<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 20, 1995
REGISTRATION NO. 33-64859
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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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:
BOB F. THOMPSON, ESQ.
BASS, BERRY & SIMS
2700 FIRST AMERICAN CENTER
NASHVILLE, TENNESSEE 37238
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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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 MERGER; PRO FORMA FINANCIAL
INFORMATION
4. Terms of the Transaction................................................ SUMMARY; GENERAL INFORMATION; THE MERGER;
DESCRIPTION OF FUNC CAPITAL STOCK; CERTAIN
DIFFERENCES IN THE RIGHTS OF BRENTWOOD AND
FUNC STOCKHOLDERS; ANNEX B; ANNEX C
5. Pro Forma Financial Information......................................... INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE; SUMMARY; PRO FORMA FINANCIAL
INFORMATION
6. Material Contacts with the Company Being Acquired....................... THE MERGER; ADDITIONAL MATTERS
7. Additional Information Required for Reoffering by Persons and Parties
Deemed to Be Underwriters............................................... *
8. Interests of Named Experts and Counsel.................................. VALIDITY OF FUNC COMMON SHARES; 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............................... *
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........................................................... SUMMARY; BRENTWOOD; ANNEX A
18. Information if Proxies, Consents or Authorizations are to be
Solicited............................................................... INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE; SUMMARY; GENERAL INFORMATION; THE
MERGER
19. Information if Proxies, Consents or Authorizations are not to be
Solicited, or in an Exchange Offer...................................... SUMMARY; GENERAL INFORMATION; THE MERGER;
BRENTWOOD; FUNC; ANNEX A; ANNEX B
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* Not applicable.
<PAGE>
BRENTWOOD NATIONAL BANK
5110 MARYLAND WAY
BRENTWOOD, TENNESSEE 37027
(615) 371-1333
December , 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 Brentwood National
Bank ("Brentwood") to be held at 9:00 a.m., local time, on January 31, 1996, at
the Athletic Club at Maryland Farms, 5101 Maryland Way, Brentwood, Tennessee.
The purpose of the meeting is to vote on a proposal to approve an Agreement
and Plan of Acquisition, dated as of July 18, 1995 (the "Merger Agreement"),
among Brentwood, First Union Corporation ("FUNC"), First Union Corporation of
Virginia ("FUNC-VA") and First Union National Bank of Tennessee ("FUNB-TN"),
pursuant to which FUNC-VA would acquire Brentwood by means of a merger (the
"Merger") of Brentwood with and into FUNB-TN. 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. The acquisition is currently
expected to close by January 1, 1996, subject to certain conditions of closing.
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 Merger, each outstanding share of Brentwood common
stock (excluding certain shares held by Brentwood or FUNC or by any dissenting
stockholders of Brentwood) would be converted into the right to receive a number
of shares of FUNC common stock equal to the result obtained (the "Exchange
Ratio") by dividing $8.8112 by the average of the last reported sale prices per
share of FUNC common stock on the New York Stock Exchange (the "NYSE") Composite
Transactions tape (the "NYSE Tape") for the ten trading days ending on the last
trading day prior to the effective date of the Merger (the "Average Closing
Price"), 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
December , 1995, was $ per share.
Consummation of the Merger is subject to certain conditions, including
approval of the Merger Agreement by Brentwood stockholders and approval of the
Merger by various regulatory agencies. Approval of the Merger Agreement requires
the affirmative vote of at least 66 2/3 percent of the votes entitled to be cast
at the meeting by the holders of Brentwood common stock.
Consummation of the Merger is also subject to the execution of
Warrantholder Agreements by all of the holders of the outstanding warrants to
purchase shares of Brentwood common stock at an exercise price of $5.00 per
share. The Warrantholder Agreements provide for cancellation of the warrants at
the effective date of the Merger and a cash payment to the warrantholders of an
amount equal to the number of warrants held by such holders times the excess of
(i) the Average Closing Price times the Exchange Ratio, over (ii) $5.00. Copies
of the accompanying Prospectus/Proxy Statement are being sent to those
warrantholders who are not also stockholders, for information purposes only;
warrantholders as such are not entitled to vote at the meeting.
The accompanying Notice of Special Meeting and Prospectus/Proxy Statement
contain information about the Merger. I urge you to review carefully such
information and the information in FUNC's 1994 Annual Report on Form 10-K, 1995
Quarterly Reports on Form 10-Q, 1995 Current Reports on Form 8-K, and 1995
Annual Meeting Proxy Statement, copies of which are available as indicated in
the accompanying Prospectus/Proxy Statement under "AVAILABLE INFORMATION".
THE BOARD OF DIRECTORS OF BRENTWOOD HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND RECOMMENDS THAT THE STOCKHOLDERS OF BRENTWOOD APPROVE THE MERGER
AGREEMENT AND THAT THE WARRANTHOLDERS OF BRENTWOOD EXECUTE THE WARRANTHOLDER
AGREEMENTS. 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,
JAMES D. HARRIS
PRESIDENT
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BRENTWOOD NATIONAL BANK
5110 MARYLAND WAY
BRENTWOOD, TENNESSEE 37027
(615) 371-1333
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 31, 1996
December , 1995
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Brentwood
National Bank ("Brentwood") will be held at 9:00 a.m., local time, on January
31, 1996, at the Athletic Club at Maryland Farms, 5101 Maryland Way, Brentwood,
Tennessee for the following purpose:
To consider and vote upon a proposal to approve an Agreement and Plan of
Acquisition, dated as of July 18, 1995 (the "Merger Agreement"), among First
Union Corporation ("FUNC"), First Union Corporation of Virginia ("FUNC-VA")
and First Union National Bank of Tennessee ("FUNB-TN"), pursuant to which
(i) FUNC-VA would acquire Brentwood by means of a merger (the "Merger") of
Brentwood with and into FUNB-TN, and (ii) each outstanding share of
Brentwood common stock (excluding certain shares held by Brentwood or FUNC
and any shares held by dissenting stockholders of Brentwood) would be
converted into the right to receive a number of shares of FUNC common stock
equal to the result obtained by dividing $8.8112 by the average of the last
reported sale prices per share of FUNC common stock on the New York Stock
Exchange Composite Transactions tape for the ten trading days ending on the
last trading day prior to the effective date of the Merger, all on and
subject to the terms and conditions contained therein.
A copy of the Merger Agreement is set forth in ANNEX B to the accompanying
Prospectus/Proxy Statement.
The Board of Directors of Brentwood has fixed December 1, 1995, as the
record date for the determination of stockholders entitled to notice of and to
vote at the meeting, and accordingly, only holders of record of Brentwood common
stock at the close of business on that date will be entitled to notice of and to
vote at the meeting.
Approval of the Merger Agreement requires the affirmative vote of at least
66 2/3 percent of the votes entitled to be cast at the meeting by the holders of
Brentwood common stock.
Holders of Brentwood common stock who (i) either vote against the Merger
Agreement at the meeting or give written notice at or prior to the meeting to
the presiding officer that they dissent from approval of the Merger Agreement,
and (ii) comply with the further provisions of 12 U.S.C. 215a, will be entitled
to receive, if the Merger is consummated, the appraised value of their Brentwood
common stock in cash. A copy of the portions of 12 U.S.C. 215a relating to
dissenters' appraisal rights is included in the accompanying Prospectus/Proxy
Statement as ANNEX F.
THE BOARD OF DIRECTORS OF BRENTWOOD UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
By Order of the Board of Directors of
BRENTWOOD NATIONAL BANK
FRANK M. BUMSTEAD
CHAIRMAN
STOCKHOLDERS ARE URGED TO COMPLETE, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED
PROXY IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE. 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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PROSPECTUS PROXY STATEMENT
FIRST UNION CORPORATION BRENTWOOD NATIONAL BANK
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This Prospectus/Proxy Statement is being furnished by Brentwood National
Bank ("Brentwood"), to the holders of Brentwood common stock, par value $2.50
per share ("Brentwood Common Stock"), as a proxy statement in connection with
the solicitation of proxies by the Board of Directors of Brentwood (the
"Brentwood Board") for use at a special meeting of stockholders of Brentwood to
be held at 9:00 a.m., local time, on January 31, 1996, at the Athletic Club at
Maryland Farms, 5101 Maryland Way, Brentwood, Tennessee (the "Special Meeting"),
and at any adjournments or postponements thereof.
This document also constitutes a prospectus of First Union Corporation
("FUNC") relating to the shares (the "FUNC Common Shares") of FUNC common stock,
$3.33 1/3 par value per share ("FUNC Common Stock"), that are issuable (together
with the FUNC Rights (as hereinafter defined) attached thereto) upon
consummation of the Merger (as hereinafter defined). See "DESCRIPTION OF FUNC
CAPITAL STOCK" and CERTAIN DIFFERENCES IN THE RIGHTS OF BRENTWOOD AND FUNC
STOCKHOLDERS".
The purpose of the Special Meeting is to consider and vote upon a proposal
to approve the Agreement and Plan of Acquisition, dated as of July 18, 1995 (the
"Merger Agreement"), among Brentwood, FUNC, First Union Corporation of Virginia
("FUNC-VA"), and First Union National Bank of Tennessee ("FUNB-TN"), pursuant to
which FUNC-VA would acquire Brentwood by means of a merger (the "Merger") of
Brentwood with and into FUNB-TN, all on and subject to the terms and conditions
contained therein. See "SUMMARY", "THE MERGER" and ANNEX B.
Upon consummation of the Merger, each outstanding share of Brentwood Common
Stock (excluding certain shares held by Brentwood or FUNC and any shares held by
any Dissenting Stockholders (as hereinafter defined)) would be converted into
the right to receive a number of shares of FUNC Common Stock, equal to the
result obtained (the "Exchange Ratio") by dividing $8.8112 by the average of the
last reported sale prices per share (the "Average Closing Price") of FUNC Common
Stock on the NYSE Tape (as hereinafter defined) for the ten trading days ending
on the last trading day prior to the Effective Date (as hereinafter defined).
In addition to approval of the Merger Agreement by the holders of Brentwood
Common Stock, consummation of the Merger is subject, among other things, to the
execution of Warrantholder Agreements ("Warrantholder Agreements") by the
holders (the "Warrantholders") of the outstanding warrants (the "Warrants") to
purchase shares of Brentwood Common Stock at an exercise price of $5.00 per
share. The Warrantholder Agreements provide for the cancellation of the Warrants
at the Effective Date and a cash payment to each Warrantholder of an amount
equal to the number of Warrants held by such holder times the excess of (i) the
Average Closing Price times the Exchange Ratio over (ii) $5.00. As of the date
of this Prospectus/Proxy Statement, there are Warrants outstanding to purchase
1,409,000 shares of Brentwood Common Stock. As of such date, the holders of
Warrants to purchase 653,250 shares of Brentwood Common Stock have executed
Warrantholder Agreements. See "THE MERGER -- Interests of Certain Persons" and
" -- Conditions to Consummation; Warrantholder Agreements; Stock Options" and
ANNEX D. Copies of this Prospectus/Proxy Statement are being sent to holders of
the Warrants who do not also own shares of Brentwood Common Stock, for
information purposes only; Warrantholders are not entitled to vote as such at
the Special Meeting.
Based on the (i) 2,040,921 shares of Brentwood Common Stock outstanding on
the Record Date (as hereinafter defined), and (ii) an Exchange Ratio equal to
, based on the last reported sale price per share of FUNC Common Stock on the
New York Stock Exchange ("NYSE") Composite Transactions tape (the "NYSE Tape")
on December , 1995, as if such closing price were the Average Closing Price,
approximately FUNC Common Shares would be issuable upon consummation
of the 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 .
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, between January
1, 1994, and September 30, 1995, FUNC completed, or had pending on September 30,
1995 , 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
acquisitions to acquire Brentwood, United Financial Corporation of South
Carolina, Inc. ("United"), Virginia-based Columbia First Bank, a Federal Savings
Bank ("Columbia"), and North Carolina-based RS Financial Corp. ("RS Financial"),
which were pending at September 30, 1995. 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 NYSE. On July 17, 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 Tape was $47.50. On December , 1995, such price was $ . See "THE
MERGER -- Market Prices". There is no public trading market for Brentwood Common
Stock. On November 30, 1995, the book value per share of Brentwood Common Stock
was $6.34.
This Prospectus/Proxy Statement, the accompanying Notice of Special Meeting
and form of proxy are first being mailed to the stockholders of Brentwood on or
about December , 1995.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE OFFICE OF THE COMPTROLLER OF THE CURRENCY OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION, THE OFFICE OF THE COMPTROLLER OF THE CURRENCY 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 DECEMBER , 1995.
<PAGE>
AVAILABLE INFORMATION
FUNC and FFB 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 and FFB 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. 33-64859) 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). IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH
DOCUMENTS, ANY SUCH REQUEST SHOULD BE MADE BY JANUARY 24, 1996.
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 in this Prospectus/Proxy Statement with respect to
Brentwood was supplied by Brentwood.
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 Brentwood. 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 Brentwood 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 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.
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.
2
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by FUNC with the Commission (File No.
1-10000) under Section 13(a) or 15(d) of the Exchange Act are hereby
incorporated by reference in this Prospectus/Proxy Statement:
(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 Amendment No. 1 dated
May 16, 1995), June 30, 1995, and September 30, 1995; and
(iii) FUNC's Current Reports on Form 8-K dated June 19, 1995, June 20,
1995, June 21, 1995, June 30, 1995 and August 30, 1995.
All documents filed by FUNC pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date hereof and prior to the Special
Meeting 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.
Certain financial and other information relating to Brentwood is contained
in this Prospectus/Proxy Statement, including ANNEX A.
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
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TABLE OF CONTENTS
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AVAILABLE INFORMATION................................................................................................. 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................................................... 3
SUMMARY............................................................................................................... 6
RECENT DEVELOPMENTS................................................................................................... 19
FFB Merger.......................................................................................................... 19
1995 and 1996 Earnings Estimates.................................................................................... 19
GENERAL INFORMATION................................................................................................... 20
General............................................................................................................. 20
Special Meeting..................................................................................................... 21
THE MERGER............................................................................................................ 22
General; Exchange Ratio............................................................................................. 22
Effective Date...................................................................................................... 22
Exchange of Brentwood Certificates.................................................................................. 22
Background and Reasons.............................................................................................. 23
Opinion of Financial Advisor to Brentwood........................................................................... 24
Interests of Certain Persons........................................................................................ 27
Certain Federal Income Tax Consequences............................................................................. 28
Business Pending Consummation....................................................................................... 29
Regulatory Approval................................................................................................. 30
Conditions to Consummation; Warrantholder Agreements; Stock Options................................................. 30
Termination......................................................................................................... 31
Waiver; Amendment................................................................................................... 31
Accounting Treatment................................................................................................ 31
Expenses............................................................................................................ 31
Dissenters' Appraisal Rights........................................................................................ 32
Resale of FUNC Common Shares........................................................................................ 32
Market Prices....................................................................................................... 33
Dividends........................................................................................................... 34
PRO FORMA FINANCIAL INFORMATION....................................................................................... 35
BRENTWOOD............................................................................................................. 41
History and Business................................................................................................ 41
FUNC.................................................................................................................. 41
General............................................................................................................. 41
History and Business................................................................................................ 41
Certain Regulatory Considerations................................................................................... 42
DESCRIPTION OF FUNC CAPITAL STOCK..................................................................................... 46
Authorized Capital.................................................................................................. 46
FUNC Common Stock................................................................................................... 46
FUNC Preferred Stock................................................................................................ 46
FUNC Class A Preferred Stock........................................................................................ 46
Rights Plan......................................................................................................... 47
Changes in Control.................................................................................................. 49
CERTAIN DIFFERENCES IN THE RIGHTS OF BRENTWOOD AND FUNC STOCKHOLDERS.................................................. 50
General............................................................................................................. 50
Authorized Capital.................................................................................................. 50
Amendment to Constituent Documents.................................................................................. 50
Size and Classification of Board of Directors; Cumulative Voting.................................................... 50
Removal of Directors................................................................................................ 50
Director Exculpation................................................................................................ 51
Conflict of Interest Transactions................................................................................... 51
Stockholder Meetings................................................................................................ 51
Director Nominations................................................................................................ 52
Stockholder Proposals............................................................................................... 52
Stockholder Protection Rights Plan.................................................................................. 53
Stockholder Inspection Rights; Stockholder Lists.................................................................... 53
Required Stockholder Vote for Certain Actions....................................................................... 53
Anti-Takeover Provisions............................................................................................ 54
Dissenters' Appraisal Rights........................................................................................ 54
Dividends and Other Distributions................................................................................... 54
Voluntary Dissolution............................................................................................... 55
</TABLE>
4
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</TABLE>
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VALIDITY OF FUNC COMMON SHARES........................................................................................ 55
EXPERTS............................................................................................................... 55
ANNEX A -- CERTAIN FINANCIAL INFORMATION RELATING TO BRENTWOOD........................................................ A-1
ANNEX B -- AGREEMENT AND PLAN OF ACQUISITION.......................................................................... B-1
ANNEX C -- VOTING AGREEMENT........................................................................................... C-1
ANNEX D -- FORM OF WARRANTHOLDER AGREEMENT............................................................................ D-1
ANNEX E -- OPINION OF FINANCIAL CONSULTING ASSOCIATES, INC............................................................ E-1
ANNEX F -- PORTIONS OF 12 U.S.C. 215a RELATING TO DISSENTERS' APPRAISAL RIGHTS AND BANKING
CIRCULAR 259 RELATING THERETO............................................................................ F-1
</TABLE>
5
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY OF CERTAIN INFORMATION RELATING TO THE MERGER IS NOT
INTENDED TO BE A SUMMARY OF ALL MATERIAL INFORMATION RELATING TO THE MERGER 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 (EXCLUDING THE EXHIBITS AND SCHEDULES
THERETO) IS SET FORTH IN ANNEX B TO THIS PROSPECTUS/PROXY STATEMENT AND
REFERENCE IS MADE THERETO FOR A COMPLETE DESCRIPTION OF THE TERMS OF THE MERGER.
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", "FUNC-VA", "FUNB-TN" AND "FFB" REFER TO SUCH ORGANIZATIONS,
RESPECTIVELY, AND, UNLESS THE CONTEXT OTHERWISE REQUIRES, TO THEIR RESPECTIVE
CONSOLIDATED SUBSIDIARIES.
PARTIES TO THE MERGERS
FUNC, FUNC-VA AND FUNB-TN
FUNC is a North Carolina-based, multi-bank holding company registered under
the Bank Holding Company Act of 1956, as amended ("BHCA"). FUNC provides a wide
range of commercial and retail banking services and trust services through
national bank subsidiaries 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 September 30, 1995, and for the nine months
then ended, FUNC reported assets of $86.8 billion, net loans of $61.8 billion,
deposits of $59.8 billion, stockholders' equity of $5.7 billion and net income
applicable to common stockholders of $734 million, and as of such date FUNC
operated through 1,481 offices in 37 states and three foreign countries. FUNC is
the ninth largest bank holding company in the United States, based on assets at
September 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.
FUNC-VA is a subsidiary of FUNC. FUNB-TN, a national banking association
that provides a wide range of commercial and retail banking services and trust
services in Tennessee, is a subsidiary of FUNC-VA. As of September 30, 1995, and
for the nine months then ended, FUNB-TN had assets of $2.0 billion, net loans of
$1.2 billion, deposits of $1.7 billion, stockholder's equity of $166 million and
net income of $22 million, and as of such date FUNB-TN operated through 54
banking offices in Tennessee.
On June 18, 1995, FUNC entered into an Agreement and Plan of Merger (the
"FFB Merger Agreement"), which provides, among other things, for the merger (the
"FFB Merger") of FFB with and into a wholly-owned subsidiary of FUNC. As of
September 30, 1995, FFB had assets of $35.3 billion. The FFB Merger will be
accounted for as a pooling of interests, and is currently expected to close by
January 1, 1996, subject to certain conditions of closing. In addition, between
January 1, 1994 and September 30, 1995, FUNC completed, or had pending on
September 30, 1995, the Purchase Acquisitions, which are reflected in certain of
the pro forma financial information presented herein, including the acquisitions
of Brentwood, United, Columbia and RS Financial, which were pending at September
30, 1995. As of September 30, 1995, Brentwood, United, Columbia and RS Financial
had aggregate assets of $4.3 billion. The United acquisition was completed in
October 1995, and the Columbia acquisition was completed in November 1995.
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" and " -- Certain Regulatory Considerations; FDIC
INSURANCE ASSESSMENTS".
BRENTWOOD
Brentwood is a national banking association that provides commercial and
retail banking services in Nashville and Brentwood, Tennsessee. As of September
30, 1995, and for the nine months then ended, Brentwood had assets of $117
million, net loans of $64 million, deposits of $90 million, stockholders' equity
of $13 million and net income of $767,000, and as of such date Brentwood
operated through one office in Nashville, Tennessee and one office in Brentwood,
Tennessee.
6
<PAGE>
The principal executive offices of Brentwood are located at 5110 Maryland Way,
Brentwood, Tennessee 37027, and its telephone number is (615)371-1333. See
"BRENTWOOD" and ANNEX A.
THE MERGER; EXCHANGE RATIO
Under the terms of the Merger Agreement, FUNC-VA would acquire Brentwood by
means of the Merger of Brentwood with and into FUNB-TN. Upon consummation of the
Merger, each outstanding share of Brentwood Common Stock (excluding any shares
of stock held by FUNC or Brentwood, other than in a fiduciary capacity or in
satisfaction of debts previously contracted ("Excluded Shares"), and any shares
("Dissenting Shares") held by any stockholders of Brentwood who have perfected
their dissenters' appraisal rights ("Dissenting Stockholders")) would be
converted into the right to receive a number of shares of FUNC Common Stock
equal to the Exchange Ratio (I.E., the result obtained by dividing $8.8112 by
the Average Closing Price).
For purposes of certain pro forma computations in this Prospectus/Proxy
Statement, a .1776 Exchange Ratio has been calculated using the closing price
per share of FUNC Common Stock on the NYSE Tape on October 31, 1995 ($49.625),
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
.1776. The pro forma information would be different if the Average Closing Price
results in an Exchange Ratio different from .1776. Stockholders are urged to
obtain up to date market quotations for FUNC Common Stock.
See "THE MERGER -- General; Exchange Ratio" and " -- Dissenters' Appraisal
Rights", "DESCRIPTION OF FUNC CAPITAL STOCK" and "CERTAIN DIFFERENCES IN THE
RIGHTS OF BRENTWOOD AND FUNC STOCKHOLDERS".
SPECIAL MEETING
The Special Meeting will be held on January 31, 1996, at 9:00 a.m., local
time, at the Athletic Club at Maryland Farms, 5101 Maryland Way, Brentwood,
Tennessee, for the purpose of stockholders considering and voting upon a
proposal to approve the Merger Agreement.
The Brentwood Board has fixed December 1, 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 2,040,921 shares of
Brentwood Common Stock outstanding and entitled to be voted at the Special
Meeting.
Approval of the Merger Agreement requires the affirmative vote of at least
66 2/3 percent of the votes entitled to be cast at the Special Meeting by the
holders of Brentwood Common Stock.
The directors and executive officers of Brentwood (including certain of
their related interests) beneficially owned, as of the Record Date, and are
entitled to vote at the Special Meeting, 441,320 shares of Brentwood Common
Stock, which represents approximately 21.6 percent of the outstanding shares of
Brentwood Common Stock entitled to be voted at the Special Meeting. As a
condition to FUNC's willingness to enter into the Merger Agreement, the
directors of Brentwood, the holders of approximately 21.6 percent of the
outstanding shares of Brentwood Common Stock entitled to be voted at the Special
Meeting, agreed to vote such shares in favor of approval of the Merger Agreement
at the Special Meeting (the "Voting Agreement"). A copy of the Voting Agreement
is set forth in ANNEX C to this Prospectus/Proxy Statement. Accordingly,
assuming such shares are so voted, approval of the Merger Agreement will require
the affirmative vote of the holders of an additional 45.1 percent of the
outstanding shares of Brentwood Common Stock entitled to be voted at the Special
Meeting.
See "GENERAL INFORMATION" and ANNEX C.
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
Merger, the Merger will become effective (the "Effective Date") on such date as
FUNC notifies Brentwood 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, or such other date as may be mutually agreed upon between FUNC and
Brentwood. Subject to the foregoing, it is currently anticipated that the Merger
will be consummated on January 31, 1996. See "THE MERGER -- Conditions to
Consummation; Warrantholder Agreements; Stock Options".
7
<PAGE>
RECOMMENDATION OF THE BRENTWOOD BOARD
THE BRENTWOOD BOARD HAS ADOPTED THE MERGER AGREEMENT BY UNANIMOUS VOTE,
BELIEVES IT IS IN THE BEST INTERESTS OF BRENTWOOD AND ITS STOCKHOLDERS AND
RECOMMENDS ITS APPROVAL BY BRENTWOOD STOCKHOLDERS. SEE "THE MERGER -- BACKGROUND
AND REASONS; BRENTWOOD".
OPINION OF FINANCIAL ADVISOR TO BRENTWOOD
Financial Consulting Associates, Inc. ("Financial") served as financial
advisor to Brentwood and has rendered an opinion to the Brentwood Board that the
consideration to be received by Brentwood's stockholders and Warrantholders in
the Merger is fair to Brentwood's stockholders and Warrantholders, from a
financial point of view. A copy of such opinion is attached to this
Prospectus/Proxy Statement as ANNEX E and should be read in its entirety with
respect to the assumptions made, other matters considered and limitations on the
reviews undertaken by Financial. See "THE MERGER -- Opinion of Financial Advisor
to Brentwood".
INTERESTS OF CERTAIN PERSONS
The directors and executive officers of Brentwood have certain interests in
the Merger in addition to interests they have as stockholders of Brentwood
generally. Those interests include, among others, provisions in the Merger
Agreement relating to indemnification, directors' and officers' liability
insurance, cash payments to holders of Warrants and all of the outstanding
options to purchase shares of Brentwood Common Stock (the "Stock Options"), and
certain other benefits.
The directors and executive officers of Brentwood, together with certain of
their related interests, beneficially owned as of the Record Date, 1,119,945
shares of Brentwood Common Stock, including 528,625 shares subject to
unexercised Warrants and 150,000 shares subject to unexercised Stock Options.
Pursuant to the Merger Agreement, (i) each holder of unexercised Warrants
at the Effective Date will receive a cash payment equal to the number of
Warrants held by such holder times the excess of (a) the Average Closing Price
times the Exchange Ratio over (b) $5.00, and (ii) each holder of unexercised
Stock Options at the Effective Date will receive a cash payment equal to the
excess of (x) $8.8112 over the exercise price per share of the Stock Options
held by such holder times (y) the number of shares of Brentwood Common Stock
covered by the Stock Options held by such holder.
The approximate payments which may be paid at the Effective Date to the
directors and executive officers of Brentwood for the Warrants and Stock Options
held by them on the Record Date is currently estimated to be approximately $2.5
million, as set forth in the following table:
<TABLE>
<CAPTION>
NAME POSITION WARRANTS STOCK OPTIONS TOTAL
<S> <C> <C> <C> <C>
Frank Bumstead Director $ 76,224 56,224 132,448
Chester A. Butler Director -- -- --
Farzin Ferdowsi Director 285,840 -- 285,840
James D. Harris Director and Executive
Officer 152,448 165,560 318,008
William B. King Director 209,616 -- 209,616
James S. Lattimore Director 304,896 -- 304,896
Boyce C. Magli Director 266,784 -- 266,784
Edwin B. Raskin Director 70,984 -- 70,984
James T. Redd Director 266,784 -- 266,784
David Rollins Director -- -- --
Reese L. Smith Director 381,120 -- 381,120
David Hall Director -- -- --
Diane West Executive Officer -- 99,336 99,336
Larry Kain Executive Officer -- 60,280 60,280
Marlena Breckenridge Executive Officer -- 80,280 80,280
Total $2,014,696 461,680 2,476,376
</TABLE>
In addition, each of Mr. Harris, Mrs. West, Mrs. Breckenridge and Mr. Kain
are subject to Executive Severance Pay Agreements which provide that if such
officer is terminated other than for cause or voluntarily terminates his or her
employment with Brentwood after consummation of the Merger, then such officer
will receive a lump sum payment equal to two times his or her average annual
compensation for the past three years in the case of Mr. Harris and one-half of
the officer's total annual compensation as of the date of termination plus such
additional benefits as may otherwise be provided on such
8
<PAGE>
date in the case of Mrs. West, Mrs. Breckenridge and Mr. Kain. The aggregate
amount of cash payments that could be made under such agreements is estimated to
be approximately $550,000.
Certain of the directors of Brentwood and/or their related interests have
various relationships with FUNB-TN and/or certain of the directors of FUNB-TN
and/or their related interests, including loan and/or deposit relationships with
FUNB-TN, that have been entered into in the ordinary course of business.
See "THE MERGER -- Interests of Certain Persons".
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Consummation of the Merger is conditioned, among other things, on receipt
by FUNC and Brentwood of an opinion of Sullivan & Cromwell, counsel for FUNC,
dated as of the Effective Date, to the effect that no gain or loss will be
recognized for federal income tax purposes by stockholders of Brentwood who
receive FUNC Common Shares in exchange for their shares of Brentwood Common
Stock, other than with respect to cash received in lieu of fractional share
interests, or, in the case of any holders of Brentwood Common Stock who perfect
their dissenters' appraisal rights, cash received upon exercise of such rights.
See "THE MERGER -- Certain Federal Income Tax Consequences" and " -- Dissenters'
Appraisal Rights".
BECAUSE CERTAIN TAX CONSEQUENCES MAY VARY DEPENDING UPON THE PARTICULAR
CIRCUMSTANCES OF EACH BRENTWOOD STOCKHOLDER, IT IS RECOMMENDED THAT BRENTWOOD
STOCKHOLDERS CONSULT THEIR TAX ADVISERS CONCERNING THE FEDERAL (AND ANY STATE
AND LOCAL) TAX CONSEQUENCES OF THE MERGER IN THEIR PARTICULAR CIRCUMSTANCES.
BUSINESS PENDING CONSUMMATION
Brentwood has agreed in the Merger Agreement to conduct its business in the
ordinary and usual course consistent with past practice and not to take certain
actions relating to the operation of Brentwood pending consummation of the
Merger, without the prior written consent of FUNC or as otherwise permitted by
the Merger Agreement. These actions include, without limitation: (i) not paying
any dividends, 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 Stock Options and Warrants) or giving any person the
right to acquire any such shares; (ii) not incurring any indebtedness for
borrowed money or becoming liable for the obligations of any other entity; (iii)
not increasing the rate of compensation or paying any bonus to any of its
directors, officers or employees; (iv) not entering into or modifying any
employment agreements or employee benefit plans; (v) not disposing of any
material portion of its assets or acquiring any material portion of the business
or property of any other entity; and (vi) not changing its lending, investment,
liability management or other material policies in any material respect.
Notwithstanding the foregoing, Brentwood may pay regular quarterly cash
dividends not in excess of $.05 per share and, from and after the record date
for FUNC's regular quarterly cash dividend payable in the first quarter of 1996
(which record date is expected to be on or about February 29, 1996), may pay
additional dividends equal to the dividends which would have been paid to the
holders of Brentwood Common Stock on the FUNC Common Shares had the Merger been
consummated on or prior to such record date, less (to the extent paid between
January 2, 1996 and such record date) the regular quarterly dividend of $.05 per
share referred to above.
Brentwood also has agreed that, provided the OCC has approved the Merger
and Brentwood is reasonably satisfied the Merger will be consummated on the
Effective Date, 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) prior to the Effective Date so as to be
consistent with those policies and practices applied by FUNC and generally
accepted accounting principles.
REGULATORY APPROVAL
The requisite approval from the Office of the Comptroller of the Currency
of the United States (the "OCC") to permit consummation of the Merger was
received on October 31, 1995.
DISSENTERS' APPRAISAL RIGHTS
Holders of Brentwood Common Stock who (i) either vote against the Merger
Agreement at the Special Meeting or give written notice at or prior to the
Special Meeting to the presiding officer that they dissent from approval of the
Merger Agreement, and (ii) comply with the further provisions of 12 U.S.C. 215a
("Section 215a"), will be entitled to receive, if the
9
<PAGE>
Merger is consummated, the appraised value of their Brentwood Common Stock in
cash. See "THE MERGER -- Dissenters' Appraisal Rights" and ANNEX F.
CONDITIONS TO CONSUMMATION; WARRANTHOLDER AGREEMENTS; STOCK OPTIONS
Consummation of the Merger is subject, among other things, to: (i) approval
of the Merger Agreement by the requisite vote of the stockholders of Brentwood;
(ii) no court or governmental or regulatory authority having taken any action
which prohibits the Merger; (iii) receipt by FUNC and Brentwood of the opinion
of Sullivan & Cromwell, counsel for FUNC, dated as of the Effective Date, as to
certain federal income tax consequences of the Merger; (iv) receipt by FUNC of a
letter from Brentwood's independent auditors, dated as of or shortly prior to
the Effective Date, with respect to Brentwood's consolidated financial position
and results of operations; and (v) the FUNC Common Shares having been approved
for listing on the NYSE, subject to official notice of issuance.
Consummation of the Merger is also subject to (i) execution of the
Warrantholder Agreements, and (ii) cancellation of all of the outstanding Stock
Options.
The Warrantholder Agreements provide for cancellation of the Warrants at
the Effective Date and a cash payment to the Warrantholders in an amount equal
to the number of Warrants held by such holders times the excess of (i) the
Average Closing Price times the Exchange Ratio, over (ii) $5.00. As of the date
of this Prospectus/Proxy Statement, there are Warrants outstanding to purchase
1,409,000 shares of Brentwood Common Stock. As of such date, the holders of
Warrants to purchase 653,250 shares of Brentwood Common Stock have executed
Warrantholder Agreements.
The Merger Agreement provides for the cancellation of all outstanding Stock
Options at the Effective Date and a cash payment to the holders of the Stock
Options equal to the excess of (i) $8.8112 over the exercise price per share of
the Stock Options, times (ii) the number of shares of Brentwood Common Stock
covered by the Stock Options. As of the date of this Prospectus/Proxy Statement
there are Stock Options outstanding to purchase 210,666 shares of Brentwood
Common Stock.
See "THE MERGER -- Interests of Certain Persons" and " -- Conditions to
Consummation; Warrantholder Agreements; Stock Options" and ANNEX D.
TERMINATION
The Merger Agreement may be terminated by mutual agreement of the Board of
Directors of FUNC (the "FUNC Board") and the Brentwood Board. The Merger
Agreement may also be terminated by either the FUNC Board or Brentwood Board if
the Merger does not occur on or before March 31, 1996, or if certain conditions
set forth in the Merger Agreement are not met. See "THE MERGER -- Termination".
ACCOUNTING TREATMENT
The completed Purchase Acquisitions have been, and the Merger and the other
pending Purchase Acquisition will be, accounted for as purchases under generally
accepted accounting principles. The FFB Merger will be accounted for as a
pooling of interests under generally accepted accounting principles. See "THE
MERGER -- Accounting Treatment".
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" of Brentwood or FUNC, which will be subject to certain restrictions
on transfer under applicable federal securities laws. See "THE MERGER -- Resale
of FUNC Common Shares".
CERTAIN DIFFERENCES IN THE RIGHTS OF BRENTWOOD AND FUNC STOCKHOLDERS
The rights of stockholders of Brentwood are currently determined by
reference to the National Bank Act (as amended, the "NB Act"), rules and
regulations adopted by the OCC, Brentwood's Articles of Association (as amended,
the "Charter") and Bylaws. On the Effective Date, stockholders of Brentwood will
become stockholders of FUNC, and their rights as stockholders of FUNC will be
determined by references to the North Carolina Business Corporation Act (the
"NCBCA") and by FUNC's Articles of Incorporation (as amended, the "Articles")
and Bylaws. See "DESCRIPTION OF FUNC CAPITAL STOCK" and "CERTAIN DIFFERENCES IN
THE RIGHTS OF BRENTWOOD AND FUNC STOCKHOLDERS".
10
<PAGE>
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 Brentwood; (ii) on a pro forma combined basis per
share of FUNC Common Stock reflecting consummation of (a) the Merger, (b) the
Purchase Acquisitions (including the Merger), and (c) the Purchase Acquisitions
(including the Merger) and the FFB Merger; and (iii) on an equivalent pro forma
basis per share of Brentwood Common Stock reflecting consummation of (x) the
Merger, (y) the Purchase Acquisitions (including the Merger), and (z) the
Purchase Acquisitions (including the Merger) and the FFB Merger. Such pro forma
information has been prepared (i) assuming a .1776 Exchange Ratio, (ii) giving
effect to the Merger and the other Purchase Acquisitions on a purchase
accounting basis, and (iii) giving effect to the FFB Merger on a pooling of
interests accounting basis. See "THE MERGER -- Accounting Treatment".
The Exchange Ratio of .1776 is based on the last reported sale price per
share of FUNC Common Stock on the NYSE Tape on October 31, 1995 ($49.625), as if
such price were the Average Closing Price. The actual Exchange Ratio will depend
on the Average Closing Price (which will not be known until shortly prior to the
Effective Date) and may be greater or less than .1776. The pro forma information
would be different if the Average Closing Price results in an Exchange Ratio
different from .1776. 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.
Pro forma financial information for the Purchase Acquisitions (including
the 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 September 30, 1995, with respect to the
Purchase Acquisitions (including the Merger) pending as of September 30, 1995).
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 Merger or any of the other Purchase
Acquisitions, consummation of the 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 Merger) and the FFB Merger might have affected
historical financial statements if the Purchase Acquisitions (including the
Merger) and the FFB Merger had been consummated at an earlier time. The pro
forma combined selected financial data do not purport to be indicative of the
results that actually would have been realized had the Purchase Acquisitions
(including the 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.
The information shown below should be read in conjunction with the
historical financial statements of FUNC, Brentwood and FFB, 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", "PRO FORMA
FINANCIAL INFORMATION" and ANNEX A.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 DECEMBER 31, 1994
<S> <C> <C>
BOOK VALUE PER SHARE:
Historical per share of:
FUNC Common Stock................................................................. $33.88 30.66
Brentwood Common Stock............................................................ 6.23 5.80
Pro forma combined per share of FUNC Common Stock (1):
FUNC and Brentwood................................................................ 33.92 30.66
FUNC and the Purchase Acquisitions (including the Merger)......................... 34.79 30.49
FUNC, the Purchase Acquisitions (including the Merger) and the FFB
Merger.......................................................................... 31.58 28.11
Equivalent pro forma per share of Brentwood Common Stock (2):
FUNC and Brentwood................................................................ 6.02 5.45
FUNC and the Purchase Acquisitions (including the Merger)......................... 6.18 5.42
FUNC, the Purchase Acquisitions (including the Merger) and the FFB
Merger.......................................................................... $ 5.61 4.99
</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 the pro forma combined period-end number of shares outstanding.
11
<PAGE>
(2) The equivalent pro forma book value per share of Brentwood Common stock
amounts represent the pro forma combined book value per share of FUNC Common
Stock amounts multiplied by a .1776 Exchange Ratio.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED DECEMBER
SEPTEMBER 30, 31,
1995 1994 1993 1992
<S> <C> <C> <C> <C>
CASH DIVIDENDS PAID PER SHARE:
Historical per share of:
FUNC Common Stock.............................................................. $1.44 1.72 1.50 1.28
Brentwood Common Stock......................................................... .14 .15 .09 --
Pro forma combined per share of FUNC Common Stock (3):
FUNC and Brentwood............................................................. 1.42 1.73 -- --
FUNC, the Purchase Acquisition (including the Merger) and the FFB Merger....... 1.27 1.56 1.30 1.00
Equivalent pro forma per share of Brentwood Common Stock (4):
FUNC and Brentwood............................................................. .25 .31 -- --
FUNC, the Purchase Acquisitions (including the Merger) and the FFB Merger...... $ .23 .28 .23 .18
</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 Brentwood Common
Stock amounts represent the pro forma combined per share of FUNC Common
Stock amounts multiplied by a .1776 Exchange Ratio, rounded 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 Brentwood
Common Stock would be $.36, based on a .1776 Exchange Ratio, rounded down to
the nearest cent. Future FUNC and Brentwood dividends are dependent upon
their respective earnings and financial condition, as well as government
regulations and policies, and other factors. See "THE MERGER -- Exchange of
Brentwood Certificates", " -- Business Pending Consummation" and
" -- Dividends" and "FUNC -- Certain Regulatory Considerations; PAYMENT OF
DIVIDENDS".
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C>
NET INCOME PER SHARE APPLICABLE TO COMMON STOCKHOLDERS (AFTER FUNC REDEMPTION
PREMIUM):
Historical per share of:
FUNC Common Stock............................................................. $4.27 4.98 4.73
Brentwood Common Stock........................................................ .29 .36 .29
Pro forma combined per share of FUNC Common Stock (5):
FUNC and Brentwood............................................................ 4.26 4.97 --
FUNC and the Purchase Acquisitions (including the Merger)..................... 3.82 4.82 --
FUNC, the Purchase Acquisitions (including the Merger) and the FFB Merger..... 3.57 4.48 4.30
Equivalent pro forma per share of Brentwood Common Stock (6):
FUNC and Brentwood............................................................ .76 .88 --
FUNC and the Purchase Acquisitions (including the Merger)..................... .68 .86 --
FUNC, and the Purchase Acquisitions (including the Merger) and
the FFB Merger.............................................................. $ .63 .80 .76
<CAPTION>
1992
<S> <C>
NET INCOME PER SHARE APPLICABLE TO COMMON STOCKHOLDERS (AFTER FUNC REDEMPTION
PREMIUM):
Historical per share of:
FUNC Common Stock............................................................. 2.23
Brentwood Common Stock........................................................ .25
Pro forma combined per share of FUNC Common Stock (5):
FUNC and Brentwood............................................................ --
FUNC and the Purchase Acquisitions (including the Merger)..................... --
FUNC, the Purchase Acquisitions (including the Merger) and the FFB Merger..... 2.53
Equivalent pro forma per share of Brentwood Common Stock (6):
FUNC and Brentwood............................................................ --
FUNC and the Purchase Acquisitions (including the Merger)..................... --
FUNC, and the Purchase Acquisitions (including the Merger) and
the FFB Merger.............................................................. .45
</TABLE>
(5) The pro forma combined income per share of FUNC Common Stock amounts
represent the pro forma combined FUNC net income (after redemption premium
on preferred stock) applicable to holders of FUNC Common Stock divided by
the pro forma combined average number of shares of FUNC Common Stock
outstanding.
(6) The equivalent pro forma income per share of Brentwood Common Stock amounts
represent the pro forma combined income per share of FUNC Common Stock
amounts multiplied by a .1776 Exchange Ratio.
12
<PAGE>
<TABLE>
<CAPTION>
JULY 17, 1995 DECEMBER , 1995
<S> <C> <C>
MARKET VALUE PER SHARE:
Historical per share of:
FUNC Common Stock......................................................................... $47.50
Equivalent pro forma per share of Brentwood Common Stock (7)................................ $ 8.375
</TABLE>
(7) Equivalent pro forma market values per share of Brentwood Common Stock
represent the historical market values per share of FUNC Common Stock,
multiplied by a .1776 Exchange Ratio, rounded down to the nearest
one-eighth. The FUNC historical market values per share represent the last
reported sale prices per share of FUNC Common Stock on the NYSE Tape (i) on
July 17, 1995, the last business day preceding public announcement of the
execution of the Merger Agreement; and (ii) on December , 1995. There is
no public trading market for Brentwood Common Stock. On November 30, 1995,
the book value per share of Brentwood Common Stock was $6.34. See "THE
MERGER -- Market Prices" and Notes (3) and (4) to "PRO FORMA FINANCIAL
INFORMATION".
SELECTED FINANCIAL DATA
The following tables set forth certain unaudited historical consolidated
selected financial information for FUNC and Brentwood and certain unaudited pro
forma combined selected financial data, reflecting consummation of (i) the
Merger, (ii) the Purchase Acquisition (including the Merger), and (iii) the
Purchase Acquisitions (including the Merger) and the FFB Merger. Such pro forma
information has been prepared (a) using a .1776 Exchange Ratio, (b) giving
effect to the 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 MERGER -- Accounting Treatment". This
information should be read in conjunction with the historical financial
statements of FUNC, Brentwood and FFB, 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", "PRO FORMA FINANCIAL INFORMATION" and ANNEX A.
Interim unaudited historical data of FUNC and Brentwood reflect, in the
respective opinions of FUNC's and Brentwood's management, all adjustments
(consisting only of normal recurring adjustments) necessary to a fair
presentation of such data.
The .1776 Exchange Ratio is based on the last reported sale price per share
of FUNC Common Stock on the NYSE Tape on October 31, 1995 ($49.625), as if such
price were the Average Closing Price. The actual Exchange Ratio will depend on
the Average Closing Price (which will not be known until shortly prior to the
Effective Date) and may be greater or less than .1776. The pro forma information
would be different if the Average Closing Price results in an Exchange Ratio
different from .1776. 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.
Pro forma financial information for the Purchase Acquisitions (including
the 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 September 30, 1995, with respect to the
Purchase Acquisitions (including the Merger) pending as of September 30, 1995).
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 Merger or any of the other Purchase
Acquisitions, consummation of the 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 Merger) and the FFB Merger might have affected
historical financial statements if the Purchase Acquisitions (including the
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 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>
NINE MONTHS ENDED
SEPTEMBER 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..................................... $ 4,674,374 3,705,191 5,094,661 4,556,332 4,479,385 4,647,440
Interest expense.................................... 2,239,387 1,450,774 2,060,946 1,790,439 2,020,968 2,742,996
Net interest income................................. 2,434,987 2,254,417 3,033,715 2,765,893 2,458,417 1,904,444
Provision for loan losses........................... 125,500 75,000 100,000 221,753 414,708 648,284
Net interest income after provision for loan
losses............................................ 2,309,487 2,179,417 2,933,715 2,544,140 2,043,709 1,256,160
Securities available for sale transactions.......... 9,591 (1,581) (11,507) 25,767 34,402 --
Investment security transactions.................... 4,041 3,595 4,006 7,435 (2,881) 155,048
Noninterest income.................................. 990,884 855,051 1,166,470 1,165,086 1,032,651 914,511
Noninterest expense................................. 2,170,390 1,973,280 2,677,228 2,521,647 2,526,678 1,905,918
Income before income taxes.......................... 1,143,613 1,063,202 1,415,456 1,220,781 581,203 419,801
Income taxes........................................ 402,552 369,371 490,076 403,260 196,152 71,070
Net income.......................................... 741,061 693,831 925,380 817,521 385,051 348,731
Dividends on preferred stock........................ 7,029 18,522 25,353 24,900 31,979 34,570
Net income applicable to common stockholders before
redemption premium................................ 734,032 675,309 900,027 792,621 353,072 314,161
Redemption premium on preferred stock............... -- -- 41,355 -- -- --
Net income applicable to common stockholders after
redemption premium................................ $ 734,032 675,309 858,672 792,621 353,072 314,161
PER COMMON SHARE DATA
Net income before redemption premium................ $ 4.27 3.94 5.22 4.73 2.23 2.24
Net income after redemption premium................. 4.27 3.94 4.98 4.73 2.23 2.24
Cash dividends...................................... 1.44 1.26 1.72 1.50 1.28 1.12
Book value.......................................... 33.88 30.37 30.66 28.90 25.25 23.23
CASH DIVIDENDS PAID ON COMMON STOCK
(In thousands)...................................... 245,118 215,850 297,902 243,845 167,601 126,029
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
(In thousands)
Assets.............................................. 86,834,113 74,243,118 77,313,505 70,786,969 63,828,031 59,273,177
Loans, net of unearned income....................... 61,802,019 51,633,034 54,029,752 46,876,177 41,923,767 41,383,580
Deposits............................................ 59,815,883 53,687,051 58,958,273 53,742,411 49,150,965 47,176,223
Long-term debt...................................... 6,040,639 3,269,363 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......................... 5,685,450 5,338,590 5,397,517 4,923,584 4,161,948 3,463,441
Total stockholders' equity.......................... $ 5,685,450 5,622,631 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........................... 167,795 175,785 176,034 170,338 164,849 149,112
CONSOLIDATED AVERAGE BALANCE SHEET ITEMS
(In thousands)
Assets.............................................. $81,614,717 71,739,670 72,670,694 68,101,222 61,145,974 55,095,439
Loans, net of unearned income....................... 58,236,262 47,866,113 49,055,215 43,631,410 41,270,991 37,314,358
Deposits............................................ 58,707,324 52,615,361 53,244,751 50,248,848 47,173,706 40,482,433
Long-term debt...................................... 4,542,779 3,162,021 3,213,607 3,006,560 2,789,653 2,187,595
Common stockholders' equity*........................ 5,576,417 5,174,974 5,282,412 4,550,048 3,889,256 3,131,716
Total stockholders' equity*......................... $ 5,576,417 5,459,014 5,554,390 4,839,397 4,213,896 3,467,437
Common shares outstanding........................... 171,921 171,265 172,543 167,692 158,683 140,003
CONSOLIDATED PERCENTAGES
Net income applicable to common stockholders before
redemption premium to average common stockholders'
equity............................................ 17.39%** 17.45** 17.04 17.42 9.08 10.03
Net income applicable to common stockholders after
redemption premium to average common stockholders'
equity............................................ 17.39** 17.45** 16.26 17.42 9.08 10.03
Net income to:
Average total stockholders' equity................ 17.55** 16.99** 16.66 16.89 9.14 10.06
Average assets.................................... 1.21** 1.29** 1.27 1.20 .63 .63
Average stockholders' equity to average assets...... 6.83 7.53 7.52 7.11 6.89 6.29
Allowance for loan losses to:
Net loans......................................... 1.46 1.95 1.81 2.18 2.24 2.06
Nonaccrual and restructured loans................. 204 203 245 147 96 72
Nonperforming assets.............................. 160 154 175 111 70 50
Net charge-offs to average net loans................ .36** .31** .33 .58 .86 1.48
Nonperforming assets to loans, net and foreclosed
properties........................................ .91 1.26 1.03 1.95 3.19 4.10
Capital ratios:***
Tier 1 capital.................................... 6.35 8.84 7.76 9.14 9.22 7.56
Total capital..................................... 10.74 14.20 12.94 14.64 14.31 11.76
Leverage.......................................... 5.10 6.77 6.12 6.13 6.55 5.31
Net interest margin................................. 4.52%** 4.80** 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 gains or losses on debt and equity securities in 1995 and
1994.
** Annualized.
*** The 1990-1992 capital ratios are not restated for pooling of interests
acquisitions. 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.
14
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
1995 1994 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
BRENTWOOD (HISTORICAL)
CONSOLIDATED SUMMARIES OF OPERATIONS
(In thousands)
Interest income..................................... $ 6,541 4,963 6,914 5,522 5,668 5,686
Interest expense.................................... 3,065 1,791 2,561 1,967 2,317 3,008
Net interest income................................. 3,476 3,172 4,353 3,555 3,351 2,678
Provision for loan losses........................... 65 165 235 315 607 561
Net interest income after provision for loan
losses............................................ 3,411 3,007 4,118 3,240 2,744 2,117
Security and loan transactions...................... -- -- -- 90 219 82
Noninterest income.................................. 586 496 634 532 366 189
Noninterest expense................................. 2,825 2,424 3,286 2,675 2,399 2,053
Income before income taxes.......................... 1,172 1,079 1,466 1,187 930 335
Income taxes........................................ 405 362 498 428 322 107
Net income.......................................... $ 767 717 968 759 608 228
PER COMMON SHARE DATA
Net income.......................................... $ .29 .26 .36 .29 .25 .15
Cash dividends...................................... .14 .11 .15 .09 -- --
Book value.......................................... 6.23 5.80 5.80 5.88 5.53 5.23
CASH DIVIDENDS PAID ON COMMON STOCK
(In thousands)...................................... 367 285 306 122 -- --
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
(In thousands)
Assets.............................................. 116,888 98,695 105,423 92,667 78,037 75,573
Loans, net of unearned income....................... 63,938 58,815 63,236 49,221 43,826 39,262
Deposits............................................ 90,364 70,495 74,474 68,545 62,766 64,362
Long-term debt...................................... -- -- -- -- -- --
Total stockholders' equity.......................... $ 12,720 11,822 11,825 11,993 11,278 10,670
Common shares outstanding........................... 2,041 2,039 2,039 2,039 2,039 2,039
CONSOLIDATED AVERAGE BALANCE SHEET ITEMS
(In thousands)
Assets.............................................. $ 109,812 95,122 94,452 82,941 77,037 64,698
Loans, net of unearned income....................... 65,268 53,078 54,801 45,790 41,483 37,578
Deposits............................................ 81,758 69,176 69,900 60,829 64,089 53,187
Long-term debt...................................... -- -- -- -- -- --
Total stockholders' equity.......................... $ 12,320 11,853 11,852 11,579 10,944 10,514
CONSOLIDATED PERCENTAGES
Net income to:
Average stockholders' equity...................... 8.30%* 8.07* 8.17 6.55 5.56 2.17
Average assets.................................... .93* 1.01* 1.00 .92 .79 .35
Average stockholders' equity to average assets...... 11.22 12.46 12.29 13.96 14.21 16.25
Allowance for loan losses to:
Net loans......................................... 1.38 1.32 1.32 1.33 1.25 1.18
Nonaccrual and restructured loans................. 447 273 230 232 145 29
Nonperforming assets.............................. 188 138 144 288 118 54
Net charge-offs to average net loans................ .04* .11* .10 .45 1.26 1.23
Nonperforming assets to loans, net and foreclosed
properties........................................ .73 .96 .91 .46 1.06 2.14
Capital ratios:**
Tier 1 capital.................................... 10.60 12.37 11.27 13.01 15.19 15.56
Total capital..................................... 11.09 12.63 12.72 13.72 15.92 16.23
Leverage.......................................... 11.58% 12.43 12.26 14.46 14.64 16.49
<CAPTION>
1990
<S> <C>
BRENTWOOD (HISTORICAL)
CONSOLIDATED SUMMARIES OF OPERATIONS
(In thousands)
Interest income..................................... 5,200
Interest expense.................................... 2,997
Net interest income................................. 2,203
Provision for loan losses........................... 200
Net interest income after provision for loan
losses............................................ 2,003
Security and loan transactions...................... --
Noninterest income.................................. 172
Noninterest expense................................. 1,799
Income before income taxes.......................... 376
Income taxes........................................ 120
Net income.......................................... 256
PER COMMON SHARE DATA
Net income.......................................... .18
Cash dividends...................................... --
Book value.......................................... 5.12
CASH DIVIDENDS PAID ON COMMON STOCK
(In thousands)...................................... --
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
(In thousands)
Assets.............................................. 56,048
Loans, net of unearned income....................... 36,701
Deposits............................................ 45,135
Long-term debt...................................... --
Total stockholders' equity.......................... 10,442
Common shares outstanding........................... 2,039
CONSOLIDATED AVERAGE BALANCE SHEET ITEMS
(In thousands)
Assets.............................................. 52,259
Loans, net of unearned income....................... 32,861
Deposits............................................ 41,360
Long-term debt...................................... --
Total stockholders' equity.......................... 10,000
CONSOLIDATED PERCENTAGES
Net income to:
Average stockholders' equity...................... 2.56
Average assets.................................... .49
Average stockholders' equity to average assets...... 19.14
Allowance for loan losses to:
Net loans......................................... 1.00
Nonaccrual and restructured loans................. 138
Nonperforming assets.............................. 39
Net charge-offs to average net loans................ .32
Nonperforming assets to loans, net and foreclosed
properties........................................ 2.53
Capital ratios:**
Tier 1 capital.................................... 18.90
Total capital..................................... 19.56
Leverage.......................................... 19.98
</TABLE>
* Annualized.
** Risk-based capital ratio guidelines require a minimum ratio of Tier 1 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.
15
<PAGE>
FUNC AND BRENTWOOD
PRO FORMA COMBINED SELECTED FINANCIAL DATA*
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1995 1994
<S> <C> <C>
CONSOLIDATED SUMMARIES OF INCOME
(In thousands)
Interest income......................................................................... $ 4,680,459 5,100,515
Interest expense........................................................................ 2,242,452 2,063,507
Net interest income..................................................................... 2,438,007 3,037,008
Provision for loan losses............................................................... 125,565 100,235
Net interest income after provision for loan losses..................................... 2,312,442 2,936,773
Securities available for sale transactions.............................................. 9,591 (11,507)
Investment security transactions........................................................ 4,041 4,006
Noninterest income...................................................................... 991,471 1,167,104
Noninterest expense..................................................................... 2,173,935 2,681,487
Income before income taxes.............................................................. 1,143,610 1,414,889
Income taxes............................................................................ 402,660 490,036
Net income.............................................................................. 740,950 924,853
Dividends on preferred stock............................................................ 7,029 25,353
Net income applicable to common stockholders before redemption premium.................. 733,921 899,500
Redemption premium on preferred stock................................................... -- 41,355
Net income applicable to common stockholders after redemption premium................... $ 733,921 858,145
PER COMMON SHARE DATA
Net income applicable to common stockholders before redemption premium.................. $ 4.26 5.21
Net income applicable to common stockholders after redemption premium................... 4.26 4.97
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
(In thousands)
Assets.................................................................................. 86,956,252 77,406,694
Loans, net of unearned income........................................................... 61,865,957 54,092,988
Deposits................................................................................ 59,906,247 59,032,747
Long-term debt.......................................................................... 6,040,639 3,428,514
Total stockholders' equity.............................................................. $ 5,703,434 5,396,815
CONSOLIDATED PERCENTAGES
Allowance for loan losses to:
Net loans............................................................................ 1.46% 1.81
Nonperforming assets................................................................. 161 175
Net charge-offs to average net loans.................................................... .36** .33
Nonperforming assets to loans, net and foreclosed properties............................ .91% 1.03
</TABLE>
* See "PRO FORMA FINANCIAL INFORMATION".
** Annualized.
16
<PAGE>
FUNC AND THE PURCHASE ACQUISITIONS (INCLUDING THE MERGER)
PRO FORMA COMBINED SELECTED FINANCIAL DATA*
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1995 1994
<S> <C> <C>
CONSOLIDATED SUMMARIES OF INCOME
(In thousands)
Interest income.......................................................................... $ 5,109,917 5,800,981
Interest expense......................................................................... 2,536,352 2,514,910
Net interest income...................................................................... 2,573,565 3,286,071
Provision for loan losses................................................................ 132,085 101,643
Net interest income after provision for loan losses...................................... 2,441,480 3,184,428
Securities available for sale transactions............................................... 5,424 (8,860)
Investment security transactions......................................................... 4,041 4,006
Noninterest income....................................................................... 1,035,366 1,221,488
Noninterest expense...................................................................... 2,390,659 3,000,398
Income before income taxes............................................................... 1,095,652 1,400,664
Income taxes............................................................................. 394,567 487,660
Net income............................................................................... 701,085 913,004
Dividends on preferred stock............................................................. 7,029 25,353
Net income applicable to common stockholders before redemption premium................... 694,056 887,651
Redemption premium on preferred stock.................................................... -- 41,355
Net income applicable to common stockholders after redemption premium.................... $ 694,056 846,296
PER COMMON SHARE DATA
Net income applicable to common stockholders before redemption premium................... $ 3.82 5.06
Net income applicable to common stockholders after redemption premium.................... 3.82 4.82
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
(In thousands)
Assets................................................................................... 91,325,401 88,423,716
Loans, net of unearned income............................................................ 65,161,475 62,217,003
Deposits................................................................................. 62,517,025 67,055,831
Long-term debt........................................................................... 6,197,600 4,524,214
Stockholders' equity..................................................................... $ 6,179,250 5,458,336
CONSOLIDATED PERCENTAGES
Allowance for loan losses to:
Net loans............................................................................. 1.42% 1.68
Nonperforming assets.................................................................. 151 140
Net charge-offs to average net loans..................................................... .35** .30
Nonperforming assets to loans, net and foreclosed properties............................. .94% 1.20
</TABLE>
* See "PRO FORMA FINANCIAL INFORMATION".
** Annualized.
17
<PAGE>
FUNC, THE PURCHASE ACQUISITIONS (INCLUDING THE MERGER) AND FFB
PRO FORMA COMBINED SELECTED FINANCIAL DATA*
<TABLE>
<CAPTION>
NINE MONTHS ENDED
(DOLLARS IN THOUSANDS, SEPTEMBER 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.................... $ 6,843,506 5,278,740 7,937,133 6,601,528 6,608,666 7,031,400 7,549,088
Interest expense................... 3,237,209 1,969,627 3,246,946 2,481,952 2,941,680 4,070,885 4,806,471
Net interest income................ 3,606,297 3,309,113 4,690,187 4,119,576 3,666,986 2,960,515 2,742,617
Provision for loan losses.......... 162,085 139,000 180,643 369,753 642,708 946,284 923,409
Net interest income after provision
for loan losses.................. 3,444,212 3,170,113 4,509,544 3,749,823 3,024,278 2,014,231 1,819,208
Securities available for sale
transactions..................... 24,472 12,130 8,860 25,767 34,402 -- --
Investment security transactions... 4,041 3,595 4,006 14,452 1,944 208,614 32,271
Noninterest income................. 1,346,489 1,147,890 1,620,712 1,541,569 1,360,202 1,254,635 1,028,755
Noninterest expense................ 3,175,444 2,770,298 4,070,027 3,536,346 3,443,524 2,777,665 2,564,124
Income before income taxes......... 1,643,770 1,563,430 2,073,095 1,795,265 977,302 699,815 316,110
Income taxes....................... 588,927 534,122 709,028 578,912 278,514 129,843 59,868
Net income......................... 1,054,843 1,029,308 1,364,067 1,216,353 698,788 569,972 256,242
Dividends on preferred stock....... 22,306 33,981 46,020 45,553 53,040 51,746 47,151
Net income applicable to common
stockholders before redemption
premium.......................... 1,032,537 995,327 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.......................... $ 1,032,537 995,327 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........................ $ 3.57 3.55 4.63 4.30 2.53 2.34 .97
Net income applicable to common
stockholders after redemption
premium........................ 3.57 3.55 4.48 4.30 2.53 2.34 .97
CONSOLIDATED PERIOD-END BALANCE
SHEET ITEMS
(In thousands)
Assets........................... 126,603,451 108,646,040 124,639,412 104,549,554 95,308,328 89,488,406 83,698,754
Loans, net of unearned income.... 89,548,999 74,009,567 86,018,244 68,263,088 60,301,462 58,725,097 54,581,023
Deposits......................... 90,095,999 81,322,608 95,962,683 81,885,433 76,155,800 72,394,773 61,274,378
Long-term debt................... 6,874,335 4,082,255 5,337,837 3,675,002 3,732,768 3,549,815 2,967,847
Stockholders' equity............. $ 9,249,944 8,507,151 8,335,311 7,946,053 6,716,813 5,805,579 4,782,825
CONSOLIDATED PERCENTAGES
Allowance for loan losses to:
Net loans...................... 1.66% 2.15 1.91 2.38 2.57 2.49 2.31
Nonperforming assets........... 170 154 153 115 76 55 58
Net charge-offs to average net
loans.......................... .37** .39** .37 .78 1.03 1.53 1.05
Nonperforming assets to loans,
net and foreclosed
properties..................... .97% 1.39 1.25 2.06 3.36 4.45 3.91
</TABLE>
* See "PRO FORMA FINANCIAL INFORMATION".
** Annualized.
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RECENT DEVELOPMENTS
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, and (iii) the exchange of
each share of the three outstanding series of FFB preferred stock for one share
of one of three corresponding new series of FUNC 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.
See "DESCRIPTION OF FUNC CAPITAL STOCK".
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 FFB and
FUNC stockholder approvals with respect to the FFB Merger were obtained on
October 3, 1993. Federal Reserve Board approval of the FFB Merger was received
on October 26, 1995.
The FFB Merger, which will be accounted for as a pooling of interests, is
currently expected to be consummated by January 1, 1996, subject to certain
conditions set forth in the FFB Merger Agreement.
Based on the closing price of FUNC Common Stock on the NYSE Tape on June
16, 1995 ($47.625), the last business day prior to public announcement of the
FFB Merger, 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, FUNC and/or FFB 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,
FUNC has purchased million shares of FUNC Common Stock at a cost of $
million, million shares of FFB common stock at a cost of $ million, and
250,000 shares of FFB convertible preferred stock at a cost of $12 million. As
of the date of this Prospectus/Proxy Statement, FFB has purchased shares
of FFB common stock at a cost of $ 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, 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
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<PAGE>
estimates for FFB are based on several assumptions, including expectations for
its existing markets. The FUNC estimated post-FFB Merger estimates are based on
several assumptions in addition to the assumptions referred to above with
respect to 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.
(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 by FFB on a more
limited basis.
(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 effective date of the FFB Merger. The estimates include
assumptions about the timing of the consummation of the FFB Merger 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 differences 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 Brentwood to its
stockholders as a Proxy Statement in connection with the solicitation of proxies
by the Brentwood Board for use at the Special Meeting to be held on January 31,
1996, and any adjournments or postponements thereof, to consider and vote upon a
proposal to approve the Merger Agreement.
In addition to approval of the Merger Agreement by the holders of Brentwood
Common Stock, consummation of the Merger is subject, among other things, to the
execution of Warrantholder Agreements by the holders of the outstanding
20
<PAGE>
Warrants. The Warrantholder Agreements provide for the cancellation of the
Warrants at the Effective Date and a cash payment to the Warrantholders of an
amount equal to the number of Warrants held by such holders times the excess of
(i) the Average Closing Price times the Exchange Rato, over (ii) $5.00. As of
the date of this Prospectus/Proxy Statement, there are Warrants outstanding to
purchase 1,409,000 shares of Brentwood Common Stock. As of such date, the
holders of Warrants to purchase 228,625 shares of Brentwood Common Stock have
executed Warrantholder Agreements. See "THE MERGER -- Interests of Certain
Persons" and " -- Conditions to Consummation; Warrantholder Agreements; Stock
Options" and ANNEX D. Copies of this Prospectus/Proxy Statement are being sent
to holders of the Warrants who do not also own shares of Brentwood Common Stock,
for information purposes only. Warrantholders are not entitled to vote as such
at the Special Meeting.
This document is also being furnished by FUNC to the holders of Brentwood
Common Stock as a Prospectus in connection with the issuance by FUNC of the FUNC
Common Shares upon consummation of the Merger.
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 Brentwood; (ii)
submitting a proxy having a later date; or (iii) such person 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 judgment 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 approve the Merger Agreement will be
voted in favor of any such adjournment or postponement. IF NO SPECIFICATION IS
MADE, PROXIES WILL BE VOTED IN FAVOR OF APPROVAL OF THE MERGER AGREEMENT.
Directors, officers and employees of Brentwood and FUNC may solicit proxies
from Brentwood stockholders, either personally or by telephone, telegraph or
other form of communication. Such persons will receive no additional
compensation for such services. 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
Brentwood.
As of the date of this Prospectus/Proxy Statement, the Brentwood Board
knows of no matters which will be presented for consideration at the Special
Meeting other than as set forth in the Notice of Special Meeting accompanying
this Prospectus/Proxy Statement. However, if any other matters come before the
Special Meeting or any adjournments or postponements thereof and be voted upon,
the enclosed proxy shall be deemed to confer discretionary authority to the
individuals named as proxies therein to vote the shares represented by such
proxy as to any such matters.
THE BRENTWOOD BOARD HAS UNANIMOUSLY ADOPTED THE MERGER AGREEMENT, BELIEVES
THE MERGER AGREEMENT IS IN THE BEST INTERESTS OF BRENTWOOD AND ITS STOCKHOLDERS
AND IS FAIR TO THE STOCKHOLDERS, AND RECOMMENDS APPROVAL OF THE MERGER AGREEMENT
BY BRENTWOOD STOCKHOLDERS. SEE "THE MERGER -- BACKGROUND AND REASONS;
BRENTWOOD ".
SPECIAL MEETING
The Brentwood Board has fixed December 1, 1995, as the Record Date for
determining stockholders entitled to notice of and to vote at the Special
Meeting, and accordingly, only holders of Brentwood 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 Brentwood Common Stock outstanding
on the Record Date was 2,040,921, 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. Approval of the Merger Agreement requires the affirmative vote of at
least 66 2/3 percent of the votes entitled to be cast at the Special Meeting by
the holders of Brentwood Common Stock.
The directors and executive officers of Brentwood (including certain of
their related interests) beneficially owned, as of the Record Date, and are
entitled to vote at the Special Meeting 441,320 shares of Brentwood Common
Stock, which represents approximately 21.6 percent of the outstanding shares of
Brentwood Common Stock entitled to be voted at the Special Meeting. Pursuant to
the terms of the Voting Agreement, the directors of Brentwood, the holders of
approximately 21.6 percent of the outstanding shares of Brentwood Common Stock
entitled to be voted at the Meeting, agreed to vote such shares in favor of
approval of the Merger Agreement at the Special Meeting. Accordingly, assuming
such shares are so voted, approval of the Merger Agreement will require the
affirmative vote of the holders of an additional 45.1 percent of the outstanding
shares of Brentwood Common Stock entitled to be voted at 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.
21
<PAGE>
THE MERGER
THE FOLLOWING INFORMATION RELATING TO THE MERGER IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION CONTAINED ELSEWHERE IN
THIS PROSPECTUS/PROXY STATEMENT, INCLUDING THE ANNEXES HERETO, AND THE DOCUMENTS
INCORPORATED HEREIN BY REFERENCE. A COPY OF THE MERGER AGREEMENT IS SET FORTH IN
ANNEX B TO THIS PROSPECTUS/PROXY STATEMENT AND REFERENCE IS MADE THERETO FOR A
COMPLETE DESCRIPTION OF THE TERMS OF THE MERGER. STOCKHOLDERS OF BRENTWOOD ARE
URGED TO READ THE MERGER AGREEMENT CAREFULLY.
GENERAL; EXCHANGE RATIO
Under the terms of the Merger Agreement, FUNC-VA would acquire Brentwood by
means of the Merger of Brentwood with and into FUNB-TN. Upon consummation of the
Merger, each outstanding share of Brentwood Common Stock (excluding any Excluded
Shares and any Dissenting Shares) would be converted, 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 result
obtained by dividing $8.8112 by the Average Closing Price). Each holder of
Brentwood 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 (i) 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 (ii) the
fraction of a share of FUNC Common Stock to which such holder would otherwise be
entitled.
For purposes of certain pro forma computations in this Prospectus/Proxy
Statement, a .1776 Exchange Ratio has been calculated using the closing price
per share of FUNC Common Stock on the NYSE Tape on October 31, 1995 ($49.625),
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
.1776. The pro forma information would be different if the Average Closing Price
results in an Exchange Ratio different from .1776. Stockholders are urged to
obtain up to date market quotations for FUNC Common Stock.
EFFECTIVE DATE
Subject to the conditions to the obligations of the parties to effect the
Merger, the Effective Date will occur on such date as FUNC notifies Brentwood 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, or such other date
as may be mutually agreed upon between FUNC and Brentwood. Subject to the
foregoing, it is currently anticipated that the Merger will be consummated on
January 31, 1996. The FUNC Board or the Brentwood Board may terminate the Merger
Agreement if the Effective Date does not occur on or before March 31, 1996. See
" -- Conditions to Consummation; Warrantholder Agreements; Stock Options" and
" -- Termination".
EXCHANGE OF BRENTWOOD CERTIFICATES
As promptly as practicable after the Effective Date, FUNC will send or
cause to be sent to each holder of record of Brentwood Common Stock as of the
Effective Date, transmittal materials for use in exchanging all of such holder's
certificates representing Brentwood 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.
BRENTWOOD 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 Brentwood 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 Brentwood Common Stock
pursuant to the Merger will be deemed issued as of the Effective Date. After the
Effective Date, former holders of record of Brentwood Common Stock will be
entitled to vote at any meeting of holders of FUNC Common Stock the number of
FUNC Common Shares into which their
22
<PAGE>
Brentwood shares have been converted, regardless of whether they have
surrendered their Brentwood 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 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 Brentwood
Common Stock certificates until such holder physically surrenders all such
certificates as hereinabove described. 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
will not include dividends on the FUNC Common Shares issued in the Merger. After
the Effective Date, the stock transfer books of Brentwood will be closed, and
there will be no transfers of the shares of Brentwood Common Stock that were
outstanding immediately prior to the Effective Date.
The Merger Agreement provides that Brentwood will use its best efforts to
obtain from each person who may be deemed to be an "affiliate" (as defined in
the Securities Act) to execute and deliver to FUNC on or before the date hereof
an agreement (an "Affiliate's Agreement") restricting the disposition of such
affiliate's shares of Brentwood Common Stock and FUNC Common Stock received by
such person in exchange for such person's shares of Brentwood Common Stock. The
Merger Agreement further provides that shares of Brentwood Common Stock held by
such affiliates of Brentwood will not be exchanged for FUNC Common Shares until
FUNC receives such an Affiliate's Agreement.
BACKGROUND AND REASONS
BRENTWOOD
The Chairman of the Brentwood Board was contacted by the President of
FUNB-TN in January 1995. In the months following, Brentwood's Chairman and
FUNB-TN's President held a number of informal discussions regarding the possible
merger of the two organizations. In April 1995, FUNC submitted a nonbinding
indication of interest to Brentwood which contemplated the aggregate value of
FUNC Common Stock and cash to be received by Brentwood stockholders,
optionholders and Warrantholders at approximately $25,000,000, or approximately
$9.08 per share. The Brentwood Board agreed to permit FUNC to review certain
additional information and to conduct a detailed due diligence investigation of
Brentwood, and following such investigation FUNC revised its informal proposal
to approximately $8.81 per share of Brentwood Common Stock. Over the next
several weeks, the Brentwood Board evaluated a number of alternative strategies
and determined that it was in the best interest of its stockholders to continue
to negotiate with FUNC. In July 1995, the Brentwood Board retained Financial to
render an opinion to the Brentwood Board concerning the fairness of FUNC's
offer, from a financial point of view, to the Brentwood stockholders and
Warrantholders. Negotiations continued and the terms of a definitive Merger
Agreement were presented to the Brentwood Board on July 18, 1995. At that
meeting, Brentwood's counsel reviewed the terms of the Merger and Financial made
a presentation to the Brentwood Board indicating that the offer was fair from a
financial point of view. On that date, each Brentwood director agreed to vote
all shares of Brentwood Common Stock owned or controlled by him in favor of the
Merger, to recommend the Merger to the Brentwood stockholders and to use his
best efforts to ensure the expeditious consummation of the Merger. In addition,
each director who held a Warrant executed a Warrantholder Agreement whereby FUNC
would pay a stated price for surrender of the Warrants.
The Brentwood Board believes that the Merger is fair and equitable to, and
in the best interest of, Brentwood and its stockholders. The Merger will permit
stockholders of Brentwood to participate in a corporation which has greater
financial resources and a larger number of banking locations in more banking
markets than Brentwood has at the present time. After the Merger, Brentwood's
customers will have access to the enhanced lending capabilities of FUNB-TN and
will acquire access to FUNB-TN facilities and personnel which will enable the
combined entity to enhance its services to its customers in the Brentwood
community.
The terms of the Merger Agreement were arrived at as the result of arm's
length negotiations between representatives of FUNC and Brentwood and its
advisors. The Merger Agreement was entered into by Brentwood after full
consideration of various factors having an effect upon the determination of a
fair value for Brentwood Common Stock in the context of a merger transaction. In
determining the amount and nature of consideration to be received by the
Brentwood stockholders, the Brentwood Board considered the history, financial
condition, results of operations and dividend record of FUNC, the market value
of FUNC Common Stock at various times and the prospects of FUNC and Brentwood,
both separately and as a combined entity. The Brentwood Board also considered
(i) that the value of the consideration to be delivered in exchange for
Brentwood Common Stock represents a premium over the book value of Brentwood
Common Stock currently outstanding and that the potential exercise of Warrants
in the future would likely dilute such book value, (ii) that the Brentwood
stockholders receiving FUNC Common Stock in the Merger will acquire securities
having a greater liquidity than the Brentwood
23
<PAGE>
Common Stock, (iii) that the dividends historically paid on FUNC Common Stock
exceed the dividends historically paid on the equivalent fraction of a share of
Brentwood Common Stock which will be exchanged for a share of FUNC Common Stock
in the Merger, and (iv) the opinion of Financial that the terms of the Merger
are fair, from a financial point of view, to Brentwood and its stockholders and
Warrantholders. See " -- Opinion of Financial Advisor to Brentwood".
THE BRENTWOOD BOARD UNANIMOUSLY RECOMMENDS THAT BRENTWOOD STOCKHOLDERS VOTE
"FOR" 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 geographic 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 Brentwood is an excellent way to
expand FUNC's presence in the Nashville/Brentwood, Tennessee 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 TO BRENTWOOD
Brentwood has retained Financial to act as its financial advisor in
connection with the Merger. A representative of Financial participated in the
meeting of the Brentwood Board held on July 18, 1995, at which the Brentwood
Board approved the Merger Agreement. At the July 18 meeting, Financial rendered
an oral opinion to the effect that, as of such date, conversion of each share of
Brentwood Common Stock into the right to receive a number of shares of FUNC
Common Stock equal to the Exchange Ratio and the additional terms provided by
the Merger Agreement (the "Per Share Price and Terms") were fair to the
stockholders and Warrantholders of Brentwood from a financial point of view.
Financial has also rendered a written opinion to the Brentwood Board that, on
July 18, 1995, and on the date of this Prospectus/Proxy Statement, based on the
information set forth therein, the Per Share Price and Terms were and are fair
from a financial point of view to the Brentwood stockholders and Warrantholders.
THE FULL TEXT OF FINANCIAL'S WRITTEN OPINION DATED THE DATE HEREOF IS
ATTACHED AS ANNEX E TO THIS PROSPECTUS/PROXY STATEMENT AND IS INCORPORATED
HEREIN BY REFERENCE. THE DESCRIPTION OF THE OPINION SET FORTH HEREIN IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO ANNEX E. BRENTWOOD STOCKHOLDERS AND
WARRANTHOLDERS ARE URGED TO READ THE OPINION IN ITS ENTIRETY FOR A DESCRIPTION
OF THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED, AND
QUALIFICATIONS AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY FINANCIAL IN
CONNECTION THEREWITH.
Financial's opinion is directed only to the Per Share Price and Terms and
does not constitute a recommendation to any Brentwood stockholder regarding how
such stockholder should vote at the Special Meeting.
In arriving at its written opinion, Financial: (i) analyzed certain audited
and unaudited financial statements and other information of Brentwood and
publicly available audited and unaudited financial statements and other
information of FUNC; (ii) reviewed and discussed with appropriate management
personnel of Brentwood the past and current business activities and financial
results and the business and financial outlook of Brentwood; (iii) reviewed the
historical price and trading activity of FUNC Common Stock; (iv) compared
certain financial and stock market data relating to FUNC with similar data of
other publicly held banking institutions considered to be potential alternative
affiliation candidates to FUNC for Brentwood; (v) performed an analysis
comparing the pro forma consequences of the Merger to Brentwood stockholders
with respect to earnings per share, book value per share, tangible book value
per share and dividends per share represented by the FUNC Common Stock they will
receive in the Merger to those same measures represented by the Brentwood Common
Stock they currently hold; (vi) reviewed the prices paid in certain comparable
acquisition transactions of community banking institutions and the multiples of
earnings and book value and the level of deposit base premium received by the
selling institutions; (vii) reviewed the Merger Agreement and certain related
documents; and (viii) considered the financial implications of certain other
strategic alternatives available to Brentwood.
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<PAGE>
In conducting its analysis and arriving at its opinion, Financial assumed
and relied upon, without independent verification, the accuracy and completeness
of the information it reviewed for the purposes of the opinion. Financial also
relied upon the management of Brentwood with respect to the reasonableness and
achievability of the financial forecast (and the assumptions and bases
underlying such forecast) provided to it. Brentwood instructed Financial that,
for the purposes of its opinion, Financial should assume that such forecast will
be realized in the amounts and in the time periods currently estimated by the
management of Brentwood. Financial also assumed, with Brentwood's consent, that
the aggregate allowances for loan losses for each of Brentwood and FUNC are
adequate to cover such losses. Financial is not an expert in the evaluation of
allowances for loan losses and has not reviewed any individual credit files.
Financial did not make, nor was it furnished with, independent valuations or
appraisals of the assets or liabilities of either Brentwood or FUNC. Financial
did not, and was not asked to, express any opinion about what the value of FUNC
Common Stock actually will be when issued to the holders of Brentwood Common
Stock pursuant to the Merger or the price at which FUNC Common Stock will trade
subsequent to the Merger. Moreover, Brentwood has informed Financial, and
Financial has assumed, that the Merger will be recorded utilizing purchase
accounting under generally accepted accounting principles. See " -- Accounting
Treatment".
No limitations were imposed by Brentwood or the Brentwood Board on the
scope of Financial's investigation or the procedures to be followed by Financial
in rendering its opinion. As part of its procedures, however, Financial was not
requested to, and did not, solicit any third-party indications of interest in
acquiring or entering into a strategic business combination with Brentwood. The
opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to Financial as of, the date of
its analysis. In arriving at the fairness, from a financial point of view, of
the consideration to be received by the stockholders and Warrantholders of
Brentwood, Financial developed an opinion of the value of Brentwood Common Stock
should the institution remain independent and analyzed such value in light of
the premium represented by the Per Share Price and Terms. In connection with
rendering its opinion to the Brentwood Board, Financial also reviewed a variety
of generally recognized valuation methodologies and merger analyses and
performed those which it believed were most appropriate for developing its
opinion of fairness, from a financial point of view.
The preparation of a fairness opinion involves various determinations of
the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances, and therefore,
such an opinion is not readily susceptible to summary description. In arriving
at its fairness opinion, Financial did not attribute any particular weight to
any analysis or factor considered by it, but rather made qualitative judgments
about the significance and relevancy of each analysis and factor. None of the
analyses performed by Financial was assigned a greater significance by Financial
than any other. Accordingly, Financial believes that its analyses must be
considered as a whole and that a review of selected portions of such analyses
and the factors considered therein, without considering all analyses and
factors, could create a misleading or incomplete view of the processes
underlying its opinion and any conclusions reached therein. In its analyses,
Financial made numerous assumptions with respect to industry performance,
general business and economic conditions, and other matters, many of which are
beyond Brentwood's and FUNC's control. Any estimates contained in Financial's
analyses are not necessarily indicative of actual values or predictive of future
results or values that may be significantly more or less favorable than such
estimates. Estimates of values of companies do not purport to be appraisals or
necessarily reflect the prices at which companies or their securities actually
may be sold. In addition, as described above, Financial's opinion and
presentation to the Brentwood Board was one of many factors taken into
consideration by the Brentwood Board in making its determination to approve the
Merger Agreement.
The following is a brief summary of the analyses performed by Financial in
connection with its opinion delivered to the Brentwood Board on July 18, 1995:
SUMMARY OF PROPOSAL. Financial reviewed the terms of the proposed
transaction as reflected in the Merger Agreement, including the calculation of
the Exchange Ratio. Financial stated that based on the recent price of FUNC
Common Stock of $48.00, the Exchange Ratio of .1836 shares of FUNC Common Stock
per share of Brentwood Common Stock would provide Brentwood stockholders a per
share value of $8.8112 (the "Per Share Price"). Financial noted that the
Exchange Ratio would vary, based on the Average Closing Price of FUNC Common
Stock for a defined ten-day period, in a manner which would have the effect of
providing Brentwood stockholders a per share value of approximately $8.8112
regardless of the FUNC Common Stock price during such defined ten-day period.
POSSIBLE VALUE OF BRENTWOOD IN A SALE OF CONTROL. In determining the
potential value per share of Brentwood Common Stock if Brentwood were to seek
affiliation alternatives to the Merger, Financial reviewed the historical
financial results of Brentwood and examined the internally prepared financial
projections of Brentwood. For purposes of this analysis, Financial adjusted
Brentwood's earnings and capital accounts to reflect a more traditional capital
position as well as reflecting potential cost savings available should Brentwood
become part of a larger in-market institution. Financial then computed the value
of
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<PAGE>
Brentwood based on an analysis utilizing representative multiples of Brentwood's
earnings for 1995 and an analysis based upon a core deposit base premium of 12
percent to 14 percent plus adjusted stockholders' equity. Based on these
analyses, and taking into account Brentwood's adjusted equity and management's
estimated earnings in 1995 as an independent bank prior to the closing of the
Merger, Financial calculated an expected value to Brentwood stockholders in a
sale of control transaction at between $8.00 and $8.75 per share.
INDICATED VALUE OF BRENTWOOD AS AN INDEPENDENT BANK. Financial also
undertook an analysis addressing the range of potential values which would be
implied if Brentwood were to remain an independent bank. Financial computed this
range of values based on a discounted cash flow analysis, relying on projections
extrapolated from Brentwood's 1995 budget and its historical performance. In
this analysis methodology, Financial assumed stockholders received, in addition
to the projected dividend stream, a terminal valuation at December 31, 1999,
based upon a 2.1 times multiple of December 31, 1999 stated book value and a
16.9 times multiple of earnings for such year. These amounts were discounted at
rates ranging from 12 percent to 14 percent and indicated net present values to
Brentwood stockholders on a per share basis ranging from $7.86 to $8.15.
PER SHARE MERGER CONSEQUENCES ANALYSIS. Based upon an Exchange Ratio of
.1836 shares of FUNC Common Stock for each share of Brentwood Common Stock and
using the earnings estimates for Brentwood prepared by Brentwood management and
earnings estimates for FUNC prepared by independent securities analysts,
Financial compared the estimated 1994 and 1995 earnings per share of Brentwood
Common Stock on a stand-alone basis to the equivalent pro forma earnings per
share of FUNC Common Stock which would be received in the Merger. Financial
concluded that the Merger would result in an earnings increase of 169 percent in
1994 and 143 percent in 1995 for Brentwood stockholders in the combined company.
Financial also analyzed the impact of the Merger on the amounts of stated
and tangible book value represented by a share of Brentwood Common Stock.
Financial assumed consummation of the Merger as of December 31, 1995, and
utilized the above described earnings estimates for Brentwood and FUNC.
Financial concluded that the Merger would result in an increase of 26 percent
and 0 percent in stated and tangible book value on an equivalent per share
basis, respectively, for Brentwood stockholders.
Finally, Financial compared the amount of dividends expected to be paid on
a share of Brentwood Common Stock before the Merger to the level expected to be
paid on a pro forma basis reflecting the Merger. Financial concluded that the
Merger would result in an increase of 154 percent in dividends per share for
Brentwood stockholders.
ANALYSIS OF SELECTED OTHER BANK MERGERS INVOLVING SOUTHEASTERN COMMUNITY
BANKS. Financial reviewed 19 mergers involving southeastern community banks and
bank holding companies announced between September 1993 and July 1995. Financial
noted in particular the prices paid in these mergers as a multiple of earnings
and book values and the transaction premiums paid in excess of tangible book
value as a percentage of core deposits. Financial also reviewed other data in
connection with each of these mergers, including the amount of total assets and
the capital level of the acquired institutions and the return on equity and the
return on assets of the acquired institutions. Financial then compared this data
to that of Brentwood and to the value to be received by Brentwood stockholders
in the Merger.
This comparison yielded a range of transaction values as multiples of
latest 12-months earnings per share of a low of 11.9 times and a high of 29.6
times and a median value of 16.8 times. The Brentwood multiple of trailing
earnings was 24.8 times. The calculations yielded a range of transaction values
as multiples of book value per share of a low of 1.45 times to a high of 3.58
times and a median value of 2.52 times. The Brentwood multiple of book value was
1.91 times. Finally, the calculations yielded a range of deposit base premiums
paid from a low of 4.55 percent to a high of 25.40 percent, with a median value
of 12.62 percent. The equivalent premium on Brentwood deposits represented by
the Per Share Price and Terms was 15.28 percent.
No company or transaction used in the above analyses as a comparison is
identical to Brentwood, FUNC or the Merger. Accordingly, an analysis of the
results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies and other factors that could affect the public trading value of
the companies to which they are being compared. Mathematical analysis (such as
determining the average or median) is not, in itself, a meaningful method of
using comparable company data.
In connection with its opinion dated the date of this Prospectus/Proxy
Statement, Financial confirmed the appropriateness of its reliance on the
analyses used to render its July 18, 1995 opinion by performing procedures to
update certain of such analyses and by reviewing the assumptions on which such
analyses were based and the factors considered in connection therewith.
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<PAGE>
Financial is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, private placements, and
valuations for estate, tax, corporate and other purposes. Further,
representatives of Financial have been involved in the recent acquisitions of
several community banks based in Tennessee which were similar to Brentwood.
Brentwood has agreed to pay Financial a fee of $20,000 in connection with its
engagement, $10,000 of which is contingent upon consummation of the Merger. No
compensation payable to Financial is contingent on the conclusions reached in
the opinion of Financial. Brentwood has also agreed to reimburse Financial for
reasonable out-of-pocket-expenses and to indemnify Financial and certain related
persons against certain liabilities relating to or arising out of its
engagement.
INTERESTS OF CERTAIN PERSONS
The directors and executive officers of Brentwood have certain interests in
the Merger in addition to interests they have as stockholders of Brentwood
generally. Those interests include, among others, provisions in the Merger
Agreement relating to indemnification, directors' and officers' liability
insurance, cash payments to holders of Warrants and Stock Options, and certain
other benefits.
The Merger Agreement provides that for the six-year period following the
Effective Date, FUNC will indemnify the directors, officers and employees of
Brentwood holding such positions on or prior to the date of the Merger
Agreement, against certain liabilities, to the extent such persons were
indemnified under OCC regulations 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 Brentwood's existing directors' and officers' liability
insurance policy for persons who were covered by such insurance on 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 the annual premium payment for such
policy.
The directors and executive officers of Brentwood, together with certain of
their related interests, beneficially owned as of the Record Date, 1,119,945
shares of Brentwood Common Stock, including 528,625 shares subject to
unexercised Warrants and 150,000 shares subject to unexercised Stock Options.
Pursuant to the Merger Agreement, (i) each holder of unexercised Warrants
at the Effective Date will receive a cash payment equal to the number of
Warrants held by such holder times the excess of (a) the Average Closing Price
times the Exchange Ratio, over (b) $5.00, and (ii) each holder of unexercised
Stock Options at the Effective Date will receive a cash payment equal to the
excess of (x) $8.8112 over the exercise price per share of the Stock Options
held by such holder times (y) the number of shares of Brentwood Common Stock
covered by the Stock Options held by such holder. In addition, the Brentwood
Board has voted to pay a bonus to each holder of a Stock Option which is
eligible to be treated as an incentive stock option under Section 422 of the
Internal Revenue Code of 1986, as amended, in an amount equal to the amount of
additional tax (including the tax associated with such bonus) occasioned by the
cancellation and surrender of such option, up to an aggregate limit for all such
bonuses of $75,000.
The approximate payments which may be paid at the Effective Date to the
directors and executive officers of Brentwood for the Warrants and Stock Options
(including the aforementioned bonuses with respect to incentive stock options)
held by them on the Record Date is currently estimated to be approximately $2.5
million, as set forth in the following table:
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<TABLE>
<CAPTION>
NAME POSITION WARRANTS STOCK OPTIONS TOTAL
<S> <C> <C> <C> <C>
Frank Bumstead Director $ 76,224 56,224 132,448
Chester A. Butler Director -- -- --
Farzin Ferdowsi Director 285,840 -- 285,840
James D. Harris Director and Executive Officer 152,448 165,560 318,008
William B. King Director 209,616 -- 209,616
James S. Lattimore Director 304,896 -- 304,896
Boyce C. Magli Director 266,784 -- 266,784
Edwin B. Raskin Director 70,984 -- 70,984
James T. Redd Director 266,784 -- 266,784
David Rollins Director -- -- --
Reese L. Smith Director 381,120 -- 381,120
David Hall Director -- -- --
Diane West Executive Officer -- 99,336 99,336
Larry Kain Executive Officer -- 60,280 60,280
Marlena Breckenridge Executive Officer -- 80,280 80,280
Total $2,014,696 461,680 2,476,376
</TABLE>
In addition, each of Mr. Harris, Mrs. West, Mrs. Breckenridge and Mr. Kain
are subject to Executive Severance Pay Agreements which provide that if such
officer is terminated other than for cause or voluntarily terminates his or her
employment with Brentwood after consummation of the Merger, then such officer
will receive a lump sum payment equal to two times his or her average annual
compensation for the past three years in the case of Mr. Harris and one-half of
the officer's total annual compensation as of the date of termination plus such
additional benefits as may otherwise be provided on such date in the case of
Mrs. West, Mrs. Breckenridge and Mr. Kain. The aggregate amount of cash payments
that could be made under such agreements is estimated to be approximately
$550,000.
FUNC agreed in the Merger Agreement that as soon as administratively
practicable following the Effective Date, employees of Brentwood 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 under
such plans), to years of service with Brentwood as if such service were with
FUNC.
Certain of the directors of Brentwood and/or their related interests have
various relationships with FUNB-TN and/or certain of the directors of FUNB-TN
and/or their related interests, including loan and/or deposit relationships with
FUNB-TN, that have been entered into in the ordinary course of business.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS A DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF
THE MERGER. THE DISCUSSION IS INCLUDED FOR GENERAL INFORMATION PURPOSES ONLY AND
MAY NOT APPLY TO SPECIAL SITUATIONS, SUCH AS BRENTWOOD STOCKHOLDERS OR
WARRANTHOLDERS, IF ANY, THAT RECEIVED THEIR BRENTWOOD COMMON STOCK OR WARRANTS
UPON THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, THAT
HOLD THEIR BRENTWOOD COMMON STOCK OR WARRANTS AS PART OF A "STRADDLE" OR
"CONVERSION TRANSACTION" OR THAT ARE INSURANCE COMPANIES, SECURITIES DEALERS,
FINANCIAL INSTITUTIONS OR FOREIGN PERSONS.
Sullivan & Cromwell, counsel for FUNC, has delivered to FUNC and Brentwood
an opinion, dated the date hereof, to the effect that:
(i) No gain or loss will be recognized for federal income tax
purposes by Brentwood stockholders upon the exchange in the Merger of
shares of Brentwood 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 Merger by
Brentwood stockholders (including the basis of any fractional share
interest in FUNC Common Stock) will be the same as the basis of the shares
of Brentwood Common Stock surrendered in exchange therefor.
(iii) The holding period of the FUNC Common Shares received in the
Merger by a Brentwood stockholder (including the holding period of any
fractional share interest in FUNC Common Stock) will include the holding
period during
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<PAGE>
which the shares of Brentwood Common Stock surrendered in exchange therefor
were held by the Brentwood stockholder, provided such shares of Brentwood
Common Stock were held as capital assets.
(iv) Cash received by a holder of Brentwood 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 Brentwood Common Stock allocable to the
fractional share interest.
(v) Brentwood stockholders that dissent from the Merger and receive
cash in exchange for their Brentwood 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
Brentwood stockholder's basis in the Brentwood Common Stock surrendered
therefor. Special rules may apply to dissenting Brentwood stockholders that
actually or constructively (pursuant to Section 318 of the Internal Revenue
Code of 1986, as amended (the "Code")) own either shares of Brentwood 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),
Brentwood stockholders that hold their shares of Brentwood 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 Brentwood stockholder is deemed to have held such shares for more than one
year, and otherwise will be short-term capital gain or loss.
Warrantholders that receive cash upon cancellation of their Warrants and
that would have held Brentwood Common Stock as a capital asset should in general
recognize capital gain or loss in an amount equal to the difference between the
amount of cash received and the Warrantholder's basis in the cancelled Warrants,
and such capital gain or loss should be long-term capital gain or loss if the
Warrantholder has a holding period in the Warrants in excess of one year at the
time of cancellation. Special rules apply to Warrantholders that received their
Warrants as compensation, and such Warrantholders are urged to consult their own
tax advisors to determine their particular tax treatment of cancellation of the
Warrants.
In addition, consummation of the Merger is conditioned, among other things,
on receipt by FUNC and Brentwood of an opinion of Sullivan & Cromwell, dated as
of the Effective Date, to the effect that (i) the Merger constitutes a
reorganization under Section 368 of the Code, and (ii) no gain or loss will be
recognized by Brentwood stockholders who receive FUNC Common Shares in exchange
for their shares of Brentwood 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 Merger.
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH STOCKHOLDER OR WARRANTHOLDER AND OTHER FACTORS,
EACH STOCKHOLDER OR WARRANTHOLDER OF BRENTWOOD IS URGED TO CONSULT SUCH HOLDER'S
OWN TAX ADVISER TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF
THE MERGER (INCLUDING THE APPLICATION AND EFFECT OF STATE AND LOCAL INCOME AND
OTHER TAX LAWS).
BUSINESS PENDING CONSUMMATION
Brentwood agreed in the Merger Agreement to conduct its business in the
ordinary and usual course consistent with past practice and not to take certain
actions relating to the operation of Brentwood pending consummation of the
Merger, without the prior written consent of FUNC, except as otherwise permitted
in the Merger Agreement. These actions include, without limitation: (i) not
paying or declaring any dividends (except as provided below), 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 Stock
Options) or giving any person the right to acquire any such shares; (ii) not
incurring any indebtedness for borrowed money or becoming liable for the
obligations of any other entity other than in the ordinary course of business
consistent with past practice; (iii) not increasing the rate of compensation or
paying any bonus to any of its directors, officers or employees other than
normal increases in regular compensation to employees in the ordinary course of
business consistent with past practice; (iv) not entering into or modifying any
employment agreements or employee benefit plans; (v) not disposing of any
material portion of its assets or acquiring any material portion of the business
or property of any other entity other than foreclosures in
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<PAGE>
the ordinary course of business consistent with past practice; and (vi) not
changing its lending, investment, liability management or other material
policies in any material respect.
Notwithstanding the foregoing, Brentwood may pay regular quarterly cash
dividends not in excess of $.05 per share and, from and after the record date
for FUNC's regular quarterly cash dividend payable in the first quarter of 1996
(which record date is expected to be on or about February 29, 1996), may pay
additional dividends equal to the dividends which would have been paid to the
holders of Brentwood Common Stock on the FUNC Common Shares had the Merger been
consummated on or prior to such record date, less (to the extent paid between
January 2, 1996 and such record date) the regular quarterly dividend of $.05 per
share referred to above.
The Merger Agreement also provides that Brentwood 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 and
generally accepted accounting principles; provided the OCC has approved the
Merger and Brentwood is reasonably satisfied the Merger will be consummated on
the Effective Date.
REGULATORY APPROVAL
On October 31, 1995, FUNC received the requisite approval of the Merger
from the OCC under both the Bank Merger Act (the "BMA") and Section 5(d)(3) of
the Federal Deposit Insurance Act (the "FDI Act"). The BMA requires that the OCC
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 (including compliance with fair lending
laws). The BMA prohibits the OCC from approving the 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 OCC finds that the anti-competitive effects
of such transaction 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. The OCC 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 (the "CRA"). Under the FDI Act and the BMA,
the Merger may not be consummated until the 15th day following the dates of each
of the requisite approvals during which periods the United States 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
the Merger on antitrust grounds. The commencement of an antitrust action would
stay the effectiveness of such an approval unless a court specifically orders
otherwise.
THE APPROVAL OF THE MERGER BY THE OCC DOES NOT CONSTITUTE A RECOMMENDATION
OR ENDORSEMENT OF THE MERGER BY THE OCC.
CONDITIONS TO CONSUMMATION; WARRANTHOLDER AGREEMENTS; STOCK OPTIONS
Consummation of the Merger is subject, among other things, to: (i) approval
of the Merger Agreement by the requisite vote of the stockholders of Brentwood;
(ii) no court or governmental or regulatory authority having taken any action
which enjoins or prohibits the Merger; (iii) receipt by FUNC and Brentwood of
the opinion of Sullivan & Cromwell, dated as of the Effective Date, as to
certain federal income tax consequences of the Merger; (iv) the FUNC Common
Shares having been approved for listing on the NYSE, subject to official notice
of issuance; (v) the delivery by Brentwood 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; (vi) 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; (vii) the receipt by FUNC of a letter from
Brentwood's independent certified public accountants, dated as of or shortly
prior to the Effective Date, with respect to Brentwood's financial position and
results of operations, and (viii) the receipt by FUNC of an Affiliate's
Agreement from each "affiliate" of Brentwood.
Consummation of the Merger is also subject to execution of the
Warrantholders Agreements and cancellation of all of the outstanding Stock
Options.
The Warrantholder Agreements provide for cancellation of the Warrants at
the Effective Date and a cash payment to the Warrantholders in an amount equal
to the number of Warrants held by such holders times the excess of (i) the
Average Closing Price times the Exchange Ratio, over (ii) $5.00. As of the date
of this Prospectus/Proxy Statement, there are Warrants
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<PAGE>
outstanding to purchase 1,409,000 shares of Brentwood Common Stock. As of such
date, the holders of Warrants to purchase 653,250 shares of Brentwood Common
Stock have executed Warrantholder Agreements.
The Merger Agreement provides for the cancellation of all outstanding Stock
Options at the Effective Date and a cash payment to the holders of the Stock
Options equal to the excess of (i) $8.8112 over the exercise price per share of
the Stock Options, times (ii) the number of shares of Brentwood Common Stock
covered by the Stock Options. As of the date of this Prospectus/Proxy Statement
there are Stock Options outstanding to purchase 210,666 shares of Brentwood
Common Stock.
See " -- Interests of Certain Persons" and ANNEX D.
TERMINATION
The Merger Agreement provides that, whether before or after the Special
Meeting and notwithstanding the approval of the Merger Agreement by the
stockholders of Brentwood, the Merger Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Date: (i) by mutual consent of the
FUNC Board and the Brentwood Board; or (ii) by either the FUNC Board or the
Brentwood Board (a) if the stockholders of Brentwood fail to approve the Merger
Agreement, (b) in the event of a breach by the other party of any
representation, warranty or covenant contained in the Merger Agreement, which is
not cured after 30 days' written notice thereof is given to the party committing
such breach, or (c) if the Merger is not consummated on or before March 31,
1996.
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 Brentwood, the consideration to be
received by the stockholders of Brentwood for each share of Brentwood Common
Stock may not thereby be decreased.
ACCOUNTING TREATMENT
The purchase method of accounting has been used to reflect the completed
Purchase Acquisitions and will be used to reflect the Merger and the other
pending Purchase Acquisition upon consummation. As required by generally
accepted accounting principles, under purchase accounting, the assets and
liabilities of the acquired company as of the effective date of the acquisition
are recorded at their respective fair market values and added to those of FUNC.
Financial statements of FUNC issued after consummation of the acquisition would
reflect such values. Financial statements of FUNC issued before consummation of
the acquisition 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 purchase accounting to account for the Merger and the other
Purchase Acquisitions.
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 pooling of
interests accounting to account for the FFB Merger.
See "PRO FORMA FINANCIAL INFORMATION".
EXPENSES
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 Brentwood.
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DISSENTERS' APPRAISAL RIGHTS
Stockholders of Brentwood (i) who vote against the Merger Agreement at the
Special Meeting, or (ii) who at or prior to the Special Meeting provide written
notice to the presiding officer of the Special Meeting that they dissent from
the Merger Agreement, shall be entitled to receive the value of the shares of
Brentwood Common Stock held by such stockholders when the Merger is approved by
the OCC upon written request made to FUNB-TN at any time before 30 days after
the Effective Date, accompanied by the surrender of such shares. Any Dissenting
Stockholders shall receive written notice of the Effective Date so that they may
make their written request to FUNB-TN. A STOCKHOLDER'S FAILURE TO EITHER VOTE
AGAINST THE MERGER AGREEMENT OR TO PROVIDE WRITTEN NOTICE THAT SUCH STOCKHOLDER
DISSENTS FROM THE MERGER AGREEMENT WILL CONSTITUTE A WAIVER OF SUCH HOLDERS'
DISSENTERS' APPRAISAL RIGHTS.
The value of Dissenting Shares shall be determined as of the Effective Date
by three appraisers, one to be selected by the holders of at least a majority of
the Dissenting Shares, one to be selected by the Board of Directors of FUNB-TN,
and the third to be selected by the two so chosen. The value agreed upon by any
two of the appraisers shall govern. If the value so fixed shall not be
satisfactory to any holder of Dissenting Shares who has requested payment, that
Dissenting Stockholder may, within five days after being notified of the
appraised value of his shares, appeal to the OCC, who shall cause a reappraisal
to be made, which shall be final and binding as to the value of such shares. The
OCC has published information describing the methods used by the OCC to estimate
the value of a bank's shares when a stockholder dissents to a merger. This
information is set forth in Banking Circular 259 and is included in ANNEX F.
If, within 90 days from the Effective Date, for any reason one or more of
the appraisers is not selected as described above, or the appraisers fail to
determine the value of the Dissenting Shares, the OCC shall upon written request
of any interested party cause an appraisal of such Dissenting Shares to be made
which will be final and binding on all parties.
The foregoing description of dissenters' appraisal rights is qualified in
its entirety by reference to the applicable provisions of Section 215a and
Banking Circular 259, which are included in this Prospectus/Proxy Statement as
ANNEX F.
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 Brentwood Common Stock who receive such shares following
consummation of the Merger and who are not deemed to be "affiliates" (as defined
under the Securities Act) of Brentwood or FUNC. It is a condition to
consummation of the Merger that each holder of Brentwood Common Stock who is
deemed by Brentwood to be an "affiliate" of Brentwood shall enter into an
Affiliate's Agreement with FUNC providing, among other things, that such
affiliate will not transfer any FUNC Common Shares received by such affiliate in
the 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 Brentwood.
32
<PAGE>
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),
with respect to each quarterly period since January 1, 1994, and (ii) the
equivalent pro forma market values per share of Brentwood Common Stock, based on
a .1776 Exchange Ratio. The .1776 Exchange Ratio is based on the last reported
sale price per share of FUNC Common Stock on the NYSE Tape on October 31, 1995
($49.625), as if such price were the Average Closing Price. The actual Exchange
Ratio will depend on the Average Closing Price (which will not be known until
shortly prior to the Effective Date) and may be greater or less than .1776. The
pro forma information would be different if the Average Closing Price results in
an Exchange Ratio different from .1776. See Notes (3) and (4) to "PRO FORMA
FINANCIAL INFORMATION".
<TABLE>
<CAPTION>
EQUIVALENT
PRO FORMA
PER SHARE
OF
BRENTWOOD
COMMON
FUNC COMMON STOCK STOCK
HIGH LOW HIGH
<S> <C> <C> <C>
1994
First quarter........................................................ $ 43 3/4 39 3/4 7 3/4
Second quarter....................................................... 47 5/8 41 1/4 8 3/8
Third quarter........................................................ 47 1/4 43 1/4 8 3/8
Fourth quarter....................................................... 45 1/4 39 3/8 8
1995
First quarter........................................................ 45 1/8 41 3/8 8
Second quarter....................................................... 49 3/4 42 7/8 8 3/4
Third quarter........................................................ 51 3/8 45 1/4 9
Fourth quarter (through December , 1995)........................... $
<CAPTION>
LOW
<S> <C<C>
1994
First quarter........................................................ 7
Second quarter....................................................... 7 1/4
Third quarter........................................................ 7 5/8
Fourth quarter....................................................... 6 7/8
1995
First quarter........................................................ 7 1/4
Second quarter....................................................... 7 1/2
Third quarter........................................................ 8
Fourth quarter (through December , 1995)........................... $
</TABLE>
(1) Equivalent pro forma market values per share of Brentwood Common Stock
amounts represent the high and low last reported sales prices per share of
FUNC Common Stock, multiplied by a .1776 Exchange Ratio, rounded down to the
nearest one-eighth.
On July 17, 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 Tape was $47.50. On December , 1995, such price
was $ . There is no public trading market for Brentwood Common Stock. On
November 30, 1995, the book value per share of Brentwood Common Stock was $6.34.
33
<PAGE>
DIVIDENDS
The following table sets forth the cash dividends paid on shares of FUNC
Common Stock and Brentwood Common Stock with respect to each calendar quarter
since January 1, 1994, and the equivalent pro forma cash dividends paid per
share of Brentwood Common Stock, based on a .1776 Exchange Ratio. The .1776
Exchange Ratio is based on the last reported sale price per share of FUNC Common
Stock on the NYSE Tape on October 31, 1995 ($49.625), as if such closing price
were the Average Closing Price. The actual Exchange Ratio will depend on the
Average Closing Price (which will not be known until shortly prior to the
Effective Date) and may be greater or less than .1776. The pro forma information
presented would be different if the Average Closing Price results in an Exchange
Ratio different from .1776.
<TABLE>
<CAPTION>
EQUIVALENT PRO FORMA
FUNC BRENTWOOD PER SHARE OF
COMMON STOCK COMMON STOCK BRENTWOOD COMMON STOCK (1)
<S> <C> <C> <C>
1994
First quarter........................................... $.40 .03 .07
Second quarter.......................................... .40 .03 .07
Third quarter........................................... .46 .04 .08
Fourth quarter.......................................... .46 .04 .08
1995
First quarter........................................... .46 .04 .08
Second quarter.......................................... .46 .04 .08
Third quarter........................................... .52 .05 .09
Fourth quarter.......................................... $.52 .05 .09
</TABLE>
(1) Equivalent pro forma cash dividends paid per share of Brentwood Common Stock
amounts represent FUNC historical dividend rates per share, multiplied by a
.1776 Exchange Ratio, rounded 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 Brentwood Common Stock would be $.36, based on a
.1776 Exchange Ratio, rounded down to the nearest cent. Future FUNC and
Brentwood dividends are dependent upon their respective earnings and
financial condition, as well as government regulations and policies, and
other factors.
See "FUNC -- Certain Regulatory Considerations; PAYMENT OF DIVIDENDS" and
"DESCRIPTION OF FUNC CAPITAL STOCK".
34
<PAGE>
PRO FORMA FINANCIAL INFORMATION
PRO FORMA COMBINED CONDENSED BALANCE SHEET
(FUNC, THE PURCHASE ACQUISITIONS (INCLUDING THE MERGER) AND FFB)
SEPTEMBER 30, 1995
(UNAUDITED)
The following unaudited pro forma combined condensed balance sheet combines
the consolidated historical balance sheets of FUNC, the companies involved in
the Purchase Acquisitions (including Brentwood) and FFB, assuming such companies
had been combined as of September 30, 1995, on a purchase accounting basis with
respect to the Purchase Acquisitions (including the Merger) pending at September
30, 1995, 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..................... $ 3,337,072 50,506 (75,274) 3,312,304 1,649,476 --
Interest-bearing balances................... 99,394 25,055 -- 124,449 462,649 --
Federal funds sold and securities purchased
under resale agreements................... 2,210,144 16,200 -- 2,226,344 425,000 --
Total cash and cash equivalents........... 5,646,610 91,761 (75,274) 5,663,097 2,537,125 --
Trading account assets...................... 1,253,214 -- -- 1,253,214 152,832 --
Securities available for sale............... 9,347,263 283,349 -- 9,630,612 2,128,992 --
Investment securities....................... 3,561,947 500,323 (3,816) 4,058,454 4,039,740 --
Loans, net of unearned income............... 61,802,019 3,359,456 -- 65,161,475 24,387,524 --
Allowance for loan losses................. (901,616) (26,842) -- (928,458) (554,690) --
Loans, net................................ 60,900,403 3,332,614 -- 64,233,017 23,832,834 --
Premises and equipment...................... 1,956,863 23,677 (7,178) 1,973,362 419,869 --
Due from customers on acceptances........... 407,010 -- -- 407,010 178,748 --
Mortgage servicing rights................... 101,928 744 4,453 107,125 47,402 --
Credit card premium......................... 47,403 -- -- 47,403 -- --
Other intangible assets..................... 1,488,203 9,010 271,100 1,768,313 808,249 --
Other assets................................ 2,123,269 70,108 (9,583) 2,183,794 1,132,259 --
Total assets.............................. $86,834,113 4,311,586 179,702 91,325,401 35,278,050 --
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing....................... 10,729,434 98,594 -- 10,828,028 4,868,663 --
Interest-bearing.......................... 49,086,449 2,602,548 -- 51,688,997 22,710,311 --
Total deposits.......................... 59,815,883 2,701,142 -- 62,517,025 27,578,974 --
Short-term borrowings....................... 12,940,658 1,084,061 -- 14,024,719 3,031,961 --
Bank acceptances outstanding................ 407,010 -- -- 407,010 178,748 --
Other liabilities........................... 1,944,473 64,806 (9,482) 1,999,797 740,938 --
Long-term debt.............................. 6,040,639 156,961 -- 6,197,600 676,735 --
Total liabilities....................... 81,148,663 4,006,970 (9,482) 85,146,151 32,207,356 --
STOCKHOLDERS' EQUITY
Preferred stock............................. -- -- -- -- 202,647 --
Common stock................................ 559,317 8,617 24,085 592,019 81,934 280,947
Paid-in capital............................. 1,056,946 99,061 362,037 1,518,044 1,251,173 (348,172)
Retained earnings........................... 4,080,495 199,762 (199,762) 4,080,495 1,606,042 --
Less: Treasury stock........................ -- (3,178) 3,178 -- (67,225) 67,225
Unrealized gain (loss) on debt and equity
securities................................ (11,308) 354 (354) (11,308) (3,877) --
Total stockholders' equity.............. 5,685,450 304,616 189,184 6,179,250 3,070,694 --
Total liabilities and stockholders'
equity................................ $86,834,113 4,311,586 179,702 91,325,401 35,278,050 --
<CAPTION>
PRO FORMA
(IN THOUSANDS) COMBINED
<S> <C>
ASSETS
Cash and due from banks..................... 4,961,780
Interest-bearing balances................... 587,098
Federal funds sold and securities purchased
under resale agreements................... 2,651,344
Total cash and cash equivalents........... 8,200,222
Trading account assets...................... 1,406,046
Securities available for sale............... 11,759,604
Investment securities....................... 8,098,194
Loans, net of unearned income............... 89,548,999
Allowance for loan losses................. (1,483,148)
Loans, net................................ 88,065,851
Premises and equipment...................... 2,393,231
Due from customers on acceptances........... 585,758
Mortgage servicing rights................... 154,527
Credit card premium......................... 47,403
Other intangible assets..................... 2,576,562
Other assets................................ 3,316,053
Total assets.............................. 126,603,451
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing....................... 15,696,691
Interest-bearing.......................... 74,399,308
Total deposits.......................... 90,095,999
Short-term borrowings....................... 17,056,680
Bank acceptances outstanding................ 585,758
Other liabilities........................... 2,740,735
Long-term debt.............................. 6,874,335
Total liabilities....................... 117,353,507
STOCKHOLDERS' EQUITY
Preferred stock............................. 202,647
Common stock................................ 954,900
Paid-in capital............................. 2,421,045
Retained earnings........................... 5,686,537
Less: Treasury stock........................ --
Unrealized gain (loss) on debt and equity
securities................................ (15,185)
Total stockholders' equity.............. 9,249,944
Total liabilities and stockholders'
equity................................ 126,603,451
</TABLE>
See accompanying notes to pro forma financial information.
35
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
(FUNC AND THE PURCHASE ACQUISITIONS (INCLUDING THE 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 Brentwood), assuming such 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>
NINE MONTHS ENDED SEPTEMBER 30, 1995
Interest income.......................................................... $4,674,374 461,473 (25,930) 5,109,917
Interest expense......................................................... 2,239,387 296,965 -- 2,536,352
Net interest income...................................................... 2,434,987 164,508 (25,930) 2,573,565
Provision for loan losses................................................ 125,500 6,585 -- 132,085
Net interest income after provision for loan losses...................... 2,309,487 157,923 (25,930) 2,441,480
Securities available for sale transactions............................... 9,591 (4,167) -- 5,424
Investment security transactions......................................... 4,041 -- -- 4,041
Noninterest income....................................................... 990,884 44,482 -- 1,035,366
Noninterest expense...................................................... 2,170,390 200,372 19,897 2,390,659
Income before income taxes............................................... 1,143,613 (2,134) (45,827) 1,095,652
Income taxes............................................................. 402,552 6,161 (14,146) 394,567
Net income............................................................... 741,061 (8,295) (31,681) 701,085
Dividends on preferred stock............................................. 7,029 -- -- 7,029
Net income applicable to common stockholders............................. $ 734,032 (8,295) (31,681) 694,056
Pro forma per common share data
Net income available to common stockholders............................ $ 4.27 3.82
Average common shares (in thousands)................................... 171,921 181,731
<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.
36
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
(FUNC, THE PURCHASE ACQUISITIONS (INCLUDING THE 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 Brentwood) and FFB, assuming such companies had
been combined for each period presented on a purchase accounting basis as to the
Purchase Acquisitions (including the Merger) (for the nine months ended
September 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>
NINE MONTHS ENDED
(DOLLARS IN THOUSANDS EXCEPT PER SHARE SEPTEMBER 30, YEARS ENDED DECEMBER 31,
DATA) 1995 1994 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income.......................... $6,843,506 5,278,740 7,937,133 6,601,528 6,608,666 7,031,400 7,549,088
Interest expense......................... 3,237,209 1,969,627 3,246,946 2,481,952 2,941,680 4,070,885 4,806,471
Net interest income...................... 3,606,297 3,309,113 4,690,187 4,119,576 3,666,986 2,960,515 2,742,617
Provision for loan losses................ 162,085 139,000 180,643 369,753 642,708 946,284 923,409
Net interest income after provision for
loan
losses................................. 3,444,212 3,170,113 4,509,544 3,749,823 3,024,278 2,014,231 1,819,208
Securities available for sale
transactions........................... 24,472 12,130 8,860 25,767 34,402 -- --
Investment security transactions......... 4,041 3,595 4,006 14,452 1,944 208,614 32,271
Noninterest income....................... 1,346,489 1,147,890 1,620,712 1,541,569 1,360,202 1,254,635 1,028,755
Noninterest expense...................... 3,175,444 2,770,298 4,070,027 3,536,346 3,443,524 2,777,665 2,564,124
Income before income taxes............... 1,643,770 1,563,430 2,073,095 1,795,265 977,302 699,815 316,110
Income taxes............................. 588,927 534,122 709,028 578,912 278,514 129,843 59,868
Net income............................... 1,054,843 1,029,308 1,364,067 1,216,353 698,788 569,972 256,242
Dividends on preferred stock............. 22,306 33,981 46,020 45,553 53,040 51,746 47,151
Net income applicable to common
stockholders before redemption
premium................................ 1,032,537 995,327 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................................ $1,032,537 995,327 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.............................. $ 3.57 3.55 4.63 4.30 2.53 2.34 .97
Net income applicable to common
stockholders after redemption
premium................................ $ 3.57 3.55 4.48 4.30 2.53 2.34 .97
Average common shares (in thousands)..... 289,438 280,079 284,673 272,439 255,384 221,469 215,529
FUNC historical per common
share data
Net income applicable to common
stockholders before redemption
premium.............................. $ 4.27 3.94 5.22 4.73 2.23 2.24 1.68
Net income applicable to common
stockholders after redemption
premium................................ $ 4.27 3.94 4.98 4.73 2.23 2.24 1.68
Average common shares (in thousands)..... 171,921 171,265 172,543 167,692 158,683 140,003 135,622
</TABLE>
See accompanying notes to pro forma financial information.
37
<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 Merger) and the FFB Merger
been consummated at the beginning of the 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 either of the pending Purchase Acquisitions (including the Merger) or
the Society Acquisition (as hereinafter defined) is not contingent upon
consummation of any other of such acquisitions. Consummation of one or both of
the pending Purchase Acquisitions (including the Merger) or the Society
Acquisition 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 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
September 30, 1995, with respect to the Purchase Acquisitions (including the
Merger) pending as of September 30, 1995). 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 Merger), pro forma assumptions
related to the Merger include (i) a .1776 Exchange Ratio based on an October 31,
1995 FUNC Common Stock closing price of $49.625; (ii) the issuance of 362,468
shares of FUNC Common Stock; (iii) the repurchase of such shares in the open
market at a cost of $19 million; (iv) the payment of $2.5 million to holders of
Stock Options and Warrants; and (v) an increase in goodwill and deposit base
premium of $14 million and $2 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 .1776. 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 81,934,078 shares of FFB common stock (less
1,293,756 treasury shares) which were outstanding at September 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 September 30, 1995, one series of which includes 3,705,980
shares of convertible preferred stock, which as of such date were convertible
into 2,891,034 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.
As a result, information was adjusted for the FFB Merger by the (i)
addition of 108,864,435 shares of FUNC Common Stock amounting to $362,881,000;
(ii) elimination of 81,934,078 shares of FFB common stock amounting to
$81,934,000; (iii) cancellation of 1,293,756 treasury shares of FFB at a cost of
$67,225,000; and (iv) recordation of the remaining net amount of $348,172,000 as
a reduction in paid-in capital at September 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 date of this Prospectus/Proxy Statment, FUNC has purchased million
shares of FUNC Common Stock at a cost of $ million, million shares of
FFB common stock at a cost of $ million, and 250,000 shares of FFB convertible
preferred stock at a cost of $12 million. As of the date of this
Prospectus/Proxy Statement, FFB has purchased million shares of FFB
common stock at a cost of $ million.
As of September 30, 1995, FUNC and FFB had 13,760,713 and 5,325,010 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 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 nine months ended September 30, 1995, FFB had net income applicable
to common stockholders of $338,481,000.
(4) During the period from January 1, 1994 through September 30, 1995, FUNC
completed or had pending at September 30, 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 Group
(completed in April 1995), Coral Gables Fedcorp, Inc. (completed in May 1995),
and Home Federal Savings Bank of Rome, Georgia (completed
38
<PAGE>
in August 1995), with aggregate assets of $4.0 billion at an aggregate cost of
$623 million in cash, (iii) the acquisitions of American Savings (completed in
July 1995), United (completed in October 1995) and Columbia (completed in
November 1995) with aggregate assets of $6.7 billion for an aggregate of 12.6
million shares of FUNC Common Stock valued at $606 million, and (iv) the
acquisitions of Brentwood and RS Financial (each of which is pending) with
aggregate assets of $903 million for an estimated 2.8 million shares of FUNC
Common Stock valued at an estimated $141 million. In addition to the foregoing
Purchase Acquisitions, in November 1995, FUNC entered into an agreement to
acquire Florida-based Society First Federal Savings Bank (the "Society
Acquisition"), with assets of $1.5 billion for $188 million in cash. The Society
Acquisition is not reflected in the pro forma financial information presented
herein.
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 $620 million and $372
million, respectively, are currently expected to result from the Purchase
Acquisitions (including the Merger).
In connection with the Purchase Acquisitions (including the 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
assumed repurchases of FUNC Common Stock that in the aggregate are estimated to
amount to 19.4 million shares at an estimated cost of $882 million. During 1994,
FUNC purchased 4.9 million shares of FUNC Common Stock at a cost of $212
million; during the first nine months of 1995, 14.5 million shares at a cost of
$670 million; and from October 1, 1995 to the date of this Prospectus/Proxy
Statement, million shares at a cost of $ 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 purchase of
the FFB Acquisition Shares. As of the date of this Prospectus/Proxy Statement,
FUNC has remaining authority to purchase up to 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 5.71 percent and 4.08 percent
cost of funds for the nine months ended September 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
10-year straight-line life related to premises and equipment and mortgage
servicing rights, a 10-year sum-of-the-years digits method related to deposit
base premium, and a 25-year straight-line life related to goodwill.
For the nine months ended September 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
$25,930,000 and $80,286,000, respectively; increases in noninterest expense of
$19,897,000 and $52,677,000, respectively; reductions in income before income
taxes of $45,827,000 and $132,963,000, respectively; reductions in income taxes
of $14,146,000 and $40,535,000, respectively; and reductions in net income
applicable to common stockholders of $31,681,000 and $92,428,000, respectively.
39
<PAGE>
The components of the pro forma adjustments related to interest income and
noninterest expense for the nine months ended September 30, 1995, and the year
ended December 31, 1994, are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED
(In thousands) 1995 DECEMBER 31, 1994
<S> <C> <C>
Interest income
Interest and fees on loans.......................................................... $ (689) 350
Interest and dividends on investment securities..................................... (2,875) (19,999)
Interest-bearing bank balances...................................................... (22,366) (60,637)
Total interest income.......................................................... (25,930) (80,286)
Noninterest expense
Equipment rentals, depreciation and maintenance..................................... (882) (3,190)
Mortgage servicing amortization..................................................... 1,281 5,437
Other amortization
Goodwill......................................................................... 10,799 27,225
Deposit base premium............................................................. 8,699 23,205
Total noninterest expense...................................................... 19,897 52,677
Income before income taxes............................................................ $ (45,827) (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 Brentwood) 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 acquisition-related expenses related to
the Purchase Acquisitions (including the 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 Merger) would have diluted FUNC's
historical net income per common share (after redemption premium) for the nine
months ended September 30, 1995 and the year ended December 31, 1994, by 16
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 Merger).
40
<PAGE>
BRENTWOOD
HISTORY AND BUSINESS
Brentwood was organized as a national banking association under the laws of
the United States in November 1987. Its principal executive offices are located
at 5110 Maryland Way, Brentwood, Tennessee 37027, and its telephone number is
(615) 371-1333.
Brentwood's business consists of substantially the same services typically
offered by commercial banks with an emphasis on providing lending and depository
services to the upscale residential market and to the commercial market of small
to medium size businesses in the Brentwood, Tennessee area. Brentwood has
invested its retail deposits primarily in commercial loans to business,
residential real estate loans including construction loans, and, to a lesser
extent, consumer loans and commercial real estate loans.
For its retail banking customers, Brentwood offers a full range of
depository products including regular, NOW and money market checking accounts,
regular and money market savings accounts, various types of certificates of
deposits and both fixed rate and individual retirement accounts.
The primary physical facility operated by Brentwood is its main office
located in the Maryland Farms office complex in Brentwood, Tennessee. Brentwood
also leases one branch facility located within a grocery store in Nashville,
Tennessee. Brentwood employed 43 persons as of September 30, 1995.
Brentwood currently competes with other national and state banks and other
financial institutions in the Brentwood and south Nashville Tennessee areas.
Brentwood also competes with regional banks for substantial corporate accounts,
deposits, loans, cash management and other services.
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 Quarterly 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". See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE".
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, First Union National Bank of North Carolina ("FUNB-NC")
and First Union Mortgage Corporation, a mortgage banking firm acquired by
FUNB-NC in 1964, became subsidiaries of FUNC.
In addition to Tennessee and North Carolina, FUNC also operates banks in
South Carolina, Florida, Georgia, Maryland, Virginia 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, home equity lending, leasing,
investment banking, insurance and securities brokerage, through other
subsidiaries.
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<PAGE>
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 60 banking-related acquisitions and currently has pending four
banking-related acquisitions (including Brentwood), 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 CLOSING 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 Banking Corporation subsidiary
banks ("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 3.6 billion common stock/purchase July 1995
FFB.......................................... New Jersey $ 35.3 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 the Southeast Banks, which represent assets of the two banking
subsidiaries of Southeast Banking Corporation acquired from the FDIC.
(2) In addition, FUNC acquired Lieber & Company ("Lieber"), a mutual fund
advisory company with approximately $3.4 billion in assets under management
at the time it was acquired in June 1994. Since such assets are not owned by
Lieber, they are not reflected on FUNC's balance sheet.
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.
42
<PAGE>
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 or waiver of the
Federal Reserve Board. 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 gov-
ernmental 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 September 30,
1995, FUNC's subsidiaries, without obtaining affirmative governmental approvals,
could pay aggregate dividends of $483 million to FUNC. During the first nine
months of 1995, FUNC's subsidiaries paid $439 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.
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 September 30, 1995, FUNC's tier 1 and total capital
ratios were 6.35 percent and 10.74 percent, respectively. On an FUNC and
Brentwood combined basis, such ratios would have been 6.34 percent and 10.73
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 September
30, 1995, was 5.10 percent. On an FUNC and Brentwood combined basis, such ratio
at September 30, 1995, would have been 5.09 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
43
<PAGE>
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 5.55 percent, as of September 30, 1995. The OCC has not
advised any of the subsidiary national banks of any specific minimum leverage
ratio applicable to it.
As of September 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"),
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% 6.56 7.33 6.46 8.18 18.67 15.88 11.85 7.61 6.89
Total capital ratio.......... 8 10.29 11.09 10.56 11.54 19.94 17.15 13.11 11.25 9.47
Leverage ratio............... 3-5% 5.87 5.85 6.02 5.56 8.50 13.11 8.19 5.69 6.22
</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.
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 has adopted regulations establishing relevant capital measures and
relevant capital levels. The relevant capital measures are the total capital
ratio, the 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
44
<PAGE>
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 September 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
Under federal law, deposits and certain claims for administrative expenses
and employee compensation against an insured depository institution will 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 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 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 revised its regulations on insurance
assessments to establish a revised assessment rate schedule of four to 31 cents
per $100.00 of deposits in replacement of the then 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 revised BIF schedule became
effective on June 1, 1995. Assessments collected at the previous assessment
schedule that exceeded the amount due under the revised schedule were refunded,
including interest, from the effective date of the revised schedule. As a
result, FUNC received a $26 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. On November 14, 1995, the FDIC further reduced the rate structure
for BIF by four cents per $100.00 of deposits, starting in January 1996. As a
result, the highest-rated institutions will pay only the statutory annual
minimum rate of $2,000.00 for FDIC insurance. The rates for all other
institutions will be reduced by four cents per $100.00 as well, leaving a
premium range of three to 27 cents per $100.00 instead of the current seven to
31 cents per $100.00 for such institutions.
45
<PAGE>
The deposits of institutions insured by the Savings Association Insurance
Fund ("SAIF") will continue paying premiums on a risk-related basis of 23 to 31
cents per $100.00 of deposits. As of June 30, 1995, FUNC had 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, including a one-time special assessment for SAIF
deposits. FUNC does not know when and if any such proposal or any other related
proposal may be adopted.
DESCRIPTION OF FUNC CAPITAL STOCK
THE FOLLOWING INFORMATION DESCRIBES CERTAIN PROVISIONS OF THE ARTICLES AND
BYLAWS OF FUNC AND THE NCBCA. SUCH INFORMATION IS QUALIFIED IN ITS ENTIRETY 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 November 30,
1995, there were 174,543,870 shares of FUNC Common Stock, and no shares of FUNC
Preferred Stock or 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 FUNC Board, 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 FUNC Board 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 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 shares issuable to the stockholders of Brentwood
upon consummation of the 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 the terms of any particular series of FUNC
Class A Preferred Stock, 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
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<PAGE>
preferred stock to be exchanged therefor. The following is a brief description
of 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, votes as a single
class with FFB common stock, 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. 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 10-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.
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 Merger,
holders of FFB 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 FFB Common Stock would receive
separate certificates with respect to
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such FUNC Rights. Each FUNC Right entitles its registered holder to purchase one
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 " -- Changes in Control" 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, exempted 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
FUNC Board may, at its 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 FUNC Board (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 $0.01 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 FUNC Board. 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.
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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.
CHANGES IN CONTROL
The Articles and Bylaws of FUNC 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 Articles: (i) classifying the FUNC Board
into three classes with each class to serve for three years with one class being
elected annually; (ii) authorizing the FUNC Board to fix the size of the FUNC
Board between nine and 30 directors; (iii) authorizing directors to fill
vacancies on the FUNC Board 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 FUNC Board, 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 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 foregoing provisions could impede a change of control of FUNC. In
particular, classification of the FUNC Board has the effect of decreasing the
number of directors that could be elected in a single year by any person who
seeks to elect its designees to a majority of the seats on the FUNC Board.
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.
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
MERGER -- Regulatory Approvals" for a description of the standards applicable to
the 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 authority of
the FUNC Board to issue FUNC Preferred Stock or FUNC Class A Preferred Stock
with rights and privileges, including voting rights, as it may deem appropriate,
may enable the FUNC Board to prevent a change of control despite a shift in
ownership of FUNC Common Stock. In addition, the FUNC Board's authority to issue
additional shares of FUNC Common Stock may help deter or delay a change of
control by increasing the number of shares needed to gain control.
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CERTAIN DIFFERENCES IN THE RIGHTS OF BRENTWOOD AND FUNC STOCKHOLDERS
GENERAL
FUNC is a North Carolina corporation subject to the provisions of the
NCBCA. Brentwood is a national banking association subject to the provisions of
the NBAct and the rules and regulations of the OCC promulgated thereunder.
Stockholders of Brentwood will, upon consummation of the Merger, become
stockholders of FUNC. 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
Brentwood stockholder under Brentwood's Charter and Bylaws and the NBAct, on the
one hand, and the rights of an FUNC stockholder under the Articles and Bylaws of
FUNC and the NCBCA, on the other hand. 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 CONSTITUENT DOCUMENTS OF EACH ORGANIZATION.
AUTHORIZED CAPITAL
BRENTWOOD. The Charter of Brentwood authorizes the issuance of up to
5,000,000 shares of Brentwood Common Stock, 2,040,921 shares of which were
issued and outstanding as of September 30, 1995.
FUNC. FUNC's authorized capital is set forth under "DESCRIPTION OF FUNC
CAPITAL STOCK -- Authorized Capital".
AMENDMENT TO CONSTITUENT DOCUMENTS
BRENTWOOD. An amendment to the Charter of Brentwood requires the
affirmative vote of the holders of a majority of the outstanding stock of
Brentwood. An amendment to the Bylaws of Brentwood requires the vote of a
majority of the total number of directors on the Brentwood Board at a regular
meeting of the Brentwood Board.
FUNC. Under North Carolina law, an amendment to the Articles of FUNC
generally requires the recommendation of the FUNC Board 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 FUNC Board 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 FUNC Board. The FUNC Board
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 Articles or Bylaws of FUNC
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; CUMULATIVE VOTING
BRENTWOOD. Brentwood's Bylaws provide that the Brentwood Board shall
consist of not less than five and no more than 25 stockholders, the exact number
of which is to be established by a resolution of a majority of the full board or
the stockholders. Currently, the Brentwood Board is set at 12 persons. Brentwood
does not have a classified Board of Directors and each director is elected
annually. Stockholders of national banking associations, including Brentwood,
have the right to cumulate their votes in the election of directors, or in other
words, to give one candidate as many votes as the number of directors multiplied
by the number of such stockholder's shares shall equal, or to distribute such
number of votes on the same principle among as many candidates as such
stockholders desires. In all other matters properly brought before a meeting of
stockholders, each stockholder is entitled to one vote for each share of stock
held by him or her.
FUNC. The size of the FUNC Board is determined by the affirmative vote of a
majority of the FUNC Board, provided that the FUNC Board 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
is divided into three classes, each as nearly as possible equal in number as the
others, with one class being elected annually. Stockholders of FUNC may not
cumulate their votes in the election of directors. See also "DESCRIPTION OF FUNC
CAPITAL STOCK".
REMOVAL OF DIRECTORS
BRENTWOOD. Neither Brentwood's Bylaws nor its Charter contain a specific
provision with respect to the removal of directors. As a national banking
association, however, Brentwood directors are subject to a number of federal
statutory
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requirements as to their qualification to serve as a director. Any director who
ceases to meet the statutory requirements of a director of a national banking
association is required to vacate his seat on the Brentwood Board.
FUNC. Except for directors elected 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, 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
BRENTWOOD. Brentwood's Charter provides for the indemnification or
reimbursement by Brentwood of any person for reasonable expenses actually
incurred in connection with any action, suit or proceeding, civil or criminal,
to which such person shall be made a party by reason of his or her being or
having been a director, officer or employee of Brentwood or of any firm,
corporation or organization which he or she served in any such capacity at the
request of Brentwood. No person shall be so indemnified or reimbursed, however,
relative to any matter in which in such action, suit or proceeding he or she was
finally adjudged to have been guilty of or liable for gross negligence, willful
misconduct or criminal acts in the performance of his or her duties to Brentwood
and no person shall be so indemnified or reimbursed relative to any matter in
any such action, suit or proceeding which has been made the subject of a
compromised settlement except with the approval of a court of competent
jurisdiction or the holders of a majority of the outstanding shares of Brentwood
Common Stock or the Brentwood Board, acting by a vote of the directors not party
to the same or substantially the same action, suit or proceeding, who constitute
a majority of the whole Brentwood Board. Regulations promulgated by the OCC also
provide that indemnification for directors, officers or employees of a national
bank against expenses, penalties or other payments incurred in an administrative
proceeding or action instituted by an appropriate bank regulatory agency is not
allowed if such action or proceeding results in a final order accessing civil
money penalties or requiring affirmative action by an individual or individuals
in the form of payments to the bank. In addition, Brentwood's Charter provides
for, and Brentwood has purchased, insurance designed to indemnify its directors,
officers and other employees to the extent indemnification is allowed.
FUNC. FUNC's 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.
CONFLICT OF INTEREST TRANSACTIONS
BRENTWOOD. As a national banking association, Brentwood is subject to a
number of restrictions imposed by the OCC and FDIC which restrict transactions
in which it may engage with persons who are deemed to be affiliates of
Brentwood. These regulatory provisions set limits on, for example, the dollar
volume and terms of loans that may be made to any affiliate or persons or
entities with whom or with which such affiliate may be related. In addition,
these provisions impose certain disclosure obligations on a national bank,
including Brentwood, with respect to any such transactions.
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 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
BRENTWOOD. A special meeting of stockholders of Brentwood may be called for
any purpose at any time by the Brentwood Board or by any three or more
stockholders owning, in the aggregate, not less than 66 2/3 percent of the
outstanding shares of Brentwood Common Stock. Every such special meeting must be
called by mailing, postage prepaid, not less than ten days prior to the date
fixed for the meeting to each stockholder at the address appearing on the books
of Brentwood, a notice stating the time, place and purpose of the meeting. A
quorum for a meeting constitutes a majority of the outstanding shares of
Brentwood Common Stock represented in person or by proxy; provided, however,
that less than a quorum may
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adjourn any meeting from time to time, and the meeting may be held as adjourned,
without further notice. Except in the case of merger transactions and other
transactions which may constitute a change of control, any matter brought before
a regular or special stockholder's meeting is decided by a majority of the votes
cast at a meeting at which a quorum is present.
FUNC. A special meeting of stockholders may be called for any purpose only
by the FUNC Board, by the Chairman of the FUNC Board 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 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 FUNC's 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
BRENTWOOD. Nominations for election to the Brentwood Board may be made by
the Brentwood Board or by any stockholder of any outstanding class of capital
stock of Brentwood entitled to vote in the election of directors. Nominations
other than those made by or on behalf of the existing management of Brentwood
must be made in writing to Brentwood and to the OCC not less than 14 days nor
more than 50 days prior to any meeting of stockholders called for the election
of directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, the nomination must be mailed or delivered to
Brentwood and to the OCC not later than the close of business on the seventh day
following the day on which the notice of meeting was mailed. A notification of a
nomination for a director must contain the following information to the extent
known to the notifying stockholder: (i) the name and address of each proposed
nominee; (ii) the principal occupation of each proposed nominee; (iii) the total
number of shares of Brentwood Common Stock that would be voted for each proposed
nominee; (iv) the name and residence address of the notifying stockholder; and
(v) the number of shares of Brentwood Common Stock owned by the notifying
stockholder. Any nominations not made pursuant those requirements may be
disregarded by the chair of the meeting at which the election of directors will
be held.
FUNC. FUNC's Bylaws establish procedures that must be followed for
stockholders to nominate persons for election to the FUNC Board. 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 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
BRENTWOOD. Neither Brentwood's Charter nor its Bylaws establish specific
procedures to be followed for a stockholder to submit a proposal to a vote of
the stockholders of Brentwood at an annual or special meeting of stockholders.
Federal law to which Brentwood is subject, however, requires that notice be
given to all stockholders of Brentwood at least ten days prior to the meeting,
which notice must be given by first-class mail and must specify the time, place
and purpose of the meeting. In the case of a merger, federal law requires,
however, that a notice be published in a newspaper of general circulation in the
place where Brentwood is located for a period of four consecutive weeks.
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
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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 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
BRENTWOOD. Brentwood has not adopted a stockholder protection rights plan.
FUNC. FUNC has adopted the FUNC Rights Agreement. See "DESCRIPTION OF FUNC
CAPITAL STOCK -- Rights Plan".
STOCKHOLDER INSPECTION RIGHTS; STOCKHOLDER LISTS
BRENTWOOD. Pursuant to the federal law to which Brentwood is subject, the
president and cashier of Brentwood are required to cause to be kept at all times
a full and correct list of the names and residences of all of the stockholders
of Brentwood and the number of shares held by each, in Brentwood's main office.
Such a list is subject to the inspection of all stockholders and creditors of
Brentwood, as well as Tennessee tax officials, during business hours of each day
in which Brentwood may legally transact business. Within ten days of any demand
of the OCC for such a list, a copy of the list, verified by the oath of the
president or cashier of Brentwood must be provided.
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 also
be available at the stockholders' meeting, and any stockholder, has agent or
attorney, may inspect such list at any time during the meeting or any
adjournment thereof.
REQUIRED STOCKHOLDER VOTE FOR CERTAIN ACTIONS
BRENTWOOD. Federal law applicable to Brentwood generally requires the
affirmative vote of the holders of at least two-thirds of the outstanding
Brentwood voting stock for approval of mergers and consolidations or the sale or
exchange of all or substantially all of Brentwood's assets.
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 FUNC Board, 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 FUNC Board
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 FUNC Board
of any such action may be conditioned on any basis, including, without
limitation, conditions regarding a supermajority voting requirement or that no
more than a certain number of shares indicate that they will seek dissenters'
rights.
53
<PAGE>
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)
FUNC's 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 FUNC Board,
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
BRENTWOOD. As a national banking association, the acquisition of Brentwood
is subject to compliance with a number of federal laws concerning acquisitions
of national banks. These laws generally require that the approval of various
federal regulatory agencies, including with respect to Brentwood, the OCC. These
statutes are similar to those described above under "DESCRIPTION OF FUNC CAPITAL
STOCK -- Changes in Control". Brentwood has not, however, adopted any specific
anti-takeover provisions in its Charter or Bylaws.
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' APPRAISAL RIGHTS
BRENTWOOD. Brentwood is subject to various federal laws providing for
dissenters' rights upon the occurrence of certain events generally constituting
a change in control of a national bank. Every stockholder of Brentwood, upon
compliance with certain provisions of Section 215a, has the right to dissent
from the Merger and to be paid the value of is Brentwood Common Stock calculated
as of the Effective Date. A stockholder who perfects such dissenters' rights
will not be entitled to receive FUNC Common Stock or cash for fractional shares
pursuant to the terms of the Merger Agreement, but will be entitled only to
those rights as are granted by Section 215a. STOCKHOLDERS WISHING TO RECEIVE
PAYMENT BY THIS MEANS ARE CAUTIONED THAT FAILURE TO FOLLOW PRECISELY THE
PROCEDURES SET FORTH IN SECTION 215A MAY RESULT IN THE LOSS OF THEIR DISSENTERS'
RIGHTS. A copy of the relevant portions of Section 215a and Banking Circular 259
are attached to this Prospectus/Proxy Statement as ANNEX F. Each stockholder who
contemplates exercising these rights is advised to read carefully the provisions
of Section 215a and Banking Circular 259 to ensure compliance with the
procedures contained therein. See "THE MERGER -- Dissenters' Appraisal 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.
DIVIDENDS AND OTHER DISTRIBUTIONS
BRENTWOOD. Under federal banking law, Brentwood generally may make
quarterly, semi-annual or annual dividends of so much of the net profits of
Brentwood as the Brentwood Board shall judge expedient, provided that the
approval of the
54
<PAGE>
OCC is required before Brentwood may pay a dividend if the total of all
dividends declared by Brentwood in any calendar year exceeds the total of its
net profits of that year combined with its retained net profits of the preceding
two years, less any required transfers to surplus or fund for the retirement of
any preferred stock.
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
BRENTWOOD. Pursuant to federal law to which Brentwood is subject, Brentwood
may go into liquidation and be closed upon the vote of stockholders owning
66 2/3 percent of the outstanding Brentwood Common Stock. If such liquidation is
to be effected in whole or in part through the sale of any of its assets in the
assumption of its deposit liabilities by another bank, the purchase and sale
agreement must also be approved by stockholders owning 66 2/3 percent of its
outstanding stock.
FUNC. North Carolina law provides that FUNC may be dissolved if the FUNC
Board proposes dissolution and a majority of the shares of FUNC entitled to vote
thereon approves. In accordance with North Carolina law, the FUNC Board may
condition its submission of a proposal for dissolution on any basis.
VALIDITY OF FUNC COMMON SHARES
The validity of the FUNC Common Shares to be issued in the Merger 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 financial statements of Brentwood as of December 31, 1994 and 1993, and
for each of the three years in the period ended December 31, 1994, included in
this Prospectus/Proxy Statement have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and have been
so included in reliance upon the report of such firm given upon their authority
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 on 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.
55
<PAGE>
ANNEX A
CERTAIN FINANCIAL INFORMATION
RELATING TO BRENTWOOD
<TABLE>
<S> <C>
Financial Statements for the Year Ended December 31, 1994, and the Nine Months Ended September 30, 1995............... A-2
Management's Discussion and Analysis of Financial Condition and Results of Operations................................. A-13
</TABLE>
A-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS AND SHAREHOLDERS
BRENTWOOD NATIONAL BANK
Brentwood, Tennessee
We have audited the accompanying balance sheets of Brentwood National Bank
as of December 31, 1994 and 1993 and the related statements of earnings, changes
in shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility of
the Bank's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Brentwood National Bank as
of December 31, 1994 and 1993, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, the Bank changed its
method of accounting for investment securities effective December 31, 1993.
DELOITTE & TOUCHE LLP
Nashville, Tennessee
January 9, 1995
(except as to Note 12, which is
July 18, 1995)
A-2
<PAGE>
BRENTWOOD NATIONAL BANK
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1993 1995
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
CASH AND DUE FROM BANKS...................................................... $ 6,781,731 $ 4,857,338 $ 6,923,945
FEDERAL FUNDS SOLD........................................................... 3,225,000 10,825,000 16,200,000
CASH AND CASH EQUIVALENTS.................................................... 10,006,731 15,682,338 23,123,945
INVESTMENT SECURITIES: (Notes 1 and 2)
Available for sale (at fair value; amortized cost of $16,289,332,
$27,082,776 and $15,870,708, repectively)............................... 15,471,699 27,308,699 15,668,347
Held to maturity (at amortized cost; fair value of $14,049,959, $0 and
$12,648,056, respectively).............................................. 14,917,815 -- 12,569,305
LOANS (Notes 1, 3 and 7)..................................................... 63,236,337 49,221,187 63,938,280
Less allowance for loan losses (Notes 1 and 3)............................. (834,714) (653,618) (880,477)
62,401,623 48,567,569 63,057,803
INTEREST RECEIVABLE.......................................................... 710,590 501,624 713,488
BANK PREMISES AND EQUIPMENT, net (Notes 1 and 4)............................. 1,213,178 462,659 1,135,465
DEFERRED TAX ASSET, net (Notes 1 and 5)...................................... 591,323 42,070 346,178
OTHER ASSETS (Note 1)........................................................ 109,966 102,322 273,861
$105,422,925 $92,667,281 $ 116,888,392
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS:
Demand deposits............................................................ $ 17,704,741 $16,736,333 $ 18,897,072
NOW and Money Market Accounts.............................................. 26,128,666 24,457,428 25,434,089
Savings.................................................................... 1,700,498 1,084,764 1,507,182
Certificates of Deposit -- under $100,000.................................. 14,829,396 12,801,394 17,726,207
Certificates of Deposit -- over $100,000................................... 14,110,972 13,465,008 26,799,086
74,474,273 68,544,927 90,363,636
REPURCHASE AGREEMENTS........................................................ 18,633,046 11,739,526 13,250,544
INCOME TAXES PAYABLE (Notes 1 and 5)......................................... 81,878 73,733 15,498
ACCRUED INTEREST AND OTHER LIABILITIES....................................... 408,239 315,998 538,934
COMMITMENTS AND CONTINGENCIES (Note 10)
SHAREHOLDERS' EQUITY: (Note 8)
Capital stock -- $2.50 par value, authorized, 5,000,000 shares; issued and
outstanding, 2,038,921 shares for 1994 and 1993 and 2,040,921 for
1995.................................................................... 5,097,303 5,097,303 5,102,303
Capital surplus............................................................ 5,097,303 5,097,303 5,103,303
Unrealized (loss) gain on available for sale securities, net of deferred
income taxes of $420,340, $85,851 and $246,124, respectively............ (689,815) 140,072 (288,242)
Retained earnings.......................................................... 2,320,698 1,658,419 2,802,416
11,825,489 11,993,097 12,719,780
$105,422,925 $92,667,281 $ 116,888,392
</TABLE>
See notes to financial statements.
A-3
<PAGE>
BRENTWOOD NATIONAL BANK
STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
1994 1993 1992 1995 1994
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
INTEREST INCOME:
Interest and fees on loans........................... $ 4,932,889 $ 3,800,240 $ 3,562,914 $ 4,875,798 $ 3,486,448
Interest on federal funds sold....................... 231,013 145,058 118,167 331,790 183,279
Interest on investment securities.................... 1,750,136 1,576,394 1,987,352 1,333,777 1,293,731
6,914,038 5,521,692 5,668,433 6,541,365 4,963,458
INTEREST EXPENSE:
Interest on deposits................................. 2,043,275 1,690,673 2,267,654 2,522,610 1,442,076
Interest on repurchase agreements.................... 517,940 276,408 49,150 542,555 349,461
2,561,215 1,967,081 2,316,804 3,065,165 1,791,537
NET INTEREST INCOME.................................... 4,352,823 3,554,611 3,351,629 3,476,200 3,171,921
PROVISION FOR LOAN LOSSES (Notes 1 and 3).............. 235,000 315,000 607,000 65,000 165,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES.... 4,117,823 3,239,611 2,744,629 3,411,200 3,006,921
NONINTEREST INCOME:
Service charges on deposit accounts.................. 329,546 324,146 268,426 319,882 243,324
Other operating income............................... 304,023 207,737 97,635 266,301 252,505
Securities gains..................................... -- 89,636 218,375 -- --
633,569 621,519 584,436 586,183 495,829
NONINTEREST EXPENSE:
Salaries and employee benefits....................... 1,893,665 1,470,573 1,181,775 1,606,360 1,367,665
Depreciation and amortization (Note 1)............... 168,112 119,125 190,481 128,859 118,667
Occupancy expense (Note 10).......................... 248,931 195,245 162,606 208,840 182,212
Other................................................ 974,867 889,329 864,355 881,606 755,779
3,285,575 2,674,272 2,399,217 2,825,665 2,424,323
INCOME BEFORE INCOME TAXES............................. 1,465,817 1,186,858 929,848 1,171,718 1,078,427
INCOME TAXES (Notes 1 and 5)........................... 497,700 428,027 322,048 404,312 361,758
NET INCOME............................................. $ 968,117 $ 758,831 $ 607,800 $ 767,406 $ 716,669
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE...... $ 0.36 $ 0.28 $ 0.25 $ 0.29 $ 0.26
</TABLE>
See notes to financial statements.
A-4
<PAGE>
BRENTWOOD NATIONAL BANK
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
NET
UNREALIZED
GAIN (LOSS) ON
CAPITAL INVESTMENT RETAINED
SHARES AMOUNT SURPLUS SECURITIES EARNINGS
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992........................... 2,038,921 $5,097,303 $5,097,303 $ -- $1,083,091
Net income........................................... -- -- -- -- 758,831
Dividends declared ($.09 per share).................. -- -- -- -- (183,503)
Net unrealized gain on available for sale securities,
net of income taxes............................... -- -- -- 140,072 --
BALANCE AT DECEMBER 31, 1993........................... 2,038,921 5,097,303 5,097,303 140,072 1,658,419
Net income........................................... -- -- -- -- 968,117
Dividends declared ($.15 per share).................. -- -- -- -- (305,838)
Net change in unrealized gain (loss) on securities
available for sale, net of income taxes........... -- -- -- (647,004) --
Net unrealized loss on transfer of securities from
available for sale to held to maturity, net of
amortization, accretion and income taxes.......... -- -- -- (182,883) --
BALANCE AT DECEMBER 31, 1994........................... 2,038,921 5,097,303 5,097,303 (689,815) 2,320,698
Net income........................................... -- -- -- -- 767,406
Dividends declared (.14 per share)................... -- -- -- -- (285,688)
Net change in unrealized gain (loss) on securities
available for sale, net of income taxes........... -- -- -- 382,063 --
Amortization of unrealized loss on transfer of
securities from available for sale to held to
maturity, net of income taxes..................... -- -- -- 19,510 --
Exercise of stock options and warrants............... 2,000 5,000 6,000 -- --
BALANCE AT SEPTEMBER 30, 1995 (unaudited).............. 2,040,921 $5,102,303 $5,103,303 $ (288,242) $2,802,416
</TABLE>
See notes to financial statements.
A-5
<PAGE>
BRENTWOOD NATIONAL BANK
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
1994 1993 1992 1995 1994
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Reconciliation of net income to net cash provided
(used) by operating activities:
Net income........................................... $ 968,117 $ 758,831 $ 607,800 $ 767,406 $ 716,669
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Provision for loan losses.......................... 235,000 315,000 607,000 65,000 165,000
Depreciation, amortization and accretion........... 156,558 96,587 190,481 111,999 154,787
(Gain) loss on sale of investment securities....... -- (89,636) (218,375) 13,591 --
Gain on sale of other real estate.................. -- (4,509) -- -- --
(Increase) decrease in interest receivable......... (208,966) 52,817 154,772 (2,898) (193,494)
Deferred tax benefit............................... (38,689) (14,546) -- -- --
(Increase) decrease in other assets................ (7,644) 11,696 290,513 (163,895) (19,416)
Increase (decrease) in accrued interest and other
liabilities..................................... 71,852 73,320 (40,038) 212,252 34,168
Increase (decrease) in income taxes payable........ 8,145 (189,301) 240,376 (66,380) (15,609)
Net cash provided by operating activities....... 1,184,373 1,010,259 1,832,529 937,075 842,105
CASH FLOWS FROM INVESTING ACTIVITIES:
Total purchases of securities available for sale....... (5,431,511) (16,400,530) (26,240,528) (2,316,652) (5,137,811)
Total proceeds from sale of securities available for
sale................................................. 500,000 5,680,935 16,906,908 -- 500,000
Total maturities of securities available for sale...... 3,015,842 9,826,070 7,550,249 2,763,180 2,712,065
Total purchases of investment securities held to
maturity............................................. (2,495,547) -- -- (331,088) (2,495,547)
Total maturities of investment securities held to
maturity............................................. 21,893 -- -- 2,700,000 --
Net increase in customer loans......................... (17,203,442) (6,464,146) (5,088,154) (2,425,927) (12,772,069)
Loan participations sold............................... 3,134,388 861,054 -- 1,376,156 3,134,588
Purchases of bank premises and equipment............... (918,631) (145,124) (161,222) (51,146) (868,262)
Proceeds from sale of other real estate................ -- 147,000 -- 315,000 --
Net cash (used in) provided by investing
activities......................................... (19,377,008) (6,494,741) (7,032,747) 2,029,523 (14,927,036)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits, NOW accounts and
savings accounts..................................... 3,255,380 3,902,857 2,174,578 304,438 370,321
Net increase (decrease) in certificates of deposit..... 2,673,966 1,875,659 (3,769,824) 15,584,925 1,579,517
Net increase (decrease) in repurchase agreements....... 6,893,520 8,252,756 3,250,986 (5,382,502) 4,291,782
Dividends paid......................................... (305,838) (122,336) -- (367,245) (285,449)
Proceeds from exercise of stock options and warrants... -- -- -- 11,000 --
Net cash provided by financing activities............ 12,517,028 13,908,936 1,655,740 10,150,616 5,956,171
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS......... (5,675,607) 8,424,454 (3,544,478) 13,117,214 (8,128,760)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR............. 15,682,338 7,257,884 10,802,362 10,006,731 15,682,338
CASH AND CASH EQUIVALENTS, END OF YEAR................... $ 10,006,731 $ 15,682,338 $ 7,257,884 $23,123,945 $ 7,553,578
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Securities transferred from the available for sale
classification into held to maturity, at fair
value................................................ $ 12,428,543 $ -- $ -- $ -- $ 12,428,543
Disposal of fully depreciated assets................... $ 393,156 $ -- $ -- $ -- $ 393,156
Acquisition of other real estate through foreclosure
(included in other assets)........................... $ -- $ -- $ 445,346 $ 328,591 $ --
SUPPLEMENTAL INFORMATION:
Amount paid for interest............................... $ 2,501,685 $ 1,995,966 $ 2,401,089 $ 2,846,847 $ 1,771,783
Amount paid for taxes.................................. 537,133 580,357 184,830 388,000 329,400
</TABLE>
See notes to financial statements.
A-6
<PAGE>
BRENTWOOD NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BRENTWOOD NATIONAL BANK (the "Bank") was incorporated and began operations
in November 1987. The accounting and reporting policies used in the preparation
of the financial statements of the Bank conform to generally accepted accounting
principles and to general practices within the banking industry. The following
captions summarize the significant accounting and reporting policies used in the
preparation of the accompanying financial statements.
INVESTMENT SECURITIES: The Bank adopted Financial Accounting Standards
("FAS") No. 115 ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES
as of December 31, 1993. Under the standard, investment securities are
classified as either Held-To-Maturity, Available-For-Sale, or Trading.
Held-To-Maturity securities are those which the Bank has the positive intent and
ability to hold to maturity and are reported at cost, adjusted for amortization
of premiums and accretion of discounts, which are recognized in interest income
using the interest method. Available-For-Sale securities are carried at fair
value, and unrealized holding gains and losses, net of tax effects, are reported
as a separate component of shareholders' equity. The Bank does not currently
maintain a trading portfolio.
During 1994, the Bank transferred certain investment securities from the
Available-For-Sale portfolio into the Held-To-Maturity portfolio to reflect the
change in the Bank's intent with respect to these securities. The unrealized
holding loss at the date of the transfer continues to be reported in a separate
component of shareholders' equity and is being amortized over the remaining
lives of the securities as an adjustment of yield using the interest method.
Interest on investment securities is recorded as income as it is earned.
Gains or losses on the sale of securities available for sale are determined
using the specific identification method.
LOANS are stated at the amount of unpaid principal. Interest is recognized
based upon outstanding principal. Fees charged on loans are recognized over the
lives of the respective loans. Accrual of interest on a loan is discontinued
when management believes, based on economic and business conditions and
collection efforts, that the borrower's financial condition is such that
collection of the interest is doubtful. When collection of principal is
considered doubtful, all payments received are recorded as principal reductions,
with no recognition of interest income.
THE ALLOWANCE FOR LOAN LOSSES is a valuation allowance available for future
potential losses incurred on loans. All losses are charged to the allowance when
the loss actually occurs or when a determination is made that a loss is likely
to occur. Recoveries are credited to the allowance at the time of recovery.
Throughout the year management estimates the likely level of future losses to
determine whether the allowance for loan losses is adequate to absorb reasonable
anticipated losses. Such estimates involve significant management judgments and
actual losses could differ significantly. It is the judgment of management that
the allowance for loan losses reflected in the balance sheets is adequate to
absorb anticipated losses which may exist in the current loan portfolio.
BANK PREMISES AND EQUIPMENT are recorded at cost less accumulated
depreciation. Depreciation is computed primarily on the straight-line method
over the estimated useful lives of the assets. Leasehold improvements are
amortized over the period of the lease on the straight-line method.
REAL ESTATE ACQUIRED THROUGH FORECLOSURE is carried at the lower of cost
(primarily the outstanding principal balance of the former loan) or estimated
fair value at the time of acquisition, and is included in other assets.
Adjustments are made to reflect declines in value subsequent to acquisition, if
any, below the recorded amount. Expenses of holding such real estate are charged
to operations as incurred.
INCOME TAXES are accounted for in accordance with FAS No. 109, ACCOUNTING
FOR INCOME TAXES, which was adopted effective January 1, 1993. Deferred tax
assets and liabilities relate principally to depreciation, the provision for
loan losses, and unrealized gains and losses on investment securities available
for sale.
EARNINGS PER SHARE are calculated based on the weighted average shares
outstanding which has been adjusted for the dilutive effect of options and
warrants to purchase common stock. There were 3,221,137 weighted average number
of shares outstanding for 1994, 1993 and 1992.
A-7
<PAGE>
BRENTWOOD NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
RECENT ACCOUNTING PRONOUNCEMENTS: The Bank has not yet adopted FAS No. 107,
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, FAS No. 114, ACCOUNTING
BY CREDITORS FOR IMPAIRMENT OF A LOAN, or FAS No. 119, DISCLOSURE ABOUT
DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS. These
standards must be adopted by the Bank in 1995. Management does not believe that
adoption of these pronouncements will have a material impact on the Bank's
financial statements.
STATEMENT OF CASH FLOWS: For purposes of reporting cash flows, cash and
cash equivalents include cash on hand, amounts due from banks, and federal funds
sold. Generally, federal funds are purchased and sold for one-day periods.
CERTAIN RECLASSIFICATIONS have been made in the prior year financial
statements to conform to the 1994 presentation.
2. INVESTMENT SECURITIES
The amortized cost and fair values of investment securities at December 31,
1994 are as follows:
<TABLE>
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED FAIR
SECURITIES AVAILABLE FOR SALE: COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S. Government Agencies....................... $ 5,349,481 $ 6,184 $ 371,154 $ 4,984,511
Obligations of states and political subdivisions....................... 2,720,299 9,676 87,021 2,642,954
Mortgage-backed securities............................................. 8,219,552 6,786 382,104 7,844,234
$16,289,332 $ 22,646 $ 840,279 $15,471,699
SECURITIES HELD TO MATURITY:
U.S. Government Agencies............................................... $ 8,636,471 $ -- $ 413,312 $ 8,223,159
Obligations of states and political subdivisions....................... 1,675,714 -- 82,534 1,593,180
Mortgage-backed securities............................................. 4,299,780 -- 372,010 3,927,770
Other.................................................................. 305,850 -- -- 305,850
$14,917,815 $ -- $ 867,856 $14,049,959
</TABLE>
The amortized cost and fair value of investment securities at December 31,
1993 were as follows:
<TABLE>
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED FAIR
SECURITIES AVAILABLE FOR SALE: COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
U.S. Treasury and other U.S. Government Agencies....................... $ 9,735,133 $ 90,204 $ 48,620 $ 9,776,717
Obligations of states and political subdivisions....................... 3,841,012 77,690 15,539 3,903,163
Mortgage-backed securities............................................. 13,200,781 207,509 85,321 13,322,969
Other securities....................................................... 305,850 -- -- 305,850
$27,082,776 $ 375,403 $ 149,480 $27,308,699
</TABLE>
Proceeds from sales of investment securities during 1994 and 1993 were
$500,000 and $5,680,935, respectively. Gross realized gains of $-0-, $95,826,
and $-0- and gross realized losses of $-0-, $6,190, and $-0- were recognized
during the years ended December 31, 1994, 1993 and 1992, respectively.
A-8
<PAGE>
BRENTWOOD NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
2. INVESTMENT SECURITIES -- Continued
The following table shows the maturity distribution of the investment
portfolio at December 31, 1994:
<TABLE>
<CAPTION>
AMORTIZED FAIR
MATURITY COST VALUE
<S> <C> <C>
SECURITIES AVAILABLE FOR SALE:
1995......................................................................................... $ 3,780,388 $ 3,620,899
1996-1999.................................................................................... 3,862,772 3,608,096
2000-2004.................................................................................... 426,620 398,470
Thereafter................................................................................... -- --
8,069,780 7,627,465
Mortgage-backed securities................................................................ 8,219,552 7,844,234
$16,289,332 $15,471,699
</TABLE>
<TABLE>
<CAPTION>
AMORTIZED FAIR
MATURITY COST VALUE
<S> <C> <C>
SECURITIES HELD TO MATURITY:
1995......................................................................................... $ 3,707,811 $ 3,548,350
1996-1999.................................................................................... 4,599,113 4,346,708
2000-2004.................................................................................... 1,175,757 1,148,116
Thereafter................................................................................... 1,135,354 1,079,015
10,618,035 10,122,189
Mortgage-backed securities................................................................ 4,299,780 3,927,770
$14,917,815 $14,049,959
</TABLE>
Investment securities with a carrying value of $24,972,422 are pledged to
secure public deposits, repurchase agreements and for other purposes as required
by law at December 31, 1994.
3. LOANS
Major classifications of loans are as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Commercial..................................................................................... $17,251,936 $17,572,385
Real estate.................................................................................... 34,024,723 23,276,853
Installment.................................................................................... 11,959,678 8,371,949
63,236,337 49,221,187
Allowance for loan losses...................................................................... (834,714) (653,618)
$62,401,623 $48,567,569
</TABLE>
Transactions in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Balance, beginning of year.............................................................. $653,618 $ 546,617 $ 463,638
Provision charged to expense............................................................ 235,000 315,000 607,000
Loans charged off during year, net of recoveries of $34,837 in 1994, $50,401 in 1993,
and $1,072 in 1992.................................................................... (53,904) (207,999) (524,021)
Balance, end of year.................................................................... $834,714 $ 653,618 $ 546,617
</TABLE>
A-9
<PAGE>
BRENTWOOD NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
3. LOANS -- Continued
As of December 31, 1994 and 1993, the Bank had loans totaling $280,042 and
$226,916 on nonaccrual status, respectively. The related forfeited interest on
nonaccrual loans totaled $30,513, $17,282 and $15,649 for the years ended
December 31, 1994, 1993 and 1992, respectively. The Bank's loans are primarily
to individuals and entities concentrated in the Middle Tennessee area.
4. BANK PREMISES AND EQUIPMENT
A summary of Bank premises and equipment is as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Land.............................................................................................. $ 162,815 $ --
Building.......................................................................................... 169,386 --
Leasehold improvements............................................................................ 133,491 206,909
Furniture and fixtures............................................................................ 461,203 270,397
Equipment......................................................................................... 829,327 753,441
Automobiles....................................................................................... 50,169 50,169
1,806,391 1,280,916
Less accumulated depreciation..................................................................... (593,213) (818,257)
$1,213,178 $ 462,659
</TABLE>
It is the Bank's policy to write off assets as they become fully
depreciated.
5. INCOME TAXES
The provision for income taxes for the years ended December 31, 1994, 1993
and 1992 consists of the following:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Currently payable........................................................................ $536,389 $442,573 $373,628
Deferred................................................................................. (38,689) (14,546) (51,580)
$497,700 $428,027 $322,048
</TABLE>
Net deferred tax assets are comprised of the following:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Depreciation.......................................................................................... $ (1,780) $ 7,284
Provision for loan losses............................................................................. 181,129 126,872
Unrealized gains and losses on investment securities.................................................. 420,340 (85,851)
Other................................................................................................. (8,366) (6,235)
$591,323 $ 42,070
</TABLE>
It is management's opinion, based on the Bank's history of operating
earnings and its expectation for the future, that operating income of the Bank
will more likely than not be sufficient to fully recognize these deferred tax
assets and therefore no valuation allowance is necessary.
The Bank's tax provision differs from that computed using a 34% federal
statutory rate due to state income taxes and the effect of nontaxable interest
income.
6. LINE OF CREDIT
The Bank has entered into a credit arrangement with another lending
institution under which the Bank may borrow up to $3,000,000, unsecured, for a
period of seven days. No borrowings were outstanding under this agreement at
December 31, 1994 or 1993.
7. RELATED PARTY TRANSACTIONS
Certain officers, directors, employees and related parties were customers
of the Bank in the ordinary course of business. Total loans with these
individuals amounted to $590,110 and $1,156,656 at December 31, 1994 and 1993,
respectively.
A-10
<PAGE>
BRENTWOOD NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
8. STOCK WARRANTS AND STOCK OPTION PLAN
Warrants to purchase 1,410,000 shares of common stock have been granted to
key organizers of the Bank. The stock purchase warrants entitle the holder to
purchase common stock of the Bank at $5.00 per share, the initial offering
price. The warrants expire in 1997 and could not be exercised until the date
upon which the Bank declared its first cash dividend. Dividends were declared in
1994 and 1993; however, no warrants were exercised.
In 1988, the shareholders of the Bank approved an incentive stock option
plan which allows for the granting of options to employees of the Bank to
purchase shares of the Bank's common stock at the fair market value on the date
of grant. The Bank has reserved 180,000 shares of common stock for issuance
under the plan. At December 31, 1994, 180,000 options were outstanding at option
prices of $5.00 and $6.00 per share. These options vest over a three-year
period. At December 31, 1994, all options were exercisable. No options were
exercised during 1994 or 1993.
9. EMPLOYEE BENEFITS
On January 1, 1994, the Bank adopted a Section 401(k) Retirement Savings
Plan available to all employees meeting certain age requirements. Employee
contributions are limited to a percentage of their basic compensation as defined
in the Plan and are supplemented by contributions by the Bank, which are subject
to vesting requirements. Bank contributions under the Plan totaled $26,765 for
the year ended December 31, 1994.
10. COMMITMENTS AND CONTINGENCIES
UNFUNDED COMMITMENTS: In the normal course of business, the Bank makes
various commitments and incurs certain contingent liabilities that are not
presented in the accompanying financial statements. Commitments to extend credit
are agreements to lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee.
Since many of these commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. These commitments and contingent liabilities include various
commitments to extend credit and letters of credit. At December 31, 1994 and
1993, such commitments aggregated $18,399,318 and $15,542,220, respectively. The
Bank does not anticipate any losses as a result of these commitments and
contingent liabilities.
LEASES: The Bank leases office space under operating leases. The lease
terms provide for the escalation of rents on an annual basis and for various
renewal options. Future minimum rental commitments are as follows: $253,776
(1995); $257,318 (1996); $88,686 (1997); $32,886 (1998); $33,760 (1999); and
$49,219 (thereafter). Total lease expense was $236,881, $189,931 and $158,113
for the years ended December 31, 1994, 1993 and 1992, respectively.
11. REGULATORY MATTERS
The Bank is required to maintain minimum amounts of capital to total "risk
weighted" assets, as defined by the banking regulators. At December 31, 1994,
the Bank is required to have minimum Tier 1 and Total capital ratios of 4.00%
and 8.00%, respectively. The Bank's actual ratios at that date were 11.3% and
12.7%, respectively. The Bank's leverage ratio at December 31, 1994 was 12.3%.
12. SUBSEQUENT EVENT
On July 18, 1995, the Bank entered into an agreement to be acquired by
First Union Corporation ("First Union") whereby all of the Bank's outstanding
common stock is to be exchanged for shares in the acquiring company. The Bank's
shareholders are to receive $8.8112 in First Union common stock for each share
of the Bank's common stock under the exchange ratio defined in the agreement.
Additionally, warrants and options to purchase Bank common stock will be
canceled at the effective date of the merger and holders of these instruments
will receive cash payments under a formula defined in the agreement.
Consummation of the merger is subject to certain conditions, including approval
by the Bank's shareholders as well as various regulatory agencies.
A-11
<PAGE>
BRENTWOOD NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
1. BASIS OF PRESENTATION
In the opinion of Management, the accompanying unaudited condensed
financial statements contain all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial position as of
September 30, 1995, and the results of operations and cash flows for the nine
months ended September 30, 1995 and 1994. The unaudited consolidated condensed
financial statements do not include all of the information and footnotes
necessary for a fair presentation of the financial position, results of
operations and cash flows in conformity with generally accepted accounting
principles and should be read in conjunction with the Bank's financial
statements as of and for the year ended December 31, 1994.
2. ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1995 1994
<S> <C> <C>
Balance, beginning of period.............................................................. $ 834,714 $ 653,618
Provision charged to expense.............................................................. 65,000 165,000
Loans charged off during the period, net of recoveries of
$32,247 in 1995 and $15,926 in 1994..................................................... (19,237) (43,816)
Balance, end of period.................................................................... $ 880,477 $ 774,802
</TABLE>
As of September 30, 1995 and 1994, the Bank had loans totaling $184,000 and
$214,000, respectively, on nonaccrual status.
A-12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
BASIS OF PRESENTATION
The following presents management's discussion and analysis of Brentwood's
financial condition and results of operations as of the dates and for the
periods indicated. The historical financial statements of Brentwood and
"Selected Financial Data" derived from the historical financial statements of
Brentwood are set forth elsewhere herein. This discussion should be read in
conjunction with those financial statements and selected financial data and
other financial information included in this Prospectus/Proxy Statement.
GENERAL
Since its inception in 1987, Brentwood's objectives have been to maximize
net income and earnings per share and to increase shareholders' equity. From
1990 through 1994, Brentwood's annual net income increased from $256,000 to
$968,000. During the same period, return on average assets increased from
approximately .5% to 1.0% and return on average equity increased from 2.6% to
8.2%. From 1990 to 1994, Brentwood's shareholder equity increased from $10.4
million to $11.8 million.
Management has emphasized maintaining strong asset quality through a credit
underwriting and review system. Over the 5-year period ended December 31, 1994,
Brentwood had an average net charge-off ratio of .67%, and the ratio was .10% in
1994. At September 30, 1995, non-accrual loans as a percentage of average total
loans was .3%.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995, COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1994
Net income increased $51,000 or 7.1% to $767,000 in the nine months ended
September 30, 1995 (the "1995 period"), from $717,000 in the nine months ended
September 30, 1994 (the "1994 period"). Return on average assets during the 1994
period and the 1995 period was 1.0% and return on average equity was 8.3% during
the 1995 period compared to 8.1% during the 1994 period. The increase in net
income was the result of increases in net interest income which resulted from
increased loan volume.
Net interest income increased $304,000, or 9.6%, to $3.5 million in the
1995 period from $3.2 million in the 1994 period. Interest income increased $1.6
million and interest expense increased $1.3 million from the 1994 period to the
1995 period. The increase in net interest income was due to a $1.6 million
increase in average earning assets offsetting a decrease in the net interest
spread (the difference between the average rate earned on earning assets and the
average rate paid on interest-bearing liabilities). The increase in average
earning assets resulted primarily from increased loan volume.
Brentwood's net interest spread and net interest margin were 3.53% and
4.58% respectively, in the 1995 period, decreasing 46 basis points and 21 basis
points, respectively, from the 1994 period. The decline in net interest spread
was primarily due to the fact that rates paid on deposits increased more than
rates earned on interest earning assets.
The provision for loan losses was $65,000 in the 1995 period, compared to
$165,000 in the 1994 period. The decrease in the provision was the result of
management's assessment that loan loss experience and asset quality had improved
sufficiently to allow a reduction in the provision. This assessment was based on
the level of the allowance for loan losses as a percentage of period-end loans
and non-performing loans, the low level of charge-offs during the 1995 period
and signs of continued improvement in the local and national economies.
Brentwood's allowance for loan losses as a percentage of its period-end loans
was 1.4% at September 30, 1995, and 1.3% at December 31, 1994, and the allowance
for loan losses was 2.4 times period-end non-performing loans at September 30,
1995, compared to 1.4 times at December 31, 1994. Brentwood experienced net
charge-offs of $19,000 in the 1995 period. See " -- Provision and Allowance for
Loan Losses".
Non-interest income increased $90,000 to $586,000 in the 1995 period, due
primarily to an increase in service charge income and fee income from the sale
of Small Business Administration ("SBA") loans into the secondary market. Non-
interest expense increased $401,000 or 16.6% to $2.8 million in the 1995 period
from $2.4 million in the 1994 period, primarily due to the fact that
non-interest expense for the 1994 period reflects only six months of salaries
and other related expenses of the branch that was opened in April 1994.
Brentwood's efficiency ratio in the 1995 period was 69.5%, compared to 66.1% in
the 1994 period. See " -- Non-interest Income and Expense".
Income before income taxes increased $93,000, or 8.7%, to $1.2 million in
the 1995 period from $1.1 million in the 1994 period.
A-13
<PAGE>
YEAR ENDED DECEMBER 31, 1994, COMPARED WITH YEAR ENDED DECEMBER 31, 1993
Brentwood's net income increased $209,000 or 27.6%, to $968,000 in 1994,
from $759,000 in 1993. This increase resulted primarily from an increase in net
interest income as a result of an increase in the level of earning assets and
increases in non-interest income. Return on average assets in 1994 was 1.0%
compared to .9% in 1993, and return on average equity was 8.2% in 1994 compared
to 6.6% in 1993.
Net interest income increased $798,000, or 22.5%, to $4.4 million in 1994
from $3.6 million in 1993, as interest income increased $1.4 million and
interest expense increased $594,000. The increase in net interest income was due
to an increase in average earning assets and an increase in the net interest
spread. Average earning assets increased $12.5 million, or 16.1% to $90.6
million in 1994 from $78.1 million in 1993, primarily as a result of increased
loan volume.
The net interest spread increased to 4.02% in 1994 from 3.83% in 1993, and
the net interest margin increased to 4.80% in 1994 from 4.55% in 1993. The net
interest spread increased due to average rates earned on interest-earning assets
increasing more than average rates paid on deposits.
The provision for loan losses was $235,000 in 1994, a decline of $80,000
from a provision of $315,000 in 1993, primarily as a result of management's
assessment that loan loss experience and asset quality had improved sufficiently
to allow a reduction in the provision. This assessment was based on the level
and trend of the allowance for loan losses as a percentage of period-end loans
and non-performing assets, the low level of net charge-offs during 1994,
increased confidence of management in its ability to identify problem credits
under Brentwood's loan review system, and indications of stability or
improvement in the local and national economies. Despite the lower provision
expense during 1994, Brentwood's allowance for loan losses as a percentage of
its period-end loans was 1.3% at December 31, 1994 and December 31, 1993, and
the allowance for loan losses was 1.4 times period-end non-performing loans at
December 31, 1994, compared to 2.9 times at December 31, 1993. Brentwood had net
charge-offs of $54,000 in 1994, resulting in a ratio of net charge-offs to
average loans of .10%, a decrease from .45% in 1993. See " -- Provision and
Allowance for Loan Losses".
Non-interest income increased $12,000, or 1.9%, to $634,000 in 1994 from
$622,000 in 1993. The increase in non-interest income was primarily the result
of an increase in other operating income of approximately $96,000 which
reflected an increase in fee income from mortgage loan originations and sales of
SBA loans into the secondary market, but which was offset by a decrease of
approximately $90,000 in securities gains from 1993 to 1994. Excluding the
impact of securities gains, non-interest income increased $102,000 or 19.1% to
$634,000 in 1994 from $532,000 in 1993. See " -- Non-Interest Income and
Expense -- Non-interest Income".
Non-interest expense increased $611,000, or 22.9%, to $3.3 million in 1994
from $2.7 million in 1993 primarily as a result of increased salaries and
employee benefits expense as well as operational expenses resulting from growth
in deposits and loans. See " -- Non-Interest Income and Expense -- Non-Interest
Expense".
YEAR ENDED DECEMBER 31, 1993, COMPARED TO YEAR ENDED DECEMBER 31, 1992
Net income increased $151,000, or 24.8%, to $759,000 in 1993 from $608,000
in 1992. This increase was primarily the result of Brentwood's higher net
interest income and non-interest income and a lower provision for loan losses
during the period. Return on average assets for 1993 was .92% compared to .79%
for 1992, and return on average equity was 6.6% in 1993 compared to 5.6% in
1992.
Net interest income increased $203,000 or 6.1%, to $3.6 million in 1993
from $3.4 million in 1992. The increase in net interest income resulted from an
improvement in the net interest spread and an increase in average earning
assets.
Net interest spread increased 19 basis points to 3.83% from 3.64%, as a
result of a higher loan to deposit ratio and a stable interest rate environment.
The increase in loans resulted primarily from an improved local and national
economy with a resulting increase in business activity and loan demand.
Brentwood's net interest margin in 1993 was 4.55%, compared to 4.61% in 1992.
The provision for loan losses was $315,000 in 1993, compared to $607,000 in
1992. Brentwood's allowance for loan losses as a percentage of its period-end
loans was 1.3% at December 31, 1993, and December 31, 1992, and the allowance
for loan losses was 2.9 times period-end non-performing loans at December 31,
1993, compared to 1.6 times at December 31, 1992. The decrease in provision
expense during 1993 was attributable to a decrease in loan losses from 1992.
Brentwood had net charge-offs of $208,000 in 1993, resulting in a ratio of net
charge-offs to average loans of .45%. See " -- Provision and Allowance for Loan
Losses".
A-14
<PAGE>
Non-interest income increased $37,000, or 6.4%, to $622,000 in 1993 from
$584,000 in 1992. Excluding the impact of securities gains, non-interest income
increased $166,000 or 45.4% to $532,000 in 1993 from $366,000 in 1992. The
increase resulted primarily from increased fee income from the sale of
residential mortgage loans. Brentwood's mortgage loan department was in
operation for a full year in 1993 but for only a portion of 1992. See
" -- Non-Interest Income and Expense -- Non-Interest Income".
Non-interest expense increased $275,000, or 11.5%, to $2.7 million in 1993
from $2.4 million in 1992 due to an increase in salaries and employee benefits
expenses as a result of an increase in the number of employees. Brentwood's
efficiency ratio was 64.0% in 1993 compared to 61.0% in 1992. See
" -- Non-Interest Income and Expense -- Non-Interest Expense".
NET INTEREST INCOME
GENERAL. The largest component of Brentwood's net income is its net
interest income, which is the difference between the income earned on assets and
interest paid on deposits and borrowings used to support such assets. Net
interest income is determined by the rate earned on Brentwood's earning assets
and the rate paid on its interest-bearing liabilities, the relative amounts of
earning assets and interest-bearing liabilities, and the degree of mismatch and
the maturity and repricing characteristics of its earnings assets and
interest-bearing liabilities. Net interest income divided by average earning
assets represents Brentwood's net interest margin.
AVERAGE BALANCES, INCOME, EXPENSES AND RATES. The following tables depict,
on a tax-equivalent basis for the periods indicated, certain information related
to Brentwood's average balance sheet and its average yields on assets and
average costs of liabilities. Such yields are derived by dividing income or
expense by the average balance of the corresponding assets or liabilities.
A-15
<PAGE>
AVERAGE BALANCES, INCOME AND EXPENSES AND RATES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992 1993 1994
<CAPTION>
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Loans (1)............................... $41,484 $3,563 8.59% $45,790 $3,800 8.30% $54,801 $4,933 9.00%
Securities:
Taxable............................... 27,071 1,937 7.16 25,073 1,465 5.84 26,294 1,582 6.02
Tax-exempt (2)........................ 917 68 7.42 2,278 150 6.58 3,613 225 6.23
Funds sold.............................. 3,313 118 3.56 4,919 145 2.95 5,892 231 3.92
Total earning assets (2).............. 72,785 5,686 7.81 78,060 5,560 7.12 90,600 6,971 7.69
Cash and due from banks................... 3,295 4,181 4,541
Premises and equipment.................... 413 475 977
Other assets.............................. 1,180 865 1,048
Allowance for loan losses................. (505) (601) (714)
Reserve for investment losses............. (131) (39) --
Total assets.......................... $77,037 $82,941 $96,452
LIABILITIES
Interest-bearing liabilities:
Interest-bearing transaction accounts... $ 9,168 256 2.79 $ 5,132 114 2.22 $ 4,720 104 2.20
Savings and money market deposits....... 18,766 653 3.48 19,731 539 2.73 22,297 716 3.21
Time deposits........................... 25,976 1,359 5.23 24,623 1,038 4.22 28,369 1,223 4.31
Other short-term borrowings............. 1,636 49 3.00 10,231 276 2.70 14,364 518 3.61
Total interest-bearing liabilities.... 55,546 2,317 4.17 59,717 1,967 3.29 69,750 2,561 3.67
Demand deposits........................... 10,179 11,342 14,514
Accrued interest and other liabilities.... 367 303 336
Shareholders' equity...................... 10,945 11,579 11,852
Total liabilities and shareholders'
equity.............................. $77,037 $82,941 $96,452
Net interest spread....................... 3.64% 3.83%
Net interest income/margin on a taxable
equivalent basis........................ 3,369 4.63% 3,593 4.60% 4,410 4.02%
Taxable equivalent adjustment............. 17 38 57 4.87%
Net interest income/margin................ $3,352 4.61% $3,555 4.55% $4,353 4.80%
</TABLE>
(1) Average loans include nonaccrual loans. All loans and deposits are domestic.
(2) Tax-equivalent adjustments have been based on an assumed tax rate of 34
percent and do not give effect to the disallowance for federal income tax
purposes of interest expense related to certain tax-exempt assets.
A-16
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
<S> <C> <C> <C> <C> <C> <C>
1994 1995
<CAPTION>
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE(3) BALANCE EXPENSE RATE(3)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Loans (1).......................................................... $53,078 $3,487 8.76% $ 65,268 $4,876 9.96%
Securities:
Taxable......................................................... 26,098 1,168 5.97 25,875 1,189 6.13
Tax-exempt (2).................................................. 3,602 169 6.25 3,987 193 6.45
Funds sold......................................................... 6,635 183 3.68 7,546 332 5.87
Total earning assets (2)........................................ 89,413 5,007 7.47 102,676 6,590 8.5 6
Cash and due from banks.............................................. 4,528 5,400
Premises and equipment............................................... 896 1,182
Other assets......................................................... 977 1,444
Allowance for loan losses............................................ (692) (890)
Reserve for investment losses........................................ -- --
Total assets.................................................... $95,122 $109,812
LIABILITIES
Interest-bearing liabilities:
Interest-bearing transaction accounts.............................. $ 4,634 76 2.19 $ 4,994 83 2.22
Savings and money market deposits.................................. 22,156 500 3.01 21,610 704 4.34
Time deposits...................................................... 28,102 866 4.11 39,510 1,736 5.86
Other short-term borrowings........................................ 13,793 350 3.38 15,237 542 4.74
Total interest-bearing liabilities.............................. 68,685 1,792 3.48 81,351 3,065 5.02
Demand deposits...................................................... 14,284 15,644
Accrued interest and other liabilities............................... 300 497
Shareholders' equity................................................. 11,853 12,320
Total liabilities and shareholders' equity...................... $95,122 $109,812
Net interest spread.................................................. 3.99% 3.54%
Net interest income/margin on a taxable equivalent basis............. 3,215 4.79% 3,525 4.58%
Taxable equivalent adjustment........................................ 43 49
Net interest income/margin........................................... $3,172 4.73% $3,476 4.51%
</TABLE>
(1) Average loans include nonaccrual loans. All loans and deposits are domestic.
(2) Tax-equivalent adjustments have been based on an assumed tax rate of 34
percent and do not give effect to the disallowance for federal income tax
purposes of interest expense related to certain tax-exempt assets.
(3) Annualized.
ANALYSIS OF CHANGES IN NET INTEREST INCOME. The following tables set forth
on a tax-equivalent basis, the effect which the varying levels of earning assets
and interest-bearing liabilities and the applicable rates have had on changes in
net interest income from 1992 to 1993 and 1993 to 1994 and between the
nine-month periods ended September 30, 1995, and 1994. For purposes of these
tables, changes which are not solely attributable to volume or rate have been
allocated to volume and rate on a prorata basis.
A-17
<PAGE>
ANALYSIS OF CHANGES IN NET INTEREST INCOME
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
<S> <C> <C> <C> <C> <C> <C>
1993 COMPARED WITH 1992 1994 COMPARED WITH 1993
VARIANCE DUE TO VARIANCE DUE TO
<CAPTION>
VOLUME RATE TOTAL VOLUME RATE TOTAL
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS
Loans................................................................. $ 351 $(114) $ 237 $792 $341 $1,133
Securities:
Taxable............................................................ (135 ) (337) (472) 73 44 117
Tax-exempt......................................................... 89 (7) 82 83 (8) 75
Funds sold............................................................ 42 (15) 27 32 54 86
Total interest income.............................................. 346 (473) (126) 980 431 1,411
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Interest-bearing transaction accounts.............................. (97 ) (45) (142) (9) (1) (10)
Savings and market rate investments................................ 36 (150) (114) 75 102 177
Certificates and other time deposits............................... (68 ) (253) (321) 161 24 185
Total interest-bearing deposits.................................. (129 ) (448) (577) 227 125 352
Other short-term borrowings........................................... 231 (4) 227 132 110 242
Total interest expense........................................... 102 (452) (350) 359 235 594
Net interest income on a taxable equivalent basis................ $ 244 $ (20) 224 $620 $197 817
Less taxable equivalent adjustment............................... 21 19
Net interest income.............................................. $ 203 $ 798
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER
30, 1995
COMPARED WITH 1994
VARIANCE DUE TO
<S> <C> <C> <C>
VOLUME RATE TOTAL
EARNING ASSETS
Loans..................................................................................... $870 $ 519 $1,389
Securities:
Taxable................................................................................ (10) 31 21
Tax-exempt............................................................................. 18 6 24
Funds sold................................................................................ 28 121 149
Total interest income................................................................ 906 677 1,583
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Interest-bearing transaction accounts.................................................. 6 1 7
Savings and market rate investments.................................................... (12) 216 204
Certificates and other time deposits................................................... 425 445 870
Total interest-bearing deposits...................................................... 419 662 1,081
Other short-term borrowings............................................................... 40 152 192
Total interest expense............................................................... 458 815 1,273
Net interest income on a taxable equivalent basis.................................... $448 $(138) 310
Less taxable equivalent adjustment................................................... 6
Net interest income.................................................................. $ 304
</TABLE>
INTEREST SENSITIVITY. Brentwood monitors and manages the pricing and
maturity of its assets and liabilities in order to diminish the potential
adverse impact that changes in interest rates could have on net interest income.
The principal monitoring technique employed by Brentwood is the measurement of
Brentwood's interest sensitivity "gap", which is the positive or
A-18
<PAGE>
negative dollar difference between assets and liabilities that are subject to
interest rate repricing within a given period of time. Interest rate sensitivity
can be managed by repricing assets or liabilities, selling securities
available-for-sale, replacing an asset or liability at maturity or by adjusting
the interest rate during the life of an asset or liability.
Brentwood evaluates interest sensitivity risk and then formulates
guidelines regarding asset generation and repricing, funding sources and
pricing, and off-balance sheet commitments in order to decrease interest
sensitivity risk. Brentwood uses computer simulations to measure the net income
effect of various interest rate scenarios. The modeling reflects interest rate
changes and the related impact on net income over specified periods of time.
The following table illustrates Brentwood's interest rate sensitivity at
September 30, 1995, assuming the relevant assets and liabilities are collected
and paid, respectively, in accordance with their stated maturities.
INTEREST SENSITIVITY
(AMOUNTS IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
<S> <C> <C> <C> <C> <C>
GREATER THAN
AFTER THREE AFTER ONE FIVE YEARS
WITHIN THROUGH THROUGH OR
THREE MONTHS TWELVE MONTHS FIVE YEARS NONSENSITIVE TOTAL
ASSETS
Earnings Assets (1)
Loans................................................ $ 30,660 $10,647 $ 20,074 $ 2,471 $63 ,852
Securities........................................... 6,745 1,987 8,513 10,993 28,238
Funds sold........................................... 16,200 -- -- -- 16,200
Total earning assets.............................. $ 53,605 $12,634 $ 28,587 $13, 464 $108,290
LIABILITIES
Interest-bearing liabilities
Interest-bearing deposits
Non-maturity interest-bearing deposits............ -- -- -- 26,942 26,942
Time deposits (2)................................. 17,307 18,717 8,501 -- 44,525
Total interest-bearing deposits................... 17,307 18,717 8,501 26,942 71,467
Other short-term borrowings.......................... 13,250 -- -- -- 13,250
Total interest-bearing liabilities................ 30,557 18,717 8,501 26,942 84,717
Period gap........................................... $ 23,048 ($6,083) $ 20,086 ($13,478) $23, 573
Cumulative gap....................................... $ 23,048 $16,965 $ 37,051 $ 23,573
Ratio of cumulative gap to total earning assets...... 21.3% 15.7% 34.3% 21.8%
</TABLE>
(1) Excludes nonaccrual loans and securities.
(2) Excludes matured certificates which have not been redeemed by the customer
and on which no interest is accruing.
Brentwood generally would benefit from increasing market rates of interest
when it has an asset-sensitive gap and generally would benefit from decreasing
market rates of interest when it is liability-sensitive.
Brentwood is asset sensitive over the three-month, one-year and five-year
time frames. Brentwood's gap analysis, however, is not a precise indicator of
its interest sensitivity position. The analysis presents only a static view of
the timing of maturities and repricing opportunities, without taking into
consideration that changes in interest rates do not effect all assets and
liabilities equally. For example, rates paid on a substantial portion of core
deposits (for example savings accounts) may change contractually within a
relatively short time frame, but those rates are viewed by management as
significantly less interest-sensitive than market-based rates, such as those
paid on non-core deposits (for example time deposits of greater than $100,000).
Net interest income may be impacted by other significant factors in a given
interest rate environment, including changes in the volume and mix of earning
assets and interest-bearing liabilities.
A-19
<PAGE>
PROVISION AND ALLOWANCE FOR LOAN LOSSES
GENERAL. Brentwood has developed policies and procedures for evaluating the
overall quality of its credit portfolio and the timely identification of
potential problem credits. On a quarterly basis, Brentwood's management
recommends and the Brentwood Board approves, the appropriate level for the
allowance for loan losses based on the results of the internal monitoring and
reporting system, analysis of economic conditions in its market, and a review of
historical statistical data for both Brentwood and other financial institutions.
Management's judgment as to the adequacy of the allowance is based upon a number
of assumptions about future events which it believes to be reasonable but which
may or may not be valid. Thus, there can be no assurance that charge-offs in
future periods will not exceed the allowance for loan losses or that additional
increases in the allowance for loan losses will not be required. The adequacy of
the allowance for loan losses and the effectiveness of Brentwood's monitoring
and analysis system are also reviewed periodically by banking regulators and
Brentwood's independent auditors.
Additions to the allowance for loan losses, which are expensed as the
provision for loan losses on Brentwood's income statement, are made periodically
to maintain the allowance at an appropriate level based on management's analysis
of the potential risk in the loan portfolio. Loan losses and recoveries are
charged or credited directly to the allowance. The amount of the provision is a
function of the amount of loan losses charged against the reserve during a given
period, the amount of recoveries of loan losses during that period, and the
overall level of the allowance required.
The following table summarizes certain information with respect to
Brentwood's allowance for loan losses and the composition of charge-offs and
recoveries for each of the last five years and for the 1995 period and 1994
period.
ALLOWANCE FOR LOAN LOSSES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER
YEAR ENDED DECEMBER 31, 30,
<S> <C> <C> <C> <C> <C> <C> <C>
1990 1991 1992 1993 1994 1994 1995
Total loans outstanding at end of period, net of
unearned income................................ $36,701 $39,262 $43,826 $49,221 $63,236 $58,815 $63,938
Average amount of loans outstanding, net of
unearned income................................ $32,861 $37,578 $41,483 $45,790 $54,801 $53,078 $65,268
Balance of allowance for loan losses at beginning
of period...................................... $ 271 $ 366 $ 464 $ 547 $ 654 $ 654 $ 835
Loans charged off................................ (105) (467) (525) (258) (89) (60) (51)
Recoveries of previous loan losses............... -- 4 1 50 35 16 32
Net (charge-offs) recoveries..................... (105) (463) (524) (208) (54) (44) (19)
Provision for loan losses........................ 200 561 607 315 235 165 65
Balance of allowance for loan losses at end of
period......................................... $ 366 $ 464 $ 547 $ 654 $ 835 $ 775 $ 881
Allowance for loan losses to period-end loans.... 1.0% 1.2% 1.3% 1.3% 1.3% 1.3% 1.4%
Net charge-offs (recoveries) to average loans.... .32% 1.23% 1.26% .45% .10% .11%(1) .04%(1)
</TABLE>
(1) Annualized.
The provision for loan losses was $65,000 in the 1995 period, compared to
$165,000 in the 1994 period. The decrease in the provision was the result of
management's assessment that loan loss experience, as reflected by the continued
low rate of net charge-offs to average loans of .03% during the 1995 period, and
asset quality, as reflected by the decrease in the ratio of non-performing
assets to period-end loans from .9% to .6% during the 1995 period, had improved
sufficiently to allow for an allowance level which was, as a percentage of
period-end loans, slightly less at the end of the 1994 period.
ALLOCATION OF ALLOWANCE. Brentwood has historically not allocated the
allowance for loan losses by loan categories, but evaluated adequacy for loan
losses on an overall portfolio basis.
NON-PERFORMING ASSETS. The following table presents Brentwood's
non-performing assets for the dates indicated.
A-20
<PAGE>
NONPERFORMING ASSETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1990 1991 1992 1993 1994 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Nonaccrual loans............................................ $126 $ 249 $249 $227 $280 $ 214 $ 184
Loans Past Due 90 days or more.............................. 150 40 83 -- 298 350 285
Total nonperforming loans................................. 276 289 332 227 578 564 469
Other real estate owned..................................... 620 564 131 -- -- -- --
Total nonperforming assets................................ $896 $ 853 $463 $227 $578 $ 564 $ 469
Restructured loans.......................................... $ 89 $1,378 $128 $ 55 $ 83 $ 71 $ 13
Allowance for loan losses to period-end loans............... 1.0% 1.2% 1.3% 1.3% 1.3% 1.3% 1.3%
Allowance for loan losses to period-end nonperforming
loans..................................................... 1.3x 1.6x 1.6x 2.9x 1.4x 1.4x 1.9x
Allowance for loan losses to period-end nonperforming
assets.................................................... .41% .54% 1.2x 2.9x 1.4x 1.4x 1.9x
Net charge-offs to average loans............................ .32% 1.23% 1.26% .45% .10% .11%(1) .04%(1)
Nonperforming assets to period end loans.................... 2.4% 2.17% 1.06% .46% .91% .96% .73%
</TABLE>
(1) Annualized.
Accrual of interest is discontinued on a loan when management believes,
after considering economic and business conditions and collection efforts, that
the borrower's financial condition is such that the collection of interest is
doubtful. A delinquent loan is generally placed on non-accrual status when it
becomes 90 days or more past due. In certain cases, management determines that
the likelihood of recovery of some loans that are 90 days or more past due is
not sufficiently in doubt to place such loans on a non-accrual status. In such
cases, however, management includes the loan in its determination of
non-performing loans. When a loan is placed on non-accrual status, all interest
which has been accrued on the loan but remains unpaid is reversed and deducted
from earnings as a reduction of reported interest income. No additional interest
is accrued on the loan balance until the collection of both principal and
interest becomes reasonably certain. When a problem loan is finally resolved,
there may ultimately be an actual write down or charge-off of the principal
balance of the loan which would necessitate additional charges to earnings.
During the 1995 period, and in years 1994, 1993 and 1992, respectively,
approximately $4,000, $31,000, $17,000 and $16,000 in additional interest income
would have been recognized if Brentwood's non-accrual loans had been current in
accordance with their original terms.
Total non-accrual loans decreased $96,000 to $184,000 at September 30,
1995. This decrease was due primarily to strong local economic conditions during
the 1995 period. Non-accrual loans were .3% of total loans at September 30,
1995. The allowance for loan losses to period-end non-accrual loans was 479% at
September 30, 1995, compared to 298% at December 31, 1994.
POTENTIAL PROBLEM LOANS. A potential problem loan is one where management
has serious doubts as to the borrower's future performance under the terms of
the loan contract. These loans are current as to principal and interest, and
accordingly, they are not included in the non-accrual loan category. Management
monitors these loans closely in order to ensure that Brentwood's interest are
protected. At September 30, 1995, Brentwood held 14 loans considered by
management to be potential problem loans totaling approximately $1.1 million.
The level of potential problem loans is factored into the determination of the
adequacy for loan losses.
NON-INTEREST INCOME AND EXPENSE
NON-INTEREST INCOME. The largest component of non-interest income is
service charges on deposit accounts, which totalled $330,000 in 1994, a 1.7%
increase over the 1993 level of $324,000. Securities gains decreased $90,000 in
1994, compared to 1993. Other non-interest income increased $96,000 primarily
due to increased fee income from the sale of residential mortgage loans.
A-21
<PAGE>
The following table sets forth, for the periods indicated, the principal
components of non-interest income.
NON-INTEREST INCOME
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
<S> <C> <C> <C>
1992 1993 1994
Service charges on deposit accounts................................................................ $268 $324 $330
Mortgage origination fees.......................................................................... 57 123 138
Fees from the sale of SBA loans.................................................................... -- 47 100
Other.............................................................................................. 41 38 66
Securities gains (losses).......................................................................... 218 90 --
Total non-interest income..................................................................... $584 $622 $634
</TABLE>
NON-INTEREST EXPENSE. The following table sets forth, for the periods
indicated, the principal components of non-interest expense.
NON-INTEREST EXPENSE
(AMOUNTS IN THOUSANDS EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
<S> <C> <C> <C>
1992 1993 1994
Salaries and employee benefits................................................................ $1,182 $1,471 $1,894
Net occupancy expense......................................................................... 201 196 254
Furniture and equipment expense............................................................... 178 180 241
Advertising................................................................................... 110 106 120
Director fees................................................................................. 12 26 29
Data processing............................................................................... 16 16 17
Insurance..................................................................................... 26 28 31
Banking assessments........................................................................... 170 173 192
Professional fees............................................................................. 111 117 90
Postage, freight and couriers................................................................. 29 36 41
Supplies...................................................................................... 71 89 90
Travel and education.......................................................................... 22 22 31
Other......................................................................................... 271 214 256
Total non-interest expense............................................................... $2,399 $2,674 $3,286
Efficiency ratio.............................................................................. 64.5% 65.4% 65.9%
</TABLE>
Salaries and employee benefits increased $423,000, or 28.8%, to $1.9
million in 1994 from $1.5 million in 1993 due primarily to an increase in the
number of employees from 35 to 50. Brentwood's efficiency ratio, which is
non-interest expense as a percentage of net interest income plus non-interest
income, net of gains and losses on the sale of assets, was 65.9% in 1994
compared to 65.4% in 1993 and 64.5% in 1992.
EARNING ASSETS
LOANS. Loans are the largest category of earning assets and typically
provide higher yields than other types of earning assets. Associated with the
higher loan yields are the inherent credit and liquidity risks which management
attempts to control and counterbalance. Loans averaged $54.8 million in 1994
compared to $45.8 million in 1993, an increase of $9.0 million or 19.7%. At
December 31, 1994, total loans were $63.2 million compared to $49.2 million at
December 31, 1993.
In 1994, growth in Brentwood's loan portfolio accelerated as the local and
national economies improved and as management continued to market Brentwood's
products and services. The following table shows the composition of Brentwood's
loan portfolio by category at the dates indicated.
A-22
<PAGE>
COMPOSITION OF LOAN PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1990 1991 1992 1993 1994
<CAPTION>
PERCENT PERCENT PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial and industrial...... $18,482 50.3% $17,995 45.9% $17,819 40.6% $19,915 40.4% $23,039
Real estate
Construction................. 1,088 3.0 1,625 4.1 2,428 5.5 4,304 8.7 5,971
Mortgage -- residential...... 8,101 22.0 8,568 21.8 11,458 26.1 13,299 27.0 17,947
Mortgage -- commercial....... 3,652 10.0 4,765 12.1 6,061 13.8 6,829 13.9 11,085
Mortgage -- other............ 317 .9 314 .8 546 1.3 316 .6 331
Consumer....................... 4,992 13.6 5,508 14.0 5,089 11.6 4,227 8.6 4,309
Other.......................... 69 .2 512 1.3 467 1.1 382 .8 650
Total gross loans............ 36,701 100.0% 39,287 100.0% 43,868 100.0% 49,272 100.0% 63,332
Unearned income................ -- 25 42 51 96
Total loans net of unearned
income..................... 36,701 39,262 43,826 49,221 63,236
Allowance for loan losses...... 366 464 546 654 835
Total net loans.............. $36,335 $38,798 $43,280 $48,567 $62,401
<CAPTION>
<S> <<C>
PERCENT
OF TOTAL
<S> <<C>
Commercial and industrial...... 36.4%
Real estate
Construction................. 9.4
Mortgage -- residential...... 28.3
Mortgage -- commercial....... 17.5
Mortgage -- other............ .5
Consumer....................... 6.8
Other.......................... 1.1
Total gross loans............ 100.0%
Unearned income................
Total loans net of unearned
income.....................
Allowance for loan losses......
Total net loans..............
</TABLE>
The principal component of Brentwood's loan portfolio is real estate loans.
At year-end 1994, this category totalled $35.0 million and represented 55.3% of
the total loan portfolio, compared to $24.7 million, or 50.1% of the total loan
portfolio at December 31, 1993. Real estate loans increased 42.8% in 1994,
compared to growth of 17.8% in 1993, primarily due to lower mortgage loan rates
during 1993.
In the context of this discussion, a "real estate loan" is defined as any
loan secured by real estate, regardless of the purpose of the loan. It is common
practice for financial institutions in Brentwood's market to obtain a security
interest in real estate whenever possible, in addition to any other available
collateral. This collateral is taken to reinforce the likelihood of the ultimate
repayment of the loan and tends to increase the magnitude of the real estate
loan portfolio component.
Commercial and industrial loans, which is the largest single category of
Brentwood's loans, increased $3.1 million, or 15.7% to $23.0 million at December
31, 1994, from $19.9 million at December 31, 1993. The growth in 1994 occurred
primarily as a result of an increase in demand for business loans as a result of
a more favorable local and national economy. Residential mortgage loans
increased $4.6 million, or 35.0%, to $17.9 million at December 31, 1994, from
$13.3 million at December 31, 1993. Non-residential mortgage loans, which
include commercial loans and other loans secured by multi-family properties and
farm land increased $4.3 million, or 59.8%, to $11.4 million at December 31,
1994, from $7.1 million at December 31, 1993. The increase in non-residential
mortgage loans also reflects the growth of Brentwood's lending for commercial
real estate purposes and an increase in commercial loans in which a security
interest in real estate was obtained as additional collateral. Consumer loans
increased $82,000, or 1.9%, to $4.3 million in 1994, from $4.2 million in 1993.
The repayment of loans in the loan portfolio as they mature is also a
source of liquidity for Brentwood. The following table sets forth Brentwood's
loans maturing within specified intervals at December 31, 1994.
A-23
<PAGE>
LOAN MATURITY SCHEDULE AND SENSITIVITY TO CHANGES IN INTEREST RATES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1994
<S> <C> <C> <C> <C>
OVER
ONE YEAR
ONE YEAR THROUGH OVER
OR LESS THREE YEARS THREE YEARS TOTAL
Commercial and industrial................................................ $ 8,590 $ 1,613 $ 7,049 $17,252
Real estate -- construction.............................................. 15,301 6,795 11,929 34,025
Real estate -- installment loans......................................... 4,598 4,467 2,895 11,960
$28,489 $12,875 $21,873 $63,237
Loans maturing after one year with:
Fixed interest rates................................................... $16,203 $ 7,919 $12,391 $36,513
Floating interest rates................................................ $26,724 -- -- 26,724
$63,237
</TABLE>
The information presented in the above table is based on the contractual
maturities of individual loans, including loans which may be subject to renewal
at their contractual maturity. Renewal of such loans is subject to review and
credit approval, as well as modification of terms upon their maturity.
Consequently, management believes this treatment presents fairly the maturity
and repricing structure of the loan portfolio.
INVESTMENT SECURITIES. The investment securities portfolio is a significant
component of Brentwood's total earning assets. Total securities averaged $29.9
million in 1994, compared to $27.4 million in 1993. At December 31, 1994, the
total securities portfolio was $30.4 million. The increase in the portfolio was
primarily due to an increase in deposits and management's decision to invest
those funds in investment securities in order to maintain the desired liquidity
for Brentwood's asset portfolio.
The following table sets forth the book value of the securities held by
Brentwood at the dates indicated.
BOOK VALUE OF SECURITIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
<S> <C> <C> <C>
1992 1993 1994
U.S. Treasury and other U.S. government agencies.......................................... $ 9,399 $ 9,777 $13,621
State, county and municipal securities.................................................... 1,556 3,903 4,319
Mortgage-backed securities................................................................ 14,861 13,323 12,144
Other..................................................................................... 306 306 306
Total securities..................................................................... $26,122 $27,309 $30,390
</TABLE>
A-24
<PAGE>
The following table shows the schedule maturities and average yields of
securities held at December 31, 1994.
INVESTMENT SECURITIES MATURITY DISTRIBUTION AND YIELDS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1994
<S> <C> <C> <C> <C> <C> <C> <C>
AFTER
AFTER ONE BUT AFTER FIVE BUT TEN
WITHIN ONE YEAR WITHIN FIVE YEARS WITHIN TEN YEARS YEARS
<CAPTION>
AMOUNT YIELD (1) AMOUNT YIELD (1) AMOUNT YIELD (1) AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury............................... $ 500 8.40% $1,100 5.55% $ -- --% $ --
U.S. government agencies.................... 8,229 5.17 5,754 5.70 3,962 7.71 6.958
State and political subdivisions............ 581 4.66 1,252 4.93 1,102 4.48 830
Other....................................... 200 9.00 339 5.39 -- -- --
Total.................................. $9,510 $8,445 $5,064 $7,788
<CAPTION>
<S> <C>
YIELD (1)
<S> <C>
U.S. Treasury............................... --%
U.S. government agencies.................... 6.29
State and political subdivisions............ 5.40
Other....................................... --
Total..................................
</TABLE>
(1) Computed on a tax-equivalent basis utilizing a 34% tax rate.
SHORT-TERM INVESTMENTS. Short-term investments, which consist primarily of
federal funds sold, averaged $5.9 million in 1994, compared to $4.9 million in
1993. At December 31, 1994, short-term investments totalled $3.2 million. At
September 30, 1995, short-term investments were $16.2 million to provide
liquidity for the anticipated withdrawal of certain municipal funds in early
October 1995. These funds are a source of Brentwood's liquidity and are
generally invested on an over-night basis.
DEPOSITS AND OTHER INTEREST-BEARING LIABILITIES
Average interest-bearing liabilities increased $10.0 million, or 16.8%, to
$69.7 million in 1994, from $59.7 million in 1993. Average interest-bearing
deposits increased $5.9 million, or 11.9%, to $55.4 million in 1994, from $49.5
million in 1993. These increases resulted from increases in all categories of
interest-bearing liabilities.
DEPOSITS. Average total deposits increased $9.1 million, or 14.9%, to $69.9
million during 1994, from $60.8 million during 1993. At December 31, 1994, total
deposits were $74.5 million compared to $68.5 million at December 31, 1993, an
increase of 8.7%.
The following table sets forth the deposits of Brentwood by category at the
dates indicated.
DEPOSITS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1990 1991 1992 1993 1994
<CAPTION>
PERCENT PERCENT PERCENT PERCENT
AMOUNT OF DEPOSITS AMOUNT OF DEPOSITS AMOUNT OF DEPOSITS AMOUNT OF DEPOSITS AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Demand deposit
accounts........... $ 4,404 9.7% $ 8,871 13.8% $10,600 16.9% $16,736 24.4% $17,705
NOW accounts and
Money market
accounts........... 16,150 35.8 26,987 41.9 27,211 43.3 24,458 35.7 26,129
Savings.............. 188 .4 343 .5 565 .9 1,085 1.6 1,700
Time deposits less
than $100,000...... 12,987 28.8 14,324 22.3 12,817 20.4 12,801 18.7 14,829
Time deposits of
$100,000 or over... 11,406 25.3 13,837 21.5 11,573 18.5 13,465 19.6 14,111
Total deposits... $45,135 100.0% $64,362 100.0% $62,766 100.0% $68,545 100.0% $74,474
<CAPTION>
<S> <<C>
PERCENT
OF DEPOSITS
<S> <<C>
Demand deposit
accounts........... 23.7%
NOW accounts and
Money market
accounts........... 35.1
Savings.............. 2.3
Time deposits less
than $100,000...... 19.9
Time deposits of
$100,000 or over... 19.0
Total deposits... 100.0%
</TABLE>
Core deposits, which excludes certificates of deposit of $100,000 or more,
provide a relatively stable funding source for Brentwood's loan portfolio and
other earning assets. Brentwood's core deposits increased $5.3 million in 1994.
A-25
<PAGE>
Deposits, and particularly core deposits, have historically been
Brentwood's primary source of funding and have enabled Brentwood to meet
successfully both its short-term and long-term liquidity needs. Management
anticipates that such deposits will continue to be Brentwood's primary source of
funding in the future. Brentwood's loan-to-deposit ratio was 84.9% at December
31, 1994, and 71.8% at December 31, 1993. The maturity distribution of
Brentwood's time deposits over $100,000 at December 31, 1994, is shown in the
following table.
MATURITIES OF CERTIFICATES OF DEPOSIT
AND OTHER TIME DEPOSITS OF $100,000 OR MORE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1994
<S> <C> <C> <C> <C> <C>
AFTER
THREE AFTER SIX
WITHIN THROUGH THROUGH AFTER
THREE MONTHS SIX MONTHS TWELVE MONTHS TWELVE MONTHS TOTAL
Certificates of deposit of $100,000 or more............ $3,659 $4,459 $ 2,150 $ 3,842 $14,110
Total............................................. $3,659 $4,459 $ 2,150 $ 3,842 $14,110
</TABLE>
Approximately 25.9% of Brentwood's time deposits over $100,000 had
scheduled maturities within three months. Large certificates of deposit
customers tend to be extremely sensitive of interest rate levels, making these
deposits less reliable sources of funding for liquidity planning purposes than
core deposits. Some financial institutions partially fund their balance sheets
using large certificates of deposit obtained through brokers. These broker
deposits are generally expensive and are unreliable as long-term funding
sources. Accordingly, Brentwood does not buy broker deposits.
CAPITAL
Under the capital guidelines of the OCC, Brentwood is currently required to
maintain a minimum risk-based total capital ratio of 8%, with at least 4% being
Tier 1 capital. For Brentwood, Tier 1 capital consists of common shareholders
equity. In addition, Brentwood must maintain a minimum Tier 1 leverage ratio
(Tier 1 capital to total assets) of at least 3%.
Brentwood exceeded its regulatory capital ratio requirements at December
31, 1992, 1993, 1994, and September 30, 1995, as set forth in the following
table.
ANALYSIS OF CAPITAL
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1992 1993 1994 1995
<S> <C> <C> <C> <C>
Tier 1 capital........................................................... $11,277 $11,853 $ 12,515 $ 12,720
Tier 2 capital........................................................... 546 654 835 592
Total qualifying capital............................................ $11,823 $12,507 $ 13,350 $ 13,312
Risk-adjusted total assets (including off-balance sheet exposures)....... $74,255 $90,156 $104,961 $ 120,012
Tier 1 risk-based capital ratio (4.00% required minimum)................. 15.19% 13.01% 11.27% 10.60%
Total risk-based capital ratio (8.00% required minimum).................. 15.92 13.72 12.72 11.09
Tier 1 leverage ratio (4.00% required minimum)........................... 14.45 14.46 12.30 11.58
</TABLE>
LIQUIDITY MANAGEMENT AND CAPITAL RESOURCES
Liquidity management involves monitoring Brentwood's sources and uses of
funds in order to meet its day-to-day cash flow requirements while maximizing
profits. Liquidity represents the ability of a company to convert assets into
cash or cash equivalents without significant loss and to raise additional funds
by increasing liabilities. Without proper liquidity management, Brentwood will
not be able to perform the primary function of a financial intermediary and
would, therefore, not be able to meet the needs of the communities it serves.
Increased liquidity in typical interest rate environments often involves
investing in earning assets with shorter maturities with reduced opportunities
to maximize profitability. Liquidity management is made more complex because
different balance
A-26
<PAGE>
sheet components are subject to varying degrees of management control. For
example, the timing of maturities of the investment portfolio is predictable and
subject to a relatively high degree of control at the time investment decisions
are made. Net deposit inflows and outflows are, however, far less predictable
and are not subject to the same degree of control.
Brentwood manages its liquidity in part through entering into repurchase
agreements with other lenders on a short-term basis. Brentwood also maintains
overnight borrowing lines with several financial institutions.
IMPACT OF INFLATION
Unlike most industrial companies, the assets and liabilities of financial
institutions such as Brentwood are primarily monetary in nature. Therefore,
interest rates have a more significant effect on Brentwood's performance than do
the effects of changes in the general rate of inflation and change in prices. In
addition, interest rates do not necessarily move in the same direction or in the
same magnitude as the prices of goods and services. Management seeks to manage
the relationships between interest sensitive assets and liabilities in order to
protect against wide interest rate fluctuations, including those resulting from
inflation.
A-27
<PAGE>
ANNEX B
[CONFORMED COPY]
AGREEMENT AND PLAN OF ACQUISITION
AGREEMENT AND PLAN OF ACQUISITION, dated as of the 18th day of July, 1995
(this "Plan"), by and among BRENTWOOD NATIONAL BANK ("Brentwood"), FIRST UNION
CORPORATION ("First Union"), FIRST UNION CORPORATION OF VIRGINIA ("FUNC-VA") and
FIRST UNION NATIONAL BANK OF TENNESSEE ("FUNB-TN").
RECITALS:
(A) BRENTWOOD. Brentwood is a national banking association duly organized
and existing in good standing under the laws of the United States, with its
principal executive offices located in Brentwood, Tennessee. As of the date
hereof, Brentwood has 5,000,000 authorized shares of common stock, each of $2.50
par value ("Brentwood Common Stock"), no other class of capital stock being
authorized), of which 2,040,921 shares of Brentwood Common Stock are issued and
outstanding. As of March 31, 1995, Brentwood had capital of $12,174,000, divided
into common stock of $5,100,000, paid-in capital of $5,100,000 and undivided
profits, including capital reserves, of $2,523,000, and net unrealized gains
(losses) on available-for-sale securities of ($549,000).
(B) 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, and a
multi-bank holding company, registered under the Bank Holding Company Act of
1956, as amended. 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 169,443,814 shares of First Union
Common Stock, no shares of First Union Class A Preferred Stock and no shares of
First Union Preferred Stock, were issued and outstanding as of March 31, 1995.
(C) FUNC-VA. FUNC-VA is a corporation duly organized and existing in good
standing under the laws of the Commonwealth of Virginia, with its principal
executive offices located in Roanoke, Virginia. As of the date hereof, FUNC-VA
has 10,000 authorized shares of Class A common stock each of $1.00 par value
("FUNC-VA Common Stock") and 5,000 authorized shares of Class B common stock
each of $1.00 par value ("FUNC-VA Class B Stock") (no other class of capital
stock being authorized), of which 1,001 shares of FUNC-VA Common Stock are
issued and outstanding and owned by First Union and 134 shares of FUNC-VA Class
B Stock are issued and outstanding and owned by Washington Bankshares, Inc., a
wholly-owned subsidiary of First Union.
(D) FUNB-TN. FUNB-TN is a national banking association duly organized and
existing under the laws of the United States, with its principal executive
offices located in Nashville, Tennessee. As of the date hereof, FUNB-TN has
5,000,000 authorized shares of common stock, each of $10.00 par value ("FUNB-TN
Common Stock") (no other class of capital stock being authorized), of which
2,610,300 shares are issued and outstanding and currently owned by a subsidiary
of FUNC-VA (other than directors' qualifying shares). As of March 31, 1995,
FUNB-TN had capital of $160,527,000 divided into common stock of $26,103,000,
surplus of $66,514,000, undivided profits, including capital reserves, of
$72,517,000, and net unrealized holding gains (losses) on available-for-sale
securities of ($4,607,000).
(E) RIGHTS, ETC. Except as Previously Disclosed (as hereinafter defined) in
Schedule 4.01(C), there are no shares of Brentwood Common Stock authorized and
reserved for issuance, Brentwood does not have any Rights (as defined below)
issued or outstanding with respect to its capital stock, and Brentwood does not
have any commitment to authorize, issue or sell any such shares or Rights,
except pursuant to this Plan and warrants to purchase 1,409,000 shares of
Brentwood Common Stock for $5.00 per share (the "Brentwood Warrants"). The term
"Rights" means securities or obligations convertible into or exchangeable for,
or giving any person any right to subscribe for or acquire, or any options,
calls or commitments relating to, shares of capital stock.
(F) APPROVALS. The Board of Directors of each of Brentwood, First Union,
FUNC-VA and FUNB-TN has approved, at meetings of each of such Boards of
Directors, this Plan and has authorized the execution hereof in counterparts.
B-1
<PAGE>
(G) OTHER. It is the intention of the parties to this Plan that the
transactions contemplated hereby shall include the right of FUNC-VA to acquire
the assets and assume the liabilities of Brentwood and to assign such assets and
liabilities to any corporation which FUNC-VA controls.
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:
I. THE ACQUISITION.
1.01. THE PURCHASE AND SALE. Subject to and upon the terms and conditions
of this Plan, on the Effective Date (as hereinafter defined), Brentwood shall
sell, transfer, convey assign and deliver to FUNC-VA (or a subsidiary
corporation designated by FUNC-VA pursuant to Section 1.02 that is controlled by
FUNC-VA) all of the assets of Brentwood, including cash balances on the
Effective Date (the "Brentwood Assets"). FUNC-VA shall (or shall cause such
subsidiary to) purchase, acquire and accept the Brentwood Assets from, and
assume all liabilities (the "Brentwood Liabilities") of, Brentwood.
1.02. RIGHT TO DIRECT BRENTWOOD ASSETS AND BRENTWOOD LIABILITIES. As
contemplated in paragraph (G) of the Recitals above, FUNC-VA may direct that the
Brentwood Assets be transferred to, and that the Brentwood Liabilities be
assumed by, a corporation controlled by FUNC-VA. Pursuant to the foregoing and
the authority of Revenue Rulings 64-73 and 70-224, FUNC-VA hereby directs
Brentwood to transfer all of the Brentwood Assets and the Brentwood Liabilities
to FUNB-TN on the Effective Date by means of a statutory merger (the "Merger").
1.03. THE MERGER. On the Effective Date:
(A) THE CONTINUING BANK. Brentwood shall be merged with and into FUNB-TN,
the separate existence of Brentwood shall cease and FUNB-TN (the "Continuing
Bank") shall survive, the name of the Continuing Bank shall be "First Union
National Bank of Tennessee" and the Continuing Bank shall continue to conduct
the business of a national banking association at its main office in Nashville,
Tennessee and at the legally established branches of Brentwood and FUNB-TN.
(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 chooses
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 any of such banks, shall not revert or be in any way impaired
by reason of the 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 Brentwood and FUNB-TN shall be preserved unimpaired.
(D) CHARTER; BY-LAWS; DIRECTORS; OFFICERS. The Charter and By-Laws of the
Continuing Bank shall be those of FUNB-TN, as in effect immediately prior to the
Merger becoming effective. The directors and officers of FUNB-TN in office
immediately prior to the 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 FUNB-TN. The amount of the capital stock of
FUNB-TN shall be not less than $26,103,000 and shall consist of not less than
2,610,300 issued and outstanding shares of common stock, each of $10.00 par
value, and the issued and outstanding shares shall remain issued and outstanding
as shares of FUNB-TN, each of $10.00 par value, and the holders thereof shall
retain their rights therein.
1.04. EFFECTIVE DATE. Subject to the conditions to the obligations of the
parties to effect the Merger as set forth in Article VI, the effective date (the
"Effective Date") shall be such date as First Union shall notify Brentwood 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, or such other date
as shall mutually be agreed upon between First Union and Brentwood.
II. CONSIDERATION.
2.01. MERGER CONSIDERATION. Subject to the provisions of this Plan, on the
Effective Date:
B-2
<PAGE>
(A) OUTSTANDING FIRST UNION COMMON STOCK. 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")), issued and outstanding immediately prior
to the Effective Date shall, on and after the Effective Date, remain as issued
and outstanding shares of First Union Common Stock.
(B) OUTSTANDING BRENTWOOD COMMON STOCK AND BRENTWOOD WARRANTS.
(1) Each share (excluding shares (i) held by any dissenting
stockholders ("Dissenters' Shares") or (ii) held by Brentwood or any of its
subsidiaries or by First Union or any of its subsidiaries, in each case
other than in a fiduciary capacity or as a result of debts previously
contracted ("Treasury Shares")) of Brentwood Common Stock issued and
outstanding immediately prior to the Effective Date shall, by virtue of the
Merger, automatically and without any action on the part of the holder
thereof, become and be converted into the right to receive a number of
shares of First Union Common Stock (the "Exchange Ratio") determined by
dividing $8.8112 by the Average Stock Price (as defined below). "Average
Stock Price" shall mean the average of the last sale prices per share of
First Union Common Stock on the New York Stock Exchange ("NYSE") Composite
Transactions tape for the ten trading days ending on the last trading day
prior to the Effective Date.
(2) Pursuant to the provisions set forth in the Warrantholder
Agreements (as hereinafter defined) that are to be executed and delivered
by the holders of Brentwood Warrants prior to the Effective Date, each
Brentwood Warrant outstanding immediately prior to the Effective Date,
shall become and be converted into the right to receive a cash payment
equal to the excess of the Average Price times the Exchange Ratio, over
$5.00.
(C) OUTSTANDING FUNB-TN COMMON STOCK. The shares of FUNB-TN Common Stock
issued and outstanding immediately prior to the Effective Date, shall, on and
after the Effective Date, remain as issued and outstanding shares of FUNB-TN
Common Stock.
2.02. STOCKHOLDER RIGHTS; STOCK TRANSFERS. On the Effective Date, holders
of Brentwood Common Stock shall cease to be, and shall have no rights as,
stockholders of Brentwood, other than to receive the consideration provided
under this Article II. After the Effective Date, there shall be no transfers on
the stock transfer books of Brentwood or the Continuing Bank of the shares of
Brentwood Common Stock which were issued and outstanding immediately prior to
the Effective Date.
2.03. FRACTIONAL SHARES. Notwithstanding any other provision hereof, no
fractional shares of First Union Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the Merger,
including in settlement of Stock Options (as hereinafter defined); instead,
First Union shall pay to each holder of Brentwood Common Stock or a Stock Option
who would otherwise be entitled to a fractional share an amount in cash
determined by multiplying such fraction by the last sale price of First Union
Common Stock on the last trading day prior to the Effective Date, as reported by
the NYSE Composite Transactions reporting system (as reported in THE WALL STREET
JOURNAL).
2.04. EXCHANGE PROCEDURES. As promptly as practicable after the Effective
Date, First Union shall send or cause to be sent to each former stockholder of
Brentwood of record immediately prior to the Effective Date transmittal
materials for use in exchanging such stockholder's certificates of Brentwood
Common Stock for the consideration set forth in this Article II. The
certificates representing the shares of First Union Common Stock into which
shares of such stockholder's Brentwood Common Stock are converted on the
Effective Date, any fractional share check which such stockholder shall be
entitled to receive, and any dividends paid on such shares of First Union Common
Stock for which the record date for determination of stockholders entitled to
such dividends is on or after the Effective Date, will be delivered to such
stockholder only upon delivery to First Union National Bank of North Carolina
(the "Exchange Agent") of the certificates representing all of such shares of
Brentwood Common Stock (or indemnity satisfactory to First Union and the
Exchange Agent, in their judgment, if any of such certificates are lost, stolen
or destroyed). No interest will be paid on any such fractional share check or
dividends to which the holder of such shares shall be entitled to receive upon
such delivery. Certificates surrendered for exchange by any person constituting
an "affiliate" of Brentwood for purposes of Rule 145 of the Securities Act (as
hereinafter defined) shall not be exchanged for certificates representing First
Union Common Stock until First Union has received a written agreement from such
person as specified in Section 4.01(W).
2.05. DISSENTING STOCKHOLDERS. To the extent, if any, that dissenters'
rights of appraisal are available to any holder of shares of Brentwood Common
Stock under applicable law, any such holder who perfects such rights in
accordance with such applicable law, shall be entitled to receive the value of
such shares in cash as determined pursuant to such applicable law.
B-3
<PAGE>
2.06. RESERVATION OF RIGHT TO REVISE TRANSACTION. First Union may at any
time change the method of effecting the acquisition of Brentwood by First Union
if and to the extent it deems such change to be desirable to consummate the
acquisition; PROVIDED, HOWEVER, that no such change shall (i) alter or change
the amount or kind of consideration to be issued to holders of Brentwood Common
Stock as provided for in this Plan, (ii) adversely affect the tax treatment to
Brentwood stockholders as a result of receiving such consideration, or (iii)
materially impede or delay receipt of any approval referred to in Section 6.02
or the consummation of the transactions contemplated by this Plan.
2.07. OPTIONS. Brentwood agrees that, at the Effective Date, all options to
purchase shares of Brentwood Common Stock (the "Option Shares") which are
outstanding immediately prior to the Effective Date ("Stock Options"), shall be
canceled and of no force or effect. Each holder of a Stock Option will be
entitled to receive on the Effective Date, in settlement thereof, a cash payment
equal to:
(i) the excess of $8.8112 over the exercise price per share of the
Stock Option,
(ii) multiplied by the number of shares of Brentwood Common Stock
covered by the Stock Option.
The number of outstanding Stock Options as of the date hereof and the
exercise prices therefor are Previously Disclosed by Brentwood on Schedule
4.01(C). Brentwood agrees to use its reasonable efforts to obtain any consent or
agreement of a holder of Stock Options that may be necessary or appropriate in
connection with the foregoing. In the case of any holder of a Stock Option which
is eligible to be treated as an incentive stock option under Section 422A of the
Internal Revenue Code of 1986, as amended, Brentwood may pay a bonus to each
such holder equal to the amount of additional tax (including the tax associated
with such bonus) occasioned by such cancellation and surrender causing such
Stock Option to be treated under Section 83 of the Internal Revenue Code of
1986, as amended, but in no event shall the aggregate amount of such bonuses
exceed $75,000.
2.08. 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 Date 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 Effective Date, the Exchange
Ratio shall be proportionately adjusted.
III. ACTIONS PENDING MERGER.
Without the prior written consent of First Union, Brentwood shall conduct
its business in the ordinary and usual course consistent with past practice and
shall use its best efforts to maintain and preserve its business organization,
employees and advantageous business relationships and retain the services of its
officers and key employees, and Brentwood will not, and will cause each of its
subsidiaries not to and Brentwood will not agree and will cause each of its
subsidiaries not to agree to:
3.01. CAPITAL STOCK. Except for the exercise of Stock Options and the
Brentwood Warrants in accordance with their terms issue, sell, or otherwise
permit to become outstanding any additional shares of Brentwood Common Stock, or
any other capital stock of Brentwood, any stock appreciation rights, or any
Rights, or enter into any agreement with respect to the foregoing, or permit any
additional shares of Brentwood Common Stock to become subject to new grants of
employee stock options, stock appreciation rights, or similar stock-based
employee compensation rights.
3.02. DIVIDENDS, ETC. Make, declare or pay any dividend on or in respect of
(other than dividends from subsidiaries to Brentwood, regular quarterly
dividends not in excess of $.05 per share and, from and after the record date
for First Union's regular quarterly cash dividend payable in the first quarter
of 1996, additional dividends equal to the dividends which would have been paid
to the holders of Brentwood Common Stock on the shares of First Union Common
Stock which would have been received pursuant to the Merger had the Merger been
consummated on or prior to such record date, less (to the extent it has been
paid between January 2, 1996 and such record date) the regular quarterly
dividend of $.05 per share referred to above), or declare or make any
distribution on, or directly or indirectly combine, redeem, reclassify, purchase
or otherwise acquire, any shares of its capital stock or, other than the
exercise of Stock Options and Brentwood Warrants in accordance with their terms
authorize the creation or issuance of, or issue, any additional shares of its
capital stock or any Rights with respect thereto.
3.03. INDEBTEDNESS; LIABILITIES; ETC. Other than in the ordinary course of
business consistent with past practice and other than federal funds purchased in
the normal course of its banking business, incur any indebtedness for borrowed
money, assume, guarantee, endorse or otherwise as an accommodation become
responsible or liable for the obligations of any other individual, corporation
or other entity.
B-4
<PAGE>
3.04. POLICIES; CAPITAL EXPENDITURES; ETC. Except as may be directed by any
regulatory agency, (i) change its or its subsidiaries' lending, investment,
liability management, operations and other material policies and procedures in
any material respect, except such changes as are in accordance and in an effort
to comply with Section 5.11 of this Plan, or (ii) incur or commit to incur any
capital expenditures other than in the ordinary course of business and not
exceeding $50,000, or (iii) commence any new lines of business.
3.05. LIENS AND ENCUMBRANCES. Other than in the ordinary course of
business, voluntarily suffer the imposition on any of its assets any lien,
charge, or encumbrance (collectively, "Liens"), or voluntarily permit any Lien
to exist.
3.06. COMPENSATION; EMPLOYMENT AGREEMENTS; ETC. Enter into or amend any
employment, severance or similar agreement or arrangement with any director,
officer or employee, or grant any salary or wage increase or increase any
employee benefit (including incentive or bonus payments), except bonuses paid
pursuant to Section 2.07, severance payments Previously Disclosed in Schedule
3.06, normal individual increases in compensation, and bonus accruals and
payments in accordance with existing bonus plans Previously Disclosed in
Schedule 3.06.
3.07. BENEFIT PLANS. Enter into or modify (except as may be required by
this Plan or applicable law) 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 (other than as expressly permitted pursuant to this Plan) that
accelerates the vesting or exercise of any benefits payable thereunder.
3.08. CONTINUANCE OF BUSINESS. Dispose of or discontinue any portion of its
assets, business or properties, which is material to Brentwood and its
subsidiaries taken as a whole, or merge or consolidate with, or acquire all or
any portion of, the business or property of any other entity which is material
to Brentwood and its subsidiaries taken as a whole (except foreclosures or
dispositions of other real estate owned or acquisitions of control by Brentwood
in its fiduciary capacity, in each case in the ordinary course of business
consistent with past practice).
3.09. AMENDMENTS. Amend its Articles of Incorporation, Charter or Bylaws.
IV. REPRESENTATIONS AND WARRANTIES.
4.01. BRENTWOOD REPRESENTATIONS AND WARRANTIES. Brentwood hereby represents
and warrants to First Union and FUNB-TN as follows:
(A) RECITALS. The facts set forth in the Recitals of this Plan with respect
to it are true and correct.
(B) ORGANIZATION, STANDING, AND AUTHORITY. It is duly qualified to do
business and is in good standing in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified and in which the failure to be duly
qualified, in the aggregate, is reasonably likely to have a Material Adverse
Effect (as hereinafter defined). Brentwood 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,
except for authorizations, the absence of which, individually or in the
aggregate, is not reasonably likely to have a Material Adverse Effect.
(C) SHARES. The outstanding shares of it are validly issued and
outstanding, fully paid and nonassessable, and subject to no preemptive rights
(and were not issued in violation of any preemptive rights). Except as
Previously Disclosed in Schedule 4.01(C), there are no shares of capital stock
of Brentwood outstanding and no outstanding Rights.
(D) BRENTWOOD SUBSIDIARIES. Brentwood has Previously Disclosed in Schedule
4.01(D) a list of all of the subsidiaries of Brentwood (each an "Brentwood
Subsidiary" and, collectively, the "Brentwood Subsidiaries") together with the
state of incorporation for each such Brentwood Subsidiary and the states or
jurisdictions in which such Brentwood Subsidiary is qualified to conduct
business. Brentwood is an "insured depository institution" as defined in the
Federal Deposit Insurance Act and applicable regulations thereunder. Except as
Previously Disclosed on Schedule 4.01(D), no equity securities of any of the
Brentwood Subsidiaries are or may become required to be issued (other than to
Brentwood) by reason of any Rights. Except as Previously Disclosed on Schedule
4.01(D), there are no contracts, commitments, understandings, or arrangements by
which any of the Brentwood Subsidiaries is or may be bound to sell or otherwise
transfer any shares of the capital stock of any Brentwood Subsidiary, and there
are no contracts, commitments, understandings, or arrangements relating to the
rights of Brentwood to vote or to dispose of such shares. Except as Previously
Disclosed on Schedule 4.01(D), all of the shares of capital stock of each
Brentwood Subsidiary held by Brentwood or an Brentwood Subsidiary are fully paid
and nonassessable
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and are owned by Brentwood or an Brentwood Subsidiary free and clear of any
charge, mortgage, pledge, security interest, restriction, claim, lien, or
encumbrance. Each Brentwood Subsidiary is in good standing under the laws of the
jurisdiction in which it is incorporated or organized, and is duly qualified to
do business and in good standing in the jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified and in which the failure to be duly qualified is reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect. Except as
Previously Disclosed in Schedule 4.01(D), Brentwood does not own beneficially,
directly or indirectly, any shares of any equity securities or similar interests
of any corporation, bank, business trust, association or other organization. The
deposits of Brentwood are insured by the Bank Insurance Fund (the "BIF") of the
Federal Deposit Insurance Corporation (the "FDIC"). Except as Previously
Disclosed in Schedule 4.01(D), neither Brentwood nor any Brentwood Subsidiary
holds any interest in a partnership or joint venture of any kind.
(E) CORPORATE POWER. It and each of its subsidiaries has the corporate
power and authority to carry on its business as it is now being conducted and to
own all its material properties and assets.
(F) CORPORATE AUTHORITY. Subject to any necessary receipt of approval by
its stockholders referred to in Section 6.01, 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 to bankruptcy,
insolvency and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(G) NO DEFAULTS. Subject to the approval by its stockholders referred to in
Section 6.01, the required regulatory approvals referred to in Section 6.02, 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 constitute (i) a breach or
violation of, or a default under, any law, rule or regulation or any judgment,
decree, order, 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 or
default is reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect, or (ii) a breach or violation of, or a default under,
its Articles of Incorporation, Charter or Bylaws; and the consummation of the
transactions contemplated by this Plan will not require any consent or approval
under any law, rule, regulation, judgment, decree, order, governmental permit or
license or, except as Previously Disclosed in Schedule 4.01(G), the consent or
approval of any other party to any such agreement, indenture or instrument,
other than the required approvals of applicable regulatory authorities referred
to in Section 6.02.
(H) FINANCIAL REPORTS. Except as Previously Disclosed in Schedule 4.01(H),
its Call Report for the fiscal year ended December 31, 1994, and all other Call
Reports filed or to be filed subsequent to December 31, 1994, in the form filed
with the Comptroller of the Currency ("OCC") (in each case, the "Brentwood
Financial Reports") did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements 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 Brentwood Financial Reports (including the
related notes and schedules thereto) fairly presents and 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 Brentwood Financial Reports
(including any related notes and schedules thereto) fairly presents and 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 during the periods
involved, and in accordance with regulatory accounting principles consistently
applied to national banking associations, except in each case as may be noted
therein, subject to normal and recurring year-end audit adjustments in the case
of unaudited statements.
(I) ABSENCE OF UNDISCLOSED LIABILITIES. None of Brentwood or the Brentwood
Subsidiaries has any obligation or liability (contingent or otherwise) that,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect. Since December 31, 1994, none of Brentwood or the Brentwood
Subsidiaries has incurred or paid any obligation or liability (including any
obligation or liability incurred in connection with any acquisitions in which
any form of direct financial assistance of the federal government or any agency
thereof has been provided to Brentwood or any Brentwood Subsidiary) which,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect.
(J) NO EVENTS. Except as Previously Disclosed on Schedule 4.01(J), since
December 31, 1994, no event has occurred which, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect.
(K) PROPERTIES. Except as reflected in the Brentwood Financial Reports,
Brentwood and the Brentwood Subsidiaries have good and marketable title, free
and clear of all Liens, to all of the properties and assets, tangible and
intangible, reflected
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in the Brentwood Financial Reports as being owned by Brentwood or the Brentwood
Subsidiaries as of the dates thereof other than those that, individually or in
the aggregate, are not reasonably likely to have a Material Adverse Effect. All
buildings and all fixtures, equipment, and other property and assets which are
held under leases or subleases by any of Brentwood or the Brentwood Subsidiaries
are held under valid leases or subleases enforceable in accordance with their
respective terms, other than any such exceptions to validity or enforceability
that, individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect. The policies of fire, theft, liability, fidelity, and
other insurance maintained with respect to the assets or businesses of Brentwood
or the Brentwood Subsidiaries provide adequate coverage against reasonably
foreseeable loss.
(L) LITIGATION; REGULATORY ACTION. Except as Previously Disclosed in
Schedule 4.01(L), no litigation, proceeding or controversy before any court or
governmental agency is pending which, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect, or which (as of the date
hereof) alleges claims under any fair lending law or other law relating to
discrimination, including, without limitation, the Equal Credit Opportunity Act,
the Fair Housing Act, the Community Reinvestment Act and the Home Mortgage
Disclosure Act, and, to the best of its knowledge, no such litigation,
proceeding or controversy has been threatened; and except as Previously
Disclosed in Schedule 4.01(L) neither it nor any of its subsidiaries or
properties is a party to or is subject to any order, decree, agreement,
memorandum of understanding or similar arrangement with, or a commitment letter
or similar submission to, any federal or state governmental agency or authority
(the "Regulatory Authorities") charged with the supervision or regulation of
depository institutions or engaged in the insurance of deposits (including,
without limitation, the OCC and the FDIC) or the supervision or regulation of
Brentwood or any of the Brentwood Subsidiaries and neither it nor any of the
Brentwood Subsidiaries has been advised by any such Regulatory Authority that
such Regulatory Authority is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
decree, agreement, memorandum or understanding, commitment letter or similar
submission.
(M) COMPLIANCE WITH LAWS. Except as Previously Disclosed in Schedule
4.01(M), each of Brentwood and the Brentwood Subsidiaries:
(1) has all permits, licenses, authorizations, orders and approvals
of, and have made all filings, applications and registrations with, all
Regulatory Authorities that are required in order to permit them to own
their businesses as presently conducted and that are material to the
business of Brentwood and the Brentwood 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 knowledge of Brentwood, no
suspension or cancellation of any of them is threatened; and all such
filings, applications and registrations are current;
(2) has received no notification or communication from any Regulatory
Authority or the staff thereof (i) asserting that any of Brentwood or any
Brentwood Subsidiary is not in compliance with any of the statutes,
regulations, or ordinances which such Regulatory Authority enforces, which,
as a result of such noncompliance in any such instance, individually or in
the aggregate, is reasonably likely to have a Material Adverse Effect, (ii)
threatening to revoke any license, franchise, permit, or governmental
authorization which revocation, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect, or (iii) requiring any
of Brentwood or any Brentwood Subsidiary (or any of their officers,
directors, or controlling persons) to enter into a cease and desist order,
agreement, or memorandum of understanding (or requiring the board of
directors thereof to adopt any resolution or policy);
(3) is not required to give prior notice to any federal banking agency
of the proposed addition of an individual to its board of directors or the
employment of an individual as a senior executive;
(4) is, in the case of Brentwood, able to receive brokered deposits
without a waiver; and
(5) is in substantial compliance with all fair lending laws or other
laws relating to discrimination, including, without limitation, the Equal
Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment
Act and the Home Mortgage Disclosure Act.
(N) MATERIAL CONTRACTS. Except as Previously Disclosed in Schedule 4.01(N),
none of Brentwood or the Brentwood Subsidiaries, nor any of their respective
assets, businesses, or operations, is a party to, or is bound or affected by, or
receives benefits under, any contract or agreement or amendment thereto that in
each case provides for annual payments in excess of $50,000. Except as
Previously Disclosed on Schedule 4.01(N), none of Brentwood or the Brentwood
Subsidiaries is in default under any contract, agreement, commitment,
arrangement, lease, insurance policy, or other instrument to which it is a
party, by which its respective assets, business, or operations may be bound or
affected, or under which it or its respective assets, business, or operations
receives benefits, which default, individually or in the aggregate, is
reasonably likely to have a
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Material Adverse Effect, and there has not occurred any event that, with the
lapse of time or the giving of notice or both, would constitute such a default.
Except as Previously Disclosed on Schedule 4.01(N), neither Brentwood nor any
Brentwood Subsidiary is subject to or bound by any contract containing covenants
which limit the ability of Brentwood or any Brentwood Subsidiary to compete in
any line of business or with any person or which involve any restriction of
geographical area in which, or method by which, Brentwood or any Brentwood
Subsidiary may carry on its business (other than as may be required by law or
any applicable Regulatory Authority).
(O) REPORTS. Since January 1, 1993, each of Brentwood and the Brentwood
Subsidiaries has filed all reports and statements, together with any amendments
required to be made with respect thereto, that it was required to file with the
FDIC, the OCC, and any other applicable Regulatory Authority. As of their
respective dates (and without giving effect to any amendments or modifications
filed after the date of this Plan with respect to reports and documents filed
before the date of this Plan), each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all of the statutes, rules, and regulations enforced or
promulgated by the authority with which they were filed and 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.
(P) 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, excluding a fee previously disclosed to First Union to be paid to
Financial Consulting Services.
(Q) EMPLOYEE BENEFIT PLANS.
(1) Schedule 4.01(Q) contains a complete list of all bonus, deferred
compensation, pension, retirement, profit-sharing, thrift, savings,
employee stock ownership, stock bonus, stock purchase, restricted stock and
stock option plans, all employment or severance contracts, all medical,
dental, health and life insurance plans, all other employee benefit plans,
contracts or arrangements and any applicable "change of control" or similar
provisions in any plan, contract or arrangement maintained or contributed
to by it or any of its subsidiaries for the benefit of officers, former
officers, employees, former employees, directors, former directors or the
beneficiaries of any of the foregoing (the "Compensation and Benefit
Plans"). True and complete copies of all Compensation and Benefit Plans,
including, but not limited to, any trust instruments and/or insurance
contracts, if any, forming a part thereof, and all amendments thereto have
been supplied to First Union.
(2) All "employee benefit plans" within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
other than "multiemployer plans" within the meaning of Section 3(37) of
ERISA ("Multiemployer Plans"), covering employees or former employees of it
and its subsidiaries (the "Plans"), to the extent subject to ERISA, are in
substantial compliance with ERISA. Each Plan which is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA ("Pension Plan")
and which is intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue
Service, and Brentwood is not aware of any circumstances reasonably likely
to result in the revocation or denial of any such favorable determination
letter. There is no material pending or, to Brentwood's knowledge,
threatened litigation relating to the Plans. Neither Brentwood nor any of
the Brentwood Subsidiaries has engaged in a transaction with respect to any
Plan that, assuming the taxable period of such transaction expired as of
the date hereof, could subject it or any of its subsidiaries to a tax or
penalty imposed by either Section 4975 of the Code or Section 502(i) of
ERISA in an amount which would be material.
(3) No liability under Subtitle C or D of Title IV of ERISA has been
or is expected to be incurred by Brentwood or any of the Brentwood
Subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any of them, or the single-employer
plan of any entity which is considered one employer with it under Section
4001(a)(15) of ERISA or Section 414 of the Code (an "ERISA Affiliate").
Neither Brentwood nor any of the Brentwood Subsidiaries presently
contributes to a Multiemployer Plan, nor have they contributed to such a
plan within the five calendar years preceding this year. No notice of a
"reportable event", within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived, has been required to
be filed for any Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof.
(4) All contributions required to be made under the terms of any Plan
have been timely made. Neither any Pension Plan nor any single-employer
plan of an ERISA Affiliate has an "accumulated funding deficiency" (whether
or not
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waived) within the meaning of Section 412 of the Code or Section 302 of
ERISA. Neither Brentwood nor any of the Brentwood Subsidiaries has
provided, or is required to provide, security to any Pension Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29)
of the Code.
(5) Under each Pension Plan which is a single-employer plan, as of the
last day of the most recent plan year ended prior to the date hereof, the
actuarially determined present value of all "benefit liabilities", within
the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of
the actuarial assumptions contained in the Plan's most recent actuarial
valuation) did not exceed the then current value of the assets of such
Plan, and there has been no material change in the financial condition of
such Plan since the last day of the most recent Plan year.
(6) Except as Previously Disclosed in Schedule 4.01(Q), (i) neither
Brentwood nor any of the Brentwood Subsidiaries has any obligations for
retiree health and life benefits under any plan or (ii) there are no
restrictions on the rights of Brentwood or any of the Brentwood
Subsidiaries to amend or terminate any Compensation and Benefit Plan
without incurring any liability thereunder.
(7) Except as Previously Disclosed in Schedule 4.01(Q), neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including,
without limitation, severance, unemployment compensation, golden parachute
or otherwise) becoming due to any director or any employee of Brentwood or
any of the Brentwood Subsidiaries under any Compensation and Benefit Plan
or otherwise from Brentwood or any of the Brentwood Subsidiaries, (ii)
increase any benefits otherwise payable under any Compensation and Benefit
Plan or (iii) result in any acceleration of the time of payment or vesting
of any such benefit.
(R) NO KNOWLEDGE. It knows of no reason why the regulatory approvals
referred to in Section 6.02 should not be obtained without the imposition of any
condition of the type referred to in the proviso following such Section 6.02.
(S) LABOR AGREEMENTS. Neither it nor any of the Brentwood Subsidiaries is a
party to, or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is it
or any of the Brentwood Subsidiaries the subject of a proceeding asserting that
it or any such subsidiary has committed an unfair labor practice (within the
meaning of the National Labor Relations Act) or seeking to compel it or such
subsidiary to bargain with any labor organization as to wages and conditions of
employment, nor is there any strike or other labor dispute involving it or any
of its subsidiaries, pending or, to the best of its knowledge, threatened, nor
is it aware of any activity involving it or any of the Brentwood Subsidiaries'
employees seeking to certify a collective bargaining unit or engaging in any
other organization activity.
(T) ASSET CLASSIFICATION. It has Previously Disclosed in Schedule 4.01(T) a
list, accurate and complete in all material respects, of the aggregate amounts
of loans, extensions of credit and other assets of Brentwood and the Brentwood
Subsidiaries that have been criticized or classified as of March 31, 1995, by
it, separated by category of classification or criticism (the "Asset
Classification"); and no amounts of loans, extensions of credit or other assets
that have been classified or criticized as of the date hereof, 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 Brentwood prior to the date hereof.
(U) ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for possible loan
losses shown on the consolidated balance sheets of Brentwood included in the
Brentwood Financial Reports at December 31, 1994, and March 31, 1995, were
adequate to provide for possible losses on loans outstanding as of the dates
thereof in accordance with generally accepted accounting principles consistently
applied during the periods involved.
(V) INSURANCE. Each of Brentwood and the Brentwood 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 (other than matters arising in connection with this Plan and the
transactions contemplated hereby) that are known to Brentwood, except for such
matters which, individually or in the aggregate, are not reasonably likely to
have a Material Adverse Effect. Previously Disclosed in Schedule 4.01(V) is a
list of all insurance policies maintained by or for the benefit of Brentwood or
the Brentwood Subsidiaries or their directors, officers, employees or agents.
(W) AFFILIATES. Except as Previously Disclosed in Schedule 4.01(W), to the
best of its knowledge, there is no person who, as of the date of this Plan, may
be deemed to be an "affiliate" of Brentwood as that term is used in Rule 145
under the Securities Act of 1933, as amended (together with the rules and
regulations thereunder, the "Securities Act").
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(X) TAKEOVER LAWS. It is not subject to any applicable takeover laws of the
State of Tennessee, excluding any applicable takeover laws of the State of
Tennessee that may apply solely to, or solely by virtue of the conduct of, First
Union or FUNB-TN. 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, any applicable takeover provisions of
Brentwood's Charter.
(Y) NO FURTHER ACTION. It has taken all action so that the entering into of
this Plan and the consummation of the transactions contemplated hereby
(including without limitation the Merger) 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 the vote required pursuant to Section
6.01), or (ii) except as Previously Disclosed in Schedule 4.01(Y), result in the
grant of any rights to any person under the Articles of Incorporation, Charter
or Bylaws of Brentwood or under any agreement to which Brentwood or any of the
Brentwood Subsidiaries is a party, or (iii) restrict or impair in any way the
ability of First Union or FUNB-TN to exercise the rights granted hereunder.
(Z) ENVIRONMENTAL MATTERS.
(1) To its knowledge, it and each of the Brentwood Subsidiaries, the
Participation Facilities and the Loan/Fiduciary Properties (each as defined
below) are in compliance with all Environmental Laws (as defined below) and
it has no knowledge of any circumstances that with the passage of time or
the giving of notice would be reasonably likely to result in noncompliance,
except for instances of noncompliance which are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect or have
been Previously Disclosed in Schedule 4.01(Z).
(2) 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 Brentwood Subsidiaries or to its knowledge, 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 presence, 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 Brentwood Subsidiaries or any Participation Facility, except for
such proceedings pending or threatened that are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect or have
been Previously Disclosed in Schedule 4.01(Z).
(3) To its knowledge, there is no proceeding pending or threatened
before any court, governmental agency or board or other forum in which any
Loan/Fiduciary Property (or it or any of the Brentwood 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 have a Material Adverse Effect
or have been Previously Disclosed in Schedule 4.01(Z).
(4) To its knowledge, there is no reasonable basis for any proceeding
of a type described in subparagraphs (2) or (3) above, that, individually
or in the aggregate, would be reasonably likely to have a Material Adverse
Effect, except as has been Previously Disclosed in Schedule 4.01(Z).
(5) To its knowledge, during the period of (i) its or any of the
Brentwood Subsidiaries' ownership or operation of any of their respective
current properties, (ii) its or any of the Brentwood Subsidiaries'
participation in the management of any Participation Facility, or (iii) its
or any of the Brentwood Subsidiaries' holding of a security or other
interest in a Loan/Fiduciary Property, there have been no releases or
threatened releases of Hazardous Material in, on, from, under or affecting
any such property, Participation Facility or Loan/Fiduciary Property,
except for such releases or threatened releases that are not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect
or have been Previously Disclosed in Schedule 4.01(Z).
(6) To its knowledge, prior to the period of (i) its or any of the
Brentwood Subsidiaries' ownership or operation of any of their respective
current properties, (ii) its or any of the Brentwood Subsidiaries'
participation in the management of any Participation Facility, or (iii) its
or any of the Brentwood Subsidiaries' holding of a security or other
interest in a Loan/Fiduciary Property, there were no releases or threatened
releases of Hazardous Material in, on, under or affecting any such
property, Participation Facility or Loan/Fiduciary Property, except for
such releases or threatened releases that are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect or have
been Previously Disclosed in Schedule 4.01(Z).
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(7) The following definitions apply for purposes of this Section
4.01(Z): "Loan/Fiduciary Property" means any property owned or controlled
by it or any of the Brentwood Subsidiaries or in which it or any of the
Brentwood Subsidiaries holds a security or other interest (including,
without limitation, a fiduciary interest), and, where required by the
context, includes any such property where Brentwood or any of the Brentwood
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 Brentwood Subsidiaries participates in the
management and, where required by the context, includes the owner or
operator of such property; "Environmental Law" means (i) any federal, state
and local law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, legal doctrine, order, judgment, decree,
injunction, requirement 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 Act, the federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, the Federal Occupational Safety
and Health Act of 1970, and any similar state or local laws 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, solid 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.
(AA) TAXES. Except as Previously Disclosed in Schedule 4.01(AA), (i) all
reports and returns with respect to Taxes (as defined below) that are required
to be filed by or with respect to it or its subsidiaries, including without
limitation consolidated federal income tax returns of it and the Brentwood
Subsidiaries (collectively, the "Brentwood Tax Returns"), have been duly filed,
or requests for extensions have been timely filed and have not expired, for
periods ended on or prior to December 31, 1994, and on or prior to the date of
the most recent fiscal year end immediately preceding the Effective Date, except
to the extent all such failures to file, taken together, are not reasonably
likely to have a Material Adverse Effect, and such Brentwood Tax Returns were
true, complete and accurate in all material respects, (ii) all taxes (which
shall include federal, state, local or foreign income, gross receipts, windfall
profits, severance, property, production, sales, use, license, excise,
franchise, employment, withholding or similar taxes imposed on the income,
properties or operations of it or the Brentwood Subsidiaries, together with any
interest, additions, or penalties with respect thereto and any interest in
respect of such additions or penalties, collectively the "Taxes") shown to be
due on the Brentwood Tax Returns have been paid in full, (iii) the Brentwood Tax
Returns have been examined by the Internal Revenue Service or the appropriate
state, local or foreign taxing authority or the period for assessment of the
Taxes in respect of which such Brentwood Tax Returns were required to be filed
has expired, (iv) all Taxes due with respect to completed and settled
examinations have been paid in full, (v) no issues have been raised by the
relevant taxing authority in connection with the examination of any of the
Brentwood Tax Returns which are reasonably likely to result in a determination
that would have a Material Adverse Effect, except as reserved against in its
Financial Reports, and (vi) no waivers of statutes of limitations (excluding
such statutes that relate to years currently under examination by the Internal
Revenue Service) have been given by or requested with respect to any Taxes of it
or the Brentwood Subsidiaries.
(BB) ACCURACY OF INFORMATION. The statements contained in this Plan, the
Schedules and any other written documents executed and delivered by or on behalf
of Brentwood 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 not misleading.
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(CC) DERIVATIVES CONTRACTS. None of Brentwood or the Brentwood 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
(including various combinations thereof)(each a "Derivatives Contract") except
for those Derivatives Contracts Previously Disclosed in Schedule 4.01(CC)
including a list, as applicable, of Brentwood assets pledged as security for
each Derivatives Contract.
(DD) VOTING AGREEMENT. Attached hereto as EXHIBIT A is the form of an
agreement which each of the Brentwood directors has executed and delivered to
FUNC, FUNC-VA and FUNB-TN, or in the case of William B. King, Chester A. Butler,
III and James S. Lattimore, Jr. will so execute and deliver by August 1, 1995,
pursuant to which such directors have agreed or will agree, as applicable, among
other things, that they will vote the shares of Brentwood Common Stock over
which they have voting control in favor of this Plan at the meeting.
(EE) WARRANTHOLDER AGREEMENTS. Attached hereto as EXHIBIT B is the form of
an agreement which each of the Brentwood directors has executed and delivered to
Brentwood or in the case of William B. King, Chester A. Butler, III and James S.
Lattimore, Jr. will so execute and deliver by August 1, 1995, together with the
certificates representing all of the Brentwood Warrants held by such Brentwood
director.
4.02. FIRST UNION AND FUNB-TN REPRESENTATIONS AND WARRANTIES. Each of First
Union and FUNB-TN hereby represents and warrants to Brentwood, as follows:
(A) RECITALS. The facts set forth in the Recitals of this Plan with respect
to it are true and correct.
(B) CORPORATE AUTHORITY. Subject to the required regulatory approvals
referred to in Section 6.02 herein, 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 to bankruptcy,
insolvency and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(C) NO DEFAULTS. Subject to the required regulatory approvals referred to
in Section 6.02, 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 constitute
(i) a breach or violation of, or a default under, any law, rule or regulation or
any judgment, decree, order, 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 or default is reasonably likely to have a Material Adverse Effect, or
(ii) a breach or violation of, or a default under, its Articles of
Incorporation, Charter or Bylaws; and the consummation by it of the transactions
contemplated by this Plan will not require any consent or approval under any
such law, rule, regulation, judgment, decree, order, governmental permit or
license or the consent or approval of any other party to any such agreement,
indenture or instrument.
(D) FINANCIAL REPORTS. In the case of First Union, its 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, 1993 under Section 13(a), 13(c),
14 or 15(d) of the Exchange Act, in the form filed with the SEC (in each such
case, the "First Union Financial Reports"), did not and will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements 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 and
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 and 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.
(E) NO EVENTS. Except as disclosed in the First Union Financial Reports
since December 31, 1994, no event has occurred which, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect.
(F) 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.
(G) NO KNOWLEDGE. It knows of no reason why the regulatory approvals
referred to in Section 6.02 herein should not be obtained without the imposition
of any condition of the type referred to in the proviso following such Section
6.02.
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(H) SHARES AUTHORIZED. In the case of First Union, the shares of First
Union Common Stock to be issued in exchange for shares of Brentwood Common Stock
upon consummation of the Merger in accordance with Article II, 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.
(I) LITIGATION; REGULATORY ACTION. No litigation, proceeding or controversy
before any court or governmental agency is pending which, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect, and, to the
best of its knowledge, no such litigation, proceeding or controversy has been
threatened.
(J) ACCURACY OF INFORMATION. The statements contained in this Plan, the
Schedules and any other written documents executed and delivered by or on behalf
of First Union or FUNB-TN 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 not
misleading.
V. COVENANTS.
Brentwood hereby covenants to First Union and FUNB-TN, and each of First
Union, FUNC-VA and FUNB-TN hereby covenants to Brentwood, that:
5.01. BEST EFFORTS. Subject to the terms and conditions of this Plan, it
shall use its best efforts in good faith to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
desirable, or advisable under applicable laws, so as to permit consummation of
the Merger on the Effective Date and to otherwise enable consummation of the
transactions contemplated hereby and shall cooperate fully with the other
parties hereto to that end (it being understood that any amendments to the
Registration Statement (as hereinafter defined) 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).
5.02. BRENTWOOD PROXY. In the case of Brentwood, it shall promptly prepare
a proxy statement (the "Proxy Statement") to be mailed to the holders of
Brentwood Common Stock in connection with the transactions contemplated hereby
and to be filed by Brentwood with the OCC and by First Union in a registration
statement (the "Registration Statement") with the SEC, which shall conform to
all applicable legal requirements and it shall call a special meeting (the
"Meeting") of the holders of Brentwood Common Stock to be held as soon as
practicable for purposes of voting upon the transactions contemplated hereby and
Brentwood shall use its best efforts to solicit and obtain votes of the holders
of Brentwood Common Stock in favor of the transactions contemplated hereby and
the board of directors of Brentwood shall recommend approval of the Merger and
this Plan by such holders.
5.03. REGISTRATION STATEMENT COMPLIANCE WITH SECURITIES LAWS. When the
Registration Statement or any post-effective amendment or supplement thereto
shall become effective, and at all times subsequent to such effectiveness, up to
and including the date of the Meeting, such Registration Statement and all
amendments or supplements thereto, with respect to all information set forth
therein furnished or to be furnished by Brentwood relating to Brentwood or the
Brentwood Subsidiaries and by First Union relating to First Union or its
subsidiaries, (i) will comply in all material respects with the provisions of
the Securities Act and any other applicable statutory or regulatory
requirements, and (ii) 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 contained therein not misleading; PROVIDED, HOWEVER, in no
event shall any party hereto be liable for any untrue statement of a material
fact or omission to state a material fact in the Registration Statement made in
reliance upon, and in conformity with, written information concerning another
party furnished by such other party specifically for use in the Registration
Statement.
5.04. REGISTRATION STATEMENT EFFECTIVE. First Union will advise Brentwood,
promptly after First Union receives notice thereof, of the time when the
Registration Statement has become effective or any supplement or amendment has
been filed, of the issuance of any stop order or the suspension of the
qualification of the First Union Common Stock for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for any such
purpose, or of any request by the SEC for the amendment or supplement of the
Registration Statement or for additional information.
5.05. PRESS RELEASES. Brentwood and First Union will not, without the prior
approval of the other, issue any press release or written statement for general
circulation relating to the transactions contemplated hereby, except as
otherwise required by applicable law.
5.06. ACCESS; INFORMATION. (1) Upon reasonable notice, Brentwood shall
afford First Union and its officers, employees, counsel, accountants and other
authorized representatives, access, during normal business hours throughout the
period prior to the Effective Date, to all of its properties, books, contracts,
commitments and records and, during such period, Brentwood
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shall furnish promptly to First Union (i) a copy of each material report,
schedule and other document filed by Brentwood pursuant to the requirements of
federal or state securities, thrift or banking laws, and (ii) all other
information concerning the business, properties and personnel of Brentwood as
First Union may reasonably request, provided that no investigation pursuant to
this Section 5.06 by First Union shall affect or be deemed to modify or waive
any representation or warranty made by Brentwood or the conditions to the
obligation of Brentwood to consummate the transactions contemplated by this
Plan; (2) First Union will not use any information obtained pursuant to this
Section 5.06 for any purpose unrelated to the consummation of the transactions
contemplated by this Plan and, if this Plan is terminated, will hold all
information and documents obtained pursuant to this paragraph in confidence (as
provided in Section 8.06) unless and until such time as such information or
documents become publicly available other than by reason of any action or
failure to act by First Union 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, and in the event of the termination of this Plan, First Union
will, upon request by Brentwood, deliver to Brentwood all documents so obtained
by First Union or destroy such documents; and (3) First Union shall furnish
promptly to Brentwood a copy of each material report, schedule and other
document filed by First Union pursuant to federal securities laws.
5.07. ACQUISITION PROPOSALS. In the case of Brentwood, it shall not, and it
shall cause the Brentwood Subsidiaries not to, solicit or encourage inquiries or
proposals with respect to, or, except as required by the fiduciary duties of the
Board of Directors of Brentwood (as advised in a written opinion of its
counsel), 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 of, or a substantial equity interest in
(whether by a purchase of outstanding stock or otherwise), Brentwood or any of
its subsidiaries or any merger or other business combination with Brentwood or
any of its subsidiaries other than as contemplated by this Plan; it shall
instruct its and the Brentwood Subsidiaries' officers, directors, agents,
advisors and affiliates to refrain from doing any of 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,
Brentwood or any of the Brentwood Subsidiaries.
5.08. REGISTRATION STATEMENT PREPARATION. In the case of First Union, it
shall, as promptly as practicable following the date of this Plan, prepare and
file the Registration Statement with the SEC and First Union shall use its best
efforts to cause the Registration Statement to be declared effective as soon as
practicable after the filing thereof.
5.09. BLUE-SKY FILINGS. In the case of First Union, it shall use its best
efforts to obtain, prior to the effective date of the Registration Statement,
all necessary state securities laws or "blue sky" permits and approvals,
provided that First Union shall not be required by virtue thereof to submit to
general jurisdiction in any state.
5.10. AFFILIATE AGREEMENTS. In the case of Brentwood, it will cause each
person who may be deemed to be an "affiliate" of Brentwood for purposes of Rule
145 under the Securities Act to execute and deliver to First Union on or before
the mailing of the Proxy Statement for the Meeting an agreement in the form
attached hereto as EXHIBIT C restricting the disposition of such affiliate's
shares of Brentwood Common Stock and the shares of First Union Common Stock to
be received by such person in exchange for such person's shares of Brentwood
Common Stock.
5.11. CERTAIN POLICIES OF BRENTWOOD. In the case of Brentwood, prior to the
Effective Date Brentwood shall use its best efforts to modify and change its
loan, litigation and real estate valuation policies and practices (including
loan classifications and levels of reserves) prior to the Effective Date so as
to be consistent with those of First Union and generally accepted accounting
principles; PROVIDED, HOWEVER, Brentwood shall not be required to take any
action set forth in (i) above until the regulatory approvals set forth in
Section 6.02 have been received and Brentwood is reasonably satisfied that the
Merger will be consummated on the Effective Date as provided herein. Brentwood's
representations, warranties and covenants contained in this Plan shall not be
deemed to be untrue or breached in any respect for any purpose as a consequence
of any modifications or changes undertaken solely on account of this Section
5.11.
5.12. NO RIGHTS TRIGGERED. In the case of Brentwood, it shall use its
reasonable best efforts to ensure that the entering into of this Plan and any
other action or combination of actions, or any other transactions contemplated
hereby, do not and will not, except as Previously Disclosed in Schedule 5.13,
(i) result in the grant of any rights to any person under the Articles of
Incorporation, Charter or Bylaws of Brentwood or under any agreement to which
Brentwood or any of the Brentwood Subsidiaries is a party, or (ii) restrict or
impair in any way the ability of First Union or FUNB-TN to exercise the rights
granted hereunder.
5.13. SHARES LISTED. In the case of First Union, First Union shall use its
best efforts to list, prior to the Effective Date, on the NYSE, upon official
notice of issuance, the shares of First Union Common Stock to be issued to the
holders of Brentwood Common Stock pursuant to this Plan.
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5.14. REGULATORY APPLICATIONS. In the case of First Union, it shall
promptly prepare and submit applications to the appropriate federal and state
bank regulatory authorities for approval of the Merger, and promptly make all
other appropriate filings to secure all other approvals, consents and rulings
which are necessary for the consummation of the Merger.
5.15. WARRANTHOLDER AGREEMENT. In the case of Brentwood, it shall use its
best efforts to obtain by the date of the Meeting, an agreement in the form of
EXHIBIT B hereto ("Warrantholder Agreement") signed by each of the holders of
the Brentwood Warrants together with the certificates representing all of such
holder's Warrants (together, the "Warrantholder Agreements and Certificates").
5.16. INDEMNIFICATION. Without limitation with respect to any
indemnification required other than pursuant to this Plan:
(a) For six years after the Effective Date, First Union shall
indemnify, defend and hold harmless the directors, officers and employees
of Brentwood and the Brentwood Subsidiaries (each, an "Indemnified Party")
against all liabilities arising out of actions or omissions occurring at or
prior to the Effective Date (including, without limitation, the
transactions contemplated by this Plan to the extent such persons are
indemnified under OCC regulations as in effect on the date hereof,
including provisions relating to advances of expenses incurred in the
defense of any litigation.
(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 5.16, 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 under paragraph (a) of this Section 5.16 (unless
such failure materially and adversely increases First Union's liability
under such paragraph (a)). In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Date), (i) First Union shall have the right to assume the defense thereof,
(ii) the Indemnified Parties will cooperate in the defense of any such
matter (iii) First Union shall not be liable for any settlement effected
without its prior written consent, and (iv) First Union shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties,
subject to the agreement of such Indemnified Parties to repay such fees and
expenses if it shall be determined by final decision (which is not
appealable) by a court of competent jurisdiction that such Indemnified
Parties are not entitled to indemnification under this Section 5.16;
PROVIDED, HOWEVER, that First Union shall be obligated pursuant to this
paragraph to pay for only one firm of counsel for all Indemnified Parties
for any single or related group of actions, suits or proceedings.
(c) First Union shall use its reasonable best efforts to maintain
Brentwood's existing directors' and officers' liability insurance policy
(or a policy, including First Union's existing policy, providing comparable
coverage amount on terms no less favorable) covering persons who are
currently covered by such insurance for a period of three years after the
Effective 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 Brentwood's directors and officers,
150% of the annual premium payment of Brentwood'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 of Brentwood'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 Brentwood's current policy in effect as of the
date of this Plan.
(d) If First Union 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 shall assume the obligations set forth in this
Section 5.16.
(e) First Union shall pay all reasonable expenses, including
reasonable attorneys' fees, that may be incurred by any Indemnified Party
in successfully enforcing the indemnity and other obligations provided for
in this Section 5.16. The rights of each Indemnified Party hereunder shall
be in addition to any other rights such Indemnified Party may have under
the Articles of Association or By-laws of Brentwood.
(f) The provisions of this Section 5.16 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and such
Indemnified Party's heirs and representatives.
VI. CONDITIONS TO CONSUMMATION OF THE MERGER.
Consummation of the Merger is conditioned upon:
6.01. SHAREHOLDER VOTE. Approval of the transactions contemplated hereby by
the requisite vote of the stockholders of Brentwood, as may be required.
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6.02. REGULATORY APPROVALS. Procurement by Brentwood, First Union and
FUNB-TN of regulatory consents and approval by the appropriate federal and state
bank regulatory authorities and the expiration of the statutory waiting period
relating thereto; PROVIDED, HOWEVER, that no approval or consent in Section 6.02
shall have imposed any condition or requirement which, in the reasonable opinion
of First Union, would so materially adversely impact the economic or business
benefits to First Union of the transactions contemplated by this Plan so as to
render inadvisable the consummation of the Merger.
6.03. NO INJUNCTION. There shall not be in effect any order, decree or
injunction of any court or agency of competent jurisdiction that enjoins or
prohibits consummation of any of the transactions contemplated hereby or under
the Stock Option Agreement.
6.04. DELOITTE & TOUCHE LLP LETTERS. First Union shall have received from
Deloitte & Touch LLP letters, dated the date of or shortly prior to (i) the
mailing of the Proxy Statement and (ii) the Effective Date, in form and
substance satisfactory to First Union, with respect to Brentwood's consolidated
financial position and results of operations, which letters shall be based upon
customary specified procedures undertaken by such firm.
6.05. LEGAL OPINION. Brentwood shall have received an opinion, dated the
Effective Date, of Marion A. Cowell, Jr., counsel for First Union and FUNB-TN,
in form reasonably satisfactory to Brentwood, which shall cover the matters
contained in EXHIBIT D hereto.
6.06. LEGAL OPINION. First Union shall have received an opinion, dated the
Effective Date, of Bass, Berry & Sims, in form reasonably satisfactory to First
Union, which shall cover the matters contained in EXHIBIT E hereto.
6.07. OFFICERS' CERTIFICATE. (i) Each of the representations and warranties
contained herein of First Union and FUNB-TN shall be true and correct as of the
date of this Plan and upon the Effective Date with the same effect as though all
such representations and warranties had been made on the Effective Date, except
for any such representations and warranties made as of a specified date, which
shall be true and correct as of such date, and (ii) each and all of the
agreements and covenants of First Union and FUNB-TN to be performed and complied
with pursuant to this Plan on or prior to the Effective Date shall have been
duly performed and complied with in all material respects, and Brentwood shall
have received a certificate signed by an executive officer of each of First
Union and FUNB-TN dated the Effective Date, to such effect.
6.08. OFFICERS' CERTIFICATE. (i) Each of the representations and warranties
contained herein of Brentwood shall be true and correct as of the date of this
Plan and upon the Effective Date with the same effect as though all such
representations and warranties had been made on the Effective Date, except for
any such representations and warranties made as of a specified date, which shall
be true and correct as of such date, and (ii) each and all of the agreements and
covenants of Brentwood to be performed and complied with pursuant to this Plan
on or prior to the Effective Date shall have been duly performed and complied
with in all material respects, and First Union and FUNB-TN shall have received a
certificate signed by the Chief Executive Officer and the Chief Financial
Officer of Brentwood dated the Effective Date, to such effect.
6.09. EFFECTIVE REGISTRATION STATEMENT. The Registration Statement shall
have become effective and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the SEC or any other
regulatory authority.
6.10. BLUE-SKY PERMITS. First Union shall have received all state
securities laws and "blue sky" permits necessary to consummate the Merger.
6.11. TAX OPINION. First Union and Brentwood shall have received an opinion
from Sullivan & Cromwell, special counsel to First Union, to the effect that (i)
the Merger constitutes a reorganization under Section 368 of the Internal
Revenue Code, and (ii) no gain or loss will be recognized by stockholders of
Brentwood who receive shares of First Union Common Stock solely in exchange for
their shares of Brentwood Common Stock, except that gain or loss may be
recognized as to cash received in lieu of fractional share interests and, in
rendering their opinion, Sullivan & Cromwell may require and rely upon
representations contained in certificates of officers of First Union, Brentwood
and others.
6.12. NYSE LISTING. The shares of First Union Common Stock issuable
pursuant to this Plan shall have been approved for listing on the NYSE, subject
to official notice of issuance.
6.13. RECEIPT OF AFFILIATE AGREEMENTS. First Union shall have received from
each affiliate of Brentwood the agreement referred to in Section 5.10.
6.14. WARRANTHOLDER AGREEMENTS. The Warrantholder Agreements and
Certificates shall have been received by Brentwood from the holders of all of
the Brentwood Warrants and satisfactory evidence thereof shall have been
delivered to First Union.
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6.15. CANCELLATION OF THE STOCK OPTIONS. All of the Stock Options shall
have been canceled and satisfactory evidence thereof shall have been delivered
to First Union. PROVIDED, HOWEVER, that a failure to satisfy any of the
conditions set forth in the proviso following Section 6.02 or in Section 6.04,
6.06, 6.08, 6.13, 6.14 or 6.15 shall only constitute conditions if asserted by
First Union, and a failure to satisfy any of the conditions set forth in Section
6.05 or 6.07 shall only constitute conditions if asserted by Brentwood.
VII. TERMINATION.
This Plan may be terminated prior to the Effective Date, either before or
after receipt of required stockholder approvals:
7.01. MUTUAL CONSENT. By the mutual consent of First Union and Brentwood,
if the Board of Directors of each so determines by vote of a majority of the
members of its entire Board.
7.02. BREACH. By First Union or Brentwood, if its Board of Directors so
determines by vote of a majority of the members of its entire Board, in the
event of (i) 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 (ii) a breach by the other party of any of the covenants or
agreements contained herein, which breach cannot be or has not been cured within
thirty (30) days after the giving of written notice to the breaching party of
such breach.
7.03. DELAY. By First Union or Brentwood, if its Board of Directors so
determines by vote of a majority of the members of its entire Board, in the
event that the Merger is not consummated by March 31, 1996.
7.04. NO STOCKHOLDER APPROVAL. By Brentwood 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 6.01
herein is not obtained at a meeting or meetings called for the purpose of
obtaining such approval.
VIII. OTHER MATTERS.
8.01. SURVIVAL. If the Effective Date occurs, all representations,
warranties, agreements and covenants contained in this Plan shall not survive
the Effective Date, except for Sections 5.16, 8.01, 8.03, 8.04, 8.09 and 8.11.
If this Plan is terminated prior to the Effective Date, the agreements and
representations of the parties in Sections 8.01, 8.04, 8.05, 8.06, 8.07, 8.09
and 8.11 shall survive such termination.
8.02. WAIVER; AMENDMENT. Prior to the Effective Date, any provision of this
Plan may be (i) waived by the party benefitted by the provision, or (ii) amended
or modified at any time, by an agreement in writing among the parties hereto
approved by their respective Boards of Directors and executed in the same manner
as this Plan, except that, after the vote by the stockholders of Brentwood, the
consideration to be received by the stockholders of Brentwood for each share of
Brentwood Common Stock shall not thereby be decreased.
8.03. COUNTERPARTS. This Plan may be executed in one or more counterparts,
each of which shall be deemed to constitute an original. This Plan shall become
effective when one counterpart has been signed by each party hereto.
8.04. GOVERNING LAW. This Plan shall be governed by, and interpreted in
accordance with, the laws of the State of Tennessee, without regard to any
conflict of law principles.
8.05. EXPENSES. Each party hereto will bear all expenses incurred by it in
connection with this Plan and the transactions contemplated hereby, except
printing expenses which shall be shared equally between Brentwood and First
Union.
8.06. CONFIDENTIALITY. Except as otherwise provided in Section 5.06(2),
each of the parties hereto and their respective agents, attorneys and
accountants will maintain the confidentiality of all information provided in
connection herewith which has not been publicly disclosed 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.
8.07. NOTICES. All notices, requests and other communications hereunder to
a party shall be in writing and shall be deemed given if personally delivered,
telecopied (with confirmation) or mailed by registered or certified mail (return
receipt requested) to such party at its address set forth below or such other
address as such party may specify by notice to the parties hereto.
B-17
<PAGE>
<TABLE>
<S> <C>
If to First Union
or FUNB-TN, to: First Union Corporation
One First Union Center
Charlotte, N.C. 28288-0013
Attn: Chief Executive Officer
Copy to: Marion A. Cowell, Jr., Esq.
First Union Corporation
One First Union Center
Charlotte, N.C. 28288-0013
If to Brentwood, to: Brentwood National Bank
5110 Maryland Way
Brentwood, TN 37027
Attn: James Harris, President
Copy to: Bob F. Thompson
Bass, Berry & Sims
2700 First American Center
Nashville, TN 37238
</TABLE>
8.08. DEFINITIONS. Any term defined anywhere in this Plan shall have the
meaning ascribed to it for all purposes of this Plan (unless expressly noted to
the contrary). In addition:
(1) the term "Material Adverse Effect" shall mean any event,
occurrence or circumstance which, individually or combined with one or more
other events, circumstances or occurrences (a) has or is reasonably likely
to have a material adverse effect on the financial condition , results of
operations or business or prospects of Brentwood and its subsidiaries,
taken as a whole, or First Union and its subsidiaries, taken as a whole or
(b) would materially impair the party's ability to perform its obligations
under this Plan or the consummation of the Merger and the other
transactions contemplated by this Plan; and
(2) the term "Previously Disclosed" by a party shall mean information
set forth in a Schedule that is delivered by that party to the other party
prior to the execution of this Plan and specifically designated as
information "Previously Disclosed" pursuant to this Plan.
8.09. ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES. This Plan
(including the exhibits and schedules), represents the entire understanding of
the parties hereto with reference to the transactions contemplated hereby and
supersedes any and all other oral or written agreements heretofore made. Other
than Section 5.16, nothing in this Plan expressed or implied, is intended to
confer upon any person, other than the parties hereto or their respective
successors, any rights, remedies, obligations or liabilities under or by reason
of this Plan.
8.10. BENEFIT PLANS. Upon consummation of the Merger, as soon as
administratively practicable, employees of Brentwood and the Brentwood
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, except to the
extent that any of such employees are parties to the severance agreements
Previously Disclosed in Schedule 3.06. 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 Brentwood or the Brentwood Subsidiaries (or
to the extent Brentwood has given effect to service with other institutions,
with such other institutions), as the case may be, as if such service were with
First Union or its subsidiaries.
8.11. HEADINGS. The headings contained in this Plan are for reference
purposes only and are not part of this Plan.
B-18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
FIRST UNION CORPORATION
By: /s/ KENNETH R. STANCLIFF
Name: Kenneth R. Stancliff
Title: Senior Vice President
FIRST UNION CORPORATION OF VIRGINIA
By: /s/ KENNETH R. STANCLIFF
Name: Kenneth R. Stancliff
Title: Senior Vice President
FIRST UNION NATIONAL BANK OF TENNESSEE
By: /s/ KENNETH R. STANCLIFF
Name: Kenneth R. Stancliff
Title: Senior Vice President
BRENTWOOD NATIONAL BANK
By: /s/ JAMES D. HARRIS
Name: James D. Harris
Title: President
B-19
<PAGE>
ALL OF THE DIRECTORS
BRENTWOOD NATIONAL BANK
<TABLE>
<S> <C>
/s/ Frank Bumstead
FRANK BUMSTEAD
/s/ CHESTER A. BUTLER
CHESTER A. BUTLER
/s/ FARZIN FERDOWSKI
FARZIN FERDOWSKI
/s/ JIM HARRIS
JIM HARRIS
/s/ BILL KING
BILL KING
/s/ JIM LATTIMORE
JIM LATTIMORE
/s/ BOYCE MAGLI
BOYCE MAGLI
/s/ EDWIN RASKIN
EDWIN RASKIN
/s/ JIM REDD
JIM REDD
/s/ DAVID ROLLINS
DAVID ROLLINS
/s/ REESE SMITH, III
REESE SMITH, III
/s/ DAVID HALL
DAVID HALL
</TABLE>
B-20
<PAGE>
BOARD OF DIRECTORS
FIRST UNION NATIONAL BANK OF TENNESSEE
<TABLE>
<S> <C>
/s/ DR. T. B. BOYD, III /s/ DONALD M. MACLEOD
DR. T. B. BOYD,
III DONALD M. MACLEOD
/s/ GAIL O. NEWMAN
DAVIS H. CARR GAIL O. NEUMAN
/s/ DR. RICHARD W. OLIVER
HAYWOOD D. COCHRANE, JR. DR. RICHARD W. OLIVER
/s/ DR. COLLEEN CONWAY-WELCH /s/ ROBERT L. REID
DR. COLLEEN CONWAY-WELCH ROBERT L. REID
/s/ JOHN P. COOPER /s/ JAMES E. ROBINSON
JOHN P. COOPER JAMES E. ROBINSON
/s/ J. WILLIAM DENNY /s/ THOMAS J. SHERRARD
J. WILLIAM DENNY THOMAS J. SHERRARD
/s/ JACK B. TURNER
DR. LLOYD C. ELAM JACK B. TURNER
/s/ WILLIAM M. JOHNSON /s/ GEORGE L. YOWELL
WILLIAM M. JOHNSON GEORGE L. YOWELL
</TABLE>
B-21
<PAGE>
LIST OF EXHIBITS1
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
<C> <S>
A FORM OF VOTING AGREEMENT2
B FORM OF WARRANTHOLDER AGREEMENT3
C FORM OF AFFILIATE LETTER
D FORM OF LEGAL OPINION
E FORM OF LEGAL OPINION
</TABLE>
1 Exhibits are excluded, except as otherwise indicated.
2 See ANNEX C.
3 See ANNEX D.
B-22
<PAGE>
ANNEX C
JULY 18, 1995
[CONFORMED COPY]
VOTING AGREEMENT
First Union Corporation
First Union Corporation of Virginia
First Union National Bank of Tennessee
One First Union Center
Charlotte, North Carolina 28288-0013
Dear Sirs:
In order to induce you to enter into an Agreement and Plan of Acquisition
(the "Plan") dated of even date herewith among Brentwood National Bank
("Brentwood"), First Union Corporation ("FUNC"), First Union Corporation of
Virginia ("FUNC-VA") and First Union National Bank of Tennessee ("FUNB-TN"),
each of the undersigned, for himself, his heirs and legal representatives,
hereby agrees, represents, warrants and covenants with and to FUNC, FUNC-VA and
FUNB-TN as follows:
1. Each of the undersigned beneficially owns the shares of Brentwood common
stock set forth opposite the undersigned's name on Annex A attached hereto and
no others. Such shares are so owned free and clear of any lien, right or
encumbrance whatsoever, except for any pledge of such shares to secure a loan to
such undersigned, and no proxy has been granted with respect thereto and each of
the undersigned has full capacity, power and authority to vote such shares
without the consent or approval of any other party in the absence of a default
under any such loan secured by such shares. If any of such shares are currently
pledged to secure a loan to such undersigned, each of the undersigned, as
applicable, (i) represents and warrants that such loan is not in default and no
event or condition exists that with notice, lapse of time or both would
constitute such a default, and (ii) agrees to take all such action as may be
necessary to prevent any such default, event or condition to exist in order to
prevent the lender from taking title to such shares and to continue to enable
such undersigned to vote such shares as hereinafter set forth.
2. Each of the undersigned hereby agrees to vote such shares in favor of
approval of the Merger (as defined in the Plan) and the Plan and, as a
shareholder, agrees to take all necessary action to consummate the Merger as
expeditiously as possible.
3. Each of the undersigned covenants that pending the earlier of the
consummation of the Merger or the termination of the Plan, the undersigned will
not sell, permit a lien or other encumbrance to exist with respect to (except as
hereinabove provided), or grant any proxy in respect of (except as hereinabove
provided and for proxies solicited by the Board of Directors of Brentwood in
connection with the special meeting to vote on the Plan or in connection with
any annual meeting of shareholders), the shares of Brentwood common stock set
forth opposite the undersigned's name, unless all the other parties to any such
sale or other transaction enter into an agreement in form and substance
satisfactory to FUNC embodying the benefits and rights contained herein.
Very truly yours,
/s/ FRANK BUMSTEAD (L.S.)
/s/ EDWIN RASKIN (L.S.)
/s/ DAVID ROLLINS (L.S.)
/s/ FARZIN FERDOWSKI (L.S.)
/s/ REESE SMITH (L.S.)
/s/ JAMES REDD (L.S.)
/s/ DAVID HALL (L.S.)
/s/ BOYCE MAGLI (L.S.)
/s/ JAMES HARRIS (L.S.)
/s/ CHESTER BUTLER (L.S.)
/s/ BILL KING (L.S.)
/s/ JIM LATTIMORE (L.S.)
C-1
<PAGE>
Annex A TO
VOTING AGREEMENT
<TABLE>
<CAPTION>
NUMBER OF
SHAREHOLDER SHARES
<S> <C>
Frank Bumstead 20,000
Edwin Raskin 33,250
David Rollins 10,000
Farzin Ferdowski 61,300
Reese Smith 19,920
James Redd 50,000
David Hall 1,000
Boyce Magli 70,250
James Harris 40,000
Chester Butler 600
Jim Lattimore 80,000
Bill King 55,000
</TABLE>
C-2
<PAGE>
ANNEX D
FORM OF WARRANTHOLDER AGREEMENT
THIS AGREEMENT, made and entered into as of the day of ,
19 , by and between ("Warrantholder") and
BRENTWOOD NATIONAL BANK ("Brentwood");
W I T N E S S E T H :
WHEREAS, Brentwood has entered into an Agreement and Plan of Acquisition,
dated as of July 18, 1995 (the "Plan"), pursuant to which Brentwood would be
merged (the "Merger") with and into First Union National Bank of Tennessee
("FUNB-TN"), and each of the outstanding shares of Brentwood common stock would
be converted into the right to receive shares of First Union Corporation
("FUNC") common stock, all subject to the terms and conditions contained
therein, including without limitation, approval of the Plan by the holders of at
least 66 2/3% of the outstanding shares of Brentwood common stock at a meeting
of such holders; and
WHEREAS, one of the conditions to consummation of the Plan is the execution
and delivery agreements in the form hereof executed by the holders of all of
outstanding warrants to purchase shares of Brentwood common stock, together with
the certificates representing all such warrants held by each of such holders;
and
WHEREAS, Warrantholder, the holder of warrants to purchase shares of
Brentwood common stock (the "Warrants"), desires to execute this Agreement in
order to facilitate consummation of the Merger, which Warrantholder believes is
in the best interests of Warrantholder, Brentwood and the stockholders,
employees and customers of Brentwood, including Warrantholder as a stockholder
of Brentwood;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and adequacy of which being hereby
acknowledged by the parties hereto, Warrantholder and Brentwood hereby
irrevocably agree as follows:
1. Warrantholder hereby delivers to Brentwood the certificates
attached hereto representing all of the Warrants, to be held in escrow by
Brentwood, or, at the option of Brentwood, Brentwood's counsel, pending
consummation of the Merger or termination of the Plan, whichever first
occurs (the "Escrow Period").
2. Warrantholder agrees that during the Escrow Period the Warrants
shall not be transferrable, other than pursuant to the law of descent and
distribution. Nothing herein shall entitle FUNC, any FUNC subsidiary or any
other person, to exercise the Warrants.
3. Warrantholder agrees that if the Merger is consummated the Warrants
shall automatically be canceled as of the consummation date of the Merger,
without any further action on the part of Warrantholder and the
Warrantholder shall be entitled to receive a cash payment for each of the
Warrants, calculated as set forth on Annex A attached hereto, which
Warrantholder agrees is fair and adequate consideration for the Warrants.
4. It is understood and agreed that if the Plan is terminated, the
certificates for the Warrants shall be promptly returned to Warrantholder
and this Agreement shall automatically expire as of the termination date of
the Plan.
5. In connection with the execution of this Agreement, Warrantholder
has received all information deemed by Warrantholder to be necessary or
appropriate and has consulted with Warrantholder's legal and tax advisors
to the extent deemed necessary or appropriate by Warrantholder.
6. Warrantholder represents and warrants that the recitals set forth
in the preamble to this Agreement are true and correct.
7. This Agreement is irrevocable and shall be binding on the
successors, assigns, heirs and personal representatives of each of the
parties hereto.
8. Warrantholder understands and agrees that the cash payment to which
Warrantholder shall be entitled to receive in exchange for his Warrants
upon consummation of the Merger will not be delivered to Warrantholder
until certificates representing all of such Warrants (or indemnity
satisfactory to FUNC, in its sole judgment, if any of such certificates are
lost, stolen or destroyed) are delivered as hereinabove provided. No
interest will be paid on any payment to which Warrantholder shall be
entitled to receive upon such delivery.
D-1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and sealed this
Agreement as of the day and year first above written.
(L.S.)
(Warrantholder)
BRENTWOOD NATIONAL BANK
By:
Name:
Title:
(BANK SEAL)
D-2
<PAGE>
Annex A TO
WARRANTHOLDER AGREEMENT
(1) Multiply the average of the last sale prices per share of First
Union Common Stock on the NYSE Composite Transactions tape for
the ten trading days ending on the last trading day prior to the
effective date of the Merger (the "Average Stock Price") by the
result of dividing $8.8112 by the Average Stock Price.
(2) Subtract $5.00 from the result of (1) above.
(3) Multiply the result of (2) above by the number of Warrants, which
shall equal the cash payment for the Warrants.
D-3
<PAGE>
ANNEX E
OPINION OF FINANCIAL CONSULTING ASSOCIATES, INC.
Board of Directors
Brentwood National Bank
5110 Maryland Way
Brentwood, Tennessee 37027
December , 1995
Dear Members of the Board:
You have asked us to advise you with respect to the fairness to the
shareholders and warrantholders of Brentwood National Bank (the "Company"), from
a financial point of view, of the per share purchase price and terms provided
for in the Agreement and Plan of Merger (the "Merger Agreement") dated as of
July 18, 1995 between the Company and First Union Corporation ("First Union").
The Merger Agreement provides for a merger (the "Merger") of the Company and
First Union pursuant to which each share of common stock of the Company will be
converted into the right to receive shares of common stock of First Union
providing approximately $8.8112 in market value (the "Per Share Price and
Terms"). The exchange ratio of First Union common shares for each share of
Company common stock will adjust, as described in the Merger Agreement, based
upon the average closing price of First Union for a defined 10 day period prior
to the effective date of the Merger. Additionally, outstanding stock warrants
for the purchase of common stock of the Company will be converted into the right
to receive $3.8112 in cash for each common share of the Company such warrant
permits its holder to subscribe for. On December , the closing price of First
Union common stock was $ .
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to First Union and the Company. We
have also reviewed certain other information, including financial forecasts,
provided to us by First Union and the Company, and have discussed with the
Company's management the business and prospects of the Company.
We have also considered certain financial and stock market data of First
Union and certain financial data of the Company and we have compared that data
with similar data for other publicly held bank holding companies and we have
considered the financial terms of certain other comparable transactions which
have recently been effected. We also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which we deemed relevant.
In connection with our review, we have not independently verified any of
the foregoing information and have relied on its being complete and accurate in
all material respects. With respect to the financial forecasts we have assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of First Union's and the Company's managements
as to the future financial performance of First Union and the Company. In
addition, we have not made an independent evaluation or appraisal of the assets
of First Union or the Company. We have not solicited third party indications of
interest in acquiring the Company.
It should be noted that this opinion is based on market conditions and
other circumstances existing on the date hereof, and this opinion does not
represent our opinion as to what the value of the First Union common stock
necessarily will be when the First Union common stock is issued to the
stockholders of the Company upon consummation of the Merger.
We have acted as financial advisor to the Company in connection with the
Merger and will receive a fee for our services, a significant portion of which
is contingent upon the consummation of the Merger.
It is understood that this opinion may be included in its entirety in any
communication by the Company or the Board of Directors to the stockholders of
the Company including the Prospectus/Proxy Statement to be delivered to the
stockholders of the Company, and which is contained in a registration statement
on Form S-4 filed by First Union with the Securities and Exchange Commission in
connection with the Merger. The opinion may not, however, be otherwise
summarized, excerpted from or publicly referred to without our prior written
consent.
Based upon and subject to the foregoing, it is our opinion that as of the
date hereof, the Per Share Price and Terms of the Merger are fair to the common
stockholders and warrantholders of the Company from a financial point of view.
Very truly yours,
FINANCIAL CONSULTING ASSOCIATES, INC.
E-1
<PAGE>
ANNEX F
PORTIONS OF 12 U.S.C. 215A RELATING TO DISSENTERS' APPRAISAL RIGHTS AND
BANKING CIRCULAR 259 RELATING THERETO
(SECTION MARK)215A. MERGER OF NATIONAL BANKS OR STATE BANKS INTO NATIONAL BANKS
(A) APPROVAL OF COMPTROLLER, BOARD AND SHAREHOLDERS; MERGER AGREEMENT;
NOTICE; CAPITAL STOCK; LIABILITY OF RECEIVING ASSOCIATION
One or more national banking associations or one or more State banks, with
the approval of the Comptroller, under an agreement not inconsistent with this
subchapter, may merge into a national banking association located within the
same State, under the charter of the receiving association. The merger agreement
shall --
(1) be agreed upon in writing by a majority of the board of directors
of each association or State bank participating in the plan of merger;
(2) be ratified and confirmed by the affirmative vote of the
shareholders of each such association or State bank owning at least
two-thirds of its capital stock outstanding, or by a greater proportion of
such capital stock in the case of a State bank if the laws of the State
where it is organized so require, at a meeting to be held on the call of
the directors, after publishing notice of the time, place, and object of
the meeting for four consecutive weeks in a newspaper of general
circulation published in the place where the association or State bank is
located, or, if there is no such newspaper, then in the newspaper of
general circulation published nearest thereto, and after sending such
notice to each shareholder of record by certified or registered mail at
least ten days prior to the meeting, except to those shareholders who
specifically waive notice, but any additional notice shall be given to the
shareholders of such State bank which may be required by the laws of the
State where it is organized. Publication of notice may be waived, in cases
where the Comptroller determines that an emergency exists justifying such
waiver, by unanimous action of the shareholders of the association or State
banks;
(3) specify the amount of the capital stock of the receiving
association, which shall not be less than that required under existing law
for the organization of a national bank in the place in which it is located
and which will be outstanding upon completion of the merger, the amount of
stock (if any) to be allocated, and cash (if any) to be paid, to the
shareholders of the association or State bank being merged into the
receiving association; and
(4) provide that the receiving association shall be liable for all
liabilities of the association or State bank being merged into the
receiving association.
(B) DISSENTING SHAREHOLDERS
If a merger shall be voted for at the called meetings by the necessary
majorities of the shareholders of each association or State bank participating
in the plan of merger, and thereafter the merger shall be approved by the
Comptroller, any shareholder of any association or State bank to be merged into
the receiving association who has voted against such merger at the meeting of
the association or bank of which he is a stockholder, or has given notice in
writing at or prior to such meeting to the presiding officer that he dissents
from the plan of merger, shall be entitled to receive the value of the shares so
held by him when such merger shall be approved by the Comptroller upon written
request made to the receiving association at any time before thirty days after
the date of consummation of the merger, accompanied by the surrender of his
stock certificates.
(C) VALUATION OF SHARES
The value of the shares of any dissenting shareholder shall be ascertained,
as of the effective date of the merger, by an appraisal made by a committee of
three persons, composed of (1) one selected by the vote of the holders of the
majority of the stock, the owners of which are entitled to payment in cash; (2)
one selected by the directors of the receiving association; and (3) one selected
by the two so selected. The valuation agreed upon by any two of the three
appraisers shall govern. If the value so fixed shall not be satisfactory to any
dissenting shareholder who has requested payment, that shareholder may, within
five days after being notified of the appraised value of his shares, appeal to
the Comptroller, who shall cause a reappraisal to be made which shall be final
and binding as to the value of the shares of the appellant.
(D) APPLICATION TO SHAREHOLDERS OF MERGING ASSOCIATIONS; APPRAISAL BY
COMPTROLLER; EXPENSES OF RECEIVING ASSOCIATION; SALE AND RESALE OF
SHARES; STATE APPRAISAL AND MERGER LAW
F-1
<PAGE>
If, within ninety days from the date of consummation of the merger, for any
reason one or more of the appraisers is not selected as herein provided, or the
appraisers fail to determine the value of such shares, the Comptroller shall
upon written request of any interested party cause an appraisal to be made which
shall be final and binding on all parties. The expenses of the Comptroller in
making the reappraisal or the appraisal, as the case may be, shall be paid by
the receiving association. The value of the shares ascertained shall be promptly
paid to the dissenting shareholders by the receiving association. The shares of
stock of the receiving association which would have been delivered to such
dissenting shareholders had they not requested payment shall be sold by the
receiving association at an advertised public auction, and the receiving
association shall have the right to purchase any of such shares at such public
auction, if it is the highest bidder therefor, for the purpose of reselling such
shares within thirty days thereafter to such person or persons and at such price
not less than par as its board of directors by resolution may determine. If the
shares are sold at public auction at a price greater than the amount paid to the
dissenting shareholders, the excess in such sale price shall be paid to such
dissenting shareholders. The appraisal of such shares of stock in any State bank
shall be determined in the manner prescribed by the law of the State in such
cases, rather than as provided in this section, if such provision is made in the
State law; and no such merger shall be in contravention of the law of the State
under which such bank is incorporated. The provisions of this subsection shall
apply only to shareholders of (and stock owned by them in) a bank or association
being merged into the receiving association.
(E) STATUS OF RECEIVING ASSOCIATION; PROPERTY RIGHTS AND INTERESTS VESTED
AND HELD AS FIDUCIARY
The corporate existence of each of the merging banks or banking
associations participating in such merger shall be merged into and continued in
the receiving association and such receiving association shall be deemed to be
the same corporation as each bank or banking association participating in the
merger. All rights, franchises, and interests of the individual merging banks or
banking associations in and to every type of property (real, personal, and
mixed) and choses in action shall be transferred to and vested in the receiving
association by virtue of such merger without any deed or other transfer. The
receiving association, upon the merger and without any order or other action on
the part of any court or otherwise, shall hold and enjoy all rights of property,
franchises, and interests, including appointments, designations, and
nominations, and all other rights and interests as trustee, executor,
administrator, registrar of stocks and bonds, guardian of estates, assignee,
receiver, and committee of estates of lunatics, and in every other fiduciary
capacity, in the same manner and to the same extent as such rights, franchises,
and interests were held or enjoyed by any one of the merging banks or banking
associations at the time of the merger, subject to the conditions hereinafter
provided.
(F) REMOVAL AS FIDUCIARY; DISCRIMINATION
Where any merging bank or banking association, at the time of the merger,
was acting under appointment of any court as trustee, executor, administrator,
registrar of stocks and bonds, guardian of estates, assignee, receiver, or
committee of estates of lunatics, or in any other fiduciary capacity, the
receiving association shall be subject to removal by a court of competent
jurisdiction in the same manner and to the same extent as was such merging bank
or banking association prior to the merger. Nothing contained in this section
shall be considered to impair in any manner the right of any court to remove the
receiving association and to appoint in lieu thereof a substitute trustee,
executor, or other fiduciary, except that such right shall not be exercised in
such a manner as to discriminate against national banking associations, nor
shall any receiving association be removed solely because of the fact that it is
a national banking association.
(G) ISSUANCE OF STOCK BY RECEIVING ASSOCIATION; PREEMPTIVE RIGHTS
Stock of the receiving association may be issued as provided by the terms
of the merger agreement, free from any preemptive rights of the shareholders of
the respective merging banks.
F-2
<PAGE>
BANKING CIRCULAR 259
DEPARTMENT OF THE TREASURY
OFFICE OF THE COMPTROLLER OF THE CURRENCY
[DOCKET NO. 92-3]
STOCK APPRAISALS
AGENCY: Office of the Comptroller of the Currency, Treasury.
AGENCY: Notice of policy statement on stock appraisals.
SUMMARY: The Office of the Comptroller of the Currency (OCC) has issued
Banking Circular 259 to describe methods used by the OCC to estimate the value
of a bank's share when a shareholder dissents to a conversion, consolidation, or
merger involving a national bank, and to summarize the results of appraisals
performed by the OCC between January 1, 1985, and September 30, 1991. This
notice, which provides the full text of BC 259, is for the benefit of persons
who do not normally receive banking circulars.
DATE: BC 259 was dated March 5, 1992.
SUPPLEMENTARY INFORMATION: On March 5, 1992, the OCC issued BC 259
describing methods used to estimate the value of a bank's shares and the results
of appraisals performed by the OCC between January 1, 1985, and September 30,
1991. The full text of B 259 is set out below.
TO: Chief Executive Officers of National Banks, Deputy Comptrollers
(District), Department and Division Heads, and Examining Personnel.
PURPOSE
This Banking Circular informs all national banks of the valuation methods
used by the Office of the Comptroller of the Currency (OCC) to estimate the
value of a bank's shares when requested to do so by a shareholder dissenting to
the conversion, merger, or consolidation of its bank. The results of appraisals
performed by the OCC between January 1, 1985, and September 30, 1991 are
summarized.
References: 12 U.S.C. 214a, 215 and 215a; 12 CFR 11.590 (item 2)
BACKGROUND
Under 12 U.S.C. 214a, a shareholder dissenting from a conversion,
consolidation, or merger involving a national bank is entitled to receive the
value of his or her shares from the resulting bank. A valuation of the shares
shall be made by a committee of three appraisers (a representative of the
dissenting shareholder, a representative of the resulting bank, and a third
appraiser selected by the other two). If the committee is formed and renders an
appraisal that is acceptable to the dissenting shareholder, the process is
complete and the appraised value of the shares is paid to the dissenting
shareholder by the resulting bank. If, for any reason, the committee is not
formed or if it renders an appraisal that is not acceptable to the dissenting
shareholder, an interested party may request an appraisal by the OCC. 12 U.S.C.
215 provides these appraisal rights to any shareholder dissenting to a
consolidation. Any dissenting shareholder of a target bank in a merger is also
entitled to these appraisal rights pursuant to 12 U.S.C. 215a.
The above provides only a general overview of the appraisal process. The
specific requirements of the process are set forth in the statutes themselves.
METHODS OF VALUATION USED
Through its appraisal process, the OCC attempts to arrive at a fair
estimate of the value of a bank's shares. After reviewing the particular facts
in each case and the available information on a bank's shares, the OCC selects
an appropriate valuation method, or combination of methods, to determine a
reasonable estimate of the shares' value.
MARKET VALUE
The OCC uses various methods to estimate the market value of shares being
appraised. If sufficient trading in the shares exists and the prices are
available from direct quotes from the Wall Street Journal or a market-maker,
those quotes are considered in determining the market value. If no market value
is readily available, or if the market value available is not
F-3
<PAGE>
well established, the OCC may use other methods of estimating market value, such
as in the investment value and adjusted book value methods.
INVESTMENT VALUE
Investment value requires an assessment of the value to investors of a
share in the future earnings of the target bank. Investment value is estimated
by applying an average price/earnings ratio of banks with similar earnings
potential to the earnings capacity of the target bank.
The peer group selection is based on location, size, and earnings patterns.
If the state in which the subject bank is located provides a sufficient number
of comparable banks using location, size and earnings patterns as the criteria
for selection, the price/earnings ratios assigned to the banks are applied to
the earnings per share estimated for the subject bank. In order to select a
reasonable peer group when there are too few comparable independent banks in a
location that is comparable to that of the subject bank, the pool of banks from
which a peer group is selected is broadened by including one-bank holding
company banks in a comparable location, and/or by selecting banks in less
comparable locations, including adjacent states, that have earnings patterns
similar to the subject bank.
ADJUSTED BOOK VALUE
The OCC also uses an "adjusted book value" method for estimating value.
Historically, the OCC has not placed any weight on the bank's "unadjusted book
value", since that value is based on historical acquisition costs of the bank's
assets, and does not reflect investors' perceptions of the value of the bank as
an ongoing concern. Adjusted book value is calculated by multiplying the book
value of the target bank's assets per share times the average market price to
book value ratio of comparable banking organizations. The average market price
to book value ratio measures the premium or discount to book value, which
investors attribute to shares of similarly situated banking organizations.
Both the investment value method and the adjusted book value method present
appraised values, which are based on the target bank's value as a going concern.
These techniques provide estimates of the market value of the shares of the
subject bank.
OVERALL VALUATION
The OCC may use more than one of the above-described methods in deriving
the value of shares of stock. If more than one method is used, varying weights
may be applied in reaching an overall valuation. The weight given to the value
by a particular valuation method is based on how accurately the given method is
believed to represent market value. For example, the OCC may give more weight to
a market value representing infrequent trading by shareholders than to the value
derived from the investment value method when the subject bank's earnings trend
is so irregular that it is considered to be a poor predictor of future earnings.
PURCHASE PREMIUMS
For mergers and consolidations, the OCC recognizes that purchase premiums
do exist and may, in some instances, be paid in the purchase of small blocks of
shares. However, the payment of purchase premiums depends entirely on the
acquisition or control plans of the purchasers, and such payments are not
regular or predictable elements of the market value. Consequently, the OCC's
valuation methods do not include consideration of purchase premiums in arriving
at the value of shares.
STATISTICAL DATA
The chart below lists the results of appraisals the OCC performed between
January 1, 1985, and September 30, 1991. The OCC provides statistical data on
book value and price/earnings ratios for comparative purposes, but does not
necessarily rely on such data in determining the value of the banks' shares.
Dissenting shareholders should not view these statistics as determinative for
future appraisals.
In connection with disclosures given to shareholders under 12 CFR 11.590
(Item 2), banks may provide shareholders a copy of this Banking Circular or
disclose the information contained in the Banking Circular, including the
results of OCC appraisals. If the bank discloses the past results of OCC
appraisals. If the bank discloses the past results of the OCC appraisals, it
should advise shareholders that: (1) The OCC did not rely on all the information
set forth in the chart in performing each appraisal; and, (2) the OCC's past
appraisals are not necessarily determinative of its future appraisals of a
particular bank's shares.
F-4
<PAGE>
APPRAISAL RESULTS
<TABLE>
<CAPTION>
AVERAGE PRICE
EARNINGS
APPRAISAL PRICE BOOK RATIO OF PEER
APPRAISAL DATE* VALUE OFFERED VALUE GROUP
<S> <C> <C> <C> <C>
1/1/85...................................................................... 107.05 110.00 178.29 5.3
1/2/85...................................................................... 73.16 NA 66.35 6.8
1/15/85..................................................................... 53.41 60.00 83.95 4.8
1/31/85..................................................................... 22.72 20.00 38.49 5.4
2/1/85...................................................................... 30.63 24.00 34.08 5.7
2/25/85..................................................................... 27.74 27.55 41.62 5.9
4/30/85..................................................................... 25.98 35.00 42.21 4.5
7/30/85..................................................................... 3,153.10 2,640.00 6,063.66 NC
9/1/85...................................................................... 17.23 21.00 21.84 4.7
11/22/85.................................................................... 316.74 338.75 519.89 5.0
11/22/85.................................................................... 30.28 NA 34.42 5.9
12/16/85.................................................................... 66.29 77.00 89.64 5.6
12/27/85.................................................................... 60.85 57.00 119.36 5.3
12/31/95.................................................................... 61.77 NA 73.56 5.9
12/31/85.................................................................... 75.79 40.00 58.74 12.1
1/12/86..................................................................... 19.93 NA 26.37 7.0
3/14/86..................................................................... 59.02 200.00 132.20 3.1
4/21/86..................................................................... 40.44 35.00 43.54 6.4
5/2/86...................................................................... 15.50 16.50 23.69 5.0
7/3/86...................................................................... 405.74 NA 612.82 3.9
7/31/86..................................................................... 297.34 600.00 650.63 4.4
8/22/86..................................................................... 103.53 106.67 136.23 NC
12/26/86.................................................................... 16.66 NA 43.57 4.0
12/31/86.................................................................... 53.39 95.58 69.66 7.1
5/1/87...................................................................... 186.42 NA 360.05 5.1
6/11/87..................................................................... 50.46 70.00 92.35 4.5
6/11/87..................................................................... 38.53 55.00 77.75 4.5
7/31/87..................................................................... 13.10 NA 20.04 6.7
8/26/87..................................................................... 55.92 57.52 70.88 NC
8/31/87..................................................................... 19.55 23.75 30.64 5.0
8/31/87..................................................................... 10.98 NA 17.01 4.2
10/6/87..................................................................... 56.48 60.00 73.11 5.6
3/15/88..................................................................... 297.63 NA 414.95 6.2
6/2/88...................................................................... 27.26 NA 28.45 5.4
6/30/88..................................................................... 137.78 NA 215.36 6.0
8/30/88..................................................................... 768.62 677.00 1,090.55 10.7
3/31/89..................................................................... 773.62 NA 557.30 7.9
5/26/89..................................................................... 136.47 180.00 250.42 4.5
5/29/90..................................................................... 9.87 NA 11.04 9.9
</TABLE>
* The "Appraisal Date" is the consummation date for the conversion,
consolidation, or merger.
NA -- Not Available.
NC -- Not Computed.
For more information regarding the OCC's stock appraisal process contact
the Office of the Comptroller of the Currency, Bank Organization and Structure.
Dated: February 26, 1992.
ROBERT L. CLARKE, COMPTROLLER OF THE CURRENCY.
F-5
<PAGE>
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 statue 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 (excluding the exhibits and schedules thereto). (Incorporated by reference to ANNEX B to
the Prospectus/Proxy Statement included in this Registration Statement.)*
(2)(b) The FFB Merger Agreement, including the 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 (3)(b) to Post-Effective Amendment No. 1 on
Form S-8 to Registration Statement No. 33-62399.)
(4)(a) Shareholder Protection Rights Agreement, as amended. (Incorporated by reference to Exhibits (4)(b) to FUNC's
Current Report on Form 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 Third 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 1995 Third Report on Form 10-Q.)
(23)(a) Consent of Deloitte & Touche LLP.**
(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 Financial Consulting Associates, Inc.
(24) Power of Attorney.**
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
(27) FUNC's Financial Data Schedule. (Incorporated by reference to Exhibit (27) to FUNC's 1995 Third Quarter Report
on Form 10-Q.)
(99) Form of proxy for the Special Meeting of Stockholders of Brentwood.
</TABLE>
* Omitted exhibits to be furnished upon request of the Commission.
** Previously filed.
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-2
<PAGE>
(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 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
PROVIDED HOWEVER, that paragraphs (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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this Amendment No. 1 to Registration Statement 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 December 20, 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, this Amendment No. 1
to Registration Statement 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
Accounting Officer)
JAMES H. HATCH
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>
II-4
<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
RADFORD D. LOVETT
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
Director
JOHN D. UIBLE
</TABLE>
II-5
<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: December 20, 1995
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION LOCATION
<S> <C> <C>
(2)(a) The Merger Agreement (exlcuding the exhibits and Incorporated by reference to ANNEX B to the
schedules thereto). Prospectus/Proxy Statement included in this
Registration Statement.*
(2)(b) The FFB Merger Agreement, including the exhibits Incorporated by reference to Exhibit (99) to FUNC's
thereto. 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 (3)(b) to Post-
Effective Amendment No. 1 on Form S-8 to Registration
Statement No. 33-62399.
(4)(a) Shareholder Protection Rights Agreement, as amended. Incorporated by reference to Exhibits (4)(b) to FUNC's
Current Reports on Form 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. Previously filed.
(8) Tax opinion of Sullivan & Cromwell. Previously filed.
(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 Third Quarter Report on Form 10-Q.
(12)(b) Pro Forma Computations of Consolidated Ratios of Incorporated by reference to Exhibit (99)(a) to FUNC's
Earnings to Fixed Charges and Pro Forma Computations 1995 Third Report on Form 10-Q.
of Consolidated Ratios of Earnings to Fixed Charges
and Preferred Stock Dividends.
(23)(a) Consent of Deloitte & Touche LLP. Previously filed.
(23)(b) Consent of KPMG Peat Marwick LLP. Previously filed.
(23)(c) Consent of KPMG Peat Marwick LLP. Previously filed.
(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 Financial Consulting Associates, Inc. Filed herewith.
(24) Power of Attorney. Previously filed.
(27) FUNC's Financial Data Schedule. Incorporated by reference to Exhibit (27) to FUNC's
1995 Third Quarter Report on Form 10-Q.
(99) Form of proxy for the Special Meeting of Stockholders Filed herewith.
of Brentwood.
</TABLE>
* Omitted exhibits to be furnished upon request of the Commission.
<PAGE>
EXHIBIT 23(F)
CONSENT OF FINANCIAL CONSULTING ASSOCIATES
We hereby consent to the inclusion as ANNEX E to the Prospectus/Proxy
Statement filed as part of the Registration Statement (No. 33-64859) on Form
S-4 of First Union Corporation of our opinion to be dated as of the date of
the Prospectus/Proxy Statement and to the references to our firm as financial
advisor to Brentwood National Bank and to our opinion contained in said
Prospectus/Proxy Statement. In giving such consent, we do not thereby admit
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933 or the Rules and Regulations of the
Securities and Exchange Commission.
FINANCIAL CONSULTING ASSOCIATES, INC.
December 20, 1995
<PAGE>
EXHIBIT (99)
BRENTWOOD NATIONAL BANK,
SPECIAL MEETING OF STOCKHOLDERS
JANUARY 31, 1996
The undersigned hereby appoints Frank M. Bumstead and Farzin Ferdowski,
with full powers of substitution, to act as attorneys and proxies for the
undersigned, to vote all shares of common stock of Brentwood National Bank
("Brentwood"), which the undersigned is entitled to vote at the Special Meeting
of Stockholders ("Special Meeting"), to be held at the Athletic Club at Maryland
Farms, 5101 Maryland Way, Brentwood, Tennessee, on January 31, 1996, at 9:00
a.m., local time, and at any and all adjournments or postponements thereof, as
follows:
To consider and vote upon a proposal to approve an Agreement and Plan of
Acquisition, dated as of July 18, 1995 (the "Merger Agreement"), among First
Union Corporation ("FUNC"), First Union Corporation of Virginia ("FUNC-VA")
and First Union National Bank of Tennessee ("FUNB-TN"), pursuant to which
(i) FUNC-VA would acquire Brentwood by means of a merger (the "Merger") of
Brentwood with and into FUNB-TN, and (ii) each outstanding share of
Brentwood common stock (excluding certain shares held by Brentwood or FUNC
and any shares held by dissenting stockholders of Brentwood) would be
converted into the right to receive a number of shares of FUNC common stock
equal to the result obtained by dividing $8.8112 by the average of the last
reported sale prices per share of FUNC common stock on the New York Stock
Exchange Composite Transactions tape for the ten trading days ending on the
last trading day prior to the effective date of the Merger, all on and
subject to the terms and conditions contained therein.
FOR AGAINST ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE STATED PROPOSAL. THIS PROXY
WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL
BE VOTED "FOR" THE STATED PROPOSAL. IF ANY OTHER BUSINESS IS PRESENTED AT THE
SPECIAL MEETING, THIS PROXY WILL BE VOTED BY THE PROXYHOLDERS IN THEIR
DISCRETION.
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned acknowledges receipt prior to the execution of this proxy
of the Notice of Special Meeting of Stockholders and the Prospectus/Proxy
Statement for the Special Meeting.
Dated: , 1996
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 PROMPTLY COMPLETE, DATE AND SIGN THIS PROXY AND MAIL IT IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
