<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 30, 1999
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 classification code number) identification
organization) 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:
CHARLES I. COGUT, ESQ.
MARIO A. PONCE, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
------------------------
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
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED (1) PER UNIT (2) OFFERING PRICE (2) FEE (2)
<S> <C> <C> <C> <C>
Common Stock, $3.33 1/3 par value
(including rights to purchase shares
of common stock or junior
participating Class A Preferred
Stock).............................. 24,250,000 shares $29.9688 $1,061,554,891 $321,684
</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 EVEREN Capital Corporation ("EVEREN") by
FUNC, based on the product of (a) the number of shares of common stock of
EVEREN outstanding at May 31, 1999, or issuable upon the exercise of
outstanding options to purchase shares of EVEREN common stock (35,422,061),
multiplied by (b) $31 divided by the closing price of FUNC's common stock on
June 28, 1999 ($46.00). Based on the foregoing, the maximum number of shares
of FUNC common stock to be issued in the acquisition is estimated to be
24,250,000. The actual maximum number of shares of FUNC common stock to be
issued in the acquisition will depend on the facts as they exist on the
effective date of the acquisition.
(2) Pursuant to Rules 457(f)(l) and 457(c), the registration fee for the FUNC
common stock is based on the average of the high and low sale prices of
EVEREN common stock on the New York Stock Exchange Composite Transactions
tape on June 28, 1999 ($29.9688).
------------------------
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.
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<PAGE>
PRELIMINARY PROXY STATEMENT/PROSPECTUS,
SUBJECT TO COMPLETION, DATED JUNE 30, 1999
THE INFORMATION IN THIS DOCUMENT IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT
DELIVER THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS DOCUMENT IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
[LOGO]
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
To the Stockholders of
EVEREN Capital Corporation:
The Board of Directors of EVEREN Capital Corporation has approved a combination
with First Union Corporation which will create the nation's sixth largest
securities brokerage firm as part of First Union's financial services business.
The merger will provide you an opportunity for continued equity participation in
a larger, more diversified enterprise with vastly increased aggregate equity
value and improved stockholder liquidity.
Upon completion of the merger, you will receive approximately $31.00 worth of
First Union common stock for each EVEREN common stock share that you own. Based
on closing prices on April 23, 1999, the trading day prior to the merger's
announcement, the merger will give you a 28% premium for your EVEREN shares.
First Union common stock is traded on the New York Stock Exchange under the
symbol "FTU".
The merger will be tax-free to you for U.S. federal income tax purposes except
for cash received for any fractional share.
The merger requires the approval of our stockholders. We have scheduled a
special meeting on , 1999, to vote on the merger.
Regardless of the number of shares you own or whether you plan to attend the
meeting, it is important that your shares be voted. Voting instructions are
inside.
This document provides you with detailed information about the merger. I
encourage you to read this entire document carefully.
This transaction will capitalize on the tremendous value EVEREN has built since
it became an independent company in 1995, and at the same time permit our
stockholders to continue their investment in EVEREN's future as part of a
larger, more diverse financial services company with impressive resources and
vision.
I look forward to your support.
JAMES R. BORIS
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED THE FIRST UNION COMMON STOCK TO BE ISSUED
IN THE MERGER OR DETERMINED WHETHER THIS DOCUMENT IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES FIRST UNION IS OFFERING THROUGH THIS DOCUMENT ARE NOT SAVINGS
OR DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF ANY BANK OR NON-BANK SUBSIDIARY OF
FIRST UNION, AND THEY ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY.
THIS DOCUMENT IS DATED , 1999, AND IS FIRST BEING MAILED TO EVEREN
STOCKHOLDERS ON OR ABOUT , 1999.
<PAGE>
EVEREN CAPITAL CORPORATION
77 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60601-1694
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD , 1999
------------------------
To the Stockholders of EVEREN Capital Corporation:
Notice is hereby given that EVEREN Capital Corporation will hold a special
meeting of its stockholders on , 1999, at a.m., local time, at
EVEREN's corporate headquarters at 77 West Wacker Drive, Chicago, Illinois
60601, for the following purpose:
To consider and vote on a proposal to adopt the Agreement and Plan of Merger
dated as of April 25, 1999, as amended and restated as of May 27, 1999, between
EVEREN, First Union Delaware, Inc. and First Union Corporation, pursuant to
which, among other things, First Union will acquire EVEREN by merging a
wholly-owned subsidiary into EVEREN. In the merger, each EVEREN common stock
share outstanding on the merger effective date will be converted into a number
of shares of First Union common stock equal to the quotient of $31.00 divided by
the average closing price of First Union common stock for the ten-day trading
period ending on the second trading day before the merger effective date.
A copy of the merger agreement is attached as ANNEX A to the accompanying
document.
The Board of Directors has determined that only stockholders of record as of
the close of business on , 1999, will be entitled to vote at the
meeting or any adjournments or postponements thereof. We do not expect that any
business other than the proposal described in this notice will be considered at
the meeting or any adjournment or postponement thereof. A list of stockholders
entitled to vote at the meeting will be available for your inspection during
business hours at EVEREN's principal executive offices during the ten-day period
prior to the meeting and will also be available at the meeting.
Approval of the merger requires the affirmative vote of a majority of the
outstanding shares of EVEREN common stock. Your vote is important and we urge
you to return your completed and signed proxy card as promptly as possible,
whether or not you expect to attend the meeting. If you are unable to attend,
your shares will be voted at the meeting if you return your proxy card. A return
envelope is enclosed for your convenience. If your shares are held in "street
name" by your broker or other nominee or by the EVEREN 401(k) and Employee Stock
Ownership Plan, only the record holder can vote your shares. You should follow
the directions provided by them regarding how you can instruct them to vote your
shares.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
MERGER, WHICH IS DESCRIBED IN DETAIL IN THE ACCOMPANYING DOCUMENT.
By Order of the Board of Directors,
Janet L. Reali
Senior Executive Vice President,
General Counsel and Secretary
, 1999
<PAGE>
FORWARD LOOKING STATEMENTS
This document contains various forward looking statements with respect to
First Union's financial condition, operating results and business. These
statements may be made directly in this document or may be "incorporated by
reference" from other documents and may include statements for the period
following the merger. You can find many of these statements by looking for words
like "believes", "expects", "anticipates", "estimates" and similar expressions.
These forward looking statements involve various 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:
- costs related to integrating First Union's and EVEREN's businesses being
greater than expected
- difficulties in integrating First Union's and EVEREN's businesses or
retaining key personnel being greater than expected
- revenues after the merger being lower than expected
- the loss of business or customers after the merger being higher than
expected or operating costs after the merger being greater than expected
- competitive pressure among financial institutions and other competitors
increasing significantly
- changes in the interest rate environment reducing interest margins
- general economic conditions, either nationally or in the states in which
the combined company will be doing business, and/or conditions in
securities markets, being less favorable than expected or
- legislation or regulatory changes adversely affecting the businesses in
which the combined company will be engaged.
REFERENCES TO ADDITIONAL INFORMATION
This document incorporates important business and financial information
about First Union and EVEREN from documents that are not included in this
mailing. This information is available to you without charge upon your request.
You can obtain documents incorporated by reference in this document (other than
some of the exhibits to those documents) by requesting them from the appropriate
company at the following addresses or phone numbers:
<TABLE>
<S> <C>
FIRST UNION CORPORATION EVEREN CAPITAL CORPORATION
Corporate Relations Investor Relations
301 South College Street 77 West Wacker Drive
Charlotte, NC 28288 Chicago, Illinois 60601-1694
(704) 374-6782 (312) 574-6000
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY , 1999,
IN ORDER TO RECEIVE THEM BEFORE THE MEETING.
See "Where You Can Find More Information" on page .
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
FORWARD LOOKING STATEMENTS........... 1
REFERENCES TO ADDITIONAL
INFORMATION........................ 1
QUESTIONS AND ANSWERS ABOUT THE FIRST
UNION/EVEREN MERGER................ 4
SUMMARY.............................. 6
The Companies...................... 6
The Meeting........................ 6
Record Date; Vote Required......... 6
Recommendation of the EVEREN Board
of Directors..................... 7
Opinion of Morgan Stanley.......... 7
The Merger......................... 7
Share Information and Market
Prices........................... 10
Comparison of Certain Unaudited per
Share Data....................... 11
Selected First Union Historical
Financial Data................... 13
Selected EVEREN Historical
Financial Data................... 15
Selected Pro Forma Combined
Financial Data................... 16
THE MEETING.......................... 17
General............................ 17
Record Date; Quorum................ 17
Vote Required...................... 17
Proxies............................ 18
THE MERGER........................... 19
General............................ 19
Background of the Merger........... 19
EVEREN's Reasons for Merger;
Recommendation of EVEREN's Board
of Directors..................... 21
Opinion of Morgan Stanley.......... 24
Effective Time..................... 28
Distribution of First Union
Certificates..................... 29
Fractional Shares.................. 29
Federal Income Tax Consequences.... 29
Management and Operations After the
Merger........................... 30
Post-Merger Compensation and
Benefits......................... 31
Treatment of Outstanding Options... 31
Retention Pool..................... 31
Interests of Certain Persons in the
Merger........................... 32
Other Information Regarding
Directors, Executive Officers and
Five Percent Stockholders........ 34
Conditions to Completion........... 34
Regulatory Approvals............... 35
Amendment, Waiver and Termination.. 36
Conduct of Business Pending the
Merger........................... 37
Certain Representations and
Warranties....................... 39
Expenses and Fees.................. 40
Accounting Treatment............... 40
Stock Exchange Listing of First
Union Common Stock............... 40
Resales of First Union Common
Stock............................ 40
Stock Option Agreement............. 41
Amendment to EVEREN Rights
Agreement........................ 43
Voting Agreements.................. 43
No Dissenters' or Appraisal
Rights........................... 43
DESCRIPTION OF FIRST UNION CAPITAL
STOCK.............................. 44
Authorized Capital................. 44
First Union Common Stock........... 44
First Union Preferred Stock........ 44
First Union Class A Preferred
Stock............................ 44
First Union Rights Plan............ 45
Other Provisions................... 46
CERTAIN DIFFERENCES IN THE RIGHTS OF
FIRST UNION STOCKHOLDERS AND EVEREN
STOCKHOLDERS....................... 48
Authorized Capital................. 48
Amendment of Articles/Certificate
of Incorporation and Bylaws...... 48
Special Meetings of Stockholders;
Written Consent.................. 48
Size and Classification of Board of
Directors........................ 49
Removal of Directors by
Stockholders..................... 49
Stockholder Proposals.............. 49
Anti-Takeover Laws................. 50
Indemnification; Limitation on
Director Liability............... 51
Director Conflict of Interest
Transactions..................... 52
Stockholder Inspection Rights;
Stockholder Lists................ 53
Dissenters' or Appraisal Rights.... 53
Director Nominations............... 54
Stockholder Protection Rights
Plan............................. 55
Required Stockholder Vote for
Certain Actions.................. 56
Dividends and Other
Distributions.................... 57
Voluntary Dissolution.............. 57
COMPARATIVE MARKET PRICES AND
DIVIDENDS.......................... 59
Market Prices...................... 59
Dividends.......................... 60
EXPERTS.............................. 60
VALIDITY OF FIRST UNION COMMON
STOCK.............................. 61
OTHER MATTERS........................ 61
STOCKHOLDER PROPOSALS FOR EVEREN'S
2000 ANNUAL MEETING................ 61
WHERE YOU CAN FIND MORE
INFORMATION........................ 61
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C>
Annexes:
ANNEX A -- Agreement and Plan of Merger, dated as of April 25, 1999, as amended and
restated as of May 27, 1999, by and between First Union Corporation, First
Union Delaware, Inc. and EVEREN Capital Corporation
ANNEX B -- Form of Voting Agreement
ANNEX C -- Stock Option Agreement
ANNEX D -- Morgan Stanley & Co. Incorporated Opinion
</TABLE>
3
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE FIRST UNION/EVEREN MERGER
Q: WHAT DO I NEED TO DO NOW?
A: After you have carefully read this document, just indicate on your proxy card
how you want to vote, sign it and mail it in the enclosed envelope as soon as
possible, so that your shares may be voted at the meeting to be held on
, 1999.
Your vote is very important. Holders of a majority of EVEREN's common stock must
approve the merger. Therefore it is important that all EVEREN stockholders
return their signed proxy cards. If you do not vote or you abstain, it will have
the effect of a vote against the merger.
EVEREN's Board of Directors unanimously recommends voting "FOR" the merger.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions on how to
vote. You should follow the directions your broker provides regarding how to
instruct your broker to vote your shares. Without instructions, your shares will
not be voted, which will have the same effect as voting against the merger.
Q: IF MY SHARES ARE HELD IN THE EVEREN 401(K) AND EMPLOYEE STOCK OWNERSHIP PLAN,
WILL THE TRUSTEE VOTE MY SHARES FOR ME?
A: Participants in the EVEREN 401(k) and Employee Stock Ownership Plan will
receive voting instructions with respect to shares of EVEREN common stock
allocated to their accounts. The trustee of that plan will vote the EVEREN
common stock held in the plan in accordance with directions received from
participants. Any EVEREN common stock shares for which the trustee does not
receive voting direction will be voted by the trustee on a proportionate basis
in accordance with the votes cast with respect to EVEREN common stock for which
voting instructions are received. The plan held % of the outstanding shares of
EVEREN common stock on the meeting record date.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. There are three ways in which you may revoke your proxy and change your
vote. First, you may send a written notice stating that you would like to revoke
your proxy to EVEREN Capital Corporation, 77 West Wacker Drive, Chicago,
Illinois 60601-1694, Attention: Secretary. Second, you may submit a new
completed proxy card. Third, you may attend the meeting and vote in person.
Simply attending the meeting, however, will not revoke your proxy. If you have
instructed a broker to vote your shares, you must follow directions received
from your broker to change your vote.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, First Union will send you written
instructions for exchanging your stock certificates.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: In the merger, you will receive approximately $31.00 worth of First Union
common stock for each share of EVEREN common stock you own, based on the average
closing price of First Union common stock during a ten trading-day period before
the merger is completed. First Union will not issue fractional shares of First
Union common stock. Instead, First Union will pay you cash for any fractional
shares.
Q: WHAT IS THE "EXCHANGE RATIO"?
A: The exchange ratio is a fraction of a share of First Union common stock into
which each share of EVEREN common stock will be converted upon the merger. The
exchange ratio will equal $31.00 divided by the average of the closing sale
prices of First Union common stock, as reported on the NYSE, for the ten trading
day period ending on the second trading day before the merger effective date.
Please note that the share price of First Union common stock may fluctuate
before and after the exchange ratio is determined. Accordingly you cannot be
sure of the number of shares of First
4
<PAGE>
Union common stock you will receive until the exchange ratio is fixed shortly
before the merger or of the actual trading value on the day of the merger of the
First Union common stock you will receive until the day of the merger.
Q: WHEN CAN I EXPECT THE MERGER WILL BE COMPLETED?
A: We are working to complete the merger as quickly as possible. In addition to
the approval of the EVEREN stockholders, we must also obtain certain banking and
other regulatory approvals that are expected to be obtained prior to the
meeting.
Q: WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER?
A: For U. S. federal income tax purposes, the conversion of your EVEREN common
stock into First Union common stock will not cause you to recognize any gain or
loss. You will, however, recognize gain or loss in connection with any cash
received for fractional shares of First Union common stock. Your tax basis for
the First Union common stock received in the merger will be the same as the tax
basis for your EVEREN common stock and your holding period for the First Union
common stock received in the merger generally will include the holding period
for your EVEREN common stock exchanged in the merger. For a more complete
description of federal income tax considerations, see page .
THIS TAX TREATMENT MAY NOT APPLY TO CERTAIN EVEREN STOCKHOLDERS, INCLUDING
STOCKHOLDERS WHO ARE NON-U.S. PERSONS OR DEALERS IN SECURITIES. DETERMINING THE
ACTUAL TAX CONSEQUENCES OF THE MERGER TO YOU MAY BE COMPLEX. THEY WILL DEPEND ON
YOUR SPECIFIC SITUATION AND ON VARIABLES NOT WITHIN OUR CONTROL. YOU SHOULD
CONSULT YOUR OWN TAX ADVISOR FOR A FULL UNDERSTANDING OF THE MERGER'S TAX
CONSEQUENCES.
Q: WHAT OTHER MATTERS WILL BE VOTED ON AT THE MEETING?
A: We do not expect that any matter other than the merger will be voted on at
the meeting.
Q: WILL MY STOCKHOLDER RIGHTS CHANGE AS A RESULT OF THE MERGER?
A: Yes. Currently, your rights as an EVEREN stockholder are governed by Delaware
law and EVEREN's certificate of incorporation and by-laws. First Union
stockholder rights are governed by North Carolina law and First Union's articles
of incorporation and by-laws. After the merger, you will become a First Union
stockholder, and therefore your rights will be governed by North Carolina law
and First Union's articles of incorporation and by-laws. For a summary of some
of the differences between the rights of EVEREN stockholders and the rights of
First Union stockholders, see page .
Q: WHOM SHOULD I CALL WITH QUESTIONS OR TO OBTAIN ADDITIONAL COPIES OF THIS
DOCUMENT?
A: You should call EVEREN Capital Corporation, Investor Relations, at (312)
574-6000.
5
<PAGE>
SUMMARY
THIS BRIEF SUMMARY HIGHLIGHTS SOME OF THE INFORMATION APPEARING ELSEWHERE IN
THIS DOCUMENT. IT DOES NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO
YOU. WE URGE YOU TO CAREFULLY READ THIS ENTIRE DOCUMENT AND THE OTHER DOCUMENTS
TO WHICH WE REFER, TO FULLY UNDERSTAND THE MERGER. SEE "WHERE YOU CAN FIND MORE
INFORMATION" ON PAGE . MANY ITEMS IN THIS SUMMARY REFER TO THE PAGE WHERE THAT
SUBJECT IS DISCUSSED IN MORE DETAIL. THE NAMES "EVEREN" AND "FIRST UNION" AS
USED IN THIS DOCUMENT INCLUDE THEIR RESPECTIVE SUBSIDIARIES UNLESS THE CONTEXT
OTHERWISE REQUIRES.
THE COMPANIES
FIRST UNION CORPORATION
301 SOUTH COLLEGE STREET
CHARLOTTE, NORTH CAROLINA 28288
(704) 374-6565
First Union is a Charlotte, North Carolina-based, multi-bank holding company
subject to the Bank Holding Company Act of 1956. Through its full-service
banking subsidiaries, First Union 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. First Union 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 March 31, 1999, and for the three months then
ended, First Union reported assets of $223 billion, net loans of $133 billion,
deposits of $134 billion, stockholders' equity of $16 billion and net income of
$706 million, and as of such date First Union operated in 45 states, Washington,
D.C. and 5 foreign countries. First Union is the sixth largest bank holding
company in the United States, based on assets at March 31, 1999. First Union was
incorporated in North Carolina in 1967.
First Union regularly evaluates acquisition opportunities and conducts due
diligence activities in connection with possible acquisitions. As a result,
acquisition discussions and, in some cases, negotiations may take place and
future acquisitions involving cash, debt or equity securities may occur.
Acquisitions typically involve the payment of a premium over book values, and,
therefore, some dilution of First Union's book value and net income per share
may occur in connection with any future transactions.
EVEREN CAPITAL CORPORATION
77 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60601-1694
(312) 574-6000
EVEREN is a Chicago, Illinois-based holding company which, through its
subsidiaries, engages in securities brokerage for individual and institutional
investors, market-making and underwriting of municipal and corporate securities,
investment management, investment banking and other financial advisory services,
and the sale of mutual funds, annuities and other financial products. While
EVEREN has clients throughout the United States and abroad, its major geographic
focus is the western two-thirds of the United States. EVEREN operates in 28
states, with significant operations in Illinois, California, Wisconsin, Ohio,
Texas and Colorado. At March 31, 1999, and for the three months then ended,
EVEREN reported consolidated assets of $2.5 billion, stockholders' equity of
$420 million and net income of $14 million. EVEREN was incorporated in Delaware
in 1995.
THE MEETING (see page )
The meeting of EVEREN stockholders will be held at a.m. on ,
1999, at EVEREN's headquarters at 77 West Wacker Drive, Chicago, Illinois 60601.
At the meeting, EVEREN stockholders will be asked to adopt the merger agreement.
RECORD DATE; VOTE REQUIRED (see page )
You can vote at the meeting if you owned EVEREN common stock at the close of
business on , 1999. As of that date, there were shares
of EVEREN common stock outstanding and entitled to be voted at the
6
<PAGE>
meeting. The holders of a majority of the outstanding shares must vote "FOR" the
merger agreement in order to adopt the merger agreement. Some EVEREN directors
and executive officers holding approximately % of the outstanding shares of
EVEREN common stock have agreed to vote their shares in favor of the merger
agreement. As a result, adoption of the merger agreement will require the
additional affirmative vote of the holders of approximately % of the
outstanding EVEREN common stock.
If you do not vote your shares of common stock, that will have the effect of
a vote against the merger agreement.
First Union's stockholders are not required to approve the merger.
RECOMMENDATION OF THE EVEREN BOARD OF DIRECTORS (see page )
EVEREN's Board believes that the merger is in your best interests and
unanimously recommends that you vote "For" the merger agreement.
OPINION OF MORGAN STANLEY (see page )
Morgan Stanley & Co. Incorporated served as EVEREN's financial advisor in
connection with the merger. In deciding to approve the merger, EVEREN's Board of
Directors considered Morgan Stanley's opinion that, as of the date of the
opinion, and based on and subject to certain matters stated therein, the
exchange ratio was fair from a financial point of view to EVEREN stockholders. A
copy of Morgan Stanley's opinion is attached to this document as ANNEX D. You
should read the entire opinion carefully to understand the assumptions made,
matters considered and limitations of Morgan Stanley's review in providing this
opinion.
THE MERGER (see page )
THE MERGER AGREEMENT IS ATTACHED AS ANNEX A TO THIS DOCUMENT. WE ENCOURAGE
YOU TO READ THE MERGER AGREEMENT AS IT IS THE LEGAL DOCUMENT THAT GOVERNS THE
MERGER. IF THERE IS ANY INCONSISTENCY BETWEEN ANY OF THE LANGUAGE IN THIS
DOCUMENT AND THE LANGUAGE IN THE MERGER AGREEMENT, THE LANGUAGE IN THE MERGER
AGREEMENT SHALL CONTROL.
GENERAL (see page )
First Union plans to acquire EVEREN by merging a wholly-owned subsidiary of
First Union into EVEREN. EVEREN will continue as the surviving corporation of
that merger.
CONVERSION OF SHARES (see page )
In the merger, each EVEREN common stock share will be converted into a
number of shares of First Union common stock equal to the quotient of $31.00
divided by the average closing price of First Union common stock during the ten
trading day period ending on the second trading day before the merger. This
fraction is referred to as the "exchange ratio". If, after applying the exchange
ratio, you would be entitled to a fractional share of First Union common stock,
you will receive cash instead of the fractional share.
MANAGEMENT AFTER THE MERGER (see page )
After the merger, EVEREN will be a wholly-owned First Union subsidiary.
James R. Boris will be Chief Executive Officer of this subsidiary. The directors
and officers of First Union in office before the merger will continue as the
directors and officers of First Union after the merger.
CONDITIONS TO COMPLETION OF THE MERGER (see page )
Completion of the merger is subject to various conditions, including, among
others:
- approval of the merger agreement by EVEREN's stockholders
- receipt of all necessary governmental and other consents and approvals
- at least two of the four employment agreements described below, including
the one with James R. Boris, remaining in effect and
- satisfaction or waiver of certain other customary conditions.
7
<PAGE>
REGULATORY APPROVALS (see page )
We cannot complete the merger unless it is approved by the Board of
Governors of the Federal Reserve System. First Union filed an application with
the Federal Reserve Board seeking approval of the merger on , 1999. In
addition, the merger is subject to the approval of or notice to certain state
and other regulatory authorities. We have filed or shortly will file all other
applications and notices with these regulatory authorities.
While we believe we will obtain the regulatory approvals in a timely manner,
we cannot be certain when or if we will obtain them.
TERMINATION OF THE MERGER AGREEMENT (see page )
EVEREN and First Union can mutually agree to abandon the merger, even if
EVEREN's stockholders have approved it. Also, either of us can decide, without
the consent of the other, to abandon the merger if any of the following occurs:
- the other party breaches the merger agreement in a material way and does
not (or cannot) correct the breach in 30 days
- the merger has not been completed by December 31, 1999, so long as the
terminating party is not in material breach and provided that First Union
may not terminate the merger agreement to the extent that the delay is
caused by another First Union acquisition or
- EVEREN's stockholders do not approve the merger agreement.
In addition, First Union may terminate the merger agreement if any of the
following occurs:
- EVEREN's Board fails to make, withdraws or modifies in a manner adverse to
First Union its recommendation to adopt the merger agreement or
- EVEREN's Board participates in or authorizes negotiations with a third
party proposing to acquire EVEREN.
EVEREN may terminate the merger agreement if:
- prior to EVEREN's stockholders approving the merger agreement, and after
giving three business days notice to First Union, EVEREN enters into an
agreement to accept a superior proposal from a third party to acquire
EVEREN.
ACCOUNTING TREATMENT (see page )
First Union will account for the merger as a purchase for financial
reporting purposes.
RESALE OF FIRST UNION COMMON STOCK (see page )
The First Union common stock issued in the merger will be freely
transferable by you, unless you are an "affiliate" of EVEREN or First Union
under applicable federal securities laws.
STOCK OPTION AGREEMENT (SEE PAGE )
In connection with and as a condition to First Union entering into the
merger agreement, EVEREN granted to First Union an option to purchase up to
19.9% of its common stock under the circumstances described in a Stock Option
Agreement dated as of April 25, 1999. The purchase price under the option is
$28.4375 per share of EVEREN common stock, the closing EVEREN common stock price
on April 26, 1999, the first trading day after we first announced the merger
agreement.
First Union cannot exercise this option unless the events described in the
stock option agreement occur. These events generally relate to another
acquisition of EVEREN or a substantial portion of its common stock or assets. No
event has occurred as of the date of this document that would allow First Union
to exercise the option. Under certain circumstances, instead of exercising the
option, First Union can require EVEREN to repurchase the option and/or any
shares purchased under the option, at a price reflecting the current value of
the option and the option shares but not exceeding $35 million in the aggregate.
Instead of requiring EVEREN to repurchase the shares, First Union
8
<PAGE>
may choose to surrender the option and option shares to EVEREN for a net cash
payment of $35 million.
The option would make an acquisition of EVEREN by a third party more costly
and is likely to prevent a competing acquiror for EVEREN from accounting for the
acquisition by using the pooling of interests accounting method. Accordingly,
the option may discourage a third party from proposing a competing transaction,
including one that might be more favorable to EVEREN stockholders than the
merger.
The stock option agreement is attached to this document as ANNEX C. If there
are any inconsistencies between any language in this document and the language
in the stock option agreement, the language in the stock option agreement shall
control.
EMPLOYEE RETENTION PROGRAM (see page )
Following the merger, First Union will award a number of EVEREN employees,
mostly investment consultants, shares of restricted First Union common stock
with an aggregate value of approximately $87 million. The restricted stock will
vest over a three-year period following the merger.
VOTING AGREEMENTS (see page )
As a condition to First Union entering into the merger agreement, five
EVEREN directors and executive officers holding approximately % of EVEREN's
outstanding common stock entered into voting agreements with First Union. The
voting agreements provide that these stockholders will vote their EVEREN common
stock shares "FOR" the merger agreement. The voting agreements will terminate if
the merger agreement is terminated.
The form of voting agreement is attached to this document as ANNEX B. If
there is any inconsistency between the language in this document and the
language in the voting agreements, the language in the voting agreements shall
control.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (see page )
Some of EVEREN's directors and executive officers have interests in the
merger in addition to their interests as EVEREN stockholders generally,
including the following:
- In connection with the merger agreement, First Union entered into
employment agreements with James R. Boris, EVEREN's Chairman and Chief
Executive Officer, and three other EVEREN executives. These employment
agreements will become effective at the time of the merger. Each of these
executives will receive, for periods ranging from one year to
approximately 39 months, a minimum amount of annual compensation. These
executives will also receive restricted First Union common stock shares
and options to purchase First Union common stock. They will also receive
payments for amounts owed to them under their existing employment
agreements with EVEREN. In addition, the new employment agreements entitle
these individuals to certain payments and other benefits upon termination
of employment.
- Vesting of all existing EVEREN stock options and restricted stock, as well
as certain other employee benefit plan account balances and accrued
benefits, will accelerate as a result of the merger.
- Following the merger, First Union will generally indemnify and provide
liability insurance to EVEREN's present officers and directors.
EVEREN's Board was aware of these interests and took them into account in
approving the merger agreement.
NO DISSENTERS' OR APPRAISAL RIGHTS (see page )
Delaware law does not provide you with dissenters' or appraisal rights in
the merger.
9
<PAGE>
SHARE INFORMATION AND MARKET PRICES (see page )
First Union common stock and EVEREN common stock are traded on the NYSE
under the symbols "FTU" and "EVR", respectively. The following table shows the
last sale prices of First Union common stock and EVEREN common stock on April
23, 1999, the last trading day before we first announced the merger, on May 27,
1999, the last trading day before we announced that the merger agreement had
been amended to provide for the issuance of approximately $31.00 worth of First
Union common stock per share of EVEREN common stock, and on , 1999.
<TABLE>
<CAPTION>
FIST UNION EVEREN
COMMON COMMON
STOCK STOCK
----------- -----------
<S> <C> <C>
April 23, 1999................ $ 55.00 24.125
May 27, 1999.................. 45.625 24.625
, 1999................. $
</TABLE>
THE MARKET PRICE OF BOTH FIRST UNION AND EVEREN COMMON STOCK WILL FLUCTUATE
PRIOR TO THE MERGER. YOU ARE ADVISED TO OBTAIN CURRENT MARKET QUOTATIONS FOR
FIRST UNION COMMON STOCK AND EVEREN COMMON STOCK.
10
<PAGE>
COMPARISON OF CERTAIN UNAUDITED PER SHARE DATA
The following table shows information about net income per share, cash
dividends per share and book value per share, and similar information after
giving effect to the merger, which we refer to as "pro forma" information. In
presenting the pro forma information, we assumed that the merger occurred as of
the beginning of the periods presented. The pro forma information gives effect
to the merger under the purchase method of accounting in accordance with
generally accepted accounting principles but excludes certain purchase
accounting adjustments not yet finalized and is calculated using an exchange
ratio of 0.6739. The 0.6739 exchange ratio is based on dividing $31.00 by a
First Union common stock price of $46.00, which was the closing price of First
Union common stock on June 28, 1999, as if that price were the average market
price used to determine the actual exchange ratio. The 0.6739 exchange ratio is
used in this document for illustrative purposes only and the actual exchange
ratio may be higher or lower than 0.6739.
We expect to incur merger and integration charges as a result of combining
our two companies. The pro forma information, while helpful in illustrating the
financial characteristics of the combined company under one set of assumptions,
does not reflect these expenses and, accordingly, does not attempt to predict or
suggest future results. It also does not necessarily reflect what the actual
historical results of the combined company would have been had our two companies
been combined during the periods presented.
The information in the following table is based on, and should be read
together with, the historical financial information that have been presented in
our respective prior SEC filings. We have incorporated this material into this
document by reference. See "Where You Can Find More Information" on page .
<TABLE>
<CAPTION>
THREE
MONTHS YEAR
ENDED ENDED
MARCH 31, DECEMBER 31,
----------- ---------------
1999 1998
----------- ---------------
<S> <C> <C>
FIRST UNION COMMON STOCK
Net income per basic share
Historical........................................................ $ 0.73 2.98
Pro forma combined................................................ 0.73 2.98
Net income per diluted share
Historical........................................................ 0.73 2.95
Pro forma combined................................................ 0.73 2.95
Dividends per share
Historical........................................................ 0.47 1.58
Pro forma combined................................................ 0.47 1.58
Book value per share
Historical........................................................ 16.76 17.48
Pro forma combined................................................ 16.76 17.48
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
THREE
MONTHS YEAR
ENDED ENDED
MARCH 31, DECEMBER 31,
----------- ---------------
1999 1998
----------- ---------------
<S> <C> <C>
EVEREN COMMON STOCK
Net income per basic share
Historical........................................................ 0.42 2.16
Equivalent pro forma combined..................................... 0.49 2.01
Net income per diluted share
Historical........................................................ 0.40 2.01
Equivalent pro forma combined..................................... 0.49 1.99
Dividends per share
Historical........................................................ 0.07 0.27
Equivalent pro forma combined..................................... 0.32 1.06
Book value per share
Historical........................................................ 11.85 11.70
Equivalent pro forma combined..................................... $ 11.29 11.78
</TABLE>
Pro forma assumptions include the 0.6739 exchange ratio; the issuance of 24
million shares of First Union common stock; the repurchase by First Union of the
shares in the open market at a cost of approximately $1.1 billion; a cost of
funds rate of 4.40 percent for the three months ended March 31, 1999, and 5.06
percent for the year ended December 31, 1998; and 20-year straight-line life
related to goodwill of $679 million. Goodwill and the related pro forma
amortization does not reflect the net adjustments that will be necessary to
record the assets and liabilities of EVEREN at their respective fair values. We
are currently evaluating various strategies for the integration of EVEREN, and
those decisions would affect the amount of goodwill recorded at consummation as
well as the amount of merger and integration charges to be incurred. Currently
such adjustments to goodwill are estimated to increase goodwill by approximately
$184 million. The selected pro forma combined financial data set forth above
does not reflect a merger and integration charge of approximately $60 million,
which First Union currently expects to incur following consummation of the
merger.
12
<PAGE>
SELECTED FIRST UNION HISTORICAL FINANCIAL DATA
The information in the following table is based on, and should be read
together with, the historical financial information that First Union has
presented in its prior SEC filings. We have incorporated this material into this
document by reference. See "Where You Can Find More Information" on page . The
interim financial information has been derived from unaudited financial
statements of First Union included in its SEC filings. First Union believes that
these financial statements include all adjustments of a normal recurring nature
and disclosures that are necessary for a fair statement of the results of
operations for the interim periods. Results for the interim periods do not
necessarily indicate results which may be expected for any other interim or
annual period.
First Union (Historical)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT PER SHARE DATA) 1999 1998 1998 1997 1996 1995 1994
- ----------------------------------------------------- --------- --------- --------- --------- --------- --------- ---------
CONSOLIDATED SUMMARIES OF INCOME
Interest income...................................... $ 3,572 3,602 14,988 14,362 13,758 13,028 10,245
Interest expense..................................... 1,792 1,771 7,711 6,568 6,151 5,732 3,739
--------- --------- --------- --------- --------- --------- ---------
Net interest income.................................. 1,780 1,831 7,277 7,794 7,607 7,296 6,506
Provision for loan losses............................ 164 135 691 1,103 678 403 458
--------- --------- --------- --------- --------- --------- ---------
Net interest income after provision for loan
losses............................................. 1,616 1,696 6,586 6,691 6,929 6,893 6,048
Securities transactions.............................. 77 23 357 55 100 82 28
Noninterest income................................... 1,873 1,326 6,198 4,267 3,435 2,976 2,336
Merger-related and restructuring charges............. 398 29 1,212 284 421 233 107
Noninterest expense.................................. 2,111 1,809 7,964 6,936 6,509 6,309 5,558
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes........................... 1,057 1,207 3,965 3,793 3,534 3,409 2,747
Income taxes......................................... 351 417 1,074 1,084 1,261 1,213 938
--------- --------- --------- --------- --------- --------- ---------
Net income........................................... 706 790 2,891 2,709 2,273 2,196 1,809
Dividends on preferred stock......................... -- -- -- -- 9 26 46
--------- --------- --------- --------- --------- --------- ---------
Net income applicable to common stockholders before
redemption premium................................. 706 790 2,891 2,709 2,264 2,170 1,763
Redemption premium on preferred stock................ -- -- -- -- -- -- 41
--------- --------- --------- --------- --------- --------- ---------
Net income applicable to common stockholders after
redemption premium................................. $ 706 790 2,891 2,709 2,264 2,170 1,722
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
PER COMMON SHARE DATA
Basic earnings....................................... $ 0.73 0.82 2.98 2.84 2.33 2.21 1.86
Diluted earnings..................................... 0.73 0.81 2.95 2.80 2.30 2.17 1.83
Cash dividends....................................... 0.47 0.37 1.58 1.22 1.10 0.98 0.86
Book value........................................... 16.76 16.31 17.48 15.95 14.85 13.91 12.58
CASH DIVIDENDS PAID ON COMMON STOCK.................. 450 342 1,524 1,141 1,031 843 686
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
Assets............................................. 222,955 219,944 237,363 205,735 197,341 188,855 159,577
Loans, net of unearned income...................... 133,416 133,814 135,383 131,687 134,647 127,905 107,965
Deposits........................................... 134,224 137,935 142,467 137,077 136,429 134,112 122,639
Long-term debt..................................... 24,858 13,738 22,949 13,487 11,604 9,586 6,405
Common stockholders' equity........................ 16,231 15,806 17,173 15,269 14,628 13,599 11,775
Total stockholders' equity......................... $ 16,231 15,806 17,173 15,269 14,628 13,782 12,005
Common shares outstanding (IN THOUSANDS)........... 968,139 972,775 982,223 960,984 988,594 981,115 941,378
</TABLE>
13
<PAGE>
First Union (Historical) continued
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
(IN MILLIONS, EXCEPT PER SHARE DATA) 1999 1998 1998 1997 1996 1995 1994
- ----------------------------------------------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED AVERAGE BALANCE SHEET ITEMS
Assets............................................. $ 224,687 210,809 222,472 196,093 189,285 173,982 150,244
Loans, net of unearned income...................... 133,908 131,214 133,235 134,517 129,120 121,245 100,835
Deposits........................................... 136,262 134,574 136,330 132,847 131,276 127,744 113,715
Long-term debt..................................... 23,968 13,635 16,268 12,596 10,443 8,334 6,049
Common stockholders' equity(a)..................... 16,058 15,455 15,800 14,365 13,788 12,977 11,453
Total stockholders' equity(a)...................... $ 16,058 15,455 15,800 14,365 13,896 13,188 11,955
Common shares outstanding (IN THOUSANDS)
Basic............................................ 959,833 965,120 969,131 955,241 973,712 979,852 927,941
Diluted.......................................... 968,626 977,155 980,112 966,792 982,755 1,001,145 946,969
CONSOLIDATED PERCENTAGES
Net income applicable to common
stockholders before redemption premium to average
common stockholders' equity(a)................... 17.83%(c) 20.74(c) 18.30 18.86 16.42 16.72 15.40
Net income applicable to common
stockholders after redemption premium to average
common stockholders' equity(a)................... 17.83(c) 20.74(c) 18.30 18.86 16.42 16.72 15.04
Net income to
Average total stockholders' equity(a).............. 17.83(c) 20.74(c) 18.30 18.86 16.36 16.65 15.14
Average assets..................................... 1.27(c) 1.52(c) 1.30 1.38 1.20 1.26 1.20
Average stockholders' equity to average assets....... 7.26 7.48 7.25 7.36 7.35 7.56 7.92
Allowance for loan losses to
Net loans.......................................... 1.37 1.39 1.35 1.40 1.64 1.80 2.09
Nonaccrual and restructured loans.................. 217 210 246 211 241 252 228
Nonperforming assets............................... 192 186 217 186 211 201 170
Net charge-offs to average net loans................. 0.49(c) 0.39(c) 0.48 0.65 0.64 0.45 0.53
Nonperforming assets to loans, net and foreclosed
properties......................................... 0.71 0.75 0.62 0.75 0.78 0.90 1.23
Capital ratios(b)
Tier 1 capital..................................... 7.03 8.66 6.94 8.43 7.91 7.40 8.32
Total capital...................................... 11.34 13.09 11.12 13.02 12.58 11.81 12.91
Leverage........................................... 6.00 6.97 6.02 7.09 6.74 6.16 6.73
Net interest margin.................................. 3.74%(c) 4.08(c) 3.81 4.53 4.55 4.76 4.93
</TABLE>
- ------------------------
(a) Excludes net unrealized gains and losses on debt and equity securities.
(b) Risk-based capital ratio guidelines require a minimum ratio of tier 1
capital to risk-weighted assets of 4.00 percent and a minimum ratio of total
capital to risk-weighted assets of 8.00 percent. The minimum leverage ratio
of tier 1 capital to adjusted average quarterly assets is from 3.00 to 4.00
percent.
(c) Annualized.
14
<PAGE>
SELECTED EVEREN HISTORICAL FINANCIAL DATA
The information in the following table is based on, and should be read
together with, the historical financial information that EVEREN has presented in
its prior filings with the SEC. EVEREN has incorporated this material into this
document by reference. See "Where You Can Find More Information" on page . The
interim financial information has been derived from the interim unaudited
financial statements of EVEREN included in its SEC filings. EVEREN believes that
these financial statements include all adjustments of a normal recurring nature
and disclosures that are necessary for a fair statement of the results of
operations for the unaudited periods. Results for the interim periods do not
necessarily indicate results which may be expected for any other interim or
annual period.
EVEREN (Historical)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT PER SHARE DATA) 1999 1998 1998 1997 1996 1995
- ---------------------------------------------------------- --------- --------- --------- --------- --------- ---------
CONSOLIDATED SUMMARIES OF INCOME
Interest income........................................... $ 26 27 108 85 74 81
Interest expense.......................................... 13 14 54 37 34 53
--------- --------- --------- --------- --------- ---------
Net interest income....................................... 13 13 54 48 40 28
Securities transactions................................... 39 30 121 103 115 122
Noninterest income (a).................................... 151 151 600 442 432 340
Noninterest expense (b)................................... 181 168 660 518 484 512
--------- --------- --------- --------- --------- ---------
Income (loss) before income taxes (benefits).............. 22 26 115 75 103 (22)
Income taxes (benefits)................................... 8 10 44 28 41 (6)
--------- --------- --------- --------- --------- ---------
Net income (loss)......................................... $ 14 16 71 47 62 (16)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
PER COMMON SHARE DATA
Basic earnings............................................ $ 0.42 0.50 2.16 1.44 2.68 n/a
Diluted earnings.......................................... 0.40 0.46 2.01 1.35 2.57 n/a
Cash dividends............................................ 0.07 0.06 0.27 0.19 0.05 n/a
Book value................................................ 11.85 10.11 11.70 9.78 8.70 n/a
CASH DIVIDENDS PAID ON COMMON STOCK....................... 2 2 9 6 1 --
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
Assets.................................................. 2,495 1,883 2,169 1,906 1,824 2,551
Loans, net of unearned income........................... 581 255 271 304 140 298
Long-term debt.......................................... 76 115 84 122 138 144
Stockholders' equity.................................... $ 420 352 409 335 289 132
Common shares outstanding (IN THOUSANDS)(c)............. 35,443 34,866 34,933 34,240 33,224 n/a
<CAPTION>
<S> <C>
(IN MILLIONS, EXCEPT PER SHARE DATA) 1994
- ---------------------------------------------------------- ---------
CONSOLIDATED SUMMARIES OF INCOME
Interest income........................................... 74
Interest expense.......................................... 45
---------
Net interest income....................................... 29
Securities transactions................................... 119
Noninterest income (a).................................... 337
Noninterest expense (b)................................... 498
---------
Income (loss) before income taxes (benefits).............. (13)
Income taxes (benefits)................................... (11)
---------
Net income (loss)......................................... (2)
---------
---------
PER COMMON SHARE DATA
Basic earnings............................................ n/a
Diluted earnings.......................................... n/a
Cash dividends............................................ n/a
Book value................................................ n/a
CASH DIVIDENDS PAID ON COMMON STOCK....................... --
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
Assets.................................................. 1,555
Loans, net of unearned income........................... 315
Long-term debt.......................................... 205
Stockholders' equity.................................... 167
Common shares outstanding (IN THOUSANDS)(c)............. n/a
</TABLE>
- ------------------------
(a) Includes net gains on the sale of certain subsidiaries of $20 million and
$50 million in 1998 and 1996, respectively.
(b) Includes $4 million in 1996 related to the early retirement of long-term
debt.
(c) 1997 and prior years have been restated to reflect a two-for-one stock
split.
n/a Data not available.
15
<PAGE>
SELECTED PRO FORMA COMBINED FINANCIAL DATA
The information in the following table is based on, and should be read
together with, the historical financial information of First Union and EVEREN.
The information has been combined on a pro forma purchase accounting basis as if
the companies had been combined as of the beginning of each period presented.
First Union and EVEREN
Selected Pro Forma Combined Financial Data (a)
<TABLE>
<CAPTION>
As of and for the
Three Months As of and for the
Ended Year Ended
(IN MILLIONS, EXCEPT PER SHARE DATA) March 31, 1999 December 31, 1998
- --------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
CONSOLIDATED SUMMARIES OF INCOME
Interest income............................................................ $ 3,586 15,040
Interest expense........................................................... 1,805 7,765
-------- --------
Net interest income........................................................ 1,781 7,275
Provision for loan losses.................................................. 164 691
-------- --------
Net interest income after provision for loan losses........................ 1,617 6,584
Securities transactions.................................................... 116 478
Noninterest income......................................................... 2,024 6,798
Merger-related and restructuring charges................................... 398 1,212
Noninterest expense........................................................ 2,300 8,658
-------- --------
Income before income taxes................................................. 1,059 3,990
Income taxes............................................................... 355 1,098
-------- --------
Net income................................................................. $ 704 2,892
-------- --------
-------- --------
PER COMMON SHARE DATA
Basic earnings............................................................. $ 0.73 2.98
Diluted earnings........................................................... 0.73 2.95
Book value................................................................. 16.76 17.48
CASH DIVIDENDS PAID ON COMMON STOCK........................................ 452 1,533
CONSOLIDATED PERIOD-END BALANCE SHEET ITEMS
Assets..................................................................... 226,129 240,211
Loans, net of unearned income.............................................. 133,997 135,654
Deposits................................................................... 134,224 142,467
Long-term debt............................................................. 24,934 23,033
Common stockholders' equity................................................ 16,231 17,173
Total stockholders' equity................................................. $ 16,231 17,173
Common shares outstanding (IN THOUSANDS)................................... 968,139 982,223
CONSOLIDATED PERCENTAGES
Allowance for loan losses to
Net loans................................................................ 1.36% 1.35
Nonperforming assets..................................................... 192 217
Net charge-offs to average net loans....................................... 0.49(b) 0.48
Nonperforming assets to loans, net and foreclosed properties............... 0.71% 0.62
</TABLE>
- ------------------------
(a) Pro forma assumptions include the 0.6739 exchange ratio; the issuance of 24
million shares of First Union common Stock; the repurchase by First Union of
the shares in the open market at a cost of approximately $1.1 billion; a
cost of funds rate of 4.40 percent for the three months ended March 31,
1999, and 5.06 percent for the year ended December 31, 1998; and 20-year
straight-line life related to goodwill of $679 million. Goodwill and the
related pro forma amortization does not reflect the net adjustments that
will be necessary to record the assets and liabilities of EVEREN at their
respective fair values. We are currently evaluating various strategies for
the integration of EVEREN, and those decisions would affect the amount of
goodwill recorded at consummation as well as the amount of merger and
integration charges to be incurred. Currently such adjustments to goodwill
are estimated to increase goodwill by approximately $184 million. The
selected pro forma combined financial data set forth above does not reflect
a merger and integration charge of approximately $60 million, which First
Union currently expects to incur following consummation of the merger.
(b) Annualized.
16
<PAGE>
THE MEETING
GENERAL
This document is being furnished to you in connection with the solicitation
of proxies by EVEREN's Board for use at the stockholders' meeting to be held on
, 1999, at am., at EVEREN's corporate headquarters, 77 West Wacker
Drive, Chicago, Illinois 60601, and at any adjournments or postponements
thereof. At the meeting, you will be asked to vote on the proposal to adopt the
merger agreement.
First Union is also providing this document to you as a prospectus in
connection with the offer and sale by First Union of the First Union common
stock shares to be issued in the merger.
EVEREN'S BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS ADVISABLE,
FAIR TO AND IN THE BEST INTERESTS OF EVEREN AND ITS STOCKHOLDERS AND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" ADOPTING THE MERGER AGREEMENT.
RECORD DATE; QUORUM
RECORD DATE. EVEREN has established the close of business on ,
1999, as the record date to determine EVEREN common stockholders entitled to
vote at the meeting. At the close of business on the record date, EVEREN
common stock shares were outstanding and entitled to vote at the meeting, and
were held by approximately record holders. The EVEREN common stock
constitutes the only outstanding class of EVEREN voting securities. Each EVEREN
common stock share is entitled to one vote on the merger agreement. Votes may be
cast at the meeting in person or by proxy.
QUORUM. The presence at the meeting, either in person or by proxy, of a
majority of the EVEREN common stock shares outstanding on the record date is
necessary to constitute a quorum to transact business at the meeting. If a
quorum is not present, it is expected that the meeting will be adjourned or
postponed in order to solicit additional proxies.
Abstentions and "broker non-votes" will be counted solely for the purpose of
determining whether a quorum is present. Broker non-votes are shares held by
brokers or nominees on behalf of customers that are represented at the meeting
but with respect to which the broker or nominee has not been instructed how to
vote. Brokers holding shares in street name for customers are prohibited from
voting those customers' shares in the absence of specific instructions from
those customers.
VOTE REQUIRED
Adoption of the merger requires the affirmative vote of the holders of a
majority of the EVEREN common stock outstanding on the record date. Abstentions
and broker non-votes will not be deemed to be cast either "FOR" or "AGAINST" the
merger. Because adoption of the merger requires the affirmative vote of the
holders of a majority of the outstanding EVEREN common stock, abstentions and
broker non-votes will have the same effect as a vote "AGAINST" the merger.
VOTING POWER OF DIRECTORS AND OFFICERS. As of the record date, to First
Union's knowledge, neither First Union nor any of its directors or executive
officers or their affiliates held any EVEREN common stock. EVEREN's directors
and executive officers owned, as of the record date, EVEREN common stock
shares, which represents approximately % of the outstanding EVEREN common
stock shares. As a condition to First Union's willingness to enter into the
merger agreement, five EVEREN directors and executive officers agreed to vote
their EVEREN common stock shares "FOR" the merger. The form of voting agreement
is attached as ANNEX B to this document. The number of EVEREN common stock
shares these individuals owned as of the record date is , which represents
approximately % of the outstanding EVEREN common stock. Assuming these shares
are
17
<PAGE>
so voted, adoption of the merger agreement will require the additional
affirmative vote of the holders of approximately % of the EVEREN common stock
outstanding on the record date.
PROXIES
Shares represented by properly executed proxies, if such proxies are
received in time and are not revoked, will be voted in accordance with the
instructions indicated on the proxies. Except for broker non-votes, if no
instructions are indicated, those proxies will be voted "FOR" adoption of the
merger, and as determined by a majority of EVEREN's Board as to any other matter
that may properly come before the meeting. In the event that a quorum is not
present at the time the meeting is convened, or if for any other reason EVEREN
believes that additional time should be allowed for the solicitation of proxies,
EVEREN may postpone the meeting or may adjourn the meeting with or without a
vote of stockholders. If EVEREN proposes to adjourn the meeting by a vote of
stockholders, the persons named in the enclosed form of proxy will vote all
EVEREN common stock for which they have voting authority in favor of an
adjournment.
The grant of a proxy on the enclosed EVEREN proxy card will not prevent you
from voting in person at the meeting. You may revoke your proxy at any time
prior to its exercise at the meeting by:
- giving written notice of revocation bearing a later date than the revoked
proxy to EVEREN's Secretary at 77 West Wacker Drive, Chicago, Illinois
60601
- properly submitting a duly executed proxy bearing a later date or
- voting in person at the meeting.
All written notices of revocation and other communications with respect to
revocation of proxies should be addressed to EVEREN Capital Corporation, 77 West
Wacker Drive, Chicago, Illinois 60601-1694, Attention: Secretary. A proxy
appointment will not be revoked by death or incapacity of the stockholder
executing the proxy unless, before the shares are voted, notice of such death or
incapacity is filed with EVEREN's Secretary or other person responsible for
tabulating votes on EVEREN's behalf.
Your attendance at the meeting will not by itself constitute revocation of
your proxy--you must also vote in person at the meeting. If you instructed your
broker to vote your EVEREN common stock, you must follow the broker's directions
in order to change your vote.
EVEREN and First Union will share equally the cost of soliciting proxies,
including the cost of printing this document, mailing it and filing it with the
SEC. In addition to solicitation by mail, EVEREN's and First Union's directors,
officers and employees may solicit proxies by telephone, fax, telegram or in
person. Arrangements will also be made with brokerage houses and other nominees
and fiduciaries for forwarding solicitation material to the beneficial owners of
stock held of record by those persons, and EVEREN will reimburse those
custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses
in connection therewith. EVEREN has retained D.F. King & Co., Inc. to assist in
distributing proxy material to such brokerage houses and other nominees and
fiduciaries for a fee not to exceed $750, plus expenses.
VOTING EVEREN 401(K) AND EMPLOYEE STOCK OWNERSHIP PLAN STOCK. Participants
in the EVEREN 401(k) and Employee Stock Ownership Plan will receive voting
instructions with respect to the EVEREN common stock allocated to their
accounts. The trustee will vote these shares in accordance with directions
received from participants. EVEREN common stock for which voting direction is
not received will be voted by the trustee on a proportionate basis in accordance
with the votes cast with respect to shares for which voting instructions are
received. The plan was the holder of approximately % of the outstanding EVEREN
common stock on the record date.
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<PAGE>
After having been submitted to the trustee, a voting instruction form may be
revoked by the person giving it at any time before it is exercised, by:
- submitting a written notice of revocation to the trustee or
- submitting a voting instruction form to the trustee having a later date.
THE MERGER
THE FOLLOWING INFORMATION DESCRIBES CERTAIN INFORMATION PERTAINING TO THE
MERGER. THIS DESCRIPTION DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE ANNEXES HERETO, INCLUDING THE MERGER AGREEMENT AND
STOCK OPTION AGREEMENT, WHICH ARE ATTACHED AS ANNEXES A AND C, RESPECTIVELY, AND
ARE INCORPORATED HEREIN BY REFERENCE. ALL STOCKHOLDERS ARE URGED TO READ THE
ANNEXES IN THEIR ENTIRETY.
GENERAL
The Agreement and Plan of Merger, dated as of April 25, 1999, and amended
and restated as of May 27, 1999, between EVEREN, First Union Delaware, Inc. and
First Union provides for a transaction in which First Union will acquire EVEREN
by merging a wholly-owned subsidiary of First Union into EVEREN. At the merger
effective time, each outstanding EVEREN common stock share will cease to be
outstanding and, excluding any shares held by EVEREN or First Union or their
subsidiaries, will be converted into a number of shares of First Union common
stock equal to the quotient of $31.00 divided by the average closing price of
First Union common stock during the ten trading day period ending on the second
trading day before the merger effective date.
The merger agreement provides that First Union may alter the merger
structure with EVEREN, provided that it cannot alter the consideration to be
received by EVEREN stockholders, adversely affect the tax treatment for EVEREN
stockholders or materially delay the merger.
BACKGROUND OF THE MERGER
In late 1997, in connection with the trend toward consolidation in the
financial services industry and increased competition in the retail securities
brokerage business, EVEREN retained Morgan Stanley as its financial advisor to
consider strategic alternatives for enhancing stockholder value.
In July 1996, EVEREN obtained a twenty percent interest in an asset
management joint venture with Wheat First Securities Inc. that operated under
the name "Mentor". Mentor offers both mutual funds and private account
investment advisory services. In January 1998, First Union acquired Wheat First.
On March 25, 1999, EVEREN and First Union entered into an agreement to form an
asset management joint venture that would combine First Union's Evergreen mutual
fund complex with Mentor. Pursuant to the joint venture agreement, First Union
would contribute its ownership interests in Evergreen and Mentor and receive a
ninety-five percent ownership interest in the new venture, and EVEREN would
contribute its ownership interest in Mentor and receive a five percent ownership
interest in the new venture.
Following the negotiation and execution of the asset management joint
venture agreement in March 1999, EVEREN's and First Union's senior management
began to discuss on a preliminary basis the possibility of a strategic
transaction between the two companies. During the week of April 12, 1999, James
R. Boris, EVEREN's Chairman and Chief Executive Officer, and Edward E.
Crutchfield, First Union's Chairman and Chief Executive Officer, discussed in
person and via telephone the potential merits of a possible strategic
transaction between the two parties and related matters. Mr. Boris indicated an
interest in such a transaction, but informed Mr. Crutchfield that he wanted to
discuss the matter with EVEREN's Board of Directors before pursuing it further.
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<PAGE>
On April 18, 1999, EVEREN's Board held a special telephonic meeting at which
various financial, structural, legal and other aspects of a possible business
combination transaction with First Union were discussed. EVEREN's senior
management reviewed with EVEREN's Board EVEREN's long-term strategic goals and
the strategic alternatives available to EVEREN. At this meeting, EVEREN's Board
also received financial analysis and advice from Morgan Stanley and the legal
advice from Simpson Thacher & Bartlett, EVEREN's outside counsel, with respect
to a potential strategic merger transaction. After discussion, EVEREN's Board
directed senior management to continue discussions with First Union and commence
negotiations concerning a definitive agreement with respect to a business
combination.
On April 19, 1999, First Union delivered initial drafts of the merger
agreement and stock option agreement to EVEREN and its legal advisors.
On April 21, 1999, EVEREN and First Union executed a confidentiality
agreement with respect to the exchange of nonpublic information between the
companies and certain other matters. Following the execution of the
confidentiality agreement and through April 25, 1999, First Union's
representatives, together with its legal advisors, conducted a due diligence
review of EVEREN's business, operations and financial condition. During the same
period, EVEREN's representatives and its legal and financial advisors similarly
conducted a due diligence review of First Union's business, operations and
financial condition.
While the companies were conducting their respective due diligence
investigations and up through the execution of the merger agreement on April 25,
1999, representatives of EVEREN and First Union and their respective legal
counsel were in frequent contact to negotiate the terms of the definitive
agreements for the merger and the related transactions.
On April 25, 1999, EVEREN's Board met to consider the proposed merger
transaction, which contemplated a fixed exchange ratio of 0.555 shares of First
Union common stock for each share of EVEREN common stock. EVEREN's senior
management, legal counsel and financial advisors updated EVEREN's Board on the
results of the negotiations that had occurred since the April 18 meeting of
EVEREN's Board. EVEREN's Board also received financial analysis and advice from
Morgan Stanley. At the meeting, Morgan Stanley rendered its oral opinion,
confirmed by a subsequent written opinion dated April 25, 1999, that, as of such
date, and based on and subject to certain matters stated therein, the 0.555
exchange ratio was fair from a financial point of view to EVEREN's stockholders.
EVEREN's legal counsel reviewed with EVEREN's Board the terms and provisions of
the merger agreement, the stock option agreement and the related agreements that
had been negotiated with First Union and its legal advisors. In addition to
discussing these terms, legal counsel advised EVEREN's Board with respect to
their fiduciary duties in connection with the proposed strategic merger.
EVEREN's Board was also informed of each of the matters related to the
transaction in which members of EVEREN's Board and senior management had an
interest which could be said to be different from or in addition to the
interests of EVEREN's stockholders in general. See "--Interests of Certain
Persons in the Merger". After discussion and consideration, EVEREN's Board voted
to approve the merger, the merger agreement, the stock option agreement and all
of the related transactions.
Following the approvals of EVEREN's Board, the merger agreement and stock
option agreement were executed in the evening of April 25, 1999, and were
publicly announced by the companies in the early morning of April 26, 1999.
On the morning of May 25, 1999, First Union announced that, following a
strategic review and analysis, it was reducing its earnings outlook for 1999.
The announcement resulted in a decline in the trading price of First Union's
common stock. Following the announcement, Mr. Boris contacted Mr. Crutchfield to
discuss the implications of First Union's announcement and the possibility of
revising the merger agreement to provide EVEREN stockholders with more certain
value in the merger
20
<PAGE>
in light of the increased volatility of the First Union common stock. Mr.
Crutchfield indicated that he would be willing to ask First Union's Board of
Directors to consider modifying the merger consideration so long as the
aggregate value of the merger consideration was the same as anticipated when the
merger agreement was originally executed. Mr. Boris and Mr. Crutchfield
ultimately agreed to propose to their respective boards of directors that the
exchange ratio in the merger be changed from a fixed exchange ratio of 0.555
shares of First Union common stock per share of EVEREN common stock to a ratio
based on a fixed value of $31.00, the approximate value of the original 0.555
exchange ratio based on the closing price of First Union common stock on the
trading day before approval of the original merger agreement.
On May 26, 1999, EVEREN's representatives conducted a supplemental due
diligence investigation of First Union in light of First Union's May 25
announcement.
On the late afternoon of May 26, 1999, EVEREN's Board met to consider the
proposed revised merger transaction, including the revised exchange ratio based
on a fixed value of approximately $31.00 worth of First Union common stock per
share of EVEREN common stock. EVEREN's senior management, legal counsel and
financial advisors updated EVEREN's Board on the developments of the prior two
days. At the meeting, Morgan Stanley provided financial analysis and advice and
indicated that, following and subject to its review of the final form of the
revised merger agreement, finalizing relevant financial analyses and completing
its internal fairness review process, among other things, it would be in a
position to deliver its written opinion as to the fairness from a financial
point of view of the revised exchange ratio to EVEREN's stockholders. EVEREN's
legal counsel reviewed with EVEREN's Board the terms and provisions of the
revised merger agreement. In addition to discussing these terms, legal counsel
advised EVEREN's Board with respect to their fiduciary duties in connection with
consideration of the proposed revised merger agreement. After discussion and
consideration, EVEREN's Board voted to approve the revised merger and merger
agreement, subject to receipt of the Morgan Stanley fairness opinion and the
approval by First Union's Board. Morgan Stanley subsequently delivered its
written fairness opinion on May 27, 1999, that as of such date, and based on and
subject to certain matters stated therein, the revised exchange ratio was fair
from a financial point of view to EVEREN's stockholders.
During the day of May 27, 1999, the two companies and their legal counsel
continued negotiation of the final form of the revised merger agreement. In the
late afternoon on that day, the companies executed the amended and restated
merger agreement and publicly announced the revised terms of the merger.
EVEREN'S REASONS FOR THE MERGER; RECOMMENDATION OF EVEREN'S BOARD OF DIRECTORS
BOARD ACTION. At meetings held on April 25, 1999, and May 26, 1999,
EVEREN's Board of Directors:
- determined that the merger agreement and the stock option agreement, and
the merger and other transactions contemplated thereby, are advisable,
fair to, and in the best interests of EVEREN and its stockholders
- approved the merger agreement and the stock option agreement, and the
merger and other transactions contemplated thereby
- directed that the merger agreement be submitted for adoption by EVEREN's
stockholders at the stockholders' meeting and
- recommended that EVEREN's stockholders adopt the merger agreement.
REASONS FOR THE MERGER. EVEREN's Board believes that the merger is in the
best interests of EVEREN and its stockholders because it believes that the
long-term value and liquidity of the First
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<PAGE>
Union common stock to be received in the merger will be superior to EVEREN
common stock as a stand-alone company. The decision of EVEREN's Board to approve
the merger agreement and recommend EVEREN's stockholders adopt it was based upon
various factors, including the following material factors:
- the judgment, advice and analyses of EVEREN's senior management, including
its favorable recommendation of the merger
- the Board's knowledge and consideration of EVEREN's business, operations,
financial condition, results of operations, competitive position and
prospects and the nature of the industry in which EVEREN operates, both on
a historical and prospective basis, and the influence of current industry,
economic and market conditions
- the Board's consideration of the increased competition and consolidation
in the securities brokerage and asset management industry, and conclusion
that the combined business enterprise of First Union and EVEREN, including
the combination of the companies' regional securities brokerage businesses
into one with nationwide coverage that would be sixth largest in the
country, would have a much stronger market position than EVEREN on a
stand-alone basis, with greater access to cost-effective capital, a
broader array of product offerings, greater capacity for technology and
other systems expenditures, and broader geographic coverage
- the Board's conclusion that the combined business enterprise, with the
experience of both First Union's and EVEREN's management teams, would
enable First Union to realize the full potential of the combined First
Union/EVEREN securities brokerage and asset management business
- the Board's consideration of the due diligence review which had been
conducted with respect to First Union's business, operations, and
competitive position and the potential operating efficiencies and
synergies that are expected to result from the merger
- the Board's consideration of Morgan Stanley's presentation on April 25,
1999, and discussion on May 26, 1999, including Morgan Stanley's opinion
that, as of May 27, 1999, and based upon and subject to the various
conditions set forth in its opinion, the exchange ratio is fair, from a
financial point of view, to EVEREN's stockholders (see "--Opinion of
Morgan Stanley")
- the Board's conclusion that the merger would provide EVEREN's stockholders
with an opportunity for continued equity participation in a larger, more
diversified enterprise with an aggregate equity value far larger than
EVEREN's current market value, including vastly increased liquidity
relative to that of EVEREN common stock
- the presentations by, and discussions with, EVEREN's senior management and
representatives of Simpson Thacher regarding the merger agreement's and
the stock option agreement's terms, including the merger closing
conditions, EVEREN's ability under certain conditions to consider
unsolicited alternative business combination proposals, EVEREN's and First
Union's ability to terminate the merger agreement under certain
conditions, and the effect of certain termination and other events on the
exercisability of the stock option agreement
- the exchange ratio in relation to historical and market trading prices for
EVEREN and First Union common stock and EVEREN's relative contribution to
the combined enterprise, including:
- that the value of the First Union common stock to be issued in the merger
represents a 28% premium to EVEREN's per share closing price on the
trading day prior to the original announcement of the merger agreement,
and a 43% premium to the average closing price of EVEREN's common stock
during the one-month period preceding that announcement
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- that the revised exchange ratio is based on a fixed $31.00 value of
merger consideration to EVEREN stockholders, and thus, unlike the
original merger consideration, the value of the revised merger
consideration will not generally be affected by variations in the trading
price of First Union's common stock prior to the merger and
- the Board's understanding, based on information furnished to it, that the
merger would likely be accretive to the per share earnings and dividends
of the combined company in 2000 and later years when compared to what
they would have been for EVEREN on a stand-alone basis
- the Board's consideration of previous inquiries from, and preliminary
discussions with, third parties concerning possible strategic transactions
- the impact of the merger on EVEREN's employees, including the effect of
the retention program provided for under the merger agreement, and the
potentially greater opportunities for continuing EVEREN employees in the
combined First Union/EVEREN enterprise
- the parties' ability to consummate the merger without significant delay
and
- that the merger will be accomplished on a tax-free basis to EVEREN's
stockholders for United States federal income tax purposes, except for
cash received in lieu of fractional shares.
In reaching its decision to approve the merger and to recommend adoption of
the merger agreement to EVEREN's stockholders, EVEREN's Board did not view any
single factor as determinative, and did not find it necessary or practicable to
assign any relative or specific weights to the various factors considered.
Furthermore, individual directors may have given differing weights to different
factors. EVEREN's Board believed each of the factors listed above supports the
decision to approve the merger, except that the eighth factor, relating to the
terms of the merger agreement and the stock option agreement, is merely inherent
to the transactions.
EVEREN's Board also considered the merger's principal risks to EVEREN and
its stockholders and other countervailing considerations, including:
- the risk of employee attrition during the transition period prior to the
merger despite the establishment of the retention program
- that the benefits of EVEREN's long-term prospects will be shared by all
First Union stockholders, including EVEREN's existing stockholders, rather
than solely by EVEREN's existing stockholders
- that the revision of the merger consideration to be based on a fixed value
of approximately $31.00 meant that, if First Union's common stock market
price at the time of the merger were above $55.85, EVEREN stockholders
would not receive any greater value in the merger as they would have under
the original 0.555 exchange ratio
- the challenge of smoothly integrating EVEREN's operations with First
Union's, in light of the nature of EVEREN's and First Union's respective
businesses, their differences in scale and scope and the numerous other
acquisitions and combinations in which First Union has recently engaged
and
- the interests of some of EVEREN's directors and management in the merger
as described in "Interests of Certain Persons in the Merger" on page .
However, EVEREN's Board determined that the foregoing considerations were
substantially outweighed by the benefits of the merger summarized above.
RECOMMENDATION OF EVEREN'S BOARD. EVEREN'S BOARD UNANIMOUSLY RECOMMENDS THAT
EVEREN STOCKHOLDERS VOTE "FOR" ADOPTION OF THE MERGER AGREEMENT.
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OPINION OF MORGAN STANLEY
EVEREN retained Morgan Stanley to act as EVEREN's financial advisor in
connection with the merger and related matters based on its qualifications,
expertise, reputation, and its knowledge of the business and affairs of EVEREN.
At the April 25, 1999, meeting of EVEREN's Board, Morgan Stanley delivered an
oral opinion to EVEREN's Board, which opinion was subsequently confirmed in
writing, that, as of such date, and based on and subject to certain
considerations set forth in such opinion, the original merger exchange ratio was
fair from a financial point of view to the holders of EVEREN common stock (other
than First Union and its affiliates). In connection with EVEREN's Board's
approval of the revised merger exchange ratio, Morgan Stanley delivered its
written opinion dated May 27, 1999, that, as of such date and based on and
subject to certain considerations set forth in such revised opinion, the revised
merger exchange ratio was fair from a financial point of view to the holders of
EVEREN common stock (other than First Union and its affiliates).
THE FULL TEXT OF MORGAN STANLEY'S OPINION DATED MAY 27, 1999, WHICH SETS
FORTH, AMONG OTHER THINGS, ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS
CONSIDERED, AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX D TO
THIS DOCUMENT. EVEREN COMMON STOCKHOLDERS ARE URGED TO, AND SHOULD, READ THE
MORGAN STANLEY OPINION CAREFULLY AND IN ITS ENTIRETY. MORGAN STANLEY'S OPINION
IS DIRECTED TO EVEREN'S BOARD AND ADDRESSED ONLY TO THE FAIRNESS OF THE EXCHANGE
RATIO FROM A FINANCIAL POINT OF VIEW TO EVEREN COMMON STOCKHOLDERS (OTHER THAN
FIRST UNION AND ITS AFFILIATES), AND IT DOES NOT ADDRESS ANY OTHER ASPECT OF THE
MERGER NOR DOES IT CONSTITUTE A RECOMMENDATION TO ANY EVEREN COMMON STOCKHOLDER
AS TO HOW TO VOTE AT THE MEETING. THE SUMMARY OF MORGAN STANLEY'S OPINION SET
FORTH IN THIS DOCUMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF THAT OPINION.
In connection with rendering its opinion, Morgan Stanley, among other
things:
- reviewed certain publicly available financial statements and other
information of EVEREN and First Union, respectively
- reviewed certain internal financial statements and other financial and
operating data, including certain financial forecasts, concerning EVEREN
and First Union prepared by management of EVEREN and First Union,
respectively
- discussed the past and current operations and financial condition and the
prospects of EVEREN and First Union with senior executives of EVEREN and
First Union, respectively
- reviewed the reported prices and trading activity for EVEREN common stock
and First Union common stock
- compared the financial performance of EVEREN and First Union and the
prices and trading activity of EVEREN common stock and First Union common
stock with that of certain other comparable publicly-traded companies and
their securities
- discussed with the senior management of EVEREN and First Union the
strategic objectives of the merger and their estimates of the synergies
and other benefits of the merger for the combined company
- analyzed the pro forma impact of the merger on the combined companies
earnings per share, consolidated capitalization and financial ratios
- reviewed the financial terms, to the extent publicly available, of certain
comparable transactions
- participated in discussions and negotiations among representatives of
EVEREN and First Union and their legal advisors
- reviewed the merger agreement and certain related documents and
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<PAGE>
- performed such other analyses and considered such other factors as Morgan
Stanley deemed appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon without
independent verification the accuracy and completeness of the information
reviewed by Morgan Stanley for the purposes of its opinion. With respect to the
financial forecasts, including the synergies and benefits expected to result
from the merger, Morgan Stanley assumed that they had been reasonably prepared
on bases reflecting the best currently available estimates and judgments of the
future financial performance of EVEREN and First Union. Morgan Stanley did not
make any independent valuation or appraisal of the assets or liabilities of
EVEREN or First Union, nor was Morgan Stanley furnished with any such appraisals
and Morgan Stanley did not examine any individual loan credit files of First
Union. In addition, Morgan Stanley assumed the merger will be consummated
substantially in accordance with the terms set forth in the merger agreement.
Morgan Stanley's opinion was necessarily based on economic, market and other
conditions as in effect on, and the information made available to Morgan Stanley
as of, the date of its opinion.
The following is a summary of certain material financial analyses performed
by Morgan Stanley in preparation of its opinion dated April 25, 1999, and
reviewed with EVEREN's Board on April 25, 1999, as updated in connection with
its opinion dated May 27, 1999. Certain of these summaries of financial analyses
include information presented in tabular format. In order to fully understand
the financial analyses used by Morgan Stanley, the tables must be read together
with the accompanying text of each summary. The tables alone do not constitute a
complete description of the financial analyses.
IMPLIED VALUE OF EXCHANGE RATIO: Morgan Stanley reviewed the terms of the
merger and noted that the merger exchange ratio based on approximately $31.00
worth of First Union common stock per share of EVEREN common stock resulted in a
premium of approximately 28% to the $24.13 closing price of EVEREN common stock
on April 23, 1999, the trading day prior to the announcement of the original
merger agreement, a premium of approximately 37% to the closing price of EVEREN
common stock on April 22, 1999, of $22.63, and a premium of approximately 44% to
the average closing price of EVEREN common stock over the past month prior to
April 23, 1999, of $21.49.
RELATIVE TRADING ANALYSIS. As part of its analysis, Morgan Stanley compared
EVEREN's common stock historical share price performance from January 1, 1997,
to April 23, 1999, with corresponding historical share price performance of the
common stock of (i) a group of five publicly traded brokerage companies that
Morgan Stanley considered comparable in certain respects with EVEREN, including
Raymond James Financial, Inc., A.G. Edwards, Inc., Dain Rauscher Corp., Freedom
Securities Corp., and PaineWebber Group, Inc. (the "BROKERAGE COMPANIES") and
(ii) the Standard and Poors 500 Index (the "S&P 500"). In this analysis, Morgan
Stanley noted the following changes in stock prices:
<TABLE>
<CAPTION>
PERCENT CHANGE IN STOCK PRICE
JANUARY 1, 1997 TO APRIL 23, 1999
---------------------------------
<S> <C>
EVEREN........................................................ 116%
Brokerage Companies........................................... 94%
S&P 500....................................................... 83%
</TABLE>
VALUATION METHODOLOGIES. As part of its financial analysis, Morgan Stanley
performed valuation analyses of EVEREN using various methodologies. Morgan
Stanley evaluated EVEREN's positions and strengths on a stand-alone basis and
considered estimates by EVEREN's and First Union's management of the synergies
which could be expected to be realized in the merger. The following is a summary
of the valuation analyses conducted by Morgan Stanley.
COMPARABLE COMPANY ANALYSIS. Morgan Stanley compared certain EVEREN
financial information with corresponding publicly available information of the
Brokerage Companies. Morgan Stanley
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<PAGE>
analyzed EVEREN's relative performance and value by comparing certain market
trading statistics for EVEREN with those of the Brokerage Companies. Historical
financial information used in connection with the ratios described below is
based on the latest reported quarterly disclosures as of April 23, 1999, with
respect to financial information for EVEREN and the Brokerage Companies. Market
information used in ratios provided below is as of April 23, 1999. Earnings per
share estimates for EVEREN and the Brokerage Companies were based on I/B/E/S
estimates as of April 23, 1999. The following table displays the results of this
analysis:
<TABLE>
<CAPTION>
PRICE/ PRICE/ PRICE/ PRICE/
52 WEEK HIGH BOOK VALUE 1999E EPS 2000E EPS
----------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
EVEREN................................... 81% 1.9x 13.2x 11.5x
Brokerage Companies Average.............. 74% 2.0x 11.9x 10.6x
</TABLE>
DIVIDEND DISCOUNT ANALYSIS. Morgan Stanley performed a dividend discount
analysis to determine a range of present values per share of EVEREN common stock
assuming EVEREN continued to operate as a stand-alone entity. This range was
determined by adding the present value of the estimated future dividend stream
that EVEREN could generate over the five-year period from 1999 through 2003, and
the present value of the "terminal value" of EVEREN common stock at the end of
2003. To determine a projected dividend stream, Morgan Stanley assumed a
constant leverage ratio equal to EVEREN's reported ratio as of March 31, 1999.
The earnings projections which formed the basis for the dividends and the
terminal value were adapted from I/B/E/S estimates for 1999, and earnings growth
rates ranging from 10% to 20% for estimating earnings for 2000 through 2003. The
terminal value for EVEREN was determined by applying two price-to-earnings
multiples (9x and 11x) to 2004 projected earnings. The dividend stream and
terminal values were discounted to present values using discount rates of 14%
and 16%, which Morgan Stanley viewed as the appropriate discount rate range for
a company with EVEREN's risk characteristics. Morgan Stanley also included the
expected gain from EVEREN's announced Mentor joint venture transaction. Based on
the above assumptions, Morgan Stanley calculated that the fully diluted
stand-alone value of EVEREN common stock ranged from approximately $17 to $28
per share.
SYNERGY VALUATION. Morgan Stanley performed an analysis of the net present
value of estimated cost savings, revenue enhancements and capital synergies
expected to result from the merger. Based on estimated pre-tax operating
synergies ranging from $50 million to $75 million (less additional annual
benefits expenses), $150 million of excess capital, a discount rate of 15%, a
cost savings phase-in period of two years, a cost savings growth rate of 3%
after the phase-in period, a 6% cost of debt, and merger and reorganization
charges equal to the fully phased-in synergies in the first year following the
merger, Morgan Stanley computed the implied value of synergies as ranging from
approximately $7 to $10 per share of EVEREN common stock.
PRECEDENT TRANSACTION ANALYSIS. Morgan Stanley performed an analysis of
seven public precedent transactions (the "PRECEDENT TRANSACTIONS") that Morgan
Stanley deemed comparable to the merger in order to compare the premiums to
market price and the multiples of book value and projected earnings indicated by
the consideration to be paid in the merger to those indicated for the Precedent
Transactions. The seven transactions constituting the Precedent Transactions
were (acquiror/acquiree): Bankers Trust Corp./Alex Brown Inc., Travelers Group
Inc./Salomon Brothers Inc, US Bancorp/Piper Jaffray, KeyCorp/McDonald & Co.,
BB&T Corp./Scott & Stringfellow, Wachovia Corp./Interstate Johnson Lane, and
Deutsche Bank AG/Bankers Trust Corp. The multiples used in the Precedent
Transactions analysis included multiples of book value (based on the acquired
company's most recently reported book value per share prior to the announcement
of the transaction in which it was acquired) and of estimated earnings per share
(based on I/B/E/S estimates of the acquired company's projected earnings per
share prior to announcement of the transaction in which it was acquired). The
premium to market price, the price to book value multiple and the price to
projected earnings multiple related to
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<PAGE>
the First Union/EVEREN merger were based on the merger exchange value of
approximately $31.00 per share. The premium to market price related to the First
Union/EVEREN merger was based on the closing price of EVEREN common stock on
April 23, 1999, of $24.13. The price to book value multiple related to the First
Union/EVEREN merger includes the estimated gain from EVEREN's announced Mentor
joint venture transaction. The resulting multiples for this analysis were:
<TABLE>
<CAPTION>
PREMIUM TO PRICE/ PRICE/ RETENTION AS % OF
MARKET PRICE PROJECTED EPS BOOK VALUE TRANSACTION VALUE
------------- ------------- ----------- -------------------
<S> <C> <C> <C> <C>
Precedent Transactions Range..... 8-65% 14.5-21.6x 1.9-4.2x 4-11%
First Union/EVEREN............... 28% 16.8x 2.4x 8%
</TABLE>
No company or transaction used in the comparable company, premium to market
and precedent transaction analyses is identical to EVEREN or the merger, as the
case may be. Accordingly, an analysis of the results of the foregoing
necessarily involves complex considerations and judgments concerning financial
and operating characteristics of EVEREN and other factors that could affect the
public trading value of the companies to which they are being compared.
Mathematical analysis (such as determining the average or median) is not in
itself a meaningful method of using comparable transaction data or comparable
company data.
CONTRIBUTION ANALYSIS. Morgan Stanley reviewed the pro forma effects of the
merger and computed the contribution to the combined company's pro forma
financial results attributable to EVEREN and First Union. Pro forma ownership
was based on the exchange ratio implied by First Union's closing share price on
May 25, 1999, of $45.63. The results of this analysis are summarized in the
following table:
<TABLE>
<CAPTION>
1999 EPS FULLY DILUTED MARKET
CONTRIBUTION AS VALUE AS OF PRO FORMA OWNERSHIP
OF MAY 25, 1999 MAY 25, 1999 BASED AS OF MAY 25, 1999
----------------- ----------------------- ---------------------------
<S> <C> <C> <C>
First Union.................... 98.0% 98.0% 97.4%
EVEREN......................... 2.0% 2.0% 2.6%
</TABLE>
Morgan Stanley also noted that EVEREN's pro forma ownership of the combined
company represented a 30% premium to EVEREN's 1999 earnings contribution and a
31% premium to EVEREN's fully diluted market value contribution as of May 25,
1999.
PRO FORMA MERGER ANALYSIS. Morgan Stanley reviewed the financial impact of
the merger on both EVEREN's and First Union's estimated earnings per share,
including cost savings and other synergies related to the transaction estimated
by the management of EVEREN and First Union, based on the exchange ratio implied
by First Union's closing stock price on May 25, 1999, of $45.63. Earnings
estimates were based on I/B/E/S earnings estimates as of May 25, 1999. Morgan
Stanley observed that, after giving effect to the merger, both EVEREN's and
First Union's fully diluted earnings per share would increase in 2000, compared
to EVEREN and First Union on a stand-alone basis. In addition, Morgan Stanley
reviewed the financial impact of the merger on EVEREN's dividends per share and
book value per share. This analysis showed that, after giving effect to the
merger, EVEREN's dividends per share would increase, while EVEREN's book value
per share would decrease, compared to EVEREN on a stand-alone basis.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, Morgan Stanley considered the results of all its
analyses as a whole and did not attribute any particular weight to any analysis
or factor considered by it. Morgan Stanley believes that selecting any portion
of its analyses, without considering
27
<PAGE>
all analyses, would create an incomplete view of the process underlying its
opinion. In addition, Morgan Stanley may have deemed various assumptions more or
less probable than other assumptions, so that the ranges of valuations resulting
from any particular analysis described above should not be taken to be Morgan
Stanley's view of EVEREN's actual value.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond EVEREN's or First Union's control. The
analyses performed by Morgan Stanley are not necessarily indicative of actual
values, which may be significantly more or less favorable than suggested by such
analyses. Such analyses were prepared solely as a part of Morgan Stanley's
analysis of the fairness from a financial point of view of the merger exchange
ratio to EVEREN's common stockholders (other than First Union and its
affiliates) and were conducted in connection with the delivery of Morgan
Stanley's opinion. The analyses do not purport to be appraisals or to reflect
the prices at which EVEREN might actually be sold.
In addition, as described above, Morgan Stanley's opinion, including Morgan
Stanley's presentation to EVEREN's Board, was one of many factors taken into
consideration by EVEREN's Board in making its determination to approve the
merger. Consequently, the Morgan Stanley analyses described above should not be
viewed as determinative of the opinion of EVEREN's Board or the view of EVEREN
management with respect to the value of EVEREN or whether EVEREN's Board would
be willing to agree to a different consideration. The merger exchange ratio was
determined through negotiations between EVEREN and First Union, and was approved
by the EVEREN Board.
Morgan Stanley is an internationally recognized investment banking and
advisory firm. As part of its investment banking business, Morgan Stanley is
regularly engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuation for estate, corporate and other purposes. In the course of its
business, Morgan Stanley and its affiliates may actively trade the debt and
equity securities of EVEREN and First Union for their own account and for the
accounts of customers, and accordingly, Morgan Stanley may at any time hold a
long or short position in such securities. In the past, Morgan Stanley has
provided financial advisory and investment banking services to EVEREN and First
Union for which services Morgan Stanley received customary fees. Among other
services, Morgan Stanley acted as financial advisor, including rendering
fairness opinions, to First Union in connection with First Union's acquisitions
of CoreStates Financial Corp and The Money Store Inc. in 1998, for which it was
paid fees approximating $[ ] million. In addition, Morgan Stanley acted as
financial advisor to EVEREN in connection with the pending Mentor joint venture
transaction, for which EVEREN has agreed to pay Morgan Stanley a fee of
approximately $ .
Pursuant to a letter agreement, EVEREN has agreed to pay Morgan Stanley a
transaction fee of approximately $[ ] million which is payable upon merger
consummation. In addition, EVEREN has agreed, among other things, to reimburse
Morgan Stanley for all reasonable out-of-pocket expenses incurred in connection
with the services provided by Morgan Stanley, and to indemnify and hold harmless
Morgan Stanley and certain related parties from and against certain liabilities
and expenses, which may include certain liabilities under the federal securities
laws, in connection with its engagement.
EFFECTIVE TIME
The merger will be consummated if EVEREN's stockholders approve the merger,
First Union and EVEREN obtain all required consents and approvals and the other
conditions to the merger are either satisfied or waived. The merger will become
effective on the date and at the time that a certificate of merger reflecting
the merger is filed with the Secretary of State of Delaware, or such later date
or time
28
<PAGE>
as indicated in such certificate. First Union and EVEREN have agreed to cause
the effective date to occur on the date on which First Union and EVEREN agree
or, if they cannot agree, on the date First Union notifies EVEREN not less than
5 days prior thereto if that date is not more than 15 days after the merger
agreement's closing conditions have been satisfied or waived. First Union and
EVEREN each has the right, acting unilaterally, to terminate the merger
agreement if the merger is not completed by December 31, 1999, so long as the
terminating party is not in material breach; provided that First Union may not
terminate to the extent that the delay is caused by another transaction in which
First Union participates. See "--Amendment, Waiver and Termination".
DISTRIBUTION OF FIRST UNION CERTIFICATES
Promptly after the merger is effective, First Union will send transmittal
materials to you for use in exchanging your EVEREN common stock certificates for
First Union common stock certificates. YOU SHOULD NOT SURRENDER YOUR
CERTIFICATES FOR EXCHANGE UNTIL YOU RECEIVE THE LETTER OF TRANSMITTAL AND
INSTRUCTIONS. First Union National Bank, a subsidiary of First Union, acting as
exchange agent, will deliver certificates for First Union common stock (and/or a
check for any fractional share interests or dividends or distributions) once it
receives the certificates representing ALL of your EVEREN common stock shares.
Neither First Union nor the exchange agent will be liable to any stockholder for
any property delivered in good faith to a public official pursuant to any
abandoned property, escheat or similar law.
At the merger effective time, you will become a record holder of the First
Union common stock to which you are entitled under the merger agreement and you
will have no rights as an EVEREN stockholder, other than to receive any dividend
or other distribution with respect to EVEREN common stock with a record date
occurring prior to the effective time. First Union will not pay any dividends or
other distributions to you until you exchange your EVEREN stock certificates for
First Union common stock. After you exchange your EVEREN stock certificates,
First Union common stock certificates together with all paid dividends and other
distributions and, if applicable, a check for any fractional share will be
delivered to you, in each case without interest.
After the effective time of the merger, there will be no transfers of EVEREN
common stock shares on EVEREN's stock transfer books. If certificates
representing shares of EVEREN common stock are presented for transfer after the
merger effective time, they will be canceled and exchanged for certificates
representing the shares of First Union common stock and a check for the amount
to be paid for fractional shares, if any.
FRACTIONAL SHARES
If you would be entitled to receive a fraction of a share of First Union
common stock as a result of the merger, you will instead receive cash, without
interest, equal to the last sale price of First Union common stock on the NYSE
on the trading day immediately preceding the merger effective date, times the
fractional share.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material U.S. federal income tax
consequences of the merger to holders who hold shares of EVEREN common stock as
capital assets. This summary does not address state, local or foreign tax
consequences of the merger.
This summary is based on the federal tax laws that are currently in effect,
which are subject to change at any time, possibly with retroactive effect. It is
not a complete description of all of the tax
29
<PAGE>
consequences of the merger, and may not address the U.S. federal income tax
considerations applicable to certain classes of stockholders, including:
- financial institutions, insurance companies, tax-exempt organizations,
broker-dealers, or traders in securities that elect to mark to market
- persons who hold EVEREN common stock as part of a straddle or conversion
transaction
- persons who are not citizens or residents of the United States, domestic
corporations, or otherwise subject to U.S. federal income taxation on a
net income basis with respect to shares of EVEREN common stock
- persons who acquired or acquire shares of EVEREN common stock pursuant to
the exercise of employee stock options or otherwise as compensation and
- persons who do not hold their shares of EVEREN common stock as a capital
asset.
In connection with the registration statement of which this document is a
part, First Union received an opinion of its special counsel, Sullivan &
Cromwell, to the effect that if consummated, the merger will constitute a
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended (the "CODE"). EVEREN also received an opinion of its counsel, Simpson
Thacher & Bartlett, to the effect that if consummated, the merger will
constitute a reorganization within the meaning of Section 368 of the Code, and
no gain or loss will be recognized by EVEREN stockholders who receive First
Union common stock shares in exchange for EVEREN common stock shares, except
with respect to cash received in lieu of fractional share interests. These
opinions are dated as of the date hereof and are based upon facts,
representations and assumptions set forth therein. In rendering such opinions,
such counsel relied upon representations from EVEREN, First Union and others.
Neither of these tax opinions are binding on the Internal Revenue Service, and
neither First Union nor EVEREN intend to request any ruling from the Internal
Revenue Service as to the U.S. federal income tax consequences of the merger. It
is a condition to merger consummation that counsel deliver the same opinions at
the merger effective date.
Additional material U.S. federal income tax consequences to EVEREN
stockholders exchanging all of their EVEREN common stock for First Union common
stock pursuant to the merger will be as follows:
- the aggregate adjusted tax basis of First Union common stock received by
an EVEREN stockholder will be the same as the aggregate adjusted tax basis
of the EVEREN common stock exchanged therefor minus any amount allocable
to a fractional share interest for which cash is received and
- the holding period of First Union common stock received by an EVEREN
stockholder will include the holding period of the EVEREN common stock
exchanged therefor.
Cash received by an EVEREN stockholder in lieu of a fractional share
interest in First Union common stock will be treated as received in redemption
of the fractional share interest. An EVEREN stockholder would generally
recognize capital gain or loss for U.S. federal income tax purposes equal to the
difference between the amount of cash received and the stockholder's adjusted
tax basis in the fractional share interest. This capital gain or loss would be
long-term capital gain or loss if the EVEREN stockholder's holding period in the
EVEREN common stock shares allocable to the fractional share interest is more
than one year. Long-term capital gain of a non-corporate person is generally
subject to a maximum tax rate of 20% in respect of property held in excess of 12
months.
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON YOUR
PARTICULAR CIRCUMSTANCES, YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISER AS TO
THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICATION AND
EFFECT OF U.S. FEDERAL, STATE AND LOCAL, FOREIGN AND OTHER TAX LAWS.
30
<PAGE>
MANAGEMENT AND OPERATIONS AFTER THE MERGER
The surviving corporation resulting from the merger will be a wholly-owned
subsidiary of First Union. James R. Boris will be Chief Executive Officer of
that subsidiary.
The directors and officers of First Union before the merger will continue to
be the directors and officers of First Union after the merger until such time as
their successors are duly elected and qualified.
POST-MERGER COMPENSATION AND BENEFITS
After the merger, employees of EVEREN who become employees of First Union
will be generally entitled to participate in the pension, benefit, welfare,
incentive compensation, sick pay, vacation, fringe benefit and similar plans of
First Union on substantially the same terms and conditions applied to employees
of First Union. For the purpose of determining eligibility to participate in
those plans and the vesting of benefits, but not for the accrual of benefits,
First Union will give effect to years of service with EVEREN, as if that service
had been with First Union. After the merger, First Union will honor in
accordance with their terms all individual compensation contracts and all
provisions for vested benefits or other vested amounts earned or accrued through
the merger effective date under EVEREN's compensation and benefit plans.
The merger agreement also contains provisions relating to payment of
severance, retiree welfare benefits, commissions and incentive bonuses after the
merger.
TREATMENT OF OUTSTANDING OPTIONS
On the merger effective date, each outstanding option to purchase EVEREN
common stock under EVEREN's stock option plans will be converted into an option
to acquire, on the same terms and conditions as were applicable under the
applicable EVEREN stock option, a number of First Union common stock shares
equal to:
- the number of EVEREN common stock shares subject to that EVEREN stock
option, multiplied by
- the exchange ratio,
at an exercise price per share equal to:
- the aggregate exercise price for the EVEREN common stock shares which were
purchasable pursuant to that EVEREN stock option, divided by
- the exchange ratio.
RETENTION POOL
The merger agreement provides that First Union will establish a retention
pool, consisting of restricted First Union common stock with a value equal to
approximately $87 million, based on the average First Union common stock price
used in calculating the exchange ratio. The restricted shares will be awarded to
a number of EVEREN employees, mostly investment consultants, in the amounts
determined by EVEREN's Chief Executive Officer after consultation with and
approval by First Union's management. Awards made under the retention pool will
be governed by the terms of First Union's 1998 Stock Incentive Plan. Generally,
transfer restrictions on the restricted shares will lapse over a three-year
period, subject to accelerated vesting upon specified employment terminations
and subject to the retention pool participant continuing as a First Union
employee at the vesting time. If a retention pool participant forfeits their
right to receive the restricted stock, that participant's shares will be
cancelled.
31
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of EVEREN's management and Board of Directors have interests
in the merger in addition to their interests as EVEREN stockholders. EVEREN's
Board was aware of these interests and considered them, among other matters, in
approving the merger agreement.
EMPLOYMENT AGREEMENTS. As a requirement of First Union entering into the
merger agreement, four EVEREN executives, one of whom is also an EVEREN
director, entered into employment agreements with First Union that will become
effective on the merger effective date. Those EVEREN executives are: James R.
Boris, EVEREN's Chairman and Chief Executive Officer; David M. Greene, EVEREN's
Senior Executive Vice President and Director of Client Services; Arthur J.
McGivern, EVEREN's Senior Executive Vice President, Treasurer and Chief
Financial Officer; and Thomas R. Reedy, EVEREN's Senior Executive Vice President
and Director of Capital Markets. The employment agreements are similar in most
respects and are described collectively, except to the extent that their terms
materially differ. Mr. Boris's agreement expires one year after the merger
effective date, Mr. Greene's agreement expires December 31, 2000, and Messrs.
McGivern's and Reedy's agreements expire December 31, 2002.
The employment agreements provide for minimum annual compensation which
consists of a minimum annual base salary and a guaranteed minimum annual bonus.
Each employment agreement also provides that the executive will be eligible to
participate in the group benefit and qualified retirement plans which are
generally available to all First Union employees. In addition, the employment
agreements provide for a gross-up payment to be made to the executive, if
necessary, to eliminate the effects of any excise tax levied under Section 4999
of the Code on the payments made under the agreements. The employment agreements
contain covenants which, upon the termination of the executive for "cause" (as
defined in the agreements) or by the executive for any reason, restrict the
executive for specified time periods from soliciting First Union clients or
employees or, in Mr. Boris's case, competing with First Union in the securities
brokerage, investment management or investment advisory businesses.
Mr. Boris's employment agreement provides that First Union will pay him a
minimum annual salary of $750,000, and a bonus in the year 2000 not less than
$1,500,000. The agreement provides that First Union will grant a number of
restricted First Union common stock shares with a value equal to $1,650,000,
based on the average market price of First Union common stock used in
calculating the merger exchange ratio (but not less than 30,000 shares), and
stock options with a value equal to $11,121,300 (but not less than 670,000
options), on the merger effective date. The restricted stock awards will vest
one year after the merger effective date. $9,046,455 worth of Mr. Boris's stock
options vest on the merger effective date and the remaining options vest on the
merger effective date's first anniversary. The option exercise price will be the
fair market value of First Union common stock on the merger effective date. Mr.
Boris's agreement guarantees him a 1999 cash bonus equal to $1,250,000 times a
percentage equaling the portion of calendar year 1999 which ends on the merger
effective date. Upon certain agreement terminations, all restricted stock awards
and stock options vest. However, if Mr. Boris violates certain noncompetition
and nonsolicitation provisions in the employment agreement, his unvested stock
options will become subject to forfeiture. The $9,046,455 worth of stock options
are not subject to forfeiture and are intended to replace certain amounts
otherwise owed to Mr. Boris under his existing employment contract with EVEREN.
That EVEREN employment agreement will be superceded by Mr. Boris's First Union
employment agreement.
Messrs. Greene, McGivern and Reedy have substantially similar First Union
employment agreements. Each provides for minimum annual compensation for 1999:
Mr. Greene--$325,000 salary and bonus not less than $500,000; Mr.
McGivern--$250,000 salary and bonus not less than $310,000; and Mr.
Reedy--$300,000 salary and bonus not less than $450,000. Starting January 1,
2000, the agreements provide for minimum annual compensation as follows: Mr.
Greene--$325,000 salary plus
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<PAGE>
bonus not less than $635,000; Mr. McGivern--$275,000 salary plus bonus not less
than $275,000; and Mr. Reedy--$300,000 salary plus bonus not less than $600,000.
On the merger effective date, Mr. Greene will receive restricted First Union
common stock shares with a value equal to $220,000, based on the average market
price of First Union common stock used in calculating the merger exchange ratio
(but not less than 4,000 shares) and stock options worth $215,787 (but not less
than 13,000 options), Mr. McGivern will receive restricted First Union common
stock shares with a value equal to $137,500, based on the average market price
of First Union common stock used in calculating the merger exchange ratio (but
not less than 2,500 shares), and stock options worth $82,995 (but not less than
5,000 options), and Mr. Reedy will receive restricted First Union common stock
shares with a value equal to $192,500, based on the average market price of
First Union common stock used in calculating the merger exchange ratio (but not
less than 3,500 shares), and stock options worth $132,792 (but not less than
8,000 options). Messrs. McGivern and Reedy will also receive restricted stock
awards and stock options in equivalent amounts to their respective effective
date awards on the merger effective date's first and second anniversaries. Mr.
Greene's restricted stock awards and stock options vest on December 31, 2000.
Messrs. McGivern's and Reedy's restricted stock awards and stock options vest in
three equal annual installments beginning one year from the grant date. In lieu
of amounts owed to Messrs. Greene, McGivern and Reedy under their respective
existing employment agreements with EVEREN, if Messrs. Greene, McGivern or Reedy
do not violate certain non-solicitation provisions in their respective
agreements, First Union will pay these executives cash payments in the following
amounts: Mr. Greene--$2,650,000; Mr. McGivern--$1,750,000; and Mr.
Reedy--$2,400,000. Mr. Greene will receive 1/3 of this payment on the merger
effective date, 1/3 six months later and 1/3 on the merger effective date's
first anniversary. Messrs. McGivern and Reedy will receive 1/3 of their
respective payments on the merger effective date, 1/3 one year later and 1/3 six
months following the second payment.
ACCELERATION OF OPTIONS, RESTRICTED STOCK AND OTHER BENEFITS. The merger
will result in accelerated vesting under EVEREN's 1995 Stock Plan, 1995
Non-employee Directors Plan, 1996 Restricted Stock Incentive Plan (except for
any shares attributable to incentive deferred compensation determined under the
EVEREN Securities, Inc. Incentive Deferred Compensation Plan), 1996 New Employee
Restricted Stock Purchase Plan, 401(k) and Employee Stock Ownership Plan, Branch
Managers' Voluntary Deferred Compensation Plan, and Supplemental Deferred
Compensation Plan (collectively, the "PLANS"). Accordingly, in accordance with
the terms of the merger agreement, the Plans, and the awards granted and
agreements entered into thereunder, on the merger effective date (1) all
outstanding stock options granted under the Plans will become exercisable and
fully vested, (2) the restrictions on all outstanding shares of restricted stock
awarded under the Plans (except for any shares attributable to incentive
deferred compensation under the EVEREN Securities, Inc. Incentive Deferred
Compensation Plan) will lapse and such shares will become fully vested and no
longer subject to forfeiture, and (3) all other account balances and benefits
accrued under the Plans, including all account balances in EVEREN's 401(k) and
Employee Stock Ownership Plan and deferred compensation accrued under the Plans,
will become fully vested. The following table indicates, for the five most
highly compensated executive officers, all other executive officers as a group
and each director, (1) the number of such stock options for which exercisability
and vesting will accelerate, (2) the value of such options, (3) the number of
such restricted shares which will vest, and (4) the value of such shares. The
value of a share of EVEREN common stock was assumed to be $31.00, the
approximate value of the First Union common stock to be received for each EVEREN
share in the merger.
33
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS
FOR WHICH NUMBER OF SHARES OF
EXERCIS- ABILITY RESTRICTED STOCK
WILL BE VALUE OF FOR WHICH VESTING VALUE OF
EXECUTIVE OFFICERS ACCELERATED SUCH OPTIONS WILL BE ACCELERATED SUCH SHARES
---------------- ------------ ------------------- ------------
<S> <C> <C> <C> <C>
James R. Boris............................... 368,893 $6,197,051 79,339 $ 2,459,509
Stephen G. McConahey......................... 164,902 3,573,268 47,112 1,460,472
David M. Greene.............................. 143,681 2,529,499 19,202 595,262
Thomas R. Reedy.............................. 115,585 2,322,665 24,615 763,065
Arthur J. McGivern........................... 48,202 847,757 14,968 464,008
All other executive officers as a group...... 97,386 2,053,691 24,251 751,331
OTHER DIRECTORS
William T. Esrey............................. 9,750 105,641
Donald P. Jacobs............................. 6,000 24,187
Jack Kemp.................................... 8,250 67,218
Homer J. Livingston.......................... 9,750 105,641
James J. O'Connor............................ 3,000 7,312
Samuel K. Skinner............................ 6,000 24,187
William C. Springer.......................... 9,750 105,641
Donna F. Tuttle.............................. 6,000 24,187
</TABLE>
INDEMNIFICATION AND INSURANCE. The merger agreement provides that for a
period of six years after the merger, First Union will indemnify EVEREN's
directors and officers against liabilities arising from facts or events
occurring prior to the merger to the extent EVEREN is permitted to indemnify its
directors and officers under the Delaware General Corporation Law, and EVEREN's
certificate of incorporation and bylaws. The merger agreement also provides that
for six years after the merger, First Union will provide directors' and
officers' liability insurance with respect to claims arising from facts or
events occurring prior to the merger.
OTHER INFORMATION REGARDING DIRECTORS, EXECUTIVE OFFICERS AND FIVE PERCENT
STOCKHOLDERS
Information concerning EVEREN's and First Union's directors and officers,
executive compensation and ownership of common stock by management and principal
stockholders is contained in the Annual Reports on Form 10-K for the fiscal year
ended December 31, 1998 of EVEREN and First Union, respectively, and is
incorporated herein by reference.
See "Where You Can Find More Information" on page .
CONDITIONS TO COMPLETION
EVEREN's and First Union's obligations to consummate the merger are subject
to the satisfaction or written waiver of the following conditions:
- EVEREN's stockholders adopting the merger agreement
- receiving the required regulatory and other approvals described below
under "--Regulatory Approvals", without any conditions which would,
following the merger effective time, have a material adverse effect on
EVEREN or adversely affect First Union in a material way
- no court or regulatory authority taking any action prohibiting the
merger's consummation
- the SEC declaring effective the registration statement of which this
document is a part and no stop order or threatened stop order existing
- receiving all state securities laws permits or authorizations
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<PAGE>
- the First Union common stock shares issuable in the merger being approved
for NYSE listing
- the representations and warranties of each party being true and correct in
all material respects, and each party performing in all material respects
all of the obligations required to be performed by it pursuant to the
merger agreement, and delivering certificates confirming satisfaction of
the foregoing
- EVEREN receiving the tax opinion of Simpson Thacher & Bartlett described
under "--Federal Income Tax Consequences" above
- First Union receiving the tax opinion of Sullivan & Cromwell described
under "--Federal Income Tax Consequences" above
- EVEREN's independent auditors delivering comfort letters with respect to
EVEREN's consolidated financial position and
- at least two of the four employment agreements referred to above under
"--Interests of Certain Persons in the Merger" (one of which is Mr.
Boris's employment agreement) remaining in full force and effect, except
as a result of death or disability.
No assurances can be provided as to when or if all of the conditions
precedent to the merger can or will be satisfied or waived by the appropriate
party. As of the date of this document, First Union and EVEREN have no reason to
believe that any of the conditions set forth above will not be satisfied.
REGULATORY APPROVALS
FEDERAL RESERVE BOARD. The merger is subject to prior approval by the
Federal Reserve Board under Section 4 of the Bank Holding Company Act of 1956.
First Union filed an application with the Federal Reserve Board seeking approval
of the merger on , 1999, and that application is currently pending.
The Federal Reserve Board, when considering a transaction such as the merger,
considers whether the performance of First Union's and EVEREN'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 First Union and EVEREN and the effect of the merger
on those resources.
The Federal Reserve Board may not approve the merger if it would result in a
monopoly or if its effect would be substantially to lessen competition or if it
would in any other manner result in a restraint of trade, unless the Federal
Reserve Board finds that the anticompetitive effects of the merger are clearly
outweighed by the probable effect of the merger in meeting the convenience and
needs of the communities to be served.
OTHER REQUISITE APPROVALS AND CONSENTS. Approvals also will be required
from certain regulatory agencies in connection with changes, as a result of the
merger, in the ownership of certain businesses EVEREN controls. These agencies
include certain state securities authorities. Approvals or notices are also
required by the NYSE, the Commodity Futures Trading Commission, the NASD, the
Securities Investor Protection Corporation and other self-regulatory
organizations and may be required by certain other regulatory agencies.
STATUS OF REGULATORY APPROVALS AND OTHER INFORMATION. First Union and
EVEREN have filed or shortly will file all applications and notices and will
promptly take other appropriate action with respect to any requisite approvals
or other action of any regulatory authority. The merger is conditioned upon,
among other things:
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- receiving all requisite regulatory approvals, including the approvals of
the Federal Reserve Board and, to the extent necessary, other authorities
- the termination or expiration of all statutory or regulatory waiting
periods in respect thereof and
- no such approvals containing conditions, restrictions or requirements
which would, after the merger effective time, have a material adverse
effect on EVEREN or adversely affect First Union in a material way.
THE MERGER CANNOT PROCEED IN THE ABSENCE OF THE REQUISITE REGULATORY
APPROVALS. THERE CAN BE NO ASSURANCES THAT ALL REGULATORY APPROVALS WILL BE
OBTAINED OR AS TO THE APPROVAL DATES. THERE CAN ALSO BE NO ASSURANCE THAT THOSE
APPROVALS WILL NOT CONTAIN A CONDITION THAT CAUSES THOSE APPROVALS TO FAIL TO
SATISFY THE MERGER AGREEMENT'S CONDITIONS TO CONSUMMATE THE MERGER.
See "--Effective Time", "--Conditions to Completion" and "--Amendment,
Waiver and Termination".
AMENDMENT, WAIVER AND TERMINATION
Prior to the merger effective time, any merger agreement provision may be
waived, amended or modified, by written agreement between First Union and
EVEREN, except that after EVEREN's stockholders adopt the merger agreement no
amendment which would require EVEREN stockholders' approval may be made without
such approval.
The merger agreement may be terminated at any time prior to the merger
effective date by mutual consent of EVEREN and First Union. In addition, the
merger agreement may be terminated prior to the merger effective date by either
First Union or EVEREN if:
- a representation, warranty, covenant or other agreement contained in the
merger agreement is not true and correct or complied with, and such
circumstance would prevent a condition to the merger from being satisfied,
and that noncompliance cannot be or has not been cured within 30 days
after written notice to the breaching party
- the merger is not completed by December 31, 1999, provided the terminating
party is not then in material breach of the merger agreement and provided
if the delay directly results from First Union's participation in another
acquisition transaction, First Union may not terminate the merger
agreement during that delay or
- the EVEREN stockholders fail to approve the merger at the meeting.
First Union may terminate the merger agreement if EVEREN's Board withdraws,
modifies or changes its recommendation to approve the merger in a manner adverse
in any respect to First Union's interests. First Union may also terminate the
merger agreement if EVEREN's Board participates in, or authorizes the
participation in negotiations with respect to, an acquisition proposal from a
third party. EVEREN may terminate the merger agreement on three business days
notice to First Union if EVEREN has not violated its obligations not to solicit
an acquisition proposal from a third party, described below, if EVEREN
contemporaneously enters into an agreement to effect a "superior proposal". A
superior proposal is defined in the merger agreement as an acquisition proposal
made by a third party, which in the good faith judgment of EVEREN's Board,
taking into account, to the extent deemed appropriate by EVEREN's Board, the
various legal, financial and regulatory aspects of the proposal and the person
making the proposal, if accepted is reasonably likely to be consummated and if
consummated is reasonably likely to result in a more favorable transaction than
the transaction contemplated by the merger agreement considering, among other
things, and to the extent deemed appropriate in good faith by EVEREN's Board,
the long-term prospects and interests of EVEREN and its stockholders and other
relevant constituencies.
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CONDUCT OF BUSINESS PENDING THE MERGER
The following is a general summary of the material agreements EVEREN and
First Union have regarding actions prior to the merger. We urge you to read the
merger agreement (which is attached as ANNEX A) for a full description of these
agreements.
EVEREN. EVEREN has agreed that it will operate its business in the ordinary
course consistent with past practice through the merger effective time. In
addition, it has agreed not to engage in the activities listed below:
- issue any additional shares of EVEREN common stock or any rights to
acquire EVEREN common stock except pursuant to already existing rights to
acquire EVEREN common stock or similar stock-based employee rights,
provided if EVEREN common stock is issued pursuant to the foregoing, those
shares will be purchased in the open market and shall not be treasury or
original issue shares unless First Union otherwise agrees
- make any distributions with respect to EVEREN common stock, other than
regular quarterly cash dividends in an amount not more than $0.07 per
share, or change its capital structure
- enter into or amend any employment related agreements, grant any salary or
wage increase or increase any employee related benefits, except in the
ordinary course of business, as required by law, as required by contract
or in connection with new hires
- enter into or amend, except as may be required by law or contemplated by
the merger agreement, any employee related benefit plan or take any action
to accelerate the vesting or exercisability of any benefits payable under
any employee related benefit plans
- dispose of any material assets, business or properties, except in the
ordinary course of business
- acquire any material assets, business, or properties, except in the
ordinary course of business
- amend its certificate of incorporation or by-laws (or similar governing
documents)
- make any change in its accounting principles, practices or methods, other
than as may be required by generally accepted accounting principles
- except in the ordinary course of business consistent with past practice,
enter into, terminate or amend any material contract
- settle any claim or proceeding except for claims involving solely money
damages in an amount not to exceed $250,000 individually or more than
$500,000 per month in the aggregate
- knowingly take any action which would materially interfere with the merger
agreement or would prevent the intended tax treatment of the merger
- authorize or make any capital expenditures, other than in the ordinary
course of business consistent with past practice in amounts not exceeding
$500,000 individually or $2,000,000 in the aggregate
- except as required by law, change or fail to follow its interest rate and
other risk management policies, procedures or practices in a manner
reasonably likely to result in a material adverse effect on EVEREN
- initiate any new business activity that would be impermissible for a "bank
holding company" under the Bank Holding Company Act
- acquire ownership or control of 5% or more of any class of an issuer's
voting securities or 25% or more of an issuer's equity, other than in
connection with underwriting activities
- borrow money other than in the ordinary course of business
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- make or change any material tax related practice other than in the
ordinary course of business or
- agree or commit to do any of the foregoing.
NONSOLICITATION. EVEREN has also agreed that it will not solicit or
encourage inquiries or proposals with respect to, or furnish any nonpublic
information relating to or participate in any negotiations or discussions
concerning, any acquisition or purchase of all or a substantial portion of the
assets of, or a substantial equity interest in, EVEREN or any of its
subsidiaries or any merger or other business combination with EVEREN or any of
its subsidiaries (each, an "ACQUISITION PROPOSAL") other than as contemplated by
the merger agreement. EVEREN agreed to instruct its officers, directors, agents,
advisors and affiliates to refrain from taking any action that would conflict
with the preceding sentence. EVEREN agreed to notify First Union immediately if
any such inquiries or proposals are received by, or any such negotiations or
discussions are sought to be initiated with, EVEREN or its subsidiaries.
However, if EVEREN is not otherwise in breach or violation of this
nonsolicitation covenant, until EVEREN's stockholders adopt the merger
agreement, EVEREN's Board may, directly or indirectly through representatives:
- provide information to, and request information from, a person that
submits a bona fide acquisition proposal that EVEREN's Board in good faith
determines is reasonably likely to constitute a "superior proposal", as
defined under "--Amendment, Waiver and Termination" above, and engage in
discussions with that person for the sole purpose of ascertaining whether
the acquisition proposal is in fact a "superior proposal" and
- engage in negotiations or discussions concerning the acquisition proposal
if EVEREN's Board determines in good faith, after consultation with and
based on the advice of outside counsel and a nationally recognized
financial advisor, that the acquisition proposal constitutes a "superior
proposal".
EVEREN agreed to immediately notify First Union of the receipt of any
acquisition proposal and shall promptly notify First Union of any significant
actions taken with respect thereto. EVEREN also agreed to cease and cause to be
terminated any activities, discussions or negotiations conducted on or prior to
the merger agreement's date with any parties other than First Union.
DIVIDENDS. EVEREN also agreed to coordinate with First Union regarding the
record dates for any EVEREN common stock dividends, so that EVEREN stockholders
do not receive two dividends or fail to receive one dividend for any single
calendar quarter with respect to EVEREN common stock and First Union common
stock they receive in the merger.
FIRST UNION. First Union has agreed that until the merger effective time,
it will not:
- make any extraordinary dividend
- knowingly take any action that is reasonably likely to materially
interfere with the merger agreement or would prevent or impede the
intended tax treatment of the merger
- knowingly take any action that is reasonably likely to result in any
representation or warranty being untrue in any material respect or any
conditions to the merger not being satisfied or
- agree or commit to do any of the foregoing.
OTHER COVENANTS. The merger agreement contains additional agreements
relating to, among other things:
- the preparation, filing, and distribution of this document and First
Union's filing of the registration statement on Form S-4 of which this
document is a part
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- the recommendation of the merger by EVEREN's Board of Directors
- convening and holding the meeting of the EVEREN stockholders as soon as
practicable
- access to information and cooperation regarding certain filings with
governmental and other agencies and organizations and
- public announcements.
CERTAIN REPRESENTATIONS AND WARRANTIES
The merger agreement contains representations and warranties, subject to
certain qualifications, made by EVEREN and First Union to each other as to,
among other things:
- their organization and the organization of their subsidiaries
- their capital structures
- power and authority to carry on business
- authorization to enter into the contemplated transactions
- consummation of the transactions not constituting a violation of, or
requiring consent under, organizational documents, contracts and laws
- accuracy of recent SEC and other reports
- accuracy of recent financial statements
- absence of material changes or events
- absence of litigation and regulatory action
- broker's and finder's fees
- tax-free nature of the merger
- applicability of rights agreements to the merger and
- year 2000 matters.
In addition, the merger agreement contains representations and warranties,
subject to certain qualifications, made by EVEREN as to, among other things:
- absence of undisclosed liabilities
- title to properties
- compliance with laws
- material contracts
- employee benefits and labor matters
- insurance
- state takeover laws
- environmental matters
- taxes
- derivatives
- accounting controls
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- intellectual property and
- investment advisory activities.
The merger agreement also contains representations and warranties, subject
to certain qualifications, made by First Union as to, among other things:
- validity of First Union's common stock to be issued in the merger and
- ownership of less than 1% of EVEREN's common stock.
EXPENSES AND FEES
Each party will be responsible for all expenses it incurs in connection with
negotiating and consummating the merger. First Union and EVEREN have agreed,
however, to share equally any expenses payable in connection with this document.
ACCOUNTING TREATMENT
First Union expects to account for the merger as a "purchase", as that term
is used under generally accepted accounting principles. Under purchase
accounting, EVEREN's assets and liabilities as of the merger effective date will
be recorded at their respective fair values and added to those of First Union.
Any excess of the purchase price over those values is recognized as goodwill.
Financial statements of First Union issued after the merger would reflect such
values and would not be restated retroactively to reflect EVEREN's historical
financial position or operating results. First Union expects to purchase in the
open market the number of First Union common stock shares expected to be issued
in the merger.
STOCK EXCHANGE LISTING OF FIRST UNION COMMON STOCK
First Union has agreed to use its reasonable best efforts to list on the
NYSE, prior to the merger effective date, subject to official issuance notice,
the First Union common stock shares to be issued to EVEREN common stockholders
in the merger.
RESALES OF FIRST UNION COMMON STOCK
First Union common stock shares to be issued in the merger will be freely
transferable under the Securities Act, except for shares issued to any
stockholder deemed to be an "affiliate" (generally including directors, certain
executive officers, and beneficial owners of 10% or more of any class of capital
stock) of EVEREN for purposes of Securities Act Rule 145 as of the meeting date.
Affiliates may not sell their First Union common stock shares acquired in the
merger except pursuant to an effective registration statement under the
Securities Act, Securities Act Rule 145 or another applicable exemption from the
Securities Act's registration requirements.
EVEREN agreed in the merger agreement to use its reasonable best efforts to
cause each person who may be deemed to be an EVEREN "affiliate", other than
EVEREN's 401(k) and Employee Stock Ownership Plan, to execute and deliver to
First Union an affiliate's agreement. Those affiliates agreed, among other
things, not to offer to sell, transfer or otherwise dispose of any First Union
common stock shares distributed to them in the merger except in compliance with
Rule 145, or in a transaction that is otherwise exempt from the Securities Act's
registration requirements, or in an offering registered under the Securities
Act. First Union may place restrictive legends on First Union common stock
certificates issued to all EVEREN "affiliates" under Rule 145. This document may
not be used by EVEREN affiliates to resell the First Union common stock they
receive in the merger.
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STOCK OPTION AGREEMENT
As a condition to First Union's entering into the merger agreement, EVEREN
and First Union entered into the stock option agreement. Pursuant to the stock
option agreement, EVEREN granted First Union an option to purchase up to 19.9%
of the issued and outstanding EVEREN common stock for $28.4375 per share, the
closing price of EVEREN common stock following merger announcement on April 26,
1999. Purchasing any EVEREN common stock shares pursuant to the option is
subject to compliance with applicable law, including receiving any necessary
approval under the Bank Holding Company Act.
First Union may exercise the option, in whole or in part, if both an
"Initial Triggering Event" and a "Subsequent Triggering Event" have occurred
prior to an "Exercise Termination Event".
"INITIAL TRIGGERING EVENT" means any of the following events:
- EVEREN, without having received First Union's prior written consent, shall
enter into an agreement to engage in an "Acquisition Transaction" or
EVEREN's Board shall recommend that the EVEREN stockholders approve any
Acquisition Transaction or EVEREN's 401(k) and Employee Stock Ownership
Plan trustee determines to vote EVEREN common stock shares over which it
exercises discretion against the merger after the trustee is aware that a
third party has made or disclosed an intention to make a bona fide
proposal to engage in an Acquisition Transaction. "ACQUISITION
TRANSACTION" means:
- a merger or consolidation, or any similar transaction, involving EVEREN
or an EVEREN subsidiary
- a purchase, lease or other acquisition by a third party of all or any
substantial part of EVEREN's assets or
- a purchase or other acquisition of securities representing 15% or more
of the voting power of EVEREN
- any person other than First Union or EVEREN's 401(k) and Employee Stock
Ownership Plan, acquires beneficial ownership of 15% or more of the
outstanding EVEREN common stock
- the EVEREN stockholders fail to approve the merger at the meeting or the
meeting is not held in violation of the merger agreement if, prior to the
meeting, or if the meeting is not held, then prior to termination of the
merger agreement, any person shall have made, or disclosed an intention to
make, a bona fide proposal to engage in an Acquisition Transaction
- EVEREN's Board fails to recommend or withdraws or modifies, or publicly
announces its intention to withdraw or modify, in any manner adverse in
any respect to First Union its recommendation that EVEREN's stockholders
approve the merger, or EVEREN engages in negotiations concerning an
Acquisition Transaction pursuant to Section 5.07(b) of the merger
agreement described above under "--Conduct of Business Pending the Merger"
- EVEREN knowingly breaches any covenant or any representation contained in
the merger agreement in anticipation of engaging in, or after a proposal
by a third party to engage in, an Acquisition Transaction, and following
such breach, First Union is entitled to terminate the merger agreement or
- EVEREN terminates the merger agreement in order to enter into or shall
have entered into an agreement effecting a "superior proposal" as defined
under "--Amendment, Waiver or Termination".
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"SUBSEQUENT TRIGGERING EVENT" means any of the following:
- the acquisition by any person other than First Union or EVEREN's 401(k)
and Employee Stock Ownership Plan of 25% or more of the outstanding EVEREN
common stock
- the occurrence of an Initial Triggering Event described in the first
bullet point of the definition of Initial Triggering Event above, except
that the percentage of voting shares to be acquired is 25% rather than 15%
or
- EVEREN enters into an agreement effecting a "superior proposal".
"EXERCISE TERMINATION EVENT" means each of the following:
- the merger effective time
- termination of the merger agreement prior to the occurrence of any Initial
Triggering Event or Subsequent Triggering Event or
- the passage of 12 months, or such longer period as provided in the stock
option agreement due to regulatory delay, after termination of the merger
agreement if such termination occurs simultaneously with or follows an
Initial Triggering Event or a Subsequent Triggering Event.
Under applicable law, First Union 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 EVEREN common stock shares. Certain other regulatory
approvals may also be required before such an acquisition could be completed.
At any time after a "Repurchase Event", at the request of the option holder,
delivered prior to an Exercise Termination Event, or such later period as
provided in the stock option agreement due to regulatory delay, EVEREN must
repurchase the option from such holder at a price equal to the amount by which
the "market/offer price" exceeds $28.4375, multiplied by the number of shares
for which the option may then be exercised; provided that EVEREN is not required
to pay more than $35 million in the aggregate for all such repurchases.
A "REPURCHASE EVENT" means any of the following:
- the acquisition by any person other than First Union or EVEREN's 401(k)
and Employee Stock Ownership Plan of 50% or more of the outstanding EVEREN
common stock or
- the consummation of an Acquisition Transaction described in the first
bullet point of the definition of Initial Triggering Event, except that
the percentage referred to in the third sub-bullet point is 50%.
The "MARKET/OFFER PRICE" is the highest of:
- the price per share of EVEREN common stock in a tender or exchange offer
- the price per share pursuant to an Acquisition Transaction agreement with
a third party
- the highest closing price for a share of EVEREN common stock within the
six-month period preceding the exercise of the repurchase right or
- the price per share implied in any sale of all or substantially all assets
of EVEREN.
First Union may, at any time following a Repurchase Event and prior to an
Exercise Termination Event, surrender the option to EVEREN in exchange for a net
cash fee (taking into account any cash First Union previously received for
shares acquired under the option) equal to $35 million.
The stock option agreement gives First Union the right to require EVEREN to
file up to two registration statements under the Securities Act in order to
permit the sale or other disposition of any
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shares of EVEREN's common stock purchased pursuant to the option, and allows
First Union to sell such shares in any other registrations EVEREN may make,
subject to certain limitations.
The stock option agreement would have the effect of making an acquisition or
other combination of EVEREN by or with a third party more costly because the
acquiror in any such transaction would have to acquire or otherwise provide for
any option shares issued under the stock option agreement and/or absorb the cost
of the repurchase or surrender right. Moreover, following consultation with its
independent accountant, the management of EVEREN believes that if the option
becomes exercisable it is likely during the following two years to prohibit any
other acquiror of EVEREN from accounting for any such acquisition by using the
pooling of interests accounting method. Accordingly, the stock option agreement
may discourage a third party from proposing a competing transaction, including
one that might be more favorable to EVEREN stockholders than the merger.
No event giving rise to exercise of the option has occurred as of the date
of this document.
A copy of the stock option agreement is attached as ANNEX C to this
document, 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 EVEREN RIGHTS AGREEMENT
In connection with the execution of the merger agreement, EVEREN amended its
Rights Agreement between EVEREN and Harris Trust and Savings Bank to provide,
among other things, that
- the execution and delivery of the stock option agreement and any
acquisition of EVEREN common stock by First Union (and certain related
persons) upon exercise thereof, or as contemplated by the merger
agreement, will not cause the EVEREN Rights to become exercisable and
- the EVEREN Rights may not become exercisable at any time from and after,
and the EVEREN Rights Agreement will terminate on, the merger effective
date.
"EVEREN Rights" is defined on page . See also "Certain Differences in the
Rights of First Union Stockholders and EVEREN Stockholders--Stockholder
Protection Rights Plans".
VOTING AGREEMENTS
As a requirement of First Union entering into the merger agreement, five
EVEREN directors and executive officers who hold approximately % of the EVEREN
common stock outstanding on the record date agreed to vote all their shares in
favor of the merger and to not vote any of their shares in favor of any other
"Acquisition Proposal". A copy of the form of voting agreement executed by each
of these directors and executive officers is attached as ANNEX B. These
stockholders have also agreed not to dispose any of their shares unless the
buyer or transferee also agrees to vote those shares in favor of the merger.
Accordingly, the merger agreement's approval will require the additional
affirmative vote of the holders of approximately % of the EVEREN common stock
outstanding on the record date in order for the merger agreement to be approved
at the meeting. See "Special Meeting--Vote Required". The voting agreements
would terminate upon termination of the merger agreement.
NO DISSENTERS' OR APPRAISAL RIGHTS
You are not entitled to dissenters' or appraisal rights under Delaware law
in connection with the merger because EVEREN common stock was listed on the NYSE
on the record date for the meeting and the shares of First Union common stock
that you will be entitled to receive in the merger will be listed on the NYSE at
the merger effective time.
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DESCRIPTION OF FIRST UNION CAPITAL STOCK
THE FOLLOWING INFORMATION OUTLINES SOME OF THE PROVISIONS IN FIRST UNION'S
ARTICLES OF INCORPORATION, BYLAWS AND THE NORTH CAROLINA BUSINESS CORPORATION
ACT. THE INFORMATION IS QUALIFIED IN ALL RESPECTS BY REFERENCE TO THE PROVISIONS
OF FIRST UNION'S ARTICLES, BYLAWS AND THE NCBCA.
AUTHORIZED CAPITAL
First Union's authorized capital stock consists of 2,000,000,000 shares of
common stock, 10,000,000 shares of preferred stock, no-par value per share, and
40,000,000 shares of Class A preferred stock, no-par value per share. As of
, 1999, there were shares of First Union common stock,
no shares of First Union preferred stock and no shares of First Union class A
preferred stock issued and outstanding. The First Union preferred stock and
First Union class A preferred stock are each issuable in one or more series, and
with respect to any series, First Union's board of directors is authorized to
fix the number of shares, dividend rates, liquidation prices, liquidation rights
of holders, redemption, conversion and voting rights and other series terms.
First Union class A preferred stock and First Union preferred stock shares that
First Union acquires may be reissued.
FIRST UNION COMMON STOCK
Subject to the prior rights of any First Union preferred stockholders and
any First Union class A preferred stockholders, First Union common stockholders
are entitled to receive such dividends as the First Union board of directors may
declare. In the event of liquidation or dissolution, First Union common
stockholders are entitled to receive First Union's net assets remaining after
paying all liabilities and after paying all holders of First Union preferred
stock and First Union class A preferred stock the full preferential amounts to
which those holders are entitled.
Pursuant to an indenture between First Union and Wilmington Trust Company,
as trustee, under which some First Union junior subordinated debt securities
were issued, First Union agreed that it generally will not pay any dividends on,
or acquire or make a liquidation payment with respect to, any of First Union's
capital stock, including First Union common stock, First Union preferred stock
and First Union class A preferred stock if, at that time, there is a default
under the indenture or a related First Union guarantee or First Union has
deferred interest payments on the securities issued under the indenture.
Subject to the prior rights of any First Union preferred stockholders and
any First Union class A preferred stockholders, First Union common stockholders
have all voting rights, each share being entitled to one vote on all matters
requiring stockholder action and in electing directors. First Union common
stockholders have no preemptive, subscription or conversion rights. Outstanding
First Union common stock shares are fully paid and nonassessable, and the First
Union common stock issuable to the EVEREN stockholders in the merger will also
be fully paid and nonassessable.
FIRST UNION PREFERRED STOCK
All shares of First Union preferred stock must rank equally 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.
FIRST UNION CLASS A PREFERRED STOCK
First Union class A preferred stock shares rank on a parity with or junior
to (but not prior or superior to) First Union preferred stock, respecting the
right to receive dividends and/or the right to receive payments out of First
Union's net assets upon any liquidation, dissolution or winding up.
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Subject to the foregoing and to the terms of any particular First Union class A
preferred stock series, each series of First Union class A preferred stock may
vary as to priority.
FIRST UNION RIGHTS PLAN
Each First Union common stock share has attached to it one right (a "FIRST
UNION RIGHT") issued pursuant to an Amended and Restated Shareholder Protection
Rights Agreement (the "FIRST UNION RIGHTS AGREEMENT"). Accordingly, in the
merger, you would receive one First Union Right for each share of First Union
common stock you receive. The First Union Right is attached to the related First
Union common stock share, unless the "Separation Time" occurs, in which case
First Union common stockholders would receive separate certificates for those
First Union Rights. Each First Union Right entitles its owner to purchase one
one-hundredth of a share of First Union class A preferred stock designed to have
economic and voting terms similar to those of one share of First Union common
stock, for $105.00 (the "RIGHTS EXERCISE PRICE"), but only after the earlier to
occur (the "SEPARATION TIME") of:
- the tenth business day (subject to extension) after any person (an
"ACQUIRING PERSON")
- commences a tender or exchange offer, which would result in such person
owning 15% or more of the outstanding First Union common stock or
- is determined by the Federal Reserve Board to "control" First Union (see
"--Other Provisions" below) and
- the tenth business day after the first date (the "FLIP-IN DATE") First
Union publicly announces that a person has become an Acquiring Person.
The First Union Rights will not trade separately from the shares of First
Union common stock unless the Separation Time occurs.
The First Union Rights Agreement provides that a person will not become an
Acquiring Person under the "control" test described above if either:
- the Federal Reserve Board's control determination would not have been made
but for such person's failure to make certain 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 First Union within 30 days (or 60 days in certain
circumstances) or
- the Federal Reserve Board's control determination was not based on such a
failure or violation and such person
- obtains a noncontrol determination within three years and
- is using its best efforts to allow First Union to make any acquisition or
engage in any legally permissible activity notwithstanding such person's
being deemed to control First Union.
The First Union Rights will not be exercisable until the business day
following the Separation Time. The First Union Rights will expire on the
earliest of:
- the "Exchange Time"
- the close of business on December 28, 2000 or
- the date on which the First Union Rights are redeemed or terminated as
described below (the "EXPIRATION TIME").
In the event the Flip-in Date occurs prior to the Expiration Time, First
Union will take the necessary action to provide that each First Union Right
constitutes the right to purchase, from First
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Union, First Union common stock shares having an aggregate market price equal to
twice the Rights Exercise Price, for a cash amount equal to the then current
Rights Exercise Price. Any First Union Rights an Acquiring Person or any
affiliate, associate or transferee thereof owns at that time shall become void.
In addition, First Union's Board may at any time after a Flip-in Date, elect to
exchange all of the then outstanding First Union Rights for shares of First
Union common stock, at an exchange ratio of two First Union common stock shares
per First Union Right (the "RIGHTS EXCHANGE RATE"). Immediately upon such action
by First Union's Board (the "EXCHANGE TIME"), the First Union Rights exercise
right will terminate, and each First Union Right will thereafter represent only
the right to receive a number of First Union common stock shares equal to the
Rights Exchange Rate. If First Union becomes obligated to issue shares of First
Union common stock upon exercise of, or in exchange for, First Union Rights,
First Union may substitute shares of First Union class A preferred stock at a
rate of two one-hundredths of a share of First Union class A preferred stock for
each First Union Right exchanged.
First Union Rights may be terminated without any payment to holders prior to
the date they become exercisable and First Union may redeem them at $.01 per
First Union Right. The First Union Rights have no voting rights and are not
entitled to dividends.
The First Union Rights will not prevent a takeover of First Union. The First
Union Rights, however, may cause substantial dilution to a person or group that
acquires 15% or more of First Union common stock (or that acquires "control" of
First Union as described above) unless First Union's Board first redeems or
terminates the First Union Rights. Nevertheless, the First Union Rights should
not interfere with a transaction that is in First Union's and its stockholders
best interests because the First Union Rights can be redeemed or terminated by
First Union's Board before that transaction is consummated.
The foregoing is qualified in its entirety by reference to the First Union
Rights Agreement. A copy of the First Union 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
First Union's articles and bylaws contain a number of provisions which may
discourage or delay attempts to gain control of First Union. These include
provisions in First Union's articles:
- classifying First Union's Board into three classes, each class to serve
for three years with one class elected annually
- authorizing First Union's Board to fix the size of First Union's Board
between nine and 30 directors
- authorizing directors to fill vacancies on First Union's Board occurring
between annual stockholder meetings, except that vacancies resulting from
a director's removal by a stockholder vote may only be filled by a
stockholder vote
- providing that directors may be removed only for cause and only by
majority vote of shares entitled to vote in electing directors, voting as
a single class
- authorizing only First Union's Board, First Union's Chairman of the Board
or First Union's President to call a special meeting of stockholders,
except for special meetings called under special circumstances for classes
or series of stock ranking superior to the First Union common stock and
- requiring an 80% stockholders vote by holders entitled to vote in electing
directors, voting as a single class, to alter any of the foregoing
provisions.
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First Union's bylaws include specific conditions under which business may be
transacted at annual stockholders' meetings, and persons may be nominated for
election as First Union directors at annual stockholders' meetings. See "Certain
Differences in the Rights of First Union Stockholders and EVEREN
Stockholders--Director Nominations" and "--Stockholder Proposals".
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
the 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 otherwise subject to Federal Reserve Board
approval. An acquisition may be made prior to the disapproval period expiring if
the Federal Reserve Board issues written notice of its intent not to disapprove
the action. Under a rebuttable presumption, the acquisition of more than 10% of
a bank holding company voting stock class with a class of securities registered
under Exchange Act Section 12, such as First Union, would constitute the
acquisition of control.
In addition, any "company" would be required to obtain Federal Reserve Board
approval before acquiring 25% (5% in the case of a bank holding company
acquiror) or more of the outstanding First Union common stock, or otherwise
obtaining "control" over First Union. "Control" generally means:
- the ownership or control of 25% or more of a bank holding company voting
securities class
- the ability to elect a majority of the bank holding company's directors or
- the ability otherwise to exercise a controlling influence over the bank
holding company's management and policies.
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 those statutes. First Union elected not to be
covered by those statutes.
In addition to the foregoing, in certain instances the ability of First
Union's Board to issue authorized but unissued First Union common stock, First
Union class A preferred stock or First Union preferred stock may have an
anti-takeover effect.
Existence of the foregoing provisions could result in First Union being less
attractive to a potential acquiror, or result in First Union stockholders
receiving less for their shares of First Union common stock than otherwise might
be available in the event of a takeover attempt.
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CERTAIN DIFFERENCES IN THE RIGHTS OF FIRST UNION
STOCKHOLDERS AND EVEREN STOCKHOLDERS
AT THE MERGER EFFECTIVE TIME, EVEREN STOCKHOLDERS AUTOMATICALLY WILL BECOME
FIRST UNION STOCKHOLDERS, AND THEIR RIGHTS AS STOCKHOLDERS WILL BE DETERMINED BY
FIRST UNION'S ARTICLES, FIRST UNION'S BYLAWS AND THE NORTH CAROLINA BUSINESS
CORPORATION ACT (NCBCA), INSTEAD OF EVEREN'S CERTIFICATE OF INCORPORATION AND
EVEREN'S BYLAWS AND THE DELAWARE GENERAL CORPORATION LAW (DGCL). THE FOLLOWING
IS A SUMMARY OF THE MATERIAL DIFFERENCES IN THE RIGHTS OF FIRST UNION AND EVEREN
STOCKHOLDERS. THIS SUMMARY IS NECESSARILY GENERAL AND DOES NOT PURPORT TO BE A
COMPLETE DISCUSSION OF, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, THE
DGCL, THE NCBCA, EVEREN'S CERTIFICATE, FIRST UNION'S ARTICLES AND THE BYLAWS OF
EACH CORPORATION.
AUTHORIZED CAPITAL
FIRST UNION. First Union's authorized capital is set forth under
"Description of First Union Capital Stock--Authorized Capital".
EVEREN. Under EVEREN's certificate, EVEREN is authorized to issue
100,000,000 shares of EVEREN common stock, par value $.01 per share, and up to
10,000,000 shares of preferred stock, par value $.01 per share.
AMENDMENT OF ARTICLES/CERTIFICATE OF INCORPORATION AND BYLAWS
FIRST UNION. Under North Carolina law, an amendment to First Union's
articles generally requires First Union's Board to recommend, and either a
majority of all shares entitled to vote thereon or a majority of the votes cast
thereon to approve, depending on the amendment's nature. In accordance with
North Carolina law, First Union's Board may condition the proposed amendment's
submission on any basis. An amendment to First Union's bylaws generally requires
either the stockholders or First Union's Board to approve. First Union's Board
generally may not amend any bylaw the stockholders approve. Under certain
circumstances, the holders of at least two-thirds, or in some cases a majority,
of the outstanding First Union Preferred Stock or First Union Class A Preferred
Stock is needed to approve an articles' amendment. In addition, certain
amendments to First Union's articles or First Union's bylaws require the
approval of not less than 80% of the outstanding First Union shares entitled to
vote in the election of directors, voting together as a single class. See
"Description of First Union Capital Stock".
EVEREN. Under the DGCL, EVEREN's Board must propose an amendment to
EVEREN's certificate of incorporation, and EVEREN's stockholders must approve
the amendment by a majority of outstanding shares entitled to vote. EVEREN's
certificate of incorporation provides that it may be amended in the manner
Delaware law prescribes, provided that holders of 75% of the then-outstanding
shares of EVEREN capital stock must approve amendments to certain provisions of
EVEREN's certificate of incorporation relating to action by written consent or
to the board of directors. EVEREN's bylaws may be amended by EVEREN's Board, or
by holders of at least 75% of the then-outstanding EVEREN common stock.
SPECIAL MEETINGS OF STOCKHOLDERS; WRITTEN CONSENT
FIRST UNION. A stockholders' special meeting may be called for any purpose
only by First Union's Board, by First Union's Chairman of the Board or by First
Union's President. The foregoing is not true for special meetings called under
specified circumstances for holders of any class or series of stock having a
preference over First Union common stock as to dividends or upon liquidation. A
quorum for a First Union stockholders' meeting is a majority of the outstanding
First Union shares entitled to vote. Except as provided in First Union's
articles or the NCBCA, a majority of the votes cast is generally
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required for any action by First Union's stockholders. North Carolina law
provides that those quorum and voting requirements may be increased only if
First Union's stockholders approve.
In addition, the NCBCA provides that all the stockholders entitled to vote
on an issue may validly act by unanimous written consent without a meeting.
Unanimous written consent is obtainable, as a practical matter, only on matters
on which there are only a relatively few stockholders entitled to vote. Any
stockholder action, including, without limitation, election of directors,
approval of mergers or sales of substantially all corporate property not in the
ordinary course of business, amendments of articles of incorporation, and
dissolution, may be accomplished by unanimous written consent.
EVEREN. Only EVEREN's Board or Chairman may call special meetings of
EVEREN's stockholders. A quorum will be present at a meeting of stockholders if
there are present in person or by proxy stockholders entitled to cast a majority
of the votes entitled to be cast. Except as the DGCL or EVEREN's certificate of
incorporation or bylaws otherwise require with respect to specific matters, all
matters must be approved by the holders of a majority of the shares present and
entitled to vote. Under EVEREN's certificate of incorporation, stockholders may
only act at a duly called meeting and not by written consent.
SIZE AND CLASSIFICATION OF BOARD OF DIRECTORS
FIRST UNION. First Union's Board size is determined by the majority vote of
First Union's Board, provided that First Union's Board may not set the director
number at less than nine nor more than 30, and provided further that no decrease
in the director number may shorten the term of any director then in office.
First Union's director number is currently set at 22. First Union's Board is
divided into three classes, each as nearly as possible equal in number as the
others, with one class being elected annually for staggered three-year terms.
See "Description of First Union Capital Stock".
EVEREN. Pursuant to EVEREN's certificate of incorporation, the number of
EVEREN directors is fixed by or in the manner specified in EVEREN's bylaws but
shall not exceed 11. EVEREN's bylaws provide that the number of directors is
determined by EVEREN's Board. EVEREN's director number is currently set at 10.
REMOVAL OF DIRECTORS BY STOCKHOLDERS
FIRST UNION. Except for directors elected under specified circumstances by
holders of any stock class or series having a dividend or liquidation preference
over First Union common stock, First Union directors may be removed only for
cause and only by a majority vote of the shares then entitled to vote in the
election of directors, voting together as a single class.
EVEREN. Pursuant to EVEREN's certificate of incorporation, any director, or
EVEREN's entire Board, may be removed from office at any time but only for cause
and only if holders of at least 75% of the then outstanding EVEREN capital stock
entitled to vote generally in the election of directors, voting together as a
single class, affirmatively vote for removal.
STOCKHOLDER PROPOSALS
FIRST UNION. First Union's bylaws establish procedures a stockholder must
follow to submit a proposal to a First Union stockholder vote at a stockholders'
annual meeting. The stockholder making the proposal must deliver written notice
to First Union's Secretary not less than 60 days nor more than 90 days prior to
the meeting. However, if less than 70 days' meeting date notice is given, that
written notice by the stockholder must be so delivered not later than the tenth
day after the day on which such meeting date notice 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:
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- a brief description of the proposal and the reasons for its submission
- the name and address of the stockholder, as they appear on First Union's
books
- the classes and number of First Union shares the stockholder owns and
- any material interest of the stockholder in that proposal other than the
holder's interest as a First Union stockholder.
The meeting chairman will, if the facts warrant, determine that any proposal
was not properly submitted in accordance with First Union's bylaws provisions,
and the defective proposal will not be submitted to the meeting for a
stockholder vote.
EVEREN. EVEREN's bylaws provide that at any annual meeting of stockholders,
only such business shall be conducted as shall have been brought before the
meeting by or at the direction of EVEREN's Board, or by any EVEREN stockholder
entitled to vote and who complies with EVEREN's bylaws' notice procedures.
Proper business at an annual meeting must relate to a subject matter proper for
stockholder action and be given with timely notice in writing to EVEREN's
Secretary. To be timely, a stockholder must deliver or mail the notice to
EVEREN's principal executive offices not less than 60 days nor more than 90 days
prior to the first anniversary of the preceding year's annual meeting date.
However, in the event that the date of the annual meeting is advanced by more
than 30 days or delayed by more than 60 days for such anniversary date, timely
notice by the stockholder must be received not earlier than the 90(th) day prior
to such annual meeting and not later than the close of business the later of the
60(th) day prior to such annual meeting or the 10(th) day following the day on
which public announcement of the date of such meeting is first made. A
stockholder's notice to EVEREN's Secretary shall set forth as to each matter
such stockholder proposes to bring before the annual meeting:
- a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting that business
- the name and address, as they appear on EVEREN's books, of the stockholder
proposing such business
- the class and number of shares of EVEREN's capital stock beneficially
owned by that stockholder and
- any material interest of that stockholder in the business.
At any stockholders' special meeting, only the business brought before the
meeting by EVEREN's Board or Chairman shall be conducted.
ANTI-TAKEOVER LAWS
FIRST UNION. 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 voting stock shares of, certain North Carolina corporations. In
accordance with these statutes' provisions, First Union elected not to be
covered by these statutes' restrictions. As a result, those statutes do not
apply to First Union. 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.
EVEREN. Under the DGCL, a corporation is prohibited from engaging in any
business combination with an interested stockholder or any entity if the
transaction is caused by the interested stockholder for a period of three years
from the date on which the stockholder first becomes an interested stockholder.
A "business combination" with an interested stockholder may take place if:
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- prior to the stockholder becoming an interested stockholder the board of
directors approves the business combination or the transaction in which
the stockholder became an interested stockholder
- upon the completion of the transaction in which the stockholder became an
interested stockholder, the interested stockholder owns at least 85% of
the voting stock of the corporation other than shares held by directors
who are also officers and certain employee stock plans or
- the business combination is approved by the board of directors and by the
affirmative vote of 66 2/3% of the outstanding voting stock not owned by
the interested stockholder at a meeting.
The DGCL defines the term "business combination" to include transactions
such as mergers, consolidations or transfers of 10% or more of the assets of the
corporation. The DGCL defines the term "interested stockholder" generally as any
person who, (together with affiliates and associates) owns (or in certain cases,
within the past three years did own) 15% or more of the outstanding voting stock
of the corporation.
INDEMNIFICATION; LIMITATION ON DIRECTOR LIABILITY
FIRST UNION. The NCBCA contains specific provisions relating to
indemnification of directors and officers of North Carolina corporations. In
general, the statute provides that
- 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
- a corporation may indemnify a director or officer if he is not wholly
successful in that 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.
First Union's bylaws provide for the indemnification of First Union's
directors and executive officers by First Union 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 First Union.
First Union's articles provide for eliminating personal liability of each
First Union director to the fullest extent the provisions of the NCBCA permit,
as the same may be in effect from time to time. The NCBCA does not permit
eliminating liability with respect to
- acts or omissions the director knew or believed were clearly in conflict
with First Union's best interests
- any liability under the NCBCA for unlawful distributions by First Union or
- any transaction from which the director derived an improper personal
benefit.
EVEREN. Under the DGCL, a Delaware corporation may indemnify directors,
officers, employees and other representatives from liability if the person acted
in good faith and in a manner reasonably believed by the person to be in or not
opposed to the best interests of the corporation, and,
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in any criminal actions, if the person had no reason to believe his action was
unlawful. In the case of an action by or on behalf of a corporation,
indemnification may not be made if the person seeking indemnification is found
liable, unless the court in which the action was brought determines the person
is fairly and reasonably entitled to indemnification. The indemnification
provisions of the DGCL require indemnification of a director or officer who has
been successful on the merits in defense of any action, suit or proceeding that
he was a party to by reason of the fact that he is or was a director or officer
of the corporation. The indemnification authorized by the DGCL is not exclusive
and is in addition to any other rights granted under the certificate of
incorporation or bylaws of the corporation or to any agreement with the
corporation. EVEREN's certificate and bylaws provide that EVEREN shall indemnify
its directors, officers, employees and other representatives to the fullest
extent permitted by law.
EVEREN's certificate of incorporation provides that an EVEREN director shall
not be personally liable to EVEREN or its stockholders for monetary damages for
breach of a fiduciary duty as a director, except for liability
- for any breach of the director's duty of loyalty to EVEREN or its
stockholders
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law
- under Section 174 of the DGCL which involves unlawful payments of
dividends or unlawful stock purchases or redemptions or
- for any transaction from which the director derived an improper personal
benefit.
In addition, EVEREN's certificate of incorporation provides that if the DGCL
is amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of an EVEREN director shall
be eliminated or limited to the fullest extent the DGCL permits, as so amended.
DIRECTOR CONFLICT OF INTEREST TRANSACTIONS
FIRST UNION. North Carolina law generally permits transactions involving a
North Carolina corporation and an interested director of that corporation if:
- the transaction's material facts and the director's interest are disclosed
and a majority of disinterested shares entitled to vote thereon
authorizes, approves or ratifies the transaction
- the material facts are disclosed and a majority of disinterested directors
or a committee of the board authorizes, approves or ratifies the
transaction or
- the transaction is fair to the corporation. North Carolina law prohibits
loans to directors or obligation guaranteeing by a North Carolina
corporation unless approved by a majority vote of disinterested
stockholders or unless the corporation's board 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.
EVEREN. The DGCL generally permits contracts and transactions involving a
Delaware corporation and an officer or director of the corporation if:
- the material facts of the contract or transaction and the officer's or
director's interest are disclosed to or known by the board of directors or
a board committee and the board of directors or committee in good faith
authorizes the transaction by disinterested directors' majority vote
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- the contract or transaction's material facts and the director's or
officer's interest are disclosed to or known by stockholders entitled to
vote and the contract or transaction is specifically approved in good
faith by a stockholder vote or
- the contract or transaction is fair to the corporation at the time it is
authorized by the board, committee or stockholders thereof.
Delaware law permits loans to officers, including officers who are also
directors, or guaranties of their obligations, whenever in the directors'
judgment such loan or guaranty may reasonably be expected to benefit the
corporation.
STOCKHOLDER INSPECTION RIGHTS; STOCKHOLDER LISTS
FIRST UNION. Under the NCBCA, qualified stockholders have the right to
inspect and copy certain First Union records if their demand is made in good
faith and for a proper purpose. That inspection right requires that the
stockholder give First Union 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 inspection rights and copying extend not only to stockholders of record but
also to beneficial ownership which the stockholder of record certifies to First
Union. However, First Union is under no duty to provide any accounting records
or any records respecting any matter First Union determines in good faith may,
if disclosed, adversely affect First Union in its business conduct or may
constitute material non-public information, and the inspection and copying
rights 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 First Union stock class. A stockholder's agent or attorney has the same
inspection and copying rights as the stockholder he represents.
In addition, after fixing a stockholders' meeting record date, First Union
is required to prepare a stockholder list with respect to the stockholders'
meeting and to make that list available at First Union's principal office or at
a place identified in the meeting notice to any stockholder beginning two
business days after meeting notice is given and continuing through the meeting
and any adjournment thereof. Subject to applicable NCBCA provisions, a
stockholder or his agent or attorney upon written demand at his own expense
during regular business hours is entitled to copy that list. The list must also
be available at the stockholders' meeting, and any stockholder, his agent or
attorney may inspect the list at any time during the meeting or any adjournment
thereof.
EVEREN. The DGCL provides that any record stockholder has the right during
the usual hours for business to inspect for any proper purpose the corporation's
stock ledger, a list of its stockholders, and its other books and records, and
to make copies or extracts from them.
DISSENTERS' OR APPRAISAL RIGHTS
FIRST UNION. The NCBCA generally provides dissenters' rights for mergers
and certain share exchanges requiring stockholder approval, sales of all or
substantially all of the corporation's assets, certain amendments to the
corporation's articles of incorporation and any corporate action taken pursuant
to a stockholder vote to the extent the articles of incorporation, bylaws or a
board resolution entitles stockholders to dissent. However, the NCBCA does not
provide dissenters' rights for North Carolina corporations, such as First Union,
who have over 2,000 record holders or whose voting stock is listed on a national
securities exchange.
EVEREN. Under the DGCL, generally, stockholders of a Delaware corporation
are entitled to appraisal rights in the event of a merger into or consolidation
with another corporation or entity. However, appraisal rights are not available
to holders of shares listed on a national securities exchange, designated as a
national market system security on the Nasdaq National Market or held of record
by
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more than 2,000 stockholders, unless the holders of such stock are required
pursuant to the terms of the merger to accept anything other than:
- shares of stock of the surviving corporation
- shares of stock of another corporation which are also listed on a national
securities exchange, designated as a national market securities on the
Nasdaq National Market or held of record by more than 2,000 holders or
- cash in lieu of fractional shares of such stock.
DIRECTOR NOMINATIONS
FIRST UNION. First Union's bylaws establish procedures stockholders must
follow to nominate persons for election to First Union's Board. The stockholder
making the nomination must deliver written notice to First Union's Secretary not
less than 60 days nor more than 90 days prior to the annual meeting at which
directors will be elected. However, if less than 70 days' meeting date notice is
given, that written notice by the stockholder must be so delivered not later
than the tenth day after the day on which such meeting date notice 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 nomination notice
must set forth certain information about the person to be nominated similar to
required disclosure in proxy solicitations for director election pursuant to
Exchange Act Regulation 14A, and the nominee'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 stockholder's name and address and the class and number of First
Union shares that stockholder owns of record or beneficially. The meeting
chairman will, if the facts warrant, determine that a nomination was not made in
accordance with First Union's bylaws provisions, and the defective nomination
will be disregarded. The foregoing procedures do not apply to any director
nominated under specified circumstances by holders of any stock class or series
having a dividend or liquidation preference over First Union common stock.
EVEREN. Nominations for election to EVEREN's Board may be made at a
stockholders' meeting at which directors are to be elected only at EVEREN's
Board's direction, or by any EVEREN stockholder entitled to vote for directors
at the meeting who complies with EVEREN's bylaws' notice procedures.
Nominations, other than those made by or at the direction of EVEREN's Board, may
be made by timely notice in writing to EVEREN's Secretary. To be timely, a
stockholder must deliver or mail the notice to EVEREN's principal executive
offices not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting date. However, in the event
that the date of the annual meeting is advanced by more than 30 days or delayed
by more than 60 days from such anniversary date, timely notice by the
stockholder must be received not earlier than the 90(th) day prior to such
annual meeting and not later than the close of business on the later of the
60(th) day prior to such annual meeting or the 10(th) day following the day on
which public announcement of the date of such meeting is first made. The
stockholder's notice must set forth:
- as to each person whom such stockholder proposes to nominate for election
or re-election as a director, all information relating to such person
required to be disclosed in proxy solicitations for director election, or
is otherwise required, in each case pursuant to Exchange Act Regulation
14A (including that person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected) and
- the name and address, as they appear on EVEREN's books, of the stockholder
giving notice and the class and number of shares of EVEREN common stock
that stockholder beneficially owns.
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STOCKHOLDER PROTECTION RIGHTS PLAN
FIRST UNION. First Union has adopted the First Union Rights Agreement. See
"Description of First Union Capital Stock--First Union Rights Agreement".
EVEREN. In connection with EVEREN's initial public offering, the EVEREN
Board declared a dividend distribution of one Preferred Share Purchase Right (an
"EVEREN RIGHT") for each share of outstanding EVEREN common stock. EVEREN Rights
have been issued in connection with all EVEREN common stock shares issued prior
to the "Rights Distribution Date". Each EVEREN Right will entitle the registered
holder to purchase from EVEREN one one-hundredth of a share of EVEREN Series A
Preferred Stock (an "EVEREN PREFERRED SHARE") at a price of $61.25 per
one-hundredth of a Preferred Share (the "PURCHASE PRICE") subject to adjustment.
The terms of the EVEREN Rights are set forth in the EVEREN Rights Agreement.
Until the earlier to occur of
- 10 days following a public announcement that a person or group of
affiliated or associated persons, other than EVEREN's 401(k) and Employee
Stock Ownership Plan (an "ACQUIRING PERSON"), has acquired beneficial
ownership of 15% or more of the outstanding EVEREN common stock, or
- 10 business days (or such later date as may be determined by action of
EVEREN's Board prior to such time as any person or group becomes an
Acquiring Person) following the commencement of, or announcement of an
intention to make, a tender offer or exchange offer the consummation of
which would result in the beneficial ownership by a person or group, other
than EVEREN's 401(k) and Employee Stock Ownership Plan, of 15% or more of
the outstanding EVEREN common stock (the earlier of such dates being
called the "RIGHTS DISTRIBUTION DATE"),
the EVEREN Rights will be evidenced by the EVEREN common stock certificates.
The Rights Agreement will provide that, until the Rights Distribution Date,
the EVEREN Rights will be transferable with and only with EVEREN common stock.
Until the Rights Distribution Date (or earlier redemption or expiration of the
Rights), EVEREN common stock certificates will contain a notation incorporating
the Rights Agreement by reference. As soon as practicable following the Rights
Distribution Date, separate certificates evidencing the rights ("RIGHTS
CERTIFICATES") will be mailed to holders of record of EVEREN common stock as of
the close of business on the Rights Distribution Date and such separate Rights
Certificates alone will evidence the EVEREN Rights.
The EVEREN Rights will not be exercisable until the Rights Distribution
Date. The EVEREN Rights will expire on the tenth anniversary of the date of
their issuance (the "FINAL EXPIRATION DATE"), unless the Final Expiration Date
is extended or unless the rights are earlier redeemed by EVEREN, in each case as
described below.
The Purchase Price payable, and the number of EVEREN Preferred Shares or
other securities or property issuable, upon exercise of the EVEREN Rights will
be subject to adjustment from time to time to prevent dilution.
The EVEREN Preferred Shares' dividend and liquidation rights are designed
such that the value of the one one-hundredth interest in an EVEREN Preferred
Share purchasable upon exercise of each EVEREN Right should approximate the
value of one share of EVEREN common stock.
In the event that any person or group of affiliated or associated persons
becomes an Acquiring Person, each holder of an EVEREN Right, other than EVEREN
Rights beneficially owned by the Acquiring Person (which will thereafter be
void), will thereafter have the right to receive upon the exercise thereof at
the then current Purchase Price of the EVEREN Right, that number of EVEREN
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<PAGE>
common stock shares (or, at EVEREN's option, Preference Shares) having a market
value of two times the Purchase Price of the EVEREN Right. In the event that, at
any time on or after the date that any person or group of affiliated or
associated persons has become an Acquiring Person, EVEREN is acquired in a
merger or other business combination transaction or 50% or more of its
consolidated assets or earning power are sold, proper provision will be made so
that each holder of an EVEREN Right will thereafter have the right to receive,
upon the exercise thereof at the then current Purchase Price of the EVEREN
Right, that number of shares of common stock of the acquiring company which at
the time of such transaction will have a market value of two times the exercise
price of the EVEREN Right.
At any time after any person or group of affiliated or associated persons
becomes an Acquiring Person and prior to the acquisition by such person or group
of 50% or more of the outstanding EVEREN common stock, EVEREN's Board may
exchange the EVEREN Rights (other than EVEREN Rights owned by such person or
group, which will have become void), in whole or in part, at an exchange ratio
of one EVEREN common stock share per EVEREN Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price.
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15% or more of the outstanding
EVEREN common stock, EVEREN's Board may redeem the rights in whole, but not in
part, at a price of $.01 per EVEREN Right (the "REDEMPTION PRICE"). Immediately
upon redeeming the EVEREN Rights, the right to exercise the EVEREN Rights will
terminate and the only right of the EVEREN Rights holders will be to receive the
Redemption Price.
The terms of the EVEREN Rights may be amended by EVEREN's Board without the
consent of the EVEREN Rights holders, except that from and after such time as
any person or group of affiliated or associated persons becomes an Acquiring
Person no such amendment may adversely affect the interests of the EVEREN Rights
holders and no supplement or amendment to the Rights Agreement may be made which
changes the Redemption Price.
Until an EVEREN Right is exercised, the holder thereof, as such, will have
no rights as an EVEREN stockholder, including, without limitation, the right to
vote or to receive dividends.
The EVEREN Rights will have certain anti-takeover effects. The EVEREN Rights
will cause substantial dilution to a person or group that attempts to acquire
EVEREN on terms not approved by EVEREN's Board, except pursuant to an offer
conditioned on a substantial number of EVEREN Rights being acquired. The EVEREN
Rights should not interfere with any merger or other business combination
approved by EVEREN's Board since the EVEREN Rights may be redeemed by EVEREN at
the Redemption Price prior to the time that a person or group has become an
Acquiring Person.
REQUIRED STOCKHOLDER VOTE FOR CERTAIN ACTIONS
FIRST UNION. Under North Carolina law, except as otherwise provided below
or in the NCBCA, any plan of merger or share exchange to which First Union is a
party would require adoption by First Union's Board, which would generally be
required to recommend its approval to the stockholders, who in turn would be
required to approve the plan by a majority vote of the outstanding shares
entitled to vote thereon. Except as otherwise provided below or in the NCBCA,
any sale, lease, exchange or other disposition of all or substantially all of
First Union's assets not made in the usual and regular course of business would
generally require First Union's Board to recommend the proposed transaction to
the stockholders who would be required to approve the transaction by a majority
vote of the outstanding shares entitled to vote thereon. In accordance with
North Carolina law, First Union's Board's
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<PAGE>
submission of that 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 First Union is a party, no vote of
First Union's stockholders is required if First Union is the surviving
corporation, and:
- First Union's articles would remain unchanged after the merger, subject to
certain exceptions
- each First Union stockholder immediately before the merger would hold the
same shares, with identical designations, limitations, preferences and
relative rights, after the merger
- the number of First Union stock shares entitled to vote unconditionally in
the election of directors to be issued in the merger would not exceed 20%
of First Union stock shares entitled to vote unconditionally in the
election of directors outstanding immediately before the merger and
- the number of First Union stock shares entitling holders to participate
without limitation in distributions to be issued in the merger would not
exceed 20% of First Union stock shares entitling holders to participate
without limitation in distributions outstanding immediately before the
merger.
In addition, First Union stockholders would not be required to vote to merge
a subsidiary of which First Union owns at least 90 percent into First Union, as
long as no amendment is made to First Union's articles that could not be made
without First Union stockholders approval. With respect to a sale, lease,
exchange or other disposition of all or substantially all of First Union's
assets made upon the First Union's Board authority, no stockholder vote 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 First Union.
EVEREN. Delaware law generally provides for EVEREN's merger or
consolidation with another corporation, or the sale of all or substantially all
of EVEREN's assets upon the approval of a majority of EVEREN's outstanding
voting stock. A merger or consolidation or disposition of assets or securities
issued by EVEREN involving an interested stockholder is subject to specific
Delaware anti-takeover law. See "--Anti-Takeover Laws".
DIVIDENDS AND OTHER DISTRIBUTIONS
FIRST UNION. Under North Carolina law, First Union generally may make
dividends or other distributions to its stockholders unless after the
distribution either First Union would not be able to pay its debts as they
become due in the usual course of business or First Union's assets would be less
than the sum of its liabilities plus the amount that would be needed to satisfy
stockholder preferential dissolution rights superior to those receiving the
distribution. See "Description of First Union Capital Stock".
EVEREN. Under Delaware law, dividends may be paid out of surplus, or if
there is no surplus, out of net profits for the fiscal year in which the
dividend is declared and/or the preceding fiscal year.
VOLUNTARY DISSOLUTION
FIRST UNION. North Carolina law provides that First Union may be dissolved
if First Union's Board proposes dissolution and a majority of First Union shares
entitled to vote thereon approves. In accordance with North Carolina law, First
Union's Board may condition submitting a dissolution proposal on any basis.
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<PAGE>
EVEREN. The DGCL provides that EVEREN may be dissolved upon a majority vote
of EVEREN's Board adopting a resolution therefore, and a majority vote of the
outstanding shares entitled to vote. Dissolution may also be authorized without
any director action if all stockholders entitled to vote consent in writing.
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<PAGE>
COMPARATIVE MARKET PRICES AND DIVIDENDS
MARKET PRICES
First Union common stock and EVEREN common stock are traded on the NYSE
under the symbols "FTU" and "EVR", respectively. The following table sets forth,
for the indicated periods, the high and low sale prices for First Union common
stock and EVEREN common stock as reported by the NYSE.
<TABLE>
<CAPTION>
FIRST UNION-COMMON EVEREN COMMON
STOCK STOCK
--------------------- --------------------
<S> <C> <C> <C> <C>
HIGH LOW HIGH LOW
---------- --------- --------- ---------
1997
First quarter........................................................ $ 47.7500 36.6250 15.1250 9.9375
Second quarter....................................................... 47.8750 39.1250 15.6250 10.0625
Third quarter........................................................ 50.6875 45.8750 20.3125 14.6875
Fourth quarter....................................................... 52.8750 46.9375 23.7500 17.5000
1998
First quarter........................................................ 58.2500 47.0625 23.6875 19.8750
Second quarter....................................................... 63.0000 55.2500 28.1250 21.3750
Third quarter........................................................ 65.6875 47.5625 29.6250 15.0000
Fourth quarter....................................................... 63.9375 44.6875 27.0000 15.2500
1999
First quarter........................................................ 65.0625 48.6250 25.6250 19.2500
Second quarter.......................................................
Third quarter (through , 1999)................................. $
</TABLE>
On April 23, 1999, the last trading day before public announcement of the
merger, the closing prices per share of First Union common stock and EVEREN
common stock on the NYSE were $55.00 and $24.125, respectively. On May 27, 1999,
the last trading day before public announcement of the revised merger agreement,
the closing prices per share of First Union common stock and EVEREN common stock
on the NYSE were $45.625 and $24.625, respectively. On , 1999, the
last practicable trading day prior to the date of this document, the closing
price per share of First Union common stock and EVEREN common stock on the NYSE
were $ and $ , respectively. Past price performance is not necessarily
indicative of likely future price performance. YOU ARE URGED TO OBTAIN CURRENT
MARKET QUOTATIONS FOR SHARES OF FIRST UNION COMMON STOCK.
In 1997 and 1998, pursuant to First Union's Board authorization, First Union
purchased 52 million and 50 million, respectively, First Union common stock
shares in the open market at a cost of $2.4 billion and $3.1 billion,
respectively. In 1999 through the date of this document, First Union has
purchased million First Union common stock shares in the open market at a
cost of $ billion.
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<PAGE>
DIVIDENDS
The following table sets forth for the quarterly periods indicated, the cash
dividends declared per share of First Union common stock and EVEREN common
stock.
<TABLE>
<CAPTION>
EQUIVALENT
PRO FORMA
PER SHARE
FIRST UNION EVEREN OF EVEREN
COMMON COMMON COMMON
STOCK STOCK STOCK (1)
------------- ----------- -------------
<S> <C> <C> <C>
1997
First quarter............................................ $ 0.29 0.045 0.195
Second quarter........................................... 0.29 0.045 0.195
Third quarter............................................ 0.32 0.045 0.216
Fourth quarter........................................... 0.32 0.055 0.216
1998
First quarter............................................ 0.37 0.055 0.249
Second quarter........................................... 0.37 0.070 0.249
Third quarter............................................ 0.42 0.070 0.283
Fourth quarter........................................... 0.42 0.070 0.283
1999
First quarter............................................ 0.47 0.070 0.317
Second quarter........................................... 0.47 0.070 0.317
Third quarter (through , 1999)................. $
</TABLE>
- ------------------------
(1) Pro forma amounts assume a 0.6739 exchange ratio. The 0.6739 exchange ratio
is based on dividing $31.00 by a First Union common stock price of $46.00,
which was the closing price of First Union common stock on June 28, 1999, as
if that price were the average market price used to determine the actual
exchange ratio. The 0.6739 exchange ratio is used in this document for
illustrative purposes only and the actual exchange ratio may be higher or
lower than 0.6739.
First Union common stock holders are entitled to receive dividends when and
if declared by First Union's Board out of funds legally available therefor.
Although First Union expects to continue paying quarterly cash dividends on
First Union common stock, it cannot be certain that its dividend policy will
remain unchanged after completion of the merger. The declaration and payment of
dividends thereafter will depend upon business conditions, operating results,
capital and reserve requirements, and First Union's Board's consideration of
other relevant factors.
In the merger agreement, EVEREN agreed to coordinate with First Union
regarding the record dates for any EVEREN common stock dividends, so that EVEREN
stockholders shall not receive two dividends or fail to receive one dividend for
any single calendar quarter with respect to EVEREN common stock and First Union
common stock they receive in the merger.
EXPERTS
The consolidated balance sheets of First Union and subsidiaries as of
December 31, 1998 and 1997, 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, 1998, included in First Union's 1998 Annual
Report to Stockholders which is included in First Union's Annual Report on Form
10-K for the year ended December 31, 1998, and incorporated by reference in this
document have been incorporated by reference in this document in reliance upon
the report of KPMG LLP, independent
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<PAGE>
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
The consolidated financial statements of EVEREN incorporated in this
document by reference from EVEREN's Annual Report on Form 10-K for the year
ended December 31, 1998, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
VALIDITY OF FIRST UNION COMMON STOCK
The validity of the shares of First Union common stock being offered hereby
will be passed upon for First Union by Marion A. Cowell, Jr., Esq., Executive
Vice President, Secretary and General Counsel of First Union.
OTHER MATTERS
As of the date of this document, EVEREN's Board knows of no matters that
will be presented for consideration at the meeting other than as described in
this document. However, if any other matter shall come before the meeting or any
adjournments or postponements thereof and shall be voted upon, the proposed
proxy will be deemed to confer authority to the individuals named as authorized
therein to vote the shares represented by such proxy as to any such matters that
fall within the purposes set forth in the notice of meeting as determined by a
majority of EVEREN's Board. See "The Meeting-- Proxies".
STOCKHOLDER PROPOSALS FOR EVEREN'S 2000 ANNUAL MEETING
Pursuant to Rule 14a-8 under the Exchange Act, stockholder proposals
intended to be presented at EVEREN's next annual meeting in 2000, if any, must
be received by the corporate secretary of EVEREN, 77 West Wacker Drive, Chicago,
Illinois 60601, no later than December 2, 1999, to be considered for inclusion
in EVEREN's proxy statement and proxy card relating to that meeting.
A stockholder that intends to present business at the 2000 annual meeting,
if any, other than pursuant to Rule 14a-8 must comply with the requirements set
forth in EVEREN's by-laws. To bring business before an annual meeting, EVEREN's
by-laws require, among other things, that the stockholder submit written notice
thereof complying with the by-laws to the corporate secretary not less than
sixty days or more than ninety days prior to the first anniversary of the
preceding year's annual meeting. Therefore, EVEREN must receive notice of a
stockholder proposal submitted other than pursuant to Rule 14a-8 no sooner than
February 6, 2000, and no later than March 7, 2000. If the notice is received
before February 6, 2000, or after March 7, 2000, it will be considered untimely
and EVEREN will not be required to present such proposal at the 2000 annual
meeting.
WHERE YOU CAN FIND MORE INFORMATION
First Union has filed a registration statement, including this document,
with the SEC under the Securities Act that registers the distribution to EVEREN
shareholders of the shares of First Union common stock to be issued in
connection with the merger. The registration statement, including the attached
exhibits and schedules, contains additional relevant information about First
Union and First Union common stock. The SEC's rules and regulations allow us to
omit certain information included in the registration statement from this
document.
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<PAGE>
In addition, First Union and EVEREN file reports, proxy statements and other
information with the SEC under the Exchange Act. You may read and copy this
information at the following locations of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois
60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates.
The SEC also maintains an Internet worldwide web site that contains reports,
proxy statements and other information about issuers, like First Union and
EVEREN, who file electronically with the SEC. The address of the site is
http://www.sec.gov.
You can also inspect reports, proxy statements and other information about
First Union and EVEREN at the offices of the NYSE, 20 Broad Street, New York,
New York 10005.
The SEC allows us to "incorporate by reference" information into this
document. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is considered to be a part of this document, except
for any information that is superseded by information that is included directly
in this document.
This document incorporates by reference the documents listed below that
First Union and EVEREN have previously filed with the SEC. They contain
important information about us and our respective financial conditions.
<TABLE>
<CAPTION>
FIRST UNION SEC FILINGS PERIOD
- --------------------------------------------------- ---------------------------------------------------
<S> <C>
Annual Report on Form 10-K......................... Year ended December 31, 1998
Quarterly Report on Form 10-Q...................... Quarter ended March 31, 1999
Current Reports on Form 8-K........................ Dated January 26, 1999, March 19, 1999, and May 25,
1999
</TABLE>
<TABLE>
<CAPTION>
EVEREN SEC FILINGS PERIOD
- --------------------------------------------------- ---------------------------------------------------
<S> <C>
Annual Report on Form 10-K......................... Year ended December 31, 1998
Quarterly Report on Form 10-Q...................... Quarter ended March 31, 1999
Current Reports on Form 8-K........................ Dated May 3, 1999 and June 11, 1999
</TABLE>
We also incorporate by reference all additional documents that either of us
may file with the SEC between the date of this document and the date of the
meeting. These documents include periodic reports, such as Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
well as proxy statements.
First Union has supplied all information contained or incorporated by
reference in this document relating to First Union, as well as all pro forma
financial information, and EVEREN has supplied all such information relating to
EVEREN.
Documents incorporated by reference are available from the companies without
charge, excluding any exhibits to those documents unless the exhibit is
specifically incorporated by reference as an exhibit in this proxy statement/
prospectus. You can obtain documents incorporated by reference in this
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<PAGE>
document by requesting them in writing or by telephone from the appropriate
company at the following addresses:
<TABLE>
<S> <C>
FIRST UNION CORPORATION EVEREN CAPITAL CORPORATION
Corporate Relations Investor Relations
301 South College Street 77 West Wacker Drive
Charlotte, North Carolina 28288 Chicago, Illinois 60601-1694
(704) 374-6782 (312) 574-6000
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY , 1999,
TO RECEIVE THEM BEFORE THE MEETING. IF YOU REQUEST ANY INCORPORATED DOCUMENTS
FROM US, WE WILL MAIL THEM TO YOU BY FIRST CLASS MAIL, OR ANOTHER EQUALLY PROMPT
MEANS, WITHIN ONE BUSINESS DAY AFTER WE RECEIVE YOUR REQUEST.
WE HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ABOUT THE MERGER OR OUR COMPANIES THAT IS DIFFERENT FROM, OR IN
ADDITION TO, THAT CONTAINED IN THIS DOCUMENT OR IN ANY OF THE MATERIALS THAT WE
HAVE INCORPORATED INTO THIS DOCUMENT. THEREFORE, IF ANYONE DOES GIVE YOU
INFORMATION OF THIS SORT, YOU SHOULD NOT RELY ON IT. IF YOU ARE IN A
JURISDICTION WHERE OFFERS TO EXCHANGE OR SELL, OR SOLICITATIONS OF OFFERS TO
EXCHANGE OR PURCHASE, THE SECURITIES OFFERED BY THIS DOCUMENT OR THE
SOLICITATION OF PROXIES IS UNLAWFUL, OR IF YOU ARE A PERSON TO WHOM IT IS
UNLAWFUL TO DIRECT THESE TYPES OF ACTIVITIES, THEN THE OFFER PRESENTED IN THIS
DOCUMENT DOES NOT EXTEND TO YOU. THE INFORMATION CONTAINED IN THIS DOCUMENT
SPEAKS ONLY AS OF THE DATE OF THIS DOCUMENT UNLESS THE INFORMATION SPECIFICALLY
INDICATES THAT ANOTHER DATE APPLIES.
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<PAGE>
ANNEX A
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of the 25th day of April, 1999 (as
amended and restated as of May 27, 1999, this "Plan"), by and between EVEREN
CAPITAL CORPORATION (the "Company"), FIRST UNION CORPORATION ("First Union"),
and FIRST UNION DELAWARE, INC. (the "FUNC Subsidiary").
RECITALS:
(A) THE COMPANY. The Company is a corporation duly organized and
validly existing in good standing under the laws of the State of Delaware,
with its principal executive offices located in Chicago, Illinois. As of the
date hereof, the Company has 100,000,000 authorized shares of common stock,
each of $0.01 par value ("Company Common Stock", together with the rights
("Company Rights") issued pursuant to the Rights Agreement between the
Company and Harris Trust and Savings Bank, dated as of October 1, 1996 (the
"Company Rights Agreement"), attached thereto), and 10,000,000 authorized
shares of preferred stock, each of $0.01 par value ("Company Preferred
Stock")(no other class of capital stock being authorized), of which
35,443,465 shares of Company Common Stock and no shares of Company Preferred
Stock were issued and outstanding as of March 31, 1999.
(B) FIRST UNION. First Union is a corporation duly organized and
validly existing in good standing under the laws of the State of North
Carolina, with its principal executive offices located in Charlotte, North
Carolina. First Union is a registered bank holding company under the Bank
Holding Company Act of 1956, as amended. As of the date hereof, First Union
has 2,000,000,000 authorized shares of common stock, each of $3.33 1/3 par
value ("First Union Common Stock", together with the rights ("First Union
Rights") issued pursuant to the Amended and Restated Shareholder Protection
Rights Agreement, dated as of October 15, 1996 (the "First Union Rights
Agreement") attached thereto), 40,000,000 authorized shares of Class A
Preferred Stock, no-par value ("First Union Class A Preferred Stock"), and
10,000,000 authorized shares of Preferred Stock, no-par value ("First Union
Preferred Stock") (no other class of capital stock being authorized), of
which approximately 968,139,000 shares of First Union Common Stock, no
shares of First Union Class A Preferred Stock, and no shares of First Union
Preferred Stock, were issued and outstanding as of March 31, 1999. The FUNC
Subsidiary is a wholly-owned direct subsidiary of First Union and was
organized by First Union solely as a vehicle to effect the Merger (as
hereinafter defined) and has engaged in no other business activities and has
conducted its operations only as contemplated hereby.
(C) RIGHTS, ETC. Except as Previously Disclosed (as hereinafter
defined), there are no shares of capital stock of the Company authorized and
reserved for issuance, the Company has no Rights (as hereinafter defined)
issued or outstanding and the Company has no commitment to authorize, issue
or sell any such shares or any Rights, except pursuant to this Plan. There
are no preemptive rights in respect of the Company Common Stock.
(D) APPROVALS. The respective Boards of Directors of each of First
Union, the FUNC Subsidiary and the Company have determined that it is in the
best interests of their respective companies and their stockholders to
consummate the transactions provided for in this Plan. The Board of
Directors of each of the Company, First Union and the FUNC Subsidiary has
approved, at meetings of each of such Boards of Directors, this Plan and has
authorized the execution hereof in counterparts.
A-1
<PAGE>
(E) INTENTION OF THE PARTIES. It is the intention of the parties that
the Merger shall qualify as a reorganization under Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
(F) EMPLOYMENT AGREEMENTS. In connection with the transactions
contemplated hereby, certain employees of the Company identified on ANNEX A
hereto have entered into employment agreements with First Union.
(G) VOTING AGREEMENT. As a condition and inducement to First Union's
willingness to enter into this Plan, certain individuals have entered into
an agreement with First Union in the form attached hereto as EXHIBIT B (the
"Voting Agreement"), pursuant to which such individuals have agreed to vote
all shares of capital stock owned or acquired by them in favor of approval
of the transactions contemplated by this Plan at the Meeting (as hereinafter
defined).
(H) RETENTION PROGRAM. First Union and the Company have agreed, in
connection with the transactions contemplated hereby, to establish a
retention program on substantially the terms described herein, the purposes
of which is to retain the services of certain employees of the Company and
the Company Subsidiaries (as hereinafter defined) following the consummation
of the transactions contemplated hereby.
(I) STOCK OPTION AGREEMENT. As a condition and inducement to First
Union's willingness to enter into this Plan, concurrently with the execution
and delivery of this Plan, the Company has executed and delivered a Stock
Option Agreement with First Union (the "Stock Option Agreement") in
substantially the form attached hereto as EXHIBIT C, pursuant to which the
Company is granting to First Union an option to purchase, under certain
circumstances, shares of Company Common Stock.
In consideration of their mutual promises and obligations, the parties
hereto adopt and make this Plan and prescribe the terms and conditions thereof
and the manner and basis of carrying it into effect, which shall be as follows:
I. THE MERGER.
1.01. THE MERGER. At the Effective Time:
(A) THE CONTINUING CORPORATION. The FUNC Subsidiary shall merge with
and into the Company (the "Merger"), the separate existence of the FUNC
Subsidiary shall cease and the Company (sometimes hereinafter referred to as
the "Continuing Corporation") shall survive the Merger and the name of the
Continuing Corporation shall be "EVEREN Capital Corporation". The Continuing
Corporation shall continue to be governed by the laws of the State of
Delaware, and the separate corporate existence of the Continuing Corporation
with all its rights, privileges, immunities, powers and franchises shall
continue unaffected by the Merger. The Merger shall have the effects
specified in the Delaware General Corporations Law (the "DGCL").
(B) CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS; OFFICERS. The
Certificate of Incorporation and Bylaws of the Continuing Corporation shall
be those of the Company, as in effect immediately prior to the Effective
Time. The directors and officers of the FUNC Subsidiary in office
immediately prior to the Effective Time (as hereinafter defined) shall be
the directors and officers of the Continuing Corporation, together with such
additional directors and officers as may thereafter be elected, who shall
hold office until such time as their successors are duly elected and
qualified.
1.02. EFFECTIVE DATE. Subject to the conditions to the obligations of the
parties to effect the Merger as set forth in ARTICLE VI and subject to the
second sentence in SECTION 2.05, the effective date (the "Effective Date") of
the Merger shall be such date as the parties hereto mutually agree upon;
A-2
<PAGE>
provided, however, that if the parties are not able to agree upon such date,
such date shall be the date as First Union shall notify the Company in writing
not less than five days prior thereto, which date shall not be more than 15 days
after such conditions have been satisfied or waived in writing, excluding those
conditions that are to be satisfied by written instrument dated as of the
Effective Date. On or prior to the Effective Date, the FUNC Subsidiary and the
Company shall execute and deliver to the Secretary of State of the State of
Delaware, a Certificate of Merger, as applicable, in accordance with applicable
law specifying the time at which the Merger shall become effective. The time on
the Effective Date at which the Merger becomes effective is referred to as the
"Effective Time".
1.03. INTEGRATION OF LEGAL ENTITIES. The parties hereto currently intend
to effectuate, or cause to be effectuated, no earlier than the day following the
Effective Time, the combination (the "Subsidiary Combination") of EVEREN
Securities, Inc., a Delaware corporation and a wholly owned subsidiary of the
Company ("EVEREN Securities"), and First Union Capital Markets Corp., a North
Carolina corporation and a wholly owned subsidiary of First Union. The parties
hereto shall, and shall cause their subsidiaries to, cooperate and take all
requisite actions, including, without limitation, executing all requisite
documentation, as may be reasonably required by First Union prior to or
following the Effective Time to consummate the Subsidiary Combination. The
parties also agree to, and shall cause their subsidiaries to, cooperate and take
all requisite additional action as may be reasonably required prior to or
following the Effective Time to merge or otherwise consolidate legal entities
following the Effective Time to the extent desirable for regulatory or other
reasons. Notwithstanding the foregoing, no actions contemplated by this SECTION
1.03 shall be taken if such actions would adversely affect the tax treatment to
the Company's stockholders as a result of receiving the Consideration or prevent
the parties from obtaining the opinions of counsel referred to in SECTIONS
6.02(C) and 6.03(C).
1.04. RESERVATION OF RIGHT TO REVISE STRUCTURE. At First Union's election,
the Merger may alternatively be structured so that the Company is merged with
and into the FUNC Subsidiary; provided however, that no such change shall (1)
alter or change the amount or kind of the consideration to be issued to the
Company's stockholders in the Merger as set forth in ARTICLE II hereof (the
"Merger Consideration"), or the treatment of the holders of the Company Options
(as hereinafter defined), (2) adversely affect the tax treatment to the
Company's stockholders as a result of receiving the Merger Consideration or
prevent the parties from obtaining the opinions of counsel referred to in
SECTIONS 6.02(C) and 6.03(C), (3) materially impede or delay consummation of the
Merger, or (4) release First Union from any of its obligations hereunder. In the
event of such an election, the parties agree to execute appropriate
documentation to reflect such election.
II. CONSIDERATION.
2.01. MERGER CONSIDERATION. Subject to the provisions of this Plan, at the
Effective Time, automatically by virtue of the Merger and without any action on
the part of any party or stockholder:
(A) OUTSTANDING FUNC SUBSIDIARY COMMON STOCK. The shares of FUNC
Subsidiary common stock issued and outstanding immediately prior to the
Effective Time shall by virtue of the Merger, become and be converted into
one share of Company Common Stock, which shall be owned by First Union.
(B) OUTSTANDING COMPANY COMMON STOCK. Each share (excluding shares
held by the Company or any Company Subsidiaries (as defined herein) or by
First Union or any of its subsidiaries, in each case other than in a trust,
fiduciary or nominee capacity or as a result of debts previously contracted
("Treasury Shares")) of Company Common Stock issued and outstanding
immediately prior to the Effective Time shall become and be converted into
the right to receive the number (the "Exchange Ratio") of shares of First
Union Common Stock (including the attached First Union Rights) equal to the
amount obtained by dividing $31.00 by the Average
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Market Price (as hereinafter defined) and rounding to the nearest
one-one-thousandth (1/1000) of a share.
(C) TREASURY SHARES. Each Treasury Share immediately prior to the
Effective Time shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
(D) For purposes of this Plan, "Average Market Price" shall mean
(subject to possible adjustment as set forth in SECTION 2.05) the average of
the daily closing sales prices of First Union Common Stock as reported on
the Composite Transactions tape of the New York Stock Exchange, Inc.
("NYSE") reporting system (as reported in THE WALL STREET JOURNAL (National
Edition)) for the ten consecutive full trading days beginning on the
eleventh trading day prior to the Effective Date and ending on the second
trading day prior to the Effective Date (such period, the "Pricing Period").
2.02. STOCKHOLDER RIGHTS; STOCK TRANSFERS. At the Effective Time, holders
of Company Common Stock shall become record holders of the shares of First Union
Common Stock to which they are entitled hereunder (subject to SECTION 2.04(C)),
and shall cease to be, and shall have no rights as, stockholders of the Company,
other than to receive any dividend or other distribution with respect to the
Company Common Stock with a record date occurring prior to the Effective Time,
subject to the provisions of SECTION 5.17, and the consideration provided under
this ARTICLE II. After the Effective Time, there shall be no transfers on the
stock transfer books of the Company or the Continuing Corporation of shares of
Company Common Stock.
2.03. FRACTIONAL SHARES. Notwithstanding any other provision hereof, no
fractional shares of First Union Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the Merger;
instead, First Union shall pay to each holder of Company Common Stock who would
otherwise be entitled to a fractional share an amount in cash (without interest)
determined by multiplying such fraction by the last sale price of First Union
Common Stock, as reported by the NYSE Composite Transactions tape (as reported
in THE WALL STREET JOURNAL (National Edition) or, if not reported therein, in
another authoritative source), for the last NYSE trading day immediately
preceding the Effective Date.
2.04. 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 shares (other than
Treasury Shares) of Company Common Stock of record immediately prior to the
Effective Time transmittal materials for use in exchanging such
stockholder's certificates formerly representing Company Common Stock ("Old
Certificates") or effecting any necessary book-entry transfers in the case
of uncertificated shares of Company Common Stock for the Merger
Consideration. The certificates representing the shares of First Union
Common Stock ("New Certificates") into which shares of such stockholder's
Company Common Stock are converted at the Effective Time and any checks in
respect of a fractional share interest or dividends or distributions which
such person shall be entitled to receive will be delivered to such
stockholder only upon delivery to First Union National Bank, as Exchange
Agent (the "Exchange Agent") of Old Certificates or evidence of any
necessary book-entry transfers in the case of uncertificated shares
representing all of such shares of Company 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 dividends or distributions which any such person shall be
entitled to receive pursuant to this ARTICLE II upon such delivery. Old
Certificates or evidence of any necessary book-entry transfers in the case
of uncertificated shares surrendered for exchange by any Affiliate (as
referred to in SECTION 5.10) of the Company shall not
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be exchanged for New Certificates until First Union has received a written
agreement from such person as specified in SECTION 5.10.
(B) Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to any former holder of Company Common Stock
for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(C) No dividends or other distributions with a record date occurring
after the Effective Time shall be paid to the holder of any unsurrendered
Old Certificates or uncertificated shares in book-entry form representing
Company Common Stock until such Old Certificates or evidence of
uncertificated shares in book-entry form have been surrendered for exchange
for New Certificates. After becoming so entitled in accordance with this
SECTION 2.04, 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(s) or evidence of uncertificated shares in book-entry form.
2.05. 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 (including but not limited to, the First Union
Rights becoming separable, distributable, unredeemable or exercisable),
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 and the First Union Common Stock is not trading on the basis of such
transaction being completed during the entire Pricing Period, the relevant
closing prices included in the Average Closing Price calculation shall be
appropriately adjusted. Prior to the Effective Date, First Union will not fail
to publish information known to it that (1) would reasonably be expected to have
a material effect on the Average Market Price and (2) would customarily be
published by First Union consistent with its past practice; provided that if any
such information is published during or after the Pricing Period and before the
Effective Date, the Effective Date shall be delayed so that the entire Pricing
Period occurs after publication.
2.06. OPTIONS.
(A) From and after the Effective Time, all employee and director stock
options to purchase shares of Company Common Stock (each, a "Company
Option"), which are then outstanding and unexercised, shall, without any
further action on the part of the holders thereof, be converted into and
become options to purchase shares of First Union Common Stock, and First
Union shall assume each such Company Option in accordance with the terms of
the applicable Previously Disclosed Compensation and Benefit Plans (as
hereinafter defined) and related agreements by which it is evidenced,
including but not limited to the accelerated vesting of such Company Options
which shall occur in connection with and by virtue of the Merger as and to
the extent required by such Previously Disclosed Compensation and Benefit
Plans; PROVIDED, HOWEVER, that from and after the Effective Time (i) each
such Company Option assumed by First Union may be exercised solely to
purchase shares of First Union Common Stock, (ii) the number of shares of
First Union Common Stock purchasable upon exercise of such Company Option
shall be equal to the number of shares of Company Common Stock that were
purchasable under such Company Option immediately prior to the Effective
Time multiplied by the Exchange Ratio and rounding to the nearest whole
share, and (iii) the per share exercise price under each such Company Option
shall be adjusted by dividing the per share exercise price of each such
Company Option immediately prior to the Effective Time by the Exchange
Ratio, and rounding to the nearest whole cent. The terms of each Company
Option shall, in accordance with its terms, be subject to further adjustment
as appropriate to reflect any stock split, stock dividend, recapitalization,
merger, reorganization or other similar transaction with respect to First
Union Common Stock on or
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subsequent to the Effective Date. Notwithstanding the foregoing, the number
of shares and the per share exercise price of each Company 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. Accordingly, with respect to any incentive stock options,
fractional shares shall be rounded down to the nearest whole number of
shares and where necessary the per share exercise price shall be rounded up
to the nearest cent.
(B) Prior to the Effective Time, First Union shall reserve for issuance
the number of shares of First Union Common Stock necessary to satisfy First
Union's obligations under SECTION 2.06(A). Promptly after the Effective
Time, First Union shall file with the SEC a registration statement on an
appropriate form under the Securities Act with respect to the shares of
First Union Common Stock subject to options to acquire First Union Common
Stock issued pursuant to SECTION 2.06(A) hereof, and shall use its
reasonable best efforts to maintain the current status of the prospectus
contained therein, as well as comply with any applicable state securities or
"blue sky laws", for so long as such options remain outstanding.
III. ACTIONS PENDING CONSUMMATION.
3.01. FOREBEARANCES OF THE COMPANY. From the date hereof until the
Effective Time, except as expressly contemplated by this Plan, as Previously
Disclosed, or as required by applicable law or regulation, without the prior
written consent of First Union, which consent shall not be unreasonably
withheld, the Company will not, and will cause each of the Company Subsidiaries
not to:
(A) ORDINARY COURSE. Conduct the business of the Company and the
Company Subsidiaries other than in the ordinary and usual course or fail to
use reasonable efforts consistent with past practice to preserve intact
their business organizations and assets and maintain their rights,
franchises and existing relations with clients, customers, suppliers,
employees and business associates, or take any action reasonably likely to
have a material adverse effect on the Company's ability to perform any of
its material obligations under this Plan, or engage in any new lines of
business.
(B) CAPITAL STOCK. Other than pursuant to Rights Previously Disclosed
and outstanding on the date hereof or as permitted by SECTION 3.01(D)(4),
(i) issue, sell or otherwise permit to become outstanding, or authorize the
creation of, any additional shares of capital stock of the Company or any
Rights, (ii) enter into any agreement with respect to the foregoing, or
(iii) permit any additional shares of capital stock of the Company to become
subject to new grants of employee or director stock options, other Rights or
similar stock-based employee rights; PROVIDED, HOWEVER, if any such shares
are issued pursuant to such Rights, the Company agrees that such shares
shall be purchased in the open market and shall not be treasury or original
issue shares unless otherwise agreed to by First Union.
(C) DIVIDENDS, ETC. (1) Make, declare, pay or set aside for payment
any dividend (other than dividends from wholly owned Company Subsidiaries to
the Company or another wholly owned Company Subsidiary, or regular quarterly
cash dividends on Company Common Stock payable at a rate not to exceed $0.07
per share) on or in respect of, or declare or make any distribution on, any
shares of capital stock of the Company or (2) directly or indirectly adjust,
split, combine, redeem, reclassify, purchase or otherwise acquire, any
shares of its capital stock.
(D) COMPENSATION; EMPLOYMENT AGREEMENTS; ETC. Enter into, amend,
modify or renew any employment, consulting, severance or similar agreements
or arrangements with any director, officer or employee of the Company or any
Company Subsidiary, or grant any salary or wage increase or increase any
employee benefit (including incentive or bonus payments), except (1) for
normal individual increases in compensation to employees in the ordinary
course of business consistent
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with past practice, (2) for other changes that are required by applicable
law, (3) to satisfy Previously Disclosed contractual obligations existing as
of the date hereof, or (4) for employment arrangements for, or grants of
awards to, newly hired employees in the ordinary course of business
consistent with past or previously announced practice.
(E) BENEFIT PLANS. Except for amendments to the Company's 401(k) and
Employee Stock Ownership Plan (the "KSOP") and related trust agreement of
which First Union has received notice as of the date hereof, enter into,
establish, adopt, amend or terminate (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, employee
of, or independent contractor with respect to, the Company or any of the
Company Subsidiaries, or take any action to accelerate the vesting,
exercisability, payment or funding of stock options, restricted stock or
other compensation or benefits payable thereunder.
(F) DISPOSITIONS. Except (i) as Previously Disclosed or (ii) with
respec to securities or other investments or assets in the ordinary course
of business consistent with past practice, sell, transfer, mortgage, lease,
encumber or otherwise dispose of or discontinue any of its assets, business
or properties.
(G) ACQUISITIONS. Except (i) as Previously Disclosed or (ii) with
respect to securities or other investments or assets in the ordinary course
of business consistent with past practice, merge, consolidate with, or
acquire any assets, business, or properties of any other entity.
(H) GOVERNING DOCUMENTS. Amend the Company's Certificate of
Incorporation, by-laws or the articles of incorporation or by-laws (or
similar governing documents) of any of the Company Subsidiaries.
(I) ACCOUNTING METHODS. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be required
by generally accepted accounting principles.
(J) CONTRACTS. Except in the ordinary course of business consistent
with past practice, enter into or terminate any material contract 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 not
to exceed $250,000 for any individual matter, and in the aggregate for all
such settlements, not more than $500,000 per month, and which, in the
judgment of First Union, is not reasonably likely to establish an adverse
precedent or basis for subsequent settlements.
(L) ADVERSE ACTIONS. (1) Take any action while knowing that such
action would, or is reasonably likely to prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the
Code; or (2) knowingly take any action that is intended or is reasonably
likely to result in (a) any of its representations and warranties set forth
in this Plan being or becoming untrue in any material respect at any time at
or prior to the Effective Time, (b) any of the conditions to the Merger set
forth in ARTICLE VII not being satisfied or (c) a material violation of any
provision of this Plan except, in each case, as may be required by
applicable law or regulation.
(M) INDEBTEDNESS. Incur any indebtedness for borrowed money other than
in the ordinary course of business.
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(N) CAPITAL EXPENDITURES. Authorize or make any capital expenditures,
other than in the ordinary course of business consistent with past practice
in amounts not to exceed $500,000 individually or $2,000,000 in the
aggregate.
(O) RISK MANAGEMENT. Except as required by applicable law or
regulation, implement or adopt any change in the risk management policies,
procedures or practices of the Company, which, individually or in the
aggregate with all such other changes, would be reasonably likely to result
in a Material Adverse Effect on the Company.
(P) NEW ACTIVITIES. (1) Initiate any new business activity that would
be impermissible for a "bank holding company" under the Bank Holding Company
Act of 1956, as amended, or acquire or permit any of the Company
Subsidiaries to acquire, other than in a bona fide fiduciary capacity or
other than in the ordinary course of business with a view towards resale, in
the aggregate, ownership or control of 5% or more of any class of an
issuer's voting securities or 25% or more of an issuer's equity (treating
subordinated debt as equity) or (2) with respect to EVEREN 1999 Capital Fund
LLC (the "Fund"), permit the Fund to make any portfolio investments, issue
any capital calls, or take any other material action not required to be
taken by its limited liability company agreement, other than the termination
of the Fund in accordance with its terms.
(Q) TAX MATTERS. Make or change any material tax election, change any
annual tax accounting period, adopt or change any method of tax accounting,
file any amended Company Tax Return (as hereinafter defined), enter into any
material closing agreement, settle any material Tax (as hereinafter defined)
claim or assessment, surrender or compromise any right to claim a material
Tax refund, consent to any extension or waiver of the limitations period
applicable to any material Tax claim or assessment, in each case, other than
any of the foregoing actions that would not be reasonably likely to have a
Material Adverse Effect on the Company and which are taken in the ordinary
and usual course of business consistent with past practice.
(R) COMMITMENTS. Agree, commit to or enter into any agreement to take
any of the actions referred to in SECTION 3.01(A) through (Q).
3.02. 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 the Company, which consent shall not be unreasonably
withheld, First Union will not, and will cause each of its subsidiaries not to:
(A) DIVIDENDS. Make, declare, pay or set aside for payment any
dividend or similar distribution, other than regular dividends on First
Union Common Stock or First Union Preferred Stock consistent with past
practice; provided, however, the foregoing shall not apply to increases in
the quarterly dividend rate payable on First Union Common Stock in the
ordinary course of business consistent with past practices or the payment of
dividends on any preferred stock (now or hereafter outstanding) in
accordance with the terms thereof.
(B) ADVERSE ACTIONS. (1) Take any action while knowing that such
action would, or is reasonably likely to, prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the
Code; or (2) knowingly take any action that is intended or is reasonably
likely to result in (a) any of its representations and warranties set forth
in this Plan being or becoming untrue in any material respect at any time at
or prior to the Effective Time, (b) any of the conditions to the Merger set
forth in Article VI not being satisfied or (c) a material violation of any
provision of this Plan except, in each case, as may be required by
applicable law or regulation.
(C) COMMITMENTS. Agree, commit to or enter into any agreement to take
any of the actions referred to in SECTION 3.02(A) or (B).
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IV. REPRESENTATIONS AND WARRANTIES.
4.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to First Union as follows, in all cases except as
Previously Disclosed:
(A) RECITALS. The facts set forth in the Recitals of this Plan with
respect to it are true and correct.
(B) ORGANIZATION, STANDING AND AUTHORITY. The Company and each Company
Subsidiary is duly qualified to do business and is in good standing in the
States of the United States and foreign jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified and in which the failure to be duly qualified, individually or in
the aggregate, is reasonably likely to have a Material Adverse Effect on the
Company. The Company and each of the Company Subsidiaries has in effect all
federal, state, local, and foreign governmental authorizations necessary for
it to own or lease its properties and assets and to carry on its business as
it is now conducted, except for such authorizations, the absence of which,
individually or in the aggregate, is not reasonably likely to have a
Material Adverse Effect on the Company. EVEREN Securities is duly
registered, qualified to do business and in good standing as a broker-dealer
with the Securities and Exchange Commission (the "SEC"), and is a member in
good standing of or registered with the National Association of Securities
Dealers, Inc. (the "NASD"), the New York Stock Exchange, Inc. (the "NYSE"),
the American Stock Exchange, Inc. (the "AMEX"), the Commodity Futures
Trading Commission (the "CFTC"), the National Futures Association (the
"NFA"), and all other securities and commodities exchanges in which the
conduct of its business requires membership or registration.
(C) SHARES. The outstanding shares of Company Common Stock are validly
issued and outstanding, fully paid and nonassessable, and are subject to no,
and have not been issued in violation of any, preemptive or similar rights.
As of the date hereof, except as Previously Disclosed, there are no shares
of Company Common Stock authorized and reserved for issuance, the Company
does not have any Rights issued or outstanding with respect to Company
Common Stock, and the Company does not have any commitment to authorize,
issue or sell any Company Common Stock or Rights, except pursuant to this
Plan. The number of shares of Company Common Stock which are issuable and
reserved for issuance upon exercise of Company Options as of the date hereof
are Previously Disclosed. No shares of Company Common Stock have been issued
from March 31, 1999, to the date of this Plan, except pursuant to Rights
Previously Disclosed.
(D) COMPANY SUBSIDIARIES. The Company has Previously Disclosed a list
of all the Company Subsidiaries, including the states in which such Company
Subsidiaries are organized, and if any of such Company Subsidiaries is not
wholly-owned by the Company or a Company Subsidiary, the percentage owned by
the Company or any Company Subsidiary and the names, addresses and
percentage ownership by any other individual or corporation, partnership,
joint venture, business trust, limited liability corporation or partnership,
association or other organization (each, a "Business Entity"). No equity
securities of any of the Company Subsidiaries are or may become required to
be issued (other than to the Company or a wholly-owned Company Subsidiary)
by reason of any Rights with respect thereto. There are no contracts,
commitments, understandings or arrangements by which any of the Company
Subsidiaries is or may be bound to sell or otherwise issue any shares of its
capital stock, and there are no contracts, commitments, understandings or
arrangements relating to the rights of the Company to vote or to dispose of
such shares. All of the shares of capital stock of each Company Subsidiary
are fully paid and nonassessable and subject to no preemptive rights and,
except as Previously Disclosed, are owned by the Company or a Company
Subsidiary free and clear of any liens, encumbrances, charges, security
interests, restrictions (including restrictions on voting rights or rights
of disposition), defaults or equities of
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any character or claims or third party rights of whatever nature
(collectively, "Liens"). Each Company Subsidiary is in good standing under
the laws of the jurisdiction in which it is incorporated or organized, and
is duly qualified to do business and in good standing in each jurisdiction
where its ownership or leasing of property or the conduct of its business
requires it to be so qualified, except for any case in which the failure to
be duly qualified is not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on the Company. Except as
Previously Disclosed, the Company does not own beneficially, directly or
indirectly, any equity securities or similar interests of any Business
Entity. The term "Company Subsidiary" means any Business Entity in which the
Company, directly or indirectly, owns or controls 50% or more of any class
of such entity's voting securities.
The Company has Previously Disclosed a list of all equity securities it
or a Company Subsidiary holds for its own account and not in a bona fide
fiduciary capacity, as of the date hereof, involving, in the aggregate,
ownership or control of 5% or more of any class of the issuer's voting
securities or 25% or more of the issuer's equity (treating subordinated debt
as equity). The Company has Previously Disclosed a list of all partnerships,
joint ventures or similar entities, in which it or any Company Subsidiary
owns or controls an interest.
(E) CORPORATE POWER. The Company and each of the Company Subsidiaries
has the corporate power and authority to carry on its business as it is now
being conducted and to own or lease all its material properties and assets.
(F) CORPORATE AUTHORITY. Subject to any necessary receipt of approval
by its stockholders referred to in SECTION 6.01(A), each of this Plan and
the Stock Option Agreement and the transactions contemplated hereby and
thereby has been authorized by all necessary corporate action of the Company
and is a valid and binding agreement of the Company enforceable in
accordance with its terms, subject as to enforcement to bankruptcy,
insolvency and other similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(G) NO DEFAULTS. Subject to the approval by the holders of at least a
majority of the outstanding shares of Company Common Stock, the required
regulatory approvals Previously Disclosed, the Previously Disclosed required
filings under federal and state securities and insurance laws and the
Previously Disclosed approvals of the NYSE and any other applicable exchange
of the Merger and the other transactions contemplated hereby, the execution,
delivery and performance of this Plan and the consummation by the Company of
the transactions contemplated hereby, does not and will not (1) constitute a
breach or violation of, or a default under, or cause or allow the
acceleration or creation of a Lien (with or without the giving of notice,
passage of time or both) pursuant to, any law, rule or regulation or any
judgment, decree, order, governmental or non-governmental permit or license,
or agreement, indenture or instrument of it or of any of the Company
Subsidiaries or to which the Company or any of the Company Subsidiaries or
its or their properties is subject or bound, which breach, violation,
default or Lien is reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect on the Company, (2) constitute a breach or
violation of, or a default under, the Certificate of Incorporation, Bylaws,
or similar governing documents of the Company or any Company Subsidiary, or
(3) require any consent or approval under any such law, rule, regulation,
judgment, decree, order, governmental or non-governmental permit or license
or the consent or approval of any other party to any such agreement,
indenture or instrument, other than any such consent or approval, which if
not obtained, would not be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on the Company.
(H) COMPANY REPORTS. Except as Previously Disclosed, since January 1,
1996, the Company has timely filed all material reports, registrations,
statements and other filings, together with any
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amendments required to be made with respect thereto, that were required to
be filed with (1) the SEC and the CFTC, (2) any applicable federal, state,
local or foreign governmental authorities and (3) the NASD, the NYSE, the
AMEX, the Chicago Mercantile Exchange (the "CME"), the Chicago Board of
Trade (the "CBOT"), the Municipal Securities Rulemaking Board (the "MSRB")
or any non-governmental self-regulatory agency, commission or authority (a
"Self-Regulatory Body") (all such reports and statements, including the
financial statements, exhibits and schedules thereto, being collectively
referred to herein as the "Company Reports"), including without limitation,
all material reports, registrations, statements and filings required under
the Investment Company Act of 1940 (together with the rules and regulations
thereunder, the "Investment Company Act"), the Investment Advisers Act of
1940 (together with the rules and regulations thereunder, the "Investment
Advisers Act"), the Securities Exchange Act of 1934 (together with the rules
and regulations thereunder, the "Exchange Act"), the Securities Act of 1933
(together with the rules and regulations thereunder, the "Securities Act")
and any applicable state securities or "blue sky" laws. As of their
respective dates (and without giving effect to any amendments or
modifications filed after the date of this Plan with respect to Company
Reports filed before the date of this Plan), each of the Company Reports
complied in all material respects with the statutes, rules, regulations and
orders enforced or promulgated by the Regulatory Authority with which they
were filed and did not contain any untrue statement of a material fact or
omit to state any material fact 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.
(I) FINANCIAL STATEMENTS. The Company's (a) Annual Report on Form 10-K
for the fiscal year ended December 31, 1998, and all other documents filed
or to be filed by the Company or any Company Subsidiary subsequent to
December 31, 1998, under Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act, in the form filed with the SEC (in each such case, the "Company
Financial Reports"), did not and will not as of their respective dates
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading; and each of the balance sheets in or incorporated by reference
into the Company Financial Reports (including the related notes and
schedules thereto) fairly presents in all material respects and will fairly
present in all material respects the financial position of the entity or
entities to which it relates as of its date and each of the statements of
income and changes in stockholders' equity and cash flows or equivalent
statements in the Company Financial Reports (including any related notes and
schedules thereto) fairly presents in all material respects and will fairly
present in all material respects the results of operations, changes in
stockholders' equity and changes in cash flows, as the case may be, of the
entity or entities to which it relates for the periods set forth therein, in
each case in accordance with generally accepted accounting principles
applied consistently during the periods involved, except as may be noted
therein, subject to normal and recurring year-end audit adjustments in the
case of unaudited statements.
(J) ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in the
Company Financial Reports prior to the date hereof, none of the Company or
the Company Subsidiaries has any obligation or liability whatsoever (whether
accrued, contingent or otherwise), including liabilities under Environmental
Laws (as hereinafter defined), that, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect on the Company.
(K) ABSENCE OF CERTAIN CHANGES. Since December 31, 1998, except as
Previously Disclosed or as specifically contemplated by this Plan, the
business of the Company and the Company
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Subsidiaries has been conducted in the ordinary and usual course, consistent
with past practice and there has not been:
(1) any event, occurrence, development or state of circumstances or
facts which has had or would reasonably be expected to constitute or
result in a Material Adverse Effect on the Company; or
(2) any event, occurrence, development or state of circumstances or
facts which would result in a violation of the covenants set forth in
ARTICLE III of this Plan had such events, occurrences, developments or
state of circumstances or facts occurred after the date hereof.
(L) PROPERTIES; SECURITIES. Except as specifically reserved against or
otherwise disclosed in the Company Financial Reports (including the related
notes and schedules thereto) and except for those properties and assets that
have been sold or otherwise disposed of in the ordinary course of business,
and except as Previously Disclosed, the Company and the Company Subsidiaries
have good and marketable title, free and clear of all Liens, to all of the
properties and assets, tangible and intangible, reflected in the Company
Financial Reports as being owned by the Company or the Company Subsidiaries
as of the dates thereof, other than those failures to have such title and
Liens that, individually or in the aggregate, are not reasonably likely to
have a Material Adverse Effect on the Company. The Company and the Company
Subsidiaries do not have a fee interest in any real property not used in the
ordinary course of their business, except as Previously Disclosed. All
buildings and all fixtures, equipment, and other property and assets which
are held under leases or subleases by any of the Company or the Company
Subsidiaries are held under valid leases or subleases enforceable in
accordance with their respective terms, except for instances where the
failure to be so enforceable is not reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect on the Company. Each of the
Company and the Company Subsidiaries has good and marketable title to all
securities held by it (except securities sold under repurchase agreements or
held in any fiduciary or agency capacity), free and clear of any Lien,
except to the extent such securities are pledged in the ordinary course of
business consistent with prudent business practices to secure obligations of
each of the Company or any of the Company Subsidiaries, and except for such
other Liens as are not reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect on the Company. All such securities are
valued on the books of the Company or the Company Subsidiaries in accordance
with generally accepted accounting principles.
(M) LITIGATION; REGULATORY ACTION. Except as disclosed in the Company
Financial Reports and except as Previously Disclosed, (1) no litigation,
proceeding or controversy ("Litigation") before any court, arbitrator,
mediator or Regulatory Authority (as hereinafter defined) is pending against
the Company or the Company Subsidiaries which, individually or in the
aggregate, has or is reasonably likely to have a Material Adverse Effect on
the Company, and, to the Company's knowledge, no such Litigation has been
threatened; (2) neither the Company nor any of the Company Subsidiaries or
properties is a party to or is subject to any order, decree, agreement,
memorandum of understanding or similar arrangement with, or a commitment
letter or similar submission to, any federal, state or municipal
governmental agency or authority or Self-Regulatory Body (the "Regulatory
Authorities") charged with the supervision or regulation of broker-dealers,
securities underwriting or trading, stock exchanges, commodities exchanges,
investment companies, investment advisers or insurance agents and brokers
(including, without limitation, the SEC, the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"), the CFTC, the NYSE,
the NASD, the AMEX, the CME, the CBOT, the MSRB, and the Federal Trade
Commission) or the supervision or regulation of the Company or any of the
Company Subsidiaries; and (3) neither the Company nor any of the Company
Subsidiaries has been advised by any such Regulatory Authority that such
Regulatory Authority is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
decree, agreement,
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memorandum or understanding, commitment letter or similar submission.
Previously Disclosed is a true and complete list, as of the date hereof, of
all Litigation pending or, to the Company's knowledge, threatened in
writing, arising out of any state of facts relating to the sale of
investment products by the Company, the Company Subsidiaries or any
employees thereof (including, without limitation, equity or debt securities,
mutual funds, insurance contracts, annuities, partnership and limited
partnership interests, interests in real estate, investment banking
services, securities underwritings in which the Company or any Company
Subsidiary was a manager, co-manager, syndicate member or distributor,
Derivatives Contracts (as hereinafter defined) or structured notes).
(N) COMPLIANCE WITH LAWS. Except as Previously Disclosed, each of the
Company and the Company Subsidiaries:
(1) in the conduct of its business (including without limitation,
municipal securities and NASDAQ market-making activities), is in
compliance in all respects 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, and the rules of all Self-Regulatory Bodies applicable
thereto, except for such instances of noncompliance which are not
reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on the Company;
(2) has all permits, licenses, authorizations, orders and approvals
of, and have made all filings, applications and registrations with, all
Regulatory Authorities that are required in order to permit it to own and
operate its businesses in all material respects as presently conducted;
all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect and, to their knowledge, no
suspension or cancellation of any of them is threatened or reasonably
likely;
(3) has received no notification or communication from any Regulatory
Authority (a) asserting that any of them is not in compliance with any of
the statutes, rules, regulations, or ordinances which such Regulatory
Authority enforces, or has otherwise engaged in any unlawful business
practice which, as a result of such noncompliance in any such instance,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on the Company, (b) threatening to revoke any license,
franchise, permit, seat on any stock or commodities exchange, or
governmental authorization which revocation, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on the
Company, (c) requiring any of them (including any of the Company's or the
Company Subsidiary's directors or controlling persons) to enter into any
order, decree, agreement, memorandum of understanding or similar
arrangement (or requiring the board of directors thereof to adopt any
resolution or policy) or (d) restricting or disqualifying the activities
of the Company or any of the Company Subsidiaries (except for
restrictions generally imposed by rule, regulation or administrative
policy on broker-dealers generally);
(4) is not aware of any pending or threatened investigation, review
or disciplinary proceedings by any Regulatory Authority against the
Company, any Company Subsidiary or any officer, director or employee
thereof, except for such investigation, review or disciplinary
proceedings which are not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on the Company;
(5) is not, nor to the Company's knowledge, is any "affiliated
person" (as defined in the Investment Company Act) with it, ineligible
pursuant to Section 9(a) or 9(b) of the Investment Company Act to serve
as an investment advisor (or in any other capacity contemplated by the
Investment Company Act) to an Investment Company. Neither the Company,
nor any "associated person" (as defined in the Investment Advisers Act)
thereof, is ineligible pursuant
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to Section 203 of the Investment Advisers Act to serve as an investment
advisor or as an associated person to a registered investment advisor;
(6) is not, nor to the Company's knowledge, is any affiliate of any
of them, subject to a "statutory disqualification" as defined in Section
3(a)(39) of the Exchange Act or is subject to a disqualification that
would be a basis for limitations on the activities, functions or
operations of, or suspension or revocation of the registration of any
broker-dealer Company Subsidiary as a broker-dealer, municipal securities
dealer, government securities broker or government securities dealer
under Section 15, Section 15B or Section 15C of the Exchange Act and, to
the Company's knowledge, there is no reasonable basis for, or proceeding
or investigation, whether preliminary or otherwise, that is reasonably
likely to result in, any such limitations, suspension or revocation;
(7) is not required to be registered as an investment company,
commodity trading advisor, commodity pool operator, futures commission
merchant, introducing broker, insurance agent, or transfer agent under
any federal, state, local or foreign statutes, laws, rules or
regulations;
(8) in the conduct of its business with respect to employee benefit
plans (other than employee benefit plans of the Company contemplated by
SECTION 4.01(Q)) subject to Title I of ERISA, has not (a) breached any
applicable fiduciary duty under Part 4 of Title I of ERISA which would
subject it to liability under Sections 405 or 409 of ERISA, and (b)
engaged in a "prohibited transaction" within the meaning of Section 406
of ERISA or Section 4975(c) of the Code which would subject the Company
to liability or Taxes under Sections 409 or 501(i) of ERISA or Section
4975(a) of the Code, except for such instances of the foregoing which are
not reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect on the Company; and
(9) is not subject to regulation under the Investment Advisers Act or
the Investment Company Act. The Company and the Company Subsidiaries are
and, except for instances of noncompliance which are not reasonably
likely, individually or in the aggregate, to have a Material Adverse
Effect on the Company, each of their employees which are or who are
required to be registered as a broker-dealer, an investment advisor, a
registered representative, an insurance agent or a sales person (or in
similar capacity) with the SEC, the securities commission of any state or
foreign jurisdiction or any Self-Regulatory Body are duly registered as
such and such registrations are in full force and effect. All federal,
state, local and foreign registration requirements have been complied
with in all material respects and such registrations as currently filed,
and all periodic reports required to be filed with respect thereto, are
accurate and complete in all material respects. The Company has made
available to First Union true and correct copies of (a) each Form
G-37/G-38 filed with the MSRB since January 1, 1996, and (b) all records
required to be kept by the Company under Rule G-8(a)(xvi) of the MSRB.
There has been no contributions or payments, and there is not any other
information, that would be required to be disclosed by the Company or any
of the Company Subsidiaries under MSRB rules and regulations, except for
noncompliance of the foregoing which is not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on
the Company.
(O) MATERIAL CONTRACTS.
(1) Except as Previously Disclosed, as of the date hereof, neither
the Company nor any Company Subsidiary is a party to, or is otherwise
bound by, any material contract (as defined in Item 601(b)(10) of
Regulation S-K under the Securities Act) to be performed after the date
hereof that has not been filed or incorporated by reference in the
Company Financial Reports filed on or prior to the date hereof.
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(2) Except as Previously Disclosed, none of the Company or the
Company Subsidiaries is in default under any contract, agreement,
commitment, arrangement, lease, insurance policy, or other instrument to
which it is a party, by which its respective assets, business, or
operations may be bound or affected, or under which it or its respective
assets, business, or operations receives benefits (each, a "Contract"),
which default, individually or in the aggregate, is reasonably likely to
have a Material Adverse Effect on the Company, and there has not occurred
any event that, with the lapse of time or the giving of notice or both,
would constitute such a default. Neither the Company nor any Company
Subsidiary is subject to or bound by any exclusive dealing arrangement or
other contract or arrangement containing covenants which limit the
ability of the Company or any Company Subsidiary to compete in any line
of business or with any person or which involve any restriction of
geographical area in which, or method by which, the Company or any
Company Subsidiary may carry on its business (other than as may be
required by law or any applicable Regulatory Authority). True and
complete copies of all such Previously Disclosed Contracts and all
amendments thereto have been supplied or made available to First Union.
There are no Contracts between any affiliate of the Company (other than
the Company, the Company Subsidiaries, First Union and First Union's
affiliates), on the one hand, and the Company or any Company Subsidiary,
on the other hand.
(3) Contracts with Clients. Except for instances of noncompliance
with the following representations (SECTION 4.01(O)(3)(A-B)) which would
not be reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect on the Company:
(a) Each of the Company and the Company Subsidiaries is in
compliance with the terms of each Contract with any customer to whom
the Company or any Company Subsidiary provides services under any
Contract (a "Client"), and each such Contract is in full force and
effect with respect to the applicable Client. There are no disputes
pending or, to the Company's knowledge, threatened with any Client
under the terms of any such Contract or with any former Client. The
Company has provided or made available to First Union true and
complete copies of the standard form of all advisory, sub-advisory
and similar agreements with Clients; and
(b) Each extension of credit by the Company or any of the Company
Subsidiaries to any Client (i) is in full compliance with Regulation
T of the Federal Reserve Board or any substantially similar
regulation of any Regulatory Authority, (ii) is fully secured, and
(iii) the Company or a Company Subsidiary, as the case may be, has a
first priority perfected security interest in the collateral securing
such extension.
(P) NO BROKERS. All negotiations relative to this Plan and the
transactions contemplated hereby have been carried on by it directly with
First Union and no action has been taken by it that would give rise to any
valid claim against any party hereto for a brokerage commission, finder's
fee or other like payment, excluding a fee to be paid to Morgan Stanley &
Co. Incorporated, a copy of the engagement letter for which has been
provided or made available to First Union.
(Q) EMPLOYEE BENEFIT PLANS.
(1) Previously Disclosed is a complete list of all bonus, deferred
compensation, pension, retirement, profit-sharing, thrift, savings,
employee stock ownership, stock bonus, stock purchase, restricted stock
and stock option plans, all employment, "change of control" or severance
contracts, all medical, dental, health and life insurance plans, all
other employee benefit plans, contracts or arrangements maintained or
contributed to by it or any of the Company Subsidiaries for the benefit
of employees, former employees, directors, former directors or their
beneficiaries (the "Compensation and Benefit Plans"). True and complete
copies of all Compensation and Benefit Plans, including, but not limited
to, any trust
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instruments and/or insurance contracts, if any, forming a part thereof,
and all amendments thereto have been supplied or made available to First
Union.
(2) All "employee benefit plans" within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), other than "multiemployer plans" within the meaning of Section
3(37) of ERISA ("Multiemployer Plans"), covering employees or former
employees of it and the Company Subsidiaries (the "ERISA Plans"), to the
extent subject to ERISA, are in compliance with ERISA in all material
respects. Except as Previously Disclosed each ERISA Plan which is an
"employee pension benefit plan" within the meaning of Section 3(2) of
ERISA ("Pension Plan") and which is intended to be qualified, under
Section 401(a) of the Code, has received a favorable determination letter
from the Internal Revenue Service with respect to "TRA" (as defined in
Section 1 of Internal Revenue Service Revenue Procedure 93-39), and it is
not aware of any circumstances reasonably likely to result in the
revocation or denial of any such favorable determination letter or the
inability to receive such a favorable determination letter. There is no
pending or, to its knowledge, threatened (in writing) litigation relating
to the ERISA Plans. Neither it nor any of the Company Subsidiaries has
engaged in a transaction with respect to any ERISA Plan that would
subject it or any of the Company Subsidiaries to a tax or penalty imposed
by either Section 4975 of the Code or Section 502(i) of ERISA in an
amount which would be material.
(3) No liability under Subtitle C or D of Title IV of ERISA has been
or is expected to be incurred by it or any of the Company Subsidiaries
with respect to any ongoing, frozen or terminated "single-employer plan",
within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any of them, or the single-employer plan of any entity
which is considered one employer with it under Section 4001(a)(15) of
ERISA or Section 414 of the Code (an "ERISA Affiliate"). Neither it nor
any of the Company Subsidiaries presently contributes to a Multiemployer
Plan, nor have they contributed to such a plan within the past five
calendar years. No notice of a "reportable event", within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has not
been waived, other than an event contemplated by this Plan, has been
required to be filed for any Pension Plan or by any ERISA Affiliate
within the past 12-month period.
(4) All contributions required to be made under the terms of any
ERISA Plan have been timely made. Neither any Pension Plan nor any
single-employer plan of an ERISA Affiliate has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of
the Code or Section 302 of ERISA. Neither it nor any of the Company
Subsidiaries has provided, or is required to provide, security to any
Pension Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Code.
(5) Under each Pension Plan which is a single-employer plan, as of
the last day of the most recent plan year, the actuarially determined
present value of all "benefit liabilities", within the meaning of Section
4001(a)(16) of ERISA (as determined on the basis of the actuarial
assumptions contained in the plan's most recent actuarial valuation) did
not exceed the then current value of the assets of such plan, and there
has been no material change in the financial condition of such plan since
the last day of the most recent plan year.
(6) Neither it nor any of the Company Subsidiaries has any
obligations for retiree health and life benefits under any plan, except
as Previously Disclosed. Under the terms of the applicable plans, there
are no restrictions on the rights of it or any of the Company
Subsidiaries to amend or terminate any such plan without incurring any
liability under the terms of the applicable plans. In addition, the
Company is not aware of any restriction on the rights of it or any of the
Company Subsidiaries to amend or terminate any such plan without
incurring any liability thereunder under current case law.
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(7) Except as Previously Disclosed, neither the execution and
delivery of this Plan nor the consummation of the transactions
contemplated hereby will (a) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute or
otherwise) becoming due to any director or any employee of it or any of
the Company Subsidiaries under any Compensation and Benefit Plan or
otherwise from it or any of the Company Subsidiaries, (b) increase any
compensation or benefits otherwise payable under any Compensation and
Benefit Plan, or (c) result in any acceleration of the time of payment,
funding or vesting of any such compensation or benefit.
(R) NO KNOWLEDGE. It knows of no reason why the regulatory approvals
referred to in SECTION 6.01(B) should not be obtained without the imposition
of any condition of the type referred to in the proviso following such
SECTION 6.01(B).
(S) LABOR RELATIONS. Each of the Company and the Company Subsidiaries
is in compliance with all currently applicable laws respecting employment
and employment practices, terms and conditions of employment and wages and
hours, including, without limitation, the Immigration Reform and Control
Act, the Worker Adjustment and Retraining Notification Act, and any such
laws relating to employment discrimination, disability rights or benefits,
equal opportunity, plant closure issues, affirmative action, workers'
compensation, employee benefits, severance payments, labor relations,
employee leave issues, wage and hour standards, occupational safety and
health requirements and unemployment insurance and related matters to the
extent that non-compliance with any such laws would not be reasonably likely
to have a Material Adverse Effect on the Company. None of the Company nor
any of the Company Subsidiaries is engaged in any unfair labor practice and
there is no unfair labor practice complaint pending or, to the Company's
knowledge, threatened against any of the Company or the Company Subsidiaries
before the National Labor Relations Board except for such complaints which
are not reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect on the Company. Neither it nor any of the Company
Subsidiaries is a party to, or is bound by, any collective bargaining
agreement, contract or other agreement or understanding with a labor union
or labor organization, nor is it or any of the Company Subsidiaries the
subject of a proceeding seeking to compel it or such subsidiary to bargain
with any labor organization as to wages and conditions of employment, nor is
there any strike or other labor dispute involving it or any of the Company
Subsidiaries, pending or, to the Company's knowledge, threatened, nor is it
aware of any activity involving its or any of the Company Subsidiaries'
employees seeking to certify a collective bargaining unit or engaging in any
other organization activity.
(T) INSURANCE. The Company and the Company Subsidiaries are insured
with reputable insurers against such risks and in such amounts as the
management of the Company reasonably has determined to be prudent in
accordance with industry practices. All of the insurance policies, binders,
or bonds maintained by the Company or the Company Subsidiaries are in full
force and effect; the Company and the Company Subsidiaries are not in
default thereunder; and all claims thereunder have been filed in due and
timely fashion, in each instance except for cases which would not be
reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on the Company. Previously Disclosed is a list of all
insurance policies maintained by or for the benefit of the Company or the
Company Subsidiaries or their directors, officers, employees or agents as of
the date hereof.
(U) AFFILIATES. Except as Previously Disclosed, there is no person
who, as of the date of this Plan, may be deemed to be an "affiliate" of the
Company (each, an "Affiliate") as that term is used in Rule 145 under the
Securities Act.
(V) STATE TAKEOVER LAWS; ARTICLES OF INCORPORATION. It has taken all
necessary action to exempt this Plan, the Stock Option Agreement and the
transactions contemplated hereby and
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thereby from, and this Plan, the Stock Option Agreement, and the
transactions contemplated hereby and thereby are exempt from, (1) Section
203 of the DGCL (assuming the accuracy of First Union's representations in
SECTION 4.02(N)), and (2) any applicable takeover provisions in the
Company's Certificate of Incorporation or By-laws.
(W) NO FURTHER ACTION. It has taken all action so that the entering
into of this Plan, the Stock Option Agreement, and the consummation of the
transactions contemplated hereby and thereby (including without limitation
the Merger) or any other action or combination of actions, or any other
transactions, contemplated hereby or thereby do not and will not (assuming
the accuracy of First Union's representations in SECTION 4.02(N))(1) require
a vote of stockholders (other than the affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock on this Plan or
on any other actions necessary to facilitate the transactions contemplated
hereby), or (2) result in the grant of any rights to any person under the
Certificate of Incorporation or Bylaws of the Company or any Company
Subsidiary or under any agreement to which the Company or any of the Company
Subsidiaries is a party, or (3) restrict or impair in any way the ability of
First Union to exercise the rights granted hereunder.
(X) ENVIRONMENTAL MATTERS. The Company and the Company Subsidiaries
have obtained and maintained in effect all licenses, permits and other
authorizations required under all applicable laws, regulations and other
requirements of governmental or regulatory authorities relating to pollution
or to the protection of the environment ("Environmental Laws") and is in
compliance in all material respects with all Environmental Laws and with all
such licenses, permits and authorizations, except in instances where the
failure to obtain or maintain such licenses, permits and other
authorizations is not reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect on the Company. It has not received notice
of liability to any person, governmental entity or Business Entity under the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601 ET SEQ. or any other Environmental Laws with respect to
real property owned or leased by the Company or the Company Subsidiaries.
(Y) TAXES. Except as Previously Disclosed and except as disclosed in
the Company Financial Reports, (1) all material reports and returns with
respect to Taxes (as defined below) and tax related information reporting
requirements that are required to be filed by or with respect to it or the
Company Subsidiaries, including without limitation consolidated federal
income tax returns of it and the Company Subsidiaries (collectively, the
"Company Tax Returns"), have been duly filed, or requests for extensions
have been timely filed and have not expired, and such Company Tax Returns
were true, complete and accurate in all respects, except for such failures
to be true, complete and accurate which are not likely, individually or in
the aggregate, to have a Material Adverse Effect on the Company, (2) all
taxes (which shall mean federal, state, local or foreign income, gross
receipts, windfall profits, severance, property, production, sales, use,
license, excise, franchise, employment, premium, recording, documentary,
documentary stamps, real estate transfer, transfer, back-up withholding or
similar taxes, together with any interest, additions, or penalties with
respect thereto, imposed on the income, properties or operations of it or
the Company Subsidiaries, together with any interest in respect of such
additions or penalties, collectively the "Taxes") shown to be due on the
Company Tax Returns have been paid in full or have been adequately reserved
against on the books of the Company or the Company Subsidiaries, (3) the
statute of limitations on assessment or collection of any federal or state
income taxes due from the Company or the Company Subsidiaries has expired
for all taxable years of the Company and the Company Subsidiaries through
December 31, 1994, (4) all Taxes due with respect to completed and settled
examinations have been paid in full, (5) no issues have been raised by the
relevant taxing authority in connection with the examination of any of the
Company Tax Returns which are reasonably likely, individually or in the
aggregate, to result in a determination that would have a Material Adverse
Effect on the Company, except as reserved against in the Company
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Financial Reports prior to the date of this Plan, (6) none of the Company,
the Company Subsidiaries, First Union or any direct or indirect subsidiary
of First Union, as a consequence of the Company's actions prior to the
Effective Time, will be obligated to make a payment to an individual that
would be a "parachute payment" as such term is defined in Section 280G of
the Code without regard to whether such payment is to be performed in the
future, (7) neither the Company nor any of the Company Subsidiaries will be
required, as a result of (A) a change in accounting method for a Tax period
beginning on or before the Effective Time, to include any adjustment under
Section 481(c) of the Code (or any similar provision of state, local or
foreign law) in taxable income for any Tax period beginning on or after the
Effective Date, or (B) any "closing agreement" as described in Section 7121
of the Code (or any similar provision of state, local or foreign Tax law),
to include any item of income in or exclude any item of deduction from any
Tax period beginning on or after the Effective Date, (8) neither the Company
nor any of the Company Subsidiaries has, since September 13, 1995, been a
member of an affiliated, combined, consolidated or unitary Tax group for
purposes of filing any Tax Return, other than a group of which the Company
or Kemper Corporation, a Delaware corporation, was the common parent, and
(9) since September 13, 1995, no closing agreements, private letter rulings,
technical advance memoranda or similar agreement or rulings have been
entered into or issued by any taxing authority with respect to the Company
or any of the Company Subsidiaries.
(Z) ACCURACY OF INFORMATION. The statements with respect to the
Company and the Company Subsidiaries contained in this Plan, the Schedules
and any other written documents executed and delivered by or on behalf of it
pursuant to the terms of this Plan are true and correct in all material
respects.
(AA) DERIVATIVES. All exchange-traded or over-the-counter swap,
forward, future, option, cap, floor or collar financial contract or any
other similar arrangement, whether entered into for the Company's account,
or for the account of one or more of the Company Subsidiaries or their
customers (except for transactions entered into by the Company or the
Company Subsidiaries on listed options effected on an agency basis for
customers), were entered into (1) in accordance with prudent business
practices and all applicable laws, rules, regulations and regulatory
policies and (2) with counterparties believed to be financially responsible
at the time; and each of them constitutes the valid and legally binding
obligation of the Company or Company Subsidiary, 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,
except to the extent the failure of any of the foregoing is not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect
on the Company. Neither the Company nor a Company Subsidiary, nor to the
Company's knowledge any other party thereto, is in material breach of any of
its obligations under any such agreement or arrangement except for such
instances which are not reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect on the Company. As of their respective
dates, the Company's Financial Reports disclose the value of such agreements
and arrangements on a mark-to-market basis in accordance with generally
accepted accounting principles and, since December 31, 1998, there has not
been a change in such value that, individually or in the aggregate, has
resulted or is reasonably likely to result in a Material Adverse Effect on
the Company.
(BB) ACCOUNTING CONTROLS. Each of the Company and the Company
Subsidiaries has devised and maintained systems of internal accounting
controls sufficient to provide reasonable assurances, that all material
transactions are recorded as necessary to permit the preparation of
financial statements in conformity with generally accepted accounting
principles consistently applied with respect to broker-dealers or any other
criteria applicable to such statements.
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(CC) PROPRIETARY RIGHTS. The Company and the Company Subsidiaries have
the right to use the names, servicemarks, trademarks and other intellectual
property (collectively, "Intellectual Property") material to the conduct of
their business, all such Intellectual Property has been Previously
Disclosed, such right of use is free and clear of any Liens and no other
person has the right to use any such Intellectual Property except for
instances which are not reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect on the Company.
(DD) REORGANIZATION. It is aware of no reason why the Merger would
fail to qualify as a reorganization under Section 368(a) of the Code.
(EE) INVESTMENT ADVISORY ACTIVITIES.
(1) None of the Company Subsidiaries provide investment management,
investment advisory, sub-advisory, administration, distribution or
certain other services to persons registered or, to the Company's
knowledge, required to be registered under the Investment Company Act.
(2) Except as Previously Disclosed, none of the Company or any
Company Subsidiary is or has been during the past five years an
"investment adviser" within the meaning of the Investment Advisers Act,
required to be registered, licensed or qualified as an investment advisor
under the Investment Advisers Act or subject to any material liability or
disability by reason of any failure to be so registered, licensed or
qualified, except for any such failure to be so registered, licensed or
qualified that would not, individually or in the aggregate, reasonably be
likely to have a Material Adverse Effect on the Company.
(3) The Company and the Company Subsidiaries have in all material
respects operated each of its investment accounts for which it has
investment discretion in accordance with the investment objectives and
guidelines in effect for each such investment account, except when lack
of compliance would not be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on the Company.
(FF) COMPANY RIGHTS AGREEMENT. The Company has duly adopted an
amendment to the Company Rights Agreement in the form of EXHIBIT D, as a
result of which neither First Union nor any affiliate or associate of First
Union will become an "Acquiring Person" and no "Distribution Date" (as such
terms are defined in the Company Rights Agreement) will occur, and the
rights issued under the Company Rights Agreement will not become separable,
distributable, unredeemable or exercisable as a result of the approval,
execution or delivery of this Plan, the Stock Option Agreement or the
consummation of the transactions contemplated hereby or thereby and the
Company Rights will expire at the Effective Time.
(GG) YEAR 2000. The Company has adopted a plan of reprogramming and
testing (the "Y2K Plan") for the purpose of assuring that all computer
software and hardware developed or currently used by the Company and the
Company Subsidiaries will be capable of providing uninterrupted millennium
functionality to record, store, process and present calendar dates falling
on or after January 1, 2000 and date-dependent data in substantially the
same manner and with the same functionality as such software records,
stores, processes and presents such calendar dates and date-dependent data
as of the date hereof (such functionality, "Y2K Compliant"). A true and
complete copy of the Y2K Plan has been made available to First Union, and
the Company is in the process of effecting the Y2K Plan in accordance with
the schedule provided for therein, except for instances which are not
reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on the Company. To the knowledge of the Company, all such
mission-critical software and hardware will be reprogrammed or replaced and
tested and will be Y2K Compliant within the times provided for in the Y2K
Plan and incurring the costs to implement the Y2K Plan is not reasonably
likely to have a Material Adverse Effect on the Company.
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4.02. FIRST UNION REPRESENTATIONS AND WARRANTIES. First Union hereby
represents and warrants to the Company, as follows:
(A) RECITALS. The facts set forth in the Recitals of this Plan with
respect to First Union and the FUNC Subsidiary are true and correct.
(B) CORPORATE AUTHORITY. This Plan has been authorized by all
necessary corporate action of First Union and the FUNC Subsidiary and is a
valid and binding agreement of it enforceable against First Union and the
FUNC Subsidiary in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency and other similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
(C) NO DEFAULTS. Subject to the required approval of the Federal
Reserve Board, and any required filings under federal and state securities
and insurance laws, and the approvals of the NYSE and the other securities
exchanges referred to in SECTION 4.01(G), of the Merger and the
other transactions contemplated hereby, the execution, delivery and
performance of this Plan, and the consummation of the transactions
contemplated hereby by it, does not and will not (1) constitute a breach or
violation of, or a default under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or agreement,
indenture or instrument of it or of any of its subsidiaries or to which it
or any of its subsidiaries or properties is subject or bound, which breach,
violation or default is reasonably likely to have a Material Adverse Effect
on First Union, (2) constitute a breach or violation of, or a default under,
its Articles of Incorporation, Charter or Bylaws, or (3) require any consent
or approval under any such law, rule, regulation, judgment, decree, order,
governmental permit or license, or the consent or approval of any other
party to any such agreement, indenture or instrument other than such consent
or approval, which if not obtained, would not be reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on First
Union.
(D) FINANCIAL REPORTS. Its Annual Report on Form 10-K for the fiscal
year ended December 31, 1998, and all other documents filed or to be filed
subsequent to December 31, 1998, under Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act, in the form filed with the SEC (in each such case, the
"First Union Financial Reports"), did not and will not as of their
respective dates contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading; and each of the balance sheets in or incorporated by
reference into the First Union Financial Reports (including the related
notes and schedules thereto) fairly presents and will fairly present the
financial position of the entity or entities to which it relates as of its
date and each of the statements of income and changes in stockholders'
equity and cash flows or equivalent statements in the First Union Financial
Reports (including any related notes and schedules thereto) fairly presents
and will fairly present the results of operations, changes in stockholders'
equity and changes in cash flows, as the case may be, of the entity or
entities to which it relates for the periods set forth therein, in each case
in accordance with generally accepted accounting principles consistently
applied to banks and bank holding companies during the periods involved,
except as may be noted therein, subject to normal and recurring year-end
audit adjustments in the case of unaudited statements. First Union has
provided the Company true and complete copies of First Union's Articles of
Incorporation and By-laws and the First Union Rights Agreement, in each case
as in effect on the date hereof.
(E) NO EVENTS. Since December 31, 1998, except as Previously Disclosed
or as specifically contemplated by this Plan, there has not been (1) any
event, occurrence, development or state of circumstances or facts which has
had or would reasonably be expected to constitute or result in a Material
Adverse Effect on First Union, or (2) any event, occurrence, development or
state of circumstances or facts which would result in a violation of the
covenants set forth in ARTICLE III of
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this Plan had such events, occurrences, developments or state of
circumstances or facts occurred after the date hereof.
(F) NO BROKERS. All negotiations relative to this Plan and the
transactions contemplated hereby have been carried on by it directly with
the Company and no action has been taken by it that would give rise to any
valid claim against any party hereto for a brokerage commission, finder's
fee or other like payment.
(G) NO KNOWLEDGE. It is aware of no reason why (1) the regulatory
approvals referred to in SECTION 6.01(B) should not be obtained without the
imposition of any condition of the type referred to in the proviso following
such SECTION 6.01(B) and (2) the Merger would fail to qualify as a
reorganization under Section 368(a) of the Code.
(H) SHARES AUTHORIZED. The shares of First Union Common Stock to be
issued in exchange for shares of Company Common Stock upon consummation of
the Merger in accordance with ARTICLE II of this Plan, have been duly
authorized and, when issued in accordance with the terms of this Plan, and
in the case of shares issued upon the exercise of such Options, the related
stock option plan, will be validly issued, fully paid and nonassessable and
subject to no preemptive rights.
(I) ORGANIZATION, STANDING AND AUTHORITY. Each of First Union and its
material subsidiaries (including, but not limited to, the FUNC Subsidiary)
is duly qualified to do business and is in good standing in the States of
the United States and foreign jurisdictions where the failure to be duly
qualified, individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect on First Union. Each of First Union and its
subsidiaries has in effect all federal, state, local and foreign
governmental authorizations necessary for it to own or lease its properties
and assets and to carry on its business as it is now conducted, the absence
of which, individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect on First Union.
(J) CORPORATE POWER. Each of First Union, its material subsidiaries
and the FUNC Subsidiary has the corporate power and authority to carry on
its business as it is now being conducted and to own or lease all its
material properties and assets except for cases that are not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect
on First Union.
(K) ACCURACY OF INFORMATION. The statements with respect to First
Union and the FUNC Subsidiary contained in this Plan, the Schedules and any
other written documents executed and delivered by or on behalf of First
Union pursuant to the terms of this Plan are true and correct in all
material respects.
(L) LITIGATION; REGULATORY ACTION. No Litigation is pending against
First Union or any of its subsidiaries before any court, arbitrator,
mediator or Regulatory Authority which, individually or in the aggregate,
has or is reasonably likely to have a Material Adverse Effect on First Union
and, to its knowledge, no such Litigation has been threatened; and neither
it nor any of its subsidiaries or any of its or their properties or their
officers, directors or controlling persons is a party to or is the subject
of any order, decree, agreement, memorandum of understanding or similar
arrangement with, or a commitment letter or similar submission to, any
Regulatory Authorities, which is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on First Union and neither it
nor any of its subsidiaries has been advised by any Regulatory Authorities
that any such authority is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
decree, agreement, memorandum or understanding, commitment letter or similar
submission.
(M) YEAR 2000. First Union has adopted a Y2K Plan for the purpose of
assuring that all computer software and hardware developed or currently used
by First Union and its subsidiaries will be Y2K Compliant. To First Union's
knowledge, all such software and hardware will be
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reprogrammed or replaced and tested and will be Y2K Compliant within the
times provided for in the Y2K Plan and incurring the costs to implement the
Y2K Plan is not reasonably likely to have a Material Adverse Effect on First
Union.
(N) OWNERSHIP OF COMPANY COMMON STOCK. Neither First Union, nor any of
its subsidiaries, or to First Union's knowledge, affiliates or associates
(as such terms are defined under the Exchange Act), beneficially owns
directly or indirectly, or is a party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of,
more than 1% of the outstanding shares of Company Common Stock (other than
shares held in a bona fide fiduciary or investment advisory capacity).
(M) FIRST UNION RIGHTS AGREEMENT. As a result of the consummation of
the transactions contemplated by this Plan, neither the Company nor any
affiliate or associate of the Company will become an "Acquiring Person" and
no "Distribution Date" (as such terms are defined in the First Union Rights
Agreement) will occur, and the rights issued under the First Union Rights
Agreement will not become separable, distributable, unredeemable or
exercisable as a result of the approval, execution or delivery of this Plan
or the consummation of the transactions contemplated hereby.
V. COVENANTS.
The Company hereby covenants to First Union, and First Union hereby
covenants to the Company, as applicable, that:
5.01. EFFORTS. Subject to the terms and conditions of this Plan, it shall,
and shall cause its subsidiaries to, use 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 Merger as promptly as reasonably practicable and
to otherwise enable consummation of the transactions contemplated hereby and
shall cooperate fully with each other to that end (it being understood that any
amendments to the Registration Statement (as hereinafter defined) or a
resolicitation of proxies as a consequence of an acquisition agreement by First
Union or any of its subsidiaries shall not violate this covenant). Without
limiting the generality of the foregoing, the Company agrees to use its
commercially reasonable efforts, and to cause the Company Subsidiaries to use
commercially reasonable efforts, to obtain (A) any consents of Clients necessary
in connection with the "assignment" of the Contracts pursuant to which the
Company or any Company Subsidiary provides investment advisory, sub-advisory or
management services to a Client within the meaning of the Investment Advisers
Act ("Advisory Agreements") resulting from the consummation of the Merger;
provided that First Union agrees that other than with respect to any Advisory
Agreement which by its terms expressly requires written consent to its
assignment, effective consent to such "assignment" of an Advisory Agreement may
be obtained for all purposes hereunder and under applicable law by requesting
written consent from the Client and informing such Client of (1) the intention
to complete the Merger, which may result in a deemed assignment of such Advisory
Agreement, (2) the Company's intention to continue the advisory services
pursuant to the existing Advisory Agreement with such Client after the Effective
Date if such Client does not terminate such agreement prior to the Effective
Date, and (3) that the consent of such Client will be deemed to have been
granted if such Client continues to accept such advisory services for at least
40 days after receipt of such notice without termination, and (B) the consent or
approval of all persons party to a Contract with the Company, to the extent such
consent or approval is required in order to consummate the Merger and for the
Continuing Corporation to receive the benefits thereof.
5.02. COMPANY PROXY/REGISTRATION STATEMENT; STOCKHOLDER APPROVAL. The
Company and First Union shall prepare a proxy statement/prospectus (the "Proxy
Statement") to be mailed to the holders of Company Common Stock in connection
with the transactions contemplated hereby and to be filed by
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First Union in a registration statement (the "Registration Statement") with the
SEC. The Company shall call a special meeting (the "Meeting") of the holders of
Company Common Stock to be held as soon as practicable for purposes of voting
upon the approval of this Plan and the Company shall use its reasonable best
efforts to solicit and obtain votes of the holders of Company Common Stock in
favor of the approval of this Plan, and the Board of Directors of the Company
shall recommend approval of this Plan by such holders, subject to the directors'
fiduciary duties under applicable laws and the provisions of SECTION 5.07.
5.03. REGISTRATION STATEMENT; COMPLIANCE WITH SECURITIES LAWS. When the
Registration Statement or any post-effective amendment or supplement thereto
shall become effective, and at all times subsequent to such effectiveness, up to
and including the date of the Meeting, such Registration Statement and all
amendments or supplements thereto, with respect to all information set forth
therein furnished or to be furnished by or on behalf of the Company relating to
the Company or the Company Subsidiaries and by or on behalf of First Union
relating to First Union or its subsidiaries, (A) will comply in all material
respects with the provisions of the Securities Act and the Exchange Act and any
other applicable statutory or regulatory requirements, and (B) will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements contained
therein not misleading; PROVIDED, HOWEVER, in no event shall any party hereto be
liable for any untrue statement of a material fact or omission to state a
material fact in the Registration Statement made in reliance upon, and in
conformity with, written information concerning another party furnished by or on
behalf of such other party specifically for use in the Registration Statement.
5.04. REGISTRATION STATEMENT EFFECTIVENESS. First Union will advise the
Company, promptly after First Union receives notice thereof, of the time when
the Registration Statement has become effective or any supplement or amendment
has been filed (after providing drafts in advance to the Company and its counsel
for review and comment), of the issuance of any stop order or the suspension of
the qualification of the First Union Common Stock for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for any such
purpose, or of any request by the SEC for the amendment or supplement of the
Registration Statement or for additional information.
5.05. PRESS RELEASES. The Company will not, without the prior approval of
First Union (which approval shall not be unreasonably withheld or delayed), and
First Union will not, without the prior approval of the Company (which approval
shall not be unreasonably withheld or delayed), issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby, except as otherwise required by law.
5.06. ACCESS; INFORMATION. (A) Subject to applicable law and any binding
confidentiality agreement, upon reasonable notice, the Company and First Union
shall afford the other party and its officers, employees, counsel, accountants
and other authorized representatives, access, during normal business hours
throughout the period prior to the Effective Date, to all of its properties,
books, contracts, data processing system files, commitments and records and,
during such period, and upon request shall furnish promptly to the other party
(1) a copy of each material report, schedule and other document filed by it and
its subsidiaries with any Regulatory Authority, and (2) all other information
concerning the business, properties and personnel of it and its subsidiaries as
the other party may reasonably request, PROVIDED that no investigation pursuant
to this SECTION 5.06 shall affect or be deemed to modify or waive any
representation or warranty made by the parties or the conditions to the
obligations of the parties to consummate the transactions contemplated by this
Plan; and (B) First Union will not use any information obtained pursuant to this
SECTION 5.06 for any purpose unrelated to the consummation of the transactions
contemplated by this Plan and, if this Plan is terminated, will hold all
information and documents obtained pursuant to this paragraph in confidence (as
provided in the confidentiality provisions contained in the Confidentiality
Agreement between the Company and First Union, dated as of April 21, 1999 (the
"Confidentiality Agreement")).
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5.07. ACQUISITION PROPOSALS. In the case of the Company, it shall not, and
it shall cause the Company Subsidiaries not to, solicit or encourage inquiries
or proposals with respect to, or furnish any nonpublic information relating to
or participate in any negotiations or discussions concerning, any acquisition or
purchase of all or a substantial portion of the assets of, or a substantial
equity interest in, the Company or any of the Company Subsidiaries or any merger
or other business combination with the Company or any of the Company
Subsidiaries (an "Acquisition Proposal") other than as contemplated by this
Plan; it shall instruct its and the Company Subsidiaries' officers, directors,
agents, advisors and affiliates to refrain from taking any action that would
violate or conflict with any of the foregoing; and it shall notify First Union
immediately if any such inquiries or proposals are received by, or any such
negotiations or discussions are sought to be initiated with, the Company or any
of the Company Subsidiaries. However, if the Company is not otherwise in breach
or violation of this SECTION 5.07, until the stockholder approval contemplated
by SECTION 6.01(A) shall have been obtained, the Company Board of Directors may,
directly or indirectly through representatives: (a) provide information to and
request information from a person (a "Bidder") that submits, after the date
hereof, a bona fide Acquisition Proposal that the Company Board of Directors in
good faith determines is reasonably likely to constitute a Superior Proposal (as
hereinafter defined), and engage in discussions with the Bidder for the sole
purpose of ascertaining whether such Acquisition Proposal is in fact a Superior
Proposal; and (b) engage in negotiations or discussions concerning such
Acquisition Proposal, if the Company Board of Directors determines in good
faith, after consultation with and based on the advice of outside counsel and a
nationally recognized financial advisor that such Acquisition Proposal
constitutes a Superior Proposal. For purposes of this Plan, a "Superior
Proposal" means an Acquisition Proposal made by a third party which, in the good
faith judgment of the Company Board of Directors, taking into account, to the
extent deemed appropriate by the Company Board of Directors, the various legal,
financial and regulatory aspects of the proposal and the person making such
proposal, (x) if accepted, is reasonably likely to be consummated, and (y) if
consummated, is reasonably likely to result in a more favorable transaction than
the transaction contemplated hereunder considering, among other things, and to
the extent deemed appropriate in good faith by the Company Board of Directors,
the long-term prospects and interests of the Company and its stockholders and
other relevant constituencies. The Company shall immediately notify First Union
of the receipt of any Acquisition Proposal and shall promptly notify First Union
of any significant actions taken or other developments related thereto. The
Company also agrees immediately to cease and to cause to be terminated any
activities, discussions or negotiations conducted on or prior to the date of
this Plan with any parties other than First Union, with respect to any of the
foregoing.
5.08. BLUE-SKY FILINGS. In the case of First Union, it shall use its
reasonable best efforts to obtain all necessary state securities laws or "blue
sky" permits and approvals, PROVIDED that First Union shall not be required by
virtue thereof to submit to general jurisdiction in any state.
5.09. STATE TAKEOVER LAWS; ARTICLES OF INCORPORATION. It shall not take
any action that would cause the transactions contemplated by this Plan to be
subject to any state takeover statute applicable to such party and shall take
all necessary steps to exempt (or ensure the continued exemption of) the
transactions contemplated by this Plan from (A) any applicable state takeover
law, as now or hereafter in effect, and (B) any applicable takeover provisions
in the its Certificate of Incorporation or By-laws.
5.10. AFFILIATE AGREEMENTS. In the case of the Company, it will use
reasonable efforts to cause each person who may be deemed to be an Affiliate of
the Company (other than the KSOP) to execute and deliver to First Union on or
before the mailing of the Proxy Statement for the Meeting an agreement in the
form attached hereto as EXHIBIT E restricting the disposition of the shares of
First Union Common Stock to be received by such Affiliate in exchange for such
Affiliate's shares of Company Common Stock.
5.11. SHARES LISTED. In the case of First Union, it shall use its
reasonable best efforts to list, prior to the Effective Date, on the NYSE, upon
official notice of issuance, the shares of First Union
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Common Stock (and related First Union Rights) to be issued to the holders of
Company Common Stock pursuant to this Plan.
5.12. REGULATORY APPLICATIONS. In the case of First Union, subject to the
cooperation of the Company, (A) it shall promptly prepare and submit
applications to the appropriate Regulatory Authorities for approval of the
Merger, and (B) promptly make all other appropriate filings to secure all other
approvals, consents and rulings which are necessary for the consummation of the
Merger by First Union. First Union will provide copies of such applications and
responses to the Company and its counsel prior to submitting such applications
and responses to the applicable Regulatory Authorities to permit the Company and
such counsel to comment thereon. In the case of the Company, it agrees, upon
request, to furnish First Union with information concerning itself, the Company
Subsidiaries, its and their directors, officers and stockholders and such other
matters as may be necessary or advisable in connection with any filing, notice
or application made by or on behalf of First Union or any of its subsidiaries in
connection with the Merger and the other transactions contemplated in this Plan.
5.13. CURRENT INFORMATION.
(A) During the period from the date of this Plan to the Effective Time,
each of the Company and First Union shall, and shall cause its
representatives to, confer on a regular and frequent basis with
representatives of the other.
(B) The Company shall promptly notify First Union of (1) any material
change in the business or operations of the Company or any Company
Subsidiary, (2) any material complaints, investigations or hearings (or
communications indicating that the same may be contemplated) of any
Regulatory Authority relating to the Company or any Company Subsidiary, (3)
the institution or the threat of material Litigation involving or relating
to the Company or any Company Subsidiary, or (4) any event or condition that
might be reasonably expected to cause any of the Company's representations
or warranties set forth herein not to be true and correct as of the
Effective Time or prevent the Company from fulfilling its obligations
hereunder; and in each case shall keep First Union informed with respect
thereto.
(C) First Union shall notify the Company of (1) any event or condition
that might reasonably be expected to cause any of First Union's
representations or warranties set forth herein not to be true and correct as
of the Effective Date or prevent First Union from fulfilling its obligations
hereunder, (2) the institution or the threat of material Litigation
involving or relating to First Union, and (3) notify the Company immediately
of any denial of any application filed by First Union with any Regulatory
Authority with respect to this Plan, and in each case shall keep the Company
informed with respect thereto.
5.14. RETENTION PROGRAM.
(A) RETENTION POOL. At the Effective Time, First Union will establish
a retention pool (the "Retention Pool"), consisting of the number of
restricted shares of First Union Common Stock equal to $87 million divided
by the Average Market Price, to be used to retain key employees of the
Company. The individuals eligible for inclusion in the Retention Pool and
the respective allocations will be determined by the Chief Executive Officer
of the Company, in consultation with and subject to the prior approval of
First Union, prior to the Effective Time.
(B) VESTING. The restricted shares of First Union Common Stock in the
Retention Pool shall vest, and shall be issued to the participants in the
Retention Pool then eligible to receive such shares, in the installments as
set forth in ANNEX B hereto. Such shares shall vest pursuant to the terms
set forth on ANNEX B.
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(C) ELIGIBILITY. Eligibility to participate in the Retention Pool
shall require an individual to be employed by First Union as of the dates
and subject to the terms and conditions set forth in such ANNEX B.
(D) ADJUSTMENT. If an employee of the Company who has been selected to
participate in the Retention Pool shall forfeit the right to receive the
restricted shares of First Union Common Stock thereunder, as set forth in
ANNEX B, the restricted shares of First Union Common Stock allocated to that
individual shall be cancelled and the number of restricted shares of First
Union Common Stock in the Retention Pool shall be adjusted accordingly.
5.15. INDEMNIFICATION/LIABILITY COVERAGE.
(A) For six years after the Effective Date, First Union shall cause the
Continuing Corporation to, indemnify, defend and hold harmless the present
and former directors, officers and employees of the Company and the Company
Subsidiaries (each, an "Indemnified Party") against all liabilities arising
out of actions or omissions occurring at or prior to the Effective Date
(including, without limitation, the transactions contemplated by this Plan)
to the extent such persons are indemnified under the DGCL and the Company's
Certificate of Incorporation and Bylaws as in effect on the date hereof,
including provisions relating to advances of expenses incurred in the
defense of any litigation.
(B) First Union shall use its reasonable best efforts to maintain the
Company's existing directors' and officers' liability insurance policy (or a
policy, including First Union's existing policy, providing comparable
coverage amount on terms no less favorable) covering persons who are
currently covered by such insurance for a period of six years after the
Effective Date; PROVIDED, that First Union shall not be obligated to make an
annual premium payment in respect of such policy (or replacement policy)
which exceeds, for the portion related to the Company's directors and
officers, 200% of the annual premium payment on the Company's current policy
in effect as of the date of this Plan; PROVIDED, FURTHER, that if such
coverage can only be obtained upon the payment of an annual premium in
excess of 200% of the annual premium payment of the Company's current
policy, First Union shall obtain such coverage as can reasonably be obtained
by paying a premium of 200% of the annual premium payment of the Company's
current policy in effect as of the date of this Plan.
(C) Any Indemnified Party wishing to claim indemnification under
SECTION 5.15(A), upon learning of such claim, action, suit, proceeding or
investigation, shall promptly notify First Union thereof; PROVIDED, that the
failure so to notify shall not affect the obligations of First Union and the
Continuing Corporation under SECTION 5.15(A) (unless such failure materially
increases First Union's liability under such Section). In the event of any
such claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Date), (1) First Union or the Continuing
Corporation shall have the right to assume the defense thereof, if it so
elects, and First Union or the Continuing Corporation shall pay all
reasonable fees and expenses of counsel for the Indemnified Parties promptly
as statements therefor are received; PROVIDED, HOWEVER, that First Union
shall be obligated pursuant to this subsection (C) to pay for only one firm
of counsel for all Indemnified Parties in any jurisdiction for any single
action, suit or proceeding or any group of actions, suits or proceedings
arising out of or related to a common body of facts, (2) the Indemnified
Parties will cooperate in the defense of any such matter, and (3) First
Union shall not be liable for any settlement effected without its prior
written consent.
5.16. DIVIDEND COORDINATION. The Company shall coordinate with First Union
regarding the record dates for any dividends in respect of Company Common Stock
and First Union Common Stock, it being the intention of the parties that holders
of Company Common Stock shall not receive two dividends, or fail to receive one
dividend, for any single calendar quarter with respect to their shares of
Company Common Stock and the First Union Common Stock that they receive in the
Merger.
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<PAGE>
5.17. NO RIGHTS TRIGGERED.
(A) It shall take all reasonable steps necessary to ensure that the
entering into this Plan and the consummation of the transactions
contemplated hereby and any other action or combination of actions
contemplated hereby and thereby do not and will not result in the grant of
any Rights to any person under its Certificate of Incorporation or By-laws.
(B) The Company shall take all actions necessary or required to ensure
that the entering into this Plan and the consummation of the transactions
contemplated hereby will not cause First Union or any affiliate or associate
of First Union to become an "Acquiring Person" for purposes of the Company
Rights Agreement, and a "Distribution Date" under the Company Rights
Agreement will not occur, and the rights issued under the Company Rights
Agreement will not become separable, distributable, unredeemable or
exercisable.
5.18. EXEMPTION FROM LIABILITY UNDER SECTION 16(B). Assuming that the
Company delivers to First Union the Section 16 Information (as defined below) in
a timely fashion, the Board of Directors of First Union, or a committee of
Non-Employee Directors thereof (as such term is defined for purposes of Rule
16b-3(d) under the Exchange Act), shall adopt a resolution providing that the
receipt by the Company Insiders (as defined below) of First Union Common Stock
in exchange for shares of Company Common Stock, and of options to purchase
shares of First Union Common Stock upon conversion of Company Options, in each
case pursuant to the transactions contemplated hereby and to the extent such
securities are listed in the Section 16 Information, are intended to be exempt
from liability pursuant to Section 16(b) and Rule 16b-3 under the Exchange Act.
"Section 16 Information" shall mean relevant information accurate in all
respects regarding the Company Insiders, the number of shares of Company Common
Stock held by each such Company Insider and expected to be exchanged for First
Union Common Stock in the Merger, and the number and description of Company
Options held by each such Company Insider and expected to be converted into
options to purchase First Union Common Stock in connection with the Merger.
"Company Insiders" shall mean those officers and directors of the Company who
with respect to Company Common Stock are, and upon the Merger shall with respect
to First Union Common Stock become, subject to the reporting requirements of
Section 16(a) of the Exchange Act and who are listed in the Section 16
Information.
VI. CONDITIONS TO CONSUMMATION OF THE MERGER.
6.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each of First Union and the Company to consummate the
Merger is subject to the fulfillment or written waiver by First Union and the
Company prior to the Effective Time of each of the following conditions:
(A) STOCKHOLDER APPROVALS. This Plan and the Merger shall have been
duly adopted by the requisite vote of the stockholders of the Company.
(B) REGULATORY APPROVALS. All regulatory approvals required to
consummate the Merger, 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 would reasonably be expected to (1)
following the Effective Time, have a Material Adverse Effect on the Company
and the Company Subsidiaries (treating them collectively as a corporate
organization) or (2) adversely affect First Union and its subsidiaries in a
material way.
(C) NO INJUNCTION. No Regulatory 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.
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<PAGE>
(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 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 Merger shall have been approved for listing on the NYSE, subject to
official notice of issuance.
6.02. CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of the
Company to consummate the Merger is also subject to the fulfillment or written
waiver by the Company 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 in all
material respects 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 so true and correct as of such date), and the Company
shall have received a certificate, dated the Effective Date, signed on
behalf of First Union by an executive 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 the Company
shall have received a certificate, dated the Effective Date, signed on
behalf of First Union by an executive officer of First Union to such effect.
(C) OPINION OF THE COMPANY'S TAX COUNSEL. The Company shall have
received an opinion of Simpson Thacher & Bartlett, special counsel to the
Company, dated the Effective Date, to the effect that, on the basis of
facts, representations and assumptions set forth in such opinion, (i) the
Merger constitutes a "reorganization" within the meaning of Section 368(a)
of the Code and (ii) no gain or loss will be recognized by stockholders of
the Company who receive shares of First Union Common Stock in exchange for
shares of Company Common Stock, except with respect to cash received in lieu
of fractional share interests. In rendering its opinion, Simpson Thacher &
Bartlett, may require and rely upon representations contained in letters
from the Company and First Union.
6.03. CONDITIONS TO OBLIGATION OF FIRST UNION. The obligation of First
Union to consummate the Merger 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 the Company set forth in this Plan shall be true and correct in all
material respects 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 so true and correct as of such date), and First Union
shall have received a certificate, dated the Effective Date, signed on
behalf of the Company by the Chief Executive Officer and the Chief Financial
Officer of the Company to such effect.
(B) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company 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 certificate, dated the Effective Date, signed
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<PAGE>
on behalf of the Company by the Chief Executive Officer and the Chief
Financial Officer of the Company to such effect.
(C) OPINION OF FIRST UNION'S TAX 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 Merger
constitutes a reorganization under Section 368(a) of the Code. In rendering
its opinion, Sullivan & Cromwell may require and rely upon representations
contained in letters from the Company and First Union.
(D) ACCOUNTANTS' LETTERS. Deloitte & Touche LLP, independent auditors
for the Company, shall have delivered to First Union letters, dated the date
of or shortly prior to (A) the mailing of the Proxy Statement, and (B) the
Effective Date, in form and substance reasonably satisfactory to First
Union, with respect to the Company's consolidated financial position and
results of operations, which letters shall be based upon "agreed upon
procedures" undertaken by such firm in accordance with the Statement on
Financial Accounting Standards No. 72.
(E) EMPLOYMENT AGREEMENTS. At least two of the employment agreements
referred to in RECITAL (F) of this Plan (one of which shall be James R.
Boris) shall be in effect (other than as a consequence of death or
disability).
VII. TERMINATION.
This Plan may be terminated prior to the Effective Date, either before or
after receipt of required stockholder approvals:
7.01. MUTUAL CONSENT. By the mutual consent of First Union and the
Company.
7.02. BREACH. By First Union or the Company, in the event of (A) a breach
by the other party of any representation or warranty contained herein, which
breach cannot be or has not been cured within thirty (30) days after the giving
of written notice to the breaching party of such breach, or (B) a breach by the
other party of any of the covenants or agreements contained herein, which breach
cannot be or has not been cured within thirty (30) days after the giving of
written notice to the breaching party of such breach (provided that a party may
terminate this Plan pursuant to this SECTION 7.02 only with respect to a breach
or breaches that would permit such party not to consummate the Merger under the
standards set forth in SECTION 6.02(A) or (B) or SECTION 6.03(A) or (B), as the
case may be).
7.03. DELAY. By First Union or the Company, in the event that the Merger
is not consummated by December 31, 1999; provided that the terminating party is
not then in material breach of this Plan; provided further, to the extent such
delay directly results from First Union's participation in an acquisition
transaction not contemplated by this Plan, First Union may not terminate the
Plan hereunder during such delay.
7.04. NO STOCKHOLDER APPROVAL. By the Company or First Union, in the event
that any stockholder approval contemplated by SECTION 6.01(A) is not obtained at
the Meeting, including any adjournment or adjournments thereof.
7.05. FAILURE TO RECOMMEND, ETC. At any time prior to the stockholder
approval contemplated by SECTION 6.01(A), by First Union if (A) the Company
Board of Directors shall have failed to make its recommendation referred to in
SECTION 5.02, withdrawn such recommendation or modified or changed such
recommendation in a manner adverse in any respect to the interests of First
Union (whether in accordance with SECTION 5.07 or otherwise) or (B) the
Company's Board of Directors participates in (or authorizes the participation
in) negotiations described in SECTION 5.07(B).
7.06. SUPERIOR PROPOSAL. At any time prior to the stockholder approval
contemplated by SECTION 6.01(A), by the Company upon three business days written
notice to First Union if (i) the Company is not then in violation of SECTION
5.07, and (ii) the Company Board of Directors
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<PAGE>
contemporaneously with the effectiveness of such termination is entering into
definitive binding documentation giving effect to a Superior Proposal.
VIII. OTHER MATTERS.
8.01. SURVIVAL. If the Effective Date occurs, all representations,
warranties, agreements and covenants contained in this Plan, except for SECTIONS
5.14, 5.15, 8.04 and 8.09, shall not survive the Effective Date. If this Plan is
terminated prior to the Effective Date, the agreements and representations of
the parties in SECTIONS 4.01(Q) and 4.02(E), SECTION 5.06(B), and SECTIONS 8.01,
8.03, 8.04, 8.05, 8.06, 8.07, 8.09, 8.11 and 8.12 shall survive such
termination.
8.02. WAIVER; AMENDMENT. Prior to the Effective Date, subject to
compliance with applicable law and SECTION 1.04, any provision of this Plan may
be (A) waived in writing by the party benefiting by the provision, or (B)
amended or modified at any time by an agreement in writing among the parties
hereto approved by their respective Boards of Directors and executed in the same
manner as this Plan, except that, after adoption of this Plan by the
stockholders of the Company, no such amendment or modification may be made which
by law or in accordance with the rules of any relevant stock exchange required
further approval by such stockholders without such further approval.
8.03. COUNTERPARTS. This Plan may be executed in one or more counterparts,
each of which shall be deemed to constitute an original. This Plan shall become
effective when one counterpart has been signed by each party hereto.
8.04. GOVERNING LAW. This Plan shall be governed by, and interpreted in
accordance with, the laws of the State of North Carolina, except, in the case of
the Company, the FUNC Subsidiary and the Merger, to the extent that the DGCL is
applicable.
8.05. EXPENSES. Each party hereto will bear all expenses incurred by it in
connection with this Plan and the transactions contemplated hereby, except Proxy
Statement printing, filing, mailing and solicitation expenses which shall be
shared equally between the Company and First Union.
8.06. CONFIDENTIALITY. Each of the parties hereto and their respective
agents, attorneys and accountants will maintain the confidentiality of all
information provided in connection herewith which has not been publicly
disclosed in accordance with the terms of the Confidentiality Agreement
pertaining to confidentiality.
8.07. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
<TABLE>
<C> <S>
If to First Union,
to: First Union Corporation
One First Union Center
Charlotte, North Carolina 28288-0013
Telecopy Number: (704)374-3425
Attention: Edward E. Crutchfield
Chairman and Chief Executive Officer
Copy to: First Union Corporation
One First Union Center
Charlotte, North Carolina 28288-0013
Telecopy Number: (704)374-3425
Attention: Marion A. Cowell, Jr.
General Counsel
</TABLE>
A-31
<PAGE>
<TABLE>
<C> <S>
If to the Company,
to: EVEREN Capital Corporation
77 West Wacker Drive
Chicago, Illinois 60601-1694
Telecopy Number: 312/574-6959
Attention: James R. Boris
Chairman and Chief Executive Officer
and Janet L. Reali
General Counsel
Copy to: Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telecopy Number: 212/455-2502
Attention: Charles I. Cogut and
Mario A. Ponce
</TABLE>
8.08. DEFINITIONS. Any term defined anywhere in this Plan shall have the
meaning ascribed to it for all purposes of this Plan (unless expressly noted to
the contrary). In addition:
(A) the term "Material Adverse Effect", when applied to a party, shall
mean an event, occurrence or circumstance (including, without limitation,
any breach of a representation or warranty contained herein by such party)
which (1) has a material adverse effect on the financial condition, results
of operations, or business of such party and its subsidiaries, taken as a
whole, or (2) would materially impair any party's ability to timely perform
its obligations under this Plan or the consummation of any of the
transactions contemplated hereby; PROVIDED, that a Material Adverse Effect
with respect to a party shall not include (x) events, occurrences or
circumstances relating to, arising out of or resulting from the departure of
securities professionals of the Company or the Company Subsidiaries to the
extent such departures can reasonably be demonstrated to arise from this
Plan or the transactions contemplated hereby, or (y) events or conditions
generally affecting the securities or banking industry or effects resulting
from general economic conditions (including changes in interest rates),
changes in accounting practices or changes to statutes, regulations or
regulatory policies, that do not have a materially more adverse effect on
such party than that experienced by similarly situated financial services
companies;
(B) the term "individually or in the aggregate" as used in ARTICLE IV
of this Plan includes all events, occurrences and circumstances described in
any paragraph of ARTICLE IV, and is not linked to any specific paragraph;
(C) the term "Previously Disclosed" by a party shall mean information
set forth in a Schedule, correspondingly enumerated to the representation,
warranty or covenant to which it relates (which information shall also be
deemed to apply to any other representation, warranty or covenant to which
such information reasonably appears on its face to be relevant), that is
delivered by such party to the other party contemporaneously with the
execution of this Plan and specifically designated as information
"Previously Disclosed" pursuant to this Plan (it being understood that
notwithstanding any other provision herein such information shall be
disclosed in light of the particular standard of "materiality" set forth in
the representation, warranty or covenant to which such information relates);
(D) the term "Rights" means securities or obligations convertible into
or exchangeable for, or giving any person any right to subscribe for or
acquire, or any options, calls or commitments relating to, shares of capital
stock (and shall include stock appreciation rights); and
A-32
<PAGE>
(E) the term "the date hereof", "the date of this Plan" or similar
references means April 25, 1999.
8.09. ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES. This Plan and
all schedules hereto represents the entire understanding of the parties hereto
with reference to the transactions contemplated hereby and supersede any and all
other oral or written agreements heretofore made. 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, except that Section 5.16 is
intended to confer on the persons named therein those rights expressly stated in
such Section.
8.10. BENEFIT PLANS.
(A) As soon as administratively practicable after the Effective Time,
employees of the Company or the Company Subsidiaries immediately prior to
the Effective Time who remain employed with First Union or its subsidiaries
following the Effective Time (the "Continued Employees") shall be generally
entitled to participate in the pension, benefit, welfare, incentive
compensation, sick pay, vacation, fringe benefit and similar plans of First
Union on substantially the same terms and conditions applied to employees of
First Union and its subsidiaries. For the purpose of determining eligibility
to participate in such plans and the vesting of benefits under such plans
(but not for the accrual of benefits under such plans), First Union shall
give effect to years of service with the Company or the Company
Subsidiaries, as the case may be, as if such service had been with First
Union or its subsidiaries.
(B) First Union shall honor in accordance with their terms all
individual compensation contracts Previously Disclosed, the Employment
Agreements entered into by First Union with the individuals set forth on
ANNEX A, and all provisions for vested benefits or other vested amounts
earned or accrued through the Effective Time under any of the Compensation
and Benefit Plans.
(C) SEVERANCE. During the period commencing at the Effective Time and
ending on the first anniversary thereof, First Union shall provide severance
benefits to Continued Employees (including those who transfer to First Union
or its subsidiaries) who terminate employment subsequent to the Effective
Time but prior to the first anniversary thereof in accordance with the
formulae used to determine the duration (or equivalent lump sum value) of
salary continuation under the severance policies covering such employees as
of the date hereof, but utilizing the policies, procedures and practices
First Union uses under its severance plan. At the discretion of First Union,
such benefits may be provided under the First Union severance plan. No
employees, including Continued Employees who transfer to First Union or its
subsidiaries, shall be entitled to any severance benefits pursuant to this
provision unless their employment with such entity is terminated prior to
the first anniversary of the Effective Date. If the Continued Employees
terminate employment after the first anniversary of the Effective Date, they
will be entitled to severance benefits, if any, in accordance with the
provisions of First Union's then current severance plan. For the purposes of
determining the applicability of this SECTION 8.10(C) only, the date of an
employee's termination will be defined as the date the affected employee is
given formal written notification his or her job will be eliminated under
the terms of the First Union severance plan.
(D) CERTAIN EMPLOYEE AGREEMENTS. Neither the Company nor any of the
Company Subsidiaries shall terminate the employment of any employee
identified on ANNEX A hereto (each, an "Identified Employee") without the
prior written consent of First Union and, subject to the terms and
conditions of this Plan, the Company shall use its reasonable best efforts
(a) to maintain the continued employment of each Identified Employee with
the Company or the Company Subsidiaries until the Effective Time and (b) not
in any way to encourage (or permit the encouragement of) any Identified
Employee to breach or violate any employment agreement or
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<PAGE>
other arrangement such Identified Employee may have with the Company or any
of the Company Subsidiaries, or First Union or any of its subsidiaries.
(E) KSOP. First Union shall take all steps reasonably necessary to
ensure that the cost basis of Continued Employees in all current and future
employer securities under the Company 401(k) and KSOP will be maintained at
all times following the Effective Time. In addition, all participants in the
KSOP shall become fully vested in their account balances under the KSOP
immediately prior to the Effective Time, as adjusted from time to time in
accordance with the terms of the KSOP.
(F) RETIREE WELFARE BENEFITS. With respect to the retiree welfare
benefits currently provided by the Company and the Company Subsidiaries, all
currently retired employees (or those who become eligible and elect to
retire prior to the Effective Time under the current terms of the retiree
welfare benefit plans provided by the Company and the Company Subsidiaries)
of the Company or any Company Subsidiary shall continue to be eligible to
receive substantially similar benefits to the benefits currently in effect
subject to First Union's right to amend, modify or terminate such benefits
in the future.
(G) COMMISSIONS SCHEDULES. For transactions effected prior to January
1, 2001, First Union shall provide compensation opportunities to investment
consultants, investment consultant trainees, and branch managers in
accordance with the Company's commission schedules as in effect on the date
hereof, which include, but are not limited to, current cash compensation,
incentive deferred compensation, and non-cash perquisites. It is understood
and agreed that the foregoing compensation shall not include the granting of
any options to purchase, or shares of, First Union Common Stock or any
subsidiaries of First Union.
(H) 1999 BONUS PAYMENTS. For Continued Employees employed by First
Union or its subsidiaries on December 31, 1999, bonus payments for 1999
shall be determined under the terms and conditions established by the
Company for bonus payments to its employees, as in effect on the date hereof
(or otherwise agreed to by First Union), and shall be paid in cash no later
than January 31, 2000. For each Continued Employee whose employment with
First Union or its subsidiaries is terminated prior to December 31, 1999,
bonus payments for 1999 shall be determined under the terms and conditions
established by the Company for bonus payments to its employees, as in effect
on the date hereof (or otherwise agreed to by First Union), but shall be
prorated based on the number of days such Continued Employee was employed by
First Union, its subsidiaries, the Company or the Company Subsidiaries in
1999; any such bonus shall be paid in cash no later than the last day of the
month following such Continued Employee's termination of employment.
Notwithstanding anything to the contrary in the Company's 1996 Restricted
Stock Incentive Plan (or any other Compensation and Benefit Plan), the
foregoing bonuses shall be paid entirely in cash without any adjustment or
any additional premium.
8.11. HEADINGS. The headings contained in this Plan are for reference
purposes only and are not part of this Plan.
8.12. 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. 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 the Company, 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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
<TABLE>
<S> <C> <C>
FIRST UNION CORPORATION
By: /s/ KENNETH R. STANCLIFF
------------------------------------
Name: Kenneth R. Stancliff
Title: Executive Vice President
FIRST UNION DELAWARE, INC.
By: /s/ KENNETH R. STANCLIFF
------------------------------------
Name: Kenneth R. Stancliff
Title: Executive Vice President
EVEREN CAPITAL CORPORATION
By: /s/ JAMES R. BORIS
------------------------------------
Name: James R. Boris
Title: Chairman and Chief Executive
Officer
</TABLE>
A-35
<PAGE>
ANNEX B
AGREEMENT, dated as of April 25, 1999, by and between the individual
stockholder of EVEREN Capital Corporation indicated on the signature page hereto
(the "Stockholder"), and First Union Corporation ("First Union").
WHEREAS, the Stockholder is the beneficial owner of and has the right to
vote shares of Common Stock, each of $0.01 par value of EVEREN
Capital Corporation (the "Company") (the "Shares");
WHEREAS, First Union and the Company have entered into an Agreement and Plan
of Merger (the "Plan"), pursuant to which First Union will acquire the Company
(the "Acquisition"), subject to the terms and conditions of the Plan;
WHEREAS, the Stockholder believes it is in the best interests of the Company
and all of the Company's stockholders for the Acquisition to be consummated on
the terms set forth in the Plan, and as a condition and inducement to First
Union's willingness to enter into the Plan, the Stockholder has agreed to enter
into this Agreement;
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the parties hereto agree as follows:
1. The Stockholder agrees to vote (including by proxy or written
consent) all the Shares, any additional Shares acquired by the Stockholder
after the date hereof and any other shares of stock of the Company owned or
controlled by him (other than in a fiduciary capacity), in favor of the Plan
and the transactions contemplated thereby at the meeting of stockholders of
the Company called for that purpose.
2. The Stockholder agrees that he will not sell or transfer any Shares
owned by him to any other party unless such party enters into an agreement,
satisfactory to First Union, to abide by all the terms of this Agreement.
3. The parties hereto agree that this Agreement shall terminate and be
of no further force and effect if the Plan is terminated in accordance with
its terms.
4. This Agreement shall not affect the Stockholder's fiduciary
obligations, to the extent the Stockholder serves in such capacity, as a
director or officer of the Company.
5. The Stockholder represents and warrants to First Union as follows:
(i) the Stockholder has good title to the Shares and owns the
Shares free and clear of any rights, claims, encumbrances, liens,
interests or restrictions of any nature whatsoever, including, without
limitation, any restrictions on the voting of the Shares or any rights of
others to vote, or to participate (including by consultation) in the
voting of, the Shares;
(ii) this Agreement is a valid and legally binding agreement
enforceable against the Stockholder in accordance with its terms, subject
to bankruptcy, insolvency and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles; and
(iii) the execution, delivery and performance of this Agreement, and
the consummation of the transactions contemplated hereby by the
Stockholder, do not and will not constitute a breach or violation of, or
a default under, any law, rule or regulation or any judgment, decree,
order, governmental permit or license, or agreement, indenture or
instrument of the Stockholder or to which the Stockholder is subject or
bound, or require any consent or approval under such law, rule,
regulation, judgment, decree, order, governmental permit or
B-1
<PAGE>
license or the consent or approval of any other party to any such
agreement, indenture or instrument.
6. The Stockholder hereby agrees that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed by
the Stockholder in accordance with its specific terms or were otherwise
breached. Accordingly, the Stockholder agrees that First Union shall be
entitled to an injunction or injunctions to prevent breaches of this
Agreement by the Stockholder and to enforce specifically the terms and
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which First
Union may be entitled at law or in equity.
7. This Agreement shall bind and benefit the successors, assigns,
executors, trustees and heirs of the parties hereto. This Agreement shall be
governed and construed in accordance with the laws of the State of Delaware
without regard to any applicable conflicts of law rules. Any term hereof
which is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without affecting the remaining terms or their validity or
enforceability in any other jurisdiction.
8. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to constitute an original. This Agreement shall become
effective when one counterpart has been signed by each party hereto.
IN WITNESS WHEREOF, the parties have caused this instrument to be executed
as of the day and year first above written.
<TABLE>
<S> <C> <C>
FIRST UNION CORPORATION
By:
------------------------------------
Name:
Title:
------------------------------------
(the Stockholder)
</TABLE>
B-2
<PAGE>
ANNEX C
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of April 25, 1999, between First Union
Corporation, a North Carolina corporation ("Grantee"), and EVEREN Capital
Corporation, a Delaware corporation ("Issuer").
RECITALS
A. Grantee and Issuer have entered into an Agreement and Plan of Merger,
dated as of April 25, 1999 (the "Merger Agreement"), providing for a merger
between Grantee and the Issuer or a wholly-owned subsidiary of the Issuer (the
"Merger").
B. As a condition and 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 7,014,357 fully paid and nonassessable shares of the common
stock, par value $0.01 per share, of Issuer ("Common Stock") at a price per
share equal to the last reported sales price per share of Common Stock as
reported on the NYSE on April 26, 1999 (as adjusted pursuant to SECTION
5(B), 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
payment of 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 1(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 Merger; (ii) termination of the Merger Agreement in accordance with
the provisions thereof if such termination occurs prior to the occurrence of
any Initial Triggering Event or Subsequent Triggering Event; or (iii) the
passage of twelve (12) months (or such longer period as provided in SECTION
10)
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after termination of the Merger Agreement if such termination occurs
simultaneously with or following the occurrence of any Initial Triggering
Event or a Subsequent Triggering Event. 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 7.02 thereof and (ii)
this Agreement shall automatically terminate upon the proper termination of
the Merger Agreement by Issuer pursuant to SECTION 7.02 thereof as a result
of the material breach by Grantee of its covenants or agreements contained
in the Merger Agreement.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring on or after the date hereof:
(i) Issuer or any of its Significant Subsidiaries (as defined
in Rule 1-02 of Regulation S-X promulgated by the Securities and
Exchange Commission (the "SEC")) (each an "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 or the trustee for the Issuer's
401(k) and Employee Stock Ownership Trust (the "Plan Trustee") shall
have determined to vote shares over which it exercises discretion
against the Merger Agreement after the Plan Trustee is aware that any
person (other than Grantee or any Grantee Subsidiary) shall have
made, or disclosed an intention to make, a bona fide proposal to
engage in an Acquisition Transaction, or in favor of any Acquisition
Transaction other than as contemplated in 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 (A) involving solely Issuer and/or one or
more wholly-owned Subsidiaries of the Issuer, or (B) in which the
voting securities of Issuer outstanding immediately prior thereto
continue to represent (by either remaining outstanding or being
converted into the voting securities of the surviving entity of any
such transaction) at least 60% of the combined voting power of the
voting securities of the Issuer or the surviving entity outstanding
immediately after the consummation of such merger, consolidation, or
similar transaction, provided, any such transaction is not entered
into in violation of the terms of the Merger Agreement), (y) a
purchase, lease or other acquisition of all or any substantial part
of the assets or deposits of Issuer or the Issuer Subsidiary, or (z)
a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities
representing 15% 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, any Grantee Subsidiary
or the Issuer's 401(k) or Employee Stock Ownership Trust (the "Plan")
shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 15% or more of the outstanding shares of
Common Stock (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of the
1934 Act, and the rules and regulations thereunder);
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(iii) The stockholders of Issuer shall have voted and failed to
adopt the Merger Agreement 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), any person (other than Grantee or any of its
Subsidiaries) shall have made, or disclosed an intention to make, a
bona fide proposal to engage in an Acquisition Transaction;
(iv) The Issuer Board shall fail to recommend or 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 adopt the Merger
Agreement, or Issuer or any Issuer Subsidiary shall have engaged in
negotiations concerning an Acquisition Transaction pursuant to
SECTION 5.07(B) of the Merger Agreement;
(v) Issuer shall have knowingly breached any covenant or
obligation, or knowingly breached any representation or warranty,
contained in the Merger Agreement in anticipation of engaging in, or
after the making of any proposal by a person (other than Grantee or
any Grantee Subsidiary) to engage 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
(vi) Issuer shall have terminated the Merger Agreement pursuant
to SECTION 7.06 of the Merger Agreement or entered into an agreement
effecting a Superior Proposal (as defined in the Merger Agreement).
(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 or the Plan) of beneficial ownership of 25% or
more of the then outstanding Common Stock;
(ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (z) of the second sentence thereof
shall be 25%; or
(iii) Issuer shall have entered into an agreement effecting a
Superior Proposal (as defined in the Merger Agreement).
(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 business day 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 applicable Regulatory Authority 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
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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 a stock option agreement, dated as of April
25, 1999, with the 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 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 Securities 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 at the close of
business on the Closing Date 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
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charter amendment or through reorganization, consolidation, merger,
dissolution or sale of assets, or by any other voluntary act, avoid or seek
to avoid the observance or performance of any of the covenants, stipulations
or conditions to be observed or performed hereunder by Issuer; and (iii)
promptly to take all action as may from time to time be required (including
complying with all applicable premerger notification, reporting and waiting
period requirements required by the applicable Regulatory Authority which
may be necessary before the Option may be exercised, and cooperating fully
with the Holder in preparing such applications or notices and providing such
information to the applicable Regulatory Authority as it 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.
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 written 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)
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or any of the shares of Common Stock issued pursuant hereto), promptly
prepare, file and keep current a registration statement under the Securities
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 obligations of
Issuer hereunder to file a registration statement and to maintain its
effectiveness may be suspended for one or more periods of time not exceeding
90 days in the aggregate if the Issuer Board of Directors shall have
determined that the filing of such registration statement or the maintenance
of its effectiveness would require disclosure of nonpublic information that
would materially and adversely affect Issuer. The foregoing notwithstanding,
if, at the time of any request by Grantee for registration of Option Shares
as provided above, Issuer is in registration with respect to an underwritten
public offering by Issuer of shares of Common Stock, and if in the good
faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the offer and
sale of the Option Shares would interfere with the successful marketing of
the shares of Common Stock offered by Issuer, the number of Option Shares
otherwise to be covered in the registration statement contemplated hereby
may be reduced; provided, however, that after any such required reduction
the number of Option Shares to be included in such offering for the account
of the Holder shall constitute at least 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. In connection
with any such registration, Issuer and each requesting Holder shall provide
the other and any underwriter with customary representations, warranties,
indemnities and other agreements. 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 written 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 written 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
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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; PROVIDED that
the Issuer shall not be required to pay more than $35 million pursuant to
this SECTION 7. 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 Acquisition Transaction 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, the sum
of the net price paid in such sale for such assets 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 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
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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 or the Plan) 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 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 the assets of the Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the market/offer price, as
defined in SECTION 7.
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for one year immediately
preceding the consolidation, merger or sale in question, but in no
event higher than the closing price of the shares of Substitute
Common Stock on the day preceding such consolidation, merger or sale;
provided that if Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of common
stock issued by the person merging into Issuer or by any company
which controls or is controlled by such person, as the Holder may
elect.
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(c) The Substitute Option shall have the same terms as the Option,
appropriately adjusted, provided that if the terms of the Substitute Option
cannot, for legal reasons, be the same as the Option, such terms shall be as
similar as possible and in no event less advantageous to the Holder. The
issuer of the Substitute Option shall also enter into an agreement with the
then Holder or Holders of the Substitute Option in substantially the same
form as this Agreement (after giving effect for such purpose to the
provisions of SECTION 9), which agreement shall be applicable to the
Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option was
exercisable immediately prior to the event described in the first sentence
of SECTION 8(A), divided by the Average Price. The exercise price of the
Substitute Option per share of Substitute Common Stock shall then be equal
to the Option Price multiplied by a fraction, the numerator of which shall
be the number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of SECTION
8(A) and the denominator of which shall be the number of shares of
Substitute Common Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute
Option. In the event that the Substitute Option would be exercisable for
more than 19.9% of the shares of Substitute Common Stock outstanding prior
to exercise but for this clause (e), the issuer of the Substitute Option
(the "Substitute Option Issuer") shall make a cash payment to Holder equal
to the excess of (i) the value of the Substitute Option without giving
effect to the limitation in this clause (e) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (e).
This difference in value shall be determined by a nationally recognized
investment banking firm selected by the Holder and reasonably satisfactory
to the Substitute Option Issuer.
(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 any time after the occurrence of a Repurchase Event, the
written request of the holder of the Substitute Option (the "Substitute
Option Holder"), delivered prior to the Exercise Termination Date, 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 written
request of the owner (the "Substitute Share Owner") of shares of Substitute
Common Stock (the "Substitute Shares"), delivered prior to the Exercise
Termination Date, 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
C-9
<PAGE>
Option (or, in the absence of such an agreement, a copy of this Agreement)
and/or certificates for Substitute Shares accompanied by a written notice or
notices stating that the Substitute Option Holder or the Substitute Share
Owner, as the case may be, elects to require the Substitute Option Issuer to
repurchase the Substitute Option and/or the Substitute Shares in accordance
with the provisions of this SECTION 9. As promptly as practicable and in any
event within five business days after the surrender of the Substitute Option
and/or certificates representing Substitute Shares and the receipt of such
notice or notices relating thereto, the Substitute Option Issuer shall
deliver or cause to be delivered to the Substitute Option Holder the
Substitute Option Repurchase Price and/or to the Substitute Share Owner the
Substitute Share Repurchase Price therefor or the portion thereof which the
Substitute Option Issuer is not then prohibited under applicable law and
regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from repurchasing the Substitute Option and/or the Substitute Shares
in part or in full, the Substitute Option Issuer shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner and
thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate,
the portion of the Substitute Option Repurchase Price and/or the Substitute
Share Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five (5) business days after the date on which the
Substitute Option Issuer is no longer so prohibited; provided, however, that
if the Substitute Option Issuer is at any time after delivery of a notice of
repurchase pursuant to subsection (b) of this SECTION 9 prohibited under
applicable law or regulation, or as a consequence of administrative policy,
from delivering to the Substitute Option Holder and/or the Substitute Share
Owner, as appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the Substitute
Option Issuer shall use its reasonable best efforts to receive all required
regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder and/or Substitute
Share Owner may revoke its notice of repurchase of the Substitute Option or
the Substitute Shares either in whole or to the extent of prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall promptly
(i) deliver to the Substitute Option Holder or Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to
the Substitute Option Holder, a new Substitute Option evidencing the right
of the Substitute Option Holder to purchase that number of shares of the
Substitute Common Stock obtained by multiplying the number of shares of the
Substitute Common Stock for which the 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 specified 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 pendancy of any temporary restraining order,
injunction or other legal bar to exercise of such rights; and (iii) to the
C-10
<PAGE>
extent necessary to avoid liability under Section 16(b) of the Exchange 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 Board of Governors of the Federal Reserve System (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 or Grantee's Subsidiaries)
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 $35 million (i) plus, if applicable,
Grantee's purchase price with respect to any Option Shares, (ii) minus, if
applicable, the excess of (A) the sum of the net proceeds, 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, and the market price at the time of disposal of any
Option Shares disposed
C-11
<PAGE>
of by Grantee other than in such arms' length sale, over (B) Grantee's
purchase price of such Option Shares, and (iii) minus, if applicable, any
amounts paid pursuant to SECTIONS 7 and 9.
(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 1(A) hereof (as adjusted
pursuant to SECTION 1(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.
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<PAGE>
18. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without regard to the conflict of
law principles thereof (except to the extent that mandatory provisions of
Federal law).
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, 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.
<TABLE>
<S> <C> <C>
EVEREN CAPITAL CORPORATION
By: /s/ JAMES R. BORIS
------------------------------------
Name: James R. Boris
Title: Chairman and Chief Executive
Officer
FIRST UNION CORPORATION
By: /s/ KENNETH R. STANCLIFF
------------------------------------
Name: Kenneth R. Stancliff
Title: Senior Vice President
</TABLE>
C-13
<PAGE>
[LETTERHEAD]
ANNEX D
May 27, 1999
Board of Directors
EVEREN Capital Corporation
77 West Wacker Drive
Chicago, Illinois 60601
Members of the Board:
We understand that EVEREN Capital Corporation ("EVEREN"), First Union
Corporation ("First Union") and First Union Delaware, Inc. ("First Union
Subsidiary"), a wholly owned subsidiary of First Union, propose to enter into an
Agreement and Plan of Merger, dated as of April 25, 1999, as amended and
restated as of May 27, 1999 (as amended, the "Merger Agreement"), which
provides, among other things, for the merger (the "Merger") of First Union
Subsidiary with and into EVEREN. Pursuant to the Merger, each issued and
outstanding share of common stock, par value $0.01 per share, of EVEREN (the
"EVEREN Common Stock"), other than shares held in treasury or held by First
Union or any affiliate of First Union, will be converted into the right to
receive that number of shares (the "Exchange Ratio") of common stock, par value
$3.33 1/3, of First Union (the "First Union Common Stock") equal to the number
obtained by dividing $31.00 by the Average Market Price (as defined in the
Merger Agreement) of First Union Common Stock. The terms and conditions of the
Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant to
the Merger Agreement is fair from a financial point of view to the holders of
shares of EVEREN Common Stock (other than First Union and its affiliates).
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of EVEREN and First Union, respectively;
(ii) reviewed certain internal financial statements and other financial and
operating data, including certain financial forecasts, concerning
EVEREN and First Union prepared by management of EVEREN and First
Union, respectively;
(iii) discussed the past and current operations and financial condition and
the prospects of EVEREN and First Union with senior executives of
EVEREN and First Union, respectively;
(iv) reviewed the reported prices and trading activity for the EVEREN Common
Stock and the First Union Common Stock;
(v) compared the financial performance of EVEREN and First Union and the
prices and trading activity of the EVEREN Common Stock and the First
Union Common Stock with that of certain other comparable publicly-traded
companies and their securities;
D-1
<PAGE>
(vi) discussed with the senior management of EVEREN and First Union the
strategic objectives of the Merger and their estimates of the synergies
and other benefits of the Merger for the combined company;
(vii) analyzed the pro forma impact of the Merger on the combined companies
earnings per share, consolidated capitalization and financial ratios;
(viii) reviewed the financial terms, to the extent publicly available, of
certain comparable transactions;
(ix) participated in discussions and negotiations among representatives of
EVEREN and First Union and their legal advisors;
(x) reviewed the Merger Agreement and certain related documents; and
(xi) performed such other analyses and considered such other factors as we
have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial forecasts, including the synergies
and benefits expected to result from the Merger, we have assumed that they have
been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of EVEREN and First
Union. We have not made any independent valuation or appraisal of the assets or
liabilities of EVEREN or First Union, nor have we been furnished with any such
appraisals and we have not examined any individual loan credit files of First
Union. In addition, we have assumed the Merger will be consummated substantially
in accordance with the terms set forth in the Merger Agreement. 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.
We have acted as financial advisor to the Board of Directors of EVEREN in
connection with this transaction and will receive a fee for our services. In the
past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for EVEREN and First Union and have
received fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of EVEREN and may not be used for any other purpose without our prior
written consent, except that this opinion may be included in its entirety in any
filing made by EVEREN with the Securities and Exchange Commission with respect
to the Merger. In addition, we express no opinion and make no recommendation as
to how the holders of EVEREN Common Stock should vote at the stockholders'
meeting in connection with the Merger.
Based on the foregoing we are of the opinion on the date hereof that the
Exchange Ratio pursuant to the Merger Agreement is fair from a financial point
of view to the holders of shares of EVEREN Common Stock (other than First Union
and its affiliates).
<TABLE>
<S> <C> <C>
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ WILLIAM H. STRONG
-----------------------------------------
William H. Strong
MANAGING DIRECTOR
</TABLE>
D-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 by laws or by contract or resolution provide
indemnification in addition to that provided by the statute, subject to certain
conditions set forth in the statute.
First Union's bylaws provide for the indemnification of First Union's
directors and executive officers by First Union 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 First Union.
First Union's articles provide for the elimination of the personal liability
of each director of First Union to the fullest extent permitted by the
provisions of the NCBCA as the same may from time to time be in effect.
First Union 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) First Union's directors and officers against
loss by reason of any of their wrongful acts, and/or (ii) First Union against
loss arising from claims against the directors and officers by reason of their
wrongful acts, all subject to the terms and conditions 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 C thereto. (Incorporated by
reference to ANNEXES A and C to the proxy statement/prospectus included in this Registration
Statement.)*
(3)(a) Articles of Incorporation of First Union Corporation, as amended. (Incorporated by reference to
Exhibit (4) to First Union's 1990 First Quarter Report on Form 10-Q, to Exhibit (99)(a) to First
Union's 1993 First Quarter Report on Form 10-Q and to Exhibit (4)(a) to First Union's Current Report
on Form 8-K dated January 10, 1996.)
(3)(b) Bylaws of First Union, as amended. (Incorporated by reference to Exhibit (3)(b) to First Union's 1995
Annual report on Form 10-K.)
(4)(a) Shareholder Protection Rights Agreement, as amended. (Incorporated by reference to Exhibit (4) to
First Union'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 First Union 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) Form of Tax Opinion of Sullivan & Cromwell.
</TABLE>
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (CONTINUED)
<TABLE>
<S> <C>
(8)(b) Form of Tax Opinion of Simpson Thacher & Bartlett.
(12) Computations of Consolidated Ratios of Earnings to Fixed Charges. (Incorporated by reference to
Exhibit (12) to First Union's 1999 First Quarter Report on Form 10-Q.)
(23)(a) Consent of Deloitte & Touche LLP.
(23)(b) Consent of KPMG 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 Simpson Thacher & Bartlett. (Included in Exhibit (8)(b).)
(24) Power of Attorney.
(27) First Union's Financial Data Schedule. (Incorporated by reference to Exhibit (27) to First Union's
1999 First Quarter Report on Form 10-Q.)
(99)(a) Form of proxy for the special meeting of stockholders of EVEREN.
(99)(b) Consent of Morgan Stanley & Co., Incorporated.
</TABLE>
- ------------------------
* Omitted exhibits to be furnished upon request of the SEC.
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
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 the 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 director, 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,
II-2
<PAGE>
ITEM 22. UNDERTAKINGS. (CONTINUED)
officer of 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 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.
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 June 30, 1999.
<TABLE>
<S> <C> <C>
FIRST UNION CORPORATION
By: /s/ MARION A. COWELL, JR.
-----------------------------------------
Marion A. Cowell, Jr.
EXECUTIVE VICE PRESIDENT
SECRETARY AND GENERAL COUNSEL
</TABLE>
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
- ------------------------------ --------------------------
<C> <S>
*EDWARD E. CRUTCHFIELD Chairman and Chief
- ------------------------------ Executive Officer and
Edward E. Crutchfield Director
*ROBERT T. ATWOOD Executive Vice President
- ------------------------------ and Chief Financial
Robert T. Atwood Officer
*JAMES H. HATCH Senior Vice President and
- ------------------------------ Controller (Principal
James H. Hatch Accounting Officer)
*EDWARD E. BARR
- ------------------------------ Director
Edward E. Barr
*G. ALEX BERNHARDT
- ------------------------------ Director
G. Alex Bernhardt
*ERSKINE B. BOWLES
- ------------------------------ Director
Erskine B. Bowles
*W. WALDO BRADLEY
- ------------------------------ Director
W. Waldo Bradley
*ROBERT J. BROWN
- ------------------------------ Director
Robert J. Brown
*A. DANO DAVIS
- ------------------------------ Director
A. Dano Davis
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- ------------------------------ --------------------------
<C> <S>
*NORWOOD H. DAVIS, JR.
- ------------------------------ Director
Norwood H. Davis, Jr.
*R. STUART DICKSON
- ------------------------------ Director
R. Stuart Dickson
*B.F. DOLAN
- ------------------------------ Director
B.F. Dolan
*RODDEY DOWD, SR.
- ------------------------------ Director
Roddey Dowd, Sr.
*JOHN R. GEORGIUS
- ------------------------------ Director
John R. Georgius
- ------------------------------ Director
Arthur M. Goldberg
*WILLIAM H. GOODWIN, JR.
- ------------------------------ Director
William H. Goodwin, Jr.
*FRANK M. HENRY
- ------------------------------ Director
Frank M. Henry
*JAMES E. S. HYNES
- ------------------------------ Director
James E. S. Hynes
*ERNEST E. JONES
- ------------------------------ Director
Ernest E. Jones
*HERBERT LOTMAN
- ------------------------------ Director
Herbert Lotman
*RADFORD D. LOVETT
- ------------------------------ Director
Radford D. Lovett
- ------------------------------ Director
Mackey J. McDonald
*PATRICIA A. MCFATE
- ------------------------------ Director
Patricia A. McFate
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- ------------------------------ --------------------------
<C> <S>
- ------------------------------ Director
Joseph Neubauer
*RANDOLPH N. REYNOLDS
- ------------------------------ Director
Randolph N. Reynolds
*JAMES M. SEABROOK
- ------------------------------ Director
James M. Seabrook
*RUTH G. SHAW
- ------------------------------ Director
Ruth G. Shaw
*CHARLES M. SHELTON, SR.
- ------------------------------ Director
Charles M. Shelton, Sr.
*LANTY L. SMITH
- ------------------------------ Director
Lanty L. Smith
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By Marion A. Cowell, Jr.,
Attorney-in-Fact
/s/ MARION A. COWELL, JR.
- -------------------------------
Marion A. Cowell, Jr.
Date: June 30, 1999
</TABLE>
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 ANNEXES A and C to
agreement as Exhibit C thereto. the proxy statement/prospectus included in this
Registration Statement.*
(3)(a) Articles of Incorporation of First Union Incorporated by reference to Exhibit (4) to First
Corporation, as amended. Union's 1990 First Quarter Report on Form 10-Q,
to Exhibit (99)(a) to First Union's 1993 First
Quarter Report on Form 10-Q and to Exhibit (4)(a)
to First Union's Current Report on Form 8-K dated
January 10, 1996.
(3)(b) Bylaws of First Union, as amended. Incorporated by reference to Exhibit (3)(b) to
First Union's 1995 Annual Report on Form 10-K.
(4)(a) Shareholder Protection Rights Agreement, as Incorporated by reference to Exhibit (4) to First
amended. Union'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 First Union and its Regulation S-K; to be furnished upon request of
subsidiaries. the Commission.
(5) Opinion of Marion A. Cowell, Jr., Esq. Filed herewith.
(8)(a) Form of Tax Opinion of Sullivan & Cromwell. Filed herewith.
(8)(b) Form of Tax Opinion of Simpson Thacher & Filed herewith.
Bartlett.
(12) Computations of Consolidated Ratios of Earnings Incorporated by reference to Exhibit (12) to
to Fixed Charges. First Union's 1999 First Quarter Report on Form
10-Q.
(23)(a) Consent of Deloitte & Touche LLP. Filed herewith.
(23)(b) Consent of KPMG 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 Simpson Thacher & Bartlett. Included in Exhibit (8)(b).
(24) Power of Attorney. Filed herewith.
(27) First Union's Financial Data Schedule. Incorporated by reference to Exhibit (27) to
First Union's 1999 First Quarter Report on Form
10-Q.
(99)(a) Form of proxy for the special meeting of Filed herewith.
stockholders of EVEREN.
(99)(b) Consent of Morgan Stanley & Co., Incorporated. Filed herewith.
</TABLE>
- ------------------------
* Omitted exhibits to be furnished upon request of the SEC.
<PAGE>
EXHIBIT (5)
June 30, 1999
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
24,250,000 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 EVEREN Capital 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 First
Union Common Stock" in the Prospectus included in the Registration Statement and
to the filling of this opinion as an Exhibit to the Registration Statement.
Very truly yours,
MARION A. COWELL, JR.
<PAGE>
EXHIBIT (8)(A)
FORM OF SULLIVAN & CROMWELL TAX OPINION
[LETTERHEAD OF SULLIVAN & CROMWELL]
June , 1999
First Union Corporation
One First Union Center
Charlotte, North Carolina 28288
Ladies and Gentlemen:
We have acted as counsel to First Union Corporation, a North Carolina
corporation ("First Union"), in connection with the planned merger (the
"Merger") of First Union Delaware, Inc., a Delaware corporation and a
wholly-owned subsidiary of First Union ("Merger Sub"), with and into EVEREN
Capital Corporation, a Delaware corporation ("EVEREN"), pursuant to the
Agreement and Plan of Merger, dated as of April 25, 1999, as amended and
restated on May 27, 1999 (the "Agreement"), by and among EVEREN, First Union and
Merger Sub. Capitalized terms used but not defined herein shall have the
meanings specified in the Registration Statement pertaining to the Merger or the
appendices thereto (including the Agreement).
We have assumed with your consent that (1) the Merger will be effected in
accordance with the Agreement and pursuant to applicable state corporation laws
and (2) the representations contained in the letters of representation from
First Union and EVEREN to us dated , 1999 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) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"); and
(ii) no gain or loss will be recognized by EVEREN stockholders on the
exchange of their shares of EVEREN common stock for First Union common stock
pursuant to the Merger, except with respect to cash received in lieu of
fractional shares.
We express no opinion as to the tax consequences to EVEREN stockholders that
are dealers in securities, traders in securities that elect to use a
mark-to-market method of accounting, tax-exempt organizations, insurance
companies, financial institutions, foreign persons, persons that hold EVEREN
common stock as part of a straddle or conversion transaction and persons who
acquired shares of EVEREN common stock through the exercise of employee stock
options or rights or otherwise as compensation or through a tax-qualified
retirement plan.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and all amendments thereto and to the references to this
opinion in the Registration Statement (and all amendments thereto). 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 1993.
Very truly yours,
<PAGE>
EXHIBIT (8)(B)
[FORM OF OPINION]
[Letterhead of Simpson Thacher & Bartlett]
[DATE]
Re: Agreement and Plan of Merger
dated as of April 25, 1999, as amended
and restated on May 27, 1999, by and
among EVEREN Capital Corporation,
First Union Corporation and First
Union Delaware, Inc.
EVEREN Capital Corporation
77 West Wacker Drive
Chicago, Illinois 60601-1694
Ladies and Gentlemen:
You have requested our opinion with respect to certain United States federal
income tax consequences of the proposed transaction in which First Union
Delaware, Inc. ("Merger Sub"), a Delaware corporation and wholly owned
subsidiary of First Union Corporation ("First Union"), will be merged (the
"Merger") with and into EVEREN Capital Corporation, a Delaware corporation
("EVEREN"). All capitalized terms used but not defined herein have the meanings
ascribed to them in the Agreement and Plan of Merger, dated as of April 25,
1999, as amended and restated on May 27, 1999, by and among EVEREN, First Union
and Merger Sub. This opinion is being delivered as an exhibit to the
registration statement on Form S-4 (the "Registration Statement") filed by First
Union with the Securities and Exchange Commission on , 1999 and
containing the Proxy Statement/Prospectus of EVEREN and First Union relating to
the Merger (the "Proxy Statement/ Prospectus").
In acting as counsel to EVEREN in connection with the Merger, we have, in
preparing our opinion, as hereinafter set forth, participated in the preparation
of the Merger Agreement and the preparation and filing of the Proxy
Statement/Prospectus.
You have requested that we render the opinions set forth below. In rendering
such opinions, we have assumed with your consent that the Merger will be
effected in accordance with the Merger Agreement and that the representations
made by First Union and EVEREN in letters provided to us and to Sullivan &
Cromwell, counsel to First Union, are true, correct and complete as of the date
hereof and will be true, correct and complete as of the Effective Time. We have
also assumed that the representations and warranties contained in the Merger
Agreement, and statements as to factual matters contained in the Registration
Statement, are true, correct and complete as of the date hereof, and that the
parties have complied with and, if applicable, will continue to comply with, the
covenants contained in the Merger Agreement. We have examined the documents
referred to above and the originals, or copies certified or otherwise identified
to our satisfaction, of such records, documents, certificates or other
instruments and made such other inquiries as in our judgment are necessary or
appropriate to enable us to render the opinions set forth below. We have not,
however, undertaken any independent investigation of any factual matter set
forth in any of the foregoing.
<PAGE>
EVEREN Capital Corporation -2- [DATE]
If the Merger is effected on a factual basis different from that
contemplated in the Merger Agreement and the Proxy Statement/Prospectus the
opinions expressed herein may be inapplicable. Our opinions are based on the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations,
administrative interpretations, and judicial precedents as of the date hereof.
If there is any subsequent change in the applicable law or regulations, or if
there are subsequently any new applicable administrative or judicial
interpretations of the law or regulations, the opinions expressed herein may
become inapplicable.
Subject to the foregoing and to the qualifications and limitations set forth
herein, and assuming that the Merger will be consummated in accordance with the
Merger Agreement (and exhibits thereto) and the Delaware General Corporation Law
and as described in the Proxy Statement/Prospectus, we are of the opinion that
for federal income tax purposes:
(1) the Merger will constitute a reorganization within the meaning of Section
368(a) of the Code; and
(2) no gain or loss will be recognized by EVEREN stockholders who receive First
Union common stock shares in exchange for EVEREN common stock shares, except
with respect to cash received in lieu of fractional share interests.
We express our opinions herein only as to those matters specifically set
forth above and no opinion should be inferred as to the tax consequences of the
Merger under any state, local or foreign law, or with respect to other areas of
United States federal taxation. We are members of the Bar of the State of New
York, and we do not express any opinion herein concerning any law other than the
federal law of the United States.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the use of our name under the caption
"The Merger--Federal Income Tax Consequences" in the Proxy Statement/Prospectus.
This opinion letter is rendered to you in connection with the above described
transaction. This opinion letter may not be relied upon by you for any other
purpose, of relied upon by, or furnished to, any other person, firm or
corporation without our prior written consent.
Very truly yours,
<PAGE>
EXHIBIT (23)(A)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of First Union Corporation on Form S-4 of our report dated March 18, 1999,
appearing in the Annual Report on Form 10-K of EVEREN Capital Corporation for
the year ended December 31, 1998 and to the reference to us under the heading
"Experts" in the Proxy Statement/Prospectus, which is part of this Registration
Statement.
Deloitte & Touche LLP
Chicago, Illinois
June 30, 1999
<PAGE>
EXHIBIT (23)(B)
CONSENT OF KPMG 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 14, 1999,
relating to the consolidated balance sheets of First Union Corporation and
subsidiaries as of December 31, 1998 and 1997, 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, 1998, which report appears
in the 1998 Annual Report to Stockholders which is incorporated by reference in
the 1998 Form 10-K of First Union Corporation. We also consent to the reference
to our firm under the caption "Experts."
KPMG LLP
Charlotte, North Carolina
June 30, 1999
<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., Mark C. Treanor 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 estimated maximum number of shares of the
Corporation's common stock expected to be issued in connection with the
acquisition of EVEREN Capital Corporation, and to sign any and all amendments to
such Registration Statements.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- ------------------------------ --------------------------
<C> <S>
/s/ EDWARD E. CRUTCHFIELD Chairman and Chief
- ------------------------------ Executive Officer and
Edward E. Crutchfield Director
/s/ ROBERT T. ATWOOD Executive Vice President
- ------------------------------ and Chief Financial
Robert T. Atwood Officer
/s/ JAMES H. HATCH Senior Vice President and
- ------------------------------ Controller (Principal
James H. Hatch Accounting Officer)
/s/ EDWARD E. BARR
- ------------------------------ Director
Edward E. Barr
/s/ G. ALEX BERNHARDT
- ------------------------------ Director
G. Alex Bernhardt
/s/ ERSKINE B. BOWLES
- ------------------------------ Director
Erskine B. Bowles
/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/ NORWOOD H. DAVIS, JR.
- ------------------------------ Director
Norwood H. Davis, Jr.
/s/ R. STUART DICKSON
- ------------------------------ Director
R. Stuart Dickson
/s/ B.F. DOLAN
- ------------------------------ Director
B.F. Dolan
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- ------------------------------ --------------------------
<C> <S>
/s/ RODDEY DOWD, SR.
- ------------------------------ Director
Roddey Dowd, Sr.
/s/ JOHN R. GEORGIUS
- ------------------------------ Director
John R. Georgius
- ------------------------------ Director
Arthur M. Goldberg
/s/ WILLIAM H. GOODWIN, JR.
- ------------------------------ Director
William H. Goodwin, Jr.
/s/ FRANK M. HENRY
- ------------------------------ Director
Frank M. Henry
/s/ JAMES E.S. HYNES
- ------------------------------ Director
James E.S. Hynes
/s/ ERNEST E. JONES
- ------------------------------ Director
Ernest E. Jones
/s/ HERBERT LOTMAN
- ------------------------------ Director
Herbert Lotman
/s/ RADFORD D. LOVETT
- ------------------------------ Director
Radford D. Lovett
- ------------------------------ Director
Mackey J. McDonald
/s/ PATRICIA A. MCFATE
- ------------------------------ Director
Patricia A. McFate
- ------------------------------ Director
Joseph Neubauer
/s/ RANDOLPH N. REYNOLDS
- ------------------------------ Director
Randolph N. Reynolds
/s/ JAMES M. SEABROOK
- ------------------------------ Director
James M. Seabrook
/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
</TABLE>
Dated: April 21, 1999
Charlotte, North Carolina
<PAGE>
EXHIBIT (99)(a)
EVEREN CAPITAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James R. Boris, Janet L. Reali and Arthur J.
McGivern, and each of them, each with full power to act without the others, and
with full power of substitution, the attorneys and proxies of the undersigned
and hereby authorizes them to represent and to vote, all the shares of Common
Stock of EVEREN Capital Corporation (the "Company") that the undersigned would
be entitled to vote, if personally present, at the Special Meeting of
Stockholders to be held on , 1999 or any adjournment or
postponement thereof, upon such business as may properly come before the
meeting, including the items set forth on the reverse side. The proxies may vote
on other matters which may properly come before the meeting as determined by a
majority of the Company's Board of Directors. All proxies previously given with
respect to the shares covered hereby are hereby revoked.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER AND AS DETERMINED BY A MAJORITY OF THE
COMPANY'S BOARD OF DIRECTORS AS TO ANY OTHER MATTERS THAT MAY PROPERLY COME
BEFORE THE MEETING. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" THE
PROPOSAL SET FORTH BELOW AND AS DETERMINED BY A MAJORITY OF THE COMPANY'S BOARD
OF DIRECTORS AS TO ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING.
PLEASE MARK, SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY
USING THE ENCLOSED ENVELOPE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
<PAGE>
EVEREN CAPITAL CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING BLACK INK ONLY
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
1. Adoption of the Agreement and Plan of Merger dated as of April 25, 1999, as
amended and restated as of May 27, 1999, between EVEREN Capital Corporation,
First Union Delaware, Inc. and First Union Corporation.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C>
/ / / / / /
</TABLE>
2. To consider and act upon such other matters as may properly come before the
meeting or any adjournments or postponements thereof.
IMPORTANT--THIS PROXY MUST BE SIGNED
AND DATED BELOW
Dated: ________________________________
Signature(s) __________________________
Please sign exactly as name appears
hereon. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title as
such. If a corporation or partnership,
please sign in full corporation or
partnership name by an authorized
officer or person.
z FOLD AND DETACH HERE z
YOUR VOTE IS IMPORTANT.
PLEASE MARK, SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
EXHIBIT (99)(B)
CONSENT OF MORGAN STANLEY & CO. INCORPORATED
First Union Corporation
Dear Sirs:
We hereby consent to the inclusion in the Registration Statement of First
Union Corporation ("First Union)", relating to the proposed merger of EVEREN
Capital Corporation with and into First Union, of our opinion letter in the
Proxy Statement/Prospectus which is a part of the Registration Statement, and to
the references of our firm name therein. In giving such consent, we do not
thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended or the rules
and regulations adopted by the Securities and Exchange Commission thereunder nor
do we 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.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
June 30, 1999
