<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 14, 1998.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
WACHOVIA CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
NORTH CAROLINA 6060 56-1473727
<S> <C> <C>
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation) Classification Code No.) Identification No.)
</TABLE>
<TABLE>
<S> <C>
100 NORTH MAIN STREET 191 PEACHTREE STREET, N.E.
P. O. BOX 3099 ATLANTA, GEORGIA 30303
WINSTON-SALEM, NORTH CAROLINA 271 (404) 332-5000
(336) 770-5000
</TABLE>
(Address, including ZIP Code, and telephone number, including area code, of
registrant's principal executive offices)
KENNETH W. MCALLISTER
SENIOR EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
P. O. BOX 3099
WINSTON-SALEM, NORTH CAROLINA 27150
(336) 770-5000
(Name, address, including ZIP Code, and telephone number, including area code,
of agent for service)
WITH COPIES TO:
<TABLE>
<S> <C>
MARK J. MENTING BARNEY STEWART III
SULLIVAN & CROMWELL MOORE & VAN ALLEN, PLLC
125 BROAD STREET NATIONSBANK CORPORATE CENTER
NEW YORK, NEW YORK 10004 100 NORTH TRYON STREET, 47TH FLOOR
(212) 558-4000 CHARLOTTE, NORTH CAROLINA 28202
(704) 331-1029
</TABLE>
---------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
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: [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] _____________________________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ____________________________________________________
---------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
BE REGISTERED REGISTERED(1) PER UNIT OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common stock .......... 7,660,859 shares N/A N/A $ 66,022(2)
-41,468(3)
$ 24,554
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Estimated to be the maximum number of shares of Common Stock, par value
$5.00 per share ("Wachovia Common Stock"), of Wachovia Corporation
expected to be issued upon the consummation of the proposed transaction to
which this Registration Statement relates pursuant to the relevant
agreements which number may be higher or lower pursuant thereto.
(2) Pursuant to Rules 457(f) and 457(c) under the Securities Act of 1933, as
amended, the registration fee is based on the average of the high and low
sales prices of IJL Common Stock, as reported on the New York Stock
Exchange on December 8, 1998 ($31), and computed based on the estimated
maximum number of such shares (7,660,859) that may be exchanged for the
Wachovia Common Stock being registered.
(3) Pursuant to Rule 457(b) under the Securities Act of 1933, as amended, the
amount of the registration fee has been reduced by $41,468, the amount
paid to the Securities and Exchange Commission on November 25, 1998 with
respect to this transaction. The difference of $24,554 is paid herewith.
---------------
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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INTERSTATE/JOHNSON LANE, INC.
IJL FINANCIAL CENTER
201 NORTH TRYON STREET
CHARLOTTE, N.C. 28202
December 18, 1998
DEAR SHAREHOLDERS:
You are cordially invited to attend a special meeting of shareholders of
Interstate/Johnson Lane, Inc. ("IJL") to be held at the Radisson Plaza Hotel,
101 South Tryon Street, Charlotte, North Carolina at 10:30 a.m. on January 26,
1999.
At the special meeting, you will be asked to consider and vote upon a
proposal to approve an Agreement and Plan of Merger dated as of October 27,
1998, between IJL and Wachovia Corporation ("Wachovia"), and the related Plan
of Merger, under which IJL will merge into Wachovia. In the merger, each
outstanding share of IJL common stock will be converted into a fraction of a
share of Wachovia common stock equal to $32.00 divided by the average of the
last sale prices of Wachovia common stock, as reported on the NYSE Composite
Transactions Reporting System, for the five trading days immediately preceding
the effective date of the merger.
This strategic transaction will provide you with the opportunity to
participate as a shareholder in one of the nation's preeminent financial
services companies. Our Board of Directors believes that by joining forces with
Wachovia, IJL can best serve its shareholders by participating in the further
development of an organization that will be able to provide a broader array of
financial products and services to the customers it serves.
Our Board of Directors has unanimously approved the merger agreement. The
Board believes that the merger is in the best interests of IJL and its
shareholders and strongly encourages you to vote "FOR" the proposal. IJL's
financial advisor, Berkshire Capital Corporation, has issued its opinion to
IJL's Board of Directors that the consideration to be paid by Wachovia for the
IJL common stock is fair from a financial point of view to IJL's shareholders.
The affirmative vote of a majority of the outstanding shares of IJL common
stock is required for approval of the merger agreement. Directors and executive
officers of IJL who hold approximately 27% of the outstanding shares of IJL
common stock have agreed to vote their shares in favor of the merger agreement.
Accordingly, assuming these shares are so voted, approval of the merger
agreement will require the affirmative vote of the holders of approximately an
additional 24% of the outstanding shares of IJL common stock.
Regardless of the number of shares you own, or whether you plan to attend
the special meeting, please take the time to vote by completing and mailing the
enclosed proxy card. If you sign, date and mail your proxy card without
indicating how you want to vote, we will vote your proxy in favor of the merger
agreement.
Please read the enclosed material carefully in making your decision.
We look forward to seeing you at the special meeting.
Sincerely,
JAMES H. MORGAN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
<PAGE>
INTERSTATE/JOHNSON LANE, INC.
IJL FINANCIAL CENTER
201 NORTH TRYON STREET
CHARLOTTE, N.C. 28202
----------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 26, 1999
----------------------------------------
TO THE SHAREHOLDERS OF INTERSTATE/JOHNSON LANE, INC.:
Notice is hereby given that a special meeting of shareholders of
Interstate/Johnson Lane, Inc. ("IJL") will be held at the Radisson Plaza Hotel,
101 South Tryon Street, Charlotte, North Carolina at 10:30 a.m. on January 26,
1999, for the following purposes:
(1) To consider and vote upon an Agreement and Plan of Merger dated as of
October 27, 1998, between IJL and Wachovia Corporation ("Wachovia") and the
related Plan of Merger (the "Merger Agreement"), pursuant to which IJL will
merge into Wachovia. In the merger, each share of IJL common stock
outstanding on the effective date of the merger will be converted into a
fraction of a share of Wachovia common stock equal to $32.00 divided by the
average of the last sale prices of Wachovia common stock, as reported on
the New York Stock Exchange ("NYSE") Composite Transactions Reporting
System for the five trading days immediately preceding the merger. A copy
of the Merger Agreement is set forth in Appendix A to the accompanying
Proxy Statement/Prospectus.
(2) To transact such other business as may properly come before the
special meeting or any adjournment or postponement of the special meeting.
Only shareholders of record at the close of business on December 10, 1998
are entitled to receive notice of and to vote at the special meeting or any
adjournments or postponements thereof. Approval of the Merger Agreement
requires the affirmative vote of a majority of the outstanding shares of IJL
common stock. Directors and executive officers of IJL who hold approximately
27% of the outstanding shares of IJL common stock have agreed to vote their
shares in favor of the merger agreement. Accordingly, assuming these shares are
so voted, approval of the merger agreement will require the affirmative vote of
the holders of approximately an additional 24% of the outstanding shares of IJL
common stock.
A list of shareholders entitled to vote at the meeting will be available
for examination by any shareholder at least ten days prior to the special
meeting at the offices of IJL in the IJL Financial Center, 201 North Tryon
Street, Charlotte, North Carolina.
THE BOARD OF DIRECTORS OF IJL UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
By Order of the Board of Directors,
MICHAEL D. HEARN, SECRETARY
December 18, 1998
<PAGE>
[Interstate/Johnson Lane [Wachovia Corporation
Logo Appears Here] Logo Appears Here]
PROXY STATEMENT OF PROSPECTUS OF
INTERSTATE/JOHNSON LANE, INC. WACHOVIA CORPORATION
---------------
The Board of Directors of IJL has agreed to a merger transaction in which
IJL will merge into Wachovia. This strategic transaction will provide you with
the opportunity to participate as a shareholder in one of the nation's
preeminent financial services companies. The Board of Directors believes that
by joining forces with Wachovia, IJL can best serve its shareholders by
participating in the further development of an organization that will be able
to provide a broader array of financial products and services to the customers
it serves.
In the merger, each outstanding share of IJL common stock will be
converted into a fraction of a share of Wachovia common stock equal to $32.00
divided by the average of the last sale prices of Wachovia common stock, as
reported on the NYSE Composite Transactions Reporting System, for the five
trading days immediately preceding the merger.
In order to complete this merger, IJL needs your approval. This document
is being furnished to you in connection with the solicitation of proxies by the
Board of Directors of IJL for its use at the special meeting of shareholders.
At the special meeting, you will be asked to consider and vote upon the
merger agreement. The affirmative vote of the holders of at least a majority of
the outstanding shares of IJL common stock is required to approve the merger
agreement. Directors and executive officers of IJL who hold approximately 27%
of the outstanding shares of IJL common stock have agreed to vote their shares
in favor of the merger agreement. Accordingly, assuming these shares are so
voted, approval of the merger agreement will require the affirmative vote of
the holders of approximately an additional 24% of the outstanding shares of IJL
common stock.
Wachovia common stock and IJL common stock are listed and traded on the
NYSE under the symbols "WB" and "IJL", respectively. On October 27, 1998, the
last trading day prior to public announcement of the proposed merger, the last
reported sale prices per share of Wachovia common stock and IJL common stock on
the NYSE were $82 3/4 and $37.00, respectively. On December 14, 1998, the last
practicable date prior to the mailing of this Proxy Statement/
Prospectus, the last reported sale prices per share were and , respectively.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED UNDER
THIS PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES THAT WACHOVIA IS OFFERING THROUGH THIS DOCUMENT ARE NOT
SAVINGS OR DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF ANY BANK OR NON-BANK
SUBSIDIARY OF WACHOVIA, AND THEY ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENTAL
AGENCY.
---------------
The date of this Proxy Statement/Prospectus is December 18, 1998, and it
is being mailed or otherwise delivered to IJL shareholders on or about such
date.
<PAGE>
FORWARD LOOKING STATEMENTS
This Proxy Statement/Prospectus contains certain forward looking
statements with respect to the financial condition, results of operations and
business of Wachovia. These statements may be made directly in this document or
may be "incorporated by reference" to other documents and may include
statements for the period following the consummation of the merger. You can
find many of these statements by looking for words such as "believes,"
"expects," "anticipates," "estimates" or similar expressions. These forward
looking statements involve certain risks and uncertainties. Factors that may
cause actual results to differ materially from those contemplated by such
forward looking statements include, among others, the following possibilities:
o costs related to the integration of the businesses of Wachovia and IJL
are greater than expected;
o difficulties in integrating the businesses of Wachovia and IJL or
retaining key personnel are greater than expected;
o revenues after the merger are lower than expected;
o the loss of business or customers after the merger is higher than
expected or operating costs after the merger are greater than expected;
o competitive pressure among financial institutions increases
significantly;
o changes in the interest rate environment reduce interest margins;
o general economic conditions, either nationally or in the states in which
the combined company will be doing business, and conditions in securities
markets, are less favorable than expected; or
o legislation or regulatory changes adversely affect the businesses in
which Wachovia will be engaged.
REFERENCES TO ADDITIONAL INFORMATION
This Proxy Statement/Prospectus incorporates important business and
financial information about Wachovia and IJL from documents that are not
included in or delivered with this document. This information is available to
you without charge upon your written or oral request. You can obtain documents
incorporated by reference in this Proxy Statement/
Prospectus (other than certain exhibits to those documents) by requesting them
in writing or by telephone from the appropriate company at the following
addresses:
<TABLE>
<S> <C> <C> <C>
WACHOVIA CORPORATION INTERSTATE/JOHNSON LANE, INC.
P. O. Box 3099 191 Peachtree Street, N.E. IJL Financial Center
Winston-Salem, NC 27150 Atlanta, Georgia 30303 201 North Tryon Street
Attention: Secretary or Attention: Secretary Charlotte, N.C. 28202
(336) 770-5000 (404) 332-5000 Attention: Secretary
(704) 379-9000
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY JANUARY 19, 1999
IN ORDER TO RECEIVE THEM BEFORE THE SPECIAL MEETING.
See "Where You Can Find More Information" on page 36.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
FORWARD LOOKING STATEMENTS .......................................... ii
REFERENCES TO ADDITIONAL INFORMATION ................................ ii
QUESTIONS AND ANSWERS ABOUT THE WACHOVIA/IJL MERGER ................. 1
SUMMARY ............................................................. 3
The Companies ..................................................... 3
Special Meeting ................................................... 3
Record Date; Vote Required ........................................ 3
Recommendation of the IJL Board of Directors ...................... 3
The Merger ........................................................ 3
Share Information and Market Prices ............................... 5
Comparison of Certain Unaudited per Share Data .................... 6
Selected Financial Data of Wachovia ............................... 8
Selected Financial Data of IJL .................................... 9
SPECIAL MEETING ..................................................... 10
General ........................................................... 10
Record Date ....................................................... 10
Solicitation and Revocability of Proxies .......................... 10
Vote Required ..................................................... 10
Recommendation of Board of Directors .............................. 11
THE MERGER .......................................................... 11
General ........................................................... 11
Background of the Merger .......................................... 11
Reasons of IJL for the Merger ..................................... 13
Opinion of IJL Financial Advisor .................................. 14
Effective Time .................................................... 17
Distribution of Wachovia Certificates ............................. 17
Fractional Shares ................................................. 17
Federal Income Tax Consequences ................................... 18
Management and Operations After the Merger ........................ 19
Post-Merger Compensation and Benefits ............................. 19
Treatment of Outstanding Options and Stock Purchase Rights ........ 19
Retention Program ................................................. 19
Interests of Certain Persons in the Merger ........................ 20
Conditions to Completion .......................................... 21
Regulatory Approvals .............................................. 22
Amendment, Waiver and Termination ................................. 23
Conduct of Business Pending the Merger ............................ 23
Expenses and Fees ................................................. 24
Accounting Treatment .............................................. 24
Stock Exchange Listing of Wachovia Common Stock ................... 24
Resales of Wachovia Common Stock .................................. 24
Stock Option Agreement ............................................ 25
Shareholder Agreements ............................................ 27
No Dissenters or Appraisal Rights ................................. 27
DESCRIPTION OF WACHOVIA CAPITAL STOCK ............................... 27
General ........................................................... 27
Preferred Stock ................................................... 27
Common Stock ...................................................... 28
Changes in Control ................................................ 28
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
CERTAIN DIFFERENCES IN THE RIGHTS OF WACHOVIA SHAREHOLDERS
AND IJL SHAREHOLDERS ........................................................ 30
Authorized Capital .......................................................... 30
Amendment of Articles of Incorporation ...................................... 31
Notice of Meetings of Shareholders .......................................... 31
Special Meetings of Shareholders ............................................ 31
Record Date ................................................................. 31
Number of Directors; Classified Board of Directors .......................... 32
Removal of Directors ........................................................ 32
Shareholder Proposals; Advance Notice of Director Nominations ............... 32
Anti-Takeover Provisions; Restrictions on Certain Business Combinations ..... 32
Limitation on Director Liability; Indemnification ........................... 33
Shareholder Inspection Rights; Shareholder Lists ............................ 34
Dissenters' Appraisal Rights ................................................ 34
COMPARATIVE MARKET PRICES AND DIVIDENDS ....................................... 35
Wachovia .................................................................... 35
IJL ......................................................................... 35
EXPERTS ....................................................................... 36
VALIDITY OF WACHOVIA COMMON STOCK ............................................. 36
OTHER MATTERS ................................................................. 36
WHERE YOU CAN FIND MORE INFORMATION ........................................... 36
</TABLE>
APPENDICES:
Appendix A -- Agreement and Plan of Merger, dated as of October 27, 1998, by
and between Wachovia Corporation and Interstate/Johnson Lane, Inc
and the Related Plan of Merger.
Appendix B -- Stock Option Agreement, dated as of October 27, 1998, by and
between Wachovia Corporation and Interstate/
Johnson Lane, Inc.
Appendix C -- Form of Shareholder Agreement
Appendix D -- Opinion of Berkshire Capital Corporation
iv
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE WACHOVIA/IJL MERGER
Q: WHY IS IJL MERGING WITH WACHOVIA?
A: IJL is merging with Wachovia because it will provide you with the
opportunity to participate as a shareholder in one of the nation's
preeminent financial services companies. IJL's Board of Directors
believes that by joining forces with Wachovia, IJL can best serve
its shareholders by participating in the further development of an
organization that will be able to provide a broader array of
financial products and services to the customers it serves.
Q: WHAT DO I NEED TO DO NOW?
A: After you have carefully read this Proxy Statement/Prospectus, just
indicate on your proxy card how you want to vote, and sign and mail
it in the enclosed prepaid return envelope marked "Proxy" as soon
as possible, so that your shares may be represented and voted at
the special meeting to be held on January 26, 1999.
Your vote is very important. Holders of a majority of the
outstanding shares of IJL common stock must approve the merger
agreement, and therefore it is important that IJL shareholders
return their signed proxy cards.
The IJL board of directors unanimously recommends voting "FOR" the
proposed 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 provided by your
broker regarding how to instruct your broker to vote your shares.
Without instructions, your shares will not be voted on the merger
agreement, which will have the same effect as voting against the
proposed merger agreement.
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 to the party to
whom you submitted your proxy stating that you would like to revoke
your proxy. Second, you may complete and submit a new proxy card.
Third, you may attend the special meeting and vote in person.
Simply attending the special 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, Wachovia will send IJL shareholders
written instructions for exchanging their share certificates.
Q: WHAT WILL HOLDERS OF IJL COMMON STOCK RECEIVE IN THE MERGER?
A: Holders of shares of IJL common stock will receive for each share of IJL
common stock a fraction of a share of Wachovia common stock equal
to $32.00 divided by the average of the last sale prices of
Wachovia common stock as reported on the NYSE Composite
Transactions Reporting System for the five trading days immediately
preceding the effective date of the merger. Wachovia will not issue
fractional shares of Wachovia common stock. Instead, cash will be
paid with respect to fractional shares. For example, assuming an
average Wachovia share price of $88, a holder of 100 shares of IJL
common stock would receive 36 shares of Wachovia common stock
($32.00 / $88.00 x 100 = 36.3636), plus a cash payment equal to the
value of 0.3636 of a share of Wachovia common stock.
Q: WHAT IS THE "EXCHANGE RATIO?"
A: The exchange ratio is a fraction of a share of Wachovia common stock
into which each share of IJL common stock will be converted upon
completion of the merger. The exchange ratio will equal $32.00
divided by the average of the last sale prices of Wachovia common
stock, as reported on the NYSE Composite Transactions Reporting
System, for the five trading days immediately preceding the
effective date of the merger.
Please note that the share price of Wachovia common stock may
fluctuate before and after the exchange ratio is determined.
Accordingly IJL shareholders cannot be sure of the number of shares
of Wachovia common stock they will receive until the exchange ratio
is fixed or the value of the shares after it is fixed.
1
<PAGE>
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working towards completing the merger as quickly as possible. In
addition to the approval of the IJL shareholders, we must also
obtain certain banking and other regulatory approvals that are
expected to be obtained following the special meeting. We expect to
receive all of these approvals in the first half of 1999.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER?
A: We expect that for United States federal income tax purposes, the
conversion of your shares of IJL common stock into shares of
Wachovia common stock generally will not cause you to recognize any
gain or loss. You will, however, recognize income or gain in
connection with any cash received instead of fractional shares of
Wachovia common stock. Your holding period for the Wachovia common
stock received in the merger, which determines how any gain or loss
should be treated for federal income tax purposes upon future sales
of Wachovia common stock, generally will include the holding period
for the IJL common stock exchanged in the merger. For a more
complete description of federal income tax considerations, see page
18.
Q: WHAT OTHER MATTERS WILL BE VOTED ON AT THE SPECIAL MEETING?
A: We do not expect to ask you to vote on any matter other than the merger
at the special meeting.
Q: WILL THE RIGHTS OF IJL SHAREHOLDERS CHANGE AS A RESULT OF THE MERGER?
A: Yes. Currently, your rights as an IJL shareholder are governed by
Delaware law and IJL's Certificate of Incorporation and By-Laws,
whereas Wachovia shareholder rights are governed by North Carolina
law and Wachovia's Articles of Incorporation and By-Laws. After the
merger, IJL shareholders will become shareholders of Wachovia, and
therefore their rights will be governed by North Carolina law and
Wachovia's Articles of Incorporation and By-Laws. For a summary of
certain differences between the rights of IJL shareholders and the
rights of Wachovia shareholders, see page 29.
Q: WHOM SHOULD IJL SHAREHOLDERS CALL WITH QUESTIONS AND TO OBTAIN
ADDITIONAL COPIES OF THIS PROXY STATEMENT/PROSPECTUS?
A: IJL shareholders should call Michael D. Hearn, Secretary, at
1-800-929-0724.
2
<PAGE>
SUMMARY
THIS BRIEF SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THE PROXY
STATEMENT/PROSPECTUS. IT DOES NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. WE URGE YOU TO CAREFULLY READ THE ENTIRE PROXY
STATEMENT/PROSPECTUS AND THE OTHER DOCUMENTS TO WHICH WE REFER TO FULLY
UNDERSTAND THE MERGER. SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 36.
EACH ITEM IN THIS SUMMARY REFERS TO THE PAGE WHERE THAT SUBJECT IS DISCUSSED IN
MORE DETAIL.
THE COMPANIES
WACHOVIA CORPORATION
100 NORTH MAIN STREET
WINSTON-SALEM, NORTH CAROLINA 27101
(336) 770-5000
AND
191 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30303
(404) 332-5000
Wachovia is a North Carolina corporation, whose principal banking subsidiary is
Wachovia Bank, National Association. Wachovia has 755 banking offices and 1,379
ATMs throughout the Southeast United States. Wachovia also has bank-related
subsidiaries engaged in large corporate and institutional relationship
management and business development, corporate leasing, remittance processing
and discount brokerage services. Based on its consolidated asset size and
market capitalization at September 30, 1998, Wachovia was ranked 17th and 13th,
respectively, among domestic U.S. bank holding companies. At that date,
Wachovia had consolidated assets, deposits and shareholders' equity of $65.6
billion, $38.8 billion and $5.2 billion, respectively.
INTERSTATE/JOHNSON LANE, INC.
IJL FINANCIAL CENTER
201 NORTH TRYON STREET
CHARLOTTE, N.C. 28202
(704) 379-9000
IJL is a Charlotte, North Carolina-based holding company which, through its
principal subsidiary, Interstate/
Johnson Lane Corporation, and other subsidiaries, engages in securities and
futures 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 Interstate/
Johnson Lane Corporation has clients throughout the United States and abroad,
its major geographic focus is the Southeast. At September 30, 1998, IJL had
consolidated assets of $652.3 million and shareholders' equity of $103.6
million.
SPECIAL MEETING (see page 10)
The special meeting of IJL shareholders will be held at 10:30 a.m. on January
26, 1999, at the Radisson Plaza Hotel, 101 South Tryon Street, Charlotte, North
Carolina. At the special meeting, IJL shareholders will be asked to consider
and vote on a proposal to adopt the merger agreement which provides for the
merger of IJL into Wachovia.
RECORD DATE; VOTE REQUIRED (see page 10)
You can vote at the special meeting if you owned IJL common stock at the close
of business on December 10, 1998. As of that date, there were 6,516,079 shares
of IJL common stock issued and outstanding and entitled to be voted at the
special meeting. The affirmative vote of the holders of at least a majority of
the outstanding shares of IJL common stock is required to approve the merger
agreement. Directors and executive officers of IJL who hold approximately 27%
of the outstanding shares of IJL common stock have agreed to vote their shares
in favor of the merger agreement. As a result, approval of the merger agreement
will require the affirmative vote of the holders of approximately an additional
24% of the outstanding shares of IJL common stock.
If you do not vote your shares of common stock, it will have the effect of a
vote against the merger agreement.
RECOMMENDATION OF THE IJL BOARD OF DIRECTORS
(see page 11)
The IJL Board of Directors believes that the merger is in your best interests
and has unanimously approved the merger agreement. The IJL Board of Directors
recommends that IJL shareholders vote "FOR" approval of the merger agreement.
THE MERGER (see page 11)
THE MERGER AGREEMENT IS ATTACHED AS APPENDIX A TO THIS PROXY
STATEMENT/PROSPECTUS. WE ENCOURAGE YOU TO READ THE MERGER AGREEMENT AS IT IS
THE LEGAL DOCUMENT THAT GOVERNS THE MERGER.
GENERAL (see page 11)
We have proposed a merger in which IJL will merge into Wachovia. Wachovia will
continue as the surviving corporation and will be governed by the laws of the
State of North Carolina. The merger will be completed if you approve the merger
agreement, we obtain all required approvals and all other conditions are
satisfied.
CONVERSION OF SHARES (see page 11)
When the merger is complete, each share of IJL common stock will be converted
into a fraction of a share of Wachovia common stock equal to $32.00 divided by
the average of the last sale prices of Wachovia common
3
<PAGE>
stock on the NYSE Composite Transactions Reporting System for the five trading
days immediately preceding the merger. This fraction is referred to as the
"exchange ratio." If, after applying the exchange ratio, an IJL shareholder
becomes entitled to a fractional share of Wachovia common stock, he or she will
receive cash instead of a fractional share.
For example, assuming an average Wachovia share price of $88, a holder of 100
shares of IJL common stock would receive 36 shares of Wachovia common stock
($32.00 / $88.00 x 100 = 36.3636), plus a cash payment equal to the value of
0.3636 of a share of Wachovia common stock.
OPINION OF FINANCIAL ADVISOR (see page 14)
Berkshire Capital Corporation has served as financial advisor to IJL in
connection with the merger and has rendered an opinion to the IJL Board of
Directors that the consideration to be paid by Wachovia for the IJL common
stock is fair from a financial point of view to IJL shareholders. A copy of the
opinion delivered by Berkshire Capital Corporation is attached to this document
as Appendix D. You should read the opinion completely to understand the
assumptions made, matters considered and limitations of the review undertaken
by Berkshire Capital Corporation in providing this opinion.
EFFECTIVE DATE (see page 17)
The merger will occur shortly after all of the conditions to completion of the
merger have been satisfied. It is currently anticipated that the merger will
occur in the first half of 1999. Wachovia and IJL can each terminate the merger
agreement if the merger is not completed by June 30, 1999.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
(see page 18)
We expect that for United States federal income tax purposes shareholders of
IJL will not recognize any gain or loss in the merger, except in connection
with any cash that IJL shareholders receive instead of fractional shares of
Wachovia common stock.
We have conditioned the merger on our receipt of legal opinions that the
federal income tax treatment will be as we have described in this document.
THIS TAX TREATMENT MAY NOT APPLY TO CERTAIN IJL SHAREHOLDERS, INCLUDING
SHAREHOLDERS 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.
MANAGEMENT AFTER THE MERGER (see page 19)
Wachovia will be the surviving corporation after the merger. The directors and
officers of Wachovia in office before the merger will serve as the directors
and officers of Wachovia after the merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (see page 20)
Some of the directors and executive officers of IJL have interests in the
merger in addition to their interests as shareholders of IJL generally.
o In connection with the merger agreement Wachovia entered into employment
agreements with 11 executives of IJL which will become effective at the
time of the merger. Each of these executives will receive, for either one,
two or three years, a minimum amount of annual compensation. In addition,
the employment agreements entitle these individuals to certain payments and
other benefits upon certain terminations of employment.
o The three-year restriction period applicable to certain shares of IJL common
stock awarded to executives of IJL will lapse upon the approval of the
merger agreement by IJL's shareholders. All but one executive has deferred
the receipt of these shares until September 30, 2001, subject to possible
earlier receipt upon the occurrence of defined events.
o Following the merger, Wachovia will generally indemnify and provide liability
insurance to the present officers and directors of IJL and its
subsidiaries.
The IJL Board of Directors was aware of these interests and took them into
account in approving the merger agreement.
CONDITIONS TO COMPLETION OF THE MERGER (see page 21)
Completion of the merger is subject to various conditions, including, among
others: (1) approval of the merger agreement by the IJL shareholders; (2)
receipt of all governmental and other consents and approvals as are necessary
to permit completion of the merger; and (3) satisfaction of certain other usual
conditions. Under the terms of the merger agreement, the conditions to the
merger may generally be waived by Wachovia or IJL, as applicable.
REGULATORY APPROVALS (see page 22)
We cannot complete the merger unless it is approved by the Board of Governors
of the Federal Reserve System. Wachovia expects to file an application with the
Federal Reserve Board seeking approval of the merger in the near future. 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
4
<PAGE>
other applications and notices with these regulatory authorities.
While we do not know of any reason why we should not 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 23).
IJL and Wachovia can mutually agree at any time to abandon the merger (and
terminate the merger agreement), even if IJL's shareholders 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:
o The other party breaches the merger agreement in a material way and does not
(or cannot) correct the breach in 30 days.
o The merger has not been completed by June 30, 1999.
o Any federal or state regulatory authority denies an approval we need to
complete the merger (in a final and nonappealable way) or issues any order
preventing the merger.
o IJL's shareholders vote not to adopt the merger agreement.
In addition, Wachovia may abandon the merger if IJL's Board of Directors
withdraws its recommendation to approve the merger agreement or modifies its
recommendation in certain ways.
ACCOUNTING TREATMENT (see page 24)
Wachovia will account for the merger as a purchase for financial reporting
purposes.
RESALE OF WACHOVIA COMMON STOCK (see page 24)
The Wachovia common stock issued in the merger will be freely transferable by
the holders of such shares, except for those holders who may be deemed to be
"affiliates" (generally including directors, certain executive officers, and
10% or more shareholders) of IJL or Wachovia under applicable federal
securities laws.
STOCK OPTION AGREEMENT (see page 25)
In connection with the merger agreement, IJL granted to Wachovia an option to
purchase shares of its common stock under certain circumstances. The maximum
number of shares that can be purchased may not exceed 19.9% of the outstanding
shares of IJL common stock. The purchase price under the option is $30.5625 per
share of IJL common stock (which was the closing price of IJL common stock on
the first trading day after we signed the merger agreement). Under certain
circumstances, IJL may be required to repurchase the option (and/or any shares
purchased under the option) at a predetermined price. Instead of purchasing the
shares, Wachovia may choose to surrender the option to IJL for a cash payment
of not less than $10 million but not more than $12 million.
Wachovia cannot exercise this option unless certain events occur. These events
can generally be described as business combinations or acquisition transactions
relating to IJL and certain related events (other than the merger we are
proposing in this document). We do not know of any event that has occurred as
of the date of this document that would allow Wachovia to exercise this option.
IJL granted the option to Wachovia in order to induce Wachovia to enter into
the merger agreement. The option agreement could have the effect of
discouraging other companies from trying or proposing to combine with or
acquire IJL.
The option agreement is attached to this document as Appendix B.
SHAREHOLDER AGREEMENTS (see page 27)
Directors and executive officers of IJL who hold approximately 27% of IJL's
outstanding common stock have entered into shareholder agreements with
Wachovia. The shareholder agreements provide, among other things, that these
shareholders will vote their shares of IJL common stock in favor of approval of
the merger agreement.
The directors and executive officers entered into the shareholder agreements in
order to induce Wachovia to enter into the merger agreement. The shareholder
agreements could discourage other companies from trying or proposing to combine
with or acquire IJL.
The form of shareholder agreement is attached to this document as Appendix C.
APPRAISAL RIGHTS (see page 27)
Delaware law does not provide IJL shareholders with dissenters' appraisal
rights in the merger.
SHARE INFORMATION AND MARKET PRICES (see page 35)
Wachovia common stock and IJL common stock are traded on the NYSE under the
symbols "WB" and "IJL", respectively. The following table sets forth the last
sale prices of Wachovia common stock, IJL common stock and the equivalent price
per share (as explained below) on October 27, 1998, the last trading day before
we announced the merger, and on December 14, 1998. We have structured the
merger so that the "equivalent per share price" of IJL common stock will
5
<PAGE>
always be $32.00. As discussed elsewhere, the exchange ratio will be determined
based on the market price of Wachovia common stock shortly before the merger.
On December 14, 1998, assuming the average of the last sale prices of
Wachovia's common stock for the five previous trading days was , the last
sale price of Wachovia common stock on that day, the exchange ratio would have
been .
<TABLE>
<CAPTION>
WACHOVIA IJL EQUIVALENT PER
COMMON COMMON SHARE PRICE OF IJL
STOCK STOCK COMMON STOCK
---------- -------- -------------------
<S> <C> <C> <C>
October 27, 1998 .......... $82 3/4 $37 $ 32.00
December 14, 1998 ......... -- -- $ 32.00
</TABLE>
THE MARKET PRICE OF BOTH WACHOVIA AND IJL COMMON STOCK WILL FLUCTUATE PRIOR TO
THE MERGER. YOU ARE ADVISED TO OBTAIN CURRENT MARKET QUOTATIONS FOR WACHOVIA
COMMON STOCK AND IJL COMMON STOCK.
COMPARISON OF CERTAIN UNAUDITED PER SHARE DATA
The following table shows information about our 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 for certain time periods, we assumed that
we had been merged as of the beginning of the period presented. The pro forma
information gives effect to the merger under the purchase method of accounting
in accordance with generally accepted accounting principles (commonly referred
to as "GAAP").
We used an assumed exchange ratio of .3677 in computing the pro forma
combined and equivalent pro forma combined per share data. This assumed
exchange ratio is based on a value of $32 per share of IJL common stock divided
by the average of the last sale prices of Wachovia common stock for the five
trading days prior to the merger announcement (October 27, 1998). The actual
exchange rate will be determined based on the last sale prices of Wachovia
common stock, as reported on the NYSE Composite Transaction Reporting System,
for the five trading days immediately preceding the effective date of the
merger.
We expect that we will incur merger and integration charges as a result of
combining our 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 historical results of the combined company would have been had
our companies been combined.
The information in the following table is based on, and should be read
together with, the historical financial information that we have presented in
our prior Securities and Exchange Commission filings. We have incorporated this
material into this document by reference. See "Where You Can Find More
Information" on page 36.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------------- -------------
1998 1997
------------------- -------------
<S> <C> <C>
WACHOVIA COMMON STOCK
Net income per basic common share
Historical ...................... $ 3.07 $ 2.99
Pro forma combined (1) .......... 3.07 2.98
Net income per diluted common share
Historical ...................... 3.01 2.94
Pro forma combined (1) .......... 3.01 2.93
Dividends per common share (2)
Historical ...................... 1.37 1.68
Pro forma combined .............. 1.37 1.68
Book value per common share
Historical ...................... 25.79 25.13
Pro forma combined .............. 26.58 25.85
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------------ -------------
1998 1997
------------------ -------------
<S> <C> <C>
INTERSTATE/JOHNSON LANE COMMON STOCK (3)
Net income per basic common share
Historical (5)............................. 1.97 1.93
Equivalent pro forma combined (4) ......... 1.13 1.10
Net income per diluted common share
Historical (5)............................. 1.70 1.74
Equivalent pro forma combined (4) ......... 1.11 1.08
Dividends per common share
Historical ................................ .15 .17
Equivalent pro forma combined (4) ......... .50 .62
Book value per common share
Historical ................................ 16.77 15.02
Equivalent pro forma combined (4) ......... 9.77 9.51
</TABLE>
1. The effect of estimated non-recurring merger and restructuring costs has not
been included in the pro forma amounts.
2. Pro forma dividends per share represent historical dividends paid by
Wachovia.
3. Per share data for the nine months ended September 30, 1998 and year ended
December 31, 1997 has been derived from IJL's quarterly and annual reports
during the fiscal years ended September 30, 1998 and 1997.
4. Equivalent IJL pro forma combined amounts are computed by multiplying the
Wachovia pro forma combined amounts by the assumed exchange ratio of .3677.
5. At December 31, 1997, IJL adopted SFAS 128, "Earnings Per Share," which
establishes standards for computing and presenting earnings per share. All
periods presented have been restated to conform with SFAS 128.
7
<PAGE>
SELECTED FINANCIAL DATA OF WACHOVIA
The following table sets forth selected historical financial data of
Wachovia and has been derived from its financial statements. The interim
financial information has been derived from unaudited financial statements of
Wachovia. Wachovia 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 for the unaudited interim periods. Results for
the interim periods do not necessarily indicate results which may be expected
for any other interim or annual period.
The information in the following table is based on, and should be read
together with, the historical financial information that we have presented in
our prior Securities and Exchange Commission filings. We have incorporated this
material into this document by reference. See "Where You Can Find More
Information" on page 36.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- -----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest Income ....................... $ 3,489 $ 3,143 $ 4,262 $ 4,010 $ 3,790 $ 3,026 $ 2,738
Interest Expense ...................... 1,748 1,605 2,169 2,086 2,011 1,369 1,129
Other Income .......................... 922 746 1,007 879 816 668 752
Other Expense ......................... 1,504 1,234 1,967 1,509 1,442 1,343 1,354
Net Income ............................ 633 589 593 757 708 624 595
PER SHARE AMOUNTS
Net Income, Basic ..................... $ 3.07 $ 2.99 $ 2.99 $ 3.70 $ 3.40 $ 3.00 $ 2.84
Net Income, Diluted ................... $ 3.01 $ 2.94 $ 2.94 $ 3.65 $ 3.36 $ 2.96 $ 2.80
Weighted Average Shares
Outstanding, Basic (thousands) ...... 205,811 197,237 198,290 204,889 208,230 208,117 208,880
Weighted Average Shares
Outstanding, Diluted (thousands) 209,881 200,542 201,901 207,432 210,600 210,651 212,584
Dividends ............................. $ 1.37 $ 1.24 $ 1.68 $ 1.52 $ 1.38 $ 1.23 $ 1.11
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------- ----------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------ ------------ ------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF CONDITION
(PERIOD END)
Total Assets .................... $ 65,574 $ 58,041 $ 65,397 $ 57,229 $ 55,792 $ 49,242 $ 46,188
Interest Earning Assets ......... $ 58,164 $ 51,986 $ 57,335 $ 50,728 $ 50,182 $ 44,164 $ 41,415
Loans ........................... $ 45,629 $ 40,748 $ 44,194 $ 38,007 $ 35,585 $ 31,664 $ 27,754
Deposits ........................ $ 38,807 $ 36,911 $ 42,654 $ 35,322 $ 34,355 $ 30,296 $ 30,008
Shareholders' Equity ............ $ 5,229 $ 4,517 $ 5,174 $ 4,608 $ 4,601 $ 3,910 $ 3,744
RATIOS
Return on Average Assets ........ 1.33% 1.38% 1.03% 1.36% 1.37% 1.34% 1.40%
Return on Average Equity ........ 16.33 17.79 13.08 16.99 17.00 16.37 16.91
Dividend Payout Ratio ........... 44.6 40.8 55.2 40.4 39.9 40.8 38.7
Average Equity to Average Assets
Ratio ......................... 8.13 7.77 7.87 8.02 8.05 8.19 8.27
</TABLE>
8
<PAGE>
SELECTED FINANCIAL DATA OF IJL
IJL derived the historical financial data for the four years ended
September 30, 1997 from its audited historical financial statements and the
historical financial data for the year ended September 30, 1998 from its
unaudited historical financial statements. Management believes that IJL's
unaudited historical financial statements contain all adjustments needed to
present fairly the information included in such statements, and that the
adjustments made consist only of normal recurring adjustments. This information
should be read together with the historical financial information that IJL has
presented in its prior filings with the Securities and Exchange Commission. We
have incorporated this material into this document by reference. See "Where You
Can Find More Information" on page 36.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED SEPTEMBER 30
-----------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Total revenues ................................................ $ 279.1 $ 232.0 $ 208.4 $ 184.0 $ 166.6
Net revenues after interest expense ........................... 257.6 212.2 187.2 151.3 147.9
Income before taxes and non-recurring items ................... 23.2 17.0 15.6 9.9 13.3
Operating income .............................................. 14.7 10.9 9.4 5.9 7.9
Cumulative Effect of a Change in Accounting Principle(2) ...... -- -- -- -- 3.0
Net income .................................................... 14.7 10.9 9.4 5.9 10.9
BASIC EARNINGS PER SHARE(1):
Operating ..................................................... $ 2.47 $ 1.87 $ 1.61 $ 0.98 $ 1.27
Net ........................................................... $ 2.47 $ 1.87 $ 1.61 $ 0.98 $ 1.76
DILUTED EARNINGS PER SHARE(1):
Operating ..................................................... $ 2.16 $ 1.74 $ 1.42 $ 0.92 $ 1.13
Net ........................................................... $ 2.16 $ 1.74 $ 1.42 $ 0.92 $ 1.52
DIVIDENDS PER SHARE ............................................. $ 0.20 $ 0.16 $ 0.12 $ 0.12 $ 0.09
FINANCIAL CONDITION:
Total assets .................................................. $ 652.3 $ 626.7 $ 568.3 $ 616.5 $ 767.8
Total assets, net of matched securities resale agreements ..... $ 648.1 $ 614.3 $ 562.5 $ 486.9 $ 428.6
Long-term debt ................................................ $ 31.0 $ 16.0 $ 21.0 $ 21.0 $ 21.0
Shareholders' equity .......................................... $ 103.6 $ 88.8 $ 76.6 $ 69.4 $ 68.0
</TABLE>
(1) At December 31, 1997, IJL adopted SFAS 128, "Earnings Per Share," which
establishes standards for computing and presenting earnings per share. All
periods presented have been restated to conform with SFAS 128.
(2) Effective October 1, 1993, IJL adopted SFAS 109, "Accounting for Income
Taxes." As permitted under SFAS 109, prior years' financial statements have
not been restated. The cumulative effect of adopting SFAS 109 was to
increase net income for the change in accounting principle in the year of
adoption.
9
<PAGE>
SPECIAL MEETING
GENERAL
The Board of Directors of IJL (the "IJL Board") is providing this Proxy
Statement/Prospectus to the holders of common stock, $0.20 par value per share,
of IJL ("IJL Common Stock") in connection with the solicitation of proxies for
use at the special meeting of shareholders of IJL and at any adjournments or
postponements of the special meeting (the "Special Meeting"). The Special
Meeting will be held at the Radisson Plaza Hotel, 101 South Tryon Street,
Charlotte, North Carolina at 10:30 a.m. on January 26, 1999.
Wachovia is also providing this Proxy Statement/Prospectus to IJL
shareholders as a prospectus in connection with the offer and sale by Wachovia
of shares of common stock, $5.00 par value per share, of Wachovia ("Wachovia
Common Stock") in connection with the merger of IJL into Wachovia.
RECORD DATE
The IJL Board has fixed the close of business on December 10, 1998, as the
record date (the "Record Date") for determining the IJL shareholders entitled
to receive notice of and to vote at the Special Meeting. As of the Record Date,
there were issued and outstanding 6,516,079 shares of IJL Common Stock. Only
holders of record of IJL Common Stock as of the Record Date are entitled to
notice of and to vote at the Special Meeting.
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares is necessary to constitute a quorum at the
Special Meeting. Abstentions and broker non-votes (as described below) will be
counted solely for the purpose of determining whether a quorum is present.
Under the applicable rules of the NYSE and the National Association of
Securities Dealers, Inc. ("NASD"), brokers and/or members, as the case may be,
who hold shares in street name for customers who are the beneficial owners of
such shares are prohibited from giving a proxy to vote such customers' shares
with respect to the approval and adoption of the Merger Agreement (as defined
below) in the absence of specific instructions from such customers ("broker
non-votes"). Abstentions and broker non-votes will not be deemed to be cast
either "FOR" or "AGAINST" the Merger Agreement. Because approval of the Merger
Agreement requires the affirmative vote of a majority of the outstanding shares
of IJL Common Stock, abstentions and broker non-votes will have the same effect
as a vote against the Merger Agreement.
SOLICITATION AND REVOCABILITY OF PROXIES
Proxies in the form accompanying this Proxy Statement/Prospectus are being
solicited by the IJL Board. 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, such proxies will be voted "FOR"
approval of the Merger Agreement and consummation of the transactions
contemplated therein, and as determined by a majority of the IJL Board, as to
any other matter that may come before the Special Meeting or any adjournment or
postponement of the Special Meeting including, among other things, a motion to
adjourn or postpone the Special Meeting to another time and/or place, for the
purpose of soliciting additional proxies or otherwise. No proxy which is voted
against the proposal to approve the Merger Agreement, however, will be voted in
favor of any adjournment or postponement of the Special Meeting.
A shareholder who has given a proxy may revoke it at any time prior to its
exercise at the Special Meeting by (1) giving written notice of revocation to
the Secretary of IJL, (2) properly submitting a duly executed proxy bearing a
later date, or (3) voting in person at the Special Meeting. All written notices
of revocation and other communications with respect to revocation of proxies
should be addressed to Interstate/Johnson Lane, Inc., 201 North Tryon Street,
Charlotte, North Carolina 28202, Attention: Secretary. A proxy appointment will
not be revoked by death or supervening incapacity of the shareholder executing
the proxy unless, before the shares are voted, notice of such death or
incapacity is filed with the Secretary of IJL, or other person responsible for
tabulating votes on behalf of IJL.
VOTE REQUIRED
Approval of the Merger Agreement at the Special Meeting and consummation
of the transactions contemplated by the Merger Agreement requires the
affirmative vote of a majority of the outstanding shares of IJL Common Stock.
As of the Record Date, neither Wachovia nor any of its directors or
executive officers or their affiliates held any shares of IJL Common Stock. The
directors and executive officers of IJL owned, as of the Record Date, and are
entitled to vote 1,770,004 shares of IJL Common Stock, which represents
approximately 27% of the outstanding shares of IJL
10
<PAGE>
Common Stock. These directors and executive officers have agreed to vote their
shares in favor of the Merger Agreement. Accordingly, assuming these shares are
so voted, approval of the Merger Agreement will require the affirmative vote of
the holders of approximately an additional 24% of the outstanding shares of IJL
Common Stock.
RECOMMENDATION OF BOARD OF DIRECTORS
For the reasons described in the section of this Proxy
Statement/Prospectus entitled "The Merger -- Reasons of IJL for the Merger,"
the IJL Board has unanimously approved the Merger Agreement, believes that the
Merger is in the best interests of IJL and recommends that shareholders of IJL
vote "FOR" approval of the Merger Agreement and the consummation of the
transactions contemplated thereby. See "The Merger -- Background of the
Merger," " -- Reasons of IJL for the Merger" and " -- Interests of Certain
Persons in the Merger."
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 APPENDICES HERETO, INCLUDING THE MERGER
AGREEMENT, WHICH IS ATTACHED AS APPENDIX A AND IS INCORPORATED HEREIN BY
REFERENCE. ALL SHAREHOLDERS ARE URGED TO READ THE APPENDICES IN THEIR ENTIRETY.
GENERAL
The Agreement and Plan of Merger, dated as of October 27, 1998, between
IJL and Wachovia and the related Plan of Merger (together, the "Merger
Agreement") provides for a transaction in which IJL will merge into Wachovia
(the "Merger"). Wachovia will be the surviving corporation of the Merger. At
the Effective Time (as defined below), each share of issued and outstanding IJL
Common Stock will cease to be outstanding and (excluding any shares held by IJL
or Wachovia or their subsidiaries) will be converted into a fraction of a share
(the "Exchange Ratio") of Wachovia Common Stock equal to $32.00 divided by the
average of the last reported sale prices of Wachovia Common Stock, as reported
on the NYSE Composite Transactions Reporting System, for the five trading days
immediately preceding the Effective Date (as defined below).
The Merger Agreement provides that Wachovia may change the way it combines
with IJL, provided that it cannot alter the consideration to be received by IJL
shareholders, adversely affect the tax treatment for IJL shareholders or
materially delay the transactions contemplated by the Merger Agreement.
BACKGROUND OF THE MERGER
During the mid-1990s, Congress and certain regulatory agencies began to
pay increasing attention to modernizing the United States' financial services
industry. Proposals were considered to modify or eliminate long-standing
restrictions on the ability of depository institutions to engage in the
underwriting of corporate debt and equity securities and other securities-
related activities. In December 1996, the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") announced a change in the
regulations governing the securities affiliates of depository institutions.
Among other things, the change increased from 10% to 25% the percentage of
revenues that bank holding companies may derive from "ineligible" activities,
essentially equity and debt underwriting, of securities affiliates. Primarily
as a result of this regulatory change, many privately and publicly held
brokerage firms, some of which operate in the same geographic markets as IJL,
have been acquired or have announced their intentions to be acquired by bank
holding companies.
As a result of this consolidation activity, IJL's senior management began
to monitor this new competitive and regulatory environment and to assess the
possible short and long-term effects on IJL's competitive position.
Specifically, a special committee of executive officers consisting of Edward C.
Ruff, Lewis F. Semones, Jr., Douglas R. Aldridge and Edwin A. Dalrymple, Jr.
(the "Special Committee") began a series of meetings in January 1998 to develop
a strategy for improving the profit margins in the firm's Private Client Group
which comprises IJL's retail brokerage operations. Of particular interest and
concern to the Special Committee was information regarding the financial
performance of the Private Client Group versus a peer group of similar firms,
many of whom had been or were in the process of being acquired by larger
financial services companies. By March 1998, the Special Committee had
determined that fundamental issues regarding both the scale of the operation
and the need for additional capital must be addressed in order for the Private
Client Group to meet both its short-term profitability goals and long-term
strategic objectives.
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Members of the Special Committee held a series of meetings with James H.
Morgan, the firm's Chairman and Chief Executive Officer, and the firm's
Management Committee (consisting of Mr. Morgan, the members of the Special
Committee and Harvey D. Harrelson) from late March through early June 1998 to
review the Special Committee's findings. As a result of these meetings, the
Management Committee recommended that Mr. Morgan begin informal discussions
with certain larger financial institutions and other potential strategic
partners that had from time to time expressed an interest in exploring possible
strategic business combinations with IJL. During the course of his discussions
with these parties, Mr. Morgan was able to gain an understanding of their views
about the potential benefits of a strategic alliance and the role that IJL
would play in their organizations. At its annual strategic planning process in
June 1998, IJL's Strategic Planning Committee (consisting of the members of the
Board of Directors of Interstate/Johnson Lane Corporation, IJL's principal
broker/dealer subsidiary, and Grady G. Thomas, Jr.) determined that the Special
Committee's findings regarding the need to increase scale and capitalization to
support the Private Client Group were applicable to several of the firm's other
operating groups as well. Consequently, Mr. Morgan continued his informal
discussions with potential strategic partners. At an IJL Board meeting on July
21, 1998, Mr. Morgan updated the directors on the conclusions reached by IJL's
Strategic Planning Committee and his discussions with potential strategic
partners.
On July 23, 1998, the Management Committee interviewed Berkshire Capital
Corporation ("Berkshire Capital") and discussed the possibility of retaining
that firm to consult with and advise the management of IJL regarding the
ongoing review of its business and operations, to evaluate IJL's strengths,
weaknesses and strategic alternatives, and to provide assistance in the event
management entered further discussions with third parties regarding a possible
strategic partnership or business combination. A decision to retain Berkshire
Capital was made later in July and representatives of that firm held their
first meeting with the Management Committee pursuant to this engagement on
August 5, 1998. On August 12, 1998, Mr. Morgan informed IJL's Board of
management's desire to retain Berkshire Capital and the purpose of that firm's
engagement, and the Board approved the retention of Berkshire Capital. A letter
agreement memorializing the engagement of Berkshire Capital was entered into as
of August 15, 1998. Based on the initial meetings with Berkshire Capital and
the previous deliberations of the Special Committee, the Management Committee,
the Strategic Planning Committee, and the authorization of the IJL Board,
Berkshire Capital was authorized to develop and prioritize a list of potential
strategic partners for IJL. The letter agreement with Berkshire Capital was
subsequently amended to expand its engagement to specifically include
assistance in evaluating, negotiating and completing a potential strategic
business combination.
In developing and prioritizing a list of strategic partners for IJL,
Berkshire Capital and the management of IJL focused on companies having the
following characteristics: (1) a high quality firm with an unquestioned
reputation; (2) superior management committed to a successful growth strategy;
(3) attractive transaction currency that could create both intermediate and
long-term value for IJL shareholders; (4) a demonstrated understanding of IJL's
culture and commitment to preserving it; (5) an ability to realize significant
benefits from cross-selling opportunities; (6) a willingness to consider IJL as
its primary full-service retail brokerage platform; (7) an opportunity to
enhance and/or expand IJL's current geographic market while maintaining
existing quality standards; (8) a commitment to investing in top quality
professionals and technological resources; and (9) a high certainty of
transaction closure. IJL management approved four of the companies identified
in this process (including Wachovia) and authorized Berkshire Capital to
deliver a descriptive memorandum regarding IJL to each company upon its
execution of a confidentiality agreement. Two additional companies had informal
discussions with IJL management but did not sign confidentiality agreements or
receive the descriptive memorandum. Two of the four companies that received the
descriptive memorandum (including Wachovia) held formal meetings with IJL
management and submitted written indications of interest in pursuing a business
combination.
At a meeting on October 9, 1998, members of management and representatives
of Berkshire Capital provided the IJL Board with an overview of the process
undertaken to date regarding the assessment of IJL's prospects as an
independent firm, assessment of the firm's strategic alternatives and
identification and communication with potential strategic partners. The two
indications of interest received in response to the descriptive memorandum
distributed by Berkshire Capital were then reviewed. Due to the reasons
discussed below, the IJL Board authorized management to enter into negotiations
regarding a strategic merger with Wachovia. Negotiations and due diligence
reviews by each party commenced shortly after that meeting. At a meeting of the
IJL Board on October 27, 1998, Messrs. Morgan and Semones reviewed the
financial features and reasons for the proposed merger with Wachovia and IJL's
legal advisors reviewed the principal terms of the Merger Agreement, the Stock
Option Agreement and the related agreements and the legal standards applicable
to the IJL Board's consideration of the proposed merger with Wachovia. In
addition, representatives of Berkshire Capital reviewed financial information
concerning Wachovia, IJL and the proposed merger, and rendered their oral
opinion that, as of such date, the consideration paid to IJL shareholders under
the Merger Agreement (the "Merger Consideration") was fair from a financial
point of view to the holders of IJL Common Stock. After discussion, the IJL
Board unanimously approved the Merger Agreement, the Stock Option Agreement and
related matters.
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Shortly after the conclusion of the IJL Board meeting, IJL and Wachovia
entered into the Merger Agreement and the Stock Option Agreement, and the
related employment and shareholder agreements were executed by the appropriate
parties.
REASONS OF IJL FOR THE MERGER
In reaching its determination to approve the Merger Agreement, the Stock
Option Agreement and the Shareholder Agreements and to recommend to the IJL
shareholders that they adopt the Merger Agreement, the IJL Board consulted with
IJL's management and its financial and legal advisors and considered a number
of factors, including, without limitation, the following principal factors:
o THE FUTURE PROSPECTS OF IJL AS AN INDEPENDENT FIRM. The IJL Board
carefully considered the prospects of IJL remaining an independent firm
and determined that rapid consolidation in the financial services industry
and the resulting competition for market share from larger, better
capitalized competitors would, over the next three to five years, create
for IJL (1) a need for additional capital that would be difficult to meet
without adverse consequences to existing shareholders, (2) downward
pressure on earnings that could adversely affect the market price for IJL
Common Stock and the ability of the firm to attract appropriate partners
or acquirors in the future, (3) a need to develop additional equity-based
compensation plans to attract and retain key employees that could have
adverse consequences to existing shareholders and (4) an unacceptable
level of risk that the pool of appropriate partners or acquirors would be
exhausted before IJL could establish the viability of remaining
independent.
o THE COMPLEMENTARY BUSINESSES AND CULTURES OF IJL AND WACHOVIA. The IJL
Board believes that it has found in Wachovia a partner with (1) common
fundamental values, including a pervasive commitment to client service,
(2) an existing business culture that reflects an understanding and
acceptance of the differences between consumer and commercial banking and
retail brokerage and capital markets activities, (3) a focus on key
markets in the Southeast that complements the existing network of IJL
offices, (4) a broad base of clients and services against which IJL can
leverage its existing lines of business and (5) a household name that
should strengthen IJL's reputation as a premier provider of retail
brokerage and capital markets services in the Southeast. Among other
benefits, the Merger will provide IJL's retail financial consultants
(including the financial consultants of its Cap Trust subsidiary) with
access to new products and services and provide IJL's capital markets
groups with the opportunity to leverage their equity and fixed income
primary and secondary distribution capabilities across Wachovia's large
customer base of middle market companies and to introduce Wachovia's
merchant banking and high-yield and other fixed income products to
existing IJL corporate and institutional clients.
o MERGER CONSIDERATION FOR IJL SHAREHOLDERS. The IJL Board carefully
evaluated the consideration to be received by IJL shareholders in the
Merger. The presentation made by Berkshire Capital to the IJL Board on
October 27, 1998, included, among other things, Berkshire Capital's
opinion that the Merger Consideration is fair to IJL shareholders from a
financial point of view. See " -- Opinion of IJL's Financial Advisor" and
Appendix D. The IJL Board also assessed the advantages of the fixed price
per share and the valuation period for the determination of the Merger
Consideration, the tax-free status of the share exchange and certain
investment considerations, including, without limitation, (1) the
liquidity of the trading market for Wachovia Common Stock, (2) the
favorable performance of Wachovia Common Stock versus the Standard &
Poor's Regional Index and a selected index of similar bank holding
companies over periods ranging from one month to 10 years, (3) the
superior price/earnings ratio and dividend yield of Wachovia Common Stock
versus IJL Common Stock, (4) Wachovia's record of exemplary risk
management, earnings stability and asset quality through a broad range of
market conditions and (5) Wachovia's franchise and market share in key
southeastern markets.
o MERGER AGREEMENT. IJL's management and legal advisors discussed with the
IJL Board the terms and conditions of the Merger Agreement, including the
amount and form of consideration, the parties' representations,
warranties, covenants and agreements, the conditions to the respective
obligations set forth in the Merger Agreement and
the operation and ramifications of the Stock Option Agreement and
Shareholder Agreements under certain circumstances.
o RETENTION OF KEY EMPLOYEES AND ENHANCED EMPLOYEE BENEFITS. The IJL Board
considered the terms and value of the key employee retention program
proposed by Wachovia, the terms and conditions of the employment
agreements entered into by eleven IJL executives, the benefit programs
offered to continuing employees, the limited amount of employee
dislocation and enhanced opportunities for employee advancement
anticipated as a result of the Merger and the fact that the existing IJL
management structure will be integrated with that of the securities and
capital
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markets activities presently being conducted by Wachovia, with James H.
Morgan and other executive officers of IJL in key leadership positions.
The above discussion of factors considered by the IJL Board is not
intended to be exhaustive but includes all material factors considered by the
IJL Board. In reaching the determination to approve the Merger Agreement and
recommend its adoption to the IJL shareholders, the IJL Board did not assign
any relative or specific weights to the various factors considered by it, and
individual members of the IJL Board may have assigned differing weights to
different factors.
BASED ON THE FOREGOING, THE IJL BOARD BELIEVES THAT THE MERGER IS IN THE
BEST INTERESTS OF IJL AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE
IJL SHAREHOLDERS VOTE "FOR" ADOPTION OF THE MERGER AGREEMENT.
OPINION OF IJL FINANCIAL ADVISOR
GENERAL. IJL retained Berkshire Capital to act as its financial advisor in
connection with the Merger and to render an opinion to the IJL Board as to the
fairness of the Merger Consideration, from a financial point of view, to the
holders of IJL Common Stock. Berkshire Capital is a nationally recognized
investment banking firm regularly engaged in the valuation of financial
services businesses and their securities in connection with mergers and
acquisitions, competitive biddings and valuations for estate, corporate and
other purposes, and acting as financial advisor in connection with other forms
of strategic transactions. The IJL Board selected Berkshire Capital to serve as
its financial advisor in connection with the Merger on the basis of such
expertise of the firm.
The full text of Berkshire Capital's written opinion, which sets forth
certain assumptions made, matters considered and limitations on review
undertaken is attached as Appendix D to this Proxy Statement/Prospectus, is
incorporated herein by reference and should be read in its entirety in
connection with this Proxy Statement/Prospectus. The summary of the opinion of
Berkshire Capital set forth in this Proxy Statement/Prospectus is qualified in
its entirety by reference to the opinion. Berkshire Capital's opinion is
directed only to the fairness of the Merger Consideration, from a financial
point of view, to the holders of IJL Common Stock. Berkshire Capital's opinion
was provided to the IJL Board to assist it in connection with its consideration
of the Merger and does not constitute a recommendation to any shareholder of
IJL as to how such shareholder should vote regarding adoption of the Merger
Agreement.
In arriving at its opinion, Berkshire Capital reviewed certain publicly
available business and financial information relating to IJL and Wachovia and
certain other information provided to it, including the following: (1) IJL's
Annual Reports to Shareholders, Annual Reports on Form 10-K and related
financial information for the three years ended September 30, 1997; (2) IJL's
Quarterly Reports on Form 10-Q for the quarterly periods ended December 31,
1997, March 31, 1998 and June 30, 1998 and press release announcing earnings
for the quarterly period and fiscal year ended September 30, 1998; (3)
Wachovia's Annual Reports to Shareholders, Annual Reports on Form 10-K and
related financial information for the three years ended December 31, 1997; (4)
Wachovia's Quarterly Reports on Form 10-Q and related financial information for
the quarterly periods ended March 31, 1998 and June 30, 1998 and press release
announcing earnings for the quarterly period ended September 30, 1998; (5)
certain publicly available information with respect to historical market prices
and trading activities for IJL Common Stock, Wachovia Common Stock and for
certain publicly traded financial institutions which Berkshire Capital deemed
relevant; (6) certain publicly available information with respect to securities
firms and the financial terms of certain other mergers and acquisitions which
Berkshire Capital deemed relevant; (7) the Merger Agreement; (8) other
financial information concerning the businesses and operations of IJL,
including certain audited financial information and certain financial analyses
and forecasts for IJL prepared by senior management; and (9) such financial
studies, analyses, inquiries and other matters as Berkshire Capital deemed
necessary. In addition, Berkshire Capital discussed the business and prospects
of IJL and Wachovia with members of senior management of each company.
In connection with its review, Berkshire Capital relied upon and assumed
the accuracy and completeness of all of the foregoing information provided to
it or publicly available, including the representations and warranties of IJL
and Wachovia included in the Merger Agreement, and Berkshire Capital has not
assumed any responsibility for independent verification of such information.
Berkshire Capital relied upon the management of IJL as to the reasonableness
and achievability of its financial and operational forecasts and projections,
and the assumptions and bases therefor, provided to Berkshire Capital, and
assumed that such forecasts and projections reflect the best currently
available estimates and judgments of such management and that such forecasts
and projections will be realized in the amounts and in the time periods
currently estimated by such management. Berkshire Capital also assumed, without
independent verification, that the aggregate reserves for loan losses,
litigation and other contingencies for IJL and Wachovia are adequate to cover
such
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losses. Berkshire Capital did not review any individual credit files of
Wachovia or make an independent evaluation or appraisal of the assets or
liabilities of IJL or Wachovia.
In connection with rendering its opinion, Berkshire Capital performed a
variety of financial analyses. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
partial analysis or summary description. Moreover, the evaluation of the
fairness of the Merger Consideration, from a financial point of view, to
holders of IJL Common Stock was to some extent a subjective one based on the
experience and judgment of Berkshire Capital and not merely the result of
mathematical analysis of financial data. Accordingly, notwithstanding the
separate factors summarized below, Berkshire Capital believes that its analyses
must be considered as a whole and that selecting portions of its analyses and
of the factors considered by it, without considering all analyses and factors,
could create an incomplete view of the evaluation process underlying its
opinion. The ranges of valuations resulting from any particular analysis
described below should not be taken to be Berkshire Capital's view of the
actual value of IJL or Wachovia.
In performing its analyses, Berkshire Capital made numerous assumptions
with respect to industry performance, business and economic conditions and
other matters, many of which are beyond the control of IJL or Wachovia. The
analyses performed by Berkshire Capital are not necessarily indicative of
actual values or future results, which may be significantly more or less
favorable than that suggested by such analyses. Additionally, analyses relating
to the values of businesses do not purport to be appraisals or to reflect the
prices at which businesses actually may be sold. In rendering its opinion,
Berkshire Capital assumed that, in the course of obtaining the necessary
regulatory approvals for the Merger, no conditions will be imposed that will
have a material adverse effect on the contemplated benefits of the Merger, on a
pro forma basis, to Wachovia.
Berkshire Capital's opinion is just one of the many factors taken into
consideration by the IJL Board in determining to approve the Merger Agreement.
Berkshire Capital's opinion does not address the relative merits of the Merger
as compared to any alternative business strategies that might exist for IJL,
nor does it address the effect of any other business combination in which IJL
might engage.
The following is a summary of the analyses performed by Berkshire Capital
in connection with its opinion expressed to the IJL Board on October 27, 1998.
Berkshire Capital employed two different methodologies to evaluate the fairness
of the Merger Consideration, from a financial point of view, to the holders of
IJL Common Stock. The methodologies were (1) comparison to publicly traded
securities firms and (2) comparable acquisitions of securities firms. The
following three main sections provide additional detail regarding the publicly
traded securities firms, comparable acquisition transactions and additional
analysis utilized by Berkshire Capital in preparing its opinion.
COMPARISON OF PUBLICLY TRADED SECURITIES FIRMS. Berkshire Capital compared
the financial performance of IJL to that of a certain group of securities firms
(the "Group") by comparing the total revenues, pre-tax income, net income and
book value of the Group's members to their respective stock prices. This Group
included A.G. Edwards, Inc.; Legg Mason, Inc.; Raymond James Financial, Inc.;
EVEREN Capital Corporation; Morgan Keegan, Inc.; Dain Rauscher Corporation;
Freedom Securities Corporation; and The Advest Group, Inc.
Berkshire Capital compared selected financial and market multiples and
ratios using financial data for the latest twelve months ended September 30,
1998 and June 30, 1998 for IJL and the Group, respectively, and market data as
of October 26, 1998 for the Group. This analysis showed: (1) the Group had
median and low-high range multiples of price to latest twelve months revenues
of 0.95x and 0.54x-1.52x , respectively, compared to 0.82x in the proposed
Merger; (2) the Group had median and low-high range multiples of price to
latest twelve months pre-tax earnings of 7.6x and 5.0x-10.0x , respectively,
compared to 9.9x in the proposed Merger; (3) the Group had median and low-high
multiples of price to latest twelve months net income of 12.3x and 9.1x-17.7x,
respectively, compared to 15.6x in the proposed Merger; and (4) the Group had
median and low-high range multiples of price to book value of 1.98x and
1.16x-2.71x, respectively, compared to 2.22x in the proposed Merger.
In addition to analyzing market price related multiples, Berkshire Capital
compared certain financial statistics to analyze the operating performance of
IJL and the Group using financial data for the latest twelve months ended
September 30, 1998 and June 30, 1998, respectively. The analysis showed: (1)
the Group had a median return on average equity ratio of 17.5% compared to
14.9% for IJL; and (2) the Group had a median latest twelve months pre-tax
income to total revenue ratio of 12.1% compared to 8.3% for IJL.
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COMPARABLE ACQUISITIONS. Berkshire Capital performed an analysis of
consideration paid in ten acquisitions of securities firms announced in 1997
and 1998 (the "Selected Transactions"). The consideration paid as a multiple of
total revenues, net income, tangible book value, book value and premium to
market price in the Selected Transactions was compared to the multiples and
premiums implied by the consideration offered by Wachovia in the Merger. The
Selected Transactions included the following transactions: Van Kasper &
Company/First Security Corporation; Hilliard-Lyons, Inc./PNC Bank Corp.;
Scott & Stringfellow Financial, Inc./BB&T Corporation; McDonald & Company
Investments, Inc./KeyCorp.; Ohio Company/Fifth Third Bancorp.; Wheat First
Securities/First Union; Piper Jaffray Companies, Inc./U.S. Bancorp; Roney & Co./
First Chicago NBD Corp.; Oppenheimer Holdings, Inc./CIBC Wood Gundy Securities
Corp.; and Alex. Brown Incorporated/Bankers Trust Corporation.
Berkshire Capital compared the Merger Consideration as a multiple of IJL's
(1) latest twelve months revenues; (2) latest twelve months net income; (3)
tangible book value; and (4) book value, to the median and low-high range
multiples for the Selected Transactions. This analysis showed that (1) the
Selected Transactions had median and low-high range multiples of consideration
to latest twelve months revenues of 1.24x and 0.45x-1.96x, respectively,
compared to 0.82x for the proposed Merger; (2) the Selected Transactions had
median and low-high range multiples of consideration to latest twelve months
net income of 16.8x and 7.9x-22.7x, respectively, compared to 15.6x in the
proposed Merger; (3) the Selected Transactions had median and low-high range
multiples of consideration to tangible book value of 2.73x and 1.02x-4.28x,
respectively, compared to 2.52x in the proposed Merger; and (4) the Selected
Transactions had median and low-high range multiples of consideration to book
value of 2.73x and 1.02x-4.28x, respectively, compared to 2.22x in the proposed
Merger. It was also noted that one transaction, because of specific
circumstances, was by a large margin above the range of consideration to latest
twelve months net income, tangible book value and book value and, as such, was
excluded from the multiples set forth above.
Berkshire Capital also compared the Merger Consideration as a premium to
IJL's market price to the relevant market premiums in those Selected
Transactions in which the seller was a publicly traded company. The average
closing price for the 30-day period ended on the last day prior to announcement
date was utilized as the market price for IJL and the publicly traded sellers
among the Selected Transactions. The Selected Transactions had median and
low-high range of premium to market price of 26% and 17%-29%, respectively,
compared to 19% for the proposed Merger.
No company or transaction used as a comparison in the above analyses is
identical to IJL, Wachovia or the Merger. Accordingly, an analysis of the
results of the foregoing necessarily involves complex considerations and
judgments concerning differences in prevailing market conditions at the time of
the transaction, financial and operating characteristics of the companies and
other factors that could affect the public trading and/or transaction value of
the companies used for comparison in the above analyses.
ADDITIONAL ANALYSIS. Since IJL shareholders will exchange their IJL Common
Stock for shares of Wachovia Common Stock, Berkshire Capital also reviewed
certain historical information relating to Wachovia Common Stock compared to a
relevant peer group, as well as to the acquirors in the Selected Transactions.
This review included a total return analysis and a comparison of trading
multiple to net income. Lastly, Berkshire Capital reviewed the impact of the
Merger on the amount of dividends an IJL shareholder would receive on a
post-Merger basis.
The total return analysis compared Wachovia's results to the S&P Regional
Bank Index and a selected sub-index of nine banks within the S&P Regional Bank
Index ("Sub-Index") that most closely compare to Wachovia in terms of size and
business mix for the one-month, three-month, six-month, one-year, two-year,
five-year and, in the case of the Sub-Index only as the S&P Regional Index was
not available, ten-year periods ended September 30, 1998. The analysis showed
that, on a total return basis, Wachovia's stock outperformed the S&P Regional
Index and the Sub-Index in all periods reviewed except for the five years ended
September 30, 1998.
The analysis of trading multiple to net income compared the relationship
of the price to net income ratio for Wachovia and IJL to that relationship for
those Selected Transactions in which both the buyer and seller were publicly
traded. Using the average closing price for the 30-day period ended on the last
day prior to the announcement date and the latest twelve months net income,
Wachovia and IJL had price to net income multiples of 19.6x and 12.5x,
respectively. This is a buyer to seller ratio of 1.57, compared to a ratio of
1.04 for the four Selected Transactions in which both buyer and seller were
publicly traded.
Additionally, Berkshire Capital compared the cash dividend that IJL
shareholders currently receive to the amount which would be received as
Wachovia shareholders. As of the announcement date, IJL paid a quarterly
dividend of $0.06, or $0.24 on an annual basis. This compares to Wachovia's
quarterly dividend of $0.49, or $1.96 on an annual basis. Adjusting for the
exchange ratio based on a $32.00 price per share of IJL Common Stock and
Wachovia's average closing
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price for the 30-day period ended on the last day prior to the announcement
date, IJL shareholders would receive a post-Merger dividend equivalent to $0.72
on an annual basis for each share of IJL Common Stock exchanged in the Merger,
as compared to the current $0.24.
Berkshire Capital's opinion is dated October 27, 1998, and is based solely
upon the information available to Berkshire Capital and the economic, market
and other circumstances as they existed as of such date. Events occurring after
that date could materially affect the assumptions and conclusions contained in
Berkshire Capital's opinion. Berkshire Capital has not undertaken to reaffirm
or revise its opinion or otherwise comment on any events occurring after that
date.
IJL and Berkshire Capital have entered into a letter agreement relating to
the services to be provided by Berkshire Capital in connection with the Merger.
IJL has agreed to pay Berkshire Capital fees as follows: (1) a cash fee of
$50,000, which was paid during the course of Berkshire Capital's assignment;
(2) an additional cash fee of $150,000 payable upon execution of the Merger
Agreement; and (3) an additional cash fee equal to $1,850,000 payable upon
completion of the Merger. IJL also has agreed to reimburse Berkshire Capital
for its reasonable and necessary out-of-pocket expenses and to indemnify
Berkshire Capital against certain liabilities, including liabilities under the
federal securities laws.
EFFECTIVE TIME
The Merger will be consummated if the Merger Agreement is approved by the
IJL shareholders, Wachovia and IJL obtain all required consents and approvals
and the other conditions to the obligations of the parties to consummate the
Merger are either satisfied or waived (as permitted). The Merger will become
effective on the date (the "Effective Date") and at the time (the "Effective
Time") that a certificate of merger reflecting the Merger is filed with the
Secretary of State of Delaware and articles of merger reflecting the Merger are
filed with the Secretary of State of North Carolina, or such later date or time
as indicated in such certificate and articles. Wachovia and IJL have generally
agreed to cause the Effective Date to occur on the fifth business day after the
last of the conditions to the consummation of the Merger have been satisfied or
waived (or if Wachovia elects, on the last business day of the month in which
such day occurs, or if such day occurs on one of the last five business days of
such month, on the last business day of the next month). Wachovia and IJL each
has the right, acting unilaterally, to terminate the Merger Agreement if the
Merger is not completed by June 30, 1999. See "The Merger -- Amendment, Waiver
and Termination."
DISTRIBUTION OF WACHOVIA CERTIFICATES
Promptly after the Effective Time, Wachovia will send transmittal
materials to each IJL shareholder for use in exchanging his or her certificates
representing shares of IJL Common Stock for shares of Wachovia Common Stock.
IJL SHAREHOLDERS SHOULD NOT SURRENDER THEIR CERTIFICATES FOR EXCHANGE UNTIL
THEY RECEIVE THE LETTER OF TRANSMITTAL AND INSTRUCTIONS. An exchange agent to
be selected will deliver certificates for Wachovia Common Stock (and/or a check
for any fractional share interests or dividends or distributions) once it
receives the certificates representing a holder's shares of IJL Common Stock.
No party will be liable to any shareholder for any property delivered in good
faith to a public official pursuant to any applicable abandoned property,
escheat or similar law.
Wachovia will not pay any dividends or other distributions with respect to
Wachovia Common Stock with a record date occurring after the Effective Time to
any holder who has not exchanged his or her certificates for Wachovia Common
Stock and no such shares shall be eligible to vote until the holder of such
certificates has exchanged his or her certificates. After exchanging his or her
certificates, all paid dividends and other distributions and, if applicable, a
check for the amount to be paid for any fractional shares will be delivered to
such shareholder, in each case without interest.
After the Effective Time, there will be no transfers of shares of IJL
Common Stock on IJL's stock transfer books. If certificates representing shares
of IJL Common Stock are presented for transfer after the Effective Time, they
will be canceled and exchanged for certificates representing the shares of
Wachovia Common Stock and a check for the amount to be paid for fractional
shares, if any.
FRACTIONAL SHARES
A holder of shares of IJL Common Stock who would otherwise have been
entitled to receive a fraction of a share of Wachovia Common Stock, will
receive, instead, cash (without interest) in an amount determined by
multiplying such fraction by the last sale price of Wachovia Common Stock, as
reported by the NYSE Composite Transactions Reporting System, on the trading
day immediately preceding the Effective Date. Holders will not be entitled to
dividends, voting rights or any other rights as a shareholder with respect to
any fractional shares.
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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 IJL 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 consequences of the
Merger, and may not address the U.S. federal income tax considerations
applicable to certain classes of shareholders, including:
o financial institutions;
o insurance companies;
o tax-exempt organizations;
o broker-dealers;
o traders in securities that elect to mark to market;
o persons who hold IJL Common Stock as part of a straddle or conversion
transaction;
o 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 IJL Common Stock;
o persons who acquired or acquire shares of IJL Common Stock pursuant to
the exercise of employee stock options or otherwise as compensation; and
o persons who do not hold their shares of IJL Common Stock as a capital
asset.
In connection with the filing of this Registration Statement, Wachovia
will receive 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"). IJL
will also receive an opinion of its counsel, Moore & Van Allen, PLLC, to the
effect that if consummated, (1) the Merger will constitute a reorganization
within the meaning of Section 368 of the Code and (2) no gain or loss will be
recognized by IJL shareholders who receive shares of Wachovia Common Stock in
exchange for shares of IJL Common Stock, except with respect to cash received
in lieu of fractional share interests. Such opinions will be dated as of the
date hereof and will be based upon facts, representations and assumptions set
forth therein. In rendering such opinions, counsel may require and rely upon
representations contained in letters to be received from IJL, Wachovia and
others. Neither of these tax opinions are binding on the Internal Revenue
Service, and neither Wachovia nor IJL intend to request any ruling from the
Internal Revenue Service as to the U.S. federal income tax consequences of the
Merger.
In accordance with the tax opinions discussed above regarding the
treatment of the Merger as a reorganization within the meaning of Section 368
of the Code, the material U.S. federal income tax consequences of the Merger to
IJL shareholders who exchange all of their shares of IJL Common Stock for
shares of Wachovia Common Stock pursuant to the Merger will be as follows:
o no gain or loss will be recognized by an IJL shareholder, except with
respect to an IJL shareholder who receives cash in lieu of a fractional
share interest in Wachovia Common Stock;
o the aggregate adjusted tax basis of shares of Wachovia Common Stock
received by an IJL shareholder will be the same as the aggregate adjusted
tax basis of the shares of IJL Common Stock exchanged therefor (reduced by
any amount allocable to a fractional share interest for which cash is
received); and
o the holding period of shares of Wachovia Common Stock received by an IJL
shareholder will include the holding period of the IJL Common Stock
exchanged therefor.
Cash received by an IJL shareholder in lieu of a fractional share interest
in Wachovia Common Stock will be treated as received in redemption of the
fractional share interest. An IJL shareholder 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 shareholder's adjusted tax basis in
the fractional share interest. This capital gain or loss would be long-term
capital gain or loss if the IJL shareholder's holding period in the shares of
IJL Common Stock 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.
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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).
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Wachovia will be the surviving corporation resulting from the Merger. It
will continue to be governed by the laws of the State of North Carolina and
will operate in accordance with its articles of incorporation and bylaws as in
effect immediately prior to the Effective Time.
The directors and officers of Wachovia before the Merger will continue to
be the directors and officers of Wachovia after the Merger, until such time as
their successors are duly elected and qualified.
POST-MERGER COMPENSATION AND BENEFITS
The Merger Agreement provides that after the Merger Wachovia will provide
employees of IJL and its subsidiaries who become employees of Wachovia and any
of its subsidiaries (the "Retained Employees") with employee benefits which are
no less favorable in the aggregate than those provided to similarly situated
employees of Wachovia. The Merger Agreement provides that any Retained
Employees generally will receive credit for their service with IJL or any of
its subsidiaries or predecessors prior to the Effective Time, to the extent IJL
credited such service, for the purpose of determining eligibility to
participate and vesting, but not for the purpose of benefit accrual, under
Wachovia's employee benefit plans. The Merger Agreement provides that Wachovia
generally will cause any and all pre-existing condition limitations and waiting
periods under group health plans to be waived with respect to the Retained
Employees and their eligible dependents. The Merger Agreement provides that
after the Merger Wachovia generally will honor IJL's compensation and benefit
plans in accordance with their terms.
TREATMENT OF OUTSTANDING OPTIONS AND STOCK PURCHASE RIGHTS
At the Effective Time, each outstanding option to purchase shares of IJL
Common Stock (each, an "IJL Stock Option") under the IJL Amended and Restated
1985 Incentive Stock Option Plan, the IJL 1985 Nonqualified Stock Option Plan
and the IJL Restated Stock Award Plan (collectively, the "IJL Stock Plans"),
whether vested or unvested, will be converted into an option (a "Replacement
Option") to acquire, on the same terms and conditions as were applicable under
such IJL Stock Option, the number of shares of Wachovia Common Stock equal to
(1) the number of shares of IJL Common Stock subject to the IJL Stock Option,
multiplied by (2) the Exchange Ratio, at an exercise price per share equal to
(a) the aggregate exercise price for the shares of IJL Common Stock which were
purchasable pursuant to such IJL Stock Option divided by (b) the Exchange
Ratio.
At the Effective Time, each outstanding share of restricted IJL Common
Stock ("Restricted IJL Stock"), each right to purchase a share of Restricted
IJL Stock, each outstanding salary deferral previously made to purchase a share
of Restricted IJL Stock or IJL Common Stock, and each deferred stock bonus
payable in Restricted IJL Stock or IJL Common Stock, will be converted, on the
same terms and conditions as were applicable to such rights in and for
Restricted IJL Stock or IJL Common Stock, into such number of shares of
restricted Wachovia Common Stock or Wachovia Common Stock, as the case may be,
that results from multiplying the number of such shares of Restricted IJL Stock
or IJL Common Stock by the Exchange Ratio (the "Replacement Shares"). As of the
Effective Time, however, all rights to purchase Restricted IJL Stock pursuant
to IJL's 15 percent discount purchase plan will terminate, and any outstanding
contributions under the plan will be refunded to its participants.
RETENTION PROGRAM
The Merger Agreement provides that, in connection with the Merger, a
retention program (the "Retention Program") will be established, consisting of
approximately $21 million in restricted units of Wachovia Common Stock, which
will be awarded to certain designated employees in the amounts determined after
consultation with IJL management. Awards made under the Retention Program will
be governed by the terms of the Wachovia Corporation Stock Plan. None of the
executives of IJL who have entered into employment agreements with Wachovia
will be eligible to participate in the Retention Program. Generally, the
restricted stock units vest and become payable in the form of Wachovia Common
Stock over a three-year period, subject to accelerated vesting upon certain
terminations of employment.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of IJL's management and the IJL Board have interests in
the Merger in addition to their interests as IJL shareholders. The IJL Board
was aware of these interests and considered them, among other matters, in
approving the Merger Agreement.
EMPLOYMENT AGREEMENTS. In order to induce Wachovia to enter into the
Merger Agreement, 11 executives of IJL, three of whom are also directors of
IJL, entered into employment agreements with Wachovia that will become
effective on the Effective Date, including the following seven executives (the
"Named Executives"): James H. Morgan, Grady G. Thomas, Jr.; Edward C. Ruff;
Lewis F. Semones, Jr.; Edwin A. Dalrymple, Jr.; Douglas R. Aldridge; and Harvey
D. Harrelson. The employment agreements are substantially similar and are
described collectively, except to the extent that their terms materially
differ. The agreements with Messrs. Morgan, Thomas, Dalyrymple and Aldridge
have a three-year term, the agreements with Messrs. Semones and Harrelson have
a two-year term and the agreement with Mr. Ruff has a one-year term. The
agreements provide that each executive will render services in a senior
management or executive capacity with Wachovia that will be consistent with his
background and training.
The employment agreements provide for annual compensation ("Minimum Annual
Compensation") which, in most cases, consists of a minimum annual base salary
and a guaranteed minimum annual bonus. The Minimum Annual Compensation, which
was established by Wachovia, is, in most cases, less than or substantially
equivalent to the combined salary and bonus each executive received from IJL
for the fiscal year ended September 30, 1998. The Minimum Annual Compensation
for each Named Executive is as follows: Mr. Morgan -- $1,340,000; Mr. Thomas --
$1,045,000; Mr. Ruff -- $910,000; Mr. Semones -- $695,000; Mr. Dalrymple --
$655,000; Mr. Aldridge -- $650,000; and Mr. Harrelson -- $620,000. In
addition, the employment agreements provide, in most cases, for grants on the
Effective Date of restricted units of Wachovia Common Stock and nonqualified
options to purchase Wachovia Common Stock. The restricted stock units for the
Named Executives (excluding Mr. Ruff), which will vest three years after the
Effective Date, are as follows: Mr. Morgan -- 3,500 shares; Messrs. Thomas,
Semones, Dalrymple and Aldridge -- 3,000 shares; and Mr. Harrelson -- 2,500
shares. The stock options to be granted to these executives, which will have an
exercise price equal to the fair market value of Wachovia Common Stock on the
Effective Date and will vest ratably over a five-year period, are
as follows: Mr. Morgan -- 15,000 shares; Mr. Thomas -- 11,250 shares; Messrs,
Semones, Dalrymple and Aldridge -- 8,000 shares; and Mr. Harrelson -- 7,700
shares. 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 Wachovia employees. Because Mr. Ruff
agreed to accept a one year agreement and will not receive any restricted stock
or option grants, his agreement provides that he will receive a non-qualified
annual retirement benefit of $45,000 and, upon his retirement, will be provided
coverage under Wachovia's retiree medical plan.
The employment agreements contain covenants which, upon the termination of
the executive for "cause" (as defined in the agreement) or by the executive for
any reason, restrict the executive for specified time periods from soliciting
Wachovia clients or employees or competing with Wachovia in the securities
brokerage, investment management or investment advisory services business in
North Carolina, South Carolina, Georgia, Virginia and Florida. The covenant not
to compete will limit the employment opportunities of the executive in the
securities industry in these states if his employment is terminated under
circumstances that trigger the application of this covenant.
If the employment of an executive is terminated during the term of the
agreement by Wachovia other than for "cause" or by the executive for certain
specified reasons, the executive will be entitled to receive cash compensation
and certain benefits from the date of such termination through the expiration
of the agreement term (the "Compensation Period"). The cash compensation, which
is payable monthly during the Compensation Period, equals 1/12th of the sum of
(1) the highest annual rate of salary for the 12 months prior to such
termination, (2) the greater of the average of the annual amounts, if any,
awarded to the executive under an annual bonus plan of Wachovia or IJL for the
three fiscal years preceding the year of such termination or the guaranteed
annual bonus provided for in the employment agreement and (3) the average of
the annual contributions made by Wachovia to its qualified retirement and
profit-sharing plans on the executive's behalf for the three calendar year
preceding the year of such termination. During the Compensation Period, the
executive and his dependents will continue to be provided with health and
group-term life benefits, but Wachovia's obligation to provide these benefits
will terminate if the executive becomes eligible to participate in the health
and welfare benefit plans of another employer. Immediately upon such
termination of the executive's employment, all of his options to acquire shares
of Wachovia Common Stock become fully vested and exercisable and certain
restricted stock awards will be deemed to be earned in full. 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 thereunder and the income
and excise taxes levied on any such gross-up payment.
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LTIP RESTRICTED SHARES. In 1995, the IJL Board established the IJL
Long-Term Incentive Plan (the "LTIP") which provided for future awards among a
group of senior executives of IJL Common Stock ranging from 100,000 to 650,000
shares based on the aggregate earnings per share (as defined in the LTIP)
achieved by IJL for the three fiscal years beginning October 1, 1995 and ending
September 30, 1998. The purpose of the LTIP was to recognize the contribution
of the executives to IJL's substantial improvement in shareholder's equity and
to align their interests with those of shareholders by allowing them to earn
increased amounts of share ownership. Under the LTIP, aggregate earnings per
share (as defined) of $3.51 were required to award the minimum number of shares
and aggregate earnings per share of $6.30 were required to award the maximum
number of shares. IJL achieved aggregate earnings per share (as defined) in
excess of $6.30 per share and, as a result, the Plans and Compensation
Committee of the IJL Board awarded 650,000 shares under the LTIP.
A substantial portion of each LTIP award was in the form of restricted
shares which vested only if the executive was still employed by IJL three years
thereafter. To protect the executives from involuntary forfeiture of those
shares in the event of a business combination that resulted in the loss of
their jobs before the three-year restriction period expired, the LTIP provided
that upon a "change of control" of IJL (as defined in the LTIP) the three-year
restriction period would lapse. Under the terms of the LTIP, approval of the
Merger Agreement by the IJL shareholders will constitute a "change of control"
of IJL. Accordingly, all restricted shares of IJL Common Stock awarded under
the LTIP will vest and convert to unrestricted shares if the Merger Agreement
is approved by the IJL shareholders at the Special Meeting. The restricted
shares of IJL Common Stock awarded under the LTIP to each of the Named
Executives was as follows: Mr. Morgan -- 96,000; Mr. Ruff -- 45,000; Mr.
Semones -- 43,200; Mr. Harrelson -- 35,400; Mr. Dalrymple -- 36,000; Mr. Thomas
- -- 31,200; and Mr. Aldridge -- 28,800. Pursuant to IJL's Voluntary Deferred
Stock Bonus Plan (the "Deferred Plan"), all of these executives, except Mr.
Thomas, deferred the receipt of their restricted shares for three years. On the
Effective Date, the deferred shares will convert to Wachovia Common Stock at
the Exchange Ratio, but will not be issued until the expiration of the deferral
period. Accordingly, except upon the occurrence of certain defined events,
including death, disability, termination of employment or hardship, the
executives will not receive the deferred shares until September 30, 2001.
INDEMNIFICATION AND INSURANCE. The Merger Agreement provides that for a
period of six years after the Merger, Wachovia will indemnify the present
directors and officers of IJL against liabilities incurred in connection with
any claim or proceeding arising from facts or events occurring at or prior to
the Effective Time to the fullest extent that IJL is permitted to indemnify its
directors and officers under the DGCL and IJL's certificate of incorporation
and bylaws. The Merger Agreement also provides that for three years after the
Merger Wachovia will, subject to certain limitations, provide directors' and
officers' liability insurance meeting certain requirements that serves to
reimburse the officers and directors of IJL with respect to claims arising from
facts or events which occurred before the Effective Time.
CONDITIONS TO COMPLETION
The obligations of IJL and Wachovia to consummate the Merger are subject
to the satisfaction or written waiver of the following conditions:
o the Merger Agreement is approved by the shareholders of IJL;
o the required regulatory approvals described below under "Regulatory
Approvals" are received, generally without any conditions, restrictions or
requirements which the Wachovia Board reasonably determines would,
following the Effective Time, have a material adverse effect on Wachovia
or reduce the benefits of the Merger to such a degree that Wachovia would
not have entered into the Merger Agreement had such conditions,
restrictions or requirements been known as of the date of the Merger
Agreement;
o all third party consents are obtained, generally without any conditions,
restrictions or requirements which the Wachovia Board reasonably
determines would, following the Effective Time, have a material adverse
effect on Wachovia or reduce the benefits of the Merger to such a degree
that Wachovia would not have entered into the Merger Agreement had such
conditions, restrictions or requirements been known as of the date of the
Merger Agreement;
o no court or regulatory authority has taken any action prohibiting the
consummation of Merger;
o the Registration Statement of which this Proxy Statement/Prospectus is a
part declared effective by the Commission and is not be subject to a stop
order or any threatened stop order;
o all permits or authorizations necessary to consummate the Merger are
received;
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o the shares of Wachovia Common Stock issuable in the Merger are approved
for listing on the NYSE;
o the representations and warranties of each party are true and correct
other than any inaccuracies which would not be reasonably likely,
individually or in the aggregate, to have a material adverse effect on the
financial condition, results of operations, businesses or prospects of the
party by whom such representations and warranties were made, and each
party has performed in all material respects all of the obligations
required to be performed by it pursuant to the Merger Agreement, and shall
have delivered certificates confirming satisfaction of the foregoing
requirements;
o IJL receives an opinion of Moore & Van Allen, PLLC, as to certain tax
matters;
o Wachovia receives an opinion of Sullivan & Cromwell, as to certain tax
matters; and
o the employment agreements referred to above are in full force and effect
(other than 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 Proxy Statement/Prospectus, the parties 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 BHC Act. The BHC Act requires the
Federal Reserve Board, when considering a transaction such as the Merger, to
consider whether the performance of Wachovia's and IJL'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 Wachovia and IJL and the effect of the
proposed transaction on those resources.
The BHC Act also prohibits the Federal Reserve Board from approving a
merger if it would result in a monopoly or be in furtherance of any combination
or conspiracy to monopolize or to attempt to monopolize a given business
activity in any part of the United States, or if its effect in any section of
the country would be substantially to lessen competition or to tend to create a
monopoly, or if it would in any other manner result in a restraint of trade,
unless the Federal Reserve Board finds that the anticompetitive effects of the
merger are clearly outweighed in the public interest by the probable effect of
the transaction 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 that are controlled by IJL.
These agencies include certain state securities authorities. Approvals or
notices are also required from or to the NYSE, the Commodity Futures Trading
Commission, the NASD, the Securities Investor Protection Corporation (the
"SIPC") and other self-regulatory organizations and may be required from or to
certain other regulatory agencies.
STATUS OF REGULATORY APPROVALS AND OTHER INFORMATION. Wachovia and IJL
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 governmental authority. The Merger Agreement provides that the obligation of
each of Wachovia and IJL to consummate the Merger is conditioned upon, among
other things, (1) the receipt of all requisite regulatory approvals, including
the approvals of the Federal Reserve Board and, to the extent necessary, other
authorities, (2) the termination or expiration of all statutory or regulatory
waiting periods in respect thereof and (3) no such approvals containing
conditions, restrictions or requirements which the Wachovia Board reasonably
determines would, after the Effective Date, have a material adverse effect on
IJL or reduce the benefits of the Merger to such a degree that Wachovia would
not have entered into the Merger Agreement had such conditions, restrictions or
requirements been known as of the date of the Merger Agreement.
THE MERGER CANNOT PROCEED IN THE ABSENCE OF THE REQUISITE REGULATORY
APPROVALS. THERE CAN BE NO ASSURANCES THAT ALL SUCH REGULATORY APPROVALS WILL
BE OBTAINED OR AS TO THE DATES OF SUCH APPROVALS. THERE CAN ALSO BE NO
ASSURANCE THAT SUCH APPROVALS WILL NOT CONTAIN A CONDITION, RESTRICTION OR
REQUIREMENT THAT CAUSES SUCH APPROVALS TO FAIL TO SATISFY THE CONDITIONS SET
FORTH IN THE MERGER AGREEMENT.
See " -- Effective Time," " -- Conditions to Completion" and " --
Amendment, Waiver and Termination."
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AMENDMENT, WAIVER AND TERMINATION
Prior to or at the Effective Time, any provision of the Merger Agreement
may be waived by the party benefitted by such provision or may be amended or
modified, by written agreement between Wachovia and IJL, except that after the
Special Meeting the Merger Agreement may not be amended in violation of the
DGCL.
The Merger Agreement may be terminated, and the Merger abandoned, at any
time prior to the Effective Time by mutual consent of IJL and Wachovia. In
addition, the Merger Agreement may be terminated, and the Merger abandoned,
prior to the Effective Time by either Wachovia or IJL if:
o the other party breaches a representation, warranty, covenant or other
agreement contained in the Merger Agreement that has a material adverse
effect on the breaching party, which cannot be or has not been cured
within 30 days after giving written notice to the breaching party;
o the Merger is not completed by June 30, 1999;
o the approval of a governmental authority required for consummation of the
Merger and the other transactions contemplated by the Merger Agreement is
denied by final nonappealable action of such authority;
o any court or regulatory authority takes a final nonappealable action
prohibiting consummation of the Merger; or
o the IJL shareholders fail to approve the Merger Agreement at the Special
Meeting.
In addition, Wachovia may terminate the Merger Agreement if IJL's Board
withdraws or materially changes its recommendation to approve the Merger
Agreement.
CONDUCT OF BUSINESS PENDING THE MERGER
The following is a general summary of the agreements IJL and Wachovia have
regarding actions prior to the Merger. We urge you to read the Merger Agreement
(which is attached as Appendix A) for a fuller description of these agreements.
IJL. IJL has agreed that it will operate its business and the businesses
of its subsidiaries in the ordinary course through the Effective Time. In
addition, it has agreed not to engage in the activities listed below.
o Issue any additional shares of IJL Common Stock or any rights to acquire
IJL Common Stock except pursuant to already existing rights to acquire IJL
Common Stock or similar stock-based employee rights.
o Make any distributions with respect to IJL Common Stock (other than
quarterly cash dividends in an amount not more than $0.06 per share) or
change its capital structure.
o 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 or as required by law.
o 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.
o Sell, encumber or otherwise dispose of any material amount of its
properties except in the ordinary course of business.
o Acquire any material assets, business, deposits or properties of any
other entity except in the ordinary course of business.
o Amend the IJL Certificate of Incorporation, IJL by-laws or the
certificate of incorporation or by-laws (or similar governing documents)
of any of IJL's subsidiaries.
o Extend credit other than in the ordinary course of business.
o Make any change in its accounting principles, practices or methods, other
than as may be required by generally accepted accounting principles.
o Except in the ordinary course of business, enter into, terminate or
amend any material contract.
o Except in the ordinary course of business, settle any material claim or
proceeding.
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o Take any action which would materially interfere with the Merger
Agreement.
o Authorize or make any capital expenditures, other than in the ordinary
course of business in amounts not exceeding $5,000,000 in the aggregate.
o Except as required by law, change or fail to follow its interest rate and
other risk management policies, procedures or practices; or otherwise
materially increase its exposure to interest rate and other risk.
o Initiate any new business activity that would be impermissible for a
"bank holding company" under the BHCA.
o Borrow money other than in the ordinary course of business.
o Make or change any material tax related practice other than in the
ordinary course of business.
o Agree or commit to do any of the foregoing.
IJL has also agreed that it will not (and it will not ask anyone to)
initiate or solicit any inquiries or any offer relating to a merger,
consolidation or similar transaction involving IJL or its significant
subsidiary (this type of proposal is referred to in this document as an
"Acquisition Proposal"). In addition, except as legally required for the
discharge by the IJL Board of its fiduciary duties, IJL will not negotiate or
provide any confidential information or data to, or have any discussions with,
any person relating to an Acquisition Proposal, or otherwise facilitate an
Acquisition Proposal. IJL has agreed to promptly advise Wachovia following the
receipt by IJL of any Acquisition Proposal and to immediately advise Wachovia
of any developments relating to the Acquisition Proposal.
WACHOVIA. Wachovia has agreed that until the Effective Time, it will not:
o Make any extraordinary dividend.
o Take any action which would materially interfere with the Merger
Agreement.
o Agree or commit to do any of the foregoing.
EXPENSES AND FEES
Each party will be responsible for all expenses incurred by it in
connection with the negotiation and consummation of the transactions
contemplated by the Merger Agreement. Wachovia and IJL have agreed, however, to
share equally any fees, proxy solicitation expenses and printing expenses
payable in connection with this Proxy Statement/Prospectus.
ACCOUNTING TREATMENT
Wachovia expects to account for the Merger as a "purchase", as that term
is used under generally accepted accounting principles, for accounting and
financial reporting purposes. Under purchase accounting, the assets and
liabilities of IJL as of the Effective Time will be recorded at their
respective fair values and added to those of Wachovia. Any excess of purchase
price over the fair values is recognized as goodwill. Financial statements of
Wachovia issued after the Effective Time would reflect such values and would
not be restated retroactively to reflect the historical financial position or
results of operations of IJL.
STOCK EXCHANGE LISTING OF WACHOVIA COMMON STOCK
Wachovia has agreed to use its reasonable best efforts to list, prior to
the Effective Date, on the NYSE, subject to official notice of issuance, the
shares of Wachovia Common Stock to be issued to the holders of IJL Common Stock
in the Merger.
RESALES OF WACHOVIA COMMON STOCK
The shares of Wachovia Common Stock to be issued in the Merger will be
freely transferable under the Securities Act, except for shares issued to any
shareholder who may be deemed to be an "affiliate" (generally including,
without limitation, directors, certain executive officers, and beneficial
owners of 10% or more of any class of capital stock) of IJL for purposes of
Rule 145 under the Securities Act as of the date of the Special Meeting.
Affiliates may not sell their shares of Wachovia Common Stock acquired in the
Merger except pursuant to an effective registration statement under the
Securities Act or other applicable exemption from the registration requirements
of the Securities Act.
IJL has agreed in the Merger Agreement to use its reasonable best efforts
to cause each person who may be deemed to be an "affiliate" of IJL to execute
and deliver to Wachovia an agreement pursuant to which such person agreed,
among
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other things, not to offer to sell, transfer or otherwise dispose of any of the
shares of Wachovia Common Stock distributed to them pursuant to the Merger
except in compliance with Rule 145 under the Securities Act, or in a
transaction that, in the opinion of counsel reasonably satisfactory to Wachovia
is otherwise exempt from the registration requirements of the Securities Act,
or in an offering which is registered under the Securities Act. Wachovia may
place restrictive legends on certificates representing Wachovia Common Stock
issued to all persons who are deemed to be "affiliates" of IJL under Rule 145.
This Proxy Statement/Prospectus does not cover resales of Wachovia Common Stock
received by any person who may be deemed to be an affiliate of IJL.
STOCK OPTION AGREEMENT
As a condition and an inducement to Wachovia's entering into the Merger
Agreement, IJL entered into the Stock Option Agreement with Wachovia. The
following description of the Stock Option Agreement is qualified in its
entirety by reference to the text of the Stock Option Agreement. We urge you to
read the text of the agreement (which is attached hereto as Appendix B) for a
fuller description of the Stock Option Agreement.
Pursuant to the Stock Option Agreement, IJL granted Wachovia an Option to
purchase up to 1,289,382 shares of IJL Common Stock. Although the number of
shares Wachovia may purchase is subject to adjustment in certain cases
(described below), it will never exceed 19.9% of the number of shares of IJL
Common Stock outstanding immediately before exercise of the Option. The
exercise price of the Option is $30.5625 per share, subject to adjustment in
certain cases (such exercise price, as adjusted is referred to below as the
"Option Price").
The Option will become exercisable if both an "Initial Triggering Event"
and a "Subsequent Triggering Event" occur prior to the occurrence of an
"Exercise Termination Event," as these terms are defined below. The purchase of
any shares of IJL Common Stock pursuant to the Option is subject to compliance
with applicable law, including the receipt of necessary approvals under the
BHCA. If Wachovia were to exercise its right to acquire the full 19.9% of the
number of shares outstanding of IJL Common Stock subject to the Option,
Wachovia would hold approximately 16.6% of the outstanding shares of the IJL
Common Stock immediately after such exercise.
The Stock Option Agreement generally defines the term "Initial Triggering
Event" to mean any of the following events or transactions: (1) IJL or its
significant subsidiary, without Wachovia's prior written consent, enters into
an agreement to engage in an "Acquisition Transaction" (as defined below) with
a third party or the IJL Board recommends that the shareholders of IJL approve
or accept any Acquisition Transaction, other than the Merger; (2) a third party
acquires beneficial ownership or the right to acquire beneficial ownership of
20% or more of the outstanding shares of IJL Common Stock; (3) the shareholders
of IJL voted but failed to approve the Merger Agreement at the Special Meeting
or the Special Meeting has been canceled or otherwise not held in violation of
the Merger Agreement and prior to the shareholder vote or cancellation a third
party has announced an Acquisition Transaction; (4) the IJL Board withdraws or
adversely modifies its recommendation that the shareholders of IJL approve the
Merger Agreement, or IJL and any of its subsidiaries, without Wachovia's prior
written consent, authorizes, recommends or proposes an agreement to engage in
an Acquisition Transaction with a third party; or (5) a third party shall have
made a bona fide proposal to IJL or its shareholders to engage in an
Acquisition Transaction and such proposal shall have been publicly announced.
As used in the Stock Option Agreement, the term "Acquisition Transaction"
means: (1) a merger or consolidation or any similar transaction, involving IJL;
(2) a purchase, lease or other acquisition of all or substantially all of the
assets of IJL or any of its subsidiaries; or (3) a purchase or other
acquisition of securities representing 20% or more of the voting power of IJL's
outstanding capital stock.
The Stock Option Agreement generally defines the term "Subsequent
Triggering Event" to mean any of the following events or transactions: (1) the
acquisition by a third party of beneficial ownership of 30% or more of the then
outstanding IJL Common Stock; (2) IJL or any of its subsidiaries, without
Wachovia's prior written consent, enters into an agreement to engage in an
Acquisition Transaction with a third party or the IJL Board recommends that the
shareholders of IJL approve or accept any Acquisition Transaction, other than
the Merger; PROVIDED that for purposes of the definition of "Subsequent
Triggering Event," the percentage referred to in clause (2) of the definition
of "Acquisition Transaction" above shall be 30% rather than 20%; or (3) the
failure of a shareholder or shareholders holding in excess of 15% of IJL Common
Stock to comply with the terms of his, her or its Shareholder Agreement.
The Stock Option Agreement defines the term "Exercise Termination Event"
to mean any of: (1) the Effective Time; (2) termination of the Merger Agreement
in accordance with its terms, if it occurs prior to the occurrence of an
Initial Triggering Event. This would not include a termination by Wachovia if
IJL willfully breaches, and does not timely cure any breach of, a
representation, warranty, covenant or other agreement contained in the Merger
Agreement and the breach
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would be reasonably likely to result in a Material Adverse Effect (as defined
in the Merger Agreement); or (3) the passage of 12 months (subject to extension
in order to obtain required regulatory approvals) after termination of the
Merger Agreement if the termination follows the occurrence of an Initial
Triggering Event.
Notwithstanding anything to the contrary contained in the Stock Option
Agreement, the Option may not be exercised at any time when Wachovia is in
breach of any of its covenants or agreements contained in the Merger Agreement
if as a result of Wachovia's breach IJL would be entitled to terminate the
Merger Agreement. The Stock Option Agreement will automatically terminate upon
the termination of the Merger Agreement by IJL as a result of a breach by
Wachovia of its covenants or agreements contained therein.
If the Option becomes exercisable, it may be exercised in whole or in part
within three months following the applicable Subsequent Triggering Event.
Wachovia's right to exercise the Option and certain other rights under the
Stock Option Agreement are subject to an extension in order to obtain required
regulatory approvals and comply with applicable regulatory waiting periods and
to avoid liability under Section 16(b) of the Exchange Act. The Option Price
and the number of shares issuable under the Option are subject to adjustment in
the event of specified changes in the capital stock of IJL.
Upon the occurrence of a Subsequent Triggering Event that occurs prior to
an Exercise Termination Event, Wachovia will have certain registration rights
with respect to the shares of IJL Common Stock issued or issuable pursuant to
the Option.
The Stock Option Agreement also provides that at any time within 90 days
after a "Repurchase Event" (as defined below), upon request, IJL shall be
obligated to repurchase the Option and all or any part of the Option Shares.
The repurchase of the Option shall be at a price per share equal to the amount
by which the "Market/Offer Price" (as defined below) exceeds the Option Price
(as adjusted). A repurchase of Option Shares shall be at a price per share
equal to the Market/Offer Price. The term "Market/Offer Price" means the
highest closing price per share of IJL Common Stock within the six-month period
immediately preceding the date that notice to repurchase is given. The term
"Repurchase Event" is defined to mean: (1) the acquisition by any third party
of beneficial ownership of 50% or more of the outstanding shares of IJL Common
Stock or (2) the consummation of an Acquisition Transaction; PROVIDED that for
purposes of the definition of "Repurchase Event," the percentage referred to in
clause (3) of the definition of "Acquisition Transaction" above shall be 50%
rather than 20%.
The Stock Option Agreement also provides that the Wachovia may, at any
time within 90 days after Repurchase Event, surrender the Option (and any
Option Shares held by the Wachovia) for a cash surrender fee (the "Surrender
Fee") equal to $10 million (1) plus, if applicable, Wachovia's purchase price
actually paid for any Option Shares and (2) minus, if applicable, the sum of
(x) any net cash received from the sale of Option Shares to any third party
(less the purchase price of such Option Shares) and (y) the net cash received
from the sale of any portion of the Option. Wachovia may not exercise its right
to surrender the Option and receive the Surrender Fee if IJL has previously
repurchased any Option Shares as described in the preceding paragraph.
The "Total Profit" (as defined below) that Wachovia may realize with
respect to the Option may not exceed $12 million. If Wachovia's Total Profit
were to exceed $12 million, Wachovia would be required, at its sole election,
to (1) reduce the number of Option Shares subject to the Option, (2) deliver
Option Shares to IJL for cancellation, (3) pay cash to IJL or (4) do any
combination of the foregoing so that Wachovia's actual realized Total Profit
would not exceed $12 million. "Total Profit" is defined to mean the aggregate
(before taxes) of: (1) any amount received pursuant to IJL's repurchase of the
Option (or any portion thereof); (2) any amount received pursuant to IJL's
repurchase of the Option Shares (less the purchase price for such Option
Shares); (3) any net cash received pursuant to the sale of Option Shares to any
third party (less the purchase price for such Option Shares); and (4) any
amounts received on transfer of the Option or any portion of it to a third
party.
In addition, Wachovia may not exercise the Option for a number of Option
Shares which would, as of the date of such exercise, result in Wachovia (if it
were to immediately sell such Option Shares, together with all other Option
Shares held by Wachovia and its affiliates as of such date, at the closing
market price on the previous trading day) realizing a net gain in excess of $12
million.
In the event that, prior to an Exercise Termination Event, IJL enters into
certain transactions in which it is not the surviving corporation, certain
fundamental changes in the capital stock of IJL occur, or IJL sells all or
substantially all of its or certain of its subsidiaries' assets, the Option
will represent the right to acquire what the holder would have received had it
exercised the Option prior to the transaction.
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The Stock Option Agreement provides that neither Wachovia nor IJL may
assign any of its rights or obligations without the written consent of the
other party. However, if a Subsequent Triggering Event occurs prior to an
Exercise Termination Event, Wachovia may, subject to certain limitations,
assign its rights and obligations in whole or in part (subject to extension in
certain cases).
Arrangements such as the Stock Option Agreement are customarily entered
into in connection with corporate mergers and acquisitions in an effort to
increase the likelihood that the transactions will be consummated in accordance
with their terms, and to compensate the person granted the option for the
efforts undertaken and the expenses and losses incurred by it if the
transaction is not completed. The Stock Option Agreement may have the effect of
discouraging offers by third parties to acquire IJL prior to the Merger, even
if such persons were prepared to offer to pay consideration to IJL shareholders
which has a higher current market price than the shares of Wachovia Common
Stock to be received by such holders pursuant to the Merger Agreement.
To the best knowledge of Wachovia and IJL, no event giving rise to the
right to exercise the Option has occurred as of the date of this Proxy
Statement/Prospectus.
SHAREHOLDER AGREEMENTS
As a condition and an inducement to Wachovia's entering into the Merger
Agreement, directors and executive officers of IJL who hold approximately 27%
of the outstanding shares of IJL Common Stock agreed to vote all their shares
in favor of approval of the Merger Agreement and to not vote any of their
shares in favor of any other Acquisition Proposal. A copy of the form of
Shareholder Agreement executed by each of these directors and executive
officers is attached as Appendix C. These shareholders have also agreed to take
all reasonable actions to consummate the Merger and, with limited exceptions,
not to sell or otherwise transfer any shares owned by them unless the buyer or
transferee also agrees to vote such shares in favor of approval of the Merger
Agreement. Accordingly, approval of the Merger Agreement will require the
affirmative vote of the holders of approximately an additional 24% of the
outstanding shares of IJL Common Stock in order for the Merger Agreement to be
approved at the Special Meeting. See "Special Meeting -- Vote Required."
NO DISSENTERS OR APPRAISAL RIGHTS
IJL shareholders will not be entitled to dissenters' appraisal rights
under Delaware law or any other statute in connection with the Merger.
DESCRIPTION OF WACHOVIA CAPITAL STOCK
THE DESCRIPTIVE INFORMATION BELOW OUTLINES CERTAIN PROVISIONS OF
WACHOVIA'S ARTICLES OF INCORPORATION ("WACHOVIA'S ARTICLES") AND BYLAWS AND THE
NORTH CAROLINA BUSINESS CORPORATION ACT. THE INFORMATION DOES NOT PURPORT TO BE
COMPLETE AND IS QUALIFIED IN ALL RESPECTS BY REFERENCE TO THE PROVISIONS OF
WACHOVIA'S ARTICLES OF INCORPORATION AND BYLAWS, WHICH ARE INCORPORATED BY
REFERENCE AS EXHIBITS TO THE REGISTRATION STATEMENT, AND THE NORTH CAROLINA
BUSINESS CORPORATION ACT. SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 36.
GENERAL
Wachovia's authorized capital stock consists of 1,000,000,000 shares of
Wachovia Common Stock and 50,000,000 shares of preferred stock, par value $5.00
per share (the "Wachovia Preferred Stock"). As of September 30, 1998, there
were 202,751,280 shares of Wachovia Common Stock outstanding and no shares of
Wachovia Preferred Stock outstanding. In addition, at September 30, 1998,
26,189,432 shares of Wachovia Common Stock were reserved for issuance upon
conversion of notes, exercise of stock options and awards and under Wachovia's
dividend reinvestment plan.
Because Wachovia is a holding company, the rights of Wachovia to
participate in any distribution of assets of any subsidiary upon its
liquidation or reorganization (and thus the ability of Wachovia's shareholders
to benefit indirectly from such distribution) would be subject to the prior
claims of creditors of that subsidiary, except that Wachovia itself may be a
creditor of that subsidiary with recognized claims. Claims on Wachovia's
subsidiaries by creditors, other than Wachovia, will include substantial
obligations with respect to deposit liabilities and purchased funds.
PREFERRED STOCK
The Wachovia Board is authorized to fix the preferences, limitations and
relative rights of the Wachovia Preferred Stock. The Board also may establish
series of Wachovia Preferred Stock and determine the variations between series,
and
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may cause Wachovia to issue any preferred stock without the approval of the
holders of Wachovia Common Stock. Holders of Wachovia Preferred Stock may have
greater rights than holders of Wachovia Common Stock. For example, holders of
Wachovia Preferred Stock may receive dividends first, and may also receive
assets of Wachovia ahead of common stock holders in a liquidation of Wachovia.
Wachovia preferred shareholders may also rank ahead of common shareholders if
the capital stock of Wachovia is redeemed.
COMMON STOCK
DIVIDENDS. The holders of Wachovia Common Stock are entitled to their
proportionate share of dividends declared by the Wachovia Board from funds
legally available for paying dividends.
VOTING RIGHTS. Each holder of Wachovia Common Stock has one vote for each
share held on matters presented for consideration by the shareholders.
CLASSIFICATION OF BOARD OF DIRECTORS. The Wachovia Board is divided into
three classes, each serving three-year terms, so that approximately one-third
of the directors of Wachovia are elected at each annual meeting of the
shareholders of Wachovia. Classification of the Wachovia Board has the effect
of decreasing the number of directors that could be elected in a single year by
any person who seeks to elect its designees to a majority of the seats on the
Wachovia Board and could impede a change in control of Wachovia.
PREEMPTIVE RIGHTS. The holders of Wachovia Common Stock have no preemptive
rights to acquire any additional shares of Wachovia Common Stock.
ISSUANCE OF STOCK. Wachovia's articles of incorporation (the "Wachovia
Articles") authorize the Wachovia Board to issue authorized shares of Wachovia
Common Stock and Wachovia Preferred Stock and any other securities without
shareholder approval. However, Wachovia Common Stock is listed on the NYSE,
which requires shareholder approval of the issuance of additional shares of
Wachovia Common Stock under certain circumstances.
LIQUIDATION RIGHTS. In the event of liquidation, dissolution or winding-up
of Wachovia, whether voluntary or involuntary, the holders of Wachovia Common
Stock will be entitled to their proportionate share of its assets or funds that
are available for distribution to its shareholders after the satisfaction of
its liabilities and after preferences given to any outstanding Wachovia
Preferred Stock.
CHANGES IN CONTROL
Certain provisions of the Wachovia Articles and Wachovia's bylaws may have
the effect of preventing, discouraging or delaying any change in control of
Wachovia. The authority of the Wachovia Board to issue Wachovia Preferred
Stock, with such rights and privileges as it may deem appropriate, may enable
the Wachovia Board to prevent a change in control despite a shift in ownership
of the Wachovia Common Stock. In addition, the Wachovia Board's power to issue
additional shares of Wachovia Common Stock may help delay or deter a change in
control by increasing the number of shares needed to gain control. Moreover,
the classification of the Wachovia Board would delay the ability of a
dissatisfied shareholder or anyone who obtains a controlling interest in the
Wachovia Common Stock to elect its designees to a majority of the seats on the
Wachovia Board. The following provisions also may deter any change in control
of Wachovia.
FAIR PRICE PROVISIONS. Certain provisions of the Wachovia Articles (the
"Fair Price Provisions") limit the ability of an Interested Shareholder to
enter into certain transactions involving Wachovia. An "Interested Shareholder"
is defined in the Wachovia Articles to mean a shareholder who directly or
indirectly beneficially owns, alone or with associates or affiliates, more than
10% of the outstanding voting shares of Wachovia or a subsidiary of Wachovia,
and subject to certain limits, certain assignees of, or successors to, the
stock once held by an Interested Shareholder. The transactions limited by the
Fair Price Provisions are referred to below collectively as a "Business
Combination," include:
o any merger with or consolidation into an Interested Shareholder or an
affiliate of an interested shareholder,
o any sale or other disposition of more than $25 million in assets to an
Interested Shareholder or an associate or affiliate of an Interested
Shareholder,
o any issuance or transfer to any Interested Shareholder, or an associate
or affiliate, of equity securities of Wachovia or a subsidiary having a
fair market value of $10 million or more,
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o any recapitalization or reclassification of Wachovia securities or
similar transaction increasing the percentage of outstanding shares owned
by an Interested Shareholder or an associate or affiliate or any proposal
for liquidation or dissolution of Wachovia.
Under the Fair Price Provisions, a Business Combination must either (1) be
approved by the holders of at least 66 2/3% of the outstanding voting
securities of Wachovia and the holders of at least a majority of the
outstanding shares of Wachovia Common Stock not owned by the Interested
Shareholder or (2) comply with either the Continuing Director (as defined
below) approval requirements described in this paragraph or the price
requirements described in the following paragraph, in which case a Business
Combination must be approved by the affirmative vote of a majority of the
outstanding voting shares of Wachovia entitled to vote thereon. Under the
Continuing Director requirement, the Business Combination must be approved by
66 2/3% of the "Continuing Directors," which consist of directors elected by
shareholders of Wachovia prior to the Interested Shareholder's acquisition of
more than 10% of the voting securities and any directors recommended to join
the Wachovia Board by a majority of directors so elected. These approval
provisions are less strin gent than those contained in the North Carolina
Shareholder Protection Act, which is not applicable to Wachovia (see " --
Antitakeover Legislation"), but are more stringent than the standard provisions
of the North Carolina Business Corporation Act, which would apply in the
absence of the Fair Price Provisions.
Under the price requirements of the Fair Price Provisions, the price per
share paid in a Business Combination must be at least equal to the greater of
(1) the fair market value per share of Wachovia Common Stock on the date of the
first public announcement of the proposed Business Combination (the
"Announcement Date") or on the date on which the Interested Shareholder became
an Interested Shareholder, whichever is higher, multiplied by the ratio of (A)
the highest per share price paid by the Interested Shareholder for any shares
of Wachovia Common Stock acquired by it during the two-year period immediately
prior to the Announcement Date to (B) the fair market value per share of
Wachovia Common Stock on the first day during such two-year period on which the
Interested Shareholder acquired any shares of Wachovia Common Stock and (2) the
highest per share price paid by such Interested Shareholder in acquiring any
shares of Wachovia Common Stock. In addition, the consideration paid for
Wachovia Common Stock in a Business Combination must be either cash or the same
form of consideration paid by the Interested Shareholder to acquire its shares
of Wachovia Common Stock. Moreover, the Interested Shareholder must not (a)
have, directly or indirectly, acquired, after having become an Interested
Shareholder, additional shares of newly issued Wachovia capital stock from
Wachovia (other than upon conversion of convertible securities, a pro rata
stock dividend or stock split or pursuant to the Fair Price provisions), (b)
have received the benefit directly, or indirectly, of financial assistance from
Wachovia or (c) have made any major changes in Wachovia's business or equity
capital structure.
The Fair Price Provisions are designed to discourage attempts to take over
Wachovia in non-negotiated transactions utilizing two-tier pricing tactics,
which typically involve the accumulation of a substantial block of the target
corporation's stock followed by a merger or other reorganization of the
acquired company on terms determined by the purchaser. In such two-step
takeover attempts, the purchaser generally pays cash to acquire a controlling
interest in a company and acquires the remaining equity interest by paying the
remaining shareholders a price lower than that paid to acquire the controlling
interest, often utilizing non-cash consideration.
Although federal and state securities laws and regulations require that
disclosure be made to shareholders of the terms of such a transaction, these
laws provide no assurance that the financial terms of such a transaction will
be fair to shareholders or that the shareholders can effectively prevent its
consummation. The Fair Price Provisions are intended to address some of the
effects of these gaps in federal and state law and to prevent some of the
potential inequities of two-step takeover attempts by encouraging negotiations
with Wachovia. While the terms of such a non-negotiated takeover could be fair
to Wachovia shareholders, negotiated transactions may result in more favorable
terms to Wachovia's shareholders because of such factors as timing of the
transaction, tax effects on the shareholders, and the fact that the nature and
amount of the consideration paid to all shareholders will be negotiated by the
parties at arm's length rather than dictated by the purchaser.
The Fair Price Provisions are designed to protect those shareholders who
have not tendered or otherwise sold their shares to an Interested Shareholder
in the initial step of a takeover attempt to which the requisite majority of
shareholders or Continuing Directors is not receptive by assuring that at least
the same price and form of consideration are paid to such shareholders as were
paid in the initial step of the acquisition.
Due to the difficulties of complying with the requirements of the Fair
Price Provisions, the Fair Price Provisions generally may discourage attempts
to obtain control of Wachovia. As a result, holders of Wachovia Common Stock
may be deprived of an opportunity to sell their shares at a premium above the
market price. In addition, the Fair Price Provisions
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would give veto power to the holders of a minority of the shares of Wachovia
Common Stock with respect to a Business Combination which is opposed by more
than 33 1/3% of the Continuing Directors but which a majority of shareholders
may believe to be desirable and beneficial. Moreover, in any Business
Combination not receiving the requisite supermajority approval of shareholders
or of Continuing Directors, the minimum price provisions of the Fair Price
Provisions, while providing objective pricing criteria, could be arbitrary and
not indicative of value.
REMOVAL OF DIRECTORS. A director of Wachovia may be removed only for cause
and only by the affirmative vote of the holders of 66 2/3% of the outstanding
voting shares and a majority of the voting shares not held by Interested
Shareholders.
AMENDMENT OF WACHOVIA ARTICLES. Except in certain specified circumstances,
the provisions of the Wachovia Articles concerning their amendment; the
duration of the corporation; the authorized capital stock; the number,
classification, election and removal of directors; the absence of pre-emptive
rights for shareholders; and the approval of Business Combinations may be
amended only by the affirmative vote of the holders of 66 2/3% of the
outstanding voting shares and a majority of the outstanding voting shares not
held by Interested Shareholders.
ANTITAKEOVER LEGISLATION. In 1987, the North Carolina General Assembly
enacted The North Carolina Shareholder Protection Act and The North Carolina
Control Share Acquisition Act (the "Control Share Act"), each of which contains
provisions intended to prevent, discourage or delay a change in control of
North Carolina corporations electing to be covered by such legislation.
Wachovia has elected to be subject only to the Control Share Act. For a summary
of the material provisions of the Control Share Act, see "Certain Differences
in the Rights of Wachovia Shareholders and IJL Shareholders -- Control Share
Acquisitions."
CONTROL ACQUISITIONS. The Federal Change in Bank Control Act of 1978, as
amended, prohibits a person or group of persons from acquiring "control" of a
bank holding company unless the Federal Reserve Board has been given 60 days'
prior written notice of such proposed acquisition and within that time period
the Federal Reserve Board has not issued a notice disapproving the proposed
acquisition or extending for up to another 30 days the period during which such
a disapproval may be issued. An acquisition may be made prior to the expiration
of the disapproval period if the Federal Reserve Board issues written notice of
its intent not to disapprove the action. The Federal Reserve Board presumes
that the acquisition of more than 10% of a class of voting stock of a bank
holding company with a class of securities registered under Section 12 of the
Exchange Act constitutes the acquisition of control. This presumption can,
under certain circumstances, be challenged.
In addition, any "company" would be required to obtain the approval of the
Federal Reserve Board under the BHCA before acquiring 25% (5% in the case of an
acquiror that is a bank holding company) or more of the outstanding shares of
Wachovia Common Stock, or such lesser number of shares as constitute control
over Wachovia.
SAVINGS AND LOAN HOLDING COMPANY REGULATIONS. As a savings and loan
holding company, Wachovia is subject to additional regulations that restrict
acquisitions of control by third parties. Subject to certain limited
exceptions, control of a savings association or a savings and loan holding
company may only be obtained with the approval (or in the case of an
acquisition of control by an individual, the absence of disapproval) of the
Office of Thrift Supervision ("OTS"), after a public comment and application
review process. Any company acquiring control of a savings association becomes
a savings and loan holding company, must register and file periodic reports
with the OTS, and is subject to OTS examination.
CERTAIN DIFFERENCES IN THE RIGHTS OF WACHOVIA
SHAREHOLDERS AND IJL SHAREHOLDERS
At the Effective Time, IJL shareholders automatically will become
shareholders of Wachovia, and their rights as shareholders will be determined
by the Wachovia Articles, Wachovia's bylaws and the North Carolina Business
Corporation Act ("NCBCA"), instead of by IJL's Certificate of Incorporation
("IJL's Certificate") and IJL's bylaws and the Delaware General Corporation Law
("DGCL"). The following is a summary of the material differences in the rights
of shareholders of Wachovia and IJL. 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, IJL's Certificate, Wachovia's
Articles and the bylaws of each corporation.
AUTHORIZED CAPITAL
WACHOVIA. Wachovia is authorized to issue 1,000,000,000 shares of Common
Stock with par value of $5.00 per share and 50,000,000 shares of Preferred
Stock with par value of $5.00 per share. As of September 30, 1998, 202,751,280
shares of Wachovia Common Stock were issued and outstanding and no shares of
Wachovia Preferred Stock were issued.
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IJL. IJL is authorized to issue 30,000,000 shares of Common Stock with par
value of $0.20 per share. As of the Record Date, 6,516,079 shares of IJL Common
Stock were issued and outstanding.
AMENDMENT OF ARTICLES OF INCORPORATION
WACHOVIA. The Wachovia Articles of Incorporation provide that the
affirmative vote of at least 66 2/3% of voting shares of Wachovia, including a
majority of the shares held by a person other than an Interested Shareholder,
is required to repeal certain provisions of the Wachovia Articles of
Incorporation relating to the duration of the corporation; the authorized
capital stock; the number, classification, election and removal of directors;
preemptive rights of shareholders; business combinations; and amendment of the
Wachovia Articles of Incorporation.
Amendment of these provisions requires the approval of the holders of at
least 66 2/3% of the voting shares of Wachovia, including a majority of the
voting shares not held by an Interested Shareholder, unless (1) there is no
Interested Shareholder and the amendment is approved by a majority of the
Wachovia Board of Directors or (2) there exists an Interested Shareholder, but
such amendment is approved by at least 66 2/3% of the Continuing Directors, in
either case, the affirmative vote of the holders of at least a majority of the
voting shares is sufficient to approve any amendment of this kind. For the
definition of an Interested Shareholder and a Continuing Director, see
"Description of Wachovia Common Stock -- Changes in Control".
IJL. Under the DGCL, an amendment to IJL's Certificate must be proposed by
the IJL Board of Directors. The amendment must then be submitted to a vote and
be approved by a majority of the shareholders entitled to vote on the
amendment.
NOTICE OF MEETINGS OF SHAREHOLDERS
WACHOVIA. The Wachovia bylaws provide that the corporation shall notify
the shareholders between 10 and 60 days prior to any annual or special meeting
of the date, time and place of the meeting and, in the case of a special or
substitute annual meeting or where otherwise required by law, shall briefly
describe the purpose or purposes of the meeting.
IJL. The IJL bylaws provide that each shareholder of record entitled to
vote shall be notified by written notice at least 10 days prior to the annual
meeting of shareholders. Written notice of a special meeting of shareholders,
stating the time, place and object thereof, shall be given to each shareholder
entitled to vote thereat, at least five days before the date fixed for the
meeting.
SPECIAL MEETINGS OF SHAREHOLDERS
WACHOVIA. A special meeting of the shareholders of Wachovia may be called
only by its chief executive officer or by the Wachovia Board of Directors.
IJL. The DGCL provides that a special meeting of shareholders may be
called by the Board of Directors or by such persons specified in the
certificate of incorporation or bylaws. IJL's bylaws provide that a special
meeting of the shareholders for any purpose, unless otherwise prescribed by
statute or by IJL's Certificate, may (1) be called by the chief executive
officer and (2) must be called by the chief executive officer or secretary at
the written request of a majority of the board of directors, or at the written
request of shareholders owning a majority in amount of the entire capital stock
of the corporation. All requests must state the purpose or purposes of the
proposed meeting.
RECORD DATE
WACHOVIA. In order to determine who the shareholders of the corporation
are for purposes of determining such things as the receipt of dividends or
voting rights, the Board of Directors or the chief executive officer may fix a
record date which must not be more than 70 days before the meeting or action
requiring a determination of shareholders.
IJL. IJL's bylaws state that the board of directors may close the stock
transfer books of the corporation for a period not more than 50 days before the
date of any meeting of shareholders or the date for payment of any dividend or
the date before certain other specified events. Closing the stock transfer
books would limit those who could vote at any shareholder meeting. In lieu of
closing the stock transfer books, the board of directors may fix a record date
which must not be more than 50 days before the meeting or action requiring a
determination of shareholders.
31
<PAGE>
NUMBER OF DIRECTORS; CLASSIFIED BOARD OF DIRECTORS
WACHOVIA. Wachovia's bylaws state that the number of directors shall be
between nine and twenty-five. The exact number of directors will be set by
resolution of the Wachovia Board of Directors. Wachovia's bylaws state that the
Wachovia Board of Directors shall be divided into three classes to serve
staggered three-year terms. The effect of Wachovia's having a classified board
of directors is that only approximately one-third of the members of the
Wachovia Board of Directors are elected each year; consequently, two annual
meetings are required for Wachovia's shareholders to change a majority of the
members of the Wachovia Board of Directors.
IJL. IJL's bylaws provide that there will be at least three directors. A
majority of the Board of Directors can increase the number of directors beyond
three. IJL's bylaws state that the IJL Board of Directors shall be divided into
three classes to serve staggered three-year terms. The effect of IJL having a
classified board of directors is that only approximately one-third of the
members of the IJL Board of Directors are elected each year; consequently, two
annual meetings are effectively required for IJL's shareholders to change a
majority of the members of the IJL Board of Directors.
REMOVAL OF DIRECTORS
WACHOVIA. Wachovia's bylaws state that a director of Wachovia may be
removed only for cause and only by the affirmative vote of the holders of
66 2/3% of the outstanding voting shares, including a majority of the voting
shares not held by an Interested Shareholder.
IJL. Because IJL has a classified Board of Directors, the DGCL provides
that any or all directors may be removed only for cause and only by the
affirmative vote of a majority of the voting power entitled to elect directors.
SHAREHOLDER PROPOSALS; ADVANCE NOTICE OF DIRECTOR NOMINATIONS
WACHOVIA. The bylaws of Wachovia provide that business conducted at
meetings of shareholders is limited to that properly submitted to the meeting.
Matters are properly submitted by the Board of Directors, or by any other
holder of voting securities of the corporation who is entitled to vote at the
meeting and who complies with the notice requirements of applicable law, or
those requirements set forth in the corporation's Articles of Incorporation or
bylaws. Wachovia's bylaws provide that director nominations by the Wachovia
Board of Directors must include the Chairman and the Chief Executive Officer,
if the Chief Executive Officer is not the Chairman and this person is not a
director or his or her term as a director is set to expire. Director
nominations by shareholders and other shareholder proposals must be made in
writing and delivered or mailed to the Secretary of Wachovia between 90 and 120
days before any meeting of shareholders; however, if less than 100 days' notice
of the meeting is given to shareholders, the notification must be mailed or
delivered no later than the close of business 10 days after notice of the
meeting was mailed.
IJL. IJL's bylaws provide that nominations for the election of directors
may be made by the IJL board or a nominating committee appointed by the IJL
board or by any shareholder entitled to vote in the election of directors
generally. However, any shareholder entitled to vote in the election of
directors generally may nominate one or more persons for election as directors
at a meeting only if written notice of such shareholder's intent to make such
nomination or nominations has been given to the secretary not later than (1)
for an election to be held at an annual meeting of shareholders, ninety days
before the anniversary date of the last annual meeting, and (2) for an election
to be held at a special meeting of shareholders for the election of directors,
the close of business on the tenth day following the date on which notice of
the meeting is first given to shareholders.
ANTI-TAKEOVER PROVISIONS; RESTRICTIONS ON CERTAIN BUSINESS COMBINATIONS
WACHOVIA. The Wachovia Articles of Incorporation have restrictions which
discourage attempts to acquire control of Wachovia in non-negotiated
transactions through the use of two-tier pricing tactics. The Fair Price
Provisions are described under "Description of Wachovia Capital Stock --
Changes in Control -- Fair Price Provisions."
The North Carolina Control Share Act contains provisions that, under
certain circumstances, would preclude an acquiror of the shares of a North
Carolina corporation who crosses one of three voting thresholds (20%, 33 1/3%
or 50%) from obtaining voting control of the shares unless a majority in
interest of the disinterested shareholders of the corporation votes to give
voting power to those shares.
The North Carolina Control Share Act provides that, in the event control
shares are accorded voting rights and, as a consequence, the holders of the
control shares have a majority of all voting power for the election of
directors, the corporation's shareholders, other than holders of control
shares, may cause the corporation to redeem their shares. The right of
32
<PAGE>
redemption is subject to limitations on corporate distributions to shareholders
and any contrary provision in the corporation's articles of incorporation or
bylaws adopted by the shareholders prior to the occurrence of a control share
acquisition. The Wachovia Articles of Incorporation and bylaws do not limit the
ability of shareholders to cause Wachovia to redeem their shares under the
circumstances described above.
IJL. Under the DGCL, a corporation is prohibited from engaging in any
business combination (as defined below) with an interested shareholder or any
entity if the transaction is caused by the interested shareholder for a period
of three years from the date on which the shareholder first becomes an
interested shareholder. A business combination with an interested shareholder
may take place if (1) prior to the shareholder becoming an interested
shareholder the board of directors approves the business combination or
approved the transaction in which the shareholder became an interested
shareholder, (2) upon the completion of the transaction in which the
shareholder became an interested shareholder, the interested shareholder owned
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 (3) 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 shareholder 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 shareholder" 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.
A corporation can expressly elect not to be governed by the business
combination statute in its certificate of incorporation or bylaws. IJL has made
no such election.
LIMITATION ON DIRECTOR LIABILITY; INDEMNIFICATION
WACHOVIA. The Wachovia Articles of Incorporation provide that, to the full
extent permitted by law, a director of Wachovia will have no personal liability
to Wachovia or its shareholders for monetary damages for breach of his or her
duty as a director, whether such action is brought by, or on behalf of Wachovia
or otherwise. North Carolina law generally provides for limitation on
director's liability. However, no provision limiting director liability shall
be effective with respect to:
o acts or omissions that the director at the time of the breach knew or
believed were clearly in conflict with the best interests of the
corporation,
o any liability for unlawful distributions,
o any transaction from which the director derived an improper personal
benefit, or
o acts or omissions occurring prior to the date the provisions became
effective.
Wachovia's bylaws provide for indemnification of any liability of
directors, officers, employees or agents of Wachovia or any wholly-owned
subsidiary of Wachovia.
Indemnification payments for liabilities and litigation expenses may be
made only following a determination that the activities of the person to be
indemnified were at the time taken not known or believed by the person to be
indemnified to be clearly in conflict with the best interest of Wachovia. This
determination will be made: (1) by a majority of disinterested directors (if
there are at least two such directors); (2) if there are not two such directors
or if a majority of the disinterested directors so directs, by independent
legal counsel in a written opinion; (3) by a majority of the shareholders; or
(4) in accordance with any reasonable procedures prescribed by the Wachovia
Board of Directors prior to the assertion of the claim for which
indemnification is sought. If the person to be indemnified is an officer or an
employee of Wachovia, the determination may be made by the chief executive
officer or a designee of the chief executive officer.
IJL. Under the DGCL, a Delaware corporation may indemnify directors from
liability if the director acted in good faith and in a manner reasonably
believed by the director to be in or not opposed to the best interests of the
corporation, and, in any criminal actions, if the director 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 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 of the corporation. The indemnification authorized
by the DGCL is not exclusive and is in addition to any other rights granted to
directors under the certificate of incorporation or bylaws of the corporation
or to any agreement between the directors and the corporation.
33
<PAGE>
The IJL Certificate provides that no director will be personally liable to
the corporation or any shareholder for monetary damages for breach of fiduciary
duty as a director, except for matters for which liability is mandated by the
DGCL or matters where the director:
o breached his duty of loyalty to the corporation or its shareholders,
o has not acted in good faith or, in failing to act, shall not have acted
in good faith,
o acted in a manner involving intentional misconduct or a knowing violation
of law or, in failing to act, acted in a manner involving intentional
misconduct or a knowing violation of law, or
o derived an improper personal benefit.
SHAREHOLDER INSPECTION RIGHTS; SHAREHOLDER LISTS
WACHOVIA. Under the NCBCA, qualified shareholders have the right to
inspect and copy certain records of Wachovia if their demand is in good faith
and for a proper purpose. The right of inspection requires that the shareholder
give Wachovia at least five business days' written notice of the demand,
describing with reasonable particularity the purpose and the requested records.
The records must be directly connected with the shareholder's purpose. However,
Wachovia is under no duty to provide any accounting records or any records with
respect to any matter that Wachovia determines in good faith may adversely
affect Wachovia in the conduct of its business or may constitute material
non-public information. Additionally, the rights of inspection and copying are
limited to shareholders who either have been shareholders for at least six
months, or who hold at least five percent of the outstanding shares of any
class of Wachovia stock.
IJL. The DGCL provides that any shareholder of record has the right during
the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its shareholders, and its other books and
records, and to make copies or extracts from them.
DISSENTERS' APPRAISAL RIGHTS
WACHOVIA. The NCBCA generally provides dissenters' rights for mergers and
certain share exchanges that would require shareholder approval, sales of all
or substantially all of the assets (other than sales that are in the usual and
regular course of business and certain liquidations and court-ordered sales),
certain amendments to the articles of incorporation and any corporate action
taken pursuant to a shareholder vote to the extent the articles of
incorporation, bylaws or a resolution of the board of directors entitles
shareholders to dissent. However, the NCBCA does not provide dissenters' rights
for North Carolina corporations who have over 2,000 record holders or whose
voting stock is listed on a national securities exchange.
IJL. Under the DGCL, generally, shareholders 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 more than 2,000 shareholders, unless the holders of such stock are required
pursuant to the terms of the merger to accept anything other than (1) shares of
stock of the surviving corporation, (2) 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 (3) cash in lieu of fractional shares of such
stock. A Delaware corporation may provide in its certificate of incorporation
that appraisal rights are available as a result of an amendment to its
certificate of incorporation, any merger or consolidation in which the
corporation is a constituent corporation, or the sale of all or substantially
all of the corporation's assets. IJL has no such provision in its Certificate
of Incorporation.
34
<PAGE>
COMPARATIVE MARKET PRICES AND DIVIDENDS
WACHOVIA
Wachovia Common Stock is traded on the NYSE under the symbol "WB." The
following table sets forth, for the indicated periods, the high and low sale
prices for Wachovia Common Stock as reported by the NYSE, and the cash
dividends declared per share of Wachovia Common Stock.
<TABLE>
<CAPTION>
PRICE RANGE CASH DIVIDENDS
----------------------- DECLARED PER
HIGH LOW SHARE
----------- --------- ---------------
<S> <C> <C> <C>
1996:
First .................... 48 3/8 41 1/4 .36
Second ................... 46 1/4 40 7/8 .36
Third .................... 49 7/8 39 5/8 .40
Fourth ................... 60 1/4 48 3/4 .40
1997:
First .................... 64 5/8 54 1/2 .40
Second ................... 66 7/8 53 1/2 .40
Third .................... 72 3/8 58 3/16 .44
Fourth ................... 83 15/16 71 1/16 .44
1998:
First .................... 85 3/4 72 3/4 .44
Second ................... 90 3/16 77 3/8 .44
Third .................... 90 15/16 72 7/8 .49
Fourth (through
December 14) ........... -- -- .49
</TABLE>
On October 27, 1998, the last trading day before public announcement of
the Merger, the closing price per share of Wachovia Common Stock on the NYSE
was $82 3/4. Past price performance is not necessarily indicative of likely
future price performance. Holders of Wachovia Common Stock are urged to obtain
current market quotations for shares of Wachovia Common Stock.
The holders of Wachovia Common Stock are entitled to receive dividends
when and if declared by the Wachovia Board out of funds legally available
therefor. Although Wachovia expects to continue paying quarterly cash dividends
on the Wachovia 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 the Wachovia Board's
consideration of other relevant factors.
IJL
IJL Common Stock is traded on the NYSE under the symbol "IJL". The
following table sets forth for the fiscal quarterly periods indicated, the high
and low sale prices for IJL Common Stock as reported by the NYSE, and the cash
dividends declared per share of IJL Common Stock.
<TABLE>
<CAPTION>
PRICE RANGE CASH DIVIDENDS
---------------------- DECLARED PER
FISCAL YEAR ENDED SEPTEMBER 30 HIGH LOW SHARE
- -------------------------------- --------- ---------- ---------------
<S> <C> <C> <C>
1996:
First ........................ 10 5/8 9 5/8 .03
Second ....................... 11 3/4 10 3/4 .03
Third ........................ 12 1/4 10 5/8 .03
Fourth ....................... 12 5/8 11 .03
1997:
First ........................ 13 3/4 12 .04
Second ....................... 18 7/8 13 3/8 .04
Third ........................ 24 1/2 17 .04
Fourth ....................... 32 1/4 19 7/8 .04
1998:
First ........................ 31 1/4 25 3/4 .05
Second ....................... 30 1/2 26 1/16 .05
Third ........................ 32 1/2 28 .05
Fourth ....................... 41 26 3/4 .05
</TABLE>
35
<PAGE>
EXPERTS
The consolidated financial statements of Wachovia Corporation and
subsidiaries at December 31, 1997 and 1996, and for each of the three years in
the period ended December 31, 1997, incorporated by reference in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon and incorporated
herein by reference, which is based in part on the reports of KPMG Peat Marwick
LLP, independent auditors. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of IJL incorporated by reference
from IJL's Annual Report on Form 10-K for the year ended September 30, 1997,
have been audited by PricewaterhouseCoopers LLP, independent accountants, as
set forth in their report thereon and incorporated herein by reference. These
consolidated statements are incorporated by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
VALIDITY OF WACHOVIA COMMON STOCK
The validity of the shares of Wachovia Common Stock being offered hereby
will be passed upon for Wachovia by Kenneth W. McAllister, Senior Executive
Vice President and General Counsel.
OTHER MATTERS
As of the date of this Proxy Statement/Prospectus, the IJL Board knows of
no matters that will be presented for consideration at the Special Meeting
other than as described in this Proxy Statement/Prospectus. However, if any
other matter shall come before the Special 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 Special Meeting as determined by
a majority of IJL Board, PROVIDED, HOWEVER, that no proxy which is voted
against the proposal to approve the Merger Agreement will be voted in favor of
any adjournment or postponement.
WHERE YOU CAN FIND MORE INFORMATION
Wachovia has filed with the Commission a Registration Statement under the
Securities Act that registers the distribution to IJL shareholders of the
shares of Wachovia Common Stock to be issued in connection with the Merger (the
"Registration Statement"). The Registration Statement, including the attached
exhibits and schedules, contains additional relevant information about Wachovia
and Wachovia Common Stock. The rules and regulations of the Commission allow us
to omit certain information included in the Registration Statement from this
Proxy Statement/Prospectus.
In addition, Wachovia and IJL file reports, proxy statements and other
information with the Commission under the Exchange Act. You may read and copy
this information at the following locations of the Commission:
<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 Commission, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates.
The Commission also maintains an Internet worldwide web site that contains
reports, proxy statements and other information about issuers, like Wachovia
and IJL, who file electronically with the Commission. The address of the site
is http://www.sec.gov.
You can also inspect reports, proxy statements and other information about
Wachovia and IJL at the offices of the NYSE, 20 Broad Street, New York, New
York 10005.
36
<PAGE>
The Commission allows Wachovia and IJL to "incorporate by reference"
information into this Proxy Statement/ Prospectus. This means that the
companies can disclose important information to you by referring you to another
document filed separately with the Commission. The information incorporated by
reference is considered to be a part of this Proxy Statement/Prospectus, except
for any information that is superseded by information that is included directly
in this document.
This Proxy Statement/Prospectus incorporates by reference the documents
listed below that Wachovia and IJL have previously filed with the Commission.
They contain important information about the companies and their financial
condition.
<TABLE>
<CAPTION>
WACHOVIA SEC FILINGS PERIOD
- -------------------------------------------------------------- --------------------------------------------------
<S> <C>
Annual Report on Form 10-K ................................... Year ended December 31, 1997
Quarterly Report on Form 10-Q ................................ Quarters ended March 31, June 30, and
September 30, 1998
The description of Wachovia Common Stock set forth in the
Wachovia's Registration Statement on Form 8-B filed pursuant
to Section 12 of the Exchange Act including any amendment or
report filed with the Commission for the purpose of updating
such description.
Current Reports on Form 8-K .................................. Dated February 13, October 8 and October 28, 1998
</TABLE>
<TABLE>
<CAPTION>
IJL SEC FILINGS PERIOD
- --------------------------------------------------------------- -------------------------------------------------
<S> <C>
Annual Report on Form 10-K .................................... Year ended September 30, 1997
Quarterly Report on Form 10-Q ................................. Quarters ended December 31, 1997, March 31, 1998
and June 30, 1998
The description of IJL Common Stock set forth in IJL's Regis-
tration Statement on Form 8-A filed pursuant to Section 12 of
the Exchange Act, including any amendment or report filed
with the Commission for the purpose of updating such
description.
</TABLE>
Wachovia and IJL incorporate by reference additional documents that either
company may file with the Commission between the date of this Proxy
Statement/Prospectus and the date of the Special 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.
Wachovia has supplied all information contained or incorporated by
reference in this Proxy Statement/Prospectus relating to Wachovia, as well as
all pro forma financial information, and IJL has supplied all such information
relating to IJL.
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 Proxy
Statement/Prospectus by requesting them in writing or by telephone from the
appropriate company at the following addresses:
<TABLE>
<S> <C>
WACHOVIA CORPORATION INTERSTATE/JOHNSON LANE
P. O. Box 3099 IJL Financial Center
Winston-Salem, North Carolina 27150 201 North Tryon Street
Telephone: (336) 770-5000 Charlotte, N.C. 28202
Telephone: (704) 379-9000
or
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Telephone: (404) 332-5000
</TABLE>
37
<PAGE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY JANUARY 19, 1999
TO RECEIVE THEM BEFORE THE SPECIAL 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 PROXY STATEMENT/PROSPECTUS 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.
38
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF OCTOBER 27, 1998
BY AND BETWEEN
WACHOVIA CORPORATION
AND
INTERSTATE/JOHNSON LANE, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
RECITALS ............................................................ 1
ARTICLE I
Certain Definitions ............................................. 1
1.01 Certain Definitions ....................................... 1
ARTICLE II
The Merger ...................................................... 5
2.01 THE MERGER ................................................ 5
2.02 EFFECTIVE DATE AND EFFECTIVE TIME ......................... 5
2.03 PLAN OF MERGER ............................................ 5
2.04 INTEGRATION OF LEGAL ENTITIES ............................. 5
ARTICLE III
Consideration; Exchange Procedures
3.01 MERGER CONSIDERATION ...................................... 5
3.02 RIGHTS AS STOCKHOLDERS; STOCK TRANSFERS ................... 6
3.03 FRACTIONAL SHARES ......................................... 6
3.04 EXCHANGE PROCEDURES ....................................... 6
3.05 ANTI-DILUTION PROVISIONS .................................. 7
ARTICLE IV
Actions Pending Merger
4.01 FOREBEARANCES OF IJL. ..................................... 7
4.02 FOREBEARANCES OF WACHOVIA ................................. 8
ARTICLE V
Representations and Warranties
5.01 DISCLOSURE SCHEDULES ...................................... 9
5.02 STANDARD .................................................. 9
5.03 REPRESENTATIONS AND WARRANTIES OF IJL ..................... 9
5.04 REPRESENTATIONS AND WARRANTIES OF WACHOVIA ................ 17
ARTICLE VI
Covenants
6.01 REASONABLE BEST EFFORTS ................................... 20
6.02 STOCKHOLDER APPROVALS ..................................... 20
6.03 REGISTRATION STATEMENT .................................... 20
6.04 PRESS RELEASES ............................................ 21
6.05 ACCESS; INFORMATION ....................................... 21
6.06 ACQUISITION PROPOSALS ..................................... 21
6.07 AFFILIATE AGREEMENTS ...................................... 21
6.08 TAKEOVER LAWS ............................................. 22
6.09 CERTAIN POLICIES .......................................... 22
6.10 NYSE LISTING .............................................. 22
6.11 REGULATORY APPLICATIONS ................................... 22
6.12 INDEMNIFICATION ........................................... 22
6.13 BENEFIT PLANS ............................................. 23
6.14 RETENTION PROGRAM ......................................... 24
6.15 SECTION 15 OF THE INVESTMENT COMPANY ACT .................. 24
6.16 NOTIFICATION OF CERTAIN MATTERS ........................... 24
6.17 DIVIDEND COORDINATION ..................................... 24
ARTICLE VII
Conditions to Consummation of the Merger
7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER 24
7.02 CONDITIONS TO OBLIGATION OF IJL ........................... 25
7.03 CONDITIONS TO OBLIGATION OF WACHOVIA ...................... 25
</TABLE>
A- ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
ARTICLE VIII
Termination
8.01 TERMINATION ............................................... 26
8.02 EFFECT OF TERMINATION AND ABANDONMENT ..................... 26
ARTICLE IX
Miscellaneous ................................................... 27
9.01 SURVIVAL .................................................. 27
9.02 WAIVER; AMENDMENT ......................................... 27
9.03 COUNTERPARTS .............................................. 27
9.04 GOVERNING LAW ............................................. 27
9.05 WAIVER OF JURY TRIAL ...................................... 27
9.06 EXPENSES .................................................. 27
9.07 NOTICES ................................................... 27
9.08 ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES ........ 28
9.09 INTERPRETATION; EFFECT .................................... 28
EXHIBIT A Stock Option Agreement [See Appendix B of this Proxy
Statement]
EXHIBIT B Form of Shareholder Agreement [See Appendix C of this Proxy
Statement]
EXHIBIT C List of Persons to Execute Employment Agreements [omitted]
EXHIBIT D Terms and Conditions of Retention Program [omitted]
EXHIBIT E Form of Plan of Merger
EXHIBIT F Form of Affiliate Agreement [omitted]
</TABLE>
A- iii
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of October 27, 1998 (this
"AGREEMENT") by and between Interstate/ Johnson Lane, Inc. ("IJL") and Wachovia
Corporation ("WACHOVIA").
RECITALS
A. INTERSTATE/JOHNSON LANE, INC. IJL is a Delaware corporation, having its
principal place of business in Charlotte, North Carolina.
B . WACHOVIA CORPORATION. Wachovia is a North Carolina corporation, having
its principal place of business in Winston-Salem, North Carolina.
C. STOCK OPTION AGREEMENT. As a condition and an inducement to Wachovia's
entering into this Agreement, IJL has granted to Wachovia an option pursuant to
a stock option agreement in substantially the form of EXHIBIT A hereto (the
"Stock Option Agreement").
D. SHAREHOLDER AGREEMENTS. As a further condition and inducement to the
willingness of Wachovia to enter into this Agreement, shareholders of IJL who
are also directors or executive officers of IJL (including certain of their
affiliates) holding the power to vote in excess of 25% of the outstanding
shares of IJL Common Stock have entered into agreements with Wachovia, in the
form of EXHIBIT B hereto, under which each shareholder has agreed to vote in
favor of this Agreement.
E. EMPLOYMENT AGREEMENTS. As a further condition and inducement to the
willingness of Wachovia to enter into this Agreement, certain employees of IJL
identified on EXHIBIT C have executed and delivered employment agreements with
Wachovia in substantially the forms provided to IJL.
F. RETENTION PROGRAM. Wachovia and IJL have agreed to establish a
retention program on the terms described herein and in EXHIBIT D, the purpose
of which is to retain the services of certain employees of IJL following the
Merger.
G. INTENTIONS OF THE PARTIES. It is the intention of the parties to this
Agreement that the business combination contemplated hereby be treated as a
"reorganization" under Section 368 of the Internal Revenue Code of 1986 (the
"CODE").
H. BOARD ACTION. The respective Boards of Directors of each of Wachovia
and IJL have determined that it is advisable and in the best interests of their
respective companies and their stockholders to consummate the strategic
business combination transaction provided for herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein the
parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01 CERTAIN DEFINITIONS. The following terms are used in this Agreement
with the meanings set forth below:
"AFFILIATE" means, with respect to any specified Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such specified Person. For the purposes of this definition, "CONTROL" when used
with respect to any specified Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by Contract or otherwise; and the terms
"CONTROLLING" and "CONTROLLED" have correlative meanings to the foregoing.
"ACQUISITION PROPOSAL" has the meaning set forth in Section 6.06.
"ADVISORY AGREEMENT" has the meaning set forth in 5.03(k)(l).
"AGREEMENT" means this Agreement, as amended or modified from time to time
in accordance with Section 9.02.
"AMEX" means the American Stock Exchange, Inc.
"BSE" means the Boston Stock Exchange, Inc.
"CFTC" means the United States Commodities Futures Trading Commission.
"CLIENT" means any Person, including the Registered Funds, to which IJL or
any of its Subsidiaries provides products or services under any Contract.
"CODE" means the Internal Revenue Code of 1986, as amended.
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"COMPANY REPORTS" has the meaning set forth in 5.03(k)(x).
"COMPENSATION AND BENEFIT PLANS" has the meaning set forth in Section
5.03(p).
"CONSULTANTS" has the meaning set forth in 5.03(p)(i).
"CONTRACT" means, with respect to any Person, any agreement, indenture,
undertaking, debt instrument, contract, lease or other commitment to which such
Person or any of its Subsidiaries is a party or by which any of them is bound
or to which any of their properties is subject.
"COSTS" has the meaning set forth in Section 6.12(a).
"DERIVATIVES CONTRACTS" has the meaning assigned in Section 5.03(v).
"DGCL" means the General Corporation Law of the State of Delaware.
"DIRECTOR" has the meaning set forth in Section 5.03(p)(i).
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 5.01.
"EFFECTIVE DATE" means the date on which the Effective Time occurs.
"EFFECTIVE TIME" means the effective time of the Merger, as provided for
in Section 2.02.
"EMPLOYEE" has the meaning set forth in Section 5.03(p)(i).
"EMPLOYMENT AGREEMENTS" means, collectively, the employment agreements
executed and delivered between Wachovia and each of the several officers and
employees of IJL and its Subsidiaries identified in EXHIBIT C, which agreements
are in substantially the form provided to IJL.
"ENVIRONMENTAL LAWS" means all applicable local, state and federal
environmental, health and safety laws and regulations, including, without
limitation, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation, and Liability Act, the Clean Water Act,
the Federal Clean Air Act, and the Occupational Safety and Health Act, each as
amended, regulations promulgated thereunder, and state counterparts.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" has the meaning set forth in Section 5.03(p)(iii).
"ERISA AFFILIATE PLAN" has the meaning set forth in Section 5.03(p)(iii).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
"EXCHANGE AGENT" has the meaning set forth in Section 3.04(a).
"EXCHANGE FUND" has the meaning set forth in Section 3.04(a).
"EXCHANGE RATIO" has the meaning set forth in Section 3.01(a).
"FINANCIAL STATEMENTS" has the meaning set forth in Section 5.03(g)
"FUND BOARD" has the meaning assigned in Section 5.03(l).
"GOVERNMENTAL AUTHORITY" means any court, administrative agency or
commission or other federal, state or local governmental authority or
instrumentality.
"IJL" has the meaning set forth in the preamble to this Agreement.
"IJL AFFILIATE" has the meaning set forth in Section 6.07(a).
"IJL BOARD" means the Board of Directors of IJL.
"IJL BY-LAWS" means the Amended and Restated By-laws of IJL.
"IJL CERTIFICATE" means the Amended and Restated Certificate of
Incorporation of IJL.
"IJL COMMON STOCK" means the common stock, par value $0.20 per share, of
IJL.
"IJL MEETING" has the meaning set forth in Section 6.02.
"IJL STOCK OPTION" has the meaning set forth in Section 6.13(b).
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"IJL STOCK PLANS" has the meaning set forth in Section 6.13(b).
"INDEMNIFIED PARTY" has the meaning set forth in Section 6.12(a).
"INSURANCE AMOUNT" has the meaning set forth in Section 6.12(b).
"INSURANCE POLICY" has the meaning set forth in Section 5.03(y).
"INVESTMENT ADVISERS ACT" means the Investment Advisers Act of 1940, as
amended, and the rules and regulations thereunder.
"INVESTMENT COMPANY" has the meaning assigned for purposes of the
Investment Company Act, disregarding Section 3(c) thereof, that is sponsored,
organized, advised or managed by IJL or one of its Subsidiaries (including the
Registered Funds).
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, as
amended, and the rules and regulations thereunder.
"LIEN" means any charge, mortgage, pledge, security interest, restriction,
claim, lien, or encumbrance.
"MATERIAL" means, with respect to any fact, circumstance, event or thing,
that such fact, circumstance, event or thing is material to (1) the financial
position, results of operations, assets, properties, business or prospects of
Wachovia and its Subsidiaries, taken as a whole, or IJL and its Subsidiaries,
taken as a whole, respectively, or (2) the ability of either Wachovia or IJL
timely to perform its obligations under this Agreement or otherwise to
consummate the transactions contemplated by this Agreement.
"MATERIAL ADVERSE EFFECT" means, with respect to Wachovia or IJL, as the
case may be, any effect that (i) is material and adverse to the financial
position, results of operations, business or prospects of Wachovia and its
Subsidiaries taken as a whole or IJL and its Subsidiaries taken as a whole,
respectively, other than any effects of (a) changes in the United States
economy or securities markets in general or (b) changes in the financial
services industry in general and, in each of (a) and (b), not specifically
relating to Wachovia or IJL and their respective Subsidiaries, or (ii) would
materially impair the ability of either Wachovia or IJL to perform its
obligations under this Agreement or otherwise materially threaten or materially
impede or delay the consummation of the Merger and the other transactions
contemplated by this Agreement.
"MERGER" has the meaning set forth in Section 2.01.
"MERGER CONSIDERATION" has the meaning set forth in Section 2.01.
"MSRB" means the Municipal Securities Rulemaking Board.
"NASD" means the National Association of Securities Dealers, Inc.
"NBCA" means the North Carolina Business Corporation Act.
"NEW CERTIFICATE" has the meaning set forth in Section 3.04(b).
"NYFE" means the New York Futures Exchange, Inc.
"NYSE" means the New York Stock Exchange, Inc.
"NORTH CAROLINA SECRETARY" has the meaning set forth in Section 2.01(b).
"OLD CERTIFICATE" has the meaning set forth in Section 3.04(b).
"PBGC" means the Pension Benefit Guaranty Corporation.
"PENSION PLAN" has the meaning set forth in Section 5.03(q).
"PERSON" means any individual, bank, corporation, partnership,
association, joint-stock company, business trust or unincorporated
organization.
"PLANS" has the meaning set forth in Section 5.03(q).
"PREVIOUSLY DISCLOSED" by a party shall mean information set forth in its
Disclosure Schedule.
"PROXY STATEMENT" has the meaning set forth in Section 6.03.
"REGISTERED FUNDS" has the meaning assigned in Section 5.03(l).
"REGISTRATION STATEMENT" has the meaning set forth in Section 6.03.
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"REPLACEMENT OPTION" has the meaning set forth in Section 6.13(b).
"REPLACEMENT SHARES" has the meaning set forth in Section 6.13(c).
"REPRESENTATIVES" means, with respect to any Person, such Person's
directors, officers, employees, legal or financial advisors or any
representatives of such legal or financial advisors.
"RETAINED EMPLOYEES" has the meaning set forth in Section 6.13(a).
"RIGHTS" means, with respect to any Person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any Person any
right to subscribe for or acquire, or any options, calls or commitments
relating to, or any stock appreciation right or other instrument the value of
which is determined in whole or in part by reference to the market price or
value of, shares of capital stock of such Person.
"SEC" means the Securities and Exchange Commission.
"SEC DOCUMENTS" has the meaning set forth in Section 5.03(g).
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"SECURITIES LAWS" means, collectively, the Securities Act, the Exchange
Act, the Investment Advisers Act, the Investment Company Act and any state
securities and "blue sky" laws.
"SELF-REGULATORY ORGANIZATION" means the NASD, the NYSE, the AMEX, the
BSE, the NYFE, the MSRB, the Midwest Stock Exchange and the Philadelphia Stock
Exchange, or other commission, board, agency or body that is not a Governmental
Authority but is charged with the supervision or regulation of brokers,
dealers, securities underwriting or trading, stock exchanges, commodities
exchanges, insurance companies or agents, investment companies or investment
advisers, or to the jurisdiction of which IJL or one of its Subsidiaries is
otherwise subject.
"STOCK OPTION AGREEMENT" has the meaning set forth in Recital C.
"SUBSIDIARY" and "SIGNIFICANT SUBSIDIARY" have the meanings ascribed to
them in Rule 1-02 of SEC Regulation S-X.
"SUBSIDIARY COMBINATION" has the meaning assigned in Section 2.04.
"SURVIVING CORPORATION" has the meaning set forth in Section 2.01.
"TAKEOVER LAWS" has the meaning set forth in Section 5.03 (t).
"TAX" and "TAXES" means all federal, state, local or foreign taxes,
charges, fees, levies or other assessments, however denominated, including,
without limitation, all net income, gross income, gross receipts, gains, sales,
use, ad valorem, goods and services, capital, production, transfer, franchise,
windfall profits, license, withholding, payroll, employment, disability,
employer health, excise, estimated, severance, stamp, occupation, property,
environmental, unemployment or other taxes, custom duties, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority whether
arising before, on or after the Effective Date.
"TAX RETURNS" means any return, amended return or other report (including
elections, declarations, disclosures, schedules, estimates and information
returns) required to be filed with respect to any Tax.
"TREASURY STOCK" shall have the meaning set forth in Section 5.03(b).
"WACHOVIA" has the meaning set forth in the preamble to this Agreement.
"WACHOVIA BOARD" means the Board of Directors of Wachovia.
"WACHOVIA COMMON STOCK" means the common stock, par value $5.00 per share,
of Wachovia.
"WACHOVIA PREFERRED STOCK" means the preferred stock, par value $5.00 per
share, of Wachovia.
"WACHOVIA STOCK" means, collectively, Wachovia Common Stock and Wachovia
Preferred Stock.
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ARTICLE II
THE MERGER
2.01 THE MERGER. (a) At the Effective Time, IJL shall merge with and into
Wachovia (the "MERGER"), the separate corporate existence of IJL shall cease
and Wachovia shall survive and continue to exist as a North Carolina
corporation (Wachovia, as the surviving corporation in the Merger, sometimes
being referred to herein as the "SURVIVING CORPORATION"). Wachovia may at any
time prior to the Effective Time change the method of effecting the combination
with IJL (including, without limitation, the provisions of this Article II) if
and to the extent it deems such change to be necessary or appropriate;
PROVIDED, HOWEVER, that no such change shall (i) alter or change the amount or
kind of consideration to be issued to holders of IJL Common Stock as provided
for in this Agreement (the "MERGER CONSIDERATION"), (ii) adversely affect the
tax treatment of IJL's stockholders as a result of receiving the Merger
Consideration or (iii) materially impede or delay consummation of the
transactions contemplated by this Agreement. In the event of such an election,
the parties agree to execute an appropriate amendment to this Agreement in
order to reflect such election.
(b) Subject to the satisfaction or waiver of the conditions set forth in
Article VII, the Merger shall become effective upon the occurrence of the
filing in the office of the Secretary of State of Delaware of a certificate of
merger in accordance with Section 252 of the DGCL and the filing in the Office
of the Secretary of State of the State of North Carolina (the "NORTH CAROLINA
SECRETARY") of articles of merger in accordance with Section 55-11-05 of the
NBCA or such later date and time as may be set forth in such certificate and
articles. The Merger shall have the effects prescribed in the NBCA and the
DGCL.
(c) ARTICLES OF INCORPORATION AND BY-LAWS. The articles of incorporation
and by-laws of Wachovia immediately after the Merger shall be those of Wachovia
as in effect immediately prior to the Effective Time.
(d) DIRECTORS AND OFFICERS OF WACHOVIA. The directors and officers of
Wachovia immediately after the Merger shall be the directors and officers of
Wachovia immediately prior to the Effective Time, until such time as their
successors shall be duly elected and qualified.
2.02 EFFECTIVE DATE AND EFFECTIVE TIME. Subject to the satisfaction or
waiver of the conditions set forth in Article VII, the parties shall cause the
effective date of the Merger (the "EFFECTIVE DATE") to occur on (a) the fifth
business day to occur after the last of the conditions set forth in Article VII
shall have been satisfied or waived in accordance with the terms of this
Agreement (or, at the election of Wachovia, on the last business day of the
month in which such day occurs or, if such last business day occurs on one of
the last five business days of such month, on the last business day of the
succeeding month) or (b) such other date to which the parties may agree in
writing. The time on the Effective Date when the Merger shall become effective
is referred to as the "EFFECTIVE TIME."
2.03 PLAN OF MERGER. Wachovia and IJL hereby enter into a separate plan of
merger, in substantially the form of EXHIBIT E, for purposes of any filing
requirement.
2.04 INTEGRATION OF LEGAL ENTITIES. At or following the Effective Time the
parties hereto currently intend to effectuate, or cause to be effectuated, the
combination (the "SUBSIDIARY COMBINATION") of all of the businesses of IJL and
its Subsidiaries and that of Wachovia Capital Markets, Inc. Each party agrees
to cooperate with the other and to take all reasonable actions prior to or
following the Effective Time, including executing all requisite documentation,
as may be requested by Wachovia to effect the Subsidiary Combination; PROVIDED,
HOWEVER, that any such actions shall not materially impede or delay receipt of
any approval or consent referred to in Section 7.01(b) or consummation of the
Merger. Each party also agrees to cooperate with the other and to take all
reasonable additional action prior to or following the Effective Time,
including executing all requisite documentation, as may be requested by
Wachovia to merge or otherwise consolidate legal entities to the extent
desirable for regulatory or other reasons; PROVIDED, HOWEVER, that any such
actions shall not materially impede or delay receipt of any approval or consent
referred to in Section 7.01(b) or consummation of the Merger. The effectiveness
of any of the foregoing transactions shall be subject to the effectiveness of
the Merger.
ARTICLE III
CONSIDERATION; EXCHANGE PROCEDURES
3.01 MERGER CONSIDERATION. Subject to the provisions of this Agreement, at
the Effective Time, automatically by virtue of the Merger and without any
action on the part of any Person:
(a) OUTSTANDING IJL COMMON STOCK. Each share of Company Common Stock,
excluding Treasury Shares, issued and outstanding immediately prior to the
Effective Time shall become and be converted into the number of shares of
Wachovia
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Common Stock equal to the Exchange Ratio (as defined in the following
sentence). The "EXCHANGE RATIO" shall mean a number equal to $32.00 divided by
the Wachovia Average Stock Price (rounded to the nearest one-thousandth). The
"WACHOVIA AVERAGE STOCK PRICE" shall mean the average of the last sale prices
of Wachovia Common Stock, as reported by the NYSE Composite Transactions
Reporting System (as reported in THE WALL STREET JOURNAL or, if not reported
therein, in another authoritative source), for the five NYSE trading days
immediately preceding the Effective Date (as defined in the Merger Agreement).
(b) OUTSTANDING WACHOVIA STOCK. Each share of Wachovia Stock issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding and unaffected by the Merger.
(c) TREASURY SHARES. Each share of IJL Stock held as Treasury Stock
immediately prior to the Effective Time shall be canceled and retired at the
Effective Time and no consideration shall be issued in exchange therefor.
3.02 RIGHTS AS STOCKHOLDERS; STOCK TRANSFERS. At the Effective Time,
holders of IJL Stock shall cease to be, and shall have no rights as,
stockholders of IJL, other than to receive any dividend or other distribution
with respect to such IJL Stock with a record date occurring prior to the
Effective Time and the consideration provided under this Article III. After the
Effective Time, there shall be no transfers on the stock transfer books of IJL
or the Surviving Corporation of shares of IJL Stock.
3.03 FRACTIONAL SHARES. Notwithstanding any other provision hereof, no
fractional shares of Wachovia Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the Merger;
instead, Wachovia shall pay to each holder of IJL Common Stock who would
otherwise be entitled to a fractional share of Wachovia Common Stock (after
taking into account all Old Certificates delivered by such holder) an amount in
cash (without interest) determined by multiplying such fraction by the last
sale price of Wachovia Common Stock, as reported by the NYSE Composite
Transactions Reporting System (as reported in THE WALL STREET JOURNAL or, if
not reported therein, in another authoritative source), for the NYSE trading
day immediately preceding the Effective Date.
3.04 EXCHANGE PROCEDURES. (a) At or prior to the Effective Time, Wachovia
shall deposit, or shall cause to be deposited, with a bank or trust company
selected by Wachovia and reasonably acceptable to IJL (which may be Wachovia
Bank, N.A.) (the "Exchange Agent"), for the benefit of the holders of Old
Certificates, for exchange in accordance with this Article III, certificates
representing the shares of Wachovia Common Stock and cash in lieu of any
fractional shares (such cash and certificates for shares of Wachovia Common
Stock, together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund") to be issued pursuant to
Section 3.01 and paid pursuant to Section 3.04(b) in exchange for outstanding
shares of IJL Common Stock.
(b) As promptly as practicable after the Effective Date, the Exchange
Agent shall send or cause to be sent to each former holder of record of shares
of IJL Common Stock immediately prior to the Effective Time transmittal
materials for use in exchanging such stockholder's certificates formerly
representing shares of IJL Common Stock ("OLD CERTIFICATES") for the
consideration set forth in this Article III. Wachovia shall cause the
certificates representing the shares of Wachovia Common Stock ("NEW
CERTIFICATES") into which shares of a stockholder's IJL Common Stock are
converted on the Effective Date and/or any check in respect of any fractional
share interests or dividends or distributions which such Person shall be
entitled to receive to be delivered to such stockholder upon delivery to the
Exchange Agent of Old Certificates representing such shares of IJL Common Stock
(or indemnity reasonably satisfactory to Wachovia and the Exchange Agent, if
any of such certificates are lost, stolen or destroyed) owned by such
stockholder. No interest will be paid on any such cash to be paid in lieu of
fractional share interests or in respect of dividends or distributions which
any such Person shall be entitled to receive pursuant to this Article III upon
such delivery. Old Certificates surrendered for exchange by any Affiliate of
IJL shall not be exchanged for New Certificates until Wachovia has received a
written agreement from such Person as specified in Section 6.07.
(c) Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to any former holder of IJL Common Stock for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(d) At the election of Wachovia, no dividends or other distributions with
respect to Wachovia Common Stock with a record date occurring after the
Effective Time shall be paid to the holder of any unsurrendered Old Certificate
representing shares of IJL Common Stock converted in the Merger into the right
to receive shares of such Wachovia Common Stock until the holder thereof shall
be entitled to receive New Certificates in exchange therefor in accordance with
the procedures set
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forth in this Section 3.04, and no such shares of IJL Common Stock shall be
eligible to vote until the holder of Old Certificates is entitled to receive
New Certificates in accordance with the procedures set forth in this Section
3.04. After becoming so entitled in accordance with this Section 3.04, the
record holder thereof also shall be entitled to receive any such dividends or
other distributions, without any interest thereon, which theretofore had become
payable with respect to shares of Wachovia Common Stock such holder had the
right to receive upon surrender of the Old Certificate.
(e) Any portion of the aggregate Merger Consideration that remains
unclaimed by the shareholders of IJL for six months after the Effective Time
and the proceeds of any investments thereof shall be repaid by the Exchange
Agent to the Surviving Corporation. Any shareholder of IJL who has not
theretofore complied with this Section 3.04 shall thereafter be entitled to
look only to the Surviving Corporation for payment of the Merger Consideration
deliverable in respect of each share of IJL stock held by such shareholder
without any interest thereon.
3.05 ANTI-DILUTION PROVISIONS. In the event Wachovia changes (or
establishes a record date for changing) the number of shares of Wachovia Common
Stock issued and outstanding prior to the Effective Date as a result of a stock
split, stock dividend, recapitalization or similar transaction with respect to
the outstanding Wachovia Common Stock and the record date therefor shall be
prior to the Effective Date, the Exchange Ratio shall be proportionately
adjusted.
ARTICLE IV
ACTIONS PENDING MERGER
4.01 FOREBEARANCES OF IJL. From the date hereof until the Effective Time,
except as expressly contemplated by this Agreement, without the prior written
consent of Wachovia, IJL will not, and will cause each of its Subsidiaries not
to:
(a) ORDINARY COURSE. Conduct the business of IJL and its Subsidiaries
other than in the ordinary and usual course or fail to use reasonable efforts
to preserve intact their business organizations and assets and maintain their
rights, franchises and existing relations with customers, suppliers, employees
and business associates, or take any action reasonably likely to have an
adverse affect upon IJL's ability to perform any of its material obligations
under this Agreement.
(b) CAPITAL STOCK. Other than pursuant to Rights Previously Disclosed and
outstanding on the date hereof, (i) issue, sell or otherwise permit to become
outstanding, or authorize the creation of, any additional shares of IJL Common
Stock or any Rights, (ii) enter into any agreement with respect to the
foregoing, or (iii) permit any additional shares of IJL Common Stock to become
subject to new grants of employee or director stock options, other Rights or
similar stock-based employee rights.
(c) DIVIDENDS, ETC. (i) Make, declare, pay or set aside for payment any
dividend (other than (A) quarterly cash dividends on IJL Common Stock in an
amount not to exceed $0.06 per share with record and payment dates consistent
with past practice and (B) dividends from wholly owned Subsidiaries to IJL or
another wholly owned Subsidiary of IJL) on or in respect of, or declare or make
any distribution on, any shares of IJL common Stock or (ii) 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 or amend or renew
any employment, consulting, severance or similar agreements or arrangements
with any director, officer, employee or consultant of IJL or its Subsidiaries,
or grant any salary or wage increase or increase any benefit (including
incentive or bonus payments), except (i) for normal individual increases in
compensation to employees in the ordinary course of business consistent with
past practice, (ii) for other changes that are required by applicable law (iii)
to satisfy Previously Disclosed contractual obligations existing as of the date
hereof or (iv) employee arrangements with newly hired employees (other than
executive officers) in the ordinary course of business consistent with past
practice.
(e) BENEFIT PLANS. Enter into, establish, adopt or amend (except as may be
required by applicable law or contemplated by this Agreement) 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, partner,
officer, employee or consultant of IJL or its Subsidiaries, or take any action
to accelerate the vesting or exercisability of stock options, restricted stock
or other compensation or benefits payable thereunder.
(f) DISPOSITIONS. Except as Previously Disclosed, sell, transfer,
mortgage, encumber or otherwise dispose of or discontinue any of its assets,
deposits, business or properties except in the ordinary course of business
consistent with past practice and in a transaction that is not Material to it
and its Subsidiaries taken as a whole.
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(g) ACQUISITIONS. Except as Previously Disclosed, purchase or acquire all
or any portion of, the assets, business, deposits or properties of any other
entity except in the ordinary course of business consistent with past practice
and in a transaction that is not Material to it and its Subsidiaries taken as a
whole.
(h) GOVERNING DOCUMENTS. Amend the IJL Certificate, IJL By-laws or the
certificate of incorporation or by-laws (or similar governing documents) of any
of IJL's Subsidiaries.
(i) EXTENSION OF CREDIT. Extend or commit to extend credit other than in
the ordinary course of business consistent with past practice.
(j) 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.
(k) 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.
(l) CLAIMS. Except in the ordinary course of business consistent with past
practice, settle any claim, action or proceeding, except for any claim, action
or proceeding involving solely money damages in an amount, individually or in
the aggregate for all such settlements, that is not Material to IJL and its
Subsidiaries taken as a whole, and that does not involve or create precedent
for claims, actions or proceedings that are reasonably likely to be Material to
IJL and its Subsidiaries taken as a whole.
(m) FUND ACTION. Except as and to the extent required, based upon the
written advice of outside counsel, in the exercise of the fiduciary obligations
of IJL or one of its Subsidiaries to any Investment Company, request that any
action be taken by any Fund Board, other than (i) routine actions that would
not, individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect on IJL or any Investment Company, (ii) actions Previously
Disclosed, or (iii) actions necessary to allow consummation of the Merger or
the Subsidiary Combination.
(n) ADVERSE ACTIONS. (i) Knowingly take any action which would materially
adversely affect its ability to consummate the Merger; (i) knowingly take any
action reasonably likely to prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368 of the Code; or (ii) 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 Agreement 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
Agreement except, in each case, as may be required by applicable law or
regulation.
(o) CAPITAL EXPENDITURES. Authorize or make any capital expenditures,
other than in the ordinary and usual course of business consistent with past
practice and in any event in amounts not exceeding $5,000,000 in the aggregate.
(p) RISK MANAGEMENT. Except as required by applicable law or regulation,
(i) implement or adopt any material change in its interest rate and other risk
management policies, procedures or practices; (ii) fail to follow its existing
policies or practices with respect to managing its exposure to interest rate
and other risk; or (iii) fail to use commercially reasonable means to avoid any
material increase in its aggregate exposure to interest rate and other risk.
(q) NEW ACTIVITIES. Initiate any new business activity that would be
impermissible for a "bank holding company" under the Bank Holding Company Act
of 1956, as amended.
(r) INDEBTEDNESS. Incur any indebtedness for borrowed money other than in
the ordinary course of business consistent with past practice.
(s) 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 Tax Return, enter into any material closing agreement, settle
any material Tax 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 are not Material and which
are taken in the ordinary and usual course of business consistent with past
practice.
(t) COMMITMENTS. Agree or commit to do any of the foregoing.
4.02 FOREBEARANCES OF WACHOVIA. From the date hereof until the Effective
Time, except as expressly contemplated by this Agreement, without the prior
written consent of IJL, Wachovia will not, and will cause each of its
Subsidiaries not to:
(a) EXTRAORDINARY DIVIDENDS. Make, declare, pay or set aside for payment
any extraordinary dividend.
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(b) ADVERSE ACTIONS. (i) Knowingly take any action which would materially
adversely affect its ability to consummate the Merger; (ii) knowingly take any
action reasonably likely to prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368 of the Code; or (iii)
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 Agreement 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
Agreement except, in each case, as may be required by applicable law or
regulation.
(c) COMMITMENTS. Agree or commit to do any of the foregoing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 DISCLOSURE SCHEDULES. On or prior to the date hereof, Wachovia has
delivered to IJL a schedule and IJL has delivered to Wachovia a schedule
(respectively, its "DISCLOSURE SCHEDULE") setting forth, among other things,
items the disclosure of which is necessary or appropriate either in response to
an express disclosure requirement contained in a provision hereof or as an
exception to one or more representations or warranties contained in Section
5.03 or 5.04 or to one or more of its covenants contained in Article IV;
PROVIDED, that (a) no such item is required to be set forth in a Disclosure
Schedule as an exception to a representation or warranty if its absence would
not be reasonably likely to result in the related representation or warranty
being deemed untrue or incorrect under the standard established by Section
5.02, and (b) the mere inclusion of an item in a Disclosure Schedule as an
exception to a representation or warranty shall not be deemed an admission by a
party that such item represents a material exception or fact, event or
circumstance or that such item is reasonably likely to result in a Material
Adverse Effect.
5.02 STANDARD. No representation or warranty of IJL or Wachovia contained
in Section 5.03 or 5.04 shall be deemed untrue or incorrect, and no party
hereto shall be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, event or circumstance unless such
fact, circumstance or event, individually or taken together with all other
facts, events or circumstances inconsistent with any representation or warranty
contained in Section 5.03 or 5.04 has had or is reasonably likely to have a
Material Adverse Effect.
5.03 REPRESENTATIONS AND WARRANTIES OF IJL. Subject to Sections 5.01 and
5.02 and except as Previously Disclosed in a paragraph of its Disclosure
Schedule corresponding to the relevant paragraph below, IJL hereby represents
and warrants to Wachovia:
(a) ORGANIZATION, STANDING AND AUTHORITY. IJL is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. IJL is duly qualified to do business and is in good standing in the
states of the United States and any foreign jurisdictions where its ownership
or leasing of property or assets or the conduct of its business requires it to
be so qualified.
(b) IJL STOCK. As of the date hereof, the authorized capital stock of IJL
consists solely of 30,000,000 shares of IJL Common Stock, of which 6,479,306
shares were outstanding as of the date hereof. As of the date hereof, no shares
of IJL Common Stock were held in treasury by IJL or otherwise owned by IJL or
its Subsidiaries ("TREASURY STOCK"). The outstanding shares of IJL Common Stock
have been duly authorized and are validly issued and outstanding, fully paid
and nonassessable, and subject to no preemptive rights (and were not issued in
violation of any preemptive rights). As of the date hereof, except as
Previously Disclosed, there are no shares of IJL Common Stock authorized and
reserved for issuance, IJL does not have any Rights issued or outstanding with
respect to IJL Stock, and IJL does not have any commitment to authorize, issue
or sell any IJL Common Stock or Rights, except pursuant to this Agreement and
the Stock Option Agreement. The number of shares of IJL Common Stock which are
issuable and reserved for issuance upon exercise of IJL Stock Options as of the
date hereof, and the exercise prices and other terms thereof, are Previously
Disclosed.
(c) SUBSIDIARIES. (i) (A) IJL has Previously Disclosed a list of all of
its Subsidiaries together with the jurisdiction of organization of each such
Subsidiary, (B) except as Previously Disclosed, it owns, directly or
indirectly, all the issued and outstanding equity securities of each of its
Subsidiaries, (C) no equity securities of any of its Subsidiaries are or may
become required to be issued (other than to it or its wholly-owned
Subsidiaries) by reason of any Right or otherwise, (D) there are no contracts,
commitments, understandings or arrangements by which any of such Subsidiaries
is or may be bound to sell or otherwise transfer any equity securities of any
such Subsidiaries (other than to it or its wholly-owned Subsidiaries), (E)
there are no contracts, commitments, understandings, or arrangements relating
to its rights to vote or to dispose of such
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securities and (F) all the equity securities of each Subsidiary held by IJL or
its Subsidiaries are fully paid and nonassessable and are owned by IJL or its
Subsidiaries free and clear of any Liens.
(ii) Except as Previously Disclosed, IJL does not own beneficially,
directly or indirectly, any equity securities or similar interests of any
Person, or any interest in a partnership, limited liability company or
joint venture or similar entity, other than its Subsidiaries and other than
in connection with its market making activities in the ordinary course of
its business consistent with past practice.
(iii) Each of IJL's Subsidiaries has been duly organized and is validly
existing in good standing under the laws of the jurisdiction of its
organization, and is duly qualified to do business and in good standing in
the jurisdictions where its ownership or leasing of property or assets or
the conduct of its business requires it to be so qualified.
(d) CORPORATE POWER. IJL and each of its Subsidiaries has the corporate
power and authority to carry on its business as it is now being conducted and
to own all its properties and assets; and IJL has the corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and the Stock Option Agreement and to consummate the transactions contemplated
hereby and thereby.
(e) CORPORATE AUTHORITY. Subject in the case of this Agreement to receipt
of the requisite approval of the agreement of merger set forth in this
Agreement by the holders of a majority of the outstanding shares of IJL Common
Stock entitled to vote thereon (which is the only shareholder vote required
thereon), this Agreement, the Stock Option Agreement and the transactions
contemplated hereby and thereby have been authorized by all necessary corporate
action of IJL and the IJL Board prior to the date hereof. The approval of the
IJL Board of this Agreement, the Stock Option Agreement and the transactions
contemplated hereby and thereby was by a unanimous vote of all members of the
IJL Board. This Agreement is a valid and legally binding obligation of IJL,
enforceable in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors' rights or by general equity principles). The IJL Board has
received the written opinion of Berkshire Capital Corporation to the effect
that as of the date hereof the Exchange Ratio is fair to the holders of IJL
Common Stock from a financial point of view.
(f) REGULATORY FILINGS; NO DEFAULTS. (i) No consents or approvals of, or
filings or registrations with, any Governmental Authority, Self-Regulatory
Organization or with any third party are required to be made or obtained by IJL
in connection with the execution, delivery or performance by IJL of this
Agreement, or to consummate the Merger, EXCEPT for (A) filings of applications
or notices with Previously Disclosed securities licensing or supervisory
authorities, (B) the filing with the SEC of the Proxy Statement in definitive
form, (C) approval of the NYSE and consents of national securities exchanges to
the transfer of ownership of seats or memberships and (D) the filing of (x) a
certificate of merger with the Secretary of State of the State of Delaware
pursuant to the DGCL and (y) articles of merger with the Secretary of State of
North Carolina pursuant to the NBCA.
(ii) Subject only to the approval by the holders of a majority of the
outstanding shares of IJL Common Stock, the receipt of the regulatory
approvals referred to in Section 5.03(f)(1), the expiration of applicable
waiting periods and the making of required filings under federal and state
securities laws, the execution, delivery and performance of this Agreement
and the Stock Option Agreement and the consummation of the transactions
contemplated hereby and thereby do not and will not (A) constitute a breach
or violation of, or a default under, or give rise to any Lien, any
acceleration of remedies (except as Previously Disclosed) or any right of
termination (with or without the giving of notice, passage of time or both)
under, any law, rule or regulation or any judgment, decree, order,
governmental or non-governmental permit or license, or Contract of IJL or
of any of its Subsidiaries or to which IJL or any of its Subsidiaries or
its or their properties is subject or bound, (B) constitute a breach or
violation of, or a default under, the IJL Certificate or the IJL By-laws or
similar governing documents of any of its Subsidiaries, or (C) require any
consent or approval under any such law, rule, regulation, judgment, decree,
order, governmental or non-governmental permit or license or Contract.
(g) FINANCIAL STATEMENTS AND SEC DOCUMENTS; NO MATERIAL ADVERSE EFFECT.
(i) IJL's Annual Reports on Form 10-K for the fiscal years ended September 30,
1995, 1996 and 1997, and all other reports, registration statements, definitive
proxy statements or information statements filed or to be filed by it or any of
its Subsidiaries subsequent to September 30, 1995 under the Securities Act, or
under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, in the form filed
or to be filed (collectively, IJL's "SEC DOCUMENTS") with the SEC, as of the
date filed, (A) complied or will comply in all material respects as to form
with the applicable requirements under the Securities Act or the Exchange Act,
as the case may be, and (B) did not and will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
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and each of the balance sheets contained in or incorporated by reference into
any such SEC Document (including the related notes and schedules thereto)
fairly presents, or will fairly present, the financial position of IJL and its
Subsidiaries as of its date, and each of the statements of income and changes
in stockholders' equity and cash flows or equivalent statements in such SEC
Documents (including any related notes and schedules thereto) fairly presents,
or will fairly present, the results of operations, changes in stockholders'
equity and changes in cash flows, as the case may be, of IJL and its
Subsidiaries for the periods to which they relate, in each case in accordance
with generally accepted accounting principles consistently applied during the
periods involved, except in each case as may be noted therein, subject to
normal year-end audit adjustments in the case of unaudited statements (the
foregoing financial statements are referred to as, the "FINANCIAL STATEMENTS").
(ii) Except as Previously Disclosed, since September 30, 1997, IJL and
its Subsidiaries have not incurred any liability other than in the ordinary
course of business consistent with past practice.
(iii) Except as Previously Disclosed, since September 30, 1997, (A) IJL
and its Subsidiaries have conducted their respective businesses in the
ordinary and usual course consistent with past practice (excluding the
incurrence of expenses related to this Agreement and the transactions
contemplated hereby) and (B) no event has occurred or circumstance arisen
that, individually or taken together with all other facts, circumstances
and events (described in any paragraph of Section 5.03 or otherwise), is
reasonably likely to have a Material Adverse Effect with respect to IJL.
(h) CONTRACTS. (i) IJL has Previously Disclosed each of the following
Contracts to which either IJL or any of its Subsidiaries is a party, or by
which any of them is bound or to which any of their properties is subject:
(A) any lease of real property that is Material to the conduct of the
business of IJL and its Subsidiaries;
(B) any agreement for the purchase of materials, supplies, goods,
services, equipment or other assets that is a "material contract" within
the meaning of item 601(b)(10) of the SEC's Regulation S-K;
(C) any options or rights to acquire from any Person any capital
stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities of such Person other than listed
options acquired in the ordinary course of business of IJL and its
Subsidiaries consistent with past practice;
(D) any agreement relating to the acquisition or disposition of any
business or operations (whether by merger, sale of stock, sale of assets,
out-sourcing or otherwise);
(E) any indenture, mortgage, promissory note, loan agreement,
guarantee or other agreement or commitment for the borrowing of money or
the deferred purchase price of property in excess of $5,000,000 (in
either case, whether incurred, assumed, guaranteed or secured by any
asset) other than repurchase agreements or reverse repurchase agreements
entered into in the ordinary course of business of IJL and its
Subsidiaries consistent with past practice;
(F) any license, franchise or similar agreement Material to IJL or any
of its Subsidiaries or any agreement relating to any trade name or
intellectual property right that is Material to the business and
operations of IJL or any of its Subsidiaries;
(G) any exclusive dealing agreement or any agreement that limits the
freedom of IJL or any of its Subsidiaries to compete in any line of
business or with any Person or in any area or that would so limit their
freedom after the Effective Date;
(H) any Advisory Agreement; and
(I) any other Material Contract.
(ii) Each Contract that has been, or is required to be Previously
Disclosed pursuant to this Section, is a valid and binding agreement of IJL
or one or more of its Subsidiaries, as the case may be, and is in full
force and effect, and IJL and such Subsidiaries and, to IJL's knowledge,
the other parties thereto are not in default or breach in any material
respect under the terms of any such Contract.
(i) CONTRACTS WITH CLIENTS. (i) Each of IJL and its Subsidiaries is in
compliance with the terms of each Contract with any Client, and each such
Contract is in full force and effect with respect to the applicable Client.
There are no disputes pending or threatened with any Client under the terms
of any such Contract or with any former Client other than disputes arising
in the ordinary course of business of IJL and its Subsidiaries. IJL has
made available to Wachovia true and complete copies of all advisory,
sub-advisory and similar agreements with any Clients.
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(ii) Except as Previously Disclosed, each extension of credit by IJL or
any of its Subsidiaries to any Client (A) is in full compliance with
Regulation T of the Federal Reserve System or any substantially similar
regulation of any governmental or regulatory agency or authority, (B) is
fully secured and (C) IJL or one or more of its Subsidiaries, as the case
may be, has a first priority perfected security interest in the collateral
securing such extension of credit.
(j) REGISTRATIONS. Except as Previously Disclosed, neither IJL nor any of
its Subsidiaries or Affiliates (excluding for these purposes any shareholder)
is subject to regulation under the Investment Advisers Act or the Investment
Company Act. IJL and its Subsidiaries and 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, any Self-Regulatory Organization or any Governmental Authority of
any federal, state or foreign jurisdiction, are duly registered as such. All
federal, state 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.
(k) COMPLIANCE WITH LAWS. Each of IJL and its Subsidiaries, and, to the
best of the IJL's knowledge, each of their respective officers and employees:
(i) is in compliance with all applicable federal, state and local
statutes, laws, regulations, ordinances, rules, judgments, orders or
decrees applicable to the conduct of its businesses or to the employees
conducting such businesses, and the rules of all Self-Regulatory
Organizations applicable thereto;
(ii) has all permits, licenses, authorizations, orders and approvals of,
and has made all filings, applications and registrations with, all
Governmental Authorities and Self-Regulatory Organizations that are
required in order to permit them to own or lease their properties and to
conduct their businesses substantially as presently conducted; all such
permits, licenses, certificates of authority, orders and approvals are in
full force and effect and are current and, to the best of the IJL's
knowledge, no suspension or cancellation of any of them is threatened or is
reasonably likely; are in good standing with all relevant Governmental
Authorities and are members in good standing with all relevant
Self-Regulatory Organizations;
(iii) Except as Previously Disclosed, has received, since September 30,
1995, no notification or communication from any Governmental Authority or
Self-Regulatory Organization (A) asserting non-compliance with any of the
statutes, regulations, rules or ordinances that such Governmental Authority
or Self-Regulatory Organization enforces, (B) threatening to revoke or
condition the continuation of any license, franchise, seat on any exchange,
permit, or governmental authorization (nor, to the IJL's knowledge, do any
grounds for any of the foregoing exist), (C) requiring any of them
(including any of IJL's or its Subsidiaries' directors or controlling
Persons) to enter into a cease and desist order, agreement, memorandum of
understanding, censure or disciplinary agreement (or requiring the board of
directors thereof to adopt any resolution or policy), or (D) restricting or
disqualifying their activities (except for restrictions generally imposed
by rule, regulation or administrative policy on brokers or dealers
generally);
(iv) is not aware of any pending or threatened investigation, review or
disciplinary proceedings by any Governmental Authority or Self-Regulatory
Organization against IJL, any of its Subsidiaries or any officer, director
or employee thereof;
(v) is not, nor to IJL'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 censure, limitations on the activities, functions or operations of, or
suspension or revocation of the registration of any broker-dealer
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 there is no reasonable basis
for, or proceeding or investigation, whether formal or informal, or whether
preliminary or otherwise, that is reasonably likely to result in, any such
censure, limitations, suspension or revocation;
(vi) 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. No
broker-dealer Subsidiary acts as the "sponsor" of a "broker-dealer trading
program", as such terms are defined in Rule 17a-23 under the Exchange Act;
(vii) in the conduct of its business with respect to employee benefit
plans 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
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ERISA or Section 4975(c) of the Code which would subject it to liability or
Taxes under Sections 409 or 502(i) of ERISA or Section 4975(a) of the Code;
(viii) IJL has made available to Wachovia true and correct copies of (A)
each Form G-37/G-38 filed with the MSRB since September 30, 1995 and (B)
all records required to be kept by IJL under Rule G-8(a)(xvi) of the MSRB;
(ix) is not subject to any cease and desist, censure or other order
issued by, or a party to any written agreement, consent agreement,
memorandum of understanding or disciplinary agreement with, or a party to
any commitment letter or similar undertaking to, or subject to any order or
directive by, a recipient of any supervisory letter from or has adopted any
board resolutions at the request of any Governmental Authority or
Self-Regulatory Organization, or been advised since September 30, 1995, by
any Governmental Authority or Self-Regulatory Organization that it is
considering issuing or requesting any such agreement or other action or
have knowledge of any pending or threatened regulatory investigation; and
(x) Except as Previously Disclosed, since September 30, 1995, has timely
filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that were required to
be filed under any applicable law, regulation or rule, with (A) any
applicable Governmental Authority and (B) any Self-Regulatory Organization
(collectively, the "COMPANY REPORTS"). As of their respective dates, the
Company Reports complied with the applicable statutes, rules, regulations
and orders enforced or promulgated by the regulatory authority with which
they were filed.
(l) INVESTMENT ADVISORY ACTIVITIES. (i) Each of the Investment Companies
(or the trust of which it is a series) has been Previously Disclosed and is
duly organized and existing in good standing under the laws of the jurisdiction
under which it is organized. Each of the Investment Companies that represents
itself in its offering materials as qualifying as a "regulated investment
company" under the Code is so qualified. Each of the Investment Companies (or
the trust or corporation of which it is a series) that is registered or
required to be registered under the Investment Company Act ("REGISTERED FUNDS")
is governed by a board of trustees or directors (each a "FUND BOARD" and,
collectively, the "FUND BOARDS") consisting of at least 50% of trustees or
directors who are not "interested persons") (as defined in the Investment
Company Act) of the Registered Funds or IJL. The Fund Boards operate in all
material respects in conformity with the requirements and restrictions of the
Investment Company Act, to the extent applicable. IJL has provided to Wachovia
true and complete copies of all the constituent documents and related advisory,
sub-advisory and similar agreements ("ADVISORY AGREEMENTS") of all of the
Investment Companies.
(ii) Each of the Investment Companies is in compliance with all
applicable foreign, federal and state laws, rules and regulations of the
SEC, the IRS, and any Self-Regulatory Organization having jurisdiction over
such Investment Company.
(iii) Each Investment Company has been operated in compliance with its
respective objectives, policies and restrictions, including those set forth
in the applicable prospectus and registration statement, if any, for that
Investment Company or governing instruments for a Client. IJL and its
Subsidiaries have operated their investment accounts in accordance with the
investment objectives and guidelines in effect for such investment
accounts.
(iv) Each Registered Fund has duly adopted procedures pursuant to Rules
17a-7, 17e-1 and 10f-3 under the Investment Company Act, to the extent
applicable.
(v) Neither IJL, nor any "affiliated person" (as defined in the
Investment Company Act) thereof, is ineligible pursuant to Section 9 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 IJL, nor any "associated person" (as defined in the
Investment Advisors Act) thereof, is ineligible pursuant to Section 203 of
the Investment Advisors Act to serve as an investment advisor or as an
associated person to a registered investment advisor.
(m) PROPERTIES; SECURITIES. (i) Except as reserved against in the IJL's
Financial Statements dated before the date hereof and except as Previously
Disclosed, IJL and its Subsidiaries have good and marketable title, free and
clear of all Liens (other than Liens for current taxes not yet delinquent) to
all of the Material properties and assets, tangible or intangible, reflected in
such financial statements as being owned by IJL and its Subsidiaries as of the
dates thereof. To the best of the IJL's knowledge, all buildings and all the
Material fixtures, equipment, and other property and assets held under leases
or subleases by any of IJL and its Subsidiaries are held under valid leases or
subleases enforceable in accordance with their respective terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally
and to general equity principles). IJL has Previously Disclosed, as of the date
hereof, a list of all real estate owned by it or a IJL Subsidiary. Each of IJL
and its Subsidiaries has good and marketable title
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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 and past business practices to secure
obligations of each of IJL or any of its Subsidiaries. Such securities are
valued on the books of IJL or its Subsidiaries in accordance with generally
accepted accounting practices.
(ii) IJL has Previously Disclosed, as of the date hereof, a list of all
equity securities it or a IJL Subsidiary holds 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).
(n) LITIGATION. Except as Previously Disclosed, no litigation, proceeding,
investigation or controversy ("LITIGATION") before any court, arbitrator,
mediator, Governmental Authority or Self-Regulatory Organization is pending
against IJL or any of its Subsidiaries, and, to the best of the IJL's
knowledge, no such Litigation has been threatened. Previously Disclosed is a
true and complete list, as of the date hereof, of all Litigation pending (or,
to the best of the IJL's knowledge, threatened) arising out of any state of
facts relating to the sale of investment products or the providing of advice by
IJL, the IJL Subsidiaries or any employees thereof (including 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 IJL or any of its Subsidiaries was
a manager, co-manager, syndicate member or distributor, Derivatives Contracts
or structured notes).
(o) NO BROKERS. No action has been taken by IJL that would give rise to
any valid claim against any party hereto for a brokerage commission, finder's
fee or other like payment with respect to the transactions contemplated by this
Agreement, excluding a Previously Disclosed fee to be paid to Berkshire Capital
Corporation.
(p) EMPLOYEE BENEFIT PLANS. (i) Section 5.03(p)(i) of IJL's Disclosure
Schedule contains a complete and accurate list of all existing bonus,
incentive, deferred compensation, pension, retirement, profit-sharing, thrift,
savings, employee stock ownership, stock bonus, stock purchase, restricted
stock, stock option, severance, welfare and fringe benefit plans, employment or
severance agreements and all similar practices, policies and arrangements under
which IJL or any of its subsidiaries has any liability or obligation to provide
benefits or compensation to or on behalf of any employee or former employee
(the "EMPLOYEES"), consultant or former consultant (the "CONSULTANTS") or
director or former director (the "DIRECTORS") of IJL or any of its Subsidiaries
(the "COMPENSATION AND BENEFIT PLANS"). Neither IJL nor any of its Subsidiaries
has any commitment to create any additional Compensation and Benefit Plan or to
modify or change any existing Compensation and Benefit Plan, except as may be
required by applicable law or contemplated by this Agreement.
(ii) Each Compensation and Benefit Plan has been operated and
administered in all material respects in accordance with its terms and with
applicable law, including, but not limited to, ERISA, the Code, the
Securities Act, the Exchange Act, the Age Discrimination in Employment Act,
and any regulations or rules promulgated thereunder, and all filings,
disclosures and notices required by ERISA, the Code, the Securities Act,
the Exchange Act, the Age Discrimination in Employment Act or any other
applicable law have been timely made. Each Compensation and Benefit Plan
which is an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA (a "PENSION PLAN") and which is intended to be qualified
under Section 401(a) of the Code has received a favorable determination
letter (including a determination that the related trust under such
Compensation and Benefit Plan is exempt from tax under Section 501(a) of
the Code) from the Internal Revenue Service ("IRS") for "TRA" (as defined
in Rev. Proc. 93-39), or will file for such determination letter prior to
the expiration of the remedial amendment period for such Compensation and
Benefit Plan, and IJL is not aware of any circumstances likely to result in
revocation of any such favorable determination letter. There is no Material
pending or, to the knowledge of IJL, threatened legal action, suit or claim
relating to the Compensation and Benefit Plans, other than routine claims
for benefits. Neither IJL nor any of its Subsidiaries has engaged in a
transaction, or omitted to take any action, with respect to any
Compensation and Benefit Plan that would reasonably be expected to subject
IJL or any of its Subsidiaries to a tax or penalty imposed by either
Section 4975 of the Code or Section 502 of ERISA, assuming for purposes of
Section 4975 of the Code that the taxable period of any such transaction
expired as of the date hereof.
(iii) No liability (other than for payment of premiums to the PBGC which
have been made or will be made on a timely basis) under Title IV of ERISA
has been or is expected to be incurred by IJL or any of its Subsidiaries
with respect to any ongoing, frozen or terminated "single-employer plan",
within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any of them, or any single-employer plan of any entity (an
"ERISA AFFILIATE") which is considered one employer with IJL under Section
4001(a)(14) of ERISA or Section 414(b) or (c) of the Code (an "ERISA
AFFILIATE PLAN"). None of IJL, any of its Subsidiaries or any ERISA
Affiliate has contributed, or has
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been obligated to contribute, to a multiemployer plan under Subtitle E of
Title IV of ERISA at any time since September 26, 1980. No notice of a
"reportable event", within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived, has been required to
be filed for any Compensation and Benefit Plan or by any ERISA Affiliate
Plan within the 12-month period ending on the date hereof, and to the
knowledge of IJL no such notice will be required to be filed as a result of
the transactions contemplated by this Agreement. The PBGC has not
instituted proceedings to terminate any Pension Plan or ERISA Affiliate
Plan and, to IJL's knowledge, no condition exists that presents a material
risk that such proceedings will be instituted. To the knowledge of IJL,
there is no pending investigation or enforcement action by the PBGC, the
Department of Labor (the "DOL") or IRS or any other governmental agency
with respect to any Compensation and Benefit Plan. Under each Pension Plan
and ERISA Affiliate Plan, as of the date of the most recent actuarial
valuation performed prior to the date of this Agreement, the actuarially
determined present value of all "benefit liabilities", within the meaning
of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in such actuarial valuation of such Pension
Plan or ERISA Affiliate Plan), did not exceed the then current value of the
assets of such Pension Plan or ERISA Affiliate Plan and since such date
there has been neither an adverse change in the financial condition of such
Pension Plan or ERISA Affiliate Plan nor any amendment or other change to
such Pension Plan or ERISA Affiliate Plan that would increase the amount of
benefits thereunder which reasonably could be expected to change such
result.
(iv) All contributions required to be made under the terms of any
Compensation and Benefit Plan or ERISA Affiliate Plan or any employee
benefit arrangements under any collective bargaining agreement to which IJL
or any of its Subsidiaries is a party have been timely made or have been
reflected on IJL's financial statements. Neither any Pension Plan nor any
ERISA Affiliate Plan has an "accumulated funding deficiency" (whether or
not waived) within the meaning of Section 412 of the Code or Section 302 of
ERISA and all required payments to the PBGC with respect to each Pension
Plan or ERISA Affiliate Plan have been made on or before their due dates.
None of IJL, any of its Subsidiaries or any ERISA Affiliate (x) has
provided, or would reasonably be expected to be required to provide,
security to any Pension Plan or to any ERISA Affiliate Plan pursuant to
Section 401(a)(29) of the Code, and (y) has taken any action, or omitted to
take any action, that has resulted, or would reasonably be expected to
result, in the imposition of a lien under Section 412(n) of the Code or
pursuant to ERISA.
(v) Neither IJL nor any of its Subsidiaries has any obligations to
provide retiree health and life insurance or other retiree death benefits
under any Compensation and Benefit Plan, other than benefits mandated by
Section 4980B of the Code, and each such Compensation and Benefit Plan may
be amended or terminated in accordance with its terms without incurring
liability thereunder. There has been no communication to Employees by IJL
or any of its Subsidiaries that would reasonably be expected to promise or
guarantee such Employees retiree health or life insurance or other retiree
death benefits on a permanent basis.
(vi) With respect to each Compensation and Benefit Plan, if applicable,
IJL has provided, or made available to Wachovia, true and complete copies
of existing: (A) Compensation and Benefit Plan documents and amendments
thereto; (B) trust instruments and insurance contracts; (C) two most recent
Forms 5500 filed with the IRS; (D) most recent actuarial report and
financial statement; (E) the most recent summary plan description; (F)
forms filed with the PBGC (other than for premium payments); (G) most
recent determination letter issued by the IRS; (H) any Form 5310 or Form
5330 filed with the IRS; and (I) most recent nondiscrimination tests
performed under ERISA and the Code (including 401(k) and 401(m) tests).
(vii) Except as Previously Disclosed, the consummation of the
transactions contemplated by this Agreement would not, directly or
indirectly (including, without limitation, as a result of any termination
of employment prior to or following the Effective Time) reasonably be
expected to (A) entitle any Employee, Consultant or Director to any payment
(including severance pay or similar compensation) or any increase in
compensation, (B) result in the vesting or acceleration of any benefits
under any Compensation and Benefit Plan or (C) result in any material
increase in benefits payable under any Compensation and Benefit Plan.
(viii) Except as Previously Disclosed, neither IJL nor any of its
Subsidiaries maintains any compensation plans, programs or arrangements the
payments under which would not reasonably be expected to be deductible as a
result of the limitations under Section 162(m) of the Code and the
regulations issued thereunder.
(ix) As a result, directly or indirectly, of the transactions
contemplated by this Agreement (including, without limitation, as a result
of any termination of employment prior to or following the Effective Time),
none of Wachovia, IJL or the Surviving Corporation, or any of their
respective Subsidiaries will be obligated to make a payment to an
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Employee of IJL or any of its Subsidiaries that would be characterized as
an "excess parachute payment" to an individual who is a "disqualified
individual" (as such terms are defined in Section 280G of the Code),
without regard to whether such payment is reasonable compensation for
personal services performed or to be performed in the future.
(q) LABOR MATTERS. Neither IJL nor any of its Subsidiaries is a party to
or is bound by any collective bargaining agreement, contract or other agreement
or understanding with a labor union or labor organization, nor is IJL or any of
its Subsidiaries the subject of a proceeding asserting that it or any such
Subsidiary has committed an unfair labor practice (within the meaning of the
National Labor Relations Act) or seeking to compel IJL or any such Subsidiary
to bargain with any labor organization as to wages or conditions of employment,
nor is there any strike or other labor dispute involving it or any of its
Subsidiaries pending or, to IJL's knowledge, threatened, nor is IJL aware of
any activity involving its or any of its Subsidiaries' employees seeking to
certify a collective bargaining unit or engaging in other organizational
activity.
(r) TAKEOVER LAWS; DISSENTERS RIGHTS. IJL has taken all action required to
be taken by it in order to exempt this Agreement, the Stock Option Agreement,
the shareholder agreements contemplated by Recital D and the transactions
contemplated hereby and thereby from, and this Agreement, the Stock Option
Agreement and the transactions contemplated hereby and thereby are exempt from
the restrictions of any "moratorium", "control share", "fair price" "affiliate
transaction", "business combination" or other antitakeover laws and regulations
of any state (collectively, "TAKEOVER LAWS") without limitation, the State of
Delaware, and including, without limitation, Section 203 of the DGCL. Holders
of IJL Common Stock do not have dissenters rights in connection with the
Merger.
(s) ENVIRONMENTAL MATTERS. Neither the conduct nor operation of IJL or its
Subsidiaries nor, to IJL's knowledge, any condition of any property presently
or previously owned, leased or operated by any of them (including, without
limitation, in a fiduciary or agency capacity), or on which any of them holds a
Lien, violates or violated Environmental Laws and no condition has existed or
event has occurred with respect to any of them or any such property that, with
notice or the passage of time, or both, is reasonably likely to result in
liability under Environmental Laws. Neither IJL nor any of its Subsidiaries has
received any notice from any Person or entity that IJL or its Subsidiaries or
the operation or condition of any property ever owned, leased, operated, or
held as collateral or in a fiduciary capacity by any of them are or were in
violation of or otherwise are alleged to have liability under any Environmental
Law, including, but not limited to, responsibility (or potential
responsibility) for the cleanup or other remediation of any pollutants,
contaminants, or hazardous or toxic wastes, substances or materials at, on,
beneath, or originating from any such property.
(t) TAX MATTERS. (i) All Tax Returns that are required to be filed by or
with respect to IJL and its Subsidiaries have been duly and timely filed, (ii)
all Taxes due with respect to the Tax Returns referred to in clause (i)
(assuming such Tax Returns have been properly completed) have been paid in
full, (iii) the Tax Returns referred to in clause (i) have been examined by the
IRS or the appropriate state, local or foreign taxing authority or the period
for assessment of the Taxes in respect of which such Tax Returns were required
to be filed has expired, (iv) all deficiencies asserted or assessments made as
a result of such examinations have been paid in full, (v) no issues that have
been raised by the relevant taxing authority in connection with the examination
of any of the Tax Returns referred to in clause (i) are currently pending, (vi)
all Taxes required by law to be withheld have been withheld and paid over to
the proper governmental authority in a timely manner, and (vii) no waivers of
statutes of limitation have been given by or requested with respect to any
Taxes of IJL or its Subsidiaries. IJL has made available to Wachovia true and
correct copies of the United States federal income Tax Returns filed by IJL and
its Subsidiaries for each of the three most recent fiscal years ended on or
before September 30, 1997. IJL and each of its Subsidiaries have complied with
all information reporting requirements and have retained all necessary
documentation in its files to permit continued compliance with information
reporting requirements. Neither IJL nor any of its Subsidiaries is a party to
any tax sharing agreement or arrangement other than with each other. Neither
IJL nor any of its Subsidiaries has been a member of any consolidated group for
income tax purposes other than the consolidated group of which IJL is the
common parent. Neither IJL nor any of its Subsidiaries has any liability with
respect to income, franchise or similar Taxes that accrued on or before the end
of the most recent period covered by IJL's SEC Documents filed on or prior to
the date hereof in excess of the amounts accrued with respect thereto that are
reflected in the financial statements included in IJL's SEC Documents filed
prior to the date hereof. Neither IJL nor any of its Subsidiaries has any
reason to believe that any conditions exist that might prevent or impede the
Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Code.
(u) INTERNAL CONTROLS. Except as Previously Disclosed, none of the
records, systems, controls, data or information of IJL and its Subsidiaries are
recorded, stored, maintained, operated or otherwise wholly or partly dependent
on or held by any means (including any electronic, mechanical or photographic
process, whether computerized or not) which (including
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all means of access thereto and therefrom) are not under the exclusive
ownership and direct control of IJL or its Subsidiaries or accountants retained
by IJL or its Subsidiaries. IJL and its Subsidiaries have devised and
maintained a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principals and to maintain accountability for
assets, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(v) DERIVATIVES; ETC. All exchange-traded, over-the-counter or other
swaps, caps, floors, collars, option agreements, futures and forward contracts
and other similar arrangements or Contracts (collectively," DERIVATIVES
CONTRACTS"), whether entered into for IJL's own account, or for the account of
one or more of IJL's Subsidiaries or their customers, were entered into (i) in
accordance with prudent business practices and all applicable laws, rules,
regulations and regulatory policies and (ii) with counterparties reasonably
believed to be financially responsible at the time; and each of them
constitutes the valid and legally binding obligation of IJL or one of its
Subsidiaries, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles), and are in full force and effect. Neither IJL nor its
Subsidiaries, nor, to the best of IJL's knowledge, any other party thereto, is
in breach of any of its obligations under any such agreement or arrangement.
IJL's SEC Documents disclose the value of such agreements and arrangements on a
mark-to-market basis in accordance with generally accepted accounting
principles.
(w) NAMES AND TRADEMARKS. IJL and its Subsidiaries have the right to use
the names, service-marks, trademarks and other intellectual property currently
used by them in the conduct of their businesses; each of such names,
service-marks, trademarks and other intellectual property which are Material to
the conduct of their business has been Previously Disclosed; and, in the case
of such names, service-marks and trademarks, in each state of the United
States, such right of use is free and clear of any Liens, and, to IJL's
knowledge, no other Person has the right to use such names, service-marks or
trademarks in any such state.
(x) BOOKS AND RECORDS. The books and records of IJL and its Subsidiaries
have been fully, properly and accurately maintained in all material respects,
and there are no material inaccuracies or discrepancies of any kind contained
or reflected therein, and they fairly present the financial position of IJL and
its Subsidiaries.
(y) INSURANCE. IJL's Disclosure Schedule sets forth all of the insurance
policies, binders, or bonds maintained by IJL or its Subsidiaries or under
which IJL pays the premiums ("INSURANCE POLICIES"). IJL and its Subsidiaries
are insured with reputable insurers against such risks and in such amounts as
the management of IJL reasonably has determined to be prudent in accordance
with industry practices. All the Insurance Policies are in full force and
effect; IJL and its Subsidiaries are not in material default thereunder; and
all claims thereunder have been filed in due and timely fashion.
(z) YEAR 2000 COMPLIANCE. The software and hardware operated by IJL and
its Subsidiaries are capable of providing or are being adapted or replaced to
provide 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.
5.04 REPRESENTATIONS AND WARRANTIES OF WACHOVIA. Subject to Sections 5.01
and 5.02 and except as Previously Disclosed in a paragraph of its Disclosure
Schedule corresponding to the relevant paragraph below, Wachovia hereby
represents and warrants to IJL as follows:
(a) ORGANIZATION, STANDING AND AUTHORITY. Wachovia is duly organized,
validly existing and in good standing under the laws of the State of North
Carolina. Wachovia is duly qualified to do business and is in good standing in
the states of the United States and foreign jurisdictions where its ownership
or leasing of property or assets or the conduct of its business requires it to
be so qualified. Wachovia 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.
(b) WACHOVIA STOCK. (i) As of the date hereof, the authorized capital
stock of Wachovia consists solely of 1,000,000,000 shares of Wachovia Common
Stock, of which 202,757,529 shares were outstanding as of the date hereof and
50,000,000 shares of Wachovia Preferred Stock, of which no shares were
outstanding as of the date hereof. As of the date hereof, except as set forth
in its Disclosure Schedule, Wachovia does not have any Rights issued or
outstanding with respect to Wachovia
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Stock, and Wachovia does not have any commitment to authorize, issue or sell
any Wachovia Stock or Rights, except pursuant to this Agreement.
(ii) The shares of Wachovia Common Stock to be issued in exchange for
shares of IJL Common Stock in the Merger, when issued in accordance with
the terms of this Agreement, will be duly authorized, validly issued, fully
paid and nonassessable.
(c) SUBSIDIARIES. Each of Wachovia's Significant Subsidiaries has been
duly organized and is validly existing in good standing under the laws of the
jurisdiction of its organization, and is duly qualified to do business and in
good standing in the jurisdictions where its ownership or leasing of property
or the conduct of its business requires it to be so qualified and it owns,
directly or indirectly, all the issued and outstanding equity securities of
each of its Significant Subsidiaries.
(d) CORPORATE POWER. Wachovia and each of its Significant Subsidiaries has
the corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets; and Wachovia has the
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated hereby.
(e) CORPORATE AUTHORITY. This Agreement and the transactions contemplated
hereby have been authorized by all necessary corporate action of Wachovia and
its Board of Directors and does not require any vote of stockholders. This
Agreement is a valid and legally binding agreement of Wachovia enforceable in
accordance with its terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws of general applicability relating to or affecting
creditors' rights or by general equity principles).
(f) REGULATORY APPROVALS; NO DEFAULTS. (i) No consents or approvals of, or
filings or registrations with, any court, administrative agency or commission
or other governmental authority or instrumentality or with any third party are
required to be made or obtained by Wachovia or any of its Subsidiaries in
connection with the execution, delivery or performance by Wachovia of this
Agreement or to consummate the Merger except for (A) approval of the listing on
the NYSE of Wachovia Common Stock to be issued in the Merger; (B) the filing
and declaration of effectiveness of the Registration Statement; (C) the filing
of articles of merger with the North Carolina Secretary of State pursuant to
the NBCA and a certificate of merger with the Delaware Secretary of State
pursuant to the DGCL; (D) such filings as are required to be made or approvals
as are required to be obtained under the securities or "Blue Sky" laws of
various states in connection with the issuance of Wachovia Stock in the Merger;
(E) the filing of an application with and approval of the Board of Governors of
the Federal Reserve System under Section 4(c)(8) of the Bank Holding Company
Act of 1956, as amended; and (F) the filings and receipts of approval set forth
in Section 7.01(b).
(ii) Subject to receipt of the regulatory approvals referred to in the
preceding paragraph and expiration of the related waiting periods, and
required filings under federal and state securities laws, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (A) constitute a
breach or violation of, or a default under, or give rise to any Lien, any
acceleration of remedies or any right of termination under, any law, rule
or regulation or any judgment, decree, order, governmental permit or
license, or agreement, indenture or instrument of Wachovia or of any of its
Subsidiaries or to which Wachovia or any of its Subsidiaries or properties
is subject or bound, (B) constitute a breach or violation of, or a default
under, the certificate of incorporation or by-laws (or similar governing
documents) of Wachovia or any of its Subsidiaries, or (C) require any
consent or approval under any such law, rule, regulation, judgment, decree,
order, governmental permit or license, agreement, indenture or instrument.
(g) FINANCIAL STATEMENTS AND SEC DOCUMENTS; MATERIAL ADVERSE EFFECT. (i)
Wachovia's SEC Documents, as of the date of Wachovia's most recent filing on
Form 10K under the Exchange Act, (A) complied or will comply in all material
respects as to form with the applicable requirements under the Securities Act
or the Exchange Act, as the case may be, and (B) did not and will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; and
each of the balance sheets contained in or incorporated by reference into any
such SEC Document (including the related notes and schedules thereto) fairly
presents, or will fairly present, the financial position of Wachovia and its
Subsidiaries as of its date, and each of the statements of income and changes
in stockholders' equity and cash flows or equivalent statements in such SEC
Documents (including any related notes and schedules thereto) fairly presents,
or will fairly present, the results of operations, changes in stockholders'
equity and changes in cash flows, as the case may be, of Wachovia and its
Subsidiaries for the periods to which they relate, in each case in accordance
with generally accepted accounting principles consistently applied during the
periods involved, except in each case as may be noted therein, subject to
normal year-end audit adjustments in the case of unaudited statements.
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(ii) Since September 30, 1997, no event has occurred or circumstance
arisen that, individually or taken together with all other facts,
circumstances and events (described in any paragraph of Section 5.04 or
otherwise), is reasonably likely to have a Material Adverse Effect with
respect to Wachovia.
(h) LITIGATION; REGULATORY ACTION. (i) Other than as set forth in its SEC
Documents filed on or before the date hereof, no litigation, claim or other
proceeding before any Governmental Authority is pending against Wachovia or any
of its Subsidiaries and, to the best of Wachovia's knowledge, no such
litigation, claim or other proceeding has been threatened.
(ii) Neither Wachovia nor any of its Subsidiaries or properties is a
party to or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter or
similar submission to, or extraordinary supervisory letter from a
Governmental Authority, nor has Wachovia or any of its Subsidiaries been
advised by a Governmental Authority that such agency is contemplating
issuing or requesting (or is considering the appropriateness of issuing or
requesting) any such order, decree, agreement, memorandum of understanding,
commitment letter, supervisory letter or similar submission.
(i) COMPLIANCE WITH LAWS. Wachovia and each of its Subsidiaries:
(i) in the conduct of its business, is in compliance with all applicable
federal, state, local and foreign statutes, laws, regulations, ordinances,
rules, judgments, orders or decrees applicable thereto or to the employees
conducting such businesses, including, without limitation, the Equal Credit
Opportunity Act, the Fair Housing Act, the Community Reinvestment Act, the
Home Mortgage Disclosure Act, ERISA and all other applicable fair lending
laws and other laws relating to discriminatory business practices; and
(ii) has all permits, licenses, authorizations, orders and approvals of,
and has made all filings, applications and registrations with, all
Governmental Authorities that are required in order to permit them to
conduct their businesses substantially as presently conducted; all such
permits, licenses, certificates of authority, orders and approvals are in
full force and effect and, to the best of its knowledge, no suspension or
cancellation of any of them is threatened.
(j) TAX MATTERS. (i) All Tax Returns that are required to be filed (taking
into account any extensions of time within which to file) by or with respect to
Wachovia and its Subsidiaries have been duly filed, (ii) all Taxes shown to be
due on the Tax Returns referred to in clause (i) have been paid in full, (iii)
the federal income Tax Returns referred to in clause (i) have been examined by
the Internal Revenue Service or the period for assessment of the Taxes in
respect of which such Tax Returns were required to be filed has expired, (iv)
all deficiencies asserted or assessments made as a result of such examinations
have been paid in full, (v) no issues that have been raised by the relevant
taxing authority in connection with the examination of any of the Tax Returns
referred to in clause (i) are currently pending, and (vi) no waivers of
statutes of limitations have been given by or requested with respect to any
Taxes of Wachovia or its Subsidiaries. Neither Wachovia nor any of its
Subsidiaries has any liability with respect to income, franchise or similar
Taxes that accrued on or before the end of the most recent period covered by
Wachovia's SEC Documents filed prior to the date hereof in excess of the
amounts accrued with respect thereto that are reflected in the financial
statements included in Wachovia's SEC Documents filed on or prior to the date
hereof. As of the date hereof, neither Wachovia nor any of its Subsidiaries has
any reason to believe that any conditions exist that might prevent or impede
the Merger from qualifying as a reorganization within the meaning of Section
368 of the Code.
(k) INTEREST RATE RISK MANAGEMENT. All interest rate swaps, caps, floors
and option agreements and other interest rate risk management arrangements,
whether entered into the account of Wachovia or one of its Subsidiaries or for
the account of a customer of Wachovia or one of its subsidiaries, were entered
into in the ordinary course of business and in accordance with prudent banking
practice and applicable rules, regulations and policies of Regulatory
Authorities and with counterparties believed by Wachovia to be financially
responsible at the time and are legal, valid and binding obligations of
Wachovia or one of its subsidiaries enforceable in accordance with their terms
(except as may be limited by bankruptcy, insolvency, moratorium, reorganization
or similar laws affecting the rights of creditors generally and the
availability of equitable remedies), and are in full force and effect. Wachovia
and each of its subsidiaries have duly performed in all material respects all
of their obligations thereunder to the extent that such obligations to perform
have accrued; and there are no material breaches, violations or defaults or
allegations or assertions of such by any party thereunder.
(l) NO BROKERS. No action has been taken by Wachovia that would give rise
to any valid claim against any party hereto for a brokerage commission,
finder's fee or other like payment with respect to the transactions
contemplated by this Agreement, excluding a fee paid to Merrill Lynch, Pierce,
Fenner & Smith Incorporated.
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ARTICLE VI
COVENANTS
6.01 REASONABLE BEST EFFORTS. (a) Subject to the terms and conditions of
this Agreement, each of IJL and Wachovia agrees to use its reasonable best
efforts in good faith to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or desirable, or advisable under
applicable laws, so as to permit consummation of the Merger as promptly as
practicable and otherwise to enable consummation of the transactions
contemplated hereby and shall cooperate fully with the other party hereto to
that end (it being understood that any amendments or supplements to the
Registration Statement or Proxy Statement or a resolicitation of proxies as a
consequence of an acquisition agreement by Wachovia or any of its subsidiaries
shall not violate this covenant).
(b) Without limiting the generality of Section 6.01(a), IJL agrees to use
its reasonable best efforts to obtain (i) any consents of Clients (including in
the case of Registered Funds, stockholders of such Registered Funds) necessary
to effect the assignment of any Advisory Agreement to the Surviving Corporation
upon consummation of the Merger and (ii) the consent or approval of all persons
party to a Contract with IJL, to the extent such consent or approval is
required in order to consummate the Merger or for the Surviving Corporation to
receive the benefits thereof.
6.02 STOCKHOLDER APPROVALS. IJL agrees to take, in accordance with
applicable law, NYSE rules and the IJL Certificate and by-laws, all action
necessary to convene an appropriate meeting of stockholders of IJL to consider
and vote upon the approval and adoption of this Agreement and any other matters
required to be approved by IJL's stockholders for consummation of the Merger
(including any adjournment or postponement, the "IJL MEETING") as promptly as
practicable after the Registration Statement is declared effective. The IJL
Board has recommended such approval, and IJL shall take all reasonable, lawful
action to solicit such approval by its stockholders. Except to the extent
legally required for the discharge by the IJL Board of its fiduciary duties
(after consultation with outside counsel), the IJL Board shall continue to
recommend such approval. At the request of Wachovia, IJL will utilize a
professional proxy solicitation firm to assist it in procuring the necessary
stockholder vote.
6.03 REGISTRATION STATEMENT. (a) Wachovia agrees to prepare a registration
statement on Form S-4 (the "REGISTRATION STATEMENT") to be filed by Wachovia
with the SEC in connection with the issuance of Wachovia Stock in the Merger
(including the proxy statement and other proxy solicitation materials of IJL
constituting a part thereof the "PROXY STATEMENT") and all related documents).
Each of the parties hereto agrees to cooperate, and to cause its Subsidiaries
to cooperate, with the other, its counsel and its accountants, in preparation
of the Registration Statement and the Proxy Statement; and PROVIDED that IJL
and its Subsidiaries have cooperated as required above, Wachovia agrees to file
the Proxy Statement in preliminary form with the SEC as promptly as reasonably
practicable, and to file the Registration Statement with the SEC as soon as
reasonably practicable after any SEC comments with respect to the preliminary
Proxy Statement are resolved. Each of IJL and Wachovia agrees to use all
reasonable efforts to cause the Registration Statement to be declared effective
under the Securities Act as promptly as reasonably practicable after filing
thereof. Wachovia also agrees to use all reasonable efforts to obtain all
necessary state securities law or "Blue Sky" permits and approvals required to
carry out the transactions contemplated by this Agreement. IJL agrees to
furnish to Wachovia all information concerning IJL, its Subsidiaries, officers,
directors and stockholders as may be reasonably requested in connection with
the foregoing.
(b) Each of IJL and Wachovia agrees, as to itself and its Subsidiaries,
that none of the information supplied or to be supplied by it for inclusion or
incorporation by reference in (i) the Registration Statement will, at the time
the Registration Statement and each amendment or supplement thereto, if any,
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and (ii) the Proxy
Statement and any amendment or supplement thereto will, at the date of mailing
to stockholders and at the time of the IJL Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading or
any statement which, in the light of the circumstances under which such
statement is made, will be false or misleading with respect to any material
fact, or which will omit to state any material fact necessary in order to make
the statements therein not false or misleading or necessary to correct any
statement in any earlier statement in the Proxy Statement or any amendment or
supplement thereto. Each of IJL and Wachovia further agrees that if it shall
become aware prior to the Effective Date of any information furnished by it
that would cause any of the statements in the Proxy Statement to be false or
misleading with respect to any material fact, or to omit to state any material
fact necessary to make the statements therein not false or misleading, to
promptly inform the other party thereof and to take the necessary steps to
correct the Proxy Statement.
(c) Wachovia agrees to advise IJL, promptly after Wachovia receives notice
thereof, of the time when the Registration Statement has become effective or
any supplement or amendment has been filed, of the issuance of any stop order
or the
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suspension of the qualification of Wachovia Stock for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for any such
purpose, or of any request by the SEC for the amendment or supplement of the
Registration Statement or for additional information.
6.04 PRESS RELEASES. Each of IJL and Wachovia agrees that it will not,
without the prior approval of the other party, issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby, except as otherwise required by applicable law or
regulation or NYSE rules.
6.05 ACCESS; INFORMATION. (a) IJL agrees that upon reasonable notice and
subject to applicable laws relating to the exchange of information, it shall
afford Wachovia and Wachovia's officers, employees, counsel, accountants and
other authorized representatives, such access during normal business hours
throughout the period prior to the Effective Time to the books, records
(including, without limitation, tax returns and work papers of independent
auditors), properties, personnel and to such other information as Wachovia may
reasonably request and, during such period, it shall furnish promptly to
Wachovia (i) a copy of each material report, schedule and other document filed
by it pursuant to the requirements of federal or state securities or banking
laws, and (ii) all other information concerning the business, properties and
personnel of it as the other party may reasonably request.
(b) Wachovia agrees that it will not, and will cause its representatives
not to, use any information obtained pursuant to this Section 6.05 (as well as
any other information obtained prior to the date hereof in connection with the
entering into of this Agreement) for any purpose unrelated to the consummation
of the transactions contemplated by this Agreement. Subject to the requirements
of law, Wachovia shall keep confidential, and shall cause its representatives
to keep confidential, all information and documents obtained pursuant to this
Section 6.05 (as well as any other information obtained prior to the date
hereof in connection with the entering into of this Agreement) unless such
information (i) was already known to Wachovia, (ii) becomes available to
Wachovia from other sources not known by such party to be bound by a
confidentiality obligation, (iii) is disclosed with the prior written approval
of the party to which such information pertains or (iv) is or becomes readily
ascertainable from published information or trade sources. In the event that
this Agreement is terminated or the transactions contemplated by this Agreement
shall otherwise fail to be consummated, Wachovia shall promptly cause all
copies of documents or extracts thereof containing information and data as to
IJL to be returned to IJL. No investigation by Wachovia of the business and
affairs of IJL shall affect or be deemed to modify or waive any representation,
warranty, covenant or agreement in this Agreement, or the conditions to
Wachovia's obligation to consummate the transactions contemplated by this
Agreement.
6.06 ACQUISITION PROPOSALS. IJL agrees that neither it nor any of its
Subsidiaries nor any of the respective officers and directors of IJL or its
Subsidiaries shall, and IJL shall direct and use its reasonable best efforts to
cause its employees, agents and representatives (including, without limitation,
any investment banker, attorney or accountant retained by it or any of its
Subsidiaries) not to, initiate, solicit or encourage, directly or indirectly,
any enquiries or the making of any proposal or offer (including, without
limitation, any proposal or offer to stockholders of IJL) with respect to a
merger, consolidation or similar transaction involving, or any purchase of all
or any significant portion of the assets or any equity securities of, IJL or
its Significant Subsidiary (any such proposal or offer being hereinafter
referred to as an "ACQUISITION PROPOSAL") or, except to the extent legally
required for the discharge by the IJL Board of its fiduciary duties (after
consultation with outside counsel) as a result of an unsolicited written, bona
fide Acquisition Proposal, engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
Person relating to an Acquisition Proposal, or otherwise facilitate any effort
or attempt to make or implement an Acquisition Proposal. IJL shall immediately
cease and cause to be terminated any activities, discussions or negotiations
conducted prior to the date of this Agreement with any parties other than
Wachovia with respect to any of the foregoing and shall use its reasonable best
efforts to enforce any confidentiality or similar agreement relating to an
Acquisition Proposal. IJL shall promptly (within 24 hours) advise Wachovia
following the receipt by IJL of any Acquisition Proposal and the substance
thereof (including the identity of the Person making such Acquisition
Proposal), and advise Wachovia of any developments with respect to such
Acquisition Proposal immediately upon the occurrence thereof.
6.07 AFFILIATE AGREEMENTS. (a) Not later than the 15th day prior to the
mailing of the Proxy Statement, IJL shall deliver to Wachovia, a schedule of
each Person that, to its knowledge, is or is reasonably likely to be, as of the
date of the IJL Meeting, deemed to be an "affiliate" of it (each, a "IJL
AFFILIATE") as that term is used in Rule 145 under the Securities Act.
(b) IJL shall use its reasonable best efforts to cause each Person who may
be deemed to be a IJL Affiliate to execute and deliver to Wachovia on or before
the date of mailing of the Proxy Statement an "affiliates agreement"
substantially in the form attached hereto as EXHIBIT F.
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6.08 TAKEOVER LAWS. No party hereto shall take any action that would cause
the transactions contemplated by this Agreement or the Stock Option Agreement
to be subject to requirements imposed by any Takeover Law and each of them
shall take all necessary steps within its control to exempt (or ensure the
continued exemption of) the transactions contemplated by this Agreement from,
or if necessary challenge the validity or applicability of, any applicable
Takeover Law, as now or hereafter in effect.
6.09 CERTAIN POLICIES. Prior to the Effective Date, IJL shall, consistent
with generally accepted accounting principles and on a basis mutually
satisfactory to it and Wachovia, modify and change its valuation and reserve
policies and practices so as to be applied on a basis that is consistent with
those of Wachovia; PROVIDED, HOWEVER, that IJL shall not be obligated to take
any such action pursuant to this Section 6.09 unless and until Wachovia
acknowledges that all conditions to its obligation to consummate the Merger
have been satisfied or irrevocably waived.
6.10 NYSE LISTING. Wachovia agrees to use its reasonable best efforts to
list, prior to the Effective Date, on the NYSE, subject to official notice of
issuance, the shares of Wachovia Common Stock to be issued to the holders of
IJL Common Stock in the Merger.
6.11 REGULATORY APPLICATIONS. (a) Wachovia and IJL and their respective
Subsidiaries shall cooperate and use their respective reasonable best efforts
to prepare all documentation, to effect all filings and to obtain all permits,
consents, approvals and authorizations of all third parties, Governmental
Authorities and Self-Regulatory Organizations necessary to consummate the
transactions contemplated by this Agreement. Each of Wachovia and IJL shall
have the right to review in advance, and to the extent practicable each will
consult with the other, in each case subject to applicable laws relating to the
exchange of information, with respect to, all material written information
submitted to any third party, any Governmental Authority or any Self-Regulatory
Organization in connection with the transactions contemplated by this
Agreement. In exercising the foregoing right, each of the parties hereto agrees
to act reasonably and as promptly as practicable. Each party hereto agrees that
it will consult with the other party hereto with respect to the obtaining of
all material permits, consents, approvals and authorizations of all third
parties, Governmental Authorities and Self-Regulatory Organizations necessary
or advisable to consummate the transactions contemplated by this Agreement and
each party will keep the other party appraised of the status of material
matters relating to completion of the transactions contemplated hereby.
(b) Each party agrees, upon request, to furnish the other party with all
information concerning itself, its Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with any filing, notice or application made by or on behalf of
such other party or any of its Subsidiaries to any third party or Governmental
Authority.
(c) Notwithstanding the foregoing, Wachovia shall not be obligated to
provide any confidential portions of any of the foregoing.
6.12 INDEMNIFICATION. (a) Following the Effective Date and for a period of
six years thereafter, Wachovia shall indemnify, defend and hold harmless the
present directors and officers of IJL and its Subsidiaries (each, an
"INDEMNIFIED PARTY") against all costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "COSTS") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of actions or omissions occurring at or prior to the
Effective Time (including, without limitation, the transactions contemplated by
this Agreement) to the fullest extent that IJL is permitted to indemnify (and
advance expenses to) its directors and officers under the DGCL, the IJL
Certificate and the IJL By-Laws as in effect on the date hereof; PROVIDED that
any determination required to be made with respect to whether an officer's or
director's conduct complies with the standards set forth under DGCL law, the
IJL Certificate and the IJL By-Laws shall be made by independent counsel (which
shall not be counsel that provides material services to Wachovia) selected by
Wachovia and reasonably acceptable to such officer or director; and PROVIDED,
FURTHER, that in the absence of applicable judicial precedent to the contrary,
such counsel, in making such determination, shall presume such officer's or
director's conduct complied with such standard and Wachovia shall have the
burden to demonstrate that such officer's or director's conduct failed to
comply with such standard. Wachovia shall advance expenses as incurred to the
extent permitted under applicable law in connection with such indemnification.
(b) For a period of three years from the Effective Time, Wachovia shall
provide that portion of director's and officer's liability insurance that
serves to reimburse the present and former officers and directors of IJL or any
of its Subsidiaries (determined as of the Effective Time) (as opposed to IJL)
with respect to claims against such directors and officers arising from facts
or events which occurred at or before the Effective Time, which insurance shall
contain at least the same coverage and amounts, and contain terms and
conditions no less advantageous, as that coverage currently provided by IJL;
PROVIDED, HOWEVER, that in no event shall Wachovia be required to expend more
than 200 percent of the current amount expended
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by IJL (the "INSURANCE AMOUNT") to maintain or procure such directors and
officers insurance coverage; and PROVIDED, FURTHER, that if Wachovia is unable
to maintain or obtain the insurance called for by this Section 6.12(b),
Wachovia shall use its reasonable best efforts to obtain as much comparable
insurance as is available for the Insurance Amount; PROVIDED, FURTHER, that
officers and directors of IJL or any Subsidiary may be required to make
application and provide customary representations and warranties to Wachovia's
insurance carrier for the purpose of obtaining such insurance.
(c) Any Indemnified Party wishing to claim indemnification under Section
6.12(a), upon learning of any claim, action, suit, proceeding or investigation
described above, shall promptly notify Wachovia thereof; PROVIDED that the
failure so to notify shall not affect the obligations of Wachovia under Section
6.12(a) unless and to the extent that Wachovia is actually prejudiced as a
result of such failure.
(d) If Wachovia or any of its successors or assigns shall consolidate with
or merge into any other entity and shall not be the continuing or surviving
entity of such consolidation or merger or shall transfer all or substantially
all of its assets to any entity, then and in each case, proper provision shall
be made so that the successors and assigns of Wachovia shall assume the
obligations set forth in this Section 6.12.
6.13 BENEFIT PLANS. (a) As soon as practicable following the Effective
Time (i) Wachovia will provide employees of IJL and its Subsidiaries who become
employees of Wachovia and any of its Subsidiaries (the "Retained Employees")
with employee benefit plans which are no less favorable in the aggregate than
those provided to similarly situated employees of Wachovia; any Retained
Employees will receive credit for service with IJL or any of its subsidiaries
or predecessors (to the extent such service was credited under the Compensation
and Benefit Plans as Previously Disclosed) prior to the Effective Time for the
purpose of determining eligibility to participate and vesting, but not for the
purpose of benefit accrual, under Wachovia's employee benefit plans and (ii)
Wachovia will cause any and all pre-existing condition limitations (to the
extent that such limitations did not apply to a pre-existing condition under
the Compensation and Benefit Plans) and waiting periods under group health
plans to be waived with respect to the Retained Employees and their eligible
dependents. All discretionary awards and benefits under any employee benefit
plans of Wachovia shall be subject to the discretion of the persons or
committee administering such plans. Following the Effective Time, Wachovia will
honor the Compensation and Benefit Plans as Previously Disclosed in accordance
with their terms. Nothing contained herein will be construed to limit the
ability of Wachovia, following the Effective Time, to terminate the employment
of any Retained Employee, or to amend or terminate any employee benefit plan or
the Compensation and Benefit Plans in accordance with their terms; PROVIDED,
HOWEVER, no amendment to or termination of any such plan shall be made which
will have a material adverse effect on the income tax consequences to any
individual participant or beneficiary under such plans.
(b) OPTIONS. At the Effective Time, each outstanding option to purchase
shares of IJL Common Stock (each, a "IJL STOCK OPTION") under the IJL Amended
and Restated 1985 Incentive Stock Option Plan, the IJL 1985 Nonqualified Stock
Option Plan, the IJL Deferred Stock Bonus Plan and the IJL Restated Stock Award
Plan (collectively, the "IJL STOCK PLANS"), whether vested or unvested, shall
be converted into an option (a "REPLACEMENT OPTION") to acquire, on the same
terms and conditions as were applicable under such IJL Stock Option, the number
of shares of Wachovia Common Stock equal to (i) the number of shares of IJL
Common Stock subject to the IJL Stock Option, multiplied by (ii) the Exchange
Ratio (such product rounded down to the nearest whole number), at an exercise
price per share (rounded up to the nearest whole cent) equal to (y) the
aggregate exercise price for the shares of IJL Common Stock which were
purchasable pursuant to such IJL Stock Option divided by (z) the number of full
shares of Wachovia Common Stock subject to such Replacement Option in
accordance with the foregoing. Notwithstanding the foregoing, each IJL Stock
Option which is intended to be an "incentive stock option" (as defined in
Section 422 of the Code) shall be adjusted in accordance with the requirements
of Section 424 of the Code. At or prior to the Effective Time, IJL shall use it
best efforts to take all action necessary, including obtaining any necessary
consents from Optionees, to permit the replacement of the outstanding IJL Stock
Options by Wachovia pursuant to this Section.
(c) STOCK RIGHTS. At the Effective Time, each outstanding share of
restricted IJL Common Stock ("RESTRICTED IJL STOCK"), each right to purchase a
share of Restricted IJL Stock, each outstanding salary deferral previously made
to purchase a share of Restricted IJL Stock, and each deferred stock bonus
payable in Restricted IJL Stock or IJL Common Stock, in each case pursuant to
the IJL Stock Plans to the extent Previously Disclosed, shall be converted, on
the same terms and conditions as were applicable to such rights in and for
Restricted IJL Stock or IJL Common Stock, into the number of shares of
restricted Wachovia Common Stock or Wachovia Common Stock as the case may be
(the "REPLACEMENT SHARES") equal to the number of shares of Restricted IJL
Stock or IJL Common Stock outstanding or issuable pursuant to each outstanding
right to purchase, salary deferral or deferred stock bonus under the IJL Stock
Plans multiplied by the Exchange Ratio; PROVIDED, HOWEVER, that as of the
Effective Time, all rights to purchase Restricted IJL Stock pursuant to the 15
percent discount purchase plan under the IJL Stock Plans shall terminate, and
any outstanding contributions thereunder shall be promptly
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refunded to the participants of such plan. At or prior to the Effective Time,
IJL shall use its best efforts to take all actions necessary to permit the
conversions by Wachovia pursuant to this Section. Subject to the above,
Wachovia agrees to take all actions necessary to reserve for issuance a
sufficient number of shares of restricted Wachovia Common Stock and Wachovia
Common Stock to effect delivery of the Replacement Shares.
(d) FILINGS. Not later than the Effective Time, Wachovia shall prepare and
file with the SEC a Registration Statement on Form S-8 (or any successor or
other appropriate form) registering a number of shares of Wachovia Common Stock
determined in accordance with Sections 6.13(b) and (c) and shall use its best
efforts to maintain the effectiveness of such Registration Statement or
Registration Statements (and maintain the current status of the prospectus and
prospectuses contained therein) for so long as any Replacement Options or
Replacement Shares are issued and remain outstanding.
6.14 RETENTION PROGRAM. (a) At the Effective Time, IJL will have
established a retention program on terms described in EXHIBIT D to be used to
retain certain employees of IJL.
(b) Notwithstanding anything to the contrary contained in this Agreement,
Wachovia shall take all actions necessary to cause the Retention Program set
forth in EXHIBIT D to be implemented. EXHIBIT D shall be deemed incorporated
into this Section 6.14.
6.15 SECTION 15 OF THE INVESTMENT COMPANY ACT. (a) IJL will use its
reasonable best efforts to obtain as promptly as practicable, (i) the approval
of the stockholders of each of the Funds, pursuant to the provisions of Section
15 of the Investment Company Act if applicable thereto, of a new investment
company advisory agreement for such Funds no less favorable to IJL or its
Subsidiaries to that in effect immediately prior to the Closing and (ii) a
consent to assignment from each private account holder to whom it is providing
investment advisory services.
(b) IJL shall assure, prior to the Effective Time, that the composition of
the board of directors or trustees, as the case may be, of each Registered Fund
is in compliance at the time with Section 15(f)(1)(A) of the Investment Company
Act.
(c) The parties each agree for a period of three years following the
Effective Time to use their respective reasonable efforts to assure compliance
with the conditions of Section 15(f) of the Investment Company Act as it
applies to the Registered Funds and the transactions contemplated by this
Agreement. Notwithstanding anything to the contrary contained herein, the
covenants contained in this Section 6.15 are intended only for the benefit of
parties to this Agreement and for no other Person.
6.16 NOTIFICATION OF CERTAIN MATTERS. Each of IJL and Wachovia shall give
prompt notice to the other of any fact, event or circumstance known to it that
(a) is reasonably likely, individually or taken together with all other facts,
events and circumstances known to it, to result in any Material Adverse Effect
with respect to it or (b) would cause or constitute a material breach of any of
its representations, warranties, covenants or agreements contained herein.
6.17 DIVIDEND COORDINATION. The Board of Directors of IJL shall cause its
regular quarterly dividend record dates and payment dates for IJL Common Stock
to be the same as Wachovia's regular quarterly dividend record dates and
payment dates for Wachovia Common Stock, and IJL shall not thereafter change
its regular dividend payment dates and record dates.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each of Wachovia and IJL to consummate the Merger is
subject to the fulfillment or written waiver by Wachovia and IJL prior to the
Effective Time of each of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement shall have been duly adopted by
the affirmative vote of the holders of a majority of the outstanding shares of
IJL Common Stock entitled to vote thereon in accordance with the DGCL, other
applicable law and the IJL Certificate and the IJL By-Laws.
(b) GOVERNMENTAL AND REGULATORY CONSENTS. All approvals and authorizations
of, filings and registrations with, and notifications to, all Governmental
Authorities and Self-Regulatory Organizations required for the consummation of
the transactions contemplated hereby and for the prevention of any termination
of any material right, privilege, license or agreement of either the Wachovia
or IJL or their respective Subsidiaries in connection with the transactions
contemplated hereby shall have been obtained or made and shall be in full force
and effect and all waiting periods shall have expired, and none of the
foregoing shall contain any conditions, restrictions or requirements which the
Wachovia Board reasonably determines would
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(i) following the Effective Time, have a Material Adverse Effect on IJL and its
Subsidiaries taken as a whole or the operations thereof or (ii) reduce the
benefits of the transactions contemplated hereby to such a degree that Wachovia
would not have entered into this Agreement had such conditions, restrictions or
requirements been known at the date hereof.
(c) THIRD PARTY CONSENTS. All consents or approvals of all persons, other
than from Governmental Authorities and Self-Regulatory Organizations, required
for or in connection with the execution, delivery and performance of this
Agreement and the consummation of the Merger shall have been obtained and shall
be in full force and effect, and none of the foregoing shall contain any
conditions, restrictions or requirements which the Wachovia Board reasonably
determines would (i) following the Effective Time, have a Material Adverse
Effect on IJL and its Subsidiaries taken as a whole or the operations thereof
or (ii) reduce the benefits of the transactions contemplated hereby to such a
degree that Wachovia would not have entered into this Agreement had such
conditions, restrictions or requirements been known at the date hereof.
(d) NO INJUNCTION. No Governmental Authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and prohibits consummation of the
transactions contemplated by this Agreement.
(e) 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.
(f) 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 Wachovia Common Stock to be issued in the Merger
shall have been received and be in full force and effect.
(g) LISTING. The shares of Wachovia Common Stock to be issued in the
Merger shall have been approved for listing on the NYSE, subject to official
notice of issuance.
7.02 CONDITIONS TO OBLIGATION OF IJL. The obligation of IJL to consummate
the Merger is also subject to the fulfillment or written waiver by IJL prior to
the Effective Time of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Subject to the standard set forth in
Section 5.02, the representations and warranties of Wachovia set forth in this
Agreement shall be true and correct as of the date of this Agreement 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
Agreement or some other date shall be true and correct as of such date), and
IJL shall have received a certificate, dated the Effective Date, signed on
behalf of Wachovia by the Chief Executive Officer and the Chief Financial
Officer of Wachovia to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF WACHOVIA. Wachovia shall have performed
in all material respects all obligations required to be performed by them under
this Agreement at or prior to the Effective Time, and IJL shall have received a
certificate, dated the Effective Date, signed on behalf of Wachovia by the
Chief Executive Officer and the Chief Financial Officer of Wachovia to such
effect.
(c) OPINION OF IJL'S COUNSEL. IJL shall have received an opinion of Moore
& Van Allen, PLLC, counsel to IJL, 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 of the Code
and (ii) no gain or loss will be recognized by stockholders of IJL who receive
shares of Wachovia Common Stock in exchange for shares of IJL Common Stock,
except that gain or loss may be recognized as to cash received in lieu of
fractional share interests. In rendering its opinion, Moore & Van Allen, PLLC
may require and rely upon representations contained in letters from IJL,
Wachovia and others.
7.03 CONDITIONS TO OBLIGATION OF WACHOVIA. The obligation of Wachovia to
consummate the Merger is also subject to the fulfillment or written waiver by
Wachovia prior to the Effective Time of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Subject to the standard set forth in
Section 5.02, the representations and warranties of IJL set forth in this
Agreement shall be true and correct as of the date of this Agreement 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
Agreement or some other date shall be true and correct as of such date) and
Wachovia shall have received a certificate, dated the Effective Date, signed on
behalf of IJL by the Chief Executive Officer and the Chief Financial Officer of
IJL to such effect.
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(b) PERFORMANCE OF OBLIGATIONS OF IJL. IJL shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Effective Time, and Wachovia shall have received a
certificate, dated the Effective Date, signed on behalf of IJL by the Chief
Executive Officer and the Chief Financial Officer of IJL to such effect.
(c) OPINION OF WACHOVIA'S COUNSEL. Wachovia shall have received an opinion
of Sullivan & Cromwell, special counsel to Wachovia, 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 of the Code. In rendering its opinion, Sullivan & Cromwell may require and
rely upon representations contained in letters from Wachovia and others.
(d) EMPLOYMENT AGREEMENTS. All of the Employment Agreements entered into
with the persons listed on Exhibit C shall be in full force and effect (other
than as a consequence of death or disability).
ARTICLE VIII
TERMINATION
8.01 TERMINATION. This Agreement may be terminated, and the Merger may be
abandoned:
(a) MUTUAL CONSENT. At any time prior to the Effective Time, by the mutual
consent of Wachovia and IJL, if the Board of Directors of each so determines by
vote of a majority of the members of its entire Board.
(b) BREACH. At any time prior to the Effective Time, by Wachovia or IJL,
if its Board of Directors so determines by vote of a majority of the members of
its entire Board, in the event of either: (i) a breach by the other party of
any representation or warranty contained herein (subject to the standard set
forth in Section 5.02), which breach cannot be or has not been cured within 30
days after the giving of written notice to the breaching party of such breach;
or (ii) a breach by the other party of any of the covenants or agreements
contained herein, which breach cannot be or has not been cured within 30 days
after the giving of written notice to the breaching party of such breach,
provided that such breach (whether under (i) or (ii)) would be reasonably
likely, individually or in the aggregate with other breaches, to result in a
Material Adverse Effect.
(c) DELAY. At any time prior to the Effective Time, by Wachovia or IJL, if
its Board of Directors so determines by vote of a majority of the members of
its entire Board, in the event that the Merger is not consummated by June 30,
1999, except to the extent that the failure of the Merger then to be
consummated arises out of or results from the knowing action or inaction of the
party seeking to terminate pursuant to this Section 8.01(c).
(d) NO APPROVAL. By IJL or Wachovia, if its Board of Directors so
determines by a vote of a majority of the members of its entire Board, in the
event (i) the approval of any Governmental Authority required for consummation
of the Merger and the other transactions contemplated by this Agreement shall
have been denied by final nonappealable action of such Governmental Authority,
(ii) any Governmental Authority of competent jurisdiction shall have enacted,
issued, promulgated, or entered any statute, rule, regulation, judgment,
decree, permanent injunction or other order which is in effect and restrains,
enjoins or otherwise prohibits the Merger and such judgment, decree, permanent
injunction or other order is or shall have become final and nonappealable or
(iii) the stockholder approval required by Section 7.01(a) herein is not
obtained at the IJL Meeting.
(e) FAILURE TO RECOMMEND, ETC. At any time prior to the IJL Meeting, by
Wachovia if the IJL Board shall have failed to make its recommendation referred
to in Section 6.02, withdrawn such recommendation or modified or changed such
recommendation in a manner adverse in any respect to the interests of Wachovia.
8.02 EFFECT OF TERMINATION AND ABANDONMENT. In the event of termination of
this Agreement and the abandonment of the Merger pursuant to this Article VIII,
no party to this Agreement shall have any liability or further obligation to
any other party hereunder except (i) as set forth in Section 9.01 and (ii) that
termination will not relieve a breaching party from liability for any willful
breach of this Agreement giving rise to such termination.
A-26
<PAGE>
ARTICLE IX
MISCELLANEOUS
9.01 SURVIVAL. No representations, warranties, agreements and covenants
contained in this Agreement shall survive the Effective Time (other than
Sections 6.12, 6.13 and this Article IX which shall survive the Effective Time)
or the termination of this Agreement if this Agreement is terminated prior to
the Effective Time (other than Sections 6.03(b), 6.05, 8.02 and this Article IX
which shall survive such termination).
9.02 WAIVER; AMENDMENT. Prior to the Effective Time, any provision of this
Agreement may be (i) waived by the party benefitted by the provision, or (ii)
amended or modified at any time, by an agreement in writing between the parties
hereto executed in the same manner as this Agreement, except that, after the
IJL Meeting, this Agreement may not be amended if it would violate the DGCL.
9.03 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
9.04 GOVERNING LAW. This Agreement shall be governed by, and interpreted
in accordance with, the laws of the State of North Carolina applicable to
contracts made and to be performed entirely within such State (except to the
extent that mandatory provisions of Federal law or of the DGCL are applicable).
9.05 WAIVER OF JURY TRIAL. Each party hereto acknowledges and agrees that
any controversy which may arise under this agreement is likely to involve
complicated and difficult issues, and therefore each such party hereby
irrevocably and unconditionally waives any right such party may have to a trial
by jury in respect of any litigation directly or indirectly arising out of or
relating to this agreement, or the transactions contemplated by this agreement.
Each party certifies and acknowledges that (a) no representative, agent or
attorney of any other party has represented, expressly or otherwise, that such
other party would not, in the event of litigation, seek to enforce the
foregoing waiver, (b) each party understands and has considered the
implications of this waiver, (c) each party makes this waiver voluntarily, and
(d) each party has been induced to enter into this agreement by, among other
things, the mutual waivers and certifications in this section 9.05.
9.06 EXPENSES. Each party hereto will bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby, except
that printing expenses, proxy solicitor expenses and SEC fees shall be shared
equally between IJL and Wachovia.
9.07 NOTICES. All notices, requests and other communications hereunder to
a party shall be in writing and shall be deemed given if personally delivered,
telecopied (with confirmation) or mailed by registered or certified mail
(return receipt requested) to such party at its address set forth below or such
other address as such party may specify by notice to the parties hereto.
If to IJL, to:
Interstate/Johnson Lane, Inc.
201 North Tryon Street
IJL Financial Center
P.O. Box 1012
Charlotte, North Carolina 28202
Attention: Chairman and Chief Executive Officer
and Chief Financial Officer
Telephone: (704) 379-9000
Facsimile: (704) 379-9122
With a copy to:
Moore & Van Allen
NationsBank Corporate Center
100 North Tryon Street, 47th Floor
Charlotte, North Carolina 28202
Attention: Barney Stewart III, Esq.
Telephone: (704) 331-1029
Facsimile: (704) 378-2029
A-27
<PAGE>
With a copy to:
Morris, Nichols, Arsht and Tunnell
1201 North Market Street, 18th Floor
Wilmington, Delaware 19801
Attention: Frederick H. Alexander, Esq.
Telephone: (302) 575-7228
Facsimile: (302) 658-3989
If to Wachovia, to:
Wachovia Corporation
301 North Main Street
Winston-Salem, North Carolina 27101
Attention: Chairman of the Board
Telephone: (910) 770-5000
Facsimile: (910) 770-5959
With a copy to:
Wachovia Corporation
301 North Main Street
Winston-Salem, North Carolina 27101
Attention: Kenneth W. McAllister
Telephone: (910) 732-5141
Facsimile: (910) 732-5959
With a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Mark J. Menting, Esq.
H. Rodgin Cohen, Esq.
Telephone: (212) 558-4000
Facsimile: (212) 558-3588
9.08 ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES. This Agreement
and the Stock Option Agreement entered into represent the entire understanding
of the parties hereto with reference to the transactions contemplated hereby
and thereby and supersede any and all other oral or written agreements
heretofore made (including the existing confidentiality agreement between the
parties). Except for Section 6.12, nothing in this Agreement 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 Agreement.
9.09 INTERPRETATION; EFFECT. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of, or
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and are not part of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation."
* * *
A-28
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
INTERSTATE/JOHNSON LANE, INC.
By: /s/ JAMES H. MORGAN
----------------------------------
Name: James H. Morgan
Title: Chairman/Chief Executive
Officer
WACHOVIA CORPORATION
By: /s/ L.M. BAKER, JR.
----------------------------------
Name: L.M. Baker, Jr.
Title: President, Chairman and
Chief Executive Officer
A-29
<PAGE>
EXHIBIT E
FORM OF PLAN OF MERGER
PLAN OF MERGER (this "PLAN") of Interstate/Johnson Lane, Inc. ("IJL") and
Wachovia Corporation ("WACHOVIA").
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINITIONS. The following terms are used in this Plan with the
meanings set forth below:
"DGCL" means the Delaware General Corporation Law.
"EFFECTIVE DATE" means the effective date of the Merger.
"EFFECTIVE TIME" means the effective time of the Merger.
"EXCHANGE AGENT" means an exchange agent appointed by Wachovia.
"IJL BOARD" means the Board of Directors of IJL.
"IJL COMMON STOCK" means the common stock, par value $0.20 per share, of
IJL.
"IJL STOCK OPTION" means each outstanding option to purchase shares of IJL
Common Stock.
"MERGER" means the merger of IJL with and into Wachovia.
"MERGER AGREEMENT" means the Agreement and Plan of Merger, dated as of
October 27, 1998, by and between IJL and Wachovia.
"MERGER CONSIDERATION" means the consideration to be issued to holders of
IJL Common Stock as provided in this Plan.
"NBCA" means the North Carolina Business Corporation Act.
"NEW CERTIFICATES" means certificates representing the shares of Wachovia
Common Stock into which shares of a stockholder's IJL Common Stock are
converted on the Effective Date.
"NYSE" means the New York Stock Exchange, Inc.
"OLD CERTIFICATES" means stockholder's certificates formerly representing
shares of IJL Common Stock.
"PERSON" means any individual, bank, corporation, partnership,
association, joint-stock company, business trust or unincorporated
organization.
"SUBSIDIARY" has the meaning ascribed to it in Rule 1-02 of the Securities
and Exchange Commission's Regulation S-X.
"SURVIVING CORPORATION" means Wachovia, as the surviving corporation of
the Merger.
"TREASURY STOCK" shall mean shares of IJL Stock held by IJL or any of its
Subsidiaries or by Wachovia or any of its Subsidiaries, in each case other than
in a fiduciary capacity or as a result of debts previously contracted in good
faith.
"WACHOVIA COMMON STOCK" means the common stock, par value $5.00 per share,
of Wachovia.
"WACHOVIA PREFERRED STOCK" means the preferred stock, par value $5.00 per
share, of Wachovia.
"WACHOVIA STOCK" means, collectively, Wachovia Common Stock and Wachovia
Preferred Stock.
ARTICLE II
THE MERGER
2.1. THE MERGER. (a) At the Effective Time, IJL shall merge with and into
Wachovia, the separate corporate existence of IJL shall cease and Wachovia
shall survive and continue to exist as a North Carolina corporation. Wachovia
may at any time prior to the Effective Time change the method of effecting the
combination with IJL (including, without limitation, the provisions of this
Article II) if and to the extent it deems such change to be necessary or
appropriate; PROVIDED, HOWEVER,
<PAGE>
that no such change shall (i) alter or change the amount or kind of Merger
Consideration, (ii) adversely affect the tax treatment of IJL's stockholders as
a result of receiving the Merger Consideration or (iii) materially impede or
delay consummation of the transactions contemplated by this Agreement. In the
event of such an election, the parties agree to execute an appropriate
amendment to this Agreement in order to reflect such election.
(b) Subject to the satisfaction or waiver of the conditions set forth in
Article VII, the Merger shall become effective upon the occurrence of the
filing in the office of the Secretary of State of Delaware of a certificate of
merger in accordance with Section 252 of the DGCL and the filing in the Office
of the Secretary of State of the State of North Carolina of articles of merger
in accordance with Section 55-11-05 of the NBCA or such later date and time as
may be set forth in such certificate and articles. The Merger shall have the
effects prescribed in the NBCA and the DGCL.
(c) ARTICLES OF INCORPORATION AND BY-LAWS. The articles of incorporation
and by-laws of Wachovia immediately after the Merger shall be those of Wachovia
as in effect immediately prior to the Effective Time.
(d) DIRECTORS AND OFFICERS OF WACHOVIA. The directors and officers of
Wachovia immediately after the Merger shall be the directors and officers of
Wachovia immediately prior to the Effective Time, until such time as their
successors shall be duly elected and qualified.
2.2. EFFECTIVE DATE AND EFFECTIVE TIME. Subject to the satisfaction or
waiver of the conditions set forth in Article VII, the parties shall cause the
Effective Date to occur on (a) the fifth business day to occur after the last
of the conditions set forth in below shall have been satisfied or waived in
accordance with the terms of the Merger Agreement (or, at the election of
Wachovia, on the last business day of the month in which such day occurs or, if
such last business day occurs on one of the last five business days of such
month, on the last business day of the succeeding month) or (b) such other date
to which the parties may agree in writing.
ARTICLE III
CONSIDERATION;
EXCHANGE PROCEDURES
3.1. 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 Person:
(a) OUTSTANDING IJL COMMON STOCK. Each share of IJL Common Stock,
excluding Treasury Shares, issued and outstanding immediately prior to the
Effective Time shall become and be converted into the number of shares of
Wachovia Common Stock equal to the Exchange Ratio (as defined in the following
sentence). The "EXCHANGE RATIO" shall mean a number equal to $32.00 divided by
the Wachovia Average Stock Price (rounded to the nearest one-thousandth). The
"WACHOVIA AVERAGE STOCK PRICE" shall mean the average of the last sale prices
of Wachovia Common Stock, as reported by the NYSE Composite Transactions
Reporting System (as reported in THE WALL STREET JOURNAL or, if not reported
therein, in another authoritative source), for the five NYSE trading days
immediately preceding the Effective Date. The Exchange Ratio and the
determination thereof shall be subject to adjustment as set forth in Section
3.5.
(b) OUTSTANDING WACHOVIA STOCK. Each share of Wachovia Stock issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding and unaffected by the Merger.
(c) TREASURY SHARES. Each share of IJL Stock held as Treasury Stock
immediately prior to the Effective Time shall be canceled and retired at the
Effective Time and no consideration shall be issued in exchange therefor.
3.2. RIGHTS AS STOCKHOLDERS; STOCK TRANSFERS. At the Effective Time,
holders of IJL Stock shall cease to be, and shall have no rights as,
stockholders of IJL, other than to receive any dividend or other distribution
with respect to such IJL Stock with a record date occurring prior to the
Effective Time and the consideration provided under this Article III. After the
Effective Time, there shall be no transfers on the stock transfer books of IJL
or the Surviving Corporation of shares of IJL Stock.
3.3. FRACTIONAL SHARES. Notwithstanding any other provision hereof, no
fractional shares of Wachovia Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the Merger;
instead, Wachovia shall pay to each holder of IJL Common Stock who would
otherwise be entitled to a fractional share of Wachovia Common Stock (after
taking into account all Old Certificates delivered by such holder) an amount in
cash (without interest) determined by multiplying such fraction by the last
sale price of Wachovia Common Stock, as reported by the NYSE Composite
Transactions Reporting System (as reported in THE WALL STREET JOURNAL or, if
not reported therein, in another authoritative source), for the NYSE trading
day immediately preceding the Effective Date.
2
<PAGE>
3.4. EXCHANGE PROCEDURES. (a) At or prior to the Effective Time, Wachovia
shall deposit, or shall cause to be deposited, with a bank or trust company
selected by Wachovia and reasonably acceptable to IJL (which may be Wachovia
Bank, N.A.) (the "Exchange Agent"), for the benefit of the holders of Old
Certificates, for exchange in accordance with this Article III, certificates
representing the shares of Wachovia Common Stock and cash in lieu of any
fractional shares (such cash and certificates for shares of Wachovia Common
Stock, together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund") to be issued pursuant to
Section 3.01 and paid pursuant to Section 3.04(b) in exchange for outstanding
shares of IJL Common Stock.
(b) As promptly as practicable after the Effective Date, the Exchange
Agent shall send or cause to be sent to each former holder of record of shares
of IJL Common Stock immediately prior to the Effective Time transmittal
materials for use in exchanging Old Certificates for the consideration set
forth in this Article III. Wachovia shall cause the New Certificates and/or any
check in respect of any fractional share interests or dividends or
distributions which such Person shall be entitled to receive to be delivered to
such stockholder upon delivery to the Exchange Agent of Old Certificates
representing such shares of IJL Common Stock (or indemnity reasonably
satisfactory to Wachovia and the Exchange Agent, if any of such certificates
are lost, stolen or destroyed) owned by such stockholder. No interest will be
paid on any such cash to be paid in lieu of fractional share interests or in
respect of dividends or distributions which any such Person shall be entitled
to receive pursuant to this Article III upon such delivery. Old Certificates
surrendered for exchange by any Affiliate of IJL shall not be exchanged for New
Certificates until Wachovia has received a written agreement from such Person
as specified in Section 6.07 of the Merger Agreement.
(c) Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to any former holder of IJL Common Stock for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(d) At the election of Wachovia, no dividends or other distributions with
respect to Wachovia Common Stock with a record date occurring after the
Effective Time shall be paid to the holder of any unsurrendered Old Certificate
representing shares of IJL Common Stock converted in the Merger into the right
to receive shares of such Wachovia Common Stock until the holder thereof shall
be entitled to receive New Certificates in exchange therefor in accordance with
the procedures set forth in this Section 3.4, and no such shares of IJL Common
Stock shall be eligible to vote until the holder of Old Certificates is
entitled to receive New Certificates in accordance with the procedures set
forth in this Section 3.4. After becoming so entitled in accordance with this
Section 3.4, 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 Wachovia Common Stock
such holder had the right to receive upon surrender of the Old Certificate.
(e) Any portion of the aggregate Merger Consideration that remains
unclaimed by the shareholders of IJL for six months after the Effective Time
and the proceeds of any investments thereof shall be repaid by the Exchange
Agent to the Surviving Corporation. Any shareholder of IJL who has not
therefore complied with this Section 3.4 shall thereafter be entitled to look
only to the Surviving Corporation for payment of the Merger Consideration
deliverable in respect of each share of IJL stock held by such shareholder
without any interest thereon.
3.5. ANTI-DILUTION PROVISIONS. In the event Wachovia changes (or
establishes a record date for changing) the number of shares of Wachovia Common
Stock issued and outstanding prior to the Effective Date as a result of a stock
split, stock dividend, recapitalization or similar transaction with respect to
the outstanding Wachovia Common Stock and the record date therefor shall be
prior to the Effective Date, the Exchange Ratio shall be proportionately
adjusted.
ARTICLE IV
CONDITIONS TO THE MERGER
4.1. Consummation of the Merger is subject to the conditions set forth in
Article VII of the Merger Agreement.
ARTICLE V
TERMINATION
5.1. This Plan may be terminated, and the Merger may be abandoned prior to
the Effective Time as provided in Article VIII of the Merger Agreement.
3
<PAGE>
APPENDIX B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of October 27, 1998, between Wachovia
Corporation, a North Carolina corporation ("Grantee"), and Interstate/Johnson
Lane, Inc., a Delaware corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer are entering into an Agreement and Plan of
Merger (the "Merger Agreement");
WHEREAS, as a condition and an inducement to Grantee's entering into the
Merger Agreement, Issuer has agreed to grant Grantee the Option (as hereinafter
defined) on the terms and conditions set forth in this Agreement; and
WHEREAS, 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 1,289,382 fully paid and nonassessable shares of the common stock,
par value $0.20 per share, of Issuer ("Common Stock") at a price per share
equal to the last reported sale price per share of Common Stock as reported on
the New York Stock Exchange on October 28, 1998 (such price, as adjusted if
applicable, the "Option Price"); PROVIDED, FURTHER, that in no event shall the
number of shares for which this Option is exercisable exceed 19.9% of the
issued and outstanding shares of Common Stock. The number of shares of Common
Stock that may be received upon the exercise of the Option and the Option Price
are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement and prior to the
termination of the Merger Agreement (other than pursuant to this Agreement and
other than pursuant to an event described in Section 5(a) hereof), the number
of shares of Common Stock subject to the Option shall be increased so that,
after such issuance, such number together with any shares of Common Stock
previously issued pursuant hereto, equals 19.9% of the number of shares of
Common Stock then issued and outstanding without giving effect to any shares
subject or issued pursuant to the Option. Nothing contained in this Section
l(b) or elsewhere in this Agreement shall be deemed to authorize Issuer to
issue shares in breach of any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, if, but only if, both an Initial Triggering Event (as
hereinafter defined) and a Subsequent Triggering Event (as hereinafter defined)
shall have occurred prior to the occurrence of an Exercise Termination Event
(as hereinafter defined), PROVIDED that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2)
within three (3) 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 an Initial Triggering
Event except a termination by Grantee pursuant to Section 8.01(b) as a result
of a material willful breach by Grantor, or (iii) the passage of twelve (12)
months (or such longer period as provided in Section 10) after termination of
the Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event or such termination is by Grantee pursuant to Section 8.01(b)
of the Merger Agreement as a result of a material willful breach by Grantor.
The term "Holder" shall mean the holder or holders of the Option.
Notwithstanding anything to the contrary contained herein, (i) the Option may
not be exercised at any time when Grantee shall be in material breach of any of
its covenants or agreements contained in the Merger Agreement such that Issuer
shall be entitled to terminate the Merger Agreement pursuant to Section 8.01(b)
thereof and (ii) this Agreement shall automatically terminate upon the proper
termination of the Merger Agreement by Issuer pursuant to Section 8.01(b)
thereof as a result of the material breach by Grantee of its covenants or
agreements contained in the Merger Agreement.
(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 subsidiary or group of subsidiaries that is, or would
on an aggregate basis constitute, a Significant Subsidiary (as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission
B-1
<PAGE>
(the "SEC")) (each such subsidiary or group of subsidiaries, 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. For
purposes of this Agreement, (a) "Acquisition Transaction" shall mean (x) a
merger or consolidation, or any similar transaction, involving Issuer or
any Issuer Subsidiary (other than mergers, consolidations or similar
transactions involving solely Issuer and/or one or more wholly-owned
Subsidiaries of the Issuer, PROVIDED, any such transaction is not entered
into in violation of the terms of the Merger Agreement), (y) a purchase,
lease or other acquisition of all or any substantial part of the assets or
deposits of Issuer or any Issuer Subsidiary, or (z) a purchase or other
acquisition (including by way of merger, consolidation, share exchange or
otherwise) of securities representing 20% or more of the voting power of
Issuer or any Issuer Subsidiary and (b) "Subsidiary" shall have the meaning
set forth in Rule 12b-2 under the 1934 Act;
(ii) Any person other than the Grantee or any Grantee Subsidiary shall
have acquired beneficial ownership or the right to acquire beneficial
ownership of 20% or more of the outstanding shares of Common Stock (the
term "beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules
and regulations thereunder);
(iii) The shareholders of Issuer shall have voted and failed to approve
the Merger Agreement and the Merger at a meeting which has been held for
that purpose or any adjournment or postponement thereof, or such meeting
shall not have been held in violation of the Merger Agreement or shall have
been canceled in violation of the Merger Agreement 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 canceled in violation of the Merger
Agreement, prior to such termination), it shall have been publicly
announced that any person (other than Grantee or any of its Subsidiaries)
shall have made, or disclosed an intention to make, a bona fide proposal to
engage in an Acquisition Transaction;
(iv) The Issuer Board shall have withdrawn or modified (or publicly
announced its intention to withdraw or modify) in any manner adverse in any
respect to Grantee its recommendation that the shareholders of Issuer
approve the transactions contemplated by the Merger Agreement, or Issuer or
any Issuer Subsidiary shall have authorized, recommended, proposed (or
publicly announced its intention to authorize, recommend or propose) an
agreement to engage in an Acquisition Transaction with any person other
than Grantee or a Grantee Subsidiary; or
(v) Any person other than Grantee or any Grantee Subsidiary shall have
made a bona fide proposal to Issuer or its shareholders to engage in an
Acquisition Transaction and such proposal shall have been publicly
announced.
(c) The term "Subsequent Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 30% 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 30%; or
(iii) The failure of a shareholder or shareholders in the aggregate
holding in excess of 15% of the Company's outstanding Common Stock to
comply with the terms of his, her or its Shareholder Agreement (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 date not earlier than three business days nor later than 10 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 Board of
Governors of the Federal Reserve System (the "Federal Reserve Board") or any
other regulatory or antitrust agency is required in connection with such
purchase, the Holder shall promptly file the required notice
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or application for approval, shall promptly notify Issuer of such filing, and
shall expeditiously process the same and the period of time that otherwise
would run pursuant to this sentence shall run instead from the date on which
any required notification periods have expired or been terminated or such
approvals have been obtained and any requisite waiting period or periods shall
have passed. Any exercise of the Option shall be deemed to occur on the Notice
Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall (i) pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer and
(ii) present and surrender this Agreement to Issuer at its principal executive
offices, PROVIDED that the failure or refusal of the Issuer to designate such a
bank account or accept surrender of this Agreement shall not preclude the
Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement, dated as of , 199 , between
the registered holder hereof and Issuer and to resale restrictions arising
under the Securities Act of 1933, as amended. A copy of such agreement is
on file at the principal office of Issuer and will be provided to the
holder hereof without charge upon receipt by Issuer of a written request
therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933 Act") in the
above legend shall be removed by delivery of substitute certificate(s) without
such reference if the Holder shall have delivered to Issuer a copy of a letter
from the staff of the SEC, or an opinion of counsel, in form and substance
reasonably satisfactory to Issuer, to the effect that such legend is not
required for purposes of the 1933 Act; (ii) the reference to the provisions of
this Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference in the
opinion of counsel to the Holder; and (iii) the legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may be
required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock;
(ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer; (iii) promptly to take all action as may from time to time be required
(including (x) complying with all applicable premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), or the Change in Bank Control Act
of 1978, as amended, or any state or other federal banking law, prior approval
of or notice to the Federal Reserve Board or to any state or other federal
regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such information to the Federal Reserve Board or such state or other
federal regulatory authority as they may require) in order to permit the Holder
to exercise the Option and Issuer duly and effectively to issue shares of
Common Stock pursuant hereto; and (iv) promptly to take all action provided
herein to protect the rights of the Holder against dilution.
4. This Agreement and the Option granted hereby are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing for
Options
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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 a percentage of the number of shares of
Common Stock then issued and outstanding equal to the percentage of such shares
into which it was exercisable immediately before such transaction.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which shall be equal to the number of shares of Common Stock purchasable
prior to the adjustment and the denominator of which shall be equal to the
number of shares of Common Stock purchasable after the adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within twelve (12) months (or such later period as provided in
Section 10) of such Subsequent Triggering Event (whether on its own behalf or
on behalf of any subsequent holder of this Option (or part thereof) or any of
the shares of Common Stock issued pursuant hereto), promptly prepare, file and
keep current a registration statement under the 1933 Act covering any shares
issued and issuable pursuant to this Option and shall use its reasonable best
efforts to cause such registration statement to become effective and remain
current in order to permit the sale or other disposition of any shares of
Common Stock issued upon total or partial exercise of this Option ("Option
Shares") in accordance with any plan of disposition requested by Grantee.
Issuer will use its reasonable best efforts to cause such registration
statement promptly to become effective and then to remain effective for such
period not in excess of 90 days from the day such registration statement first
becomes effective or such shorter time as may be reasonably necessary to effect
such sales or other dispositions. Grantee shall have the right to demand two
such registrations. The Issuer shall bear the costs of such registrations
(including, but not limited to, Issuer's attorneys' fees, printing costs and
filing fees, except for underwriting discounts or commissions, brokers' fees
and the fees and disbursements of Grantee's counsel related thereto). The
foregoing notwithstanding, if, at the time of any request by Grantee for
registration of Option Shares as provided above, Issuer is in registration with
respect to an underwritten public offering by Issuer of shares of Common Stock,
and if in the good faith judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or underwriters, of such
offering the offer and sale of the Option Shares would interfere with the
successful marketing of the shares of Common Stock offered by Issuer, the
number of Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; PROVIDED, HOWEVER, that after any such
required reduction the number of Option Shares to be included in such offering
for the account of the Holder shall constitute at least 25% of the total number
of shares to be sold by the Holder and Issuer in the aggregate; and PROVIDED
FURTHER, HOWEVER, that if such reduction occurs, then Issuer shall file a
registration statement for the balance as promptly as practicable thereafter as
to which no reduction pursuant to this Section 6 shall be permitted or occur
and the Holder shall thereafter be entitled to one additional registration and
the twelve (12) month period referred to in the first sentence of this section
shall be increased to twenty-four (24) months. Each such Holder shall provide
all information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. If requested by any such Holder
in connection with such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in such underwriting
agreements for Issuer. Upon
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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 between the occurrence of a Repurchase Event (as
defined below) and the 90th day after such occurrence (i) at the request of the
Holder, delivered prior to an Exercise Termination Event (or such later period
as provided in Section 10), Issuer (or any successor thereto) shall repurchase
the Option from the Holder at a price (the "Option Repurchase Price") equal to
the amount by which (A) the market/offer price (as defined below) exceeds (B)
the Option Price, multiplied by the number of shares for which this Option may
then be exercised and (ii) at the request of the owner of Option Shares from
time to time (the "Owner"), delivered prior to an Exercise Termination Event
(or such later period as provided in Section 10), Issuer (or any successor
thereto) shall repurchase such number of the Option Shares from the Owner as
the Owner shall designate at a price (the "Option Share Repurchase Price")
equal to the market/offer price multiplied by the number of Option Shares so
designated. The term "market/offer price" shall mean 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.
(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 best efforts to obtain (and to take
all action necessary to obtain) all required regulatory and legal approvals and
to file any required notices as promptly as practicable in order to accomplish
such repurchase), the Holder or Owner may revoke its notice of repurchase of
the Option and/or the Option Shares whether in whole or to the extent of the
prohibition, whereupon, in the latter case, Issuer shall promptly (i) deliver
to the Holder and/or the Owner, as appropriate, that portion of the Option
Repurchase Price and/or the Option Share Repurchase Price that Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Holder, a new Agreement evidencing the right of the Holder to purchase that
number of shares of Common Stock obtained by multiplying the number of shares
of Common Stock for which the surrendered Agreement was exercisable at the time
of delivery of the notice of repurchase by a fraction, the numerator of which
is the Option Repurchase Price less the portion thereof theretofore delivered
to the Holder and the denominator of which is the Option Repurchase Price,
and/or (B) to the Owner, a certificate for the Option Shares it is then so
prohibited from repurchasing. If an Exercise Termination Event shall have
occurred prior to the date of the notice by Issuer described in the first
sentence of this subsection (c), or shall be scheduled to occur at any time
before the expiration of a period ending on the thirtieth day after such date,
the Holder shall nonetheless have the right to exercise the Option until the
expiration of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be deemed
to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 50% or more of the then outstanding
Common Stock; or
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(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 any Issuer Subsidiary's assets or
deposits to any person, other than Grantee or a Grantee Subsidiary, then, and
in each such case, the agreement governing such transaction shall make proper
provision so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, represent the
right to acquire what the Holder would have received had it exercised such
Option prior to such transaction.
(b) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the proper provision referenced therein is
provided for.
9. The time periods for exercise of certain rights under Sections 2, 6, 7,
11 and 13 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
or 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 (provided that such extension shall not be longer than six months or
the time at which any required approvals have been denied); and (ii) to the
extent necessary to avoid liability under Section 16(b) of the 1934 Act by
reason of such exercise.
10. 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.
11. 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 a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder; PROVIDED,
HOWEVER, that until the date 15 days following the date on which the Federal
Reserve Board has approved an application by Grantee to acquire the shares of
Common Stock subject to the Option, Grantee may not assign its rights under the
Option except in (i) a widely dispersed public distribution, (ii) a private
placement in which no one party acquires the right to purchase in excess of 2%
of the voting shares of Issuer, (iii) an assignment to a single party (E.G., a
broker or investment banker) for the purpose of conducting a widely dispersed
public distribution on Grantee's behalf or (iv) any other manner approved by
the Federal Reserve Board.
12. 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.
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13. (a)(i) Notwithstanding any other provision of this Agreement, in no
event shall the Grantee's Total Profit (as hereinafter defined) exceed $12
million and, if it otherwise would exceed such amount, the Grantee, at its sole
election, shall either (a) reduce the number of shares of Common Stock subject
to this Option, (b) deliver to Issuer for cancellation Option Shares previously
purchased by Grantee, (c) pay cash to Issuer, or (d) do any combination
thereof, so that Grantee's actually realized Total Profit shall not exceed $12
million after taking into account the foregoing actions.
(ii) Notwithstanding any other provision of this Agreement, this Option
may not be exercised for a number of shares as would, as of the date of
exercise, result in a Notional Total Profit (as defined below) of more than
$12 million, PROVIDED that nothing in this sentence shall restrict any
exercise of the Option permitted hereby on any subsequent date.
(iii) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount received by Grantee
pursuant to Issuer's repurchase of the Option (or any portion thereof)
pursuant to Section 7, (ii) (x) the amount received by Grantee pursuant to
Issuer's repurchase of Option Shares pursuant to Section 7, less (y) the
Grantee's purchase price for such Option Shares, (iii) (x) the net cash
amounts received by Grantee pursuant to the sale of Option Shares (or any
other securities into which such Option Shares are converted or exchanged)
to any unaffiliated party, less (y) the Grantee's purchase price of such
Option Shares, (iv) any amounts received by Grantee on the transfer of the
Option (or any portion thereof) to any unaffiliated party, and (v) any
amount equivalent to the foregoing with respect to the Substitute Option.
(iv) As used herein, the term "Notional Total Profit" with respect to any
number of shares as to which Grantee may propose to exercise this Option
shall be the Total Profit determined as of the date of such proposed
exercise assuming that this Option were exercised on such date for such
number of shares and assuming that such shares, together with all other
Option Shares held by Grantee and its affiliates as of such date, were sold
for cash at the closing market price for the Common Stock as of the close
of business on the preceding trading day (less customary brokerage
commissions).
(b)(i) Grantee may, at any time between the occurrence of a Repurchase
Event and the 90th day after such occurrence (or such later period as provided
in Section 9), relinquish the Option (together with any Option Shares issued to
and then owned by Grantee) to Issuer in exchange for a cash fee equal to the
Surrender Price; PROVIDED, HOWEVER, that Grantee may not exercise its rights
pursuant to this Section 13(b) 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 $10.0 million (i) plus, if applicable, Grantee's
purchase price with respect to any Option Shares and (ii) minus, if applicable,
the sum of (1) the excess of (A) the net cash amounts, if any, received by
Grantee pursuant to the arms' length sale of Option Shares (or any other
securities into which such Option Shares were converted or exchanged) to any
unaffiliated party, over (B) Grantee's purchase price of such Option Shares,
and (2) the net cash amounts, if any, received by Grantee pursuant to an arms'
length sale of any portion of the Option sold.
(ii) Grantee may exercise its right to relinquish the Option and any
Option Shares pursuant to this Section 13(b) 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 13(b) 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.
(iii) 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 13 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 best efforts to obtain (and to
take all action necessary 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
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of this Section 13(b), (during which period Grantee may exercise any of its
rights hereunder, including any and all rights pursuant to this Section
13).
14. 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.
15. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire, or Issuer is not
permitted to repurchase pursuant to Section 7, the full number of shares of
Common Stock provided in Section l(a) hereof (as adjusted pursuant to Section
l(b) or Section 5 hereof), it is the express intention of Issuer to allow the
Holder to acquire or to require Issuer to repurchase such lesser number of
shares as may be permissible, without any amendment or modification hereof.
16. 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.
17. This Agreement shall be governed by and construed in accordance with
the laws of the State of North Carolina, without regard to the conflict of law
principles thereof (except to the extent that mandatory provisions of Federal
law are applicable).
18. 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.
19. 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.
20. 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.
21. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
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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.
INTERSTATE/JOHNSON LANE, INC.
By: /s/ JAMES H. MORGAN
----------------------------------
Name: James H. Morgan
Title: Chairman/Chief Executive
Officer
WACHOVIA CORPORATION
By: /s/ G. JOSEPH PRENDERGAST
----------------------------------
Name: G. Joseph Prendergast
Title: Senior Executive Vice
President
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APPENDIX C
FORM OF SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT, dated as of October 27, 1998 (this "Agreement"), by
and between Wachovia Corporation ("Wachovia") and the shareholder of
Interstate/Johnson Lane, Inc. ("IJL") identified as the signatory hereto (the
"Shareholder").*
WHEREAS, Wachovia is prepared to enter into an agreement and plan of
merger with IJL substantially in the form previously provided to Shareholder
(the "Merger Agreement") simultaneously with the execution of this Agreement;
WHEREAS, Wachovia would not enter into the Merger Agreement unless the
Shareholder enters into this Agreement;
WHEREAS, each Shareholder will benefit directly and substantially from the
Merger Agreement.
NOW, THEREFORE, in consideration of Wachovia's entry into the Merger
Agreement, the Shareholder agrees with Wachovia as follows:
1. The Shareholder represents and warrants that (a) he, she or it owns or
controls (regardless of in what capacity) the number of shares of IJL set forth
on the signature page hereof (the "Owned Shares") free from any lien,
encumbrance or restriction whatsoever and with full power to vote the Owned
Shares without the consent or approval of any other person and (b) this
Agreement constitutes the valid and legally binding obligation of such
Shareholder, enforceable in accordance with its terms. For all purposes of this
Agreement, Owned Shares shall include any shares of IJL as to which beneficial
ownership is acquired after the execution hereof.
2. The Shareholder irrevocably and unconditionally agrees that he, she or
it will (a) vote all of the Owned Shares in favor of the Merger Agreement and
the merger provided for therein (the "Merger") at any meeting or meetings of
IJL's shareholders called to vote upon the Merger Agreement and the Merger and
(b) will not vote such shares (or otherwise provide a proxy or consent or a
voting agreement with respect thereto) in favor of any other Acquisition
Proposal (as defined in the Merger Agreement).
3. The Shareholder agrees that he, she or it will not (a) directly or
indirectly, sell, transfer, pledge, assign or otherwise dispose of, or enter
into any contract, option, commitment or other arrangement or understanding
with respect to the sale, transfer, pledge, assignment or other disposition of,
any of the Owned Shares, unless it receives (i) an irrevocable proxy, in form
and substance substantially similar to the provisions of Section 2 hereof, to
vote such Owned Shares with respect to the Merger Agreement and the Merger, and
such Shareholder will vote such proxy as provided in Section 2 of this
Agreement and (ii) an agreement identical in all material respects to this
Agreement executed by the transferee of the Owned Shares the subject thereof;
and (b) take any action or omit to take any action which would prohibit,
prevent or preclude Shareholder from performing its obligations under this
Agreement.
4. The Shareholder agrees to take all reasonable actions and make such
reasonable efforts to consummate the Merger and effect the other transactions
contemplated by the Merger Agreement.
5. The Shareholder agrees that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed by it in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that Wachovia shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement by the Shareholder 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 it is entitled at law or in equity, and that the Shareholder waives the
posting of any bond or security in connection with any proceeding related
thereto.
6. 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 signature page has been signed by each party
hereto and delivered to the other party (which delivery may be by facsimile).
7. The Shareholder agrees to execute and deliver all such further
documents, certificates and instruments and take all such further reasonable
action as may be necessary or appropriate, in order to consummate the
transactions contemplated hereby.
- ---------
* To be executed by each director, executive officer and any controlled
company.
C-1
<PAGE>
8. Notwithstanding anything in this Agreement to the contrary, Wachovia
understands and agrees that (i) Owned Shares may be subject to liens,
encumbrances or restrictions (other than those relating to voting) arising in
connection with pledges of Owned Shares by the Shareholder or its affiliates
that exist as of the date hereof or that may be made after the date hereof
other than with the intent to avoid or thwart the purposes of this Agreement,
(ii) any transfer of Owned Shares pursuant to any bona fide foreclosure under
any such pledge shall not violate this Agreement, and (iii) the Shareholder may
transfer Owned Shares not comprising a significant part of such Shareholders'
Owned Shares to a charitable organization for charitable purposes provided that
such a transfer is not made with the intent to avoid or thwart the purposes of
this Agreement and that the Shareholder in good faith seeks to have the donee
provide the proxy and agreement contemplated by Section 3 or a similar
arrangement (provided that if such agreement and proxy or a similar arrangement
cannot be obtained as described above such shares may be transferred without
such proxy or agreement or similar arrangement).
9. This Agreement shall terminate as follows:
(a) On the 100th day after the termination of the Merger Agreement if
either (1) the Merger Agreement is terminated by Wachovia pursuant to Section
8.01(b) of the Merger Agreement as a result of a material willful breach by IJL
or (2) the Merger Agreement is terminated after the occurrence of an Initial
Triggering Event (as defined in the Stock Option Agreement provided for in the
Merger Agreement) or a Subsequent Triggering Event (as defined in the Stock
Option Agreement provided for in the Merger Agreement);
(b) If the circumstances set forth in paragraph (a)(1) or (a)(2) above are
not applicable, on the 30th day after the termination of the Merger Agreement
unless such termination is by IJL pursuant to Section 8.01(b) of the Merger
Agreement as a result of a material willful breach by Wachovia;
(c) If the circumstances set forth in paragraph (a)(1) or (a)(2) above are
not applicable and the Merger Agreement is terminated by IJL pursuant to
Section 8.01(b) of the Merger Agreement as a result of a material willful
breach by Wachovia, on the date of the termination of the Merger Agreement; and
(d) At the effective time of the merger provided for in the Merger
Agreement.
C-2
<PAGE>
IN WITNESS WHEREOF, the Shareholder and Wachovia have duly executed this
Agreement as of the date first above written.
WACHOVIA CORPORATION
By:
----------------------------------
Name:
Title:
SHAREHOLDER
or
-----------------------------------
-------------------------------------
By:
----------------------------------
Name:
Title:
Number of Owned Shares: _______
C-3
<PAGE>
APPENDIX D
BERKSHIRE CAPITAL CORPORATION
399 PARK AVENUE O 28TH FLOOR O NEW YORK, NEW YORK 10022
TEL: (212) 207-1000 O FAX: (212) 207-1019
October 27, 1998
Board of Directors
Interstate/Johnson Lane, Inc.
IJL Financial Center
Charlotte, North Carolina 28201
Gentlemen:
We understand that, pursuant to the Agreement and Plan of Merger (the
"Agreement") to be entered into by and between Wachovia Corporation, a North
Carolina corporation ("WB") and Interstate/Johnson Lane, Inc., a Delaware
corporation ("IJL" or the "Company"), IJL intends to combine with WB by means
of the merger of IJL with and into WB (the "Transaction"). We understand that
pursuant to the Agreement, at the closing of the Transaction, the holders of
IJL common stock will exchange each of their IJL shares for that number of
shares of common stock of WB which, calculated consistent with the terms of the
Agreement, have a value equal to $32.00 per IJL common share (the "Transaction
Consideration"). The terms and conditions of the Transaction are set forth in
more detail in the Agreement.
You have requested our opinion as to whether the Transaction Consideration
to be received in the Transaction by the shareholders of IJL is fair to the
shareholders of IJL from a financial point of view, as of the date hereof.
In arriving at our opinion, we have, among other things: (i) reviewed
certain publicly available business and financial information relating to IJL
and WB; (ii) reviewed certain internal financial information and other data
provided to us by the management of IJL relating to the business and prospects
of IJL, including financial projections for IJL; (iii) conducted discussions
with members of the senior management of IJL and WB concerning the operations
of IJL and WB, historical financial information of IJL and WB, future prospects
of IJL and other matters relating to IJL and WB; (iv) reviewed the Agreement;
(v) reviewed the financial terms, to the extent publicly available, of certain
acquisition transactions which we considered relevant; (vi) reviewed publicly
available financial and securities market data pertaining to certain publicly
held companies in lines of business we considered to be generally comparable to
those of IJL and WB; (vii) initiated and participated, based upon the direction
of IJL management, in discussions between IJL and several potential buyers
including WB; and (viii) conducted such other financial studies, analyses and
investigations, and considered such other information we deemed necessary and
appropriate.
In conducting our review and arriving at our opinion, with your consent,
we have not assumed any responsibility for independent verification of any of
the foregoing information. We have, with your consent, relied upon the
information described in the preceding paragraph (exclusive of the information
referred to in clauses (vii) and (viii)) being complete and accurate in all
material respects and have relied upon the assurances of the members of
management of IJL that they are unaware of any facts that would make the
information or projections provided to us incomplete or misleading. We have not
been requested to and have not made an independent evaluation or appraisal of
any assets or liabilities (contingent or otherwise) of IJL and WB or any of
their respective affiliates, nor have we been furnished with any such evaluation
or appraisal. Further, we have assumed, with your consent, that all of the
information prepared by the management of IJL provided to us for purposes of
this opinion, including the projections for IJL, was prepared in good faith and
on a basis reflecting the best currently available estimates and judgments of
the management of IJL as to the future financial performance of IJL and the
assumptions underlying such projections were viewed by management as being
reasonable at the time made. We have not undertaken any independent legal
analysis of the Transaction, any related transactions, the Agreement or any
legal or regulatory proceedings pending or threatened related to IJL or WB. We
have not been asked to, and do not, express any opinion as to the after-tax
consequences of the Transaction to the shareholders of IJL. In addition, our
opinion is based on economic, monetary and market conditions existing on the
date hereof. We have assumed that the Transaction will be consummated on the
terms described in the Agreement without any waiver of any material items or
conditions by the shareholders of IJL and that obtaining the necessary approvals
for the Transaction will not have any adverse effect on IJL or WB.
D-1
<PAGE>
Board of Directors October 27, 1998
Interstate/Johnson Lane, Inc. Page 2
We have not been asked to pass upon, and express no opinion with respect
to, any matter other than the fairness, from a financial point of view, of the
Transaction Consideration to be received by the shareholders of IJL. In
connection with the preparation of this opinion, we have been authorized by the
Company to solicit, and we have solicited, third party indications of interest
for a business combination with the Company only from a limited number of
potential purchasers of the Company, including WB, selected by the Company.
In rendering this opinion, we are not rendering any opinion as to the
value of IJL as a whole or making any recommendations to the board of directors
of IJL or any shareholders of IJL with respect to the advisability of
approving, recommending or voting in favor of the Transaction.
Berkshire Capital Corporation, as part of its investment banking business,
is engaged in the business of providing financial advisory services with regard
to mergers and acquisitions. We have acted as financial adviser to IJL in
connection with the Transaction, have received retainer fees for such services,
and will receive a fee for our services which is contingent upon the
consummation of the Transaction. In addition, IJL has agreed to reimburse us
for our reasonable expenses, including attorneys' fees, and to indemnify us
against certain liabilities that may arise out of this assignment, including
the rendering of this opinion.
This opinion is for the use and benefit of the Board of Directors of IJL
and is rendered to the Board of Directors of IJL in connection with its
consideration of the Transaction.
Based upon and subject to the foregoing, we are of the opinion that the
Transaction Consideration to be received in the Transaction by the shareholders
of IJL is fair to the shareholders of IJL from a financial point of view, as of
the date hereof.
Very truly yours,
BERKSHIRE CAPITAL CORPORATION
By: /s/ Peter L. Bain
--------------------------------
Peter L. Bain
MANAGING DIRECTOR
D-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant is incorporated under the laws of North Carolina. Sections
55-8-50 ET SEQ. of the North Carolina Business Corporation Act prescribe the
conditions under which indemnification may be obtained by a present or former
director or officer of the Registrant who incurs expenses or liability as a
consequence of certain proceedings arising out of his or her activities as a
director or officer. Article IX of the Registrant's Bylaws also provides for
indemnification of directors and officers under certain circumstances. The
Registrant has purchased a standard liability policy, which, subject to any
limitations set forth in the policy, indemnifies the Registrant's directors and
officers for damages that they become legally obligated to pay as a result of
any negligent act, error or omission committed while serving in their official
capacity.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits (see exhibit index immediately preceding the exhibits for the
page number where each exhibit can be found)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------- -------------------------------------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of October 27, 1998, by and between Wachovia Corporation and
Interstate/Johnson Lane, Inc. (included as Appendix A to the Proxy Statement/Prospectus and incorporated
by reference herein).
3.1 Amended and Restated Articles of Incorporation (Exhibit 3.1 to Wachovia Corporation's Form 10-K for
the year ended December 31, 1993, File No. 1-9021*).
3.2 Bylaws.
4.1 Amended and Restated Articles of Incorporation (Exhibit 3.1 to Wachovia Corporation's Form 10-K for
the year ended December 31, 1993, File No. 1-9021*).
4.2 Bylaws (included herewith as Exhibit 3.2).
4.3 All instruments defining the rights of holders of long-term debt of Wachovia Corporation 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.)
5.1 Opinion of Kenneth W. McAllister, including consent.
8.1 Opinion of Sullivan & Cromwell, including consent.
8.2 Opinion of Moore & Van Allen, PLLC, including consent.
23.1 Consent of Kenneth W. McAllister (appears in Legal Opinion, Exhibit 5.1)
23.2 Consent of Sullivan & Cromwell (appears in Legal Opinion, Exhibit 8.1)
23.3 Consent of Moore & Van Allen, PLLC (appears in Legal Opinion, Exhibit 8.2)
23.4 Consent of Ernst & Young LLP
23.5 Consent of KPMG Peat Marwick LLP
23.6 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney
99.1 Form of Proxy
99.2 Stock Option Agreement, dated as of October 27, 1998, by and between Wachovia Corporation and
Interstate/Johnson Lane, Inc. (included as Appendix B to the Proxy Statement/Prospectus and incorporated
by reference herein).
</TABLE>
- ---------
* Incorporated herein by reference
(b) Financial Statement Schedules
Schedules are omitted because they are not required or are not applicable,
or the required information is shown in the financial statements or notes
thereto.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement;
II-1
<PAGE>
(i) To include any Prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of 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.
(c) 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), the Registrant undertakes that such reoffering
Prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items of
the applicable form.
(d) That every Prospectus (a) that is filed pursuant to paragraph (c)
immediately preceding, or (b) that purports to meet the requirements of Section
10(a)(3) of the Securities Act of 1933 and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, 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.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions (See Item 20),
or otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(f) 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.
II-2
<PAGE>
(g) 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Winston-Salem, State of
North Carolina, on December 11, 1998.
Wachovia Corporation
By: /s/ L. M. BAKER, JR.
-------------------------------------
L. M. BAKER, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------------------------- ------------------------- ------------------
<S> <C> <C>
/s/ L.M. BAKER, JR. Director, President and December 11, 1998
---------------------------------- Chief Executive Officer
L.M. BAKER, JR.
/s/ JAMES S. BALLOUN* Director December 11, 1998
----------------------------------
JAMES S. BALLOUN
/s/ JAMES F. BETTS* Director December 11, 1998
----------------------------------
JAMES F. BETTS
/s/ PETER C. BROWNING* Director December 11, 1998
----------------------------------
PETER C. BROWNING
/s/ JOHN T. CASTEEN III* Director December 11, 1998
----------------------------------
JOHN T. CASTEEN III
/s/ JOHN L. CLENDENIN* Director December 11, 1998
----------------------------------
JOHN L. CLENDENIN
/s/ LAWRENCE M. GRESSETTE, JR.* Director December 11, 1998
----------------------------------
LAWRENCE M. GRESSETTE, JR.
/s/ THOMAS K. HEARN, JR.* Director December 11, 1998
----------------------------------
THOMAS K. HEARN, JR.
/s/ GEORGE W. HENDERSON III* Director December 11, 1998
----------------------------------
GEORGE W. HENDERSON III
/s/ W. HAYNE HIPP* Director December 11, 1998
----------------------------------
W. HAYNE HIPP
/s/ ROBERT A. INGRAM* Director December 11, 1998
----------------------------------
ROBERT A. INGRAM
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------------------- ------------------------------------- ------------------
<S> <C> <C>
/s/ GEORGE R. LEWIS* Director December 11, 1998
----------------------------------
GEORGE R. LEWIS
/s/ ROBERT S. MCCOY, JR. Senior Executive Vice President and December 11, 1998
---------------------------------- Chief Financial Officer
ROBERT S. MCCOY, JR.
/s/ JOHN G. MEDLIN, JR.* Director December 11, 1998
----------------------------------
JOHN G. MEDLIN, JR.
/s/ LLOYD U. NOLAND, III* Director December 11, 1998
----------------------------------
LLOYD U. NOLAND, III
/s/ SHERWOOD H. SMITH, JR.* Director December 11, 1998
----------------------------------
SHERWOOD H. SMITH, JR.
/s/ DONALD K. TRUSLOW Executive Vice President, Treasurer December 11, 1998
---------------------------------- and Comptroller
DONALD K. TRUSLOW
/s/ JOHN C. WHITAKER, JR.* Director December 11, 1998
- ----------------------------------
JOHN C. WHITAKER, JR.
</TABLE>
*By: /s/ KENNETH W. MCALLISTER
------------------------------
KENNETH W. MCALLISTER
ATTORNEY-IN-FACT
II-4
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
WACHOVIA CORPORATION
AMENDED AND RESTATED JULY 25, 1997
AMENDED OCTOBER 23, 1998
<PAGE>
TABLE OF CONTENTS TO BYLAWS
OF
WACHOVIA CORPORATION
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
ARTICLE 1
MEETINGS OF SHAREHOLDERS ................................................ 1
Section 1.1. Place of Meeting ......................................... 1
Section 1.2. Annual Meeting ........................................... 1
Section 1.3. Substitute Annual Meeting ................................ 1
Section 1.4. Special Meetings ......................................... 1
Section 1.5. Notice of Meetings ....................................... 1
Section 1.6. Quorum ................................................... 2
Section 1.7. Shareholders' List ....................................... 2
Section 1.8. Voting of Shares ......................................... 2
Section 1.9. Conduct of Meeting and Order of Business ................. 2
Section 1.10. Action to be Taken at Annual Meetings of Shareholders ... 3
ARTICLE 2
BOARD OF DIRECTORS ...................................................... 3
Section 2.1. General Powers ........................................... 3
Section 2.2. Number, Term, Qualification and Nomination ............... 3
Section 2.3. Removal .................................................. 4
Section 2.4. Vacancies ................................................ 4
Section 2.5. Compensation ............................................. 4
Section 2.6. Chairman of the Board of Directors ....................... 5
Section 2.7. Vice Chairmen ............................................ 5
Section 2.8. Directors Emeritus ....................................... 5
ARTICLE 3
MEETINGS OF DIRECTORS ................................................... 5
Section 3.1. Regular Meetings ......................................... 5
Section 3.2. Special Meetings ......................................... 5
Section 3.3. Notice of Meetings ....................................... 5
Section 3.4. Quorum ................................................... 6
Section 3.5. Manner of Acting ......................................... 6
Section 3.6. Presumption of Assent .................................... 6
Section 3.7. Action Without Meeting ................................... 6
Section 3.8. Meeting by Communications Device ......................... 6
ARTICLE 4
COMMITTEES .............................................................. 7
Section 4.1. Election and Powers ...................................... 7
Section 4.2. Removal; Vacancies ....................................... 7
Section 4.3. Meetings ................................................. 7
Section 4.4. Minutes .................................................. 8
Section 4.5. Standing Committees ...................................... 8
ARTICLE 5
OFFICERS ................................................................ 8
Section 5.1. Titles ................................................... 8
Section 5.2. Election; Appointment .................................... 8
Section 5.3. Removal .................................................. 8
Section 5.4. Vacancies ................................................ 8
Section 5.5. Compensation ............................................. 8
Section 5.6. Chief Executive Officer .................................. 9
Section 5.7. President ................................................ 9
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Section 5.8. Vice Presidents ........................................... 9
Section 5.9. Secretary ................................................. 9
Section 5.10. Assistant Secretaries .................................... 10
Section 5.11. Voting Upon Stocks ....................................... 10
ARTICLE 6
CAPITAL STOCK ............................................................ 10
Section 6.1. Certificates .............................................. 10
Section 6.2. Transfer of Shares ........................................ 10
Section 6.3. Transfer Agent and Registrar .............................. 10
Section 6.4. Regulations ............................................... 10
Section 6.5. Fixing Record Date ........................................ 11
Section 6.6. Lost Certificates ......................................... 11
ARTICLE 7
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES ..................... 11
Section 7.1. Indemnification Provisions ................................ 11
Section 7.2. Definitions ............................................... 12
Section 7.3. Settlements ............................................... 12
Section 7.4. Litigation Expense Advances ............................... 12
Section 7.5. Approval of Indemnification Payments ...................... 13
Section 7.6. Suits by Claimant ......................................... 13
Section 7.7. Consideration; Personal Representatives and Other Remedies 14
Section 7.8. Scope of Indemnification Rights ........................... 14
ARTICLE 8
GENERAL PROVISIONS ....................................................... 14
Section 8.1. Dividends and other Distributions ......................... 14
Section 8.2. Seal ...................................................... 14
Section 8.3. Waiver of Notice .......................................... 14
Section 8.4. Checks .................................................... 14
Section 8.5. Fiscal Year ............................................... 14
Section 8.6. Amendments ................................................ 14
Section 8.7. Applicability of Antitakeover Statutes .................... 15
</TABLE>
ii
<PAGE>
BYLAWS
OF
WACHOVIA CORPORATION
ARTICLE 1
MEETINGS OF SHAREHOLDERS
SECTION 1.1. PLACE OF MEETING. Meetings of shareholders shall be held at
the principal offices of the corporation in Winston-Salem, North Carolina or
Atlanta, Georgia, or at such other place as shall be fixed by the board of
directors or the chief executive officer and designated in the notice of the
meeting.
SECTION 1.2. ANNUAL MEETING. The annual meeting of shareholders shall be
held at 10:30 a.m. on the fourth Friday in April of each year, if not a legal
holiday, but if a legal holiday, then on the preceding business day which is
not a legal holiday, or at such other hour and date as the board of directors,
the chief executive officer or secretary may designate, for the purpose of
electing directors of the corporation and the transaction of such other
business as may be properly brought before the meeting.
SECTION 1.3. SUBSTITUTE ANNUAL MEETING. If the annual meeting is not held
on the day designated or provided for in these bylaws, a substitute annual
meeting may be called in accordance with Section 1.4. A meeting so called shall
be designated and treated for all purposes as the annual meeting.
SECTION 1.4. SPECIAL MEETINGS. Special meetings of the shareholders may be
called at any time by the chief executive officer or the board of directors.
SECTION 1.5. NOTICE OF MEETINGS. At least 10 and no more than 60 days
prior to any annual or special meeting of shareholders, the corporation shall
notify shareholders of the date, time and place of the meeting and, in the case
of a special or substitute annual meeting or where otherwise required by law,
shall briefly describe the purpose or purposes of the meeting. Only business
within the purpose or purposes described in the notice may be conducted at a
special meeting. Unless otherwise required by law or by the articles of
incorporation (including, but not limited to, in the event of a meeting to
consider the adoption of a plan of merger or share exchange, a sale of assets
other than in the ordinary course of business or a voluntary dissolution), the
corporation shall be required to give notice only to shareholders entitled to
vote at the meeting. If an annual or special shareholders' meeting is adjourned
to a different date, time or place, notice thereof need not be given if the new
date, time or place is announced at the meeting before adjournment. If a new
record date for the adjourned meeting is fixed pursuant to Section 6.5 hereof,
notice of the adjourned meeting shall be given to persons who are shareholders
as of the new record date. It shall be the primary responsibility of the
secretary to give the notice, but notice may be given by or at the direction of
the chief executive officer or other person or persons calling the meeting. If
mailed, such notice shall be deemed to be effective when deposited in the
United States mail with postage thereon prepaid, correctly addressed to the
shareholder's address shown in the corporation's current record of
shareholders.
SECTION 1.6. QUORUM. A majority of the votes entitled to be cast by a
voting group on a matter, represented in person or by proxy at a meeting of
shareholders, shall constitute a quorum for that voting group for any action on
that matter, unless the articles of incorporation provide otherwise or other
quorum requirements are fixed by law, including by a court of competent
jurisdiction acting pursuant to Section 55-7-03 of the General Statutes of
North Carolina. Once a share is represented for any purpose at a meeting, it is
deemed present for quorum purposes for the remainder of the meeting and any
adjournment thereof, unless a new record date is or must be set for the
adjournment. Action may be taken by a voting group at any meeting at which a
quorum of that voting group is represented, regardless of whether action is
taken at that meeting by any other voting group. In the absence of a quorum at
the opening of any meeting of shareholders, such meeting may be adjourned from
time to time, subject to Section 6.5, by a vote of the majority of the shares
voting on the motion to adjourn.
SECTION 1.7. SHAREHOLDERS' LIST. After a record date is fixed for a
meeting, the secretary of the corporation shall prepare an alphabetical list of
the names of all its shareholders who are entitled to notice of the
shareholders' meeting. Such list shall be arranged by voting group (and within
each voting group by class or series of shares) and shall show the address of
and number of shares held by each shareholder. The shareholders' list shall be
made available for inspection by any shareholder beginning two business days
after notice of the meeting is given for which the list was prepared and
continuing through the meeting, at the corporation's principal office or at
such other place identified in the meeting notice in the city where the meeting
will be held. The corporation shall make the shareholders' list available at
the meeting, and any shareholder or his or her agent or attorney is entitled to
inspect the list at any time during the meeting or any adjournment.
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SECTION 1.8. VOTING OF SHARES. Except as otherwise provided by the
articles of incorporation or by law, each outstanding share of voting capital
stock of the corporation shall be entitled to one vote on each matter submitted
to a vote at a meeting of the shareholders. Unless otherwise provided in the
articles of incorporation, cumulative voting for directors shall not be
allowed. Action on a matter by a voting group for which a quorum is present is
approved if the votes cast within the voting group favoring the action exceed
the votes cast opposing the action, unless the vote of a greater number is
required by law or by the articles of incorporation. Absent special
circumstances, the shares of the corporation are not entitled to vote if they
are owned, directly or indirectly, by a second corporation, domestic or
foreign, and the corporation owns, directly or indirectly, a majority of the
shares entitled to vote for directors of the second corporation, except that
this provision shall not limit the power of the corporation to vote shares held
by it in a fiduciary capacity.
SECTION 1.9. CONDUCT OF MEETING AND ORDER OF BUSINESS. The chairman of the
board of directors or the chief executive officer shall act as chairman at all
meetings of shareholders and the secretary of the corporation or, in the
secretary's absence, an assistant secretary, shall act as secretary at all
meetings of shareholders. The chairman shall have the right and authority to
determine and maintain the rules, regulations and procedures for the proper
conduct of the meeting, including but not limited to restricting entry to the
meeting after it has commenced, maintaining order and the safety of those in
attendance, opening and closing the polls for voting, dismissing business not
properly submitted, and limiting time allowed for discussion of the business of
the meeting.
SECTION 1.10. ACTION TO BE TAKEN AT ANNUAL MEETINGS OF SHAREHOLDERS. No
business shall be transacted at an annual meeting of shareholders, except such
business as shall be (a) specified in the notice of meeting given as provided
in Section 1.5 hereof; (b) otherwise brought before the meeting by or at the
direction of the board of directors; or (c) otherwise properly brought before
the meeting by a holder of voting securities entitled to vote at the meeting,
in compliance with the procedures set forth in this Section 1.10. In addition
to any other applicable requirement, for business to be brought before an
annual meeting by a holder of voting securities pursuant to (c) above, the
holder must have given timely notice in writing to the secretary of the
corporation. To be timely, notice must be delivered to, or mailed to and
received by, the secretary of the corporation at the principal offices of the
corporation not less than 90 days nor more than 120 days prior to the meeting;
provided, however, that if less than 100 days' notice or prior public
disclosure of the meeting is given or made by the corporation, notice will be
timely if received not later than the close of business on the tenth day
following the day on which such notice or public disclosure of the meeting was
given or made. Notwithstanding the foregoing, notice shall be deemed to have
been given more than 100 days in advance of an annual meeting if the meeting is
held on the day indicated in Section 1.2 hereof. Notice of business to be
brought before the annual meeting pursuant to (c) above shall set forth as to
each matter the holder of voting securities proposes to bring before the annual
meeting: (i) a brief description of the business desired to be brought before
the annual meeting and the reasons for bringing such business before the annual
meeting; (ii) the name and address, as they appear on the corporation's books,
of each holder of voting securities proposing such business; (iii) the classes
and number of shares of the corporation that are owned of record and
beneficially by such holder; and (iv) any material interest of such holder in
such business other than his interest as a shareholder of the corporation.
Notwithstanding anything in these bylaws to the contrary, no business shall be
conducted at an annual meeting except in accordance with the provisions set
forth in this Section 1.10.1
ARTICLE 2
BOARD OF DIRECTORS
SECTION 2.1. GENERAL POWERS. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall
be managed under the direction of, the board of directors.
SECTION 2.2. NUMBER, TERM, QUALIFICATION AND NOMINATION. The number of
directors constituting the board of directors shall be not less than nine nor
more than 25, as may be fixed or changed from time to time, within the minimum
and the maximum, by the shareholders or by the board of directors.2
The board of directors shall be divided into three classes as equal in
number as may be feasible, with the term of office of one class expiring each
year. The members of the initial board of directors shall be divided into three
classes as hereinafter provided, with directors of the first class to hold
office for a term expiring at the first annual meeting of shareholders,
directors of the second class to hold office for a term expiring at the second
annual meeting of shareholders and directors of the third class to hold office
for a term expiring at the third annual meeting of shareholders. At each annual
meeting of shareholders, successors to the directors whose terms shall then
expire shall be elected to hold office for terms expiring at the third
succeeding annual meeting. In case of any vacancies, by reason of an increase
in the number of directors or otherwise, each additional director may be
elected by the board of directors to hold office until the end of the term he
is elected
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to fill and until his successor shall have been elected and qualified in the
class to which such director is assigned and for the term or remainder of the
term of such class. Directors shall continue in office until others are chosen
and qualified in their stead. When the number of directors is changed, any
newly created directorships or any decrease in directorships shall be so
assigned among the classes by a majority of the directors then in office,
though less than a quorum, so as to make all classes as equal in number as may
be feasible. No decrease in the number of directors shall shorten the term of
any incumbent director.
No person shall be elected a director nor shall continue to serve an
unexpired term as a director past the annual meeting of the corporation if such
person has, as of the date of the annual meeting, reached the age of 67 years.
No person shall be elected as a director who has retired from active
participation in the person's principal business or from the active practice of
the person's principal profession; however, a director who retires from active
participation in his or her principal business or profession during the course
of an unexpired term as director may complete such unexpired term subject to
the above age 67 limitation. Notwithstanding the foregoing, a person who has
served for five or more years as chief executive officer of the corporation may
complete, after retirement as an employee of the corporation, an unexpired term
and may be elected and serve thereafter as a director, provided, however, that
such person's service as a director shall not extend beyond the annual meeting
of the corporation immediately following the date on which he or she reaches 66
years of age. Each director nominee must be the owner in his or her own right
of shares of stock of the corporation having an aggregate par value of not less
than $1,000. Other qualifications which shall be considered in the selection of
director nominees are the extent of experience in business, finance or
management; the extent of knowledge in regional, national or international
business and finance; and the overall capacity to advise and govern the
corporation in fulfilling its mission and meeting its responsibilities to
shareholders, customers, employees and the public.
Only persons who are nominated in accordance with the provisions set forth
in these bylaws shall be eligible to be elected as directors at an annual or
special meeting of shareholders. Nominations for election to the board of
directors shall be made by the board of directors or a committee appointed by
the board of directors. Nominations for election as a director by the board of
directors or a committee thereof shall include the chief executive officer and
the chairman if the chief executive officer is not the chairman and if any such
person is not then a director or if his term as a director will expire at such
meeting. Nominations for election to the board of directors may also be made by
a holder of any outstanding class of shares of the corporation entitled to vote
for the election of directors at any such meeting if written notice of the
nomination of such person(s) shall have been delivered to the secretary of the
corporation at the principal offices of the corporation not less than 90 days
nor more than 120 days prior to the meeting; provided, however, that if less
than 100 days' notice or prior public disclosure of the meeting is given or
made by the corporation, such notice shall be delivered to the secretary of the
corporation not later than the close of business on the tenth day following the
day on which such notice or public disclosure of the meeting was given or made.
Notwithstanding the foregoing, notice shall be deemed to have been given more
than 100 days in advance of an annual meeting if the annual meeting is held on
the day indicated in Section 1.2 hereof. Each such notice shall set forth: (a)
the name and address of the shareholder who intends to make the nomination and
of the person or persons to be nominated; (b) a representation that the
shareholder is a holder of record of shares of the corporation entitled to vote
at the meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (c) a description of
all arrangements or understandings between the shareholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nomination or nominations are to be made by the shareholder; (d) such other
information regarding each such nominee as would be required to be included in
a proxy statement filed pursuant to the proxy rules of the Securities and
Exchange Commission if the nominee had been nominated by the board of directors
or a committee thereof; and (e) the written consent of each nominee to serve as
a director of the corporation if so elected. Nominations not made in accordance
herewith may be disregarded by the chairman of the meeting in his discretion,
and upon his instructions the voting inspectors or tabulators may disregard all
votes cast for each such nominee.3
SECTION 2.3. REMOVAL. Any director may be removed from office as a
director, but only for cause, by the affirmative vote at a meeting called as
provided herein for that purpose, of at least 66 2/3% in interest of the
holders of voting stock of the corporation issued and outstanding, including a
majority in interest of the holders of issued and outstanding voting stock of
the corporation held by persons other than any person who is an "Interested
Shareholder" as defined in paragraph (3) of Article X.D of the corporation's
articles of incorporation; provided, the notice of the shareholders' meeting at
which such action is to be taken states that a purpose of the meeting is
removal of the director, and the number of votes cast to remove the director
exceeds the number of votes cast not to remove him.
SECTION 2.4. VACANCIES. Except as otherwise provided in the articles of
incorporation or these bylaws, a vacancy occurring in the board of directors,
including, without limitation, a vacancy resulting from an increase in the
number of directors
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or from the failure by the shareholders to elect the full authorized number of
directors, may be filled by a majority of the remaining directors or by the
sole director remaining in office. The shareholders may elect a director at any
time to fill a vacancy not filled by the directors. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office.
SECTION 2.5. COMPENSATION. The directors shall have authority to vote
themselves reasonable compensation for their services as directors. The
directors may provide for their own indemnification and for the indemnification
of others, in accordance with these bylaws or as otherwise authorized by law,
and the directors may authorize the purchase of insurance in connection
therewith. Any director may serve the corporation in any other capacity and
receive compensation therefor.
SECTION 2.6. CHAIRMAN OF THE BOARD OF DIRECTORS. The board of directors
shall elect a chairman who shall preside at all meetings of the board of
directors. The chairman of the board may but need not be an officer or employee
of the corporation. If not elected chief executive officer, the chairman shall
have such other authority and shall perform such other duties as may from time
to time be conferred upon him herein or by the directors or by the chief
executive officer, and in the event of the disability or death of the chief
executive officer or president, he shall perform the duties of the chief
executive officer or president unless and until a new chief executive officer
or president is elected by the directors.
SECTION 2.7. VICE CHAIRMEN. The board of directors may elect one or more
vice chairmen who shall have such authority and shall perform such duties as
may from time to time be conferred upon them by the directors or by the chief
executive officer. A vice-chairman may but need not be an officer or employee
of the bank.
SECTION 2.8. DIRECTORS EMERITUS. Upon retiring from the board of
directors, a director may be elected a director emeritus by the board of
directors. A director emeritus shall not have the right to vote and shall not
be charged with the responsibilities or be subject to the liabilities of
directors. A director emeritus may attend meetings of the board only upon
invitation of the directors.
ARTICLE 3
MEETINGS OF DIRECTORS
SECTION 3.1. REGULAR MEETINGS. Regular meetings of the board of directors
shall be held on the fourth Friday of January, April, July and October of each
year at the principal offices of the corporation in Winston-Salem, North
Carolina or Atlanta, Georgia, unless the board of directors fixes some other
place or time for the holding of such meetings. If any date for which a regular
meeting is scheduled shall be a legal holiday, the meeting shall be held on
such other date as is designated in a notice of the meeting.
If possible, the directors, including directors-elect, shall meet
following each annual meeting of shareholders for the purpose of organizing the
board and electing officers for the succeeding year; provided, in any event the
new board shall be organized and officers elected no later than at the next
regular meeting of the directors.
SECTION 3.2. SPECIAL MEETINGS. Special meetings of the board of directors
may be called by or at the request of the chief executive officer or any three
directors. Such meetings may be held at the time and place designated in the
notice of the meeting.
SECTION 3.3. NOTICE OF MEETINGS. Unless the articles of incorporation
provide otherwise, regular meetings of the board of directors held on a date
specified in or pursuant to the first sentence of Section 3.1 may be held
without notice of the date, time, place or purpose of the meeting. The
secretary giving notice of a regular meeting to be held on a date other than a
date specified in or pursuant to the first sentence of Section 3.1, and the
secretary or other person calling a special meeting, shall give notice by any
usual means of communication to be sent at least 24 hours before the meeting if
notice is sent by means of telephone, telecopy or personal delivery and at
least five days before the meeting if notice is sent by mail.
SECTION 3.4. QUORUM. Except as otherwise provided in the articles of
incorporation, a majority of the directors in office shall constitute a quorum
for the transaction of business at a meeting of the board of directors,
provided a majority of the directors present are not also officers of the
corporation. Less than a quorum may adjourn any meeting from time to time, and
the meeting as adjourned may be held without further notice. In the event of
the death, disability or other absence of directors due to war or other
catastrophe, reducing the number of directors able to attend a meeting to less
than that required for a quorum, a majority of the remaining directors shall
constitute a quorum.
SECTION 3.5. MANNER OF ACTING. Except as otherwise provided in the
articles of incorporation, the affirmative vote of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
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SECTION 3.6. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the board of directors at which action on any corporate
matter is taken is deemed to have assented to the action taken unless he or she
objects at the beginning of the meeting (or promptly upon arrival) to holding,
or transacting business at, the meeting, or unless his or her dissent or
abstention is entered in the minutes of the meeting or unless he or she shall
file written notice of his or her dissent or abstention to such action with the
presiding officer of the meeting before its adjournment or with the corporation
immediately after adjournment of the meeting. The right of dissent or
abstention shall not apply to a director who voted in favor of such action.
SECTION 3.7. ACTION WITHOUT MEETING. Unless otherwise provided in the
articles of incorporation, action required or permitted to be taken at a
meeting of the board of directors may be taken without a meeting if the action
is taken by all members of the board. The action must be evidenced by one or
more written consents signed by each director before or after such action,
describing the action taken, and included in the minutes or filed with the
corporate records. Action taken without a meeting is effective when the last
director signs the consent, unless the consent specifies a different effective
date.
SECTION 3.8. MEETING BY COMMUNICATIONS DEVICE. Unless otherwise provided
in the articles of incorporation, the board of directors may permit any or all
directors to participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting. A director
participating in a meeting by this means is deemed to be present in person at
the meeting.
ARTICLE 4
COMMITTEES
SECTION 4.1. ELECTION AND POWERS. Unless otherwise provided by the
articles of incorporation, a majority of the board of directors may create one
or more committees and appoint two or more directors to serve at the pleasure
of the board on each such committee. To the extent specified by the board of
directors or in the articles of incorporation or the bylaws, each committee
shall have and may exercise the powers of the board in the management of the
business and affairs of the corporation, except that no committee shall have
authority to do the following:
(a) Authorize distributions.
(b) Approve or propose to shareholders action required to be approved by
shareholders.
(c) Fill vacancies on the board of directors or on any of its committees.
(d) Amend the articles of incorporation.
(e) Adopt, amend or repeal the bylaws.
(f) Approve a plan of merger not requiring shareholder approval.
(g) Authorize or approve the reacquisition of shares, except according to a
formula or method prescribed by the board of directors.
(h) Authorize or approve the issuance, sale or contract for sale of shares,
or determine the designation and relative rights, preferences and
limitations of a class or series of shares, except that the board of
directors may authorize a committee (or a senior executive officer of
the corporation) to do so within limits specifically prescribed by the
board of directors.
The board of directors or the chief executive officer may establish
nonboard committees composed of directors, employees or others to deal with
corporate powers not required to be exercised by the board of directors.
SECTION 4.2. REMOVAL; VACANCIES. Any member of a committee may be removed
at any time with or without cause, and vacancies in the membership of a
committee by means of death, resignation, disqualification or removal shall be
filled, by a majority of the full board of directors.
SECTION 4.3. MEETINGS. The provisions of Article 3 governing meetings of
the board of directors, action without meeting, notice, waiver of notice and
quorum and voting requirements shall apply to the committees of the board and
its members.
SECTION 4.4. MINUTES. Each committee shall keep minutes of its proceedings
and shall report thereon to the board of directors at or before the next
meeting of the board.
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SECTION 4.5. STANDING COMMITTEES. The directors shall appoint annually the
chairman and members of and shall establish the charter, responsibilities and
authority of the following standing committees: Audit, Compliance, Corporate
Governance and Nominating, Credit, Executive, Finance, and Management Resources
and Compensation. Each committee shall consist entirely of directors. No active
or former officer or employee of the corporation shall serve on the Audit,
Compliance, Corporate Governance and Nominating, or Management Resources and
Compensation committees other than as an ex officio member of such committees.
ARTICLE 5
OFFICERS
SECTION 5.1. TITLES. The officers of the corporation shall be a chief
executive officer, a president, one or more vice presidents and a secretary and
may include one or more executive vice presidents, a treasurer, a comptroller,
a general auditor, one or more assistant secretaries, one or more assistant
treasurers, one or more assistant comptrollers, and such other officers as
shall be deemed necessary. The officers shall have the authority and perform
the duties as set forth herein or as from time to time may be prescribed by the
board of directors or by the chief executive officer (to the extent that the
chief executive officer is authorized by the board of directors or these bylaws
to prescribe the authority and duties of officers). Any two or more offices may
be held by the same individual, but no officer may act in more than one
capacity where action of two or more officers is required.
SECTION 5.2. ELECTION; APPOINTMENT. The officers of the corporation shall
be elected from time to time by the board of directors or appointed from time
to time by the chief executive officer to the extent that the chief executive
officer is authorized by the board to appoint officers; provided, the chief
executive officer may from time to time elect one or more assistant secretaries
notwithstanding the absence of such authorization.
SECTION 5.3. REMOVAL. Any officer may be removed by the board of directors
at any time with or without cause whenever in the board's judgment the best
interests of the corporation will be served, but removal shall not itself
affect the officer's contract rights, if any, with the corporation.
SECTION 5.4. VACANCIES. Vacancies among the officers may be filled and new
offices may be created and filled by the board of directors, or by the chief
executive officer to the extent authorized by the board.
SECTION 5.5. COMPENSATION. Except as provided by Section 5.6, the
compensation of the officers shall be fixed by, or under the direction of, the
Management Resources and Compensation Committee or by such person or persons to
whom authority to fix compensation has been delegated by the board or such
committee.
SECTION 5.6. CHIEF EXECUTIVE OFFICER. The chief executive officer of the
corporation shall be elected annually by the directors and may hold either or
both of the titles of chairman and president. The chief executive officer shall
have overall responsibility and authority for administering the affairs of the
corporation and of all its subsidiary banks and companies. The chief executive
officer shall exercise all of the powers customarily exercised by a chief
executive officer of any corporation by whatever name called unless expressly
limited by the directors. All officers of the corporation shall report to the
chief executive officer to the extent the chief executive officer may require.
In the interim between meetings of the directors or meetings of the
Executive Committee, the chief executive officer may make appointments pro tem
to any office below the level of executive vice president, either for the
purpose of filling a vacancy or increasing the number of officers, such
appointees pro tem to hold office until the next succeeding regular or special
meeting of the directors, who may in their discretion ratify or revoke any such
appointments. The compensation of all agents and employees of the corporation
other than certain senior officers specified by the board shall be fixed by the
chief executive officer or by senior officers or committees appointed by the
chief executive officer. The chief executive officer shall have the power to
execute in the name and on behalf of the corporation, or to delegate such power
to others, all contracts or instruments of every character relating to real or
personal property without express authority of the directors unless such
authority is expressly limited by the directors.
It shall be the duty of the chief executive officer or an individual
designated by the chief executive officer to make a report of the corporation's
performance and condition to the shareholders at their annual meeting and to
the directors at their regular meetings including therein such recommendations
as to the policy and conduct of the business of the corporation as the chief
executive officer may deem advisable. The chief executive officer shall be ex
officio a member of all committees of the board.
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SECTION 5.7. PRESIDENT. If not elected chief executive officer, the
president shall have such authority and shall perform such duties as may from
time to time be conferred by the directors or by the chief executive officer,
and in the event of disability of the chief executive officer or chairman,
shall perform the duties of the chief executive officer or chairman unless and
until the Corporate Governance and Nominating Committee shall appoint an acting
chief executive officer or chairman or until a new chief executive officer or
chairman is elected by the directors.
SECTION 5.8. VICE PRESIDENTS. Vice presidents may be designated as senior
executive vice presidents, executive vice presidents, regional vice presidents,
group vice presidents, senior vice presidents, first vice presidents, vice
presidents and assistant vice presidents. The board of directors, subject to
the provisions of Section 5.2, annually shall elect such number of each
designation as it may deem proper. Each category of vice presidents shall have
such responsibilities and duties as shall be specifically assigned to them by
the directors or by the chief executive officer.
SECTION 5.9. SECRETARY. The secretary shall act as secretary at all
meetings of the shareholders and at all meetings of the directors. The
secretary shall issue notices for such meetings in accordance with the
requirements of the bylaws. The secretary shall have custody of the corporate
seal and, upon request of an officer authorized by the board of directors to
execute on behalf of the corporation an instrument relating to real or personal
property, shall attest any such instrument and shall perform such other duties
as from time to time shall be assigned by the directors or by the chief
executive officer.
SECTION 5.10. Assistant Secretaries. Each assistant secretary, if such
officer is elected, shall have such powers and perform such duties as may be
assigned by the board of directors or the chief executive officer
(notwithstanding the absence of any authorization by the board of directors to
prescribe the authority and duties of officers), and the assistant secretaries
shall exercise the powers of the secretary during that officer's absence or
inability to act.
SECTION 5.11. VOTING UPON STOCKS. Unless otherwise ordered by the board of
directors, the chief executive officer (or such officer as the chief executive
officer shall designate) shall have full power and authority on behalf of the
corporation to attend, act and vote at meetings of the shareholders of any
corporation in which this corporation may hold stock, and at such meetings
shall possess and may exercise any and all rights and powers incident to the
ownership of such stock and which, as the owner, the corporation might have
possessed and exercised if present. The board of directors may by resolution
from time to time confer such power and authority upon any other person or
persons.
ARTICLE 6
CAPITAL STOCK
SECTION 6.1. CERTIFICATES. Shares of the capital stock of the corporation
shall be represented by certificates. The name and address of the persons to
whom shares of capital stock of the corporation are issued, with the number of
shares and date of issue, shall be entered on the stock transfer records of the
corporation. Certificates for shares of the capital stock of the corporation
shall be in such form not inconsistent with the articles of incorporation of
the corporation as shall be approved by the board of directors. Each
certificate shall be signed (either manually or by facsimile) by the chief
executive officer, the chairman or the president and by the secretary or an
assistant secretary. Each certificate may be sealed with the seal of the
corporation or a facsimile thereof.
SECTION 6.2. TRANSFER OF SHARES. Transfer of shares shall be made on the
stock transfer records of the corporation, and transfers shall be made only
upon surrender of the certificate for the shares sought to be transferred by
the recordholder or by a duly authorized agent, transferee or legal
representative. All certificates surrendered for transfer or reissue shall be
cancelled before new certificates for the shares shall be issued.
SECTION 6.3. TRANSFER AGENT AND REGISTRAR. The board of directors may
appoint one or more transfer agents and one or more registrars of transfers and
may require all stock certificates to be signed or countersigned by the
transfer agent and registered by the registrar of transfers.
SECTION 6.4. REGULATIONS. The board of directors may make rules and
regulations as it deems expedient concerning the issue, transfer and
registration of shares of capital stock of the corporation.
SECTION 6.5. FIXING RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders,
or entitled to receive payment of any dividend, or in order to make a
determination of shareholders for any other purpose, the board of directors or
the chief executive officer may fix in advance a date as the record date for
the determination of shareholders. The record date shall be not more than 70
days before the meeting or action requiring a determination of shareholders. A
determination of shareholders entitled to notice of or to vote at a
shareholders' meeting shall be effective for any adjournment of the meeting
unless the board of directors fixes a new record date, which it
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shall do if the meeting is adjourned to a date more than 120 days after the
date fixed for the original meeting. If no record date is fixed for the
determination of shareholders, the record date shall be the day the notice of
the meeting is mailed or the day the action requiring a determination of
shareholders is taken.
SECTION 6.6. LOST CERTIFICATES. The corporation must authorize the
issuance of a new certificate in place of a certificate claimed to have been
lost, destroyed or wrongfully taken, upon receipt of (a) an affidavit from the
person explaining the loss, destruction or wrongful taking, and (b) a bond from
the claimant in such sum and with such surety or other security and in such
form acceptable to the corporation as the corporation may reasonably direct to
indemnify the corporation against loss from any claim with respect to the
certificate claimed to have been lost, destroyed or wrongfully taken. The
corporation may, in its discretion, waive the affidavit and bond and authorize
the issuance of a new certificate in place of a certificate claimed to have
been lost, destroyed or wrongfully taken or authorize the chief executive
officer to waive the bond and authorize issuance of a new replacement
certificate.
ARTICLE 7
INDEMNIFICATION OF DIRECTORS, OFFICERS, AND EMPLOYEES
SECTION 7.1. INDEMNIFICATION PROVISIONS. Any person who at any time serves
or has served as a director, officer or employee of the corporation or of any
wholly owned subsidiary or affiliate of the corporation, or in such capacity at
the request of the corporation for any other foreign or domestic corporation,
partnership, joint venture, trust or other enterprise, or as a trustee or
administrator under any employee benefit plan of the corporation or of any
wholly owned subsidiary thereof (a "Claimant"), shall be indemnified and held
harmless by the corporation to the fullest extent from time to time permitted
by law against all liabilities and litigation expenses (as hereinafter defined)
in the event a claim shall be made or threatened against that person in, or
that person is made or threatened to be made a party to, any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, and whether or not brought by or on behalf of
the corporation, including all appeals therefrom (a "proceeding"), seeking to
hold the Claimant liable by reason of the fact that he or she is or was serving
in such capacity (whether the basis of such proceeding is alleged action in
such official capacity or in any other capacity while serving in such official
capacity); provided, such indemnification shall not be effective with respect
to (a) that portion of any liabilities or litigation expenses with respect to
which the Claimant is entitled to receive payment under any insurance policy
other than a directors' and officers' insurance policy maintained by the
Company or (b) any liabilities or litigation expenses incurred on account of
any of the Claimant's activities which were at the time taken known or believed
by the Claimant to be clearly in conflict with the best interests of the
corporation.
SECTION 7.2. DEFINITIONS. As used in this Article, (a) "liabilities" shall
include, without limitation, (1) payments in satisfaction of any judgment,
money decree, excise tax, fine or penalty for which the Claimant had become
liable in any proceeding and (2) payments in settlement of any such proceeding
subject, however, to Section 7.3; (b) "litigation expenses" shall include,
without limitation, (1) reasonable costs and expenses and attorneys' fees and
expenses actually and necessarily incurred by the Claimant in connection with
any proceeding and (2) reasonable costs and expenses and attorneys' fees and
expenses in connection with the enforcement of rights to the indemnification
granted hereby or by applicable law, if such enforcement is successful in whole
or in part; and (c) "disinterested directors" shall mean directors who are not
party to the proceeding in question.
SECTION 7.3. SETTLEMENTS. The corporation shall not be liable to indemnify
the Claimant for any amounts paid in settlement of any proceeding effected
without the corporation's written consent. The corporation will not
unreasonably withhold its consent to any proposed settlement.
SECTION 7.4. LITIGATION EXPENSE ADVANCES.
(a) Subject to the provisions of subsections (b) and (c) below, any
litigation expenses shall be advanced to any Claimant within 60 days of receipt
by the general counsel or secretary of the corporation of a demand therefor,
together with an undertaking (in such form as the corporation may prescribe
from time to time) by or on behalf of the Claimant to repay to the corporation
such amount unless it is ultimately determined that the Claimant is entitled to
be indemnified by the corporation against such expenses. The Claimant shall
also forward to the general counsel or secretary a statement as to any
insurance in effect of the type described in Section 7.1, together with any
information which the Claimant wishes to have considered in determining whether
the standards set forth below have been met. The general counsel or secretary
shall promptly forward notice of the demand and undertaking immediately to all
directors of the corporation.
(b) In the event a demand for an advance of litigation expenses is
received from a Claimant who is or was a director or the chief executive of the
corporation, the general counsel or secretary shall call a meeting of a special
committee (the
10
<PAGE>
"Special Committee"), the membership of which shall include only disinterested
directors, and such Special Committee shall determine within 30 days
thereafter, based upon the facts and information then available to them,
whether the Claimant's activities were at the time taken known or believed by
the Claimant to be clearly in conflict with the best interests of the
corporation. In making such determination, the Special Committee shall consult
with representatives of any insurance carrier having a directors' and officers'
liability policy in effect, which covers the Claimant, where such insurance has
been purchased by the corporation. No such advance shall be made if a majority
of the Special Committee determines that the litigation expenses have been
incurred on account of activities which at the time taken by such Claimant were
known or believed by him to be clearly in conflict with the best interests of
the corporation. To the extent that any Claimant shall be entitled to an
advance under this section, it shall be a further condition to such advance
that counsel selected by a Claimant be approved by the corporation and to the
extent deemed necessary by the corporation the selection of such counsel shall
also be approved by the carrier of any directors' and officer's liability
insurance then in effect. The corporation also reserves the right, in the
instance of multiple Claimants, to require, if appropriate, the consolidation
of the defense of Claimants with counsel chosen by the corporation. No such
advance of any particular items of litigation expenses shall be made if a
majority of the Special Committee affirmatively determines that such particular
items are unreasonable and/or excessive. In any such case, the Special
Committee must determine the unreasonable or excessive amount, and the Company
shall withhold advances of expenses only in the dollar amount so determined as
excessive and/or unreasonable.
(c) In the discretion of the chief executive officer or the chief
executive officer's designee, the Special Committee procedures set forth in
Section 7.4(b) may be deemed to apply to a demand for an advance of litigation
expenses received from a Claimant not referred to in the first sentence f
Section 7.4(b) (including but not limited to a Claimant who is or was an
officer (other than the chief executive officer) or employee of the corporation
or a director, officer or employee of a subsidiary of the corporation).
Alternatively, the chief executive officer or the chief executive officer's
designee may cause the Special Committee procedures set forth in subsection (b)
to be waived and, in lieu thereof, the chief executive officer or the chief
executive officer's designee may determine whether the applicable standard of
conduct required by Section 7.4(b) has been met, whether the amount of such
expenses is reasonable and the amount of such expenses, if any, that are
unreasonable or excessive and consequently are to be withheld.
SECTION 7.5. APPROVAL OF INDEMNIFICATION PAYMENTS. Except as may be
determined in an action brought pursuant to Section 7.6 below, indemnification
payments by the corporation for liabilities and litigation expenses (or a
termination of the undertaking required under Section 7.4 above with respect to
advanced expenses) may be made only following a determination that the
activities of the Claimant (if the Claimant is or was a director of the
corporation) were not of the kind described in Section 7.4(b), which
determination shall be made (a) by a majority of the disinterested directors
(if there are at least two such directors), or (b) if there are not two such
directors, or if a majority of the disinterested directors so directs, by
independent legal counsel in a written opinion, or (c) by a majority of the
shareholders or (d) in accordance with any other reasonable procedures
prescribed by the board of directors prior to the assertion of the claim for
which indemnification is sought. The reasonableness of amounts of settlements
and litigation expenses may be approved by a majority of the disinterested
members of the board of directors. If the Claimant is an officer or employee of
the corporation, the determination required by this paragraph may be made by
the chief executive officer of the corporation or his designee.
SECTION 7.6. SUITS BY CLAIMANT. If a claim under Section 7.1 is not paid
in full by the corporation within 60 days after a written claim has been
received by the corporation, or a demand for advances is not paid within 60
days of receipt by the corporation of such demand accompanied by an undertaking
as described in Section 7.4, the Claimant may at any time thereafter bring suit
against the corporation to recover the unpaid amount of the claim or demand. It
shall be a defense to any such action that the Claimant's liabilities or
litigation expenses were incurred on account of activities which were at the
time taken known or believed by the Claimant to be clearly in conflict with the
best interests of the corporation, or were unreasonable, but the burden of
proving such defense shall be on the corporation. Neither the failure of the
corporation (including its disinterested directors, independent legal counsel,
shareholders or the chief executive officer or his designee, if applicable) to
have made a determination prior to the commencement of such action that
indemnification of the Claimant is proper in the circumstances, nor an actual
determination by the corporation (including its disinterested directors,
independent legal counsel, shareholders or the chief executive officer or the
chief executive officer's designee, if applicable) that the Claimant had not
met such applicable standard of conduct shall be a defense to the action or
create a presumption that Claimant has not met the applicable standard of
conduct.
SECTION 7.7. CONSIDERATION; PERSONAL REPRESENTATIVES AND OTHER REMEDIES.
Any Claimant who during such time as this Article or corresponding provisions
of predecessor bylaws is or has been in effect serves or has served in any of
the capacities described in Section 7.1 shall be deemed to be doing so or to
have done so in reliance upon, and as consideration for, the right of
indemnification provided herein or therein. The right of indemnification
provided herein or therein shall inure
11
<PAGE>
to the benefit of the legal representatives of any Claimant hereunder, and the
right shall not be exclusive of any other rights to which the Claimant or legal
representative may be entitled apart from this Article.
SECTION 7.8. SCOPE OF INDEMNIFICATION RIGHTS. The rights granted herein
shall not be limited by the provisions of Section 55-8-51 of the General
Statutes of North Carolina or any successor statute.
ARTICLE 8
GENERAL PROVISIONS
SECTION 8.1. DIVIDENDS AND OTHER DISTRIBUTIONS. The board of directors may
from time to time declare and the corporation may pay dividends or make other
distributions with respect to its outstanding shares in the manner and upon the
terms and conditions provided by law. If the board of directors does not fix
the record date for determining shareholders entitled to a distribution, the
record date shall be the date the board of directors authorizes the
distribution (other than a distribution involving a purchase, redemption or
other acquisition of the corporation's shares, for which no record date is
required to be fixed).
SECTION 8.2. SEAL. The seal of the corporation shall be any form approved
from time to time or at any time by the board of directors. The seal may be
affixed to any document by the secretary, any assistant secretary, or any other
person or persons specifically authorized by the board of directors or the
chief executive officer.
SECTION 8.3. WAIVER OF NOTICE. Whenever notice is required to be given to
a shareholder, director or other person under the provisions of these bylaws,
the articles of incorporation or applicable law, a waiver in writing signed by
the person or persons entitled to the notice, whether before or after the date
and time stated in the notice, and delivered to the corporation shall be
equivalent to giving the notice.
SECTION 8.4. CHECKS. ALL checks, drafts or orders for the payment of money
shall be signed by the officer or officers or other individuals that the board
of directors or chief executive officer may from time to time authorize.
SECTION 8.5. FISCAL YEAR. The fiscal year of the corporation shall be the
calendar year or such other period fixed by the board of directors.
SECTION 8.6. AMENDMENTS. Unless otherwise provided in the articles of
incorporation or a bylaw adopted by the shareholders or by law, these bylaws
may be amended or repealed by the board of directors, except that a bylaw
adopted, amended or repealed by the shareholders may not be readopted, amended
or repealed by the board of directors if neither the articles of incorporation
nor a bylaw adopted by the shareholders authorizes the board of directors to
adopt, amend or repeal that particular bylaw or the bylaws generally. These
bylaws may be amended or repealed by the shareholders even though the bylaws
may also be amended or repealed by the board of directors. A bylaw that fixes a
greater quorum or voting requirement for the board of directors may be amended
or repealed (a) if originally adopted by the shareholders, only by the
shareholders, unless such bylaw as originally adopted by the shareholders
provides that such bylaw may be amended or repealed by the board of directors
or (b) if originally adopted by the board of directors, either by the
shareholders or by the board of directors. A bylaw that fixes a greater quorum
or voting requirement may not be adopted by the board of directors by a vote
less than a majority of the directors then in office and may not itself be
amended by a quorum or vote of the directors less than the quorum or vote
prescribed in such bylaw or prescribed by the shareholders.
SECTION 8.7. APPLICABILITY OF ANTITAKEOVER STATUTES. The provisions of
Article 9 of the North Carolina Business Corporation Act, entitled "Shareholder
Protection Act," shall not be applicable to the corporation.
1 Section added October 23, 1998
2 Paragraph amended and restated October 23, 1998
3 Paragraph amended and restated October 23, 1998
12
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF WACHOVIA CORPORATION]
December 11, 1998
Wachovia Corporation
100 North Main Street
P.O. Box 3099
Winston-Salem, North Carolina 27150
Registration Statement on Form S-4
Gentlemen:
I am familiar with the proceedings taken by Wachovia Corporation (the
"Company") in connection with the preparation and filing with the Securities
and Exchange Commission of a Registration Statement on Form S-4 (the
"Registration Statement") under the Securities Act of 1933, as amended,
pertaining to the issuance of up to 7,660,859 shares of the Company's Common
Stock, par value $5.00 per share (the "Shares"), pursuant to the terms of the
Agreement and Plan of Merger, dated as of October 27, 1998, by and between the
Company and Interstate/Johnson Lane, Inc. (the "Merger Agreement").
As counsel for the Company, I have reviewed the Registration Statement and
the Merger Agreement, and I have examined and am familiar with the records
relating to the organization of the Company, including its articles of
incorporation, bylaws and all amendments thereto, and the records of all
proceedings taken by the Board of Directors of the Company pertinent to the
rendering of this opinion.
Based on the foregoing, and having regard for such legal considerations as
I have deemed relevant, I am of the opinion that the Shares have been duly
authorized and, upon issuance in accordance with the terms of the Merger
Agreement, will be validly issued, fully paid and nonassessable.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the listing of my name in the Prospectus.
Sincerely,
/s/ KENNETH W. MCALLISTER
Kenneth W. McAllister
Wachovia Corporation -1-
December 11, 1998
Wachovia Corporation,
301 North Main Street,
Winston-Salem, North Carolina 27101.
Ladies and Gentlemen:
We have acted as special counsel to Wachovia Corporation, a North
Carolina corporation (the "Company"), in connection with the planned merger of
Interstate/Johnson Lane, Inc., a Delaware Corporation ("IJL") with and into the
Company, pursuant to the Agreement and Plan of Merger, dated as of October 27,
1998, by and between the Company and IJL (the "Agreement"). We render this
opinion to you, in part, in connection with the registration of the Wachovia
Common Stock to be issued in connection with the Merger. All capitalized terms
used and not otherwise defined herein shall have the meanings provided in the
Agreement.
For purposes of this opinion, we have reviewed the Agreement and
such other documents and matters of law and fact as we have considered necessary
or appropriate, and we have assumed, with your consent, the following:
(1) The Merger will be completed in the manner set forth in the
Agreement and the Joint Proxy Statement/Prospectus of the Company and IJL
(the "Proxy/Prospectus"); and
(2) The representations contained in the letters of representation
from the Company and IJL to us and Moore & Van Allen PLLC, counsel to IJL,
both dated December 11, 1998, will be true and complete 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 (which we
<PAGE>
Wachovia Corporation -2-
have assumed will not change between now and the Effective Time), that the
Merger will constitute a "reorganization" within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended.
This opinion is limited to the federal income tax laws of the United
States and does not purport to discuss the consequences or effectiveness of the
Merger under any other laws.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to us under the headings "THE
MERGER - Federal Income Tax Consequences" in the Proxy/Prospectus. 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.
Very truly yours,
/s/ Sullivan & Cromwell
-----------------------
<PAGE>
EXHIBIT 8.2
MOORE & VAN ALLEN, PLLC
A PROFESSIONAL LIMITED LIABILITY COMPANY
ATTORNEYS AT LAW
NATIONSBANK CORPORATE CENTER
100 NORTH TRYON STREET, FLOOR 47
CHARLOTTE, NC 28202-4003
704-331-1000
December 11, 1998
Interstate/Johnson Lane, Inc.
IJL Financial Center
201 North Tryon Street
Charlotte, North Carolina 28201
Ladies and Gentlemen:
We have acted as special counsel to Interstate/Johnson Lane, Inc., a
Delaware corporation ("I/JL") in connection with the proposed merger (the
"Merger") of I/JL into Wachovia Corporation, a North Carolina corporation
("Wachovia"), upon the terms and conditions set forth in the Agreement and Plan
of Merger dated as of October 27, 1998 between I/JL and Wachovia (the "Merger
Agreement"). At your request, in connection with the filing of a Registration
Statement on Form S-4 with the United States Securities and Exchange Commission
in connection with the Merger (the "Registration Statement"), we are rendering
our opinion herein concerning certain federal income tax consequences of the
Merger.
For purposes of the opinions set forth herein, we have relied upon the
accuracy and completeness of the statements and representations (which
statements and representations we have neither investigated nor verified)
contained in the representation letters from I/JL and Wachovia to us and
Sullivan & Cromwell, and we have assumed that such warranties and
representations will be complete and accurate as of the Effective Time. We have
also relied upon the accuracy of the Registration Statement and the Proxy
Statement and Prospectus therein (together, the "Proxy Statement"). Capitalized
terms used but not defined herein have the meanings given to such terms in the
Proxy Statement or the Merger Agreement.
We have also assumed that the transactions contemplated by the Merger
Agreement will be consummated in accordance therewith and as described in the
Proxy Statement.
Based on the foregoing, it is our opinion that:
(1) The Merger will constitute a "reorganization" described in section 368
of the Internal Revenue Code of 1986, as amended; and
(2) No gain or loss will be recognized by the stockholders of I/JL who
receive shares of common stock of Wachovia in exchange for shares of common
stock of I/JL, except with respect to cash received in lieu of fractional
shares.
No legal opinion expressed herein is binding upon the Internal Revenue
Service and there can be no guarantee that the Internal Revenue Service will not
challenge any tax issue discussed herein. In rendering this opinion we are
assuming no obligation to keep any of the parties apprised of any changes in law
or regulations subsequent to the Effective Time.
The opinions expressed in this letter are based solely upon the
information, representations and assumptions set forth herein. No views are
expressed with respect to any state and local tax consequences, any federal tax
consequences other than those set forth above, or any other federal or state
laws not explicitly referred to and discussed.
We consent to the filing of this opinion with the Securities and Exchange
Commission as an exhibit to the Registration Statement, and to the references
to us under the caption "THE MERGER -- Federal Income Tax Consequences" and
elsewhere in the Proxy Statement.
Very truly yours,
MOORE & VAN ALLEN, PLLC
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Proxy Statement/Prospectus of
Wachovia Corporation and to the incorporation by reference therein of our
report dated January 20, 1998, with respect to the consolidated financial
statements of Wachovia Corporation incorporated by reference in its Annual
Report (Form 10-K) for the year ended December 31, 1997, filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
Winston-Salem, North Carolina
December 9, 1998
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Wachovia Corporation:
We consent to the use of our reports with respect to Central Fidelity
National Bank and Central Fidelity Banks, Inc. incorporated herein by reference
and to the reference to our firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Richmond, Virginia
December 9, 1998
(PRICEWATERHOUSECOOPERS Logo)
- ------------------------------------------------------------------------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-4 of Interstate/Johnson Lane, Inc. of our report dated October 21, 1997,
on our audits of the consolidated financial statements of Interstate/Johnson
Lane, Inc., and Subsidiaries as of September 30, 1997 and 1996, and for each of
the years in the three year period ended September 30, 1997, which report is
included in the Annual Report on Form 10-K filed by Interstate/Johnson Lane,
Inc. for the year ended September 30, 1997, which is incorporated by reference.
We also consent to the reference to our firm under the caption "Experts."
PricewaterhouseCoopers LLP
Charlotte, North Carolina
December 11, 1998
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned directors of Wachovia
Corporation, and each of us, do hereby appoint Kenneth W. McAllister and
William M. Watson, Jr., and each of them (either of whom may act without the
consent or joinder of the other), my attorneys-in-fact and agents with full
power of substitution for me and in my name, place and stead, in any and all
capacities, to file a Registration Statement on Form S-4 or other applicable
form, relating to one or more offerings of the Corporation's common stock, with
the Securities and Exchange Commission, and to sign any and all amendments
(including post-effective amendments) to the Registration Statement, and to
file the same, with any exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact, and each of them individually, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in the premises, as fully to all intents and purposes as I might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact or
either of them, or their substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, we have each executed this Power of Attorney as of the
12th day of November, 1998.
<TABLE>
<S> <C>
/s/ L. M. BAKER, JR. /s/ JAMES S. BALLOUN
- -------------------------------------- --------------------------------------
L. M. BAKER, JR. JAMES S. BALLOUN
/s/ JAMES F. BETTS /s/ PETER C. BROWNING
- -------------------------------------- --------------------------------------
JAMES F. BETTS PETER C. BROWNING
/s/ JOHN T. CASTEEN III /s/ JOHN L. CLENDENIN
- -------------------------------------- --------------------------------------
JOHN T. CASTEEN III JOHN L. CLENDENIN
/s/ LAWRENCE M. GRESSETTE, JR. /s/ THOMAS K. HEARN, JR.
- -------------------------------------- --------------------------------------
LAWRENCE M. GRESSETTE, JR. THOMAS K. HEARN, JR.
/s/ GEORGE W. HENDERSON III /s/ W. HAYNE HIPP
- -------------------------------------- --------------------------------------
GEORGE W. HENDERSON III W. HAYNE HIPP
/s/ ROBERT A. INGRAM /s/ GEORGE R. LEWIS
- -------------------------------------- --------------------------------------
ROBERT A. INGRAM GEORGE R. LEWIS
/s/ JOHN G. MEDLIN, JR. /s/ LLOYD U. NOLAND, III
- -------------------------------------- --------------------------------------
JOHN G. MEDLIN, JR. LLOYD U. NOLAND, III
/s/ SHERWOOD H. SMITH /s/ JOHN C. WHITAKER, JR.
- -------------------------------------- --------------------------------------
SHERWOOD H. SMITH JOHN C. WHITAKER, JR.
</TABLE>
<PAGE>
EXHIBIT 99.1
PROXY SOLICITED BY INTERSTATE/JOHNSON LANE, INC.
The undersigned, a holder of record of shares of common stock, par value
$.20 per share ("IJL Common Stock"), of Interstate/Johnson Lane, Inc., a
Delaware corporation ("IJL"), hereby appoints James H. Morgan, Edward C. Ruff
and Michael D. Hearn, and each of them, with full power of substitution, to
attend the Special Meeting of IJL shareholders at 10:30 a.m., on January 26,
1999, at the Radisson Plaza Hotel, 101 South Tryon Street, Charlotte, North
Carolina (and any adjournments, postponements, continuations or reschedulings
thereof), and to vote as specified in this proxy all the shares of IJL Common
Stock which the undersigned would otherwise be entitled to vote if personally
present. The undersigned hereby revokes any previous proxies with respect to the
matters covered in this proxy.
IF RETURNED CARDS ARE SIGNED BUT NOT MARKED, THE UNDERSIGNED WILL BE
DEEMED TO HAVE VOTED FOR THE PROPOSAL AND AS DETERMINED BY A MAJORITY OF THE
IJL BOARD AS TO ANY OTHER MATTER.
THE BOARD OF DIRECTORS OF IJL UNANIMOUSLY RECOMMENDS A VOTE FOR THE
PROPOSAL SET FORTH BELOW.
1. Approval of the Agreement and Plan of Merger, dated as of October 27, 1998,
and the related Plan of Merger, between IJL and Wachovia Corporation
("Wachovia"), pursuant to which IJL will merge with and into Wachovia.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments,
postponements, continuations or reschedulings hereof.
<PAGE>
Please sign your name exactly as it appears hereon. When shares of IJL
Common Stock are held of record by joint tenants, only one need sign. When
signing as an attorney-in-fact, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign in full corporate
name by president or authorized officer. If a partnership, please sign in
partnership name by authorized person.
Dated:______________, 1999
______________________________________
Signature (Title, if any)
______________________________________
Signature (Title, if any)
