.
45
<PAGE>
FUNC
GENERAL
Financial and other information relating to FUNC, including information
relating to FUNC's directors and executive officers, is set forth in FUNC's 1994
Annual Report on Form 10-K, 1995 First and Second Quarter Reports on Form 10-Q,
1995 Annual Meeting Proxy Statement and 1995 Current Reports on Form 8-K, copies
of which may be obtained from FUNC as indicated under "AVAILABLE INFORMATION".
HISTORY AND BUSINESS
FUNC was incorporated under the laws of North Carolina in 1967 and is
registered as a bank holding company under the BHCA. Pursuant to a corporate
reorganization in 1968, FUNB-NC and First Union Mortgage Corporation, a mortgage
banking firm acquired by FUNB-NC in 1964, became subsidiaries of FUNC.
In addition to FUNB-NC, FUNC also operates banks in South Carolina,
Florida, Georgia, Tennessee, Virginia, Maryland and Washington, D.C. In addition
to providing a wide range of commercial and retail banking and trust services
through its banking subsidiaries, FUNC also provides various other financial
services, including mortgage banking, capital markets services, insurance and
securities' brokerage services, through other subsidiaries.
Since the 1985 Supreme Court decision upholding regional interstate banking
legislation, FUNC has concentrated its efforts on building a large, regional
banking organization in what it perceives to be some of the better banking
markets in the eastern region of the United States. Since November 1985, FUNC
has completed 58 banking-related acquisitions, and currently has pending four
banking-related acquisitions, including the more significant acquisitions (I.E.,
involving the acquisition of $3.0 billion or more of assets or deposits) set
forth in the following table.
<TABLE>
<CAPTION>
ASSETS/ CONSIDERATION/
NAME HEADQUARTERS DEPOSITS(1)(2) ACCOUNTING TREATMENT COMPLETION DATE
<S> <C> <C> <C> <C>
Atlantic Bancorporation...................... Florida $ 3.8 billion common stock/pooling November 1985
Northwestern Financial Corporation........... North Carolina 3.0 billion common stock/pooling December 1985
First Railroad & Banking Company of
Georgia.................................... Georgia 3.7 billion common stock/pooling November 1986
Florida National Banks of Florida, Inc....... Florida 7.9 billion cash and preferred January 1990
stock/purchase
Southeast banks.............................. Florida 9.9 billion cash, notes and preferred September 1991
stock/
purchase
Resolution Trust Company ("RTC") 5.3 billion cash/purchase 1991-1994
acquisitions............................... Florida,
Georgia,
Virginia
Dominion Bankshares Corporation.............. Virginia 8.9 billion common stock and March 1993
preferred stock/pooling
Georgia Federal Bank, FSB.................... Georgia 4.0 billion cash/purchase June 1993
First American Metro Corp.................... Virginia 4.6 billion cash/purchase June 1993
American Savings............................. Florida 3.3 billion common stock/purchase July 1995
FFB.......................................... New Jersey,
Pennsylvania $ 35.4 billion common stock and pending
preferred stock/pooling
</TABLE>
(1) The dollar amounts indicated represent the assets of the related
organization as of the last reporting period prior to acquisition, except
for (i) the dollar amount relating to RTC acquisitions, which represents
savings and loan deposits acquired from the RTC, and (ii) the dollar amount
relating to Southeast banks, which represent assets of the two banking
subsidiaries of Southeast Banking Corporation acquired from the FDIC.
(2) In addition, FUNC purchased Lieber & Company ("Lieber"), a mutual fund
advisory company with approximately $3.4 billion in assets under management,
in June 1994. Since such assets are not owned by Lieber, they are not
reflected on FUNC's balance sheet.
46
<PAGE>
FUNC is continually evaluating acquisition opportunities and frequently
conducts due diligence activities in connection with possible acquisitions. As a
result, acquisition discussions and, in some cases, negotiations frequently take
place and future acquisitions involving cash, debt or equity securities can be
expected. Acquisitions typically involve the payment of a premium over book and
market values, and therefore some dilution of FUNC's book value and net income
per common share may occur in connection with any future transactions. See "PRO
FORMA FINANCIAL INFORMATION" and " -- Certain Regulatory Considerations;
INTERSTATE BANKING AND BRANCHING LEGISLATION".
CERTAIN REGULATORY CONSIDERATIONS
AS A BANK HOLDING COMPANY, FUNC IS SUBJECT TO REGULATION UNDER THE BHCA AND
TO ITS EXAMINATION AND REPORTING REQUIREMENTS. THE FOLLOWING DISCUSSION SETS
FORTH CERTAIN OF THE MATERIAL ELEMENTS OF THE REGULATORY FRAMEWORK APPLICABLE TO
BANK HOLDING COMPANIES AND THEIR SUBSIDIARIES AND PROVIDES CERTAIN SPECIFIC
INFORMATION RELEVANT TO FUNC. TO THE EXTENT THAT THE FOLLOWING INFORMATION
DESCRIBES STATUTORY AND REGULATORY PROVISIONS, IT IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE PARTICULAR STATUTORY AND REGULATORY PROVISIONS. A CHANGE IN
APPLICABLE STATUTES, REGULATIONS OR REGULATORY POLICY MAY HAVE A MATERIAL EFFECT
ON THE BUSINESS OF FUNC.
GENERAL
FUNC is a bank holding company within the meaning of the BHCA and is
registered as such with the Federal Reserve Board. Under the BHCA, bank holding
companies may not directly or indirectly acquire the ownership or control of
more than five percent of the voting shares or substantially all of the assets
of any company, including a bank, without the prior approval of the Federal
Reserve Board. See "THE MERGERS -- Regulatory Approvals". In addition, bank
holding companies are generally prohibited under the BHCA from engaging in
nonbanking activities, subject to certain exceptions.
The earnings of FUNC are affected by general economic conditions,
management policies and the legislative and governmental actions of various
regulatory authorities, including the Federal Reserve Board and the OCC. In
addition, there are numerous governmental requirements and regulations which
affect the activities of FUNC.
PAYMENT OF DIVIDENDS
FUNC is a legal entity separate and distinct from its banking and other
subsidiaries. A major portion of FUNC's revenues result from amounts paid as
dividends to FUNC by its national bank subsidiaries. The prior approval of the
OCC is required if the total of all dividends declared by a national bank in any
calendar year will exceed the sum of such bank's net profits for that year and
its retained net profits for the preceding two calendar years, less any required
transfers to surplus. Federal law also prohibits any national bank from paying
dividends which would be greater than such bank's undivided profits after
deducting statutory bad debt in excess of such bank's allowance for loan losses.
Under the foregoing dividend restrictions and certain restrictions
applicable to certain of FUNC's nonbanking subsidiaries, as of June 30, 1995,
FUNC's subsidiaries, without obtaining affirmative governmental approvals, could
pay aggregate dividends of $153 million to FUNC. During the first half of 1995,
FUNC's subsidiaries paid $394 million in cash dividends to FUNC.
In addition, FUNC and its national bank subsidiaries are subject to various
general regulatory policies and requirements relating to the payment of
dividends, including requirements to maintain adequate capital above regulatory
minimums. The appropriate federal regulatory authority is authorized to
determine under certain circumstances relating to the financial condition of a
national bank or bank holding company that the payment of dividends would be an
unsafe or unsound practice and to prohibit payment thereof. The OCC and the FDIC
have indicated that paying dividends that deplete a bank's capital base to an
inadequate level would be an unsound and unsafe banking practice. The OCC, the
FDIC and the Federal Reserve Board have each indicated that banking
organizations should generally pay dividends only out of current operating
earnings.
BORROWINGS
There are also various legal restrictions on the extent to which each of
FUNC and its nonbank subsidiaries can borrow or otherwise obtain credit from its
bank subsidiaries. In general, these restrictions require that any such
extensions of credit must be secured by designated amounts of specified
collateral and are limited, as to any one of FUNC or such nonbank subsidiaries,
to ten percent of the lending bank's capital stock and surplus, and as to FUNC
and all such nonbank subsidiaries in the aggregate, to 20 percent of such
lending bank's capital stock and surplus.
47
<PAGE>
CAPITAL
The minimum guidelines for the ratio of capital to risk-weighted assets
(including certain off-balance sheet activities, such as standby letters of
credit) is eight percent. At least half of the total capital is to be composed
of common equity, retained earnings and a limited amount of qualifying perpetual
preferred stock, less certain intangibles ("tier 1 capital" and, together with
tier 2 capital, "total capital"). The remainder may consist of subordinated
debt, qualifying preferred stock and a limited amount of the loan loss allowance
("tier 2 capital"). At June 30, 1995, FUNC's tier 1 and total capital ratios
were 6.86 percent and 11.58 percent, respectively. On an FUNC and RSFC combined
basis, such ratios at June 30, 1995, would have been 6.53 percent and 11.24
percent, respectively.
In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum leverage ratio of tier 1 capital to adjusted average quarterly assets
("leverage ratio") equal to three percent for bank holding companies that meet
certain specified criteria, including having the highest regulatory rating. All
other bank holding companies will generally be required to maintain a leverage
ratio of from at least four to five percent. FUNC's leverage ratio at June 30,
1995, was 5.74 percent. On an FUNC and RSFC combined basis, such ratio at June
30, 1995, would have been 5.47 percent. The guidelines also provide that bank
holding companies experiencing internal growth or making acquisitions will be
expected to maintain strong capital positions substantially above the minimum
supervisory levels without significant reliance on intangible assets.
Furthermore, the guidelines indicate that the Federal Reserve Board will
continue to consider a "tangible tier 1 leverage ratio" (deducting all
intangibles) in evaluating proposals for expansion or new activity. The Federal
Reserve Board has not advised FUNC of any specific minimum leverage ratio or
tangible tier 1 leverage ratio applicable to it.
Each of FUNC's subsidiary national banks is subject to similar capital
requirements adopted by the OCC. Each of FUNC's subsidiary banks had a leverage
ratio in excess of 5.14 percent, as of June 30, 1995. The OCC has not advised
any of the subsidiary national banks of any specific minimum leverage ratio
applicable to it.
As of June 30, 1995, the capital ratios of FUNC's banking subsidiaries,
which consist of FUNB-NC, First Union National Bank of South Carolina
("FUNB-SC"), First Union National Bank of Georgia ("FUNB-GA"), First Union
National Bank of Florida ("FUNB-FL"), First Union National Bank of Washington,
D.C. ("FUNB-DC"), First Union National Bank of Maryland ("FUNB-MD"), First Union
National Bank of Tennessee ("FUNB-TN"), First Union National Bank of Virginia
("FUNB-VA") and First Union Home Equity Bank, N.A. ("FUHEB") were as follows:
<TABLE>
<CAPTION>
REGULATORY
MINIMUM FUNB-NC FUNB-SC FUNB-GA FUNB-FL FUNB-DC FUNB-MD FUNB-TN FUNB-VA FUHEB
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tier 1 capital ratio......... 4% 6.65 7.86 8.72 6.55 17.46 20.14 11.62 6.81 5.28
Total capital ratio.......... 8 10.32 11.79 11.52 10.01 18.74 21.42 12.88 10.39 8.28
Leverage ratio............... 3-5% 5.81 5.94 6.40 5.15 7.70 13.08 7.71 5.28 5.53
</TABLE>
Banking regulators continue to indicate their desire to raise capital
requirements applicable to banking organizations, including a proposal to add an
interest rate risk component to risk-based capital guidelines.
FIRREA
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA"), among other things, imposes liability on an institution the deposits
of which are insured by the FDIC, such as FUNC's subsidiary national banks, for
certain potential obligations to the FDIC incurred in connection with other
FDIC-insured institutions under common control with such institution.
Under the National Bank Act, if the capital stock of a national bank is
impaired by losses or otherwise, the OCC is authorized to require payment of the
deficiency by assessment upon the bank's stockholders, pro rata and, to the
extent necessary, if any such assessment is not paid by any stockholder after
three months notice, to sell the stock of such stockholder to make good the
deficiency. Under Federal Reserve Board policy, FUNC is expected to act as a
source of financial strength to each of its subsidiary banks and to commit
resources to support each of such subsidiaries. This support may be required at
times when, absent such Federal Reserve Board policy, FUNC may not find itself
willing or able to provide it.
Any capital loans by a bank holding company to any of its subsidiary banks
are subordinate in right of payment to deposits and to certain other
indebtedness of such subsidiary banks. In the event of a bank holding company's
bankruptcy, any commitment by the bank holding company to a federal bank
regulatory agency to maintain the capital of a subsidiary bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment.
48
<PAGE>
FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991 (as
amended, "FDICIA"), among other things, requires the federal banking agencies to
take "prompt corrective action" in respect of depository institutions that do
not meet minimum capital requirements. The FDICIA establishes five capital
tiers: "well capitalized"; "adequately capitalized"; "undercapitalized";
"significantly undercapitalized"; and "critically undercapitalized". A
depository institution's capital tier will depend upon how its capital levels
compare to various relevant capital measures and certain other factors, as
established by regulation.
The OCC adopted regulations establishing relevant capital measures and
relevant capital levels. The relevant capital measures are the total capital
ratio, tier 1 capital ratio and the leverage ratio. Under the regulations, a
bank will be (i) "well capitalized" if it has a total capital ratio of ten
percent or greater, a tier 1 capital ratio of six percent or greater and a
leverage ratio of five percent or greater and is not subject to any order or
written directive by the OCC to meet and maintain a specific capital level for
any capital measure; (ii) "adequately capitalized" if it has a total capital
ratio of eight percent or greater, a tier 1 capital ratio of four percent or
greater and a leverage ratio of four percent or greater (three percent in
certain circumstances) and is not "well capitalized"; (iii) "undercapitalized"
if it has a total capital ratio of less than eight percent, a tier 1 capital
ratio of less than four percent or a leverage ratio of less than four percent
(three percent in certain circumstances); (iv) "significantly undercapitalized"
if it has a total capital ratio of less than six percent, a tier 1 capital ratio
of less than three percent or a leverage ratio of less than three percent; and
(v) "critically undercapitalized" if its tangible equity is equal to or less
than two percent of average quarterly tangible assets. As of June 30, 1995, all
of FUNC's deposit-taking subsidiary banks had capital levels that qualify them
as being "well capitalized" under such regulations. FUHEB is not a
deposit-taking bank.
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
"undercapitalized". "Undercapitalized" depository institutions are subject to
growth limitations and are required to submit a capital restoration plan. The
federal banking agencies may not accept a capital plan without determining,
among other things, that the plan is based on realistic assumptions and is
likely to succeed in restoring the depository institution's capital. In
addition, for a capital restoration plan to be acceptable, the depository
institution's parent holding company must guarantee that the institution will
comply with such capital restoration plan. The aggregate liability of the
parent holding company is limited to the lesser of: (i) an amount equal to
five percent of the depository institution's total assets at the time it
became "undercapitalized"; and (ii) the amount which is necessary (or would
have been necessary) to bring the institution into compliance with all capital
standards applicable with respect to such institution as of the time it fails
to comply with the plan. If a depository institution fails to submit an
acceptable plan, it is treated as if it is "significantly undercapitalized".
"Significantly undercapitalized" depository institutions may be subject to
a number of requirements and restrictions, including orders to sell sufficient
voting stock to become "adequately capitalized", requirements to reduce total
assets, and cessation of receipt of deposits from correspondent banks.
"Critically undercapitalized" institutions are subject to the appointment of a
receiver or conservator.
DEPOSITOR PREFERENCE STATUTE
Legislation has been enacted providing that deposits and certain claims for
administrative expenses and employee compensation against an insured depository
institution would be afforded a priority over other general unsecured claims
against such an institution, including federal funds and letters of credit, in
the "liquidation or other resolution" of such an institution by any receiver.
INTERSTATE BANKING AND BRANCHING LEGISLATION
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "IBBEA") authorizes interstate acquisitions of banks and bank holding
companies without geographic limitation beginning one year after enactment. In
addition, beginning June 1, 1997, a bank may merge with a bank in another state
as long as neither of the states has opted out of interstate branching between
the date of enactment of the IBBEA and May 31, 1997. The IBBEA further provides
that states may enact laws permitting interstate merger transactions prior to
June 1, 1997. A bank may establish and operate a DE NOVO branch in a state in
which the bank does not maintain a branch if that state expressly permits DE
NOVO branching. Once a bank has established branches in a state through an
interstate merger transaction, the bank may establish and acquire additional
branches at any location in the state where any bank involved in the interstate
merger transaction could have established or acquired branches under applicable
federal or state law. A bank that has established a branch in a state through DE
NOVO
49
<PAGE>
branching may establish and acquire additional branches in such state in the
same manner and to the same extent as a bank having a branch in such state as a
result of an interstate merger. If a state opts out of interstate branching
within the specified time period, no bank in any other state may establish a
branch in the opting out state, whether through an acquisition or DE NOVO.
FDIC INSURANCE ASSESSMENTS
On August 8, 1995, the FDIC amended its regulations on insurance
assessments to establish a new assessment rate schedule of four to 31 cents per
$100.00 of deposits in replacement of the existing schedule of 23 to 31 cents
per $100.00 of deposits for institutions whose deposits are subject to
assessment by the Bank Insurance Fund ("BIF"). The FDIC has maintained the
current assessment rate schedule of 23 to 31 cents per $100.00 of deposits for
institutions whose deposits are subject to assessment by the SAIF. The new BIF
schedule became effective on June 1, 1995. Assessments collected at the previous
assessment schedule that exceeded the amount due under the new schedule were
refunded, with interest, from the effective date of the new schedule. As a
result, FUNC received a $25 million refund, including interest, in the third
quarter of 1995. As of June 30, 1995, FUNC had a BIF deposit assessment base of
$40.9 billion and a SAIF deposit assessment base of $16.4 billion. Various
legislative proposals regarding the future of the BIF and the SAIF have been
reported recently. Several of these proposals include a one-time special
assessment for SAIF deposits and a subsequent comparable and reduced level of
annual premiums for SAIF and BIF deposits. FUNC does not know when and if any
such proposal or any other related proposal may be adopted.
BHCA LEGISLATION
Various bills have been introduced into the United States Congress that
would repeal in some respects the provisions of the Glass-Steagall Act
prohibiting certain banking organizations from engaging in certain securities
activities and the provisions of the BHCA prohibiting affiliations between
banking organizations and nonbanking organizations. FUNC cannot predict if and
when any such legislation or any similar legislation may be enacted.
DESCRIPTION OF FUNC CAPITAL STOCK
THE DESCRIPTIVE INFORMATION SUPPLIED HEREIN OUTLINES CERTAIN PROVISIONS OF
THE ARTICLES OF INCORPORATION, AS AMENDED (THE "ARTICLES"), AND BYLAWS OF FUNC
AND THE NCBCA. THE INFORMATION DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED
IN ALL RESPECTS BY REFERENCE TO THE PROVISIONS OF FUNC'S ARTICLES AND BYLAWS AND
THE NCBCA.
AUTHORIZED CAPITAL
The authorized capital stock of FUNC consists of 750,000,000 shares of FUNC
Common Stock, 10,000,000 shares of Preferred Stock, no-par value per share
("FUNC Preferred Stock"), and 40,000,000 shares of FUNC Class A Preferred Stock,
no-par value per share ("FUNC Class A Preferred Stock"). As of September 30,
1995, there were 167,795,141 shares of FUNC Common Stock, and no shares of FUNC
Preferred Stock and FUNC Class A Preferred Stock issued and outstanding. The
FUNC Preferred Stock and FUNC Class A Preferred Stock are each issuable in one
or more series and, with respect to any series, the Board of Directors of FUNC,
subject to certain limitations, is authorized to fix the numbers of shares,
dividend rates, liquidation prices, liquidation rights of holders, redemption,
conversion and voting rights and other terms of the series. Shares of FUNC Class
A Preferred Stock and FUNC Preferred Stock that are redeemed, repurchased or
otherwise acquired by FUNC have the status of authorized, unissued and
undesignated shares of FUNC Class A Preferred Stock and FUNC Preferred Stock,
respectively, and may be reissued. On March 31, 1995, FUNC redeemed a series of
FUNC Preferred Stock at an aggregate redemption price of $325 million.
FUNC COMMON STOCK
Subject to the prior rights of the holders of any FUNC Preferred Stock and
any FUNC Class A Preferred Stock then outstanding, holders of FUNC Common Stock
are entitled to receive such dividends as may be declared by the Board of
Directors out of funds legally available therefor and in the event of
liquidation or dissolution, to receive the net assets of FUNC remaining after
payment of all liabilities and after payment to holders of all shares of FUNC
Preferred Stock and FUNC Class A Preferred Stock of the full preferential
amounts to which such holders are respectively entitled, in proportion to their
respective holdings. See "FUNC -- Certain Regulatory Considerations; PAYMENT OF
DIVIDENDS".
Subject to the rights of the holders of any FUNC Preferred Stock and any
FUNC Class A Preferred Stock then outstanding, all voting rights are vested in
the holders of the shares of FUNC Common Stock, each share being entitled to one
vote on
50
<PAGE>
all matters requiring stockholder action and in the election of directors.
Holders of FUNC Common Stock have no preemptive, subscription or conversion
rights. All of the outstanding shares of FUNC Common Stock are fully paid and
nonassessable, and the FUNC Common Shares issuable to the stockholders of RSFC
upon consummation of the Corporate Merger will, upon issuance, be fully paid and
nonassessable.
FUNC PREFERRED STOCK
All shares of each series of FUNC Preferred Stock must be of equal rank and
have the same powers, preferences and rights and are subject to the same
qualifications, limitations and restrictions, except with respect to dividend
rates, redemption prices, liquidation amounts, terms of conversion or exchange
and voting rights.
FUNC CLASS A PREFERRED STOCK
Shares of FUNC Class A Preferred Stock rank prior or superior to FUNC
Common Stock and on a parity with or junior to (but not prior or superior to)
FUNC Preferred Stock or any series thereof, in respect of the right to receive
dividends and/or the right to receive payments out of the net assets of FUNC
upon any involuntary or voluntary liquidation, dissolution or winding up of
FUNC. Subject to the foregoing and to the terms of any particular series of FUNC
Class A Preferred Stock, each series of FUNC Class A Preferred Stock may vary as
to priority.
In the FFB Merger Agreement, upon consummation of the FFB Merger, FUNC
agreed to issue three corresponding new series of FUNC Class A Preferred Stock
with terms substantially identical to those of the three outstanding series of
FFB preferred stock to be exchanged therefor. The following is a brief
description of the certain terms of the three outstanding series of FFB
preferred stock, based on information filed by FFB with, and publicly available
from, the Commission and the NYSE.
FFB SERIES B PREFERRED STOCK
The FFB Series B Convertible Preferred Stock (the "FFB Series B Preferred
Stock") bears a cumulative annual dividend of $2.15 per share, has a liquidation
preference of $25.00 per share, is redeemable in whole or in part at the option
of FFB at $25.00 per share plus accrued but unpaid dividends to the the
redemption date, and is currently convertible at the option of the holder
thereof into .7801 of a share of FFB common stock per share, subject to
adjustment in certain events. Upon consummation of the FFB Merger, such
conversion ratio would be adjusted in accordance with the FFB Merger exchange
ratio (1.35 shares of FUNC Common Stock for each share of FFB common stock
outstanding at the time the FFB Merger is consummated, subject to increase in
certain circumstances). Holders of FFB Series B Preferred Stock are entitled to
vote on all matters on which the holders of FFB common stock vote, together with
FFB common stock as a single class, and in such circumstances each holder of FFB
Series B Preferred Stock is entitled to such number of votes as is equal to
one-half of the number of shares of FFB common stock into which such holder's
shares of FFB Series B Preferred stock are then convertible. Holders of FFB
Series B Preferred Stock are also entitled to vote as a separate class (with
other similarly situated holders of preferred stock) (i) to elect directors in
the event of extended dividend arrearages, (ii) with respect to any amendment of
the FFB Certificate of Incorporation which adversely affects the rights of
holders of FFB Series B Preferred Stock, (iii) for FFB to redeem fewer than all
shares of FFB Series B Preferred Stock at any time when any dividends thereon
have not been paid for past periods, and (iv) in certain circumstances with
respect to the authorization or creation of more than ten million shares of any
FFB preferred stock or the authorization or creation of any securities ranking
prior to FFB Series B Preferred Stock.
FFB SERIES D PREFERRED STOCK
The FFB Series D Adjustable Rate Cumulative Preferred Stock (the "FFB
Series D Preferred Stock") is non-voting, subject to certain limited exceptions,
has a liquidation preference of $100.00 per share and is redeemable in whole or
in part at the option of FFB at a redemption price of $100.00 per share plus
accrued but unpaid dividends to the redemption date. FFB Series D Preferred
Stock cannot be converted into any other class of capital stock of FFB. FFB
Series D Preferred Stock bears cumulative dividends at an annual rate (the
"applicable rate") equal to .75 percent less than the highest of the three-month
U.S. Treasury Bill rate, the U.S. Treasury ten-year constant maturity rate or
the U.S. Treasury 20-year constant maturity rate, adjusted quarterly; however,
in no event may the applicable rate be less than 6.25 percent or more than 12.75
percent per annum. Holders of FFB Series D Preferred Stock are also entitled to
vote as a separate class (with other similarly situated holders of FFB preferred
stock) (i) to elect directors in the event of extended dividend arrearages, (ii)
with respect to any amendment of the FFB Certificate of Incorporation which
adversely affects the rights of holders of FFB Series D Preferred Stock, and
(iii) with respect to the authorization or creation of any securities ranking
prior to FFB Series D Preferred Stock.
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FFB SERIES F PREFERRED STOCK
The FFB Series F 10.64% Preferred Stock (the "FFB Series F Preferred
Stock") bears a cumulative annual dividend rate of 10.64 percent, is non-voting,
subject to certain limited exceptions, has a liquidation preference of $1,000.00
per share and is redeemable in whole or in part at the option of FFB on or after
July 1, 1996, at $1,000.00 per share plus accrued and unpaid dividends to the
redemption date. FFB Series F Preferred Stock cannot be converted into any other
class of capital stock of FFB. The shares of FFB Series F Preferred Stock are
represented by depositary shares, with each depositary share representing a
1/40th interest in a share of FFB Series F Preferred Stock. Holders of the
depositary shares are entitled to all rights and preferences of FFB Series F
Preferred Stock proportionate to the ownership interest represented by the
number of depositary shares owned by them. Holders of FFB Series F Preferred
Stock are also entitled to vote as a separate class (with other similarly
situated holders of FFB preferred stock) (i) to elect directors in the event of
extended dividend arrearages, (ii) with respect to any amendment of the FFB
Certificate of Incorporation which adversely affects the rights of holders of
FFB Series F Preferred Stock, and (iii) with respect to the authorization or
creation of any securities ranking prior to FFB Series F Preferred Stock.
RIGHTS PLAN
Each outstanding share of FUNC Common Stock currently has attached to it
one right (a "FUNC Right") issued pursuant to a Shareholder Protection Rights
Agreement (as amended, the "FUNC Rights Agreement"). Accordingly, in the
Corporate Merger, holders of RSFC Common Stock would receive one FUNC Right with
respect to each share of FUNC Common Stock they receive, which FUNC Right will
be attached to the related shares of FUNC Common Stock, unless the Separation
Time (as defined below) has occurred, in which case holders of RSFC Common Stock
would receive separate certificates with respect to such FUNC Rights. Each FUNC
Right entitles its registered holder to purchase one-hundredth of a share of a
junior participating series of FUNC Class A Preferred Stock designed to have
economic and voting terms similar to those of one share of FUNC Common Stock,
for $110.00, subject to adjustment (the "Rights Exercise Price"), but only after
the earlier to occur (the "Separation Time") of: (i) the tenth business day
(subject to extension) after any person (an "Acquiring Person") (x) commences a
tender or exchange offer, which, if consummated, would result in such person
becoming the beneficial owner of 15 percent or more of the outstanding shares of
FUNC Common Stock, or (y) is determined by the Federal Reserve Board to
"control" FUNC within the meaning of the BHCA (see " -- Other Provisions"
below), subject to certain exceptions; and (ii) the tenth business day after the
first date (the "Flip-in Date") of a public announcement that a person has
become an Acquiring Person. The FUNC Rights will not trade separately from the
shares of FUNC Common Stock unless and until the Separation Time occurs.
The FUNC Rights Agreement provides that a person will not become an
Acquiring Person under the BHCA control test described above if either (i) the
Federal Reserve Board's control determination would not have been made but for
such person's failure to make certain customary passivity commitments, or such
person's violation of such commitments made, to the Federal Reserve Board, so
long as the Federal Reserve Board determines that such person no longer controls
FUNC within 30 days (or 60 days in certain circumstances), or (ii) the Federal
Reserve Board's control determination was not based on such a failure or
violation and such person (x) obtains a noncontrol determination within three
years, and (y) is using its best efforts to allow FUNC to make any acquisition
or engage in any legally permissible activity notwithstanding such person's
being deemed to control FUNC for purposes of the BHCA.
The Third Amendment to the FUNC Rights Agreement, effective as of June 18,
1995, exempts the grant by FUNC to FFB of an option to purchase up to 19.9
percent of the outstanding shares of FUNC Common Stock (the "FUNC Option"), and
the purchase of shares of such common stock pursuant to the FUNC Option, from
causing the holder of the FUNC Option or such shares from becoming an Acquiring
Person as a result thereof.
The FUNC Rights will not be exercisable until the business day following
the Separation Time. The FUNC Rights will expire on the earliest of: (i) the
Exchange Time (as defined below); (ii) the close of business on December 28,
2000; and (iii) the date on which the FUNC Rights are redeemed or terminated as
described below (in any such case, the "Expiration Time"). The Rights Exercise
Price and the number of FUNC Rights outstanding, or in certain circumstances the
securities purchasable upon exercise of the FUNC Rights, are subject to
adjustment upon the occurrence of certain events.
In the event that prior to the Expiration Time a Flip-in Date occurs, FUNC
will take such action as shall be necessary to ensure and provide that each FUNC
Right (other than FUNC Rights beneficially owned by an Acquiring Person or any
affiliate, associate or transferee thereof, which FUNC Rights shall become void)
shall constitute the right to purchase, from FUNC, shares of FUNC Common Stock
having an aggregate market price equal to twice the Rights Exercise Price for an
amount in cash equal to the then current Rights Exercise Price. In addition, the
Board of Directors of FUNC may, at its
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option, at any time after a Flip-in Date and prior to the time that an Acquiring
Person becomes the beneficial owner of more than 50 percent of the outstanding
shares of FUNC Common Stock, elect to exchange all of the then outstanding FUNC
Rights for shares of FUNC Common Stock, at an exchange ratio of two shares of
FUNC Common Stock per FUNC Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the Separation Time
(the "Rights Exchange Rate"). Immediately upon such action by the Board of
Directors (the "Exchange Time"), the right to exercise the FUNC Rights will
terminate and each FUNC Right will thereafter represent only the right to
receive a number of shares of FUNC Common Stock equal to the Rights Exchange
Rate. If FUNC becomes obligated to issue shares of FUNC Common Stock upon
exercise of or in exchange for FUNC Rights, FUNC, at its option, may substitute
therefor shares of junior participating FUNC Class A Preferred Stock upon
exercise of each FUNC Right at a rate of two one-hundredths of a share of junior
participating FUNC Class A Preferred Stock upon the exchange of each FUNC Right.
The FUNC Rights are redeemable by FUNC at $.01 per right, subject to
adjustment upon the occurrence of certain events, at any date prior to the date
on which they become exercisable and, in certain events, may be canceled and
terminated without any payment to the holders thereof. The FUNC Rights have no
voting rights and are not entitled to dividends.
The FUNC Rights will not prevent a takeover of FUNC. The FUNC Rights,
however, may cause substantial dilution to a person or group that acquires 15
percent or more of FUNC Common Stock (or that acquires "control" of FUNC within
the meaning of the BHCA) unless the FUNC Rights are first redeemed or terminated
by the Board of Directors of FUNC. Nevertheless, the FUNC Rights should not
interfere with a transaction that is in the best interests of FUNC and its
stockholders because the FUNC Rights can be redeemed or terminated, as
hereinabove described, before the consummation of such transaction.
The complete terms of the FUNC Rights are set forth in the FUNC Rights
Agreement. The foregoing description of the FUNC Rights and the FUNC Rights
Agreement is qualified in its entirety by reference to such document. The FUNC
Rights Agreement is incorporated by reference as an exhibit to the Registration
Statement. A copy of the FUNC Rights Agreement can be obtained upon written
request to the Rights Agent, First Union National Bank of North Carolina, Two
First Union Center, Charlotte, North Carolina 28288-1154.
OTHER PROVISIONS
The FUNC Articles and Bylaws contain a number of provisions which may be
deemed to have the effect of discouraging or delaying attempts to gain control
of FUNC, including provisions in the FUNC Articles: (i) classifying the Board of
Directors into three classes with each class to serve for three years with one
class being elected annually; (ii) authorizing the Board of Directors to fix the
size of the Board of Directors between nine and 30 directors; (iii) authorizing
directors to fill vacancies on the Board of Directors that occur between annual
meetings, except that vacancies resulting from a removal of a director by a
stockholder vote may only be filled by a stockholder vote; (iv) providing that
directors may be removed only for cause and only by affirmative vote of the
majority of shares entitled to be voted in the election of directors, voting as
a single class; (v) authorizing only the Board of Directors, the Chairman of the
Board or the President to call a special meeting of stockholders (except for
special meetings called under specified circumstances for holders of classes or
series of stock ranking superior to the FUNC Common Stock); and (vi) requiring
an 80 percent vote of stockholders entitled to vote in the election of
directors, voting as a single class, to alter any of the foregoing provisions.
The FUNC Bylaws include provisions setting forth specific conditions under
which: (i) business may be transacted at an annual meeting of stockholders; and
(ii) persons may be nominated for election as directors of FUNC at an annual
meeting of stockholders.
The Change in Bank Control Act prohibits a person or group of persons from
acquiring "control" of a bank holding company unless the Federal Reserve Board
has been given 60 days' prior written notice of such proposed acquisition and
within that time period the Federal Reserve Board has not issued a notice
disapproving the proposed acquisition or extending for up to another 30 days the
period during which such a disapproval may be issued, or unless the acquisition
is subject to Federal Reserve Board approval under the BHCA. An acquisition may
be made prior to the expiration of the disapproval period if the Federal Reserve
Board issues written notice of its intent not to disapprove the action. Under a
rebuttable presumption established by the Federal Reserve Board, the acquisition
of more than ten percent of a class of voting stock of a bank holding company
with a class of securities registered under Section 12 of the Exchange Act, such
as FUNC, would, under the circumstances set forth in the presumption, constitute
the acquisition of control.
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In addition, any "company" would be required to obtain the approval of the
Federal Reserve Board under the BHCA before acquiring 25 percent (five percent
in the case of an acquiror that is a bank holding company) or more of the
outstanding shares of FUNC Common Stock, or otherwise obtaining "control" over
FUNC. Under the BHCA, "control" generally means (i) the ownership or control of
25 percent or more of any class of voting securities of the bank holding
company, (ii) the ability to elect a majority of the bank holding company's
directors, or (iii) the ability otherwise to exercise a controlling influence
over the management and policies of the bank holding company. See "THE
MERGERS -- Regulatory Approvals" for a description of the standards applicable
to the Corporate Merger under the BHCA.
Two North Carolina "anti-takeover" statutes adopted in 1987, The North
Carolina Shareholder Protection Act and The North Carolina Control Share
Acquisition Act, allowed North Carolina corporations to elect to either be
covered or not be covered by such statutes. FUNC elected not to be covered by
such statutes.
In addition to the foregoing, in certain instances the issuance of
authorized but unissued shares of FUNC Common Stock, FUNC Class A Preferred
Stock or FUNC Preferred Stock may have an anti-takeover effect.
The existence of the foregoing provisions could (i) result in FUNC being
less attractive to a potential acquiror, and (ii) result in FUNC stockholders
receiving less for their shares of FUNC Common Stock than otherwise might be
available in the event of a take-over attempt.
CERTAIN DIFFERENCES IN THE RIGHTS OF RSFC AND FUNC STOCKHOLDERS
GENERAL
FUNC and RSFC are North Carolina corporations subject to the provisions of
the NCBCA. Stockholders of RSFC will, upon consummation of the Corporate Merger,
become stockholders of FUNC (unless they have perfected dissenters' rights with
respect to their shares of RSFC Common Stock as described in "THE
MERGERS -- Dissenters' Rights"). The rights of such stockholders as stockholders
of FUNC will then be governed by the Articles and Bylaws of FUNC, in addition to
the NCBCA.
Set forth below are the material differences between the rights of a RSFC
stockholder under the RSFC Articles and Bylaws, on the one hand, and the rights
of an FUNC stockholder under the FUNC Articles and Bylaws, on the other hand.
Both RSFC and FUNC are subject to the provisions of the NCBCA. THIS SUMMARY DOES
NOT PURPORT TO BE A COMPLETE DISCUSSION OF, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO, THE GOVERNING LAW AND THE ARTICLES OF INCORPORATION AND BYLAWS OF
EACH CORPORATION.
AUTHORIZED CAPITAL
RSFC. RSFC has authority to issue 40,000,000 shares of stock. The
authorized stock is divided into 30,000,000 shares of RSFC Common Stock, with a
par value of $1.00 per share, and 10,000,000 shares of RSFC Preferred Stock,
with a par value of $1.00 per share. As of September 30, 1995, there were
2,804,780 shares of RSFC Common Stock outstanding and held by approximately
1,178 holders of record. There are no shares of RSFC Preferred Stock
outstanding.
FUNC. FUNC's authorized capital is set forth under "DESCRIPTION OF FUNC
CAPITAL STOCK -- Authorized Capital".
AMENDMENT TO ARTICLES OF INCORPORATION OR BYLAWS
RSFC. The RSFC Articles generally may be amended or repealed in the manner
prescribed by the laws of North Carolina. However, in addition to any provision
of state law, an affirmative vote of at least 75 percent of the holders of
outstanding shares of RSFC Common Stock entitled to vote is required to amend or
repeal provisions concerning (i) the calling of a special meeting of the
stockholders, (ii) the requirements for removal of a director or the entire
board, (iii) the board classification system, (iv) the amendment or repeal of
the Bylaws, (v) indemnification of directors, (vi) directors' exemption from
personal liability, and (vii) any amendment or repeal of Article 13 of the RSFC
Articles, which sets forth the voting requirements described above. The RSFC
Articles also provide that the affirmative vote of at least 80 percent of the
holders of outstanding shares of RSFC Common Stock entitled to vote is required
to amend or repeal any of the provisions relating to the approval of Business
Combinations (as such term is defined in the RSFC Articles). The RSFC Board is
expressly empowered to adopt, amend or repeal the Bylaws of RSFC with the
approval of a majority of the Whole Board (as defined in the RSFC Articles). The
stockholders may also adopt, amend or repeal the Bylaws with the approval of at
least 75 percent of the voting shares.
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FUNC. Under North Carolina law, an amendment to the FUNC Articles generally
requires the recommendation of the Board of Directors and the approval of either
a majority of all shares entitled to vote thereon or a majority of the votes
cast thereon, depending on the nature of the amendment. In accordance with North
Carolina law, the Board of Directors of FUNC may condition its submission of the
proposed amendment on any basis. An amendment to the Bylaws of FUNC generally
requires the approval of either the stockholders or the Board of Directors of
FUNC. The Board of Directors of FUNC generally may not amend any Bylaw approved
by the stockholders. Under certain circumstances, the approval of the holders of
at least two-thirds, or in some cases a majority, of the outstanding shares of
any series of FUNC Preferred Stock or FUNC Class A Preferred Stock may be
required to amend the FUNC Articles. In addition, certain amendments to the FUNC
Articles or Bylaws require the approval of not less than 80 percent of the
outstanding shares of FUNC entitled to vote in the election of directors, voting
together as a single class. See "DESCRIPTION OF FUNC CAPITAL STOCK".
SIZE AND CLASSIFICATION OF BOARD OF DIRECTORS
RSFC. The Bylaws of RSFC provide that the RSFC Board may determine the size
of the RSFC Board, as long as the membership is not less than nine nor greater
than 15. The number of directors of RSFC is currently set at 11. The RSFC Board
is divided into three classes, as nearly equal in number as reasonably possible.
Each director is elected for a three-year term, with one third of the directors'
terms expiring each year. Such classification of directors may make it more
difficult for a person seeking to acquire control of RSFC to gain majority
representation on the RSFC Board.
FUNC. The size of the Board of Directors of FUNC is determined by the
affirmative vote of a majority of the Board of Directors of FUNC, provided that
the FUNC Board of Directors may not set the number of directors at less than
nine nor more than 30, and provided further that no decrease in the number of
directors may shorten the term of any director then in office. The number of
directors of FUNC is currently set at 25. The FUNC Board of Directors is divided
into three classes, each as nearly as possible equal in number as the others,
with one class being elected annually. See also "DESCRIPTION OF FUNC CAPITAL
STOCK".
REMOVAL OF DIRECTORS
RSFC. Any director or the entire RSFC Board, may be removed from office at
any time, but only for cause (as defined in the RSFC Articles) and only by the
affirmative vote of the holders of 75 percent of the outstanding shares of RSFC
Common Stock.
FUNC. Except for directors elected under specified circumstances by holders
of any class or series of stock having a preference over the FUNC Common Stock
as to dividends or upon liquidation, directors of FUNC may be removed only for
cause and only by a vote of the holders of a majority of the shares then
entitled to vote in the election of directors, voting together as a single
class.
DIRECTOR EXCULPATION
RSFC. The RSFC Articles provide that to the fullest extent permitted by the
NCBCA, no director or former director of RSFC is personally liable to RSFC or
any of its stockholders for monetary damages for breach of duty as a director.
FUNC. The FUNC Articles provide for the elimination of personal liability
of each director of FUNC to the fullest extent permitted by the provisions of
the NCBCA, as the same may be in effect from time to time. The NCBCA does not
permit the elimination of such liability with respect to (i) acts or omissions
the director knew or believed were clearly in conflict with the best interests
of FUNC, (ii) any liability under the NCBCA for unlawful distributions by FUNC,
or (iii) any transaction from which the director derived an improper personal
benefit.
DIRECTOR CONFLICT OF INTEREST TRANSACTIONS
RSFC. The RSFC Articles and Bylaws contain no specific provisions
concerning director conflict of interest transactions. However, like FUNC, RSFC
is governed by North Carolina law, as described below.
FUNC. North Carolina law generally permits transactions involving a North
Carolina corporation and an interested director of that corporation if: (i) the
material facts of the transaction and the director's interest are disclosed and
a majority of disinterested shares entitled to vote thereon authorizes, approves
or ratifies the transaction; (ii) the material facts are disclosed and a
majority of disinterested directors or a committee of the board of directors
authorizes, approves or ratifies the transaction; or (iii) the transaction is
fair to the corporation. North Carolina law prohibits loans to directors or the
guaranteeing of their obligations by a North Carolina corporation unless
approved by a majority vote of disinterested stockholders or
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unless the corporation's board of directors determines that the loan or
guarantee benefits the corporation and either approves the specific loan or
guarantee or a general plan of loans and guarantees by the corporation.
STOCKHOLDER MEETINGS
RSFC. The RSFC Articles provide that special meetings of the stockholders
of RSFC may be called only by the Chairman of the RSFC Board, the President or
by a resolution passed by a majority of the Whole Board (as defined in the RSFC
Articles). The notice of the special meeting must specifically state the purpose
or purposes for which the meeting is called. A majority of outstanding shares
entitled to vote constitutes a quorum for stockholders meetings. However, for
Substitute Annual Meetings (as defined in the RSFC Articles) a quorum consists
of the shares represented at the meeting, even though less than a majority.
Except as provided in the RSFC Articles, Bylaws or by the NCBCA, a vote of the
majority of shares voted at a meeting of the stockholders at which a quorum is
present constitutes an act of the stockholders on that matter.
FUNC. A special meeting of stockholders may be called for any purpose only
by the Board of Directors of FUNC, by the Chairman of FUNC's Board of Directors
or by FUNC's President (except for special meetings called under specified
circumstances for holders of any class or series of stock having a preference
over the FUNC Common Stock as to dividends or upon liquidation). A quorum for a
meeting of the stockholders of FUNC is a majority of the outstanding shares of
FUNC entitled to vote. Except as provided in the FUNC Articles or the NCBCA, a
majority of the votes cast is generally required for any action by the
stockholders of FUNC. North Carolina law provides that such quorum and voting
requirements may be increased only with the approval of the stockholders of
FUNC.
DIRECTOR NOMINATIONS
RSFC. The RSFC Bylaws provide that the RSFC Board serves as the nominating
committee for selecting nominees for election as directors. Nominations for the
RSFC Board must be submitted to the Secretary of RSFC at least 20 days before
the annual meeting. Stockholders also may make nominations for the RSFC Board
and such nominees will be voted upon if such nominations are delivered to the
Secretary in writing at least five days prior to the annual meeting. If the
nominating committee fails to submit a list of nominees at least 20 days prior
to the annual meeting, nominations for directors may be made at the meeting by
any stockholder who is entitled to vote, and such nomination must be voted upon.
FUNC. FUNC's Bylaws establish procedures that must be followed for
stockholders to nominate persons for election to FUNC's Board of Directors. Such
nominations must be made by delivering written notice to the Secretary of FUNC
not less than 60 or more than 90 days prior to the annual meeting at which
directors will be elected; provided, however, that if less than 70 days' notice
of the date of the meeting is given, such written notice by the stockholder must
be so delivered not later than the tenth day after the day on which such notice
of the date of the meeting was given. Notice will be deemed to have been given
more than 70 days prior to the meeting if the meeting is called on the third
Tuesday of April regardless as to when public disclosure is made. The nomination
notice must set forth certain information about the person to be nominated
similar to that required to be disclosed in the solicitation of proxies for
election of directors pursuant to Items 7(a) and 7(b) of Regulation 14A under
the Exchange Act, and such person's written consent to being nominated and to
serving as a director if elected. The nomination notice must also set forth
certain information about the person submitting the notice, including the name
and address of the stockholder and the class and number of shares of FUNC Common
Stock owned of record or beneficially by such stockholder. The Chairman of the
meeting will, if the facts warrant, determine that a nomination was not made in
accordance with the provisions prescribed by the Bylaws, and the defective
nomination will be disregarded. The foregoing procedures do not apply to any
director who is nominated under specified circumstances by holders of any class
or series of stock having a preference over FUNC Common Stock as to dividends or
upon liquidation.
STOCKHOLDER PROPOSALS
RSFC. The RSFC Articles do not contain any provisions relating to
submission of stockholder proposals.
FUNC. FUNC's Bylaws establish procedures that must be followed for a
stockholder to submit a proposal to a vote of the stockholders of FUNC at an
annual meeting of stockholders. Such proposal must be made by the stockholder
delivering written notice to the Secretary of FUNC not less than 60 days nor
more than 90 days prior to the meeting; provided, however, that if less than 70
days' notice of the date of the meeting is given, such written notice by the
stockholder must be so delivered not later than the tenth day after the day on
which such notice of the date of the meeting was given. Notice will be deemed to
have been given more than 70 days prior to the meeting if the meeting is called
on the third Tuesday of April. The stockholder proposal notice must set forth:
(i) a brief description of the proposal and the reasons for its submission; (ii)
the name and address of the stockholder, as they appear on FUNC's books; (iii)
the classes and number of shares of FUNC stock
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owned by the stockholder; and (iv) any material interest of the stockholder in
such proposal other than such holder's interest as a stockholder of FUNC. The
Chairman of the meeting will, if the facts warrant, determine that any proposal
was not properly submitted in accordance with the provisions prescribed by the
Bylaws and the defective proposal will not be submitted to the meeting for a
vote of the stockholders.
STOCKHOLDER PROTECTION RIGHTS PLAN
RSFC. RSFC has not adopted any stockholder protection rights plan.
FUNC. FUNC has adopted the FUNC Rights Agreement. See "DESCRIPTION OF FUNC
CAPITAL STOCK -- FUNC Rights Plan".
STOCKHOLDER INSPECTION RIGHTS; STOCKHOLDER LISTS
RSFC. The RSFC Bylaws provide that at least ten days before each
stockholders' meeting, the Secretary must prepare a list of stockholders
entitled to vote at the meeting. The stockholder list is kept on file at RSFC's
registered office for ten days before the meeting, and is subject to inspection
there by any stockholder during business hours. The list is also available for
inspection at the stockholder meeting. RSFC, like FUNC, is governed by the
provisions of the NCBCA relating to the rights of stockholders to inspect and
copy certain corporate records, as described below.
FUNC. Under the NCBCA, qualified stockholders have the right to inspect and
copy certain records of FUNC if their demand is made in good faith and for a
proper purpose. Such right of inspection requires that the stockholder give FUNC
at least five business days' written notice of the demand, describing with
reasonable particularity his purpose and the requested records. The records must
be directly connected with the stockholder's purpose. The rights of inspection
and copying extend not only to stockholders of record but also to beneficial
owners whose beneficial ownership is certified to FUNC by the stockholder of
record. However, FUNC is under no duty to provide any accounting records or any
records with respect to any matter that FUNC determines in good faith may, if
disclosed, adversely affect FUNC in the conduct of its business or may
constitute material non-public information, and the rights of inspection and
copying are limited to stockholders who either have been stockholders for at
least six months or who hold at least five percent of the outstanding shares of
any class of stock of FUNC. A stockholder's agent or attorney has the same
inspection and copying rights as the stockholder he represents.
In addition, after fixing a record date for a stockholders' meeting, FUNC
is required to prepare a stockholder list with respect to such stockholders'
meeting and to make such list available at FUNC's principal office or at a place
identified in the meeting notice to any stockholder beginning two business days
after notice of such meeting is given and continuing through such meeting and
any adjournment thereof. Subject to the applicable provisions of the NCBCA, a
stockholder or his agent or attorney upon written demand at his own expense
during regular business hours is entitled to copy such list. Such list must be
available at the stockholders' meeting, and any stockholder, his agent or
attorney, may inspect such list at any time during the meeting or any
adjournment thereof.
REQUIRED STOCKHOLDER VOTE FOR CERTAIN ACTIONS
RSFC. The RSFC Articles provide that, in addition to any vote requirements
of the NCBCA, an affirmative vote of at least 75 percent of the holders of
outstanding shares of RSFC Common Stock entitled to vote is required to amend or
repeal provisions concerning (i) the calling of a special meeting of the
stockholders, (ii) the requirements for removal of a director or the entire
board, (iii) the board classification system, (iv) the amendment or repeal of
the Bylaws, (v) indemnification of directors, (vi) directors' exemption from
personal liability, and (vii) any amendment or repeal of Article 13 of the RSFC
Articles, which sets forth the voting requirements described above. The RSFC
Articles also provide that the affirmative vote of at least 80 percent of the
holders of outstanding shares of RSFC Common Stock entitled to vote is required
to amend or repeal the provisions relating to the approval of Business
Combinations (as such term is defined in the RSFC Articles). See
" -- Anti-Takeover Provisions" for a discussion of the stockholder vote required
for such Business Combinations.
FUNC. Under North Carolina law, except as otherwise provided below or in
the NCBCA, any plan of merger or share exchange to which FUNC is a party, would
require adoption by the Board of Directors, who would generally be required to
recommend its approval to the stockholders, who in turn would be required to
approve the plan by a vote of a simple majority of the outstanding shares.
Except as otherwise provided below or in the NCBCA, any sale, lease, exchange or
other disposition of all or substantially all of FUNC's assets not made in the
usual and regular course of business would generally require that the Board of
Directors recommend the proposed transaction to the stockholders who would be
required to approve the transaction by a vote of a simple majority of the
outstanding shares. In accordance with North Carolina law, the submission by the
Board of Directors of any such action may be conditioned on any basis,
including, without limitation, conditions
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regarding a supermajority voting requirement or that no more than a certain
number of shares indicate that they will seek dissenters' rights.
With respect to a plan of merger to which FUNC is a party, no vote of the
stockholders of FUNC is required if FUNC is the surviving corporation and: (i)
the FUNC Articles would remain unchanged after the merger, subject to certain
exceptions; (ii) each stockholder of FUNC immediately before the merger would
hold an identical number of shares, with identical designations, limitations,
preferences and relative rights, after the merger; (iii) the number of shares of
FUNC stock entitled to vote unconditionally in the election of directors to be
issued in the merger (either by the conversion of securities issued in the
merger or by the exercise of rights and warrants issued in the merger) would not
exceed 20 percent of the shares of FUNC stock entitled to vote unconditionally
in the election of directors outstanding immediately before the merger; and (iv)
the number of shares of FUNC stock entitling holders to participate without
limitation in distributions to be issued in the merger (either by the conversion
of securities issued in the merger or by the exercise of rights and warrants
issued in the merger) would not exceed 20 percent of the shares of FUNC stock
entitling holders to participate without limitation in distributions outstanding
immediately before the merger.
In addition, no vote of the stockholders of FUNC would be required to merge
a subsidiary of which FUNC owns at least 90 percent of the outstanding shares of
each class of subsidiary shares, into FUNC, as long as no amendment is made to
the FUNC Articles that could not be made without approval of FUNC's
stockholders.
With respect to a sale, lease, exchange or other disposition of all or
substantially all the assets of FUNC made upon the authority of the Board of
Directors, no vote of the stockholders of FUNC would be required if such
disposition is made in the usual and regular course of business or if such
disposition is made to a wholly-owned subsidiary of FUNC.
ANTI-TAKEOVER PROVISIONS
RSFC. RSFC has elected not to be covered by the North Carolina Shareholder
Protection Act. However, the provisions of the North Carolina Control Share
Acquisition Act are applicable.
Certain provisions of the RSFC Articles and Bylaws may be deemed to have an
anti-takeover effect in that they could prevent, discourage or delay any change
in control of RSFC. The following summary describes such material provisions.
The summary is not intended to be complete and is qualified in all respects by
the information contained in the RSFC Articles and Bylaws. The purpose of these
provisions in general is, among other things, to facilitate stability of
leadership and enhance the role of the RSFC Board in connection with attempts to
acquire control of RSFC so the RSFC Board can further and protect the interests
of RSFC, its stockholders, and its other constituencies, as appropriate under
the circumstances. However, these provisions also may tend to discourage some
acquisition proposals. As a result, RSFC's stockholders may be deprived of
opportunities to sell some or all of their shares at prices that represent a
premium over prevailing market prices. These provisions also may discourage open
market purchases by a potential acquiror that might otherwise increase the
market price of RSFC Common Stock temporarily, enabling stockholders to sell
their shares at a price higher than that which would otherwise prevail. In
addition, these provisions may decrease the market price of RSFC Common Stock by
making it less attractive to persons who invest in securities in anticipation of
a price increase if an acquisition proposal is made. These provisions also may
make it more difficult and time consuming for a potential acquiror to obtain
control of RSFC by replacing the RSFC Board, and thereby, management.
ISSUING STOCK. The RSFC Articles authorize the issuance of up to 30,000,000
shares of RSFC Common Stock and 10,000,000 shares of RSFC Preferred Stock. The
authority to issue additional shares generally and to establish classes or
series with voting powers, designations, preferences and rights as it
determines, without further stockholder approval or authorization (subject to
applicable laws, rules, and regulations), provides the RSFC Board with some
ability to prevent a change in control despite a shift in ownership of RSFC
Common Stock and may help discourage or delay a change in control by increasing
the number of shares needed to gain control of RSFC.
BOARD STRUCTURE. The classification of the RSFC Board as described above
may also have an anti-takeover effect. Because only one-third of the members of
the RSFC Board are elected each year, at least two annual meetings would be
required for an Interested Stockholder (as defined in the RSFC Articles) to
change a majority of the members constituting the RSFC Board.
SUPERMAJORITY REQUIREMENTS. The RSFC Articles contain certain supermajority
voting requirements. Such voting requirements may have an anti-takeover effect
in that they make it more difficult for an Interested Stockholder to change
provisions concerning pricing and voting in Business Combinations (as such term
is defined in the RSFC Articles) and other
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actions that could enhance the Interested Stockholder's control. See
" -- Amendment to Articles of Incorporation or Bylaws", " -- Required
Stockholder Vote for Certain Actions" and " -- FAIR PRICE PROVISIONS".
FAIR PRICE PROVISIONS. The RSFC Articles require the affirmative vote of 80
percent of the outstanding shares of RSFC Common Stock entitled to vote to
approve a Business Combination. Business Combination is defined in the RSFC
Articles generally as (i) any merger or consolidation of RSFC with an Interested
Stockholder (as defined in the RSFC Articles); (ii) any sale, lease, exchange,
transfer or other disposition of 25 percent or more of the assets of RSFC to any
Interested Stockholder; (iii) the issuance or transfer by RSFC of any of its
securities to any Interested Stockholder in exchange for cash, securities or
other property having a fair market value of 25 percent or greater of the
combined assets of RSFC; or (iv) any reclassification of securities or
recapitalization of RSFC, or merger or consolidation which has the effect,
directly or indirectly, of increasing the proportionate share of the outstanding
shares of any class which is owned by an Interested Shareholder. The RSFC
Articles provide that the 80 percent vote requirement will not apply in the case
of a Business Combination only if: (i) the Business Combination has been
approved by a majority of the Disinterested Directors (as defined in the RSFC
Articles) or (ii) all of the following conditions have been met: (A) the
aggregate consideration to be received per share of RSFC Common Stock by RSFC's
stockholders is not less than the higher of (1) the highest per share price paid
by the Interested Stockholder for RSFC Common Stock acquired by it within the
two-year period immediately prior to the announcement of the Business
Combination or the date the person became an Interested Shareholder and (2) the
fair market value per share of RSFC Common Stock on such announcement date or on
the date on which the person became an Interested Stockholder; (B) the aggregate
consideration to be received by RSFC's stockholders per share of any other class
of RSFC's voting stock is at least the higher of (1) the highest price per share
paid by the Interested Stockholder for shares of such other class of voting
stock within two years preceding the announcement of the Business Combination or
the date the person became an Interested Stockholder, (2) the highest
preferential amount per share to which the holders of shares of such other class
are entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of RSFC, and (3) the fair market value per share of
such other class of stock on the announcement date or the date the person became
an Interested Stockholder; (C) the consideration to be received by RSFC's
stockholders is in cash or in the same form as the consideration paid by the
Interested Stockholder in acquiring shares already owned (provided, that if the
Interested Stockholder has paid varying forms of consideration, the form of
consideration paid to RSFC's stockholders in the Business Combination must be
either cash or the form used to acquire the largest number of shares of such
class of voting stock already owned); (D) except as approved by a majority of
the Disinterested Directors, after the Interested Stockholder has become such
and prior to the consummation of the Business Combinations (1) there has been no
failure to declare and pay at the regular rate any full quarterly dividends on
any outstanding RSFC Preferred Stock or reduction in the annual rate of
dividends paid on RSFC Common Stock, (2) the Interested Stockholder shall not
have acquired beneficial ownership of any additional shares of RSFC voting
stock, and (3) after becoming an Interested Stockholder, such person shall not
have received the benefit of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantages provided by
RSFC; and (E) a proxy or information statement in conformity with the Exchange
Act and rules and regulations thereunder shall be mailed to all stockholders of
RSFC at least 30 days prior to the consummation of such Business Combination.
FUNC. North Carolina has two anti-takeover statutes in force, The North
Carolina Shareholder Protection Act and The North Carolina Control Share
Acquisition Act. These statutes restrict business combinations with, and the
accumulation of shares of voting stock of, certain North Carolina corporations.
In accordance with the provisions of these statutes, FUNC elected not to be
covered by the restrictions imposed by these statutes. As a result, such
statutes do not apply to FUNC. In addition, North Carolina has a Tender Offer
Disclosure Act, which contains certain prohibitions against deceptive practices
in connection with making a tender offer and also contains a filing requirement
with the North Carolina Secretary of State that has been held unenforceable as
to its 30-day waiting period.
DISSENTERS' RIGHTS
RSFC. RSFC, like FUNC, is governed by the requirements of the NCBCA with
respect to dissenters' rights.
FUNC. North Carolina law generally provides dissenters' rights for mergers
and certain share exchanges that would require stockholder approval, sales of
all or substantially all of the assets (other than sales that are in the usual
and regular course of business and certain liquidations and court-ordered
sales), certain amendments to the articles of incorporation and any corporate
action taken pursuant to a stockholder vote to the extent the articles of
incorporation, bylaws or a resolution of the board of directors entitles
stockholders to dissent.
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DIVIDENDS AND OTHER DISTRIBUTIONS
RSFC. The RSFC Board may declare and RSFC may pay dividends on outstanding
shares in cash, property, or its own shares pursuant to law and subject to the
provisions of the RSFC Articles.
FUNC. Under North Carolina law, FUNC generally may make dividends or other
distributions to its stockholders unless after the distribution either: (i) FUNC
would not be able to pay its debts as they become due in the usual course of
business; or (ii) FUNC's assets would be less than the sum of its liabilities
plus the amount that would be needed to satisfy the preferential dissolution
rights of stockholders whose preferential rights are superior to those receiving
the distribution. See "FUNC -- Certain Regulatory Considerations; PAYMENT OF
DIVIDENDS" and "DESCRIPTION OF FUNC CAPITAL STOCK".
VOLUNTARY DISSOLUTION
RSFC. In the event of a liquidation, dissolution, or winding-up of RSFC,
whether voluntary or involuntary, the holders of RSFC Common Stock would be
entitled to ratably receive, after payment of or making of adequate provisions
for all debts and liabilities of RSFC and after the rights, if any, of preferred
stockholders of RSFC are satisfied, all remaining assets of RSFC available for
distribution.
In connection with Raleigh Federal's conversion from mutual to stock form
in 1987, Raleigh Federal established a liquidation account for the benefit of
certain eligible account holders who maintained their accounts in Raleigh
Federal. In the event of a complete liquidation of RSFC and Raleigh Federal,
such holders would be entitled to receive liquidating distributions of any
assets remaining after payment of all creditors' claims (including the claims of
all depositors to the withdrawal values of their deposit accounts, including
accrued interest) before any distributions are made on Raleigh Federal's common
stock, equal to such holders' proportionate interest in the remaining
liquidation account balance of Raleigh Federal in accordance with the
regulations of the OTS. The Mergers are not considered to be a liquidation of
RSFC or Raleigh Federal and as such will not affect Raleigh Federal's
liquidation account. Upon consummation of the Bank Merger, FUNB-NC will assume
Raleigh Federal's liquidation account.
FUNC. North Carolina law provides that FUNC may be dissolved if the Board
of Directors of FUNC proposes dissolution and a majority of the shares of FUNC
entitled to vote thereon approves. In accordance with North Carolina law, the
Board of Directors of FUNC may condition its submission of a proposal for
dissolution on any basis.
RESALE OF FUNC COMMON SHARES
The FUNC Common Shares have been registered under the Securities Act,
thereby allowing such shares to be traded freely and without restriction by
those holders of RSFC Common Stock who receive such shares following
consummation of the Corporate Merger and who are not deemed to be "affiliates"
(as defined under the Securities Act, but generally including directors, certain
executive officers and ten percent or more stockholders) of RSFC or FUNC. It is
a condition to consummation of the Mergers that each holder of RSFC Common Stock
who is deemed by RSFC to be an affiliate has entered into an agreement with FUNC
providing, among other things, that such affiliate will not transfer any FUNC
Common Shares received by such affiliate in the Corporate Merger except in
compliance with the Securities Act. This Prospectus/Proxy Statement does not
cover any resales of FUNC Common Shares received by affiliates of RSFC.
ADDITIONAL MATTERS
From time to time FUNB-NC has entered into transactions with certain of the
directors of RSFC and their affiliates in the ordinary course of business,
including, without limitation, maintaining deposit and lending relationships.
VALIDITY OF FUNC COMMON SHARES
The validity of the FUNC Common Shares being offered hereby is being passed
upon for FUNC by Marion A. Cowell, Jr., Esq., Executive Vice President,
Secretary and General Counsel of FUNC. Mr. Cowell is also a stockholder of FUNC
and holds options to purchase additional shares of FUNC Common Stock.
EXPERTS
The consolidated balance sheets of RSFC as of December 31, 1994 and 1993,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the years in the three-year period ended December 31,
1994,
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included in RSFC's Annual Report on Form 10-K for the year ended December 31,
1994, have been included herein in reliance on the report of McGladrey & Pullen,
L.L.P., independent certified public accountants, and upon the authority of said
firm as experts in accounting and auditing.
The consolidated balance sheets of FUNC as of December 31, 1994 and 1993,
and the related consolidated statements of income, changes in stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1994, included in FUNC's 1994 Annual Report to Stockholders which
is incorporated by reference in FUNC's 1994 Annual Report on Form 10-K and
incorporated by reference herein, have been incorporated by reference herein in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing. The aforementioned report of KPMG
Peat Marwick LLP covering FUNC's consolidated financial statements refers to a
change in the method of accounting for investments in 1994.
The consolidated statements of condition of FFB as of December 31, 1994 and
1993, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1994, included in FFB's 1994 Annual Report on Form
10-K and incorporated by reference herein, have been incorporated by reference
herein in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing. The aforementioned
report of KPMG Peat Marwick LLP covering FFB's consolidated financial statements
refers to changes in the methods of accounting for income taxes, postretirement
benefits other than pensions, postemployment benefits, and investments in 1993.
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ANNEX A
AGREEMENT AND PLAN OF MERGERS
This AGREEMENT AND PLAN OF MERGERS, is made and entered into as of May 30,
1995 (this "Plan"), by and among RS FINANCIAL CORP., a North Carolina
corporation ("RSFC"), RALEIGH FEDERAL SAVINGS BANK, a federal savings bank ("RF
Bank"), FIRST UNION CORPORATION, a North Carolina corporation ("First Union"),
and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking association
("FUNB-NC").
RECITALS:
(A) RSFC. RSFC is a corporation duly organized, validly existing and in
good standing under the laws of the State of North Carolina, with its principal
executive offices located in Raleigh, North Carolina. RSFC is a registered
savings and loan holding company under the Home Owners' Loan Act of 1933, as
amended ("HOLA"). As of the date hereof, RSFC has 30,000,000 authorized shares
of common stock, each of $1.00 par value ("RSFC Common Stock"), and 10,000,000
authorized shares of serial preferred stock, each of $1.00 par value ("RSFC
Preferred Stock") (no other class of capital stock being authorized), of which
2,722,300 shares of RSFC Common Stock and no shares of RSFC Preferred Stock are
issued and outstanding.
(B) RF BANK. RF Bank is a stock federal savings bank duly organized and
validly existing under the laws of the United States, with its principal
executive offices located in Raleigh, North Carolina. As of the date hereof, RF
Bank has 30,000,000 authorized shares of common stock, each of $1.00 par value
("Bank Common Stock"), and 10,000,000 authorized shares of preferred stock, each
of $1.00 par value ("Bank Preferred Stock")(no other class of capital stock
being authorized), of which 3,450,000 shares of Bank Common Stock are issued and
outstanding and owned by RSFC and no shares of Bank Preferred Stock are issued
and outstanding. As of March 31, 1995, RF Bank had capital of $65,099,000,
divided into common stock of $3,450,000, surplus of $26,314,000 and undivided
profits, including capital reserves, of $36,247,000, and net unrealized gain
(loss) on investment securities of ($912,000).
(C) FIRST UNION. First Union is a corporation duly organized and existing
in good standing under the laws of the State of North Carolina, with its
principal executive offices located in Charlotte, North Carolina. As of the date
hereof, First Union has 750,000,000 authorized shares of common stock, each of
$3.33 1/3 par value (together with the First Union Rights (as hereinafter
defined) attached thereto, "First Union Common Stock"), 40,000,000 authorized
shares of Class A Preferred Stock, no par value ("First Union Class A Preferred
Stock"), and 10,000,000 authorized shares of Preferred Stock, no par value
("First Union Preferred Stock") (no other class of capital stock being
authorized), of which 171,669,951 shares of First Union Common Stock, no shares
of First Union Class A Preferred Stock and no shares of Preferred Stock were
issued and outstanding as of April 30, 1995.
(D) FUNB-NC. FUNB-NC is a national banking association duly organized and
existing under the laws of the United States, with its principal executive
offices located in Charlotte, North Carolina. As of the date hereof, FUNB-NC has
7,500,000 authorized shares of common stock, each of $15.00 par value ("FUNB-NC
Common Stock") (no other class of capital stock being authorized), of which
5,519,634 shares are issued and outstanding and owned by First Union (other than
directors' qualifying shares). As of March 31, 1995, FUNB-NC had capital of
$1,438,493,000, divided into common stock of $82,795,000, surplus of
$335,982,000 and undivided profits, including capital reserves, of
$1,038,553,000, and net unrealized gain (loss) on investment securities of
($18,837,000).
(E) RIGHTS, ETC. Except as Previously Disclosed in SCHEDULE 5.3, there are
no shares of capital stock of RSFC or RF Bank authorized and reserved for
issuance, neither RSFC nor RF Bank has any Rights issued or outstanding and RSFC
has no commitment to authorize, issue or sell any such shares or any Rights,
except pursuant to this Plan. There are no preemptive rights in respect of RSFC
Common Stock.
(F) APPROVALS. The Board of Directors of each of RSFC, RF Bank, First Union
and FUNB-NC has duly approved, at meetings duly called and held of each of such
Boards of Directors, this Plan and has duly authorized the execution and
delivery hereof in counterparts.
In consideration of their mutual promises and obligations, the parties
hereto adopt and make this Plan and prescribe the terms and conditions thereof
and the manner and basis of carrying it into effect, which shall be as follows:
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ARTICLE I
DEFINITIONS
"Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated
under the 1934 Act.
"Allowance" shall have the meaning set forth in SECTION 5.11 of this Plan.
"Articles of Merger" shall have the meaning set forth in SECTION 2.4 of
this Plan.
"Asset Classification" shall have the meaning set forth in SECTION 5.28 of
this Plan.
"Authorizations" shall have the meaning set forth in SECTION 5.2 of this
Plan.
"Average Market Price" shall have the meaning set forth in SECTION 3.1 of
this Plan.
"Bank Common Stock" shall have the meaning set forth in the Recitals of
this Plan.
"Bank Merger" shall have the meaning set forth in SECTION 2.2 of this Plan.
"Bank Preferred Stock" shall have the meaning set forth in the Recitals of
this Plan.
"Closing" shall have the meaning set forth in SECTION 2.3 of this Plan.
"Closing Date" shall have the meaning set forth in SECTION 2.3 of this
Plan.
"Consideration" shall have the meaning set forth in SECTION 3.1 of this
Plan.
"Continuing Bank" shall have the meaning set forth in SECTION 2.2 of this
Plan.
"Continuing Corporation" shall have the meaning set forth in SECTION 2.1 of
this Plan.
"Corporate Merger" shall have the meaning set forth in SECTION 2.1 of this
Plan.
"Costs" shall have the meaning set forth in SECTION 10.3 of this Plan.
"Derivatives Contract" shall have the meaning set forth in SECTION 5.31 of
this Plan.
"Effective Time" shall mean the time specified pursuant to SECTION 2.4
hereof as the effective time of the Merger.
"Employee Benefit Plan" shall mean any (i) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (ii) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (iii) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan, (iv)
Employee Welfare Benefit Plan or material fringe benefit plan or program, or (v)
stock option, stock purchase, stock appreciation. stock or cash bonus, or
similar plan or arrangement.
"Employee Pension Benefit Plan" shall have the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" shall have the meaning set forth in ERISA
Section 3(1).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Agent" shall mean FUNB-NC, in its capacity as exchange agent for
the exchange of shares of RSFC Common Stock for shares of First Union Common
Stock upon consummation of the Corporate Merger.
"Exchange Ratio" shall have the meaning set forth in SECTION 3.1 of this
Plan.
"Excluded Shares" shall have the meaning set forth in SECTION 3.1 of this
Plan.
"FDIC" shall mean the Federal Deposit Insurance Corporation, or any
successor thereto.
"Federal Reserve" shall mean the Federal Reserve Bank of Richmond acting
under delegated authority from the Federal Reserve Board, or any successor
thereto.
"Federal Reserve Board" shall mean the Board of Governors of the Federal
Reserve System, or any successor thereto.
"FHL Bank" shall have the meaning set forth in SECTION 5.4(C) of this Plan.
"Fiduciary" shall have the meaning set forth in ERISA Section 3(21).
"First Union" shall have the meaning set forth in the introductory
paragraph of this Plan.
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"First Union Class A Preferred Stock" shall have the meaning set forth in
the Recitals of this Plan.
"First Union Common Stock" shall have the meaning set forth in the Recitals
of this Plan.
"First Union Financial Reports" shall have the meaning set forth in SECTION
6.4 of this Plan.
"First Union Preferred Stock" shall have the meaning set forth in the
Recitals of this Plan.
"First Union Rights" shall have the meaning set forth in SECTION 3.1 of
this Plan.
"First Union Rights Agreement" shall have the meaning set forth in SECTION
3.1 of this Plan.
"FUNB-NC" shall have the meaning set forth in the introductory paragraph of
this Plan.
"FUNB-NC Common Stock" shall have the meaning set forth in the Recitals of
this Plan.
"GAAP" shall mean generally accepted accounting principles in effect in the
United States from time to time, as applied by the entity in respect of which
the term is used consistently with its past practices.
"HOLA" shall have the meaning set forth in the Recitals of this Plan.
"HSR Act" shall have the meaning set forth in SECTION 5.6(C) of this Plan.
"IRS" shall mean the Internal Revenue Service.
"Indemnified Party" shall have the meaning set forth in SECTION 8.1 of this
Plan.
"Knowledge," when used in the phrase "to the knowledge" or a similar
phrase, shall mean the actual knowledge of the executive officers (including,
without limitation, the executive officers responsible for Tax matters) of RSFC,
RF Bank, First Union or FUNB-NC, as applicable, after reasonable inquiry of the
other executive officers and the directors of RSFC, RF Bank, First Union or
FUNB-NC, as applicable, and the Persons responsible for the day-to-day
operations of the RSFC Subsidiaries or the First Union Subsidiaries, as
applicable.
"Lien" shall mean any lien, claim, encumbrance, security interest,
assessment, charge, restriction (including restriction on voting rights or
rights of disposition), mortgage, deed of trust, equity of any character, third
party right of whatever nature or other similar or like charge.
"Material Adverse Event" shall mean an event, occurrence or circumstance
(including without limitation, any breach of a representation or warranty
contained herein by such party) which (1) has a material adverse effect on the
properties, financial condition, results of operations, business or prospects of
such party and its subsidiaries, taken as a whole, or (2) would materially
impair such party's, or any affiliated party's (which includes, as to RSFC, the
RSFC Subsidiaries), ability to perform its obligations under this Plan or the
consummation of any of the transactions contemplated hereby; PROVIDED, that a
Material Adverse Event shall not include effects resulting from general economic
conditions, or changes in a party's financial condition as a result of changes
in accounting practices or changes to statutes, regulations or regulatory
policies (and interpretations thereof by the courts or governmental entities)
that have not resulted in materially more severe adverse changes than that
experienced by similarly situated financial institutions.
"Mergers" shall have the meaning set forth in SECTION 2.2 of this Plan.
"Multiemployer Plan" shall have the meaning set forth in ERISA Section
3(37).
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NCBCA" shall mean the North Carolina Business Corporation Act.
"NYSE" shall have the meaning set forth in SECTION 3.1 of this Plan.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"OCC" shall mean the Office of the Comptroller of the Currency.
"Ordinary Course of Business" shall mean the ordinary course of business of
the entity respecting which this term is used, conducted in the same manner as
theretofore conducted since January 1, 1993, and consistent with the entity's
past policies, practices, and methods (including with respect to quantity and
frequency) in effect during such period.
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"OTS" shall mean the Office of Thrift Supervision of the U.S. Department of
the Treasury.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Person" shall mean an individual, a partnership, a corporation, a
commercial bank, an industrial bank, a savings association, a savings bank, a
limited liability company, an association, a joint stock company, a trust, a
business trust, a joint venture, an unincorporated organization, or a
governmental entity (or any department, agency, or political subdivision
thereof).
"Plan" shall have the meaning set forth in the introductory paragraph to
this Plan.
"Plan of Merger" shall have the meaning set forth in SECTION 2.4 of this
Plan.
"Previously Disclosed" shall mean, as to RSFC, all information disclosed in
schedules delivered by RSFC to First Union, and, as to First Union, all
information disclosed in schedules to this Plan delivered by First Union to
RSFC, in each case delivered contemporaneously with the execution of this Plan
and making such disclosure specifically referring to this Plan and specifically
designated as information "Previously Disclosed" pursuant to this Plan arranged
in paragraphs corresponding to the Sections, subsections and items of this Plan
applicable thereto. Information shall be deemed Previously Disclosed for the
purpose of a given Section, subsection or item only to the extent a specific
reference thereto is made in connection with disclosure of such information.
"Prohibited Transaction" shall have the meaning set forth in ERISA Section
406 and Tax Code Section 4975.
"Proxy Statement" shall have the meaning set forth in SECTION 7.5(A) of
this Plan.
"Registration Statement" shall have the meaning set forth in SECTION 7.5(A)
of this Plan.
"Regulatory Agreement" shall have the meaning set forth in SECTION 5.13(A)
of this Plan.
"Regulatory Approvals" shall mean the order of the Federal Reserve Board
(or, if applicable, of the Federal Reserve acting under delegated authority)
approving the Mergers and the required order, approval, or exemption of the
FDIC, the OTS, the OCC or any other Regulatory Authority approving the Corporate
Merger and/or the Bank Merger.
"Regulatory Authorities" shall have the meaning set forth in SECTION
5.13(A) of this Plan.
"Reportable Event" shall have the meaning set forth in ERISA Section 4043.
"RF Bank" shall have the meaning set forth in the introductory paragraph of
this Plan.
"RF Bank OTS Financial Reports" shall have the meaning set forth in SECTION
5.7 of this Plan.
"Rights" shall mean warrants, calls, commitments, options, rights (whether
stock appreciation rights, conversion rights, exchange rights, profit
participation rights, or otherwise), securities or obligations convertible into
or exchangeable for, or giving any Person any right to subscribe for or acquire,
and other arrangements or commitments which obligate a Person to issue,
otherwise cause to become outstanding, sell, transfer, pledge, or otherwise
dispose of any of its capital stock or other ownership interests, or any voting
rights thereof or therein, or to pay monetary sums by reference to the existence
or market valuation, or in lieu and place, of any of its capital stock or
ownership interests therein.
"RSFC" shall have the meaning set forth in the introductory paragraph of
this Plan.
"RSFC Benefit Equivalency Plan" shall mean the non-qualified supplemental
pension plan adopted by RF Bank.
"RSFC Benefit Plans" shall have the meaning set forth in SECTION 5.14(A) of
this Plan.
"RSFC Branch Plan" shall mean the RF Bank Retail Management Incentive Plan.
"RSFC Common Stock" shall have the meaning set forth in the Recitals of
this Plan.
"RSFC Deferred Compensation Plans" shall mean (i) the RSFC Directors Plan
and (ii) any Previously Disclosed deferred compensation agreements and related
agreements maintained for current or former officers and/or directors of RSFC or
an RSFC Subsidiary.
"RSFC Directors Plan" means the RF Bank Directors' Deferred Fee Plan.
"RSFC Dissenting Shareholders" shall have the meaning set forth in SECTION
3.7 of this Plan.
"RSFC ERISA Plan" shall have the meaning set forth in SECTION 5.14(A) of
this Plan.
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"RSFC Financial Reports" shall have the meaning set forth in SECTION 5.7 of
this Plan.
"RSFC Incentive Plan" shall mean the RF Bank 1993 Incentive Compensation
Plan.
"RSFC Option Plans" shall mean the RSFC Long-Term Incentive Stock Option
Plan and all other plans of RSFC, or any RSFC Subsidiary or predecessor thereof
adopted or assumed by RSFC, providing for the granting, acquisition and/or
exercise of Rights.
"RSFC 401(k) Plan" shall mean the RF Bank Employees' Savings Plus Plan.
"RSFC Pension Plan" shall mean the RSFC noncontributory defined benefit
pension plan.
"RSFC Preferred Stock" shall have the meaning set forth in the Recitals of
this Plan.
"RSFC Shareholder Financial Reports" shall have the meaning set forth in
SECTION 5.7 of this Plan.
"RSFC Stock Options" shall mean all Rights outstanding as of the date of
the execution of this Plan under any RSFC Option Plan.
"RSFC Subsidiaries" shall mean any and all of RF Bank and the subsidiaries
of RF Bank, 1905 Corporation and Builders Acceptance Corporation.
"SAIF" shall have the meaning set forth in SECTION 5.4(C) of this Plan.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC Document" shall mean any registration statement, document, report,
notice or other filing filed by RSFC or First Union, as applicable, with the SEC
pursuant to the 1933 Act or the 1934 Act.
"Securities Laws" shall have the meaning set forth in SECTION 5.6(C) of
this Plan.
"Shareholders' Meeting" shall have the meaning set forth in SECTION 7.6 of
this Plan.
"Significant Contract" shall mean, with respect to RSFC and any RSFC
Subsidiary, (a) any note, bond, mortgage or other instrument which evidences or
secures indebtedness of such Person (other than a deposit) with a balance
outstanding of $100,000 or more, which cannot be redeemed or prepaid at the
option of such Person for an amount which, when added to the outstanding
principal balance, would be less than $100,000, (b) any agreement, arrangement,
commitment, contract or other instrument, except a lease of real or personal
property, to which such Person is a party or by which they are bound, if (i)
such agreement, arrangement, commitment, contract or instrument was not made in
the Ordinary Course of Business by such Person, or (ii) the performance or
nonperformance of such agreement, arrangement, commitment, contract or
instrument could either (X) increase the liabilities or decrease the assets of
the Person, or (Y) decrease the income or increase the expenses of such Person,
in each case by $100,000 or more over the remaining term of the obligation,
exclusive of all optional renewal periods and extensions of the term. It is
understood that Significant Contracts do not include loans or commitments to
fund loans or to extend credit.
"Significant Lease" shall mean, with respect to RSFC and any RSFC
Subsidiary, (a) any lease of real or personal property, or any sublease of real
property, by such Person, as lessee, pursuant to which such Person reasonably
anticipates the payment of aggregate rent, Taxes, insurance, utilities (if
applicable) and other charges in excess of $100,000 over the remaining term of
the lease, exclusive of all optional renewal periods and optional extensions of
the term; or (b) any lease of real or personal property, or any sublease of real
property, by such Person, as lessor, pursuant to which such Person reasonably
anticipates the collection of aggregate rent in excess of $100,000 over the
remaining term of the lease, exclusive of all optional renewal periods and
extensions of the term.
"Tax" or "Taxes" shall mean any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, withholding, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes
under Tax Code Section 59A), customs duties, capital stock, franchise, profits,
social security (or similar), unemployment, disability, production, recording,
documentary, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax or taxes of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
"Tax Code" shall mean the Internal Revenue Code of 1986, as amended.
"Tax Return" shall mean any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
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"Trident" shall mean Trident Financial Corporation, Raleigh, North
Carolina.
Other terms used herein are defined elsewhere in this Plan.
ARTICLE II
THE MERGERS
2.1 THE CORPORATE MERGER. On the Closing Date:
(A) THE CONTINUING CORPORATION. RSFC shall merge with and into First Union
(the "Corporate Merger"), the separate existence of RSFC shall cease and First
Union (the "Continuing Corporation") shall survive and the name of the
Continuing Corporation shall be "First Union Corporation".
(B) RIGHTS, ETC. The Continuing Corporation shall thereupon and thereafter
possess all of the rights, privileges, immunities and franchises, of a public as
well as of a private nature, of each of the merging corporations; and all
property, real, personal and mixed, and all debts due on whatever account, and
all other choses in action, and all and every other interest, of or belonging to
or due to each of the corporations so merged, shall be deemed to be vested in
the Continuing Corporation without further act or deed; and the title to any
real estate or any interest therein, vested in each of such corporations, shall
not revert or be in any way impaired by reason of the Corporate Merger.
(C) LIABILITIES. The Continuing Corporation shall thenceforth be
responsible and liable for all the liabilities, obligations and penalties of
each of the corporations so merged, in accordance with applicable law.
(D) ARTICLES OF INCORPORATION; BY-LAWS; DIRECTORS; OFFICERS. The Articles
of Incorporation and By-laws of the Continuing Corporation shall be those of
First Union, as in effect immediately prior to the Corporate Merger becoming
effective. The directors and officers of First Union in office immediately prior
to the Corporate Merger becoming effective shall be the directors and officers
of the Continuing Corporation, together with such additional directors and
officers as may thereafter be elected, who shall hold office until such time as
their successors are elected and qualified.
2.2 THE BANK MERGER. On the day following the Closing Date or as soon
thereafter as FUNB-NC may deem appropriate:
(A) THE CONTINUING BANK. RF Bank shall be merged with and into FUNB-NC (the
"Bank Merger" and together with the Corporate Merger, the "Mergers"), the
separate existence of RF Bank shall cease and FUNB-NC (the "Continuing Bank")
shall survive; the name of the Continuing Bank shall be "First Union National
Bank of North Carolina"; and the Continuing Bank shall continue to conduct the
business of a national banking association at FUNB-NC's main office in
Charlotte, North Carolina and at the legally established branches of RF Bank and
FUNB-NC.
(B) RIGHTS, ETC. The Continuing Bank shall thereupon and thereafter possess
all the rights, privileges, immunities and franchises, of a public as well as of
a private nature, of each of the banks so merged; and all property, real,
personal and mixed, and all debts due on whatever account, and all other choses
in action, and all and every other interest, of or belonging to or due to each
of the banks so merged, shall be taken and deemed to be transferred to and
vested in the Continuing Bank without further act or deed, including
appointments, designations and nominations and all other rights and interests in
any fiduciary capacity; and the title to any real estate or any interest
therein, vested in each of such banks, shall not revert or be in any way
impaired by reason of the Bank Merger.
(C) LIABILITIES, ETC. The Continuing Bank shall thenceforth be responsible
and liable for all the liabilities, obligations and penalties of the banks so
merged (including liabilities arising out of the operation of any trust
departments). All rights of creditors and obligors and all liens on the property
of each of RF Bank and FUNB-NC shall be preserved unimpaired.
(D) CHARTER; BY-LAWS; DIRECTORS; OFFICERS. The Charter and By-Laws of the
Continuing Bank shall be those of FUNB-NC, as in effect immediately prior to the
Bank Merger becoming effective. The directors and officers of FUNB-NC in office
immediately prior to the Bank Merger becoming effective shall be the directors
and officers of the Continuing Bank, together with such additional directors and
officers as may thereafter be elected, who shall hold office until such time as
their successors are elected and qualified.
(E) OUTSTANDING STOCK OF THE CONTINUING BANK. The amount of the capital
stock of the Continuing Bank shall be not less than $1,197,264,000 and shall
consist of not less than 5,519,634 issued and outstanding shares of common
stock, each of $15.00 par value, and the issued and outstanding shares shall
remain issued and outstanding as shares of FUNB-NC, each of $15.00 par value,
and the holders thereof shall retain their rights therein.
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(F) OUTSTANDING STOCK OF RF BANK. Promptly after the Bank Merger becomes
effective, the Continuing Corporation shall deliver all of the issued and
outstanding shares of the capital stock of RF Bank to the Continuing Bank for
cancellation.
2.3 TIME AND PLACE OF CLOSING. The closing of the Corporate Merger (the
"Closing") will take place at the offices of Brooks, Pierce, McLendon, Humphrey
& Leonard, L.L.P., in Raleigh, North Carolina, on the date that the Effective
Time occurs (the "Closing Date"), or at such other place as may be mutually
agreed upon by RSFC and First Union.
2.4 EFFECTIVE TIME. The Corporate Merger shall become effective at the time
(the "Effective Time") specified in the Articles of Merger containing a Plan of
Merger in substantially the form of EXHIBIT A hereto (the "Plan of Merger") and
the other provisions required by, and executed in accordance with, Section
55-11-05 of the NCBCA (the "Articles of Merger") filed with the Secretary of
State of the State of North Carolina. Subject to the terms and conditions
hereof, the Effective Time shall be such time on such date as First Union shall
notify RSFC in writing not less than five days prior thereto, which date shall
not be more than 30 days after such conditions have been satisfied or waived in
writing.
2.5 RESERVATION OF RIGHT TO REVISE TRANSACTION. First Union may at any time
change the method of effecting the acquisition of RSFC and RF Bank (including
without limitation the provisions of this ARTICLE II) if and to the extent it
deems such change to be desirable; PROVIDED, HOWEVER, that no such change shall
(i) alter the type of consideration to be issued to the holders of RSFC Common
Stock as provided for in this Plan, (ii) reduce the value of such consideration,
(iii) adversely affect the intended tax-free treatment to RSFC's stockholders as
a result of receiving such consideration or prevent the parties from obtaining
the opinion of Sullivan & Cromwell referred to in SECTION 9.1(F) of this Plan,
or (iv) materially impair the ability to receive the Regulatory Approvals.
ARTICLE III
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of this ARTICLE III, at
the Effective Time, by virtue of the Corporate Merger and without any action on
the part of the holders thereof, each of the shares of RSFC Common Stock issued
and outstanding immediately prior to the Effective Time (excluding shares held
by RSFC, First Union, any RSFC Subsidiary or any First Union Subsidiary, in each
case other than in a fiduciary capacity or as a result of debts previously
contracted, and excluding shares held by RSFC Dissenting Shareholders (the
"Excluded Shares")) shall be converted into the right to receive the
Consideration (as defined below) in accordance with ARTICLE IV of this Plan.
Each of the shares of First Union Common Stock (including the rights ("First
Union Rights") issued pursuant to a Shareholder Protection Rights Agreement,
dated December 18, 1990 (as amended, the "First Union Rights Agreement")), and
any shares of any First Union Subsidiary or RSFC Subsidiary outstanding
immediately prior to the Effective Time shall continue to be issued and
outstanding, and shall not be converted, exchanged or altered in any manner as a
result of the Corporate Merger.
For purposes of this Plan: (1) "Average Market Price" shall mean the
average of the closing prices of First Union Common Stock as reported on the
Composite Transactions Tape of the New York Stock Exchange, Inc. ("NYSE") for
each of the ten consecutive trading days ending on and including the trading day
immediately preceding the Closing Date and (2) "Consideration"shall mean the
number of shares of First Union Common Stock equal to $40.25 divided by the
Average Market Price (such quotient rounded to four decimal places, the
"Exchange Ratio").
3.2 CONVERSION OF OPTIONS. At the Effective Time, all Rights with respect
to RSFC Stock Options granted under RSFC Option Plans, whether or not then
exercisable, shall be converted into and become Rights of the same type with
respect to First Union Common Stock, and First Union shall assume all
obligations of RSFC with respect to each RSFC Stock Option, in accordance with
the terms of the respective RSFC Option Plan under which it was issued and the
agreement with the holder thereof by which it may be evidenced. From and after
the Effective Time, (i) each RSFC Stock Option which is an option to acquire
RSFC Common Stock shall be assumed by First Union and may be exercised solely
for shares of First Union Common Stock, (ii) the number of shares of First Union
Common Stock subject to each RSFC Stock Option shall be equal to the number of
shares of RSFC Common Stock subject to such RSFC Stock Option immediately prior
to the Effective Time multiplied by the Exchange Ratio and rounding down to the
nearest whole share, and (iii) the per share exercise price under each such RSFC
Stock Option shall be adjusted by dividing such number of shares of First Union
Common Stock obtained in (ii) above into the result obtained by multiplying the
per share exercise price under each such option by the number of shares of RSFC
Common Stock covered by such option and rounding down to the nearest cent;
PROVIDED, HOWEVER, that the number of shares of First Union Common Stock subject
to each RSFC Stock Option and the per share exercise price shall be subject to
further adjustment as appropriate to reflect any stock split, stock dividend,
recapitalization or other similar transaction declared or effected by First
Union subsequent to the Effective Time. RSFC represents and warrants that
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the number of shares of RSFC Common Stock which are issuable upon exercise of
RSFC Stock Options as of the date hereof is Previously Disclosed in SCHEDULE
3.2. It is intended that the foregoing adjustments and assumption shall be
undertaken in a manner that will constitute a "modification"within the meaning
of, and that is otherwise consistent with, Tax Code Section 424(a) as to any
stock option which is an "incentive stock option" (as defined in Section 422 of
the Tax Code).
3.3 ANTI-DILUTION PROVISIONS. In the event First Union changes the number
of shares of First Union Common Stock issued and outstanding prior to the
Effective Time as a result of a stock split, stock dividend, recapitalization or
similar transaction with respect to the outstanding First Union Common Stock and
the record date therefor shall be prior to the Closing Date, the Consideration
and the Exchange Ratio shall be proportionately adjusted.
3.4 EXCLUDED SHARES. Each of the Excluded Shares shall be canceled and
retired at the Effective Time and no consideration shall be issued in exchange
therefor.
3.5 FRACTIONAL SHARES. Notwithstanding any other provision of this Plan,
each holder of shares of RSFC Common Stock converted pursuant to the Corporate
Merger, who would otherwise have been entitled to receive a fraction of a share
of First Union Common Stock (after taking into account all shares of RSFC Common
Stock owned by such holder) shall receive, in lieu thereof, an amount in cash
(without interest) determined by multiplying such fraction by the last sale
price of First Union Common Stock on the last trading day prior to the Closing
Date, as reported by the Composite Transactions reporting system of the NYSE (as
reported in THE WALL STREET JOURNAL).
3.6 TRANSFERS. At the Effective Time, the stock transfer books of RSFC
shall be closed and no transfer of RSFC Common Stock shall thereafter be made or
recognized. Any other provision of this Plan notwithstanding, none of RSFC,
First Union, the Exchange Agent or any affiliate of the foregoing shall be
liable to a holder of RSFC Common Stock for any amount paid or property
delivered in good faith to a public official pursuant to any applicable
abandoned property, escheat, or similar law.
3.7 DISSENTING SHAREHOLDERS. Notwithstanding any other provision of this
Plan, shares of RSFC Common Stock held by holders who did not vote in favor of
the Corporate Merger and who otherwise perfect dissenters' rights under Section
55-13-01 ET SEQ. of the NCBCA ("RSFC Dissenting Shareholders") shall not be
converted into or become shares of First Union Common Stock, but such shares of
RSFC Common Stock shall represent only the right to receive the "fair value" of
such shares as provided in the NCBCA. If any such holder shall have failed to
perfect or shall have effectively withdrawn or lost such dissenters' rights,
such shares of RSFC Common Stock shall thereupon be deemed to have been
converted and become shares of First Union Common Stock in accordance with the
Exchange Ratio as of the Effective Time without any interest thereon. RSFC shall
give First Union prompt notice of any purported exercise of dissenters' rights
and First Union shall have the right to participate in all negotiations and
proceedings with respect to any such demands. RSFC shall not, except with the
prior written consent of First Union, voluntarily make any payment with respect
to, or settle or offer or agree to settle, any such demand for payment.
ARTICLE IV
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. As promptly as practicable after the Effective
Time, First Union shall cause the Exchange Agent to mail appropriate transmittal
materials (which shall specify that delivery shall be effected, and risk of loss
and title to the certificates theretofore representing shares of RSFC Common
Stock shall pass, only upon proper delivery of such certificates to the Exchange
Agent) to the former shareholders of RSFC. After the Effective Time, each holder
of shares of RSFC Common Stock issued and outstanding at the Effective Time
(other than shares to be canceled pursuant to SECTIONS 3.4 OR 3.7 of this Plan)
shall surrender the certificate or certificates theretofore representing all of
such shares (or indemnity satisfactory to First Union and the Exchange Agent, in
their judgment, if any such certificates are lost, stolen or destroyed),
together with such transmittal materials properly executed, to the Exchange
Agent in exchange for the Consideration provided in SECTION 3.1 of this Plan,
together with all declared but unpaid dividends in respect of such shares (in
each case, without interest). The certificate or certificates of RSFC Common
Stock so surrendered shall be duly endorsed as the Exchange Agent may require.
To the extent provided by SECTION 3.5 of this Plan, each holder of shares of
RSFC Common Stock issued and outstanding at the Effective Time also shall
receive, upon surrender of the certificate or certificates representing such
shares, cash in lieu of any fractional shares of First Union Common Stock of
which such holder would otherwise be entitled (without interest). First Union
shall not be obligated to deliver the Consideration to which any former holder
of RSFC Common Stock is entitled as a result of the Corporate Merger until such
holder surrenders his certificate or certificates representing all of such
holder's shares of RSFC Common Stock for exchange as provided in this ARTICLE
IV. In addition, certificates surrendered
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for exchange by any Person constituting an "affiliate" of RSFC for purposes of
Rule 145(c) under the 1933 Act shall not be exchanged for certificates
representing shares of First Union Common Stock until First Union has received a
written agreement from such Person as provided in SECTION 7.7 of this Plan.
4.2 VOTING AND DIVIDENDS. Former shareholders of record of RSFC shall be
entitled to vote after the Effective Time at any meeting of shareholders of
First Union the number of whole shares of First Union Common Stock into which
their respective shares of RSFC Common Stock are converted, regardless of
whether such holders have exchanged their certificates representing RSFC Common
Stock for certificates representing First Union Common Stock in accordance with
the provisions of this Plan. Until surrendered for exchange in accordance with
the provisions of SECTION 4.1 of this Plan, each certificate theretofore
representing shares of RSFC Common Stock (other than shares to be canceled
pursuant to SECTION 3.4 OR 3.7 of this Plan) shall from and after the Effective
Time represent for all purposes only the right to receive shares of First Union
Common Stock and cash in lieu of fractional shares as set forth in this Plan.
Whenever a dividend or other distribution is declared by First Union on First
Union Common Stock, the record date for which is at or after the Effective Time,
the declaration shall include dividends or other distributions on all shares of
First Union Common Stock issuable pursuant to this Plan, but no dividend or
other distribution payable to the holders of record of First Union Common Stock
at or as of any time after the Effective Time shall be paid to the holder of any
shares of RSFC Common Stock issued and outstanding at the Effective Time until
such holder physically surrenders the certificates representing such shares for
exchange as provided in SECTION 4.1 of this Plan (without interest).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF RSFC AND RF BANK
Each of RSFC and RF Bank represents and warrants to First Union and FUNB-NC
as follows:
5.1 RECITALS. The facts set forth in the Recitals of this Plan with respect
to it are true and correct.
5.2 ORGANIZATION, STANDING, AND AUTHORITY. Except as Previously Disclosed
in SCHEDULE 5.2, it is duly qualified to do business and in good standing in all
jurisdictions (whether federal, state, local or foreign) where both its
ownership or leasing of property or the conduct of its business requires it to
be so qualified and the failure to do so would, individually or in the
aggregate, be reasonably likely to constitute a Material Adverse Event. It has
all requisite corporate power and authority to carry on its business
substantially as now conducted and to own, lease and operate its material
assets, properties and business, and to execute, deliver and perform its
obligations under this Plan. RSFC is duly registered as a savings and loan
holding company under the HOLA. It has in effect all federal, state, local and
foreign governmental, regulatory and other authorizations, permits and licenses
(collectively, "Authorizations") necessary for it to own or lease its material
properties and assets and to carry on its business substantially as now
conducted.
5.3 CAPITAL STOCK.
(a) All of the issued and outstanding shares of RSFC Common Stock are duly
and validly issued and outstanding and are fully paid and nonassessable. None of
the outstanding shares of RSFC Common Stock has been issued in violation of any
preemptive Rights. Except as Previously Disclosed in SCHEDULE 5.3, there are no
other shares of capital stock or other equity securities of RSFC outstanding and
no Rights relating to the capital stock of RSFC. As of the date hereof, there
were RSFC Stock Options to acquire 226,600 shares of RSFC Common Stock.
(b) The RSFC Common Stock is duly registered under the 1934 Act. The RSFC
Common Stock is not subject to any restrictions as to transfer thereof
(exclusive of restrictions respecting shares of RSFC Common Stock held by its
directors, officers or other "affiliates" imposed in accordance with the
Securities Laws). To the knowledge of RSFC, except as Previously Disclosed in
SCHEDULE 5.3, as of the date hereof, no Person is a beneficial owner of, or has
a Right to own beneficially, five percent (5%) or more of RSFC Common Stock. For
purposes of this SECTION 5.3, the term "beneficial owner" shall have the meaning
provided in Rule 13d-3 of the rules and regulations of the SEC as in effect on
the date hereof, except that the terms shall not include ownership of any of the
RSFC Common Stock held by RSFC or any RSFC Subsidiary as trustee or in some
other fiduciary or custodial capacity.
5.4 RSFC SUBSIDIARIES.
(A) Each of RSFC's Subsidiaries (i) is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization, (ii)
except as Previously Disclosed in SCHEDULE 5.4, is duly qualified to do business
and is in good standing in all jurisdictions (whether federal, state, local or
foreign) where both its ownership or leasing of property or
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the conduct of its business requires it to be so qualified and the failure to do
so would, individually or in the aggregate, be reasonably likely to constitute a
Material Adverse Event, (iii) has all requisite corporate power and authority
to, and has in effect all Authorizations necessary for it to, carry on its
business substantially as now conducted and to own, lease and operate its
material assets, properties and business, and (iv) is Previously Disclosed in
SCHEDULE 5.4. Other than the RSFC Subsidiaries, RSFC neither owns nor controls
five percent (5%) or more of the outstanding equity securities, either directly
or indirectly, of any Person.
(B) RSFC is the direct, record and beneficial owner of 100% of the
outstanding shares of capital stock of RF Bank, and RF Bank is the direct,
record and beneficial owner of 100% of the outstanding shares of capital stock
of each of the other RSFC Subsidiaries. Except as Previously Disclosed in
SCHEDULE 5.4, there are no contracts, commitments, understandings or
arrangements by which any of the RSFC Subsidiaries is or may be bound to sell or
otherwise issue any shares of its capital stock, and there are no contracts,
commitments, understandings or arrangements relating to the rights of RSFC or RF
Bank to vote or to dispose of such shares. All of the shares of capital stock of
each of the RSFC Subsidiaries are fully paid and nonassessable and are owned by
RSFC or RF Bank free and clear of any Liens. No equity securities of any RSFC
Subsidiary are or may become required to be issued (other than to RSFC or RF
Bank) under any Rights.
(C) RF Bank is a savings bank and is an "insured depository institution" as
defined in the Federal Deposit Insurance Act and the applicable regulations
thereunder. The deposits of RF Bank are insured by the Savings Association
Insurance Fund (the "SAIF") of the FDIC. RF Bank is a member in good standing
with the Federal Home Loan Bank of Atlanta (the "FHL Bank").
5.5 CORPORATE POWER. It and each of the RSFC Subsidiaries has the corporate
power and authority to carry on its business substantially as it is now being
conducted and to own or lease all its material properties and assets.
5.6 AUTHORIZATION OF MERGERS AND RELATED TRANSACTIONS.
(A) The execution and delivery of this Plan by it and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action in respect thereof on the part of RSFC, RF Bank
and the other RSFC Subsidiaries, respectively, subject to the approval of RSFC's
shareholders to the extent required by applicable law. This Plan, subject to
RSFC shareholder approval and Regulatory Approvals, represents a valid and
legally binding obligation of it, enforceable against it in accordance with the
terms hereof, subject as to enforcement to bankruptcy, insolvency and similar
laws of general applicability relating to or affecting creditors' rights and to
general equity principles.
(B) Neither the execution and delivery of this Plan by it, nor the
consummation by it of the transactions contemplated herein, nor compliance by it
with any of the provisions hereof will (i) conflict with or result in a breach
of any provision of its respective Articles of Incorporation, Charter or Bylaws,
(ii) except as Previously Disclosed in SCHEDULE 5.6, constitute or result in a
breach of any term, condition or provision of, or constitute a default under, or
give rise to any right of termination, cancellation or acceleration with respect
to, or result in the creation of any Lien upon, any material property or assets
of it or any RSFC Subsidiary or pursuant to any Significant Contract or
Significant Lease, or (iii) subject to receipt of RSFC shareholder approval and
Regulatory Approvals, violate any order, writ, injunction, decree, statute, rule
or regulation applicable to it or any RSFC Subsidiary or any of their material
properties or assets.
(C) Other than (i) in connection or compliance with the provisions of
applicable state securities laws, the 1933 Act, the 1934 Act, and the rules and
regulations of the SEC and any state securities or "Blue Sky" administrators
promulgated thereunder (collectively, the "Securities Laws"), and the rules,
regulations and bylaws of the NASD, (ii) consents, authorizations, approvals or
exemptions required from the Federal Reserve Board, the Federal Reserve, the
FDIC, the OTS, the OCC, and (iii) notices to or filings with the IRS or the PBGC
with respect to any employee benefit plans, or under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), no notice to,
filing with, authorization of, exemption by, or consent or approval of any
public body or authority is necessary for the consummation of the Mergers and
the other transactions contemplated in this Plan.
(D) Except as Previously Disclosed in SCHEDULE 5.6, it knows of no reason
why the approvals, consents and waivers of Regulatory Authorities referred to in
SECTION 7.5(C) should not be obtained or why the accountants' letters referred
to in SECTION 9.3(E) should not be obtained.
5.7 FINANCIAL REPORTS. (i) RSFC's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, and all other documents filed or to be filed
subsequent to December 31, 1994 under Section 13(a), 13(c), 14 or 15(d) of the
1934 Act, in the form filed with the SEC (in each such case, the "RSFC
Shareholder Financial Reports"), and (ii) RF Bank's Thrift
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Financial Report for the fiscal year ended December 31, 1994, and all other
reports filed or to be filed subsequent to December 31, 1994, in the form filed
with the OTS (in each case, the "RF Bank OTS Financial Reports" and together
with the RSFC Shareholder Financial Reports, the "RSFC Financial Reports") did
not, as of their respective dates (or in the case of RSFC Financial Reports
filed after the date of this Plan, 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 made therein, in light of the circumstances
under which they were made, not misleading; and each of the balance sheets in or
incorporated by reference into the RSFC Financial Reports (including the related
notes and schedules thereto) fairly presents (or in the case of RSFC Financial
Reports filed after the date of this Plan, will fairly present) the financial
position of the entity or entities to which it relates as of its date and each
of the statements of income and changes in stockholders' equity and cash flows
or equivalent statements in the RSFC Financial Reports (including any related
notes and schedules thereto) fairly presents (or in the case of RSFC Financial
Reports filed after the date of this Plan, will fairly present) the results of
operations, changes in stockholders' equity and changes in cash flows, as the
case may be, of the entity or entities to which it relates for the periods set
forth therein, in each case in accordance with GAAP consistently applied during
the periods involved, except in each case as may be noted therein, subject to
normal and recurring year-end audit adjustments in the case of unaudited
statements.
5.8 BOOKS; ACCOUNTING CONTROLS AND CORPORATE RECORDS.
(A) The books of account of RSFC and the RSFC Subsidiaries have been
maintained in substantial compliance with all applicable legal and accounting
requirements and in such manner as to reflect fairly their respective items of
income and expense and their respective assets, liabilities and shareholders'
equity. To the knowledge of RSFC, RSFC and the RSFC Subsidiaries have filed all
material reports and returns required by any law or regulation to be filed and
have duly paid or accrued on their books of account all Taxes and charges due
pursuant to such reports and returns, or assessed against them, including,
without limitation, all such reports, statements and assessments which RSFC or
any RSFC Subsidiary is required to have filed or paid pursuant to all bank
holding company, state commercial bank and state savings bank laws and
regulations, none of which reports, statements or assessments has been the
subject of any material objection by the regulatory agent with which filed.
(B) Except as Previously Disclosed in SCHEDULE 5.8, the respective minute
books of RSFC and each RSFC Subsidiary accurately reflect the required corporate
actions which their respective shareholders and board of directors, and all
committees thereof, have taken. All of the minute books of RSFC and the RSFC
Subsidiaries have been made available to First Union and its representatives as
of the date hereof.
(C) Except as Previously Disclosed in SCHEDULE 5.8, each of RSFC and the
RSFC Subsidiaries has devised and maintained systems of internal accounting
controls sufficient to provide reasonable assurances, in the judgment of the
Board of Directors of RSFC, that (i) all material transactions are executed in
accordance with management's general or specific authorization; (ii) all
material transactions are recorded as necessary to permit the preparation of
financial statements in conformity with GAAP consistently applied with respect
to thrift or any other criteria applicable to such statements; (iii) access to
the material property and assets of RSFC and the RSFC Subsidiaries is permitted
only in accordance with management's general or specific authorization; (iv) the
recorded accountability for items is compared with the actual levels at
reasonable intervals and appropriate action is taken with respect to any
differences; and (v) there are no material violations of the Bank Secrecy Act.
5.9 ABSENCE OF UNDISCLOSED LIABILITIES. Except as Previously Disclosed in
SCHEDULE 5.9 and as reflected in any RSFC Shareholder Financial Report filed by
RSFC since January 1, 1995 and prior to the date hereof, neither RSFC nor any
RSFC Subsidiary has any obligations or liabilities (contingent or otherwise)
that would be reasonably likely to constitute, individually or in the aggregate,
a Material Adverse Event. Except as reflected in any RSFC Shareholder Financial
Report filed by RSFC since January 1, 1995 and prior to the date hereof, neither
RSFC nor any RSFC Subsidiary has incurred or paid any obligation or liability
which, individually or in the aggregate, would be reasonably likely to
constitute a Material Adverse Event.
5.10 TAX MATTERS.
(A) All Tax Returns required to be filed by or on behalf of RSFC or any
RSFC Subsidiary have been timely filed, or requests for extensions have been
timely filed and granted and have not expired, for periods ending on or before
December 31, 1994, and, to the knowledge of RSFC, all such Tax Returns filed are
complete and accurate in all material respects. Except as reflected in any SEC
Document filed by RSFC since January 1, 1992 and prior to the date hereof, all
Taxes shown on filed Tax Returns have been paid. Except as reflected in any SEC
Document filed by RSFC since January 1, 1992 and prior to the date hereof, there
is no audit examination, deficiency or refund litigation or matter in
controversy with respect to
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any Taxes that, individually or in the aggregate, be reasonably likely to
constitute a Material Adverse Event. All Taxes due from RSFC and the RSFC
Subsidiaries with respect to completed and settled examinations or concluded Tax
litigation have been paid.
(B) Neither RSFC nor any RSFC Subsidiary has executed an extension or
waiver of any statute of limitations on the assessment or collection of any Tax
due that is currently in effect.
(C) In the opinion of RSFC's management, adequate provision for any Taxes
due or to become due from RSFC or any RSFC Subsidiary for any period or periods
through and including March 31, 1995, has been made and is reflected on the
March 31. 1995 interim consolidated financial statements included in the RSFC
Shareholder Financial Reports.
(D) Deferred Taxes of RSFC and the RSFC Subsidiaries have been provided for
in the RSFC Shareholder Financial Reports in accordance with GAAP, subject in
the case of interim financial statements to normal recurring year-end
adjustments.
5.11 ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses (the
"Allowance") shown on the consolidated statements of financial condition of RSFC
and the RSFC Subsidiaries as of March 31, 1995, included in the RSFC Shareholder
Financial Report as of such date, and the Allowance shown on the consolidated
statements of financial condition of RSFC and the RSFC Subsidiaries as of dates
subsequent to the execution of this Plan included in the RSFC Financial Reports
will be, in each case as of the dates thereof, in the opinion of management of
RSFC and determined in accordance with GAAP, adequate to provide for losses
relating to or inherent in the loan portfolios of RSFC and the RSFC
Subsidiaries.
5.12 PROPERTIES. Except as Previously Disclosed in SCHEDULE 5.12, RSFC and
the RSFC Subsidiaries have good and marketable title to all their material
properties and assets, whether tangible or intangible, real, personal or mixed,
including, but not limited to, all material properties and assets reflected in
the interim consolidated balance sheet of RSFC and the RSFC Subsidiaries as of
March 31, 1995 included in the RSFC Shareholder Financial Report as of such
date, or reflected in the notes thereto, and all properties and assets purchased
by RSFC and the RSFC Subsidiaries since such date, except for such properties
and assets which have been sold or otherwise disposed of in the Ordinary Course
of Business, are in each case free and clear of all Liens, except for (i) zoning
ordinances, easements of record, permits and other restrictions or limitations
on the use of real property which do not individually or in the aggregate
materially detract from the value of, or impair the use of, such property by
RSFC or any of the RSFC Subsidiaries in the operation of its business, (ii)
Liens for current Taxes on property not yet due, and (iii) Liens which are not,
individually or in the aggregate, reasonably likely to constitute a Material
Adverse Event. RSFC has Previously Disclosed in SCHEDULE 5.12 all material
properties and assets which have been purchased or disposed of by RSFC or any
RSFC Subsidiary since March 31, 1995. RSFC has Previously Disclosed in SCHEDULE
5.12 all business locations of RSFC and the RSFC Subsidiaries, including whether
such locations are owned or leased and a statement of when such locations were
first occupied by RSFC or the applicable RSFC Subsidiary. Except as Previously
Disclosed in SCHEDULE 5.12, all buildings and all fixtures, equipment, and other
property and assets which are material to its business on a consolidated basis
and are held under leases or subleases by any of RSFC or the RSFC Subsidiaries
are held under valid leases or subleases enforceable in accordance with their
respective terms.
5.13 COMPLIANCE WITH LAWS.
(A) Except as Previously Disclosed in SCHEDULE 5.13, neither RSFC nor any
RSFC Subsidiary has received any notification or communication from, or
consented to or entered into any memorandum, agreement or order with, any
federal or state governmental agency or authority charged with the supervision
or regulation of depository institutions or engaged in the insurance of deposits
(together with any and all agencies or departments of federal, state or local
government, including, without limitation, the OTS, the FHL Bank, the FDIC, the
Federal Reserve Board and any other federal or state bank, thrift or other
financial institution, insurance or securities regulatory authorities (including
the SEC, the "Regulatory Authorities")), (i) asserting that RSFC or any RSFC
Subsidiary is not in compliance with any of the statutes, regulations, rules or
ordinances which such Regulatory Authority has promulgated or enforces, or the
internal policies and procedures of RSFC or any RSFC Subsidiary, as applicable,
(ii) threatening to revoke any Authorization, (iii) requiring or threatening to
require RSFC or any RSFC Subsidiary, or indicating that RSFC or any RSFC
Subsidiary may be required, to enter into a cease and desist order, agreement or
memorandum of understanding or any other agreement restricting or limiting or
purporting to restrict or limit in any manner the operations of RSFC or any RSFC
Subsidiary, including, without limitation, any restriction on the payment of
dividends, or (iv) directing, restricting or limiting, or threatening to direct,
restrict or limit in any manner the operations of RSFC or any RSFC Subsidiary,
including, without limitation, any restriction on the payment of dividends (any
such notification, communication, memorandum, agreement or order described in
this sentence herein referred to as a "Regulatory Agreement"). True and correct
copies of all Regulatory Agreements, if any, have been Previously Disclosed on
SCHEDULE 5.13.
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(B) Each of RSFC and the RSFC Subsidiaries:
(1) has all permits, licenses, authorizations, orders and approvals
of, and has made all filings, applications and registrations with, all
Regulatory Authorities that are required in order to permit it to carry on
its business as presently conducted and that are material to the business
of RSFC and the RSFC Subsidiaries taken as a whole; 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; and except as Previously Disclosed in
SCHEDULE 5.13, all such filings, applications and registrations are
current;
(2) is not required to give prior notice to any federal banking or
thrift agency of the proposed addition of an individual to its Board of
Directors or the employment of an individual as a senior executive;
(3) is "well capitalized" as defined in 12 CFR (section mark)564.4 and
is not in "troubled condition" as defined in 12 CFR (section mark)574.9;
(4) is, in the case of RF Bank, able to receive brokered deposits
without a waiver;
(5) is in compliance in all material respects with all fair lending
laws or other laws relating to discrimination, including, without
limitation, the Equal Credit Opportunity Act, the Fair Credit Reporting
Act, the Fair Housing Act, the Community Reinvestment Act and the Home
Mortgage Disclosure Act and similar federal and state laws and regulations;
and
(6) pays the lowest FDIC assessment premium rate available to SAIF
members.
5.14 EMPLOYEE BENEFIT PLANS.
(A) RSFC has Previously Disclosed in SCHEDULE 5.14 and has delivered to
First Union true and complete copies of, the RSFC Deferred Compensation Plans,
the RSFC Option Plans, the RSFC 401(K) Plan, the RSFC Pension Plan, the RSFC
Benefit Equivalency Plan, the RSFC Incentive Plan, the RSFC Branch Plan and all
other pension, retirement, profit-sharing, long term incentive compensation,
deferred compensation, stock option, employee stock ownership, severance pay,
vacation, bonus or other incentive plans, all other written employee programs,
arrangements or agreements, whether arrived at through collective bargaining or
otherwise, all medical (including post-retirement medical), vision, dental or
other health plans, all life insurance plans and all other employee benefit
plans or fringe benefit plans, including, without limitation, all Employee
Benefit Plans currently adopted, maintained by, sponsored in whole or in part
by, or contributed to by RSFC or any RSFC Subsidiary or any Affiliate thereof
for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent contractors or other
beneficiaries are eligible to participate (collectively, the "RSFC Benefit
Plans"). Any of the RSFC Benefit Plans which is an Employee Pension Benefit Plan
is referred to herein as an "RSFC ERISA Plan".
(B) Each such RSFC Benefit Plan (and each related trust, insurance
contract, or fund) complies in form and in operation in all respects with the
applicable requirements of ERISA and the Tax Code, except where the failure to
comply, individually or in the aggregate, would be reasonably likely to
constitute a Material Adverse Event.
(C) All required reports and descriptions (including Form 5500 Annual
Reports, Summary Annual Reports, PBGC-1's, and Summary Plan Descriptions) have
been filed or distributed appropriately with respect to each such RSFC Benefit
Plan. The requirements of Part 6 of Subtitle B of Title I of ERISA and of Tax
Code Section 4980B have been met with respect to each such RSFC Benefit Plan
which is an Employee Welfare Benefit Plan.
(D) All contributions (including all employer contributions and employee
salary reduction contributions) which are due have been paid to each such RSFC
Benefit Plan which is an RSFC ERISA Plan and all contributions for any period
ending at or before the Effective Time which are not yet due have been paid to
each such RSFC ERISA Plan or accrued by RSFC and the RSFC Subsidiaries in the
Ordinary Course of Business. All premiums or other payments for all periods
ending on or before the Effective Time have been paid with respect to each such
RSFC Benefit Plan which is an Employee Welfare Benefit Plan.
(E) Each such RSFC Benefit Plan which is a RSFC ERISA Plan and which is
intended to be a "qualified plan" meets the requirements of a "qualified plan"
under Tax Code Section 401(a) and has received since December 31, 1989, a
favorable determination letter from the IRS.
(F) With respect to each RSFC Benefit Plan that RSFC or any RSFC Subsidiary
maintains or ever has maintained or to which any of them contributes, ever has
contributed, or ever has been required to contribute:
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(1) No such RSFC Benefit Plan which is a RSFC ERISA Plan has been the
subject of a Reportable Event as to which notices would be required to be
filed with the PBGC. No proceeding by the PBGC to terminate any such RSFC
ERISA Plan has been instituted or, to the knowledge of RSFC, threatened.
(2) There have been no Prohibited Transactions with respect to any
such RSFC Benefit Plan. No Fiduciary has any liability for breach of
fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of any such RSFC Benefit Plan.
No action, suit, proceeding, hearing, or investigation with respect to the
administration or the investment of the assets of any such RSFC Benefit
Plan (other than routine claims for benefits) is pending or, to the
knowledge of RSFC, threatened.
(G) Neither RSFC nor any RSFC Subsidiary contributes to, ever has
contributed to, or ever has been required to contribute to any Multiemployer
Plan or has any liability (including withdrawal liability) under any
Multiemployer Plan.
(H) Except for the RSFC Pension Plan, neither RSFC nor any RSFC Subsidiary
maintains any defined benefit plans. Neither RSFC nor any RSFC Subsidiary has
incurred, and to the knowledge of RSFC, neither RSFC nor any RSFC Subsidiary has
any reason to expect that any of them will incur, any liability to the PBGC
(other than PBGC premium payments) or otherwise under Title IV of ERISA
(including any withdrawal liability) or under the Tax Code with respect to any
such RSFC Benefit Plan which is a RSFC ERISA Plan and that is maintained or ever
has been maintained by RSFC or any RSFC Subsidiary.
5.15 COMMITMENTS AND CONTRACTS. Except as Previously Disclosed on SCHEDULE
5.15, neither RSFC nor any RSFC Subsidiary is a party or subject to any of the
following (whether written or oral, express or implied):
(A) any employment contract or understanding (including any understandings
or obligations with respect to severance or termination pay liabilities or
fringe benefits) with any present or former officer, director, employee (other
than those which are terminable at will by RSFC or any RSFC Subsidiary without
any obligation on the part of RSFC or such RSFC Subsidiary to make any payment
in connection with such termination), including in any such Person's capacity as
a consultant;
(B) any labor contract or agreement with any labor union;
(C) any contract, agreement or arrangement which limits the ability of RSFC
or any RSFC Subsidiary to compete in any line of business or which involves any
restriction of the geographic area in which RSFC or such RSFC Subsidiary may
carry on its business (other than as may be required by law or applicable
Regulatory Authorities);
(D) any Significant Contract or Significant Lease; or
(E) any other contract which would be required to be disclosed as an
exhibit to an SEC Document of RSFC and which has not been so disclosed.
5.16 MATERIAL CONTRACT DEFAULTS. Except as Previously Disclosed in SCHEDULE
5.16, neither RSFC nor any RSFC Subsidiary is, or has received any notice or has
any knowledge that any other Person is, in default in any respect under any
Significant Contract or Significant Lease to which the material assets, business
or operations of it may be bound or materially affected or under which it or its
respective assets, business or operations receives material benefits.
5.17 LEGAL PROCEEDINGS. Except as Previously Disclosed in SCHEDULE 5.17,
there are no actions, suits or proceedings instituted or pending or, to the
knowledge of RSFC, threatened against RSFC or any RSFC Subsidiary, or against
any property, asset, interest or right of any of them, that if decided adversely
to RSFC or such RSFC Subsidiary would be reasonably likely, individually or in
the aggregate, to constitute a Material Adverse Event. Neither RSFC nor any RSFC
Subsidiary is subject to any judgment, order, writ, injunction, decree or
ruling, that would be reasonably likely, individually or in the aggregate, to
constitute a Material Adverse Event.
5.18 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since January 1, 1993, except as
Previously Disclosed in SCHEDULE 5.18, neither RSFC nor any RSFC Subsidiary has
(i) failed to operate in the Ordinary Course of Business, (ii) incurred any
liabilities (direct, contingent or otherwise) or engaged in any transaction or
entered into any agreement outside of the Ordinary Course of Business, (iii)
increased the salaries, compensation or general benefits payable to its
employees other than in the Ordinary Course of Business, (iv) suffered any loss,
destruction or damage to any of its properties or assets that would be
reasonably likely, individually or in the aggregate, to constitute a Material
Adverse Event, or (v) made an acquisition or disposition of any material assets
or entered into any Significant Contract or Significant Lease other than in the
Ordinary Course of Business.
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5.19 REPORTS. Since January 1, 1993, RSFC and each RSFC Subsidiary has
filed all reports and statements, together with all amendments required to be
made with respect thereto, that it was required to file with Regulatory
Authorities. Copies of each of such reports and documents have been delivered or
made available to First Union. As of their respective dates, each of such
reports and documents complied in all material respects with all of the
statutes, rules and regulations enforced or promulgated by the respective
Regulatory Authority and each of such reports did not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.
5.20 INSURANCE. RSFC and each RSFC Subsidiary is presently insured, and
during each of the past five (5) calendar years has been insured, for reasonable
amounts against such risks as companies engaged in a similar business would, in
accordance with good business practice, customarily be insured. The policies of
fire, theft, liability and other insurance maintained with respect to the assets
or businesses of RSFC and the RSFC Subsidiaries provide adequate coverage
against loss, and the fidelity bonds in effect as to which RSFC or any RSFC
Subsidiary is a named insured are sufficient for their purpose. Each of RSFC and
the RSFC Subsidiaries has taken all requisite action (including without
limitation the making of claims and the giving of notices) pursuant to its
directors' and officers' liability insurance policy or policies in order to
preserve all rights thereunder with respect to all matters that are known to it.
Previously Disclosed in SCHEDULE 5.20 is a list of all insurance policies
maintained by or for the benefit of RSFC or the RSFC Subsidiaries or their
directors, officers, employees or agents.
5.21 LABOR. No work stoppage involving RSFC or any RSFC Subsidiary is
pending or, to the knowledge of RSFC, threatened. Neither RSFC nor any RSFC
Subsidiary is involved in, or, to the knowledge of RSFC, threatened with or
affected by, any labor dispute, arbitration, lawsuit or administrative
proceeding that would be reasonably likely, individually or in the aggregate, to
constitute a Material Adverse Event. RSFC and each RSFC Subsidiary has complied
in all material respects with all laws relating to the employment of labor,
including, without limitation, any provisions thereof relating to wages, and no
Person has asserted or, to the knowledge of RSFC, will assert, that RSFC or any
RSFC Subsidiary is liable in any material amount for any arrears or wages or any
taxes or penalties for failure to comply with any of the foregoing. There is no
action, suit or proceeding by any Person pending or, to the knowledge of RSFC,
threatened, against RSFC or any RSFC Subsidiary (or any of the employees
thereof), involving employment discrimination, sexual harassment, wrongful
discharge or similar claims. Employees of RSFC and the RSFC Subsidiaries are not
represented by any labor union, and, to the knowledge of RSFC, no labor union is
attempting to organize employees of RSFC or any RSFC Subsidiary.
5.22 REGISTRATION OBLIGATION. Neither RSFC nor any RSFC Subsidiary is under
any obligation, contingent or otherwise, or as a result of the Corporate Merger
will be under any obligation, contingent or otherwise, to register any of its
securities or Rights relating thereto under the 1933 Act.
5.23 ENVIRONMENTAL MATTERS.
(A) To its knowledge, it and each of the RSFC Subsidiaries, the
Participation Facilities and the Loan/Fiduciary Properties (each as defined
below) are, and have been, in compliance with all Environmental Laws (as defined
below), except for instances of noncompliance which are not reasonably likely,
individually or in the aggregate, to constitute a Material Adverse Event.
(B) There is no proceeding pending or, to its knowledge, threatened before
any court, governmental agency or board or other forum in which it or any of the
RSFC Subsidiaries or any Participation Facility has been, or with respect to
threatened proceedings, reasonably would be expected to be, named as a defendant
or potentially responsible party (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law, or (ii) relating to the release or
threatened release into the environment of any Hazardous Material (as defined
below), whether or not occurring at or on a site owned, leased or operated by it
or any of the RSFC Subsidiaries or any Participation Facility, except for such
proceedings pending or threatened that are not reasonably likely, individually
or in the aggregate, to constitute a Material Adverse Event or have been
Previously Disclosed in SCHEDULE 5.23).
(C) There is no proceeding pending or, to its knowledge, threatened before
any court, governmental agency or board or other forum in which any
Loan/Fiduciary Property (or it or any of the RSFC Subsidiaries in respect of any
Loan/Fiduciary Property) has been, or with respect to threatened proceedings,
reasonably would be expected to be, named as a defendant or potentially
responsible party (i) for alleged noncompliance (including by any predecessor)
with any Environmental Law, or (ii) relating to the release or threatened
release into the environment of any Hazardous Material, whether or not occurring
at or on a Loan/Fiduciary Property, except for such proceedings pending or
threatened that are not reasonably likely, individually or in the aggregate, to
constitute a Material Adverse Event or have been Previously Disclosed in
SCHEDULE 5.23.
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(D) To its knowledge, there is no reasonable basis for any proceeding of a
type described in subsections (b) or (c) above, except as has been Previously
Disclosed in SCHEDULE 5.23.
(E) To its knowledge, during the period of (i) its or any of the RSFC
Subsidiaries' ownership or operation of any of their respective current
properties, (ii) its or any of the RSFC Subsidiaries' participation in the
management of any Participation Facility, or (iii) its or any of the RSFC
Subsidiaries' holding of a security or other interest in a Loan/Fiduciary
Property, there have been no releases of Hazardous Material in, on, under or
affecting any such property, Participation Facility or Loan/Fiduciary Property,
except for such releases that are not reasonably likely, individually or in the
aggregate, to constitute a Material Adverse Event or have been Previously
Disclosed in SCHEDULE 5.23.
(F) To its knowledge, prior to the period of (i) its or any of the RSFC
Subsidiaries' ownership or operation of any of their respective current
properties, (ii) its or any of the RSFC Subsidiaries' participation in the
management of any Participation Facility, or (iii) its or any of the RSFC
Subsidiaries' holding of a security or other interest in a Loan/Fiduciary
Property, there were no releases of Hazardous Material in, on, under or
affecting any such property, Participation Facility or Loan/Fiduciary Property,
except for such releases that are not reasonably likely, individually or in the
aggregate, to constitute a Material Adverse Event or have been Previously
Disclosed in SCHEDULE 5.23.
(G) The following definitions apply for purposes of this SECTION 5.23:
"Loan/Fiduciary Property" means any property owned or controlled by it or any of
the RSFC Subsidiaries or in which it or any of the RSFC Subsidiaries holds a
security or other interest, and, where required by the context, includes any
such property where it or any of the RSFC Subsidiaries constitutes the owner or
operator of such property, but only with respect to such property;
"Participation Facility" means any facility in which it or any of the RSFC
Subsidiaries participates in the management and, where required by the context,
includes the owner or operator or such property, but only with respect to such
property; "Environmental Law" means (i) any federal, state and local law,
statute, ordinance, rule, regulation, code, license, permit, approval, order,
judgment, decree, injunction, or agreement with any governmental entity,
relating to (A) the protection, preservation or restoration of the environment,
(including, without limitation, air, water vapor, surface water, groundwater,
drinking water supply, surface land, subsurface land, plant and animal life or
any other natural resource), or to human health or safety, or (B) the exposure
to, or the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of Hazardous
Material, in each case as amended and as now in effect and includes, without
limitation, the federal Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, the Superfund Amendments and Reauthorization Act, the
Federal Water Pollution Control Act of 1972, the federal Clean Air Act, the
federal Clean Water Act, the federal Resource Conservation and Recovery Act of
1976 (including the Hazardous and Solid Waste Amendments thereto), the federal
Solid Waste Disposal and the federal Toxic Substances Control Act, and the
Federal Insecticide, Fungicide and Rodenticide Act, the Federal Occupational
Safety and Health Act of 1970, each as amended and as now in effect, and (ii)
any common law or equitable doctrine (including, without limitation, injunctive
relief and tort doctrines such as negligence, nuisance, trespass and strict
liability) that may impose liability or obligations for injuries or damages due
to, or threatened as a result of, the presence of or exposure to any Hazardous
Material; "Hazardous Material" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental Law, whether by type or quantity,
and includes, without limitation, any oil or other petroleum product, toxic
waste, pollutant, contaminant, hazardous substance, toxic substance, hazardous
waste, special waste or petroleum or any derivative or by-product thereof,
radon, radioactive material, asbestos, asbestos containing material, urea
formaldehyde foam insulation, lead and polychlorinated biphenyl.
5.24 ACCOUNTING; TAX; REGULATORY MATTERS. Neither RSFC nor any RSFC
Subsidiary has taken or agreed to take any action or has any knowledge of any
fact or circumstance that would (i) prevent (or, together with other events,
would be reasonably likely to prevent) the Corporate Merger from qualifying as a
Tax-free reorganization within the meaning of Tax Code Section 368, or (ii)
materially impede or delay receipt of any Regulatory Approval.
5.25 BROKERS AND FINDERS. Except for Trident, neither RSFC nor any RSFC
Subsidiary nor any of their respective officers, directors or employees has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finders' fees, and no broker or
finder has acted directly or indirectly for RSFC or any RSFC Subsidiary in
connection with this Plan or the transactions contemplated hereby.
5.26 STATEMENTS TRUE AND CORRECT. The representations and warranties of
RSFC and RF Bank in this Plan and the information which is deemed to be
Previously Disclosed by RSFC and RF Bank for the purpose of this Plan are true
and accurate in all material respects.
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5.27 ASSET CLASSIFICATION. It has Previously Disclosed in SCHEDULE 5.27 a
list, accurate and complete in all material respects, of the aggregate amounts
of loans, extensions of credit or other assets of RSFC and the RSFC Subsidiaries
that have been classified by it as of April 30, 1995 (the "Asset
Classification"); and no amounts of loans, extensions of credit or other assets
that have been classified as of April 30, 1995 by any regulatory examiner as
"Other Loans Specially Mentioned", "Substandard", "Doubtful", "Loss", or words
of similar import are excluded from the amounts disclosed in the Asset
Classification, other than amounts of loans, extensions of credit or other
assets that were charged off by RSFC or a RSFC Subsidiary prior to April 30,
1995.
5.28 AFFILIATES. Except as Previously Disclosed in SCHEDULE 5.28, there is
no Person who, as of the date of this Plan, may be deemed to be an "affiliate"
of RSFC as that term is used in Rule 145 under the 1933 Act.
5.29 STATE TAKEOVER LAWS. It is not subject to any applicable takeover laws
of the State of North Carolina (including, but not limited to, Article 7A of the
NCBCA) and it has taken all necessary action to exempt this Plan and the
transactions contemplated hereby from, and this Plan and the transactions
contemplated hereby are exempt from, the applicable takeover provisions of
RSFC's Articles of Incorporation and Bylaws.
5.30 NO FURTHER ACTION. It has taken all action so that the entering into
of this Plan, and the consummation of the transactions contemplated hereby or
any other action or combination of actions, or any other transactions,
contemplated hereby do not and will not (i) require a vote of stockholders
(other than a vote of the holders of a majority of the outstanding shares of
RSFC Common Stock), or (ii) result in the grant of any rights to any Person
under the Articles of Incorporation, Charter or Bylaws of RSFC or any RSFC
Subsidiary, or (iii) except as Previously Disclosed in SCHEDULE 5.30, result in
the grant of any rights to any Person under any material agreement to which RSFC
or any of the RSFC Subsidiaries is a party, or (iv) restrict or impair in any
material way the ability of First Union or FUNB-NC to exercise the rights
granted hereunder.
5.31 DERIVATIVES CONTRACTS; STRUCTURED NOTES; ETC. None of RSFC or the RSFC
Subsidiaries is a party to or has agreed to enter into an exchange-traded or
over-the-counter swap, forward, future, option, cap, floor or collar financial
contract or any other contract not included on the balance sheet which is a
derivative contract (including various combinations thereof) (each a
"Derivatives Contract") or owns securities that (1) are referred to as
"structured notes", "high risk mortgage derivatives", "capped floating rate
notes" or "capped floating rate mortgage derivatives", or (2) are likely to have
changes in value as a result of interest rate changes that significantly exceed
normal changes in value attributable to interest rate changes, except for those
Derivatives Contracts and other instruments legally purchased or entered into in
the ordinary course of business and Previously Disclosed in SCHEDULE 5.31,
including a list, as applicable, of any RSFC or RSFC Subsidiary assets pledged
as security for each such instrument.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF FIRST UNION AND FUNB-NC
Each of First Union and FUNB-NC represents and warrants to RSFC and RF Bank
as follows:
6.1 RECITALS. The facts set forth in the Recitals of this Plan with respect
to it are true and correct.
6.2 AUTHORITY. Subject to the required Regulatory Approvals referred to in
SECTION 9.1(B), this Plan has been authorized by all necessary corporate action
of it and is a valid and binding agreement of it enforceable against it in
accordance with its terms, subject as to enforcement to bankruptcy, insolvency
and similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles.
6.3 NO DEFAULTS. Subject to receipt of the required Regulatory Approvals
referred to in SECTION 9.1(B) and the required filings under federal and state
securities laws, the execution, delivery and performance of this Plan and the
consummation of the transactions contemplated hereby by it, do not and will not
(i) constitute a breach or violation of, or a default under or the acceleration
or creation of a Lien (with or without the giving of notice, passage of time or
both) pursuant to, any law, rule or regulation or any judgment, decree, order,
governmental or non-governmental permit or license, or agreement, indenture or
instrument of it or of any of its subsidiaries or to which it or any of its
subsidiaries or properties is subject or bound, which breach, violation, default
or Lien is reasonably likely, individually or in the aggregate, to constitute a
Material Adverse Event, (ii) constitute a breach or violation of, or a default
under, its Articles of Incorporation, Charter or Bylaws, or (iii) require any
consent or approval under any such law, rule, regulation, judgment, decree,
order, governmental or non-governmental permit or license, or the consent or
approval of any other party to any such agreement, indenture or instrument other
than such consent or approval, which if not obtained, would not be reasonably
likely, individually or in the aggregate, to constitute a Material Adverse
Event.
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6.4 FINANCIAL REPORTS. First Union's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, and all other documents filed or to be
filed subsequent to December 31, 1994 under Sections 13(a), 13(c), 14 or 15(d)
of the 1934 Act, in the form filed with the SEC (in each such case, the "First
Union Financial Reports"), did not as of their respective dates (or in the case
of First Union Financial Reports filed after the date of this Plan, 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 made therein,
in light of the circumstances under which they were made, not misleading; and
each of the balance sheets in or incorporated by reference into the First Union
Financial Reports (including the related notes and schedules thereto) fairly
presents (or in the case of First Union Financial Reports filed after the date
of this Plan, will fairly present) the financial position of the entity or
entities to which it relates as of its date and each of the statements of income
and changes in stockholders' equity and cash flows or equivalent statements in
the First Union Financial Reports (including any related notes and schedules
thereto) fairly presents (or in the case of First Union Financial Reports filed
after the date of this Plan, will fairly present) the results of operations,
changes in stockholders' equity and changes in cash flows, as the case may be,
of the entity or entities to which it relates for the periods set forth therein,
in each case in accordance with generally accepted accounting principles
consistently applied to banks and bank holding companies during the periods
involved, except as may be noted therein, subject to normal and recurring
year-end audit adjustments in the case of unaudited statements.
6.5 NO BROKERS. All negotiations relative to this Plan and the transactions
contemplated hereby have been carried on by it directly with the other parties
hereto and no action has been taken by it that would give rise to any valid
claim against any party hereto for a brokerage commission, finder's fee or other
like payment.
6.6 SHARES AUTHORIZED. The shares of First Union Common Stock to be issued
in exchange for shares of RSFC Common Stock upon consummation of the Corporate
Merger in accordance with ARTICLE II of this Plan have been duly authorized and,
when issued in accordance with the terms of this Plan, will be validly issued,
fully paid and nonassessable and subject to no preemptive Rights.
6.7 STANDING. It is duly qualified to do business and is in good standing
in each jurisdiction where the failure to be duly qualified, individually or in
the aggregate, is reasonably likely to constitute a Material Adverse Event. Each
of First Union and its subsidiaries 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, the
absence of which, individually or in the aggregate, is reasonably likely to
constitute a Material Adverse Event.
6.8 CORPORATE POWER. It has the corporate power and authority to carry on
its business as it is now being conducted and to own or lease all its material
properties and assets.
6.9 ACCURACY OF INFORMATION. The statements with respect to it contained in
this Plan, the Schedules and any other written documents executed and delivered
by or on behalf of it pursuant to the terms of this Plan are true and correct in
all material respects, and such statements and documents do not omit any
material fact necessary to make the statements contained therein, in light of
the circumstances under which they were made, not misleading.
6.10 NO EVENTS. No events have occurred, or circumstances have arisen,
since March 31, 1995, which, individually or in the aggregate, have had or are
reasonably likely to have a Material Adverse Event.
6.11 NO KNOWLEDGE. It knows of no reason why the approvals, consents and
waivers of Regulatory Authorities referred to in SECTION 7.5(C) should not be
obtained without the imposition of any condition of the type referred to in the
proviso following SECTION 9.1(B).
6.12 LEGAL PROCEEDINGS. There are no actions, suits or proceedings
instituted or pending or, to the knowledge of First Union, threatened against
First Union or any First Union subsidiary, or against any property, asset,
interest or right of any of them, that if decided adversely to First Union or
such First Union subsidiary would be reasonably likely, individually or in the
aggregate, to constitute a Material Adverse Event. Neither First Union nor any
First Union subsidiary is subject to any judgment, order, writ, injunction,
decree or ruling, that would be reasonably likely, individually or in the
aggregate, to constitute a Material Adverse Event.
ARTICLE VII
CONDUCT PRIOR TO THE EFFECTIVE TIME
7.1 CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME. During the period from
the date of the execution of this Plan to the Effective Time, RSFC shall, and
shall cause each of the RSFC Subsidiaries to, (i) conduct its business in the
Ordinary Course
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of Business, (ii) use its best efforts to maintain and preserve intact its
business organization, employees and advantageous business relationships and
retain the services of its officers and key employees, and (iii) except as
required by law or regulation after having consulted with and obtained the
written advice of counsel (a copy of which advice shall be provided to First
Union), take no action which would adversely affect or delay the ability of
RSFC, RF Bank, First Union or FUNB-NC to obtain any Regulatory Approval or to
perform its covenants and agreements under this Plan or the agreements
referenced or contemplated herein on a timely basis.
7.2 FORBEARANCES. During the period from the date of the execution of this
Plan to the Effective Time, except as Previously Disclosed herein by RSFC and
except as required by law or regulation, RSFC shall not, nor shall it permit any
of the RSFC Subsidiaries to, without the prior written consent of First Union:
(A) other than in the Ordinary Course of Business, incur any indebtedness
for borrowed money (other than short-term indebtedness incurred to refinance
short-term indebtedness) (it being understood and agreed that incurrence of
indebtedness in the Ordinary Course of Business shall include, without
limitation, the creation of deposit liabilities, purchases of federal funds,
sales of certificates of deposits and entering into repurchase agreements),
assume, guarantee, endorse or otherwise as an accommodation become responsible
for the obligations of any other Person;
(B) adjust, split, combine, reclassify or sell, grant, issue or otherwise
permit (directly or indirectly) to become outstanding any additional shares of
RSFC Common Stock, RSFC Preferred Stock, Bank Common Stock, Bank Preferred Stock
or any other capital stock of RSFC or RF Bank or any securities or obligations
convertible into or exchangeable for any or its shares of capital stock, any
stock appreciation rights, or any Rights with respect thereto, or permit any
additional shares of RSFC Common Stock, RSFC Preferred Stock, Bank Common Stock
or Bank Preferred Stock to become subject to grants of employee stock options,
stock appreciation rights or similar stock based employee compensation rights;
PROVIDED, HOWEVER, that as contemplated in this Plan, RSFC may issue shares of
RSFC Common Stock pursuant to the exercise of RSFC Stock Options granted at any
time prior to the date of the execution of this Plan;
(C) make, declare or pay any dividend or declare or make any other
distribution on or in respect of, or directly or indirectly combine, split,
redeem, reclassify, purchase or otherwise acquire any shares of the capital
stock of RSFC, RF Bank or the RSFC Subsidiaries or, other than as expressly
permitted in or contemplated by this Plan, authorize the creation or issuance
of, or issue, any additional shares of such capital stock or any Rights with
respect thereto; PROVIDED, HOWEVER, that (i) RSFC may declare and pay cash
dividends on RSFC Common Stock at a quarterly rate not to exceed $0.15 per
share, PROVIDED THAT with respect to such dividend that otherwise may be payable
in the quarter during which the Closing takes place, RSFC agrees to consult with
First Union prior to the declaration of such dividend so that, in the event the
Boards of Directors of each of First Union and RSFC, in their respective sole
discretion, intend to declare a dividend in such quarter, RSFC shareholders
shall receive either such dividend from RSFC or a dividend from First Union with
respect to such quarter but do not receive both such dividend from RSFC and a
dividend from First Union with respect to such quarter, and (ii) the RSFC
Subsidiaries may declare and pay cash dividends to RSFC or RF Bank, as the case
may be;
(D) (1) dispose of or discontinue any portion of its assets, deposits,
business or properties, which is material to RSFC and the RSFC Subsidiaries
taken as a whole, or discontinue or terminate any existing line of business, or
(2) merge or consolidate with, or acquire all or any portion of the business or
property of, any other entity which is material to RSFC and the RSFC
Subsidiaries taken as a whole (except foreclosures or acquisitions by RF Bank in
a fiduciary capacity, in each case in the Ordinary Course of Business);
(E) except in the Ordinary Course of Business, make any material investment
either by purchase of stock, securities or Rights, contributions to capital,
property transfers, or purchase of any property or assets of any Person other
than RSFC or an RSFC Subsidiary;
(F) enter into, terminate, or (except as otherwise provided in SECTION 8.2)
make any change in, any Significant Contract or Significant Lease, other than
contracts, agreements or leases that are terminable by it without penalty on not
more than 30 days prior written notice;
(G) except as Previously Disclosed in SCHEDULE 7.2, enter into or amend any
employment, severance or similar agreement or arrangement, or increase in any
manner the compensation, salary, wages or fringe benefits (including the terms
of any RSFC Stock Option, incentive or bonus) of any of its employees,
directors, officers, agents or consultants, other than normal individual
increases in regular compensation to existing employees in the Ordinary Course
of Business;
(H) except as Previously Disclosed in SCHEDULE 7.2, pay any pension or
retirement allowance not required by any existing plan, policy or agreement to
any of its directors, officers or other employees, or become a party to, amend
(except as
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otherwise provided in SECTION 8.2) or commit itself to modify 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
related thereto, in respect of any of its directors, officers or other
employees, including without limitation taking any action that accelerates the
vesting or exercise of any benefits payable thereunder; PROVIDED, HOWEVER, that
in connection with the Corporate Merger, RSFC may terminate the RSFC Pension
Plan as Previously Disclosed in SCHEDULE 7.2(H);
(I) subject to the provisions of SECTION 7.11, solicit, encourage or
authorize any Person to solicit from any third party any inquiries or proposals
relating to the disposition of business or assets by, or the acquisition of the
voting securities of, or the merger of, in the case of RSFC, it, RF Bank or any
other RSFC Subsidiary, to or with any Person other than as provided by this Plan
or, subject to the fiduciary obligations of its Board of Directors, provide any
Person with information or assistance or negotiate with any Person in
furtherance of such inquiries or to obtain such a proposal (and RSFC shall
promptly notify First Union of all of the relevant details relating to all
inquiries and proposals which it may receive relating to any of such matters);
(J) settle any claim, action or proceeding against it involving liability
for any material money damages or any restrictions upon the operations of RSFC,
RF Bank or any RSFC Subsidiary, or forgive or compromise any amount of debt of
any Person other than a wholly-owned RSFC Subsidiary;
(K) take any action that would prevent or impede the Corporate Merger from
qualifying as a Tax-free reorganization within the meaning of Tax Code Section
368;
(L) amend its Articles of Incorporation (or Charter) or Bylaws;
(M) except as may be directed by any Regulatory Authority, (1) change its
or any of the RSFC Subsidiaries' lending, investment, liability management or
other material banking or other policies in any material respect, except such
changes as are in accordance and in an effort to comply with SECTION 7.15, (2)
incur or commit to incur any capital expenditures beyond those Previously
Disclosed in SCHEDULE 7.2(M) other than in the Ordinary Course of Business and
not exceeding $50,000 individually or $250,000 in the aggregate, or (3)
implement or adopt any change in accounting principles, practices or methods,
other than as may be required by GAAP;
(N) impose, or permit or suffer the imposition, on any shares of capital
stock of any of the RSFC Subsidiaries, or on any of its or the RSFC
Subsidiaries' other assets, any Liens, other than Liens on such other assets
that, individually or in the aggregate, are not material to the business,
properties or operations of RSFC, RF Bank and the RSFC Subsidiaries, taken as a
whole; or
(O) agree to, or make any commitment to, take any of the actions prohibited
by this SECTION 7.2.
7.3 ACCESS AND INFORMATION; CONFIDENTIALITY.
(A) During the period from the date of this Plan to the Effective Time,
RSFC (and each RSFC Subsidiary) shall each afford to First Union, and to its
accountants, counsel, financial advisors and other representatives, full access
during normal business hours, to all of their respective properties, books,
contracts, commitments and records and, during such period, shall furnish
promptly to First Union (i) a copy of each RSFC Financial Report filed by it,
(ii) all regulatory examination reports and exit interview summaries, and (iii)
all other information concerning its business, properties and personnel as First
Union may reasonably request, PROVIDED THAT no investigation pursuant to this
SECTION 7.3 shall affect or be deemed to modify or waive any representation or
warranty made by RSFC or the conditions to the obligations of RSFC to consummate
the transactions contemplated by this Plan.
(B) Each party hereto shall, and shall cause its Affiliates, advisors and
representatives to, (i) hold confidential all information obtained in connection
with any transaction contemplated hereby with respect to the other party which
is not otherwise public knowledge, (ii) in the event of the termination of this
Plan return all documents (including copies thereof) obtained hereunder from the
other party, and (iii) use its best efforts to cause all information obtained
pursuant to this Plan or in connection with the negotiation hereof to be treated
as confidential and not use, or knowingly permit others to use, any such
information unless such information becomes generally available to the public
through no fault of such party or as it is advised by counsel that any such
information or document is required by law or applicable stock exchange rule to
be disclosed.
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7.4 CURRENT INFORMATION.
(A) RSFC shall promptly notify First Union of (1) any material change in
the business, operations or prospects of RSFC or any RSFC Subsidiary, (2) any
complaints, investigations or hearings (or communications indicating that the
same may be contemplated) of any Regulatory Authority relating to RSFC or any
RSFC Subsidiary, (3) the institution or the threat of material litigation
involving or relating to RSFC or any RSFC Subsidiary, or (4) any event or
condition that might be reasonably expected to cause any of RSFC's
representations or warranties set forth herein not to be true and correct as of
the Effective Time (except to the extent contemplated by SECTION 9.3) or prevent
RSFC from fulfilling its obligations hereunder; and in each case shall keep
First Union informed with respect thereto.
(B) First Union shall (1) promptly notify RSFC of any event or condition
that might reasonably be expected to cause any of First Union's representations
or warranties set forth herein not to be true and correct as of the Effective
Time (except to the extent contemplated by SECTION 9.2), and (2) notify RSFC
immediately of any denial of any application filed by First Union or its
subsidiaries with any Regulatory Authority with respect to this Plan, and in
each case shall keep RSFC informed with respect thereto.
7.5 REGISTRATION STATEMENT; REGULATORY MATTERS.
(A) None of the information supplied or to be supplied by RSFC or RF Bank,
on the one hand, or First Union or FUNB-NC, on the other hand, for inclusion in
the registration statement on Form S-4, or other appropriate form, to be filed
by First Union with the SEC under the 1933 Act for the registration of the
offering of the shares of First Union Common Stock to be issued in the Corporate
Merger (the "Registration Statement"), the proxy statement to be used by RSFC to
solicit any required approval of shareholders as contemplated by this Plan (the
"Proxy Statement") or any other document to be filed with any Regulatory
Authority in connection with the transactions contemplated hereby will contain
when filed, or, in the case of the Proxy Statement, when it is first mailed to
the shareholders of RSFC, any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which such statements are made, not
misleading, or, in the case of the Registration Statement, when it becomes
effective under the 1933 Act (and when any post-effective amendment thereto
becomes effective), be false or misleading with respect to any material fact, or
omit to state any material fact necessary in order to make the statements
therein not misleading, or, in the case of the Proxy Statement or any amendment
thereof or supplement thereto, at the time of the Shareholders' Meeting,
including any adjournments thereof, be false or misleading with respect to any
material fact or omit to state any material fact necessary to correct any
statement or remedy any omission in any earlier communication with respect to
the solicitation of any proxy for the Shareholders' Meeting.
(B) First Union shall (i) with the assistance of RSFC, prepare and file
with the SEC as soon as practicable the Registration Statement and the Proxy
Statement, (ii) use its best efforts to cause the Registration Statement to
become effective under the 1933 Act, and (iii) take any action reasonably
required to be taken under any applicable state securities or "Blue Sky" laws in
connection therewith. RSFC and the RSFC Subsidiaries shall furnish First Union
with all information concerning RSFC, the RSFC Subsidiaries and the holders of
RSFC Common Stock as First Union may reasonably request in connection with the
foregoing.
(C) First Union and RSFC shall cooperate and use their respective best
efforts (i) as soon as practicable to prepare all documentation, to effect all
filings and to obtain all Regulatory Approvals and all other permits, consents,
approvals and authorizations of all third parties, Regulatory Authorities and
other governmental authorities necessary to consummate the Corporate Merger, the
Bank Merger and the other transactions contemplated by this Plan, and (ii) to
cause the Corporate Merger, the Bank Merger and the other transactions
contemplated by this Plan to be consummated as soon as reasonably practicable.
First Union and RSFC shall advise one another concerning all filings to be made
by it and all other consents, approvals and authorizations required to be
obtained by it, and shall promptly furnish the other with copies of all such
filings and all correspondence, orders and other communications in connection
with all such filings, consents, approvals and authorizations and all Regulatory
Approvals.
7.6 SHAREHOLDERS' APPROVAL. RSFC shall cause a duly called and noticed
meeting of its shareholders to be held as soon as practicable for the purpose of
voting upon this Plan (the "Shareholders' Meeting"). In connection with the
Shareholders' Meeting, First Union and RSFC shall prepare the Proxy Statement
and mail it to RSFC's shareholders. The Board of Directors of RSFC shall submit
for approval of its shareholders the matters to be voted upon at the
Shareholders' Meeting, and shall, subject to its fiduciary obligations,
recommend approval of such matters and use its best efforts (including, without
limitation, soliciting proxies for such approval) to obtain such shareholder
approval.
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7.7 AGREEMENTS OF AFFILIATES. Previously Disclosed in SCHEDULE 7.7 is a
list identifying all Persons whom RSFC believes are "affiliates" of RSFC for
purposes of Rule 145 under the 1933 Act. RSFC shall use its best efforts to
cause each "affiliate" of RSFC to deliver to First Union at least 30 days prior
to the Effective Time a written agreement in the form of EXHIBIT B attached
hereto, providing that each such Person will not offer, sell, pledge, transfer
or otherwise dispose of any shares of First Union Common Stock except in
compliance with the applicable provisions of the 1933 Act and the rules and
regulations of the SEC thereunder.
7.8 TAX-FREE REORGANIZATION. RSFC and First Union undertake and agree to
use their best efforts to cause the Corporate Merger to qualify as a Tax-free
reorganization under Tax Code Section 368.
7.9 PRESS RELEASES. RSFC and First Union shall promptly consult with each
other as to the form and substance, and prior to the release or issuance, of any
press release or other public disclosure related to this Plan, the Mergers or
any other transaction contemplated hereby. RSFC and First Union agree not to
release or issue any such press release or other public disclosure without the
approval of the other (such approval not being unreasonably withheld) unless
required by law.
7.10 MISCELLANEOUS AGREEMENTS AND CONSENTS. Subject to the terms and
conditions of this Plan, each of the parties hereto agrees to use its best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Plan as expeditiously as reasonably practicable, including, without
limitation, using its best efforts to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the parties
to consummate the transactions contemplated hereby. RSFC and First Union shall
use, and shall cause each of the RSFC Subsidiaries and the First Union
subsidiaries, as applicable, to use their best efforts to obtain all Regulatory
Approvals and all other consents, approvals and authorizations of third parties
and Regulatory Authorities necessary or, in the reasonable opinion of RSFC and
First Union, desirable for the consummation of the transactions contemplated by
this Plan (it being understood that any amendments to the Registration Statement
or a resolicitation of proxies as a consequence of an acquisition agreement by
First Union or any of its subsidiaries shall not violate this covenant or any
other terms or conditions of this Plan).
7.11 ACQUISITION PROPOSALS. In the case of RSFC, without the prior written
consent of First Union, it shall not, and it shall cause the RSFC Subsidiaries
not to, solicit or encourage inquiries or proposals with respect to, or furnish
any nonpublic information relating to or participate in any negotiations or
discussions concerning, any acquisition or purchase of all or a substantial
portion of the assets or deposits of, or a substantial equity interest in, RSFC
or any of the RSFC Subsidiaries or any merger or other business combination with
RSFC or any of the RSFC Subsidiaries other than as contemplated by this Plan;
PROVIDED, HOWEVER, that if RSFC is not otherwise in violation of this SECTION
7.11, the Board of Directors of RSFC may furnish or cause to be furnished
information and may participate in such discussions and negotiations if such
Board of Directors, after having consulted with and considered the written
advice of outside counsel, has determined that the failure to provide such
information or participate in such negotiations and discussions would cause the
members of such Board of Directors to breach their fiduciary duties under
applicable law. RSFC shall instruct its and the RSFC Subsidiaries' officers,
directors, agents, advisors and affiliates to refrain from taking any action
that would violate or conflict with the foregoing; and it shall notify First
Union immediately if any such inquiries or proposals are received by, or any
such negotiations or discussions are sought to be initiated with, RSFC or any of
the RSFC Subsidiaries.
7.12 CERTAIN POLICIES OF RSFC AND RF BANK. In the case of RSFC and RF Bank,
it shall, consistent with GAAP and regulatory accounting principles, use its
best efforts to record any accounting adjustments required to conform its and
the RSFC Subsidiaries' loan, litigation and other reserve and real estate
valuation policies and practices (including loan classifications and levels of
reserves) so as to reflect consistently on a mutually satisfactory basis the
policies and practices of First Union; PROVIDED, HOWEVER, that RSFC and RF Bank
shall not be obligated to record any such accounting adjustments pursuant to
this SECTION 7.12 (i) unless and until RSFC and RF Bank shall be reasonably
satisfied that the conditions to the obligation of the parties to consummate the
Mergers will be satisfied or waived on or before the Effective Time, and (ii) in
no event until the day prior to the Closing Date.
7.13 ANTI-TAKEOVER LAW. In the case of RSFC, it shall not take any action
that would cause the transactions contemplated by this Plan to be subject to any
applicable "anti-takeover" statute (including but not limited to Article 7A of
the NCBCA) and it shall take all necessary steps to exempt (or ensure the
continued exemption of) the transactions contemplated by this Plan from any
applicable "anti-takeover" law, as now or hereafter in effect.
7.14 NO RIGHTS TRIGGERED. In the case of RSFC, it shall take all necessary
steps to ensure that the entering into of this Plan and the consummation of the
transactions contemplated hereby (including without limitation the Mergers) and
any other action or combination of actions, or any other transactions
contemplated hereby do not and will not (i) result in the grant of
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any rights to any Person (including directors, officers and employees of RSFC)
under the Articles of Incorporation, Charter or Bylaws of RSFC, or (ii) except
as Previously Disclosed in SCHEDULE 5.30, result in the grant of any rights to
any Person (including directors, officers and employees of RSFC) under any
material agreement to which RSFC or any of the RSFC Subsidiaries is a party, or
(iii) restrict or impair in any material way the ability of First Union or
FUNB-NC to exercise the rights granted hereunder.
7.15 REGULATORY DIVESTITURES. In the case of RSFC, effective at or before
the Effective Time (to the extent required by any Regulatory Authority), RSFC
and the RSFC Subsidiaries shall cease engaging in such activities as First Union
shall advise RSFC in writing are not permitted to be engaged in by First Union
or FUNB-NC under applicable law following the Effective Time and, to the extent
required by any Regulatory Authority as a conditional approval of the
transactions contemplated by this Plan, RSFC shall divest any RSFC Subsidiary
engaged in activities or holding assets that are impermissible for a bank
holding company or a national banking association, on terms and conditions
agreed to by First Union.
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1 INDEMNIFICATION AND INSURANCE.
(A) For six years after the Closing Date, First Union shall, and shall
cause the Continuing Corporation to, indemnify, defend and hold harmless the
present and former directors, officers and employees of RSFC and the RSFC
Subsidiaries (each, an "Indemnified Party") against all expense, liability and
loss arising out of actions or omissions occurring at or prior to the Effective
Time to the extent such persons are indemnified under the NCBCA and RSFC's
Articles of Incorporation and Bylaws as in effect on the date hereof, including
provisions relating to advances of expenses incurred in the defense of any
action, suit or proceeding, whether civil, criminal, administrative or
investigative.
(B) First Union shall use its reasonable best efforts to maintain RSFC's
existing directors' and officers' liability insurance policy (or a policy,
including First Union's existing policy, providing comparable coverage on terms
no less favorable) covering persons who are currently covered by such insurance
for a period of three years after the Closing Date; PROVIDED, THAT First Union
shall not be obligated to make a premium payment in respect of such policy (or
replacement policy) which exceeds, for the portion related to RSFC's directors
and officers, 150% of the annual premium payment on RSFC's current policy in
effect as of the date of this Plan; PROVIDED, FURTHER, that if such coverage can
only be obtained upon the payment of a premium in excess of 150% of the annual
premium payment of RSFC's current policy, First Union shall obtain such coverage
as can reasonably be obtained by paying a premium of 150% of the annual premium
payment of RSFC's current policy in effect as of the date of this Plan.
(C) Any Indemnified Party wishing to claim indemnification under subsection
(a) of this SECTION 8.1, upon learning of such claim, action, suit, proceeding
or investigation, shall promptly notify First Union thereof; PROVIDED, THAT the
failure so to notify shall not affect the obligations of First Union and the
Continuing Corporation under subsection (a) of this SECTION 8.1 (unless such
failure materially increases First Union's liability under such subsection (a)).
In the event of any such claim, action, suit, proceeding or investigation
(whether arising before or after the Closing Date), (i) First Union or the
Continuing Corporation shall have the right to assume the defense thereof, if it
so elects, and First Union or the Continuing Corporation shall pay all
reasonable fees and expenses of counsel for the Indemnified Parties promptly as
statements therefor are received; PROVIDED, HOWEVER, that First Union shall be
obligated pursuant to this subsection (c) to pay for only one firm of counsel
for all Indemnified Parties in any jurisdiction for any single action, suit or
proceeding or any group of actions, suits or proceedings arising out of or
related to a common body of facts, PROVIDED, FURTHER, that First Union will,
pursuant to this subsection (c), pay for an additional firm of counsel for an
Indemnified Party who has a conflict of interest with other Indemnified Parties
(it being understood, however, that First Union shall not be liable for the
expenses of more than one separate counsel representing the Indemnified Parties
who are parties to such action), (ii) the Indemnified Parties will cooperate in
the defense of any such matter, and (iii) First Union shall not be liable for
any settlement effected without its prior written consent.
(D) If First Union or the Continuing Corporation 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 First
Union or the Continuing Corporation shall assume the obligations set forth in
this SECTION 8.1.
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(E) First Union shall pay, or cause the Continuing Corporation to pay, all
reasonable expenses, including reasonable attorneys' fees, that may be incurred
by any Indemnified Party in enforcing the indemnity and other obligations
provided for in this SECTION 8.1. The rights of each Indemnified Party hereunder
shall be in addition to any other rights such Indemnified Party may have under
the Articles of Incorporation or By-laws of RSFC, under the NCBCA or otherwise.
8.2 EMPLOYEE BENEFITS. As soon as administratively practicable after the
Effective Time, employees of RSFC and the RSFC Subsidiaries shall be generally
entitled to participate in the pension, severance, benefit and similar plans on
substantially the same terms and conditions as employees of First Union and its
subsidiaries. For the purpose of determining eligibility to participate in such
plans and the vesting of benefits under such plans (but not for the accrual of
benefits under such plans), First Union shall give effect to years of service
with RSFC or the RSFC Subsidiaries, as the case may be, as if such service had
been with First Union or its subsidiaries.
ARTICLE IX
CONDITIONS
9.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGERS. The
respective obligations of each of RSFC and First Union to effect the Mergers and
the other transactions contemplated hereby shall be subject to the fulfillment
or waiver at or prior to the Effective Time of the following conditions:
(A) The shareholders of RSFC shall have approved all matters relating to
this Plan required to be approved by such shareholders.
(B) The Corporate Merger, the Bank Merger and the other transactions
contemplated hereby shall have received all required Regulatory Approvals,
including all required approvals by the Federal Reserve Board, Federal Reserve,
the OTS, the FDIC, the OCC and any other Regulatory Authority whose approval is
required for consummation of the transactions contemplated hereby, and no such
Regulatory Approvals or other required approval shall have imposed any condition
or requirement which would so materially adversely impact the business or
economic benefits reasonably expected to be obtained by First Union from the
transactions contemplated by this Plan as to render inadvisable in the
reasonable judgment of First Union the consummation of the Mergers.
(C) The Registration Statement shall have been declared effective by the
SEC and First Union shall have received all state securities or "Blue Sky" law
permits or other authorizations, or confirmations as to the availability of an
exemption from registration requirements, as may be necessary to issue First
Union Common Stock pursuant to the terms of this Plan. Neither the Registration
Statement nor any such permit, authorization or confirmation shall be subject to
any stop order, threatened stop order, rescission or withdrawal by the SEC or
any state securities or "Blue Sky" authority with competent jurisdiction.
(D) Neither RSFC, RF Bank, First Union nor FUNB-NC shall be subject to any
order, decree or injunction of a court of competent jurisdiction or any
Regulatory Authority which enjoins or prohibits the consummation of the
Corporate Merger or the Bank Merger.
(E) The shares of First Union Common Stock issuable pursuant to the
Corporate Merger shall have been approved for listing on the NYSE.
(F) First Union and RSFC shall have received an opinion of Sullivan &
Cromwell, satisfactory in form and substance to each of First Union and RSFC, to
the effect that the Corporate Merger will constitute a Tax-free reorganization
within the meaning of Tax Code Section 368 and that no gain or loss will be
recognized by the shareholders of RSFC to the extent that they receive First
Union Common Stock solely in exchange for their RSFC Common Stock in the
Corporate Merger.
9.2 CONDITIONS TO THE OBLIGATION OF RSFC AND RF BANK. The obligations of
RSFC and RF Bank to effect the Corporate Merger, the Bank Merger and the other
transactions contemplated hereby shall be subject to the fulfillment or waiver
at or prior to the Effective Time of the following additional conditions:
(A) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
each of First Union and FUNB-NC set forth in ARTICLE VI hereof shall be true and
correct as of the date of this Plan and as of the Effective Time (as though made
on and as of the Effective Time except to the extent such representations and
warranties are by their express provisions made as of a specified date, in which
case such representations and warranties shall be true and correct as of such
date) and RSFC and RF Bank shall have received a certificate signed by an
executive officer of each of First Union and FUNB-NC to that effect.
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(B) PERFORMANCE OF OBLIGATIONS. Each of First Union and FUNB-NC shall have
performed in all material respects all obligations and covenants required to be
performed by it under this Plan prior to the Effective Time, and RSFC and RF
Bank shall have received a certificate signed by an executive officer of each of
First Union and FUNB-NC to that effect.
(C) LEGAL OPINION. RSFC and RF Bank shall have received from Marion A.
Cowell, Jr., counsel to First Union and FUNB-NC, an opinion which shall cover
the matters contained in EXHIBIT C hereto. In rendering the foregoing opinion,
such counsel may rely as to questions of fact and of good standing upon the
representations and warranties of First Union and FUNB-NC contained in this Plan
or upon the certificates of appropriate officers of First Union and FUNB-NC or
of public officials.
9.3 CONDITIONS TO THE OBLIGATIONS OF FIRST UNION AND FUNB-NC. The
obligations of First Union and FUNB-NC to effect the Corporate Merger, the Bank
Merger and the other transactions contemplated hereby shall be subject to the
fulfillment at or prior to the Effective Time of the following additional
conditions:
(A) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
each of RSFC and RF Bank set forth in ARTICLE V hereof shall be true and correct
as of the date of this Plan and as of the Effective Time (as though made on and
as of the Effective Time except to the extent such representations and
warranties are by their express provisions made as of a specified date, in which
case such representations and warranties shall be true and correct as of such
date) and First Union and FUNB-NC shall have received a certificate signed by
the Chief Executive Officer and the Chief Financial Officer of each of RSFC and
RF Bank to that effect.
(B) PERFORMANCE OF OBLIGATIONS. Each of RSFC and RF Bank shall have
performed in all material respects all obligations and covenants required to be
performed by it under this Plan prior to the Effective Time, and First Union and
FUNB-NC shall have received a certificate signed by the Chief Executive Officer
and the Chief Financial Officer of each of RSFC and RF Bank to that effect.
(C) LEGAL OPINION. First Union shall have received from Brooks, Pierce,
McLendon, Humphrey & Leonard, L.L.P., counsel to RSFC and RF Bank, an opinion
which shall cover the matters contained in EXHIBIT D hereto. In rendering the
foregoing opinion, such counsel may rely as to questions of fact and of good
standing upon the representations and warranties of RSFC and RF Bank contained
in this Plan or upon the certificates of appropriate officers of RSFC and RF
Bank or of public officials.
(D) AFFILIATES LETTERS. RSFC shall have delivered to First Union all of the
written agreements of its "affiliates"described in SECTION 7.7.
(E) MCGLADREY & PULLEN, L.L.P. LETTERS. RSFC shall cause McGladrey &
Pullen, L.L.P. to deliver to First Union letters, dated the date of or shortly
prior to (A) the mailing of the Proxy Statement, and (B) the Closing Date, in
form and substance satisfactory to First Union, with respect to RSFC's
consolidated financial position and results of operations and the financial
information with respect to RSFC included in the Registration Statement, which
letters shall be based upon "agreed upon procedures" undertaken by such firm in
accordance with the Statement on Auditing Standards No. 72.
ARTICLE X
TERMINATION
10.1 TERMINATION. Notwithstanding any other provision of this Plan, and
notwithstanding the approval of this Plan by the shareholders of RSFC, this Plan
may be terminated and such transactions abandoned at any time prior to the
Effective Time:
(a) by mutual consent of the Board of Directors of RSFC and the Board of
Directors of First Union;
(b) by First Union or RSFC, if its Board of Directors so determines by vote
of a majority of the members of its entire Board, in the event of (1) a breach
by the other party of any representation or warranty contained herein, which
breach cannot be or has not been cured within thirty (30) days after the giving
of written notice to the breaching party of such breach, or (2) 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 thirty (30) days after the giving of
written notice to the breaching party of such breach;
(c) upon notice to the other party, by the Board of Directors of RSFC or
the Board of Directors of First Union (provided that the terminating party is
not then in material breach of any representation, warranty, covenant or other
agreement contained herein) if the Effective Time shall not have occurred on or
before April 1, 1996; or
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(d) by RSFC or First Union, if its Board of Directors so determines by a
vote of a majority of the members of its entire Board, in the event that any
stockholder approval contemplated by SECTION 9.1(A) herein is not obtained at
the Shareholders' Meeting, including any adjournment or adjournments thereof.
10.2 EFFECT OF TERMINATION. In the event of the termination and abandonment
of this Plan pursuant to SECTION 10.1, this Plan shall become void and have no
effect, except that (i) the provisions of SECTION 7.3(B), SECTION 10.3, SECTION
10.4 and ARTICLE XI shall survive any such termination and abandonment, and (ii)
no party shall be relieved or released from any liability arising out of a
willful or grossly negligent breach of any provision of this Plan.
10.3 EXPENSES. Each party hereto shall bear its own expenses incident to
preparing, entering into and carrying out this Plan and the transactions
contemplated hereby, including filing fees and financial advisor, legal,
accounting, printing and investment banking fees and expenses (the "Costs").
10.4 TERMINATION FEE.
(a) RSFC hereby agrees to pay First Union and First Union shall be entitled
to payment of, a nonperformance fee (the "Termination Fee") of $5.9 million
following the occurrence of a Purchase Event (as defined below), PROVIDED THAT
First Union shall have sent written notice of such entitlement within 90 days
after First Union actually becomes aware of such occurrence. Such payment shall
be made in immediately available funds within five business days after delivery
of a notice from First Union requesting such payment. The right to receive the
Termination Fee shall terminate if any of the following (a "Fee Termination
Event") occurs prior to a Purchase Event: (i) the Closing Date, (ii) termination
of this Plan in accordance with the provisions hereof if such termination occurs
prior to the occurrence of a Preliminary Purchase Event (as defined below),
except a termination by First Union pursuant to SECTION 10.1(B) following a
knowing breach of a representation, warranty, covenant or agreement contained
herein, (iii) termination of this Plan following the occurrence of a Preliminary
Purchase Event and the passage of eighteen (18) months after such termination,
or (iv) termination of this Plan by First Union pursuant to SECTION 10.1(B)
following a knowing breach of a representation, warranty, covenant or agreement
contained herein, and the passage of eighteen (18) months after such
termination.
(b) The term "Preliminary Purchase Event" shall mean any of the following
events or transactions occurring after the date hereof:
(I) RSFC or any of the RSFC Subsidiaries without having received First
Union's prior written consent, shall have entered into an agreement to
engage in any Acquisition Transaction (as defined below) with any person
(the term "person" for purposes of this SECTION 10.4 having the meaning
assigned thereto in Section 3(a)(9) and 13(d)(3) of the 1934 Act) other
than First Union or any of its subsidiaries or affiliates or the Board of
Directors of RSFC shall have recommended that the shareholders of RSFC
approve or accept any Acquisition Transaction with any person other than
First Union or any of its subsidiaries or affiliates. For purposes of this
Plan, "Acquisition Transaction" shall mean (a) a merger or consolidation,
or any similar transaction, involving RSFC or any of the RSFC Subsidiaries,
(b) a purchase, lease or other acquisition of all or substantially all of
the assets or deposits of RSFC or any of the RSFC Subsidiaries, (c) a
purchase or other acquisition (including by way of merger, consolidation,
share exchange or otherwise) of securities representing 20% or more of the
voting power of RSFC or of the RSFC Subsidiaries; provided that the term
"Acquisition Transaction" does not include any internal merger or
consolidation involving only RSFC and/or any of the RSFC Subsidiaries;
(II) (a) any person (other than First Union or any of its subsidiaries
or affiliates) shall have acquired beneficial ownership or the right to
acquire beneficial ownership of 20% or more of the outstanding shares of
RSFC Common Stock (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of the 1934
Act, or (b) any group (as such term "group" is defined in Section 13(d)(3)
of the 1934 Act), other than a group of which any of First Union or any of
its subsidiaries or affiliates is a member, shall have been formed that
beneficially owns 20% or more of the RSFC Common Stock then outstanding;
(III) any person other than First Union or any of its subsidiaries or
affiliates shall have made a bona fide proposal to RSFC or its
shareholders, by public announcement or written communication that is or
becomes the subject of public disclosure, to engage in an Acquisition
Transaction (including, without limitation, any situation in which any
person other than First Union or any of its subsidiaries or affiliates
shall have commenced (as such term is defined in Rule 14d-2 under the 1934
Act) or shall have filed a registration statement under the 1933 Act, with
respect to, a tender offer or exchange offer to purchase any shares of RSFC
Common Stock such that, upon consummation of such offer, such person would
own or control 20% or more of the then outstanding shares of RSFC Common
Stock (such an offering referred to herein as a "Tender Offer" or an
"Exchange Offer", respectively));
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(IV) after a proposal is made by a third party to RSFC or its
shareholders to engage in an Acquisition Transaction, or such third party
states its intention to RSFC to make such a proposal if this Plan
terminates, RSFC shall have knowingly breached any representation, covenant
or obligation contained in this Plan and such breach would entitle First
Union to terminate this Plan under SECTION 10.1(B) (without regard to the
cure period provided for therein unless such cure is promptly effected
without jeopardizing consummation of the Corporate Merger); or
(V) the holders of shares of RSFC Common Stock shall not have approved
this Plan at the Shareholders' Meeting or the Shareholders' Meeting shall
not have been held or shall have been canceled prior to termination of this
Plan, in each case after any person (other than First Union or any of its
subsidiaries or affiliates) shall have (A) made, or disclosed an intention
to make, a bona fide proposal to engage in an Acquisition Transaction or
(B) commenced a Tender Offer or filed a registration statement under the
1933 Act, with respect to an Exchange Offer.
(c) The term "Purchase Event" shall mean either of the following events or
transactions occurring after the date hereof:
(I) the acquisition by any person, other than First Union or any of
its subsidiaries or affiliates, alone or together with such person's
affiliates and association, or any group (as defined in Section 13(d)(3) of
the 1934 Act), of beneficial ownership of 25% or more of the outstanding
shares of RSFC Common Stock; or
(II) the occurrence of a Preliminary Purchase Event described in (x)
clause (B)(i) above, except that the percentage referred to in clause (c)
thereof shall be 25%, or (y) clause (B)(v) above.
(d) RSFC shall notify First Union promptly in writing of its knowledge of
the occurrence of any Preliminary Purchase Event or Purchase Event; PROVIDED,
HOWEVER, that the giving of such notice by RSFC shall not be a condition to the
right of First Union to the Termination Fee.
ARTICLE XI
GENERAL PROVISIONS
11.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS FOLLOWING
THE EFFECTIVE TIME. Except for SECTION 8.1 and ARTICLE XI, none of the
respective representations, warranties, obligations, covenants and agreements of
the parties hereto shall survive the Effective Time.
11.2 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. Except as otherwise
expressly provided herein, this Plan contains the entire agreement between the
parties hereto with respect to the transactions contemplated hereunder and
thereunder, and such agreements supersede all prior arrangements or
understandings heretofore made. The terms and conditions of this Plan shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors. Nothing in this Plan, expressed or implied, shall confer
upon any Person, other than First Union, FUNB-NC, RSFC and RF Bank or their
respective successors, any rights, remedies, obligations or liabilities under or
by reason of this Plan.
11.3 AMENDMENTS. To the extent permitted by law, this Plan may be amended
by a subsequent writing signed by each of the parties hereto upon the approval
of the Board of Directors of each of the parties hereto; PROVIDED, HOWEVER, that
the provisions hereof relating to the basis on which shares of RSFC Common Stock
will be exchanged for First Union Common Stock shall not be amended after the
Shareholders' Meeting without any requisite approval of the holders of the RSFC
Common Stock entitled to vote thereon.
11.4 WAIVERS. Prior to or at the Effective Time, each of the parties hereto
shall have the right to waive any default in the performance of any term of this
Plan by any other party hereto, to waive or extend the time for the compliance
or fulfillment by any other party hereto of any and all of the other's
obligations under this Plan and to waive any or all of the conditions precedent
to its obligations under this Plan, except any condition which, if not
satisfied, would result in the violation of any law or applicable governmental
regulation.
11.5 NO ASSIGNMENT. None of the parties hereto may assign any of its rights
or delegate any of its obligations under this Plan to any other Person. Any such
purported assignment or delegation that is made without the prior written
consent of the other parties to this Plan shall be void and of no effect.
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11.6 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and shall be deemed given if delivered
by hand, by facsimile transmission (with confirmation), or by registered or
certified mail (return receipt requested), postage prepaid, to the Persons at
the addresses set forth below (or at such other address as may be provided
hereunder):
<TABLE>
<S> <C>
If to RSFC: Stanley E. Wright
President and Chief Executive Officer
RS Financial Corp.
219 Fayetteville Street Mall
Raleigh, North Carolina 27601
With a required copy to: Edward C. Winslow III, Esq.
Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P.
Post Office Box 26000
Greensboro, North Carolina 27420-6000
If to the First Union: First Union Corporation
One First Union Center
Charlotte, North Carolina 28288-0013
Attn: Chief Executive Officer
With a required copy to: Marion A. Cowell, Jr., Esq.
First Union Corporation
One First Union Center
Charlotte, North Carolina 28288-0013
</TABLE>
or to such other Person as any party shall specify by notice in writing to each
of the other party.
11.7 SEVERABILITY. If any term, provision, covenant or restriction
contained in this Plan is held by a Regulatory Authority or court of competent
jurisdiction to be invalid, void, unenforceable or against public or regulatory
policy, the remainder of the terms, provisions, covenants and restrictions
contained in this Plan shall remain in full force and effect and shall in no way
be effected, impaired or invalidated.
11.8 GOVERNING LAW. This Plan shall in all respects be governed by and
construed in accordance with the laws of the State of North Carolina.
11.9 COUNTERPARTS. This Plan may be executed in one or more counterparts,
each of which shall be deemed to constitute an original, but all of which
together shall constitute one and the same instrument.
11.10 CAPTIONS. The captions contained in this Plan are for reference
purposes only and are not part of this Plan.
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IN WITNESS WHEREOF, RSFC, RF Bank, First Union and FUNB-NC have caused this
Plan to be signed by their respective officers thereunto duly authorized, all as
of the date first written above.
RS FINANCIAL CORP
By: /s/ STANLEY E. WRIGHT
NAME: STANLEY E. WRIGHT
TITLE: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
RALEIGH FEDERAL SAVINGS BANK
By: /s/ STANLEY E. WRIGHT
NAME: STANLEY E. WRIGHT
TITLE: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
FIRST UNION CORPORATION
By: /s/ KENNETH R. STANCLIFF
NAME: KENNETH R. STANCLIFF
TITLE: SENIOR VICE PRESIDENT
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By: /s/ KENNETH R. STANCLIFF
NAME: KENNETH R. STANCLIFF
TITLE: SENIOR VICE PRESIDENT
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ANNEX B
OPINION OF TRIDENT FINANCIAL CORPORATION
October 20, 1995
Board of Directors,
RS Financial Corp.
219 Fayetteville Street Mall
Raleigh, North Carolina 27601
Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of shares of common stock ("RS Financial Common Stock"),
of RS Financial Corp. ("RS Financial") of the consideration to be received by
such stockholders in the proposed merger (the "Proposed Merger") of RS Financial
with First Union Corporation ("First Union"), pursuant to the Agreement and Plan
of Mergers dated May 30, 1995 (the "Agreement").
As more specifically set forth in the Agreement, and subject to a number of
conditions and procedures described in the Agreement, in the Proposed Merger
each of the issued and outstanding shares of RS Financial Common Stock shall be
converted into shares of common stock of First Union ("First Union Common
Stock") at an exchange ratio equivalent to $40.25 for each outstanding share of
RS Financial Common Stock. All unexercised options for the right to purchase
shares of RS Financial Common Stock will be converted into options for the right
to purchase shares of First Union Common Stock using the same exchange ratio as
applicable to the holders of RS Financial Common Stock.
Trident Financial Corporation ("Trident") is a financial consulting and
investment banking firm experienced in the valuation of business enterprises
with considerable experience in the valuation of thrift institutions. Since
1975, Trident has valued in excess of 300 thrift institutions in connection with
mutual-to-stock conversions, mergers and acquisitions, as well as other
transactions. Trident is not affiliated with RS Financial or First Union.
In connection with rendering our opinion, we have received and analyzed,
among other things, the following: (i) the Agreement and Registration Statement
on Form S-4 of First Union related thereto; (ii) certain publicly available
information concerning RS Financial, including the audited financial statements
of RS Financial for each of the years in the three-year period ended December
31, 1994 and unaudited financial statements for each of the six-month periods
ended June 30, 1994 and 1995; (iii) certain publicly available information
concerning First Union, including the audited financial statements of First
Union for each of the years in the three-year period ended December 31, 1994 and
unaudited financial statements for each of the six-month periods ended June 30,
1994 and 1995; (iv) certain other internal information, primarily financial in
nature, concerning the business and operations of RS Financial and First Union
furnished to us by RS Financial and First Union for purposes of our analysis;
(v) information with respect to the trading market for RS Financial Common
Stock; (vi) information with respect to the trading market for First Union
Common Stock; (vii) certain publicly available information with respect to other
companies that we believe to be comparable to RS Financial and First Union and
the trading markets for such other companies' securities; and (viii) certain
publicly available information concerning the nature and terms of other
transactions that we believe relevant to our inquiry. We have also met with
certain officers and employees of RS Financial and First Union to discuss the
foregoing as well as other matters we believe relevant to our inquiry.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to us or publicly available. We have not attempted
independently to verify any such information. We have not conducted a physical
inspection of the properties or facilities of RS Financial or First Union, nor
have we made or obtained any independent evaluations or appraisals of any of
such properties or facilities. We did not specifically evaluate RS Financial's
or First Union's loan portfolio or the adequacy of RS Financial's or First
Union's reserves for possible loan losses.
In conducting our analysis and arriving at our opinion as expressed herein,
we have considered such financial and other factors as we have deemed
appropriate under the circumstances including, among others, the following: (i)
the historical and current financial condition and results of operations of RS
Financial and First Union, including interest income, interest expense,net
interest income, net interest margin, interest sensitivity, non-interest
expenses, earnings, dividends, book value, return on assets, return on equity,
capitalization, the amount and type of non-performing assets and the reserve for
loan losses; (ii) the business prospects of RS Financial and First Union; (iii)
the economies in RS Financial's and First Union's market areas; (iv) the
historical and current market for RS Financial Common Stock and First Union
Common Stock and for
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<PAGE>
<PAGE>
the equity securities of certain other companies that we believe to be
comparable to RS Financial and First Union; and (v) the nature and terms of
certain other acquisition transactions that we believe to be relevant. We have
also taken into account our assessment of general economic, market, financial
and regulatory conditions and trends, as well as our knowledge of the banking
and thrift industries, our experience in connection with similar transactions,
and our knowledge of securities valuation generally. Our opinion necessarily is
based upon conditions as they exist and can be evaluated on the date hereof. Our
opinion is, in any event, limited to the fairness, from a financial point of
view, of the consideration to be received by the holders of RS Financial Common
Stock in the Proposed Merger and does not address RS Financial's underlying
business decision to effect the Proposed Merger.
Based upon and subject to the foregoing, we are of the opinion that the
consideration to be received by the holders of RS Financial Common Stock in the
Proposed Merger is fair, as of the date hereof, from a financial point of view,
to such holders.
This opinion is being delivered to the Board of Directors of RS Financial
and is not to be reproduced, disseminated or delivered to any third party
without the express written consent of Trident, except as required by law.
Very truly yours,
TRIDENT FINANCIAL CORPORATION
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ANNEX C
ARTICLE 13 OF THE NORTH CAROLINA
BUSINESS CORPORATION ACT --
RELATING TO DISSENTERS' RIGHTS
(SECTION MARK)55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under G.S. 55-13-02 and who exercises that right when and
in the manner required by G.S. 55-13-20 through 55-13-28.
(3) "Fair value" with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or depreciation
in anticipation of the corporate action unless exclusion would be
inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the rate that is fair and equitable
under all the circumstances, giving due consideration to the rate currently
paid by the corporation on its principal bank loans, if any, but not less
than the rate provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.
(6) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
(SECTION MARK)55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation (other
than a parent corporation in a merger under G.S. 55-11-04) is a party
unless (i) approval by the shareholders of that corporation is not required
under G.S. 55-11-03(g) or (ii) such shares are then redeemable by the
corporation at a price not greater than the cash to be received in exchange
for such shares;
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, unless such
shares are then redeemable by the corporation at a price not greater than
the cash to be received in exchange for such shares;
(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than as permitted by G.S.
55-12-01, including a sale in dissolution, but not including a sale
pursuant to court order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed in
cash to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it (i)
alters or abolishes a preferential right of the shares; (ii) creates,
alters, or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares; (iii) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities; (iv) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes; (v)
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional share so created is to be acquired for cash under
G.S. 55-6-04; or (vi) changes the corporation into a nonprofit corporation
or cooperative organization;
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(5) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property, unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(SECTION MARK)55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
(SECTION MARK)55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders, the corporation shall no later than 10
days thereafter notify in writing all shareholders entitled to assert
dissenters' rights that the action was taken and send them the dissenters'
notice described in G.S. 55-13-22.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
(SECTION MARK)55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must actually
receive, before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
(SECTION MARK)55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is authorized at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after the
corporate action was taken, and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
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(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the subsection (a) notice is mailed; and
(5) Be accompanied by a copy of this Article.
(SECTION MARK)55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this Article.
(SECTION MARK)55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
(SECTION MARK)55-13-25. OFFER OF PAYMENT.
(a) As soon as the proposed corporate action is taken, or upon receipt of a
payment demand, the corporation shall offer to pay each dissenter who complied
with G.S. 55-13-23 the amount the corporation estimates to be the fair value of
his shares, plus interest accrued to the date of payment, and shall pay this
amount to each dissenter who agrees in writing to accept it in full satisfaction
of his demand.
(b) The offer of payment must be accompanied by:
(1) The corporation's most recent available balance sheet as of the
end of a fiscal year ending not more than 16 months before the date of
offer of payment, an income statement for that year, a statement of cash
flows for that year, and the latest available interim financial statements,
if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under G.S.
55-13-28; and
(5) A copy of this Article.
(SECTION MARK)55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
(SECTION MARK)55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S
OFFER OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate or reject the corporation's offer under G.S. 55-13-25 and demand
payment of the fair value of his shares and interest due, if:
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(1) The dissenter believes that the amount offered under G.S. 55-13-25
is less than the fair value of his shares or that the interest due is
incorrectly calcualted;
(2) The corporation fails to make payment to a dissenter who accepts
the corporation's offer under G.S. 55-13-25 within 30 days after the
dissenter's acceptance; or
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing (i) under
subdivision (a)(1) within 30 days after the corporation offered payment for his
shares or (ii) under subdivisions (a)(2) and (a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
(SECTION MARK)55-13-30. COURT ACTION.
(a) If a demand for payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the date of his payment
demand under G.S. 55-13-28 and petition the court to determine the fair value of
the shares and accrued interest. Upon service upon it of the petition filed with
the court, the corporation shall pay to the dissenter the amount offered by the
corporation under G.S. 55-13-25.
(a1) If the dissenter does not commence the proceeding within the 60-day
period, the dissenter shall have an additional 30 days to either (i) accept in
writing the amount offered by the corporation under G.S. 55-13-25, upon which
the corporation shall pay such amount to the dissenter in full satisfaction of
his demand, or (ii) withdraw his demand for payment and resume the status of a
nondissenting shareholder. A dissenter who takes no action within such 30-day
period shall be deemed to have withdrawn his dissent and demand for payment.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the petition. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decisions on the
question of fair value. The appraisers have the powers described in the order
appointing them, or in any amendment to it. The parties are entitled to the same
discovery rights as parties in other civil proceedings. However, in a proceeding
by a dissenter in a public corporation, there is no right to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his shares,
plus interest, exceeds the amount paid by the corporation.
(SECTION MARK)55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of G.S. 55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of either
or any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this Article.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 55-8-50 through 55-8-58 of the NCBCA contain specific provisions
relating to indemnification of directors and officers of North Carolina
corporations. In general, the statute provides that (i) a corporation must
indemnify a director or officer who is wholly successful in his defense of a
proceeding to which he is a party because of his status as such, unless limited
by the articles of incorporation, and (ii) a corporation may indemnify a
director or officer if he is not wholly successful in such defense, if it is
determined as provided in the statute that the director or officer meets a
certain standard of conduct, provided when a director or officer is liable to
the corporation, the corporation may not indemnify him. The statute also permits
a director or officer of a corporation who is a party to a proceeding to apply
to the courts for indemnification, unless the articles of incorporation provide
otherwise, and the court may order indemnification under certain circumstances
set forth in the statute. The statute further provides that a corporation may in
its articles of incorporation or bylaws or by contract or resolution provide
indemnification in addition to that provided by the statute, subject to certain
conditions set forth in the statute.
FUNC's Bylaws provide for the indemnification of FUNC's directors and
executive officers by FUNC against liabilities arising out of his status as
such, excluding any liability relating to activities which were at the time
taken known or believed by such person to be clearly in conflict with the best
interests of FUNC.
FUNC's Articles provide for the elimination of the personal liability of
each director of FUNC to the fullest extent permitted by the provisions of the
NCBCA, as the same may from time to time be in effect.
FUNC maintains directors and officers liability insurance, which provides
coverage of up to $80,000,000, subject to certain deductible amounts. In
general, the policy insures (i) FUNC's directors and officers against loss by
reason of any of their wrongful acts, and/or (ii) FUNC against loss arising from
claims against the directors and officers by reason of their wrongful acts, all
subject to the terms and conditions contained in the policy.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
(2)(a) The Merger Agreement. (Incorporated by reference to ANNEX A to the Prospectus/Proxy Statement included in this
Registration Statement.)*
(2)(b) The FFB Merger Agreement, including exhibits thereto. (Incorporated by reference to Exhibit (99) to FUNC's
Current Report on Form 8-K dated June 21, 1995.)
(3)(a) Articles of Incorporation of FUNC, as amended. (Incorporated by reference to Exhibit (4) to FUNC's 1990 First
Quarter Report on Form 10-Q and to Exhibit (99)(a) to FUNC's 1993 First Quarter Report on Form 10-Q.)
(3)(b) Bylaws of FUNC, as amended. (Incorporated by reference to Exhibit (4)(b) to FUNC's Form 8-K dated September 20,
1991.)
(4)(a) Shareholder Protection Rights Agreement, as amended. (Incorporated by reference to Exhibits (4)(b) to FUNC's
Forms 8-K dated December 18, 1990 and October 20, 1992, and to Exhibit (99) to FUNC's Current Reports on Form
8-K dated June 20, 1995 and June 21, 1995.)
(4)(b) All instruments defining the rights of holders of long-term debt of FUNC and its subsidiaries. (Not filed
pursuant to (4)(iii) of Item 601(b) of Regulation S-K; to be furnished upon request of the Commission.)
(5) Opinion of Marion A. Cowell, Jr., Esq.**
(8) Tax opinion of Sullivan & Cromwell.**
(10) Employment Agreement between FUNC and John R. Georgius. (Incorporated by reference to Exhibit (10) to Amendment
No. 1 to FUNC's Registration Statement No. 33-60835.)
(12)(a) Computations of Consolidated Ratios of Earnings to Fixed Charges. (Incorporated by reference to Exhibit (12) to
FUNC's 1995 Second Quarter Report on Form 10-Q.)
(12)(b) Pro forma Computations of Consolidated Ratios of Earnings to Fixed Charges and Pro Forma Computations of
Consolidated Ratios of Earnings to Fixed Charges and Preferred Stock Dividends. (Incorporated by reference to
Exhibit (99)(b) to FUNC's Second Quarter Report on Form 10-Q.)
(23)(a) Consent of McGladrey & Pullen, L.L.P.**
(23)(b) Consent of KPMG Peat Marwick LLP.**
(23)(c) Consent of KPMG Peat Marwick LLP.**
(23)(d) Consent of Marion A. Cowell, Jr., Esq. (Included in Exhibit (5).)
(23)(e) Consent of Sullivan & Cromwell. (Included in Exhibit (8).)
(23)(f) Consent of Trident Financial Corporation.**
(24) Power of Attorney.**
(27) FUNC's Financial Data Schedule. (Incorporated by reference to Exhibit (27) to FUNC's 1995 Second Quarter Report
on Form 10-K.)
(99) Form of proxy for the Special Meeting of Stockholders of RSFC.
</TABLE>
* Omitted exhibits to be furnished upon request of the Commission.
** Previously filed.
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ITEM 22. UNDERTAKINGS.
(a)(1) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933 (as amended and the
rules and regulations thereunder, the "Securities Act"), each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (as amended and the rules and regulations
thereunder, the "Exchange Act") (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(2) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c)
promulgated pursuant to the Securities Act, the issuer undertakes that such
reoffering prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items of
the applicable form.
(3) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (2) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415 promulgated
pursuant to the Securities Act, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(4) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions of this Item 22, or otherwise
(other than insurance), the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act, and is therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a) (3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
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<PAGE>
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
PROVIDED HOWEVER, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13 or
15(d) of the Exchange Act that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 1 to Registration Statement No.
33-63387 on Form S-4 to be signed on its behalf by the undersigned, thereunto,
duly authorized, in the City of Charlotte, State of North Carolina, on October
18, 1995.
FIRST UNION CORPORATION
By: MARION A. COWELL, JR.
MARION A. COWELL, JR.
EXECUTIVE VICE PRESIDENT,
SECRETARY AND GENERAL COUNSEL
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to Registration Statement No. 33-63387 on Form S-4 has been
signed by the following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
<S> <C>
*EDWARD E. CRUTCHFIELD Chairman, and Chief Executive Officer and Director
EDWARD E. CRUTCHFIELD
*ROBERT T. ATWOOD Executive Vice President and Chief Financial Officer
ROBERT T. ATWOOD
*JAMES H. HATCH Senior Vice President and Corporate Controller (Principal
JAMES H. HATCH Accounting Officer)
*G. ALEX BERNHARDT Director
G. ALEX BERNHARDT
*W. WALDO BRADLEY Director
W. WALDO BRADLEY
*ROBERT J. BROWN Director
ROBERT J. BROWN
*ROBERT D. DAVIS Director
ROBERT D. DAVIS
*R. STUART DICKSON Director
R. STUART DICKSON
*B.F. DOLAN Director
B.F. DOLAN
*RODDEY DOWD, SR. Director
RODDEY DOWD, SR.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
<S> <C>
*JOHN R. GEORGIUS Director
JOHN R. GEORGIUS
*WILLIAM N. GOODWIN, JR. Director
WILLIAM N. GOODWIN, JR.
*BRENTON S. HALSEY Director
BRENTON S. HALSEY
*HOWARD H. HAWORTH Director
HOWARD H. HAWORTH
*TORRENCE E. HEMBY, JR. Director
TORRENCE E. HEMBY, JR.
*LEONARD G. HERRING Director
LEONARD G. HERRING
*JACK A. LAUGHERY Director
JACK A. LAUGHERY
*MAX LENNON Director
MAX LENNON
RADFORD D. LOVETT Director
*HENRY D. PERRY, JR. Director
HENRY D. PERRY, JR.
*RANDOLPH N. REYNOLDS Director
RANDOLPH N. REYNOLDS
*RUTH G. SHAW Director
RUTH G. SHAW
*LANTY L. SMITH Director
LANTY L. SMITH
*DEWEY L. TROGDON Director
DEWEY L. TROGDON
*JOHN D. UIBLE Director
JOHN D. UIBLE
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
<S> <C>
*B. J. WALKER Director
B. J. WALKER
*KENNETH G. YOUNGER Director
KENNETH G. YOUNGER
*By Marion A. Cowell, Jr., Attorney-in-Fact
MARION A. COWELL, JR.
MARION A. COWELL, JR.
</TABLE>
Date: October 18, 1995
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<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION LOCATION
<S> <C> <C>
(2)(a) The Merger Agreement. Incorporated by reference to ANNEX A to the
Prospectus/Proxy Statement included in this
Registration Statement.*
(2)(b) The FFB Merger Agreement, including exhibits thereto. Incorporated by reference to Exhibit (99) to FUNC's
Current Report on Form 8-K dated June 21, 1995.
(3)(a) Articles of Incorporation of FUNC, as amended. Incorporated by reference to Exhibit (4) to FUNC's
1990 First Quarter Report on Form 10-Q and to Exhibit
(99)(a) to FUNC's 1993 First Quarter Report on Form
10-Q.
(3)(b) Bylaws of FUNC, as amended. Incorporated by reference to Exhibit (4)(b) to FUNC's
Form 8-K dated September 20, 1991.
(4)(a) Shareholder Protection Rights Agreement, as amended. Incorporated by reference to Exhibits (4)(b) to FUNC's
Forms 8-K dated December 18, 1990 and October 20,
1992, and to Exhibit (99) to FUNC's Current Reports on
Form 8-K dated June 20, 1995 and June 21, 1995.
(4)(b) All instruments defining the rights of holders of Not filed pursuant to (4)(iii) of Item 601(b) of
long-term debt of FUNC and its subsidiaries. Regulation S-K; to be furnished upon request of the
Commission.
(5) Opinion of Marion A. Cowell, Jr., Esq. **
(8) Tax opinion of Sullivan & Cromwell. **
(10) Employment Agreement between FUNC and John R. Incorporated by reference to Exhibit (10) to Amendment
Georgius. No. 1 to FUNC's Registration Statement No. 33-60835.
(12)(a) Computations of Consolidated Ratios of Earnings to Incorporated by reference to Exhibit (12) to FUNC's
Fixed Charges. 1995 Second Quarter on Form 10-Q.
(12)(b) Pro Forma Computations of Consolidated Ratios of Incorporated by reference to Exhibit (99)(b) to FUNC's
Earnings to Fixed Charges and Pro Forma Computations Second Quarter Report on Form 10-Q.
of Consolidated Ratios of Earnings to Fixed Charges
and Preferred Stock Dividends.
(23)(a) Consent of McGladrey & Pullen, L.L.P. **
(23)(b) Consent of KPMG Peat Marwick LLP. **
(23)(c) Consent of KPMG Peat Marwick LLP. **
(23)(d) Consent of Marion A. Cowell, Jr., Esq. Included in Exhibit (5).
(23)(e) Consent of Sullivan & Cromwell. Included in Exhibit (8).
(23)(f) Consent of Trident Financial Corporation. **
(24) Power of Attorney. **
(27) FUNC's Financial Data Schedule. Incorporated by reference to Exhibit (27) to FUNC's
1995 Second Quarter Report on
Form 10-Q.
(99) Form of proxy for the Special Meeting of Stockholders Filed herewith.
of RSFC.
</TABLE>
* Omitted exhibits to be furnished upon request of the Commission.
** Previously filed.
<PAGE>
EXHIBIT (99)
FORM OF PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS OF RSFC
<PAGE>
RS FINANCIAL CORP.
R E V O C A B L E
SPECIAL MEETING OF STOCKHOLDERS
P R O X Y
NOVEMBER 20, 1995
The undersigned hereby appoints the official proxy committee of the Board of
Directors of RS Financial Corp. ("RSFC") with full powers of substitution to act
as attorneys and proxies for the undersigned, to vote all shares of common stock
of RSFC, which the undersigned is entitled to vote at the Special Meeting of
Stockholders ("Special Meeting"), to be held at the executive offices of RSFC
and Raleigh Federal Savings Bank ("Raleigh Federal"), 219 Fayetteville Street
Mall, Raleigh, North Carolina, on November 20, 1995, at 5:00 p.m., local time,
and at any and all adjournments or postponements thereof, as follows:
1. To consider and vote upon a proposal to approve the Agreement and Plan of
Mergers, dated as of May 30, 1995 (the "Merger Agreement"), among RSFC,
Raleigh Federal, First Union Corporation ("FUNC"), and First Union National
Bank of North Carolina ("FUNB-NC"), pursuant to which (i) RSFC would merge
with and into FUNC (the "Corporate Merger") and Raleigh Federal would merge
with and into FUNB-NC, and (ii) each outstanding share of RSFC common stock
(excluding any dissenters' shares and certain shares held by RSFC or FUNC)
would be converted into the right to receive a number of shares of FUNC
common stock equal to $40.25 divided by the average closing price of FUNC
common stock on the New York Stock Exchange Composite Transactions tape for
the ten trading days immediately prior to the effective date of the Corporate
Merger, all on and subject to the terms and conditions contained in the
Merger Agreement.
FOR AGAINST ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE LISTED PROPOSITION.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE PROPOSITION STATED. IF ANY OTHER BUSINESS IS
PRESENTED AT THE SPECIAL MEETING, THIS PROXY WILL BE VOTED BY THE OFFICIAL PROXY
COMMITTEE IN ITS BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE SPECIAL MEETING.
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned acknowledges receipt prior to the execution of this proxy of the
combined Notice of Special Meeting of Stockholders and Prospectus/Proxy
Statement, dated October 20, 1995.
Dated: , 1995
PRINT NAME OF STOCKHOLDER
SIGNATURE OF STOCKHOLDER
PRINT NAME OF STOCKHOLDER
SIGNATURE OF STOCKHOLDER
Please sign exactly as name
appears on this card. When signing
as attorney, executor,
administrator, trustee or
guardian, please give your full
title. If shares are held jointly,
each holder should sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
