<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 30, 1997
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 value 69,700,000 shares $54.8125 $3,810,178,517
(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 $1,154,600
(including rights to purchase - 612,028
shares of common stock or junior $ 542,572
participating Class A Preferred
Stock)...........................
</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 Signet Banking Corporation ("Signet") 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
Signet common stock on the New York Stock Exchange Composite Transactions
tape on September 26, 1997 ($54.8125), and computed based on the estimated
maximum number of such shares (69,512,949) that may be exchanged for the
securities being registered. A filing fee of $612,028 was previously paid in
connection with the filing by Signet (CIK number 009659) of preliminary
proxy material and is credited against the registration fee payable
hereunder. The $542,572 balance due is to be paid by debiting Signet's
account (CIK number 009659) 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/PROXY-STATEMENT
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/PROXY STATEMENT
<C> <S> <C>
1. Forepart of Registration Statement and Outside Front Cover
Page of Prospectus......................................... COVER PAGE; FACING PAGE
2. Inside Front and Outside Back Cover Pages of Prospectus.... COVER PAGE; INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE; AVAILABLE INFORMATION; TABLE OF CONTENTS
3. Risk Factors, Ratio of Earnings to Fixed Charges and Other
Information................................................ SUMMARY
4. Terms of the Transaction................................... SUMMARY; GENERAL INFORMATION; THE MERGERS; DESCRIPTION OF
FUNC CAPITAL STOCK; CERTAIN DIFFERENCES IN THE RIGHTS OF
SIGNET AND FUNC STOCKHOLDERS; ANNEXES A AND B
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..................... EXPERTS; VALIDITY OF FUNC COMMON SHARES
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-2 or
S-3 Registrants............................................ *
15. Information with Respect to S-3 Companies.................. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE; SUMMARY;
RECENT DEVELOPMENTS; SIGNET
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; SIGNET; EXPERTS
19. Information if Proxies, Consents or Authorizations are not
to be Solicited, or in an Exchange Offer................... *
</TABLE>
*Not Applicable.
<PAGE>
SIGNET BANKING CORPORATION
7 NORTH EIGHTH STREET
RICHMOND, VIRGINIA 23219
(804) 747-2000
, 1997
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 Signet Banking
Corporation ("Signet"). The meeting will be held at a.m. on November 13,
1997, at , Richmond, Virginia.
The purpose of the meeting is to vote on a proposal to approve the
Agreement and Plan of Mergers, dated as of July 18, 1997 (the "Merger
Agreement"), by and among Signet, Signet Bank, First Union Corporation ("FUNC")
and First Union National Bank ("FUNB"), pursuant to which, among other things,
Signet will merge with and into FUNC (the "Corporate Merger") and Signet Bank
will merge with and into FUNB (the "Bank Merger", and together with the
Corporate Merger, the "Mergers"), all on and subject to the terms and conditions
contained in the Merger Agreement. FUNC is the sixth largest bank holding
company in the nation, based on assets of $143 billion at June 30, 1997.
Upon consummation of the Corporate Merger, each outstanding share of Signet
common stock (excluding certain shares held by Signet or FUNC) will be converted
into 1.10 shares of FUNC common stock, 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 New York Stock Exchange. The last reported sale
price of FUNC common stock on the New York Stock Exchange Composite Transactions
Tape on , was $ per share.
Consummation of the Mergers is subject to certain conditions, including
approval of the Merger Agreement by Signet stockholders and approval of the
Mergers by various regulatory agencies. Approval of the Merger Agreement
requires the affirmative vote of more than two-thirds of the votes entitled to
be cast at the meeting by the holders of Signet 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 1996 Annual Report on Form 10-K, 1997
First and Second Quarter Reports on Form 10-Q, 1997 Annual Meeting Proxy
Statement and 1997 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 SIGNET HAS APPROVED THE MERGER AGREEMENT BY
UNANIMOUS VOTE, BELIEVES IT IS IN THE BEST INTERESTS OF SIGNET AND ITS
STOCKHOLDERS AND RECOMMENDS ITS APPROVAL BY SIGNET STOCKHOLDERS. 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,
/s/ Malcolm S. McDonald
MALCOLM S. MCDONALD
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
<PAGE>
SIGNET BANKING CORPORATION
7 NORTH EIGHTH STREET
RICHMOND, VIRGINIA 23219
(804) 747-2000
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 13, 1997
, 1997
Dear Stockholder:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Signet
Banking Corporation ("Signet") will be held at a.m. on November 13, 1997,
at , Richmond, Virginia (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 July 18, 1997 (the "Merger Agreement"), by and among
Signet, Signet Bank, First Union Corporation ("FUNC") and First Union
National Bank ("FUNB"), pursuant to which, among other things, (i) Signet
will merge with and into FUNC (the "Corporate Merger") and Signet Bank will
merge with and into FUNB (the "Bank Merger", and together with the Corporate
Merger, the "Mergers"), and (ii) each outstanding share of Signet common
stock (excluding certain shares held by Signet or FUNC) will be converted
into 1.10 shares of FUNC common stock, 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 Signet has fixed October 3, 1997, 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 Signet 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 more than
two-thirds of the votes entitled to be cast at the Special Meeting by the
holders of Signet common stock.
Pursuant to the Virginia Stock Corporation Act, holders of Signet common
stock do not have dissenters' or appraisal rights in connection with the
Mergers.
THE BOARD OF DIRECTORS OF SIGNET UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
By Order of the Board of Directors of
SIGNET BANKING CORPORATION,
/s/ Sara Redding Wilson
SARA REDDING WILSON
CORPORATE SECRETARY
BECAUSE THE AFFIRMATIVE VOTE OF MORE THAN TWO-THIRDS OF THE VOTES ENTITLED TO BE
CAST AT THE SPECIAL MEETING IS REQUIRED TO APPROVE THE MERGER AGREEMENT, SIGNET
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
SHARES
FIRST UNION CORPORATION SIGNET BANKING CORPORATION
COMMON STOCK SPECIAL MEETING OF STOCKHOLDERS
$3.33 1/3 PAR VALUE PER SHARE TO BE HELD ON NOVEMBER 13, 1997
</TABLE>
This Prospectus/Proxy Statement is being furnished by Signet Banking
Corporation, a Virginia corporation ("Signet"), to the holders of Signet common
stock, par value $5.00 per share (together with the Signet Rights (as
hereinafter defined) attached thereto, "Signet Common Stock"), as a Proxy
Statement in connection with the solicitation of proxies by the Board of
Directors of Signet (the "Signet Board") for use at a Special Meeting of
Stockholders of Signet to be held at a.m., on November 13, 1997, at
, Richmond, Virginia (including 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 ("FUNC Common Stock"), that
are issuable upon consummation of the Corporate Merger (as hereinafter defined),
together with the appropriate number of FUNC Rights (as hereinafter defined)
attached thereto.
This Prospectus/Proxy Statement, the accompanying Notice of Special Meeting
and form of proxy are first being mailed to the stockholders of Signet on or
about October , 1997.
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 July 18, 1997 (the
"Merger Agreement"), among Signet, Signet Bank, a Virginia bank, FUNC, and First
Union National Bank, a national banking association ("FUNB"), pursuant to which,
among other things, Signet will merge with and into FUNC (the "Corporate
Merger") and Signet Bank will merge with and into FUNB (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 Signet
Common Stock (excluding any shares held by Signet or FUNC, other than in a
fiduciary capacity or in satisfaction of a debt previously contracted (the
"Excluded Shares")) will be converted into 1.10 FUNC Common Shares (the
"Exchange Ratio"). Upon consummation of the Corporate Merger, the Excluded
Shares will be cancelled.
Based on the (i) shares of Signet Common Stock outstanding on
the Record Date (as hereinafter defined), (ii) shares of Signet Common
Stock issuable upon the exercise of all options outstanding on the Record Date
to purchase shares of Signet Common Stock granted to employees, officers and
directors of Signet or the vesting of shares of restricted stock granted to
employees of Signet for which certificates have not yet been issued as of the
Record Date, and (iii) the Exchange Ratio, a total of FUNC Common
Shares will be issuable upon consummation of the Corporate Merger, which
represents approximately percent of the number of shares of FUNC Common Stock
outstanding on August 31, 1997, plus such number of FUNC Common Shares.
FUNC Common Stock and Signet Common Stock are listed and traded on the New
York Stock Exchange ("NYSE"). On July 18, 1997, 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 and Signet Common Stock on the NYSE
Composite Transactions Tape (the "NYSE Tape") were $48.6875 (as adjusted to
reflect the FUNC Stock Split (as hereinafter defined)) and $36.6875,
respectively. On , 1997, such prices were $ and $ ,
respectively.
Holders of Signet Common Stock are not entitled to dissenters' or appraisal
rights in connection with the Mergers. See "THE MERGERS -- No Dissenters'
Rights".
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 (THE "FDIC") OR ANY OTHER
GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY
STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS/PROXY STATEMENT IS OCTOBER , 1997.
<PAGE>
AVAILABLE INFORMATION
FUNC and Signet 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 Signet 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 are also available from the
Commission over the Internet at http://www.sec.gov. Since FUNC Common Stock and
Signet Common Stock are listed on the NYSE, reports, proxy statements and other
information relating to FUNC and Signet 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 the Registration Statement have been omitted pursuant to the
rules and regulations of the Commission and reference is hereby made to such
omitted portions of the Registration Statement for further information.
THIS PROSPECTUS/PROXY STATEMENT INCORPORATES BY REFERENCE DOCUMENTS 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,
CORPORATE RELATIONS, ONE FIRST UNION CENTER, CHARLOTTE, NORTH CAROLINA
28288-0206 (TELEPHONE NUMBER (704) 374-6782) AS TO FUNC DOCUMENTS; AND TO:
SIGNET BANKING CORPORATION, CORPORATE COMMUNICATIONS, 7 NORTH EIGHTH STREET,
RICHMOND, VIRGINIA 23219 (TELEPHONE NUMBER (804) 771-7210) AS TO SIGNET
DOCUMENTS. IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY SUCH
REQUEST SHOULD BE MADE BY NOVEMBER 6, 1997.
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 Signet was supplied by Signet.
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 SIGNET. 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 SIGNET 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.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by FUNC (File No.
1-10000) and by Signet (File No. 1-06505) 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,
1996;
(ii) FUNC's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1997 and June 30, 1997; and
(iii) FUNC's Current Reports on Form 8-K dated January 13, 1997, July
21, 1997 and August 20, 1997.
Signet documents:
(i) Signet's Annual Report on Form 10-K for the year ended December
31, 1996;
(ii) Signet's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1997 and June 30, 1997; and
(iii) Signet's Current Reports on Form 8-K dated June 3, 1997 and July
21, 1997.
All documents filed by FUNC or Signet 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.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This Prospectus/Proxy Statement (including information included or
incorporated by reference herein) contains certain forward-looking statements
with respect to the financial condition, results of operations, plans,
objectives, future performance and business of each of FUNC and Signet on a
stand-alone basis and of FUNC on a pro forma combined basis following
consummation of the Mergers, including (i) statements relating to the cost
savings estimated to result from the Mergers (see "RECENT DEVELOPMENTS -- FUNC",
"THE MERGERS -- Background and Reasons" and " -- Opinion of Financial Advisor"),
(ii) statements relating to revenues estimated to result from the Mergers (see
"RECENT DEVELOPMENTS -- FUNC"), (iii) statements relating to the restructuring
charges estimated to be incurred in connection with the Mergers (see "RECENT
DEVELOPMENTS -- FUNC"), and (iv) statements preceded by, followed by or that
include the words "believes", "expects", "anticipates", "estimates" or similar
expressions. These forward-looking statements involve certain risks and
uncertainties. Factors that may cause actual results to differ materially from
those contemplated by such forward-looking statements include, among others, the
following possibilities: (a) expected cost savings from the Mergers may not be
fully realized or realized within the expected time frame; (b) revenues
following the Mergers may be lower than expected, or deposit attrition,
operating costs or customer loss and business disruption following the Mergers
may be greater than expected; (c) competitive pressures among depository and
other financial institutions may increase significantly; (d) costs or
difficulties related to the integration of the business of FUNC and Signet may
be greater than expected; (e) changes in the interest rate environment may
reduce margins; (f) general economic or business conditions, either nationally
or in the states in which FUNC is doing business, may be less favorable than
expected, resulting in, among other things, a deterioration in credit quality or
a reduced demand for credit; (g) legislative or regulatory changes may adversely
affect the business in which FUNC is engaged; and (h) changes may occur in the
securities markets.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
AVAILABLE INFORMATION.................................................................................................. 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................................................................ 3
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION............................................................ 3
SUMMARY................................................................................................................ 6
RECENT DEVELOPMENTS.................................................................................................... 18
FUNC................................................................................................................. 18
Signet............................................................................................................... 19
GENERAL INFORMATION.................................................................................................... 20
General.............................................................................................................. 20
Record Date; Vote Required; Revocation of Proxies.................................................................... 20
THE MERGERS............................................................................................................ 22
General; Exchange Ratio.............................................................................................. 22
Effective Date....................................................................................................... 22
Exchange of Signet Certificates...................................................................................... 22
Background and Reasons............................................................................................... 23
Opinion of Financial Advisor......................................................................................... 25
Interests of Certain Persons......................................................................................... 30
Certain Federal Income Tax Consequences.............................................................................. 33
Business Pending Consummation........................................................................................ 33
Regulatory Approvals................................................................................................. 34
Conditions to Consummation; Termination.............................................................................. 36
Waiver; Amendment.................................................................................................... 36
Accounting Treatment................................................................................................. 36
Expenses............................................................................................................. 36
Stock Option Agreement............................................................................................... 37
Amendment to Signet Rights Agreement................................................................................. 38
No Dissenters' Rights................................................................................................ 39
Market Prices........................................................................................................ 39
Dividends............................................................................................................ 40
SIGNET................................................................................................................. 41
General.............................................................................................................. 41
History and Business................................................................................................. 41
FUNC................................................................................................................... 42
General.............................................................................................................. 42
History and Business................................................................................................. 42
Certain Regulatory Considerations.................................................................................... 43
DESCRIPTION OF FUNC CAPITAL STOCK...................................................................................... 46
Authorized Capital................................................................................................... 46
FUNC Common Stock.................................................................................................... 46
FUNC Preferred Stock................................................................................................. 47
FUNC Class A Preferred Stock......................................................................................... 47
FUNC Rights Plan..................................................................................................... 47
Other Provisions..................................................................................................... 48
CERTAIN DIFFERENCES IN THE RIGHTS OF SIGNET AND FUNC STOCKHOLDERS...................................................... 49
General.............................................................................................................. 49
Authorized Capital................................................................................................... 49
Amendment to Articles of Incorporation or Bylaws..................................................................... 49
Size and Classification of Board of Directors........................................................................ 50
Removal of Directors................................................................................................. 50
Director Exculpation................................................................................................. 50
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Director Conflict of Interest Transactions........................................................................... 50
Stockholder Meetings................................................................................................. 51
Director Nominations................................................................................................. 51
Stockholder Proposals................................................................................................ 52
Stockholder Protection Rights Plans.................................................................................. 52
Stockholder Inspection Rights; Stockholder Lists..................................................................... 53
Required Stockholder Vote for Certain Actions........................................................................ 54
Anti-Takeover Provisions............................................................................................. 55
Dissenters' Rights................................................................................................... 56
Dividends and Other Distributions.................................................................................... 56
Voluntary Dissolution................................................................................................ 56
RESALE OF FUNC COMMON SHARES........................................................................................... 56
VALIDITY OF FUNC COMMON SHARES......................................................................................... 57
EXPERTS................................................................................................................ 57
ANNEX A -- AGREEMENT AND PLAN OF MERGERS (including the Stock Option Agreement as Exhibit A thereto)................... A-1
ANNEX B -- OPINION OF J.P. MORGAN SECURITIES INC....................................................................... B-1
</TABLE>
5
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY OF CERTAIN INFORMATION RELATING TO THE MERGERS IS NOT
INTENDED TO INCLUDE 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", "FUNB", "SIGNET" AND "SIGNET BANK"
REFER TO SUCH ORGANIZATIONS, RESPECTIVELY, AND UNLESS THE CONTEXT OTHERWISE
REQUIRES, TO THEIR RESPECTIVE CONSOLIDATED SUBSIDIARIES.
PARTIES TO THE MERGERS
FUNC AND FUNB
FUNC is a North Carolina-based, multi-bank holding company subject to the
Bank Holding Company Act of 1956, as amended, and the rules and regulations
promulgated thereunder (the "BHCA"). Through its full-service 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 Washington, D.C. FUNC also provides various other financial
services, including mortgage banking, home equity lending, credit cards,
leasing, investment banking, insurance and securities brokerage services,
through other subsidiaries. As of June 30, 1997, and for the six months then
ended, FUNC reported assets of $142.9 billion, net loans of $96.4 billion,
deposits of $92.9 billion, stockholders' equity of $10.0 billion and net income
applicable to common stockholders of $956 million, and as of such date FUNC
operated in 38 states, Washington, D.C. and six foreign countries. FUNC is the
sixth largest bank holding company in the United States, based on assets at June
30, 1997. 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.
FUNB is a national banking association headquartered in Charlotte, North
Carolina, and is a subsidiary of FUNC. As of June 30, 1997, and for the six
months then ended, FUNB reported assets of $83.9 billion, net loans of $59.1
billion, deposits of $58.6 billion, stockholder's equity of $6.0 billion and net
income of $607 million, and as of such date FUNB operated banking offices in
North Carolina, Georgia and Florida. Pursuant to corporate reorganizations (i)
on June 5, 1997, FUNC's subsidiary national banks in Florida and Georgia merged
into FUNB, and (ii) on July 31, 1997, FUNC's subsidiary banks in South Carolina,
Tennessee, Virginia, Maryland, Connecticut and Washington, D.C. merged into
FUNB. On a pro forma basis as of June 30, 1997, giving effect to the July 31,
1997 corporate reorganization, before intercompany eliminations, FUNB would have
had assets of $112.2 billion, net loans of $76.4 billion, deposits of $78.4
billion, stockholder's equity of $8.8 billion and net income of $831 million.
See "FUNC -- Certain Regulatory Considerations; INTERSTATE BANKING AND BRANCHING
LEGISLATION".
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 -- FUNC " and "FUNC".
SIGNET AND SIGNET BANK
Signet is a Virginia-based, bank holding company subject to the BHCA.
Signet is engaged in general commercial and consumer banking businesses through
its principal bank subsidiary, Signet Bank. Signet Bank provides financial
services through banking offices located throughout Virginia, Maryland and
Washington, D.C., on-line Internet access and a 24-hour full-service telephone
banking center. Signet also has subsidiaries which are engaged in trust
operations, various kinds of servicing and leasing activities, insurance agency
activities, mortgage servicing and broker-dealer activities. As of June 30,
1997, and for the six months then ended, Signet reported assets of $11.9
billion, net loans of $6.3 billion, deposits of $8.1 billion, stockholders'
equity of $936 million and net income of $31 million. The principal executive
offices of Signet are located at 7 North Eighth Street, Richmond, Virginia
23219, and its telephone number is (804) 747-2000. See " -- Comparison of
Certain Unaudited Per Share Data", " -- Selected Financial Data", "RECENT
DEVELOPMENTS -- Signet" and "SIGNET".
6
<PAGE>
SPECIAL MEETING; RECORD DATE
The Special Meeting is scheduled to be held on November 13, 1997, at
a.m., at , Richmond, Virginia. At the Special
Meeting, stockholders will consider and vote upon a proposal to approve the
Merger Agreement.
The Signet Board has fixed October 3, 1997, 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
Signet 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, Signet will
merge with and into FUNC and Signet Bank will merge with and into FUNB. Upon
consummation of the Corporate Merger, each outstanding share of Signet Common
Stock (excluding any Excluded Shares) will be converted into 1.10 FUNC Common
Shares (I.E., the Exchange Ratio).
See "THE MERGERS -- General; Exchange Ratio", "DESCRIPTION OF FUNC CAPITAL
STOCK" and "CERTAIN DIFFERENCES IN THE RIGHTS OF SIGNET AND FUNC STOCKHOLDERS".
VOTE REQUIRED
Approval of the Merger Agreement requires the affirmative vote of more than
two-thirds of the votes entitled to be cast at the Special Meeting by the
holders of Signet Common Stock.
The directors and executive officers of Signet (including certain of their
related interests) beneficially owned, as of the Record Date, and are entitled
to vote at the Special Meeting, shares of Signet Common Stock, which
represents percent of the outstanding shares of Signet Common Stock entitled
to be voted at the Special Meeting. Each such person has advised Signet that he,
she or it intends to vote in favor of approval of the Merger Agreement. To the
best of FUNC's knowledge, the directors, executive officers and affiliates of
FUNC beneficially own less than one percent of the outstanding shares of Signet
Common Stock, all of which are expected to be voted in favor of approval of the
Merger Agreement.
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 (i) the fifth business day to occur after
the last of the conditions set forth in the Merger Agreement shall have been
satisfied or waived (or, at the election of FUNC, on the last business day of
the month in which such day occurs or, if such last business day occurs on one
of the last five business days of such month, on the last business day of the
succeeding month), or (ii) such date as FUNC and Signet mutually agree upon.
Subject to the foregoing, it is currently anticipated that the Mergers will be
consummated in the fourth quarter of 1997. If the Corporate Merger is
consummated in such quarter, or in any other quarter, Signet 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 Signet
Certificates", " -- Business Pending Consummation" and " -- Conditions to
Consummation; Termination".
RECOMMENDATION OF THE SIGNET BOARD
THE SIGNET BOARD HAS APPROVED THE MERGER AGREEMENT BY UNANIMOUS VOTE,
BELIEVES IT IS IN THE BEST INTERESTS OF SIGNET AND ITS STOCKHOLDERS AND
RECOMMENDS ITS APPROVAL BY SIGNET STOCKHOLDERS. SEE "THE MERGERS -- BACKGROUND
AND REASONS; SIGNET".
7
<PAGE>
OPINION OF FINANCIAL ADVISOR
J.P. Morgan Securities Inc. ("J.P. Morgan"), which has acted as financial
advisor to Signet, has advised the Signet Board that, in its opinion, the
consideration to be received by Signet stockholders in the Corporate Merger is
fair, from a financial point of view, to the holders of Signet Common Stock. The
full text of the J.P. Morgan 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 Signet
stockholders. See "THE MERGERS -- Opinion of Financial Advisor".
INTERESTS OF CERTAIN PERSONS IN THE MERGERS
Certain members of Signet's management and the Signet Board may be deemed
to have interests in the Mergers in addition to their interests as stockholders
of Signet generally. These interests include, among other things, provisions in
the Merger Agreement relating to indemnification, directors' and officers'
liability insurance and certain other benefits as summarized below.
In connection with the execution of the Merger Agreement, FUNC entered into
five-year employment agreements with Malcolm S. McDonald, Chairman and Chief
Executive Officer and a director of Signet, Wallace B. Millner, III, Vice
Chairman and Chief Financial Officer and a director of Signet, and T. Gaylon
Layfield, III, President and Chief Operating Officer and a director of Signet,
which will become effective as of the Effective Date (the "Employment
Agreements"). The Employment Agreements provide, among other things, for such
executives to receive annual salaries of not less than $700,000, $425,000 and
$475,000, respectively, an annual bonus of not less than $700,000, $425,000 and
$475,000, respectively, and certain additional retirement, death and other
benefits. The Employment Agreements also provide for certain payments,
notwithstanding termination of employment, associated gross-up payments for
taxes, and Messrs. McDonald, Millner and Layfield to receive annual retirement
benefits for life (with a 50 percent joint and survivor benefit to their
respective current spouses), commencing upon the expiration of the Employment
Period, equal to $840,000, $510,000 and $300,000, respectively (subject to
reduction by the receipt of social security benefits and certain other pension
benefits).
In addition, on the Effective Date, Mr. McDonald will be granted 40,000
restricted shares of FUNC Common Stock and an option to purchase 100,000 shares
of FUNC Common Stock; Mr. Millner will be granted 18,000 restricted shares and
an option to purchase 45,000 shares; and Mr. Layfield will be granted 24,000
restricted shares and an option to purchase 60,000 shares. Such options shall
have an exercise price equal to the market price of FUNC Common Stock as of the
Effective Date. The options and the restricted shares will vest in installments
over a three-year period. Based upon the last reported sale price per share of
FUNC Common Stock on the NYSE Tape on , 1997 ($ ), such
restricted stock awards would have values of $ , $ and $ ,
respectively, to Messrs. McDonald, Millner and Layfield.
The Employment Agreements will supercede any employment agreements Messrs.
McDonald, Millner and Layfield have with Signet.
Pursuant to the Merger Agreement, FUNC has agreed to assume Signet's
obligations under employment agreements (the "Signet Executive Agreements") with
12 executive officers other than Messrs. McDonald, Millner and Layfield (the
"Signet Officers"). Pursuant to the Signet Executive Agreements, each of the
Signet Officers would receive certain payments if his or her employment were
terminated by FUNC without "Cause" or by the Signet Officer with "Good Reason"
during the three-year period following stockholder approval of the Merger
Agreement or if the Signet Officer voluntarily terminates employment during the
13th month following stockholder approval of the Merger Agreement. Messrs.
McDonald, Millner, Layfield and the Signet Officer participants in such plans
would also become vested in accrued benefits under certain supplemental
retirement benefit plans upon stockholder approval of the Merger Agreement.
Pursuant to the terms of the individual stock option agreements with Messrs.
McDonald, Millner, Layfield and the Signet Officers, certain options to purchase
shares of Signet Common Stock will become exercisable upon stockholder approval
of the Merger Agreement. In addition, Signet may establish a $5 million
retention bonus pool to be allocated by Signet to key personnel (other than
Messrs. McDonald, Millner and Layfield), and may amend or modify certain
cash-based incentive plans to provide certain payments under such plans.
The Merger Agreement provides for FUNC to cause two members of the Signet
Board to be elected or appointed as directors to the FUNC Board of Directors as
promptly as practicable after the Effective Date. Pursuant to his Employment
Agreement with FUNC, Mr. McDonald will be one of such members of the Signet
Board to be nominated for election or appointed to the FUNC Board of Directors.
FUNC expects to nominate for election or appoint Norwood H. Davis, Jr., as the
other member of the Signet Board to be elected or appointed to the FUNC Board of
Directors.
8
<PAGE>
For more information about the Employment Agreements, Signet Executive
Agreements, supplemental retirement benefit plans, stock option agreements and
cash-based incentive plans, 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, counsel for FUNC, dated as of
the Effective Date, to the effect that the Corporate Merger constitutes a
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"), and (ii) by Signet of an opinion of Wachtell, Lipton,
Rosen & Katz, special counsel for Signet, dated as of the Effective Date, 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 for federal income
tax purposes by stockholders of Signet who receive FUNC Common Shares in
exchange for their shares of Signet Common Stock, except with respect to cash
received in lieu of fractional share interests. See "THE MERGERS -- Certain
Federal Income Tax Consequences".
BECAUSE CERTAIN TAX CONSEQUENCES MAY VARY DEPENDING UPON THE PARTICULAR
CIRCUMSTANCES OF EACH SIGNET STOCKHOLDER, IT IS RECOMMENDED THAT SIGNET
STOCKHOLDERS CONSULT THEIR TAX ADVISORS CONCERNING THE FEDERAL (AND ANY STATE
AND LOCAL) TAX CONSEQUENCES OF THE CORPORATE MERGER IN THEIR PARTICULAR
CIRCUMSTANCES.
NO DISSENTERS' RIGHTS
Pursuant to the Virginia Stock Corporation Act (the "VSCA"), holders of
Signet Common Stock do not have dissenters' or appraisal rights in connection
with the Mergers. See "THE MERGERS -- No Dissenters' Rights".
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
Signet or FUNC. See "RESALE OF FUNC COMMON SHARES".
BUSINESS PENDING CONSUMMATION
Signet agreed in the Merger Agreement to refrain from taking certain
actions relating to its operations pending consummation of the Mergers, without
the prior written consent of FUNC, except as otherwise permitted by the Merger
Agreement. Signet also agreed in the Merger Agreement to make certain
modifications or changes to its loan, litigation and real estate valuation
policies and practices prior to the Effective Date, to the extent mutually
agreed upon between FUNC and Signet. Signet also agreed in the Merger Agreement
to cause its regular quarterly dividend record and payment dates for Signet
Common Stock to correspond to FUNC's regular quarterly dividend record and
payment dates for FUNC Common Stock. The fourth quarter dividend on FUNC Common
Stock is expected to be declared on October 21, 1997, with a record date of
November 28, 1997, and a payment date of December 15, 1997. The third quarter
dividend on FUNC Common Stock in the amount of $.32 per share was paid on
September 15, 1997.
See "THE MERGERS -- Interests of Certain Persons" and " -- Business Pending
Consummation".
REGULATORY APPROVALS
The Mergers are subject to the prior approval of the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board"), the Office of the
Comptroller of the Currency (the "OCC") and the Virginia Bureau of Financial
Institutions (the "Virginia Bureau"). Applications have been filed with such
regulatory authorities for such approvals. There can be no assurance that the
necessary regulatory approvals will be obtained or as to the timing or
conditions of such approvals. 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
Signet; (ii) receipt of the regulatory approvals referred to above without any
requirements, restrictions or conditions which the FUNC Board of Directors
reasonably determines would (a) following the Effective Date, have a material
adverse effect on FUNC and its subsidiaries taken as a whole, or (b) reduce the
benefits of the transactions contemplated by the Merger Agreement to such a
degree that FUNC would not have entered into the Merger Agreement had such
9
<PAGE>
requirements, restrictions or conditions been known at the time the Merger
Agreement was executed; (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 Signet 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 Signet's independent auditors, dated as of or shortly
prior to the Effective Date, with respect to Signet's consolidated financial
position and results of operations; (vi) receipt by Signet of a letter from
FUNC's independent auditors, dated as of or shortly prior to the Effective Date,
with respect to FUNC's consolidated financial position and results of
operations; (vii) receipt by FUNC from its independent auditors and receipt by
Signet from its independent auditors, of letters, each dated as of the Effective
Date, that the Corporate Merger, including the transactions contemplated by the
Merger Agreement and other agreements between the parties to the Merger
Agreement related thereto, qualify for pooling of interests accounting
treatment; and (viii) the FUNC Common Shares issuable in the Corporate Merger
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
Signet. The Merger Agreement may also be terminated by the Board of Directors of
either FUNC or Signet if the Corporate Merger does not occur on or before July
31, 1998, 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 and the Commission fee
for filing the Registration Statement will be shared equally by FUNC and Signet.
STOCK OPTION AGREEMENT
As an inducement and condition to FUNC's willingness to enter into the
Merger Agreement, Signet (as issuer) entered into a Stock Option Agreement with
FUNC (as grantee), dated as of July 19, 1997 (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, Signet granted to FUNC an
irrevocable option (the "Option"), exercisable only under certain circumstances
(none of which, to the best of Signet's and FUNC's knowledge, has occurred as of
the date hereof) to purchase up to 19.9 percent of the issued and outstanding
shares of Signet Common Stock for a purchase price of $37.4688 per share,
subject to adjustment in certain circumstances.
Under certain circumstances, if the Option becomes exercisable, Signet may
be required to repurchase the Option (or the shares, if any, purchased pursuant
thereto). The purchase of any shares of Signet Common Stock pursuant to the
Option is subject to compliance with applicable law, including receipt of any
necessary approval under the BHCA.
In certain circumstances, FUNC may relinquish the Option to Signet in
exchange for a cash fee equal to $60.0 million.
The Stock Option Agreement and the 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 Signet.
See "THE MERGERS -- Stock Option Agreement".
AMENDMENT TO SIGNET RIGHTS AGREEMENT
In connection with the execution of the Merger Agreement, Signet amended
the Signet Rights Agreement (as hereinafter defined) to provide, among other
things, that (i) the execution and delivery of the Stock Option Agreement and
any acquisition of shares of Signet Common Stock by FUNC (and certain related
persons) upon exercise thereof, or as contemplated by the Merger Agreement, will
not cause the Signet Rights (as hereinafter defined) to become exercisable, and
(ii) the Signet Rights may not become exercisable at any time from and after,
and the Signet Rights Agreement will terminate on, the Effective Date. See "THE
MERGERS -- Amendment to Signet Rights Agreement", "DESCRIPTION OF FUNC CAPITAL
STOCK -- FUNC Rights Plan" and "CERTAIN DIFFERENCES IN THE RIGHTS OF SIGNET AND
FUNC STOCKHOLDERS -- Stockholder Protection Rights Plans".
10
<PAGE>
ACCOUNTING TREATMENT
It is intended that the Mergers will be accounted for as a pooling of
interests under generally accepted accounting principles. Consummation of the
Corporate Merger is conditioned upon receipt of letters from Signet's and FUNC's
independent auditors to the effect that the Corporate Merger, including the
transactions contemplated by the Merger Agreement and other agreements between
the parties to the Merger Agreement related thereto, may be accounted for in
such manner. See "RECENT DEVELOPMENTS -- FUNC; FUNC Common Stock Transactions",
"THE MERGERS -- Conditions to Consummation; Termination" and " -- Accounting
Treatment".
CERTAIN DIFFERENCES IN THE RIGHTS OF SIGNET AND FUNC STOCKHOLDERS
The rights of stockholders of Signet are currently determined by reference
to the VSCA and by Signet's Articles of Incorporation (as amended, the "Signet
Articles") and bylaws (as amended, the "Signet Bylaws"). On the Effective Date,
stockholders of Signet 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 SIGNET AND FUNC STOCKHOLDERS".
COMPARISON OF CERTAIN UNAUDITED PER SHARE DATA
The following unaudited information, adjusted to reflect the two-for-one
FUNC Common Stock split paid on July 31, 1997, to holders of record on July 1,
1997 (the "FUNC Stock Split"), 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 Signet; (ii) on a pro forma
combined basis per share of FUNC Common Stock; and (iii) on an equivalent pro
forma basis per share of Signet Common Stock. Such pro forma information has
been prepared assuming consummation of the Mergers on a pooling of interests
accounting basis as of the beginning of each of the periods presented. See "THE
MERGERS -- Accounting Treatment".
Pro forma financial information is intended to show how the Mergers might
have affected historical financial statements if the Mergers 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 Mergers 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 pro forma financial information presented
herein does not reflect the pending FUNC acquisitions of WFBS (as hereinafter
defined) or Covenant (as hereinafter defined). See "RECENT DEVELOPMENTS -- FUNC;
OTHER PENDING ACQUISITIONS".
The information shown below should be read in conjunction with the
historical financial statements of FUNC and Signet, 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 SIGNET Pro Forma Combined Selected
Financial Data" under " -- Selected Financial Data".
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
<S> <C> <C>
BOOK VALUE PER SHARE
Historical per share of
FUNC Common Stock............................................................................... $17.79 17.41
Signet Common Stock............................................................................. 15.50 15.38
Pro forma combined per share of FUNC Common Stock (1).............................................. 17.40 17.06
Equivalent pro forma per share of Signet Common Stock (2).......................................... $19.14 18.77
</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 of FUNC Common
Stock outstanding.
(2) The equivalent pro forma book value per share of Signet Common Stock amounts
represent the pro forma combined book value per share of FUNC Common Stock
amounts multiplied by the Exchange Ratio.
11
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED
SIX MONTHS ENDED DECEMBER 31,
JUNE 30, 1997 1996 1995 1994
<S> <C> <C> <C> <C>
CASH DIVIDENDS PAID PER SHARE
Historical per share of
FUNC Common Stock............................................................... $ 0.58 1.10 0.98 0.86
Signet Common Stock............................................................. 0.42 0.81 0.79 1.00
Pro forma combined per share of FUNC Common Stock (3).............................. 0.56 1.06 0.61 0.57
Equivalent pro forma per share of Signet Common Stock (4).......................... $ 0.62 1.16 0.68 0.62
</TABLE>
(3) The pro forma combined cash dividends paid per share of FUNC Common Stock
amounts represent pro forma combined cash dividends paid on common stock
outstanding, divided by pro forma combined average number of shares of FUNC
Common Stock outstanding, rounded to the nearest cent.
(4) The equivalent pro forma cash dividends paid per share of Signet Common
Stock amounts represent pro forma combined per share of FUNC Common Stock
amounts multiplied by the Exchange Ratio, rounded to the nearest cent. The
current annualized dividend rate per share for FUNC Common Stock, based on
the most recently declared quarterly dividend rate of $.32 per share paid on
September 15, 1997, would be $1.28. On an equivalent pro forma basis, such
current annualized FUNC dividend per share of Signet Common Stock would be
$1.41, rounded up to the nearest cent. Any future FUNC and Signet dividends
are dependent on their respective earnings and financial conditions,
government regulations and policies and other factors. See "THE
MERGERS -- Exchange of Signet Certificates", " -- Business Pending
Consummation" and " -- Dividends".
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEARS ENDED
JUNE 30, DECEMBER 31,
1997 1996 1996 1995 1994
<S> <C> <C> <C> <C> <C>
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS
Historical per share of
FUNC Common Stock (5).............................................................. $1.70 1.20 2.67 2.52 2.29
Signet Common Stock................................................................ 0.51 1.02 2.06 1.86 2.59
Pro forma combined per share of FUNC Common Stock (6)................................. 1.57 1.17 2.59 2.43 2.29
Equivalent pro forma per share of Signet Common Stock (7)............................. $1.72 1.29 2.85 2.67 2.52
</TABLE>
(5) FUNC net income applicable to common stockholders amounts as of and for the
year ended December 31, 1996, includes (i) $181 million, or $0.32 per share
of FUNC Common Stock, in after-tax First Fidelity Bancorporation ("FFB")
merger-related restructuring charges, and (ii) $86 million, or $0.16 per
share of FUNC Common Stock, in after-tax charges relating to the
recapitalization of the Savings Association Insurance Fund ("SAIF"). The
acquisition of FFB by FUNC was consummated on January 1, 1996. See
"FUNC -- History and Business" and " -- Certain Regulatory Considerations".
(6) 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.
(7) The equivalent pro forma income per share of Signet Common Stock amounts
represent pro forma combined income per share of FUNC Common Stock amounts
multiplied by the Exchange Ratio.
12
<PAGE>
<TABLE>
<CAPTION>
HISTORICAL
FUNC SIGNET EQUIVALENT PRO FORMA
COMMON STOCK COMMON STOCK PER SHARE OF SIGNET COMMON STOCK (8)
<S> <C> <C> <C>
MARKET VALUE PER SHARE
July 14, 1997......................................... $ 48.6875 36.6875 53.50
, 1997................................. $
</TABLE>
(8) The equivalent pro forma market values per share of Signet Common Stock
represent the historical market values per share of FUNC Common Stock
multiplied by the Exchange Ratio, rounded down to the nearest one-sixteenth.
The FUNC and Signet historical market values per share represent the last
reported sale prices per share of FUNC Common Stock and Signet Common Stock
on the NYSE Tape on: (i) July 18, 1997, the last business day preceding
public announcement of the execution of the Merger Agreement; and (ii) on
, 1997. 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 Signet Common Stock
will receive upon consummation of the Corporate Merger may increase or decrease
prior to and after the receipt of such shares. Signet stockholders are urged to
obtain current market quotations for FUNC Common Stock.
13
<PAGE>
SELECTED FINANCIAL DATA
The following tables set forth certain unaudited historical consolidated
selected financial information for FUNC and Signet and certain unaudited pro
forma combined selected financial information. Such pro forma information has
been prepared assuming consummation of the Mergers on a pooling of interests
accounting basis as of the beginning of each of the periods presented. See "THE
MERGERS -- Accounting Treatment". FUNC net income applicable to common
stockholders amounts as of and for the year ended December 31, 1996, include (i)
$181 million, or $0.32 per share of FUNC Common Stock, in after-tax FFB
merger-related restructuring charges, and (ii) $86 million, or $0.16 per share
of FUNC Common Stock, in after-tax charges relating to the recapitalization of
the SAIF. See "FUNC -- History and Business" and " -- Certain Regulatory
Considerations". This information should be read in conjunction with the
historical financial statements of FUNC and Signet, 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 Signet reflect, in the respective
opinions of management, all adjustments (consisting only of normal recurring
adjustments) necessary to a fair presentation of such data.
Pro forma financial information is intended to show how the Mergers might
have affected historical financial statements if the Mergers 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 Mergers 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 pro forma
financial information presented herein does not reflect the pending FUNC
acquisitions of WFBS or Covenant. See "RECENT DEVELOPMENTS -- FUNC; OTHER
PENDING ACQUISITIONS".
14
<PAGE>
FUNC (HISTORICAL)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
(IN MILLIONS, EXCEPT PER SHARE DATA) 1997 1996 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARIES OF INCOME
Interest income.......................................... $ 4,977 4,770 9,628 8,687 7,231 6,602
Interest expense........................................ 2,350 2,294 4,632 4,052 2,793 2,482
Net interest income..................................... 2,627 2,476 4,996 4,635 4,438 4,120
Provision for loan losses............................... 310 150 375 220 179 370
Net interest income after provision for loan losses..... 2,317 2,326 4,621 4,415 4,259 3,750
Securities available for sale transactions.............. 9 18 31 44 6 33
Investment security transactions........................ 1 3 4 5 4 7
Noninterest income...................................... 1,498 1,051 2,322 1,848 1,566 1,542
Merger-related restructuring charges.................... -- 281 281 -- -- --
SAIF special assessment................................. -- -- 133 -- -- --
Noninterest expense..................................... 2,351 2,063 4,254 4,093 3,747 3,536
Income before income taxes.............................. 1,474 1,054 2,310 2,219 2,088 1,796
Income taxes............................................ 518 372 811 789 712 579
Net income.............................................. 956 682 1,499 1,430 1,376 1,217
Dividends on preferred stock............................ -- 7 9 26 46 46
Net income applicable to common stockholders before
redemption premium.................................... 956 675 1,490 1,404 1,330 1,171
Redemption premium on preferred stock................... -- -- -- -- 41 --
Net income applicable to common stockholders after
redemption premium.................................... $ 956 675 1,490 1,404 1,289 1,171
PER COMMON SHARE DATA (a)
Net income before redemption premium.................... $ 1.70 1.20 2.67 2.52 2.36 2.15
Net income after redemption premium..................... 1.70 1.20 2.67 2.52 2.29 2.15
Cash dividends.......................................... 0.58 0.52 1.10 0.98 0.86 0.75
Book value.............................................. 17.79 16.23 17.41 15.94 14.10 13.36
CASH DIVIDENDS PAID ON COMMON STOCK....................... 329 291 611 336 298 244
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
Assets.................................................. 142,942 139,886 140,127 131,880 113,529 104,550
Loans, net of unearned income........................... 96,411 91,339 95,858 90,563 77,831 68,263
Deposits................................................ 92,934 91,453 94,815 92,555 87,865 81,885
Long-term debt.......................................... 7,258 7,807 7,660 7,121 4,242 3,675
Guaranteed preferred beneficial interests............... 990 -- 495 -- -- --
Preferred stockholders' equity.......................... -- 163 -- 183 230 262
Common stockholders' equity............................. 9,980 9,153 10,008 8,860 8,044 7,432
Total stockholders' equity.............................. $ 9,980 9,316 10,008 9,043 8,274 7,946
Preferred shares outstanding (IN THOUSANDS)............. -- 2,599 -- 3,388 5,213 11,560
Common shares outstanding (IN THOUSANDS)................ 560,977 563,895 574,697 555,692 570,721 556,408
CONSOLIDATED AVERAGE BALANCE SHEET ITEMS
Assets.................................................. $137,390 133,597 134,127 118,142 106,413 99,610
Loans, net of unearned income........................... 94,959 89,546 90,660 83,265 70,726 62,996
Deposits................................................ 92,837 91,367 91,320 87,274 80,760 76,830
Long-term debt.......................................... 7,482 7,429 7,565 5,707 4,009 3,598
Guaranteed preferred beneficial interests............... 951 -- 47 -- -- --
Common stockholders' equity (b)......................... 9,767 9,049 9,079 8,412 7,870 6,782
Total stockholders' equity (b).......................... $ 9,767 9,221 9,187 8,623 8,372 7,302
Common shares outstanding (IN THOUSANDS)................ 563,003 562,950 557,624 557,354 563,325 544,876
CONSOLIDATED PERCENTAGES
Net income applicable to common stockholders before
redemption premium to average common stockholders'
equity (b)............................................. 19.74%(c) 14.99(c) 16.41 16.69 16.91 17.26
Net income applicable to common stockholders after
redemption premium to average common stockholders'
equity (b)............................................ 19.74(c) 14.99(c) 16.41 16.69 16.38 17.26
Net income to
Average total stockholders' equity (b)................ 19.74(c) 14.88(c) 16.32 16.59 16.44 16.66
Average assets........................................ 1.40(c) 1.03(c) 1.12 1.21 1.29 1.22
Average stockholders' equity to average assets (d)...... 7.06 6.90 6.82 7.23 7.52 7.11
Allowance for loan losses to
Net loans............................................. 1.42 1.55 1.42 1.66 2.03 2.38
Nonaccrual and restructured loans..................... 223 195 204 233 248 151
Nonperforming assets.................................. 194 169 179 182 178 115
Net charge-offs to average net loans.................... 0.64(c) 0.56(c) 0.63 0.41 0.40 0.78
Nonperforming assets to loans, net and foreclosed
properties............................................ 0.73 0.91 0.80 0.91 1.14 2.06
Capital ratios (d)
Tier 1 capital........................................ 7.55 7.11 7.33 6.70 7.76 9.14
Total capital......................................... 12.64 11.94 12.33 11.45 12.94 14.64
Leverage.............................................. 6.23 5.60 6.13 5.49 6.12 6.13
Net interest margin..................................... 4.36%(c) 4.18(c) 4.21 4.46 4.75 4.82
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE DATA) 1992
<S> <C>
CONSOLIDATED SUMMARIES OF INCOME
Interest income.......................................... 6,609
Interest expense........................................ 2,942
Net interest income..................................... 3,667
Provision for loan losses............................... 643
Net interest income after provision for loan losses..... 3,024
Securities available for sale transactions.............. 39
Investment security transactions........................ (3)
Noninterest income...................................... 1,360
Merger-related restructuring charges.................... --
SAIF special assessment................................. --
Noninterest expense..................................... 3,443
Income before income taxes.............................. 977
Income taxes............................................ 278
Net income.............................................. 699
Dividends on preferred stock............................ 53
Net income applicable to common stockholders before
redemption premium.................................... 646
Redemption premium on preferred stock................... --
Net income applicable to common stockholders after
redemption premium.................................... 646
PER COMMON SHARE DATA (a)
Net income before redemption premium.................... 1.26
Net income after redemption premium..................... 1.26
Cash dividends.......................................... 0.64
Book value.............................................. 11.68
CASH DIVIDENDS PAID ON COMMON STOCK....................... 168
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
Assets.................................................. 95,308
Loans, net of unearned income........................... 60,301
Deposits................................................ 76,156
Long-term debt.......................................... 3,733
Guaranteed preferred beneficial interests............... --
Preferred stockholders' equity.......................... 277
Common stockholders' equity............................. 6,187
Total stockholders' equity.............................. 6,717
Preferred shares outstanding (IN THOUSANDS)............. 12,158
Common shares outstanding (IN THOUSANDS)................ 529,790
CONSOLIDATED AVERAGE BALANCE SHEET ITEMS
Assets.................................................. 90,621
Loans, net of unearned income........................... 58,700
Deposits................................................ 71,947
Long-term debt.......................................... 3,528
Guaranteed preferred beneficial interests............... --
Common stockholders' equity (b)......................... 5,724
Total stockholders' equity (b).......................... 6,280
Common shares outstanding (IN THOUSANDS)................ 510,768
CONSOLIDATED PERCENTAGES
Net income applicable to common stockholders before
redemption premium to average common stockholders'
equity (b)............................................. 11.28
Net income applicable to common stockholders after
redemption premium to average common stockholders'
equity (b)............................................ 11.28
Net income to
Average total stockholders' equity (b)................ 11.13
Average assets........................................ 0.77
Average stockholders' equity to average assets (d)...... 6.89
Allowance for loan losses to
Net loans............................................. 2.57
Nonaccrual and restructured loans..................... 105
Nonperforming assets.................................. 76
Net charge-offs to average net loans.................... 1.03
Nonperforming assets to loans, net and foreclosed
properties............................................ 3.36
Capital ratios (d)
Tier 1 capital........................................ 9.22
Total capital......................................... 14.31
Leverage.............................................. 6.55
Net interest margin..................................... 4.73
</TABLE>
(a) Per common share data has been restated to reflect the FUNC Stock Split.
(b) Average common stockholders' equity and total stockholders' equity exclude
net unrealized gains and (losses) on debt and equity securities in 1994
through 1997.
(c) Annualized.
(d) The average stockholders' equity to average assets ratios and all capital
ratios for 1992-1994 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.
15
<PAGE>
SIGNET (HISTORICAL) (A)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
(IN MILLIONS, EXCEPT PER SHARE DATA) 1997 1996 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARIES OF INCOME
Interest income............................................. $ 419 408 831 866 807 804
Interest expense........................................... 182 174 362 373 297 275
Net interest income........................................ 237 234 469 493 510 529
Provision for loan losses.................................. 30 25 74 38 14 47
Net interest income after provision for loan losses........ 207 209 395 455 496 482
Securities available for sale transactions................. -- 1 5 1 3 4
Investment security transactions........................... -- -- -- 1 -- --
Noninterest income......................................... 124 121 275 277 564 361
Noninterest expense........................................ 286 237 486 564 846 598
Income before income taxes................................. 45 94 189 170 217 249
Income taxes............................................... 14 32 64 59 67 75
Net income................................................. $ 31 62 125 111 150 174
PER COMMON SHARE DATA
Net income................................................. $ 0.51 1.02 2.06 1.86 2.59 3.06
Cash dividends............................................. 0.42 0.40 0.81 0.79 1.00 0.80
Book value................................................. 15.50 14.48 15.38 14.59 18.96 17.04
CASH DIVIDENDS PAID ON COMMON STOCK.......................... 25 24 48 46 57 45
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
Assets...................................................... 11,853 11,526 11,720 10,978 12,931 11,849
Loans, net of unearned income.............................. 6,345 5,912 6,355 5,416 7,924 6,310
Deposits................................................... 8,055 7,480 7,887 7,593 7,822 7,821
Long-term debt............................................. 350 250 400 253 254 266
Total stockholders' equity................................. $ 936 862 924 864 1,111 965
Common shares outstanding (IN THOUSANDS)................... 60,383 59,564 60,077 59,209 58,637 56,609
CONSOLIDATED AVERAGE BALANCE SHEET ITEMS
Assets...................................................... $11,416 11,207 11,364 11,134 11,469 11,617
Loans, net of unearned income.............................. 6,264 5,690 5,908 6,120 6,408 6,206
Deposits................................................... 7,770 7,538 7,589 7,367 7,747 7,733
Long-term debt............................................. 387 252 295 365 255 287
Total stockholders' equity (b)............................. $ 924 835 858 854 1,049 889
Common shares outstanding (IN THOUSANDS)................... 61,424 60,429 60,672 59,826 57,863 56,920
CONSOLIDATED PERCENTAGES
Net income to
Average common stockholders' equity...................... 6.72%(c) 14.54(c) 14.35 12.79 14.33 19.62
Average assets........................................... 0.55(c) 1.11(c) 1.10 1.00 1.31 1.50
Average stockholders' equity to average assets............. 8.17 7.61 7.66 7.80 9.12 7.65
Allowance for loan losses to
Net loans................................................ 1.89 2.14 2.15 2.39 2.78 4.01
Nonaccrual and restructured loans........................ 508 372 483 337 846 343
Nonperforming assets..................................... 359 230 352 239 454 217
Net charge-offs to average net loans....................... 0.95(c) 1.00(c) 1.13 0.87 0.71 0.91
Nonperforming assets to loans, net and foreclosed
properties............................................... 0.52 0.92 0.61 1.00 0.61 1.83
Capital ratios (d)
Tier 1 capital........................................... 10.99 10.33 10.78 9.82 12.58 11.12
Total capital............................................ 14.36 12.40 14.70 12.56 15.59 15.02
Leverage................................................. 7.73 7.14 7.43 6.93 9.90 8.13
Net interest margin........................................ 4.75%(c) 4.83(c) 4.73 5.08 5.16 5.17
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE DATA) 1992
<S> <C>
CONSOLIDATED SUMMARIES OF INCOME
Interest income............................................. 767
Interest expense........................................... 331
Net interest income........................................ 436
Provision for loan losses.................................. 68
Net interest income after provision for loan losses........ 368
Securities available for sale transactions................. 10
Investment security transactions........................... (18)
Noninterest income......................................... 281
Noninterest expense........................................ 499
Income before income taxes................................. 142
Income taxes............................................... 33
Net income................................................. 109
PER COMMON SHARE DATA
Net income................................................. 1.96
Cash dividends............................................. 0.45
Book value................................................. 14.77
CASH DIVIDENDS PAID ON COMMON STOCK.......................... 25
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
Assets...................................................... 12,093
Loans, net of unearned income.............................. 5,809
Deposits................................................... 7,823
Long-term debt............................................. 298
Total stockholders' equity................................. 827
Common shares outstanding (IN THOUSANDS)................... 55,962
CONSOLIDATED AVERAGE BALANCE SHEET ITEMS
Assets...................................................... 11,168
Loans, net of unearned income.............................. 5,618
Deposits................................................... 7,886
Long-term debt............................................. 298
Total stockholders' equity (b)............................. 768
Common shares outstanding (IN THOUSANDS)................... 55,727
CONSOLIDATED PERCENTAGES
Net income to
Average common stockholders' equity...................... 14.22
Average assets........................................... 0.98
Average stockholders' equity to average assets............. 6.88
Allowance for loan losses to
Net loans................................................ 4.57
Nonaccrual and restructured loans........................ 228
Nonperforming assets..................................... 147
Net charge-offs to average net loans....................... 2.34
Nonperforming assets to loans, net and foreclosed
properties............................................... 3.08
Capital ratios (d)
Tier 1 capital........................................... 9.56
Total capital............................................ 13.86
Leverage................................................. 7.24
Net interest margin........................................ 4.47
</TABLE>
(a) Signet spun off Capital One Financial Corporation ("Capital One") on
February 28, 1995. The amount of pre-tax income related to Capital One was
as follows: 1995 -- $27 million; 1994 -- $147 million; 1993 -- $171
million; and 1992 -- $49 million. See "SIGNET -- History and Business".
In 1994, noninterest expense included $43 million in restructuring charges
and $49 million in contract termination fees. The first six months of 1997
included $59 million in restructuring charges. See "RECENT
DEVELOPMENTS -- Signet" and "SIGNET -- History and Business".
(b) Average total stockholders' equity excludes net unrealized gains and
(losses) on debt and equity securities in 1994 through 1997.
(c) Annualized.
(d) 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.
16
<PAGE>
FUNC AND SIGNET
PRO FORMA COMBINED SELECTED FINANCIAL DATA (A)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
(IN MILLIONS, EXCEPT PER SHARE DATA) 1997 1996 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARIES OF INCOME
Interest income........................................ $ 5,396 5,178 10,459 9,553 8,038 7,406
Interest expense...................................... 2,532 2,468 4,994 4,425 3,090 2,757
Net interest income................................... 2,864 2,710 5,465 5,128 4,948 4,649
Provision for loan losses............................. 340 175 449 258 193 417
Net interest income after provision for loan losses... 2,524 2,535 5,016 4,870 4,755 4,232
Securities available for sale transactions............ 9 19 36 45 9 37
Investment security transactions...................... 1 3 4 6 4 7
Noninterest income.................................... 1,622 1,172 2,597 2,125 2,130 1,903
Merger-related restructuring charges.................. -- 281 281 -- -- --
SAIF special assessment............................... -- -- 133 -- -- --
Noninterest expense................................... 2,637 2,300 4,740 4,657 4,593 4,134
Income before income taxes............................ 1,519 1,148 2,499 2,389 2,305 2,045
Income taxes.......................................... 532 404 875 848 779 654
Net income............................................ 987 744 1,624 1,541 1,526 1,391
Dividends on preferred stock.......................... -- 7 9 26 46 46
Net income applicable to common stockholders before
redemption premium.................................. 987 737 1,615 1,515 1,480 1,345
Redemption premium on preferred stock................. -- -- -- -- 41 --
Net income applicable to common stockholders after
redemption premium.................................. $ 987 737 1,615 1,515 1,439 1,345
PER COMMON SHARE DATA
Net income before redemption premium................... $ 1.57 1.17 2.59 2.43 2.36 2.21
Net income after redemption premium................... 1.57 1.17 2.59 2.43 2.29 2.21
Book value............................................ 17.40 15.91 17.06 15.66 14.41 13.57
CASH DIVIDENDS PAID ON COMMON STOCK..................... 354 315 659 382 355 289
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
Assets................................................. 154,795 151,412 151,847 142,858 126,460 116,399
Loans, net of unearned income......................... 102,756 97,251 102,213 95,979 85,755 74,573
Deposits.............................................. 100,989 98.933 102,702 100,148 95,687 89,706
Long-term debt........................................ 7,608 8,057 8,060 7,374 4,496 3,941
Guaranteed preferred beneficial interests............. 990 -- 495 -- -- --
Preferred stockholders' equity........................ -- 163 -- 183 230 262
Common stockholders' equity........................... 10,916 10,015 10,932 9,724 9,155 8,397
Total stockholders' equity............................ $ 10,916 10,178 10,932 9,907 9,385 8,911
Preferred shares outstanding (IN THOUSANDS)........... -- 2,599 -- 3,388 5,213 11,560
Common shares outstanding (IN THOUSANDS).............. 627,398 629,415 640,782 620,822 635,222 618,678
CONSOLIDATED PERCENTAGES
Allowance for loan losses to
Net loans........................................... 1.45% 1.59 1.47 1.71 2.10 2.52
Nonperforming assets................................ 201 173 187 186 192 123
Net charge-offs to average net loans.................. 0.66(b) 0.58(b) 0.66 0.44 0.42 0.79
Nonperforming assets to loans, net and foreclosed
properties.......................................... 0.72% 0.91 0.78 0.92 1.09 2.04
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE DATA) 1992
<S> <C>
CONSOLIDATED SUMMARIES OF INCOME
Interest income........................................ 7,376
Interest expense...................................... 3,273
Net interest income................................... 4,103
Provision for loan losses............................. 711
Net interest income after provision for loan losses... 3,392
Securities available for sale transactions............ 49
Investment security transactions...................... (21)
Noninterest income.................................... 1,641
Merger-related restructuring charges.................. --
SAIF special assessment............................... --
Noninterest expense................................... 3,942
Income before income taxes............................ 1,119
Income taxes.......................................... 311
Net income............................................ 808
Dividends on preferred stock.......................... 53
Net income applicable to common stockholders before
redemption premium.................................. 755
Redemption premium on preferred stock................. --
Net income applicable to common stockholders after
redemption premium.................................. 755
PER COMMON SHARE DATA
Net income before redemption premium................... 1.32
Net income after redemption premium................... 1.32
Book value............................................ 11.86
CASH DIVIDENDS PAID ON COMMON STOCK..................... 193
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
Assets................................................. 107,401
Loans, net of unearned income......................... 66,110
Deposits.............................................. 83,979
Long-term debt........................................ 4,031
Guaranteed preferred beneficial interests............. --
Preferred stockholders' equity........................ 277
Common stockholders' equity........................... 7,014
Total stockholders' equity............................ 7,544
Preferred shares outstanding (IN THOUSANDS)........... 12,158
Common shares outstanding (IN THOUSANDS).............. 591,348
CONSOLIDATED PERCENTAGES
Allowance for loan losses to
Net loans........................................... 2.75
Nonperforming assets................................ 82
Net charge-offs to average net loans.................. 1.14
Nonperforming assets to loans, net and foreclosed
properties.......................................... 3.34
</TABLE>
(a) It is assumed that the Mergers will be accounted for on a pooling of
interests accounting basis, and accordingly, the Pro Forma Combined
Selected Financial Data reflects the (i) the Exchange Ratio, where
appropriate, and (ii) combining of the historical financial information of
FUNC and Signet.
(b) Annualized.
17
<PAGE>
RECENT DEVELOPMENTS
FUNC
THE MERGERS
On July 21, 1997, FUNC filed a Current Report on Form 8-K with the
Commission (the "Form 8-K") which contained, among other items, certain
financial and other information (the "Form 8-K Materials") about the Mergers.
The Form 8-K Materials contained certain forward-looking statements regarding
FUNC, Signet and the combined organization following the Mergers, including
statements relating to estimated cost savings and enhanced revenues that may be
realized from the Mergers, and certain restructuring charges expected to be
incurred in connection with the Mergers. Such forward-looking statements involve
significant risks and uncertainties. Actual results may differ materially from
the results discussed in the Form 8-K Materials and herein. Factors that might
cause such a difference include, but are not limited to, those discussed in the
Form 8-K and FUNC's Quarterly Report on Form 10-Q for the period ended June 30,
1997. See "CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION" and
"AVAILABLE INFORMATION".
As indicated in the Form 8-K:
o FUNC expects to realize before-tax expense savings resulting
from the Mergers of approximately $169 million in 1998 and
$242 million in 1999, or approximately $108 million and $155
million after-tax, respectively. These estimates assume that
approximately 50 percent of Signet's 1996 annual expenses
are eliminated by the end of 1999. See " -- Signet".
o FUNC expects to realize before-tax revenue enhancements
relating to the Mergers of approximately $30 million in 1998
and $37 million in 1999, or approximately $15 million and
$19 million after-tax, respectively. These estimates are
primarily based on an analysis of fee income generating
products currently offered by FUNC which either are not
offered by Signet or are offered by Signet on a more limited
basis.
o Assuming (i) the restructuring charges discussed below and
the expense savings and revenue enhancements discussed above
are as indicated, (ii) 641 million shares of FUNC Common
Stock are outstanding in 1998 and 646 million shares of FUNC
Common Stock are outstanding in 1999, (iii) the Mergers are
consummated in 1997, (iv) the conversion of Signet's
operations and computer systems to FUNC's operations and
computer systems are completed by April 1998, (v) 1998
earnings per share of (a) FUNC Common Stock are $3.905 and
(b) Signet Common Stock are $2.62, which represent the First
Call Consensus estimates (before public announcement of the
Merger Agreement and before Signet's June 3, 1997 corporate
redesign announcement, the "1998 Illustrative First Call
Consensus Estimates") and 1999 earnings per share of FUNC
Common Stock and Signet Common Stock are equal to the 1998
Illustrative First Call Consensus Estimates plus ten percent
(the "1999 Illustrative Estimates") (I.E., $4.295 for FUNC
Common Stock and $2.88 for Signet Common Stock), and (vi)
certain other assumptions contained in the Form 8-K, the
Mergers are estimated to add $0.005 per share to the 1998
Illustrative First Call Consensus Estimates for FUNC Common
Stock and $0.065 per share to the 1999 Illustrative
Estimates for FUNC Common Stock. The 1998 Illustrative First
Call Consensus Estimates and the 1999 Illustrative Estimates
are presented for illustrative purposes only, are subject to
the risks and uncertainties set forth in the Form 8-K
Materials and under "CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION", and do not constitute earnings
projections or estimates by FUNC or Signet.
o FUNC expects to take an after-tax restructuring charge
relating to the Mergers currently estimated at $135 million,
or $0.42 per share of FUNC Common Stock, in 1997. The
estimated $135 million restructuring charge is summarized
below.
<TABLE>
<CAPTION>
(IN MILLIONS, AFTER TAX)
<S> <C>
Severance and change in control related obligations............................... $ 58
Fixed asset write-downs and vacant space accrual.................................. 38
Service contract terminations..................................................... 18
Other............................................................................. 21
Total............................................................................. $135
</TABLE>
The estimated restructuring charge includes approximately $18 million in
non-cash charges. Cash payments included in the estimated restructuring charge
are expected to be completed by the end of the second quarter of 1998. The
"Other" category includes Mergers-related amounts, none of which is estimated to
exceed $13 million. The amounts included in the
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$135 million estimated restructuring charge are subject to change prior to the
Effective Date. The estimates include assumptions about the timing of the
consummation of the Mergers and number of employees whose employment will
terminate as a result of the Mergers. Changes in such assumptions could result
in a change in the estimated restructuring charge.
OTHER PENDING ACQUISITIONS
On August 4, 1997, FUNC entered into an agreement to acquire Covenant
Bancorp, Inc. ("Covenant"), a bank holding company based in Haddonfield, New
Jersey. Covenant's bank subsidiary operates 16 branches in southern New Jersey
and at June 30, 1997, Covenant reported $454 million in assets. Under the terms
of the agreement, FUNC will exchange (i) 0.3813 shares of FUNC Common Stock for
each share of Covenant common stock, (ii) 1.516 shares of FUNC Common Stock for
each share of Covenant Series A preferred stock, and (iii) 1.2 shares of FUNC
Common Stock for each share of Covenant Series B preferred stock. Based on a
price of $49.50 per share of FUNC Common Stock (the last reported sale price per
share of FUNC Common Stock on the NYSE Tape on August 4, 1997, the day before
the acquisition was announced), the purchase price would be approximately $78
million. The acquisition, which will be accounted for as a purchase, is expected
to close in the first quarter of 1998, subject to certain conditions of closing.
FUNC has repurchased in the open market 1.65 million shares of FUNC Common Stock
expected to be issued in the acquisition at a cost of $79 million.
On August 20, 1997, FUNC entered into an agreement to acquire Wheat First
Butcher Singer, Inc. ("WFBS"), a full service investment banking, brokerage and
asset management company based in Richmond, Virginia. WFBS is employee-owned and
operates 126 offices in 19 states and Washington, D.C. Under the terms of the
agreement, First Union will issue 10,267,029 shares of FUNC Common Stock (as may
be adjusted in certain circumstances) in exchange for the outstanding shares of
capital stock of WFBS. In addition, FUNC agreed to establish an employee
retention pool of $75 million in restricted FUNC Common Stock to be paid over a
three-year period to certain key employees of WFBS. The acquisition, which will
be accounted for as a pooling of interests, is expected to close in the fourth
quarter of 1997, subject to certain conditions of closing. Certain additional
financial and other information relating to WFBS and the proposed acquisition
are set forth in FUNC's Current Report on Form 8-K dated August 20, 1997, which
is incorporated by reference herein. See "AVAILABLE INFORMATION".
FUNC COMMON STOCK TRANSACTIONS
In 1995, as adjusted to reflect the FUNC Stock Split, FUNC repurchased in
the open market 51 million shares of FUNC Common Stock at a cost of $1.2
billion; in 1996, 31 million shares at a cost of $968 million; and from January
1, 1997 to the most recent practicable date prior to the mailing of this
Prospectus/Proxy Statement, million shares (including the shares
related to the acquisition of Covenant discussed above) at a cost of
$ million.
On September 23, 1997, FUNC sold 7.5 million shares of FUNC Common Stock in
a public offering (the "Offering"), in order for the Mergers to qualify for
pooling of interests accounting treatment. See "THE MERGERS -- Accounting
Treatment". The Offering also included the sale by Banco Santander, S.A.
("Santander") of all of the remaining 44.7 million shares of FUNC Common Stock
(approximately 7.98 percent of the outstanding shares of FUNC Common Stock as of
August 31, 1997) beneficially owned by Santander. Santander had acquired its
shares of FUNC Common Stock in connection with FUNC's acquisition of FFB on
January 1, 1996. FUNC received $358 million in net proceeds from its sale of the
7.5 million shares in the Offering. FUNC did not receive any proceeds from the
sale of Santander's shares in the Offering.
FUTURE ACQUISITIONS
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
"FUNC -- History and Business".
SIGNET
On June 3, 1997, Signet filed a Current Report on Form 8-K with the
Commission which announced the results of a comprehensive redesign program
("ADVANCE") that would enable Signet to achieve its strategic goal of becoming a
national, customer-focused, information-based financial services company. The
announcement contained certain forward-looking statements relating to ADVANCE,
including statements relating to estimated cost savings and enhanced revenues
that may be realized from the implementation of the program. Such
forward-looking statements involve significant risks and uncertainties. Actual
results derived from ADVANCE may differ materially from the results discussed in
such forward-
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<PAGE>
looking statements. Factors that might cause such a difference include, but are
not limited to, those discussed in Signet's Current Report on Form 8-K filed on
June 3, 1997 and Quarterly Report on Form 10-Q for the period ended June 30,
1997. Additionally, the Mergers may have a dramatic impact on the implementation
of ADVANCE initiatives, the effect of which cannot be determined at this time.
See "CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION" and "AVAILABLE
INFORMATION".
As indicated in the Form 8-K:
(Bullet) Implementation of the program would have been expected to add
approximately $10 million to revenues and to reduce expenses by
approximately $58 million for an annual total benefit of
approximately $68 million pre-tax by year-end 1998. These benefits
are net of implementation costs and significant investments in
technology. The per share annual improvement was expected to be
$.72 after tax by December 1998, excluding the effect of the sale
of certain Signet branch offices, described below.
(Bullet) In connection with ADVANCE, Signet recorded a 1997 second quarter
restructuring charge of $59 million pre-tax.
(Bullet) Implementation of ADVANCE action plans were scheduled to occur
over the next 18 months and would have included the sale of 39
branches located in Southwest Virginia, the Northern Neck of
Virginia, the Eastern Shore of Virginia and Maryland. Signet also
announced that the Signet Board authorized the repurchase of up to
five percent of the outstanding shares of Signet Common Stock, to
be completed by year-end.
Many of these actions have been placed on hold for further review as a
result of the pending Mergers, and the plan to repurchase common shares was
rescinded by the Signet Board on July 18, 1997. There is a possibility, however,
that Signet may proceed with a sale of a portion of the branches originally
announced to be sold.
GENERAL INFORMATION
GENERAL
This Prospectus/Proxy Statement is being furnished by Signet to its
stockholders as a Proxy Statement in connection with the solicitation of proxies
by the Signet Board for use at the Special Meeting to be held on November 13,
1997, and any adjournments or postponements thereof, to consider and vote upon a
proposal to approve the Merger Agreement. This Prospectus/Proxy Statement is
also being furnished by FUNC to the holders of Signet 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 Signet and FUNC may solicit proxies
from Signet stockholders, either personally or by telephone, telegraph or other
forms of communication. Such persons will receive no additional compensation for
such services. Signet has retained Georgeson & Company, Inc. 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 $11,000, 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 and the Commission
fee for filing the Registration Statement, which will be shared equally between
FUNC and Signet.
THE SIGNET BOARD HAS UNANIMOUSLY ADOPTED THE MERGER AGREEMENT, BELIEVES IT
IS IN THE BEST INTERESTS OF SIGNET AND ITS STOCKHOLDERS AND RECOMMENDS ITS
APPROVAL BY SIGNET STOCKHOLDERS. SEE "THE MERGERS -- BACKGROUND AND REASONS;
SIGNET ".
RECORD DATE; VOTE REQUIRED; REVOCATION OF PROXIES
The Signet Board has fixed October 3, 1997, as the Record Date for
determining stockholders entitled to notice of and to vote at the Special
Meeting, and accordingly, only holders of Signet 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 Signet 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 any voting instructions
from the beneficial owners or other persons as to the proposal to approve the
Merger Agreement) 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 more than two-thirds of the votes
entitled to be cast at the Special Meeting by the holders of Signet Common
Stock. Therefore, abstentions and broker non-votes will have the same effect as
votes against approval of the Merger Agreement.
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The directors and executive officers of Signet (including certain of their
related interests) beneficially owned, as of the Record Date, and are entitled
to vote at the Special Meeting shares of Signet Common Stock, which
represent percent of the outstanding shares of Signet Common Stock entitled
to be voted at the Special Meeting. Each such person has advised Signet that he,
she or it intends to vote in favor of approval of the Merger Agreement. To the
best of FUNC's knowledge, the directors, executive officers and affiliates of
FUNC beneficially own less than one percent of the outstanding shares of Signet
Common Stock, all of which are expected to be voted in favor of approval of the
Merger Agreement.
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 Corporate Secretary of Signet; (ii)
submitting a duly executed proxy having a later date; or (iii) appearing at the
Special Meeting and notifying the Corporate Secretary of such stockholder's
intention to vote in person. 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 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.
21
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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
SIGNET ARE URGED TO READ THE MERGER AGREEMENT CAREFULLY.
GENERAL; EXCHANGE RATIO
Subject to the terms and conditions of the Merger Agreement, Signet will
merge with and into FUNC and Signet Bank will merge with and into FUNB. Upon
consummation of the Corporate Merger, each outstanding share of Signet Common
Stock (other than Excluded Shares) will be converted, by virtue of the Corporate
Merger, automatically and without any action on the part of the holder thereof,
into a number of FUNC Common Shares equal to the Exchange Ratio (I.E. 1.10
shares of FUNC Common Stock). Each holder of Signet 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.
EFFECTIVE DATE
Subject to the conditions to the obligations of the parties to effect the
Mergers, the Effective Date will occur on (i) the fifth business day to occur
after the last of the conditions set forth in the Merger Agreement shall have
been satisfied or waived (or, at the election of FUNC, on the last business day
of the month in which such day occurs or, if such last business day occurs on
one of the last five business days of such month, on the last business day of
the succeeding month), or (ii) such date as FUNC and Signet mutually agree upon.
Subject to the foregoing, it is currently anticipated that the Mergers will be
consummated in the last quarter of 1997. If the Corporate Merger is consummated
in such quarter, or in any other quarter, Signet 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 Signet may
terminate the Merger Agreement if the Effective Date does not occur on or before
July 31, 1998. See " -- Exchange of Signet Certificates", " -- Business Pending
Consummation" and " -- Conditions to Consummation; Termination".
EXCHANGE OF SIGNET CERTIFICATES
As promptly as practicable after the Effective Date, FUNC will send or
cause to be sent to each holder of record of Signet Common Stock as of the
Effective Date, transmittal materials for use in exchanging all of such holder's
certificates representing Signet 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.
SIGNET STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.
Upon surrender of all of the certificates for Signet 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 Signet 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 Signet Common Stock will
be entitled to vote at any meeting of holders of FUNC Common Stock the number of
FUNC Common Shares into which their shares of Signet Common Stock have been
converted, regardless of whether they have surrendered their Signet 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 Signet Common
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<PAGE>
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. See " -- Business Pending
Consummation". After the Effective Date, the stock transfer books of Signet will
be closed, and there will be no transfers on the transfer books of Signet of the
shares of Signet Common Stock that were outstanding immediately prior to the
Effective Date.
The Merger Agreement provides that Signet will use its reasonable best
efforts to cause each person who may be deemed to be an "affiliate" (as defined
in the Securities Act) of Signet to execute an agreement restricting the
disposition of such affiliate's shares of Signet Common Stock and FUNC Common
Shares. The Merger Agreement further provides that although shares of Signet
Common Stock held by an affiliate of Signet will automatically be converted into
FUNC Common Shares upon consummation of the Corporate Merger, such shares will
not be physically exchanged for FUNC Common Shares until FUNC receives such an
agreement.
BACKGROUND AND REASONS
SIGNET
BACKGROUND OF THE MERGERS. On July 1, 1997, Mr. Edward E. Crutchfield, the
Chairman and Chief Executive Officer of FUNC, contacted Mr. Malcolm S. McDonald,
the Chairman and Chief Executive Officer and a director of Signet, to discuss
the possibility of a strategic business combination between FUNC and Signet.
Following this initial contact, Signet retained J.P. Morgan to act as its
financial advisor in connection with such a possible strategic business
combination and Mr. McDonald met with Mr. Crutchfield on July 2, 1997, to
discuss the broad terms upon which such a business combination might be pursued.
At this meeting, Mr. Crutchfield indicated that FUNC was interested in a
possible strategic business combination with Signet and presented a broad
outline of FUNC's proposed terms for such a business combination. Mr. McDonald
advised Mr. Crutchfield at such meeting that he would present FUNC's proposed
terms to the Signet Board for discussion.
The Signet Board met on July 14, 1997, to discuss with Signet senior
management and its legal and financial advisors the terms of a possible
strategic business combination with FUNC. Senior management and Signet's
advisors presented to the Signet Board, FUNC's proposed terms for such a
transaction, including an in-depth analysis comparing the anticipated benefits
of a combination with the benefits that could be derived from continued pursuit
of Signet's current strategic plan. Following a thorough discussion of such
proposed terms, Signet's current strategic plan and other opportunities
potentially available to Signet, including the possibility of pursuing a
strategic business combination with other potential partners, and the relative
benefits thereof, the Signet Board determined that, notwithstanding Signet's
success at creating substantial stockholder value through the implementation of
its strategic plan and the Signet Board's expectation that continued pursuit
thereof would yield further significant value, a strategic business combination
with FUNC could present an exceptional opportunity for Signet and its
stockholders. After due consideration of the foregoing matters, the Signet Board
authorized Signet's officers and legal and financial advisors to continue
discussions and negotiations with FUNC.
During the week commencing July 14, 1997, members of FUNC's and Signet's
senior management teams and other personnel conducted a due diligence review
and, with their respective legal and financial advisors, negotiated the terms of
the proposed Mergers and the related agreements, including the Employment
Agreements, the Merger Agreement and the Stock Option Agreement. The Exchange
Ratio and other financial terms of the Mergers were negotiated directly by the
senior management of FUNC and Signet.
At a meeting of the Signet Board held on July 18, 1997, Mr. McDonald, other
members of Signet's senior management and Signet's legal and financial advisors
presented the terms of the proposed Mergers to the Signet Board and discussed
with the Signet Board various factors relating to the proposed Mergers,
including the Exchange Ratio and those factors described under "; RECOMMENDATION
OF THE SIGNET BOARD AND REASONS FOR THE MERGERS". In addition, Signet's legal
advisors summarized the terms of the Employment Agreements, the Merger Agreement
and the Stock Option Agreement. J.P. Morgan rendered its opinion that the
consideration to be paid to Signet stockholders in the Corporate Merger was fair
to such stockholders from a financial point of view. After due consideration of
the foregoing matters, the Signet Board determined that the Mergers were in the
best interest of Signet and its stockholders and unanimously approved the
Mergers, the Merger Agreement, the Stock Option Agreement and the transactions
contemplated thereby.
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FUNC and Signet executed the Merger Agreement and the Stock Option
Agreement immediately after the meeting of the Signet Board and issued a joint
press release announcing the Merger Agreement on July 21, 1997.
RECOMMENDATION OF THE SIGNET BOARD AND REASONS FOR THE MERGERS. The Signet
Board believes that the consummation of the Mergers presents a unique
opportunity to enhance Signet stockholder value by combining with a premier
multi-state banking organization. The Mergers will create a strong consumer and
business banking franchise in the Virginia, Maryland and Washington D.C. region.
The Mergers will combine FUNC's strengths in fee-income generating products and
services with Signet's strengths in information-based technologies, and will
combine two strong management teams with experience in completing merger
transactions that realize cost savings through organizational consolidation and
the achievement of operating efficiencies. The Mergers will also permit each
company to diversify beyond its current businesses and services by expanding the
marketing of products and services to the customers now served by the other, and
will enable the combined company to continue to provide a broad array of
innovative financial services and products to the customers and communities
currently served by each.
In reaching its conclusion that the Mergers are in the best interest of
Signet and its stockholders, the Signet Board considered and reviewed with
Signet's senior management, as well as its financial and legal advisors, a
variety of factors, including but not limited to, the following:
(i) The Mergers would represent a strategic alliance between FUNC and
Signet and Signet stockholders would realize the expected benefits of
such an alliance, including, but not limited to, the earnings per
share prospects of the combined company (as described in "RECENT
DEVELOPMENTS -- FUNC; THE MERGERS"), the combined company's financial
strength and its consequent enhanced ability to strengthen its
existing businesses and develop new products and services to better
serve customers and communities of the two companies, the cost
savings to be realized through consolidation of services in the
Virginia, Maryland and Washington D.C. markets, the potential for
cross-marketing services to customers of the two companies and
increased access to the combined company's customers, the opportunity
to diversify earnings, the business synergies that might be realized,
and the potential effect of the Mergers on the perceptions of the
combined company's businesses by the rating agencies and financial
markets as a result of the factors considered by the Signet Board
described herein.
(ii) The Mergers would significantly enhance the combined company's
ability to compete effectively in the region and to meet the changing
credit and product needs of its customers and communities by
combining two financially sound institutions with complementary
businesses and business strategies, including consumer- and middle
market-focused products and services and information-based
technologies, thereby creating a stronger combined company with
greater size, flexibility, breadth of services, efficiency, capital
strength, profitability and potential for growth (including through
appropriate acquisitions and investments in products and technology)
than Signet would possess on a stand-alone basis.
(iii) The management teams of FUNC and Signet and the compatibility of
their respective management philosophies, including commitment to
customers and employees, and strategic focus.
(iv) The effectiveness of the Mergers to implement and accelerate Signet's
basic long-term business strategies as reflected in its strategic
plan.
(v) The financial condition, businesses and prospects of Signet and FUNC,
including, but not limited to, information with respect to their
respective recent and historic stock and earnings performance and
their respective relatively strong credit position and access to the
capital markets; the Exchange Ratio, noting, in particular, that it
reflected a 42.4 percent premium for Signet stockholders based on the
closing prices of Signet Common Stock and FUNC Common Stock,
respectively, on the last trading day prior to July 18, 1997; and the
detailed financial analyses and pro forma and other information with
respect to Signet and FUNC discussed by J.P. Morgan, as well as the
Signet Board's and senior management's own knowledge of Signet, FUNC
and their respective businesses.
(vi) The opinion of J.P. Morgan that, as of July 18, 1997, the
consideration to be paid to Signet stockholders in the Corporate
Merger was fair, from a financial point of view, to such
stockholders. See " -- Opinion of Financial Advisor".
(vii) The terms of the Mergers (including the Exchange Ratio and the
expected treatment of the Mergers as a pooling of interests for
financial reporting and accounting purposes and as a tax-free
reorganization to Signet stockholders (other than with respect to
cash paid in lieu of fractional shares)), the Merger Agreement and
the Stock Option
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Agreement and the transactions contemplated thereby, and the
proposed arrangements with respect to the management structure and
employee severance following the Mergers, including the terms of the
Employment Agreements. See " -- Interests of Certain Persons".
(viii) The effect on Signet stockholder value of Signet continuing as a
stand-alone entity or pursuing a strategic business combination with
other potential partners, compared to the effect of Signet combining
with FUNC pursuant to the Merger Agreement in light of the factors
summarized above regarding the financial condition and prospects of
the two companies on a stand-alone basis and of the combined
company, and current economic and financial environment.
(ix) The likelihood of the Mergers being approved by the appropriate
regulatory authorities. See " -- Regulatory Approvals".
(x) The anticipated cost savings, operating efficiencies and revenue
enhancements available to the combined company from the Mergers. See
"RECENT DEVELOPMENTS -- FUNC".
(xi) The effect of the Mergers on Signet's other constituencies, including
the customers and communities it serves and its employees, including
management.
The foregoing discussion of the information and factors considered by
Signet is not intended to be exhaustive but includes the material factors
considered by the Signet Board. In reaching its determination to approve and
recommend the Merger Agreement and the transactions contemplated thereby, the
Signet Board did not assign any relative or specific weights to the foregoing
factors, and individual directors may have given differing weights to different
factors.
FOR THE REASONS DESCRIBED ABOVE, THE SIGNET BOARD UNANIMOUSLY APPROVED THE
MERGERS, THE MERGER AGREEMENT AND THE STOCK OPTION AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, AND BELIEVES THAT THE MERGERS ARE IN THE BEST
INTEREST OF SIGNET AND ITS STOCKHOLDERS. ACCORDINGLY, THE SIGNET BOARD
UNANIMOUSLY RECOMMENDS THAT SIGNET STOCKHOLDERS VOTE "FOR" APPROVAL OF THE
MERGER AGREEMENT.
FUNC
FUNC believes that it is advantageous to build a multi-state banking
organization that has one of the leading positions in each of its markets. The
economies of banking favor such an organization as a way of gaining efficiency
and spreading costs over a larger base, as well as providing diversification. To
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 Signet is an excellent way to expand FUNC's presence in Virginia, Maryland
and Washington, D.C.
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
Signet retained J.P. Morgan to act as its financial advisor in connection
with the Corporate Merger and related matters based upon its qualifications,
expertise and reputation, as well as J.P. Morgan's prior investment banking
relationship and general familiarity with Signet. At the July 18, 1997 meeting
of the Signet Board, J.P. Morgan rendered an opinion to the Signet Board that,
as of such date, the consideration to be paid to the holders of Signet Common
Stock in the Corporate Merger was fair to the stockholders of Signet from a
financial point of view. J.P. Morgan subsequently delivered to the Signet Board
a written opinion, dated as of the date of this Prospectus/Proxy Statement (the
"Signet Fairness Opinion"), confirming its opinion of July 18, 1997.
THE FULL TEXT OF THE SIGNET FAIRNESS OPINION, WHICH SETS FORTH, AMONG OTHER
THINGS, ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED, AND
LIMITATIONS ON THE SCOPE OF REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX B TO THIS
PROSPECTUS/PROXY STATEMENT AND IS INCORPORATED HEREIN BY REFERENCE. SIGNET'S
STOCKHOLDERS ARE URGED TO READ THE SIGNET FAIRNESS OPINION IN ITS ENTIRETY. THIS
SUMMARY OF THE SIGNET FAIRNESS OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO THE FULL TEXT OF SUCH OPINION.
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J.P. Morgan's opinions are addressed to the Signet Board, are directed only
to the fairness, from a financial point of view of the consideration to be paid
to the holders of Signet Common Stock in the Corporate Merger and do not
constitute a recommendation to any stockholder of Signet as to how such
stockholder should vote at any meeting held in connection with the Corporate
Merger.
In arriving at the Signet Fairness Opinion, J.P. Morgan reviewed (i) the
Merger Agreement; (ii) certain publicly available information concerning the
business of Signet and of certain other companies engaged in businesses
comparable to those of Signet, and the reported market prices for certain other
companies' securities deemed comparable; (iii) publicly available terms of
certain transactions involving companies comparable to Signet and the
consideration received for such companies; (iv) current and historical market
prices of common stock of Signet and FUNC; (v) the audited financial statements
of Signet and FUNC for the fiscal year ended December 31, 1996, and the
unaudited financial statements of Signet and FUNC for the period ended June 30,
1997; (vi) certain internal financial analyses and forecasts prepared by Signet
and FUNC and their respective managements; and (vii) the terms of other business
combinations that J.P. Morgan deemed relevant.
In addition, J.P. Morgan held discussions with certain members of the
managements of Signet and FUNC with respect to certain aspects of the Corporate
Merger, the past and current business operations of Signet and FUNC, the
financial condition and future prospects and operations of Signet and FUNC, the
effects of the Corporate Merger on the financial condition and future prospects
of Signet and FUNC, and certain other matters J.P. Morgan believed necessary or
appropriate to its inquiry. J.P. Morgan reviewed such other financial studies
and analyses and considered such other information as it deemed appropriate for
the purposes of the Signet Fairness Opinion.
In giving the Signet Fairness Opinion, J.P. Morgan relied upon and assumed,
without independent verification, the accuracy and completeness of all
information that was publicly available or was furnished to Signet and FUNC or
otherwise reviewed by J.P. Morgan and did not assume any responsibility or
liability therefor. J.P. Morgan did not conduct any valuations or appraisal of
any assets or liabilities, nor were any such valuations or appraisals provided
to J.P. Morgan. J.P. Morgan was not requested to review individual credit files
or make any independent assessment as to the future performance or non-
performance of Signet's or FUNC's assets. J.P. Morgan assumed that current
allowances and reserves for loan losses for both Signet and FUNC are sufficient
to cover all such losses. In relying on financial analyses and forecasts
provided to J.P. Morgan, J.P. Morgan assumed that they have been reasonably
prepared based on assumptions reflecting the best currently available estimates
and judgments by management as to the expected future results of operations and
financial conditions of Signet and FUNC to which such analyses or forecasts
relate. J.P. Morgan also assumed that, in the course of obtaining regulatory and
third party consents for the Corporate Merger and the other transactions
contemplated by the Merger Agreement, no restriction will be imposed that will
have a material adverse effect on the future results of operations or financial
conditions of Signet or FUNC. J.P. Morgan also assumed that the Corporate Merger
and other transactions contemplated by the Merger Agreement will have no
material adverse tax consequences to holders of Signet Common Stock.
J.P. Morgan's opinions are based on economic, market and other conditions
as in effect on, and the information made available to J.P. Morgan as of, the
date of such opinions. Subsequent developments may affect the Signet Fairness
Opinion dated the date of this Prospectus/Proxy Statement, and J.P. Morgan does
not have any obligation to update, revise, or reaffirm such opinion.
In connection with rendering its July 18, 1997 opinion to the Signet Board,
J.P. Morgan performed a variety of financial analyses. The summary set forth
below does not purport to be a complete description of the analyses performed by
J.P. Morgan in this regard, although it describes the material analyses
performed by J.P. Morgan. The preparation of a fairness opinion is a complex
process involving various subjective determinations as to the most appropriate
and relevant methods of financial analysis and the application of these methods
to the particular circumstances, and therefore, such an opinion is not readily
susceptible to a partial analysis or summary description. Accordingly,
notwithstanding the separate factors summarized below, J.P. Morgan believes that
its analyses must be considered in their entirety and that selecting portions of
its analyses and factors considered by it, without considering all analyses and
factors, or attempting to ascribe relative weights to some or all such analyses
and factors, could create an incomplete view of the evaluation process
underlying J.P. Morgan's opinion. In light of the foregoing, the ranges of
valuations resulting from any particular analysis described below should not be
taken to be J.P. Morgan's view of the actual value of Signet or FUNC. The fact
that any specific analysis has been referred to in the summary below is not
meant to indicate that such analysis was given more weight than any other
analysis.
In performing its analyses, J.P. Morgan made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, all of which are beyond the control of J.P. Morgan, Signet and
FUNC. The analyses performed by J.P. Morgan are not necessarily indicative of
actual values or actual future results, which may be significantly more or less
favorable than suggested by such analyses. In addition, the analyses do not
purport to be appraisals
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or to reflect the prices at which any securities of Signet or FUNC may trade at
the present time or at any time in the future. Such analyses were prepared
solely as part of J.P. Morgan's analysis of the fairness, from a financial point
of view of the consideration to be paid to the holders of Signet Common Stock in
the Corporate Merger and were provided to the Signet Board in connection with
the delivery of J.P. Morgan's opinion dated July 18, 1997. With respect to the
comparison of selected companies and transactions analyses summarized below, no
public company or transaction utilized as a comparison is identical to Signet or
FUNC or to the proposed Corporate Merger, as the case may be, and such analyses
necessarily involve complex considerations and judgments concerning the
differences in financial and operating characteristics of the companies, and the
financial and other terms of the prior transactions, and other factors that
could affect the public trading values of the companies concerned or that
affected the financial terms of prior transactions.
The following is a summary of the material analyses presented by J.P.
Morgan to the Signet Board in connection with its July 18, 1997 opinion:
(a) OFFER VALUATION. J.P. Morgan reviewed the terms of the proposed
Corporate Merger, including the Exchange Ratio and the aggregate transaction
value and also reviewed the implied value of the consideration offered based
upon the closing share price of FUNC Common Stock of $49.50 (as adjusted to
reflect the FUNC Stock Split) on July 17, 1997 (the last trading day prior to
the July 18, 1997 meeting of the Signet Board) (the "FUNC Stock Price"), which
indicated that the implied value of the consideration offered in the FUNC
proposal was approximately $54.45 per share of Signet Common Stock, representing
a 42.4 percent premium to the July 17, 1997 Signet Common Stock closing market
price of $38.25 per share (the "Signet July 17 Closing Price"). J.P. Morgan
further calculated the premiums implied by the Exchange Ratio to the average
market price of Signet Common Stock for the period five, ten and 30 trading days
prior to July 18, 1997, based on the average market price of FUNC Common Stock
for the same periods and determined that the implied premiums were 44.2 percent,
43.4 percent and 44.2 percent, respectively.
(b) PRO FORMA CORPORATE MERGER ANALYSIS. Based on earnings estimates as
reported by Institutional Brokers Estimate System ("IBES") and management
estimates provided by Signet and FUNC, J.P. Morgan analyzed certain pro forma
effects expected to result from the Corporate Merger during the calendar years
of 1998 and 1999. This analysis indicated that relative to Signet on a
stand-alone basis the Corporate Merger would be accretive to Signet's earnings
per share, dividends per share and tangible book value per share in each of the
years analyzed. Additionally, this analysis indicated that the transaction would
be slightly accretive to estimated earnings per share of FUNC Common Stock in
1998 and 1999 and would be accretive to FUNC's tangible book value per share in
1998. IBES is a data service that monitors and publishes compilations of
earnings estimates by selected research analysts.
(c) CONTRIBUTION ANALYSIS. J.P. Morgan reviewed the relative contributions
to be made by Signet and FUNC to the combined entity. The financial and
operating information reviewed in such analysis included, among other things,
total assets, loans, deposits, equity, tangible equity, net income for the
twelve-month period ended June 30, 1997, and estimated net income for 1998. This
analysis showed that, based upon the Exchange Ratio, the stockholders of Signet
would own approximately 10.6 percent of the outstanding shares of common stock
of the combined company immediately following the Corporate Merger and that
Signet would be contributing 7.7 percent of total assets, 6.2 percent of loans,
8.0 percent of deposits, 8.6 percent of equity, 11.0 percent of tangible equity,
6.9 percent of net income for the twelve-month period ended June 30, 1997, and
7.3 percent of estimated 1998 net income, without taking into account synergies,
and 11.5 percent of estimated 1998 net income, including estimated synergies.
(d) DISCOUNTED CASH FLOW ANALYSIS. Using a discounted cash flow analysis,
J.P. Morgan estimated the net present value of the future streams of after-tax
cash flows that Signet could produce on a stand-alone basis from 1997 through
2002 and distribute to Signet's stockholders ("Dividendable Net Income"). In
this analysis, J.P. Morgan assumed that Signet performed in accordance with
Signet's management projections and projected the after-tax distributions to
stockholders such that Signet's tangible common equity ratio would be maintained
at a 7.5 percent level. J.P. Morgan calculated the sum of (i) the terminal
values per share of Signet Common Stock based on assumed multiples of Signet's
projected 2002 earnings ranging from 12.0x to 15.0x plus (ii) the projected
1997-2002 Dividendable Net Income streams per share, in each case, discounted to
present values at assumed discount rates ranging from ten percent to 13 percent.
This discounted cash flow analysis indicated a reference range of $39.67 to
$54.54 per share of Signet. In addition, J.P. Morgan tested the sensitivity of
these values by varying certain assumptions. The reference range was not
materially changed by reasonable variations of key assumptions. J.P. Morgan also
performed a discounted cash flow analysis assuming certain cost savings and
revenue enhancements estimated to result from the Mergers are achieved. In this
analysis, J.P. Morgan adjusted Signet's management projections to reflect that a
previously announced corporate restructuring would not take effect. Taking into
account Signet's adjusted management projections and the synergies associated
with the Corporate Merger, J.P. Morgan projected the after-tax distributions
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to stockholders such that Signet's tangible common equity ratio would be
maintained at 6.5 percent. This analysis indicated a reference range of $60.22
to $79.08. As indicated above, this analysis did not purport to be indicative of
actual future results and did not purport to reflect the prices at which shares
of Signet Common Stock may trade. Discounted cash flow analysis was included
because it is a widely used valuation methodology, but the results of such
methodology are highly dependent upon the numerous assumptions that must be
made, including earnings growth rates, dividend payout rates, terminal values
and discount rates.
(e) ANALYSIS OF SELECTED ACQUISITION TRANSACTIONS. J.P. Morgan reviewed
publicly available information regarding selected bank acquisitions in the
United States with a value greater than $500 million which had been announced
since January 1, 1996 (including Wachovia Corporation/Central Fidelity Banks
Inc., Wachovia Corporation/Jefferson Bankshares Inc., Huntington Bancshares,
Inc./First Michigan Bank Corporation, First Bank System, Inc./US Bancorp, Allied
Irish Banks p.l.c./Dauphin Deposit Corporation, Banc One Corporation/Liberty
Bancorp, Inc., BB&T Corp./United Carolina Bancshares Corp., Mercantile
Bancorporation, Inc./Mark Twain Bancshares Inc., Crestar Financial
Corporation/Citizens Bancorporation, NationsBank Corporation/Boatmen's
Bancshares, Inc. and Wells Fargo & Company/First Interstate Bancorp). J.P.
Morgan calculated the premium represented by the purchase price paid in such
acquisitions to market price on the day prior to the announcement and the
average price for the five days prior to announcement, last 12 months earnings
per share, estimates of the next 12 months projected earnings per share and
estimates of the subsequent 12 months projected earnings per share, book value
per share, tangible book value per share, and assets, as well as the core
deposit premium paid (defined as the difference between the transaction value
and the tangible book value of the acquired company, divided by core deposits
(I.E., total deposits excluding time deposits of $100,000 or more)), which J.P.
Morgan determined resulted in relevant ranges of premiums of (i) with respect to
the market price on the day prior to the announcement and to the average price
for the five days prior to announcement, 2.4 percent to 58.9 percent and 7.6
percent to 63.0 percent, respectively, with a median of 26.3 percent and 28.4
percent, respectively (resulting in imputed values per share of Signet Common
Stock based on the market price the day prior to announcement of $39.18, $60.78,
and $48.31, respectively, and based on the average price for the five days prior
to announcement of $41.16, $62.33 and $49.12, respectively); (ii) with respect
to last 12 months earnings per share, 13.8x to 20.8x, with a median of 19.4x
(resulting in imputed values per share of Signet Common Stock of $28.75, $43.35
and $40.29, respectively); (iii) with respect to estimates of the next 12 months
projected earnings per share and to estimates of the subsequent 12 months
projected earnings per share, 13.3x to 18.3x and 12.9x to 17.0x, respectively,
with medians of 17.5x and 16.0x, respectively (resulting in imputed values per
share of Signet Common Stock of $33.47, $46.12 and $43.99, respectively, based
on estimates for the next 12 months, and $39.09, $51.57 and $48.57,
respectively, based on estimates for the subsequent 12 months); (iv) with
respect to book value per share, 1.82x to 3.40x, with a median of 2.81x
(resulting in imputed values per share of Signet Common Stock of $28.26, $52.63
and $43.55, respectively); (v) with respect to tangible book value per share,
1.87x to 3.98x, with a median of 2.95x (resulting in imputed values per share of
Signet Common Stock of $27.65, $58.88 and $43.61, respectively); (vi) with
respect to assets, 18.1 percent to 27.3 percent, with a median of 22.7 percent
(resulting in imputed values per share of Signet Common Stock of $35.59, $53.63
and $44.60, respectively); and (vii) with respect to core deposits, 13.0 percent
to 29.8 percent, with a median of 21.9 percent (resulting in imputed values per
share of Signet Common Stock of $31.70, $53.64 and $43.35, respectively). In
performing the above analysis, J.P. Morgan used results for Signet as of or for
the period ended June 30, 1997, except with respect to the market price of
Signet Common Stock, which was as of July 17, 1997.
No company or transaction used in the above analysis as a comparison is
identical to Signet or the proposed Mergers. Accordingly, an analysis of the
results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies and other factors that could affect the value of the companies and
other factors that could affect the value of the companies to which they are
being compared. Mathematical analysis (such as determining the median) is not,
in itself, a meaningful method of using comparable data.
(f) COMPARISON OF SELECTED COMPANIES. J.P. Morgan reviewed and compared
certain public market multiples relating to Signet to the publicly available
corresponding data for three peer groups of selected banks which J.P. Morgan
deemed to be relevant. The group of selected Virginia banks (the "Signet
Selected Virginia Banks") consisted of Crestar Financial Corporation and First
Virginia Banks, Inc. The group of selected Southeastern banks (the "Signet
Selected Southeastern Banks") consisted of Regions Financial Corporation,
SouthTrust Corporation, Union Planters Corporation, AmSouth Bancorporation,
First Tennessee National Corporation, Compass Bancshares, Inc., First American
Corporation, First Commerce Corporation, Hibernia Corporation, and Mercantile
Bankshares Corporation. The group of selected banks located in all regions of
the United States (the "Signet Selected National Banks" and together with the
Signet Selected Virginia Banks and Signet Selected Southeastern Banks, the
"Signet Selected Banks") consisted of all of the Signet Selected Southeastern
Banks as well
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as Commerce Bancshares, Inc., Star Banc Corporation, First of America Bank
Corporation, Firstar Corporation, First Security Corporation, Old Kent Financial
Corporation, Marshall & Ilsley Corporation, Pacific Century Financial
Corporation, Associated Banc-Corp., Zions Bancorporation, and Provident
Financial Group, Inc.
Based on a review of such information for the Signet Selected Banks, J.P.
Morgan determined (in each case based on company data as of or for the 12 months
ended March 31, 1997, and closing stock prices as of July 17, 1997): (i) that,
with respect to the ratio of price to earnings per share for the 12 month period
ended March 31, 1997, the Signet Selected Virginia Banks, Signet Selected
Southeastern Banks, and Signet Selected National Banks had a median of 19.4x,
17.4x and 17.2x, respectively, compared to 18.4x for Signet; (ii) that, with
respect to the multiple of stock price to estimated earnings per share for 1997,
the Signet Selected Virginia Banks, Signet Selected Southeastern Banks, and
Signet Selected National Banks (based on projected earnings per share for 1997
as reported by IBES for Signet Selected Banks and First Call for Signet) had a
median of 16.0x, 15.3x and 15.4x, respectively, compared to 16.5x for Signet;
(iii) that, with respect to the multiple of stock price to estimated earnings
per share of 1998, the Signet Selected Virginia Banks, Signet Selected
Southeastern Banks, and the Signet Selected National Banks (based on earnings
per share for 1998 as reported by IBES for Signet Selected Banks and First Call
for Signet) had a median of 14.5x, 13.8x and 14.0x, respectively, compared to
13.4x for Signet; (iv) that, with respect to the multiple of stock price to book
value, the Signet Selected Virginia Banks, Signet Selected Southeastern Banks,
and the Signet Selected National Banks had a median of 2.50x, 2.54x and 2.61x,
respectively, compared to 2.49x for Signet; and (v) that, with respect to the
multiple of stock price to tangible book value, the Signet Selected Virginia
Banks, Signet Selected Southeastern Banks, and the Signet Selected National
Banks had a median of 2.78x, 2.81x and 2.94, respectively, compared to 2.64x for
Signet.
J.P. Morgan also calculated a range of imputed values for a share of Signet
Common Stock based on a 30 percent equity control premium and certain of the
ratios for the Signet Selected Virginia Banks, Signet Selected Southeastern
Banks, and Signet Selected National Banks, including the ratio of the closing
price of the common stock on July 17, 1997, to each of book value, tangible book
value, earnings per share for the 12 months ended March 31, 1997, and estimated
earnings per share for 1997 and 1998, in each case as reported by IBES for
Signet Selected Banks and First Call for Signet. This analysis, including a 30
percent equity control premium, resulted in a range of imputed values for Signet
Common Stock of between $46.07 and $55.39.
J.P. Morgan reviewed and compared certain public market multiples relating
to FUNC to the publicly available corresponding data for a peer group of
selected banks which J.P. Morgan deemed to be relevant. The group of selected
banks (the "First Union Selected Banks") held assets of more than $50 billion
and excluded "money center" banks. The First Union Selected Banks were
NationsBank Corporation, BankAmerica Corporation, Banc One Corporation, Norwest
Corporation, First Chicago NBD Corporation, Wells Fargo & Company, Sun Trust
Banks, Inc., PNC Bank Corp., National City Corporation, KeyCorp, Fleet Financial
Group, Inc., BankBoston Corporation and U.S. Bancorp.
Based on a review of such information for the First Union Selected Banks,
J.P. Morgan determined (in each case based on company data as of March 31, 1997,
and closing stock prices as of July 17, 1997): (i) that, with respect to the
ratio of stock price to earnings per share for the 12 month period ended March
31, 1997, the First Union Selected Banks had a low of 14.8x, a median of 17.0x
and a high of 21.9x, compared to 15.9x for FUNC; (ii) that, with respect to the
multiple of stock price to estimated earnings per share for each of 1997 and
1998, the First Union Selected Banks (based on projected earnings per share for
the applicable year as reported by IBES) had a low of 12.9x and 11.8x, a median
of 15.5x and 13.5x and a high of 19.5x and 17.8x, respectively, compared to
14.0x and 12.6x, respectively, for FUNC; (iii) that, with respect to the
multiple of stock price to book value, the First Union Selected Banks had a low
of 1.77x, a median of 2.63x and a high of 3.94x, compared to 2.89x for FUNC;
(iv) that, with respect to the multiple of stock price to tangible book value,
the First Union Selected Banks showed a low of 2.58x, a median of 3.31x and a
high of 5.91x, compared to 4.12x for FUNC; and (v) that, with respect to
dividend yield, the First Union Selected Banks showed a low of 1.49 percent, a
median of 2.40 percent and a high of 3.48 percent, compared to 2.61 percent for
FUNC.
In connection with the Signet Fairness Opinion dated the date of this
Prospectus/Proxy Statement, J.P. Morgan performed procedures to update, as
necessary, certain of the analyses described above and reviewed the assumptions
on which such analyses described above were based and the factors considered in
connection therewith. J.P. Morgan did not perform any analyses in addition to
those described in updating its July 18, 1997 opinion.
J.P. Morgan was retained by the Signet Board as an independent contractor
to act as financial advisor to Signet with respect to the Corporate Merger and
will receive a fee for its services, a significant portion of which is
contingent upon the consummation of the Corporate Merger. J.P. Morgan is a an
internationally recognized investment banking firm which,
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among other things, regularly engages in the valuation of businesses and
securities, including banking institutions, in connection with mergers and
acquisitions. J.P. Morgan in the past has provided financial advisory,
investment banking and other services to Signet and FUNC and has received
customary fees for the rendering of such services. In addition, in the ordinary
course of its securities business, J.P. Morgan may actively trade debt and/or
equity securities of Signet and FUNC, and their respective affiliates, for its
own account and the accounts of its customers, and J.P. Morgan, therefore, may
from time to time hold a long or short position in such securities. J.P. Morgan
also maintains customary banking relationships with both Signet and FUNC.
Signet and J.P. Morgan entered into a letter agreement relating to the
services to be provided by J.P. Morgan in connection with the Corporate Merger.
Signet agreed to compensate J.P. Morgan as follows: (i) a fee of $250,000, which
was paid in cash upon execution of the letter agreement; and (ii) a fee of 0.4
percent of the aggregate purchase price paid in the Corporate Merger (or certain
other business combinations involving Signet occurring or agreed upon during
J.P. Morgan's engagement or within one year thereafter), payable upon
consummation of the Corporate Merger or such other business combination (which
fee would be upon consummation of the Corporate Merger approximately $ million
if calculated as of the Record Date, based on shares of Signet Common
Stock outstanding as of such date, the Exchange Ratio and the $ last reported
sale price per share of FUNC Common Stock on such date as reported on the NYSE
Tape, provided that the actual fee paid upon consummation of the Corporate
Merger will be calculated based on the actual aggregate purchase price paid and
not as of such date), from which fee will be deducted any amounts previously
paid pursuant to clause (i). Signet also agreed to reimburse J.P. Morgan for its
reasonable out-of-pocket expenses incurred in connection with its advisory work,
including the reasonable fees and disbursements of its legal counsel, and to
indemnify J.P. Morgan against certain liabilities relating to or arising out of
the Corporate Merger, including liabilities which might arise under the federal
securities laws. In addition Signet has engaged J.P. Morgan as a financial
advisor on the sale of certain branches. J.P. Morgan will receive a fee of
$500,000 for such services if a sale of such branches is consummated. See
"RECENT DEVELOPMENTS -- Signet".
INTERESTS OF CERTAIN PERSONS
GENERAL
Certain members of Signet's management and the Signet Board have interests
in the Mergers that are in addition to any interests they have as stockholders
of Signet generally. The material interests include provisions in the Merger
Agreement relating to the indemnification of Signet's directors and officers,
directors' and officers' liability insurance, and certain other benefits, as
described below.
EMPLOYMENT AGREEMENTS
FUNC has entered into the Employment Agreements with Messrs. McDonald,
Millner and Layfield. The terms of the Employment Agreements run from the
Effective Date through the fifth anniversary of the Effective Date (the
"Employment Period"). Pursuant to the Employment Agreements, Mr. McDonald will
serve as Chairman of, and be the most senior officer with direct responsibility
for, the Virginia, Maryland and Washington, D.C. banking operations of FUNC (the
"Banking Operations") reporting to the Vice Chairman of FUNC responsible for the
Banking Operations, and will also serve on the Board of Directors of FUNC; Mr.
Millner and Mr. Layfield will each serve as a Vice Chairman of the Banking
Operations, reporting directly to Mr. McDonald. During the term of the
Employment Agreements, Messers. McDonald, Millner and Layfield will be entitled
to receive base salaries of at least $700,000, $425,000 and $475,000,
respectively, and minimum annual bonuses of no less than $700,000, $425,000 and
$475,000, respectively. During the term of the Employment Agreements, FUNC will
provide Messrs. McDonald, Millner and Layfield with benefits and perquisites no
less favorable than those provided to peer executives of FUNC and its
affiliates. The Employment Agreements provide that Messrs. McDonald, Millner and
Layfield will receive annual retirement benefits for life (with a 50 percent
joint and survivor benefit to their respective current spouses), commencing upon
the expiration of the Employment Period, equal to $840,000, $510,000 and
$300,000, respectively (subject to reduction by the receipt of social security
benefits and certain other pension benefits).
On the Effective Date, Mr. McDonald will be granted 40,000 restricted
shares of FUNC Common Stock and an option to purchase 100,000 shares of FUNC
Common Stock; Mr. Millner will be granted 18,000 restricted shares and an option
to purchase 45,000 shares; and Mr. Layfield will be granted 24,000 restricted
shares and an option to purchase 60,000 shares. Such options shall have an
exercise price equal to the market price of FUNC Common Stock as of the
Effective Date. The options and the restricted shares will vest in installments
over a three-year period. Based upon the last reported sale price per share of
FUNC Common Stock on the NYSE Tape on , 1997 ($ ), such
restricted stock awards would have values of $ , $ and $ ,
respectively, to Messrs. McDonald, Millner and Layfield.
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In the event the employment of the executive is terminated during the
Employment Period by FUNC without "Cause" or by the executive for "Good Reason",
FUNC shall (i) pay the Executive a pro rata minimum annual bonus for the year of
termination, (ii) continue to pay the executive his base salary and minimum
annual bonus through the Employment Period, (iii) provide the executive and his
spouse and dependents with continued medical and dental benefits for the lives
of the executive and his spouse, and (iv) vest the option and restricted stock
grants. If the executive terminates his employment without Good Reason during
the employment period, he will receive the payments and benefits described in
clauses (i), (ii) and (iii) above.
The Employment Agreements provide for a gross-up payment to be made to the
executive, if necessary, to eliminate the effects of the imposition of the
excise tax under Section 4999 of the Code on payments made to the executive and
of the imposition of income and excise taxes on such gross-up payment.
The executives have agreed that while employed by FUNC and for one year
after termination of employment, they will not solicit for employment employees
of FUNC or their affiliates or solicit commercial banking business from any
commercial customer with whom the executives had a direct customer relationship
while at FUNC.
SIGNET EXECUTIVE AGREEMENTS
In the Merger Agreement, FUNC has agreed to honor the Signet Executive
Agreements with the Signet Officers. The Signet Executive Agreements for Messrs.
McDonald, Millner and Layfield will be superceded by the Employment Agreements.
The Signet Executive Agreements generally provide that during the three-year
"employment period" following stockholder approval of the Merger Agreement (a
"Change in Control"), the executive will receive (i) an annual base salary at
least equal to 12 times the highest monthly base salary paid to the executive
during the prior 12 month period, and (ii) for each fiscal year beginning or
ending during the employment period, an annual bonus at least equal to the sum
of the short-term target award and annualized long-term target award under
Signet's Executive Incentive Compensation Plan (the "Recent Annual Bonus"). Upon
a termination of an executive's employment by FUNC (other than for "Cause" or
disability) or by an executive for "Good Reason" (including termination for any
reason during the 30-day period immediately following the first anniversary of
the Change in Control), FUNC shall (i) pay the executive a lump sum pro rata
bonus, (ii) pay the executive a lump sum payment equal to three times the sum of
(a) the executive's annual base salary, (b) the greater of the executive's
Recent Annual Bonus and the annual bonus paid for the last completed fiscal year
during the employment period, and (c) the cash award paid to the executive under
the Signet Employee Profit Sharing Plan for the last full fiscal year prior to
the Change in Control, (iii) provide the executive with continued welfare
benefits for the remainder of the employment period (or such longer period
provided by the applicable program), and (iv) pay the executive a lump sum
retirement benefit equal to the excess of the actuarial equivalent of the
benefits the executive would have accrued under the Signet retirement plans had
he or she remained employed through the employment period and the actuarial
equivalent of the actual benefits accrued.
The Signet Executive Agreements provide for a gross-up payment to be made
to the executive, if necessary, to eliminate the effects of the imposition of
the excise tax under Section 4999 of the Code on payments made to the executive
and the imposition of income and excise taxes on such gross-up payment.
In the event that the employment of the Signet Officers with Signet
Executive Agreements were terminated immediately following a Change in Control
and such Signet Officers were entitled to receive the lump sum payments set
forth above, it is currently estimated that they would receive approximately
$ in the aggregate.
CASH-BASED INCENTIVE
Signet may establish prior to the Effective Date a $5 million retention
bonus pool to be allocated by Signet to key personnel (other than Messrs.
McDonald, Millner and Layfield). Pursuant to the Merger Agreement, Signet may
amend or modify (i) Signet's annual bonus plans to provide full year payments
under such plans at the greater of target payment or payment pursuant to
performance results through the Effective Date, and (ii) Signet's Executive
Long-Term Incentive Plan to provide full-year 1997 payments for the performance
cycle ending in 1997 at the greater of target payment or payment pursuant to
performance results through the Effective Date. If annual bonus target awards
are paid out, Messrs. McDonald, Millner and Layfield would be entitled to
receive $ , $ and $ , respectively, and that the Signet
Officer participants in such plans would be entitled to receive an aggregate
amount of $ . If 1997 payouts are paid out at target under Signet's
Executive Long-Term Incentive Plan, Messrs. McDonald, Millner and Layfield would
be entitled to receive $ , $ and $ , respectively, and the
Signet Officer participants in such plan would be entitled to receive an
aggregate amount of $ .
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<PAGE>
NONQUALIFIED RETIREMENT PLANS
Upon stockholder approval of the Merger Agreement, accrued benefits will
vest under Signet's Excess Benefit Retirement Plan, Excess Savings Plan,
Executive SERP and Supplemental Retirement Plans. Such benefits are included in
the retirement benefits provided by FUNC to Messrs. McDonald, Layfield and
Millner under their Employment Agreements. The lump sum present value of the
benefits in which the Signet Officer participants in such plans would vest is
currently estimated to be approximately $ in the aggregate.
EQUITY INCENTIVE PLANS
The Merger Agreement provides that all options to acquire Signet Common
Stock outstanding at the Effective Date under the stock option plans of Signet,
including those held by management and members of the Signet Board (the "Signet
Stock Options"), will be assumed by FUNC. Each Signet Stock Option will
thereafter constitute an option to acquire shares of FUNC Common Stock equal to
the number of shares of Signet Common Stock subject to such option multiplied by
the Exchange Ratio (rounded down to the nearest whole share), at an exercise
price per share equal to the aggregate exercise price of the shares of Signet
Common Stock subject to such option divided by the number of shares of FUNC
Common Stock subject to the assumed option (rounded up to the nearest whole
cent). Certain of the Signet Stock Options contain change of control provisions
that will result in acceleration of the exercisability thereof upon stockholder
approval of the Merger Agreement.
The following table sets forth with respect to Messrs. McDonald, Millner
and Layfield and the Signet Officers as a group (i) the number of shares covered
by Signet Stock Options held by such persons, (ii) the number of shares covered
by Signet Stock Options held by such persons that will become exercisable upon
approval of the Merger Agreement by Signet stockholders, (iii) the weighted
average exercise price for such exercisable options held by such persons, and
(iv) the aggregate value of such exercisable options based upon the per share
value (I.E., stock price less option exercise price) of Signet Common Stock on
the Record Date.
<TABLE>
<CAPTION>
WEIGHTED
OPTIONS AVERAGE
EXERCISABLE EXERCISE AGGREGATE
UPON APPROVAL PRICE PER VALUE OF
OPTIONS OF THE MERGER EXERCISABLE EXERCISABLE
HELD AGREEMENT OPTION OPTION
<S> <C> <C> <C> <C>
Malcolm S. McDonald......................................................
T. Gaylon Layfield, III..................................................
Wallace B. Millner, III..................................................
Signet Officers..........................................................
Total..................................................................
</TABLE>
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE
The Merger Agreement provides that for the six-year period following the
Effective Date, FUNC will indemnify the directors and officers of Signet 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 VSCA, the
Signet Articles and the Signet 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 Signet's existing directors' and officers' liability
insurance policy for persons who were covered by such policy on the date of the
Merger Agreement for a period of five years after the Effective Date at an
annual cost not to exceed 200 percent of the current amount expended by Signet
to maintain or procure such insurance coverage for a comparable five-year
period.
CERTAIN OTHER MATTERS RELATING TO THE MERGERS
The Merger Agreement provides for FUNC to cause two members of the Signet
Board to be elected or appointed as directors to the FUNC Board of Directors as
promptly as practicable after the Effective Date. Pursuant to his Employment
Agreement with FUNC, Mr. McDonald will be one of such members of the Signet
Board to be nominated for election or appointed to the FUNC Board of Directors.
FUNC expects to nominate for election or appoint Norwood H. Davis, Jr. as the
other member of the Signet Board to be elected or appointed to the FUNC Board of
Directors.
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As indicated above under "; EMPLOYMENT AGREEMENTS", upon consummation of
the Mergers, Mr. McDonald will serve as Chairman of the Banking Operations and
Messrs. Millner and Layfield will become Vice Chairmen of the Banking
Operations. Benjamin Jenkins, currently the Chairman and Chief Executive Officer
of the Banking Operations, will become President and Chief Operating Officer of
such Banking Operations. Upon completion of the Mergers, it is anticipated that
certain overlapping operations will be consolidated and certain products and
services currently offered by FUNC will be offered to Signet customers. See
"RECENT DEVELOPMENTS -- FUNC; THE MERGERS".
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS A DISCUSSION OF ALL MATERIAL 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
SIGNET STOCKHOLDERS WHO RECEIVED THEIR SIGNET COMMON STOCK UPON THE EXERCISE OF
EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, THAT HOLD THEIR SIGNET
COMMON STOCK AS PART OF A "STRADDLE" OR "CONVERSION TRANSACTION", OR THAT ARE
INSURANCE COMPANIES, SECURITIES DEALERS, FINANCIAL INSTITUTIONS OR FOREIGN
PERSONS.
Sullivan & Cromwell, counsel for FUNC, have advised FUNC, and Wachtell,
Lipton, Rosen & Katz, special counsel for Signet, have advised Signet, that, in
their opinion:
(i) No gain or loss will be recognized for federal income tax
purposes by Signet stockholders upon the exchange in the Corporate Merger
of shares of Signet Common Stock solely for FUNC Common Shares (except with
respect to cash received in lieu of a fractional share interest in FUNC
Common Stock deemed received).
(ii) The basis of FUNC Common Shares received in the Corporate Merger
by Signet stockholders (including the basis of any fractional share
interest in FUNC Common Stock deemed received) will be the same as the
basis of the shares of Signet Common Stock surrendered in exchange
therefor.
(iii) The holding period of the FUNC Common Shares received in the
Corporate Merger by a Signet stockholder (including the holding period of
any fractional share interest in FUNC Common Stock) will include the
holding period of the shares of Signet Common Stock surrendered in exchange
therefor, provided such shares of Signet Common Stock were held as capital
assets at the Effective Time.
(iv) Cash received by a holder of Signet 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 Signet 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 dated as of
the Effective Date, that the Corporate Merger constitutes a reorganization under
Section 368 of the Code and by Signet of an opinion of Wachtell, Lipton, Rosen &
Katz, dated as of the Effective Date, that (i) the Corporate Merger constitutes
a reorganization within the meaning of Section 368 of the Code, and (ii) no gain
or loss will be recognized by Signet stockholders who receive FUNC Common Shares
in exchange for their shares of Signet Common Stock, except with respect to cash
received in lieu of fractional share interests. FUNC and Signet do not currently
intend to waive the receipt of such tax opinions; however, if such tax opinions
were waived and the material federal income tax consequences of the Corporate
Merger were materially different from those summarized above, Signet would
resolicit its stockholders prior to consummating the Corporate Merger. 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 SIGNET STOCKHOLDER AND OTHER FACTORS,
EACH SIGNET 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
Signet agreed in the Merger Agreement 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.
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<PAGE>
These actions include, without limitation: (i) conducting the business of Signet
other than in the ordinary and usual course or failing to use reasonable efforts
to preserve Signet's business organizations, assets and relationships, or taking
any action likely to have an adverse effect upon Signet's ability to perform its
obligations under the Merger Agreement; (ii) issuing (including pursuant to
Signet's Dividend Reinvestment Plan and any compensation and benefit plan
qualified under Section 401(k) of the Code), any additional shares of Signet
Common Stock, or permitting any additional shares of Signet Common Stock to
become subject to new grants of employee or director stock options, or similar
stock-based employee rights; (iii) (a) declaring or paying any dividend (other
than quarterly cash dividends on Signet Common Stock in an amount not to exceed
$0.21 per share) on shares of Signet Common Stock or (b) adjusting,
reclassifying or acquiring any shares of Signet's capital stock; (iv) entering
into, amending or renewing any employment, consulting, severance or similar
agreement with any director, officer or employee, or granting any salary or wage
increase or increasing any employee benefit, except (a) for normal individual
compensation increases in the ordinary course of business consistent with past
practice, (b) for changes required by applicable law, (c) to satisfy existing
contractual obligations, or (d) for employment arrangement for, or grants of
awards to newly hired employees consistent with past practice; (v) entering
into, establishing, adopting or amending (except (a) as required by applicable
law or (b) to satisfy existing obligations) any employee benefit, incentive or
welfare contract, plan or arrangement, in respect of any director, officer or
employee, or taking any action to accelerate the vesting or exercisability of
stock options, restricted stock or other compensation or benefits payable
thereunder; (vi) encumbering or disposing of or discontinuing any of its assets,
deposits, business or properties except in a transaction that is not material to
Signet; (vii) acquiring all or any portion of, the assets, business, deposits or
properties of any other entity except in a transaction that is not material to
Signet; (viii) amending the Signet Articles or the Signet Bylaws; (ix)
implementing or adopting any change in its accounting principles, practices or
methods, other than as may be required by generally accepted accounting
principles; (x) amending, or taking any action adverse to FUNC with respect to,
the Signet Rights Agreement or, entering into, terminating, amending or
modifying any material contract; (xi) settling any claim, action or proceeding,
except for those involving solely money damages in an amount, individually or in
the aggregate for all such settlements, that is not material to Signet; (xii)
knowingly taking any action that would (a) prevent or impede the Corporate
Merger from qualifying (1) for pooling of interests accounting treatment or (2)
as a reorganization within the meaning of Section 368 of the Code, or (b) result
in (1) any of its representations and warranties set forth in the Merger
Agreement being untrue in any material respect at any time at or prior to the
Effective Time, (2) any of the conditions to the Corporate Merger set forth in
the Merger Agreement not being satisfied or (3) a material violation of any
provision of the Merger Agreement except, in each case, as may be required by
applicable law; (xiii) except as required by applicable law, (a) implementing or
adopting any material change in Signet's interest rate or other risk management
policies, procedures or practices, (b) failing to follow Signet's existing
policies or practices with respect to managing exposure to interest rate and
other risk, or (c) failing to use commercially reasonable means to avoid any
material increase in Signet's aggregate exposure to interest rate risk; (xiv)
incurring any indebtedness for borrowed money; and (xv) agreeing or committing
to do any of the foregoing.
Signet also agreed in the Merger Agreement to make such modifications or
changes to its loan, litigation and real estate valuation policies and practices
prior to the Effective Date, as may be mutually agreed upon between FUNC and
Signet. Signet also agreed in the Merger Agreement to cause its regular
quarterly dividend record and payment dates for Signet Common Stock to
correspond to FUNC's regular quarterly dividend record and payment dates for
FUNC Common Stock. The fourth quarter dividend on FUNC Common Stock is expected
to be declared on October 21, 1997, with a record date of November 28, 1997, and
a payment date of December 15, 1997. The third quarter dividend on FUNC Common
Stock in the amount of $.32 per share was paid on September 15, 1997.
From time to time Signet 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, and various additional transactions may be
engaged in, as a result of the execution of the Merger Agreement.
REGULATORY APPROVALS
REGULATORY MATTERS. Consummation of the Mergers is conditioned on the
receipt of all approvals of regulatory authorities required for both the
Corporate Merger and the Bank Merger without any conditions, restrictions or
requirements which the FUNC Board of Directors reasonably determines would (i)
following the Effective Date, have a material adverse effect on FUNC and its
subsidiaries taken as a whole, or (ii) reduce the benefits of the transactions
contemplated by the Merger Agreement to such a degree that FUNC would not have
entered into the Merger Agreement had such conditions, restrictions or
requirements been known at the date the Merger Agreement was executed.
THE CORPORATE MERGER. The Corporate Merger is subject to prior approval by
the Federal Reserve Board under Section 3 of the BHCA and prior notice to the
Federal Reserve Board under Section 4 of the BHCA. Section 3 of the BHCA
requires
34
<PAGE>
the Federal Reserve Board, when considering a transaction such as the Corporate
Merger, to take into consideration the financial and managerial resources
(including the competence, experience and integrity of the officers, directors
and principal stockholders), the future prospects of the existing and proposed
institutions and the convenience to and the needs of the communities to be
served. In considering financial resources and future prospects, the Federal
Reserve Board will, among other things, evaluate the adequacy of the capital
levels of the parties to a proposed transaction and of the resulting
institutions.
The BHCA prohibits the Federal Reserve Board from approving a merger (i) if
it 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 its effect in any section of the
country would be substantially to lessen competition or to tend to create a
monopoly, or if it would in any other respect result in a restraint of trade,
unless the Federal Reserve Board finds that the anti-competitive effects of the
merger are clearly outweighed by the probable effect of the transaction in
meeting the convenience and needs of the communities to be served. In addition,
under the Community Reinvestment Act of 1977, as amended (the "CRA"), the
Federal Reserve Board must take into account the record of performance of the
existing institutions in meeting the credit needs of the entire community,
including low- and moderate-income neighborhoods, served by such institutions.
The Federal Reserve Board will furnish notice and a copy of the application
for approval of the Corporate Merger to the OCC, and the Virginia Bureau. These
agencies have 30 days to submit their views and recommendations to the Federal
Reserve Board. The Federal Reserve Board is required to hold a public hearing in
the event it receives a written recommendation of disapproval of the application
from either of these agencies within such 30-day period. Furthermore, applicable
Federal law provides for the publication of notice and public comment on
applications filed with the Federal Reserve Board and authorizes such agency to
permit interested parties to intervene in the proceedings. If an interested
party is permitted to intervene, such intervention could delay the regulatory
approvals required for consummation of the Corporate Merger.
Under Section 4 of the BHCA and related regulations, the Federal Reserve
Board must consider whether the performance of FUNC's and Signet's nonbanking
activities on a combined basis can reasonably be expected to produce benefits to
the public (such as greater convenience, increased competition and gains in
efficiency) that outweigh possible adverse effects (such as undue concentration
of resources, decreased or unfair competition, conflicts of interest and unsound
banking practices). This consideration includes an evaluation of the financial
and managerial resources of FUNC and Signet and the effect of the proposed
transaction on those resources.
THE BANK MERGER. Consummation of the Bank Merger is subject to receipt of
the prior approval of the OCC under the Bank Merger Act, 12 U.S.C.
(section mark)1828(c) (the "BMA"), and the prior approval of the Virginia Bureau
under Virginia law. The BMA requires that the OCC take into consideration, among
other factors, the financial and managerial resources and future prospects of
the institutions and the convenience to and the needs of the communities to be
served. The BMA also includes a competitive standard that is substantially
identical to the standard in the BHCA.
Under the BMA, the OCC has the authority to deny an application if it
concludes that the combined organization would have an inadequate capital
position. The OCC could also deny an application if the acquiring organization
does not meet the requirements of the CRA.
STATUS OF APPLICATIONS, ETC. Applications have been filed pursuant to the
BHCA with the Federal Reserve Board, pursuant to the BMA with the OCC, and
pursuant to Virginia law with the Virginia Bureau. The Mergers may not be
consummated until the 30th day (or, with the consent of the relevant agencies,
the 15th day) following the dates of each of the requisite Federal Reserve Board
and OCC approvals, during which period the United States Department of Justice
may comment adversely on the Mergers (which has the effect of extending the
waiting period to the 30th day following approval) or challenge the Mergers on
antitrust grounds. The commencement of an antitrust action would stay the
effectiveness of such an approval unless a court specifically orders otherwise.
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 UNITED
STATES 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.
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<PAGE>
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
Signet; (ii) receipt of the regulatory approvals referred to above without any
requirements, restrictions or conditions which the FUNC Board of Directors
reasonably determines would (a) following the Effective Date, have a material
adverse effect on FUNC and its subsidiaries taken as a whole, or (b) reduce the
benefits of the transactions contemplated by the Merger Agreement to such a
degree that FUNC would not have entered into the Merger Agreement had such
requirements, restrictions or conditions been known at the time the Merger
Agreement was executed; (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 Signet 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 Signet and FUNC, each to the other, of certificates
executed by certain of their respective executive officers as to compliance with
the Merger Agreement; and (ii) the receipt by FUNC and Signet of letters from
their respective independent certified public accountants, dated as of or
shortly prior to the Effective Date, (a) with respect to their respective
financial position and results of operations, and (b) that the Corporate Merger,
including the transactions contemplated by the Merger Agreement and other
agreements between the parties to the Merger Agreement related thereto,
qualifies for pooling of interests accounting treatment.
The Merger Agreement provides that, whether before or after the Special
Meeting and notwithstanding the approval of the Merger Agreement by the
stockholders of Signet, 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 Signet; or (ii) by either the Board of Directors of FUNC or the Signet Board
(a) if the stockholders of Signet 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 July 31, 1998.
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 by an agreement in writing among the parties executed in the same
manner as the Merger Agreement, provided that after approval by the stockholders
of Signet, the Merger Agreement may not be amended if it would violate the VSCA,
change the amount or kind of consideration to be received by the stockholders of
Signet in the Corporate Merger or change the terms thereof in a way that would
adversely affect the stockholders of Signet.
ACCOUNTING TREATMENT
It is expected that the pooling of interests method of accounting will be
used to reflect the Mergers and the pending acquisition of WFBS. The unaudited
pro forma financial data contained in this Prospectus/Proxy Statement has been
prepared using the pooling of interests accounting basis to account for the
Mergers. Such data does not reflect consummation of either the pending WFBS
acquisition or the pending Covenant acquisition. See "RECENT
DEVELOPMENTS -- FUNC; Other Pending Acquisitions". Under pooling of interests
accounting, as of the effective date of an acquisition, the assets and
liabilities of the acquired company are 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 are combined on the acquiring
company's consolidated balance sheet. Depending on the relative significance of
the acquisition, together with any other pending acquisitions, to the acquiring
company, income and other financial statements of the acquiring company for
periods ended prior to the effective date of the acquisition may be restated to
reflect the consolidated combined financial position and results of operations
as if such acquisition had taken place prior to the periods covered by such
financial statements. Due to the significance of the Mergers to FUNC, such
financial statements are currently expected to be restated as a result of the
Mergers but are not expected to be restated as a result of the pending
acquisition of WFBS.
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 and the Commission fee
for filing the Registration Statement will be shared equally by FUNC and Signet.
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<PAGE>
STOCK OPTION AGREEMENT
As an inducement and condition to FUNC's willingness to enter into the
Merger Agreement, Signet entered into the Stock Option Agreement with FUNC.
Pursuant to the Stock Option Agreement, Signet granted the Option to FUNC to
purchase up to 19.9 percent of the issued and outstanding shares of Signet
Common Stock for a purchase price of $37.4688 per share, subject to adjustment
in certain circumstances. The purchase of any shares of Signet Common Stock
pursuant to the Option is subject to compliance with applicable law, including
the receipt of any necessary approval under the BHCA.
Subject to applicable law and regulatory restrictions, FUNC may exercise
the Option, in whole or in part, if, but only if, both an Initial Triggering
Event (as hereinafter defined) and a Subsequent Triggering Event (as hereinafter
defined) have occurred prior to the occurrence of an Exercise Termination Event
(as hereinafter defined), provided that written notice of such exercise as
required by the Stock Option Agreement is provided within six months following
such Subsequent Triggering Event (or such later period as provided in the Stock
Option Agreement).
As defined in the Stock Option Agreement, "Initial Triggering Event" means
any of the following events or transactions occurring on or after the date of
signing the Stock Option Agreement:
(i) Signet or any Significant Subsidiary (as defined in the Stock
Option Agreement), without having received FUNC's prior written consent,
shall have entered into an agreement to engage in an Acquisition
Transaction (as hereinafter defined) with any person or the Signet Board
shall have recommended that the stockholders of Signet approve or accept
any Acquisition Transaction other than as contemplated by the Merger
Agreement. For purposes of the Stock Option Agreement, "Acquisition
Transaction" means (x) a merger or consolidation, or any similar
transaction, involving Signet or a Signet Subsidiary (I.E. "Issuer
Subsidiary", as defined in the Stock Option Agreement), (y) a purchase,
lease or other acquisition of all or any substantial part of the assets or
deposits of Signet or a Signet Subsidiary, or (z) a purchase or other
acquisition of securities representing ten percent or more of the voting
power of Signet or a Signet Subsidiary;
(ii) any person shall have acquired beneficial ownership or the right
to acquire beneficial ownership of ten percent or more of the outstanding
shares of Signet Common Stock;
(iii) the stockholders of Signet shall have voted and failed to
approve the Merger Agreement at the Special Meeting, or the Special Meeting
shall not have been held in violation of the Merger Agreement or shall have
been canceled prior to termination of the Merger Agreement if, prior to the
Special Meeting (or if the Special Meeting shall not have been held or
shall have been canceled, prior to such termination), it shall have been
publicly announced that any person shall have made, or disclosed an
intention to make, a proposal to engage in an Acquisition Transaction;
(iv) the Signet Board shall have withdrawn or modified in any manner
adverse in any respect to FUNC its recommendation that the stockholders of
Signet approve the transactions contemplated by the Merger Agreement, or
Signet or a Signet Subsidiary shall have authorized, recommended or
proposed an agreement to engage in an Acquisition Transaction with any
person;
(v) any person shall have made a proposal to Signet or its
stockholders to engage in an Acquisition Transaction and such proposal
shall have been publicly announced;
(vi) any person shall have filed with the Commission a registration
statement or tender offer materials with respect to a potential exchange or
tender offer that would constitute an Acquisition Transaction;
(vii) Signet shall have willfully breached any covenant or obligation
contained in the Merger Agreement in anticipation of engaging in an
Acquisition Transaction, and following such breach, FUNC would be entitled
to terminate the Merger Agreement; or
(viii) any person shall have filed an application or notice with the
Federal Reserve Board or other federal or state bank regulatory or
antitrust authority for approval to engage in an Acquisition Transaction.
As defined in the Stock Option Agreement, "Subsequent Triggering Event"
means any of the following events or transactions occurring after the date of
signing the Stock Option Agreement:
(i) the acquisition by any person of beneficial ownership of 20
percent or more of the then outstanding Signet Common Stock; or
(ii) the occurrence of an Initial Triggering Event described above,
except that the percentage referred to in clause (z) of subparagraph (i)
thereof shall be 20 percent.
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<PAGE>
As defined in the Stock Option Agreement, "Exercise Termination Event"
means each of the following:
(i) the Effective Date;
(ii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the occurrence of an
Initial Triggering Event, except a termination (a) by FUNC due to a breach
of the Merger Agreement by Signet or due to the Signet Board failing to
recommend the Merger Agreement to Signet's stockholders, or (b) by FUNC or
Signet if Signet's stockholders fail to approve the Merger Agreement (each,
a "Listed Termination"); or
(iii) the passage of 18 months (or such longer period as provided in
the Stock Option Agreement) after termination of the Merger Agreement if
such termination follows the occurrence of an Initial Triggering Event or
is a Listed Termination.
Under applicable law, FUNC may be required to obtain the prior approval of
the Federal Reserve Board prior to acquiring five percent or more of the issued
and outstanding shares of Signet Common Stock. Certain other regulatory
approvals may also be required before such an acquisition could be completed.
At any time after the occurrence of a Repurchase Event (as hereinafter
defined) at the request of the holder of the Option, delivered prior to an
Exercise Termination Event (or such later period as provided in the Stock Option
Agreement), Signet must repurchase the Option from such holder at a price (the
"Option Repurchase Price") equal to the amount by which (i) the market/offer
price exceeds (ii) $37.4688, multiplied by the number of shares for which the
Option may then be exercised.
A "Repurchase Event" will be deemed to have occurred upon the occurrence of
any of the following events or transactions:
(i) the acquisition by any person of beneficial ownership of 50
percent or more of the then outstanding Signet Common Stock; or
(ii) the consummation of any Acquisition Transaction described in
subparagraph (i) under the definition of Initial Triggering Event, except
that the percentage referred to in clause (z) shall be 50 percent.
FUNC may, at any time following a Repurchase Event and prior to the
occurrence of an Exercise Termination Event (or such later period as provided in
the Stock Option Agreement), relinquish the Option to Signet in exchange for a
cash fee equal to $60.0 million.
The Stock Option Agreement and the 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 Signet.
To the knowledge of Signet and FUNC, no event giving rise to exercise of
the 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 Option. The foregoing discussion is qualified in its
entirety by reference to the Stock Option Agreement.
AMENDMENT TO SIGNET RIGHTS AGREEMENT
In connection with the execution of the Merger Agreement, Signet amended
the Signet Rights Agreement to provide, among other things, that (i) the
execution and delivery of the Stock Option Agreement and any acquisition of
shares of Signet Common Stock by FUNC (and certain related persons) upon
exercise thereof, or as contemplated by the Merger Agreement, will not cause the
Signet Rights to become exercisable, and (ii) the Signet Rights may not become
exercisable at any time from and after, and the Signet Rights Agreement will
terminate on, the Effective Date. See also "DESCRIPTION OF FUNC CAPITAL
STOCK -- FUNC Rights Plan" and "CERTAIN DIFFERENCES IN THE RIGHTS OF SIGNET AND
FUNC STOCKHOLDERS -- Stockholder Protection Rights Plans".
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<PAGE>
NO DISSENTERS' RIGHTS
Pursuant to the VSCA, holders of Signet Common Stock do not have
dissenters' or appraisal rights in connection with the Mergers because Signet
has more than 2,000 record stockholders and FUNC Common Stock is listed on the
NYSE. See "CERTAIN DIFFERENCES IN THE RIGHTS OF SIGNET AND FUNC
STOCKHOLDERS -- Dissenters' Rights".
MARKET PRICES
The following table sets forth (i) the high and low last reported sale
prices per share of FUNC Common Stock and Signet Common Stock on the NYSE Tape
(trading symbols FTU and SBK, respectively), with respect to each quarterly
period since January 1, 1995, and (ii) the equivalent pro forma market values
per share of Signet Common Stock. The prices of FUNC Common Stock shown below
have been adjusted, where applicable, to reflect the FUNC Stock Split. Signet
stockholders are urged to obtain current quotations of the market price of FUNC
Common Stock. See "RECENT DEVELOPMENTS -- FUNC; FUNC Common Stock Transactions".
<TABLE>
<CAPTION>
FUNC SIGNET
COMMON STOCK COMMON STOCK
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
1995
First quarter......................................... $ 22 1/2 20 5/8 36 5/8(2) 17 5/8
Second quarter........................................ 24 7/8 21 3/8 23 1/4 20 1/8
Third quarter......................................... 25 5/8 22 5/8 28 21 1/2
Fourth quarter........................................ 29 3/8 24 3/4 28 22
1996
First quarter......................................... 31 3/8 25 3/4 27 1/4 21 3/8
Second quarter........................................ 32 1/4 28 3/4 27 23 1/4
Third quarter......................................... 33 7/8 30 1/2 29 21
Fourth quarter........................................ 38 1/2 33 1/2 30 3/4 25
1997
First quarter......................................... 47 3/4 36 5/8 32 7/8 29 3/8
Second quarter........................................ 47 7/8 39 1/8 36 3/4 28
Third quarter (through October , 1997).............. $
<CAPTION>
EQUIVALENT PRO FORMA
PER SHARE OF SIGNET
COMMON STOCK(1)
HIGH LOW
<S> <C> <C>
1995
First quarter......................................... 24 3/4 22 5/8
Second quarter........................................ 27 1/4 23 1/2
Third quarter......................................... 28 1/8 24 7/8
Fourth quarter........................................ 32 1/4 27 1/8
1996
First quarter......................................... 34 1/2 28 1/4
Second quarter........................................ 35 3/8 31 5/8
Third quarter......................................... 37 1/4 33 1/2
Fourth quarter........................................ 42 1/4 36 3/4
1997
First quarter......................................... 52 1/2 40 1/4
Second quarter........................................ 52 5/8 43
Third quarter (through October , 1997)..............
</TABLE>
(1) Equivalent pro forma market values per share of Signet Common Stock amounts
represent the high and low last reported sales prices per share of FUNC
Common Stock multiplied by the Exchange Ratio, rounded down to the nearest
one-eighth.
(2) In 1995, the first quarter Signet Common Stock high sales price occurred
prior to the spin-off of Capital One. See "SIGNET -- History and Business".
On July 18, 1997, 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 and Signet Common Stock on the NYSE Tape were $48.6875 (as
adjusted to reflect the FUNC Stock Split) and $36.6875, respectively. On
October , 1997, such prices were $ and $ , respectively.
The Merger Agreement provides for the filing of a listing application with
the NYSE covering the FUNC Common Shares. It is a condition to consummation of
the Mergers that the FUNC Common Shares be authorized for listing on the NYSE,
effective upon official notice of issuance. See " -- Conditions to Consummation;
Termination".
39
<PAGE>
DIVIDENDS
The following table sets forth the cash dividends paid on FUNC Common Stock
and Signet Common Stock with respect to each calendar quarter since January 1,
1995, and the equivalent pro forma cash dividends paid per share of Signet
Common Stock. Dividends paid on shares of FUNC Common Stock shown below have
been adjusted, where applicable, to reflect the FUNC Stock Split.
<TABLE>
<CAPTION>
EQUIVALENT
PRO FORMA
PER SHARE OF
FUNC SIGNET SIGNET
COMMON COMMON COMMON
STOCK STOCK STOCK(1)
<S> <C> <C> <C>
1995
First quarter.............................................................................. $0.23 0.25 0.250
Second quarter............................................................................. 0.23 0.17 0.250
Third quarter.............................................................................. 0.26 0.17 0.285
Fourth quarter............................................................................. 0.26 0.20 0.285
1996
First quarter.............................................................................. 0.26 0.20 0.285
Second quarter............................................................................. 0.26 0.20 0.285
Third quarter.............................................................................. 0.29 0.20 0.320
Fourth quarter............................................................................. 0.29 0.21 0.320
1997
First quarter.............................................................................. 0.29 0.21 0.320
Second quarter............................................................................. 0.29 0.21 0.320
Third quarter.............................................................................. $0.32 0.21 0.350
</TABLE>
(1) Equivalent pro forma cash dividends paid per share of Signet Common Stock
amounts represent FUNC historical dividend rates per share multiplied by the
Exchange Ratio, rounded to the nearest one-half cent. The current annualized
dividend rate per share for FUNC Common Stock, based on the most recently
declared quarterly dividend of $.32 per share paid on September 15, 1997,
would be $1.28. On an equivalent pro forma basis, such current annualized
FUNC dividend per share of Signet Common Stock would be $1.41, rounded up to
the nearest cent. Any future FUNC and Signet dividends are dependent on
their respective earnings and financial condition, government regulations
and policies and other factors.
See " -- Business Pending Consummation", "FUNC -- Certain Regulatory
Considerations; PAYMENT OF DIVIDENDS" and "DESCRIPTION OF FUNC CAPITAL STOCK".
40
<PAGE>
SIGNET
GENERAL
Financial and other information relating to Signet, including information
about Signet's directors and executive officers, is set forth in Signet's 1996
Annual Report on Form 10-K, 1997 First and Second Quarter Reports on Form 10-Q,
1997 Annual Meeting Proxy Statement and 1997 Current Reports on Form 8-K, which
are incorporated by reference herein and copies of which may be obtained from
Signet as indicated under "AVAILABLE INFORMATION".
HISTORY AND BUSINESS
Signet is a registered bank holding company under the BHCA, incorporated in
Virginia in 1962, and had consolidated assets of $11.9 billion as of June 30,
1997. On the basis of total assets and deposits at June 30, 1997, Signet is the
second largest banking organization headquartered in Virginia.
On February 28, 1995, Signet distributed all of the remaining Capital One
common stock it held to Signet stockholders in a tax-free distribution (the
"spin-off"). Related assets of $3.6 billion and equity of $383 million were
included in the spin-off at that time. The spin-off created two independent
financial institutions, each pursuing separate long-term business strategies.
Signet is engaged in general commercial and consumer banking businesses
through its principal bank subsidiary, Signet Bank, which is a member of the
Federal Reserve System. Signet Bank (which resulted from mergers of Signet
Bank/Virginia and Signet Bank/Maryland in 1995 and Signet Bank N.A. in June
1996) is headquartered in Richmond, Virginia. Signet Bank provides financial
services through banking offices located throughout Virginia, Maryland and
Washington, D.C., on-line Internet access and a 24-hour full-service telephone
Banking Center. Signet Bank owns a commercial bank operating in the Bahamas.
International banking operations are conducted through a foreign branch of
Signet Bank. Service subsidiaries are engaged in writing insurance in connection
with the lending activities of Signet Bank and bank-related subsidiaries and
owning real estate for banking premises. Other subsidiaries are engaged in trust
operations, various kinds of lending and leasing activities, insurance agency
activities, mortgage servicing and broker and dealer activities relating to
certain phases of the domestic securities business.
As of June 30, 1997, Signet and its subsidiaries employed 3,565 full-time
and 893 part-time employees.
See "RECENT DEVELOPMENTS -- Signet".
41
<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 1996
Annual Report on Form 10-K, 1997 First and Second Quarter Reports on Form 10-Q,
1997 Annual Meeting Proxy Statement and 1997 Current Reports on Form 8-K, which
are incorporated by reference herein and 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 FUNC is
registered as a bank holding company under the BHCA. Pursuant to a corporate
reorganization in 1968, FUNB and First Union Mortgage Corporation, a mortgage
banking firm acquired by FUNB in 1964, became subsidiaries of FUNC.
In addition to FUNB (which, as a result of corporate reorganizations in
June and July 1997, conducts commercial banking operations in Florida, Georgia,
South Carolina, North Carolina, Tennessee, Virginia, Maryland, Connecticut and
Washington, D.C.), FUNC also owns banks conducting operations in Delaware, New
Jersey, Pennsylvania and New York. In addition to providing a wide range of
commercial and retail banking and trust services through its banking
subsidiaries, FUNC also provides various other financial services, including
mortgage banking, home equity lending, credit cards, 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 72 banking-related acquisitions and has pending three
banking-related acquisitions (including Signet), 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. See "RECENT DEVELOPMENTS -- FUNC;
OTHER PENDING ACQUISITIONS".
<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 3.6 billion common stock/purchase July 1995
FFB.......................................... New Jersey,
Pennsylvania 35.3 billion common stock and January 1996
preferred stock/pooling
Center Financial Corporation................. Connecticut 4.0 billion common stock/purchase November 1996
Signet....................................... Virginia $ 11.9 billion common stock/pooling 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
42
<PAGE>
acquired from the RTC, and (ii) the dollar amount relating to Southeast
banks, which represent assets of the two banking subsidiaries of Southeast
Banking Corporation acquired from the FDIC.
(2) In addition, FUNC acquired (i) Lieber & Company, a mutual fund advisory
company with approximately $3.4 billion in assets under management, in June
1994, and (ii) Keystone Investments, Inc., a mutual fund advisory company
with approximately $11.6 billion in assets under management, in December
1996. The consideration paid by FUNC in each acquisition was FUNC Common
Stock. Since such assets are not owned by these mutual fund advisory
companies, 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 -- 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
As a bank holding company, FUNC is subject to regulation under the BHCA and
to its examination and reporting requirements. 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, or a waiver of
the requirement for such approval by, the Federal Reserve Board. In addition,
bank holding companies are generally prohibited under the BHCA from engaging in
nonbanking activities, subject to certain exceptions.
The earnings of FUNC are affected by the legislative and governmental
actions of various regulatory authorities, including the Federal Reserve Board,
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 for the payment of any dividend by a national bank if the total
of all dividends declared by the board of directors of such 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 one state-chartered
bank subsidiary 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, 1997,
FUNC's subsidiaries, without obtaining affirmative governmental approvals, could
pay aggregate dividends of $717 million to FUNC. In the first six months of
1997, FUNC's subsidiaries paid $603 million in cash dividends to FUNC. In
addition, the corporate reorganization of FUNC's subsidiary banks in Georgia and
Florida into FUNB on June 5, 1997, resulted in a reduction of capital in the
amount of $400 million, which was paid 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
43
<PAGE>
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 subsidiary) have indicated that paying dividends
that deplete a bank's capital base to an inadequate level would be an unsound
and unsafe banking practice. The OCC, the FDIC and the Federal Reserve Board
have each indicated that banking organizations should generally pay dividends
only out of current operating earnings.
BORROWINGS; ETC.
There are also various legal restrictions on the extent to which each of
FUNC and certain of 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.
The Federal Deposit Insurance Act, as amended (the "FDIA") imposes
liability on an institution the deposits of which are insured by the FDIC, such
as FUNC's subsidiary banks, for certain potential losses of 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.
CAPITAL ADEQUACY
The Federal Reserve Board, the FDIC and the OCC have adopted substantially
similar risk-based and leverage capital guidelines for United States banking
organizations. Under these risked-based capital standards, the minimum
consolidated ratio of total 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
stockholder's equity, retained earnings, a limited amount of qualifying
perpetual preferred stock and minority interests in the equity accounts of
consolidated subsidiaries, less goodwill and certain intangibles ("tier 1
capital" and, together with tier 2 capital, "total capital"). The remainder of
total capital may consist of mandatory convertible debt securities and a limited
amount of subordinated debt, qualifying preferred stock and loan loss allowance
("tier 2 capital"). At June 30, 1997, FUNC's tier 1 and total capital ratios
were 7.55 percent and 12.64 percent, respectively. On an FUNC and Signet
combined basis, such ratios at June 30, 1997, would have been 7.90 percent and
12.87 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
less certain amounts ("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, 1997, was 6.23 percent. On an FUNC and Signet
combined basis, such ratio at June 30, 1997, would have been 6.43 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.
44
<PAGE>
Each of FUNC's subsidiary 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 5.47 percent as of June 30, 1997. The federal banking
agencies have not advised any of the subsidiary banks of any specific minimum
leverage ratio applicable to it.
PROMPT CORRECTIVE ACTION
The FDIA, among other things, requires the federal banking agencies to take
"prompt corrective action" in respect of depository institutions that do not
meet minimum capital requirements. The FDIA 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 federal bank regulatory agencies have 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. An institution may be
downgraded to, or deemed to be in, a capital category that is lower than is
indicated by its capital ratios if it is determined to be in an unsafe or
unsound condition or if it receives an unsatisfactory examination rating with
respect to certain matters. As of June 30, 1997, all of FUNC's deposit-taking
subsidiary banks had capital levels that qualify them as being "well
capitalized" under such regulations.
The FDIA 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. A bank that is not "well capitalized" is subject
to certain limitations relating to so-called "brokered" deposits.
DEPOSITOR PREFERENCE STATUTE
Under federal law, 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") authorized interstate acquisitions of banks and bank holding
companies without geographic limitation beginning one year after enactment. In
addition, it authorized, beginning June 1, 1997, a bank to 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. In
addition, 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
45
<PAGE>
interstate branching. It was pursuant to authority from IBBEA that FUNB
completed its reorganizations in June and July 1997 and plans to effectuate the
Bank Merger. In addition, First Union National Bank, which conducts banking
operations in New York, New Jersey and Pennsylvania, is to be merged with FUNB
in February 1998, pending regulatory approval.
FDIC INSURANCE ASSESSMENTS; DIFA
Effective January 1, 1996, the FDIC reduced the insurance premiums it
currently charges on bank deposits insured by the Bank Insurance Fund ("BIF") to
the statutory minimum of $2,000 for "well capitalized" banks. The Deposit
Insurance Funds Act of 1996, which was enacted on September 30, 1996 ("DIFA"),
reduced the amount of semi-annual FDIC insurance premiums for savings
association deposits acquired by banks and insured by SAIF to the same levels
assessed for deposits insured by BIF. DIFA also provided for a special one-time
assessment imposed on deposits insured by SAIF, including such deposits held by
banks, to bring the SAIF up to statutorily required levels. FUNC accrued for the
one-time assessment in the third quarter of 1996 in the amount of $86 million
after tax in connection with the SAIF recapitalization. Signet amounts were not
significant.
DIFA further provides for assessments to be imposed on insured depository
institutions with respect to deposits insured by the BIF, and continues the
assessments currently imposed on depository institutions with respect to
SAIF-insured deposits, to pay for the cost of Financing Corporation funding.
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 August 31, 1997,
there were 560,469,397 shares of FUNC Common Stock, no shares of FUNC Preferred
Stock and no shares of 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 of Directors,
subject to certain limitations, is authorized to fix the number 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.
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 of
Directors out of funds legally available therefor, and in the event of
liquidation or dissolution, to receive the net assets of FUNC remaining after
payment of all liabilities and after payment to holders of all shares of FUNC
Preferred Stock and FUNC Class A Preferred Stock of the full preferential
amounts to which such holders are respectively entitled, in proportion to their
respective holdings. See "FUNC -- Certain Regulatory Considerations; PAYMENT OF
DIVIDENDS".
Pursuant to an indenture dated as of November 27, 1996, between FUNC and
Wilmington Trust Company, as trustee, under which certain of FUNC's outstanding
junior subordinated debt securities have been issued, FUNC has covenanted that
it generally will not declare or pay any dividends or distributions on, or
redeem, repurchase, acquire or make a liquidation payment with respect to, any
of FUNC's capital stock, including FUNC Common Stock, FUNC Preferred Stock and
FUNC Class A Preferred Stock if, at such time, certain defaults have occurred
under such indenture or a related guarantee of FUNC or FUNC shall have exercised
its right under such indenture to defer interest payments on the securities
issued thereunder.
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
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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 Signet
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 be subject to the same
qualifications, limitations and restrictions, except with respect to dividend
rates, redemption prices, liquidation amounts, terms of conversion or exchange
and voting rights.
FUNC CLASS A PREFERRED STOCK
Shares of FUNC Class A Preferred Stock rank prior or superior to FUNC
Common Stock and on a parity with or junior to (but not prior or superior to)
FUNC Preferred Stock or any series thereof, in respect of the right to receive
dividends and/or the right to receive payments out of the net assets of FUNC
upon any involuntary or voluntary liquidation, dissolution or winding up of
FUNC. Subject to the foregoing and to the terms of any particular series of FUNC
Class A Preferred Stock, each series of FUNC Class A Preferred Stock may vary as
to priority.
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 Signet 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 Signet
Common Stock would receive separate certificates with respect to such FUNC
Rights. Each FUNC Right entitles its registered holder to purchase one
one-hundredth of a share of a junior participating series of FUNC Class A
Preferred Stock designed to have economic and voting terms similar to those of
one share of FUNC Common Stock, for $105.00 (as adjusted to reflect the FUNC
Stock Split), 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 by FUNC
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
will take such action as shall be necessary to ensure and provide that each FUNC
Right (other than FUNC Rights beneficially owned by an Acquiring Person or any
affiliate, associate or transferee thereof, which FUNC Rights shall become void)
shall constitute the right to purchase, from FUNC, shares of FUNC Common Stock
having an aggregate market price equal to twice the Rights Exercise Price for an
amount in cash equal to the then current Rights Exercise Price. In addition, the
FUNC Board of Directors may, at its option, at any time after a Flip-in Date,
elect to exchange all of the then outstanding FUNC Rights for shares of FUNC
Common
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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 of Directors (the "Exchange
Time"), the right to exercise the FUNC Rights will terminate, and each FUNC
Right will thereafter represent only the right to receive a number of shares of
FUNC Common Stock equal to the Rights Exchange Rate. If FUNC becomes obligated
to issue shares of FUNC Common Stock upon exercise of or in exchange for FUNC
Rights, FUNC, at its option, may substitute therefor shares of junior
participating FUNC Class A Preferred Stock upon exercise of each FUNC Right at a
rate of two one-hundredths of a share of junior participating FUNC Class A
Preferred Stock upon the exchange of each FUNC Right.
The FUNC Rights may be canceled and terminated without any payment to
holders thereof at any time prior to the date that they become exercisable and
are redeemable by FUNC at $.01 per FUNC Right, subject to adjustment upon the
occurrence of certain events, at any date prior to the date on which they become
exercisable and the Flip-In Date. 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 of Directors. 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, 1525 West W. T. Harris
Blvd., Charlotte, North Carolina 28288-1153.
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 of Directors into three classes with each class to serve for
three years with one class being elected annually; (ii) authorizing the FUNC
Board of Directors to fix the size of the FUNC Board of Directors at between
nine and 30 directors; (iii) authorizing directors to fill vacancies on the FUNC
Board of Directors that occur between annual meetings, except that vacancies
resulting from a removal of a director by a stockholder vote may only be filled
by a stockholder vote; (iv) providing that directors may be removed only for
cause and only by affirmative vote of the majority of shares entitled to be
voted in the election of directors, voting as a single class; (v) authorizing
only the FUNC Board of Directors, the Chairman of the FUNC Board of Directors or
the President to call a special meeting of stockholders (except for special
meetings called under specified circumstances for holders of classes or series
of stock ranking superior to the FUNC Common Stock); and (vi) requiring an 80
percent vote of stockholders entitled to vote in the election of directors,
voting as a single class, to alter any of the foregoing provisions.
The FUNC Bylaws include provisions setting forth specific conditions under
which: (i) business may be transacted at an annual meeting of stockholders; and
(ii) persons may be nominated for election as directors of FUNC at an annual
meeting of stockholders.
The Change in Bank Control Act prohibits a person or group of persons from
acquiring "control" of a bank holding company unless the Federal Reserve Board
has been given 60 days' prior written notice of such proposed acquisition and
within that time period the Federal Reserve Board has not issued a notice
disapproving the proposed acquisition or extending for up to another 30 days the
period during which such a disapproval may be issued, or unless the acquisition
is subject to Federal Reserve Board approval under the BHCA. An acquisition may
be made prior to the expiration of the disapproval period if the Federal Reserve
Board issues written notice of its intent not to disapprove the action. Under a
rebuttable presumption established by the Federal Reserve Board, the acquisition
of more than ten percent of a class of voting stock of a bank holding company
with a class of securities registered under Section 12 of the Exchange Act, such
as FUNC, would, under the circumstances set forth in the presumption, constitute
the acquisition of control.
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In addition, any "company" would be required to obtain the approval of the
Federal Reserve Board under the BHCA before acquiring 25 percent (five percent
in the case of an acquiror that is a bank holding company) or more of the
outstanding shares of FUNC Common Stock, or otherwise obtaining "control" over
FUNC. Under the BHCA, "control" generally means (i) the ownership or control of
25 percent or more of any class of voting securities of the bank holding
company, (ii) the ability to elect a majority of the bank holding company's
directors, or (iii) the ability otherwise to exercise a controlling influence
over the management and policies of the bank holding company.
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 of Directors 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 SIGNET AND FUNC STOCKHOLDERS
GENERAL
FUNC is a North Carolina corporation subject to the provisions of the
NCBCA, and Signet is a Virginia corporation subject to the provisions of the
VSCA. Stockholders of Signet will, upon consummation of the Corporate Merger,
become stockholders of FUNC. 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 Signet
stockholder under the VSCA, the Signet Articles and the Signet Bylaws, on the
one hand, and the rights of an FUNC stockholder under the NCBCA, 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
SIGNET. Signet has authority to issue 100,000,000 shares of Signet Common
Stock, with a par value of $5.00 per share, and 5,000,000 shares of preferred
stock, with a par value of $20.00 per share. As of the Record Date, there were
shares of Signet Common Stock outstanding. 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
SIGNET. As permitted by the VSCA, the Signet Articles provide that, unless
a greater vote is required by law, the Signet Articles or a resolution of the
Signet Board, the Signet Articles may be amended if the amendment is adopted by
the Signet Board and approved by a vote of the holders of a majority of the
votes entitled to be cast on the amendment by each voting group entitled to vote
thereon. Amendments to the Signet Articles that reduce the stockholder vote to
approve a merger, a statutory share exchange, a sale of all or substantially all
of the assets of Signet or the dissolution of Signet must be approved by the
vote of more than two-thirds of all votes entitled to be cast by each voting
group.
The Signet Bylaws generally provide that the Signet Board may amend the
Signet Bylaws and that Signet stockholders may adopt new bylaws.
FUNC. Under North Carolina law, an amendment to the FUNC Articles generally
requires the recommendation of the FUNC Board of Directors and the approval of
either a majority of all shares entitled to vote thereon or a majority of the
votes cast thereon, depending on the nature of the amendment. In accordance with
North Carolina law, the FUNC Board of Directors may condition its submission of
the proposed amendment on any basis. An amendment to the FUNC Bylaws generally
requires the approval of either the stockholders or the FUNC Board of Directors.
The FUNC Board of Directors 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
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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
SIGNET. The Signet Bylaws provide for a Board of Directors consisting of at
least ten and not more than 20 directors. The Signet Board currently consists of
11 members.
FUNC. The size of the FUNC Board of Directors is determined by the
affirmative vote of a majority of the FUNC Board of Directors, 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 of Directors is divided into three classes,
each as nearly as possible equal in number as the others, with one class being
elected annually. See "THE MERGERS -- Interests of Certain Persons" and
"DESCRIPTION OF FUNC CAPITAL STOCK".
REMOVAL OF DIRECTORS
SIGNET. The Signet Bylaws provide that any vacancy occurring on the Signet
Board may be filled in the manner provided in the VSCA. The VSCA provides that
unless the articles of incorporation provide otherwise, vacancies on the board
of directors, including a vacancy resulting from an increase in the number of
directors, may be filled by the board of directors, the stockholders or, if the
directors remaining in office constitute less than quorum, a majority vote of
the directors remaining in office.
The Signet Articles and Signet Bylaws do not contain any provisions
relating to the removal of directors. The VSCA provides that the stockholders
may remove a director with or without cause, unless the articles of
incorporation provide that directors may be removed only with cause, and that if
a director is elected by a voting group of stockholders, only the members of
that voting group may vote to remove him or her. A director may be removed by
stockholders only at a meeting called for purposes of removing such director.
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
SIGNET. The Signet Articles provide that to the full extent that the VSCA
permits the limitation or elimination of the liability of directors or officers,
a director or officer of Signet shall not be liable to Signet or its
stockholders for monetary damages in an amount greater than one dollar. The
Signet Articles provide that to the full extent permitted by the VSCA and any
other applicable law, Signet shall indemnify a director or officer of Signet who
is, was or is threatened to be made a party to any proceeding by reason of the
fact that he or she is or was such a director or officer or is or was serving
any other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, at the request of Signet while a director or officer of
Signet.
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
SIGNET. The VSCA provides that transactions between a corporation and a
director in which the director has a direct or indirect personal interest is not
voidable by the corporation solely because of the director's interest in the
transaction if: (i) the material facts of the transaction and the director's
interest were disclosed or known to the board of directors (or a committee
thereof) and the board (or such committee) authorized, approved or ratified the
transaction, (ii) the material facts of the transaction and the director's
interest were disclosed to the stockholders entitled to vote and they
authorized, approved or ratified the transaction, or (iii) the transaction was
fair to the corporation. For purposes of clause (i) above, a conflict of
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interest transaction is authorized, approved or ratified if it receives the
affirmative vote of the majority of directors (or committee members), who have
no direct or indirect personal interest in the transaction. The presence of, or
a vote cast by, a director with a direct or indirect personal interest does not
affect the validity of any action taken under clause (i) above if the
transaction is otherwise authorized, approved or ratified pursuant to that
clause.
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
SIGNET. The Signet Bylaws provide that special meetings of the stockholders
for any purpose or purposes may be called at any time by the Chairman of the
Board of Directors, the President or the Signet Board.
FUNC. A special meeting of stockholders may be called for any purpose only
by the FUNC Board of Directors, the Chairman of the FUNC Board of Directors 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 in 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
SIGNET. The Signet Bylaws establish procedures that must be followed for a
stockholder to nominate persons for election to the Signet Board at an annual
meeting of stockholders. Such nominations must be made by delivering written
notice to the Corporate Secretary of Signet at its principal executive offices
not later than the close of business on the 90th calendar day, nor earlier than
the close of business on the 120th calendar day, prior to the first anniversary
of the preceding year's annual meeting; provided however, that in the event that
the date of the annual meeting is more than 30 calendar days before or more than
60 calendar days after such anniversary date, notice by the stockholder to be
timely must be so delivered not earlier than the close of business on the 120th
calendar day prior to such annual meeting and not later than the close of
business on the later of the 90th calendar day prior to such annual meeting or
the tenth calendar day following the calendar day on which public announcement
of the date of such meeting is first made by Signet. The nomination notice must
set forth (i) as to each person whom the stockholder proposes to nominate for
election or reelection as a director, all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Exchange Act and Rule 14a-11 thereunder
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected), and (ii) as to the
stockholder giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made the name and address of such stockholder, as
they appear on Signet's books, and of such beneficial owner and the class and
number of Signet shares which are owned beneficially and of record by such
stockholder and such beneficial owner.
In the event that the number of directors to be elected to the Signet Board
is increased and there is no public announcement by Signet naming all of the
nominees for director or specifying the size of the increased Signet Board at
least 100 calendar days prior to the first anniversary of the preceding year's
annual meeting, a stockholder's notice also will be considered timely, but only
with respect to nominees for any new positions created by such increase, if it
is delivered to the Corporate Secretary at Signet's principal executive offices
not later than the close of business on the tenth calendar day following the day
on which such public announcement is first made by Signet.
Except as otherwise provided by law, the Signet Articles or the Signet
Bylaws, the Chairman of the meeting shall have the power and duty to determine
whether a nomination or any business proposed to be brought before the meeting
was made or proposed, as the case may be, in accordance with the procedures set
forth in the Signet Bylaws and, if any proposed nomination or business is not in
compliance with the Signet Bylaws, to declare that such defective proposal or
nomination shall be disregarded.
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FUNC. The FUNC Bylaws establish procedures that must be followed for
stockholders to nominate persons for election to the FUNC Board of Directors.
Such nominations must be made by delivering written notice to the Secretary of
FUNC not less than 60 or more than 90 days prior to the annual meeting at which
directors will be elected; provided, however, that if less than 70 days' notice
of the date of the meeting is given, such written notice by the stockholder must
be so delivered not later than the tenth day after the day on which such notice
of the date of the meeting was given. Notice will be deemed to have been given
more than 70 days prior to the meeting if the meeting is called on the third
Tuesday of April regardless as to when public disclosure is made. The nomination
notice must set forth certain information about the person to be nominated
similar to that required to be disclosed in the solicitation of proxies for
election of directors pursuant to Items 7(a) and 7(b) of Regulation 14A under
the Exchange Act and such person's written consent to being nominated and to
serving as a director if elected. The nomination notice must also set forth
certain information about the person submitting the notice, including the name
and address of the stockholder and the class and number of shares of FUNC Common
Stock owned of record or beneficially by such stockholder. The Chairman of the
meeting will, if the facts warrant, determine that a nomination was not made in
accordance with the provisions prescribed by the 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
SIGNET. The Signet Bylaws establish procedures that must be followed for a
stockholder to submit a proposal for a vote at an annual meeting of
stockholders. Such proposals must be made by delivering written notice to the
Corporate Secretary of Signet at its principal executive offices not later than
the close of the business on the 90th calendar day, nor earlier than the close
of business on the 120th calendar day, prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is more than 30 calendar days before or more than 60
calendar days after such anniversary date, notice by the stockholder to be
timely must be so delivered not earlier than the close of business on the 120th
calendar day prior to such annual meeting and not later than the close of
business on the later of the 90th calendar day prior to such annual meeting or
the tenth calendar day following the calendar day on which public announcement
of the date of such meeting is first made by Signet. The stockholder's proposal
notice must set forth (i) a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (ii) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made, the name and address of such
stockholder, as they appear on Signet's books, and of such beneficial owner and
the class and number of Signet shares which are owned beneficially and of record
by such stockholder and such beneficial owner.
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 at the meeting for a vote of the stockholders.
STOCKHOLDER PROTECTION RIGHTS PLANS
SIGNET. Signet has adopted a stockholders' rights plan which is intended to
protect stockholders in the event of unsolicited offers or attempts to acquire
Signet, including offers that do not treat all stockholders equally,
acquisitions in the open market of shares sufficient to obtain control without
offering fair value to all stockholders, and other coercive or unfair takeover
tactics that could impair the Signet Board's ability to represent stockholders'
interests fully. Pursuant to the stockholders' rights plan, the Signet Board
declared a dividend distribution of one right (a "Signet Right") for each
outstanding share of Signet Common Stock to stockholders of record at the close
of business on June 5, 1989 (the "Rights Record Date") and authorized the
issuance of one Signet Right (as adjusted pursuant to the Signet Rights
Agreement, as described below)
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for each share of Signet Common Stock issued between the Rights Record Date and
the Distribution Date (as described below). Each Signet Right entitles the
registered holder to purchase from Signet a unit consisting of one one-hundredth
of a share (a "Unit") of Series A Junior Participating Preferred Stock at a
price of $140 per Unit, subject to adjustment. The description and terms of the
Signet Rights are set forth in a Rights Agreement dated as of May 23, 1989 (the
"Signet Rights Agreement"), between Signet and Mellon Bank, N.A., as Rights
Agent. The Signet Rights contain certain transfer restrictions in accordance
with Virginia law.
The Signet Rights have certain anti-takeover effects. The Signet Rights may
cause substantial dilution to a person who attempts to acquire Signet without
the approval of the Signet Board unless the offer is conditioned on a
substantial number of Signet Rights being acquired. The Signet Rights, however,
should not affect offers for all outstanding shares of Signet Common Stock at a
fair price and otherwise in the best interests of Signet and its stockholders as
determined by the Signet Board, since the Signet Board may, at its option,
redeem all, but not fewer than all, of the then outstanding Signet Rights.
Initially, the Signet Rights are and will be attached to all certificates
representing outstanding Signet Common Stock. The Signet Rights will separate
from the Signet Common Stock and become exercisable on the Distribution Date,
which will occur ten days after a person or group either acquires 20 percent or
more of the Signet Common Stock or announces an offer which would result in such
person or group owning 20 percent or more of the Signet Common Stock (even if no
purchases actually occur) unless extended by the Signet Board before such person
or group becomes an acquiring person.
If Signet is acquired in a merger or other business combination
transaction, each Signet Right will entitle its holder to purchase, at the
Signet Right's then current exercise price, a number of the acquiror's shares
having a market price at that time of twice the Signet Right's exercise price.
If any person or group acquires 20 percent or more of the Signet Common
Stock and thereupon engages in certain specified "self-dealing" transactions or
acquires ownership of 25 percent or more of the Signet Common Stock (other than
through a cash tender offer for all shares in which such person or group
acquires 90 percent or more of the outstanding shares), the "flip-in" provision
of the Signet Rights will be triggered. Under this provision, the Signet Rights
will entitle a holder (except that person or group involved in a self-dealing
transaction) to buy a number of additional shares of Signet Common Stock having
a market value at that time of twice the exercise price of each share.
Following the acquisition by any person or group of 20 percent or more of
the Signet Common Stock, but prior to the acquisition by a person or group of 50
percent of the Signet Common Stock, the Signet Board will also have the ability
to exchange the Signet Rights (except those Signet Rights held by such person or
group following a "self-dealing" transaction), in whole or in part, for either
one share of Signet Common Stock or one Unit of Series A Junior Participating
Preferred Stock.
Prior to the acquisition by a person or group of beneficial ownership of 20
percent or more of the Signet Common Stock, the Signet Rights are redeemable, at
the option of the Signet Board, for $0.01 per Right.
In connection with the execution of the Merger Agreement, the Signet Rights
Agreement was amended in certain respects and will terminate at the Effective
Date and the Signet Rights will no longer be of any effect. See "THE MERGERS --
Amendment to Signet Rights Agreement".
FUNC. FUNC has adopted the FUNC Rights Agreement. See "DESCRIPTION OF FUNC
CAPITAL STOCK -- FUNC Rights Plan".
STOCKHOLDER INSPECTION RIGHTS; STOCKHOLDER LISTS
SIGNET. The Signet Articles and Signet Bylaws do not contain any provisions
which govern stockholder inspection rights or stockholder lists. Under the VSCA,
a stockholder of a Virginia corporation is entitled to inspect and copy certain
books and records of the corporation, including a list of stockholders, if (i)
the stockholder has been a stockholder of record for at least six months
immediately preceding his or her written demand or is the holder of at least
five percent of the corporation's outstanding shares, (ii) the stockholder's
demand is made in good faith and for a proper purpose, (iii) the stockholder
describes with reasonable particularity the purpose of the request and the
records desired to be inspected, and (iv) the records are directly connected
with the stated purpose, and the stockholder gives the corporation written
notice of his or her demand at least five business days before the date he or
she wishes to inspect or copy. The VSCA also provides that a corporation shall
make available for inspection by any stockholder during usual business hours, at
least ten days before each meeting of stockholders, a complete list of the
stockholders entitled to vote at such meeting, provided that such stockholder
meets the requirements of the preceding sentence if the corporation has
securities registered under the Exchange Act.
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FUNC. Under the NCBCA, qualified stockholders have the right to inspect and
copy certain records of FUNC if their demand is made in good faith and for a
proper purpose. Such right of inspection requires that the stockholder give FUNC
at least five business days' written notice of the demand, describing with
reasonable particularity his purpose and the requested records. The records must
be directly connected with the stockholder's purpose. The rights of inspection
and copying extend not only to stockholders of record but also to beneficial
owners whose beneficial ownership is certified to FUNC by the stockholder of
record. However, FUNC is under no duty to provide any accounting records or any
records with respect to any matter that FUNC determines in good faith may, if
disclosed, adversely affect FUNC in the conduct of its business or may
constitute material non-public information, and the rights of inspection and
copying are limited to stockholders who either have been stockholders for at
least six months or who hold at least five percent of the outstanding shares of
any class of stock of FUNC. A stockholder's agent or attorney has the same
inspection and copying rights as the stockholder he or she 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 or her agent or attorney upon written demand at his or her
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 or
her agent or attorney, may inspect such list at any time during the meeting or
any adjournment thereof.
REQUIRED STOCKHOLDER VOTE FOR CERTAIN ACTIONS
SIGNET. The VSCA generally requires the approval of a majority of a
corporation's board of directors, and the holders of more than two-thirds of all
the votes entitled to be cast thereon by each voting group entitled to vote, on
any plan of merger or consolidation, plan of share exchange or sale of
substantially all of the assets of a corporation not in the ordinary course of
business. The VSCA also specifies additional voting requirements for Affiliated
Transactions (as hereinafter defined) and transactions that would cause an
acquiring person's voting power to meet or exceed specified thresholds, as
discussed below.
The VSCA contains provisions governing "Affiliated Transactions". These
provisions, with several exceptions discussed below, require approval of
material acquisition transactions between a Virginia corporation and any holder
of more than ten percent of any class of its outstanding voting shares (an
"Interested Shareholder") by the holders of at least two-thirds of the remaining
voting shares. Affiliated Transactions subject to the approval requirement
include mergers, share exchanges, material dispositions of corporate assets not
in the ordinary course of business, any dissolution of the corporation proposed
by or on behalf of an Interested Shareholder, or any reclassification, including
reverse stock splits, recapitalization or merger of the corporation with its
subsidiaries which increases the percentage of voting shares owned beneficially
by an Interested Shareholder by more than five percent.
For three years following the time that an Interested Shareholder becomes
an owner of ten percent of the outstanding voting shares, a Virginia corporation
cannot engage in an Affiliated Transaction with such Interested Shareholder
without approval of two-thirds of the voting shares other than those shares
beneficially owned by the Interested Shareholder, and majority approval of the
"Disinterested Directors". A Disinterested Director means, with respect to a
particular Interested Shareholder, a member of a corporation's board of
directors who was (i) a member on the date on which an Interested Shareholder
became an Interested Shareholder, and (ii) recommended for election by, or was
elected to fill a vacancy and received the affirmative vote of, a majority of
the Disinterested Directors then on the board. At the expiration of the three-
year period, the statute requires approval of Affiliated Transactions by
two-thirds of the voting shares other than those beneficially owned by the
Interested Shareholder.
The principal exceptions to the special voting requirement apply to
transactions proposed after the three-year period has expired and require either
that the transaction be approved by a majority of the corporation's
Disinterested Directors or that the transaction satisfy the fair-price
requirements of the VSCA. In general, the fair-price requirement provides that
in a two-step acquisition transaction, the Interested Shareholder must pay the
stockholders in the second step either the same amount of cash or the same
amount and type of consideration paid to acquire the Virginia corporation's
shares in the first step.
None of the foregoing limitations and special voting requirements applies
to a transaction, such as the Corporate Merger, with an Interested Shareholder
whose acquisition of shares making such person an Interested Shareholder was
approved by a majority of the Virginia corporation's Disinterested Directors.
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These provisions were designed to deter certain takeovers of Virginia
corporations. In addition, the statute provides that, by affirmative vote of a
majority of the voting shares other than shares owned by any Interested
Shareholder, a corporation can adopt an amendment to its articles of
incorporation or bylaws providing that the Affiliated Transactions provisions
shall not apply to the corporation. Signet has not "opted out" of (I.E., elected
not to be governed by) the Affiliated Transactions provisions.
Virginia law also provides that shares acquired in a transaction ("control
shares") that would cause the acquiring person's voting strength to meet or
exceed any of three thresholds (20 percent, 33 1/3 percent or 50 percent) have
no voting rights unless granted by a majority vote of shares not owned by the
acquiring person or any officer or employee-director of the Virginia
corporation. This provision empowers an acquiring person to require the Virginia
corporation to hold a special meeting of stockholders to consider the matter
within 50 days of the request. This Virginia law provides that, in the event
control shares are accorded voting rights and, as a result, the holder of the
control shares has a majority of all voting power for the election of directors,
the stockholders, other than such holder, may cause the corporation to redeem
their shares at "fair value" (as defined in the VSCA).
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 of Directors, which 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 of Directors recommend the proposed transaction to the
stockholders who would be required to approve the transaction by a vote of a
simple majority of the outstanding shares. In accordance with North Carolina
law, the submission by the FUNC Board of Directors 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
of Directors, no vote of the stockholders of FUNC would be required if such
disposition is made in the usual and regular course of business or if such
disposition is made to a wholly-owned subsidiary of FUNC.
ANTI-TAKEOVER PROVISIONS
SIGNET. For a description of certain provisions of the VSCA which may be
deemed to have an anti-takeover effect and are applicable to Signet as a
Virginia corporation, see " -- Required Stockholder Vote for Certain Actions;
SIGNET".
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.
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DISSENTERS' RIGHTS
SIGNET. Article 15 of the VSCA provides stockholders of a Virginia
corporation the right to dissent from and obtain payment of the fair value of
their shares in the event of mergers, consolidations and certain other corporate
transactions. However, Article 15 of the VSCA, also provides that stockholders
of a Virginia corporation with shares listed on a national securities exchange
or with at least 2,000 record stockholders are not entitled to dissenters'
rights unless certain requirements are met. Because Signet has more than 2,000
record stockholders and FUNC Common Stock is listed on the NYSE, holders of
Signet Common Stock do not have dissenters' or appraisal rights in connection
with the Mergers.
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 that the articles of
incorporation, bylaws or a resolution of the board of directors entitle
stockholders to dissent.
DIVIDENDS AND OTHER DISTRIBUTIONS
SIGNET. The VSCA generally provides that a corporation may make
distributions to its stockholders unless, after giving effect to the
distribution, (i) the corporation would not be able to pay its debts as they
become due in the usual course of business, or (ii) the corporation's total
assets would be less than the sum of its total liabilities plus the amount that
would be needed, if the corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of
stockholders whose preferential rights are superior to those receiving the
distribution. These requirements are applicable to Signet as a Virginia
corporation.
In addition to the limitations set forth in the VSCA, there are various
regulatory requirements that are applicable to distributions by bank holding
companies such as Signet.
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
SIGNET. The VSCA generally provides that a corporation's board of directors
may propose dissolution for submission to stockholders and that to be
authorized, dissolution must be recommended by the board to the stockholders and
approved by the holders of more than two-thirds of all votes entitled to be cast
on the proposal, unless the articles of incorporation of the corporation require
a greater or lesser vote. There are no provisions in the Signet Articles which
would modify the statutory requirements for dissolution under the VSCA.
FUNC. North Carolina law provides that FUNC may be dissolved if the FUNC
Board of Directors proposes dissolution and a majority of the shares of FUNC
entitled to vote thereon approves. In accordance with North Carolina law, the
FUNC Board of Directors may condition its submission of a proposal for
dissolution on any basis.
RESALE OF FUNC COMMON SHARES
The FUNC Common Shares have been registered under the Securities Act,
thereby allowing such shares to be traded freely and without restriction by
those holders of Signet 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 Signet or FUNC.
Signet has agreed to use its reasonable best efforts to cause each holder of
Signet Common Stock who is deemed by Signet to be an affiliate to enter 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 Signet.
In addition to the foregoing, "affiliates" of Signet and FUNC have agreed
not to sell or otherwise dispose of any FUNC Common Stock or Signet Common Stock
beneficially owned by them during a period commencing 30 days prior to the
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Effective Date and ending upon publication by FUNC of combined financial
statements covering at least 30 days of the combined entities' operations after
the Corporate Merger.
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 financial statements of Signet incorporated by reference
in Signet's Annual Report (Form 10-K) for the year ended December 31, 1996, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon incorporated by reference therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The consolidated balance sheets of FUNC as of December 31, 1996 and 1995,
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, 1996, included in FUNC's 1996 Annual Report to Stockholders which
is incorporated by reference in FUNC's 1996 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.
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ANNEX A
AGREEMENT AND PLAN OF MERGERS
AGREEMENT AND PLAN OF MERGERS, dated as of the 18th day of July, 1997 (this
"Plan"), by and among SIGNET BANKING CORPORATION ("Signet"), SIGNET BANK (the
"Bank"), FIRST UNION CORPORATION ("First Union"), and FIRST UNION NATIONAL BANK
("FUNB").
RECITALS
A. SIGNET. Signet is a Virginia corporation, having its principal place of
business in Richmond, Virginia.
B. FIRST UNION. First Union is a North Carolina corporation, having its
principal place of business in Charlotte, North Carolina.
C. THE BANK. The Bank is a Virginia commercial bank, having its principal
place of business in Richmond, Virginia. As of March 31, 1997, the Bank had
capital of $925,905,000 divided into common stock of $301,132,000, surplus of
$211,369,000, and undivided profits, including capital reserves, of
$419,673,000, and net unrealized holding gains (losses) on available for sale
securities of ($6,269,000).
D. FUNB. FUNB is a national banking association having its principal place
of business in Charlotte, North Carolina. As of March 31, 1997, FUNB had capital
of $2,304,325,000, divided into common stock of $82,795,000, surplus of
$763,989,000, undivided profits, including capital reserves, of $1,468,980,000,
and net unrealized holding gains (losses) on available for sale securities of
($11,439,000).
E. STOCK OPTION AGREEMENT. As an inducement to the willingness of First
Union to continue to pursue the transactions contemplated by this Plan, Signet
expects (but is not obligated) to grant to First Union an option pursuant to a
stock option agreement, in substantially the form of Exhibit A (the "Stock
Option Agreement").
F. INTENTIONS OF THE PARTIES. It is the intention of the parties to this
Plan that the business combination contemplated hereby be accounted for under
the "pooling-of-interests" accounting method and be treated as a
"reorganization" under Section 368 of the Internal Revenue Code of 1986 as
amended (the "Code").
G. BOARD ACTION. The respective Boards of Directors of each of First Union,
FUNB, Signet and the Bank have determined that it is in the best interests of
their respective companies and their stockholders to consummate the strategic
business combination transaction provided for herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein the
parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01. CERTAIN DEFINITIONS. The following terms are used in this Plan with
the meanings set forth below:
"Acquisition Proposal" means any tender or exchange offer, proposal
for a merger, consolidation or other business combination involving Signet
or any of its Subsidiaries or any proposal or offer to acquire in any
manner a substantial equity interest in, or a substantial portion of the
assets or deposits of, Signet or any of its Subsidiaries, other than the
transactions contemplated by this Plan.
"Asset Classification" has the meaning set forth in Section 5.03(w).
"Bank" has the meaning set forth in the preamble to this Plan.
"Bank Merger" has the meaning set forth in Section 2.02.
"Code" has the meaning set forth in Recital F.
"Compensation and Benefit Plans" has the meaning set forth in Section
5.03(m).
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"Consultants" has the meaning set forth in Section 5.03(m)(i).
"Continuing Bank" has the meaning set forth in Section 2.02(a).
"Corporate Merger" has the meaning set forth in Section 2.01.
"Corporation Commission" has the meaning set forth in Section 2.01(b).
"Costs" has the meaning set forth in Section 6.12(a).
"Covered Transactions" has the meaning set forth in Section 5.03(o).
"Directors" has the meaning set forth in Section 5.03(m)(i).
"Disclosure Schedule" has the meaning set forth in Section 5.01.
"DRP" has the meaning set forth in Section 4.01(b).
"Effective Date" has the meaning set forth in Section 2.03.
"Effective Time" has the meaning set forth in Section 2.03.
"Employees" has the meaning set forth in Section 5.03(m)(i).
"Environmental Laws" means all applicable local, state and federal
environmental, health and safety laws and regulations, including, without
limitation, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation, and Liability Act, the Clean Water
Act, the Federal Clean Air Act, and the Occupational Safety and Health Act,
each as amended, regulations promulgated thereunder, and state
counterparts.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has the meaning set forth in Section 5.03(m).
"ERISA Affiliate Plan" has the meaning set forth in Section 5.03(m).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Exchange Agent" has the meaning set forth in Section 3.04.
"Exchange Ratio" has the meaning set forth in Section 3.01.
"FDIC" means the Federal Deposit Insurance Corporation.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System.
"First Union" has the meaning set forth in the preamble to this Plan.
"First Union Board" means the Board of Directors of First Union.
"First Union Class A Preferred Stock" means the Class A preferred
stock, no par value per share, of First Union.
"First Union Common Stock" means the common stock, par value $3.33 1/3
per share, of First Union.
"First Union Preferred Stock" means the preferred stock, no par value
per share, of First Union.
"First Union Rights" has the meaning set forth in Section 3.01(b).
"First Union Rights Agreement" means the Shareholder Protection Rights
Agreement, dated as of December 18, 1990 (as amended), between First Union
and FUNB.
"First Union Stock" means, collectively, First Union Common Stock,
First Union Class A Preferred Stock and First Union Preferred Stock.
"FUNB" has the meaning set forth in the preamble to this Plan.
"Governmental Authority" means any court, administrative agency or
commission or other federal, state or local governmental authority or
instrumentality.
"Indemnified Party" has the meaning set forth in Section 6.12(a).
"Insurance Amount" has the meaning set forth in Section 6.12(b).
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"Insurance Policy" has the meaning set forth in Section 5.03(t).
"IRS" means the Internal Revenue Service.
"Liens" means any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance.
"Material Adverse Effect" means, with respect to First Union or
Signet, any effect that (i) is material and adverse to the financial
position, results of operations or business of First Union and its
Subsidiaries taken as a whole or Signet and its Subsidiaries taken as a
whole, respectively, or (ii) would materially impair the ability of either
First Union or Signet to perform its obligations under this Plan or
otherwise materially threaten or materially impede the consummation of the
Mergers and the other transactions contemplated by this Plan; provided,
however, that Material Adverse Effect shall not be deemed to include the
impact of (a) changes in banking and similar laws of general applicability
or interpretations thereof by courts or governmental authorities, (b)
changes in generally accepted accounting principles or regulatory
accounting requirements applicable to banks and their holding companies
generally and (c) any modifications or changes to valuation policies and
practices in connection with the Mergers or restructuring charges taken in
connection with the Mergers, in each case in accordance with generally
accepted accounting principles.
"Mergers" has the meaning set forth in Section 2.02.
"Merger Consideration" has the meaning set forth in Section 2.01.
"Multiemployer Plans" has the meaning set forth in Section 5.03(m).
"NCBCA" means the North Carolina Business Corporation Act.
"New Certificate" has the meaning set forth in Section 3.04.
"North Carolina Secretary" has the meaning set forth in Section
2.01(b).
"NYSE" means the New York Stock Exchange, Inc.
"Old Certificates" has the meaning set forth in Section 3.04.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means any individual, bank, corporation, partnership,
association, joint-stock company, business trust or unincorporated
organization.
"Pension Plan" has the meaning set forth in Section 5.03(m).
"Plan" has the meaning set forth in the preamble to this Plan, as
amended or modified from time to time in accordance with Section 9.02.
"Previously Disclosed" by a party shall mean information set forth in
its Disclosure Schedule.
"Proxy Statement" has the meaning set forth in Section 6.03.
"Registration Statement" has the meaning set forth in Section 6.03.
"Regulatory Authority" has the meaning set forth in Section 5.03(i).
"Replacement Option" has the meaning set forth in Section 3.06.
"Representatives" means, with respect to any Person, such Person's
directors, officers, employees, legal or financial advisors or any
representatives of such legal or financial advisors.
"Rights" means, with respect to any Person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any person
any right to subscribe for or acquire, or any options, calls or commitments
relating to, or any stock appreciation right or other instrument the value
of which is determined in whole or in part by reference to the market price
or value of, shares of capital stock of such person.
"SEC" means the Securities and Exchange Commission.
"SEC Documents" has the meaning set forth in Section 5.03(g).
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Signet" has the meaning set forth in the preamble to this Plan.
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"Signet Affiliate" has the meaning set forth in Section 6.07(a).
"Signet Board" means the Board of Directors of Signet.
"Signet By-Laws" means the By-laws of Signet.
"Signet Certificate" means the Articles of Incorporation of Signet.
"Signet Common Stock" means the common stock, par value $5.00 per
share, of Signet.
"Signet Meeting" has the meaning set forth in Section 6.02.
"Signet Preferred Stock" means the preferred stock, par value $20.00
per share, of Signet.
"Signet Rights" means the preferred share purchase rights issued under
the Signet Rights Agreement.
"Signet Rights Agreement" means the Rights Agreement, dated as of May
23, 1989, between Signet and Mellon Bank, N.A.
"Signet Stock" means, collectively, Signet Common Stock and Signet
Preferred Stock.
"Signet Stock Options" has the meaning set forth in Section 3.06.
"Signet Stock Plans" means all employee and director stock options to
purchase shares of Signet Common Stock.
"Stock Option Agreement" has the meaning set forth in Recital E.
"Subsidiary" and "Significant Subsidiary" have the meanings ascribed
to them in Rule 1-02 of Regulation S-X of the SEC.
"Surviving Corporation" has the meaning set forth in Section 2.01.
"Takeover Laws" has the meaning set forth in Section 5.03 (o).
"Tax" and "Taxes" means all federal, state, local or foreign taxes,
charges, fees, levies or other assessments, however denominated, including,
without limitation, all net income, gross income, gains, gross receipts,
sales, use, ad valorem, goods and services, capital, production, transfer,
franchise, windfall profits, license, withholding, payroll, employment,
disability, employer health, excise, estimated, severance, stamp,
occupation, property, environmental, unemployment or other taxes, custom
duties, fees, assessments or charges of any kind whatsoever, together with
any interest and any penalties, additions to tax or additional amounts
imposed by any taxing authority whether arising before, on or after the
Effective Date.
"Tax Returns" means any return, amended return or other report
(including elections, declarations, disclosures, schedules, estimates and
information returns) required to be filed with respect to any Tax.
"Treasury Stock" shall mean shares of Signet Stock held by Signet or
any of its Subsidiaries or by First Union or any of its Subsidiaries, in
each case other than in a fiduciary (including custodial or agency)
capacity or as a result of debts previously contracted in good faith.
"VSCA" means the Virginia Stock Corporation Act.
ARTICLE II
THE MERGERS
2.01. THE CORPORATE MERGER.
(A) THE CORPORATE MERGER. At the Effective Time, Signet shall merge
with and into First Union (the "Corporate Merger"), the separate corporate
existence of Signet shall cease and First Union shall survive and continue
to exist as a North Carolina corporation (First Union, as the surviving
corporation in the Corporate Merger, sometimes being referred to herein as
the "Surviving Corporation"). First Union may at any time prior to the
Effective Time change the method of effecting the combination with Signet
(including, without limitation, the provisions of this Article II) if and
to the extent it deems such change to be necessary, appropriate or
desirable; provided, however, that no such change shall (i) alter or change
the amount or kind of consideration to be issued to holders of Signet
Common Stock as provided for in this Plan
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(the "Merger Consideration"), (ii) adversely affect the tax treatment of
Signet's stockholders as a result of receiving the Merger Consideration or
(iii) materially impede or delay consummation of the transactions
contemplated by this Plan.
(B) EFFECTIVENESS OF THE CORPORATE MERGER. Subject to the satisfaction
or waiver of the conditions set forth in Article VII, the Corporate Merger
shall become effective upon the occurrence of the filing in the office of
the Virginia State Corporation Commission (the "Corporation Commission") of
articles of merger in accordance with Section 13.1-720 of the VSCA and the
filing in the Office of the Secretary of State of the State of North
Carolina (the "North Carolina Secretary") of articles of merger in
accordance with Section 55-11-05 of the NCBCA or such later date and time
as may be set forth in such articles and the issuance of certificates of
merger by the Corporation Commission and the North Carolina Secretary under
the VSCA and the NCBCA, respectively. The Corporate Merger shall have the
effects prescribed in the NCBCA and the VSCA.
(C) ARTICLES OF INCORPORATION AND BY-LAWS. The articles of
incorporation and by-laws of First Union immediately after the Corporate
Merger shall be those of First Union as in effect immediately prior to the
Effective Time.
(D) DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The directors
and officers of First Union immediately after the Corporate Merger shall be
the directors and officers of First Union (except as provided in Section
6.16) immediately prior to the Effective Time, until such time as their
successors shall be duly elected and qualified.
2.02. THE BANK MERGER. No sooner than the day following the Corporate
Merger on the Effective Date or as soon thereafter as First Union may deem
appropriate:
(A) THE CONTINUING BANK. The Bank shall be merged with and into FUNB
(the "Bank Merger" and together with the Corporate Merger, the "Mergers"),
the separate existence of the Bank shall cease and FUNB (the "Continuing
Bank") shall survive; the name of the Continuing Bank shall be "First Union
National Bank"; and the Continuing Bank shall continue to conduct the
business of a national banking association at FUNB's main office in
Charlotte, North Carolina and at the legally established branches of the
Bank and FUNB.
(B) RIGHTS, ETC. The Continuing Bank shall thereupon and thereafter
possess all the rights, privileges, immunities and franchises, of a public
as well as of a private nature, of each of the banks so merged; and all
property, real personal and mixed, and all debts due on whatever account,
and all other choses in action, and all and every other interest, of or
belonging to or due to each of the banks so merged, shall be taken and
deemed to be transferred to and vested in the Continuing Bank without
further act or deed, including appointments, designations and nominations
and all other rights and interests in any fiduciary capacity; and the title
to any real estate or any interest therein, vested in each of such banks,
shall not revert or be in any way impaired by reason of the Bank Merger.
(C) LIABILITIES, ETC. The Continuing Bank shall thenceforth be
responsible and liable for all the liabilities, obligations and penalties
of the banks so merged (including liabilities arising out of the operation
of any trust departments). All rights of creditors and obligors and all
liens on the property of each of the Bank and FUNB shall be preserved
unimpaired.
(D) CHARTER; BYLAWS; DIRECTORS; OFFICERS. The charter and bylaws of
the Continuing Bank shall be those of FUNB, as in effect immediately prior
to the Bank Merger becoming effective. The directors and officers of FUNB
in office immediately prior to the Bank Merger becoming effective shall be
the directors and officers of the Continuing Bank, together with such
additional directors and officers as may thereafter be elected, who shall
hold office until such time as their successors are elected and qualified.
(E) OUTSTANDING STOCK OF THE CONTINUING BANK. The amount of the
capital stock of the Continuing Bank shall be not less than $82,794,510 and
shall consist of not less than 5,519,634 issued and outstanding shares of
common stock, each of $15.00 par value, and the issued and outstanding
shares shall remain issued and outstanding as shares of FUNB, each of
$15.00 par value, and the holders thereof shall retain their rights
therein.
(F) OUTSTANDING STOCK OF THE BANK. Promptly after the Bank Merger
becomes effective, the Surviving Corporation shall deliver all of the
issued and outstanding shares of the capital stock of the Bank to the
Continuing Bank for cancellation.
2.03. EFFECTIVE DATE AND EFFECTIVE TIME. Subject to the satisfaction or
waiver of the conditions set forth in Article VII, the parties shall cause the
effective date of the Corporate Merger (the "Effective Date") to occur on (i)
the fifth business day to occur after the last of the conditions set forth in
Article VII shall have been satisfied or waived in accordance with the terms of
this Plan (or, at the election of First Union, on the last business day of the
month in which such day occurs or, if
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such last business day occurs on one of the last five business days of such
month, on the last business day of the succeeding month) or (ii) such other date
to which the parties may agree in writing. The time on the Effective Date when
the Corporate Merger shall become effective is referred to as the "Effective
Time."
ARTICLE III
CONSIDERATION; EXCHANGE PROCEDURES
3.01. MERGER CONSIDERATION. Subject to the provisions of this Plan, at the
Effective Time, automatically by virtue of the Corporate Merger and without any
action on the part of any Person:
(A) OUTSTANDING SIGNET COMMON STOCK AND SIGNET RIGHTS. Each share,
excluding Treasury Stock, of Signet Common Stock 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 1.10 (the "Exchange Ratio") shares of
First Union Common Stock (together with the attached First Union Rights),
as adjusted for the two-for-one First Union Common Stock split payable on
July 31, 1997. The Exchange Ratio shall be subject to adjustment as set
forth in Section 3.05.
(B) OUTSTANDING FIRST UNION COMMON STOCK. Each share of First Union
Common Stock (together with the rights ("First Union Rights") issued
pursuant to the First Union Rights Agreement attached thereto), issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding and unaffected by the Corporate Merger.
(C) TREASURY SHARES. Each share of Signet Common Stock held as
Treasury Stock immediately prior to the Effective Time shall be canceled
and retired at the Effective Time and no consideration shall be issued in
exchange therefor.
3.02. RIGHTS AS STOCKHOLDERS; STOCK TRANSFERS. At the Effective Time,
holders of Signet Common Stock shall cease to be, and shall have no rights as,
stockholders of Signet, other than to receive any dividend or other distribution
with respect to such Signet Common Stock with a record date occurring prior to
the Effective Time and the consideration provided under this Article III. After
the Effective Time, there shall be no transfers on the stock transfer books of
Signet or the Surviving Corporation of shares of Signet Common Stock.
3.03. 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 Signet Common
Stock who would otherwise be entitled to a fractional share of First Union
Common Stock (after taking into account all Old Certificates delivered by such
holder) an amount in cash (without interest) determined by multiplying such
fraction by the average of the last sale prices of First Union Common Stock, as
reported by the NYSE Composite Transactions Reporting System (as reported in The
Wall Street Journal or, if not reported therein, in another authoritative
source), for the five NYSE trading days immediately preceding the Effective
Date.
3.04. EXCHANGE PROCEDURES.
(A) As promptly as practicable after the Effective Date, First Union
shall send or cause to be sent to each former holder of record of shares of
Signet Common Stock immediately prior to the Effective Time transmittal
materials for use in exchanging such stockholder's certificates formerly
representing shares of Signet Common Stock and the associated Signet Rights
(the "Old Certificates") for the consideration set forth in this Article
III. First Union shall cause the certificates representing the shares of
First Union Common Stock (the "New Certificates") and/or any check in
respect of any fractional share interests or dividends or distributions
which such person shall be entitled to receive to be delivered to such
stockholder upon delivery to First Union National Bank, as exchange agent
(the "Exchange Agent"), of Old Certificates representing such shares of
Signet Common Stock (or indemnity reasonably satisfactory to First Union
and the Exchange Agent, if any of such certificates are lost, stolen or
destroyed) owned by such stockholder. No interest will be paid on any such
cash to be paid in lieu of fractional share interests or in respect of
dividends or distributions which any such person shall be entitled to
receive pursuant to this Article III upon such delivery.
(B) Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to any former holder of Signet Stock for any
amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(C) At the election of First Union, no dividends or other
distributions with respect to First Union Common Stock with a record date
occurring after the Effective Time shall be paid to the holder of any
unsurrendered Old Certificate representing shares of Signet Common Stock
converted in the Corporate Merger into the right to receive shares of such
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First Union Common Stock until the holder thereof shall be entitled to
receive New Certificates in exchange therefor in accordance with the
procedures set forth in this Section 3.04. After becoming so entitled in
accordance with this Section 3.04, the record holder thereof also shall be
entitled to receive any such dividends or other distributions, without any
interest thereon, which theretofore had become payable with respect to
shares of First Union Common Stock such holder had the right to receive
upon surrender of the Old Certificate.
3.05. ANTI-DILUTION PROVISIONS. In the event First Union changes (or
establishes a record date for changing) the number of shares of First Union
Common Stock issued and outstanding prior to the Effective Date as a result of a
stock split, stock dividend, recapitalization or similar transaction with
respect to the outstanding First Union Common Stock and the record date therefor
shall be prior to the Effective Date, the Exchange Ratio shall be
proportionately adjusted; provided, however, the Exchange Ratio shall not be
adjusted to reflect the two-for-one First Union Common Stock split payable on
July 31, 1997.
3.06. OPTIONS. At the Effective Time, each outstanding option to purchase
shares of Signet Common Stock under the Signet Stock Plans (each, a "Signet
Stock Option"), whether vested or unvested, shall be converted into an option to
acquire, on the same terms and conditions as were applicable under such Signet
Stock Option, the number of shares of First Union Common Stock equal to (a) the
number of shares of Signet Common Stock subject to the Signet Stock Option,
multiplied by (b) the Exchange Ratio (such product rounded down to the nearest
whole number) (a "Replacement Option"), at an exercise price per share (rounded
up to the nearest whole cent) equal to (y) the aggregate exercise price for the
shares of Signet Common Stock which were purchasable pursuant to such Signet
Stock Option divided by (z) the number of full shares of First Union Common
Stock subject to such Replacement Option in accordance with the foregoing.
Notwithstanding the foregoing, each Signet Stock Option which is intended to be
an "incentive stock option" (as defined in Section 422 of the Code) shall be
adjusted in accordance with the requirements of Section 424 of the Code. At or
prior to the Effective Time, Signet shall take all action, if any, necessary
with respect to the Signet Stock Plans to permit the replacement of the
outstanding Signet Stock Options by First Union pursuant to this Section. At the
Effective Time, First Union shall assume the Signet Stock Plans; provided, that
such assumption shall be only in respect of the Replacement Options and that
First Union shall have no obligation with respect to any awards under the Signet
Stock Plans other than the Replacement Options and shall have no obligation to
make any additional grants or awards under such assumed Signet Stock Plans.
ARTICLE IV
ACTIONS PENDING ACQUISITION
4.01. FOREBEARANCES OF SIGNET. From the date hereof until the Effective
Time, except as expressly contemplated by this Plan or as Previously Disclosed,
without the prior written consent of First Union, Signet will not, and will
cause each of its Subsidiaries not to:
(A) ORDINARY COURSE. Conduct the business of Signet and its
Subsidiaries other than in the ordinary and usual course or fail to use
reasonable efforts to preserve intact their business organizations and
assets and maintain their rights, franchises and existing relations with
customers, suppliers, employees and business associates, or take any action
reasonably likely to have an adverse affect upon Signet's ability to
perform any of its material obligations under this Plan.
(B) CAPITAL STOCK. Other than pursuant to Rights Previously Disclosed
and outstanding on the date hereof, (i) issue, sell or otherwise permit to
become outstanding (including pursuant to Signet's Dividend Reinvestment
Plan (the "DRP") and any Compensation and Benefit Plan qualified under
Section 401(k) of the Code to the extent such Compensation and Benefit Plan
offers Signet Common Stock as an investment option), or authorize the
creation of, any additional shares of Signet Stock or any Rights, (ii)
enter into any agreement with respect to the foregoing, or (iii) permit any
additional shares of Signet Stock to become subject to new grants of
employee or director stock options, other Rights or similar stock-based
employee rights.
(C) DIVIDENDS, ETC. (a) Make, declare, pay or set aside for payment
any dividend (other than (A) subject to Section 6.17, quarterly cash
dividends on Signet Common Stock in an amount not to exceed $0.21 per share
with record and payment dates consistent with past practice and (B)
dividends from wholly owned Subsidiaries to Signet or another wholly owned
Subsidiary of Signet) on or in respect of, or declare or make any
distribution on, any shares of Signet Common Stock or (b) directly or
indirectly adjust, split, combine, redeem, reclassify, purchase or
otherwise acquire, any shares of its capital stock.
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(D) COMPENSATION; EMPLOYMENT AGREEMENTS; ETC. Enter into or amend or
renew any employment, consulting, severance or similar agreements or
arrangements with any director, officer or employee of Signet or its
Subsidiaries, or grant any salary or wage increase or increase any employee
benefit (including incentive or bonus payments), except (i) for normal
individual increases in compensation to employees in the ordinary course of
business consistent with past practice, (ii) for other changes that are
required by applicable law, (iii) to satisfy Previously Disclosed
contractual obligations existing as of the date hereof, or (iv) for
employment arrangement for, or grants of awards to newly hired employees
consistent with past practice.
(E) BENEFIT PLANS. Enter into, establish, adopt or amend (except (i)
as may be required by applicable law or (ii) to satisfy Previously
Disclosed contractual obligations existing as of the date hereof) any
pension, retirement, stock option, stock purchase, savings, profit sharing,
deferred compensation, consulting, bonus, group insurance or other employee
benefit, incentive or welfare contract, plan or arrangement, or any trust
agreement (or similar arrangement) related thereto, in respect of any
director, officer or employee of Signet or its Subsidiaries, or take any
action to accelerate the vesting or exercisability of stock options,
restricted stock or other compensation or benefits payable thereunder.
(F) DISPOSITIONS. Except as Previously Disclosed, sell, transfer,
mortgage, encumber or otherwise dispose of or discontinue any of its
assets, deposits, business or properties except in the ordinary course of
business and in a transaction that is not material to it and its
Subsidiaries taken as a whole.
(G) ACQUISITIONS. Except as Previously Disclosed, acquire (other than
by way of foreclosures or acquisitions of control in a bona fide fiduciary
capacity or in satisfaction of debts previously contracted in good faith,
in each case in the ordinary and usual course of business consistent with
past practice) all or any portion of, the assets, business, deposits or
properties of any other entity except in the ordinary course of business
and in a transaction that is not material to it and its Subsidiaries taken
as a whole.
(H) GOVERNING DOCUMENTS. Amend the Signet Certificate, Signet By-laws
or the certificate of incorporation or by-laws (or similar governing
documents) of any of Signet's Subsidiaries.
(I) ACCOUNTING METHODS. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be required
by generally accepted accounting principles.
(J) CONTRACTS. Amend, or take any action adverse to First Union with
respect to, the Signet Rights Agreement or, except in the ordinary course
of business consistent with past practice, enter into or terminate any
material contract (as defined in Section 5.03(k)) or amend or modify in any
material respect any of its existing material contracts.
(K) CLAIMS. Settle any claim, action or proceeding, except for any
claim, action or proceeding involving solely money damages in an amount,
individually or in the aggregate for all such settlements, that is not
material to Signet and its Subsidiaries, taken as a whole.
(L) ADVERSE ACTIONS. (a) Take any action while knowing that such
action would, or is reasonably likely to, prevent or impede the Corporate
Merger from qualifying (i) for "pooling of interests" accounting treatment
or (ii) as a reorganization within the meaning of Section 368 of the Code;
or (b) knowingly take any action that is intended or is reasonably likely
to result in (i) any of its representations and warranties set forth in
this Plan being or becoming untrue in any material respect at any time at
or prior to the Effective Time, (ii) any of the conditions to the Corporate
Merger set forth in Article VII not being satisfied or (iii) a material
violation of any provision of this Plan except, in each case, as may be
required by applicable law or regulation.
(M) RISK MANAGEMENT. Except as required by applicable law or
regulation, (i) implement or adopt any material change in its interest rate
and other risk management policies, procedures or practices; (ii) fail to
follow its existing policies or practices with respect to managing its
exposure to interest rate and other risk; or (iii) fail to use commercially
reasonable means to avoid any material increase in its aggregate exposure
to interest rate risk.
(N) INDEBTEDNESS. Incur any indebtedness for borrowed money other than
in the ordinary course of business.
(O) COMMITMENTS. Agree or commit to do any of the foregoing.
4.02. FOREBEARANCES OF FIRST UNION. From the date hereof until the
Effective Time, except as expressly contemplated by this Plan, without the prior
written consent of Signet, First Union will not, and will cause each of its
Subsidiaries not to:
(A) EXTRAORDINARY DIVIDENDS. Make, declare, pay or set aside for
payment any extraordinary dividend; provided, however, the foregoing shall
not apply to the two-for-one First Union Common Stock split payable on July
31, 1997 and
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increases in the quarterly dividend rate payable on First Union Common
Stock in the ordinary course of business consistent with past practices.
(B) ADVERSE ACTIONS. (a) Take any action while knowing that such
action would, or is reasonably likely to, prevent or impede the Corporate
Merger from qualifying (i) for "pooling of interests" accounting treatment
or (ii) as a reorganization within the meaning of Section 368 of the Code;
or (b) knowingly take any action that is intended or is reasonably likely
to result in (i) any of its representations and warranties set forth in
this Plan being or becoming untrue in any material respect at any time at
or prior to the Effective Time, (ii) any of the conditions to the Corporate
Merger set forth in Article VII not being satisfied or (iii) a material
violation of any provision of this Plan except, in each case, as may be
required by applicable law or regulation; provided, however, that nothing
contained herein shall limit the ability of First Union to exercise its
rights under the Stock Option Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. DISCLOSURE SCHEDULES. On or prior to the date hereof, First Union has
delivered to Signet a schedule and Signet has delivered to First Union a
schedule (respectively, its "Disclosure Schedule") setting forth, among other
things, items the disclosure of which is necessary or appropriate either (i) in
response to an express disclosure requirement contained in a provision hereof or
(ii) as an exception to one or more representations or warranties contained in
Section 5.03 or 5.04 or to one or more of its covenants contained in Article IV
or VI; provided, that (a) no such item is required to be set forth in a
Disclosure Schedule as an exception to a representation or warranty if its
absence would not be reasonably likely to result in the related representation
or warranty being deemed untrue or incorrect under the standard established by
Section 5.02, and (b) the mere inclusion of an item in a Disclosure Schedule as
an exception to a representation or warranty shall not be deemed an admission by
a party that such item represents a material exception or fact, event or
circumstance or that such item is reasonably likely to result in a Material
Adverse Effect.
5.02. STANDARD. No representation or warranty of Signet or First Union
contained in Section 5.03 or 5.04 shall be deemed untrue or incorrect, and no
party hereto shall be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, event or circumstance unless such
fact, circumstance or event, individually or taken together with all other
facts, events or circumstances inconsistent with any representation or warranty
contained in Section 5.03 or 5.04 has had or is reasonably likely to have a
Material Adverse Effect on the party making such representation or warranty.
5.03. REPRESENTATIONS AND WARRANTIES OF SIGNET. Subject to Sections 5.01
and 5.02 and except as Previously Disclosed in a paragraph of its Disclosure
Schedule corresponding to the relevant paragraph below, Signet hereby represents
and warrants to First Union:
(A) ORGANIZATION, STANDING AND AUTHORITY. Signet is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia. Signet is duly qualified to do business and is in
good standing in the states of the United States and any foreign
jurisdictions where its ownership or leasing of property or assets or the
conduct of its business requires it to be so qualified.
(B) SIGNET STOCK. As of the date hereof, the authorized capital stock
of Signet consists solely of (i) 100,000,000 shares of Signet Common Stock,
of which no more than 60,382,648 shares were outstanding as of June 30,
1997, and (ii) 5,000,000 shares of Signet Preferred Stock, of which no
shares are outstanding. As of the date hereof, no shares of Signet Common
Stock and no shares of Signet Preferred Stock were held in treasury by
Signet or otherwise owned by Signet or its Subsidiaries. The outstanding
shares of Signet Common Stock have been duly authorized and are validly
issued and outstanding, fully paid and nonassessable, and subject to no
preemptive rights (and were not issued in violation of any preemptive
rights). As of the date hereof, there are no shares of Signet Stock
authorized and reserved for issuance, Signet does not have any Rights
issued or outstanding with respect to Signet Stock, and Signet does not
have any commitment to authorize, issue or sell any Signet Stock or Rights,
except pursuant to this Plan and the Stock Option Agreement. The number of
shares of Signet Common Stock which are issuable and reserved for issuance
upon exercise of Signet Stock Options as of the date hereof are Previously
Disclosed.
(C) SUBSIDIARIES.
(i) (A) Signet has Previously Disclosed a list of all of its
Subsidiaries together with the jurisdiction of organization and
principal business of each such Subsidiary, (B) except as Previously
Disclosed, it owns, directly or
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indirectly, all the issued and outstanding equity securities of each of
its Subsidiaries, (C) no equity securities of any of its Subsidiaries
are or may become required to be issued (other than to it or its
wholly-owned Subsidiaries) by reason of any Right or otherwise, (D)
there are no contracts, commitments, understandings or arrangements by
which any of such Subsidiaries is or may be bound to sell or otherwise
transfer any equity securities of any such Subsidiaries (other than to
it or its wholly-owned Subsidiaries), (E) there are no contracts,
commitments, understandings, or arrangements relating to its rights to
vote or to dispose of such securities and (F) all the equity securities
of each Subsidiary held by Signet or its Subsidiaries are fully paid and
nonassessable and are owned by Signet or its Subsidiaries free and clear
of any Liens.
(ii) Signet does not own beneficially, directly or indirectly, any
equity securities or similar interests of any Person, or any interest in
a partnership or joint venture of any kind, other than its Subsidiaries.
(iii) Each of Signet's Subsidiaries has been duly organized and is
validly existing in good standing under the laws of the jurisdiction of
its organization, and is duly qualified to do business and in good
standing in the jurisdictions where its ownership or leasing of property
or the conduct of its business requires it to be so qualified. Each of
Signet's Subsidiaries that is a bank is an "insured depository
institution" as defined in the Federal Deposit Insurance Act and
applicable regulations thereunder. The deposits of the Bank are insured
by the Bank Insurance Fund of the FDIC.
(D) CORPORATE POWER. Signet and each of its Subsidiaries has the
corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets; and each of Signet and
the Bank has the corporate power and authority to execute, deliver and
perform its obligations under this Plan and as to Signet, the Stock Option
Agreement, and to consummate the transactions contemplated hereby and
thereby.
(E) CORPORATE AUTHORITY. Subject in the case of this Plan to receipt
of the requisite approval of the agreement of merger set forth in this Plan
by the holders of more than two-thirds of the outstanding shares of Signet
Common Stock entitled to vote thereon (which is the only shareholder vote
required thereon), this Plan, the Stock Option Agreement and the
transactions contemplated hereby and thereby have been authorized by all
necessary corporate action of Signet and the Bank. This Plan is a valid and
legally binding obligation of each of Signet and the Bank, enforceable in
accordance with its terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws of general applicability relating to or affecting
creditors' rights or by general equity principles). The Signet Board has
received the written opinion of J.P. Morgan & Co., Inc. to the effect that
as of the date hereof the consideration to be received by the holders of
Signet Common Stock in the Corporate Merger is fair to the holders of
Signet Common Stock from a financial point of view.
(F) REGULATORY APPROVALS; NO DEFAULTS.
(i) No consents or approvals of, or filings or registrations with,
any Governmental Authority or with any third party are required to be
made or obtained by Signet or any of its Subsidiaries in connection with
the execution, delivery or performance by Signet of this Plan or the
Stock Option Agreement or to consummate the Mergers except for (A)
filings of applications or notices with federal and Virginia banking
authorities, (B) filings with the SEC and state securities authorities
and the approval of this Plan by the stockholders of Signet, and (C) the
filing of articles of merger with the Corporation Commission pursuant to
the VSCA and the North Carolina Secretary pursuant to the NCBCA and the
issuance of related certificates of merger. As of the date hereof,
Signet is not aware of any reason why the approvals set forth in Section
7.01(b) will not be received without the imposition of a condition,
restriction or requirement of the type described in Section 7.01(b).
(ii) Subject to receipt of the regulatory approvals referred to in
the preceding paragraph, and expiration of related waiting periods, and
required filings under federal and state securities laws, the execution,
delivery and performance of this Plan and the Stock Option Agreement and
the consummation of the transactions contemplated hereby and thereby do
not and will not (A) constitute a breach or violation of, or a default
under, or give rise to any Lien, any acceleration of remedies or any
right of termination under, any law, rule or regulation or any judgment,
decree, order, governmental permit or license, or agreement, indenture
or instrument of Signet or of any of its Subsidiaries or to which Signet
or any of its Subsidiaries or properties is subject or bound, (B)
constitute a breach or violation of, or a default under, the Signet
Certificate or the Signet By-Laws, or (C) require any consent or
approval under any such law, rule, regulation, judgment, decree, order,
governmental permit or license, agreement, indenture or instrument.
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(G) FINANCIAL REPORTS AND SEC DOCUMENTS.
(i) Signet's Annual Reports on Form 10-K for the fiscal years ended
December 31, 1994, 1995 and 1996, and all other reports, registration
statements, definitive proxy statements or information statements filed
or to be filed by it or any of its Subsidiaries subsequent to December
31, 1994 under the Securities Act, or under Section 13(a), 13(c), 14 or
15(d) of the Exchange Act, in the form filed or to be filed
(collectively, "SEC Documents") with the SEC, as of the date filed, (A)
complied or will comply as to form with the applicable requirements
under the Securities Act or the Exchange Act, as the case may be, and
(B) did not and will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and each of
the balance sheets contained in or incorporated by reference into any
such Signet SEC Document (including the related notes and schedules
thereto) fairly presents, or will fairly present, the financial position
of Signet and its Subsidiaries as of its date, and each of the
statements of income and changes in stockholders' equity and cash flows
or equivalent statements in such Signet SEC Documents (including any
related notes and schedules thereto) fairly presents, or will fairly
present, the results of operations, changes in stockholders' equity and
changes in cash flows, as the case may be, of Signet and its
Subsidiaries for the periods to which they relate, in each case in
accordance with generally accepted accounting principles consistently
applied during the periods involved, except in each case as may be noted
therein, subject to normal year-end audit adjustments in the case of
unaudited statements.
(ii) Since December 31, 1996, Signet and its Subsidiaries have not
incurred any liability other than in the ordinary course of business
consistent with past practice.
(iii) Since December 31, 1996, (A) Signet and its Subsidiaries have
conducted their respective businesses in the ordinary and usual course
consistent with past practice (excluding the incurrence of expenses
related to this Plan and the transactions contemplated hereby) and (B)
no event has occurred or fact or circumstance arisen that, individually
or taken together with all other facts, circumstances and events
(described in any paragraph of Section 5.03 or otherwise), is reasonably
likely to have a Material Adverse Effect with respect to Signet.
(H) LITIGATION. No litigation, claim or other proceeding before any
court or governmental agency is pending against Signet or any of its
Subsidiaries and, to Signet's knowledge, no such litigation, claim or other
proceeding has been threatened.
(I) REGULATORY MATTERS.
(i) Neither Signet nor any of its Subsidiaries or properties is a
party to or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter or
similar submission to, or extraordinary supervisory letter from, any
federal or state Governmental Authority charged with the supervision or
regulation of financial institutions or issuers of securities or engaged
in the insurance of deposits (including, without limitation, the Federal
Reserve Board, the FDIC and the Virginia Bureau of Financial
Institutions) or the supervision or regulation of it or any of its
Subsidiaries (collectively, the "Regulatory Authorities").
(ii) Neither it nor any of its Subsidiaries has been advised by any
Regulatory Authority that such Regulatory Authority is contemplating
issuing or requesting (or is considering the appropriateness of issuing
or requesting) any such order, decree, agreement, memorandum of
understanding, commitment letter, supervisory letter or similar
submission.
(J) COMPLIANCE WITH LAWS. Signet and each of its Subsidiaries:
(i) is in compliance with all applicable federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable thereto or to the employees conducting such
businesses, including, without limitation, the Equal Credit Opportunity
Act, the Fair Housing Act, the Community Reinvestment Act, the Home
Mortgage Disclosure Act and all other applicable fair lending laws and
other laws relating to discriminatory business practices;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations
with, all Governmental Authorities that are required in order to permit
them to own or lease their properties and to conduct their businesses as
presently conducted; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect and, to
Signet's knowledge, no suspension or cancellation of any of them is
threatened; and
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(iii) has received, since December 31, 1995, no notification or
communication from any Governmental Authority (A) asserting that Signet
or any of its Subsidiaries is not in compliance with any statutes,
regulations, or ordinances or (B) threatening to revoke any license,
franchise, permit, or governmental authorization (nor, to Signet's
knowledge, do any grounds for any of the foregoing exist).
(K) MATERIAL CONTRACTS; DEFAULTS. Except for those agreements and
other documents filed as exhibits to its SEC Documents, neither it nor any
of its Subsidiaries is a party to, bound by or subject to any agreement,
contract, arrangement, commitment or understanding (whether written or
oral) (i) that is a "material contract" within the meaning of Item
601(b)(10) of the SEC's Regulation S-K (without giving effect to the
"ordinary course" exception set forth therein) or (ii) that materially
restricts the conduct of business by it or any of its Subsidiaries. Neither
it nor any of its Subsidiaries is in default under any contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to
which it is a party, by which its respective assets, business, or
operations may be bound or affected, or under which it or its respective
assets, business, or operations receives benefits, and there has not
occurred any event that, with the lapse of time or the giving of notice or
both, would constitute such a default. Neither it nor any of its
Subsidiaries is subject to, or bound by, any contract containing covenants
which (i) limit the ability of it or any 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, it or any Subsidiary may
carry on its business (other than as may be required by law or any
applicable Regulatory Authority).
(L) NO BROKERS. No action has been taken by Signet that would give
rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other like payment with respect to the
transactions contemplated by this Plan, excluding a Previously Disclosed
fee to be paid to J.P. Morgan & Co., Inc.
(M) EMPLOYEE BENEFIT PLANS.
(i) Section 5.03(m) (i) of Signet's Disclosure Schedule contains a
complete and accurate list of all existing bonus, incentive, deferred
compensation, pension, retirement, profit-sharing, thrift, savings,
employee stock ownership, stock bonus, stock purchase, restricted stock,
stock option, severance, welfare and fringe benefit plans, employment or
severance agreements and all similar practices, policies and
arrangements maintained or contributed to by Signet or any of its
Subsidiaries in which any employee or former employee (the "Employees"),
consultant or former consultant (the "Consultants") or director or
former director (the "Directors") of Signet or any of its Subsidiaries
participates or to which any such Employees, Consultants or Directors
are a party (the "Compensation and Benefit Plans"). Neither Signet nor
any of its Subsidiaries has any commitment to create any additional
Compensation and Benefit Plan or to modify or change any existing
Compensation and Benefit Plan.
(ii) Each Compensation and Benefit Plan has been operated and
administered in all material respects in accordance with its terms and
with applicable law, including, but not limited to, ERISA, the Code, the
Securities Act, the Exchange Act, the Age Discrimination in Employment
Act, or any regulations or rules promulgated thereunder, and all
filings, disclosures and notices required by ERISA, the Code, the
Securities Act, the Exchange Act, the Age Discrimination in Employment
Act and any other applicable law have been timely made. Each
Compensation and Benefit Plan which is an "employee pension benefit
plan" within the meaning of Section 3(2) of ERISA (a "Pension Plan") and
which is intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter (including a determination
that the related trust under such Compensation and Benefit Plan is
exempt from tax under Section 501(a) of the Code) from the IRS for "TRA"
(as defined in Rev. Proc. 93-39), or will file for such determination
letter prior to the expiration of the remedial amendment period for such
Compensation and Benefit Plan, and Signet is not aware of any
circumstances likely to result in revocation of any such favorable
determination letter. There is no material pending or, to the knowledge
of Signet, threatened legal action, suit or claim relating to the
Compensation and Benefit Plans. Neither Signet nor any of its
Subsidiaries has engaged in a transaction, or omitted to take any
action, with respect to any Compensation and Benefit Plan that would
reasonably be expected to subject Signet or any of its Subsidiaries to a
tax or penalty imposed by either Section 4975 of the Code or Section 502
of ERISA, assuming for purposes of Section 4975 of the Code that the
taxable period of any such transaction expired as of the date hereof.
(iii) No liability (other than for payment of premiums to the PBGC
which have been made or will be made on a timely basis) under Title IV
of ERISA has been or is expected to be incurred by Signet or any of its
Subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of Section 4001(a)(15) of
ERISA, currently or formerly maintained by any of them, or any
single-employer plan of any entity (an "ERISA Affiliate") which is
considered one employer with Signet under Section 4001(a)(14) of ERISA
or Section 414(b) or (c) of the Code (an "ERISA Affiliate Plan"). None
of Signet, any of its Subsidiaries or any
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ERISA Affiliate has contributed, or has been obligated to contribute, to
a multiemployer plan under Subtitle E of Title IV of ERISA at any time
since September 26, 1980. No notice of a "reportable event", within the
meaning of Section 4043 of ERISA for which the 30-day reporting
requirement has not been waived, has been required to be filed for any
Compensation and Benefit Plan or by any ERISA Affiliate Plan within the
12-month period ending on the date hereof, and no such notice will be
required to be filed as a result of the transactions contemplated by
this Plan. The PBGC has not instituted proceedings to terminate any
Pension Plan or ERISA Affiliate Plan and, to Signet's knowledge, no
condition exists that presents a material risk that such proceedings
will be instituted. To the knowledge of Signet, there is no pending
investigation or enforcement action by the PBGC, the Department of Labor
(the "DOL") or IRS or any other governmental agency with respect to any
Compensation and Benefit Plan. Under each Pension Plan and ERISA
Affiliate Plan, as of the date of the most recent actuarial valuation
performed prior to the date of this Plan, the actuarially determined
present value of all "benefit liabilities", within the meaning of
Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in such actuarial valuation of such
Pension Plan or ERISA Affiliate Plan), did not exceed the then current
value of the assets of such Pension Plan or ERISA Affiliate Plan and
since such date there has been neither an adverse change in the
financial condition of such Pension Plan or ERISA Affiliate Plan nor any
amendment or other change to such Pension Plan or ERISA Affiliate Plan
that would increase the amount of benefits thereunder which in either
case reasonably could be expected to change such result.
(iv) All contributions required to be made under the terms of any
Compensation and Benefit Plan or ERISA Affiliate Plan or any employee
benefit arrangements under any collective bargaining agreement to which
Signet or any of its Subsidiaries is a party have been timely made or
have been reflected on Signet's financial statements to the extent
required by generally accepted accounting principles. Neither any
Pension Plan nor any ERISA Affiliate Plan has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of
the Code or Section 302 of ERISA and all required payments to the PBGC
with respect to each Pension Plan or ERISA Affiliate Plan have been made
on or before their due dates. None of Signet, any of its Subsidiaries or
any ERISA Affiliate (x) has provided, or would reasonably be expected to
be required to provide, security to any Pension Plan or to any ERISA
Affiliate Plan pursuant to Section 401(a)(29) of the Code, and (y) has
taken any action, or omitted to take any action, that has resulted, or
would reasonably be expected to result, in the imposition of a lien
under Section 412(n) of the Code or pursuant to ERISA.
(v) Neither Signet nor any of its Subsidiaries has any obligations
to provide retiree health and life insurance or other retiree death
benefits under any Compensation and Benefit Plan, other than benefits
mandated by Section 4980B of the Code, and each such Compensation and
Benefit Plan may be amended or terminated without incurring liability
thereunder. There has been no communication to Employees by Signet or
any of its Subsidiaries that would reasonably be expected to promise or
guarantee such Employees retiree health or life insurance or other
retiree death benefits on a permanent basis.
(vi) Signet and its Subsidiaries do not maintain any Compensation
and Benefit Plans covering foreign Employees.
(vii) With respect to each Compensation and Benefit Plan, if
applicable, Signet has provided or made available to First Union, true
and complete copies of its existing (A) Compensation and Benefit Plan
documents and amendments thereto and (B) trust instruments and insurance
contracts.
(viii) The consummation of the transactions contemplated by this
Plan would not, directly or indirectly (including, without limitation,
as a result of any termination of employment prior to or following the
Effective Time) reasonably be expected to (A) entitle any Employee,
Consultant or Director to any payment (including severance pay or
similar compensation) or any increase in compensation, (B) result in the
vesting or acceleration of any benefits under any Compensation and
Benefit Plan or (C) result in any material increase in benefits payable
under any Compensation and Benefit Plan.
(ix) Neither Signet nor any of its Subsidiaries maintains any
compensation plans, programs or arrangements the payments under which
would not reasonably be expected to be deductible as a result of the
limitations under Section 162(m) of the Code and the regulations issued
thereunder.
(x) As a result, directly or indirectly, of the transactions
contemplated by this Plan (including, without limitation, as a result of
any termination of employment prior to or following the Effective Time),
none of First Union, Signet or the Surviving Corporation, or any of
their respective Subsidiaries will be obligated to make a payment
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that would be characterized as an "excess parachute payment" to an
individual who is a "disqualified individual" (as such terms are defined
in Section 280G of the Code), without regard to whether such payment is
reasonable compensation for personal services performed or to be
performed in the future.
(N) LABOR MATTERS. Neither Signet nor any of its Subsidiaries is a
party to or is bound by any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization,
nor is Signet or any of its Subsidiaries the subject of a proceeding
asserting that it or any such Subsidiary has committed an unfair labor
practice (within the meaning of the National Labor Relations Act) or
seeking to compel Signet or any such Subsidiary to bargain with any labor
organization as to wages or conditions of employment, nor is there any
strike or other labor dispute involving it or any of its Subsidiaries
pending or, to Signet's knowledge, threatened, nor is Signet aware of any
activity involving its or any of its Subsidiaries' employees seeking to
certify a collective bargaining unit or engaging in other organizational
activity.
(O) TAKEOVER LAWS; DISSENTERS RIGHTS. Signet has taken all action
required to be taken by it in order to exempt this Plan, the Stock Option
Agreement and the transactions contemplated hereby and thereby from, and
this Plan, the Stock Option Agreement and the transactions contemplated
hereby and thereby (the "Covered Transactions") are exempt from, the
requirements of any "moratorium", "control share", "fair price", "affiliate
transaction", "business combination" or other antitakeover laws and
regulations of any state (collectively, "Takeover Laws"), including,
without limitation, the Commonwealth of Virginia, and including, without
limitation, Sections 13.1-725 through 13.1-728 of the VSCA (because a
majority of Signet's disinterested directors approved such transactions for
such purposes prior to any "determination date"with respect to First Union)
and Sections 13.1-728.1 through 13.1-728.9 of the VSCA. The provisions of
Article VIII of the Signet Certificate do not apply to the Covered
Transactions as they have been approved by a majority of the Disinterested
Directors (as defined in Article VIII). Holders of Signet Common Stock do
not have dissenters' or appraisal rights in connection with the execution
of this Plan or the consummation of any of the transactions contemplated
hereby.
(P) ENVIRONMENTAL MATTERS. Neither the conduct nor operation of Signet
or its Subsidiaries nor any condition of any property presently or
previously owned, leased or operated by any of them (including, without
limitation, in a fiduciary or agency capacity), or on which any of them
holds a Lien, violates or violated Environmental Laws and no condition has
existed or event has occurred with respect to any of them or any such
property that, with notice or the passage of time, or both, is reasonably
likely to result in liability under Environmental Laws. Neither Signet nor
any of its Subsidiaries has received any notice from any person or entity
that Signet or its Subsidiaries or the operation or condition of any
property ever owned, leased, operated, or held as collateral or in a
fiduciary capacity by any of them are or were in violation of or otherwise
are alleged to have liability under any Environmental Law, including, but
not limited to, responsibility (or potential responsibility) for the
cleanup or other remediation of any pollutants, contaminants, or hazardous
or toxic wastes, substances or materials at, on, beneath, or originating
from any such property.
(Q) TAX MATTERS.
(i) (A) All Tax Returns that are required to be filed (taking into
account any extensions of time within which to file) by or with respect
to Signet and its Subsidiaries have been duly filed and the information
therein reported is substantially correct, (B) all Taxes shown to be due
on the Tax Returns referred to in clause (A) have been paid in full, (C)
the federal income Tax Returns referred to in clause (A) have been
examined by the Internal Revenue Service or the period for assessment of
the Taxes in respect of which such Tax Returns were required to be filed
has expired, (D) all deficiencies asserted or assessments made as a
result of such examinations have been paid in full, (E) no issues that
have been raised by the relevant taxing authority in connection with the
examination of any of the Tax Returns referred to in clause (A) are
currently pending, and (F) no waivers of statutes of limitation have
been given by or requested with respect to any Taxes of Signet or its
Subsidiaries. Signet has made available to First Union true and correct
copies of the United States federal income Tax Returns filed by Signet
and its Subsidiaries for each of the three most recent fiscal years
ended on or before December 31, 1996. Neither Signet nor any of its
Subsidiaries has any liability with respect to Taxes that accrued on or
before the end of the most recent period covered by Signet's SEC
Documents filed prior to the date hereof in excess of the amounts
accrued with respect thereto that are reflected in the financial
statements included in Signet's SEC Documents filed on or prior to the
date hereof. As of the date hereof, neither Signet nor any of its
Subsidiaries has any reason to believe that any conditions exist that
might prevent or impede the Corporate Merger from qualifying as a
reorganization within the meaning of Section 368 of the Code.
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(ii) No Tax is required to be withheld pursuant to Section 1445 of
the Code as a result of the transfer contemplated by this Plan.
(R) RISK MANAGEMENT INSTRUMENTS. All interest rate swaps, caps,
floors, option agreements, futures and forward contracts and other similar
risk management arrangements, whether entered into for Signet's own
account, or for the account of one or more of Signet's Subsidiaries or
their customers (all of which are listed on Signet's Disclosure Schedule),
were entered into (i) in accordance with prudent business practices and all
applicable laws, rules, regulations and regulatory policies and (ii) with
counterparties believed to be financially responsible at the time; and each
of them constitutes the valid and legally binding obligation of Signet or
one of its Subsidiaries, enforceable in accordance with its terms (except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general
equity principles), and are in full force and effect. Neither Signet nor
its Subsidiaries, nor to Signet's knowledge, any other party thereto, is in
breach of any of its obligations under any such agreement or arrangement.
(S) BOOKS AND RECORDS. The books and records of Signet and its
Subsidiaries have been fully, properly and accurately maintained, and there
are no material inaccuracies or discrepancies of any kind contained or
reflected therein, and they fairly present the financial position of Signet
and its Subsidiaries.
(T) INSURANCE. Signet's Disclosure Schedule sets forth all of the
insurance policies, binders, or bonds maintained by Signet or its
Subsidiaries ("Insurance Policies"). Signet and its Subsidiaries are
insured with reputable insurers against such risks and in such amounts as
the management of Signet reasonably has determined to be prudent in
accordance with industry practices. All the Insurance Policies are in full
force and effect; Signet and its Subsidiaries are not in default
thereunder; and all claims thereunder have been filed in due and timely
fashion.
(U) ACCOUNTING TREATMENT. As of the date hereof, Signet is aware of no
reason why the Corporate Merger will fail to qualify for "pooling of
interests" accounting treatment.
(V) RIGHTS AGREEMENT. Signet has duly adopted an amendment to the
Signet Rights Agreement in the form of Exhibit B, as a result of which
neither First Union nor any affiliate or associate will become an
"Acquiring Person" and no "Distribution Date" (as such terms are defined in
the Signet Rights Agreement) will occur, and the rights issued under the
Rights Agreement will not become separable, distributable, unredeemable or
exercisable as a result of the approval, execution or delivery of this Plan
or the Stock Option Agreement or the consummation of the transactions
contemplated hereby or thereby and the Signet Rights will expire upon the
Effective Time.
(W) ASSET CLASSIFICATION. Signet has Previously Disclosed a list,
accurate and complete in all material respects, of the aggregate amounts of
loans, extensions of credit or other assets of it and its Subsidiaries that
have been classified by it as of June 30, 1997 (the "Asset
Classification"); and no amounts of loans, extensions of credit or other
assets that have been classified as of June 30, 1997 by any Regulatory
Authority 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 it or a Subsidiary prior to
June 30, 1997.
(X) DISCLOSURE. The representations and warranties contained in this
Section 5.03 do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained in this Section 5.03 not misleading.
5.04. REPRESENTATIONS AND WARRANTIES OF FIRST UNION. Subject to Sections
5.01 and 5.02 and except as Previously Disclosed in a paragraph of its
Disclosure Schedule corresponding to the relevant paragraph below, First Union
hereby represents and warrants to Signet as follows:
(A) ORGANIZATION, STANDING AND AUTHORITY. First Union is duly
organized, validly existing and in good standing under the laws of the
State of North Carolina. First Union is duly qualified to do business and
is in good standing in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or assets or the
conduct of its business requires it to be so qualified. First Union 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.
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(B) FIRST UNION STOCK.
(i) As of the date hereof, the authorized capital stock of First
Union consists solely of 750,000,000 shares of First Union Common Stock,
of which no more than 285,000,000 shares are outstanding as of the date
hereof (without giving effect to the two-for-one First Union Common
Stock split payable on July 31, 1997 to holders of record of First Union
Common Stock on July 1, 1997), 40,000,000 shares of First Union Class A
Preferred Stock, of which no shares were outstanding as of the date
hereof, and 10,000,000 shares of First Union Preferred Stock, of which
no shares were outstanding as of the date hereof.
(ii) The shares of First Union Common Stock to be issued in
exchange for shares of Signet Common Stock in the Corporate Merger, when
issued in accordance with the terms of this Plan, will be duly
authorized, validly issued, fully paid and nonassessable.
(C) SUBSIDIARIES. Each of First Union's Significant Subsidiaries has
been duly organized and is validly existing in good standing under the laws
of the jurisdiction of its organization, and is duly qualified to do
business and in good standing in the jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified and it owns, directly or indirectly, all the issued and
outstanding equity securities of each of its Significant Subsidiaries.
(D) CORPORATE POWER. First Union and each of its Significant
Subsidiaries has the corporate power and authority to carry on its business
as it is now being conducted and to own all its properties and assets; and
each of First Union and FUNB has the corporate power and authority to
execute, deliver and perform its obligations under this Plan and to
consummate the transactions contemplated hereby.
(E) CORPORATE AUTHORITY. This Plan and the transactions contemplated
hereby have been authorized by all necessary corporate action of each of
First Union and FUNB. This Plan is a valid and legally binding agreement of
each of First Union and FUNB enforceable in accordance with its terms
(except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar
laws of general applicability relating to or affecting creditors' rights or
by general equity principles).
(F) REGULATORY APPROVALS; NO DEFAULTS.
(i) No consents or approvals of, or filings or registrations with,
any court, administrative agency or commission or other governmental
authority or instrumentality or with any third party are required to be
made or obtained by First Union or any of its Subsidiaries in connection
with the execution, delivery or performance by First Union of this Plan
or to consummate the Mergers except for (A) the filing of applications
and notices, as applicable, with federal and state banking authorities,
receipt of approval thereof and expiration of related waiting periods;
(B) approval of the listing on the NYSE of First Union Common Stock to
be issued in the Corporate Merger; (C) the filing and declaration of
effectiveness of the Registration Statement; (D) the filing of articles
of merger with the Corporation Commission pursuant to the VSCA and the
North Carolina Secretary pursuant to the NCBCA and the issuance of
related certificates of merger; (E) such filings as are required to be
made or approvals as are required to be obtained under the securities or
"Blue Sky" laws of various states in connection with the issuance of
First Union Stock in the Corporate Merger; and (F) receipt of the
approvals set forth in Section 7.01(b). As of the date hereof, First
Union is not aware of any reason why the approvals set forth in Section
7.01(b) will not be received without the imposition of a condition,
restriction or requirement of the type described in Section 7.01(b).
(ii) Subject to receipt of the regulatory approvals referred to in
the preceding paragraph and expiration of the related waiting periods,
and required filings under federal and state securities laws, the
execution, delivery and performance of this Plan and the consummation of
the transactions contemplated hereby do not and will not (A) constitute
a breach or violation of, or a default under, or give rise to any Lien,
any acceleration of remedies or any right of termination under, any law,
rule or regulation or any judgment, decree, order, governmental permit
or license, or agreement, indenture or instrument of First Union or of
any of its Subsidiaries or to which First Union or any of its
Subsidiaries or properties is subject or bound, (B) constitute a breach
or violation of, or a default under, the articles of incorporation or
by-laws (or similar governing documents) of First Union or any of its
Subsidiaries, or (C) require any consent or approval under any such law,
rule, regulation, judgment, decree, order, governmental permit or
license, agreement, indenture or instrument.
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(G) FINANCIAL REPORTS AND SEC DOCUMENTS; MATERIAL ADVERSE EFFECT.
(i) First Union's SEC Documents, as of the date filed, (A) complied
or will comply as to form with the applicable requirements under the
Securities Act or the Exchange Act, as the case may be, and (B) did not
and will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which
they were made, not misleading; and each of the balance sheets contained
in or incorporated by reference into any such SEC Document (including
the related notes and schedules thereto) fairly presents, or will fairly
present, the financial position of First Union and its Subsidiaries as
of its date, and each of the statements of income and changes in
stockholders' equity and cash flows or equivalent statements in such SEC
Documents (including any related notes and schedules thereto) fairly
presents, or will fairly present, the results of operations, changes in
stockholders' equity and changes in cash flows, as the case may be, of
First Union and its Subsidiaries for the periods to which they relate,
in each case in accordance with generally accepted accounting principles
consistently applied during the periods involved, except in each case as
may be noted therein, subject to normal year-end audit adjustments in
the case of unaudited statements.
(ii) Since December 31, 1996, no event has occurred or fact or
circumstance arisen that, individually or taken together with all other
facts, circumstances and events (described in any paragraph of Section
5.04 or otherwise), is reasonably likely to have a Material Adverse
Effect with respect to it.
(H) LITIGATION; REGULATORY ACTION.
(i) Other than as set forth in its SEC Documents filed on or before
the date hereof, no litigation, claim or other proceeding before any
Governmental Authority is pending against First Union or any of its
Subsidiaries and, to the best of First Union's knowledge, no such
litigation, claim or other proceeding has been threatened.
(ii) Neither First Union nor any of its Subsidiaries or properties
is a party to or is subject to any order, decree, agreement, memorandum
of understanding or similar arrangement with, or a commitment letter or
similar submission to, or extraordinary supervisory letter from a
Regulatory Authority, nor has First Union or any of its Subsidiaries
been advised by a Regulatory Authority that such agency is contemplating
issuing or requesting (or is considering the appropriateness of issuing
or requesting) any such order, decree, agreement, memorandum of
understanding, commitment letter, supervisory letter or similar
submission.
(I) COMPLIANCE WITH LAWS. First Union and each of its Subsidiaries:
(i) in the conduct of its business, is in compliance with all
applicable federal, state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees applicable
thereto or to the employees conducting such businesses, including,
without limitation, the Equal Credit Opportunity Act, the Fair Housing
Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act
and all other applicable fair lending laws and other laws relating to
discriminatory business practices; and
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations
with, all Governmental Authorities that are required in order to permit
them to conduct their businesses substantially as presently conducted;
all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect and, to the best of its
knowledge, no suspension or cancellation of any of them is threatened.
(J) NO BROKERS. No action has been taken by First Union that would
give rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other like payment with respect to the
transactions contemplated by this Plan, excluding a fee to be paid to
Credit Suisse First Boston Corporation.
(K) TAX MATTERS. (A) All Tax Returns that are required to be filed
(taking into account any extensions of time within which to file) by or
with respect to First Union and its Subsidiaries have been duly filed and
the information therein reported is substantially correct, (B) all Taxes
shown to be due on the Tax Returns referred to in clause (A) have been paid
in full, (C) the federal income Tax Returns referred to in clause (A) have
been examined by the Internal Revenue Service or the period for assessment
of the Taxes in respect of which such Tax Returns were required to be filed
has expired, (D) all deficiencies asserted or assessments made as a result
of such examinations have been paid in full, (E) no issues that have been
raised by the relevant taxing authority in connection with the examination
of any of the Tax Returns referred to in clause (A) are currently pending,
and (F) no waivers of statutes of limitation have been given
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by or requested with respect to any Taxes of First Union or its
Subsidiaries. Neither First Union nor any of its Subsidiaries has any
liability with respect to Taxes that accrued on or before the end of the
most recent period covered by First Union's SEC Documents filed prior to
the date hereof in excess of the amounts accrued with respect thereto that
are reflected in the financial statements included in First Union's SEC
Documents filed on or prior to the date hereof. As of the date hereof,
neither First Union nor any of its Subsidiaries has any reason to believe
that any conditions exist that might prevent or impede the Corporate Merger
from qualifying as a reorganization within the meaning of Section 368 of
the Code.
(L) ACCOUNTING TREATMENT. As of the date hereof, First Union is aware
of no reason why the Corporate Merger will fail to qualify for "pooling of
interests" accounting treatment.
(M) DISCLOSURE. The representations and warranties contained in this
Section 5.04 do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained in this Section 5.04 not misleading.
ARTICLE VI
COVENANTS
6.01. REASONABLE BEST EFFORTS. Subject to the terms and conditions of this
Plan, each of Signet and First Union agrees to use its reasonable best efforts
in good faith to take, or cause to be taken, all actions, and to do, or cause to
be done, all things necessary, proper or desirable, or advisable under
applicable laws, so as to permit consummation of the Mergers as promptly as
practicable and otherwise to enable consummation of the transactions
contemplated hereby and shall cooperate fully with the other party hereto to
that end.
6.02. STOCKHOLDER APPROVAL. Signet agrees to take, in accordance with
applicable law, NYSE rules and its articles of incorporation and by-laws, all
action necessary to convene an appropriate meeting of its stockholders to
consider and vote upon the approval and adoption of this Plan and any other
matters required to be approved by Signet's stockholders for consummation of the
Mergers (including any adjournment or postponement, the "Signet Meeting"), as
promptly as practicable after the Registration Statement is declared effective.
The Signet Board shall recommend such approval, and Signet shall take all
reasonable, lawful action to solicit such approval by its stockholders.
6.03. REGISTRATION STATEMENT.
(A) First Union agrees to prepare a registration statement on Form S-4
or other applicable form (the "Registration Statement") to be filed by
First Union with the SEC in connection with the issuance of First Union
Common Stock in the Corporate Merger (including the proxy statement and
prospectus and other proxy solicitation materials of First Union and Signet
constituting a part thereof (the "Proxy Statement") and all related
documents). Signet agrees to cooperate, and to cause its Subsidiaries to
cooperate, with First Union, its counsel and its accountants, in
preparation of the Registration Statement and the Proxy Statement; and
provided that Signet and its Subsidiaries have cooperated as required
above, First Union agrees to file the Proxy Statement in preliminary form
with the SEC as promptly as reasonably practicable, and to file the
Registration Statement with the SEC as soon as reasonably practicable after
any SEC comments with respect to the preliminary Proxy Statement are
resolved. Each of Signet and First Union agrees to use all reasonable
efforts to cause the Registration Statement to be declared effective under
the Securities Act as promptly as reasonably practicable after filing
thereof. First Union also agrees to use all reasonable efforts to obtain
all necessary state securities law or "Blue Sky" permits and approvals
required to carry out the transactions contemplated by this Plan. Signet
agrees to furnish to First Union all information concerning Signet, its
Subsidiaries, officers, directors and stockholders as may be reasonably
requested in connection with the foregoing.
(B) Each of Signet and First Union agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it
for inclusion or incorporation by reference in (i) the Registration
Statement will, at the time the Registration Statement and each amendment
or supplement thereto, if any, becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Proxy Statement and any
amendment or supplement thereto will, at the date of mailing to
stockholders and at the time of the Signet Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading or any statement which, in the light of the circumstances under
which such statement is made, will be false or misleading with respect to
any material fact, or which will omit to state any material fact necessary
in order to
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make the statements therein not false or misleading or necessary to correct
any statement in any earlier statement in the Proxy Statement or any
amendment or supplement thereto. Each of Signet and First Union further
agrees that if it shall become aware prior to the Effective Date of any
information furnished by it that would cause any of the statements in the
Proxy Statement to be false or misleading with respect to any material
fact, or to omit to state any material fact necessary to make the
statements therein not false or misleading, to promptly inform the other
party thereof and to take the necessary steps to correct the Proxy
Statement.
(C) First Union agrees to advise Signet, promptly after First Union
receives notice thereof, of the time when the Registration Statement has
become effective or any supplement or amendment has been filed, of the
issuance of any stop order or the suspension of the qualification of 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.
6.04. PRESS RELEASES. Each of Signet and First Union agrees that it will
not, without the prior approval of the other party, issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby, except as otherwise required by applicable law or
regulation or NYSE rules.
6.05. ACCESS; INFORMATION.
(A) Each of Signet and First Union agrees that upon reasonable notice
and subject to applicable laws relating to the exchange of information, it
shall afford the other party and the other party's officers, employees,
counsel, accountants and other authorized representatives, such access
during normal business hours throughout the period prior to the Effective
Time to the books, records (including, without limitation, tax returns and
work papers of independent auditors), properties, personnel and to such
other information as any party may reasonably request and, during such
period, it shall furnish promptly to such other party (i) a copy of each
material report, schedule and other document filed by it pursuant to the
requirements of federal or state securities or banking laws, and (ii) all
other information concerning the business, properties and personnel of it
as the other may reasonably request.
(B) Each agrees that it will not, and will cause its representatives
not to, use any information obtained pursuant to this Section 6.05 (as well
as any other information obtained prior to the date hereof in connection
with the entering into of this Plan) for any purpose unrelated to the
consummation of the transactions contemplated by this Plan. Subject to the
requirements of law, each party will keep confidential, and will cause its
representatives to keep confidential, all information and documents
obtained pursuant to this Section 6.05 (as well as any other information
obtained prior to the date hereof in connection with the entering into of
this Plan) unless such information (i) was already known to such party,
(ii) becomes available to such party from other sources not known by such
party to be bound by a confidentiality obligation, (iii) is disclosed with
the prior written approval of the party to which such information pertains
or (iv) is or becomes readily ascertainable from published information or
trade sources. In the event that this Plan is terminated or the
transactions contemplated by this Plan shall otherwise fail to be
consummated, each party shall promptly cause all copies of documents or
extracts thereof containing information and data as to another party hereto
to be returned to the party which furnished the same.
(C) No investigation by either party of the business and affairs of
the other shall affect or be deemed to modify or waive any representation,
warranty, covenant or agreement in this Plan, or the conditions to either
party's obligation to consummate the transactions contemplated by this
Plan.
6.06. ACQUISITION PROPOSALS. Signet agrees that it shall not, and shall
cause its Subsidiaries and its Subsidiaries' officers, directors, agents,
advisors and affiliates not to, solicit or encourage inquiries or proposals with
respect to, or engage in any negotiations concerning, or provide any
confidential information to, or have any discussions with, any person relating
to, any Acquisition Proposal. It shall immediately cease and cause to be
terminated any activities, discussions or negotiations conducted prior to the
date of this Plan with any parties other than First Union with respect to any of
the foregoing and shall use its reasonable best efforts to enforce any
confidentiality or similar agreement relating to an Acquisition Proposal. Signet
shall promptly (within 24 hours) advise First Union following the receipt by
Signet of any Acquisition Proposal and the substance thereof (including the
identity of the person making such Acquisition Proposal), and advise First Union
of any developments with respect to such Acquisition Proposal immediately upon
the occurrence thereof.
6.07. AFFILIATE AGREEMENTS.
(A) Not later than the 15th day prior to the mailing of the Proxy
Statement, (i) Signet shall deliver to First Union a schedule of each
person that, to the best of its knowledge, is or is reasonably likely to
be, as of the date of the Signet
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Meeting, deemed to be an "affiliate" of Signet (each, a "Signet Affiliate")
as that term is used in Rule 145 under the Securities Act or SEC Accounting
Series Releases 130 and 135.
(B) Each of Signet and First Union shall use its reasonable best
efforts to cause each person who may be deemed to be a Signet Affiliate or
an "affiliate" of First Union (as that term is used in the preceding
section), as the case may be, to execute and deliver to First Union and
Signet, respectively, on or before the date of mailing of the Proxy
Statement an agreement in the form attached hereto as Exhibit C or Exhibit
D, respectively. Such Signet Affiliates will not receive New Certificates
until such agreement is delivered to First Union.
6.08. TAKEOVER LAWS. No party hereto shall take any action that would cause
the transactions contemplated by this Plan or the Stock Option Agreement to be
subject to requirements imposed by any Takeover Law and each of them shall take
all necessary steps within its control to exempt (or ensure the continued
exemption of) the transactions contemplated by this Plan from, or if necessary
challenge the validity or applicability of, any applicable Takeover Law, as now
or hereafter in effect.
6.09. CERTAIN MODIFICATIONS; RESTRUCTURING CHARGES.
(A) Signet and First Union shall consult with respect to their loan,
litigation and real estate valuation policies and practices (including loan
classifications and levels of reserves) and Signet shall make such
modifications or changes to its policies and practices, if any, and at such
date prior to the Effective Time, as may be mutually agreed upon. Signet
and First Union shall also consult with respect to the character, amount
and timing of restructuring charges to be taken by each of them in
connection with the transactions contemplated hereby and shall take such
charges in accordance with generally accepted accounting principles, as may
be mutually agreed upon. No party's representations, warranties and
covenants contained in this Plan shall be deemed to be untrue or breached
in any respect for any purpose as a consequence of any modifications or
changes to such policies and practices which may be undertaken on account
of this Section 6.09.
(B) Each of Signet and First Union agrees to cooperate with the other
in effecting, prior to the Effective Time, repurchases of shares of First
Union Common Stock and/or Signet Common Stock; provided, however, that no
such redemption or repurchase shall be effected by either party (1) if KPMG
Peat Marwick LLP or Ernst & Young LLP concludes that, as a result thereof,
such firm may be unable to deliver the respective letters referred to in
Sections 7.02(e) and 7.03(e), (2) if Sullivan & Cromwell, counsel to First
Union, or Wachtell, Lipton, Rosen & Katz, special tax counsel to Signet,
concludes that, as a result thereof, such firms may be unable to deliver
the respective opinions referred to in Sections 7.02(c) and 7.03(c), or (3)
except in accordance with the Exchange Act and other applicable law.
(C) In the case of Signet, it agrees to use its reasonable best
efforts to amend its DRP and any Compensation and Benefit Plan qualified
under Section 401(k) of the Code which offers Signet Common Stock as an
investment option, as soon as reasonably practicable after the execution of
this Plan, so that no original issue shares of Signet Common Stock will be
issued under the DRP or such Compensation and Benefit Plan thereafter.
6.10. NYSE LISTING. First Union agrees to use its reasonable best efforts
to list, prior to the Effective Date, on the NYSE, subject to official notice of
issuance, the shares of First Union Common Stock to be issued to the holders of
Signet Common Stock in the Corporate Merger.
6.11. REGULATORY APPLICATIONS.
(A) First Union and Signet and their respective Subsidiaries shall
cooperate and use their respective reasonable best efforts to prepare all
documentation, to effect all filings and to obtain all permits, consents,
approvals and authorizations of all third parties and Governmental
Authorities necessary to consummate the transactions contemplated by this
Plan. Each of First Union and Signet shall have the right to review in
advance, and to the extent practicable each will consult with the other, in
each case subject to applicable laws relating to the exchange of
information, with respect to all material written information submitted to
any third party or any Governmental Authority in connection with the
transactions contemplated by this Plan. In exercising the foregoing right,
each of the parties hereto agrees to act reasonably and as promptly as
practicable. Each party hereto agrees that it will consult with the other
party hereto with respect to the obtaining of all material permits,
consents, approvals and authorizations of all third parties and
Governmental Authorities necessary or advisable to consummate the
transactions contemplated by this Plan and each party will keep the other
party appraised of the status of material matters relating to completion of
the transactions contemplated hereby.
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(B) Each party agrees, upon request, to furnish the other party with
all information concerning itself, its Subsidiaries, directors, officers
and stockholders and such other matters as may be reasonably necessary or
advisable in connection with any filing, notice or application made by or
on behalf of such other party or any of its Subsidiaries to any third party
or Governmental Authority.
6.12. INDEMNIFICATION.
(A) Following the Effective Date and for a period of six years
thereafter, First Union shall indemnify, defend and hold harmless the
present directors and officers of Signet and its Subsidiaries (each, an
"Indemnified Party") against all costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative
or investigative, arising out of actions or omissions occurring at or prior
to the Effective Time (including, without limitation, the transactions
contemplated by this Plan) to the fullest extent that Signet is permitted
to indemnify (and advance expenses to) its directors and officers under the
laws of the Commonwealth of Virginia, the Signet Certificate and the Signet
By-Laws as in effect on the date hereof; provided that any determination
required to be made with respect to whether an officer's or director's
conduct complies with the standards set forth under Virginia law, the
Signet Certificate and the Signet By-Laws shall be made by independent
counsel (which shall not be counsel that provides material services to
First Union) selected by First Union and reasonably acceptable to such
officer or director; and provided, further, that in the absence of
applicable Virginia judicial precedent to the contrary, such counsel, in
making such determination, shall presume such officer's or director's
conduct complied with such standard and First Union shall have the burden
to demonstrate that such officer's or director's conduct failed to comply
with such standard.
(B) For a period of five years from the Effective Time, First Union
shall use its reasonable best efforts to provide that portion of director's
and officer's liability insurance that serves to reimburse the present and
former officers and directors of Signet or any of its Subsidiaries
(determined as of the Effective Time) (as opposed to Signet) with respect
to claims against such directors and officers arising from facts or events
which occurred before the Effective Time, which insurance shall contain at
least the same coverage and amounts, and contain terms and conditions no
less advantageous, as that coverage currently provided by Signet; provided,
however, that in no event shall First Union be required to expend more than
200 percent of the current amount expended by Signet (the "Insurance
Amount") to maintain or procure such directors and officers insurance
coverage for a comparable five-year period; provided, further, that if
First Union is unable to maintain or obtain the insurance called for by
this Section 6.12(b), First Union shall use its reasonable best efforts to
obtain as much comparable insurance as is available for the Insurance
Amount; provided, further, that officers and directors of Signet or any
Subsidiary may be required to make application and provide customary
representations and warranties to First Union's insurance carrier for the
purpose of obtaining such insurance.
(C) Any Indemnified Party wishing to claim indemnification under
Section 6.12(a), upon learning of any claim, action, suit, proceeding or
investigation described above, shall promptly notify First Union thereof;
provided that the failure so to notify shall not affect the obligations of
First Union under Section 6.12(a) unless and to the extent that First Union
is actually prejudiced as a result of such failure.
(D) If First Union or any of its successors or assigns shall
consolidate with or merge into any other entity and shall not be the
continuing or surviving entity of such consolidation or merger or shall
transfer all or substantially all of its assets to any other entity, then
and in each case, proper provision shall be made so that the successors and
assigns of First Union shall assume the obligations set forth in this
Section 6.12.
6.13. BENEFIT PLANS.
(A) As soon as administratively practicable after the Effective Time,
employees of Signet and its Subsidiaries shall be entitled to participate
in the pension, benefit, welfare, incentive compensation, vacation, sick
pay, fringe benefit, and similar plans of First Union (other than the
severance policy of First Union during such period that the Signet
Severance Pay Plan (as rewritten to conform eligibility criteria as written
for the Advance project in the Severence Pay Plan amendment dated January
28, 1997, to define the new eligibility event as the merger between First
Union and Signet with such benefits being in place for any employee
terminated on or before 12 months from the Effective Date)) on
substantially the same terms and conditions as employees of First Union and
its Subsidiaries and until such time as administratively practicable the
plans of Signet shall remain in effect without any adverse amendments
except as required by law. No employee of Signet who elects to be covered
under a First Union medical insurance plan shall be excluded from coverage
under such plan (for such employee or any other coverage person) on the
basis of a pre-existing condition that was not also excluded under Signet's
medical insurance plans. For the purpose of determining eligibility
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to participate in such plans, the vesting of benefits under such plans (but
not for the accrual of benefits under such defined benefit plans), First
Union shall give effect to years of service with Signet or its
Subsidiaries, as the case may be, as if such service had been with First
Union or its Subsidiaries. Retirees on or before to October 1, 1998, shall
have their retiree welfare benefits grandfathered at a substantially
similar level as those in effect at Signet on the date hereof.
(B) First Union shall honor and continue in accordance with their
terms all Compensation and Benefit Plans, including, without limitation,
employment, severance, split-dollar insurance and other compensation
contracts Previously Disclosed, the employment agreements entered into by
First Union with Messrs. McDonald, Millner and Layfield and all provisions
for vested benefits or other vested amounts earned or accrued through the
Effective Time of the Merger under any of the Compensation and Benefit
Plans. First Union agrees that all Signet Stock Options shall vest in
accordance with their terms.
(C) In the event the Effective Time shall occur prior to December 31,
1997, First Union or Signet shall take all necessary action to provide full
payouts under Signet's annual short-term incentive plans for the full 1997
plan year and under Signet's Executive Long-Term Incentive Plan for the
full performance cycle ending December 31, 1997, in amounts equal to the
greater of target payout or performance-based payout under such plans for
the relevant period. The provisions of this Section 6.13 relating to
existing employment contracts are intended to be for the benefit of, and
shall be enforceable by the employees who executed such employment
contracts.
6.14. ACCOUNTANTS' LETTERS. Each of Signet and First Union shall use its
reasonable best efforts to cause to be delivered to the other party, and to
First Union's directors and officers who sign the Registration Statement, a
letter of KPMG Peat Marwick LLP and Ernst & Young LLP, respectively, independent
auditors, dated (i) the date on which the Registration Statement shall become
effective and (ii) a date shortly prior to the Effective Date, and addressed to
such other party, and such directors and officers, in form and substance
customary for "comfort" letters delivered by independent accountants in
accordance with Statement of Accounting Standards No. 72.
6.15. NOTIFICATION OF CERTAIN MATTERS. Each of Signet and First Union shall
give prompt notice to the other of any fact, event or circumstance known to it
that (i) is reasonably likely, individually or taken together with all other
facts, events and circumstances known to it, to result in any Material Adverse
Effect with respect to it or (ii) would cause or constitute a material breach of
any of its representations, warranties, covenants or agreements contained
herein.
6.16. DIRECTORS. First Union agrees to cause two members of the Signet
Board on the date hereof (selected by First Union after consultation with
Signet), who are still members of the Signet Board immediately prior to the
Effective Time and willing and eligible to serve, to be elected or appointed as
directors of First Union as promptly as practicable after the Effective Time.
6.17. DIVIDEND COORDINATION. The Board of Directors of Signet shall cause
its regular quarterly dividend record dates and payment dates for Signet Common
Stock to be the same as First Union's regular quarterly dividend record dates
and payment dates for First Union Common Stock (e.g., Signet shall move its next
dividend record and payment dates from September and October to August and
September, respectively), and Signet shall not thereafter change its regular
dividend payment dates and record dates.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGERS
7.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGERS. The
respective obligation of each of First Union and Signet to consummate the
Mergers is subject to the fulfillment or written waiver by First Union and
Signet prior to the Effective Time of each of the following conditions:
(A) STOCKHOLDER APPROVALS. This Plan and the Corporate Merger shall
have been duly adopted by the requisite vote of the stockholders of Signet.
(B) REGULATORY APPROVALS. All regulatory approvals required to
consummate the transactions contemplated hereby, shall have been obtained
and shall remain in full force and effect and all statutory waiting periods
in respect thereof shall have expired and no such approvals shall contain
any conditions, restrictions or requirements which the First Union Board
reasonably determines would (i) following the Effective Time, have a
Material Adverse Effect on the Surviving Corporation and its Subsidiaries
taken as a whole or (ii) reduce the benefits of the transactions
contemplated hereby to
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such a degree that First Union would not have entered into this Plan had
such conditions, restrictions or requirements been known at the date
hereof.
(C) NO INJUNCTION. No Governmental Authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute,
rule, regulation, judgment, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and prohibits
consummation of the transactions contemplated by this Plan.
(D) REGISTRATION STATEMENT. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
SEC.
(E) BLUE SKY APPROVALS. All permits and other authorizations under
state securities laws necessary to consummate the transactions contemplated
hereby and to issue the shares of First Union Common Stock to be issued in
the Corporate Merger shall have been received and be in full force and
effect.
(F) LISTING. The shares of First Union Common Stock to be issued in
the Corporate Merger shall have been approved for listing on the NYSE,
subject to official notice of issuance.
7.02. CONDITIONS TO OBLIGATION OF SIGNET AND THE BANK. The obligation of
Signet and the Bank to consummate the Mergers is also subject to the fulfillment
or written waiver by Signet prior to the Effective Time of each of the following
conditions:
(A) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of First Union set forth in this Plan shall be true and correct as of the
date of this Plan and as of the Effective Date as though made on and as of
the Effective Date (except that representations and warranties that by
their terms speak as of the date of this Plan or some other date shall be
true and correct as of such date), and Signet shall have received a
certificate, dated the Effective Date, signed on behalf of First Union by
the Chief Financial Officer of First Union to such effect.
(B) PERFORMANCE OF OBLIGATIONS OF FIRST UNION. First Union shall have
performed in all material respects all obligations required to be performed
by it under this Plan at or prior to the Effective Time, and Signet shall
have received a certificate, dated the Effective Date, signed on behalf of
First Union by the Chief Financial Officer of First Union to such effect.
(C) OPINION OF SIGNET'S COUNSEL. Signet shall have received an opinion
of Wachtell, Lipton, Rosen & Katz, special counsel to Signet, dated the
Effective Date, to the effect that, on the basis of facts, representations
and assumptions set forth in such opinion, (i) the Corporate Merger
constitutes a "reorganization" within the meaning of Section 368 of the
Code and (ii) no gain or loss will be recognized by stockholders of Signet
who receive shares of First Union Common Stock in exchange for shares of
Signet Common Stock, except with respect to cash received in lieu of
fractional share interests. In rendering its opinion, Wachtell, Lipton,
Rosen & Katz, may require and rely upon representations contained in
letters from Signet, First Union and stockholders of Signet.
(D) ACCOUNTANTS' LETTERS. Signet shall have received the letters
referred to in Section 6.14 from KPMG Peat Marwick LLP, First Union's
independent auditors.
(E) ACCOUNTING TREATMENT. Signet shall have received from Ernst &
Young LLP, Signet's independent auditors, letters, dated the date of or
shortly prior to each of the mailing date of the Proxy Statement and the
Effective Date, stating its opinion that the Corporate Merger, including
the transactions contemplated by this Plan and other agreements between the
parties to this Plan related thereto, shall qualify for
pooling-of-interests accounting treatment.
7.03. CONDITIONS TO OBLIGATION OF FIRST UNION AND FUNB. The obligation of
First Union and FUNB to consummate the Mergers is also subject to the
fulfillment or written waiver by First Union prior to the Effective Time of each
of the following conditions:
(A) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Signet set forth in this Plan shall be true and correct as of the date
of this Plan and as of the Effective Date as though made on and as of the
Effective Date (except that representations and warranties that by their
terms speak as of the date of this Plan or some other date shall be true
and correct as of such date) and First Union shall have received a
certificate, dated the Effective Date, signed on behalf of Signet by the
Chief Executive Officer and the Chief Financial Officer of Signet to such
effect.
(B) PERFORMANCE OF OBLIGATIONS OF SIGNET. Signet shall have performed
in all material respects all obligations required to be performed by it
under this Plan at or prior to the Effective Time, and First Union shall
have received a
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<PAGE>
certificate, dated the Effective Date, signed on behalf of Signet by the
Chief Executive Officer and the Chief Financial Officer of Signet to such
effect.
(C) OPINION OF FIRST UNION'S COUNSEL. First Union shall have received
an opinion of Sullivan & Cromwell, counsel to First Union, dated the
Effective Date, to the effect that, on the basis of facts, representations
and assumptions set forth in such opinion, the Corporate Merger constitutes
a reorganization under Section 368 of the Code. In rendering its opinion,
Sullivan & Cromwell may require and rely upon representations contained in
letters from Signet, First Union and stockholders of Signet.
(D) ACCOUNTANTS' LETTERS. First Union and its directors and officers
who sign the Registration Statement shall have received the letters
referred to in Section 6.14 from Ernst & Young LLP, Signet's independent
auditors.
(E) ACCOUNTING TREATMENT. First Union shall have received from KPMG
Peat Marwick LLP, First Union's independent auditors, letters, dated the
date of or shortly prior to each of the mailing date of the Proxy Statement
and the Effective Date, stating its opinion that the Corporate Merger,
including transactions contemplated by this Plan and other agreements
between the parties to this Plan related thereto, shall qualify for
pooling-of-interests accounting treatment.
(F) SIGNET RIGHTS. No person shall have become an "Acquiring Person"
and no "Distribution Date" (as such terms are defined in the Signet Rights
Agreement) shall have occurred, and the Signet Rights shall not have become
separable, distributable, redeemable or exercisable.
ARTICLE VIII
TERMINATION
8.01. TERMINATION. This Plan may be terminated, and the Corporate Merger
may be abandoned:
(A) MUTUAL CONSENT. At any time prior to the Effective Time, by the
mutual consent of First Union and Signet, if the Board of Directors of each
so determines by vote of a majority of the members of its entire Board.
(B) BREACH. At any time prior to the Effective Time, by First Union or
Signet, if its Board of Directors so determines by vote of a majority of
the members of its entire Board, in the event of either: (i) a breach by
the other party of any representation or warranty contained herein (subject
to the standard set forth in Section 5.02), which breach cannot be or has
not been cured within 30 days after the giving of written notice to the
breaching party of such breach; or (ii) a breach by the other party of any
of the covenants or agreements contained herein, which breach cannot be or
has not been cured within 30 days after the giving of written notice to the
breaching party of such breach, provided that such breach (whether under
(i) or (ii)) would be reasonably likely, individually or in the aggregate
with other breaches, to result in a Material Adverse Effect.
(C) DELAY. At any time prior to the Effective Time, by First Union or
Signet, if its Board of Directors so determines by vote of a majority of
the members of its entire Board, in the event that the Corporate Merger is
not consummated by July 31, 1998, except to the extent that the failure of
the Corporate Merger then to be consummated arises out of or results from
the knowing action or inaction of the party seeking to terminate pursuant
to this Section 8.01(c).
(D) NO APPROVAL. By Signet 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 (i) the approval of any Governmental Authority required for
consummation of the Corporate Merger and the other transactions
contemplated by this Plan shall have been denied by final nonappealable
action of such Governmental Authority or (ii) any stockholder approval
required by Section 7.01(a) herein is not obtained at the Signet Meeting.
(E) FAILURE TO RECOMMEND, ETC. At any time prior to the Signet
Meeting, by First Union if the Signet Board shall have failed to make its
recommendation referred to in Section 6.02, withdrawn such recommendation
or modified or changed such recommendation in a manner adverse in any
respect to the interests of First Union.
(F) FAILURE TO EXECUTE AND DELIVER STOCK OPTION AGREEMENT. At any time
prior to July 21, 1997, by First Union if Signet shall not have executed
and delivered the Stock Option Agreement to First Union.
8.02. EFFECT OF TERMINATION AND ABANDONMENT. In the event of
termination of this Plan and the abandonment of the Corporate Merger
pursuant to this Article VIII, no party to this Plan shall have any
liability or further obligation to any other party hereunder except (i) as
set forth in Section 9.01 and (ii) that termination will not relieve a
breaching party from liability for any willful breach of this Plan giving
rise to such termination.
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<PAGE>
ARTICLE IX
MISCELLANEOUS
9.01. SURVIVAL. No representations, warranties, agreements and
covenants contained in this Plan shall survive the Effective Time (other
than Section 6.12 and this Article IX which shall survive the Effective
Time) or the termination of this Plan if this Plan is terminated prior to
the Effective Time (other than Sections 6.03(b), 6.05, 8.02, and this
Article IX which shall survive such termination).
9.02. WAIVER; AMENDMENT. Prior to the Effective Time, any provision of
this Plan may be (i) waived by the party benefitted by the provision, or
(ii) amended or modified at any time, by an agreement in writing between
the parties hereto executed in the same manner as this Plan, except that
after the Signet Meeting, this Plan may not be amended if it would violate
the VSCA or reduce the consideration to be received by Signet stockholders
in the Corporate Merger.
9.03. COUNTERPARTS. This Plan may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
9.04. GOVERNING LAW. This Plan shall be governed by, and interpreted
in accordance with, the laws of the State of North Carolina applicable to
contracts made and to be performed entirely within such State (except to
the extent that mandatory provisions of Federal law or of the NCBCA or VSCA
are applicable).
9.05. EXPENSES. Each party hereto will bear all expenses incurred by
it in connection with this Plan and the transactions contemplated hereby,
except that printing expenses and SEC fees shall be shared equally between
Signet and First Union.
9.06. NOTICES. All notices, requests and other communications
hereunder to a party shall be in writing and shall be deemed given if
personally delivered, telecopied (with confirmation) or mailed by
registered or certified mail (return receipt requested) to such party at
its address set forth below or such other address as such party may specify
by notice to the parties hereto.
If to Signet, to:
Signet Banking Corporation
7 North Eighth Street
Richmond, Virginia 23219
Attention: Malcolm S. McDonald
Chairman and Chief Executive Officer
Facsimile: (804) 747-2000
With a copy to:
Signet Banking Corporation
7 North Eighth Street
Richmond, Virginia 23219
Attention: Sara R. Wilson, Esq.
General Counsel
Facsimile: (804) 747-2000
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Edward D. Herlihy, Esq.
Facsimile: (212) 403-2000
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<PAGE>
If to First Union, to:
First Union Corporation
One First Union Center
Charlotte, North Carolina 28288-0013
Attention: Edward E. Crutchfield
Chairman and Chief Executive Officer
Facsimile: (704) 374-3425
With a copy to:
First Union Corporation
One First Union Center
Charlotte, North Carolina 28288-0013
Attention: Marion A. Cowell, Jr., Esq.
General Counsel
Facsimile: (704) 374-3425
9.07. ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES. This Plan
and any Stock Option Agreement entered into represent the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and thereby and this Plan supersedes any and all other
oral or written agreements heretofore made (other than any such Stock
Option Agreement). Except for Section 6.12, 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.
9.08. INTERPRETATION; EFFECT. When a reference is made in this Plan to
Sections, Exhibits or Schedules, such reference shall be to a Section of,
or Exhibit or Schedule to, this Plan unless otherwise indicated. The
headings contained in this Plan are for reference purposes only and are not
part of this Plan. Whenever the words "include," "includes" or "including"
are used in this Plan, they shall be deemed to be followed by the words
"without limitation". No provision of this Plan shall be construed to
require Signet, First Union or any of their respective Subsidiaries,
affiliates or directors to take any action which would violate applicable
law (whether statutory or common law), rule or regulation.
IN WITNESS WHEREOF, the parties hereto have caused this Plan to be
executed in counterparts by their duly authorized officers, all as of the
day and year first above written.
SIGNET BANKING CORPORATION
By: /s/ MALCOLM S. MCDONALD
NAME: MALCOLM S. MCDONALD
TITLE: CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
SIGNET BANK
By: /s/ W.B. MILLNER III
NAME: W.B. MILLNER III
TITLE: VICE CHAIRMAN AND CHIEF
FINANCIAL OFFICER
FIRST UNION CORPORATION
By: /s/ EDWARD E. CRUTCHFIELD
NAME: EDWARD E. CRUTCHFIELD
TITLE: CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
FIRST UNION NATIONAL BANK
By: /s/ MARION A. COWELL, JR.
NAME: MARION A. COWELL, JR.
TITLE: EXECUTIVE VICE PRESIDENT AND
GENERAL COUNSEL
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<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of July 19, 1997, between First Union
Corporation, a North Carolina corporation ("Grantee"), and Signet Banking
Corporation, a Virginia corporation ("Issuer").
RECITALS
A. Grantee and Issuer have entered into an Agreement and Plan of Mergers
(the "Merger Agreement").
B. As an inducement to the willingness of Grantee to continue to pursue the
transactions contemplated by the Merger Agreement, Issuer has agreed to grant
Grantee the Option (as hereinafter defined).
C. The Board of Directors of Issuer has approved the grant of the Option
and the Merger Agreement prior to the date hereof.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to an aggregate of
12,000,000 fully paid and nonassessable shares of the common stock, par value
$5.00 per share, of Issuer ("Common Stock") at a price per share equal to the
average of last reported sale prices per share of Common Stock as reported on
the NYSE Composite Transactions reporting system (as reported in The Wall Street
Journal or, if not reported therein, another authoritative source) on July 17
and 18, 1997; provided, however, that in the event Issuer issues or agrees to
issue any shares of Common Stock (other than shares of Common Stock issued
pursuant to stock options granted pursuant to any employee benefit plan prior to
the date hereof and other than shares of Common Stock that Issuer is obligated
to issue under any stock or benefit plan thereof in effect as of the date
hereof) at a price less than such average price per share (as adjusted pursuant
to Section 5(b)), such price shall be equal to such lesser price (such price, as
adjusted if applicable, the "Option Price"); provided, further, that in no event
shall the number of shares for which this Option is exercisable exceed 19.9% of
the issued and outstanding shares of Common Stock. The number of shares of
Common Stock that may be received upon the exercise of the Option and the Option
Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 5(a) hereof), the number of shares of Common Stock subject to the Option
shall be increased so that, after such issuance, such number together with any
shares of Common Stock previously issued pursuant hereto, equals 19.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section l(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer to issue shares in breach of any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, if, but only if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2) within
six (6) months following such Subsequent Triggering Event (or such later period
as provided in Section 10). Each of the following shall be an Exercise
Termination Event: (i) the Effective Time of the Corporate Merger; (ii)
termination of the Merger Agreement in accordance with the provisions thereof if
such termination occurs prior to the occurrence of an Initial Triggering Event
except a termination by Grantee pursuant to Section 8.01(b) or Section 8.01(e)
of the Merger Agreement or by Grantee or Issuer pursuant to Section 8.01(d)(ii)
of the Merger Agreement (each, a "Listed Termination"); or (iii) the passage of
eighteen (18) months (or such longer period as provided in Section 10) after
termination of the Merger Agreement if such termination follows the occurrence
of an Initial Triggering Event or is a Listed Termination. The term
"Holder"shall mean the holder or holders of the Option. Notwithstanding anything
to the contrary contained herein, (i) the Option may not be exercised at any
time when Grantee shall be in material breach of any of its covenants or
agreements contained in the Merger Agreement such that Issuer shall be entitled
to terminate the Merger Agreement pursuant to Section 8.01(b) thereof and (ii)
this Agreement shall automatically terminate upon the proper termination of the
Merger Agreement by Issuer pursuant to Section 8.01(b) thereof as a result of
the material breach by Grantee of its covenants or agreements contained in the
Merger Agreement.
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<PAGE>
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring on or after the date hereof:
(i) Issuer or its Significant Subsidiary (as defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange Commission (the
"SEC")) (the "Issuer Subsidiary"), without having received Grantee's prior
written consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as hereinafter defined) with any person (the term
"person" for purposes of this Agreement having the meaning assigned thereto in
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), and the rules and regulations thereunder) other than Grantee
or any of its Subsidiaries (each a "Grantee Subsidiary") or the Board of
Directors of Issuer (the "Issuer Board") shall have recommended that the
shareholders of Issuer approve or accept any Acquisition Transaction other than
as contemplated by the Merger Agreement. For purposes of this Agreement, (a)
"Acquisition Transaction" shall mean (x) a merger or consolidation, or any
similar transaction, involving Issuer or the Issuer Subsidiary (other than
mergers, consolidations or similar transactions involving solely Issuer and/or
one or more wholly-owned Subsidiaries of the Issuer, provided, any such
transaction is not entered into in violation of the terms of the Merger
Agreement), (y) a purchase, lease or other acquisition of all or any substantial
part of the assets or deposits of Issuer or the Issuer Subsidiary, or (z) a
purchase or other acquisition (including by way of merger, consolidation, share
exchange or otherwise) of securities representing 10% or more of the voting
power of Issuer or the Issuer Subsidiary and (b) "Subsidiary" shall have the
meaning set forth in Rule 12b-2 under the 1934 Act;
(ii) Any person other than the Grantee or any Grantee Subsidiary shall have
acquired beneficial ownership or the right to acquire beneficial ownership of
10% or more of the outstanding shares of Common Stock (the term "beneficial
ownership" for purposes of this Agreement having the meaning assigned thereto in
Section 13(d) of the 1934 Act, and the rules and regulations thereunder);
(iii) The shareholders of Issuer shall have voted and failed to approve the
Merger Agreement and the Corporate Merger at a meeting which has been held for
that purpose or any adjournment or postponement thereof, or such meeting shall
not have been held in violation of the Merger Agreement or shall have been
cancelled prior to termination of the Merger Agreement if, prior to such meeting
(or if such meeting shall not have been held or shall have been cancelled, prior
to such termination), it shall have been publicly announced that any person
(other than Grantee or any of its Subsidiaries) shall have made, or disclosed an
intention to make, a proposal to engage in an Acquisition Transaction;
(iv) The Issuer Board shall have withdrawn or modified (or publicly
announced its intention to withdraw or modify) in any manner adverse in any
respect to Grantee its recommendation that the shareholders of Issuer approve
the transactions contemplated by the Merger Agreement, or Issuer or the Issuer
Subsidiary shall have authorized, recommended, proposed (or publicly announced
its intention to authorize, recommend or propose) an agreement to engage in an
Acquisition Transaction with any person other than Grantee or a Grantee
Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary shall have made
a proposal to Issuer or its shareholders to engage in an Acquisition Transaction
and such proposal shall have been publicly announced;
(vi) Any person other than Grantee or any Grantee Subsidiary shall have
filed with the SEC a registration statement or tender offer materials with
respect to a potential exchange or tender offer that would constitute an
Acquisition Transaction (or filed a preliminary proxy statement with the SEC
with respect to a potential vote by its shareholders to approve the issuance of
shares to be offered in such an exchange offer);
(vii) Issuer shall have willfully breached any covenant or obligation
contained in the Merger Agreement in anticipation of engaging in an Acquisition
Transaction, and following such breach Grantee would be entitled to terminate
the Merger Agreement (whether immediately or after the giving of notice or
passage of time or both); or
(viii) Any person other than Grantee or any Grantee Subsidiary shall have
filed an application or notice with the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") or other federal or state bank
regulatory or antitrust authority, which application or notice has been accepted
for processing, for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 20% or more of the then outstanding
Common Stock; or
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<PAGE>
(ii) The occurrence of the Initial Triggering Event described in clause (i)
of subsection (b) of this Section 2, except that the percentage referred to in
clause (z) of the second sentence thereof shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option (or any portion thereof), it shall send to Issuer a written notice (the
date of which being herein referred to as the "Notice Date") specifying (i) the
total number of shares it will purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 60 business
days from the Notice Date for the closing of such purchase (the "Closing Date");
provided, that if prior notification to or approval of the Federal Reserve Board
or any other regulatory or antitrust agency is required in connection with such
purchase, the Holder shall promptly file the required notice or application for
approval, shall promptly notify Issuer of such filing, and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall (i) pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer and (ii)
present and surrender this Agreement to Issuer at its principal executive
offices, provided that the failure or refusal of the Issuer to designate such a
bank account or accept surrender of this Agreement shall not preclude the Holder
from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement, dated as of July 19, 1997, between
the registered holder hereof and Issuer and to resale restrictions arising
under the Securities Act of 1933, as amended. A copy of such agreement is
on file at the principal office of Issuer and will be provided to the
holder hereof without charge upon receipt by Issuer of a written request
therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act") in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions of this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference in the opinion of Counsel to the Holder;
and (iii) the legend shall be removed in its entirety if the conditions in the
preceding clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other
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<PAGE>
voluntary act, avoid or seek to avoid the observance or performance of any of
the covenants, stipulations or conditions to be observed or performed hereunder
by Issuer; (iii) promptly to take all action as may from time to time be
required (including (x) complying with all applicable premerger notification,
reporting and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), or the Change in Bank Control Act
of 1978, as amended, or any state or other federal banking law, prior approval
of or notice to the Federal Reserve Board or to any state or other federal
regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such information to the Federal Reserve Board or such state or other
federal regulatory authority as they may require) in order to permit the Holder
to exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and (iv) promptly to take all action provided herein to
protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing for
Options of different denominations entitling the holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Agreements and
related Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to adjustment from time to time
as provided in this Section 5.
(a) In the event of any change in, or distributions in respect of, the
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares
or the like, the type and number of shares of Common Stock purchasable upon
exercise hereof shall be appropriately adjusted and proper provision shall be
made so that, in the event that any additional shares of Common Stock are to be
issued or otherwise become outstanding as a result of any such change (other
than pursuant to an exercise of the Option), the number of shares of Common
Stock that remain subject to the Option shall be increased so that, after such
issuance and together with shares of Common Stock previously issued pursuant to
the exercise of the Option (as adjusted on account of any of the foregoing
changes in the Common Stock), it equals 19.9% of the number of shares of Common
Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock purchasable upon exercise
hereof is adjusted as provided in this Section 5, the Option Price shall be
adjusted by multiplying the Option Price by a fraction, the numerator of which
shall be equal to the number of shares of Common Stock purchasable prior to the
adjustment and the denominator of which shall be equal to the number of shares
of Common Stock purchasable after the adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within twelve (12) months (or such later period as provided in Section
10) of such Subsequent Triggering Event (whether on its own behalf or on behalf
of any subsequent holder of this Option (or part thereof) or any of the shares
of Common Stock issued pursuant hereto), promptly prepare, file and keep current
a registration statement under the 1933 Act covering any shares issued and
issuable pursuant to this Option and shall use its reasonable best efforts to
cause such registration statement to become effective and remain current in
order to permit the sale or other disposition of any shares of Common Stock
issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee. Issuer will use
its reasonable best efforts to cause such registration statement promptly to
become effective and then to remain effective for such period not in excess of
180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such registrations. The
Issuer shall bear the costs of such registrations (including, but not limited
to, Issuer's attorneys' fees, printing costs and filing fees, except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto). The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering by Issuer of shares of Common Stock, and if in the
good faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the offer
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<PAGE>
and sale of the Option Shares would interfere with the successful marketing of
the shares of Common Stock offered by Issuer, the number of Option Shares
otherwise to be covered in the registration statement contemplated hereby may be
reduced; provided, however, that after any such required reduction the number of
Option Shares to be included in such offering for the account of the Holder
shall constitute at least 25% of the total number of shares to be sold by the
Holder and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then Issuer shall file a registration statement for the
balance as promptly as practicable thereafter as to which no reduction pursuant
to this Section 6 shall be permitted or occur and the Holder shall thereafter be
entitled to one additional registration and the twelve (12) month period
referred to in the first sentence of this section shall be increased to
twenty-four (24) months. Each such Holder shall provide all information
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements for Issuer. Upon receiving
any request under this Section 6 from any Holder, Issuer agrees to send a copy
thereof to any other person known to Issuer to be entitled to registration
rights under this Section 6, in each case by promptly mailing the same, postage
prepaid, to the address of record of the persons entitled to receive such
copies. Notwithstanding anything to the contrary contained herein, in no event
shall the number of registrations that Issuer is obligated to effect be
increased by reason of the fact that there shall be more than one Holder as a
result of any assignment or division of this Agreement.
7. (a) At any time after the occurrence of a Repurchase Event (as defined
below) (i) at the request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer (or
any successor thereto) shall repurchase the Option from the Holder at a price
(the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii) at
the request of the owner of Option Shares from time to time (the "Owner"),
delivered prior to an Exercise Termination Event (or such later period as
provided in Section 10), Issuer (or any successor thereto) shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. Anything to the
contrary notwithstanding, the Option Share Repurchase Price shall not be less
than $60.0 million. The term "market/offer price" shall mean the highest of (i)
the price per share of Common Stock at which a tender or exchange offer therefor
has been made, (ii) the price per share of Common Stock to be paid by any third
party pursuant to an agreement with Issuer, (iii) the highest closing price for
shares of Common Stock within the six-month period immediately preceding the
date the Holder gives notice of the required repurchase of this Option or the
Owner gives notice of the required repurchase of Option Shares, as the case may
be, or (iv) in the event of a sale of all or any substantial part of Issuer's
assets or deposits, the sum of the net price paid in such sale for such assets
or deposits and the current market value of the remaining net assets of Issuer
as determined by a nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, and reasonably acceptable to Issuer,
divided by the number of shares of Common Stock of Issuer outstanding at the
time of such sale. In determining the market/offer price, the value of
consideration other than cash shall be determined by a nationally recognized
investment banking firm selected by the Holder or Owner, as the case may be, and
reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and any Option Shares pursuant to this
Section 7 by surrendering for such purpose to Issuer, at its principal office, a
copy of this Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the Holder or the Owner,
as the case may be, elects to require Issuer to repurchase this Option and/or
the Option Shares in accordance with the provisions of this Section 7. As
promptly as practicable, and in any event within five business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto, Issuer shall deliver or
cause to be delivered to the Holder the Option Repurchase Price and/or to the
Owner the Option Share Repurchase Price therefor or the portion thereof that
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business days after
the date on which Issuer is no longer so prohibited; provided, however, that if
Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Holder and/or the
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<PAGE>
Owner, as appropriate, the Option Repurchase Price and the Option Share
Repurchase Price, respectively, in full (and Issuer hereby undertakes to use its
reasonable best efforts to obtain all required regulatory and legal approvals
and to file any required notices as promptly as practicable in order to
accomplish such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option and/or the Option Shares whether in whole or to the
extent of the prohibition, whereupon, in the latter case, Issuer shall promptly
(i) deliver to the Holder and/or the Owner, as appropriate, that portion of the
Option Repurchase Price and/or the Option Share Repurchase Price that Issuer is
not prohibited from delivering; and (ii) deliver, as appropriate, either (A) to
the Holder, a new Agreement evidencing the right of the Holder to purchase that
number of shares of Common Stock obtained by multiplying the number of shares of
Common Stock for which the surrendered Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which is
the Option Repurchase Price less the portion thereof theretofore delivered to
the Holder and the denominator of which is the Option Repurchase Price, and/or
(B) to the Owner, a certificate for the Option Shares it is then so prohibited
from repurchasing. If an Exercise Termination Event shall have occurred prior to
the date of the notice by Issuer described in the first sentence of this
subsection (c), or shall be scheduled to occur at any time before the expiration
of a period ending on the thirtieth day after such date, the Holder shall
nonetheless have the right to exercise the Option until the expiration of such
30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be deemed to
have occurred upon the occurrence of any of the following events or transactions
after the date hereof:
(i) the acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 50% or more of the then outstanding
Common Stock; or
(ii) the consummation of any Acquisition Transaction described in Section
2(b) (i) hereof, except that the percentage referred to in clause (z) shall be
50%.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or a Grantee Subsidiary, or engage in a plan of exchange with
any person, other than Grantee or a Grantee Subsidiary and Issuer shall not be
the continuing or surviving corporation of such consolidation or merger or the
acquirer in such plan of exchange, (ii) to permit any person, other than Grantee
or a Grantee Subsidiary, to merge into Issuer or be acquired by Issuer in a plan
of exchange and Issuer shall be the continuing or surviving or acquiring
corporation, but, in connection with such merger or plan of exchange, the then
outstanding shares of Common Stock shall be changed into or exchanged for stock
or other securities of any other person or cash or any other property or the
then outstanding shares of Common Stock shall after such merger or plan of
exchange represent less than 50% of the outstanding shares and share equivalents
of the merged or acquiring company, or (iii) to sell or otherwise transfer all
or a substantial part of its or the Issuer Subsidiary's assets or deposits to
any person, other than Grantee or a Grantee Subsidiary, then, and in each such
case, the agreement governing such transaction shall make proper provision so
that the Option shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged for,
an option (the "Substitute Option"), at the election of the Holder, of either
(x) the Acquiring Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or surviving
person of a consolidation or merger with Issuer (if other than Issuer), (ii) the
acquiring person in a plan of exchange in which Issuer is acquired, (iii) the
Issuer in a merger or plan of exchange in which Issuer is the continuing or
surviving or acquiring person, and (iv) the transferee of all or a substantial
part of Issuer's assets or deposits (or the assets or deposits of the Issuer
Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock issued by the
issuer of the Substitute Option upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the market/offer price, as defined in
Section 7.
(iv) "Average Price" shall mean the average closing price of a share of the
Substitute Common Stock for one year immediately preceding the consolidation,
merger or sale in question, but in no event higher than the closing price of the
shares of Substitute Common Stock on the day preceding such consolidation,
merger or sale; provided that if Issuer is the issuer of the Substitute Option,
the Average Price shall be computed with respect to a share of common stock
issued by the person merging into Issuer or by any company which controls or is
controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option, provided
that if the terms of the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall be as similar as possible and in no event
less advantageous to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of
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the Substitute Option in substantially the same form as this Agreement (after
giving effect for such purpose to the provisions of Section 9), which agreement
shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option was exercisable immediately prior to the
event described in the first sentence of Section 8(a) and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder.
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 8 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to the amount by which (i) the Highest Closing
Price (as hereinafter defined) exceeds (ii) the exercise price of the Substitute
Option, multiplied by the number of shares of Substitute Common Stock for which
the Substitute Option may then be exercised, and at the request of the owner
(the "Substitute Share Owner") of shares of Substitute Common Stock (the
"Substitute Shares"), the Substitute Option Issuer shall repurchase the
Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to
the Highest Closing Price multiplied by the number of Substitute Shares so
designated. The term "Highest Closing Price" shall mean the highest closing
price for shares of Substitute Common Stock within the six-month period
immediately preceding the date the Substitute Option Holder gives notice of the
required repurchase of the Substitute Option or the Substitute Share Owner gives
notice of the required repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective rights to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and/or certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable and in any event within five business days
after the surrender of the Substitute Option and/or certificates representing
Substitute Shares and the receipt of such notice or notices relating thereto,
the Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor or the
portion thereof which the Substitute Option Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify the Substitute
Option Holder and/or the Substitute Share Owner and thereafter deliver or cause
to be delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Option
Repurchase Price and/or the Substitute Share Repurchase Price, respectively,
which it is no longer prohibited from delivering, within five (5) business days
after the date on which the Substitute Option Issuer is no longer so prohibited;
provided, however, that if the Substitute Option Issuer is at any time after
delivery of a notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Substitute Option Holder and/or
the Substitute Share Owner, as appropriate, the Substitute Option Repurchase
Price and the Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its reasonable best efforts to receive all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder and/or Substitute
Share Owner may
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<PAGE>
revoke its notice of repurchase of the Substitute Option or the Substitute
Shares either in whole or to the extent of prohibition, whereupon, in the latter
case, the Substitute Option Issuer shall promptly (i) deliver to the Substitute
Option Holder or Substitute Share Owner, as appropriate, that portion of the
Substitute Option Repurchase Price or the Substitute Share Repurchase Price that
the Substitute Option Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, and/or (B) to the Substitute Share Owner, a certificate for
the Substitute Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the notice
by the Substitute Option Issuer described in the first sentence of this
subsection (c), or shall be scheduled to occur at any time before the expiration
of a period ending on the thirtieth day after such date, the Substitute Option
Holder shall nevertheless have the right to exercise the Substitute Option until
the expiration of such 30-day period.
10. The 30-day, 6-month, 12-month, 18-month or 24-month periods for
exercise of certain rights under Sections 2, 6, 7, 9, 12 and 14 shall be
extended: (i) to the extent necessary to obtain all regulatory approvals for the
exercise of such rights (for so long as the Holder, Owner, Substitute Option
Holder or Substitute Share Owner, as the case may be, is using commercially
reasonable efforts to obtain such regulatory approvals), and for the expiration
of all statutory waiting periods; (ii) during the pendency of any temporary
restraining order, injunction or other legal bar to exercise of such rights; and
(iii) to the extent necessary to avoid liability under Section 16(b) of the 1934
Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) 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
Issuer Board prior to the date hereof and no other corporate proceedings on the
part of Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant thereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event an Initial Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder; provided, however,
that until the date 15 days following the date on which the Federal Reserve
Board has approved an application by Grantee to acquire the shares of Common
Stock subject to the Option, Grantee may not assign its rights under the Option
except in (i) a widely dispersed public distribution, (ii) a private placement
in which no one party acquires the right to purchase in excess of 2% of the
voting shares of Issuer, (iii) an assignment to a single party (e.g., a broker
or investment banker) for the purpose of conducting a widely dispersed public
distribution on Grantee's behalf or (iv) any other manner approved by the
Federal Reserve Board.
13. Each of Grantee and Issuer will use its reasonable best efforts to make
all filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including, without limitation, applying to the Federal Reserve
Board under the BHCA for approval to acquire the shares issuable hereunder, but
Grantee shall not be obligated to apply to state banking authorities for
approval to acquire the shares of Common Stock issuable hereunder until such
time, if ever, as it deems appropriate to do so.
14. (a) Grantee may, at any time following a Repurchase Event and prior to
the occurrence of an Exercise Termination Event (or such later period as
provided in Section 10), relinquish the Option (together with any Option Shares
issued to and then owned by Grantee) to Issuer in exchange for a cash fee equal
to the Surrender Price (as hereinafter defined); provided, however, that Grantee
may not exercise its rights pursuant to this Section 14 if Issuer has
repurchased the Option (or any portion thereof) or any Option Shares pursuant to
Section 7. The "Surrender Price" shall be equal to $60.0 million (i) plus, if
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<PAGE>
applicable, Grantee's purchase price with respect to any Option Shares and (ii)
minus, if applicable, the excess of (B) the net cash amounts, if any, received
by Grantee pursuant to the arms' length sale of Option Shares (or any other
securities into which such Option Shares were converted or exchanged) to any
unaffiliated party, over (B) Grantee's purchase price of such Option Shares.
(b) Grantee may exercise its right to relinquish the Option and any Option
Shares pursuant to this Section 14 by surrendering to Issuer, at its principal
office, a copy of this Agreement together with certificates for Option Shares,
if any, accompanied by a written notice stating (i) that Grantee elects to
relinquish the Option and Option Shares, if any, in accordance with the
provisions of this Section 14 and (ii) the Surrender Price. The Surrender Price
shall be payable in immediately available funds on or before the second business
day following receipt of such notice by Issuer.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Grantee in full, Issuer shall immediately so notify Grantee
and thereafter deliver or cause to be delivered, from time to time, to Grantee,
the portion of the Surrender Price that it is no longer prohibited from paying,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of surrender pursuant to paragraph (b) of this Section 14 is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from paying to Grantee the Surrender Price in full, (i) Issuer shall (A)
use its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to make such payments, (B) within five days of the submission or receipt of any
documents relating to any such regulatory and legal approvals, provide Grantee
with copies of the same, and (c) keep Grantee advised of both the status of any
such request for regulatory and legal approvals, as well as any discussions with
any relevant regulatory or other third party reasonably related to the same and
(ii) Grantee may revoke such notice of surrender by delivery of a notice of
revocation to Issuer and, upon delivery of such notice of revocation, the
Exercise Termination Date shall be extended to a date six months from the date
on which the Exercise Termination Date would have occurred if not for the
provisions of this Section 14(c) (during which period Grantee may exercise any
of its rights hereunder, including any and all rights pursuant to this Section
14).
15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief. In connection therewith both
parties waive the posting of any bond or similar requirement.
16. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section l(a) hereof (as adjusted pursuant to Section l(b) or Section
5 hereof), it is the express intention of Issuer to allow the Holder to acquire
or to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
18. This Agreement shall be governed by and construed in accordance with
the laws of the State of North Carolina, without regard to the conflict of law
principles thereof (except to the extent that mandatory provisions of Federal
law or of the VSCA are applicable).
19. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
20. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assignees.
Nothing in this Agreement,
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<PAGE>
expressed or implied, is intended to confer upon any party, other than the
parties hereto, and their respective successors except as assignees, any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
SIGNET BANKING CORPORATION
By: /s/ MALCOLM S. MCDONALD
NAME: MALCOLM S. MCDONALD
TITLE: CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
FIRST UNION CORPORATION
By: /s/ EDWARD E. CRUTCHFIELD
NAME: EDWARD E. CRUTCHFIELD
TITLE: CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
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<PAGE>
ANNEX B
J.P. Morgan Securities Inc. [JP Morgan
60 Wall Street logo appears
New York, NY here]
10260-0060
[date]
The Board of Directors
Signet Banking Corporation
7 North 8th Street
Richmond, Virginia 23219
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the stockholders of Signet Banking Corporation (the "Company") of
the consideration proposed to be paid to them in connection with the proposed
merger (the "Merger") of the Company with First Union Corporation ("First
Union"). Pursuant to the Agreement and Plan of Mergers, dated as of July 18,
1997 (the "Agreement"), by and among the Company, Signet Bank (the "Bank"),
First Union and First Union National Bank ("FUNB"), the Company will merge with
and into First Union, the Bank will merge with and into FUNB, and stockholders
of the Company will receive, for each share of Common Stock, par value $5.00 per
share, of the Company held by them, consideration equal to 1.10 shares of Common
Stock, par value $3.33 1/3 per share, of First Union, as adjusted for the
two-for-one First Union Common Stock split payable on July 31, 1997, subject to
adjustment as set forth in the Agreement.
In arriving at our opinion, we have reviewed (i) the Agreement; (ii)
certain publicly available information concerning the business of the Company
and of certain other companies engaged in businesses comparable to those of the
Company, and the reported market prices for certain other companies' securities
deemed comparable; (iii) publicly available terms of certain transactions
involving companies comparable to the Company and the consideration received for
such companies; (iv) current and historical market prices of the common stock of
the Company and First Union; (v) the audited financial statements of the Company
and First Union for the fiscal year ended December 31, 1996, and the unaudited
financial statements of the Company and First Union for the period ended June
30, 1997; (vi) certain internal financial analyses and forecasts prepared by the
Company and First Union and their respective managements; and (vii) the terms of
other business combinations that we deemed relevant.
In addition, we have held discussions with certain members of the
management of the Company and First Union with respect to certain aspects of the
Merger, and the past and current business operations of the Company and First
Union, the financial condition and future prospects and operations of the
Company and First Union, the effects of the Merger on the financial condition
and future prospects of the Company and First Union, and certain other matters
we believed necessary or appropriate to our inquiry. We have reviewed such other
financial studies and analyses and considered such other information as we
deemed appropriate for the purposes of this opinion.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was publicly
available or was furnished to us by the Company and First Union or otherwise
reviewed by us, and we have not assumed any responsibility or liability
therefor. We have not conducted any valuation or appraisal of any assets or
liabilities, nor have any such valuations or appraisals been provided to us. We
have not been requested to review individual credit files or make any
independent assessment as to the future performance or non-performance of the
Company's or First Union's assets. We have assumed that current allowances and
reserves for loan losses for
B-1
<PAGE>
both the Company and First Union are sufficient to cover all such losses. In
relying on financial analyses and forecasts provided to us, we have assumed that
they have been reasonably prepared based on assumptions reflecting the best
currently available estimates and judgments by management as to the expected
future results of operations and financial condition of the Company and First
Union to which such analyses or forecasts relate. We have also assumed that, in
the course of obtaining regulatory and third party consents for the Merger and
the other transactions contemplated by the Agreement, no restriction will be
imposed that will have a material adverse effect on the future results of
operations or financial condition of the Company or First Union. We have also
assumed that the Merger and other transactions contemplated by the Agreement
will have no material adverse tax consequences to holders of the Company's
common stock. We have relied as to all legal matters relevant to rendering our
opinion upon the advice of counsel.
Our opinion is necessarily based on economic, market and other conditions
as in effect on, and the information made available to us as of, the date
hereof. It should be understood that subsequent developments may affect this
opinion and that we do not have any obligation to update, revise, or reaffirm
this opinion. We are expressing no opinion herein as to the price at which First
Union's common stock will trade at any future time. In connection with our
engagement, we were not requested to, and did not, solicit third party
indications of interest in acquiring all of the Company.
We have acted as financial advisor to the Company with respect to the
proposed Merger and will receive a fee from the Company for our services. We
will also receive an additional fee if the proposed Merger is consummated. We
maintain customary banking relationships with the Company and First Union. In
the ordinary course of their businesses, our affiliates may actively trade the
debt and equity securities of the Company or First Union for their own account
or for the accounts of customers and, accordingly, they may at any time hold
long or short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the
date hereof that the consideration to be paid to the Company's stockholders in
the proposed Merger is fair, from a financial point of view, to such
stockholders.
This letter is provided to the Board of Directors of the Company in
connection with and for the purposes of its evaluation of the Merger. This
opinion does not constitute a recommendation to any stockholder of the Company
as to how such stockholder should vote with respect to the Merger. This opinion
may not be disclosed, referred to, or communicated (in whole or in part) to any
third party for any purpose whatsoever and must be treated as confidential
except with our prior written consent in each instance. This opinion may be
reproduced in full in any proxy or information statement mailed to stockholders
of the Company but may not otherwise be disclosed publicly in any manner without
our prior written approval.
Very truly yours,
J.P. MORGAN SECURITIES INC.
By:
Name: Gail M. Rogers
Title: Managing Director
B-2
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 55-8-50 through 55-8-58 of the NCBCA contain specific provisions
relating to indemnification of directors and officers of North Carolina
corporations. In general, the statute provides that (i) a corporation must
indemnify a director or officer who is wholly successful in his defense of a
proceeding to which he is a party because of his status as such, unless limited
by the articles of incorporation, and (ii) a corporation may indemnify a
director or officer if he is not wholly successful in such defense, if it is
determined as provided in the 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 E
(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 and to Exhibit (4) to FUNC's Current Report on Form 8-K dated October
16, 1996.)
(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) Computations of Consolidated Ratios of Earnings to Fixed Charges. (Incorporated by reference to Exhibit (12) to
FUNC's 1997 Second Quarter Report on Form 10-Q.)
(23)(a) Consent of Independent Auditors.
(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 J.P. Morgan Securities Inc.
(24) Power of Attorney.
(27) FUNC's Financial Data Schedule. (Incorporated by reference to Exhibit (27) to FUNC's 1997 Second Quarter Report
on Form 10-Q.)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
(99)(a) Form of proxy for the Special Meeting of Stockholders of Signet.
(99)(b) Consent of Malcolm S. McDonald.
(99)(c) Consent of Norwood H. Davis, Jr.
(99)(d) Employment Agreement between FUNC and Malcolm S. McDonald.
</TABLE>
* Omitted exhibits to be furnished upon request of the Commission.
ITEM 22. UNDERTAKINGS.
(a)(1) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933 (as amended and the
rules and regulations thereunder, the "Securities Act"), each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (as amended and the rules and regulations
thereunder, the "Exchange Act") (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(2) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c)
promulgated pursuant to the Securities Act, the issuer undertakes that such
reoffering prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items of
the applicable form.
(3) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (2) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415 promulgated
pursuant to the Securities Act, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(4) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions of this Item 22, or otherwise
(other than insurance), the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act, and is therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a) (3) of the
Securities Act;
II-2
<PAGE>
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 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
(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 September 30 1997.
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
JAMES H. HATCH Accounting Officer)
*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
*A. DANO DAVIS Director
A. DANO 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
*WILLIAM N. GOODWIN, JR. Director
WILLIAM N. GOODWIN, JR.
*HOWARD H. HAWORTH Director
HOWARD H. HAWORTH
*FRANK M. HENRY Director
FRANK M. HENRY
LEONARD G. HERRING Director
LEONARD G. HERRING
*JUAN RODRIGUEZ INCIARTE Director
JUAN RODRIGUEZ INCIARTE
JACK A. LAUGHERY Director
*MAX LENNON Director
MAX LENNON
*RADFORD D. LOVETT Director
RADFORD D. LOVETT
*MACKEY J. MCDONALD Director
MACKEY J. MCDONALD
*JOSEPH NEUBAUER Director
JOSEPH NEUBAUER
*RANDOLPH N. REYNOLDS Director
RANDOLPH N. REYNOLDS
*RUTH G. SHAW Director
RUTH G. SHAW
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
<S> <C>
*CHARLES M. SHELTON, SR. Director
CHARLES M. SHELTON, SR.
*LANTY L. SMITH Director
LANTY L. SMITH
*ANTHONY P. TERRACCIANO Director
ANTHONY P. TERRACCIANO
*DEWEY L. TROGDON Director
DEWEY L. TROGDON
Director
JOHN D. UIBLE Director
*B. J. WALKER
B. J. WALKER
*By Marion A. Cowell, Jr., Attorney-in-Fact
MARION A. COWELL, JR.
MARION A. COWELL, JR.
</TABLE>
Date: September 30, 1997
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 and to
Exhibit (4) to FUNC's Current Report on Form 8-K dated
October 16, 1996.
(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) Computations of Consolidated Ratios of Earnings to Incorporated by reference to Exhibit (12) to FUNC's
Fixed Charges. 1997 Second Quarter on Form 10-Q.
(23)(a) Consent of Independent Auditors. 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 J.P. Morgan Securities, Inc. Filed herewith.
(24) Power of Attorney. Filed herewith.
(27) FUNC's Financial Data Schedule. Incorporated by reference to Exhibit (27) to FUNC's
1997 Second Quarter Report on
Form 10-Q.
(99)(a) Form of proxy for the Special Meeting of Stockholders Filed herewith.
of Signet.
(99)(b) Consent of Malcolm S. McDonald. Filed herewith.
(99)(c) Consent of Norwood H. Davis, Jr. Filed herewith.
(99)(d) Employment Agreement between FUNC and Malcolm S. Filed herewith.
McDonald.
</TABLE>
* Omitted exhibits to be furnished upon request of the Commission.
<PAGE>
EXHIBIT (5)
September 30, 1997
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
69,700,000 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 Signet Banking 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,
/s/ MARION A. COWELL, JR.
MARION A. COWELL, JR.
<PAGE>
EXHIBIT (8)(A)
SULLIVAN & CROMWELL TAX OPINION
September 30, 1997
FIRST UNION CORPORATION,
One First Union Center,
Charlotte, North Carolina 28288.
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 merger (the "Corporate Merger") of Signet Banking Corporation, a
Virginia corporation, ("Signet") with and into First Union, pursuant to the
Agreement and Plan of Mergers (the "Agreement"), dated as of July 18, 1997, by
and between Signet, Signet Bank, First Union and First Union National Bank.
Capitalized terms used but not defined herein shall have the meanings specified
in the Registration Statement or the appendices thereto (including the
Agreement).
We have assumed with your consent that (1) the Coporate Merger will be
effected in accordance with the Agreement and will qualify as a merger under
applicable law and (2) the representations contained in the letters of
representation from First Union and Signet to us dated September 29, 1997, and
September 30, 1997, respectively, were true and correct when made and will be
true and correct at the Effective Time.
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:
(i) no gain or loss will be recognized for federal income tax purposes
by Signet stockholders upon the exchange in the Corporate Merger of shares
of Signet Common Stock solely for First Union Common Stock (except with
respect to cash received in lieu of a fractional share interest in First
Union Common Stock);
(ii) the basis of First Union Common Stock received in the Corporate
Merger by Signet stockholders (including the basis of any fractional share
interest in First Union Common Stock deemed received) will be the same as
the basis of the shares of Signet Common Stock surrendered in exchange
therefor;
(iii) the holding period of First Union Common Stock received in the
Corporate Merger by a Signet stockholder (including the holding period of
any fractional share interest in First Union Common Stock deemed received)
will include the period during which the shares of Signet Common Stock
surrendered in exchange therefor were held by the Signet stockholder,
provided such shares of Signet Common Stock were held as capital assets at
the Effective Time; and
(iv) cash received by a Signet stockholder in lieu of a fractional
share interest in First Union 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 stockholder, 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 stockholder's adjusted tax basis in the Signet Common Stock allocable
to the fractional share interest.
We express no opinion as to the effect of the Corporate Merger on any
shareholder that is required to recognize unrealized gains and losses for
federal income tax purposes at the end of each taxable year under a
mark-to-market system.
<PAGE>
First Union Corporation - 2 -
The federal income tax consequences described herein may not apply to
certain classes of taxpayers, including, without limitation, Signet stockholders
who received their Signet Common Stock upon the exercise of employee stock
options or otherwise as compensation, that hold their Signet Common Stock as
part of a "straddle" or "conversion transaction" for federal income tax
purposes, or that are foreign persons, insurance companies, financial
institutions or securities dealers.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to this opinion in the Registration
Statement. 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)
WACHTELL, LIPTON, ROSEN & KATZ TAX OPINION
September 30, 1997
SIGNET BANKING CORPORATION
7 North Eighth Street
Richmond, Virginia 23219
Ladies/Gentlemen:
We have acted as special counsel to Signet Banking Corporation, a Virginia
corporation ("Signet"), in connection with the proposed merger (the "Corporate
Merger") of Signet with and into First Union Corporation, a North Carolina
corporation ("FUNC"), upon the terms and conditions set forth in the Agreement
and Plan of Merger dated as of July 18, 1997, by and among Signet, Signet Bank,
a Virginia commercial bank, FUNC and First Union National Bank, a national
banking association (the "Agreement"). At your request, in connection with the
filing of the Registration Statement on Form S-4 filed with the Securities and
Exchange Commission in connection with the Corporate Merger (the "Registration
Statement"), we are rendering our opinion concerning certain federal income tax
consequences of the Corporate Merger.
For purposes of the opinion set forth below, we have relied, with the
consent of Signet and the consent of FUNC, upon the accuracy and completeness of
the statements and representations (which statements and representations we have
neither investigated nor verified) contained, respectively, in the certificates
of the officers of Signet and FUNC (copies of which are attached hereto and
which are incorporated herein by reference), and have assumed that such
certificates will be complete and accurate as of the Effective Time. We have
also relied upon the accuracy of the Registration Statement and the Proxy
Statement/Prospectus included therein (together, the "Proxy Statement"). Any
capitalized term used and not defined herein has the meaning given to it in the
Proxy Statement or 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 Proxy
Statement and that the Corporate Merger will qualify as a statutory merger under
the applicable laws of the Commonwealth of Virginia and the State of North
Carolina.
Based upon and subject to the foregoing, it is our opinion that, under
currently applicable United States federal income tax law:
(i) No gain or loss will be recognized for federal income tax purposes
by Signet stockholders upon the exchange in the Corporate Merger of shares
of Signet Common Stock solely for FUNC Common Shares (except with respect
to cash received in lieu of a fractional share interest in FUNC Common
Stock deemed received);
(ii) The basis of FUNC Common Shares received in the Corporate Merger
by Signet stockholders (including the basis of any fractional share
interest in FUNC Common Stock deemed received) will be the same as the
basis of the shares of Signet Common Stock surrendered in exchange
therefor;
(iii) The holding period of the FUNC Common Shares received in the
Corporate Merger by a Signet stockholder (including the holding period of
any fractional share interest in FUNC Common Stock) will include the
holding period of the shares of Signet Common Stock surrendered in exchange
therefor, provided such shares of Signet Common Stock were held as capital
assets at the Effective Time; and
(iv) Cash received by a holder of Signet 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 Signet Common Stock allocable to the fractional
share interest.
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
references to us under the captions "SUMMARY -- Certain Federal Income Tax
Consequences" and "THE MERGERS -- Certain Federal Income Tax Consequences" and
elsewhere in the Proxy Statement. In giving such consent, we do not thereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended.
<PAGE>
Signet Banking Corporation
September 30, 1997
Page 2
This opinion may not be applicable to special situations, such as Signet
stockholders who received their Signet Common Stock upon the exercise of
employee stock options or otherwise as compensation, that hold their Signet
Common Stock as part of a "straddle" or "conversion transaction," or that are
insurance companies, securities dealers, financial institutions or foreign
persons.
Very truly yours,
WACHTELL, LIPTON, ROSEN & KATZ
<PAGE>
EXHIBIT (23)(A)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Proxy Statement of Signet Banking Corporation that is made a part of the
Registration Statement (Form S-4 No. 333-00000) and related prospectus of First
Union Corporation for the registration of 69,700,000 shares of its common stock
and to the incorporation by reference therein of our report dated January 22,
1997, with respect to the consolidated financial statements of Signet Banking
Corporation incorporated by reference in its Annual Report (Form 10-K) for the
year ended December 31, 1996, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Richmond, Virginia
September 24, 1997
<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 16, 1997,
relating to the consolidated balance sheets of First Union Corporation and
subsidiaries as of December 31, 1996 and 1995, 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, 1996, which report appears
in the 1996 Annual Report to Stockholders which is incorporated by reference in
the 1996 Form 10-K of First Union Corporation.
KPMG PEAT MARWICK LLP
Charlotte, North Carolina
September 30, 1997
<PAGE>
EXHIBIT (23)(F)
CONSENT OF J.P. MORGAN SECURITIES INC.
We hereby consent to (i) the use of our opinion letter to the Board of
Directors of Signet Banking Corporation (the "Company") included as Annex B to
the Proxy Statement/Prospectus which forms a part of the Registration Statement
on Form S-4 relating to the proposed merger of the Company and First Union
Corporation, and (ii) the references to such opinion in such Proxy
Statement/Prospectus. In giving such consent, we do not admit that we come
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, nor do we hereby admit that we
are experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder.
J.P. MORGAN SECURITIES INC.
By: /s/ GAIL M. ROGERS
Name: Gail M. Rogers
Title: Managing Director
September 30, 1997
<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, one or more Registration Statements to be filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
relating to the registration of the estimated maximum number of shares of the
Corporation's common stock expected to be issued in connection with the merger
of Signet Banking Corporation with and into the Corporation, and to sign any and
all amendments to such Registration Statements.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
<C> <S> <C>
/s/ EDWARD E. CRUTCHFIELD Chairman and Chief Executive Officer and
Director
EDWARD E. CRUTCHFIELD
/s/ ROBERT T. ATWOOD Executive Vice President and Chief Financial
Officer
ROBERT T. ATWOOD
/s/ JAMES H. HATCH Senior Vice President and Controller
(Principal Accounting Officer)
JAMES H. HATCH
/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/ A. DANO DAVIS Director
A. DANO 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.
/s/ JOHN R. GEORGIUS Director
JOHN R. GEORGIUS
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Director
ARTHUR M. GOLDBERG
/s/ WILLIAM H. GOODWIN, JR. Director
WILLIAM H. GOODWIN, JR.
/s/ HOWARD H. HAWORTH Director
HOWARD H. HAWORTH
/s/ FRANK M. HENRY Director
FRANK M. HENRY
/s/ LEONARD G. HERRING Director
LEONARD G. HERRING
/s/ JUAN RODRIGUEZ INCIARTE Director
JUAN RODRIGUEZ INCIARTE
JACK A. LAUGHERY Director
/s/ MAX LENNON Director
MAX LENNON
/s/ RADFORD D. LOVETT Director
RADFORD D. LOVETT
/s/ MACKEY J. MCDONALD Director
MACKEY J. MCDONALD
/s/ JOSEPH NEUBAUER Director
JOSEPH NEUBAUER
/s/ RANDOLPH N. REYNOLDS Director
RANDOLPH N. REYNOLDS
/s/ RUTH G. SHAW Director
RUTH G. SHAW
/s/ CHARLES M. SHELTON, SR. Director
CHARLES M. SHELTON, SR.
/s/ LANTY L. SMITH Director
LANTY L. SMITH
/s/ ANTHONY P. TERRACCIANO Director
ANTHONY P. TERRACCIANO
/s/ DEWEY L. TROGDON Director
DEWEY L. TROGDON
</TABLE>
<PAGE>
<TABLE>
<S> <C>
JOHN D. UIBLE Director
/s/ B. J. WALKER Director
B. J. WALKER
</TABLE>
Dated: August 19, 1997
Charlotte, North Carolina
<PAGE>
R E V O C A B L E
P R O X Y EXHIBIT 99(A)
SIGNET BANKING CORPORATION
SPECIAL MEETING OF STOCKHOLDERS
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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 Signet Banking Corporation ("Signet"), which
the undersigned is entitled to vote at the Special Meeting of Stockholders
("Special Meeting"), to be held at , Richmond,
Virginia, on November 13, 1997, at 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 July 18, 1997 (the "Merger Agreement"), among Signet,
Signet Bank, First Union Corporation ("FUNC"), and First Union National Bank
("FUNB"), pursuant to which, among other things, (i) Signet will merge with
and into FUNC and Signet Bank will merge with and into FUNB, and (ii) each
outstanding share of Signet common stock (excluding certain shares held by
Signet or FUNC) will be converted into 1.10 shares of FUNC common stock, 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>
Dated: , 1997
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.
<PAGE>
EXHIBIT (99)(B)
CONSENT OF MALCOLM S. MCDONALD
The undersigned hereby consents, pursuant to Rule 438 of the Securities Act
of 1933, as amended, to the reference to him in the Proxy Statement/Prospectus
of First Union Corporation and Signet Banking Corporation, which is part of this
Registration Statement on Form S-4 of First Union Corporation, with respect to
his being elected or appointed as a director of First Union Corporation under
the circumstances described therein.
/s/ MALCOLM S. MCDONALD
Malcolm S. McDonald
September 30, 1997
<PAGE>
<PAGE>
EXHIBIT (99)(C)
CONSENT OF NORWOOD H. DAVIS, JR.
The undersigned hereby consents, pursuant to Rule 438 of the Securities Act
of 1933, as amended, to the reference to him in the Proxy Statement/Prospectus
of First Union Corporation and Signet Banking Corporation, which is part of this
Registration Statement on Form S-4 of First Union Corporation, with respect to
his being elected or appointed as a director of First Union Corporation under
the circumstances described therein.
/s/ NORWOOD H. DAVIS, JR.
Norwood H. Davis, Jr.
September 30, 1997
<PAGE>
EXHIBIT (99)(D)
EMPLOYMENT AGREEMENT
AGREEMENT by and between First Union Corporation, a North Carolina
corporation (the "Company") and Malcolm S. McDonald (the "Executive") dated as
of the 18th day of July, 1997.
The Board of Directors of the Company (the "Board") has determined that it
is in the best interests of the Company and its respective shareholders to
assure that the Company and Signet Banking Corporation, a Virginia corporation
("SBC") will have the continued dedication of the Executive pending the merger
of the Company and SBC (the "Merger") pursuant to the Agreement and Plan of
Mergers dated as of July 18, 1997 and to provide the surviving corporation after
the Merger with continuity of management. Therefore, in order to accomplish
these objectives, the Board of the Company has caused the Company to enter into
this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. EFFECTIVE DATE. The "Effective Date" shall mean the effective date of
the Merger.
2. EMPLOYMENT PERIOD. The Company hereby agrees to employ the Executive,
and the Executive hereby agrees to enter into the employ of the Company subject
to the terms and conditions of this Agreement, for the period commencing on the
Effective Date and ending on the fifth anniversary thereof (the "Employment
Period").
3. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) (A) During the
Employment Period, the Executive shall serve as Chairman of, and the most senior
officer with direct responsibility for the Virginia, Maryland and Washington,
D.C. banking operations of the Company (the "Banking Operations"), reporting
directly to the Vice Chairman of the Company responsible for banking operations,
with such authority (including being the executive to whom the President and
Vice Chairmen of the Banking Operations report), duties and responsibilities as
are commensurate with such position and as may be consistent with such position,
including special responsibilities for transition issues relating to the Merger
and (B) the Executive's services shall be performed in Richmond, Virginia. The
Executive shall serve on the Company's Board of Directors while employed by the
Company.
(ii) During the Employment Period, and excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive agrees to
devote his reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) COMPENSATION. (i) BASE SALARY. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary") of at least
$700,000. Any increase in Annual Base Salary shall not serve to limit or reduce
any other obligation to the Executive under this Agreement. Annual Base Salary
shall not be reduced after any such increase and the term Annual Base Salary as
utilized in this Agreement shall refer to Annual Base Salary as so increased.
Nothing in this Agreement shall obligate the Company to grant any increases in
Annual Base Salary to the Executive during the Employment Period. As used in
this Agreement, the term "affiliated companies" shall include any company
controlled by, controlling or under common control with the Company.
(ii) ANNUAL BONUS. During the Employment Period, the Executive shall
receive an annual cash bonus of no less than $700,000 (the "Minimum Annual
Bonus").
(iii) INCENTIVE AWARDS. On the Effective Date, the Company shall grant the
Executive 40,000 shares of restricted common stock of the Company (the
"Restricted Stock") and an option to acquire 100,000 shares of the Company's
common stock (the "Option") pursuant to the terms of the Company's master stock
compensation plan. The number of shares of Restricted Stock and the number of
shares subject to the Option take into account the two-for-one Company common
stock split payable on July 31, 1997 but shall be adjusted to reflect any other
stock split or similar change in capital structure of the Company that occurs
after the date hereof. The Option will have an exercise price equal to the fair
market value of the stock subject thereto on the date of grant and shall remain
exercisable until the tenth anniversary of the date of grant, whether or not the
<PAGE>
Executive remains employed by the Company. Except as otherwise provided herein,
the Option and the Restricted Stock shall vest in equal installments on the
first, second and third anniversaries of the Effective Date or, if earlier, upon
a change of control of the Company (as defined in the Company's master stock
compensation plan).
(iv) RETIREMENT BENEFITS; LIFE INSURANCE. Upon the expiration of the
Employment Period, the Company shall thereafter and for the life of the
Executive, guarantee the Executive an annual retirement income of $840,000.00.
The monthly amount of this benefit ("Monthly Benefit") will be calculated as the
difference between $70,000.00 and the sum of (i) the monthly Social Security
primary insurance amount to which the Executive would be entitled at the later
of age 62 or the Executive's age on the date of the Executive's retirement, (ii)
the monthly amount of any non-qualified retirement benefit payable to the
Executive (other than deferred compensation attributable to the Executive's
contributions) assumed by the Company through the Merger or payable by the
Company, (iii) the monthly amount of the qualified pension benefit to which the
Executive is entitled under the Company's Pension Plan, and (iv) the monthly
amount of any qualified or non-qualified retirement benefit payable to the
Executive (other than deferred compensation attributable to the Executive's
contributions) from any predecessor employer other than SBC. For purposes of
determining the Monthly Benefit, the benefits described in (ii), (iii) and (iv)
shall be stated in the form of a single life annuity commencing on the date upon
which the Executive is first entitled to receive the retirement benefits
described in this Section 3(iv), regardless of whether the Executive elects to
receive such benefits in such form. Upon the Executive's death, his current
spouse, should she survive the Executive, shall be paid a monthly benefit of 50%
of the Monthly Benefit for her life. The Monthly Benefit shall commence on the
fifth anniversary of the Effective Date. During the Employment Period and
following the Executive's termination of employment, if prior to the end of the
premium payment period, the Company shall continue in force any split-dollar
life insurance arrangements to which the Executive is a party and pay the
premiums with respect thereto in accordance with SBC's prior practice.
(v) OTHER EMPLOYEE BENEFIT PLANS. During the Employment Period, except as
otherwise expressly provided herein, the Executive shall be entitled to
participate in all employee benefit, welfare and other plans, practices,
policies and programs applicable to peer executives of the Company on a basis no
less favorable than that provided to peer executives of the Company.
(vi) EXPENSES. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the Company's policies.
(vii) FRINGE BENEFITS. During the Employment Period but in no event beyond
the Date of Termination (as defined below), the Executive shall be entitled to
fringe benefits, including, without limitation, payment of club dues, and, if
applicable, use of an automobile and payment of related expenses, to the extent
applicable to peer executives of the Company.
(viii) OFFICE AND SUPPORT STAFF. During the Employment Period but in no
event beyond the Date of Termination (as defined below), the Executive shall be
entitled to an office or offices of a size and with furnishings and other
appointments as provided generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(ix) VACATION. During the Employment Period but in no event beyond the Date
of Termination (as defined below), the Executive shall be entitled to paid
vacation in accordance with the plans, policies, programs and practices of the
Company and its affiliated companies as in effect with respect to peer
executives.
4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's
employment shall terminate automatically upon the Executive's death during the
Employment Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written
notice in accordance with Section 11(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.
(b) CAUSE. The Company may terminate the Executive's employment during the
Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean:
(i) the continued and willful failure of the Executive to perform
substantially the Executive's duties with the Company or one of its
affiliates (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer
<PAGE>
of the Company which specifically identifies the manner in which the Board
or Chief Executive Officer believes that the Executive has not
substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than two-thirds of the entire
membership of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice is provided to the Executive and the Executive
is given an opportunity, together with counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board, the Executive is guilty of
the conduct described in subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.
(c) GOOD REASON. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean in the absence of a written consent of the Executive:
(i) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 3(a) of this Agreement, or any other action by the
Company which, in the Executive's reasonable judgment, results in a
diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the provisions
of Section 3(b) of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is remedied by
the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be based at any office
or location more than 35 miles from Richmond, Virginia;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
10(c) of this Agreement.
For purposes of this Section 4(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause, or by
the Executive for Good Reason, shall be communicated by Notice of Termination to
the other party hereto given in accordance with Section 11(b) of this Agreement.
For purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than thirty days after the
giving of such notice). The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (i) if the Executive's
employment is terminated by the Company for Cause, or by the Executive for Good
Reason, the date of receipt of the Notice of Termination or any later date
specified therein within 30 days of such notice, as the case may be, (ii) if the
Executive's employment is terminated by the Company other than for Cause or
Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD REASON; OTHER THAN
FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period, the Company
shall terminate the Executive's employment other than for Cause or Disability or
the Executive shall terminate employment for Good Reason:
<PAGE>
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the sum of (1) the Executive's
Annual Base Salary through the Date of Termination to the extent not
theretofore paid, and (2) the product of (x) the Minimum Annual Bonus and
(y) a fraction, the numerator of which is the number of days in the fiscal
year in which the Date of Termination occurs through the Date of
Termination, and the denominator of which is 365, in each case to the
extent not theretofore paid (the "Pro Rata Bonus") (the sum of the amounts
described in clauses (1) and (2), shall be hereinafter referred to as the
"Accrued Obligations"); and
(ii) the Company shall continue to pay the Executive the sum of the
Annual Base Salary and Minimum Annual Bonus in equal monthly installments
until the fifth anniversary of the Effective Date (the "Continuation
Payments"), except to the extent that the Executive has previously elected
to defer such amounts into a deferral plan provided by the Company;
(iii) for the remainder of the Executive's life and that of his
current spouse, the Company shall continue to provide medical and dental
benefits to the Executive, his spouse and dependents on the same basis that
such benefits were provided to the Executive immediately prior to the
Effective Date by SBC (collectively "Medical Benefits");
(iv) the Option and the Restricted Stock shall vest immediately; and
(v) to the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to
receive under any plan, program, policy or practice or contract or
agreement of the Company and its affiliated companies through the Date of
Termination (such other amounts and benefits shall be hereinafter referred
to as the "Other Benefits").
(b) DEATH. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement (other
than the provisions of Section 8) shall terminate without further
obligations to the Executive's legal representatives under this Agreement,
other than for payment of Accrued Obligations, the Continuation Payments to
the Executive's estate, the timely payment or provision of Other Benefits
and any amounts due under Section 8. In addition, the Option and the
Restricted Stock shall vest immediately. Accrued Obligations shall be paid
to the Executive's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this
Section 5(b) shall include death benefits as in effect on the date of the
Executive's death with respect to peer executives of the Company and his
beneficiaries and the continued provision of Medical Benefits to the
Executive's current spouse and dependents.
(c) DISABILITY. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement
(other than the provisions of Section 8) shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations, the Continuation Payments, the timely payment or provision of
Other Benefits and any amounts due under Section 8. In addition, the Option
and the Restricted Stock shall vest immediately. Accrued Obligations shall
be paid to the Executive in a lump sum in cash within 30 days of the Date
of Termination. With respect to the provision of Other Benefits, the term
Other Benefits as utilized in this Section 5(c) shall include, and the
Executive shall be entitled after the Disability Effective Date to receive,
disability and other benefits as in effect at any time thereafter generally
with respect to peer executives of the Company and the continued provision
of Medical Benefits to the Executive, his current spouse and dependents.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment
shall be terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive other than the
obligation to pay to the Executive (x) his Annual Base Salary through the
Date of Termination, (y) provision of Medical Benefits to the Executive and
his current spouse, and (z) Other Benefits, in each case only to the extent
owing and theretofore unpaid. If the Executive's employment shall be
terminated without Good Reason by the Executive during the Employment
Period, in addition to the benefits described in the preceding sentence,
the Executive shall receive the Pro Rata Bonus and the Continuation
Payments.
6. NON-EXCLUSIVITY OF RIGHTS. Except as specifically provided, nothing
in this Agreement shall prevent or limit the Executive's continuing or
future participation in any plan, program, policy or practice provided by
the Company or any of its affiliated companies and for which the Executive
may qualify, nor, subject to Section 12(f), shall anything herein limit or
otherwise affect such rights as the Executive may have under any contract
or agreement with the Company or any of its affiliated companies. Amounts
which are vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or
subsequent to the Date of Termination shall be payable in accordance with
such plan, policy, practice or program or contract or agreement except as
explicitly modified by this Agreement.
<PAGE>
7. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against
the Executive or others. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this
Agreement and, such amounts shall not be reduced whether or not the
Executive obtains other employment. The Company agrees to pay as incurred,
to the full extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest (regardless of
the outcome thereof) by the Company, the Executive or others of the
validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of
any contest by the Executive about the amount of any payment pursuant to
this Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate provided for in Section 7872(f)(2)(A) of the
Internal Revenue Code of 1986, as amended (the "Code").
8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of the
Executive (whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise, but determined without regard
to any additional payments required under this Section 8) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the Code or
any interest or penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"),
then the Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Executive
of all taxes (including any interest or penalties imposed with respect to
such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed
upon the Gross-Up Payment, The Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding
the foregoing provisions of this Section 8(a), if it shall be determined
that the Executive is entitled to a Gross-Up Payment, but that the Payments
do not exceed 110% of the greatest amount (the "Reduced Amount") that could
be paid to the Executive such that the receipt of Payments would not give
rise to any Excise Tax, then no Gross-Up Payment shall be made to the
Executive and the Payments, in the aggregate, shall be reduced to the
Reduced Amount.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be
made by KPMG Peat Marwick LLP or such other certified public accounting
firm reasonably acceptable to the Company as may be designated by the
Executive (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days
of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. All fees and expenses
of the Accounting Firm shall be borne solely by the Company. Any Gross-Up
Payment, as determined pursuant to this Section 8, shall be paid by the
Company to the Executive within five days of (i) the later of the due date
for the payment of any Excise Tax, and (ii) the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the uncertainty
in the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have
been made ("Underpayment"), consistent with the calculations required to be
made hereunder. In the event that the Company exhausts its remedies
pursuant to Section 8 (c) and the Executive thereafter is required to make
a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than ten business days after the Executive
is informed in writing of such claim and shall apprise the Company of the
nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which it gives such notice to the
Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies the
Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
<PAGE>
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a result
of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 8(c) the Company
shall control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of such claim and may, at its sole option, either direct the Executive to
pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to
pay such claim and sue for a refund, the Company shall advance the amount
of such payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes for
the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder
and the Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(c), the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 8(c)) promptly
pay to the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the Company pursuant to
Section 8(c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such determination, then
such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount
of Gross-Up Payment required to be paid.
(e) For purposes of this Section 8, any reference to the Executive
shall be deemed to include the Executive's surviving spouse, estate and/or
beneficiaries with respect to payments or adjustments provided by this
Section 8.
9. CONFIDENTIAL INFORMATION: NONSOLICITATION. (a) The Executive shall
hold in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any
of its affiliated companies, and their respective businesses, which shall
have been obtained by the Executive during the Executive's employment by
the Company or any of its affiliated companies and which shall not be or
become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company, the Executive
shall not, without the prior written consent of the Company or as may
otherwise by required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and
those designated by it. In no event shall an asserted violation of the
provisions of this Section 9 constitute a basis for deferring or
withholding any amounts otherwise payable to the Executive under this
Agreement.
(b) While employed by the Company and for one year after the Date of
Termination, the Executive shall not, directly or indirectly, on behalf of
the Executive or any other person, solicit for employment by other than the
Company any person employed by the Company or its affiliates or SBC on the
Effective Date, nor shall the Executive, directly or indirectly, on behalf
of the Executive or any other person, solicit for employment by other than
the Company any person known by the Executive to be employed at the time by
the Company or its affiliates or directly and personally solicit commercial
banking business from any commercial customer of the Company with whom the
Executive had a direct customer relationship while employed by the Company.
<PAGE>
(c) In the event of a breach or threatened breach of this Section 9,
the Executive agrees that the Company shall be entitled to injunctive
relief in a court of appropriate jurisdiction to remedy any such breach or
threatened breach, the Executive acknowledges that damages would be
inadequate and insufficient.
(d) Any termination of the Executive's employment or of this Agreement
shall have no effect on the continuing operation of this Section 9.
10. SUCCESSORS. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by
the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
11. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of North Carolina,
without reference to principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no force or
effect. This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
IF TO THE EXECUTIVE:
IF TO THE COMPANY:
First Union Corporation
One First Union Center
Charlotte, NC 28288-0013
Attention: Marion A. Cowell, Jr.
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such Federal, state, local or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or by the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 4 (c)(i)-(v) of such Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
(f) The Executive and the Company acknowledge that, except as may otherwise
be provided under any other written agreement between the Executive and SBC, the
employment of the Executive by SBC is "at will", and prior to the Effective
Date, the Executive's employment may be terminated by either the Executive or
SBC at any time, in which case the Executive shall have no further rights under
this Agreement. From and after the Effective Date this Agreement shall supersede
any other employment, severance or change of control employment agreement
between Executive and SBC or any of its affiliated companies or the Company, or
any of their predecessors.
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
/s/ MALCOLM S. MCDONALD
MALCOLM S. McDONALD
FIRST UNION CORPORATION
By /s/ EDWARD E. CRUTCHFIELD
