<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 14, 1996
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FIRST UNION CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
NORTH CAROLINA 6711 56-0898180
(State or other jurisdiction (Primary standard industrial (I.R.S. employer
of incorporation or organization) classification code number) identification number)
</TABLE>
ONE FIRST UNION CENTER
CHARLOTTE, NORTH CAROLINA 28288-0013
(704) 374-6565
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
MARION A. COWELL, JR., ESQ.
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
FIRST UNION CORPORATION
ONE FIRST UNION CENTER
CHARLOTTE, NORTH CAROLINA 28288-0013
(704) 374-6828
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPY TO:
EDWARD D. HERLIHY, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES 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. [ ]
CALCULATION OF REGISTRATION FEE
[CAPTION]
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<S> <C> <C> <C>
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO AMOUNT TO BE OFFERING PRICE AGGREGATE OFFER-
BE REGISTERED REGISTERED (1) PER UNIT (2) ING PRICE (2)
<S> <C> <C> <C>
Common Stock, $3.33 1/3 par 7,500,000 shares $24.5625 $395,222,759
value (including rights to
purchase shares of common
stock or junior participating
Class A Preferred Stock).........
<CAPTION>
TITLE OF EACH CLASS AMOUNT OF
OF SECURITIES TO REGISTRATION
BE REGISTERED FEE (2)
<S> <C>
Common Stock, $3.33 1/3 par
value (including rights to $136,284
purchase shares of common
- 81,957
stock or junior participating
Class A Preferred Stock)......... $ 54,327
</TABLE>
(1) Represents the estimated maximum number of shares of common stock, par value
$3.33 1/3 per share, issuable by First Union Corporation ("FUNC") upon
consummation of the acquisition of Center Financial Corporation ("CFC") by
FUNC, including shares issuable upon the exercise of outstanding employee
and director stock options.
(2) Pursuant to Rules 457(f)(1) and 457(c), the registration fee for the FUNC
common stock is based on the average of the high and low sale prices of CFC
common stock on the Nasdaq National Market on August 12, 1996 ($24.5625),
and computed based on the estimated maximum number of such shares
(16,090,494) that may be exchanged for the securities being registered. A
filing fee of $81,957 was previously paid in connection with the filing by
CFC (CIK number 0000948463) of preliminary proxy material and is credited
against the registration fee payable hereunder. The $54,327 balance
due is to be paid by debiting CFC's account (CIK number 0000948463)
for such amount.
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.
<TABLE>
<CAPTION>
FORM S-4 ITEM LOCATION IN PROSPECTUS
<C> <S> <C>
1. Forepart of Registration Statement and Outside Front Cover Page of
Prospectus.............................................................. Outside front cover page; facing page
2. Inside Front and Outside Back Cover Pages of Prospectus................. AVAILABLE INFORMATION; TABLE OF CONTENTS
3. Risk Factors, Ratio of Earnings to Fixed Charges and Other
Information............................................................. SUMMARY; THE MERGERS; ANNEX C
4. Terms of the Transaction................................................ SUMMARY; GENERAL INFORMATION; THE MERGERS;
DESCRIPTION OF FUNC CAPITAL STOCK; CERTAIN
DIFFERENCES IN THE RIGHTS OF CFC AND FUNC
STOCKHOLDERS; ANNEX A
5. Pro Forma Financial Information......................................... SUMMARY
6. Material Contacts with the Company Being Acquired....................... SUMMARY; THE MERGERS
7. Additional Information Required for Reoffering by Persons and Parties
Deemed to Be Underwriters............................................... *
8. Interests of Named Experts and Counsel.................................. LEGAL OPINIONS; EXPERTS
9. Disclosure of Commission Position on Indemnification for Securities Act
Liabilities............................................................. *
10. Information with Respect to S-3 Registrants............................. INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE; SUMMARY; RECENT DEVELOPMENTS; FUNC
11. Incorporation of Certain Information by Reference....................... INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE
12. Information with Respect to S-2 or S-3 Registrants...................... *
13. Incorporation of Certain Information by Reference....................... *
14. Information with Respect to Registrants Other Than S-3 or
S-2 Registrants......................................................... *
15. Information with Respect to S-3 Companies............................... INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE; SUMMARY; RECENT DEVELOPMENTS; CFC
16. Information with Respect to S-2 or S-3 Companies........................ *
17. Information with Respect to Companies Other Than S-2 or
S-3 Companies........................................................... *
18. Information if Proxies, Consents or Authorizations are to be
Solicited............................................................... INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE; SUMMARY; GENERAL INFORMATION; THE
MERGERS; FUNC; CFC
19. Information if Proxies, Consents or Authorizations are not to be
Solicited, or in an Exchange Offer...................................... *
</TABLE>
* Not applicable.
<PAGE>
CENTER FINANCIAL CORPORATION
60 NORTH MAIN STREET
WATERBURY, CONNECTICUT 06702
(203) 578-7000
August 23, 1996
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 Center Financial
Corporation ("CFC"). The meeting will be held at 10:00 a.m. on September 25,
1996, at the Mattatuck Museum, 144 West Main Street, Waterbury, Connecticut.
The purpose of the meeting is to vote on a proposal to approve the
Agreement and Plan of Mergers, dated as of June 14, 1996 (the "Merger
Agreement"), by and among CFC, Centerbank, First Union Corporation ("FUNC") and
First Union Bank of Connecticut ("FUB-CT"), pursuant to which, among other
things, CFC will merge with and into FUNC (the "Corporate Merger") and
Centerbank will merge with and into FUB-CT (the "Bank Merger" and together with
the Corporate Merger, the "Mergers"), all on and subject to the terms and
conditions contained therein. FUNC is the sixth largest bank holding company in
the nation, based on assets of $139.9 billion at June 30, 1996.
Upon consummation of the Corporate Merger, each outstanding share of CFC
common stock (excluding dissenters' shares and certain shares held by CFC or
FUNC) will be converted into the right to receive a number of shares of FUNC
common stock equal to the result obtained by dividing $25.44 by the average
closing price of FUNC common stock on the New York Stock Exchange (the "NYSE")
Composite Transactions Tape (the "NYSE Tape") for the ten trading days
immediately prior to the effective date of the Corporate Merger, in a
transaction that is generally tax-free for federal income tax purposes, all as
more fully discussed in the accompanying Prospectus/Proxy Statement. The common
stock of FUNC is actively traded and is listed on the NYSE. The last reported
sale price of FUNC common stock on the NYSE Tape on , 1996, was
$ per share.
Consummation of the Mergers is subject to certain conditions, including
approval of the Merger Agreement by CFC stockholders and approval of the Mergers
by various regulatory agencies. Approval of the Merger Agreement requires the
affirmative vote of at least two-thirds of the votes entitled to be cast at the
meeting by the holders of CFC common stock.
The accompanying Notice of Special Meeting and Prospectus/Proxy Statement
contain information about the Mergers. I urge you to review carefully such
information and the information in FUNC's 1995 Annual Report on Form 10-K, 1996
First and Second Quarter Reports on Form 10-Q, 1996 Annual Meeting Proxy
Statement and 1996 Current Reports on Form 8-K, copies of which are available as
indicated in the accompanying Prospectus/Proxy Statement under "AVAILABLE
INFORMATION".
THE BOARD OF DIRECTORS OF CFC HAS UNANIMOUSLY ADOPTED THE MERGER AGREEMENT
AND RECOMMENDS THAT THE STOCKHOLDERS OF CFC APPROVE THE MERGER AGREEMENT. A
FAILURE TO VOTE, EITHER BY NOT RETURNING THE ENCLOSED PROXY OR BY CHECKING THE
"ABSTAIN" BOX THEREON, WILL HAVE THE SAME EFFECT AS A VOTE "AGAINST" APPROVAL OF
THE MERGER AGREEMENT. EVEN IF YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE
COMPLETE THE ENCLOSED PROXY, SIGN AND DATE IT AND MAIL IT PROMPTLY IN THE
ENCLOSED POSTAGE-PAID, RETURN ADDRESSED ENVELOPE.
Yours very truly,
ROBERT J. NARKIS
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND TREASURER
<PAGE>
CENTER FINANCIAL CORPORATION
60 NORTH MAIN STREET
WATERBURY, CONNECTICUT 06702
(203) 578-7000
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 25, 1996
August 23, 1996
Dear Stockholder:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Center
Financial Corporation ("CFC") will be held at 10:00 a.m. on September 25, 1996,
at the Mattatuck Museum, 144 West Main Street, Waterbury, Connecticut (the
"Special Meeting"), for the following purpose:
To consider and vote upon a proposal to approve the Agreement and Plan of
Mergers, dated as of June 14, 1996 (the "Merger Agreement"), by and among
CFC, Centerbank, First Union Corporation ("FUNC") and First Union Bank of
Connecticut ("FUB-CT"), pursuant to which, among other things, (i) CFC will
merge with and into FUNC (the "Corporate Merger") and Centerbank will merge
with and into FUB-CT (the "Bank Merger", and together with the Corporate
Merger, the "Mergers"), and (ii) each outstanding share of CFC common stock
(excluding dissenters' shares and certain shares held by CFC or FUNC) will
be converted into the right to receive a number of shares of FUNC common
stock equal to the result obtained by dividing $25.44 by the average closing
price of FUNC common stock on the New York Stock Exchange Composite
Transactions Tape for the ten trading days immediately prior to the
effective date of the Corporate Merger, all on and subject to the terms and
conditions contained in the Merger Agreement.
A copy of the Merger Agreement is set forth in ANNEX A to the accompanying
Prospectus/Proxy Statement.
The Board of Directors of CFC has fixed August 20, 1996, as the record date
for the determination of stockholders entitled to notice of and to vote at the
Special Meeting, and accordingly, only holders of record of CFC common stock at
the close of business on that date will be entitled to notice of and to vote at
the Special Meeting.
Approval of the Merger Agreement requires the affirmative vote of at least
two-thirds of the votes entitled to be cast at the Special Meeting by the
holders of CFC common stock.
Each holder of CFC common stock who is entitled to vote on approval of the
Merger Agreement has the right to object to the Mergers and to be paid the fair
value of such holder's CFC common stock in cash if the Merger Agreement is
approved and the Corporate Merger is consummated. The right of any such holder
of CFC common stock to receive such payment is contingent upon strict compliance
with the requirements set forth in the applicable provisions of the Connecticut
General Statutes Annotated, the full text of which provisions is set forth in
ANNEX C to the accompanying Prospectus/Proxy Statement and a summary of which is
set forth under "THE MERGERS -- Dissenters' Rights".
THE BOARD OF DIRECTORS OF CFC UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" APPROVAL OF THE MERGER AGREEMENT.
By Order of the Board of Directors of
CENTER FINANCIAL CORPORATION
JOSEPH CARLSON II
SECRETARY
BECAUSE THE AFFIRMATIVE VOTE OF AT LEAST TWO-THIRDS OF THE VOTES ENTITLED TO BE
CAST AT THE SPECIAL MEETING IS REQUIRED TO APPROVE THE MERGER AGREEMENT, CFC
STOCKHOLDERS ARE URGED TO COMPLETE, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED
PROXY IN THE ACCOMPANYING ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. 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>
<TABLE>
<S> <C>
PROSPECTUS PROXY STATEMENT
FIRST UNION CORPORATION CENTER FINANCIAL CORPORATION
COMMON STOCK SPECIAL MEETING OF STOCKHOLDERS
$3.33 1/3 PAR VALUE PER SHARE
</TABLE>
This Prospectus/Proxy Statement is being furnished by Center Financial
Corporation, a Connecticut corporation ("CFC"), to the holders of CFC common
stock, par value $1.00 per share (together with the CFC Rights (as hereinafter
defined) attached thereto, "CFC Common Stock"), as a Proxy Statement in
connection with the solicitation of proxies by the Board of Directors of CFC
(the "CFC Board") for use at a Special Meeting of Stockholders of CFC to be held
at 10:00 a.m., on September 25, 1996, at the Mattatuck Museum, 144 West Main
Street, Waterbury, Connecticut, and at any adjournments or postponements thereof
(the "Special Meeting"). This Prospectus/Proxy Statement is also being furnished
by First Union Corporation, a North Carolina corporation ("FUNC"), as a
Prospectus with respect to the shares (the "FUNC Common Shares") of FUNC common
stock, $3.33 1/3 par value per share (together with the FUNC Rights (as
hereinafter defined) attached thereto, "FUNC Common Stock"), that are issuable
upon consummation of the Corporate Merger (as hereinafter defined).
This Prospectus/Proxy Statement, the accompanying Notice of Special Meeting
and form of proxy are first being mailed to the stockholders of CFC on or about
August 23, 1996.
The purpose of the Special Meeting is to consider and vote upon a proposal
to approve the Agreement and Plan of Mergers, dated as of June 14, 1996 (the
"Merger Agreement"), among CFC, Centerbank, a Connecticut stock savings bank,
FUNC, and First Union Bank of Connecticut, a Connecticut state bank ("FUB-CT"),
pursuant to which, among other things, CFC will merge with and into FUNC (the
"Corporate Merger") and Centerbank will merge with and into FUB-CT (the "Bank
Merger", and together with the Corporate Merger, the "Mergers"), all on and
subject to the terms and conditions contained therein.
Upon consummation of the Corporate Merger, each outstanding share of CFC
Common Stock (excluding shares with respect to which dissenters' rights have
been perfected ("Dissenting Shares") and certain shares held by CFC or FUNC)
will be converted into the right to receive a number of FUNC Common Shares (the
"Exchange Ratio") equal to the result obtained by dividing $25.44 by the average
closing price (the "Average Closing Price") of FUNC Common Stock on the NYSE
Tape (as hereinafter defined) for the ten trading days immediately prior to the
Effective Date (as hereinafter defined).
Based on the (i) shares of CFC Common Stock outstanding on the
Record Date (as hereinafter defined), (ii) shares of CFC Common Stock
issuable upon the exercise of all outstanding options to purchase shares of CFC
Common Stock granted to employees and directors of CFC, and (iii) an assumed
Exchange Ratio equal to .4240 (which is based on the closing price of FUNC
Common Stock on the NYSE Tape on June 14, 1996 ($60.00), the date the Merger
Agreement was executed, as if such closing price were the Average Closing
Price), a total of FUNC Common Shares will be issuable upon consummation
of the Corporate Merger. The actual Exchange Ratio and the actual number of FUNC
Common Shares to be issued will depend on the Average Closing Price (which will
not be known until shortly before the Effective Date). As a result, the actual
Exchange Ratio may be higher or lower than .4240. CFC stockholders are urged to
obtain current quotations of the market price of FUNC Common Stock.
FUNC Common Stock is listed and traded on the New York Stock Exchange
("NYSE") and CFC Common Stock is listed and traded on the Nasdaq National
Market. On June 14, 1996, the last business day prior to public announcement of
the execution of the Merger Agreement, the last reported sale price per share of
FUNC Common Stock on the NYSE Composite Transactions Tape (the "NYSE Tape") and
the last reported sale price of CFC Common Stock on the Nasdaq National Market
were $60.00 and $22.875, respectively. On , 1996, such prices were
$ and $ , respectively.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY
STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS/PROXY STATEMENT IS AUGUST 23, 1996.
<PAGE>
AVAILABLE INFORMATION
FUNC and CFC 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 CFC 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. Certain of
such reports, proxy statements and other information is also available from the
Commission over the Internet at http://www.sec.gov. Since FUNC Common Stock is
listed on the NYSE, reports, proxy statements and other information relating to
FUNC 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. 333- ), 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 ANY
PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROSPECTUS/PROXY STATEMENT
IS DELIVERED, UPON WRITTEN OR ORAL REQUEST TO: FIRST UNION CORPORATION, INVESTOR
RELATIONS, TWO FIRST UNION CENTER, CHARLOTTE, NORTH CAROLINA 28288-0206
(TELEPHONE NUMBER (704) 374-6782) AS TO FUNC DOCUMENTS; AND TO: CENTER FINANCIAL
CORPORATION, SHAREHOLDER COMMUNICATIONS, 60 NORTH MAIN STREET, WATERBURY,
CONNECTICUT 06702 (TELEPHONE NUMBER (203) 578-6630) AS TO CFC DOCUMENTS. IN
ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY SUCH REQUEST SHOULD BE
MADE BY SEPTEMBER 18, 1996.
All information contained or incorporated by reference in this
Prospectus/Proxy Statement with respect to FUNC was supplied by FUNC, and all
information contained or incorporated by reference in this Prospectus/Proxy
Statement with respect to CFC was supplied by CFC.
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 CFC. 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 OR CFC SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS
PROSPECTUS/PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE FUNC COMMON SHARES
OR AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT LAWFUL.
The Commissioner of Insurance of the State of North Carolina (the
"Commissioner") has not approved or disapproved this offering nor has the
Commissioner passed upon the accuracy or adequacy of this Prospectus/Proxy
Statement.
THE FUNC COMMON SHARES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR
OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by FUNC (File No.
1-10000) and by CFC (File No. 0-26384) under Section 13(a) or 15(d) of the
Exchange Act are hereby incorporated by reference in this Prospectus/Proxy
Statement:
FUNC documents:
(i) FUNC's Annual Report on Form 10-K for the year ended December 31,
1995;
(ii) FUNC's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1996 and June 30, 1996; and
(iii) FUNC's Current Reports on Form 8-K dated January 10, 1996 and
February 9, 1996.
CFC documents:
(i) CFC's Annual Report on Form 10-K for the year ended December 31,
1995;
(ii) CFC's Quarterly Reports on Form 10-Q for the periods ended March
31, 1996 and June 30, 1996; and
(iii) CFC's Current Reports on Form 8-K dated May 31, 1996 and June
14, 1996.
All documents filed by FUNC or CFC pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the date of
the Special Meeting are hereby incorporated by reference into this
Prospectus/Proxy Statement and shall be deemed to be a part hereof from the date
of filing of such documents.
Any statement contained herein, in any supplement hereto or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of the Registration Statement and this
Prospectus/Proxy Statement to the extent that a statement contained herein, in
any supplement hereto or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Registration
Statement, this Prospectus/Proxy Statement or any supplement hereto.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
AVAILABLE INFORMATION.................................................................................................. 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................................................................ 3
SUMMARY................................................................................................................ 6
RECENT DEVELOPMENTS.................................................................................................... 17
Certain 1996 Completed and Pending Acquisitions...................................................................... 17
GENERAL INFORMATION.................................................................................................... 18
General.............................................................................................................. 18
Record Date; Vote Required; Revocation of Proxies.................................................................... 18
THE MERGERS............................................................................................................ 18
General; Exchange Ratio.............................................................................................. 19
Effective Date....................................................................................................... 19
Exchange of CFC Certificates......................................................................................... 19
Background and Reasons............................................................................................... 20
Opinion of Financial Advisor......................................................................................... 22
Interests of Certain Persons......................................................................................... 24
Certain Federal Income Tax Consequences.............................................................................. 28
Business Pending Consummation........................................................................................ 28
Regulatory Approvals................................................................................................. 29
Conditions to Consummation; Termination.............................................................................. 30
Waiver; Amendment.................................................................................................... 30
Accounting Treatment................................................................................................. 30
Expenses............................................................................................................. 31
Stock Option Agreement............................................................................................... 31
Dissenters' Rights................................................................................................... 32
Market Prices........................................................................................................ 34
Dividends............................................................................................................ 35
CFC.................................................................................................................... 36
General.............................................................................................................. 36
History and Business................................................................................................. 36
FUNC................................................................................................................... 37
General.............................................................................................................. 37
History and Business................................................................................................. 37
Certain Regulatory Considerations.................................................................................... 38
DESCRIPTION OF FUNC CAPITAL STOCK...................................................................................... 41
Authorized Capital................................................................................................... 41
FUNC Common Stock.................................................................................................... 41
FUNC Preferred Stock................................................................................................. 41
FUNC Class A Preferred Stock......................................................................................... 41
FUNC Rights Plan..................................................................................................... 42
Other Provisions..................................................................................................... 43
CERTAIN DIFFERENCES IN THE RIGHTS OF CFC AND FUNC STOCKHOLDERS......................................................... 44
General.............................................................................................................. 44
Authorized Capital................................................................................................... 44
Amendment to Articles of Incorporation or Bylaws..................................................................... 44
Size and Classification of Board of Directors........................................................................ 45
Removal of Directors................................................................................................. 45
Director Exculpation................................................................................................. 45
Director Conflict of Interest Transactions........................................................................... 46
Stockholder Meetings................................................................................................. 47
Director Nominations................................................................................................. 47
Stockholder Proposals................................................................................................ 48
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Stockholder Protection Rights Plans.................................................................................. 48
Stockholder Inspection Rights; Stockholder Lists..................................................................... 49
Required Stockholder Vote for Certain Actions........................................................................ 50
Anti-Takeover Provisions............................................................................................. 52
Dissenters' Rights................................................................................................... 53
Dividends and Other Distributions.................................................................................... 53
Voluntary Dissolution................................................................................................ 53
RESALE OF FUNC COMMON SHARES........................................................................................... 54
VALIDITY OF FUNC COMMON SHARES......................................................................................... 54
EXPERTS................................................................................................................ 54
ANNEX A -- AGREEMENT AND PLAN OF MERGERS (including the Stock Option Agreement as Exhibit A thereto)................... A-1
ANNEX B -- OPINION OF KEEFE, BRUYETTE, & WOODS, INC.................................................................... B-1
ANNEX C -- SECTIONS OF THE CONNECTICUT GENERAL STATUTES ANNOTATED
RELATING TO DISSENTERS' RIGHTS............................................................................ C-1
</TABLE>
5
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY OF CERTAIN INFORMATION RELATING TO THE MERGERS IS NOT
INTENDED TO BE A SUMMARY OF ALL MATERIAL INFORMATION RELATING TO THE MERGERS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION
CONTAINED ELSEWHERE IN THIS PROSPECTUS/PROXY STATEMENT, INCLUDING THE ANNEXES
HERETO, AND IN THE DOCUMENTS INCORPORATED BY REFERENCE IN THIS PROSPECTUS/PROXY
STATEMENT. A COPY OF THE MERGER AGREEMENT IS SET FORTH IN ANNEX A TO THIS
PROSPECTUS/PROXY STATEMENT AND REFERENCE IS MADE THERETO FOR A COMPLETE
DESCRIPTION OF THE TERMS OF THE MERGERS. STOCKHOLDERS ARE URGED TO READ
CAREFULLY THIS ENTIRE PROSPECTUS/PROXY STATEMENT, INCLUDING THE ANNEXES HERETO
AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE. AS USED IN THIS
PROSPECTUS/PROXY STATEMENT, THE TERMS "FUNC", "FUB-CT", "CFC" AND "CENTERBANK"
REFER TO SUCH ORGANIZATIONS, RESPECTIVELY, AND UNLESS THE CONTEXT OTHERWISE
REQUIRES, TO THEIR RESPECTIVE CONSOLIDATED SUBSIDIARIES.
PARTIES TO THE MERGERS
FUNC AND FUB-CT
FUNC is a North Carolina-based, multi-bank holding company registered under
the Bank Holding Company Act of 1956, as amended, and the rules and regulations
promulgated thereunder (the "BHCA"). Through its banking subsidiaries, FUNC
provides a wide range of commercial and retail banking services and trust
services in North Carolina, Florida, South Carolina, Georgia, Tennessee,
Virginia, Maryland, Delaware, Pennsylvania, New Jersey, New York, Connecticut
and the District of Columbia. FUNC also provides various other financial
services, including mortgage banking, leasing, investment banking, insurance and
securities brokerage services, through other subsidiaries. As of June 30, 1996,
and for the six months then ended, FUNC reported assets of $139.9 billion, net
loans of $91.3 billion, deposits of $91.5 billion, stockholders' equity of $9.3
billion and net income applicable to common stockholders of $675 million, and as
of such date FUNC operated through 2,210 offices in 38 states, the District of
Columbia and four foreign countries. FUNC is the sixth largest bank holding
company in the United States, based on assets at June 30, 1996. 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.
FUB-CT, a Connecticut state bank that provides a wide range of commercial
and retail banking services and trust services in Connecticut, is an indirect
subsidiary of FUNC. As of June 30, 1996, and for the six months then ended,
FUB-CT reported assets of $2.6 billion, net loans of $1.9 billion, deposits of
$2.1 billion, stockholder's equity of $247 million and net income of $37
million, and as of such date FUB-CT operated through 66 banking offices in
Connecticut.
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" and "FUNC".
CFC AND CENTERBANK
CFC is a bank holding company registered under the BHCA. CFC is the parent
corporation of Centerbank, a Connecticut stock savings bank that provides
commercial and retail banking services in Connecticut. In addition to its
banking activities, Centerbank provides diversified lending and financing
services through its subsidiaries, Centerbank Mortgage Company, Center Credit
Corporation, Center Capital Corporation and Affiliated Business Credit
Corporation. As of June 30, 1996, and for the six months then ended, CFC
reported assets of $4.0 billion, net loans of $3.1 billion, deposits of $2.6
billion, stockholder's equity of $234 million and net income of $13 million, and
as of such date CFC operated through 80 offices in 17 states. The principal
executive offices of CFC are located at 60 North Main Street, Waterbury,
Connecticut 06702, and its telephone number is (203) 578-7000. See
" -- Comparison of Certain Unaudited Per Share Data", " -- Selected Financial
Data", "RECENT DEVELOPMENTS" and "CFC".
SPECIAL MEETING; RECORD DATE
The Special Meeting is scheduled to be held on September 25, 1996, at 10:00
a.m., at the Mattatuck Museum, 144 West Main Street, Waterbury, Connecticut. At
the Special Meeting, stockholders will consider and vote upon a proposal to
approve the Merger Agreement.
6
<PAGE>
The CFC Board has fixed August 20, 1996, 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 shares of CFC Common Stock
outstanding and entitled to be voted at the Special Meeting.
See "GENERAL INFORMATION".
THE MERGERS; EXCHANGE RATIO
Subject to the terms and conditions of the Merger Agreement, CFC will merge
with and into FUNC and Centerbank will merge with and into FUB-CT. Upon
consummation of the Corporate Merger, each outstanding share of CFC Common Stock
(excluding Dissenting Shares and any shares of stock held by FUNC or CFC, other
than in a fiduciary capacity or in satisfaction of a debt previously contracted
(together with the Dissenting Shares, "Excluded Shares")) will be converted into
the right to receive a number of FUNC Common Shares equal to the Exchange Ratio
(I.E., the result obtained by dividing $25.44 by the Average Closing Price).
For purposes of the pro forma computations in this Prospectus/Proxy
Statement, a .4240 Exchange Ratio has been calculated using the closing price
per share of FUNC Common Stock on the NYSE Tape on June 14, 1996 ($60.00), the
date the Merger Agreement was executed, 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 .4240. The pro forma information
will be different if the Average Closing Price results in an Exchange Ratio
different from .4240. 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 prior to the mailing hereof. CFC
stockholders are urged to obtain current quotations of the market price of FUNC
Common Stock.
See "THE MERGERS -- General; Exchange Ratio", " -- Dissenters' Rights",
"DESCRIPTION OF FUNC CAPITAL STOCK" and "CERTAIN DIFFERENCES IN THE RIGHTS OF
CFC AND FUNC STOCKHOLDERS".
VOTE REQUIRED
Approval of the Merger Agreement requires the affirmative vote of at least
two-thirds of the votes entitled to be cast at the Special Meeting by the
holders of CFC Common Stock.
The directors and executive officers of CFC (including certain of their
related interests) beneficially owned, as of the Record Date, and are entitled
to vote at the Special Meeting, shares of CFC Common Stock, which
represents percent of the outstanding shares of CFC Common Stock entitled to
be voted at the Special Meeting. Assuming that the directors and executive
officers of CFC vote their shares of CFC Common Stock in favor of approval of
the Merger Agreement, approval of the Merger Agreement will require the
affirmative vote of the holders of an additional percent of the outstanding
shares of CFC Common Stock entitled to be voted at the Special Meeting.
See "GENERAL INFORMATION -- Record Date; Vote Required; Revocation of
Proxies".
A FAILURE TO VOTE, EITHER BY NOT RETURNING THE ENCLOSED PROXY OR BY
CHECKING THE "ABSTAIN" BOX THEREON, WILL HAVE THE SAME EFFECT AS A VOTE
"AGAINST" APPROVAL OF THE MERGER AGREEMENT.
EFFECTIVE DATE
Subject to the conditions to the obligations of the parties to effect the
Mergers set forth in the Merger Agreement, the Corporate Merger will become
effective (the "Effective Date") on such date as FUNC and CFC mutually agree
upon, and if not so agreed upon, such date shall be the date that FUNC notifies
CFC in writing not less than five days prior thereto. Subject to the foregoing,
it is currently anticipated that the Mergers will be consummated in the fourth
quarter of 1996 or the first quarter of 1997. If the Corporate Merger is
consummated in either of such quarters, or in any other quarter, CFC
stockholders should not assume or expect that the Effective Date will precede
the record date for the dividend on FUNC Common Stock for that quarter, so as to
enable such stockholders to receive such dividend. See "THE MERGERS -- Exchange
of CFC Certificates" and " -- Conditions to Consummation; Termination".
RECOMMENDATION OF THE CFC BOARD
THE CFC BOARD HAS ADOPTED THE MERGER AGREEMENT BY UNANIMOUS VOTE, BELIEVES
IT IS IN THE BEST INTERESTS OF CFC AND ITS STOCKHOLDERS AND RECOMMENDS ITS
APPROVAL BY CFC STOCKHOLDERS. SEE "THE MERGERS -- BACKGROUND AND REASONS; CFC".
7
<PAGE>
OPINION OF FINANCIAL ADVISOR
Keefe, Bruyette & Woods, Inc. ("Keefe Bruyette") has advised the CFC Board
that, in its opinion, the consideration to be received by CFC stockholders in
the Corporate Merger is fair, from a financial point of view, to the holders of
CFC Common Stock. The full text of the Keefe Bruyette opinion, which describes
the procedures followed, assumptions made, limitations on the review undertaken
and other matters in connection with rendering such opinion, is set forth in
ANNEX B to this Prospectus/Proxy Statement and should be read in its entirety by
CFC stockholders. See "THE MERGERS -- Opinion of Financial Advisor".
INTERESTS OF CERTAIN PERSONS IN THE MERGERS
Certain members of CFC's management and the CFC Board may be deemed to have
interests in the Mergers in addition to their interests as stockholders of CFC
generally. These include, among other things, provisions in the Merger Agreement
relating to indemnification, directors' and officers' liability insurance, and
certain other benefits as summarized below.
CFC has certain employment agreements, severance agreements, supplemental
severance agreements and stock award plans in effect covering certain of its
officers and employees, including its senior executive officers, Robert J.
Narkis, President, Chief Executive Officer, Treasurer and a director of CFC,
Joseph Carlson II, Vice President, Chief Financial Officer and Secretary of CFC,
William H. Placke, Vice President of CFC and President and Chief Operating
Officer of Centerbank, and Thomas C. Brown, Vice President of CFC and President
and Chief Executive Officer of Centerbank Mortgage Company. Certain of the
benefits under such agreements and plans are either triggered by a change in
control of CFC (such as the Corporate Merger) or are accelerated by such a
change in control (the "Change of Control Benefits"). Assuming the Corporate
Merger were to occur on October 31, 1996, and assuming the Change of Control
Benefits were to become payable or otherwise become fully vested on such date,
it is currently estimated that the approximate value of such benefits would be
$5.3 million with respect to Mr. Narkis, $2.3 million with respect to Mr.
Carlson, $2.8 million with respect to Mr. Placke, $2.6 million with respect to
Mr. Brown and $8.4 million with respect to all other employees in the aggregate.
The Change of Control Benefits are in addition to various other employee
benefits that are not triggered or accelerated as a result of the Corporate
Merger, including, with respect to Messrs. Narkis, Carlson, Placke and Brown,
the value of their employee stock options to purchase shares of CFC Common
Stock, all of which are fully vested, and the value of certain of their
restricted shares of CFC Common Stock which have vested.
In addition, CFC has certain benefit plans in effect with respect to its
directors, including stock option plans pursuant to which outstanding options to
purchase an aggregate of 206,400 shares of CFC Common Stock have been granted to
the ten non-employee directors of CFC, certain of which options will become
exercisable upon a change in control of CFC (such as the Corporate Merger). It
is currently estimated that the approximate aggregate value of all such stock
options upon consummation of the Corporate Merger would be $3.4 million.
See "THE MERGERS -- Interests of Certain Persons".
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Among other things, consummation of the Mergers is conditioned upon receipt
(i) by FUNC of an opinion of Sullivan & Cromwell, special counsel for FUNC, and
(ii) by CFC of an opinion of Wachtell, Lipton, Rosen & Katz, special counsel for
CFC, each 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 CFC who
receive FUNC Common Shares in exchange for their shares of CFC Common Stock,
except that gain or loss may be recognized as to cash received in lieu of
fractional share interests, or in the case of any holders of CFC Common Stock
who perfect their dissenters' rights, cash received upon exercise of such
rights. See "THE MERGERS -- Certain Federal Income Tax Consequences" and
" -- Dissenters' Rights".
BECAUSE CERTAIN TAX CONSEQUENCES MAY VARY DEPENDING UPON THE PARTICULAR
CIRCUMSTANCES OF EACH CFC STOCKHOLDER, IT IS RECOMMENDED THAT CFC STOCKHOLDERS
CONSULT THEIR TAX ADVISORS CONCERNING THE FEDERAL (AND ANY STATE AND LOCAL) TAX
CONSEQUENCES OF THE CORPORATE MERGER IN THEIR PARTICULAR CIRCUMSTANCES.
DISSENTERS' RIGHTS
Holders of CFC Common Stock entitled to vote on approval of the Merger
Agreement have the right to object to the Mergers, and upon consummation of the
Corporate Merger and the satisfaction of certain specified procedures, to be
paid the
8
<PAGE>
fair value of such holders' shares of CFC Common Stock in cash, in accordance
with the applicable provisions of the Connecticut General Statutes Annotated
("CGSA"). The procedures to be followed by objecting stockholders are summarized
under "THE MERGERS -- Dissenters' Rights". A copy of the applicable provisions
of the CGSA is set forth in ANNEX C to this Prospectus/Proxy Statement. FAILURE
TO FOLLOW SUCH PROVISIONS PRECISELY MAY RESULT IN LOSS OF SUCH DISSENTERS'
RIGHTS.
In general, any objecting stockholder who perfects such holder's statutory
right to be paid in cash the fair value of such holder's CFC Common Stock will
recognize gain or loss for federal income tax purposes upon receipt of such
cash. See "THE MERGERS -- Certain Federal Income Tax Consequences".
RESALE OF FUNC COMMON SHARES
The FUNC Common Shares will be freely transferable by the holders of such
shares under applicable federal securities laws, except for those shares held by
those holders who may be deemed to be "affiliates" (generally including
directors, certain executive officers and ten percent or more stockholders) of
CFC or FUNC. See "RESALE OF FUNC COMMON SHARES".
BUSINESS PENDING CONSUMMATION
CFC agreed in the Merger Agreement to conduct its business in the ordinary
and usual course consistent with past practice and to refrain from taking
certain actions relating to its operation pending consummation of the Mergers,
without the prior written consent of FUNC, except as otherwise permitted by the
Merger Agreement. These actions include, without limitation: (i) paying any
dividends, other than dividends payable on CFC Common Stock at a quarterly rate
not to exceed $.07 per share (provided CFC may not pay any dividend for the
quarter in which the Effective Date occurs unless the record date for the FUNC
Common Stock dividend for such quarter precedes the Effective Date), or
redeeming or otherwise acquiring any shares of its capital stock, or issuing any
additional shares of its capital stock, or giving any person the right to
acquire any such shares; (ii) incurring any indebtedness for borrowed money or
becoming liable for the obligations of any other entity (other than in the
ordinary course of business consistent with past practice); (iii) increasing the
rate of compensation (other than normal individual increases in regular
compensation in the ordinary course of business consistent with past practice)
or paying any bonus to any of its directors, officers or employees (excluding
certain bonuses payable under CFC's Short-Term Incentive Compensation Plan and
certain retention bonuses); (iv) entering into or modifying any employment
agreements or employee benefit plans; (v) disposing of any material portion of
its assets or acquiring any portion of the business or property of any other
entity which is material to it; (vi) changing its lending, investment, liability
management or other material banking policies in any material respect; (vii)
settling any claim, action or proceeding involving money damages in an amount
greater than $100,000 or any restrictions upon the operations of CFC; or (viii)
entering into, terminating or materially changing any material agreements,
except for those agreements entered into in the ordinary course of business
consistent with past practice that are terminable by CFC without penalty on not
more than 60 days' prior written notice.
CFC also has agreed that it will use its best efforts to conform 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 of FUNC, provided certain conditions are met.
See "THE MERGERS -- "Interests of Certain Persons" and " -- Business
Pending Consummation".
REGULATORY APPROVALS
The Mergers are subject to the prior approval of the Federal Deposit
Insurance Corporation (the "FDIC") and the Banking Commissioner of the State of
Connecticut (the "Connecticut Commissioner") and to the prior approval, or a
waiver of the requirement to receive such approval, from the Board of Governors
of the Federal Reserve System (the "Federal Reserve Board"). An application has
been filed with such regulatory authorities for such approval or waiver with
respect to the FDIC and the Federal Reserve Board, and is expected to be filed
in the near future with the Connecticut Commissioner. There can be no assurance
that the necessary regulatory approvals or waiver will be obtained or as to the
timing or conditions of such approvals or waiver. See "THE MERGERS -- Regulatory
Approvals".
CONDITIONS TO CONSUMMATION; TERMINATION
Consummation of the Mergers is subject, among other things, to: (i)
approval of the Merger Agreement by the requisite vote of the stockholders of
CFC; (ii) receipt of the regulatory approvals referred to above without any
restrictions or conditions which, in the reasonable opinion of FUNC, would so
materially adversely impact the economic or business benefits to FUNC of the
transactions contemplated by the Merger Agreement so as to render inadvisable
the consummation of the
9
<PAGE>
Mergers; (iii) no court or governmental or regulatory authority having taken any
action which prohibits the Mergers; (iv) receipt by FUNC of the opinion of
Sullivan & Cromwell and receipt by CFC of the opinion of Wachtell, Lipton, Rosen
& Katz, each dated as of the Effective Date, as to certain federal income tax
consequences of the Corporate Merger, as discussed above; (v) receipt by FUNC of
a letter from CFC's independent auditors, dated as of or shortly prior to the
Effective Date, with respect to CFC's consolidated financial position and
results of operations; and (vi) the FUNC Common Shares having been approved for
listing on the NYSE, subject to official notice of issuance.
The Merger Agreement may be terminated by mutual consent of FUNC and CFC.
The Merger Agreement may also be terminated by the Board of Directors of either
FUNC or CFC if the Corporate Merger does not occur on or before May 1, 1997, or
if certain conditions set forth in the Merger Agreement are not met.
See "THE MERGERS -- Conditions to Consummation; Termination".
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 CFC.
STOCK OPTION AGREEMENT
As an inducement and condition to FUNC's willingness to enter into the
Merger Agreement, CFC (as issuer) entered into a Stock Option Agreement with
FUNC (as grantee), dated as of June 15, 1996 (the "Stock Option Agreement"). The
Stock Option Agreement is set forth in Exhibit A to the Merger Agreement, which
is set forth in ANNEX A to this Proxy Statement/Prospectus.
Pursuant to the Stock Option Agreement, CFC granted to FUNC an irrevocable
option (the "FUNC Option"), exercisable only under certain circumstances (none
of which, to the best of CFC's and FUNC's knowledge, has occurred as of the date
hereof) to purchase up to 19.9 percent of the authorized but unissued shares of
CFC Common Stock for a purchase price of $22.875 per share, subject to
adjustment in certain circumstances.
Under certain circumstances, if the FUNC Option becomes exercisable, CFC
may be required to repurchase the FUNC Option (or the shares purchased pursuant
thereto). The purchase of any shares of CFC Common Stock pursuant to the FUNC
Option is subject to compliance with applicable law, including receipt of any
necessary approval under the BHCA.
The Stock Option Agreement and the FUNC Option are intended to increase the
likelihood that the Mergers will be consummated on the terms set forth in the
Merger Agreement, and may be expected to discourage offers by third parties to
acquire CFC.
See "THE MERGERS -- Stock Option Agreement".
ACCOUNTING TREATMENT
It is intended that the Corporate Merger will be accounted for as a
purchase under generally accepted accounting principles. See "THE
MERGER -- Accounting Treatment".
CERTAIN DIFFERENCES IN THE RIGHTS OF CFC AND FUNC STOCKHOLDERS
The rights of stockholders of CFC are currently determined by reference to
the CGSA and by CFC's Articles of Incorporation (as amended, the "CFC Articles")
and bylaws (as amended, the "CFC Bylaws"). On the Effective Date, stockholders
of CFC will become stockholders of FUNC, and their rights as stockholders of
FUNC will be determined by reference to the North Carolina Business Corporation
Act (the "NCBCA") and by FUNC's Articles of Incorporation (as amended, the "FUNC
Articles") and bylaws (as amended, the "FUNC Bylaws"). See "DESCRIPTION OF FUNC
CAPITAL STOCK" and "CERTAIN DIFFERENCES IN THE RIGHTS OF CFC AND FUNC
STOCKHOLDERS".
COMPARISON OF CERTAIN UNAUDITED PER SHARE DATA
The following unaudited information, adjusted for any stock dividends and
stock splits, reflects, where applicable, certain comparative per share data
related to book value, cash dividends paid, income and market value: (i) on a
historical basis for FUNC and CFC; (ii) on a pro forma combined basis per share
of FUNC Common Stock; and (iii) on an equivalent pro forma basis per share of
CFC Common Stock. Such pro forma information has been prepared assuming (a) a
.4240 Exchange
10
<PAGE>
Ratio, and (b) consummation of the Corporate Merger on a purchase accounting
basis as of the beginning of each of the periods presented. All data with
respect to FUNC (i) as of and for periods ended on or before December 31, 1995,
have been restated to reflect the pooling of interests acquisition of First
Fidelity Bancorporation ("FFB") on January 1, 1996, and (ii) as of and for six
months ended June 30, 1996, includes $181 million, or $0.64 per share of FUNC
Common Stock, in after-tax FFB merger-related restructuring charges. All data
with respect to CFC (i) as of and for periods ended on or before September 30,
1995, have been restated to reflect the pooling of interests acquisition of
Great Country Bank on December 15, 1995, and (ii) as of and for periods ended on
or prior to March 31, 1995, reflects data for Centerbank, which became a wholly-
owned subsidiary of CFC on July 7, 1995, as a result of a corporate
reorganization effective as of such date. See "RECENT DEVELOPMENTS", "THE
MERGERS -- Accounting Treatment" and "CFC".
The .4240 Exchange Ratio used in the pro forma information is based on
$60.00, the last reported sale price per share of FUNC Common Stock on the NYSE
Tape on June 14, 1996, the date the Merger Agreement was executed. 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 .4240.
The pro forma information would be different if the Average Closing Price
results in an Exchange Ratio different from .4240. 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 prior to
the date hereof. Stockholders are urged to obtain current quotations of the
market price per share of FUNC Common Stock.
Since purchase accounting does not require restatement of results for prior
periods following consummation of the Corporate Merger, consummation of the
Corporate Merger will not affect FUNC's historical results for the periods
indicated. Pro forma financial information is intended to show how the Corporate
Merger might have affected historical financial statements if the Corporate
Merger had been consummated at an earlier time. The pro forma financial
information does not purport to be indicative of the results that actually would
have been realized had the Corporate 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 any future periods.
The information shown below should be read in conjunction with the
historical financial statements of FUNC and CFC, including the respective notes
thereto, and the documents incorporated herein by reference. See "AVAILABLE
INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE". See also the
footnotes to the table "FUNC and CFC Pro Forma Combined Selected Financial
Information" under " -- Selected Financial Data".
<TABLE>
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
<S> <C> <C>
BOOK VALUE PER SHARE:
Historical per share of:
FUNC Common Stock...................................................................... $ 32.46 31.89
CFC Common Stock....................................................................... 15.58 15.33
Pro forma combined per share of FUNC Common Stock (1)..................................... 32.46 31.89
Equivalent pro forma per share of CFC Common Stock (2).................................... $ 13.76 13.52
</TABLE>
(1) The pro forma combined book value per share of FUNC Common Stock amounts
represent the sum of the pro forma combined stockholders' equity amounts,
divided by pro forma combined period-end number of shares outstanding.
(2) The equivalent pro forma book value per share of CFC Common Stock amounts
represent the pro forma combined book value per share of FUNC Common Stock
amounts multiplied by a .4240 Exchange Ratio.
<TABLE>
<CAPTION>
YEARS ENDED
SIX MONTHS ENDED DECEMBER 31,
JUNE 30, 1996 1995 1994 1993
<S> <C> <C> <C> <C>
CASH DIVIDENDS PAID PER SHARE:
Historical per share of:
FUNC Common Stock............................................................... $ 1.04 1.96 1.72 1.50
CFC Common Stock................................................................ 0.14 0.20 -- --
Pro forma combined per share of FUNC Common Stock (3).............................. 1.04 1.22 -- --
Equivalent pro forma per share of CFC Common Stock (4)............................. $ 0.44 0.52 -- --
</TABLE>
11
<PAGE>
(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 CFC Common Stock
amounts represent pro forma combined per share of FUNC Common Stock amounts
multiplied by a .4240 Exchange Ratio, rounded up to the nearest cent. The
current annualized dividend rate per share for FUNC Common Stock, based upon
the most recently declared quarterly dividend rate of $.58 per share payable
on September 16, 1996, would be $2.32. On an equivalent pro forma basis,
such current annualized FUNC dividend per share of CFC Common Stock would be
$.98, based on a .4240 Exchange Ratio, rounded to the nearest cent. Any
future FUNC and CFC dividends are dependent upon their respective earnings
and financial conditions, government regulations and policies and other
factors. Equivalent pro forma cash dividends per share of CFC Common Stock
based on FUNC historical dividends are set forth under "THE MERGERS--
Dividends". See "THE MERGERS -- Exchange of CFC Certificates", " -- Business
Pending Consummation" and " -- Dividends".
<TABLE>
<CAPTION>
YEARS ENDED
SIX MONTHS ENDED DECEMBER 31,
JUNE 30, 1996 1995 1994 1993
<S> <C> <C> <C> <C>
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS:
Historical per share of:
FUNC Common Stock............................................................... $ 2.40 5.04 4.58 4.30
CFC Common Stock................................................................ 0.90 1.58 0.31 0.73
Pro forma combined per share of FUNC Common Stock (5).............................. 2.39 5.00 -- --
Equivalent pro forma per share of CFC Common Stock (6)............................. $ 1.01 2.12 -- --
</TABLE>
(5) The pro forma combined income per share of FUNC Common Stock amounts
represent pro forma combined net income applicable to holders of FUNC Common
Stock, divided by pro forma combined average number of shares of FUNC Common
Stock outstanding.
(6) The equivalent pro forma income per share of CFC Common Stock amounts
represent pro forma combined income per share of FUNC Common Stock amounts
multiplied by a .4240 Exchange Ratio.
<TABLE>
<CAPTION>
HISTORICAL
FUNC CFC EQUIVALENT PRO FORMA
COMMON STOCK COMMON STOCK PER SHARE OF CFC COMMON STOCK (7)
<S> <C> <C> <C>
MARKET VALUE PER SHARE:
June 14, 1996.......................................... $ 60.00 22.875 25.375
, 1996...................................... $
</TABLE>
(7) The equivalent pro forma market values per share of CFC Common Stock
represent the historical market values per share of FUNC Common Stock
multiplied by a .4240 Exchange Ratio, rounded down to the nearest
one-eighth. The FUNC and CFC historical market values per share represent
the last reported sale prices per share of FUNC Common Stock and CFC Common
Stock on the NYSE Tape and the Nasdaq National Market, respectively: (i) on
June 14, 1996, the last business day preceding public announcement of the
execution of the Merger Agreement; and (ii) on , 1996. See "THE
MERGERS -- Market Prices".
Because the market price of FUNC Common Stock is subject to fluctuation,
the market value of the FUNC Common Shares that holders of CFC Common Stock will
receive upon consummation of the Corporate Merger may increase or decrease prior
to and after the receipt of such shares. CFC stockholders are urged to obtain
current market quotations for FUNC Common Stock.
SELECTED FINANCIAL DATA
The following tables set forth certain unaudited historical consolidated
selected financial information for FUNC and CFC and certain unaudited pro forma
combined selected financial information. Such pro forma information has been
prepared assuming (i) a .4240 Exchange Ratio, and (ii) consummation of the
Corporate Merger on a purchase accounting basis as of the beginning of each of
the periods presented. All data with respect to FUNC (i) as of and for periods
ended on or before December 31, 1995, have been restated to reflect the pooling
of interests acquisition of FFB on January 1, 1996, and
12
<PAGE>
(ii) as of and for the six months ended June 30, 1996, includes $181 million, or
$0.64 per share of FUNC Common Stock, in after-tax FFB merger-related
restructuring charges. All data with respect to CFC (i) as of and for periods
ended on or before September 30, 1995, have been restated to reflect the pooling
of interests acquisition of Great Country Bank on December 15, 1995, and have
not been restated for the acquisition of Heritage Bank, and (ii) as
of and for periods ended on or prior to March 31, 1995, reflects data for
Centerbank, which became a wholly-owned subsidiary of CFC on July 7, 1995, as a
result of a corporate reorganization effective as of such date. See "RECENT
DEVELOPMENTS", "THE MERGERS -- Accounting Treatment" and "CFC". This information
should be read in conjunction with the historical financial statements of FUNC
and CFC, including the respective notes thereto, and the other documents
incorporated herein by reference. See "AVAILABLE INFORMATION" and "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE". Interim unaudited historical data of FUNC
and CFC reflect, in the respective opinions of management, all adjustments
(consisting only of normal recurring adjustments) necessary to a fair
presentation of such data.
The .4240 Exchange Ratio used in the pro forma information is based on
$60.00, the last reported sale price per share of FUNC Common Stock on the NYSE
Tape on June 14, 1996, the date the Merger Agreement was executed. 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 .4240.
The pro forma information would be different if the Average Closing Price
results in an Exchange Ratio different from .4240. 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 prior to
the mailing hereof. Stockholders are urged to obtain current quotations of the
market price per share of FUNC Common Stock.
Since purchase accounting does not require restatement of results for prior
periods following consummation of the Corporate Merger, consummation of the
Corporate Merger will not affect FUNC's historical results for the periods
indicated. Pro forma financial information is intended to show how the Corporate
Merger might have affected historical financial statements if the Corporate
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 Corporate 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 any future periods.
13
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
1996 1995 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
FUNC (HISTORICAL)
CONSOLIDATED SUMMARIES OF INCOME
(In thousands, except per share data)
Interest income............................... $ 4,771,184 4,155,528 8,686,377 7,230,813 6,601,528 6,608,666
Interest expense.............................. 2,294,522 1,871,877 4,051,815 2,792,982 2,481,952 2,941,680
Net interest income........................... 2,476,662 2,283,651 4,634,562 4,437,831 4,119,576 3,666,986
Provision for loan losses..................... 150,000 96,500 220,000 179,000 369,753 642,708
Net interest income after provision for loan
losses...................................... 2,326,662 2,187,151 4,414,562 4,258,831 3,749,823 3,024,278
Securities available for sale transactions.... 18,276 18,921 44,340 6,213 32,784 39,227
Investment security transactions.............. 2,541 1,450 4,818 4,006 7,435 (2,881)
Noninterest income............................ 1,051,210 835,253 1,847,350 1,565,694 1,541,569 1,360,202
Noninterest expense........................... 2,344,253 1,936,534 4,092,469 3,746,857 3,536,346 3,443,524
Income before income taxes.................... 1,054,436 1,106,241 2,218,601 2,087,887 1,795,265 977,302
Income taxes.................................. 372,217 392,003 788,420 711,444 578,912 278,514
Net income.................................... 682,219 714,238 1,430,181 1,376,443 1,216,353 698,788
Dividends on preferred stock.................. 7,584 17,350 26,390 46,020 45,553 53,040
Net income applicable to common stockholders
before redemption premium................... 674,635 696,888 1,403,791 1,330,423 1,170,800 645,748
Redemption premium on preferred stock......... -- -- -- 41,355 -- --
Net income applicable to common stockholders
after redemption premium.................... $ 674,635 696,888 1,403,791 1,289,068 1,170,800 645,748
PER COMMON SHARE DATA
Net income before redemption premium.......... $ 2.40 2.49 5.04 4.72 4.30 2.53
Net income after redemption premium........... 2.40 2.49 5.04 4.58 4.30 2.53
Cash dividends................................ 1.04 0.92 1.96 1.72 1.50 1.28
Book value.................................... 32.46 30.42 31.89 28.19 26.71 23.36
CASH DIVIDENDS PAID ON COMMON STOCK
(In thousands)................................. 291,303 158,418 336,321 297,902 243,845 167,601
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
(In thousands)
Assets........................................ 139,885,834 118,462,474 131,879,873 113,529,201 104,549,554 95,308,328
Loans, net of unearned income................. 91,338,626 84,019,654 90,562,880 77,830,993 68,263,088 60,301,462
Deposits...................................... 91,452,597 87,660,947 92,555,218 87,865,125 81,885,433 76,155,800
Long-term debt................................ 7,806,544 6,053,033 7,120,947 4,242,137 3,675,002 3,732,768
Preferred stockholders' equity................ 163,495 218,349 183,223 229,707 262,014 276,946
Common stockholders' equity................... 9,152,453 8,456,896 8,859,921 8,044,785 7,431,590 6,187,426
Total stockholders' equity.................... $ 9,315,948 8,675,245 9,043,144 8,274,492 7,946,053 6,716,813
Preferred shares outstanding.................. 2,599 4,793 3,388 5,213 11,560 12,158
Common shares outstanding..................... 281,948 278,019 277,846 285,361 278,204 264,895
CONSOLIDATED AVERAGE BALANCE SHEET ITEMS
(In thousands)
Assets........................................ $133,597,354 113,257,292 118,142,086 106,413,103 99,610,438 90,620,843
Loans, net of unearned income................. 89,546,269 79,511,312 83,265,397 70,725,906 62,996,378 58,700,311
Deposits...................................... 91,367,200 85,286,901 87,274,641 80,760,083 76,830,389 71,946,699
Long-term debt................................ 7,428,892 5,050,528 5,707,257 4,009,128 3,597,957 3,527,853
Common stockholders' equity*.................. 9,048,848 8,303,939 8,412,020 7,869,710 6,781,863 5,723,532
Total stockholders' equity*................... $ 9,220,985 8,530,840 8,623,039 8,371,959 7,302,152 6,280,407
Common shares outstanding..................... 281,475 280,337 278,677 281,663 272,438 255,384
CONSOLIDATED PERCENTAGES
Net income applicable to common stockholders
before redemption premium to average common
stockholders' equity*........................ 14.99%* 16.92** 16.69 16.91 17.26 11.28
Net income applicable to common stockholders
after redemption premium to average common
stockholders' equity*....................... 14.99** 16.92** 16.69 16.38 17.26 11.28
Net income to:
Average total stockholders' equity*......... 14.88** 16.88** 16.59 16.44 16.66 11.13
Average assets.............................. 1.03** 1.27** 1.21 1.29 1.22 0.77
Average stockholders' equity to average
assets***................................... 6.90 7.39 7.23 7.52 7.11 6.89
Allowance for loan losses to:
Net loans................................... 1.55 1.83 1.66 2.03 2.38 2.57
Nonaccrual and restructured loans........... 195 244 233 248 151 105
Nonperforming assets........................ 169 182 182 178 115 76
Net charge-offs to average net loans.......... 0.56** 0.40** 0.41 0.40 0.78 1.03
Nonperforming assets to loans, net and
foreclosed properties....................... 0.91 1.00 0.91 1.14 2.06 3.36
Capital ratios:***
Tier 1 capital.............................. 7.11 7.31 6.70 7.76 9.14 9.22
Total capital............................... 11.94 11.72 11.45 12.94 14.64 14.31
Leverage.................................... 5.60 5.96 5.49 6.12 6.13 6.55
Net interest margin........................... 4.18%** 4.64** 4.46 4.75 4.82 4.73
<CAPTION>
1991
<S> <C>
FUNC (HISTORICAL)
CONSOLIDATED SUMMARIES OF INCOME
(In thousands, except per share data)
Interest income............................... 7,031,400
Interest expense.............................. 4,070,885
Net interest income........................... 2,960,515
Provision for loan losses..................... 946,284
Net interest income after provision for loan
losses...................................... 2,014,231
Securities available for sale transactions.... 53,566
Investment security transactions.............. 155,048
Noninterest income............................ 1,254,635
Noninterest expense........................... 2,777,665
Income before income taxes.................... 699,815
Income taxes.................................. 129,843
Net income.................................... 569,972
Dividends on preferred stock.................. 51,746
Net income applicable to common stockholders
before redemption premium................... 518,226
Redemption premium on preferred stock......... --
Net income applicable to common stockholders
after redemption premium.................... 518,226
PER COMMON SHARE DATA
Net income before redemption premium.......... 2.34
Net income after redemption premium........... 2.34
Cash dividends................................ 1.12
Book value.................................... 21.21
CASH DIVIDENDS PAID ON COMMON STOCK
(In thousands)................................. 126,029
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
(In thousands)
Assets........................................ 89,488,406
Loans, net of unearned income................. 58,725,097
Deposits...................................... 72,394,773
Long-term debt................................ 3,549,815
Preferred stockholders' equity................ 377,144
Common stockholders' equity................... 5,175,987
Total stockholders' equity.................... 5,805,579
Preferred shares outstanding.................. 16,165
Common shares outstanding..................... 244,070
CONSOLIDATED AVERAGE BALANCE SHEET ITEMS
(In thousands)
Assets........................................ 83,822,199
Loans, net of unearned income................. 54,844,025
Deposits...................................... 64,602,620
Long-term debt................................ 3,192,477
Common stockholders' equity*.................. 4,554,234
Total stockholders' equity*................... 5,083,574
Common shares outstanding..................... 221,469
CONSOLIDATED PERCENTAGES
Net income applicable to common stockholders
before redemption premium to average common
stockholders' equity*........................ 11.38
Net income applicable to common stockholders
after redemption premium to average common
stockholders' equity*....................... 11.38
Net income to:
Average total stockholders' equity*......... 11.21
Average assets.............................. 0.68
Average stockholders' equity to average
assets***................................... 6.29
Allowance for loan losses to:
Net loans................................... 2.49
Nonaccrual and restructured loans........... 77
Nonperforming assets........................ 55
Net charge-offs to average net loans.......... 1.53
Nonperforming assets to loans, net and
foreclosed properties....................... 4.45
Capital ratios:***
Tier 1 capital.............................. 7.56
Total capital............................... 11.76
Leverage.................................... 5.31
Net interest margin........................... 4.12
</TABLE>
* Average common stockholders' equity and total stockholders' equity exclude
net unrealized gains (losses) on debt and equity securities in 1994 through
1996.
** Annualized.
*** The average stockholders' equity to average asset ratios and all capital
ratios for 1991-1994 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>
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
CFC (HISTORICAL)
CONSOLIDATED SUMMARIES OF INCOME
(In thousands, except per share data)
Interest income....................................... $ 134,227 254,103 211,465 213,963 247,271
Interest expense...................................... 77,159 141,127 100,163 101,992 144,233
Net interest income................................... 57,068 112,976 111,302 111,971 103,038
Provision for loan and lease losses................... 3,737 8,616 20,103 17,052 16,129
Net interest income after provision for loan losses... 53,331 104,360 91,199 94,919 86,909
Securities available for sale transactions............ 3,156 1,813 753 -- --
Investment securities transactions.................... -- -- -- 3,512 234
Noninterest income.................................... 19,063 34,172 29,906 28,183 23,109
Noninterest expense................................... 55,528 115,900 122,478 117,790 116,879
Income (loss) before income taxes (benefits).......... 20,022 24,445 (620) 8,824 (6,627)
Income taxes (benefits)............................... 6,593 1,797 (4,956)(a) (634) 4,400
Net income (loss)..................................... $ 13,429 22,648 4,336 9,458 (11,027)
PER COMMON SHARE DATA
Net income (loss)..................................... $ 0.90 1.58 0.31 0.73 (0.85)
Cash dividends........................................ 0.14 0.20 -- -- --
Book value............................................ 15.58 15.33 13.77 13.62 13.27
CASH DIVIDENDS PAID ON COMMON STOCK
(In thousands)......................................... 2,058 2,547 -- -- --
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
(In thousands)
Assets................................................ 4,018,341 3,580,419 3,405,303 3,207,355 3,058,945
Loans and leases, net of unearned income.............. 3,127,972 2,909,732 2,593,667 2,602,050 2,515,391
Deposits.............................................. 2,638,246 2,540,170 2,486,817 2,542,012 2,606,866
Long-term debt........................................ 400,424 379,805 333,244 240,050 173,730
Common stockholders' equity........................... 233,936 221,426 195,946 189,638 172,136
Total stockholders' equity............................ $ 233,936 221,426 195,946 189,638 172,136
Common shares outstanding............................. 15,014 14,446 14,229 13,927 12,974
CONSOLIDATED AVERAGE BALANCE SHEET ITEMS
(In thousands)
Assets................................................ $3,768,543 3,491,481 3,225,960 3,064,304 3,208,361
Loans and leases, net of unearned income.............. 2,961,751 2,704,526 2,406,138 2,448,880 2,508,953
Deposits.............................................. 2,612,438 2,460,690 2,537,307 2,568,045 2,730,778
Common stockholders' equity........................... 224,973 207,342 192,021 182,288 180,611
Total stockholders' equity............................ $ 224,973 207,342 192,021 182,288 180,611
Common shares outstanding............................. 14,929 14,326 14,146 13,006 12,958
CONSOLIDATED PERCENTAGES
Net income to:
Average total stockholders' equity.................... 12.00%* 10.92 2.26 5.19 (6.11)
Average assets........................................ 0.72* 0.65 0.13 0.31 (0.34)
Average stockholders' equity to average assets.......... 5.97 5.94 5.95 5.95 5.63
Allowance for loan losses to:
Loans, net of unearned income......................... 1.42 1.48 1.76 2.40 2.95
Nonaccrual and restructured loans..................... 56.42 67.23 73.90 72.27 71.47
Nonperforming assets.................................. 41.13 45.68 43.88 35.88 33.41
Net charge-offs to average net loans.................... 0.23* 0.42 1.62 1.16 1.21
Nonperforming assets to loans, net
and foreclosed properties............................. 3.42 3.20 3.95 6.61 8.42
Capital ratios**
Tier 1 capital........................................ 8.92 8.87 8.45 8.71 8.20
Total capital......................................... 11.19 11.22 9.71 9.98 9.48
Leverage.............................................. 5.71 5.79 5.53 5.59 5.31
Net interest margin..................................... 3.24%* 3.51 3.87 4.17 3.61
<CAPTION>
1991
<S> <C>
CFC (HISTORICAL)
CONSOLIDATED SUMMARIES OF INCOME
(In thousands, except per share data)
Interest income....................................... 208,636
Interest expense...................................... 145,766
Net interest income................................... 62,870
Provision for loan and lease losses................... 24,374
Net interest income after provision for loan losses... 38,496
Securities available for sale transactions............ --
Investment securities transactions.................... (1,169)
Noninterest income.................................... 28,260
Noninterest expense................................... 89,847
Income (loss) before income taxes (benefits).......... (24,260)
Income taxes (benefits)............................... (795)
Net income (loss)..................................... (23,465)
PER COMMON SHARE DATA
Net income (loss)..................................... (1.82)
Cash dividends........................................ --
Book value............................................ 14.14
CASH DIVIDENDS PAID ON COMMON STOCK
(In thousands)......................................... --
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
(In thousands)
Assets................................................ 3,376,932
Loans and leases, net of unearned income.............. 2,676,622
Deposits.............................................. 2,812,750
Long-term debt........................................ 296,779
Common stockholders' equity........................... 182,940
Total stockholders' equity............................ 182,940
Common shares outstanding............................. 12,942
CONSOLIDATED AVERAGE BALANCE SHEET ITEMS
(In thousands)
Assets................................................ 2,401,059
Loans and leases, net of unearned income.............. 1,876,438
Deposits.............................................. 1,683,820
Common stockholders' equity........................... 193,652
Total stockholders' equity............................ 193,652
Common shares outstanding............................. 12,927
CONSOLIDATED PERCENTAGES
Net income to:
Average total stockholders' equity.................... (12.12)
Average assets........................................ (0.98)
Average stockholders' equity to average assets.......... 8.07
Allowance for loan losses to:
Loans, net of unearned income......................... 3.29
Nonaccrual and restructured loans..................... 75.21
Nonperforming assets.................................. 37.70
Net charge-offs to average net loans.................... 1.55
Nonperforming assets to loans, net
and foreclosed properties............................. 8.37
Capital ratios**
Tier 1 capital........................................ 7.85
Total capital......................................... 9.39
Leverage.............................................. 5.43
Net interest margin..................................... 2.94
</TABLE>
* Annualized.
** Risked-based capital ratio guidelines require a minimum ratio of tier 1
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.
(a) Includes benefit of $4,547,000 for cumulative effect of change in
accounting for income taxes.
15
<PAGE>
FUNC AND CFC
PRO FORMA COMBINED SELECTED FINANCIAL DATA (1)
<TABLE>
<CAPTION>
SIX MONTHS ENDED AS OF AND FOR THE YEAR
JUNE 30, 1996 ENDED DECEMBER 31, 1995
<S> <C> <C>
CONSOLIDATED SUMMARIES OF INCOME
(In thousands,except per share data)
Interest income................................................................ $ 4,894,353 8,916,155
Interest expense............................................................... 2,371,681 4,192,942
Net interest income............................................................ 2,522,672 4,723,213
Provision for loan losses...................................................... 153,737 228,616
Net interest income after provision for loan losses............................ 2,368,935 4,494,597
Securities available for sale transactions..................................... 21,432 46,153
Investment security transactions............................................... 2,541 4,818
Noninterest income............................................................. 1,070,273 1,881,522
Noninterest expense............................................................ 2,413,522 4,235,852
Income before income taxes..................................................... 1,049,659 2,191,238
Income taxes................................................................... 370,056 771,806
Net income..................................................................... 679,603 1,419,432
Dividends on preferred stock................................................... 7,584 26,390
Net income applicable to common stockholders................................... $ 672,019 1,393,042
Net income per common share.................................................... $ 2.39 5.00
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
(In thousands)
Assets......................................................................... $143,702,481 135,268,455
Loans, net of unearned income.................................................. 94,466,598 93,472,612
Deposits....................................................................... 94,090,843 95,095,388
Long-term debt................................................................. 8,206,968 7,500,752
Preferred stockholders' equity................................................. 163,495 183,223
Common stockholders' equity.................................................... 9,152,453 8,859,921
Total stockholders' equity..................................................... $ 9,315,948 9,043,144
Preferred shares outstanding................................................... 2,599 3,388
Common shares outstanding...................................................... 281,948 277,846
CONSOLIDATED PERCENTAGES
Allowance for loan losses to:
Net loans...................................................................... 1.55% 1.66
Nonperforming assets........................................................... 155 168
Net charge-offs to average net loans............................................. .55* 0.41
Nonperforming assets to loans, net and foreclosed properties..................... 1.00% 0.98
</TABLE>
* Annualized.
(1) Pro forma assumptions related to the Corporate Merger include (i) a .4240
Exchange Ratio based on the June 14, 1996 FUNC Common Stock closing price of
$60.00; (ii) the issuance of 6.8 million shares FUNC Common Stock; (iii) the
repurchase by FUNC of such shares in the open market at a cost of $425
million; (iv) a cost of funds rate of 5.25 percent for the six months ended
June 30, 1996, and 5.77 percent for the year ended December 31, 1995; and
(v) an increase in mortgage servicing rights, goodwill and deposit base
premium of $4 million, $112 million and $124 million, respectively, which is
being amortized over 10-year straight-line, 25-year straight-line and
10-year accelerated bases, respectively. See "THE MERGERS -- Market Prices".
16
<PAGE>
RECENT DEVELOPMENTS
CERTAIN 1996 COMPLETED AND PENDING ACQUISITIONS
FUNC
On January 1, 1996, FUNC completed the pooling of interests acquisition of
FFB. Each share of FFB common stock was exchanged for 1.35 shares of FUNC Common
Stock; and each share of the three outstanding series of FFB preferred stock was
exchanged for one share of one of the three corresponding new series of FUNC
Class A Preferred Stock having substantially identical terms as the related
series of FFB preferred stock. Based on the closing price of FUNC Common Stock
on the NYSE Tape on December 29, 1995 ($55.625), the FFB acquisition was valued
at $5.9 billion and represented a purchase price of $75.09 for each share of FFB
common stock. Approximately 106.3 million shares of FUNC Common Stock were
issued in the FFB acquisition. Two of the three series of FUNC Class A Preferred
Stock that were issued in the FFB acquisition were redeemed by FUNC on July 1,
1996, at an aggregate redemption price of $109 million.
At December 31, 1995, FFB had assets of $35.3 billion, net loans of $24.9
billion, deposits of $27.6 billion and net income applicable to common
stockholders of $398 million. FUNC's 1995 Annual Report on Form 10-K includes as
an exhibit, supplemental consolidated financial statements of the Corporation
and FFB on a combined basis, and the related notes thereto, and additional
financial and other information on a combined basis. Reference is made thereto
for such statements and information. See "AVAILABLE INFORMATION".
In addition to the FFB acquisition, during the first six months of 1996,
FUNC completed three additional banking-related acquisitions, RS Financial Corp.
(a savings and loan holding company based in Raleigh, North Carolina, completed
January 11, 1996), Brentwood Savings Bank (based in Brentwood, Tennessee,
completed January 31, 1996) and Society First Federal Savings Bank (based in
Fort Myers, Florida, completed June 1, 1996). These three acquisitions had
combined assets, net loans and deposits of approximately $2.1 billion, $1.4
billion and $1.8 billion, respectively. An aggregate of 2.4 million shares of
FUNC Common Stock were issued in the RS Financial Corp. and Brentwood National
Bank acquisitions and $164 million in cash was paid in the Society First Federal
Savings Bank acquisition. The acquisitions were accounted for as purchases. A
number of shares of FUNC Common Stock equal to the number of such shares issued
in the two stock-for-stock acquisitions has been repurchased by FUNC in the open
market.
On June 16, 1996, FUNC entered into an agreement to acquire Home Financial
Corporation ("HFC"), a savings and loan holding company based in Hollywood,
Florida. HFC operates eight branches in southeast Florida and at June 30, 1996,
reported $1.2 billion in assets and $888 million in deposits. Under the terms of
the agreement, FUNC will exchange 0.2233 shares of FUNC Common Stock for each
share of HFC common stock, subject to adjustment under certain circumstances.
Based on a price of $60.00 per share of FUNC Common Stock and a .2233 exchange
ratio, the purchase price would be approximately $336 million. The acquisition,
which will be accounted for as a purchase, is expected to close late in 1996 or
early in 1997, subject to certain conditions of closing. FUNC expects to
repurchase in the open market the number of shares of FUNC Common Stock to be
issued in the acquisition.
On July 31, 1996, a subsidiary of FUNC acquired the assets of USL Capital's
railcar leasing business. USL Capital is a member of Ford Motor Company's
Financial Services Group. The purchase price amounted to $920 million in cash,
subject to adjustment based on the net book value of such assets on the closing
date.
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 and 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 may occur in connection with future acquisitions.
See "THE MERGERS -- Accounting Treatment", " -- Market Prices" and "FUNC".
CFC
On April 12, 1996, CFC acquired Heritage Bank ("Heritage"), based in
Watertown, Connecticut, for 437,539 shares of CFC Common Stock. As of and for
the three months ended March 31, 1996, Heritage reported assets of $57 million,
net loans of $41 million, deposits of $42 million and a net loss of $0.1
million. The acquisition has been accounted for as a pooling of interests but
due to the relative size of Heritage compared to CFC, the financial statements
of CFC have not been restated as a result of the acquisition. See "THE
MERGERS -- Accounting Treatment" and "CFC".
17
<PAGE>
GENERAL INFORMATION
GENERAL
This Prospectus/Proxy Statement is being furnished by CFC to its
stockholders as a Proxy Statement in connection with the solicitation of proxies
by the CFC Board for use at the Special Meeting to be held on September 25,
1996, and any adjournments or postponements thereof, to consider and vote upon a
proposal to approve the Merger Agreement. This Prospectus/Proxy Statement is
also beingfurnished by FUNC to the holders of CFC Common Stock as a Prospectus
in connection with the issuance by FUNC of the FUNC Common Shares upon
consummation of the Corporate Merger.
Directors, officers and employees of CFC and FUNC may solicit proxies from
CFC stockholders, either personally or by telephone, telegraph or other forms of
communication. Such persons will receive no additional compensation for such
services. CFC has retained to assist in soliciting proxies and to
send proxy materials to brokerage houses and other custodians, nominees and
fiduciaries for transmittal to their principals, at a cost not expected to
exceed $ , plus out-of-pocket expenses. All expenses associated with the
solicitation of proxies in the form enclosed will be borne by the party
incurring the same, except for printing expenses, which will be shared equally
between FUNC and CFC.
THE CFC BOARD HAS UNANIMOUSLY ADOPTED THE MERGER AGREEMENT, BELIEVES THE
MERGER AGREEMENT IS IN THE BEST INTERESTS OF CFC AND ITS STOCKHOLDERS AND IS
FAIR TO THE STOCKHOLDERS, AND RECOMMENDS APPROVAL OF THE MERGER AGREEMENT BY CFC
STOCKHOLDERS. SEE "THE MERGER -- BACKGROUND AND REASONS; CFC".
RECORD DATE; VOTE REQUIRED; REVOCATION OF PROXIES
The CFC Board has fixed August 20, 1996, as the Record Date for determining
stockholders entitled to notice of and to vote at the Special Meeting, and
accordingly, only holders of CFC Common Stock of record at the close of business
on that day are entitled to notice of and to vote at the Special Meeting. The
number of shares of CFC Common Stock outstanding on the Record Date was
, each of such shares being entitled to one vote. The presence, in
person or by proxy, of at least a majority of the total number of outstanding
shares is necessary to constitute a quorum at the Special Meeting. Abstentions
and broker non-votes (I.E., proxies from brokers or nominees indicating that
such persons have not received instructions from the beneficial owners or other
persons as to certain proposals on which such beneficial owners or persons are
entitled to vote their shares but with respect to which the brokers or nominees
have no discretionary power to vote without such instructions) will be treated
as shares present at the Special Meeting for purposes of determining the
presence of a quorum. Approval of the Merger Agreement requires the affirmative
vote of at least two-thirds of the votes entitled to be cast at the Special
Meeting by the holders of CFC Common Stock. Therefore, abstentions and broker
non-votes will have the same effect as votes against approval of the Merger
Agreement.
The directors and executive officers of CFC (including certain of their
related interests) beneficially owned, as of the Record Date, and are entitled
to vote at the Special Meeting shares of CFC Common Stock, which
represents percent of the outstanding shares of CFC Common Stock entitled to
be voted at the Special Meeting. Assuming that the directors and executive
officers of CFC vote their shares of CFC Common Stock in favor of approval of
the Merger Agreement, approval of the Merger Agreement will require the
affirmative vote of the holders of an additional percent of the outstanding
shares of CFC Common Stock entitled to be voted at the Special Meeting.
After having been submitted, the enclosed proxy may be revoked by the
person giving it, at any time before it is exercised, by: (i) submitting written
notice of revocation of such proxy to the Secretary of CFC; (ii) submitting a
proxy having a later date; or (iii) appearing at the Special Meeting and
requesting a return of the proxy. All shares represented by valid proxies will
be exercised in the manner specified thereon. If no specification is made, such
shares will be voted in favor of approval of the Merger Agreement and otherwise
in the discretion of the proxyholders named thereon in accordance with their
best judgment as to any other matters which may be voted on at the Special
Meeting, including among other things, a motion to adjourn or postpone the
Special Meeting to another time and/or place for the purpose of soliciting
additional proxies or otherwise; provided, however, that no proxy which is voted
against the proposal to adopt the Merger Agreement will be voted in favor of any
adjournment or postponement proposed for the purpose of soliciting additional
votes in favor of the Merger Agreement.
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THE MERGERS
THE FOLLOWING INFORMATION RELATING TO THE MERGERS IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION CONTAINED ELSEWHERE IN
THIS PROSPECTUS/PROXY STATEMENT, INCLUDING THE ANNEXES HERETO, AND IN THE
DOCUMENTS INCORPORATED HEREIN BY REFERENCE. A COPY OF THE MERGER AGREEMENT IS
SET FORTH IN ANNEX A TO THIS PROSPECTUS/PROXY STATEMENT AND REFERENCE IS MADE
THERETO FOR A COMPLETE DESCRIPTION OF THE TERMS OF THE MERGERS. STOCKHOLDERS OF
CFC ARE URGED TO READ THE MERGER AGREEMENT CAREFULLY.
GENERAL; EXCHANGE RATIO
Subject to the terms and conditions of the Merger Agreement, CFC will merge
with and into FUNC and Centerbank will merge with and into FUB-CT. Upon
consummation of the Corporate Merger, each outstanding share of CFC Common Stock
(excluding any Excluded Shares) will be converted, by virtue of the Corporate
Merger, automatically and without any action on the part of the holder thereof,
into the right to receive a number of FUNC Common Shares equal to the Exchange
Ratio (I.E. the the result obtained by dividing $25.44 by the Average Closing
Price). Each holder of CFC 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 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 the fraction of a share of FUNC Common Stock to which such holder would
otherwise be entitled.
For purposes of the pro forma computations in this Prospectus/Proxy
Statement, a .4240 Exchange Ratio has been calculated using the closing price
per share of FUNC Common Stock on the NYSE Tape on June 14, 1996 ($60.00), the
date the Merger Agreement was executed, 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 .4240. The pro forma information
will be different if the Average Closing Price results in an Exchange Ratio
different from .4240. Set forth on the cover page of the 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 prior to the mailing hereof. CFC
stockholders are urged to obtain current quotations of the market price of FUNC
Common Stock.
The Merger Agreement provides that FUNC may at any time change the method
of acquiring CFC and Centerbank; provided, however, no such change may (i) alter
the amount or kind of consideration to be issued to the holders of CFC Common
Stock pursuant to the Merger Agreement, (ii) adversely affect the intended
tax-free treatment to such holders as a result of receiving such consideration,
or (iii) materially impede or delay receipt of any required regulatory approvals
of the Mergers or the consummation of the transactions contemplated by the
Merger Agreement.
EFFECTIVE DATE
Subject to the conditions to the obligations of the parties to effect the
Mergers, the Effective Date will occur on such date as FUNC and CFC mutually
agree upon, and if not so agreed upon, such date shall be the date that FUNC
notifies CFC in writing not less than five days prior thereto. Subject to the
foregoing, it is currently anticipated that the Mergers will be consummated in
the last quarter of 1996 or the first quarter of 1997. If the Corporate Merger
is consummated in either of such quarters, or in any other quarter, CFC
stockholders should not assume or expect that the Effective Date will precede
the record date for the dividend on FUNC Common Stock for that quarter, so as to
enable such stockholders to receive such dividend. The Board of Directors of
either FUNC or CFC may terminate the Merger Agreement if the Effective Date does
not occur on or before May 1, 1997. See " -- Exchange of CFC Certificates" and
" -- Conditions to Consummation; Termination".
EXCHANGE OF CFC CERTIFICATES
As promptly as practicable after the Effective Date, FUNC will send or
cause to be sent to each holder of record of CFC Common Stock as of the
Effective Date, transmittal materials for use in exchanging all of such holder's
certificates representing CFC 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.
CFC STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE
THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.
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Upon surrender of all of the certificates for CFC 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 CFC Common Stock pursuant
to the Corporate Merger will be deemed issued as of the Effective Date. After
the Effective Date, former holders of record of CFC Common Stock (other than
holders of Dissenting Shares) will be entitled to vote at any meeting of holders
of FUNC Common Stock the number of FUNC Common Shares into which their shares of
CFC Common Stock have been converted, regardless of whether they have
surrendered their CFC Common Stock certificates. FUNC dividends having a record
date on or after the Effective Date will include dividends on all FUNC Common
Shares issued in the Corporate Merger, but no dividend or other distribution
payable to the holders of record of FUNC Common Shares at or as of any time
after the Effective Date will be distributed to the holder of any CFC Common
Stock certificates until such holder physically surrenders all such certificates
as described above. Promptly after such surrender, all undelivered dividends and
other distributions and, where applicable, a check for any fractional share
interest, will be delivered to such holder, in each case, without interest. FUNC
dividends having a record date before the Effective Date (which record date may,
in FUNC's sole discretion, be the day immediately preceding the Effective Date
or any other day prior to the Effective Date) will not include dividends on the
FUNC Common Shares issued in the Corporate Merger. After the Effective Date, the
stock transfer books of CFC will be closed, and there will be no transfers on
the transfer books of CFC of the shares of CFC Common Stock that were
outstanding immediately prior to the Effective Date.
The Merger Agreement provides that CFC will cause each person who may be
deemed to be an "affiliate" (as defined in the Securities Act) to execute an
agreement restricting the disposition of such affiliate's shares of CFC Common
Stock. The Merger Agreement further provides that shares of CFC Common Stock
held by an affiliate of CFC will not be exchanged for FUNC Common Shares until
FUNC receives such an agreement.
BACKGROUND AND REASONS
CFC
Over the past several years, the CFC Board from time to time has reviewed
the strategic options available to CFC. As one resource to aid in that process,
Centerbank and CFC have retained Keefe Bruyette as a financial advisor since
1990.
Prior to April 1996, after considering the information available to it,
together with the advice of its financial advisors, the CFC Board had, in
connection with each such review, determined that the best course of action for
CFC's stockholders would be for CFC to remain an independent entity and to grow
its business by expanding its existing operations and, where appropriate,
acquiring other financial institutions.
In mid-April 1996, Keefe Bruyette informed Robert J. Narkis, the Chief
Executive Officer of CFC, that FUNC's management had informed Keefe Bruyette
that FUNC might have an interest in acquiring CFC. At the next regularly
scheduled meeting of the CFC Board, on April 23, 1996, Mr. Narkis related to the
CFC Board his conversation with Keefe Bruyette regarding FUNC. Mr. Narkis
recommended, and the CFC Board agreed, that the CFC Board should hold a
strategic review session with Keefe Bruyette on May 2, 1996.
At the May 2, 1996, meeting, the CFC Board again reviewed its strategic
options with internal management and Keefe Bruyette. In that review, information
provided to, and discussions by, the CFC Board caused the CFC Board to
reconsider its belief that remaining independent would be best for CFC's
stockholders. Among other things, the continuing pace of merger and acquisition
activity nationwide and in the New England area suggested to the CFC Board that
moderately-sized institutions such as CFC could have difficulty in the long run
competing with larger organizations which had lower administrative and operating
costs relative to their revenues. The CFC Board reevaluated its historical
strategy of remaining independent in order to achieve management's desired
performance objectives in light of CFC's progress in achieving such objectives
and in light of continuing increases in profitability of the industry's highest
performers.
In the meeting, the full range of strategic options available to CFC was
reviewed in detail. The options considered included continued independence, the
potential for a merger of equals and the possibility of the sale of the company.
Although the CFC Board did not conclude that any of the options was necessarily
superior to the others, the CFC Board did conclude that remaining independent
would make achieving management's desired performance goals increasingly
difficult
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given the changing industry environment; and that it was in the stockholders'
interests to determine whether certain institutions were likely to be interested
in making a compelling offer for a business combination with, or acquisition of,
CFC. Management and the CFC Board also believed the information gained in the
process of contacting such institutions would be useful in the process of
initiating any new internal restructuring efforts that would be required if it
were determined CFC would remain independent. Three banking institutions were
identified (including FUNC) which were considered by the CFC Board and its
advisors to be the most likely candidates, and CFC's management was instructed
to contact these institutions to determine what level of interest they might
have.
Contact was made with the three institutions on May 3, 8, and 9, 1996,
respectively, at which management invited these institutions to indicate their
interest in pursuing a transaction with CFC. On May 15, 1996, Keefe Bruyette and
management reviewed with the CFC Board information regarding banking industry
trends, merger and acquisition activity in New England and financial analysis of
CFC and the three banking institutions that had been contacted by management.
Management also reviewed the results of the meetings with the three
institutions. Based on the foregoing, the CFC Board directed management to
continue its dialogue with those institutions.
At a meeting on June 10, 1996, the CFC Board determined that of the three
parties contacted, only FUNC had made meaningful progress toward a potential
transaction. At the June 10 meeting, the CFC Board authorized management to
negotiate with FUNC the terms of a merger transaction which had been proposed by
FUNC's management.
During the period from June 10, 1996 to June 14, 1996, CFC, FUNC and their
legal and financial advisors negotiated the terms of the Merger Agreement and
the Stock Option Agreement. On June 14, 1996, the CFC Board met to consider the
form of Merger Agreement and Stock Option Agreement presented to the CFC Board.
After discussing the implications of the transaction for CFC's stockholders,
reviewing the other alternatives available to CFC, including remaining
independent, and receiving advice from outside counsel concerning the CFC
Board's fiduciary duties relating to the consideration and approval of the
Merger Agreement, the CFC Board voted unanimously to approve the Merger
Agreement.
In reaching its determination to approve and adopt the Merger Agreement and
the transactions contemplated thereby, the CFC Board considered a number of
factors, including, without limitation, the following:
(i) the CFC Board's review of the operating environment, including,
but not limited to, the continuing consolidation and increasing competition
in the banking and financial services industries in New England, the
prospect for further changes in these industries and the increasing
importance of access to financial resources to a bank's ability to
capitalize on opportunities in these industries;
(ii) the CFC Board's review, with the assistance of management and
Keefe Bruyette, of the financial condition, results of operations, business
and overall prospects of FUNC, as well as management's views of CFC's
prospects;
(iii) the CFC Board's assessment, based on discussions with management
and Keefe Bruyette of CFC's strategic alternatives, that the Corporate
Merger represented the most attractive strategic alternative available to
CFC for enhancing stockholder value;
(iv) the information reviewed by Keefe Bruyette with the CFC Board and
the opinion of Keefe Bruyette as to the fairness from a financial point of
view of the Exchange Ratio to CFC's stockholders (see " -- Opinion of
Financial Advisor");
(v) the CFC Board's belief that the terms of the Merger Agreement are
attractive in that the agreement allows CFC stockholders to become
stockholders of an organization which the CFC Board believes to be
well-managed and in a strong competitive position; and
(vi) the expectation that the Corporate Merger will generally be a
tax-free transaction to CFC's stockholders (see " -- Certain Federal Income
Tax Consequences").
The foregoing discussion of the information and factors discussed by the
CFC Board is not meant to be exhaustive but is believed to include all material
factors considered by the CFC Board. The CFC Board did not quantify or attach
any particular weight to the various factors that it considered in reaching its
determination that the Merger Agreement and the transactions contemplated
thereby are in the best interests of CFC's stockholders.
FUNC
FUNC believes that it is advantageous to build a multi-state banking
organization. The economies of banking favor such an organization as a way of
gaining efficiency and spreading costs over a large base, as well as providing
diversification. To
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further its objective to build a multi-state banking organization, FUNC has
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 CFC is an excellent way to significantly expand FUNC's presence in the
State of Connecticut.
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
"FUNC -- History and Business".
OPINION OF FINANCIAL ADVISOR
Keefe Bruyette's opinion is addressed to the CFC Board and does not
constitute a recommendation as to how any stockholder of CFC should vote with
respect to the Merger Agreement.
THE FULL TEXT OF THE OPINION OF KEEFE BRUYETTE, WHICH SETS FORTH A
DESCRIPTION OF THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITS ON THE REVIEW UNDERTAKEN, IS ATTACHED TO THIS PROSPECTUS/PROXY STATEMENT
AS ANNEX B AND IS INCORPORATED HEREIN BY REFERENCE. STOCKHOLDERS ARE URGED TO
READ THE OPINION IN ITS ENTIRETY. THE FOLLOWING SUMMARY OF THE OPINION IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.
In rendering its opinion, Keefe Bruyette (i) reviewed the Merger Agreement,
Annual Reports to Stockholders and Annual Reports on Form 10-K of CFC and FUNC
for the four years ended December 31, 1995, certain interim reports to
stockholders and Quarterly Reports on Form 10-Q of CFC and FUNC and certain
internal financial analyses and forecasts prepared by CFC management; (ii) held
discussions with members of senior management of CFC and FUNC regarding the past
and current business operations, regulatory relationships, financial condition
and future prospects of the respective companies; (iii) compared certain
financial and stock market information for CFC and FUNC with similar information
for certain other companies the securities of which are publicly traded; (iv)
reviewed the financial terms of certain recent business combinations in the
banking industry; and (v) performed such other studies and analyses as it
considered appropriate.
In conducting its review and arriving at its opinion, Keefe Bruyette relied
upon and assumed the accuracy and completeness of all of the financial and other
information provided to it or publicly available, and Keefe Bruyette did not
assume any responsibility for independently verifying any of such information.
Keefe Bruyette relied upon the management of CFC as to the reasonableness and
achievability of the financial and operating forecasts and projections (and the
assumptions and bases therefor) provided to it, and Keefe Bruyette assumed that
such forecasts and projections reflect the best currently available estimates
and judgments of CFC and that such forecasts and projections will be realized in
the amounts and in the time periods currently estimated by CFC management. Keefe
Bruyette also assumed that the aggregate allowances for loan losses for CFC and
FUNC are adequate to cover such losses. In rendering its opinion, Keefe Bruyette
did not make or obtain any evaluations or appraisals of the property of CFC or
FUNC, nor did it examine any individual credit files.
The following is a summary of the material financial analyses employed by
Keefe Bruyette in connection with providing its oral opinion of June 14, 1996,
and does not purport to be a complete description of all analyses employed by
Keefe Bruyette.
FINANCIAL SUMMARY OF THE FIRST UNION TRANSACTION. Keefe Bruyette calculated
the multiple which the $25.44 per share offer represents when compared to CFC's
March 31, 1996 stated book value per share of $15.46, its March 31, 1996
estimated tangible book value per share of $14.41, its trailing 12 months (March
31, 1995 to March 31, 1996) earnings per share of $1.70 and its estimated 1996
earnings per share (as reported by Zachs) of $1.92. The price to book value
multiple was 165 percent, the price to tangible book value was 177 percent, the
price to trailing 12 months earnings per share was 14.96 times, and the price to
1996 estimated earnings per share was 13.25 times. Keefe Bruyette also
calculated a deposit premium of seven percent by dividing the premium paid over
tangible equity by the total deposits of CFC as of March 30, 1996, and a market
premium of 21 percent by dividing $25.44 over the June 13, 1996 closing CFC
Common Stock price of $21.00. Keefe Bruyette also described the floating
exchange ratio that generally would enable each share of CFC Common Stock to be
exchanged for a number of shares of FUNC Common Stock equal to $25.44 divided by
the average closing price of FUNC Common Stock on the NYSE Tape for the ten
trading days immediately prior to the Effective Date. For illustrative purposes,
Keefe Bruyette assumed throughout its analysis that such exchange ratio equaled
.4188 FUNC shares (derived by dividing $25.44 by $60.75, the closing price of
FUNC Common Stock on June 13, 1996).
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SELECTED TRANSACTIONS ANALYSIS. Keefe Bruyette analyzed certain information
relating to 11 bank and thrift acquisitions in the New England market announced
since August 1993 (the "New England Acquisitions") and relating to 21 such
acquisitions occurring in other parts of the United States (the "National
Acquisitions"). The New England Acquisitions analyzed were Peoples Heritage
Financial Group, Inc.'s acquisition of Family Bancorp, BayBanks, Inc.'s
acquisition of NFS Financial Corp., Citizens Financial Group's acquisition of
Quincy Savings Bank, Shawmut National Bank's acquisition of Northeast Federal
Corp., Fleet Financial Group's acquisition of NBB Bancorp, Inc., Bank of
Boston's acquisition of Pioneer Financial Cooperative Bank, Shawmut National
Bank's acquisition of Gateway Financial Corporation, Citizens Financial Group's
acquisition of Neworld Bancorp, Fleet Financial Group's acquisition of Sterling
Bancshares, Bank of Boston's acquisition of Bank Worcester, and Shawmut National
Bank's acquisition of Peoples of Worcester. The National Acquisitions analyzed
were Union Planters Corporation's acquisition of Leader Financial Corp., MAF
Bancorp's acquisition of N.S. Bancorp, South Trust Corp.'s acquisition of
Bankers First Corp., Norwest Corporation's acquisition of AMFED Financial, Inc.,
NationsBank Corp.'s acquisition of CSF Holdings, Crestar Financial Corp.'s
acquisition of Loyola Capital Corp., FUNC's acquisitions of Columbia First FSB,
Coral Gables Fedcorp, American Savings of Florida, and BancFlorida Financial,
First Interstate Bancorp's acquisitions of University Savings Bank and
Sacramento Savings Bank, Summit Bancorp's acquisitions of Bankers Corp. and
Crestmont Financial Corp., TCF Financial Corp.'s acquisition of Great Lakes
Bancorp, Firstar Corp.'s acquisition of Investors Bank Corp., Astoria Financial
Corp.'s acquisition of Fidelity New York FSB, North Fork Bancorp's acquisition
of Metro Bancshares, Fleet Financial Group's acquisition of NBB Bancorp, Inc.,
CoreStates Financial Corp's acquisition of Germantown Savings Bank, and Fifth
Third Bancorp's acquisition of Cumberland Federal Bancorporation. Keefe
Bruyette's analyses of these acquisitions indicated that (i) among the New
England Acquisitions, the consideration paid to the acquired party's
stockholders averaged 176 percent of book value per share (with a range of 142
percent to 262 percent), 187 percent of tangible book value (with a range of 142
percent to 263 percent), 14.51 times trailing four quarter earnings per share
(with a range of 12.28x to 16.25x) and 13.52 times future earnings (with a range
of 11.15x to 15.5x), and (ii) that among the National Acquisitions, the
consideration paid to the acquired party's stockholders averaged 158 percent of
book value per share (with a range of 114 percent to 219 percent), 169 percent
of tangible book value per share (with a range of 123 percent to 219 percent),
and 14.03 times trailing four quarter earnings per share. The consideration to
be received by CFC stockholders in the Corporate Merger with respect to shares
of CFC Common Stock will be 165 percent of CFC's March 31, 1996 stated book
value per share, 177 percent of CFC's March 31, 1996 estimated tangible book
value per share, 13.28 times projected 1996 earnings (as reported by Zachs) and
14.96 times trailing four quarter earnings (March 31, 1995 to March 31, 1996).
DISCOUNTED CASH FLOW ANALYSIS. Keefe Bruyette compared the present value of
future cash flows that would accrue to a holder of a share of CFC Common Stock
assuming CFC were to remain independent to the present value of future cash
flows that would accrue to a holder of .4188 shares of FUNC Common Stock
assuming the Corporate Merger were to occur. These values were determined by
adding (i) the present value of the estimated future dividend stream that CFC
and FUNC could generate over the period beginning January 1997 and ending in
December 1999, and (ii) the present value of the "terminal value" of CFC Common
Stock and FUNC Common Stock at the end of 1999. This analysis was based on
several assumptions, including a 20 percent dividend payout ratio for CFC and
estimates provided by management of CFC for earnings through 1999. FUNC earnings
projections were derived from the mean Wall Street estimate (as provided by
Zachs) of $6.90 for 1997 and a ten percent annual growth rate for the years 1998
and 1999. A 35 percent dividend payout ratio was assumed for FUNC through 1999.
A terminal price to earnings multiple value of 10.0x was used for both companies
as well as a discount rate of 13 percent. Based on such assumptions, Keefe
Bruyette's analysis indicated that the present value of a share of CFC Common
Stock would be $21.14 compared with a present value of .4188 shares of FUNC
Common Stock of $26.85 after giving effect to the Corporate Merger. Keefe
Bruyette also presented a table showing the foregoing analysis with a range of
discount rates from 13 percent to 17 percent and a range of price-to-earnings
multiples of 8x to 15x, resulting in a range of present values for a share of
CFC Common Stock of $15.48 to $31.12. Keefe Bruyette stated that the discounted
cash flow analysis is a widely-used valuation methodology but noted that it
relies on numerous assumptions, including asset and earnings growth rates,
dividend payout rates, terminal values and discount rates. The analysis did not
purport to be indicative of the actual values or expected values of CFC Common
Stock or FUNC Common Stock.
PRO FORMA EPS, BOOK VALUE AND DIVIDENDS PER SHARE. Keefe Bruyette analyzed
the pro forma EPS, book value and dividends per share of CFC Common Stock
assuming an exchange ratio of .4188 shares of FUNC Common Stock for each share
of CFC Common Stock. Based on 1995 earnings per share of $1.58 for CFC and $5.04
for FUNC, CFC's pro forma 1995 EPS would have increased to $2.11, reflecting a
33.6 percent increase. CFC's pro forma March 30, 1996 stated book value per
share would be $13.32, a 13.9 percent decrease from CFC's stated book value per
share of $15.46. CFC's pro forma annualized dividends per share would be $.87, a
211 percent increase from CFC's annualized dividend per share of $.28.
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OTHER ANALYSES. Keefe Bruyette also reviewed the relative financial and
market performance of CFC and FUNC to a variety of relevant industry peer groups
and indices. Keefe Bruyette also reviewed selected investment research reports,
earnings estimates, historical stock performance and other financial data for
FUNC.
The preparation of a fairness opinion is a complex process and is not
necessarily amenable to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analysis as a whole, could create an incomplete view of the processes
underlying Keefe Bruyette's opinion. In arriving at its fairness determination,
Keefe Bruyette considered the results of all such analyses. None of the banking
institutions selected for use in developing comparisons is identical to CFC and
none of the New England Acquisitions or National Acquisitions is identical to
the Corporate Merger. Accordingly, Keefe Bruyette indicated to the CFC Board
that analyses of the results described above are not purely mathematical, but
rather involve complex considerations and judgments concerning differences in
operating and financial characteristics, including, among other things,
differences in revenue composition and earnings performance among CFC, FUNC and
the selected companies and acquisitions reviewed. The analyses were prepared by
Keefe Bruyette solely for the purpose of preparing its opinion of June 14, 1996,
to the CFC Board as to the fairness of the consideration to be received by
stockholders of CFC in the Corporate Merger, and do not purport to be appraisals
or necessarily reflect the prices at which CFC or its securities may actually be
sold. Analyses based upon forecasts of future results are not necessarily
indicative of actual future results, which may be significantly more or less
favorable than suggested by such analyses.
Pursuant to an engagement letter, dated May 21, 1996 (the "Keefe Bruyette
Engagement Letter"), CFC agreed to pay Keefe Bruyette a fee equal to .90 percent
of the market value of the consideration paid by the party acquiring CFC up to a
maximum of $3.5 million. Such fee has been or will be paid in two parts: (i) at
the signing of the Merger Agreement, and (ii) at the closing of the Corporate
Merger. As of the date hereof, $250,000 has been paid to Keefe Bruyette.
Pursuant to the Keefe Bruyette Engagement Letter, CFC also agreed to reimburse
Keefe Bruyette for certain expenses related to its retention and to indemnify
Keefe Bruyette against certain liabilities, including liabilities under the
federal securities laws.
Keefe Bruyette is a recognized investment banking firm that regularly
engages in the valuation of businesses and their securities in connection with
mergers and acquisitions. The CFC Board selected Keefe Bruyette to act as its
financial advisor on the basis of its expertise and its reputation in investment
banking and mergers and acquisitions.
Keefe Bruyette has provided certain investment banking and advisory
services to CFC from time to time, for which it has received customary
compensation. In addition, Keefe Bruyette has provided, and may provide in the
future, certain investment banking services to FUNC, for which it received, and
will receive, customary compensation.
Keefe Bruyette has advised CFC that, in the ordinary course of its business
as a full-service securities firm, Keefe Bruyette may, subject to certain
restrictions, actively trade the equity and/or debt securities of CFC and/or of
FUNC for its own account or for the accounts of its customers, and accordingly,
may at any time hold a long or short position in such securities.
INTERESTS OF CERTAIN PERSONS
GENERAL
Certain members of CFC's management and the CFC Board have interests in the
Mergers that are in addition to any interests they have as stockholders of CFC
generally. These interests include, among others, provisions in the Merger
Agreement relating the indemnification of CFC's directors and officers,
directors' and officers' liability insurance, and certain other benefits, as
described below.
EMPLOYMENT AGREEMENTS AND SPECIAL TERMINATION AGREEMENTS
EMPLOYMENT AGREEMENTS WITH SENIOR EXECUTIVE OFFICERS. On May 15, 1996, CFC
entered into Employment Agreements (the "Employment Agreements") with its senior
executive officers -- Messrs. Narkis, Carlson, Placke and Brown. The Employment
Agreements will become effective as of the date on which a change in control
(such as the Corporate Merger) of CFC occurs.
Under the terms of each Employment Agreement, CFC agrees to employ the
executive for a period of three years following the effective date of the
Employment Agreement. During this period, the executive's position, authority,
status and responsibilities will be at least commensurate with those which the
executive had during the 120-day period preceding the change in control.
Moreover, during this period CFC will pay the executive: (i) a base salary at
least equal to 12 times his
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highest monthly base salary during the 12-month period preceding the change in
control; plus (ii) an annual bonus equal to at least the highest annual bonus
paid to the executive under CFC's Short-Term Incentive Compensation Plan during
the three fiscal years preceding the change in control. In addition, the
executive will be entitled to participate in incentive, savings and retirement
plans and welfare benefit plans, and will be entitled to receive paid vacations,
on a basis at least as favorable as that in effect during the 120-day period
preceding the change in control.
During the three-year term of the Employment Agreement, if CFC terminates
the executive's employment other than for cause or disability or if the
executive terminates his employment for good reason, then the executive will
receive a lump sum equal to the following:
(i) an amount equal to the sum of (a) his base salary for the period
through his date of termination, plus (b) his pro rata share of the highest
annual bonus paid during the three fiscal years preceding the change in
control or the annual bonus payable for the fiscal year preceding the date
of termination (whichever is higher), plus (c) all accrued vacation and
deferred compensation; plus
(ii) a severance benefit equal to three times the sum of (a) the
executive's annual base salary, and (b) the highest annual bonus paid to
the executive during the three fiscal years preceding the change in control
or the annual bonus payable to the executive for the fiscal year preceding
his date of termination of employment (whichever is higher); plus
(iii) an amount equal to the excess of (a) the actuarial value of the
benefits which the executive would have accrued under CFC's qualified
defined benefit pension plan and non-qualified supplemental retirement plan
(and, in the case of Mr. Narkis, under the supplemental deferred
compensation program entered into between CFC and the executive) if the
executive's employment had continued for a period of three years following
his date of termination, over (b) the actuarial equivalent of the
executive's actual benefit under the defined benefit pension plan and the
non-qualified supplemental retirement plan; plus
(iv) an amount equal to the present value of the cash payments which
the executive would have received during the three-year period following
his date of termination of employment under the terms of the supplemental
compensation policy relating to supplemental long-term disability benefits.
In addition, for the three-year period following the executive's
termination of employment, CFC will continue to provide the executive and his
family with the welfare benefits which he would have received if his employment
had not been terminated. Under certain circumstances, the lump sum amount
described in (iii) above may be paid in the form of actuarially equivalent
installments.
Under the Code, an excise tax is imposed on certain payments which an
executive receives in connection with a change in control in the event the
payments exceed a certain threshold amount. If it is determined that any
benefits payable to an executive would be subject to the imposition of such an
excise tax, then CFC will pay the executive an additional "gross-up payment" so
that, after the payment of all taxes attributable to the "gross-up payment"
(including any excise taxes and income taxes), the amount of the "gross-up
payment" which remains will be sufficient to pay the excise taxes imposed on the
payments made to the executive.
Assuming the Corporate Merger were to occur on October 31, 1996, and the
executives were terminated immediately thereafter, the lump sum severance
benefits payable to the executives under the terms of the Employment Agreements
(including any "gross-up payments") are currently estimated to be approximately
equal to the following: Mr. Narkis: $4.4 million; Mr. Carlson: $1.8 million; Mr.
Placke: $2.4 million; and Mr. Brown: $2.1 million.
SEVERANCE AGREEMENTS WITH OTHER SENIOR OFFICERS. CFC has entered into
severance agreements with ten additional senior officers. Such agreements
provide for the payment of a lump sum severance benefit in the event the
officer's employment is terminated following a change in control of CFC (such as
the Corporate Merger). Although the terms of the agreements vary, the amount of
the lump sum severance benefit generally equals two times the officer's
compensation. Certain of such agreements also provide for the officer's
continued participation in CFC's welfare benefit plans on the same basis as an
active employee for a two-year period following the officer's termination of
employment. Assuming the Corporate Merger were to occur on October 31, 1996, and
all of the senior officers were terminated immediately thereafter, the aggregate
severance benefits payable to such officers are currently estimated to be
approximately $3.0 million.
SUPPLEMENTAL SEVERANCE AGREEMENTS WITH KEY EMPLOYEES. CFC has entered into
supplemental severance agreements with 18 key employees. Under the terms of the
supplemental severance agreements, if a change in control of CFC occurs (such as
the Corporate Merger) and the employee thereafter terminates employment due to a
position elimination, the employee will be entitled to receive supplemental
severance benefits in addition to the severance benefits payable under
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CFC's regular severance policy. In general, the sum of the employee's regular
severance benefits and supplemental severance benefits will equal one year's pay
(although, for some employees, the sum of the employee's regular severance
benefits and supplemental severance benefits will equal six months' pay). The
employee will also be entitled to participate in CFC's welfare benefit plans on
the same terms as an active employee for a period of one year (or for some
employees, six months) following his or her termination of employment. Assuming
the Corporate Merger were to occur on October 31, 1996, and all of the key
employees were terminated immediately thereafter, the aggregate supplemental
severance benefits payable to such employees are currently estimated to be
approximately $1.1 million.
ADDITIONAL SUPPLEMENTAL SEVERANCE BENEFITS. In addition to the supplemental
severance benefits discussed above, FUNC has agreed that CFC may pay up to an
additional $2,000,000 in supplemental severance benefits to its employees.
EMPLOYEE INCENTIVE STOCK AWARDS
CFC maintains three plans which authorize the grant of employee stock
options -- the Centerbank Executive Stock Incentive Plan, the Centerbank 1992
Executive Stock Incentive Plan (the "1992 Plan") and the Centerbank 1996
Executive Stock Incentive Plan (the "1996 Plan"). The 1992 Plan and the 1996
Plan also authorize the grant of shares of restricted stock.
All outstanding options which have not become vested will become vested
upon the occurrence of a change in control of CFC (such as the Corporate
Merger). Under certain circumstances, options may become vested prior to a
change in control. However, all of the outstanding stock options held by Messrs.
Narkis, Carlson, Placke and Brown have already become vested without regard to
the occurrence of the Corporate Merger. At the time of the Corporate Merger, all
outstanding stock options to acquire shares of CFC Common Stock will be
converted into options to acquire shares of FUNC Common Stock, and the number of
shares and the exercise price of such options will be appropriately adjusted.
The aggregate number of stock options held by Messrs. Narkis, Carlson,
Brown and Placke and the seven other executive officers of CFC as a group as of
July 31, 1996, and the aggregate value of such stock options are set forth
below. The aggregate value of the stock options equals the difference between
the per share option exercise prices and $25.44 (the purchase price per share of
CFC Common Stock in the Corporate Merger), times the number of options held:
Robert J. Narkis -- 107,000, $1,922,578; Joseph Carlson II -- 52,200, $986,168;
Thomas C. Brown -- 46,200, $920,028; William H. Placke -- 57,000, $939,580; and
the other executive officers as a group -- 95,310, $1,395,423.
Messrs. Narkis, Carlson, Placke and Brown have also been granted shares of
restricted stock. To the extent the shares of restricted stock are not vested,
they will become vested upon the occurrence of a change in control of CFC (such
as the Corporate Merger). At the time of the Corporate Merger, all of such
shares of restricted stock will be converted into shares of FUNC Common Stock.
For Messrs. Narkis, Carlson, Placke and Brown, the number of shares of
restricted stock which are vested, the number of shares of restricted stock
which are not vested, and the aggregate value of the restricted stock as of July
31, 1996, are set forth below. The aggregate value of the restricted stock
equals the number of vested and unvested shares of restricted stock multiplied
by the excess of $25.44 (the purchase price per share of CFC Common Stock in the
Corporate Merger) over $1.00 (the par value of the CFC Common Stock): Robert J.
Narkis -- 26,250, 38,750, $1,588,600; Joseph Carlson II -- 10,000, 18,000,
$684,320; William H. Placke -- 10,125, 18,375, $696,540; and Thomas C.
Brown -- 9,750, 17,250, $659,880.
DIRECTOR STOCK OPTIONS
The non-employee directors of CFC have been granted options to purchase
shares of CFC Common Stock under the Centerbank 1991 Directors Stock Option Plan
(the "1991 Plan") and the Centerbank 1993 Directors Stock Option Plan (the "1993
Plan"). All outstanding options granted under the 1991 Plan are fully
exercisable. All outstanding options granted under the 1993 Plan that are not
fully exercisable will become exercisable upon a change in control of CFC (such
as the Corporate Merger). At the time of the Corporate Merger, all outstanding
stock options to acquire shares of CFC Common Stock will be converted into
options to acquire shares of FUNC Common Stock, and the number of shares and the
exercise price of such options will be appropriately adjusted.
The aggregate number of stock options held by each of the non-employee
directors of CFC as of July 31, 1996, and the aggregate value of such stock
options is set forth below. The aggregate value of the stock options equals the
difference between the per share option exercise prices and $25.44 (the purchase
price per share of CFC Common Stock in the Corporate Merger), times the number
of options held: John F. Burbank -- 15,000, $210,975; Martha L.
Fordiani -- 15,000, $197,850; Nicholas M. Mihalas -- 25,000, $433,500; J. Garry
Mitchell -- 15,000, $210,975; John J. Pacowta -- 15,000,
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$210,975; Reginald H. Post -- 25,000, $433,500; Edward Shaker -- 25,000,
$433,500; Frank E. Shepard -- 25,000, $433,500; Justin L. Smith, Jr. -- 21,400,
$353,391; and Stedman G. Sweet -- 25,000, $433,500. Mr. Sweet's wife also holds
an aggregate number of 7,250 options having an aggregate value of $97,472.
DIRECTORS DEFERRED COMPENSATION PLAN
CFC maintains a deferred compensation plan (the "Directors Deferred
Compensation Plan") for the benefit of its non-employee directors. Under the
Directors Deferred Compensation Plan, a director may irrevocably elect to defer
all or any portion of the compensation which he or she may otherwise receive as
a director during a calendar year. If a director so elects prior to the first
day of the calendar year, CFC will establish a deferral account for he or she.
Such account will be reflected on the books of CFC, and at the election of the
director, either (i) will be adjusted based upon fluctuations in the value of
CFC Common Stock, or (ii) will be credited with interest at a rate determined
annually by CFC. The deferred amounts and earnings thereon will be paid to the
director, commencing at such time as he or she shall specify, either in a lump
sum or in equal annual installments not exceeding ten. Five of the ten
non-employee directors have deferred accounts under the Directors Deferred
Compensation Plan, four of whom elected prior to January 1, 1996, to have such
accounts adjusted in 1996 based upon fluctuations in the value of CFC Common
Stock.
RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS
CFC maintains a retirement plan for the benefit of its non-employee
directors (the "Directors Pension Plan"). Each non-employee director of CFC is
eligible to participate in the Directors Pension Plan, plus Mr. Narkis, who was
a non-employee director immediately prior to becoming an employee of CFC.
Under the terms of the Directors Pension Plan, as expected to be amended
and agreed to by FUNC, each director who has at least ten years of service as a
non-employee director will receive an annual retirement benefit equal to 100
percent of the annual rate of his or her retainer at the time of his or her
termination of service as an employee or non-employee director. The benefit will
commence on the later of the director's 65th birthday or the date of the
director's termination of service as a director, and will continue for the life
of the director. Under certain circumstances, the director may be able to elect
to receive his or her benefits as an actuarially equivalent lump sum. In the
case of Mr. Narkis, his retirement benefit will equal 100 percent of the
retainer in effect at the time of his termination of service as an employee of
CFC.
Upon a change in control (such as the Corporate Merger), any director who
has at least four years of service will be vested in his or her right to receive
a retirement benefit. If the director has four or more years of service but less
than ten years of service, the amount of his or her retirement benefit will be
prorated for less than ten years of service. Nine of the ten non-employee
directors have more than ten years of service; one has four years of
service. The present value of the benefits payable to the ten eligible
non-employee directors and to Mr. Narkis under the Directors Pension Plan upon
consummation of the Corporate Merger is currently estimated to equal
approximately $1.3 million.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE
The Merger Agreement provides that for the six-year period following the
Effective Date, FUNC will indemnify the directors, officers and employees of CFC
holding such positions on or prior to the date of the Merger Agreement, against
certain liabilities to the extent such persons were indemnified under the CGSA
and the CFC Articles and bylaws as in effect on the date of the Merger
Agreement.
In addition, FUNC agreed in the Merger Agreement to use its reasonable best
efforts to maintain CFC's existing directors' and officers' liability insurance
policy for persons who were covered by such insurance maintained by CFC 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 CFC's annual premium payment
on CFC's current policy.
CERTAIN OTHER MATTERS RELATING TO THE MERGERS
In connection with the execution of the Merger Agreement, FUNC agreed to
cause those members of the CFC Board who are nominated by CFC and are willing to
do so, to be appointed to an advisory board, which will advise FUB-CT on deposit
and lending activities in Centerbank's market area for at least 24 months
following the Effective Date. The directors of CFC who serve on the advisory
board will receive $800 for each quarterly meeting they attend. Currently, the
directors of CFC receive an annual retainer of $12,000. Committee chairman
(except those who are CFC officers) receive an additional retainer of $3,000 per
year. Directors also receive $800 for each board of directors meeting they
attend and $500 for each committee meeting they attend.
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FUNC also agreed that if the Effective Date is prior to December 31, 1996,
CFC may make bonus payments to participants in CFC's Short-Term Incentive
Compensation Plan, not to exceed $2.1 million prorated based on the number of
full months from January 1, 1996 to the Effective Date.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS A DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF
THE CORPORATE MERGER. THE DISCUSSION IS INCLUDED FOR GENERAL INFORMATION
PURPOSES ONLY AND MAY NOT APPLY TO SPECIAL SITUATIONS, SUCH AS CFC STOCKHOLDERS,
IF ANY, WHO RECEIVED THEIR CFC COMMON STOCK UPON THE EXERCISE OF EMPLOYEE STOCK
OPTIONS OR OTHERWISE AS COMPENSATION, THAT HOLD THEIR CFC COMMON STOCK AS PART
OF A "STRADDLE" OR "CONVERSION TRANSACTION", OR THAT ARE INSURANCE COMPANIES,
SECURITIES DEALERS, FINANCIAL INSTITUTIONS OR FOREIGN PERSONS.
Sullivan & Cromwell, special counsel for FUNC, have advised FUNC, and
Wachtell, Lipton, Rosen & Katz, special counsel for CFC, have advised CFC, that,
in their opinion:
(i) No gain or loss will be recognized for federal income tax
purposes by CFC stockholders upon the exchange in the Corporate Merger of
shares of CFC Common Stock solely for FUNC Common Shares (except with
respect to cash received in lieu of a fractional share interest in FUNC
Common Stock).
(ii) The basis of FUNC Common Shares received in the Corporate Merger
by CFC stockholders (including the basis of any fractional share interest
in FUNC Common Stock) will be the same as the basis of the shares of CFC
Common Stock surrendered in exchange therefor.
(iii) The holding period of the FUNC Common Shares received in the
Corporate Merger by a CFC stockholder (including the holding period of any
fractional share interest in FUNC Common Stock) will include the holding
period during which the shares of CFC Common Stock surrendered in exchange
therefor were held by the CFC stockholder, provided such shares of CFC
Common Stock were held as capital assets.
(iv) Cash received by a holder of CFC 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 CFC Common Stock allocable to the fractional
share interest.
In addition, consummation of the Mergers is conditioned, among other
things, upon receipt by FUNC of an opinion of Sullivan & Cromwell and by CFC of
an opinion of Wachtell, Lipton, Rosen and Katz, each dated as of the Effective
Date, to the effect that (i) the Corporate Merger constitutes a reorganization
under Section 368 of the Code, and (ii) no gain or loss will be recognized by
CFC stockholders who receive FUNC Common Shares in exchange for their shares of
CFC 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
and Wachtell, Lipton, Rosen & Katz summarized above are or will be based, among
other things, on representations relating to certain facts and circumstances of,
and the intentions of the parties to, the Corporate Merger.
BECAUSE CERTAIN TAX CONSEQUENCES OF THE CORPORATE MERGER MAY VARY DEPENDING
UPON THE PARTICULAR CIRCUMSTANCES OF EACH CFC STOCKHOLDER AND OTHER FACTORS,
EACH CFC STOCKHOLDER IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF THE CORPORATE MERGER
(INCLUDING THE APPLICATION AND EFFECT OF STATE AND LOCAL INCOME AND OTHER TAX
LAWS).
BUSINESS PENDING CONSUMMATION
CFC agreed in the Merger Agreement to conduct its business in the ordinary
and usual course consistent with past practice and to refrain from taking
certain actions relating to its operation pending consummation of the Mergers,
without the prior written consent of FUNC, except as otherwise permitted in the
Merger Agreement. These actions include, without limitation: (i) paying any
dividends, other than dividends on CFC Common Stock at a quarterly rate not to
exceed $.07 per share (provided CFC may not pay any dividend for the quarter in
which the Effective Date occurs unless the record date for the FUNC Common Stock
dividend for such quarter precedes the Effective Date), or redeeming or
otherwise acquiring any shares of its capital stock, or issuing any additional
shares of its capital stock, or giving any person the right to acquire any such
shares; (ii) incurring any indebtedness for borrowed money or becoming liable
for the obligations of any other entity other than in the ordinary course of
business consistent with past practice; (iii) increasing the rate of
compensation (other
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than normal individual increases in regular compensation in the ordinary course
of business consistent with past practice) or paying any bonus to any of its
directors, officers or employees (excluding certain bonuses payable under CFC's
Short-Term Incentive Compensation Plan and certain retention bonuses); (iv)
entering into or modifying any employment agreements or employee benefit plans;
(v) disposing of any material portion of its assets or acquiring any portion of
the business or property of any other entity which is material to it; (vi)
changing its lending, investment, liability management or other material banking
policies in any material respect; (vii) settling any claims involving any
liability for money damages in an amount greater than $100,000 or restrictions
on the operations of CFC; (viii) entering into, terminating or changing any
material agreements, except for those agreements entered into in the ordinary
course of business consistent with past practices that are terminable by CFC
without penalty on not more than 60 days' prior written notice.
The Merger Agreement also provides that, consistent with generally accepted
accounting principles, CFC will use its best efforts to conform its loan,
litigation, and other reserve and real estate valuation policies and practices
(including loan classifications and levels of reserves) so as to be consistent
on a mutually satisfactory basis with those of FUNC, provided that CFC shall not
be obligated to take any such action until CFC is reasonably satisfied that the
conditions to consummation of the Mergers will be satisfied or waived and until
the day prior to the Effective Date.
From time to time CFC and its affiliates engage in transactions with FUNC
and its affiliates in the ordinary course of business. It is anticipated that
such transactions may increase as a result of the execution of the Merger
Agreement.
REGULATORY APPROVALS
Consummation of the Bank Merger is subject to receipt of the prior approval
of the FDIC under the Bank Merger Act, 12 U.S.C. (section mark)1828(c) (the
"BMA") and the prior approval of the Connecticut Commissioner under Connecticut
law. The BMA requires that the relevant regulatory agency take into
consideration, among other factors, the financial and managerial resources and
future prospects of the institutions and the convenience and needs of the
communities to be served. The BMA prohibits the FDIC from approving the Bank
Merger (i) if such transaction would result in a monopoly or be in furtherance
of any combination or conspiracy to monopolize or to attempt to monopolize the
business of banking in any part of the United States, or (ii) if the effect of
such transaction in any section of the country may be substantially to lessen
competition or to tend to create a monopoly, or if it would in any other manner
be a restraint of trade, unless the relevant regulatory agency finds that the
anti-competitive effects of such merger are clearly outweighed by the public
interest and by the probable effect of the transaction in meeting the
convenience and needs of the communities to be served.
In addition to receipt of the approvals necessary for consummation of the
Bank Merger, consummation of the Corporate Merger also is subject to receipt of
the prior approval of the Federal Reserve Board under the BHCA, or a waiver of
such requirement in accordance with regulations adopted by the Federal Reserve
Board under the BHCA, 12 C.F.R. (section mark)225.12(d). If an application is
required under the BHCA, the Federal Reserve Board would consider whether the
proposed transaction can reasonably be expected to produce benefits to the
public, such as greater convenience, increased competition, or gains in
efficiency, that outweigh possible adverse effects, such as undue concentration
of resources, decreased or unfair competition, conflicts of interests, or
unsound banking practices. In addition, the Federal Reserve Board would be
prohibited from approving an application if it finds that the proposed
transaction (i) would result in a monopoly or which would 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) may have the
effect in any section of the United States of substantially lessening
competition, or tending to create a monopoly, or resulting in a restraint of
trade, unless the Federal Reserve Board finds that the anti-competitive effects
of the 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.
Under both statutes, the relevant federal regulatory agency has the
authority to deny an application if it concludes that the combined organization
would have an inadequate capital position or if the acquiring organization does
not meet the requirements of the Community Reinvestment Act of 1977.
The Mergers may not be consummated until the 15th day following the dates
of each of the requisite approvals, during which period the U.S. Department of
Justice may comment adversely on the transaction (which has the effect of
extending the waiting period to the 30th day following approval) or challenge
such merger on antitrust grounds. The commencement of an antitrust action would
stay the effectiveness of such an approval unless a court specifically orders
otherwise.
An application has been filed pursuant to the BMA with the FDIC and is
expected to be filed pursuant to state law with the Connecticut Commissioner in
the near future. A request for a waiver pursuant to the BHCA has been filed with
the Federal Reserve Board.
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THE MERGERS WILL NOT PROCEED IN THE ABSENCE OF THE REQUISITE REGULATORY
APPROVALS FOR BOTH THE CORPORATE MERGER AND THE BANK MERGER. THERE CAN BE NO
ASSURANCE THAT SUCH REGULATORY APPROVALS WILL BE OBTAINED, AND IF THE MERGERS
ARE APPROVED, THERE CAN BE NO ASSURANCE AS TO THE DATE OF ANY SUCH APPROVAL.
THERE CAN ALSO BE NO ASSURANCE THAT SUCH APPROVALS WILL NOT CONTAIN A CONDITION
OR REQUIREMENT WHICH CAUSES SUCH APPROVALS TO FAIL TO SATISFY THE CONDITIONS SET
FORTH IN THE MERGER AGREEMENT AND DESCRIBED BELOW UNDER " -- CONDITIONS TO
CONSUMMATION; TERMINATION". THERE CAN LIKEWISE BE NO ASSURANCE THAT THE U.S.
DEPARTMENT OF JUSTICE OR A STATE ATTORNEY GENERAL WILL NOT CHALLENGE THE
CORPORATE MERGER OR THE BANK MERGER, OR IF SUCH A CHALLENGE IS MADE, AS TO THE
OUTCOME THEREOF.
CONDITIONS TO CONSUMMATION; TERMINATION
Consummation of the Mergers is subject, among other things, to: (i)
approval of the Merger Agreement by the requisite vote of the stockholders of
CFC; (ii) receipt of the regulatory approvals referred to above without any
restrictions or conditions which, in the reasonable opinion of FUNC, would so
materially adversely impact the economic or business benefits to FUNC of the
transactions contemplated by the Merger Agreement so as to render inadvisable
the consummation of the Mergers; (iii) no court or governmental or regulatory
authority having taken any action which enjoins or prohibits the Mergers; (iv)
receipt by FUNC of the opinion of Sullivan & Cromwell and by CFC of the opinion
of Wachtell, Lipton, Rosen & Katz, each dated as of the Effective Date, as to
certain federal income tax consequences of the Corporate Merger; and (v) the
FUNC Common Shares having been approved for listing on the NYSE, subject to
official notice of issuance.
Consummation of the Mergers is also subject to the satisfaction or waiver
of various other conditions specified in the Merger Agreement, including, among
others: (i) the delivery by CFC and FUNC, each to the other, of (a) opinions of
their respective counsel, and (b) certificates executed by certain of their
respective executive officers as to compliance with the Merger Agreement; (ii)
the receipt by FUNC of a letter from CFC's independent certified public
accountants, dated as of or shortly prior to the Effective Date, with respect to
CFC's financial position and results of operations; and (iii) the receipt by
FUNC of an agreement from each "affiliate" of CFC restricting the sale of FUNC
Common Shares received by such affiliate in the Corporate Merger. See "RESALE OF
FUNC COMMON SHARES".
The Merger Agreement provides that, whether before or after the Special
Meeting and notwithstanding the approval of the Merger Agreement by the
stockholders of CFC, the Merger Agreement may be terminated and the Mergers
abandoned at any time prior to the Effective Date: (i) by mutual consent of FUNC
and CFC; or (ii) by either the Board of Directors of FUNC (the "FUNC Board") or
the CFC Board (a) if the stockholders of CFC fail to approve the Merger
Agreement or any required regulatory approval is denied, (b) in the event of a
breach by the other party of any representation, warranty or covenant contained
in the Merger Agreement, which breach is not cured after 30 days' written notice
thereof is given to the party committing such breach, or (c) if the Corporate
Merger is not consummated on or before May 1, 1997.
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 CFC, the consideration to be received by
the stockholders of CFC may not thereby be decreased.
ACCOUNTING TREATMENT
It is expected that the purchase method of accounting will be used to
reflect the Corporate Merger upon consummation. As required by generally
accepted accounting principles, under purchase accounting the assets and
liabilities of CFC as of the Effective Date will be recorded at their respective
fair market values and added to those of FUNC. Financial statements of FUNC
issued after consummation of the Corporate Merger would reflect such values.
Financial statements of FUNC issued before consummation of the Corporate Merger
would not be restated to reflect the acquired company's historical financial
position or results of operations. The unaudited pro forma financial information
contained in this Prospectus/Proxy Statement has been prepared using the
purchase accounting basis to account for the Corporate Merger.
The pooling of interests method of accounting was used to reflect the FFB
acquisition by FUNC and the Great Country Bank acquisition by CFC. As required
by generally accepted accounting principles, under pooling of interests
accounting, as of the effective date of such acquisitions, the assets and
liabilities of the acquired company were added to those of the acquiring company
at their recorded book values and the stockholders' equity accounts of the
acquired company and the acquiring company were combined on the acquiring
company's consolidated balance sheet. On a pooling of interests
30
<PAGE>
accounting basis, income and other financial statements of the acquiring company
for periods ended prior to the effective date of such acquisitions, have been
restated to reflect the consolidated combined financial position and results of
operations as if such acquisitions had taken place prior to the periods covered
by such financial statements.
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 CFC.
STOCK OPTION AGREEMENT
As an inducement and condition to FUNC's willingness to enter into the
Merger Agreement, CFC entered into the Stock Option Agreement with FUNC.
Pursuant to the Stock Option Agreement, CFC granted the FUNC Option to FUNC. The
purchase of any shares of CFC Common Stock pursuant to the FUNC Option is
subject to compliance with applicable law, including the receipt of any
necessary approval under the BHCA.
If FUNC is not in material breach of the Stock Option Agreement or the
Merger Agreement, and if no injunction or other court order against delivery of
the shares covered by the FUNC Option is in effect, the holder of the Option
(which may be a person or party other than FUNC) may exercise the FUNC Option,
in whole or in part, at any time and from time to time following the happening
of certain events (each a "Purchase Event"), including.
(i) without FUNC's prior written consent, CFC taking certain actions
(each an "Acquisition Transaction"), including authorizing, recommending,
proposing or entering into an agreement with any third party to effect (a)
a merger, consolidation or similar transaction involving CFC or any of its
significant subsidiaries, (b) the sale, lease, exchange or other
disposition of 20 percent or more of the consolidated assets or deposits of
CFC and its subsidiaries, or (c) the issuance, sale or other disposition of
securities representing 20 percent or more of the voting power of CFC or
any of its significant subsidiaries; or
(ii) any third party acquiring or having the right to acquire 20
percent or more of the voting power of CFC or any of its significant
subsidiaries, except as otherwise permitted by the Stock Option Agreement;
provided that the FUNC Option will terminate upon the earliest to occur of
certain events, including:
(i) consummation of the Corporate Merger;
(ii) termination of the Merger Agreement prior to the happening of a
Purchase Event or Preliminary Purchase Event (as defined below), other than
a termination (a "Default Termination") by FUNC as a result of a willful
breach by CFC;
(iii) 18 months after a Default Termination; or
(iv) 18 months after termination of the Merger Agreement (other than a
Default Termination) following the occurrence of a Purchase Event or a
Preliminary Purchase Event (other than a Preliminary Purchase Event
referred to in (iv) below, in which case such 18-month period shall be
reduced to a 12-month period).
The term "Preliminary Purchase Event" shall mean the occurrence of certain
events, including:
(i) the commencement by any third party of a tender or exchange offer,
which upon consummation, would result in such third party owning 15 percent
or more of the outstanding shares of CFC Common Stock;
(ii) the failure of the stockholders of CFC to approve the Merger
Agreement, or the failure of the Meeting to be held, or the cancellation of
the Meeting, or the CFC Board shall have withdrawn or modified in any
manner adverse to FUNC the recommendation of the CFC Board with respect to
the Merger Agreement, in each case after public announcement that a third
party:
(a) proposes to engage in an Acquisition Transaction; or
(b) commences a tender offer, which upon consummation, would result
in such third party owning 15 percent or more of the outstanding shares
of CFC Common Stock; or
(c) files an application under certain federal statutes relating to
the regulation of banks and other financial institutions or their
holding companies, to engage in an Acquisition Transaction;
31
<PAGE>
(iii) the proposal by any third party to CFC or its stockholders,
publicly or in any writing that becomes publicly disclosed, to engage in an
Acquisition Transaction;
(iv) after a proposal by a third party to CFC or its stockholders to
engage in an Acquisition Transaction, the breach by CFC of any
representation or covenant in the Merger Agreement which would entitle FUNC
to terminate the Merger Agreement; or
(v) the filing by any third party of an application with any federal
or state bank regulatory authority for approval to engage in an Acquisition
Transaction.
Upon the occurrence of certain events set forth in the Stock Option
Agreement, at the election of FUNC the FUNC Option (or shares issued pursuant to
the exercise thereof) must be repurchased by CFC or converted into, or exchanged
for, an option of another corporation or CFC. In addition, the Stock Option
Agreement grants certain registration rights to FUNC with respect to the shares
purchaseable upon exercise of the FUNC Option.
The Stock Option Agreement and the FUNC Option are intended to increase the
likelihood that the Mergers will be consummated according to the terms set forth
in the Merger Agreement, and may be expected to discourage offers by third
parties to acquire CFC.
To the knowledge of CFC and FUNC, no event giving rise to exercise of the
FUNC Option has occurred as of the date of this Prospectus/Proxy Statement.
A copy of the Stock Option Agreement is set forth in Exhibit A to the
Merger Agreement which is set forth in ANNEX A to this Prospectus/Proxy
Statement, and reference is made thereto for the complete terms of the Stock
Option Agreement and the FUNC Option. The foregoing discussion is qualified in
its entirety by reference to the Stock Option Agreement.
DISSENTERS' RIGHTS
Any CFC stockholder who objects to the Mergers shall have the right to be
paid the value of all shares of CFC Common Stock owned by such stockholder in
accordance with the provisions of Section 33-374 of the CGSA ("Section 33-374"),
a copy of which is set forth in ANNEX C to this Prospectus/Proxy Statement. The
right to be paid the value of such shares shall be such stockholder's exclusive
remedy as holder of such shares with respect to the Mergers, whether or not such
stockholder proceeds as provided in Section 33-374. As used in this discussion,
the term "corporation" includes, if the context so indicates, FUNC as the
surviving corporation in the Corporate Merger, in addition to CFC.
Any CFC stockholder may elect to exercise such right by giving written
notice to the corporation of such stockholder's objection to the Mergers prior
to voting on the proposal to approve the Merger Agreement. If the Merger
Agreement is approved, any such stockholder so notifying the corporation,
provided none of such stockholder's shares shall have been voted in favor
thereof, may require the corporation to purchase such stockholder's shares at
fair value by delivering to the corporation a written demand to that effect,
within ten days after the date on which the vote was taken and stating thereon
the number and class of shares of such stockholder. Except as described below,
any stockholder making such demand shall thereafter be entitled only to payment
as provided in Section 33-374 and shall not be entitled to vote, to receive
dividends or to exercise any other rights of a stockholder in respect of such
shares. No such demand may be withdrawn unless the corporation consents thereto.
Any stockholder failing to make such demand as described above shall be bound by
the terms of the Merger Agreement.
At any time after the receipt of a notice by a stockholder objecting to the
Mergers, but not later than ten days after receipt of the demand to purchase
such stockholder's shares or ten days after the Merger Agreement is effective,
whichever is later, the corporation shall make a written offer to each
stockholder who makes such demand, to pay for such stockholder's shares at a
specified price deemed by the corporation to be the fair value thereof as of the
day prior to the date on which this Prospectus/Proxy Statement was mailed,
exclusive of any element of value arising from the expectation or accomplishment
of the Mergers.
Within 20 days after demanding the purchase of such stockholder's shares,
each such stockholder shall submit the certificate or certificates representing
such stockholder's shares to the corporation for notation thereon that such
demand has been made. Such stockholder's failure to do so shall, at the option
of the corporation, terminate such stockholder's rights under Section 33-374
unless a court of competent jurisdiction otherwise directs. If shares
represented by a certificate on which notation has been so made are transferred,
each new certificate issued therefor shall bear a similar notation, together
with the name of the stockholder of such shares who made such demand, and a
transferee of such shares shall acquire by such transfer no rights in the
corporation other than those which such stockholder had after making such
demand.
32
<PAGE>
If the corporation and any stockholder making a demand to purchase shares
as described above, agree in writing as to the value of the shares, the
corporation shall pay such stockholder such value upon and concurrently with the
surrender to the corporation of the certificate or certificates representing
such shares, duly endorsed for transfer. If the corporation defaults in or
refuses to make such payment, such stockholder may file a petition in the
superior court for the judicial district where the principal office of the
corporation is located, praying that judgment be entered for such amount, and
such stockholder shall be entitled to judgment for such amount. If any such
stockholder should be a party to a proceeding described below, the court in such
proceeding shall upon motion of either the corporation or such stockholder
dismiss the proceeding with respect to such stockholder.
At any time during the period of 60 days after the date the corporation is
obliged to make an offer as described above, the corporation, or any stockholder
who has made a demand to purchase shares as described above and who has not
accepted the offer made by the corporation and acting in the name of the
corporation, may file a petition in the superior court for the judicial district
where its principal office of the corporation is located, or before any judge
thereof, praying that the value of the shares of such stockholder be found and
determined. All stockholders making demand as described above, who have not
accepted the offer made by the corporation, wherever residing, shall be made
parties to the proceeding. A copy of the petition shall be served on each such
stockholder who is a resident of Connecticut and shall be served by registered
or certified mail on each such stockholder who is a nonresident. Service on
nonresidents shall also be made by publication as provided by law. The
jurisdiction of the court shall be exclusive. All stockholders who are parties
to the proceeding shall be entitled to judgment against the corporation for the
amount of the fair value of their shares as of the day prior to the date on
which this Prospectus/Proxy Statement was mailed, exclusive of any element of
value arising from the expectation or accomplishment of the Mergers. The court
may, if it so elects, appoint one or more persons as appraisers to receive
evidence and recommend a decision on the question of fair value. The appraisers
shall have such power and authority as shall be specified in the order of their
appointment or an amendment thereof. The court shall determine the fair value of
the shares of the stockholders entitled to payment therefor and shall direct the
payment of such value, together with interest, if any, as hereinafter provided,
to the stockholders entitled thereto. The judgment may include an allowance for
interest at such rate as the court may find to be fair and equitable in all the
circumstances, from the date this Prospectus/Proxy Statement was mailed to the
date of payment. The costs and expenses of any such proceeding shall be
determined by the court and shall be assessed against the corporation, but all
or any part of such costs and expenses may be apportioned and assessed as the
court may deem equitable against any or all stockholders who are parties to the
proceeding to whom the corporation has made an offer to pay for the shares if
the court finds that the action of such stockholders in failing to accept such
offer was arbitrary or vexatious or not in good faith. Such expenses shall
include reasonable compensation for and reasonable expenses of the appraisers,
but shall exclude the fees and expenses of counsel for and experts employed by
any party; but if the fair value of the shares as determined materially exceeds
the amount which the corporation offered to pay therefor, or if no offer was
made, the court in its discretion may award to any stockholder who is a party to
the proceeding such sum as the court may determine to be reasonable compensation
to any expert or experts employed by the stockholder in the proceeding.
Any judgment entered shall be enforceable as other decrees of the superior
court may be enforced and shall be payable only upon and concurrently with the
surrender to the corporation of the certificate or certificates representing the
shares for which payment is due, duly endorsed for transfer. Upon payment of any
such judgment, the stockholder shall cease to have any interest in such shares.
If a demand to purchase shares as described above is withdrawn upon
consent, or if the Mergers are abandoned or rescinded or the CFC stockholder
revokes the authority to effect the same, or if no demand or petition for the
determination of fair value by a court has been made or filed within the time
described above, or if a court of competent jurisdiction determines that such
stockholder is not entitled to the relief provided by Section 33-374, then the
right of such stockholder to be paid the fair value of such stockholder's shares
shall cease and such stockholder's status as a stockholder shall thereupon be
restored.
THE FOREGOING IS ONLY A SUMMARY OF THE RIGHTS OF AN OBJECTING HOLDER OF CFC
COMMON STOCK. ANY HOLDER OF CFC COMMON STOCK WHO INTENDS TO OBJECT TO THE
MERGERS SHOULD CAREFULLY REVIEW THE TEXT OF THE APPLICABLE PROVISIONS OF THE
CGSA SET FORTH IN ANNEX C TO THIS PROSPECTUS/PROXY STATEMENT AND SHOULD ALSO
CONSULT WITH SUCH HOLDER'S ATTORNEY. THE FAILURE OF A HOLDER OF CFC COMMON STOCK
TO FOLLOW PRECISELY THE PROCEDURES SUMMARIZED ABOVE AND SET FORTH IN ANNEX C MAY
RESULT IN LOSS OF DISSENTERS' RIGHTS. NO FURTHER NOTICE OF THE EVENTS GIVING
RISE TO DISSENTERS' RIGHTS OR ANY STEPS ASSOCIATED THEREWITH WILL BE FURNISHED
TO HOLDERS OF CFC COMMON STOCK, EXCEPT AS INDICATED ABOVE OR OTHERWISE REQUIRED
BY LAW.
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<PAGE>
In general, any objecting stockholder who perfects such holder's right to
be paid the fair value of such holder's CFC Common Stock in cash will recognize
taxable gain or loss for federal income tax purposes upon receipt of such cash.
See " -- Certain Federal Income Tax Consequences".
MARKET PRICES
The following table sets forth (i) the high and low last reported sale
prices per share of FUNC Common Stock on the NYSE Tape (trading symbol, FTU),
with respect to each quarterly period since January 1, 1994, (ii) the high and
low last reported sale prices per share of CFC Common Stock on the Nasdaq
National Market (trading symbol, CFCX) with respect to the period from July 7,
1995, (iii) the high and low last reported sale prices per share of Centerbank
common stock on the Nasdaq National Market prior to July 7, 1995, and (iv) the
equivalent pro forma market values per share of CFC Common Stock, based on the
.4240 Exchange Ratio. The .4240 Exchange Ratio is based on the closing price per
share of FUNC Common Stock on the NYSE Tape on June 14, 1996 ($60.00), the date
the Merger Agreement was executed, 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 .4240. The pro forma information presented
would be different if the Average Closing Price results in an Exchange Ratio
different from .4240. Set forth on the cover page of this Prospectus/ Proxy
Statement is the last reported sale price per share of FUNC Common Stock of the
NYSE Tape on the most recent practicable date prior to the mailing hereof. CFC
stockholders are urged to obtain current quotations of the market price of FUNC
Common Stock.
<TABLE>
<CAPTION>
FUNC CFC
COMMON STOCK COMMON STOCK
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
1994
First quarter......................................... $ 43 3/4 39 3/4 13 3/4 11 1/4
Second quarter........................................ 47 5/8 41 1/4 18 11 5/8
Third quarter......................................... 47 1/4 43 1/4 17 1/2 13 1/2
Fourth quarter........................................ 45 1/4 39 3/8 13 7/8 9 1/4
1995
First quarter......................................... 45 1/8 41 3/8 13 1/8 9 3/4
Second quarter........................................ 49 3/4 42 7/8 15 1/8 12 1/8
Third quarter......................................... 51 3/8 45 1/4 19 5/8 14 1/4
Fourth quarter........................................ 58 7/8 49 5/8 19 1/4 17
1996
First quarter......................................... 62 7/8 51 1/2 20 1/8 17
Second quarter........................................ 64 5/8 57 1/2 24 3/8 16 1/8
Third quarter (through , 1996)............ $
<CAPTION>
EQUIVALENT PRO FORMA
PER SHARE OF CFC
COMMON STOCK (1)
HIGH LOW
<S> <C> <C> <C>
1994
First quarter......................................... 18 1/2 16 3/4
Second quarter........................................ 20 1/8 17 3/8
Third quarter......................................... 20 18 1/4
Fourth quarter........................................ 19 1/8 16 5/8
1995
First quarter......................................... 19 1/8 17 1/2
Second quarter........................................ 21 18 1/8
Third quarter......................................... 21 3/4 19 1/8
Fourth quarter........................................ 24 7/8 21
1996
First quarter......................................... 26 5/8 21 3/4
Second quarter........................................ 27 3/8 24 3/8
Third quarter (through , 1996)............
</TABLE>
(1) Equivalent pro forma market values per share of CFC Common Stock amounts
represent the high and low last reported sales prices per share of FUNC
Common Stock multiplied by a .4240 Exchange Ratio, rounded down to the
nearest one-eighth.
On June 14, 1996, the last business day prior to public announcement of the
execution of the Merger Agreement, the last reported sale prices per share of
FUNC Common Stock on the NYSE Tape and of CFC Common Stock on the Nasdaq
National Market were $60.00 and $22.875, respectively. On , 1996,
such prices were $ and $ , respectively.
FUNC expects to repurchase in the open market a number of shares of FUNC
Common Stock equal to (i) the 6.8 million FUNC Common Shares expected to be
issued in the Corporate Merger, and (ii) the 6.0 million shares of FUNC Common
Stock expected to be issued in connection with the pending HFC acquisition. In
1994, FUNC repurchased 4.9 million shares of FUNC Common Stock at a cost of $212
million; in 1995, 20 million shares at a cost of $965 million; and from January
1, 1996 to the most recent practicable date prior to the mailing of this
Prospectus/Proxy Statement, million shares at a cost of $ million.
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<PAGE>
The Merger Agreement provides for the filing of a listing application with
the NYSE covering the FUNC Common Shares. It is a condition to consummation of
the Corporate Merger that the FUNC Common Shares be authorized for listing on
the NYSE effective upon official notice of issuance. See " -- Conditions to
Consummation; Termination".
DIVIDENDS
The following table sets forth the cash dividends paid on FUNC Common Stock
and CFC Common Stock (Centerbank common stock prior to July 7, 1995) with
respect to each calendar quarter since January 1, 1994, and the equivalent pro
forma cash dividends paid per share of CFC Common Stock, based on a .4240
Exchange Ratio. The .4240 Exchange Ratio is based on the closing price per share
of FUNC Common Stock on the NYSE Tape on June 14, 1996 ($60.00), the date the
Merger Agreement was executed, 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 .4240. The pro forma information presented would be
different if the Average Closing Price results in an Exchange Ratio different
from .4240. Set forth on the cover page of this Prospectus/ Proxy Statement is
the last reported sale price per share of FUNC Common Stock of the NYSE Tape on
the most recent practicable date prior to the mailing hereof. CFC stockholders
are urged to obtain current quotations of the market price of FUNC Common Stock.
<TABLE>
<CAPTION>
EQUIVALENT PRO FORMA
FUNC CFC PER SHARE OF CFC
COMMON STOCK COMMON STOCK COMMON STOCK (1)
<S> <C> <C> <C>
1994
First quarter.......................................................... $.40 -- 0.170
Second quarter......................................................... .40 -- 0.170
Third quarter.......................................................... .46 -- 0.195
Fourth quarter......................................................... .46 -- 0.195
1995
First quarter.......................................................... .46 .05 0.195
Second quarter......................................................... .46 .05 0.195
Third quarter.......................................................... .52 .05 0.220
Fourth quarter......................................................... .52 .05 0.220
1996
First quarter.......................................................... .52 .07 0.220
Second quarter......................................................... .52 .07 0.220
Third quarter.......................................................... $.58 .07 0.245
</TABLE>
(1) Equivalent pro forma cash dividends paid per share of CFC Common Stock
amounts represent FUNC historical dividend rates per share multiplied by a
.4240 Exchange Ratio, rounded up to the nearest one-half cent. The current
annualized dividend rate per share for FUNC Common Stock, based upon the
most recently declared quarterly dividend of $.58 per share payable on
September 16, 1996, would be $2.32. On an equivalent pro forma basis, such
current annualized FUNC dividend per share of CFC Common Stock would be
$.98, based on a .4240 Exchange Ratio, rounded up to the nearest cent. Any
future FUNC and CFC dividends are dependent upon their respective earnings
and financial condition, government regulations and policies and other
factors.
See "FUNC -- Certain Regulatory Considerations; PAYMENTS OF DIVIDENDS" and
"DESCRIPTION OF FUNC CAPITAL STOCK".
35
<PAGE>
CFC
GENERAL
Financial and other information relating to CFC, including information
about CFC's directors and executive officers, is set forth in CFC's 1995 Annual
Report on Form 10-K, 1996 First and Second Quarter Reports on Form 10-Q, 1996
Annual Meeting Proxy Statement and 1996 Current Reports on Form 8-K, copies of
which may be obtained from CFC as indicated under "AVAILABLE INFORMATION".
HISTORY AND BUSINESS
CFC is a bank holding company registered under the BHCA. It was organized
under the laws of the State of Connecticut on December 19, 1988, and became a
bank holding company on July 7, 1995, through the consummation of a plan of
merger and reorganization between CFC and Centerbank, pursuant to which
Centerbank became a wholly-owned subsidiary of CFC. Upon formation of CFC, each
outstanding share of Centerbank common stock was exchanged for a share of CFC
Common Stock. Stockholders electing not to effectively exchange their shares of
Centerbank for shares of the new corporation had the right to receive cash equal
to the value of Centerbank's common stock as of July 7, 1995.
Centerbank was established in 1850 and is a Connecticut state-chartered,
savings bank headquartered in Waterbury, Connecticut. Deposits of Centerbank are
insured, up to applicable limits, by the Bank Insurance Fund, which is
administered by the FDIC. Centerbank serves 61 Connecticut communities located
in New Haven, Fairfield, Litchfield, Middlesex and Hartford counties through its
network of 47 branch offices and 54 ATM locations. Centerbank offers an
extensive line of retail and commercial deposit products and originates a
variety of residential, commercial and consumer loans. Centerbank also offers
customers access to alternative investment products, retirement planning
services and life insurance through its branch network.
In addition to its banking activities, Centerbank offers diversified
lending and financing opportunities through its four principal wholly-owned
subsidiaries. Centerbank Mortgage Company is a full-service mortgage banking
company with a residential mortgage servicing portfolio of $7.3 billion as of
March 31, 1996, including $1.6 billion serviced for Centerbank. Centerbank
Mortgage Company operates through a nationwide network of 26 retail, wholesale
and correspondent offices. Centerbank Mortgage Company established Center Credit
Corporation, a wholly-owned subsidiary, to offer other consumer loans, such as
nonconforming mortgages and home equity lines of credit and credit cards. Center
Credit Corporation does not retain the loans originated, but sells the products
to investors in the secondary market. Center Capital Corporation is an equipment
leasing firm that provides lease financing services nationwide to manufacturers
and end-users of capital equipment. Affiliated Business Credit Corporation is a
commercial finance company serving the Northeast.
CFC completed the merger of Great Country Bank of Ansonia, Connecticut,
with and into Centerbank on December 15, 1995. Under the terms of the agreement,
CFC exchanged one share of CFC Common Stock for each 3.1888 shares of Great
Country common stock outstanding. The transaction was accounted for as a pooling
of interests and 1,589,220 shares of CFC's Common Stock were issued in the
exchange. CFC's assets increased by $322 million, consisting primarily of loans
of $233 million and securities of $63 million, its deposits increased by $274
million, its borrowings increased by $14 million and its stockholders' equity
increased by $18 million as a result of the Great Country Bank merger.
CFC acquired specific assets and liabilities of Founders Bank of New Haven,
Connecticut, from the FDIC in an assisted transaction accounted for as a
purchase on July 28, 1995. As a result of this transaction, CFC obtained $75
million in insured deposits and $11 million in loans.
CFC completed the acquisition of certain assets and liabilities of the Bank
of Waterbury of Waterbury, Connecticut, in March 1994. As a result of the
transaction, which was accounted for as a purchase, CFC increased its assets by
$50 million and expanded its share of the Waterbury market. CFC issued 153,198
shares of CFC Common Stock, with a market value of $2 million, to the former
stockholders of the Bank of Waterbury in accordance with the purchase and
assumption agreement.
See "RECENT DEVELOPMENTS -- Certain 1996 Completed and Pending
Acquisitions; CFC".
36
<PAGE>
FUNC
GENERAL
Financial and other information relating to FUNC, including information
relating to FUNC's directors and executive officers, is set forth in FUNC's 1995
Annual Report on Form 10-K, 1996 First and Second Quarter Reports on Form 10-Q,
1996 Annual Meeting Proxy Statement and 1996 Current Reports on Form 8-K, copies
of which may be obtained from FUNC as indicated under "AVAILABLE INFORMATION".
HISTORY AND BUSINESS
FUNC was incorporated under the laws of North Carolina in 1967 and is
registered as a bank holding company under the BHCA. Pursuant to a corporate
reorganization in 1968, 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 Connecticut and North Carolina, FUNC also operates banks in
South Carolina, Florida, Georgia, Tennessee, Virginia, Maryland, Delaware, New
Jersey, Pennsylvania, New York 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, leasing, investment banking, insurance and
securities' brokerage services, through other subsidiaries.
Since the 1985 Supreme Court decision upholding regional interstate banking
legislation, FUNC has concentrated its efforts on building a large, regional
banking organization in what it perceives to be some of the better banking
markets in the eastern region of the United States. Since November 1985, FUNC
has completed over 60 banking-related acquisitions, and currently has pending
four banking-related acquisitions, including the more significant acquisitions
(I.E., involving the acquisition of $3.0 billion or more of assets or deposits)
set forth in the following table.
<TABLE>
<CAPTION>
ASSETS/ CONSIDERATION/
NAME HEADQUARTERS DEPOSITS(1)(2) ACCOUNTING TREATMENT COMPLETION DATE
<S> <C> <C> <C> <C>
Atlantic Bancorporation...................... Florida $ 3.8 billion common stock/pooling November 1985
Northwestern Financial Corporation........... North Carolina 3.0 billion common stock/pooling December 1985
First Railroad & Banking Company of
Georgia.................................... Georgia 3.7 billion common stock/pooling November 1986
Florida National Banks of Florida, Inc....... Florida 7.9 billion cash and preferred January 1990
stock/purchase
Southeast banks.............................. Florida 9.9 billion cash, notes and preferred September 1991
stock/
purchase
Resolution Trust Company ("RTC") 5.3 billion cash/purchase 1991-1994
acquisitions............................... Florida,
Georgia,
Virginia
Dominion Bankshares Corporation.............. Virginia 8.9 billion common stock and March 1993
preferred stock/pooling
Georgia Federal Bank, FSB.................... Georgia 4.0 billion cash/purchase June 1993
First American Metro Corp.................... Virginia 4.6 billion cash/purchase June 1993
American Savings of Florida, F.S.B........... Florida 3.3 billion common stock/purchase July 1995
FFB.......................................... New Jersey,
Pennsylvania 35.4 billion common stock and January 1996
preferred stock/pooling
CFC.......................................... Connecticut $ 4.0 billion common stock/purchase pending
</TABLE>
(1) The dollar amounts indicated represent the assets of the related
organization as of the last reporting period prior to acquisition, except
for (i) the dollar amount relating to RTC acquisitions, which represents
savings and loan deposits acquired from the RTC, and (ii) the dollar amount
relating to Southeast banks, which represent assets of the two banking
subsidiaries of Southeast Banking Corporation acquired from the FDIC.
37
<PAGE>
(2) In addition, FUNC purchased Lieber & Company ("Lieber"), a mutual fund
advisory company with approximately $3.4 billion in assets under management,
in June 1994. Since such assets are not owned by Lieber, they are not
reflected on FUNC's balance sheet.
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 -- Certain 1996 Completed and Pending
Acquisitions; FUNC".
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 APPLICABLE STATUTORY AND REGULATORY PROVISIONS. A CHANGE IN
APPLICABLE STATUTES, REGULATIONS OR REGULATORY POLICY MAY HAVE A MATERIAL EFFECT
ON THE BUSINESS OF FUNC.
GENERAL
FUNC is a bank holding company within the meaning of the BHCA and is
registered as such with the Federal Reserve Board. Under the BHCA, bank holding
companies may not directly or indirectly acquire the ownership or control of
more than five percent of the voting shares or substantially all of the assets
of any company, including a bank, without the prior approval of the Federal
Reserve Board. See "THE MERGERS -- Regulatory Approvals". In addition, bank
holding companies are generally prohibited under the BHCA from engaging in
nonbanking activities, subject to certain exceptions.
The earnings of FUNC are affected by general economic conditions,
management policies and the legislative and governmental actions of various
regulatory authorities, including the Federal Reserve Board, the Office of the
Comptroller of the Currency (the "OCC") and the FDIC. 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.
In addition to its national bank subsidiaries, FUNC has two state-chartered
bank subsidiaries each of which is subject to dividend limitations under
applicable state laws.
Under the foregoing dividend restrictions and certain restrictions
applicable to certain of FUNC's nonbanking subsidiaries, as of June 30, 1996,
FUNC's subsidiaries, without obtaining affirmative governmental approvals, could
pay aggregate dividends of $792 million to FUNC. In the first six months of
1996, FUNC's subsidiaries paid $427 million in cash dividends to FUNC.
In addition, FUNC and its 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 (the appropriate agency with
respect to FUNC's national bank subsidiaries) and the FDIC (the appropriate
agency with respect to FUNC's state-chartered bank subsidiaries) 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.
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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 June 30, 1996, FUNC's tier 1 and total capital ratios
were 7.11 percent and 11.94 percent, respectively. On an FUNC and CFC combined
basis, such ratios at June 30, 1996, would have been 6.75 percent and 11.51
percent, respectively.
In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum leverage ratio of tier 1 capital to adjusted average quarterly assets
("leverage ratio") equal to three percent for bank holding companies that meet
certain specified criteria, including having the highest regulatory rating. All
other bank holding companies will generally be required to maintain a leverage
ratio of from at least four to five percent. FUNC's leverage ratio at June 30,
1996, was 5.60 percent. On an FUNC and CFC combined basis, such ratio at June
30, 1996, would have been 5.27 percent. The guidelines also provide that bank
holding companies experiencing internal growth or making acquisitions will be
expected to maintain strong capital positions substantially above the minimum
supervisory levels without significant reliance on intangible assets.
Furthermore, the guidelines indicate that the Federal Reserve Board will
continue to consider a "tangible tier 1 leverage ratio" (deducting all
intangibles) in evaluating proposals for expansion or new activity. The Federal
Reserve Board has not advised FUNC of any specific minimum leverage ratio or
tangible tier 1 leverage ratio applicable to it.
Each of FUNC's subsidiary national banks is subject to similar capital
requirements adopted by the OCC or the FDIC. Each of FUNC's subsidiary banks had
a leverage ratio in excess of 5.22 percent, as of June 30, 1996. The federal
banking agencies have not advised any of the subsidiary national banks of any
specific minimum leverage ratio applicable to it.
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
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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 regulatory agencies adopted regulations establishing relevant capital
measures and relevant capital levels applicable to FDIC-insured banks. The
relevant capital measures are the total capital ratio, tier 1 capital ratio and
the leverage ratio. Under the regulations, a FDIC-insured bank will be (i) "well
capitalized" if it has a total capital ratio of ten percent or greater, a tier 1
capital ratio of six percent or greater and a leverage ratio of five percent or
greater and is not subject to any order or written directive by the OCC to meet
and maintain a specific capital level for any capital measure; (ii) "adequately
capitalized" if it has a total capital ratio of eight percent or greater, a tier
1 capital ratio of four percent or greater and a leverage ratio of four percent
or greater (three percent in certain circumstances) and is not "well
capitalized"; (iii) "undercapitalized" if it has a total capital ratio of less
than eight percent, a tier 1 capital ratio of less than four percent or a
leverage ratio of less than four percent (three percent in certain
circumstances); (iv) "significantly undercapitalized" if it has a total capital
ratio of less than six percent, a tier 1 capital ratio of less than three
percent or a leverage ratio of less than three percent; and (v) "critically
undercapitalized" if its tangible equity is equal to or less than two percent of
average quarterly tangible assets. As of June 30, 1996, all of FUNC's
deposit-taking subsidiary banks had capital levels that qualify them as being
"well capitalized" under such regulations.
FDICIA generally prohibits a FDIC-insured 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" insured depository institutions may be
subject to a number of requirements and restrictions, including orders to sell
sufficient voting stock to become "adequately capitalized", requirements to
reduce total assets, and cessation of receipt of deposits from correspondent
banks. "Critically undercapitalized" institutions are subject to the appointment
of a receiver or conservator.
DEPOSITOR PREFERENCE STATUTE
Legislation has been enacted providing that deposits and certain claims for
administrative expenses and employee compensation against an insured depository
institution would be afforded a priority over other general unsecured claims
against such an institution, including federal funds and letters of credit, in
the "liquidation or other resolution" of such an institution by any receiver.
INTERSTATE BANKING AND BRANCHING LEGISLATION
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "IBBEA") authorizes interstate acquisitions of banks and bank holding
companies without geographic limitation beginning one year after enactment. In
addition, beginning June 1, 1997, a bank may merge with a bank in another state
as long as neither of the states has opted out of interstate branching between
the date of enactment of the IBBEA and May 31, 1997. The IBBEA further provides
that states may enact laws permitting interstate merger transactions prior to
June 1, 1997. A bank may establish and operate a DE NOVO branch in a state in
which the bank does not maintain a branch if that state expressly permits DE
NOVO branching. Once a bank has established branches in a state through an
interstate merger transaction, the bank may establish and acquire additional
branches at any location in the state where any bank involved in the interstate
merger transaction could have established or acquired branches under applicable
federal or state law. A bank that has established a branch in a state through DE
NOVO 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.
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FDIC INSURANCE ASSESSMENTS
The FDIC has significantly reduced the insurance premiums it charges on
federally insured bank deposits to the statutory minimum of $2,000.00 for "well
capitalized" banks, effective January 1, 1996. Premiums related to savings and
loan association deposits acquired by banks will continue to be assessed at the
rate of 23 cents to 31 cents per $100.00 of deposits. Legislation has been
proposed to merge the Bank Insurance Fund and the Savings Association Insurance
Fund ("SAIF") and a provision to recapitalize SAIF through a one-time
assessment. At June 30, 1996, FUNC had $24,1 billion in SAIF deposits that were
subject to the potential one-time assessment. Based on certain of the
legislation that has been proposed, the one-time assessment could be as high as
$84 million after tax.
DESCRIPTION OF FUNC CAPITAL STOCK
THE DESCRIPTIVE INFORMATION SUPPLIED HEREIN OUTLINES CERTAIN PROVISIONS OF
THE FUNC ARTICLES, THE FUNC BYLAWS AND THE NCBCA. THE INFORMATION DOES NOT
PURPORT TO BE COMPLETE AND IS QUALIFIED IN ALL RESPECTS BY REFERENCE TO THE
PROVISIONS OF THE FUNC ARTICLES, THE FUNC 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 June 30, 1996,
there were 281,947,670 shares of FUNC Common Stock, 2,174,705 shares of Series B
Convertible Class A Preferred Stock ("Series B"), 350,000 shares of Series D
Adjustable Rate Cumulative Class A Preferred Stock ("Series D"), 74,130 shares
of Series F 10.64% Class A Preferred Stock ("Series F") and no shares of FUNC
Preferred Stock and FUNC Class A Preferred Stock issued and outstanding. The
FUNC Preferred Stock and FUNC Class A Preferred Stock are each issuable in one
or more series, and with respect to any series, the 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 July 1, 1996, FUNC redeemed the Series D and Series F at an
aggregate redemption price of $109 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 FUNC Common Shares issuable to the stockholders
of CFC upon consummation of the Corporate Merger will, upon issuance, be fully
paid and nonassessable.
FUNC PREFERRED STOCK
All shares of each series of FUNC Preferred Stock must be of equal rank and
have the same powers, preferences and rights and are subject to the same
qualifications, limitations and restrictions, except with respect to dividend
rates, redemption prices, liquidation amounts, terms of conversion or exchange
and voting rights.
FUNC CLASS A PREFERRED STOCK
Shares of FUNC Class A Preferred Stock rank prior or superior to FUNC
Common Stock and on a parity with or junior to (but not prior or superior to)
FUNC Preferred Stock or any series thereof, in respect of the right to receive
dividends and/or the right to receive payments out of the net assets of FUNC
upon any involuntary or voluntary liquidation, dissolution or
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winding up of FUNC. Subject to the foregoing and to the terms of any particular
series of FUNC Class A Preferred Stock, each series of FUNC Class A Preferred
Stock may vary as to priority.
SERIES B
The Series B bears a cumulative annual dividend of $2.15 per share, has a
liquidation preference of $25.00 per share, is redeemable in whole or in part at
the option of FUNC at $25.00 per share plus accrued but unpaid dividends to the
redemption date, and is currently convertible at the option of the holder
thereof into .52655 of a share of FUNC Common Stock per share, subject to
adjustment in certain events. Holders of Series B are entitled to vote on all
matters on which the holders of FUNC Common Stock vote, together with FUNC
Common Stock as a single class, and in such circumstances each holder of Series
B is entitled to such number of votes as is equal to one-half of the number of
shares of FUNC Common Stock into which such holder's shares of Series B are then
convertible. Holders of Series B 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 FUNC Articles which adversely affects the rights of holders of
Series B, (iii) for FUNC to redeem fewer than all shares of Series B 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 FUNC preferred stock or the authorization or creation
of any securities ranking prior to Series B.
FUNC RIGHTS PLAN
Each outstanding share of FUNC Common Stock currently has attached to it
one right (an "FUNC Right") issued pursuant to a Shareholder Protection Rights
Agreement (as amended, the "FUNC Rights Agreement"). Accordingly, in the
Corporate Merger, holders of CFC 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 CFC Common Stock
would receive separate certificates with respect to such FUNC Rights. Each FUNC
Right entitles its registered holder to purchase one-hundredth of a share of a
junior participating series of FUNC Class A Preferred Stock designed to have
economic and voting terms similar to those of one share of FUNC Common Stock,
for $110.00, subject to adjustment (the "Rights Exercise Price"), but only after
the earlier to occur (the "Separation Time") of: (i) the tenth business day
(subject to extension) after any person (an "Acquiring Person") (x) commences a
tender or exchange offer, which, if consummated, would result in such person
becoming the beneficial owner of 15 percent or more of the outstanding shares of
FUNC Common Stock, or (y) is determined by the Federal Reserve Board to
"control" FUNC within the meaning of the BHCA (see " -- Other Provisions"
below), subject to certain exceptions; and (ii) the tenth business day after the
first date (the "Flip-in Date") of a public announcement that a person has
become an Acquiring Person. The FUNC Rights will not trade separately from the
shares of FUNC Common Stock unless and until the Separation Time occurs.
The FUNC Rights Agreement provides that a person will not become an
Acquiring Person under the BHCA control-based 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 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
has agreed to 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
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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 for each such share of FUNC Common Stock one
one-hundredth of a share of junior participating FUNC Class A Preferred Stock.
The FUNC Rights are redeemable by FUNC at $.01 per right, subject to
adjustment upon the occurrence of certain events, at any date prior to the date
on which they become exercisable and, in certain events, may be canceled and
terminated without any payment to the holders thereof. The FUNC Rights have no
voting rights and are not entitled to dividends.
The FUNC Rights will not prevent a takeover of FUNC. The FUNC Rights,
however, may cause substantial dilution to a person or group that acquires 15
percent or more of FUNC Common Stock (or that acquires "control" of FUNC within
the meaning of the BHCA) unless the FUNC Rights are first redeemed or terminated
by the 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.
The complete terms of the FUNC Rights are set forth in the FUNC Rights
Agreement. The foregoing description of the FUNC Rights and the FUNC Rights
Agreement is qualified in its entirety by reference to such document. The FUNC
Rights Agreement is incorporated by reference as an exhibit to the Registration
Statement. A copy of the FUNC Rights Agreement can be obtained upon written
request to the Rights Agent, First Union National Bank of North Carolina, Two
First Union Center, Charlotte, North Carolina 28288-1154.
OTHER PROVISIONS
The FUNC Articles and the FUNC Bylaws contain a number of provisions which
may be deemed to have the effect of discouraging or delaying attempts to gain
control of FUNC. These include provisions in the FUNC 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 FUNC
Board or the President to call a special meeting of stockholders (except for
special meetings called under specified circumstances for holders of classes or
series of stock ranking superior to the FUNC Common Stock); and (vi) requiring
an 80 percent vote of stockholders entitled to vote in the election of
directors, voting as a single class, to alter any of the foregoing provisions.
The FUNC Bylaws include provisions setting forth specific conditions under
which: (i) business may be transacted at an annual meeting of stockholders; and
(ii) persons may be nominated for election as directors of FUNC at an annual
meeting of stockholders.
The Change in Bank Control Act prohibits a person or group of persons from
acquiring "control" of a bank holding company unless the Federal Reserve Board
has been given 60 days' prior written notice of such proposed acquisition and
within that time period the Federal Reserve Board has not issued a notice
disapproving the proposed acquisition or extending for up to another 30 days the
period during which such a disapproval may be issued, or unless the acquisition
is subject to Federal Reserve Board approval under the BHCA. An acquisition may
be made prior to the expiration of the disapproval period if the Federal Reserve
Board issues written notice of its intent not to disapprove the action. Under a
rebuttable presumption established by the Federal Reserve Board, the acquisition
of more than ten percent of a class of voting stock of a bank holding company
with a class of securities registered under Section 12 of the Exchange Act, such
as FUNC, would, under the circumstances set forth in the presumption, constitute
the acquisition of control.
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.
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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 ability of the FUNC
Board to issue authorized but theretofore unissued shares of FUNC Common Stock,
FUNC Class A Preferred Stock or FUNC Preferred Stock may have an anti-takeover
effect.
The existence of the foregoing provisions could (i) result in FUNC being
less attractive to a potential acquiror, or (ii) result in FUNC stockholders
receiving less for their shares of FUNC Common Stock than otherwise might be
available in the event of a take over attempt.
CERTAIN DIFFERENCES IN THE RIGHTS OF CFC AND FUNC STOCKHOLDERS
GENERAL
FUNC is a North Carolina corporation subject to the provisions of the
NCBCA, and CFC is a Connecticut corporation subject to the provisions of the
CGSA. Stockholders of CFC will, upon consummation of the Corporate Merger,
become stockholders of FUNC (unless they have perfected dissenters' rights with
respect to their shares of CFC Common Stock as described in "THE
MERGERS -- Dissenters' Rights"). The rights of such stockholders as stockholders
of FUNC will then be governed by the FUNC Articles and the FUNC Bylaws, in
addition to the NCBCA.
Set forth below are the material differences between the rights of a CFC
stockholder under the CFC Articles and the CFC Bylaws, on the one hand, and the
rights of an FUNC stockholder under the FUNC Articles and the FUNC Bylaws, 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
ARTICLES OF INCORPORATION AND BYLAWS OF EACH CORPORATION.
AUTHORIZED CAPITAL
CFC. CFC has authority to issue 75,000,000 shares of CFC Common Stock, with
a par value of $1.00 per share, 1,000,000 shares of voting preferred stock, no
par value, and 10,000,000 shares of nonvoting preferred stock, no par value. As
of June 30, 1996, there were 15,039,740 shares of CFC Common Stock outstanding
and held by approximately 7,250 holders of record. There are no shares of
preferred stock outstanding.
FUNC. FUNC's authorized capital is set forth under "DESCRIPTION OF FUNC
CAPITAL STOCK -- Authorized Capital".
AMENDMENT TO ARTICLES OF INCORPORATION OR BYLAWS
CFC. In general, approval of an amendment to the CFC Articles requires the
approval of the holders of only a majority of the outstanding shares of CFC
Common Stock entitled to vote thereon. However, Article Eighteenth of the CFC
Articles requires that any amendment of the provisions of the CFC Articles
relating to various board of director provisions, provisions relating to
restrictions on the acquisition of ten percent or more of CFC's Common Stock,
business combinations with Interested Stockholders (as hereinafter defined), the
"anti-greenmail" provisions, meetings of stockholders, the removal of directors
with cause, and the procedure for the amendment of the foregoing provisions be
approved by at least 80 percent of the outstanding shares of CFC Common Stock
entitled to vote thereon. If there is an Interested Stockholder, the amendment
must also be approved by at least two-thirds of the CFC Common Stock entitled to
vote thereon held by stockholders other than the Interested Stockholder.
Portions of the CFC Bylaws may be amended by the affirmative vote of the
holders of a majority of the outstanding shares of CFC Common stock entitled to
vote thereon or by the affirmative vote of directors holding a majority of the
number of positions on the CFC Board. However, certain provisions of the CFC
Bylaws relating to the fixing of the number of directorships, stockholder
nomination of candidates for director, the removal of directors with cause, the
filling of vacancies on the CFC Board, the calling of special meetings of
stockholders and the procedure for the amendment of the CFC Bylaws may be
amended only by the affirmative vote of at least 80 percent of the outstanding
shares of CFC Common Stock entitled to vote thereon. If there is an Interested
Stockholder, the bylaw amendment must also be approved by at least two-thirds of
the CFC Common Stock entitled to vote thereon held by stockholders other than
the Interested Stockholder.
FUNC. Under North Carolina law, an amendment to the FUNC Articles 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
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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 FUNC Articles
or the FUNC Bylaws require the approval of not less than 80 percent of the
outstanding shares of FUNC entitled to vote in the election of directors, voting
together as a single class. See "DESCRIPTION OF FUNC CAPITAL STOCK".
SIZE AND CLASSIFICATION OF BOARD OF DIRECTORS
CFC. Certain provisions of the CFC Articles and the CFC Bylaws impede
changes in majority control of the CFC Board. Article Sixth of the CFC Articles
provides that the CFC Board will consist of not less than six members and will
be divided into three classes, with directors in each class elected for
three-year terms. The CFC Bylaws provide that the number of positions on the CFC
Board will be fixed by resolution of the CFC Board, or in the absence of such
resolution, will be the number of directors elected at the last annual meeting
plus the number of incumbent directors whose terms did not expire at such annual
meeting. The CFC Board may increase the number of directors by no more than two
in each fiscal year, and may decrease the number of directors at any time (but
to not less than six directors). No decrease in the number of directors will
shorten the term of any incumbent director.
Article Tenth of the CFC Articles and the CFC Bylaws provide that vacancies
created by an increase in the number of directorships shall be filled for the
unexpired term by the CFC Board. Vacancies occurring for any other reason, such
as death or resignation, shall be filled by the remaining directors. The effect
of these provisions is to prevent a new majority stockholder from increasing the
size of the CFC Board and from then immediately filling the vacancies created by
such increase. These provisions would also prevent a new majority stockholder
from filling any vacancies on the CFC Board arising by resignation, death or
other reason.
No person is eligible for election as a director if he or she has reached
age 70 at the time of such election. Any director who reaches age 70 at any
subsequent time during his or her term of office is required to vacate office at
the next subsequent annual meeting of stockholders.
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 29. 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. See "DESCRIPTION OF FUNC CAPITAL
STOCK".
REMOVAL OF DIRECTORS
CFC. Article Eleventh of the CFC Articles and the CFC Bylaws provide that
any director of CFC may be removed from office at any time with cause by the
affirmative vote of the holders of not less than 80 percent of the outstanding
shares of CFC Common Stock entitled to vote thereon. If there is an Interested
Stockholder, such removal must also be approved by at least two-thirds of the
CFC Common Stock entitled to vote thereon held by stockholders other than the
Interested Stockholder. The CFC Bylaws define "cause" as either conviction of a
felony or negligence in the performance of a duty to CFC, as determined in good
faith by a vote of not less than a majority of the CFC 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
CFC. The CFC Bylaws provide that CFC will indemnify its officers,
directors, employees and other persons to the fullest extent permitted by the
CSCA. Section 33-320a of the CSCA contains the indemnification provisions
applicable to corporations. Under that statute, the amount of corporate
indemnification differs, depending on whether or not liability arises as a
result of an action brought by or in the right of a corporation. An action
brought by or in the right of a corporation is called a "corporate suit", while
an action not brought by or in the right of a corporation is called a "third
party suit".
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Connecticut law provides that a corporation shall indemnify a director or
officer, and his legal representatives, against judgments, fines, penalties,
amounts paid in settlement and reasonable expenses, including attorneys' fees,
incurred with regard to any third party suit if: (i) the person is successful on
the merits in defending the action; (ii) the board of directors, independent
legal counsel or the stockholders conclude that the person acted in good faith
and in a manner he reasonably believed to be in the best interests of the
corporation and that, with respect to a criminal action or proceeding, he had no
reasonable cause to believe that his conduct was unlawful; or (iii) the court,
upon application, determines that it is fair and reasonable for the corporation
to indemnify the person. The termination of a proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere does not, in and of
itself, create a presumption that the person did not act in good faith or in a
manner he reasonably believed to be in the best interests of the corporation, or
that, with respect to any criminal action or proceeding, he had reasonable cause
to believe that his conduct was unlawful.
The statutes also provide that a corporation shall indemnify a director or
officer, and his legal representatives, for reasonable expenses incurred in
connection with a corporate suit. However, the corporation may not provide
indemnification unless such person is finally adjudged not to have breached his
duty to the corporation or unless the court, upon application, determines that
it is fair and reasonable for the corporation to so indemnify the person.
Moreover, the corporation may not indemnify such person for any amounts paid to
the corporation, to a plaintiff or to counsel for a plaintiff in settling or
otherwise disposing of a corporate suit (whether with or without court
approval), or for expenses incurred in defending a proceeding which is settled
or otherwise disposed of without court approval.
Article Seventeenth of the CFC Articles limits the personal liability of
directors to CFC or to its stockholders for monetary damages arising due to the
breach of the directors' duty of care. However, certain limitations apply: (i) a
director's liability to CFC cannot be reduced to an amount less than the
compensation received by the director for the year in which the violation
occurred; and (ii) to be subject to the limitation on liability, the breach of
duty: (a) cannot involve a knowing and culpable violation of law; (b) cannot
enable the director or an associate to receive an improper personal gain; (c)
cannot show a lack of good faith or a conscious disregard of duty under
circumstances where the director was aware that his conduct created an
unjustifiable risk of serious injury to CFC; (d) cannot constitute a sustained
and unexcused pattern of inattention that amounted to an abdication of duty to
CFC; and (e) cannot involve a violation or assent to a violation of the
Connecticut law governing the liability of directors of a corporation.
Recent changes in federal banking law have significantly increased the
potential for lawsuits against directors by banking regulators and private
parties. Under these changes, the FDIC is given express authority to regulate
indemnification agreements which benefit directors and executive officers.
FUNC. The FUNC Articles provide for the elimination of personal liability
of each director of FUNC to the fullest extent permitted by the provisions of
the NCBCA, as the same may be in effect from time to time. The NCBCA does not
permit the elimination of such liability with respect to (i) acts or omissions
the director knew or believed were clearly in conflict with the best interests
of FUNC, (ii) any liability under the NCBCA for unlawful distributions by FUNC,
or (iii) any transaction from which the director derived an improper personal
benefit.
DIRECTOR CONFLICT OF INTEREST TRANSACTIONS
CFC. Connecticut law generally permits transactions between a corporation
and a director (or a member of the director's immediate family or an entity in
which the director has an interest) if any one of the following four criteria is
satisfied: (i) the family relationship or the director's interest in the entity
(if it is a substantial interest) is fully disclosed, the transaction is not
unfair as to the corporation, and the transaction is authorized by the directors
or other persons who do not have a substantial interest in the transaction; (ii)
the family relationship or the director's interest in the entity (if it is a
substantial interest) is fully disclosed and the transaction is authorized by
the vote of a majority of the voting power of the shares entitled to vote
thereon; (iii) the transaction is not with the director or a member of his
immediate family but is with an entity in which the director has an interest,
the director's interest in such entity is not substantial, and either the
transaction is not manifestly unfair to the corporation or the transaction is
approved by the vote of a majority of the voting power of the shares entitled to
vote thereon; or (iv) the transaction is fair as to the corporation.
For purposes of this statute, a member of a director's immediate family
includes the director's spouse, parents and children. Moreover, a director's
interest in an entity is not deemed to be substantial if: (i) the director owns
less than ten percent of the entity; (ii) the interest of the director in the
entity is merely that of a director, officer or employee; or (iii) the
director's interest in the entity arises merely because the corporation has a
debt or equity interest in the entity.
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If a corporation makes a loan to a director and the loan either is not made
in the usual course of business or is not made primarily for a legitimate
business purpose of the corporation, then those directors who vote for the
making of the loan will be jointly and severally liable to the corporation for
the amount of the loan until it is repaid in full.
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
CFC. The annual meeting of the stockholders of CFC is held during April or
May or such date as is determined by the CFC Board in order to elect directors
and transact any other business properly before the meeting. The presence in
person or by proxy of holders of shares entitled to cast a majority of the votes
of all outstanding shares of CFC Common Stock constitutes a quorum at any
stockholders' meeting.
Article Ninth of the CFC Articles and the CFC Bylaws provide that, unless a
special meeting of stockholders is otherwise required by law, such a meeting can
only be called by the Chairman of the CFC Board (if any), the President, the CFC
Board, or upon the written request of holders of not less than one-third of the
then-outstanding shares of voting stock of CFC.
Moreover, Article Thirteenth of the CFC Articles permits the stockholders
to act only at a duly called annual or special meeting and not by any written
consent of the stockholders. Unless the holders of at least one-third of CFC's
outstanding voting stock agree, this provision effectively prevents any
stockholder action prior to the next annual meeting unless the Chairman of the
CFC Board (if any), the President or the CFC Board agrees to call a
stockholders' meeting prior to that date.
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 the 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 the FUNC Articles or the NCBCA, a majority of the votes cast is
generally required for any action by the stockholders of FUNC. North Carolina
law provides that such quorum and voting requirements may be increased only with
the approval of the stockholders of FUNC.
DIRECTOR NOMINATIONS
CFC. The CFC Articles and the CFC Bylaws impose restrictions on the ability
of stockholders to nominate candidates for the CFC Board. Directors nominations
which are not made by the CFC Board must be made in writing and must be
delivered to the Secretary of CFC not less than 30 days nor more than 50 days
prior to the annual meeting of stockholders at which directors are to be
elected. However, if less than 30 days notice of the annual meeting is provided
to the stockholders, such nomination must be delivered to the Secretary of CFC
not later than the close of business on the fifth day following the day on which
the notice of such meeting was mailed.
The notification of the nomination must contain: (i) the name, age,
business address and residence address of the proposed nominee; (ii) the
principal occupation of the nominee; (iii) total number of shares of CFC Common
Stock that will be voted for the proposed nominee; (iv) the name and address of
the stockholder providing the notification; (v) the number of shares of CFC
Common Stock owned by the stockholder providing the notification and by the
proposed nominee; (vi) a representation by the notifying stockholder that he
intends to appear in person or by proxy at the meeting to nominate and vote for
the proposed nominee; and (vii) any other information relating to the proposed
nominee which is required to be disclosed in proxy solicitations for the
election of directors pursuant to Regulation 14A under the Exchange Act.
Nominations not made in accordance with the required procedures may be
disregarded by the chairman of the annual meeting, and upon his instructions,
the vote tellers may disregard all votes cast for the nominee.
FUNC. The FUNC 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
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or more than 90 days prior to the annual meeting at which directors will be
elected; provided, however, that if less than 70 days' notice of the date of the
meeting is given, such written notice by the stockholder must be so delivered
not later than the tenth day after the day on which such notice of the date of
the meeting was given. Notice will be deemed to have been given more than 70
days prior to the meeting if the meeting is called on the third Tuesday of April
regardless as to when public disclosure is made. The nomination notice must set
forth certain information about the person to be nominated similar to that
required to be disclosed in the solicitation of proxies for election of
directors pursuant to Items 7(a) and 7(b) of Regulation 14A under the Exchange
Act, and such person's written consent to being nominated and to serving as a
director if elected. The nomination notice must also set forth certain
information about the person submitting the notice, including the name and
address of the stockholder and the class and number of shares of FUNC Common
Stock owned of record or beneficially by such stockholder. The Chairman of the
meeting will, if the facts warrant, determine that a nomination was not made in
accordance with the provisions prescribed by the FUNC 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
CFC. Except for nomination of directors, business is properly brought
before an annual meeting if it is specified in the notice of annual meeting, is
otherwise properly brought before the meeting by or at the direction of the CFC
Board, or is otherwise properly brought before the meeting by a stockholder. The
chairman of the annual meeting may disregard any business not properly brought
before the meeting.
For a stockholder to properly bring business before the annual meeting, the
stockholder must give timely notice thereof in writing to the Secretary of CFC.
The notice must be delivered to the Secretary of CFC not less than 30 days nor
more than 50 days prior to the annual meeting. However, if less than 30 days
notice or prior public disclosure of the date of the annual meeting is provided
to the stockholders, such notice must be delivered to the secretary of CFC not
later than the close of business on the fifth day following the earlier of the
day on which the notice of such meeting was mailed or such public disclosure was
made.
The stockholder's notice must contain: (i) a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting; (ii) the name and address of the
stockholder proposing such business; (iii) the number of shares of CFC Common
Stock owned by the stockholder proposing such business; and (iv) any material
interest of the stockholder in the business.
FUNC. The FUNC Bylaws establish procedures that must be followed for a
stockholder to submit a proposal to a vote of the stockholders of FUNC at an
annual meeting of stockholders. Such proposal must be made by the stockholder
delivering written notice to the Secretary of FUNC not less than 60 days nor
more than 90 days prior to the meeting; provided, however, that if less than 70
days' notice of the date of the meeting is given, such written notice by the
stockholder must be so delivered not later than the tenth day after the day on
which such notice of the date of the meeting was given. Notice will be deemed to
have been given more than 70 days prior to the meeting if the meeting is called
on the third Tuesday of April. The stockholder proposal notice must set forth:
(i) a brief description of the proposal and the reasons for its submission; (ii)
the name and address of the stockholder, as they appear on FUNC's books; (iii)
the classes and number of shares of FUNC stock 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 FUNC Bylaws, and the defective
proposal will not be submitted to the meeting for a vote of the stockholders.
STOCKHOLDER PROTECTION RIGHTS PLANS
CFC. The CFC Board adopted a rights plan, effective as of July 7, 1995.
Pursuant to the terms of the rights plan, each stockholder of record on July 7,
l995, received a right (the "CFC Right") for each share of CFC Common Stock then
held. Each holder of a CFC Right may purchase one one-thousandth share of a
newly-issued class of preferred stock of CFC (the "Series A Voting Preferred
Stock") per CFC Right. The CFC Rights will expire in ten years. The CFC Rights
may also be redeemed by CFC at $.01 per CFC Right until the tenth business day
after the date a public announcement is made that a person, together with its
affiliates and associates, has become the beneficial owner of 20 percent or more
of the shares of CFC Common Stock.
Initially the CFC Rights are not exercisable. However, the CFC Rights will
become exercisable ten business days after the first of three triggering events
occurs: (i) a person or group acquires 20 percent or more of the shares of CFC
Common
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Stock; (ii) a person or group announces a tender or exchange offer that would
result in the person or group acquiring 25 percent or more of CFC Common Stock;
or (iii) a person or group acquires ten percent or more of CFC Common Stock and
the CFC Board determines that such acquisition involves improper self-dealing,
will have a material adverse effect on CFC, or otherwise is not in the best
interests of CFC and its stockholders.
The character of the CFC Rights will change again in the event a person or
group either: (i) acquires 25 percent or more of CFC Common Stock; or (ii)
acquires ten percent or more of the CFC Common Stock in a transaction not
approved by the CFC Board and the CFC Board determines it is not in the best
interests of CFC or its stockholders. In such a case, the holder of a CFC Right
will be entitled to purchase a certain number of shares of CFC Common Stock at a
price equal to 50 percent of the then current market price of CFC Common Stock.
However, CFC Rights in the hands of a beneficial owner of 20 percent or more of
CFC Common Stock, or ten percent or more if the CFC Board determines that such
ownership is not in the best interests of CFC or its stockholders, will be null
and void and cannot be used to acquire shares of CFC Common Stock.
Moreover, in the event that CFC merges with another entity and CFC is not
the survivor, or in the event that 50 percent or more of CFC's assets are sold
or transferred, then the holder of a CFC Right is entitled to purchase shares of
the acquiring company's common stock at a price equal to 50 percent of the then
current market price of the common stock of the acquiring company.
Until a CFC Right is exercised, the holder, as such, will have no rights as
a stockholder of CFC (including, without limitation, the right to vote or to
receive dividends, if any).
The CFC Board has amended the rights plan to provide that the consummation
of the Corporate Merger between CFC and FUNC will not constitute a triggering
event and will not cause the CFC Rights to become exercisable.
FUNC. FUNC has adopted the FUNC Rights Agreement. See "DESCRIPTION OF FUNC
CAPITAL STOCK -- FUNC Rights Plan".
STOCKHOLDER INSPECTION RIGHTS; STOCKHOLDER LISTS
CFC. Connecticut law requires that a corporation maintain certain basic
records, including books and records of account, minutes of meetings of
stockholders and directors, and stock records reflecting the name and address of
each stockholder and the number of shares held by each stockholder. In addition,
a corporation must prepare, at least every 12 months, a balance sheet showing
the financial condition of the corporation as of a date not more than four
months prior thereto and a profit and loss statement respecting its operations
for the 12 months preceding such date.
The balance sheets and profit and loss statements prepared by a corporation
are subject to inspection by any stockholder of record during business hours. In
addition, a stockholder may inspect the bylaws of the corporation and minutes of
stockholders meetings at any reasonable time, and may make copies thereof.
However, a corporation does not have to honor a stockholder's request to inspect
its bylaws and minutes of stockholders meetings unless the request is in writing
and is for a specified, reasonable and proper purpose.
Prior to each meeting of stockholders for which the corporation provides at
least seven days prior notice, the corporation must prepare a stockholders list
which sets forth the name and address of each stockholder and the number of
shares of stock held by the stockholder. Such list must be kept on file in the
office of the corporation for a period of five days prior to the meeting. The
list is subject to inspection by any stockholder during usual business hours for
any proper purpose in the interest of the stockholder as such or of the
corporation, and not for speculative or trading purposes or for any purpose
inimical to the interest of the corporation or its stockholders. Such list must
also be produced and kept open at the meeting and is subject to inspection for
any proper purpose during the meeting.
At the request of a stockholder, the superior court may require the
corporation to allow the stockholder to examine and make copies of such of the
corporation's books and records of account, record of stockholders and minutes
of meetings of the board of directors and committees thereof as the court
determines to be justified under the circumstances. However, the stockholder has
the burden of showing that the examination is in good faith in the interest of
the stockholder as such or of the corporation and is not for speculative or
trading purposes or for any purpose inimical to the interest of the corporation
or its stockholders.
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
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records. The records must be directly connected with the stockholder's purpose.
The rights of inspection and copying extend not only to stockholders of record
but also to beneficial owners whose beneficial ownership is certified to FUNC by
the stockholder of record. However, FUNC is under no duty to provide any
accounting records or any records with respect to any matter that FUNC
determines in good faith may, if disclosed, adversely affect FUNC in the conduct
of its business or may constitute material non-public information, and the
rights of inspection and copying are limited to stockholders who either have
been stockholders for at least six months or who hold at least five percent of
the outstanding shares of any class of stock of FUNC. A stockholder's agent or
attorney has the same inspection and copying rights as the stockholder he
represents.
In addition, after fixing a record date for a stockholders' meeting, FUNC
is required to prepare a stockholder list with respect to such stockholders'
meeting and to make such list available at FUNC's principal office or at a place
identified in the meeting notice to any stockholder beginning two business days
after notice of such meeting is given and continuing through such meeting and
any adjournment thereof. Subject to the applicable provisions of the NCBCA, a
stockholder or his agent or attorney upon written demand at his own expense
during regular business hours is entitled to copy such list. Such list must be
available at the stockholders' meeting, and any stockholder, his agent or
attorney, may inspect such list at any time during the meeting or any
adjournment thereof.
REQUIRED STOCKHOLDER VOTE FOR CERTAIN ACTIONS
CFC. Article Seventh of the CFC Articles requires that, unless otherwise
required by law, certain "business combinations" with a holder of ten percent or
more (an "Interested Stockholder") of CFC's capital stock entitled to vote in
the election of directors ("CFC Voting Stock") must be approved by
"super-majority" votes of stockholders. The purpose of this provision is to
discourage "front load" or two-tier acquisitions. In this type of acquisition,
one price is offered in a tender offer for a controlling block of stock and then
a much lower price and/or less desirable form of consideration is offered for
the remainder of the outstanding stock.
Under the provisions of the CFC Articles, three votes are necessary before
a business combination with an Interested Stockholder can occur. First, the CFC
Board must approve the transaction. Second, the holders of at least 80 percent
of the voting power of the outstanding CFC Voting Stock must approve the
transaction. Third, the holders of at least two-thirds of the voting power of
the outstanding CFC Voting Stock other than that controlled by the Interested
Stockholder must approve the transaction.
The term "business combination" encompasses six categories of transactions.
The first includes any merger, consolidation or share exchange by CFC or any
subsidiary with any Interested Stockholder or related persons. The second
category includes any sale, lease, exchange, mortgage or other disposition of
assets to an Interested Stockholder within any 12-month period which is not in
the usual and regular course of business, if the assets have a book value of ten
percent or more of either the total market value of the outstanding stock of CFC
or CFC's net worth as of the end of the most recent fiscal quarter. The third
category is the issuance or transfer to an Interested Stockholder, on a non-pro
rata basis, of stock having a market value equal to five percent or more of the
total market value of all shares of stock of CFC. The fourth category is a
liquidation or dissolution proposed by or on behalf of an Interested Stockholder
or related person. The fifth category is any reclassification of securities or
recapitalization which increases an Interested Stockholder's proportionate
ownership of CFC's equity or convertible securities. The sixth category is CFC's
grant to an Interested Stockholder of any loan, advance, guarantee, pledge or
other financial assistance.
The CFC Articles exempt from the super-majority voting requirements
described above any business combination with an Interested Stockholder if the
transaction is approved by the CFC Board before the Interested Stockholder first
becomes an Interested Stockholder.
The CFC Articles also exempt from the foregoing super-majority voting
requirements business combinations described in the first category set forth
above (that is, mergers, consolidations and share exchanges) which satisfy
certain "fair price" and procedural provisions. Four basic conditions must be
met in order for this exemption to apply. The first condition requires that
stockholders whose stock is acquired in the second or later stage of an
acquisition must receive at least as much as the highest price the Interested
Stockholder paid for shares within the prior two years, and in some cases a
higher price, as determined by various formulas specified in the exemptive
provision. These prices may bear no relation to the then-current market value of
CFC's stock. The second condition is that the consideration in the business
combination must be cash or the same form of consideration as the Interested
Stockholder previously paid. This requirement prevents the use of cash in the
"first tier" of an acquisition and less valuable securities in the "second
tier". The third condition is designed to ensure that an Interested Stockholder
has not, through the exercise of influence over CFC, enhanced his position or
brought about actions
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detrimental to the other stockholders. Thus, any omission of preferred stock
dividends, or the receipt by the Interested Stockholder of specified financial
or tax benefits (such as loans, advances, pledges or guarantees provided by
CFC), will prevent the use of the "fair price" exemption. The fourth condition
requires that a proxy or information statement complying with the provisions of
the Exchange Act be mailed to CFC's stockholders at least 30 days prior to the
consummation of the business combination, whether or not such proxy or
information statement is required under the Exchange Act.
In the event that the requisite approval of the CFC Board was given or the
"fair price" and procedural requirements were met with respect to a particular
business combination, the normal voting requirements of Connecticut law would
apply. Under Connecticut law, a merger, consolidation, sale of substantially all
of the assets of CFC or the adoption of a plan of dissolution of CFC would
require the approval of at least two-thirds of the outstanding shares of CFC
Common Stock. A reclassification of CFC's securities involving an amendment to
its certificate of incorporation would require the approval of the holders of a
majority of CFC's capital stock entitled to vote thereon. A sale of less than
all of the assets of CFC, a merger of CFC with a company in which it owns at
least 90 percent of the outstanding capital stock, or a reclassification of
CFC's securities not involving an amendment to its articles of incorporation
would not require stockholder approval.
The super-majority voting and other provisions of the CFC Articles are
substantially similar to the provisions of Sections 33-374a, 33-374b and 33-374c
of the CSCA, except that the fair price and procedural requirements contained in
Section 33-374c do not include the furnishing of proxy information to
stockholders in connection with mergers, consolidations and share exchanges. The
fair price provisions have been included in the CFC Articles to retain the
super-majority voting requirements and other provisions set forth in Sections
33-374a, 33-374b and 33-374c in the event the Connecticut statutory provisions
are repealed or amended by the Connecticut legislature. For example, if Sections
33-374a, 33-374b or 33-374c were repealed, the fair price provisions in the
certificate of incorporation would govern business combinations with Interested
Stockholders of CFC. If the percentage voting requirements set forth in Section
33-374b were lowered, the higher percentage voting requirements set forth in the
fair price provisions would apply. However, if the percentage voting
requirements of Section 33-374b were increased, the higher percentage voting
requirements would govern combinations with respect to CFC and any Interested
Stockholders.
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.
With respect to a plan of merger to which FUNC is a party, no vote of the
stockholders of FUNC is required if FUNC is the surviving corporation and: (i)
the FUNC Articles would remain unchanged after the merger, subject to certain
exceptions; (ii) each stockholder of FUNC immediately before the merger would
hold an identical number of shares, with identical designations, limitations,
preferences and relative rights, after the merger; (iii) the number of shares of
FUNC stock entitled to vote unconditionally in the election of directors to be
issued in the merger (either by the conversion of securities issued in the
merger or by the exercise of rights and warrants issued in the merger) would not
exceed 20 percent of the shares of FUNC stock entitled to vote unconditionally
in the election of directors outstanding immediately before the merger; and (iv)
the number of shares of FUNC stock entitling holders to participate without
limitation in distributions to be issued in the merger (either by the conversion
of securities issued in the merger or by the exercise of rights and warrants
issued in the merger) would not exceed 20 percent of the shares of FUNC stock
entitling holders to participate without limitation in distributions outstanding
immediately before the merger.
In addition, no vote of the stockholders of FUNC would be required to merge
a subsidiary of which FUNC owns at least 90 percent of the outstanding shares of
each class of subsidiary shares, into FUNC, as long as no amendment is made to
the FUNC Articles that could not be made without approval of FUNC's
stockholders.
With respect to a sale, lease, exchange or other disposition of all or
substantially all the assets of FUNC made upon the authority of the 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.
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ANTI-TAKEOVER PROVISIONS
CFC. The CFC Articles have several provisions which are designed to make
the accomplishment of certain mergers, tender offers and other extraordinary
corporate transactions more difficult.
RESTRICTIONS ON ACQUISITION OF TEN PERCENT OF STOCK. Article Fifteenth of
the CFC Articles contains a provision that prohibits any person from acquiring
control of ten percent or more of the voting stock of CFC unless all required
state and federal bank regulatory approvals have been obtained (or, as
applicable, the necessary notice or other required filings have been made with
the requisite authority and a disapproval has not been received within the
applicable time period). Moreover, no person may directly or indirectly offer to
acquire or acquire control of ten percent or more of the voting stock of CFC
unless it has obtained prior approval of the acquisition by the Federal Reserve
Board and the Connecticut Commissioner (or, as applicable, with regard to each
such agency, has filed any required filings with such regulator or agency in a
timely manner and the action or proposed action set forth on such filing has not
been disapproved within the applicable time period).
The word "person" includes any individual, firm, corporation, partnership,
association, joint stock company, trust, unincorporated organization, government
or political subdivision or other entity, acting singly or in concert with any
affiliates, associates or group of persons. However, offers made exclusively to
CFC by underwriters or members of a selling group acting on CFC's behalf for
resale to the general public are excepted. The foregoing provisions also state
that any shares of CFC's voting stock acquired in violation of these
requirements shall not be voted or treated as outstanding for any purposes
involving stockholder action. So long as these provisions are in effect, such
provisions would have the effect of preventing an acquisition of CFC without
such requisite approval. The CFC Articles also state that, notwithstanding any
provision thereof, nothing therein shall be construed to restrict any authority
of the Connecticut Commissioner to authorize an acquisition as provided in the
Connecticut Bank Holding Company and Bank Acquisition Act.
BOARD OF DIRECTORS APPROVAL OF A BUSINESS COMBINATION OR STOCK PURCHASE.
Article Eighth of the CFC Articles prevents an Interested Stockholder from
engaging in any "business combination" with CFC for a period of five years
following the date on which it first became an Interested Stockholder (i.e., the
date on which it first acquired ten percent or more of the CFC Voting Stock). A
"business combination" is defined in the same way as in the section entitled
" -- Required Stockholder Vote for Certain Actions" set forth above.
Nevertheless, a business combination with an Interested Stockholder may occur
before the termination of the five-year period if the CFC Board gives its
approval, before the date on which the Interested Stockholder becomes an
Interested Stockholder, to either the proposed business combination or the
proposed acquisition of CFC Voting Stock. Moreover, the nonemployee members of
the CFC Board (of which there must be at least two) must also give their prior
approval. The purpose of this provision is to effectively require any potential
acquiror of CFC to seek the approval of the CFC Board before launching a
takeover attempt.
In the event that the requisite prior board of director approval is
obtained with respect to a particular business combination, the normal voting
requirements of Connecticut law would apply. Under Connecticut law, a merger,
consolidation, sale of substantially all of the assets of CFC or the adoption of
a plan of dissolution of CFC would require the approval of at least two-thirds
of the outstanding shares of CFC's capital stock. A reclassification of CFC's
securities involving an amendment to its certificate of incorporation would
require the approval of the holders of a majority of CFC's capital stock
entitled to vote thereon. A sale of less than all the assets of CFC, a merger of
CFC with a company in which it owns at least 90 percent of the outstanding
capital stock, a reclassification of CFC's securities not involving an amendment
to its certificate of incorporation, or the granting of loans, advances,
guarantees, pledges or other financial assistance to a person, would not require
stockholder approval.
The requirement for the prior approval by the CFC Board of a business
combination or stock purchase which is contained in the CFC Articles is
substantially similar to the provisions of Section 33-374d et seq. of the CGSA.
These provisions have been included in the CFC Articles in order to retain the
requirement for prior board of director approval in the event the Connecticut
statutory provisions are repealed or amended by the Connecticut legislature.
ANTI-GREENMAIL PROVISIONS. Article Fourteenth of the CFC Articles requires,
under certain circumstances, the affirmative vote of holders of not less than a
majority of the outstanding shares of CFC's capital stock, voting together as a
class, but excluding any stock owned by an Interested Securityholder (as
hereinafter defined), before CFC may, directly or indirectly, purchase any of
its equity securities from such Interested Securityholder who has beneficially
owned such security less than two years prior to the date of said purchase. An
Interested Securityholder is generally defined as the holder, directly or
indirectly, of three percent or more of the class of CFC's securities to be
acquired. No such vote is required, however, if CFC makes a transfer or exchange
offer to the Interested Securityholder and to all other stockholders on the same
terms and conditions and in compliance with the federal securities laws.
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FUNC. North Carolina has two anti-takeover statutes in force, The North
Carolina Shareholder Protection Act and The North Carolina Control Share
Acquisition Act. These statutes restrict business combinations with, and the
accumulation of shares of voting stock of, certain North Carolina corporations.
In accordance with the provisions of these statutes, FUNC elected not to be
covered by the restrictions imposed by these statutes. As a result, such
statutes do not apply to FUNC. In addition, North Carolina has a Tender Offer
Disclosure Act, which contains certain prohibitions against deceptive practices
in connection with making a tender offer and also contains a filing requirement
with the North Carolina Secretary of State that has been held unenforceable as
to its 30-day waiting period.
DISSENTERS' RIGHTS
CFC. For a description of the Connecticut statute governing dissenters'
rights, see "THE MERGERS -- Dissenters' Rights".
FUNC. North Carolina law generally provides dissenters' rights for mergers
and certain share exchanges that would require stockholder approval, sales of
all or substantially all of the assets (other than sales that are in the usual
and regular course of business and certain liquidations and court-ordered
sales), certain amendments to the articles of incorporation and any corporate
action taken pursuant to a stockholder vote to the extent the articles of
incorporation, bylaws or a resolution of the board of directors entitles
stockholders to dissent.
DIVIDENDS AND OTHER DISTRIBUTIONS
CFC. Holders of CFC Common Stock are entitled to receive dividends when, as
and if declared by the CFC Board out of funds legally available therefor. Cash
dividends may be paid out of current or accumulated net profits and not out of
the capital surplus account.
The principal source of funds for the payment of dividends on CFC Common
Stock are dividends paid to CFC by Centerbank. Under Connecticut law, a
Connecticut-chartered capital stock savings bank like Centerbank may not pay out
in dividends in any calendar year an amount exceeding its current or accumulated
net profits for the prior two complete fiscal years, unless the dividend is
specifically approved by the Connecticut Commissioner. In addition, Centerbank
may not pay dividends on its capital stock if the effect thereof would cause
Centerbank's net worth to be reduced below the amount required for its
liquidation account established in connection with its conversion from a mutual
savings bank to a capital stock savings bank. Earnings appropriated to bad debt
reserves for loan losses and deducted for federal income tax purposes also are
not available for cash dividends without the payment of taxes at the then
current income tax rates on the earnings so used. Further, Centerbank may not
pay cash dividends if Centerbank's net worth would thereby be reduced below the
amount required by the Connecticut Commissioner or the FDIC.
The CFC Board has declared and paid cash dividends on a quarterly basis,
taking into account such factors as CFC's net income, capital requirements,
financial condition, alternative investment options, tax implications,
prevailing economic conditions, industry practices, the needs of CFC, and other
factors deemed relevant at the time.
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
CFC. In the event of the dissolution of CFC, the holders of CFC Common
Stock would be entitled to receive, after payment of all of its debts,
liabilities, and of all sums to which holders of any preferred stock may be
entitled, all of the remaining assets of CFC. A voluntary dissolution of CFC may
be effected by the affirmative vote of a majority of the outstanding CFC Common
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.
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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 CFC Common Stock who receive such shares following consummation
of the Corporate Merger and who are not deemed to be "affiliates" (as defined
under the Securities Act, but generally including directors, certain executive
officers and ten percent or more stockholders) of CFC or FUNC. It is a condition
to consummation of the Mergers that each holder of CFC Common Stock who is
deemed by CFC to be an affiliate has entered into an agreement with FUNC
providing, among other things, that such affiliate will not transfer any FUNC
Common Shares received by such affiliate in the Corporate Merger except in
compliance with the Securities Act. This Prospectus/Proxy Statement does not
cover any resales of FUNC Common Shares received by affiliates of CFC.
VALIDITY OF FUNC COMMON SHARES
The validity of the FUNC Common Shares being offered hereby is being passed
upon for FUNC by Marion A. Cowell, Jr., Esq., Executive Vice President,
Secretary and General Counsel of FUNC. Mr. Cowell is also a stockholder of FUNC
and holds options to purchase additional shares of FUNC Common Stock.
EXPERTS
The consolidated balance sheets of CFC as of December 31, 1995 and 1994,
and the related consolidated statements of operations, changes in shareholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1995, included in CFC's 1995 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 CFC's consolidated financial statements refers to a
change in the method of accounting for mortgage servicing rights, securities,
income taxes and postretirement benefits.
The consolidated balance sheets of FUNC as of December 31, 1995 and 1994,
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, 1995, included in FUNC's 1995 Supplemental Annual Report to
Stockholders which is incorporated by reference in FUNC's 1995 Annual Report on
Form 10-K and incorporated by reference herein, have been incorporated by
reference herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing. The
aforementioned report of KPMG Peat Marwick LLP covering FUNC's consolidated
financial statements refers to a change in the method of accounting for
investments.
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ANNEX A
AGREEMENT AND PLAN OF MERGERS
AGREEMENT AND PLAN OF MERGERS, dated as of the 14th day of June, 1996 (this
"Plan"), by and among CENTER FINANCIAL CORPORATION (the "Company"), CENTERBANK
(the "Bank"), FIRST UNION CORPORATION ("First Union") and FIRST UNION BANK OF
CONNECTICUT ("FUB-CT").
RECITALS:
(A) THE COMPANY. The Company is a corporation duly organized and existing
in good standing under the laws of the State of Connecticut, with its principal
executive offices located in Waterbury, Connecticut. The Company is a bank
holding company under the Bank Holding Company Act of 1956, as amended ("BHCA").
As of the date hereof, the Company has 75,000,000 authorized shares of common
stock, each of $1.00 par value ("Company Common Stock"), 1,000,000 authorized
shares of voting preferred stock, no par value and 10,000,000 authorized shares
of nonvoting preferred stock, no par value, (of which 300,000 shares of such
class are Series A Participating Preferred Stock, all of such Series A
Participating Preferred Stock being reserved for issuance pursuant to the Rights
Agreement, dated as of July 7, 1995 (the "Company Rights Agreement"), between
the Company and Mellon Bank, N.A., as Rights Agent) (no other class of capital
stock being authorized), of which 15,014,452 shares of Company Common Stock and
no shares of voting or nonvoting preferred stock are issued and outstanding.
(B) THE BANK. The Bank is a stock savings bank duly organized and existing
in good standing under the laws of the State of Connecticut, with its principal
executive offices located in Waterbury, Connecticut. As of the date hereof, the
Bank has 75,000,000 authorized shares of common stock, each of $1.00 par value
("Bank Common Stock"); 1,000,000 authorized shares of voting preferred stock, no
par value, and 10,000,000 authorized shares of nonvoting preferred stock, no par
value (no other class of capital stock being authorized), all of which shares of
Bank Common Stock are issued and outstanding and owned by the Company and no
shares of voting or nonvoting preferred stock are issued and outstanding.
(C) FIRST UNION. First Union is a corporation duly organized and existing
in good standing under the laws of the State of North Carolina, with its
principal executive offices located in Charlotte, North Carolina. First Union is
a registered bank holding company under the BHCA. 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 rights ("First Union Rights") issued pursuant to a
Shareholder Protection Rights Agreement, dated December 18, 1990 (as amended,
the "First Union Rights Agreement")) 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 282,918,259 shares of First Union
Common Stock, 2,174,705 shares of First Union Series B Convertible Class A
Preferred Stock, 350,000 shares of First Union Series D Adjustable Rate
Cumulative Class A Preferred Stock, 74,130 shares of First Union Series F 10.64%
Class A Preferred Stock (represented by depositary shares, each representing a
one one-fortieth interest in a share of First Union Series F 10.64% Class A
Preferred Stock), and no shares of First Union Preferred Stock, were issued and
outstanding as of May 31, 1996.
(D) FUB-CT. FUB-CT is a bank duly organized and existing in good standing
under the laws of the State of Connecticut, with its principal executive offices
located in Stamford, Connecticut. As of the date hereof, FUB-CT has 6,000,000
authorized shares of common stock, each of $5.00 par value ("FUB-CT Common
Stock") (no other class of capital stock being authorized), of which 2,884,736
shares are issued and outstanding and owned by Northeast Bancorp, Inc.
("Northeast"), a wholly-owned subsidiary of First Union Corporation of New
Jersey ("FUNC-NJ"), a wholly-owned subsidiary of First Union. As of March 31,
1996, FUB-CT had capital of $254,180,000, divided into common stock of
$14,424,000, surplus of $200,511,000 and undivided profits, including capital
reserves of $39,325,000, and net unrealized gains (loss) on investment
securities of $120,000.
(E) STOCK OPTION AGREEMENT. As a condition and inducement to First Union's
and FUB-CT's willingness to enter into this Plan, the Company and First Union
intend to enter into a Stock Option Agreement (the "Stock Option Agreement") in
the form attached hereto as EXHIBIT A, pursuant to which the Company shall grant
to First Union an option to purchase under certain circumstances, shares of
Company Common Stock. The execution, delivery and performance of the Stock
Option Agreement in accordance with its terms shall be deemed to constitute
transactions contemplated by this Plan.
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(F) RIGHTS, ETC. Except as Previously Disclosed (as hereinafter defined) in
SCHEDULE 4.01(C), there are no shares of capital stock of the Company or the
Bank authorized and reserved for issuance, neither the Company nor the Bank has
any Rights (as defined below) issued or outstanding and neither the Company nor
the Bank has any commitment to authorize, issue or sell any such shares or any
Rights, except pursuant to this Plan. 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 (and shall include stock appreciation rights). There are
no preemptive rights in respect of the Company Common Stock.
(G) APPROVALS. The Board of Directors of each of the Company, the Bank and
First Union has approved, at meetings of each of such Boards of Directors, this
Plan and has authorized the execution hereof in counterparts. First Union agrees
promptly to cause the Board of Directors of FUB-CT to approve this Plan and
authorize the execution hereof in counterparts, prior to the Effective Date.
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 MERGERS.
1.01. THE CORPORATE MERGER. Subject to the terms and conditions of this
Plan and subject to SECTION 2.06, at the Effective Time (as hereinafter
defined):
(A) THE CONTINUING CORPORATION. The Company shall merge with and into First
Union (the "Corporate Merger"), the separate existence of the Company shall
cease and First Union (the "Continuing Corporation") shall survive and the name
of the Continuing Corporation shall be "First Union Corporation".
(B) RIGHTS, ETC. The Continuing Corporation shall thereupon and thereafter
possess all of the rights, privileges, immunities and franchises, of a public as
well as of a private nature, of each of the merging corporations; and all
property, real, personal and mixed, and all debts due on whatever account, and
all other choses in action, and all and every other interest, of or belonging to
or due to each of the corporations so merged, shall be deemed to be vested in
the Continuing Corporation without further act or deed; and the title to any
real estate or any interest therein, vested in each of such corporations, shall
not revert or be in any way impaired by reason of the Corporate Merger.
(C) LIABILITIES. The Continuing Corporation shall thenceforth be
responsible and liable for all the liabilities, obligations and penalties of
each of the corporations so merged, in accordance with applicable law.
(D) CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS; OFFICERS. The
Certificate of Incorporation and Bylaws of the Continuing Corporation shall be
those of First Union, as in effect immediately prior to the Corporate Merger
becoming effective. The directors and officers of First Union in office
immediately prior to the Corporate Merger becoming effective shall be the
directors and officers of the Continuing Corporation, together with such
additional directors and officers as may thereafter be elected, who shall hold
office until such time as their successors are elected and qualified.
1.02. THE BANK MERGER. Following the Corporate Merger on the Effective Date
or as soon thereafter as First Union may deem appropriate:
(A) CONTRIBUTION OF BANK COMMON STOCK. First Union shall contribute the
Bank Common Stock to FUNC-NJ and shall cause FUNC-NJ to contribute the Bank
Common Stock to Northeast.
(B) THE CONTINUING BANK. Following the contribution of the Bank Common
Stock to FUNC-NJ and from FUNC-NJ to Northeast and at least one day following
the Effective Date, the Bank shall be merged with and into FUB-CT (the "Bank
Merger" and together with the Corporate Merger, the "Mergers"), the separate
existence of the Bank shall cease and FUB-CT (the "Continuing Bank") shall
survive; the name of the Continuing Bank shall be "First Union Bank of
Connecticut"; and the Continuing Bank shall continue to conduct the business of
banking at the Bank's main office in Waterbury, Connecticut and at the legally
established branches of the Bank and FUB-CT.
(C) RIGHTS, ETC. The Continuing Bank shall thereupon and thereafter possess
all the rights, privileges, immunities and franchises, of a public as well as of
a private nature, of each of the banks so merged; and all property, real,
personal and mixed, and all debts due on whatever account, and all other choses
in action, and all and every other interest, of or belonging to or due to each
of the banks so merged, shall be deemed to be 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
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to any real estate or any interest therein, vested in each of such banks, shall
not revert or be in any way impaired by reason of the Bank Merger.
(D) LIABILITIES, ETC. The Continuing Bank shall thenceforth be responsible
and liable for all the liabilities, obligations and penalties of each of the
banks so merged (including liabilities arising out of the operation of any trust
departments), in accordance with applicable law.
(E) CHARTER; BYLAWS; DIRECTORS; OFFICERS. The Charter and Bylaws of the
Continuing Bank shall be those of FUB-CT, as in effect immediately prior to the
Bank Merger becoming effective. The directors and officers of FUB-CT in office
immediately prior to the Bank Merger becoming effective shall be the directors
and officers of the Continuing Bank, together with such additional directors and
officers as may thereafter be elected, who shall hold office until such time as
their successors are elected and qualified.
(F) OUTSTANDING STOCK OF THE CONTINUING BANK. The amount of the capital
stock of the Continuing Bank shall be not less than $14,424,000 and shall
consist of not less than 2,884,736 issued and outstanding shares of common
stock, each of $5.00 par value, and the issued and outstanding shares shall
remain issued and outstanding as shares of FUB- CT, each of $5.00 par value, and
the holders thereof shall retain their rights therein.
(G) OUTSTANDING STOCK OF THE BANK. Promptly after the Bank Merger becomes
effective, Northeast shall deliver all of the issued and outstanding shares of
the capital stock of the Bank to the Continuing Bank for cancellation.
II. CONSIDERATION.
2.01. CORPORATE MERGER CONSIDERATION. Subject to the provisions of this
Plan, on the Effective Date:
(A) OUTSTANDING FIRST UNION COMMON STOCK. The shares of First Union 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 First
Union Common Stock.
(B) OUTSTANDING COMPANY COMMON STOCK. Each share (excluding (i) shares
("Dissenter's Shares") of Company Common Stock held by holders who take all of
the steps required to be taken in order to entitle such holders to be paid in
accordance with Sections 33-373 and 33-374 of the CGSA (as hereinafter defined)
or (ii) shares held by the Company 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 ("Excluded Shares")) of Company
Common Stock including each attached right (a "Company Right") issued pursuant
to the Company Rights Agreement issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Corporate Merger, automatically and
without any action on the part of the holder thereof, become and be converted
into the right to receive the number of shares of First Union Common Stock (the
"Exchange Ratio") equal to the result of dividing $25.44 by the average of the
daily closing sales prices of First Union Common Stock as reported on the
Composite Transactions tape of the New York Stock Exchange, Inc. (the "NYSE")
reporting system for the ten consecutive trading days on which such shares are
traded on the NYSE ending on the last trading day prior to the Effective Date
(as reported in THE WALL STREET JOURNAL).
2.02. STOCKHOLDER RIGHTS; STOCK TRANSFERS. At the Effective Time, holders
of Company Common Stock shall cease to be, and shall have no rights as,
stockholders of the Company, other than to receive the consideration provided
under this ARTICLE II, without interest. After the Effective Time, there shall
be no transfers on the stock transfer books of the Company or the Continuing
Corporation of the shares of Company Common Stock which were issued and
outstanding immediately prior to the Effective Time.
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
Corporate Merger; instead, First Union shall pay to each holder of Company
Common Stock 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 Tape (as reported in THE WALL STREET
JOURNAL).
2.04. EXCHANGE PROCEDURES. As promptly as practicable after the Effective
Date, First Union will send or cause to be sent to each former stockholder of
the Company of record immediately prior to the Effective Time, transmittal
materials for
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use in exchanging such stockholder's certificates for Company 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
Company 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 Company 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 (as hereinafter defined) of
the Company, 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 5.10.
2.05. EXCLUDED SHARES; DISSENTER'S SHARES. Each of the Excluded Shares
shall be canceled and retired at the Effective Time, and no consideration shall
be issued in exchange therefor. Dissenter's Shares shall be purchased and paid
for in accordance with Section 33-374 of CGSA. If requested by First Union,
prior to the Effective Time, the Company will establish an escrow to pay for
such Dissenter's Shares.
2.06. RESERVATION OF RIGHT TO REVISE TRANSACTION. First Union may at any
time change the method of effecting the acquisition of the Company and the Bank
(including without limitation the provisions of this ARTICLE II) if and to the
extent it deems such change to be desirable; PROVIDED, HOWEVER, that no such
change shall (A) alter or change the amount or kind of consideration to be
issued to holders of Company Common Stock as provided for in this Plan, (B)
adversely affect the intended tax-free treatment to the Company's stockholders
as a result of receiving such consideration, or (C) 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. From and after the Effective Time, all employee and director
stock options to purchase shares of Company Common Stock ("Options"), which are
then outstanding and unexercised, shall be converted into and become the right
to purchase shares of First Union Common Stock, and First Union shall assume
each such Option in accordance with the terms of the plan and agreement by which
it is evidenced; PROVIDED, HOWEVER, that from and after the Effective Time (i)
each such Option assumed by First Union may be exercised solely to purchase
shares of First Union Common Stock, (ii) the number of shares of First Union
Common Stock purchasable upon exercise of such Option shall be equal to the
number of shares of Company Common Stock that were purchasable under such Option
immediately prior to the Effective Time multiplied by the Exchange Ratio and
rounding down to the nearest whole share, with cash being paid for any
fractional share interest that otherwise would be purchasable, and (iii) the per
share exercise price under each such Option shall be adjusted by dividing the
per share exercise price of each such Option by the Exchange Ratio, and rounding
up to the nearest cent. The terms of each Option shall, in accordance with its
terms, be subject to further adjustment as appropriate to reflect any stock
split, stock dividend, recapitalization or other similar transaction with
respect to First Union Common Stock on or subsequent to the Effective Date. The
Company represents and warrants that the number of shares of Company Common
Stock which are issuable upon exercise of Options as of the date hereof are
Previously Disclosed in SCHEDULE 2.07.
2.08. EFFECTIVE DATE AND EFFECTIVE TIME. Subject to the conditions to the
obligations of the parties to effect the Mergers as set forth in ARTICLE VI, the
effective date of the Corporate Merger (the "Effective Date") shall be such date
as First Union and the Company shall mutually agree upon following the
satisfaction of the conditions set forth in SECTIONS 6.01 and 6.02 or if such
parties do not so agree, shall be such date as First Union shall notify the
Company in writing not less than five days prior thereto. The time on the
Effective Date at which the Corporate Merger shall become effective is referred
to as the "Effective Time".
III. ACTIONS PENDING CONSUMMATION.
Without the prior written consent of First Union, the Company shall conduct
its and each of the Company Subsidiaries' (as hereinafter defined) business in
the ordinary and usual course consistent with past practice and shall use its
reasonable best efforts to maintain and preserve its and each of the Company
Subsidiaries' business organization, employees and advantageous business
relationships and to retain the services of its and each of the Company
Subsidiaries' officers and key employees, and the Company will not, and will
cause each of the Company Subsidiaries (as hereinafter defined) not to, agree
to:
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3.01. CAPITAL STOCK. Except as Previously Disclosed in SCHEDULE 4.01(C),
issue, sell or otherwise permit to become outstanding any additional shares of
capital stock of the Company or the Company Subsidiaries, or any Rights with
respect thereto, or enter into any agreement with respect to the foregoing, or
permit any additional shares of Company Common Stock to become subject to grants
of employee stock options, stock appreciation rights or similar stock based
employee compensation rights or take any action that permits the acceleration of
Options.
3.02. DIVIDENDS, ETC. Make, declare or pay any dividend on or in respect of
(other than dividends payable on Company Common Stock in a quarterly amount not
to exceed $0.07 per share, and dividends from Company Subsidiaries to the
Company or the Bank, as applicable) (provided, however, that the Company will
not declare or pay any dividend during the calendar quarter in which the
Effective Date occurs unless the record date for the dividend payable on First
Union Common Stock for such quarter precedes the Effective Date), or declare or
make any distribution on, or directly or indirectly combine, split, redeem,
reclassify, purchase or otherwise acquire, any shares of the capital stock of
the Company or the Company Subsidiaries or, other than as permitted in or
contemplated by this Plan, authorize the creation or issuance of, or issue, any
additional shares of such capital stock or any Rights with respect thereto.
3.03. INDEBTEDNESS; LIABILITIES; ETC. Other than in the ordinary course of
business consistent with past practice, incur any indebtedness for borrowed
money or assume, guarantee, endorse or otherwise as an accommodation become
liable for the obligations of any other individual or corporation, bank,
partnership, joint venture, business trust, association or other organization
(each, a "Business Entity").
3.04. OPERATING PROCEDURES; CAPITAL EXPENDITURES; ETC. Except as may be
directed by any regulatory agency, (A) change its or any of the Company
Subsidiaries' lending, investment, liability management or other material
banking or other policies in any material respect, except such changes as are in
accordance and in an effort to comply with SECTION 5.11, (B) incur or commit to
incur any capital expenditures beyond those Previously Disclosed in SCHEDULE
3.04, other than in the ordinary course of business and not exceeding the
Company's current budget for such expenditure as set forth on SCHEDULE 3.04, or
(C) implement or adopt any change in accounting principles, practices or
methods, other than as may be required by generally accepted accounting
principles.
3.05. LIENS. Impose, or permit or suffer the imposition, on any shares of
capital stock of any of the Company Subsidiaries, or on any of its or the
Company Subsidiaries' other assets, any Liens (as hereinafter defined), other
than Liens on such other assets that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect (as hereinafter defined) on
the Company, or permit any such Lien to exist.
3.06. COMPENSATION; EMPLOYMENT AGREEMENTS; ETC. Except as Previously
Disclosed in SCHEDULE 3.06, enter into or amend any employment, severance or
similar agreement or arrangement with any of its directors, officers, employees
or consultants, or grant any salary or wage increase, amend the terms of any
Option or increase any employee benefit (including incentive or bonus payments),
except normal individual increases in regular compensation to employees in the
ordinary course of business consistent with past practice.
3.07. BENEFIT PLANS. Except as Previously Disclosed in SCHEDULE 3.07, enter
into or modify (except as may be required by applicable law) any employment,
pension, retirement, stock option, stock purchase, savings, profit sharing,
deferred compensation, consulting, bonus, group insurance or other employee
benefit, incentive or welfare contract, plan or arrangement, or any trust
agreement related thereto, in respect of any of its directors, officers or other
employees, including without limitation taking any action that accelerates the
vesting or exercise of any benefits payable thereunder.
3.08. CONTINUANCE OF BUSINESS. (A) Dispose of any portion of its assets,
deposits, business or properties, except any such disposition that is in the
ordinary course of business and is not material to the Company and the Company
Subsidiaries taken as a whole, or discontinue or terminate any existing line of
business, or make any bulk sales of mortgage servicing, (B) merge or consolidate
with, or acquire all or any portion of the business or property of, any other
entity, except any such transaction that is in the ordinary course of business
and is not material to the Company and the Company Subsidiaries taken as a whole
(except foreclosures or acquisitions by the Bank in a fiduciary capacity, in
each case in the ordinary course of business consistent with past practice) or
(C) make any material investment either by purchase of stock or securities,
contributions to capital, property transfers or purchase of any property or
assets of any person or Business Entity other than from wholly-owned Company
Subsidiaries and other than the purchase or sale of loans or marketable
securities in the ordinary course of business consistent with past practices.
3.09. AMENDMENTS. Amend its Certificate of Incorporation, Charter or
Bylaws.
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3.10. CLAIMS. Settle any claim, action or proceeding involving liability
for any material money damages in an amount greater than $100,000 or any
restrictions upon the operations of the Company or any of the Company
Subsidiaries, or forgive or compromise any material amount of debt of any person
or Business Entity, other than wholly-owned Company Subsidiaries.
3.11. CONTRACTS. Enter into, terminate or make any change in any material
contract, agreement or lease, except in the ordinary course of business
consistent with past practice with respect to such contracts, agreements and
leases that are terminable by it without penalty on not more than 60 days prior
written notice.
3.12. OTHER ACTIONS. Take any actions that would (A) materially impede or
delay the receipt of any approval referred to in SECTION 6.02 without the
imposition of a condition or restriction of the type referred to in the proviso
to such SECTION or (B) adversely affect the ability of any party to timely
perform its obligations under this Plan.
3.13. AGREEMENTS. Authorize, commit to or enter into any agreement to take
any of the actions referred to in SECTIONS 3.01 through 3.12.
IV. REPRESENTATIONS AND WARRANTIES.
4.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE BANK. Each of
the Company and the Bank hereby represents and warrants to First Union and
FUB-CT 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, individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect on the Company. Each of the Company and the Company
Subsidiaries has in effect all federal, state, local, and foreign governmental
authorizations necessary for it to own or lease its properties and assets and to
carry on its business as it is now conducted, the absence of which, individually
or in the aggregate, is reasonably likely to have a Material Adverse Effect on
the Company.
(C) SHARES. The outstanding shares of it are validly issued and
outstanding, fully paid and nonassessable, and subject to no, and have not been
issued in violation of, preemptive rights. Except as Previously Disclosed in
SCHEDULE 4.01(C), and except as provided in the Stock Option Agreement, there
are no shares of capital stock or other equity securities of the Company or the
Bank outstanding and no outstanding Rights with respect thereto.
(D) COMPANY SUBSIDIARIES. The Company has Previously Disclosed in SCHEDULE
4.01(D) a list of all Business Entities five percent or more of the equity
interests of which are owned directly or indirectly by the Company. Each of the
Company Subsidiaries that is a savings bank is an "insured depository
institution" as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder. No equity securities of any of the Company Subsidiaries
are or may become required to be issued (other than to the Company or a
wholly-owned Company Subsidiary) by reason of any Rights with respect thereto.
There are no contracts, commitments, understandings or arrangements by which any
of the Company Subsidiaries is or may be bound to sell or otherwise issue any
shares of its capital stock, and there are no contracts, commitments,
understandings or arrangements relating to the rights of the Company or the
Bank, as applicable, to vote or to dispose of such shares. All of the shares of
capital stock of each Company Subsidiary held by the Company or a Company
Subsidiary are fully paid and nonassessable and subject to no, and have not been
issued in violation of, preemptive rights and are owned by the Company or a
Company Subsidiary free and clear of any Liens. Each Company 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 each
jurisdiction 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 on the Company. Except as Previously Disclosed in
SCHEDULE 4.01(D), the Company does not own beneficially, directly or indirectly,
any equity securities or similar interests of any Business Entity. The deposits
of the Bank are insured by the Bank Insurance Fund (the "BIF") of the Federal
Deposit Insurance Corporation (the "FDIC"). The Bank is a member in good
standing of the Federal Home Loan Bank of Boston (the "FHL Bank"). The term
"Company Subsidiary" means any Business Entity (including the Bank) which the
Company "controls", as defined in Section 225.2(e) of Regulation Y of the
Federal Reserve Board (other than Branford Savings Bank, so long as the option
that the Company holds to acquire voting securities remains unexercised).
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(E) CORPORATE POWER. It and each of the Company Subsidiaries has the
corporate power and authority to carry on its business as it is now being
conducted and to own or lease all its material properties and assets.
(F) CORPORATE AUTHORITY. Subject to any necessary receipt of approval by
its stockholders referred to in SECTION 6.01, this Plan and the transactions
contemplated hereby have been authorized by all necessary corporate action of it
and this Plan is a valid and binding agreement of it enforceable against it in
accordance with its terms, subject as to enforcement to bankruptcy, insolvency
and other similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles. Upon execution and delivery,
the Stock Option Agreement will be a valid and binding agreement of the Company,
enforceable against it in accordance with its terms, subject as to enforcement
to bankruptcy, insolvency and other similar 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, and except as
Previously Disclosed in SCHEDULE 4.01(G), the execution, delivery and
performance of this Plan and the consummation by it of the transactions
contemplated hereby, does not and will not (1) constitute a breach or violation
of, or a default under, or the acceleration or creation of a Lien (with or
without the giving of notice, passage of time or both) pursuant to, any law,
rule or regulation or any judgment, decree, order, governmental or
non-governmental permit or license, or agreement, indenture or instrument of it
or of any of the Company Subsidiaries or to which it or any of the Company
Subsidiaries or its or their properties is subject or bound, which breach,
violation, default or Lien is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on the Company, (2) constitute a
breach or violation of, or a default under, its Certificate of Incorporation,
Charter or Bylaws, or (3) require any consent or approval under any such law,
rule, regulation, judgment, decree, order, governmental or non-governmental
permit or license or the consent or approval of any other party to any such
agreement, indenture or instrument, other than any such consent or approval,
which if not obtained, would not be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on the Company.
(H) FINANCIAL REPORTS. As to (1) the Company, its Annual Report on Form
10-K for the fiscal year ended December 31, 1995, and all other documents filed
or to be filed subsequent to December 31, 1995 under Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended (together with the
rules and regulations thereunder, the "Exchange Act"), in the form filed with
the Securities and Exchange Commission (the "SEC") (in each such case, the
"Company Financial Reports"), and (2) the Bank, its Call Reports for the fiscal
year ended December 31, 1995, and all other call reports filed or to be filed
subsequent to December 31, 1995, in the form filed with the FDIC (in each case,
the "Bank Financial Reports" and together with the Company Financial Reports,
the "Company/Bank Financial Reports"), did not and will not as of their
respective dates 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 Company/Bank 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 Company/Bank Financial Reports (including any
related notes and schedules thereto) fairly presents and will fairly present the
results of operations, changes in stockholders' equity and 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, 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 the Company or the Company
Subsidiaries has any obligation or liability (contingent or otherwise) that,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on the Company.
(J) NO EVENTS. No events have occurred, or circumstances have arisen, since
March 31, 1996, which, individually or in the aggregate, have had or are
reasonably likely to have a Material Adverse Effect on the Company.
(K) PROPERTIES. Except as specifically reserved against or otherwise
disclosed in the Company Financial Reports (including the related notes and
schedules thereto) and except for those properties and assets that have been
sold or otherwise disposed of in the ordinary course of business, and except as
Previously Disclosed in SCHEDULE 4.01(K), the Company and the Company
Subsidiaries have good and marketable title, free and clear of all liens,
encumbrances, charges, security interests, restrictions (including restrictions
on voting rights or rights of disposition), defaults or equities of any
character or claims or third party rights of whatever nature (collectively
"Liens"), to all of the properties and assets, tangible and intangible,
reflected in the Company Financial Reports as being owned by the Company or the
Company Subsidiaries as of the dates thereof, other than those Liens that,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse
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Effect on the Company. All buildings and all fixtures, equipment, and other
property and assets which are held under leases or subleases by any of the
Company or the Company Subsidiaries are held under valid leases or subleases
enforceable in accordance with their respective terms.
(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 on the Company or which
alleges claims under any fair lending law or other law relating to
discrimination, including, without limitation, the Truth in Lending Act, the
Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Housing
Act, the Community Reinvestment Act and the Home Mortgage Disclosure Act, and,
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 the Company Subsidiaries or any of its or their material
properties or their officers, directors or controlling persons is a party to or
is subject to any order, decree, agreement, memorandum of understanding or
similar arrangement with, or a commitment or supervisory letter or similar
submission to or from, any federal or state governmental agency or authority
charged with the supervision or regulation of depository institutions or engaged
in the insurance of deposits (together with any and all agencies or departments
of federal, state or local government (including, without limitation the FHL
Bank, the Federal Reserve Board, the FDIC and any other federal or state bank,
thrift or other financial institution, insurance or securities regulatory
authorities (including the SEC), the "Regulatory Authorities")) and neither it
nor any of the Company Subsidiaries has been advised by any of the Regulatory
Authorities that any such authority is contemplating issuing or requesting (or
is considering the appropriateness of issuing or requesting) any such order,
decree, agreement, memorandum of understanding, commitment or supervisory letter
or similar submission.
(M) COMPLIANCE WITH LAWS. Except as Previously Disclosed in SCHEDULE
4.01(M), each of the Company and the Company Subsidiaries:
(1) has all permits, licenses, authorizations, orders and approvals
of, and has made all filings, applications and registrations with, all
Regulatory Authorities that are required in order to permit it to conduct
its business as presently conducted and that are material to the business
of the Company and the Company Subsidiaries taken as a whole; all such
permits, licenses, certificates of authority, orders and approvals are in
full force and effect and, to the best of its knowledge, no suspension or
cancellation of any of them is threatened; and all such filings,
applications and registrations are current;
(2) has received no notification or communication from any Regulatory
Authority or the staff thereof (a) asserting that any of the Company or the
Company Subsidiaries 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 on
the Company, (b) 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 on the
Company, or (c) requiring any of the Company or the Company Subsidiaries
(or any of their officers, directors or controlling persons) to enter into
any order, agreement or memorandum of understanding (or requiring the board
of directors thereof to adopt any material resolution or policy);
(3) with respect to the Bank is "well capitalized" for purposes of
Section 38 of the Federal Deposit Insurance Act and regulations thereunder;
and
(4) is in compliance in all material respects with all fair lending
laws or other laws relating to discrimination, including, without
limitation, the Truth in Lending Act, the Equal Credit Opportunity Act, the
Fair Credit Reporting Act, the Fair Housing Act, the Community Reinvestment
Act and the Home Mortgage Disclosure Act and similar federal and state laws
and regulations, except where, individually or in the aggregate, any events
of noncompliance are not reasonably likely to have a Material Adverse
Effect on the Company.
(N) MATERIAL CONTRACTS. Except as Previously Disclosed in SCHEDULE 4.01(N),
none of the Company or the Company Subsidiaries, nor any of its respective
assets, business 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 (1) is required to be filed as an exhibit to an Annual Report on Form
10-K filed by the Company that has not been filed as an exhibit to the Company's
Annual Report on Form 10-K filed for the fiscal year ended December 31, 1995, or
(2) which provides for annual payments by the Company or a Company Subsidiary of
$100,000 or more. True and correct copies of such contracts, and any agreements
or amendments thereto, have been made available to First Union. None of the
Company or the Company 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 any of its respective assets, business
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or operations receives benefits, which default, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on the
Company, and there has not occurred any event that, with lapse of time or giving
of notice or both, would constitute such a default. Except as Previously
Disclosed in SCHEDULE 4.01(N), neither the Company nor any Company Subsidiary is
subject to, or bound by, any contract containing covenants which (i) limit the
ability of the Company or any Company Subsidiary to compete in any line of
business or with any person, or (ii) involve any restriction of geographical
area in which, or method by which, the Company or any Company 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 the Company and the Company
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 (1)
the SEC, (2) the Connecticut Banking Commission, FDIC, the FHL Bank and the
Federal Home Financing Board, and (3) any other applicable Regulatory
Authorities. 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 Regulatory 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
Keefe, Bruyette & Woods, Inc.
(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 the Company Subsidiaries for the benefit of employees,
former employees, directors, former directors or their beneficiaries (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 or made available 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 the Company Subsidiaries (the "ERISA Plans"), to the extent subject to
ERISA, are in substantial compliance with ERISA. Each ERISA 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 Internal Revenue Code of 1986, as amended (the "Code"), has
received a favorable determination letter from the Internal Revenue
Service, and it is not aware of any circumstances reasonably likely to
result in the revocation of any such favorable determination letter. There
is no pending or, to its knowledge, threatened litigation relating to the
ERISA Plans which, if determined adversely to the Company is reasonably
likely, individually or in the aggregate, to result in material liability.
Neither it nor any of the Company Subsidiaries has engaged in a transaction
with respect to any ERISA Plan that would subject it or any of the Company
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 it or any of the Company 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") which have not been
satisfied. Neither it nor any of the Company Subsidiaries presently
contributes to a Multiemployer Plan, nor have they contributed to such a
plan within the past five calendar years. 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 past 12-month
period.
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(4) All contributions required to be made under the terms of any ERISA
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 waived) within the meaning of Section 412 of the Code or Section 302 of
ERISA. Neither it nor any of the Company 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, 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) Neither it nor any of the Company Subsidiaries has any obligations
for retiree health and life benefits under any plan, except as set forth in
SCHEDULE 4.01(Q). There are no restrictions on the rights of it or any of
the Company Subsidiaries to amend or terminate any such plan without
incurring any liability thereunder, except to the extent the participants
in such plan who are receiving the benefits thereunder or who have
satisfied the eligibility requirements thereunder and may have accrued
vested rights to such benefits.
(7) Except as Previously Disclosed in SCHEDULE 4.01(Q), neither the
execution and delivery of this Plan nor the consummation of the
transactions contemplated hereby will (a) result in any payment (including,
without limitation, severance, unemployment compensation, golden parachute
or otherwise) becoming due to any director or any employee of it or any of
the Company Subsidiaries under any Compensation and Benefit Plan or
otherwise from it or any of the Company Subsidiaries, (b) increase any
benefits otherwise payable under any Compensation and Benefit Plan, or (c)
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 Company 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 Company Subsidiaries the subject of a proceeding asserting that it
or any such Company 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 the Company Subsidiaries, pending or, to the best of its knowledge,
threatened, nor is it aware of any activity involving its or any of the Company
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 or other assets of the Company and the Company
Subsidiaries that have been classified by it as of March 31, 1996 (the "Asset
Classification"); and no amounts of loans, extensions of credit or other assets
that have been classified as of March 31, 1996 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 the Company or a Company Subsidiary prior to
March 31, 1996.
(U) ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for possible loan
losses shown on the consolidated balance sheets of the Company included in the
Company's Form 10-Q for the quarter ended March 31, 1996 was, and the allowance
for possible loan losses to be shown on subsequent Company Financial Reports,
will be, adequate, in the opinion of the Board of Directors and management of
the Company, determined in accordance with generally accepted accounting
principles, to provide for possible losses, net of recoveries relating to loans
previously charged off, on loans outstanding (including accrued interest
receivables) as of the date thereof.
(V) INSURANCE. Each of Company and the Company Subsidiaries has taken all
requisite action (including without limitation the making of claims and the
giving of notices) pursuant to its directors' and officers' liability insurance
policy or policies in order to preserve all rights thereunder with respect to
all matters that are known to it, except for such matters which, individually or
in the aggregate, are not reasonably likely to have a Material Adverse Effect on
the Company. Set forth in SCHEDULE 4.01(V) is a list of all insurance policies
maintained by or for the benefit of the Company or the Company Subsidiaries or
their directors, officers, employees or agents.
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(W) AFFILIATES. Except as Previously Disclosed in SCHEDULE 4.01(W), there
is no person who, as of the date of this Plan, may be deemed to be an
"affiliate" of the Company (each, an "Affiliate") 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").
(X) STATE TAKEOVER LAWS; CERTIFICATE OF INCORPORATION. 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,
(1) any applicable state takeover laws, including, without limitation, the
provisions of Section 33-374b of the Connecticut General Statutes Annotated (the
"CGSA"), (2) any applicable takeover provisions in the Company's Certificate of
Incorporation, or in the Bank's charter, and (3) any takeover provisions set
forth in any agreement to which the Company is a party or may be bound.
(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 or any
other action or combination of actions, or any other transactions, contemplated
hereby do not and will not (1) require a vote of stockholders (other than the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of Company Common Stock entitled to be cast on this Plan or on any other actions
necessary to facilitate the transactions contemplated hereby and the approval of
the Company in its capacity as sole stockholder of the Bank, which approval has
been given), or (2) result in the grant of any rights to any person under the
Certificate of Incorporation, Charter or Bylaws of the Company or any Company
Subsidiary or under any agreement to which the Company or any of the Company
Subsidiaries is a party, or (3) restrict or impair in any way the ability of
First Union or FUB-CT, to exercise the rights granted hereunder or, as to First
Union, under the Stock Option Agreement.
(Z) ENVIRONMENTAL MATTERS.
(1) To its knowledge, it and each of the Company Subsidiaries, the
Participation Facilities and the Loan/Fiduciary Properties (each as defined
below) are, and have been, in compliance with all Environmental Laws (as
defined below), except for instances of noncompliance which are not
reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on the Company.
(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 Company Subsidiaries or any Participation Facility has been,
or with respect to threatened proceedings, reasonably would be expected to
be, named as a defendant or potentially responsible party (a) for alleged
noncompliance (including by any predecessor) with any Environmental Law, or
(b) relating to the release or threatened release into the environment of
any Hazardous Material (as defined below), whether or not occurring at or
on a site owned, leased or operated by it or any of the Company
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 on the Company or have
been Previously Disclosed in SCHEDULE 4.01(Z).
(3) There is no proceeding pending or, to its knowledge, threatened
before any court, governmental agency or board or other forum in which any
Loan/Fiduciary Property (or it or any of the Company 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 (a) for alleged noncompliance
(including by any predecessor) with any Environmental Law, or (b) 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
on the Company 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 subsections (2) or (3) above, except as has been
Previously Disclosed in SCHEDULE 4.01(Z).
(5) To its knowledge, during the period of (a) its or any of the
Company Subsidiaries' ownership or operation of any of their respective
current properties, (b) its or any of the Company Subsidiaries'
participation in the management of any Participation Facility, or (c) its
or any of the Company Subsidiaries' holding of a security or other interest
in a Loan/Fiduciary Property, there have been no releases of Hazardous
Material in, on, under or affecting any such property, Participation
Facility or Loan/Fiduciary Property, except for such releases that are not
reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on the Company or have been Previously Disclosed in SCHEDULE
4.01(Z).
(6) To its knowledge, prior to the period of (a) its or any of the
Company Subsidiaries' ownership or operation of any of their respective
current properties, (b) its or any of the Company Subsidiaries'
participation in the management of
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any Participation Facility, or (c) its or any of the Company Subsidiaries'
holding of a security or other interest in a Loan/Fiduciary Property, there
were no releases of Hazardous Material in, on, under or affecting any such
property, Participation Facility or Loan/Fiduciary Property, except for
such releases that are not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on the Company or have been
Previously Disclosed in SCHEDULE 4.01(Z).
(7) The following definitions apply for purposes of this SECTION
4.01(Z): "Loan/Fiduciary Property" means any property owned or controlled
by the Company or any of the Company Subsidiaries or in which it or any of
the Company Subsidiaries holds a security or other interest, and, where
required by the context, includes any such property where Company or any of
the Company 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 Company Subsidiaries
participates in the management and, where required by the context, includes
the owner or operator or such property, but only with respect to such
property; "Environmental Law"means (a) any federal, state and local law,
statute, ordinance, rule, regulation, code, license, permit, approval,
order, judgment, decree, injunction, or agreement with any governmental
entity, relating to (i) 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 (ii) the exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production,
release or disposal of Hazardous Material, in each case as amended and as
now in effect and includes, without limitation, the federal Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, the
Superfund Amendments and Reauthorization Act, the Federal Water Pollution
Control Act of 1972, the federal Clean Air Act, the federal Clean Water
Act, the federal Resource Conservation and Recovery Act of 1976 (including
the Hazardous and Solid Waste Amendments thereto), the federal Solid Waste
Disposal and the federal Toxic Substances Control Act, and the Federal
Insecticide, Fungicide and Rodenticide Act, the Federal Occupational Safety
and Health Act of 1970, each as amended and as now in effect, and (b) any
common law or equitable doctrine (including, without limitation, injunctive
relief and tort doctrines such as negligence, nuisance, trespass and strict
liability) that may impose liability or obligations for injuries or damages
due to, or threatened as a result of, the presence of or exposure to any
Hazardous Material; "Hazardous Material" means any substance presently
listed, defined, designated or classified as hazardous, toxic, radioactive
or dangerous, or otherwise regulated, under any Environmental Law, whether
by type or quantity, and includes, without limitation, any oil or other
petroleum product, toxic waste, pollutant, contaminant, hazardous
substance, toxic substance, hazardous waste, special waste or petroleum or
any derivative or by-product thereof, radon, radioactive material,
asbestos, asbestos containing material, urea formaldehyde foam insulation,
lead and polychlorinated biphenyl.
(8) For purposes of this SECTION 4.01(Z), the term "knowledge" means
that of the directors and officers of the Company and the Company
Subsidiaries and includes their actual knowledge as well as that which
could have been obtained by a reasonable person in the exercise of
reasonable inquiry.
(AA) TAXES. Except as Previously Disclosed in SCHEDULE 4.01(AA), (1) all
reports and returns with respect to Taxes (as defined below) and tax related
information reporting requirements that are required to be filed by or with
respect to the Company or the Company Subsidiaries, including without limitation
consolidated federal income tax returns of the Company and the Company
Subsidiaries (collectively, the "Company Tax Returns"), have been duly filed, or
requests for extensions have been timely filed and have not expired, except to
the extent all such failures to file, taken together, are not reasonably likely
to have a Material Adverse Effect on the Company, and such Company Tax Returns
were true, complete and accurate in all material respects, (2) all taxes (which
shall mean federal, state, local or foreign income, gross receipts, windfall
profits, severance, property, production, sales, use, license, excise,
franchise, employment, premium, recording, documentary, transfer, back-up
withholding or similar taxes, together with any interest, additions, or
penalties with respect thereto, imposed on the income, properties or operations
of the Company or the Company Subsidiaries, together with any interest in
respect of such additions or penalties, collectively the "Taxes") shown to be
due on the Company Tax Returns or otherwise imposed on the income, properties or
operations of the Company or Company Subsidiaries have been paid in full, (3)
the Company 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 Company Tax Returns were
required to be filed has expired, (4) all Taxes due with respect to completed
and settled examinations have been paid in full, (5) no issues have been raised
by the relevant taxing authority in connection with the examination of any of
the Company Tax Returns which are reasonably likely, individually or in the
aggregate, to result in a determination that would have a Material Adverse
Effect on the Company, except as reserved against in the Company Financial
Reports filed prior to the date of this Plan, and (6) no waivers of
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statutes of limitations (excluding such statutes that relate to years under
examination by the Internal Revenue Service) have been given by or requested
with respect to any Taxes of the Company or the Company Subsidiaries.
(BB) ACCURACY OF INFORMATION. The statements with respect to the Company
and the Company Subsidiaries contained in this Plan, the Stock Option Agreement,
the Schedules and any other written documents executed and delivered by or on
behalf of it pursuant to the terms of this Plan do not omit any material fact
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
(CC) DERIVATIVES CONTRACTS; STRUCTURAL NOTES; ETC. None of the Company or
the Company Subsidiaries is a party to or has agreed to enter into an
exchange-traded or over-the-counter swap, forward, future, option, cap, floor or
collar financial contract or any other contract not included on the balance
sheet which is a derivative contract (including various combinations thereof)
(each a "Derivatives Contract") or owns securities that (1) are referred to as
"structured notes", "high risk mortgage derivatives", "capped floating rate
notes," or "capped floating rate mortgage derivatives," or (2) are likely to
have changes in value as a result of interest rate changes that significantly
exceed normal changes in value attributable to interest rate changes, except for
those Derivatives Contracts and other instruments legally purchased or entered
into in the ordinary course of business and Previously Disclosed in SCHEDULE
4.01(CC), including a list, as applicable, of any Company or Company Subsidiary
assets pledged as security for each such instrument.
(DD) ACCOUNTING CONTROLS. Each of the Company and the Company Subsidiaries
has devised and maintained systems of internal accounting controls sufficient to
provide reasonable assurances, in the reasonable judgment of the Board of
Directors of the Company, that (1) all material transactions are executed in
accordance with management's general or specific authorization; (2) all material
transactions are recorded as necessary to permit the preparation of financial
statements in conformity with generally accepted accounting principles
consistently applied with respect to thrifts or any other criteria applicable to
such statements; (3) access to the material property and assets of the Company
and the Company Subsidiaries is permitted only in accordance with management's
general or specific authorization; (4) the recorded accountability for items is
compared with the actual levels at reasonable intervals and appropriate action
is taken with respect to any differences; and (5) there are no violations of
applicable laws, including the Bank Secrecy Act.
(EE) COMMITMENTS AND CONTRACTS. Neither the Company nor any Company
Subsidiary is a party or subject to any of the following (whether written or
oral, express or implied):
(1) except as Previously Disclosed in SCHEDULE 4.01(EE), any
employment contract or understanding (including any understandings or
obligations with respect to severance or termination pay liabilities or
fringe benefits) with any present or former officer, director or employee
(other than those which are terminable at will by the Company or such
Company Subsidiary without any obligation on the part of the Company or
such Company Subsidiary to make any payment in connection with such
termination);
(2) except as Previously Disclosed in SCHEDULE 4.01(EE), any real
property lease with annual rental payments aggregating $100,000 or more; or
(3) except as Previously Disclosed in SCHEDULE 4.01(EE), any material
contract with any Affiliate.
(FF) OPTION SHARES. As to the Company, the Option Shares (as defined in the
Stock Option Agreement), when issued in accordance with the terms of the Stock
Option Agreement, will be validly issued, fully paid and nonassessable and
subject to no preemptive Rights.
4.02. FIRST UNION AND FUB-CT REPRESENTATIONS AND WARRANTIES. Each of First
Union and FUB-CT hereby represents and warrants to the Company, 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 and approval by the Board of Directors of FUB-CT as
contemplated by Recital (G), this Plan has been authorized by all necessary
corporate action of it and is a valid and binding agreement of it enforceable
against it in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency and other similar 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, does not and will not (1)
constitute 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
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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 on First Union, (2) constitute a breach or
violation of, or a default under, its Certificate of Incorporation, Charter or
Bylaws, or (3) 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 other than such consent or approval, which if not obtained, would not
be reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on First Union.
(D) FINANCIAL REPORTS. In the case of First Union, its Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, and all other documents
filed or to be filed subsequent to December 31, 1995 under Sections 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 as of
their respective dates 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. No events have occurred, or circumstances have arisen, since
March 31, 1996, which, individually or in the aggregate, have had or are
reasonably likely to have a Material Adverse Effect on First Union.
(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 should not be obtained without the imposition of any
condition of the type referred to in the proviso following such SECTION 6.02.
(H) SHARES AUTHORIZED. In the case of First Union, the shares of First
Union Common Stock to be issued in exchange for shares of Company Common Stock
upon consummation of the Corporate Merger 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) 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 the failure to be duly qualified, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on First
Union. Each of First Union and its subsidiaries has in effect all federal,
state, local and foreign governmental authorizations necessary for it to own or
lease its properties and assets and to carry on its business as it is now
conducted, the absence of which, individually or in the aggregate, is reasonably
likely to have a Material Adverse Effect on First Union.
(J) CORPORATE POWER. First Union and FUB-CT each has the corporate power
and authority to carry on its business as it is now being conducted and to own
or lease all its material properties and assets.
(K) ACCURACY OF INFORMATION. The statements with respect to First Union and
FUB-CT contained in this Plan, the Stock Option Agreement, the Schedules and any
other written documents executed and delivered by or on behalf of First Union or
FUB-CT pursuant to the terms of this Plan are true and correct in all material
respects, and such statements and documents do not omit any material fact
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
(L) LITIGATION; REGULATORY ACTION. Neither First Union nor any of its
subsidiaries is a party to any litigation, proceeding or controversy before any
court or governmental agency which, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect on First Union and, to the
best of its knowledge, no such litigation, proceeding or controversy has been
threatened; and neither it nor any of its subsidiaries or any of its or their
material properties or their officers, directors or controlling persons is a
party to or is the subject of any order, decree, agreement, memorandum of
understanding
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or similar arrangement with, or a commitment letter or similar submission to,
any Regulatory Authorities, which is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on First Union and neither it nor
any of its subsidiaries has been advised by any Regulatory Authorities that any
such 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) ABSENCE OF UNDISCLOSED LIABILITIES. None of First Union or its
subsidiaries has any obligation or liability (contingent or otherwise) that,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on First Union, except as reflected in the First Union Financial
Reports prior to the date of this Plan.
V. COVENANTS.
Each of the Company and the Bank hereby covenants to First Union and
FUB-CT, and each of First Union and FUB-CT hereby covenants to the Company and
the Bank, that:
5.01. EFFORTS TO CONSUMMATE. Subject to the terms and conditions of this
Plan, it shall use its reasonable best efforts in good faith to take, or cause
to be taken, all actions, and to do, or cause to be done, all things necessary,
proper or desirable, or advisable under applicable laws, so as to permit
consummation of the Corporate 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), including
cooperating in developing and implementing a plan relating to data processing
and any other systems conversions.
5.02. COMPANY PROXY/REGISTRATION STATEMENT. The Company and First Union
shall prepare a proxy statement/prospectus (the "Proxy Statement") to be mailed
to the holders of Company Common Stock in connection with the transactions
contemplated hereby and to be filed by First Union (after providing drafts in
advance to the Company and its counsel for review and comment) in a registration
statement (the "Registration Statement") with the SEC as provided in SECTION
5.08, which shall conform to all applicable legal requirements. The Company
shall call a special meeting (the "Meeting") of the holders of Company Common
Stock to be held as soon as practicable for purposes of voting upon the approval
of this Plan and the Company shall use its best efforts to solicit and obtain
votes of the holders of Company Common Stock in favor of the approval of this
Plan, and, subject to the exercise of its fiduciary duties under applicable law
(based upon the written advice of outside counsel), the Board of Directors of
the Company shall recommend approval of 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 or on behalf of the Company relating to
the Company or the Company Subsidiaries and by or on behalf of First Union
relating to First Union or its subsidiaries, (A) will comply in all material
respects with the provisions of the Securities Act and any other applicable
statutory or regulatory requirements, and (B) 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 or on behalf of such
other party specifically for use in the Registration Statement.
5.04. REGISTRATION STATEMENT EFFECTIVENESS. First Union will advise the
Company, 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 (after providing drafts in advance to the Company and its counsel
for review and comment), 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. Neither the Company nor the Bank will, without the
prior approval of First Union (which approval shall not be unreasonably withheld
or delayed), and neither First Union nor FUB-CT will, without the prior approval
of the Company (which approval shall not be unreasonably withheld or delayed),
issue any press release or written statement for general circulation relating to
the transactions contemplated hereby, except as otherwise required by law.
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5.06. ACCESS; INFORMATION. Upon reasonable notice, the Company 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 and the Company Subsidiaries'
properties, books, contracts, data processing system files, commitments and
records and, during such period, the Company shall furnish promptly to First
Union (1) a copy of each material report, schedule and other document filed by
the Company and the Company Subsidiaries with any Regulatory Authority, and (2)
all other information concerning the business, properties and personnel of the
Company and the Company Subsidiaries as First Union may reasonably request,
PROVIDED THAT no investigation pursuant to this SECTION 5.06 shall affect or be
deemed to modify or waive any representation or warranty made by the Company or
the Bank or the conditions to the obligations of the Company or the Bank to
consummate the transactions contemplated by this Plan; and (B) 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 in writing that any such information or document is required
by law or applicable published stock exchange rule to be disclosed, and in the
event of the termination of this Plan, First Union will, upon request by the
Company, deliver to the Company all documents so obtained by First Union or
destroy such documents and, in the case of destruction, will certify such fact
to the Company.
5.07. ACQUISITION PROPOSALS. In the case of the Company, without the prior
written consent of First Union, it shall not, and it shall cause the Company
Subsidiaries not to, solicit or encourage inquiries or proposals with respect
to, or furnish any nonpublic information relating to or participate in any
negotiations or discussions concerning, any acquisition or purchase of all or a
substantial portion of the assets or deposits of, or a substantial equity
interest in, the Company or any of the Company Subsidiaries or any merger or
other business combination with the Company or any of the Company Subsidiaries
other than as contemplated by this Plan, PROVIDED, HOWEVER, that the Company may
so furnish such nonpublic information if, in the judgment of the Board of
Directors of the Company, with the written advice of such Board's outside
counsel, such furnishing of information is required under applicable law; it
shall instruct its and the Company Subsidiaries' officers, directors, agents,
advisors and affiliates to refrain from taking any action that would violate or
conflict with 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, the Company or any of the Company
Subsidiaries.
5.08. REGISTRATION STATEMENT PREPARATION. In the case of First Union, it
shall, as promptly as practicable following the date of this Plan, and subject
to the cooperation of the Company, prepare and file the Registration Statement
with the SEC, and shall use its reasonable 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
reasonable best efforts to obtain 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 the Company, it will cause each
person who may be deemed to be an Affiliate of the Company 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 B restricting the
disposition of the shares of First Union Common Stock to be received by such
Affiliate in exchange for such Affiliate's shares of Company Common Stock.
5.11. CERTAIN POLICIES OF THE COMPANY. In the case of the Company, it
shall, consistent with generally accepted accounting principles and regulatory
accounting principles, use its best efforts to record any accounting adjustments
required to conform its and the Company Subsidiaries' loan, litigation and other
reserve and real estate valuation policies and practices (including loan
classifications and levels of reserves) so as to reflect consistently on a
mutually satisfactory basis the policies and practices of First Union; PROVIDED,
HOWEVER, that the Company shall not be obligated to record any such accounting
adjustments pursuant to this SECTION 5.11 (A) unless and until the Company shall
be reasonably satisfied that the conditions to the obligation of the parties to
consummate the Mergers will be satisfied or waived on or before the Effective
Time, and (B) in no event until the day prior to the Effective Date.
5.12. STATE TAKEOVER LAWS; CERTIFICATE OF INCORPORATION. In the case of the
Company, it shall not take any action that would cause the transactions
contemplated by this Plan to be subject to any applicable state takeover statute
and the Company shall take all necessary steps to exempt (or ensure the
continued exemption of) the transactions contemplated by this Plan from (A) any
applicable state takeover law, as now or hereafter in effect, including, without
limitation, Sections 33-374b
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and 33-374e of the CGSA, (B) any applicable takeover provisions in the Company's
Certificate of Incorporation or in the Bank's charter, and (C) any takeover
provisions set forth in any agreement to which the Company is a party or may be
bound.
5.13. NO RIGHTS TRIGGERED. In the case of the Company, it shall take all
necessary steps to ensure that the entering into of this Plan and the
consummation of the transactions contemplated hereby and any other action or
combination of actions, or any other transactions contemplated hereby or thereby
do not and will not, (A) result in the grant of any rights to any person
(including directors, officers and employees of the Company or any Company
Subsidiary) under the Certificate of Incorporation or Bylaws of the Company or
any Company Subsidiary or under any agreement to which the Company or any of the
Company Subsidiaries is a party, including the Company Rights Agreement, or (B)
restrict or impair in any way the ability of First Union or FUB-CT to exercise
the rights granted hereunder or, as to First Union, under the Stock Option
Agreement. In addition, in the case of the Company, it shall not declare First
Union or any subsidiary of First Union an "Adverse Person" pursuant to the
Company Rights Agreement or take action that would cause First Union to be an
"Acquiring Person" as a result of the Stock Option Agreement. The shareholder
rights plan of the Bank pursuant to which a dividend was declared on February 2,
1990 has been duly terminated, and no shareholder rights exist thereunder.
5.14. SHARES LISTED. In the case of First Union, it shall use its
reasonable 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 Company Common Stock pursuant to this Plan.
5.15. REGULATORY APPLICATIONS. In the case of First Union and FUB-CT,
subject to the cooperation of the Company and the Bank, (A) it shall promptly
prepare and submit applications to the appropriate Regulatory Authorities for
approval of the Mergers, and (B) promptly make all other appropriate filings to
secure all other approvals, consents and rulings which are necessary for the
consummation of the Mergers by First Union and FUB-CT. First Union will provide
copies of such applications and responses to the Company and its counsel prior
to submitting such applications and responses to the applicable Regulatory
Authorities. In the case of the Company, it agrees, upon request, to furnish
First Union with information concerning itself, the Company Subsidiaries, its
and their directors, officers and stockholders and such other matters as may be
necessary or advisable in connection with any filing, notice or application made
by or on behalf of First Union or any of its subsidiaries in connection with the
Mergers and the other transactions contemplated in this Plan.
5.16. REGULATORY DIVESTITURES. In the case of the Company, effective on or
before the Effective Date (to the extent required by any Regulatory Authority),
the Company and the Company Subsidiaries shall cease engaging in such activities
as First Union shall advise the Company in writing are not permitted to be
engaged in by First Union under applicable law following the Effective Date, and
to the extent required by any Regulatory Authority as a conditional approval of
the transactions contemplated by this Plan, the Company shall divest any Company
Subsidiary engaged in activities or holding assets that are impermissible for a
bank holding company, on terms and conditions agreed to by First Union.
5.17. INDEMNIFICATION/LIABILITY COVERAGE.
(A) For six years after the Effective Date, First Union shall, and shall
cause the Continuing Corporation to, indemnify, defend and hold harmless the
present and former directors, officers and employees of the Company and the
Company 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 the CGSA and the Company's
Certificate of Incorporation and Bylaws, in each case as in effect on the date
hereof, including provisions relating to advances of expenses incurred in the
defense of any litigation.
(B) First Union shall use its reasonable best efforts to maintain the
Company'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
the Company's directors and officers, 150% of the annual premium payment on the
Company's current policy in effect as of the date of this Plan; PROVIDED,
FURTHER, that if such coverage can only be obtained upon the payment of a
premium in excess of 150% of the annual premium payment of the Company'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 the Company's current
policy in effect as of the date of this Plan.
(C) Any Indemnified Party wishing to claim indemnification under SECTION
5.17(A), upon learning of such claim, action, suit, proceeding or investigation,
shall promptly notify First Union thereof; PROVIDED, that the failure to so
notify shall not affect the obligations of First Union and the Continuing
Corporation under SECTION 5.17(A) (unless such failure materially increases
First Union's liability under such Section). In the event of any such claim,
action, suit, proceeding or investigation
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(whether arising before or after the Effective Date), (1) First Union or the
Continuing Corporation shall have the right to assume the defense thereof, if it
so elects, and First Union or the Continuing Corporation shall pay all
reasonable fees and expenses of counsel for the Indemnified Parties promptly as
statements therefor are received; PROVIDED, HOWEVER, that First Union shall be
obligated pursuant to this subsection (C) to pay for only one firm of counsel
for all Indemnified Parties in any jurisdiction for any single action, suit or
proceeding or any group of actions, suits or proceedings arising out of or
related to a common body of facts, (2) the Indemnified Parties will cooperate in
the defense of any such matter, and (3) First Union shall not be liable for any
settlement effected without its prior written consent.
(D) If First Union or the Continuing Corporation or any of its successors
or assigns shall consolidate with or merge into any other entity and shall not
be the continuing or surviving entity of such consolidation or merger or shall
transfer all or substantially all of its assets to any entity, then and in each
case, proper provision shall be made so that the successors and assigns of First
Union or the Continuing Corporation shall assume the obligations set forth in
this SECTION 5.17.
5.18. CURRENT INFORMATION.
(A) During the period from the date of this Plan to the Effective Date,
each of the Company and First Union shall, and shall cause its representatives
to, confer on a regular and frequent basis with representatives of the other.
(B) The Company shall promptly notify First Union of (1) any material
change in the business or operations of the Company or any Company Subsidiary,
(2) any material complaints, investigations or hearings (or communications
indicating that the same may be contemplated) of any Regulatory Authority
relating to the Company or any Company Subsidiary, (3) the institution or the
threat of material litigation involving or relating to the Company or any
Company Subsidiary, or (4) any event or condition that might be reasonably
expected to cause any of the Company's or the Bank's representations or
warranties set forth herein not to be true and correct as of the Effective Time
or prevent the Company or the Bank from fulfilling its obligations hereunder;
and in each case shall keep First Union informed with respect thereto.
(C) First Union shall (1) promptly notify the Company of any event or
condition that might reasonably be expected to cause any of First Union's and
FUB-CT's representations or warranties set forth herein not to be true and
correct as of the Effective Date and (2) notify the Company immediately of any
denial of any application filed by First Union or FUB-CT with any Regulatory
Authority with respect to this Plan, and in each case shall keep the Company
informed with respect thereto.
5.19 EMPLOYEE CONTRACTS. Following the Effective Time, First Union shall
assume and honor in accordance with their terms all employment, severance and
other compensation contracts, plans and arrangments between the Company and any
director, officer or employee that are set forth on SCHEDULE 5.19; PROVIDED,
HOWEVER, that nothing herein shall prevent First Union from terminating any such
contract, plan or arrangement in accordance with its terms.
5.20 EMPLOYEES.
(A) To the extent that a Company Employee (as defined below) participates
in pension, benefit and similar plans of First Union or its subsidiaries, First
Union shall cause such plan, program or arrangement to treat the prior service
with the Company and its affiliates of each person who is an employee of the
Company and its affiliates at the Effective Time ("Company Employees") as
service rendered to First Union or its affiliate, as the case may be, for
purposes of eligibility to participate and vesting.
(B) Each person employed by the Company and its affiliates prior to the
Effective Time who remains an employee of First Union or its affiliates
following the Effective Time (each a "Continued Employee") shall be generally
entitled, as soon as administratively practicable after the Effective Time, as
an employee of First Union or its affiliates, to participate in the pension,
benefit and similar plans, of First Union and its subsidiaries that are
generally available to employees of First Union and its affiliates. All such
participation shall be subject to such terms of such plans as may be in effect
from time to time.
VI. CONDITIONS TO CONSUMMATION OF THE ACQUISITION.
Consummation of the Mergers is conditioned upon:
6.01. SHAREHOLDER VOTE. Approval of this Plan by the requisite vote of the
stockholders of the Company.
6.02. REGULATORY APPROVALS. Procurement by First Union and FUB-CT, as
applicable, of all required regulatory consents and approvals by the appropriate
Regulatory Authorities and the expiration of the statutory waiting period
relating thereto;
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PROVIDED, HOWEVER, that no such approval or consent shall have imposed any
condition or requirement which, in the reasonable opinion of First Union, would
so materially and 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 Mergers.
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.
6.04. ACCOUNTANTS' LETTERS. The Company shall cause KPMG Peat Marwick LLP
to deliver to First Union letters, dated the date of or shortly prior to (A) the
mailing of the Proxy Statement, and (B) the Effective Date, in form and
substance reasonably satisfactory to First Union, with respect to the Company's
consolidated financial position and results of operations, which letters shall
be based upon "agreed upon procedures" undertaken by such firm in accordance
with the Statement on Financial Accounting Standards No. 72.
6.05. LEGAL OPINION. The Company shall have received an opinion, dated the
Effective Date, of Marion A. Cowell, Jr., counsel for First Union in form
reasonably satisfactory to the Company, which shall cover the matters contained
in the first sentence in RECITAL (C), the first sentence in RECITAL (D) SECTION
4.02(B), (C), (H), (I), the first sentence in 4.02(L) and SECTION 5.03.
6.06. LEGAL OPINION. First Union shall have received an opinion or
opinions, dated the Effective Date, of Gager & Peterson and/or Wachtell, Lipton,
Rosen & Katz, counsel for the Company, in form reasonably satisfactory to First
Union which shall cover the matters referred to in the first sentence in RECITAL
(A), THE FIRST SENTENCE IN RECITAL (B), SECTION 4.01(B), 4.01(C), the fifth
sentence and the sixth sentence in SECTION 4.01(D), SECTION 4.01(F) and (G), the
first sentence in SECTION 4.01(L), SECTION 4.01(W), (X), (Y) and (FF).
6.07. OFFICERS' CERTIFICATE. (A) Each of the representations and warranties
contained herein of First Union and FUB-CT 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 (B) each and all of the
agreements and covenants of First Union and FUB-CT 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 the Company and
the Board shall have received a certificate signed by an executive officer of
each of First Union and FUB-CT, dated the Effective Date, to such effect.
6.08. OFFICERS' CERTIFICATE. (A) Each of the representations and warranties
contained herein of the Company and the Bank 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 (B) each and all of the
agreements and covenants of the Company and the Bank 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 FUB-CT shall have received a certificate signed by the Chief Executive
Officer and the Chief Financial Officers of the Company and the Bank, dated the
Effective Date, to such effect.
6.09. EFFECTIVE REGISTRATION STATEMENT. The Registration Statement shall
have become effective and no stop or other 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 Acquisition.
6.11. TAX OPINIONS. First Union shall have received an opinion from
Sullivan & Cromwell, and the Company shall have received an opinion from
Wachtell, Lipton, Rosen & Katz, to the effect that (A) the Corporate Merger
constitutes a reorganization under Section 368 of the Code, and (B) no gain or
loss will be recognized by stockholders of the Company who receive shares of
First Union Common Stock in exchange for their shares of Company Common Stock,
except that gain or loss may be recognized as to cash received in lieu of
fractional share interests. In rendering their opinions, Sullivan & Cromwell and
Wachtell, Lipton, Rosen & Katz may require and rely upon representations and
agreements contained in documents executed by officers of First Union, the
Company 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.
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6.13. RECEIPT OF AFFILIATE AGREEMENTS. First Union shall have received from
each Affiliate of the Company the agreement referred to in SECTION 5.10.
PROVIDED, HOWEVER, that a failure to satisfy any of the conditions set forth in
the proviso following SECTION 6.02 or in SECTIONS 6.04, 6.06, 6.08 OR 6.13 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 the Company.
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 the Company.
7.02. BREACH. By First Union or the Company, if its Board of Directors so
determines by vote of a majority of the members of its entire Board, in the
event of (A) 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 (B) 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 the Company, 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 May 1, 1997.
7.04. NO STOCKHOLDER OR REGULATORY APPROVAL. By the Company 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 is not obtained at the Meeting, including any adjournment or
adjournments thereof, or in the event that written notice is received which
states that any required regulatory approval contemplated by SECTION 6.02 has
not been approved or has been denied.
7.05. STOCK OPTION AGREEMENT EXECUTION. By First Union, if the Company does
not execute and deliver to First Union the Stock Option Agreement on June 15,
1996.
VIII. OTHER MATTERS.
8.01. SURVIVAL. If the Effective Date occurs, all representations,
warranties, agreements and covenants contained in this Plan, except for SECTIONS
5.17, 8.01, 8.04 AND 8.09, shall not survive the Effective Date. If this Plan is
terminated prior to the Effective Date, the agreements and representations of
the parties in SECTIONS 4.01(P), 4.01(FF) AND 4.02(F), SECTIONS 5.03, 5.06(2),
5.12 AND 5.13 AND SECTIONS 8.01, 8.03, 8.04, 8.05, 8.06, 8.07 AND 8.09 shall
survive such termination.
8.02. WAIVER; AMENDMENT. Prior to the Effective Date, any provision of this
Plan may be (A) waived in writing by the party benefitting by the provision, or
(B) amended or modified at any time (including the structure of the transactions
contemplated hereby) 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 the Company,
the consideration to be received by the stockholders of the Company for each
share of Company 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 North Carolina.
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 the Company and First
Union.
8.06. CONFIDENTIALITY. Except as otherwise provided in SECTION 5.06, 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.
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8.07. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
<TABLE>
<S> <C>
If to First Union First Union Corporation
or FUB-CT, to: One First Union Center
Charlotte, North Carolina 28288-0013
Telecopy Number: (704)374-3425
Attention: Marion A. Cowell, Jr.
General Counsel
If to the Company Center Financial Corporation
or the Bank, to: 60 North Main Street
Waterbury, Connecticut 06702
Attention: Robert J. Narkis
President, Chief Executive
Officer and Treasurer
</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:
(A) the term "Material Adverse Effect", when applied to a party, shall mean
an event, occurrence or circumstance (including without limitation, any breach
of a representation or warranty contained herein by such party) which (1) has a
material adverse effect on the financial condition, results of operations,
business or prospects of such party and its consolidated subsidiaries, taken as
a whole, or (2) would materially impair such party's, or any affiliated party's
(which includes, as to the Company, the Bank, and as to First Union, FUB-CT),
ability to timely perform its obligations under this Plan or the consummation of
any of the transactions contemplated hereby; PROVIDED, that a Material Adverse
Effect with respect to a party shall not include effects resulting from general
economic conditions, changes in accounting practices or changes to statutes,
regulations or regulatory policies, that do not have a materially more adverse
effect on such party than that experienced by similarly situated financial
institutions;
(B) the term "individually or in the aggregate" as used in ARTICLE IV of
this Plan includes all events, occurrences and circumstances described in any
paragraph of ARTICLE IV, and is not linked to any specific paragraph; and
(C) the term "Previously Disclosed" by a party shall mean information set
forth in a Schedule that is delivered by such party to the other party
contemporaneously with 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
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. Except for SECTION 5.17, 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. HEADINGS. The headings contained in this Plan are for reference
purposes only and are not part of this Plan.
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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 BANK OF CONNECTICUT
By: /s/ KENNETH R. STANCLIFF
NAME: KENNETH R. STANCLIFF
TITLE: SENIOR VICE PRESIDENT
CENTER FINANCIAL CORPORATION
By: /s/ R. J. NARKIS
NAME: ROBERT J. NARKIS
TITLE: PRESIDENT, CHIEF EXECUTIVE
OFFICER AND TREASURER
CENTERBANK
By: /s/ R. J. NARKIS
NAME: ROBERT J. NARKIS
TITLE: CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
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EXHIBIT A
STOCK OPTION AGREEMENT, dated as of June 15, 1996 (this "Agreement"), by
and between Center Financial Corporation, a Connecticut corporation ("Issuer"),
and First Union Corporation, a North Carolina corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Mergers, dated as of June 14, 1996 (the "Plan"), providing for, among other
things, the merger of Issuer with and into Grantee, with Grantee being the
surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the Plan,
Grantee has required that Issuer agree, and Issuer has agreed, to grant Grantee
the Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. DEFINED TERMS. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Plan.
2. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 2,987,875 shares (as adjusted as set forth herein, the "Option Shares",
which shall include the Option Shares before and after any transfer of such
Option Shares, but in no event shall the number of Option Shares for which this
Option is exercisable exceed 19.9% of the issued and outstanding shares of
common stock, par value $1.00 per share ("Issuer Common Stock"), of Issuer) at a
purchase price per Option Share (as adjusted as set forth herein, the "Purchase
Price") equal to the closing price per share of Issuer Common Stock on June 14,
1996, as reported by the Nasdaq National Market reporting system (as reported in
THE WALL STREET JOURNAL or, if not reported therein, another authoritative
source). Each Option Share issued upon exercise of the Option shall be
accompanied by Company Rights as provided in the Company Rights Agreement.
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement or the Plan, and (ii) no preliminary or permanent
injunction or other order against the delivery of shares covered by the Option
issued by any court of competent jurisdiction in the United States shall be in
effect, the Holder may exercise the Option, in whole or in part, at any time and
from time to time following the occurrence of a Purchase Event (as hereinafter
defined); PROVIDED that the Option shall terminate and be of no further force or
effect upon the earliest to occur of (A) the Effective Time, (B) termination of
the Plan in accordance with the terms thereof prior to the occurrence of a
Purchase Event or a Preliminary Purchase Event other than a termination thereof
by Grantee pursuant to SECTION 7.02 of the Plan (but only if the breach of
Issuer giving rise to such termination was willful) (a termination of the Plan
by Grantee pursuant to SECTION 7.02 thereof as a result of a willful breach by
Issuer being referred to herein as a "Default Termination"), (C) 18 months after
a Default Termination, or (D) 18 months after termination of the Plan (other
than a Default Termination) following the occurrence of a Purchase Event or a
Preliminary Purchase Event (other than a Preliminary Purchase Event referred to
in Section 3(c)(iv), in which case such 18 month period shall be reduced to a 12
month period); PROVIDED, HOWEVER, that any purchase of shares upon exercise of
the Option shall be subject to compliance with applicable law. The term "Holder"
shall mean the holder or holders of the Option from time to time, and which
initially is Grantee. The rights set forth in SECTION 8 hereof shall terminate
when the right to exercise the Option terminates (other than as a result of a
complete exercise of the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the following events:
(i) without Grantee's prior written consent, Issuer shall have
recommended, publicly proposed or publicly announced an intention to
authorize, recommend or propose, or entered into an agreement with any
person (other than Grantee or any subsidiary of Grantee) to effect an
Acquisition Transaction. As used herein, an "Acquisition Transaction" shall
mean (A) a merger, consolidation or similar transaction involving Issuer or
any of its significant subsidiaries (other than transactions solely between
Issuer's subsidiaries that are not violative of the Plan), (B) the
disposition, by sale, lease, exchange or otherwise, of assets or deposits
of Issuer or any of its significant subsidiaries representing in either
case 20% or more of the consolidated assets or deposits of Issuer and its
subsidiaries or (C) the issuance, sale or other disposition by Issuer of
(including by way of merger, consolidation, share exchange or any similar
transaction) securities representing 20% or more of the voting power of
Issuer or any of its significant subsidiaries; or
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(ii) any person (other than Grantee or any subsidiary of Grantee)
shall have acquired beneficial ownership (as such term is defined in Rule
13d-3 promulgated under the Exchange Act) of or the right to acquire
beneficial ownership of, or any "group" (as such term is defined in Section
13(d)(3) of the Exchange Act) shall have been formed which beneficially
owns or has the right to acquire beneficial ownership of, 20% or more of
the voting power of Issuer or any of its significant subsidiaries.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any subsidiary of Grantee) shall
have commenced (as such term is defined in Rule 14d-2 under the Exchange
Act) or shall have filed a registration statement under the Securities Act,
with respect to, a tender offer or exchange offer to purchase any shares of
Issuer Common Stock such that, upon consummation of such offer, such person
would own or control 15% or more of the then outstanding shares of Issuer
Common Stock (such an offer being referred to herein as a "Tender Offer" or
an "Exchange Offer," respectively); or
(ii) the holders of Issuer Common Stock shall not have approved the
Plan by the requisite vote at the Meeting, the Meeting shall not have been
held or shall have been canceled prior to termination of the Plan, or
Issuer's Board of Directors shall have withdrawn or modified in a manner
adverse to Grantee the recommendation of Issuer's Board of Directors with
respect to the Plan, in each case after it shall have been publicly
announced that any person (other than Grantee or any subsidiary of Grantee)
shall have (A) made, or disclosed an intention to make, a bona fide
proposal to engage in an Acquisition Transaction, (B) commenced a Tender
Offer or filed a registration statement under the Securities Act with
respect to an Exchange Offer or (C) filed an application (or given a
notice), whether in draft or final form, under the Home Owners' Loan Act,
as amended ("HOLA"), the BHCA, the Bank Merger Act, as amended (the "BMA")
or the Change in Bank Control Act of 1978, as amended (the "CBCA"), for
approval to engage in an Acquisition Transaction; or
(iii) any person (other than Grantee or any subsidiary of Grantee)
shall have made a bona fide proposal to Issuer or its stockholders by
public announcement, or written communication that is or becomes the
subject of public disclosure, to engage in an Acquisition Transaction; or
(iv) after a proposal is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, or such third party
states its intention to the Issuer to make such a proposal if the Plan
terminates, Issuer shall have breached any representation, warranty,
covenant or agreement contained in the Plan and such breach would entitle
Grantee to terminate the Plan under SECTION 7.02 thereof (without regard to
the cure period provided for therein unless such cure is promptly effected
without jeopardizing consummation of the Mergers pursuant to the terms of
the Plan); or
(v) any person (other than Grantee or any subsidiary of Grantee) other
than in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with any
Regulatory Authority for approval to engage in an Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Preliminary Purchase Event or Purchase Event, it being understood that the
giving of such notice by Issuer shall not be a condition to the right of Holder
to exercise the Option.
(e) In the event Holder wishes to exercise the Option, it shall send to
Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise and (ii) a place and date not earlier than
three business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior
notification to or approval of any Regulatory Authority is required in
connection with such purchase, Issuer shall cooperate with the Holder in the
filing of the required notice of application for approval and the obtaining of
such approval and the Closing shall occur immediately following such regulatory
approvals (and any mandatory waiting periods). Any exercise of the Option shall
be deemed to occur on the Notice Date relating thereto.
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4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in immediately
available funds by wire transfer to a bank account designated by Issuer, an
amount equal to the Purchase Price multiplied by the number of Option Shares to
be purchased on such Closing Date, and (ii) present and surrender this Agreement
to the Issuer at the address of the Issuer specified in SECTION 12(F).
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in SECTION 4(A), (i)
Issuer shall deliver to Holder (A) a certificate or certificates representing
the Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all Liens and subject to no preemptive rights, and (B) if the
Option is exercised in part only, an executed new agreement with the same terms
as this Agreement evidencing the right to purchase the balance of the shares of
Issuer Common Stock purchasable hereunder, and (ii) Holder shall deliver to
Issuer a letter agreeing that Holder shall not offer to sell or otherwise
dispose of such Option Shares in violation of applicable federal and state law
or of the provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF JUNE
15, 1996. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER
HEREOF WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST
THEREFOR.
It is understood and agreed that the portion of the above legend relating to the
Securities Act shall be removed by delivery of substitute certificate(s) without
such legend if Holder shall have delivered to Issuer a copy of a letter from the
staff of the SEC, or an opinion of counsel in form and substance reasonably
satisfactory to Issuer and its counsel, to the effect that such legend is not
required for purposes of the Securities Act.
(d) Upon the giving by Holder to Issuer of the written notice of exercise
of the Option provided for under SECTION 3(E), the tender of the applicable
purchase price in immediately available funds and the tender of this Agreement
to Issuer, Holder shall be deemed to be the holder of record of the shares of
Issuer Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates representing
such shares of Issuer Common Stock shall not then be actually delivered to
Holder. Issuer shall pay all expenses, and any and all United States federal,
state, and local taxes and other charges that may be payable in connection with
the preparation, issuance and delivery of stock certificates under this Section
in the name of Holder or its assignee, transferee, or designee.
(e) Issuer agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock, (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer, (iii) promptly to take all action as may from time to time be required
(including (A) complying with all premerger notification, reporting and waiting
period requirements and (B) in the event prior approval of or notice to any
Regulatory Authority is necessary before the Option may be exercised,
cooperating fully with Holder in preparing such applications or notices and
providing such information to such Regulatory Authority as it may require) in
order to permit Holder to exercise the Option and Issuer duly and effectively to
issue shares of the Issuer Common Stock pursuant hereto, and (iv) promptly to
take all action provided herein to protect the rights of Holder against
dilution.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby represents and
warrants to Grantee (and Holder, if different than Grantee) as follows:
(a) CORPORATE AUTHORITY. Issuer has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby; the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Issuer, and no other corporate
proceedings on the part of Issuer are necessary to authorize this Agreement or
to consummate the transactions so contemplated; this Agreement has been duly and
validly executed and delivered by Issuer.
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(b) SHARES RESERVED FOR ISSUANCE; CAPITAL STOCK. Issuer has taken all
necessary corporate action to authorize and reserve and permit it to issue, and
at all times from the date hereof through the termination of this Agreement in
accordance with its terms, will have reserved for issuance upon the exercise of
the Option, that number of shares of Issuer Common Stock equal to the maximum
number of shares of Issuer Common Stock at any time and from time to time
purchasable upon exercise of the Option, and all such shares, upon issuance
pursuant to the Option, will be duly authorized, validly issued, fully paid and
nonassessable, and will be delivered free and clear of all Liens (other than
those created by this Agreement) and not subject to any preemptive Rights.
(c) NO VIOLATIONS. The execution, delivery and performance of this
Agreement does not or will not, and the consummation by Issuer of any of the
transactions contemplated hereby will not, constitute or result in (A) a breach
or violation of, or a default under, its articles of incorporation or bylaws, or
the comparable governing instruments of any of its subsidiaries, or (B) a breach
or violation of, or a default under, any agreement, lease, contract, note,
mortgage, indenture, arrangement or other obligation of it or any of its
subsidiaries (with or without the giving of notice, the lapse of time or both)
or under any law, rule, ordinance or regulation or judgment, decree, order,
award or governmental or non-governmental permit or license to which it or any
of its subsidiaries is subject, that would, in any case give any other person
the ability to prevent or enjoin Issuer's performance under this Agreement in
any material respect.
(d) RIGHTS AGREEMENT. Prior to termination of this Agreement in accordance
with its terms, Issuer agrees not to take any action that would cause First
Union to be an "Acquiring Person" or an "Adverse Person" as a result of this
Agreement.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby represents and
warrants to Issuer that Grantee has full corporate power and authority to enter
into this Agreement and, subject to obtaining the approvals referred to in this
Agreement, to consummate the transactions contemplated by this Agreement; the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee; and this Agreement has been duly
executed and delivered by Grantee.
7. ADJUSTMENT. (a) In the event of any change in Issuer Common Stock by
reason of a stock dividend, stock split, split-up, recapitalization,
combination, exchange of shares, exercise of the Company Rights or similar
transaction, the type and number of shares or securities subject to the Option,
and the Purchase Price therefor, shall be adjusted appropriately, and proper
provision shall be made in the agreements governing such transaction so that
Holder shall receive, upon exercise of the Option, the number and class of
shares or other securities or property that Holder would have received in
respect of Issuer Common Stock if the Option had been exercised immediately
prior to such event, or the record date therefor, as applicable. If any
additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this SECTION 7(A), upon exercise of any option to purchase Issuer Common Stock
outstanding on the date hereof or upon conversion into Issuer Common Stock of
any convertible security of Issuer outstanding on the date hereof), the number
of shares of Issuer Common Stock subject to the Option shall be adjusted so
that, after such issuance, it, together with any shares of Issuer Common Stock
previously issued pursuant hereto, equals 19.9% of the number of shares of
Issuer Common Stock then issued and outstanding, without giving effect to any
shares subject to or issued pursuant to the Option. No provision of this SECTION
7 shall be deemed to affect or change, or constitute authorization for any
violation of, any of the covenants or representations in the Plan.
(b) In the event that Issuer shall enter into an agreement (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Grantee or one of
its subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Issuer Common Stock shall be changed into or exchanged for stock or
other securities of Issuer or any other person or cash or any other property or
the outstanding shares of Issuer Common Stock immediately prior to such merger
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its assets or deposits to any person, other than
Grantee or one of its subsidiaries, then, and in each such case, the agreement
governing such transaction shall make proper provisions so that the Option
shall, upon the consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of Holder, of either (x) the Acquiring
Corporation (as hereinafter defined), (y) any person that controls the Acquiring
Corporation, or (z) in the case of a merger described in clause (ii), Issuer
(such person being referred to as "Substitute Option Issuer").
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(c) The Substitute Option shall have the same terms as the Option,
provided, that, if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Holder. Substitute Option Issuer shall also enter
into an agreement with Holder in substantially the same form as this Agreement,
which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock (as hereinafter defined) as is equal to the Assigned
Value (as hereinafter defined) multiplied by the number of shares of Issuer
Common Stock for which the Option was theretofore exercisable, divided by the
Average Price (as hereinafter defined). The exercise price of Substitute Option
per share of Substitute Common Stock (the "Substitute Option Price") shall then
be equal to the Purchase Price multiplied by a fraction in which the numerator
is the number of shares of Issuer Common Stock for which the Option was
theretofore exercisable and the denominator is the number of shares of the
Substitute Common Stock for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, or (iii) the transferee of all or substantially all of
Issuer's assets (or a substantial part of the assets of its subsidiaries
taken as a whole).
(2) "Substitute Common Stock" shall mean the shares of capital stock
(or similar equity interest) with the greatest voting power in respect of
the election of directors (or persons similarly responsible for the
direction of the business and affairs) of the Substitute Option Issuer.
(3) "Assigned Value" shall mean the highest of (w) the price per share
of Issuer Common Stock at which a Tender Offer or an Exchange Offer
therefor has been made, (x) the price per share of Issuer Common Stock to
be paid by any third party pursuant to an agreement with Issuer, (y) the
highest closing price for shares of Issuer Common Stock within the
six-month period immediately preceding the consolidation, merger, or sale
in question and (z) in the event of a sale of all or substantially all of
Issuer's assets or deposits an amount equal to (i) the sum of the price
paid in such sale for such assets (and/or deposits) and the current market
value of the remaining assets of Issuer, as determined by a nationally
recognized investment banking firm selected by Holder divided by (ii) the
number of shares of Issuer Common Stock outstanding at such time. In the
event that a Tender Offer or an Exchange Offer is made for Issuer Common
Stock or an agreement is entered into for a merger or consolidation
involving consideration other than cash, the value of the securities or
other property issuable or deliverable in exchange for Issuer Common Stock
shall be determined by a nationally recognized investment banking firm
selected by Holder.
(4) "Average Price" shall mean the average closing price of a share of
Substitute Common Stock for the one year immediately preceding the
consolidation, merger, or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer
of the Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by Issuer, the person merging into Issuer
or by any company which controls such person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
but for the limitation in the first sentence of this SECTION 7(F), Substitute
Option Issuer shall make a cash payment to Holder equal to the excess of (i) the
value of the Substitute Option without giving effect to the limitation in the
first sentence of this SECTION 7(F) over (ii) the value of the Substitute Option
after giving effect to the limitation in the first sentence of this SECTION
7(F). This difference in value shall be determined by a nationally-recognized
investment banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in SECTION 7(B)
unless the Acquiring Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer hereunder and take
all other actions that may be necessary so that the provisions of this SECTION 7
are given full force and effect (including, without limitation, any action that
may be necessary so that the holders of the other shares of common stock issued
by Substitute Option Issuer are not entitled to exercise any rights by reason of
the issuance or exercise of the Substitute Option and the shares of Substitute
Common Stock are otherwise in no way distinguishable from or have lesser
economic value (other than any diminution in value resulting from the fact that
the Substitute Common Stock are restricted securities, as defined in Rule 144
under the Securities Act or any successor provision) than other shares of common
stock issued by Substitute Option Issuer).
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8. REPURCHASE AT THE OPTION OF HOLDER. (a) Subject to the last sentence of
SECTION 3(A), at the request of Holder at any time commencing upon the first
occurrence of a Repurchase Event (as defined in SECTION 8(D)) and ending 12
months immediately thereafter, Issuer shall repurchase from Holder (i) the
Option and (ii) all shares of Issuer Common Stock purchased by Holder pursuant
hereto with respect to which Holder then has beneficial ownership. The date on
which Holder exercises its rights under this SECTION 8 is referred to as the
"Request Date". Such repurchase shall be at an aggregate price (the "Section 8
Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to which
Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to SECTION 7), multiplied by the number of
shares of Issuer Common Stock with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to SECTION 7) paid (or, in the case
of Option Shares with respect to which the Option has been exercised but
the Closing Date has not occurred, payable) by Holder for each share of
Issuer Common Stock with respect to which the Option has been exercised and
with respect to which Holder then has beneficial ownership, multiplied by
the number of such shares.
(b) If Holder exercises its rights under this SECTION 8, Issuer shall,
within 10 business days after the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment, Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and Holder shall
warrant that it has sole record and beneficial ownership of such shares and that
the same are then free and clear of all Liens. Notwithstanding the foregoing, to
the extent that prior notification to or approval of any Regulatory Authority is
required in connection with the payment of all or any portion of the Section 8
Repurchase Consideration, Holder shall have the ongoing option to revoke its
request for repurchase pursuant to SECTION 8, in whole or in part, or to require
that Issuer deliver from time to time that portion of the Section 8 Repurchase
Consideration that it is not then so prohibited from paying and promptly file
the required notice or application for approval and expeditiously process the
same (and each party shall cooperate with the other in the filing of any such
notice or application and the obtaining of any such approval). If any Regulatory
Authority disapproves of any part of Issuer's proposed repurchase pursuant to
this SECTION 8, Issuer shall promptly give notice of such fact to Holder. If any
Regulatory Authority prohibits the repurchase in part but not in whole, then
Holder shall have the right (i) to revoke the repurchase request or (ii) to the
extent permitted by such Regulatory Authority, determine whether the repurchase
should apply to the Option and/or Option Shares and to what extent to each, and
Holder shall thereupon have the right to exercise the Option as to the number of
Option Shares for which the Option was exercisable at the Request Date less the
sum of the number of shares covered by the Option in respect of which payment
has been made pursuant to SECTION 8(A) (II) and the number of shares covered by
the portion of the Option (if any) that has been repurchased. Holder shall
notify Issuer of its determination under the preceding sentence within five (5)
business days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Holder's rights
under this SECTION 8 shall terminate on the date of termination of this Option
pursuant to SECTION 3(A).
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in SECTION 8(D)(I), (ii) the price
per share of Issuer Common Stock received by holders of Issuer Common Stock in
connection with any merger or other business combination transaction described
in SECTION 7(B)(I), 7(B)(II) OR 7(B)(III), or (iii) the highest closing sales
price per share of Issuer Common Stock quoted on the Nasdaq National Market (or
if Issuer Common Stock is not quoted on the Nasdaq National Market, the highest
bid price per share as quoted on the principal trading market or securities
exchange on which such shares are traded as reported by a recognized source
chosen by Holder) during the 40 business days preceding the Request Date;
PROVIDED, HOWEVER, that in the event of a sale of less than all of Issuer's
assets, the Applicable Price shall be the sum of the price paid in such sale for
such assets and the current market value of the remaining assets of Issuer as
determined by a nationally recognized investment banking firm selected by
Holder, divided by the number of shares of the Issuer Common Stock outstanding
at the time of such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally recognized investment banking firm selected by Holder and
reasonably acceptable to Issuer, which determination shall be conclusive for all
purposes of this Agreement.
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(d) As used herein, "Repurchase Event" shall occur if (i) any person (other
than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act), or the right to acquire beneficial ownership of, or any "group"
(as such term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 50% or
more of the then outstanding shares of Issuer Common Stock, or (ii) any of the
transactions described in SECTION 7(B)(I), 7(B)(II) or 7(B)(III) shall be
consummated.
9. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHTS. Issuer shall, subject to the conditions of
SECTION 9(C) below, if requested by any Holder, including Grantee and any
permitted transferee ("Selling Shareholder"), as expeditiously as possible
prepare and file a registration statement under the Securities Act if such
registration is necessary in order to permit the sale or other disposition of
any or all shares of Issuer Common Stock or other securities that have been
acquired by or are issuable to the Selling Shareholder upon exercise of the
Option in accordance with the intended method of sale or other disposition
stated by the Selling Shareholder in such request, including without limitation
a "shelf" registration statement under Rule 415 under the Securities Act or any
successor provision, and Issuer shall use its best efforts to qualify such
shares or other securities for sale under any applicable state securities laws.
(b) ADDITIONAL REGISTRATION RIGHTS. If Issuer at any time after the
exercise of the Option proposes to register any shares of Issuer Common Stock
under the Securities Act in connection with an underwritten public offering of
such Issuer Common Stock, Issuer will promptly give written notice to the
Selling Shareholders of its intention to do so and, upon the written request of
any Selling Shareholder given within 30 days after receipt of any such notice
(which request shall specify the number of shares of Issuer Common Stock
intended to be included in such underwritten public offering by the Selling
Shareholder), Issuer will cause all such shares for which a Selling Shareholder
requests participation in such registration, to be so registered and included in
such underwritten public offering; PROVIDED, HOWEVER, that Issuer may elect to
not cause any such shares to be so registered (i) if the underwriters in good
faith object for valid business reasons, or (ii) in the case of a registration
solely to implement an employee benefit plan or a registration filed on Form S-4
of the Securities Act or any successor Form; PROVIDED, FURTHER, HOWEVER, that
such election pursuant to (i) may only be made two times. If some but not all
the shares of Issuer Common Stock, with respect to which Issuer shall have
received requests for registration pursuant to this SECTION 9(B), shall be
excluded from such registration, Issuer shall make appropriate allocation of
shares to be registered among the Selling Shareholders desiring to register
their shares pro rata in the proportion that the number of shares requested to
be registered by each such Selling Shareholder bears to the total number of
shares requested to be registered by all such Selling Shareholders then desiring
to have Issuer Common Stock registered for sale.
(c) CONDITIONS TO REQUIRED REGISTRATION. Issuer shall use all reasonable
efforts to cause each registration statement referred to in SECTION 9(A) above
to become effective and to obtain all consents or waivers of other parties which
are required therefor and to keep such registration statement effective,
PROVIDED, HOWEVER, that Issuer may delay any registration of Option Shares
required pursuant to SECTION 9(A) above for a period not exceeding 90 days
provided Issuer shall in good faith determine that any such registration would
adversely affect an offering or contemplated offering of other securities by
Issuer, and Issuer shall not be required to register Option Shares under the
Securities Act pursuant to SECTION 9(A) above:
(i) prior to the earliest of (a) termination of the Plan pursuant to
ARTICLE VII thereof, (b) failure to obtain the requisite stockholder
approval pursuant to SECTION 6.01 of ARTICLE VI of the Plan, and (c) a
Purchase Event or a Preliminary Purchase Event;
(ii) on more than one occasion during any calendar year;
(iii) within 90 days after the effective date of a registration
referred to in SECTION 9(B) above pursuant to which the Selling Shareholder
or Selling Shareholders concerned were afforded the opportunity to register
such shares under the Securities Act and such shares were registered as
requested; and
(iv) unless a request therefor is made to Issuer by Selling
Shareholders that hold at least 25% or more of the aggregate number of
Option Shares (including shares of Issuer Common Stock issuable upon
exercise of the Option) then outstanding.
In addition to the foregoing, Issuer shall not be required to maintain the
effectiveness of any registration statement after the expiration of nine months
from the effective date of such registration statement. Issuer shall use all
reasonable efforts to make any filings, and take all steps, under all applicable
state securities laws to the extent necessary to permit the sale or other
disposition of the Option Shares so registered in accordance with the intended
method of distribution for such shares;
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PROVIDED, HOWEVER, that Issuer shall not be required to consent to general
jurisdiction or qualify to do business in any state where it is not otherwise
required to so consent to such jurisdiction or to so qualify to do business.
(d) EXPENSES. Except where applicable state law prohibits such payments,
Issuer will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and expenses
of counsel), legal expenses, including the reasonable fees and expenses of one
counsel to the holders whose Option Shares are being registered, printing
expenses and the costs of special audits or "cold comfort" letters, expenses of
underwriters, excluding discounts and commissions but including liability
insurance if Issuer so desires or the underwriters so require, and the
reasonable fees and expenses of any necessary special experts) in connection
with each registration pursuant to SECTION 9(A) or 9(B) above (including the
related offerings and sales by holders of Option Shares) and all other
qualifications, notifications or exemptions pursuant to SECTION 9(A) or 9(B)
above.
(e) INDEMNIFICATION. In connection with any registration under SECTION 9(A)
or 9(B) above Issuer hereby indemnifies the Selling Shareholders, and each
underwriter thereof, including each person, if any, who controls such holder or
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, losses, claims, damages and liabilities caused by any untrue, or
alleged untrue, statement of a material fact contained in any registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) or any preliminary prospectus, or caused by
any omission, or alleged omission, to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged untrue statement
that was included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use therein, and
Issuer and each officer, director and controlling person of Issuer shall be
indemnified by such Selling Shareholders, or by such underwriter, as the case
may be, for all such expenses, losses, claims, damages and liabilities caused by
any untrue, or alleged untrue, statement, that was included by Issuer in any
such registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) in reliance upon, and in
conformity with, information furnished in writing to Issuer by such holder or
such underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this SECTION 9(E) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this SECTION 9(E), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
SECTION 9(E). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and satisfactory to such
indemnified party. The indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel (other than reasonable costs of investigation)
shall be paid by the indemnified party unless (i) the indemnifying party either
agrees to pay the same, (ii) the indemnifying party fails to assume the defense
of such action with counsel satisfactory to the indemnified party, or (iii) the
indemnified party has been advised by counsel that one or more legal defenses
may be available to the indemnifying party that may be contrary to the interest
of the indemnified party, in which case the indemnifying party shall be entitled
to assume the defense of such action notwithstanding its obligation to bear fees
and expenses of such counsel. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may not be
unreasonably withheld.
If the indemnification provided for in this SECTION 9(E) is unavailable to
a party otherwise entitled to be indemnified in respect of any expenses, losses,
claims, damages or liabilities referred to herein, then the indemnifying party,
in lieu of indemnifying such party otherwise entitled to be indemnified, shall
contribute to the amount paid or payable by such party to be indemnified as a
result of such expenses, losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative benefits received by
Issuer, the Selling Shareholders and the underwriters from the offering of the
securities and also the relative fault of Issuer, the Selling Shareholders and
the underwriters in connection with the statements or omissions which resulted
in such expenses, losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The amount paid or payable by a party as a
result of the expenses, losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim; PROVIDED, HOWEVER, that in no case shall any Selling Shareholder be
responsible, in the aggregate, for any amount in excess of the net offering
proceeds attributable to its Option Shares included in the offering. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act)
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shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Any obligation by any holder to indemnify shall be
several and not joint with other holders.
In connection with any registration pursuant to SECTION 9(A) or 9(B) above,
Issuer and each Selling Shareholder (other than Grantee) shall enter into an
agreement containing the indemnification provisions of this SECTION 9(E).
(f) MISCELLANEOUS REPORTING. Issuer shall comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any Option Shares by the Selling Shareholders
thereof in accordance with and to the extent permitted by any rule or regulation
promulgated by the SEC from time to time, including, without limitation, Rule
144A. Issuer shall at its expense provide the Selling Shareholders with any
information necessary in connection with the completion and filing of any
reports or forms required to be filed by them under the Securities Act or the
Exchange Act, or required pursuant to any state securities laws or the rules of
any stock exchange.
(g) ISSUE TAXES. Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save the Selling Shareholders harmless, without
limitation as to time, against any and all liabilities, with respect to all such
taxes.
10. QUOTATION; LISTING. If Issuer Common Stock or any other securities to
be acquired in connection with the exercise of the Option are then authorized
for quotation or trading or listing on the Nasdaq National Market or any
securities exchange, Issuer, upon the request of Holder, will promptly file an
application, if required, to authorize for quotation or trading or listing the
shares of Issuer Common Stock or other securities to be acquired upon exercise
of the Option on the Nasdaq National Market or such other securities exchange
and will use its best efforts to obtain approval, if required, of such quotation
or listing as soon as practicable.
11. DIVISION OF OPTION. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. MISCELLANEOUS.
(a) EXPENSES. Each of the parties hereto shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
(b) WAIVER AND AMENDMENT. Any provision of this Agreement may be waived at
any time by the party that is entitled to the benefits of such provision. This
Agreement may not be modified, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by the parties hereto.
(c) ENTIRE AGREEMENT: NO THIRD-PARTY BENEFICIARIES; SEVERABILITY. This
Agreement, together with the Plan and the other documents and instruments
referred to herein and therein, between Grantee and Issuer (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof
and (ii) is not intended to confer upon any person other than the parties hereto
(other than the indemnified parties under SECTION 9(E) and any transferees of
the Option Shares or any permitted transferee of this Agreement pursuant to
SECTION 12(H)) any rights or remedies hereunder. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction or Regulatory Authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated. If for any reason such court or Regulatory Authority determines
that the Option does not permit Holder to acquire, or does not require Issuer to
repurchase, the full number of shares of Issuer Common Stock as provided in
SECTION 2 (as may be adjusted herein), it is the express intention of Issuer to
allow Holder to acquire or to require Issuer to repurchase such lesser number of
shares as may be permissible without any amendment or modification hereof.
(d) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of North Carolina without regard to any
applicable conflicts of law rules.
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(e) DESCRIPTIVE HEADINGS. The descriptive headings contained herein are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the addresses set forth in the Plan (or at such
other address for a party as shall be specified by like notice).
(g) COUNTERPARTS. This Agreement and any amendments hereto may be executed
in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations hereunder or under the Option shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party, except that Holder may assign this Agreement
to a wholly-owned subsidiary of Holder and Holder may assign its rights
hereunder in whole or in part after the occurrence of a Purchase Event. Subject
to the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
(i) FURTHER ASSURANCES. In the event of any exercise of the Option by the
Holder, Issuer and the Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) SPECIFIC PERFORMANCE. The parties hereto agree that this Agreement may
be enforced by either party through specific performance, injunctive relief and
other equitable relief. Both parties further agree to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
CENTER FINANCIAL CORPORATION
By:
NAME:
TITLE:
FIRST UNION CORPORATION
By:
NAME:
TITLE:
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ANNEX B
DRAFT
, 1996
Board of Directors
Center Financial Corp.
60 North Main Street
Waterbury, CT 06702
Gentlemen:
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to the common shareholders of Center Financial
Corp. ("Center") of the consideration in the proposed merger (the "Merger") of
Center with and into First Union Corporation ("First Union"), pursuant to the
Agreement and Plan of Merger dated as of June 14, 1996 between Center and First
Union (the "Agreement"). Under the terms of the Merger, each outstanding share
of common stock, $1.00 par value, of Center will be exchanged for $25.44 (the
"Consideration") worth of First Union Common Stock, $3.33 1/3 par value. It is
our understanding that the Merger will be structured as a purchase accounting
transaction under generally accepted accounting practices.
Keefe, Bruyette & Woods, Inc. as part of its investment banking business,
is continually engaged in the valuation of banking businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. As specialists in the securities of banking companies, we have
experience in, and knowledge of, the valuation of banking enterprises. In the
ordinary course of our business as a broker-dealer, we may, from time to time,
purchase securities from, and sell securities to, Center and First Union and as
a market maker in securities we may from time to time have a long or short
position in, and buy or sell, debt or equity securities of Center and First
Union for our own account and for the accounts of our customers. To the extent
we have any such position as of the date of this opinion it has been disclosed
to Center. We have acted exclusively for the Board of Directors of Center in
rendering this fairness opinion and will receive a fee from Center for our
services.
IN CONNECTION WITH THIS OPINION, WE HAVE RECEIVED, AMONG OTHER THINGS, THE
AGREEMENT; THE REGISTRATION STATEMENT ON FORM S-4, INCLUDING THE PROXY
STATEMENT-PROSPECTUS RELATING TO THE SPECIAL MEETING OF CENTER STOCKHOLDERS AT
WHICH HOLDERS OF THE SHARES WILL BE ASKED TO APPROVE THE MERGER; ANNUAL REPORTS
TO STOCKHOLDERS AND ANNUAL REPORTS ON FORM 10-K OF CENTER AND FIRST UNION FOR
THE FOUR YEARS ENDED DECEMBER 31, 1995; CERTAIN INTERIM REPORTS TO STOCKHOLDERS
AND QUARTERLY REPORTS ON FORM 10-Q OF CENTER AND FIRST UNION, AND CERTAIN
INTERNAL FINANCIAL ANALYSES AND FORECASTS FOR CENTER PREPARED BY MANAGEMENT. WE
ALSO HAVE HELD DISCUSSIONS WITH MEMBERS OF THE SENIOR MANAGEMENT OF CENTER AND
FIRST UNION REGARDING THE PAST AND CURRENT BUSINESS OPERATIONS, REGULATORY
RELATIONSHIPS, FINANCIAL CONDITION AND FUTURE PROSPECTS OF THEIR RESPECTIVE
COMPANIES. IN ADDITION, WE HAVE COMPARED CERTAIN FINANCIAL AND STOCK MARKET
INFORMATION FOR CENTER AND FIRST UNION WITH SIMILAR INFORMATION FOR CERTAIN
OTHER COMPANIES THE SECURITIES OF WHICH ARE PUBLICLY TRADED, REVIEWED THE
FINANCIAL TERMS OF CERTAIN RECENT BUSINESS COMBINATIONS IN THE BANKING INDUSTRY
AND PERFORMED SUCH OTHER STUDIES AND ANALYSES AS WE CONSIDERED APPROPRIATE.
In conducting our review and arriving at our opinion, we have relied upon
and assumed the accuracy and completeness of all of the financial and other
information provided to us or publicly available and we have not assumed any
responsibility for independently verifying any of such information. We have
relied upon the management of Center as to the reasonableness and achievability
of the financial and operating forecasts and projections (and the assumptions
and bases therefor) provided to us, and we have assumed that such forecasts and
projections reflect the best currently available estimates and judgments of
Center and that such forecasts and projections will be realized in the amounts
and in the time periods currently estimated by such management. We have also
assumed that the aggregate allowances for loan losses for Center and First Union
are adequate to cover such losses. In rendering our opinion, we have not made or
obtained any evaluations or appraisals of the property of Center or First Union,
nor have we examined any individual credit files.
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including among others the following: (i)
the historical and current financial position and results of operations of
Center and First Union; (ii) the assets and liabilities of Center and First
Union; and (iii) the nature and terms of certain other merger transactions
involving banks and bank holding companies. We have also taken into account our
assessment of general economic,
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market and financial conditions and our experience in other transactions, as
well as our experience in securities valuation and our knowledge of the banking
industry generally. Our opinion is necessarily based upon conditions as they
exist and can be evaluated on the date hereof and the information made available
to us through the date hereof.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Consideration in the Merger is fair, from a financial point of
view, to the common shareholders of Center.
Very truly yours,
KEEFE, BRUYETTE & WOODS, INC.
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ANNEX C
(SECTION MARK)33-373. RIGHTS OF OBJECTING SHAREHOLDERS
(a) Any objecting holder of preferred shares shall have the right to be
paid the value of all shares of such class owned by him in accordance with the
provisions of section 33-374 if an amendment to the certificate of incorporation
is effected which would: (1) Cancel or otherwise affect the right to accrued
dividends or other arrearages in respect of such class of shares; (2) reduce the
dividend preference thereof; (3) make noncumulative, in whole or in part,
dividends thereof, which had theretofore been cumulative; (4) reduce the
redemption price thereof or make such shares subject to redemption when not
otherwise redeemable; (5) reduce any preferential amount payable thereon upon
voluntary or involuntary liquidation.
(b) If an offer is made by the corporation to holders of its shares of any
class having accrued dividends or other arrearages to exchange such shares for
other securities of the corporation which would be entitled to preference in the
receipt of any periodical payment or dividend over such shares, and if the offer
is accepted by, and such exchange is effected with, any holder of such shares,
then any other holder of such shares who objects to the terms of the offer shall
have the right to be paid the value of all shares of such class owned by him in
accordance with the provisions of section 33-374.
(c) Any shareholder of a merging or consolidating domestic corporation who
objects to the merger or consolidation shall have the right to be paid the value
of all shares of such corporation owned by him in accordance with the provisions
of section 33-374, except that a shareholder of a merging domestic corporation
which is to be the surviving corporation shall have such right only: (1) If and
to the extent that the plan of merger will effect an amendment to the
certificate of incorporation of the surviving corporation which would entitle
the shareholder to such right pursuant to the provisions of subsection (a) of
this section, or (2) if the plan of merger provides for the distribution to
shareholders of the surviving corporation of cash, securities or other property
in lieu of or in exchange for or upon conversion of outstanding shares of the
surviving corporation.
(d) If a corporation sells all or substantially all its assets primarily in
consideration for securities of another corporation, domestic or foreign, and
such transaction is part of a general plan of liquidation and distribution
substantially equivalent to a merger, any shareholder of such corporation
objecting to such sale shall have the right to be paid the value of all shares
of such corporation owned by him in accordance with the provisions of section
33-374.
(e) If a distribution to shareholders, by dividend, liquidating
distribution or otherwise, is effected by transfer of assets in kind to
shareholders collectively as co-owners, any objecting shareholder who would
otherwise receive such distribution shall have the right to be paid the value of
all shares of such corporation owned by him in accordance with the provisions of
section 33-374.
(f) Where the right to be paid the value of shares is made available to a
shareholder by this section, such remedy shall be his exclusive remedy as holder
of such shares against the corporate transactions described in this section,
whether or not he proceeds as provided in section 33-374.
(SECTION MARK)33-374. PROCEDURE FOR OBJECTING SHAREHOLDER
(a) As used in this section, the term (1) "corporation" includes, if the
context so indicates, the successor, surviving or new corporation which acquires
the property of a predecessor corporation upon a sale of assets for securities,
merger or consolidation; (2) "the date on which the exchange was effective"
means the date on which the corporation first actually consummated an exchange
of shares or, if it reserved the right to postpone the operation or
effectiveness of all acceptances of its offer of exchange, the date on which it
declared the acceptance operative or effective; (3) "sale of assets for
securities" means a sale of assets entitling objecting shareholders to be paid
the value of shares pursuant to subsection (d) of section 33-373; (4) "shares"
of shareholder means those shares owned by him as to which he is entitled to be
paid the value pursuant to the provisions of section 33-373.
(b) Any shareholder designated in section 33-373 as having the right to be
paid the value of shares as provided in this section may elect to exercise such
right by giving notice to the corporation, in writing, objecting to the proposed
corporate transaction giving rise to such right. (1) In the case of a
shareholder so designated in subsections (a), (c) and (d) of section 33-373 such
notice shall be delivered to the corporation prior to the meeting of
shareholders called for the purpose of voting on such transactions, or at such
meeting prior to voting on such transaction, or prior to the time action taken
by consents as provided in section 33-330 shall become effective. If such
transaction is approved, any such shareholders so notifying the corporation,
provided none of his shares shall have been voted in favor thereof, may require
the corporation to purchase his shares at fair value by delivering to the
corporation a demand to that effect in writing, within ten days after the date
on which
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the vote was taken or action taken by consents as provided in section 33-330
became effective. (2) In the case of a shareholder so designated in subsection
(b) of section 33-373, such notice shall be delivered to the corporation within
fifteen days after the date of mailing the offer. If an exchange is effected
with any shareholder, any such shareholder so notifying the corporation,
provided none of his shares shall have been so exchanged, may require the
corporation to purchase his shares at fair value by delivering to the
corporation a demand to that effect in writing, within ten days after the date
on which the exchange was effective if the corporation shall give notice of such
date to such shareholder or within sixty days after delivering the written
notice to the corporation, whichever is the earlier. (3) A shareholder so
designated in subsection (e) of section 33-373 may require the corporation to
purchase his shares at fair value by delivering such notice to the corporation
within fifteen days after the date of mailing the distribution or any notice
thereof from the corporation, whichever is earlier, accompanied by a demand to
that effect in writing, provided such shareholder shall not have accepted such
distribution. (4) In the case of a shareholder so designated in subsection (c)
of section 33-373, where a merger has been effected as provided in section
33-370, such notice shall be delivered to the corporation within fifteen days
after the date of mailing the plan of merger, and be accompanied by a demand in
writing that the corporation purchase his shares at fair value.
(c) Any demand to purchase shares under subsection (b) of this section
shall state the number and classes of shares of the shareholder making the
demand. Except as provided in subsection (i) of this section, any shareholder
making such demand shall thereafter be entitled only to payment as in this
section provided and shall not be entitled to vote, to receive dividends or to
exercise any other rights of a shareholder in respect of such shares. No such
demand may be withdrawn unless the corporation consents thereto. Any shareholder
failing to make demand as provided in subsection (b) of this section shall be
bound by the corporate transaction involved in accordance with its terms.
(d) At any time after the receipt of a notice by a shareholder objecting to
the proposed corporate transaction giving rise to rights under this section, but
not later than ten days after receipt of a demand to purchase shares or ten days
after the corporate transaction is effective, whichever is later, the
corporation shall make a written offer, to each shareholder who makes demand as
provided in this section, to pay for his shares at a specified price deemed by
such corporation to be the fair value thereof as of the day prior to the date on
which notice of the proposed corporate transaction was mailed, exclusive of any
element of value arising from the expectation or accomplishment of such
corporate transaction.
(e) Within twenty days after demanding the purchase of his shares, each
shareholder so demanding shall submit the certificate or certificates
representing his shares to the corporation for notation thereon that such demand
has been made. His failure to do so shall, at the option of the corporation,
terminate his rights under this section unless a court of competent
jurisdiction, for good and sufficient cause shown, otherwise directs. If shares
represented by a certificate on which notation has been so made are transferred,
each new certificate issued therefor shall bear similar notation, together with
the name of the shareholder of such shares who made such demand, and a
transferee of such shares shall acquire by such transfer no rights in the
corporation other than those which such shareholder had after making such
demand.
(f) If the corporation and any shareholder making a demand to purchase
shares under subsection (b) of this section agree in writing as to the value of
the shares, the corporation shall pay such shareholder such value upon and
concurrently with the surrender to the corporation of the certificate or
certificates representing such shares duly endorsed for transfer. If the
corporation defaults in or refuses to make such payment, such shareholder may
file a petition in the superior court for the judicial district where the
principal office of the corporation is located, praying that judgment be entered
for such amount, and such shareholder shall be entitled to judgment for such
amount. If any such shareholder should be a party to a proceeding under
subsection (g) of this section, the court in such proceeding shall upon motion
of either the corporation or such shareholder dismiss the proceeding with
respect to such shareholder.
(g) At any time during the period of sixty days after the date the
corporation is obliged to make an offer under subsection (d) of this section,
the corporation, or any shareholder who has made a demand to purchase shares
under subsection (b) of this section and who has not accepted the offer made by
the corporation and acting in the name of the corporation, may file a petition
in the superior court for the judicial district where its principal office is
located, or before any judge thereof, praying that the value of the shares of
such shareholders be found and determined. All shareholders making demand under
subsection (b) of this section who have not accepted the offer made by the
corporation, wherever residing, shall be made parties to the proceeding as an
action against their shares quasi in rem. A copy of the petition shall be served
on each such shareholder who is a resident of this state and shall be served by
registered or certified mail on each such shareholder who is a nonresident.
Service on nonresidents shall also be made by publication as provided by law.
The jurisdiction of the court shall be plenary and exclusive. All shareholders
who are parties to the proceeding shall be entitled to judgment against the
corporation for the amount of the fair value of their shares as of the day prior
to the date on which notice of the proposed corporate transaction was mailed,
exclusive of any element of value arising from the expectation or accomplishment
of such
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corporate transaction. The court may, if it so elects, appoint one or more
persons as appraisers to receive evidence and recommend a decision on the
question of fair value. The appraisers shall have such power and authority as
shall be specified in the order of their appointment or an amendment thereof.
The court shall by its judgment determine the fair value of the shares of the
shareholders entitled to payment therefor and shall direct the payment of such
value, together with interest, if any, as hereinafter provided, to the
shareholders entitled thereto. The judgment may include an allowance for
interest at such rate as the court may find to be fair and equitable in all the
circumstances, from the date notice of the proposed corporate transaction was
mailed to the date of payment. The costs and expenses of any such proceeding
shall be determined by the court and shall be assessed against the corporation,
but all or any part of such costs and expenses may be apportioned and assessed
as the court may deem equitable against any or all shareholders who are parties
to the proceeding to whom the corporation has made an offer to pay for the
shares if the court finds that the action of such shareholders in failing to
accept such offer was arbitrary or vexatious or not in good faith. Such expenses
shall include reasonable compensation for and reasonable expenses of the
appraisers, but shall exclude the fees and expenses of counsel for and experts
employed by any party; but if the fair value of the shares as determined
materially exceeds the amount which the corporation offered to pay therefor, or
if no offer was made, the court in its discretion may award to any shareholder
who is a party to the proceeding such sum as the court may determine to be
reasonable compensation to any expert or experts employed by the shareholder in
the proceeding.
(h) Any judgment entered under subsection (f) or (g) of this section shall
be enforceable as other decrees of the superior court may be enforced and shall
be payable only upon and concurrently with the surrender to the corporation of
the certificate or certificates representing the shares for which payment is
due, duly endorsed for transfer. Upon payment of any such judgment, the
shareholder shall cease to have any interest in such shares. The liability to
pay for shares or to pay damages imposed by this section on a corporation
extends to the successor corporation which acquires the assets of the
predecessor, whether by merger, consolidation or sale of assets for securities.
Shares acquired by a corporation pursuant to payment of the agreed value
therefor or to payment of the judgment entered therefor, as in this section
provided, may be held and disposed of by such corporation as in the case of
other treasury shares, unless in the case of a merger or consolidation the plan
of merger or consolidation otherwise provides.
(i) If a demand to purchase shares under subsection (b) of this section is
withdrawn upon consent, or if the proposed corporate action is abandoned or
rescinded or the shareholders revoke the authority to effect such action, or if
no demand or petition for the determination of fair value by a court has been
made or filed within the time provided in this section, or if a court of
competent jurisdiction determines that such shareholder is not entitled to the
relief provided by this section, then the right of such shareholder to be paid
the fair value of his shares shall cease and his status as a shareholder shall
thereupon be restored.
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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 55-8-50 through 55-8-58 of the NCBCA contain specific provisions
relating to indemnification of directors and officers of North Carolina
corporations. In general, the statute provides that (i) a corporation must
indemnify a director or officer who is wholly successful in his defense of a
proceeding to which he is a party because of his status as such, unless limited
by the articles of incorporation, and (ii) a corporation may indemnify a
director or officer if he is not wholly successful in such defense, if it is
determined as provided in the statute that the director or officer meets a
certain standard of conduct, provided when a director or officer is liable to
the corporation, the corporation may not indemnify him. The statute also permits
a director or officer of a corporation who is a party to a proceeding to apply
to the courts for indemnification, unless the articles of incorporation provide
otherwise, and the court may order indemnification under certain circumstances
set forth in the statute. The statute further provides that a corporation may in
its articles of incorporation or bylaws or by contract or resolution provide
indemnification in addition to that provided by the statute, subject to certain
conditions set forth in the statute.
FUNC's bylaws provide for the indemnification of FUNC's directors and
executive officers by FUNC against liabilities arising out of his status as
such, excluding any liability relating to activities which were at the time
taken known or believed by such person to be clearly in conflict with the best
interests of FUNC.
The FUNC 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) The Merger Agreement, including the Stock Option Agreement as Exhibit A thereto. (Incorporated by reference to
ANNEX A to the Prospectus/Proxy Statement included in this Registration Statement.)*
(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, to Exhibit (99)(a) to FUNC's 1993 First Quarter Report on Form 10-Q and to Exhibit
(4)(a) to FUNC's Current Report on Form 8-K dated January 10, 1996.)
(3)(b) Bylaws of FUNC, as amended. (Incorporated by reference to Exhibit (3)(b) to FUNC's 1995 Annual Report on Form
10-K.)
(4)(a) Shareholder Protection Rights Agreement, as amended. (Incorporated by reference to Exhibits (4)(b) to FUNC's
Forms 8-K dated December 18, 1990 and October 20, 1992, and to Exhibit (99) to FUNC's Current Reports on Form
8-K dated June 20, 1995 and June 21, 1995.)
(4)(b) All instruments defining the rights of holders of long-term debt of FUNC and its subsidiaries. (Not filed
pursuant to (4)(iii) of Item 601(b) of Regulation S-K; to be furnished upon request of the Commission.)
(5) Opinion of Marion A. Cowell, Jr., Esq.
(8)(a) Tax opinion of Sullivan & Cromwell.
(8)(b) Tax opinion of Wachtell, Lipton, Rosen & Katz.
(12)(a) Computations of Consolidated Ratios of Earnings to Fixed Charges. (Incorporated by reference to Exhibit (12)(a)
to FUNC's 1996 Second Quarter Report on Form 10-Q.)
(12)(b) Computations of Consolidated Ratios of Earnings to Fixed Charges and Preferred Stock Dividends. (Incorporated by
reference to Exhibit (12)(b) to FUNC's 1996 Second Quarter Report on Form 10-Q.)
(23)(a) Consent of KPMG Peat Marwick LLP.
(23)(b) Consent of KPMG Peat Marwick LLP.
(23)(c) Consent of Marion A. Cowell, Jr., Esq. (Included in Exhibit (5).)
(23)(d) Consent of Sullivan & Cromwell. (Included in Exhibit (8)(a).)
(23)(e) Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit (8)(b).)
(23)(f) Consent of Keefe, Bruyette & Woods, Inc.
(24) Power of Attorney.
(27) FUNC's Financial Data Schedule. (Incorporated by reference to Exhibit (27) to FUNC's 1996 Second Quarter Report
on Form 10-Q.)
(99) Form of proxy for the Special Meeting of Stockholders of CFC.
</TABLE>
* Omitted exhibits to be furnished upon request of the Commission.
II-1
<PAGE>
ITEM 22. UNDERTAKINGS.
(a)(1) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933 (as amended and the
rules and regulations thereunder, the "Securities Act"), each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (as amended and the rules and regulations
thereunder, the "Exchange Act") (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(2) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c)
promulgated pursuant to the Securities Act, the issuer undertakes that such
reoffering prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items of
the applicable form.
(3) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (2) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415 promulgated
pursuant to the Securities Act, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(4) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions of this Item 22, or otherwise
(other than insurance), the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act, and is therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a) (3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
II-2
<PAGE>
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(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, as amended, the
registrant has duly caused this 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 August 14, 1996.
FIRST UNION CORPORATION
By: MARION A. COWELL, JR.
MARION A. COWELL, JR.
EXECUTIVE VICE PRESIDENT,
SECRETARY AND GENERAL COUNSEL
Pursuant to the requirements of the Securities Act of 1933, as amended,
this 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
*EDWARD E. BARR Director
EDWARD E. BARR
*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
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
<S> <C>
*RODDEY DOWD, SR. Director
RODDEY DOWD, SR.
*JOHN R. GEORGIUS Director
JOHN R. GEORGIUS
*ARTHUR M. GOLDBERG Director
ARTHUR M. GOLDBERG
*WILLIAM N. GOODWIN, JR. Director
WILLIAM N. GOODWIN, JR.
*BRENTON S. HALSEY Director
BRENTON S. HALSEY
*HOWARD H. HAWORTH Director
HOWARD H. HAWORTH
*FRANK M. HENRY Director
FRANK M. HENRY
Director
LEONARD G. HERRING
*JUAN RODRIGUEZ INCIARTE Director
JUAN RODRIGUEZ INCIARTE
*JACK A. LAUGHERY Director
JACK A. LAUGHERY
*MAX LENNON Director
MAX LENNON
*RADFORD D. LOVETT Director
RADFORD D. LOVETT
*JOSEPH NEUBAUER Director
JOSEPH NEUBAUER
Director
HENRY D. PERRY, JR.
*RANDOLPH N. REYNOLDS Director
RANDOLPH N. REYNOLDS
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
<S> <C>
*RUTH G. SHAW Director
RUTH G. SHAW
*LANTY L. SMITH Director
LANTY L. SMITH
*ANTHONY P. TERRACCIANO Director
ANTHONY P. TERRACCIANO
*DEWEY L. TROGDON Director
DEWEY L. TROGDON
*JOHN D. UIBLE Director
JOHN D. UIBLE
*B. J. WALKER Director
B. J. WALKER
*By Marion A. Cowell, Jr., Attorney-in-Fact
MARION A. COWELL, JR.
MARION A. COWELL, JR.
</TABLE>
Date: August 14, 1996
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION LOCATION
<S> <C> <C>
(2) The Merger Agreement, including the Stock Option Incorporated by reference to ANNEX A to the
Agreement as Exhibit A thereto. Prospectus/Proxy Statement included in this
Registration Statement.*
(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, to Exhibit
(99)(a) to FUNC's 1993 First Quarter Report on Form
10-Q and to Exhibit (4)(a) to FUNC's Current Report on
Form 8-K dated January 10, 1996.
(3)(b) Bylaws of FUNC, as amended. Incorporated by reference to Exhibit (3)(b) to FUNC's
1995 Annual Report on Form 10-K.
(4)(a) Shareholder Protection Rights Agreement, as amended. Incorporated by reference to Exhibits (4)(b) to FUNC's
Forms 8-K dated December 18, 1990 and October 20,
1992, and to Exhibit (99) to FUNC's Current Reports on
Form 8-K dated June 20, 1995 and June 21, 1995.
(4)(b) All instruments defining the rights of holders of Not filed pursuant to (4)(iii) of Item 601(b) of
long-term debt of FUNC and its subsidiaries. Regulation S-K; to be furnished upon request of the
Commission.
(5) Opinion of Marion A. Cowell, Jr., Esq. Filed herewith.
(8)(a) Tax opinion of Sullivan & Cromwell. Filed herewith.
(8)(b) Tax opinion of Wachtell, Lipton, Rosen & Katz. Filed herewith.
(12)(a) Computations of Consolidated Ratios of Earnings to Incorporated by reference to Exhibit (12)(a) to FUNC's
Fixed Charges. 1996 Second Quarter on Form 10-Q.
(12)(b) Computations of Consolidated Ratios of Earnings to Incorporated by reference to Exhibit (12)(b) to FUNC's
Fixed Charges and Preferred Stock Dividends. 1996 Second Quarter Report on Form 10-Q.
(23)(a) Consent of KPMG Peat Marwick LLP. Filed herewith.
(23)(b) Consent of KPMG Peat Marwick LLP. Filed herewith.
(23)(c) Consent of Marion A. Cowell, Jr., Esq. Included in Exhibit (5).
(23)(d) Consent of Sullivan & Cromwell. Included in Exhibit (8)(a).
(23)(e) Consent of Wachtell, Lipton, Rosen & Katz. Included in Exhibit (8)(b).
(23)(f) Consent of Keefe, Bruyette & Woods, Inc. Filed herewith.
(24) Power of Attorney. Filed herewith.
(27) FUNC's Financial Data Schedule. Incorporated by reference to Exhibit (27) to FUNC's
1996 Second Quarter Report on
Form 10-Q.
(99) Form of proxy for the Special Meeting of Stockholders Filed herewith.
of CFC.
</TABLE>
* Omitted exhibits to be furnished upon request of the Commission.
<PAGE>
EXHIBIT (5)
<TABLE>
<S> <C> <C>
FIRST UNION CORPORATION One First Union Center(0013) Post Office Box 2080
LEGAL DIVISION Charlotte, North Carolina 28288 Jacksonville, Florida 32231-0010
704 374-6828 904 361-3785
FAX: 704 374-3425 FAX: 904 361-3144
MARION A. COWELL, JR. 123 South Broad Street (PMB010)
Executive Vice President Philadelphia, Pennsylvania 19109
General Counsel and 215 985-7969
Secretary FAX: 215 985-8973
</TABLE>
Reply to Charlotte Office
(First Union Logo appears here)
August 14, 1996
Board of Directors
First Union Corporation
Charlotte, North Carolina 28288
Gentlemen:
I have acted as counsel for First Union Corporation (the "Corporation") in
connection with the registration on Form S-4 (the "Registration Statement") of
7,500,000 shares of the Corporation's Common Stock, $3.33 1/3 par value per
share (together with the rights attached thereto, the "First Union Common
Shares"), which are issuable in connection with the acquisition by the
Corporation of Center Financial Corporation.
On the basis of such investigation as I deemed necessary, I am of the
opinion that:
(1) the Corporation has been duly incorporated and is validly existing
under the laws of the State of North Carolina; and
(2) the First Union Common Shares have been duly authorized and when the
Registration Statement becomes effective and the shares are issued pursuant to
the Merger Agreement, such shares will be validly issued, fully paid and
nonassessable.
I hereby consent to the use of my name under the heading "Validity of
Shares of Common Stock" in the Prospectus included in the Registration Statement
and to the filing of this opinion as an Exhibit to the Registration Statement.
Very truly yours,
MARION A. COWELL, JR.
<PAGE>
EXHIBIT (8)(A)
August 14, 1996
First Union Corporation,
One First Union Center
Charlotte, North Carolina 28288-0013
Ladies and Gentlemen:
We have acted as counsel to First Union Corporation, a corporation
organized under the laws of North Carolina ("First Union"), in connection with
the planned acquisition of Center Financial Corporation, a corporation organized
under the laws of Connecticut ("CFC"), accomplished by means of a merger of CFC
with and into First Union (the "Corporate Merger"), pursuant to the Agreement
and Plan of Mergers, dated as of the 14th day of June, 1996, by and among First
Union, CFC, Centerbank and First Union Bank of Connecticut (the "Merger
Agreement"). Capitalized terms used but not defined herein shall have the
meanings specified in the Proxy Statement-Prospectus pertaining to the Corporate
Merger.
We have assumed with your consent that:
(a) the Corporate Merger will be effected in accordance with the Merger
Agreement, and
(b) the representations contained in the letters of representation from CFC
and First Union to us dated August 13, 1996, will be true on the Effective Date.
On the basis of the foregoing, and our consideration of such other matters
of fact and law as we have deemed necessary or appropriate, it is our opinion,
under presently applicable federal income tax law, that the Corporate Merger
will constitute a reorganization under Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code"), and that:
(i) no gain or loss will be recognized for federal income tax purposes
by CFC stockholders upon the exchange in the Corporate Merger of shares of
CFC Common Stock solely for FUNC Common Shares (except with respect to cash
received in lieu of a fractional share interest in FUNC Common Stock);
(ii) the basis of FUNC Common Shares received in the Corporate Merger
by CFC stockholders (including the basis of any fractional share interest
in FUNC Common Stock) will be the same as the basis of the shares of CFC
Common Stock surrendered in exchange therefor;
(iii) the holding period of FUNC Common Shares received in the
Corporate Merger by a CFC stockholder (including the holding period of any
fractional share interest in FUNC Common Stock) will include the holding
period during which the shares of CFC Common Stock surrendered in exchange
therefor were held by the CFC stockholder, provided such shares of CFC
Common Stock were held as capital assets; and
(iv) cash received by a holder of CFC 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 CFC Common Stock allocable to the fractional
share interest.
The tax consequences described above may not be applicable to CFC
stockholders that acquired their CFC Common Stock pursuant to the exercise of an
employee stock option or right or otherwise as compensation, that hold CFC
Common Stock as part of a "straddle" or "conversion transaction" or that are
insurance companies, securities dealers, financial institutions or foreign
persons.
We hereby consent to the reference to us under the heading "THE
MERGERS -- Certain Federal Income Tax Consequences" in the Proxy
Statement-Prospectus pertaining to the Corporate Merger and to the filing of
this opinion as an exhibit to the related Registration Statement on Form S-4
filed with the Securities and Exchange Commission. In giving this consent, we do
not hereby admit that we are within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
SULLIVAN & CROMWELL
<PAGE>
EXHIBIT (8)(B)
DATED THE EFFECTIVE DATE OF THE S-4 REGISTRATION STATEMENT
Center Financial Corporation
60 North Main Street
Waterbury, Connecticut 06702
Ladies/Gentlemen:
We have acted as counsel to Center Financial Corporation, a Connecticut
corporation (the "Company"), in connection with the proposed merger (the
"Merger") of the Company with and into First Union Corporation, a North Carolina
corporation ("First Union"), upon the terms and conditions set forth in the
Agreement and Plan of Mergers (the "Agreement") dated as of June 14, 1996, by
and among First Union, the Company, Centerbank and First Union Bank of
Connecticut. At your request, in connection with the filing by First Union of
the Registration Statement on Form S-4 (the "Registration Statement") in respect
of the shares of FUNC Common Stock to be issued in the Merger and the
preliminary Prospectus/Proxy Statement of First Union and the Company filed with
the Securities Exchange Commission on August 14, 1996 (the "Prospectus/Proxy
Statement") included as part thereof, we are rendering our opinion concerning
certain federal income tax consequences of the Merger.
For purposes of the opinion set forth below, we have relied, with the
consent of First Union and the consent of the Company, upon the accuracy and
completeness of the statements and representations (which statements and
representations we have neither investigated nor verified) contained,
respectively, in certificates of the officers of First Union and the Company
delivered to us, and have assumed that such certificates will be complete and
accurate as of the time the Corporate Merger becomes effective. We have also
relied upon the accuracy of the Prospectus/Proxy Statement. Any capitalized term
used and not defined herein has the meaning given to it in the Prospectus/Proxy
Statement or, if not defined therein, in the appendices thereto (including the
Agreement).
We have also assumed that the transactions contemplated by the Agreement
will be consummated in accordance therewith and as described in the
Prospectus/Proxy Statement and that the Merger will qualify as a statutory
merger under the applicable laws of the States of North Carolina and
Connecticut.
Based upon and subject to the foregoing, it is our opinion that, under
currently applicable law, the Merger will constitute a reorganization within the
meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended
(the "Code"), and that, accordingly, the following will be all the material
federal income tax consequences of the Merger:
(i) No gain or loss will be recognized for federal income tax purposes by
the shareholders of the Company on the exchange of their shares of CFC
Common Stock solely for shares of FUNC Common Stock (except with
respect to cash received in lieu of a fractional share interest in
FUNC Common Stock) pursuant to the terms of the Merger.
(ii) The federal income tax basis of the shares of FUNC Common Stock for
which shares of CFC Common Stock are exchanged pursuant to the Merger
(including the basis allocable to any fractional interest in any
share of FUNC Common Stock) will be the same as the basis of such
shares of CFC Common Stock exchanged therefor.
(iii) The holding period for shares of FUNC Common Stock for which shares
of CFC Common Stock are exchanged (including the holding period of
any fractional share interest in FUNC Common Stock) will include the
period that such shares of CFC Common Stock were held by the holder,
provided such shares were a capital asset of the holder.
(iv) The receipt of cash in lieu of fractional shares of FUNC Common Stock
by a Company shareholder will be treated as if the fractional shares
were distributed as part of the exchange and then were redeemed by
First Union 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 CFC Common Stock allocable to the
fractional share interest.
This opinion may not be applicable to Company shareholders who received
their CFC Common Stock pursuant to the exercise of employee stock options or
otherwise as compensation or who are not citizens or residents of the United
States.
<PAGE>
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement, and to the
reference to this opinion under the caption "SUMMARY -- Certain Federal Income
Tax Consequences", under the caption "THE MERGERS -- Certain Federal Income Tax
Consequences" and elsewhere in the Prospectus/Proxy Statement.
Very truly yours,
WACHTELL, LIPTON, ROSEN & KATZ
<PAGE>
EXHIBIT (23)(A)
CONSENT OF KPMG PEAT MARWICK LLP
BOARD OF DIRECTORS
CENTER FINANCIAL CORPORATION
We consent to the incorporation by reference in this Registration Statement
on Form S-4 of First Union Corporation of our report dated January 24, 1996,
relating to the consolidated balance sheets of Center Financial Corporation and
subsidiary as of December 31, 1995 and 1994, and the related consolidated
statements of operations, changes in shareholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1995, which report
appears in the 1995 Form 10-K of Center Financial Corporation. The report refers
to a change in the method of accounting for mortgage servicing rights,
securities, income taxes and postretirement benefits.
KPMG PEAT MARWICK LLP
Hartford, Connecticut
August 14, 1996
<PAGE>
EXHIBIT (23)(B)
CONSENT OF KPMG PEAT MARWICK LLP
BOARD OF DIRECTORS
FIRST UNION CORPORATION
We consent to the incorporation by reference in this Registration Statement
on Form S-4 of First Union Corporation of our report dated January 11, 1996,
relating to the consolidated balance sheets of First Union Corporation and
subsidiaries as of December 31, 1995 and 1994, 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, 1995, which report appears
in the 1995 Supplemental Annual Report to Stockholders which is incorporated by
reference in the 1995 Form 10-K of First Union Corporation. The report refers to
a change in the method of accounting for investments.
KPMG PEAT MARWICK LLP
Charlotte, North Carolina
August 14, 1996
<PAGE>
EXHIBIT (23)(F)
CONSENT OF FINANCIAL ADVISOR
August 14, 1996
We hereby consent to the use in this Registration Statement on Form S-4 of
our letter to the Board of Directors of Center Financial Corporation included as
Annex B to the Prospectus/Proxy Statement forming a part of this Registration
Statement on Form S-4 and to all references to our firm in such Prospectus/Proxy
Statement. In giving such consent, we do not hereby 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 thereunder.
KEEFE, BRUYETTE & WOODS, INC.
By: /s/ Frank S. Cicero
Name: Frank S. Cicero
Title: Vice President
<PAGE>
EXHIBIT (24)
FIRST UNION CORPORATION
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned directors and officers
of FIRST UNION CORPORATION (the "Corporation") hereby constitute and appoint
Marion A. Cowell, Jr. and Kent S. Hathaway, and each of them severally, the true
and lawful agents and attorneys-in-fact of the undersigned with full power and
authority in said agents and the attorneys-in-fact, and in any one of them, to
sign for the undersigned and in their respective names as directors and officers
of the Corporation, a Registration Statement to be filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, relating to
the registration of the shares of Common Stock of the Corporation that are
issuable in connection with the acquisition of Center Financial Corporation, and
to sign any and all amendments to such Registration Statement.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
<S> <C>
/s/ EDWARD E. CRUTCHFIELD Chairman and Chief Executive
EDWARD E. CRUTCHFIELD Officer and Director
/s/ ROBERT T. ATWOOD Executive Vice President and
ROBERT T. ATWOOD Chief Financial Officer
/s/ JAMES H. HATCH Senior Vice President and
JAMES H. HATCH Controller (Principal
Accounting Officer)
/s/ EDWARD E. BARR Director
EDWARD E. BARR
/s/ G. ALEX BERNHARDT Director
G. ALEX BERNHARDT
/s/ W. WALDO BRADLEY Director
W. WALDO BRADLEY
/s/ ROBERT J. BROWN Director
ROBERT J. BROWN
/s/ ROBERT D. DAVIS Director
ROBERT D. DAVIS
/s/ R. STUART DICKSON Director
R. STUART DICKSON
/s/ B. F. DOLAN Director
B. F. DOLAN
/s/ RODDEY DOWD, SR. Director
RODDEY DOWD, SR.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
<S> <C>
/s/ JOHN R. GEORGIUS Director
JOHN R. GEORGIUS
/s/ ARTHUR M. GOLDBERG Director
ARTHUR M. GOLDBERG
/s/ WILLIAM H. GOODWIN, JR. Director
WILLIAM H. GOODWIN, JR.
/s/ BRENTON S. HALSEY Director
BRENTON S. HALSEY
/s/ HOWARD H. HAWORTH Director
HOWARD H. HAWORTH
/s/ FRANK M. HENRY Director
FRANK M. HENRY
Director
LEONARD G. HERRING
/s/ JUAN RODRIGUEZ INCIARTE Director
JUAN RODRIGUEZ INCIARTE
/s/ JACK A. LAUGHERY Director
JACK A. LAUGHERY
/s/ MAX LENNON Director
MAX LENNON
/s/ RADFORD D. LOVETT Director
RADFORD D. LOVETT
/s/ JOSEPH NEUBAUER Director
JOSEPH NEUBAUER
Director
HENRY D. PERRY, JR.
/s/ RANDOLPH N. REYNOLDS Director
RANDOLPH N. REYNOLDS
/s/ RUTH G. SHAW Director
RUTH G. SHAW
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
<S> <C>
/s/ LANTY L. SMITH Director
LANTY L. SMITH
/s/ ANTHONY P. TERRACCIANO Director
ANTHONY P. TERRACCIANO
/s/ DEWEY L. TROGDON Director
DEWEY L. TROGDON
/s/ JOHN D. UIBLE Director
JOHN D. UIBLE
/s/ B. J. WALKER Director
B. J. WALKER
</TABLE>
Dated: June 18, 1996
Charlotte, North Carolina
<PAGE>
EXHIBIT (99)
FORM OF PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS OF CFC
<PAGE>
CENTER FINANCIAL CORPORATION
R E V O C A B L E
SPECIAL MEETING OF STOCKHOLDERS
P R O X Y
, 1996
The undersigned hereby appoints , and
with full power of substitution to act as attorneys and
proxies for the undersigned, to vote all shares of common stock of Center
Financial Corporation ("CFC"), which the undersigned is entitled to vote at the
Special Meeting of Stockholders ("Special Meeting"), to be held at the Mattatuck
Museum, 144 West Main Street, Waterbury, Connecticut, on September 25, 1996, at
10:00 a.m., and at any and all adjournments or postponements thereof, as
follows:
To consider and vote upon a proposal to approve the Agreement and Plan of
Mergers, dated as of June 14, 1996 (the "Merger Agreement"), among CFC,
Centerbank, First Union Corporation ("FUNC"), and First Union Bank of
Connecticut ("FUB-CT"), pursuant to which, among other things, (i) CFC will
merge with and into FUNC (the "Corporate Merger") and Centerbank will merge
with and into FUB-CT, and (ii) each outstanding share of CFC common stock
(excluding any dissenters' shares and certain shares held by CFC or FUNC) will
be converted into the right to receive a number of shares of FUNC common stock
equal to the result obtained by dividing $25.44 by the average closing price
of FUNC common stock on the New York Stock Exchange Composite Transactions
Tape for the ten trading days immediately prior to the effective date of the
Corporate Merger, all on and subject to the terms and conditions contained in
the Merger Agreement.
FOR ( ) AGAINST ( ) ABSTAIN ( )
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ABOVE PROPOSAL.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE ABOVE PROPOSAL. IF ANY OTHER MATTERS ARE VOTED ON AT
THE SPECIAL MEETING, THIS PROXY WILL BE VOTED BY THE PROXYHOLDERS ON SUCH
MATTERS IN THEIR SOLE DISCRETION.
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF CFC
The undersigned acknowledges receipt of the combined Notice of Special Meeting
of Stockholders and Prospectus/Proxy Statement with respect to 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 COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
