<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 25, 1999.
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)
NORTH CAROLINA 6060 56-1473727
(State or other jurisdiction (Primary standard industrial (I.R.S. employer
of incorporation) classification code no.) identification no.)
100 NORTH MAIN STREET 191 PEACHTREE STREET, N.E.
P. O. BOX 3099 ATLANTA, GEORGIA 30303
WINSTON-SALEM, NORTH CAROLINA 27150 (404) 332-5000
(336) 770-5000
(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) 732-5141
(Name, address, including ZIP Code, and telephone number, including area
code, of agent for service)
WITH COPIES TO:
MARK J. MENTING E. ROBERT GOODKIND ANDRE WEISS
SULLIVAN & CROMWELL GOODKIND LABATON RUDOFF & SCHULTE ROTH & ZABEL LLP
125 BROAD STREET SUCHAROW LLP 900 THIRD AVENUE
NEW YORK, NEW YORK 10004 100 PARK AVENUE NEW YORK, NEW YORK 10010
(212) 558-4000 NEW YORK, NEW YORK 10017 (212) 756-2000
(212) 907-0700
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE
SECURITIES TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Registered(1) Offering Price Per Unit Aggregate Offering Price Registration Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, par value
$5.00 per share.................. 2,268,000 shares $3.17 $31,471,937.52 $8,750(2)(3)
====================================================================================================================================
</TABLE>
(1) Represents the estimated maximum number of shares of common stock, par
value $5.00 per share ("Wachovia Common Stock"), issuable upon consummation
of the merger of OFFITBANK Holdings, Inc. ("OFFITBANK Holdings") with and
into Wachovia Corporation ("Wachovia").
(2) Pursuant to Rule 457(f)(2), the registration fee is based on the book value
of the common stock, par value $0.01 per share ("OFFITBANK Holdings Common
Stock"), of OFFITBANK Holdings as of May 31, 1999 ($3.17), and computed
based on the estimated maximum number of shares of OFFITBANK Holdings
Common Stock (9,928,056) that may be converted into the shares of Wachovia
Common Stock to be 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 $6,213, the amount paid
to the Securities and Exchange Commission on June 9, 1999 with respect to
this transaction. The difference of $2,537 is paid herewith.
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. [ ] ______________
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> 2
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
OFFITBANK HOLDINGS, INC.
520 MADISON AVENUE
NEW YORK, NY 10022
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 2, 1999
TO THE SHAREHOLDERS OF OFFITBANK HOLDINGS, INC.:
Notice is hereby given that a special meeting of shareholders of
OFFITBANK Holdings, Inc. will be held at OFFITBANK Holdings, Inc., 520 Madison
Avenue, New York, NY 10022 at 10:00 a.m. on August 2, 1999, for the following
purposes:
(1) To consider and vote upon an Agreement and Plan of Merger,
dated as of May 13, 1999, between OFFITBANK Holdings and
Wachovia Corporation and the related Plan of Merger pursuant
to which OFFITBANK Holdings will merge into Wachovia. In the
merger, each share of OFFITBANK Holdings common stock
outstanding on the effective date of the merger will be
converted into 0.2284 of a share of Wachovia common stock. You
can find a copy of the merger agreement and related plan of
merger in Appendix A to the accompanying proxy
statement/prospectus.
(2) To transact other business that 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 June 4, 1999
are entitled to receive notice of and to vote at the special meeting or any
adjournments or postponements of the special meeting.
Appraisal rights are available to OFFITBANK Holdings shareholders with
respect to the merger under Delaware law. Please see the section entitled
"Dissenters' Appraisal Rights" beginning on page 36 of the accompanying proxy
statement/prospectus for a discussion of the availability of appraisal rights
and the procedures to be followed in asserting dissenters' rights in connection
with the proposed transactions.
THE OFFITBANK HOLDINGS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" APPROVAL OF THE MERGER.
By Order of the Board of Directors,
WALLACE MATHAI-DAVIS, Corporate Secretary
June 28, 1999
<PAGE> 3
[OFFITBANK LOGO] [WACHOVIA LOGO]
PROXY STATEMENT OF PROSPECTUS OF
OFFITBANK HOLDINGS, INC. WACHOVIA CORPORATION
Your board of directors has approved unanimously a merger transaction
in which OFFITBANK Holdings will merge into Wachovia. This strategic transaction
provides OFFITBANK Holdings with growth and strategic opportunities that would
not have been available to us on a stand-alone basis. In addition, it provides
you with the opportunity to participate as a shareholder in one of the nation's
leading financial services companies.
IN THE MERGER, EACH OF YOUR SHARES OF OFFITBANK HOLDINGS COMMON STOCK
WILL BE CONVERTED INTO 0.2284 OF A SHARE OF WACHOVIA COMMON STOCK. THIS
REPRESENTS A VALUE OF $18.857 BASED ON THE JUNE 24, 1999 PRICE OF WACHOVIA
COMMON STOCK. IN ADDITION, THE CONVERSION OF YOUR SHARES OF OFFITBANK HOLDINGS
COMMON STOCK GENERALLY WILL NOT BE TAXABLE.
In order to complete this merger, OFFITBANK Holdings needs your
approval. This document is being furnished to you in connection with the
solicitation of proxies by OFFITBANK Holdings' board of directors for its use at
the special meeting of shareholders and with the solicitation of consents by the
OFFITBANK Holdings board for the termination of the shareholders' agreement.
The special meeting will be held at OFFITBANK Holdings, Inc., 520
Madison Avenue, New York, NY 10022 at 10:00 a.m. on August 2, 1999. At the
special meeting, you will be asked to consider and vote upon the merger. You are
also being asked to consent to the termination of the shareholders' agreement
among OFFITBANK Holdings and its shareholders. The termination of the
shareholders' agreement is a condition to the completion of the merger.
Your board of directors believes that the merger is in the best
interests of OFFITBANK Holdings and its shareholders and strongly encourages you
to vote "FOR" the merger proposal and to consent to the termination of the
shareholders' agreement. OFFITBANK Holdings' financial advisor, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, has issued its opinion to the OFFITBANK
Holdings board of directors that the exchange ratio is fair from a financial
point of view to OFFITBANK Holdings shareholders.
Wachovia common stock is listed and traded on the NYSE under the symbol
"WB".
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 June 25, 1999, and it is
being mailed or otherwise delivered to OFFITBANK Holdings shareholders on or
about that date.
<PAGE> 4
REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about Wachovia 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 Wachovia at
the following addresses:
WACHOVIA CORPORATION
P.O. Box 3099 191 Peachtree Street, N.E.
Winston-Salem, NC 27150 Atlanta, Georgia 30303
Attention: Secretary or Attention: Secretary
(336) 732-2549 (404) 332-6661
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY JULY 23, 1999
IN ORDER TO RECEIVE THEM BEFORE THE SPECIAL MEETING.
See "Where You Can Find More Information" on page 58 for further
information.
-ii-
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
REFERENCES TO ADDITIONAL INFORMATION................................................................................. ii
QUESTIONS AND ANSWERS ABOUT THE WACHOVIA/OFFITBANK HOLDINGS MERGER................................................... 1
SUMMARY ............................................................................................................ 2
Comparison of Certain Unaudited per Share Data.............................................................. 7
Selected Financial Data of Wachovia......................................................................... 8
Selected Financial Data of OFFITBANK Holdings............................................................... 9
FORWARD-LOOKING STATEMENTS........................................................................................... 10
SPECIAL MEETING...................................................................................................... 11
Record Date................................................................................................. 11
Quorum; Effect of Abstentions............................................................................... 11
Proxies ................................................................................................... 11
Vote Required............................................................................................... 12
Recommendation of Board of Directors........................................................................ 12
CONSENT TO TERMINATION OF SHAREHOLDERS' AGREEMENT.................................................................... 12
Reasons for Termination..................................................................................... 12
Consents ................................................................................................... 12
Consent Required............................................................................................ 12
Recommendation of the Board of Directors.................................................................... 13
THE MERGER........................................................................................................... 13
Overview ................................................................................................... 13
Background of the Merger.................................................................................... 13
Reasons of OFFITBANK Holdings for the Merger................................................................ 14
Opinion of OFFITBANK Holdings' Financial Advisor............................................................ 16
Effective Time of the Merger................................................................................ 25
Distribution of Wachovia Certificates....................................................................... 25
Fractional Shares........................................................................................... 26
Federal Income Tax Consequences............................................................................. 26
Management and Operations after the Merger.................................................................. 28
Post-Merger Compensation and Benefits....................................................................... 28
Treatment of Outstanding Options and Stock Purchase Rights.................................................. 28
Retention Program........................................................................................... 28
Interests of Certain Persons in the Merger.................................................................. 29
Non-Competition Agreements.................................................................................. 29
OFFITBANK Holdings Stock Option Plan........................................................................ 30
Conditions to Completion.................................................................................... 30
Regulatory Approvals........................................................................................ 31
Amendment, Waiver and Termination........................................................................... 31
Conduct of Business Pending the Merger...................................................................... 32
Termination Fee............................................................................................. 34
Expenses and Fees........................................................................................... 35
Accounting Treatment........................................................................................ 35
Stock Exchange Listing of Wachovia Common Stock............................................................. 35
Resales of Wachovia Common Stock............................................................................ 35
Voting Agreements........................................................................................... 36
Dissenters' Appraisal Rights................................................................................ 36
DESCRIPTION OF WACHOVIA CAPITAL STOCK................................................................................ 38
Authorized Stock............................................................................................ 38
Preferred Stock............................................................................................. 38
Common Stock................................................................................................ 39
Changes in Control.......................................................................................... 39
</TABLE>
-iii-
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
<S> <C>
CERTAIN DIFFERENCES IN THE RIGHTS OF WACHOVIA
SHAREHOLDERS AND OFFITBANK HOLDINGS SHAREHOLDERS............................................................ 42
Authorized Capital.......................................................................................... 42
Amendment of Articles of Incorporation...................................................................... 42
Notice of Meetings of Shareholders.......................................................................... 43
Special Meetings of Shareholders............................................................................ 43
Record Date................................................................................................. 43
Number of Directors; Classified Board of Directors.......................................................... 43
Removal of Directors........................................................................................ 43
Shareholder Proposals; Advance Notice of Director Nominations............................................... 44
Anti-Takeover Provisions; Restrictions on Certain Business Combinations..................................... 44
Limitation on Director Liability; Indemnification........................................................... 44
Shareholder Inspection Rights; Shareholder Lists............................................................ 45
Dissenters' Appraisal Rights................................................................................ 46
COMPARATIVE MARKET PRICES AND DIVIDENDS.............................................................................. 46
Wachovia ................................................................................................... 46
OFFITBANK Holdings.......................................................................................... 47
CERTAIN ADDITIONAL INFORMATION ABOUT OFFITBANK HOLDINGS.............................................................. 47
Business Description and Background......................................................................... 47
Regulatory Matters.......................................................................................... 48
Information Relating to Morris W. Offit..................................................................... 49
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
OFFITBANK HOLDINGS.......................................................................................... 50
Three Months Ended March 31, 1999 Compared to the Three Months Ended March 31, 1998......................... 50
Year Ended December 31, 1998 Compared to the Year Ended December 31, 1997................................... 51
Year Ended December 31, 1997 Compared to the Year Ended December 31, 1996................................... 53
Liquidity and Capital Resources............................................................................. 54
Year 2000................................................................................................... 54
Interest Rate Sensitivity................................................................................... 55
Economic and Market Conditions.............................................................................. 56
Impact of Inflation and Changing Prices..................................................................... 56
New Accounting Pronouncements............................................................................... 56
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS OF OFFITBANK HOLDINGS................................................... 57
EXPERTS ............................................................................................................ 58
VALIDITY OF WACHOVIA COMMON STOCK.................................................................................... 58
OTHER MATTERS........................................................................................................ 58
WHERE YOU CAN FIND MORE INFORMATION.................................................................................. 58
OFFITBANK HOLDINGS, INC. FINANCIAL STATEMENTS........................................................................ F-1
</TABLE>
APPENDICES:
Appendix A -- Agreement and Plan of Merger
Appendix B -- Form of Voting Agreement
Appendix C -- Form of Shareholders' Agreement
Appendix D -- Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
Appendix E -- Section 262 of the Delaware General Corporation Law
-iv-
<PAGE> 7
QUESTIONS AND ANSWERS ABOUT THE WACHOVIA/OFFITBANK HOLDINGS MERGER
Q: WHAT DO I NEED TO DO NOW?
A: Just indicate on your proxy and consent card how you want to vote with
respect to the merger and whether or not you want to consent to the
termination of the shareholders' agreement. Sign and mail it in the
enclosed prepaid return envelope marked "Proxy and Consent" as soon as
possible, so that your shares may be represented and voted at the
special meeting to be held on August 2, 1999.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY AND CONSENT
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 and consent
card, but only with respect to the vote on the merger. Third, you may
attend the special meeting and vote in person. Simply attending the
special meeting, however, will not revoke your proxy.
Q: CAN I CHANGE MY CONSENT AFTER I HAVE MAILED MY SIGNED PROXY AND CONSENT
CARD?
A: No, you may not change or revoke your decision to consent once made.
If you decide not to consent, you may subsequently decide to consent by
submitting a new proxy and consent card.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, Wachovia will send you written
instructions for exchanging your stock certificates.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We expect the merger to be completed by October 30, 1999. We are
working towards completing the merger as quickly as possible. To do so,
we must obtain the OFFITBANK Holdings shareholder approval of both the
merger and the termination of the shareholder agreement as well as
certain banking and other regulatory approvals that are expected to be
obtained following the special meeting.
Q: WHOM SHOULD I CALL WITH QUESTIONS OR TO OBTAIN ADDITIONAL COPIES OF
THIS PROXY STATEMENT/PROSPECTUS?
A: You should call Wallace Mathai-Davis at (212) 350-3730.
<PAGE> 8
SUMMARY
This brief summary highlights selected information from this proxy
statement/prospectus. It does not contain all of the information that is
important to you. You should 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 58 on
how to obtain copies of those documents. Each item in this summary refers to the
page where that subject is discussed in more detail.
MERGER CONSIDERATION WILL BE 0.2284 OF A WACHOVIA SHARE FOR EACH OFFITBANK
HOLDINGS SHARE (see page 13)
When the merger is complete, each of your shares of OFFITBANK Holdings common
stock will be converted into 0.2284 of a share of Wachovia common stock. This
exchange ratio of 0.2284 is fixed. However, the market price of Wachovia common
stock may change at any time. Consequently, the value of the Wachovia common
stock you will be entitled to receive as a result of the merger may be
significantly higher or lower than its current value or its value at the date of
the special meeting.
In the case of fractional shares, you will receive cash in lieu of a fractional
share.
For example, if you hold 100 shares of OFFITBANK Holdings common stock, you will
receive 22 shares of Wachovia common stock (100 x 0.2284 = 22.84), plus a cash
payment equal to the value of 0.84 of a share of Wachovia common stock.
SHARE INFORMATION AND MARKET PRICES (see page 46)
Wachovia common stock is traded on the NYSE under the symbol "WB". The following
table lists the closing price of Wachovia common stock and the equivalent value
of an OFFITBANK Holdings share on May 12, 1999, the last trading day before we
announced the merger, and on June 24, 1999, the last trading date before the
mailing of this proxy statement/prospectus. The equivalent per share value of
OFFITBANK Holdings at the specified dates represents the closing price of a
share of Wachovia common stock on that date multiplied by the exchange ratio of
0.2284.
<TABLE>
<CAPTION>
EQUIVALENT PER SHARE
VALUE OF
WACHOVIA OFFITBANK
COMMON HOLDINGS COMMON
STOCK STOCK
------------ ---------------------
<S> <C> <C>
May 12, 1999...... $ 90.25 $ 20.61
June 23, 1999..... $ 82.5625 $ 18.857
</TABLE>
THE MARKET PRICE OF WACHOVIA COMMON STOCK WILL FLUCTUATE PRIOR TO THE MERGER BUT
WILL NOT AFFECT THE EXCHANGE RATIO IN THE MERGER . YOU SHOULD OBTAIN CURRENT
MARKET QUOTATIONS FOR WACHOVIA COMMON STOCK. OFFITBANK HOLDINGS COMMON STOCK IS
NOT PUBLICLY TRADED.
GENERALLY, TAX-FREE TRANSACTION FOR OFFITBANK HOLDINGS SHAREHOLDERS (see
page 26)
We expect that for United States federal income tax purposes, you will not
recognize any gain or loss in the merger, except in connection with any cash
that you may receive in lieu 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 your
holding period for the OFFITBANK Holdings common stock exchanged in the merger.
Both OFFITBANK Holdings and Wachovia have conditioned the merger on their
receipt of legal opinions that the federal income tax treatment will be as
described in this document.
This tax treatment may not apply to certain OFFITBANK Holdings 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
-2-
<PAGE> 9
not within our control. You should consult your own tax advisor for a full
understanding of the merger's tax consequences in your own particular
circumstances.
SHAREHOLDER RIGHTS (see page 42)
Currently, your rights as an OFFITBANK Holdings shareholder are governed by
Delaware law, OFFITBANK Holdings certificate of incorporation and by-laws and
the shareholders' agreement. However, Wachovia shareholder rights are governed
by North Carolina law and Wachovia's articles of incorporation and by-laws.
After the merger, you will become a Wachovia shareholder and your rights will be
governed by North Carolina law and Wachovia's articles of incorporation and
by-laws.
OFFITBANK HOLDINGS BOARD UNANIMOUSLY RECOMMENDS THAT YOU APPROVE THE MERGER AND
CONSENT TO THE TERMINATION OF THE SHAREHOLDERS' AGREEMENT (see page 13)
The OFFITBANK Holdings board believes that the merger is in your best interests
and has approved unanimously the merger. The OFFITBANK Holdings board of
directors recommends that OFFITBANK Holdings shareholders vote "FOR" approval of
the merger and consent to the termination of the shareholders' agreement.
FINANCIAL ADVISOR SAYS CONSIDERATION FAIR TO OFFITBANK HOLDINGS SHAREHOLDERS
FROM A FINANCIAL POINT OF VIEW (see page 16)
Merrill Lynch, Pierce, Fenner & Smith Incorporated, the financial advisor to
OFFITBANK Holdings in connection with the merger, has delivered an opinion to
the OFFITBANK Holdings board that the exchange ratio is fair from a financial
point of view to OFFITBANK Holdings shareholders. A copy of the opinion
delivered by Merrill Lynch is attached to this document as Appendix D. You
should read the opinion in full to understand the assumptions made, matters
considered and limitations of the review undertaken by Merrill Lynch in
providing this opinion.
Merrill Lynch will receive total fees of $1.8 million for its services as
financial advisor to OFFITBANK Holdings in connection with the merger.
The merger agreement is attached as Appendix A to this proxy statement/
prospectus. We encourage you to read the merger agreement because it
is the legal document that governs the merger.
SPECIAL MEETING TO BE HELD ON AUGUST 2, 1999 (see page 11)
The special meeting of OFFITBANK Holdings shareholders will be held at 10:00
a.m. on August 2, 1999, at OFFITBANK Holdings, Inc., 520 Madison Avenue, New
York, NY 10022. At the special meeting, you will be asked to consider and vote
to adopt the merger agreement which provides for the merger of OFFITBANK
Holdings into Wachovia.
RECORD DATE SET AT JUNE 4, 1999; MAJORITY VOTE OF OUTSTANDING SHARES IS
REQUIRED TO APPROVE MERGER (see page 11)
You can vote at the special meeting if you owned OFFITBANK Holdings common stock
at the close of business on June 4, 1999. As of that date, there were
9,254,808 shares of OFFITBANK Holdings 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 OFFITBANK Holdings common
stock is required to approve the merger. The directors and executive officers of
OFFITBANK Holdings owned, as of the record date, and are entitled to vote,
7,322,256 shares of OFFITBANK Holdings common stock, which represents
approximately 73.84% of the outstanding shares of OFFITBANK Holdings common
stock.
If you do not vote your shares of common stock, it will have the effect of a
vote against the merger.
TERMINATION OF SHAREHOLDERS' AGREEMENT IS A CONDITION TO THE COMPLETION OF THE
MERGER (see page 12)
You are also being asked to consent to the termination of the shareholders'
agreement, which would take effect simultaneously with the completion of the
merger. The termination of the shareholders' agreement is a condition to the
completion of the merger. The shareholders' agreement is being terminated to
eliminate the possibility of certain restrictions on transferability that would
otherwise continue to apply to the Wachovia common stock received in the merger.
Termination of the share holders' agreement requires the consent of at least 80%
of the outstanding shares of OFFITBANK
-3-
<PAGE> 10
Holdings common stock. A form of the shareholders' agreement is attached to
this document as Appendix C.
CERTAIN SHAREHOLDERS HAVE AGREED TO VOTE IN FAVOR OF MERGER AND TO CONSENT TO
THE TERMINATION OF THE SHAREHOLDERS' AGREEMENT (see page 36)
Directors and executive officers of OFFITBANK Holdings who together hold
approximately 59% of OFFITBANK Holdings outstanding common stock have entered
into voting agreements with Wachovia. Under the voting agreements, these
shareholders have agreed to vote their shares of OFFITBANK Holdings common stock
in favor of approval of the merger and to consent to the termination of the
shareholders' agreement.
The directors and executive officers entered into the voting agreements in order
to induce Wachovia to enter into the merger agreement. The voting agreements
could discourage other companies from trying or proposing to combine with or
acquire OFFITBANK Holdings. The form of voting agree ment is attached to this
document as Appendix B.
DISSENTERS' APPRAISAL RIGHTS (see page 36)
Delaware law provides OFFITBANK Holdings shareholders with dissenters' appraisal
rights in the merger. However, under the shareholders' agreement, each
shareholder has agreed to consent and raise no objection to a merger if it is
approved by the holders of two-thirds of the OFFITBANK Holdings shares
outstanding.
INFORMATION REGARDING WACHOVIA AND
OFFITBANK HOLDINGS
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. As of March 31, 1999, Wachovia had 753
branches and 1,381 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 March 31, 1999, Wachovia was ranked 16th among
domestic U.S. bank holding companies in each of these categories. At that date,
Wachovia had consolidated assets of $65.3 billion, deposits of $40.3 billion and
shareholders' equity of $5.4 billion.
OFFITBANK HOLDINGS, INC.
520 Madison Avenue
New York, NY 10022
(212) 758-9600
OFFITBANK Holdings is a Delaware corporation, whose principal subsidiary is
OFFITBANK, a limited purpose New York trust bank. On January 1, 1999, OFFITBANK
reorganized into a holding company structure where OFFITBANK Holdings became the
parent company of OFFITBANK. OFFITBANK is a leading provider of wealth
management services to the upper tier of the wealth management market. OFFITBANK
also provides financial services, which enhance OFFITBANK Holdings' core asset
management business. These financial services include custody, sophisticated
client reporting, foreign exchange services and, on a more limited basis,
collateralized lending and trust services. At March 31, 1999, OFFITBANK Holdings
had consolidated assets of $33.5 million and shareholders' equity of $28.4
million.
WACHOVIA WILL BE THE SURVIVING CORPORATION (see page 28)
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. In addition, Morris W. Offit, Chief
Executive Officer and Chairman of OFFITBANK Holdings, has been invited to join
the Wachovia board upon completion of the merger.
-4-
<PAGE> 11
WACHOVIA WILL USE PURCHASE ACCOUNTING TREATMENT (see page 35)
Wachovia will account for the merger as a purchase for financial reporting
purposes.
CERTAIN PERSONS HAVE INTERESTS IN THE MERGER (see page 29)
Some of the directors and executive officers of OFFITBANK Holdings have
interests in the merger in addition to their interests as shareholders of
OFFITBANK Holdings generally.
- - In connection with the merger, Wachovia entered into an employment
agreement with Morris W. Offit which will become effective at the time
of the merger and will continue to be in effect until December 31,
2001. This employment agreement entitles Mr. Offit to payments and
other benefits upon termination of employment under certain
circumstances.
- - Following the merger, Wachovia will generally indemnify the present
officers and directors of OFFITBANK Holdings and its subsidiaries.
The OFFITBANK Holdings board was aware of these interests and took them into
account in approving the merger.
WACHOVIA COMMON STOCK IS FREELY TRANSFERABLE BY NON-AFFILIATES (see page 35)
Wachovia common stock issued in the merger will be freely transferable by you
unless you are deemed to be an "affiliate" of OFFITBANK Holdings under
applicable federal securities laws. Generally, "affiliates" include directors,
certain executive officers and 10% plus shareholders.
CONDITIONS THAT MUST BE SATISFIED FOR THE MERGER TO OCCUR (see page 30)
Completion of the merger is subject to various conditions which include: (1)
approval of the merger agreement by OFFITBANK Holdings shareholders; (2) receipt
by Wachovia and OFFITBANK Holdings of all governmental and other consents and
approvals necessary to permit completion of the merger; (3) the satisfaction of
OFFITBANK Holdings revenue threshold; (4) the termination of the shareholders'
agreement; (5) the employment, at the effective date of the merger, of Morris
Offit and Wallace Mathai-Davis with OFFITBANK Holdings in a position at least as
important as the one each of them held on May 13, 1999; and (6) the satisfaction
of other usual conditions are satisfied. Under the terms of the merger
agreement, the conditions to the merger generally may be waived by Wachovia or
OFFITBANK, as applicable.
REGULATORY APPROVALS WE MUST OBTAIN FOR THE MERGER (see page 31)
We cannot complete the merger unless it is approved by the Board of Governors of
the Federal Reserve System and Banking Board of the State of New York Banking
Department. Wachovia expects to file an application with the Federal Reserve
Board and the New York Banking Department for their approval of the merger in
the near future. In addition, the merger is subject to the approval of or notice
to other regulatory authorities. We have filed or shortly will file all other
applications and notices with these regulatory authorities.
We cannot be certain when or if we will obtain the regulatory approvals.
However, we do not know of any reason why we should not obtain them in a timely
manner.
TERMINATION OF THE MERGER AGREEMENT (see page 31).
OFFITBANK Holdings and Wachovia can mutually agree at any time to abandon the
merger and terminate the merger agreement, even if OFFITBANK Holdings
shareholders have approved it. Also, either of our boards can decide, without
the consent of the other, to abandon the merger if any of the following occurs:
- - The other party breaches the merger agreement in a material way and
does not, or cannot, correct the breach in 30 days.
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<PAGE> 12
- - The merger has not been completed by December 31, 1999.
- - A governmental authority denies an approval necessary to complete the
merger, in a final and nonappealable way.
- - OFFITBANK Holdings shareholders fail to approve the merger agreement.
In addition, Wachovia may abandon the merger if OFFITBANK Holdings board
withdraws its recommendation to approve the merger or modifies its
recommendation in certain ways.
OFFITBANK HOLDINGS WILL BE REQUIRED TO PAY WACHOVIA $10 MILLION UNDER CERTAIN
CIRCUMSTANCES IF THE MERGER IS NOT COMPLETED (see page 34)
Under the merger agreement, OFFITBANK Holdings has agreed to pay Wachovia $10
million if the merger is not completed and certain events have occurred without
Wachovia's consent. These events can generally be described as business
combinations or acquisition transactions relating to OFFITBANK Holdings and
particular 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 entitle Wachovia to payment of this fee.
This provision of the merger agreement could have the effect of discouraging
other companies from trying or proposing to combine with or acquire OFFITBANK
Holdings.
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<PAGE> 13
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 is called "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 earliest period presented. The pro
forma information gives effect to the merger under the purchase method of
accounting in accordance with generally accepted accounting principles, or GAAP.
We used the exchange ratio of 0.2284 in computing the pro forma
combined and equivalent pro forma combined per share data.
We expect that we will incur merger and integration charges as a result
of combining our companies. The pro forma information is helpful in illustrating
the financial characteristics of the combined company under one set of
assumptions. However, it does not reflect these expenses and, accordingly, does
not attempt to predict or suggest future results. Also, it does not necessarily
reflect what the historical results of the combined company would have been had
our companies been combined.
You should read the Wachovia information in the following table
together with the historical financial information that Wachovia has presented
in its prior Securities and Exchange Commission filings. Wachovia has
incorporated this material into this document by reference to those other
filings. See "Where You Can Find More Information" on page 58 on how to obtain
this information.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1999 1998
------------------ ------------
<S> <C> <C>
WACHOVIA COMMON STOCK
Net income per basic common share
Historical ....................................................................... $ 1.20 $ 4.26
Pro forma combined (1) ........................................................... 1.18 4.20
Net income per diluted common share
Historical ....................................................................... 1.18 4.18
Pro forma combined (1) ........................................................... 1.16 4.12
Dividends per common share (2)
Historical ....................................................................... .49 1.86
Pro forma combined ............................................................... .49 1.86
Book value per common share
Historical ....................................................................... 26.77 26.30
Pro forma combined ............................................................... 27.47 27.00
OFFITBANK HOLDINGS COMMON STOCK
Net income per basic common share
Historical ....................................................................... .16 .51
Equivalent pro forma combined .................................................... .27 .96
Net income per diluted common share
Historical ....................................................................... .15 .49
Equivalent pro forma combined .................................................... .26 .94
Dividends per common share
Historical ....................................................................... -- .33
Equivalent pro forma combined .................................................... .11 .42
Book value per common share
Historical ....................................................................... 3.07 2.93
Equivalent pro forma combined .................................................... 6.27 6.17
</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.
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<PAGE> 14
SELECTED FINANCIAL DATA OF WACHOVIA
The table below presents selected Wachovia historical financial data
derived from its previously filed audited consolidated financial statements for
the five years ended December 31, 1998. 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.
You should read the following table together with the historical
financial information that Wachovia has presented in its prior SEC filings.
Wachovia has incorporated this material into this document by reference to those
other filings. See "Where You Can Find More Information" on page 58 on how to
obtain this information.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
(UNAUDITED) YEAR ENDED DECEMBER 31,
--------------------- ---------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
(in Millions)
Interest Income .......................... $ 1,130 $ 1,148 $ 4,665 $ 4,262 $ 4,010 $ 3,790 $ 3,026
Interest Expense ......................... 522 579 2,314 2,169 2,086 2,011 1,369
Other Income ............................. 334 287 1,249 1,007 879 816 668
Other Expense ............................ 492 494 1,996 1,967 1,509 1,442 1,343
Net Income ............................... 243 195 874 593 757 708 624
PER SHARE AMOUNTS
Net Income, Basic ........................ $ 1.20 $ 0.95 $ 4.26 $ 2.99 $ 3.70 $ 3.40 $ 3.00
Net Income, Diluted ...................... 1.18 0.93 4.18 2.94 3.65 3.36 2.96
Weighted Average Shares
Outstanding, Basic (thousands) ........... 203,119 205,894 205,058 198,290 204,889 208,230 208,117
Weighted Average Shares
Outstanding, Diluted (thousands) ......... 206,959 210,158 209,153 201,901 207,432 210,600 210,651
Dividends ................................ 0.49 0.44 1.86 1.68 1.52 1.38 1.23
STATEMENT OF CONDITION
(PERIOD END)
(in Millions)
Total Assets ............................. $ 65,319 $ 65,125 $ 64,123 $ 65,397 $ 57,229 $ 55,792 $ 49,242
Interest Earning Assets .................. 57,660 57,464 56,537 57,335 50,728 50,182 44,164
Loans .................................... 46,393 44,498 45,719 44,194 38,007 35,585 31,664
Deposits ................................. 40,288 39,857 40,995 42,654 35,322 34,355 30,296
Shareholders' Equity ..................... 5,432 5,237 5,338 5,174 4,608 4,601 3,910
RATIOS
Return on Average Assets(1) .............. 1.51% 1.24% 1.37% 1.03% 1.36% 1.37% 1.34%
Return on Average Equity(1) .............. 18.31 15.29 16.92 13.08 16.99 17.00 16.37
Dividend Payout Ratio .................... 40.97 46.38 43.67 55.21 40.37 39.91 40.77
Average Equity to Average Assets
Ratio .................................... 8.25 8.09 8.08 7.87 8.02 8.05 8.19
Tier 1 Risk Weighted Capital
Ratio .................................... 7.73 8.20 7.99 8.43 8.93 9.21 9.54
Total Capital Risk Weighted
Ratio .................................... 11.44 10.76 11.34 11.11 12.32 13.17 13.13
Tier 1 Leverage Ratio .................... 8.97 8.91 8.67 9.24 8.52 8.11 8.29
</TABLE>
- -------------------------
(1) Including non-recurring items.
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<PAGE> 15
SELECTED FINANCIAL DATA OF OFFITBANK HOLDINGS
The table below presents selected OFFITBANK Holdings historical
financial data. OFFITBANK Holdings derived the historical financial data for the
five years ended December 31, 1998 from its audited historical financial
statements and the historical interim financial data for the three months ended
March 31, 1999 and 1998 from its unaudited historical financial statements. The
interim financial information has been derived from unaudited financial
statements of OFFITBANK Holdings and OFFITBANK Holdings 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. Because OFFITBANK Holdings has been the holding
company for OFFITBANK since the January 1, 1999 reorganization of OFFITBANK, all
historical financial data relating to pre-1999 periods are based solely on
OFFITBANK operations. You should read this information together with OFFITBANK
Holdings' audited and unaudited consolidated financial statements and their
respective notes, which are included in this document.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
(UNAUDITED) YEAR ENDED DECEMBER 31,
------------------------ -----------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ---------- ----------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
(in Thousands)
Management Fee Revenues ........... $ 9,955 $ 9,379 $ 38,172 $ 32,868 $ 28,220 $ 22,804 $ 22,022
Other Revenues .................... 704 835 3,047 3,225 3,226 3,304 9,160
----------- ---------- ----------- ---------- ---------- ---------- -----------
Total Revenues .................... 10,659 10,214 41,219 36,093 31,446 26,108 31,182
Total Operating Expenses .......... 7,962 7,838 32,975 30,182 27,176 23,539 25,756
Net Income ........................ $ 1,470 $ 1,379 $ 4,700 $ 3,281 $ 2,406 $ 1,438 $ 2,685
Net Income Per Share .............. $ 0.16 $ 0.15 $ 0.51 $ 0.35 $ 0.26 $ 0.16 $ 0.30
Net Income Per Share, Diluted ..... $ 0.15 $ 0.15 $ 0.49 $ 0.35 $ 0.26 $ 0.15 $ 0.29
BALANCE SHEET DATA:
(in Thousands)
Total Assets ........................ $ 33,495 $ 32,365 $ 32,051 $ 30,453 $ 28,716 $ 26,617 $ 24,513
Total Liabilities ................... 5,086 5,214 5,057 4,784 3,287 2,789 2,994
Total Stockholders' Equity .......... 28,409 27,151 26,994 25,669 24,889 23,828 21,519
Dividends Declared .................. -- -- 3,085 2,619 1,263 493 --
Performance Fees Included in
Investment Management Fees ...... -- -- -- -- 1,527 309 301
SELECTED BUSINESS DATA:
Assets Under Management at End of
Period ............................ $10,764,000 $9,679,000 $10,259,000 $9,342,000 $7,985,000 $6,651,000 $ 6,007,000
Annualized Investment Management Fee
at End of Period .................. 40,862 38,670 39,446 37,011 29,350 25,045 20,144
Average Investment Management Fees at
End of Period As A Percentage of
Assets Under Management ........... 0.38% 0.40% 0.39% 0.40% 0.37% 0.38% 0.34%
</TABLE>
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<PAGE> 16
FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains and incorporates statements
that plan for or anticipate the future. Forward-looking statements include
statements about the future 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 the following possibilities:
- - costs or difficulties related to the combination of the businesses of
Wachovia and OFFITBANK Holdings are greater than expected;
- - post-merger revenues are lower than expected;
- - competitive pressure among financial institutions increases
significantly;
- - general economic conditions or conditions in securities markets are
less favorable than expected; and
- - legislation or regulatory changes adversely affect the businesses in
which Wachovia will be engaged.
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<PAGE> 17
SPECIAL MEETING
The OFFITBANK Holdings board is providing this proxy
statement/prospectus to you in connection with the solicitation of proxies for
use at the special meeting of OFFITBANK Holdings shareholders and at any
adjournments or postponements of the special meeting. The special meeting will
be held at OFFITBANK Holdings, Inc., 520 Madison Avenue, New York, NY 10022 at
10:00 a.m. on August 2, 1999. At the special meeting, you will be asked to
consider and vote to adopt the merger agreement which provides for the merger of
OFFITBANK Holdings into Wachovia.
Wachovia is also providing this proxy statement/prospectus to you
as a prospectus in connection with the offer and sale by Wachovia of its shares
of common stock as a result of OFFITBANK Holdings' merger into Wachovia.
RECORD DATE
The OFFITBANK Holdings board has fixed the close of business on
June 4, 1999 as the record date for determining the OFFITBANK Holdings
shareholders entitled to receive notice of and to vote at the special meeting.
As of the record date, there were issued and outstanding 9,254,808 shares of
OFFITBANK Holdings common stock. Only holders of record of OFFITBANK Holdings
common stock as of the record date are entitled to notice of and to vote at the
special meeting.
QUORUM; EFFECT OF ABSTENTIONS
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 will be counted solely for the
purpose of determining whether a quorum is present. Abstentions will not be
deemed to be cast either "FOR" or "AGAINST" the merger. Because approval of the
merger requires the affirmative vote of a majority of the outstanding shares of
OFFITBANK Holdings common stock, abstentions will have the same effect as a vote
against the merger agreement.
PROXIES
Solicitation. Proxies in the form included in the proxy and
consent card accompanying this proxy statement/prospectus are being solicited by
the OFFITBANK Holdings board. Shares represented by properly executed proxies
which are received in time and not revoked will be voted in accordance with the
instructions indicated on the proxies. If no instructions are indicated, those
proxies will be voted "FOR" approval of the merger and any other matter that may
come before the special meeting, including a motion to adjourn or postpone the
special meeting to another time and/or place for the purpose of soliciting
additional proxies or otherwise. However, no proxy with instructions to vote
against either the proposal to approve the merger or to terminate the
shareholders' agreement will be voted in favor of any adjournment or
postponement of the special meeting.
Revocability. You may revoke your proxy at any time before its
exercise at the special meeting by:
- giving written notice of revocation to the OFFITBANK
Holdings Corporate Secretary,
- properly submitting a duly executed proxy bearing a later
date, or
- voting in person at the special meeting.
You should address all written notices of revocation and other
communications with respect to revocation of proxies addressed to OFFITBANK
Holdings, Inc., 520 Madison Avenue, New York, NY 10022, Attention: Corporate
Secretary. A proxy appointment will not be revoked by death or supervening
incapacity of the shareholder executing the proxy unless notice of the death or
incapacity is filed with OFFITBANK Holdings' Corporate Secretary, or other
person responsible for tabulating votes on behalf of OFFITBANK, before the
shares are voted.
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<PAGE> 18
VOTE REQUIRED
Approval of the merger at the special meeting requires the
affirmative vote of a majority of the outstanding shares of OFFITBANK Holdings
common stock.
As of the record date, neither Wachovia nor any of its directors
or executive officers or their affiliates held any shares of OFFITBANK Holdings
common stock. The directors and executive officers of OFFITBANK Holdings owned,
as of the record date, and are entitled to vote 7,322,256 shares of OFFITBANK
Holdings common stock, which represents approximately 73.84% of the outstanding
shares of OFFITBANK Holdings common stock. Certain directors and executive
officers, who together hold approximately 59% of the outstanding shares of
OFFITBANK Holdings common stock, have agreed to vote their shares in favor of
the merger pursuant to voting agreements. You can find a form of the voting
agreement in Appendix B to this proxy statement/prospectus.
RECOMMENDATION OF BOARD OF DIRECTORS
For the reasons described in the section of this proxy
statement/prospectus entitled "The Merger --Reasons of OFFITBANK Holdings for
the Merger," the OFFITBANK Holdings board has approved unanimously the merger,
believes that the merger is in the best interests of OFFITBANK Holdings and
recommends that you vote "FOR" approval of the merger.
CONSENT TO TERMINATION OF SHAREHOLDERS' AGREEMENT
The OFFITBANK Holdings board is also providing this proxy
statement/prospectus to you in connection with the solicitation of consents for
the termination of the Shareholders' Agreement entered into by and between each
OFFITBANK Holdings shareholder pursuant to Section 2.4 of the Exchange
Agreement, dated August 1998, among OFFITBANK Holdings and the then OFFITBANK
shareholders. Termination of the shareholders' agreement is a condition to the
completion of the merger.
REASONS FOR TERMINATION
The shareholders' agreement is being terminated to eliminate
restrictions on transferability that could otherwise continue to apply to the
Wachovia common stock received in the merger. Under the shareholders' agreement,
OFFITBANK Holdings shareholders may not transfer their shares, including shares
of Wachovia common stock received in the merger without having first offered
these shares to OFFITBANK Holdings following procedures outlined in the
shareholders' agreement.
CONSENTS
Consents in the form included in the proxy and consent card
accompanying this proxy statement/prospectus are being solicited by the
OFFITBANK Holdings board. If you sign the proxy and consent card without
indicating whether or not you consent to the termination of the shareholders'
agreement, you will have consented to the termination of the shareholders'
agreement. Once you have signed and mailed in the proxy and consent card, you
may not revoke your decision to consent to the termination of the shareholders'
agreement. However, if you decide not to consent, you may subsequently decide to
consent to the termination of the shareholders' agreement by submitting a new
proxy card and consent. If you do not sign or return the proxy and consent card,
you will be deemed to have not consented to the termination of the shareholders'
agreement.
CONSENT REQUIRED
The termination of the shareholders' agreement requires the
consent of at least 80% of the outstanding shares of OFFITBANK Holdings common
stock. Certain directors and executive officers who together hold approximately
59% of the outstanding shares of OFFITBANK Holdings common stock have agreed to
consent to the termination of the shareholders' agreement pursuant to voting
agreements. You can find a form of the voting agreement in Appendix B to this
proxy statement/prospectus.
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<PAGE> 19
RECOMMENDATION OF THE BOARD OF DIRECTORS
The OFFITBANK Holdings board believes that the merger is in the
best interests of OFFITBANK Holdings and, since the termination of the
shareholders' agreement is a condition to the completion of the merger,
recommends that you consent to the termination of the shareholders' agreement.
THE MERGER
The following information describes the material information
pertaining to the merger. This description is not complete and is qualified by
the more detailed Appendices to this document which are incorporated to this
section by reference, including the merger agreement in Appendix A. We urge you
to read the Appendices in their entirety.
OVERVIEW
The merger agreement provides for a transaction in which
OFFITBANK Holdings will merge into Wachovia. Wachovia will be the surviving
corporation of the merger. At the effective time of the merger, each share of
issued and outstanding OFFITBANK Holdings common stock will cease to be
outstanding and will be converted into 0.2284 of a share of Wachovia common
stock.
The merger agreement provides that Wachovia may change the way it
combines with OFFITBANK Holdings. However, it cannot (1) alter the consideration
to be received by OFFITBANK Holdings shareholders, (2) adversely affect the tax
treatment for OFFITBANK Holdings shareholders or (3) materially delay the
merger.
BACKGROUND OF THE MERGER
In early 1998, OFFITBANK's management determined that the
long-term success of OFFITBANK's business could be enhanced by building upon
OFFITBANK's reputation and franchise in wealth management through the expansion
of its product offerings and its services, including trust and lending services,
as well as by expanding OFFITBANK's national presence. In April 1998,
OFFITBANK's board authorized management to explore the possibility of effecting
an initial public offering of approximately $40,000,000 - $50,000,000 of common
stock to provide the capital to finance these strategic initiatives. Management
recommended to OFFITBANK's board, and OFFITBANK's board authorized management to
proceed with, the preparation of a registration statement for an IPO for which
Merrill Lynch would act as lead managing underwriter. The board also authorized
management to implement an exchange agreement with OFFITBANK Holdings in order
to create a holding company structure under which OFFITBANK's strategic plan,
including geographic expansion, could be most effectively implemented.
On August 6, 1998, OFFITBANK Holdings filed a registration
statement with the SEC anticipating an offering of shares of common stock to
provide OFFITBANK with the capital to fund the implementation of the strategic
initiatives identified by management. However, OFFITBANK Holdings chose to defer
the anticipated fall 1998 offering date for the IPO given the sudden and extreme
decline in the equity and corporate fixed income markets in August 1998. In
September and October 1998, OFFITBANK Holdings management reviewed its strategic
objectives with the board, and a consensus was reached that it was advisable for
management to explore alternative approaches to implement OFFITBANK's strategic
initiatives. Thus, OFFITBANK Holdings considered the possibility of a business
combination with one of a very limited number of financial institutions whose
reputations, cultures, products and geographic presence would enable OFFITBANK
Holdings to achieve the strategic goals outlined by management. Both management
and Merrill Lynch identified Wachovia as one of the institutions that
potentially met these standards.
In November 1998, a director of OFFITBANK Holdings, who is also a
friend of Leslie M. Baker, Jr., the Chairman and Chief Executive Officer of
Wachovia, introduced Morris W. Offit and Mr. Baker. Beginning in early December
1998, OFFITBANK Holdings management engaged in a series of meetings and
telephone discussions with Wachovia to determine first whether the parties'
strategic goals in the wealth management area were in
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<PAGE> 20
congruence and, after establishing that they agreed on such strategic goals, to
determine whether they could agree upon certain key strategic operating issues
and upon the marketing, product expansion and operational opportunities that a
combined business would pursue.
By April 1999, the managements of both OFFITBANK Holdings and
Wachovia believed that a business combination could be mutually advantageous.
OFFITBANK Holdings requested Merrill Lynch to advise it concerning a potential
business combination with Wachovia and the valuation issues pertinent to the
business combination agreement.
At OFFITBANK Holdings' board meeting held on April 21, 1999,
management provided OFFITBANK Holdings' board with an overview of its
discussions with Wachovia. The OFFITBANK Holdings board authorized management to
enter into negotiations regarding a strategic merger with Wachovia.
In late April 1999, representatives of OFFITBANK Holdings and
Wachovia entered into discussions concerning the range of values which might be
ascribed to OFFITBANK Holdings in a business combination. The parties also
reviewed each other's business and operations. Wachovia circulated a draft of
the merger agreement the first week of May. Between May 5th and 11th, 1999,
management of both parties, together with counsel and representatives of Merrill
Lynch, concluded a mutually agreeable draft of the merger agreement.
At a meeting of OFFITBANK Holdings' board on May 12, 1999,
OFFITBANK Holdings' management reviewed the financial features and reasons for
the proposed combination with Wachovia. OFFITBANK Holdings' legal advisors
reviewed the principal terms of the merger agreement and the related agreements,
as well as the legal standards applicable to the OFFITBANK Holdings board's
consideration of the proposed combination with Wachovia. Representatives of
Merrill Lynch reviewed financial information concerning Wachovia, OFFITBANK
Holdings and the proposed merger. Merrill Lynch rendered its oral opinion that
the exchange ratio was fair from a financial point of view to the OFFITBANK
Holdings shareholders. The OFFITBANK Holdings board also discussed the proposed
termination of the shareholders' agreement in connection with the merger. After
discussion, OFFITBANK Holdings' board unanimously approved the merger agreement
and related matters.
The OFFITBANK Holdings board unanimously approved the merger and
recommended that OFFITBANK Holdings shareholders vote "FOR" the merger and
consent to the termination of the shareholders' agreement since the termination
of the shareholders' agreement is a condition to the completion of the merger.
REASONS OF OFFITBANK HOLDINGS FOR THE MERGER
In reaching its determination to approve the merger agreement and
to recommend to OFFITBANK Holdings shareholders that they adopt the merger
agreement and consent to the termination of the shareholders' agreement,
OFFITBANK Holdings' board consulted with OFFITBANK Holdings' management as well
as its financial and legal advisors and considered a number of factors,
including:
The Complementary Businesses and Cultures of OFFITBANK and
Wachovia. The OFFITBANK Holdings board believes that Wachovia:
(1) shares OFFITBANK's fundamental values, including a
pervasive commitment to client service;
(2) has an existing business culture that reflects an
understanding and acceptance of the differences between
the consumer and commercial banking business and the
provision of wealth management services to very high net
worth clients;
(3) represents a strong presence in key markets in the
Southeast and across the United States which can become
the basis for the further development of the OFFITBANK
wealth management franchise;
(4) has a broad base of clients and services which OFFITBANK
can leverage as part of its core business; and
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<PAGE> 21
(5) has developed a reputation for quality of product and
service and a name recognition that should complement
OFFITBANK's identity as a premier provider of wealth
management services.
The OFFITBANK Holdings board believes that the benefits of the merger include
the ability to offer OFFITBANK's clients superior trust, lending and
philanthropy management services and access to Wachovia's other products which
will complement the services which OFFITBANK currently provides.
The Future Prospects of OFFITBANK as an Independent Firm. The
OFFITBANK Holdings board carefully considered the prospects of OFFITBANK if it
were to remain an independent firm, and it determined that, while OFFITBANK
would in all likelihood remain successful,
(1) in order to achieve its strategic objectives, OFFITBANK
would be required to raise substantial additional equity
capital, and both the timing thereof and the amount of
consequent dilution that would be incurred by OFFITBANK
Holdings shareholders were uncertain;
(2) the successful implementation of OFFITBANK's expansion
plans was not assured even if the capital became
available;
(3) there could be substantial further dilution to OFFITBANK
Holdings' existing shareholders arising from common stock
issued in acquisitions of businesses and from the need to
implement additional equity-based compensation plans to
attract, retain and create incentives for an expanding
number of employees; and
(4) the opportunity to effect a business combination with an
attractive strategic partner might not be replicable,
particularly in light of the expectation that OFFITBANK's
competitors in wealth management would also seek
combinations with the very limited number of appropriate
potential strategic partners, and thereby greatly diminish
the likelihood that a strategic business combination
involving OFFITBANK would remain a viable alternative
strategy.
Merger Consideration for OFFITBANK Holdings Shareholders. The
OFFITBANK Holdings board carefully evaluated the consideration to be received by
OFFITBANK Holdings shareholders in the merger. The presentation made by Merrill
Lynch to the OFFITBANK Holdings board on May 12, 1999 included Merrill Lynch's
opinion that the exchange ratio is fair to OFFITBANK Holdings shareholders from
a financial point of view. See "- Opinion of OFFITBANK Holdings' Financial
Advisor" and Appendix D. The OFFITBANK Holdings board also assessed the fixed
exchange ratio 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 performance of Wachovia common stock, which is
comparable to both the S&P 500 Index and the S&P Major
Regional Bank Index;
(3) the price/earnings ratio and dividend yield of Wachovia
common stock;
(4) Wachovia's record of successful risk management, earnings
stability and asset quality through a broad range of
market conditions; and
(5) Wachovia's franchise and strong presence in key
Southeastern markets.
Merger Agreement. OFFITBANK Holdings' management and legal
advisors discussed with the OFFITBANK Holdings board the terms and conditions of
the merger agreement, including the amount and form of the merger consideration,
the parties' representations, warranties, covenants and agreements, as well as
the conditions to the respective obligations set forth in the merger agreement.
-15-
<PAGE> 22
Retention of Employees and Enhanced Employee Benefits. The
OFFITBANK Holdings board considered the terms and value of the employee
retention program proposed by Wachovia, the terms and conditions of the
employment agreement to be entered into by Mr. Offit, the benefit programs
offered to continuing employees, the lack of any anticipated employee
dislocation, the enhanced opportunities for employee advancement anticipated as
a result of the merger and the expectation that the existing management will
continue to have operational responsibility for OFFITBANK.
The above discussion of factors considered by the OFFITBANK
Holdings board is not intended to be exhaustive but includes all material
factors considered by the OFFITBANK Holdings board. In reaching the
determination to approve the merger agreement and recommend its adoption to
OFFITBANK Holdings shareholders, the OFFITBANK Holdings board did not assign any
relative or specific weights to the various factors considered by it, and
individual members of the OFFITBANK Holdings board may have assigned differing
weights to different factors.
THE OFFITBANK HOLDINGS BOARD BELIEVES THAT THE MERGER IS IN THE
BEST INTERESTS OF OFFITBANK HOLDINGS AND ITS SHAREHOLDERS. IT UNANIMOUSLY
APPROVED THE MERGER AND RECOMMENDS THAT YOU VOTE "FOR" THE MERGER AND, SINCE THE
TERMINATION OF THE SHAREHOLDERS' AGREEMENT IS A CONDITION TO THE COMPLETION OF
THE MERGER, RECOMMENDS THAT YOU CONSENT TO THE TERMINATION OF THE SHAREHOLDERS'
AGREEMENT. THE OFFITBANK HOLDINGS BOARD BELIEVES THAT THE MERGER WILL ENABLE YOU
TO REALIZE SIGNIFICANT VALUE ON A TAX-FREE BASIS AND ALSO WILL ENABLE YOU TO
ACQUIRE A MORE LIQUID STOCK IN A FINANCIALLY STRONG ORGANIZATION.
OPINION OF OFFITBANK HOLDINGS' FINANCIAL ADVISOR
Merrill Lynch acted as financial advisor to OFFITBANK Holdings in
connection with the merger. At the meeting of the OFFITBANK Holdings board held
on May 12, 1999, Merrill Lynch rendered its preliminary, oral opinion to the
OFFITBANK Holdings board to the effect that, as of such date, and based upon the
assumptions made, matters considered and limits of review set forth in Merrill
Lynch's written opinion, the exchange ratio was fair, from a financial point of
view, to the holders of OFFITBANK Holdings common stock. Merrill Lynch
subsequently confirmed its preliminary, oral opinion by delivery of its written
opinion dated May 13, 1999. Merrill Lynch has not been requested to, and does
not expect to, update its opinion prior to the closing of the merger. The full
text of Merrill Lynch's May 13, 1999 opinion is included in Appendix D to this
document and is incorporated herein by reference. The description of the Merrill
Lynch opinion outlined below is qualified in its entirety by reference to the
full text of the Merrill Lynch opinion. OFFITBANK Holdings shareholders are
urged to read the Merrill Lynch opinion in its entirety.
THE MERRILL LYNCH OPINION IS ADDRESSED TO THE OFFITBANK HOLDINGS
BOARD AND ADDRESSES ONLY THE FAIRNESS OF THE EXCHANGE RATIO FROM A FINANCIAL
POINT OF VIEW TO THE HOLDERS OF OFFITBANK HOLDINGS COMMON STOCK. IT DOES NOT
ADDRESS THE MERITS OF THE UNDERLYING DECISION BY THE OFFITBANK HOLDINGS BOARD TO
ENGAGE IN THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY OFFITBANK
HOLDINGS SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE OFFITBANK
HOLDINGS SPECIAL MEETING. THE PROPOSED CONSIDERATION TO BE RECEIVED BY THE
OFFITBANK HOLDINGS SHAREHOLDERS PURSUANT TO THE MERGER WAS DETERMINED ON THE
BASIS OF NEGOTIATIONS AMONG OFFITBANK HOLDINGS AND WACHOVIA AND WAS APPROVED BY
THE OFFITBANK HOLDINGS BOARD.
Merrill Lynch is an internationally recognized investment banking
firm and, as part of its investment banking business, is continually engaged in
the valuation of businesses and their securities in connection with mergers and
acquisitions, underwritings, distributions of securities and similar activities.
Merrill Lynch was retained by the OFFITBANK Holdings board on the basis of its
qualifications, reputation and experience and its familiarity with OFFITBANK
Holdings and its businesses.
The Merrill Lynch opinion necessarily was based upon market,
economic and other conditions as they existed and could be evaluated on, and the
information made available to Merrill Lynch as of, the date of the Merrill Lynch
opinion. In connection with the preparation of the Merrill Lynch opinion,
Merrill Lynch was not asked by OFFITBANK Holdings or the OFFITBANK Holdings
board to solicit, nor did it solicit, third-party indications of interest for
the acquisition of all or any part of OFFITBANK Holdings. Merrill Lynch assumed
that, in the course of
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<PAGE> 23
obtaining the necessary regulatory or other consents or approvals, contractual
or otherwise, for the merger, no restrictions, including any divestiture
requirements or amendments or modifications, will be imposed that will have a
material adverse effect on the contemplated benefits of the merger.
In arriving at its opinion, Merrill Lynch, among other things:
(1) reviewed certain business and historical financial
information relating to OFFITBANK Holdings provided to
Merrill Lynch by OFFITBANK Holdings' management and
certain publicly available business and financial
information relating to Wachovia that Merrill Lynch
deemed to be relevant;
(2) reviewed certain information, including financial
forecasts, relating to the respective businesses,
earnings, assets, liabilities and prospects of OFFITBANK
Holdings and Wachovia, furnished to Merrill Lynch by
senior management of OFFITBANK Holdings and Wachovia, as
well as the amount and timing of the cost savings,
revenue enhancements and related expenses expected to
result from the merger furnished to Merrill Lynch by
senior management of OFFITBANK Holdings and Wachovia;
(3) conducted discussions with members of senior management
and representatives of OFFITBANK Holdings and Wachovia
concerning the matters described in clauses 1 and 2
above, as well as their respective businesses and
prospects before and after giving effect to the merger;
and the expected cost savings, revenue enhancements and
related expenses expected to result from the merger;
(4) reviewed the market prices and valuation multiples for
certain publicly traded companies comparable to
OFFITBANK Holdings that Merrill Lynch deemed to be
relevant;
(5) reviewed the market prices and valuation multiples for
the Wachovia common stock and compared them with those
of certain publicly traded companies that Merrill Lynch
deemed to be relevant;
(6) compared the proposed financial terms of the merger with
the financial terms of certain other transactions that
Merrill Lynch deemed to be relevant;
(7) participated in certain discussions and negotiations
among representatives of OFFITBANK Holdings and Wachovia
and their financial and legal advisors;
(8) reviewed the potential pro forma impact of the merger
and the expected cost savings, revenue enhancement and
related expenses expected to result from the merger;
(9) reviewed the merger agreement and all related documents
and instruments; and
(10) reviewed such other financial studies and analyses and
took into account such other matters as Merrill Lynch
deemed necessary, including Merrill Lynch's assessment
of general economic, market and monetary conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the
accuracy and completeness of all information supplied or otherwise made
available to Merrill Lynch, discussed with, or reviewed by, or for Merrill
Lynch, or publicly available. In addition, Merrill Lynch did not assume any
responsibility for independently verifying this information or undertake an
independent evaluation or appraisal of the assets or liabilities of OFFITBANK
Holdings or Wachovia nor has Merrill Lynch been furnished any such evaluation or
appraisal. Merrill Lynch is not an expert in the evaluation of allowances for
loan losses, and neither made an independent evaluation of the adequacy of the
allowances for loan losses of Wachovia, nor reviewed any individual credit files
of Wachovia or been requested to conduct such a review, and, as a result,
Merrill Lynch has assumed that the aggregate allowances for loan losses for
Wachovia are adequate to cover those losses and will be adequate on a pro
forma basis for the combined company. In addition, Merrill Lynch did not assume
any obligation to conduct, nor did Merrill Lynch conduct, any physical
inspection of the properties or facilities of OFFITBANK Holdings or Wachovia.
Merrill Lynch assumed that the financial and operating forecast information
furnished to or discussed
-17-
<PAGE> 24
with Merrill Lynch by OFFITBANK Holdings or Wachovia, including the cost
savings, revenue enhancements and related expenses expected to result from the
merger, had been reasonably prepared. Merrill Lynch also assumed that this
information reflects the best currently available estimates and judgments of the
senior management of each of OFFITBANK Holdings and Wachovia as to the future
financial and operating performance of OFFITBANK Holdings, Wachovia or the
combined company, as the case may be. Merrill Lynch's opinion is necessarily
based upon market, economic and other conditions as in effect on, and on the
information made available to Merrill Lynch as of, the date of its opinion.
For the purposes of rendering its opinion, Merrill Lynch assumed
that, in all respects material to its analysis:
(1) the merger will be completed substantially in accordance
with the terms outlined in the merger agreement;
(2) the representations and warranties of each party in the
merger agreement and in all related documents and
instruments referred to in the merger agreement are true
and correct;
(3) each party to the merger agreement and all related
documents will perform all of the covenants and
agreements required to be performed by that party under
these documents;
(4) all conditions to the completion of the merger will be
satisfied without any waivers; and
(5) in the course of obtaining the necessary regulatory or
other consents or approvals (contractual or otherwise)
for the merger, no restrictions, including any
divestiture requirements or amendment or modifications,
will be imposed that materially will affect the future
results of operations or financial condition of the
combined entity or the contemplated benefits of the
merger, including the cost savings, revenue enhancements
and related expenses expected to result from the merger.
Merrill Lynch further assumed that the merger will be accounted
for as a purchase under GAAP, and that the merger will qualify as a tax-free
reorganization for U.S. federal income tax purposes. Merrill Lynch's opinion is
not an expression of an opinion as to the prices at which shares of Wachovia
common stock will trade following the announcement of the merger or the actual
value of the shares of common stock of the combined company when issued pursuant
to the merger, or the prices at which the shares of common stock of the combined
company will trade following the consummation of the merger.
In performing its analyses, Merrill Lynch made numerous
assumptions with respect to industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of Merrill Lynch, OFFITBANK Holdings and Wachovia. Any estimates
contained in the analyses performed by Merrill Lynch are not necessarily
indicative of actual values or future results, which may be significantly more
or less favorable than suggested by these analyses. Additionally, estimates of
the value of businesses or securities do not purport to be appraisals or to
reflect the prices at which those businesses or securities might actually be
sold. Accordingly, such analyses and estimates are inherently subject to
substantial uncertainty. In addition, the Merrill Lynch opinion was one among
several factors taken into consideration by OFFITBANK Holdings' board in making
its determination to approve the merger agreement and the merger. Consequently,
the analyses described below should not be viewed as determinative of the
decision of the OFFITBANK Holdings board or OFFITBANK Holdings' management with
respect to the fairness of the exchange ratio.
The following is a summary of the material financial analyses
presented by Merrill Lynch to the OFFITBANK Holdings board on May 12, 1999 in
connection with the rendering of its oral opinion on that date. The financial
analyses summarized below include information presented in tabular format. The
tables must be read together with the text of each summary in order to
understand fully Merrill Lynch's financial analyses. The tables alone do not
constitute a complete description of the financial analyses. You should consider
the full narrative description of the financial analyses, including the
methodologies and assumptions underlying the analyses, with the tabular data
below in order to avoid obtaining a misleading or incomplete view of Merrill
Lynch's financial analyses.
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<PAGE> 25
Calculation of Implied Value of Exchange Ratio. Merrill Lynch
reviewed the terms of the merger. They noted that the exchange ratio was
intended to result in an implied value of $200 million for OFFITBANK Holdings
based upon the average closing price of Wachovia common stock for the five
trading days ending on the last trading day prior to the signing of a definitive
agreement. May 11, 1999 was the last trading day prior to the presentation by
Merrill Lynch to the OFFITBANK Holdings board. Based upon the five day average
of Wachovia common stock of $89.9625 as of that date, the exchange ratio used by
Merrill Lynch for purposes of this analysis was 0.2292. After giving effect to
the merger, based on the 0.2292 exchange ratio, OFFITBANK Holdings shareholders
would have had an ownership interest of approximately 1.09% in the pro forma
combined company. Based on the exchange ratio of 0.2284, after giving effect to
the merger, OFFITBANK Holdings shareholders will have an ownership interest of
approximately 1.08% in the pro forma combined company.
Selected Comparable Trust Banks Analysis--OFFITBANK Holdings.
Merrill Lynch compared certain financial data relating to OFFITBANK Holdings to
corresponding financial data for two publicly traded trust banks: Northern Trust
Corporation and U.S. Trust Corporation. These selected trust banks were chosen
because they are publicly traded companies with operations that, for purposes of
this analysis, may be considered reasonably similar to the operations of
OFFITBANK Holdings.
For each of the selected trust banks, Merrill Lynch calculated
the following financial data:
- market value of equity;
- market price per share of common stock to estimated
1999 earnings, the 1999 estimated P/E multiple;
- market price per share of common stock to estimated
2000 earnings, the 2000 estimated P/E multiple;
- market value of equity to shareholders' equity
(stated book value); and
- market value of equity to tangible shareholders'
equity (stated tangible book value).
For purposes of calculating the selected trust banks' 1999 and
2000 P/E multiples, Merrill Lynch utilized the closing price per share of their
common stock on May 11, 1999 and their estimated 1999 and 2000 calendar years
EPS, based on Merrill Lynch research estimates as of May 11, 1999.
The following table lists information concerning the appropriate
range of trading multiples of the selected financial data extracted by Merrill
Lynch for the selected trust banks discussed above:
<TABLE>
<CAPTION>
MEDIAN MULTIPLE
OFFITBANK HOLDINGS SELECTED COMPARABLE TRUST BANKS
<S> <C>
Estimated 1999 P/E Multiple........................................................................... 25.83x
Estimated 2000 P/E Multiple........................................................................... 22.77x
Price to Stated Book Value........................................................................... 5.82x
Price to Tangible Book Value.......................................................................... 6.86x
</TABLE>
Merrill Lynch calculated implied equity values of OFFITBANK
Holdings by applying the above selected trust banks' range of trading multiples
to OFFITBANK Holdings':
- estimated 1999 net income;
- estimated 2000 net income;
- stated book value; and
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<PAGE> 26
- tangible book value.
This analysis was based on base case and upside case projections
for fiscal years 1999 and 2000 prepared by the management of OFFITBANK Holdings.
Projected annualized revenue increased annually at 12.5% in the base case and
15% in the upside case.
The following table presents the ranges of implied equity values
of OFFITBANK Holdings implied by applying the selected trust banks' trading
multiples as compared with the merger consideration valued at $200 million:
<TABLE>
<CAPTION>
IMPLIED EQUITY VALUE
OFFITBANK HOLDINGS
---------------------------
BASE CASE UPSIDE CASE
--------- -----------
($ IN MILLIONS)
OFFITBANK HOLDINGS SELECTED COMPARABLE TRUST BANKS ANALYSIS
<S> <C> <C>
Estimated 1999 P/E Multiple............................................................. $ 162 $ 167
Estimated 2000 P/E Multiple............................................................. $ 177 $ 190
Price to Stated Book Value............................................................. $ 165 $ 165
Price to Tangible Book Value............................................................ $ 195 $ 195
Merger Consideration ................................................................... $200
</TABLE>
Selected Comparable Asset Managers Analysis--OFFITBANK Holdings.
Merrill Lynch compared certain financial data relating to OFFITBANK Holdings to
corresponding financial data for ten publicly traded asset managers: Franklin
Resources Inc., Amvescap PLC, T. Rowe Price Associates, Inc., Waddell & Reed
Financial Inc., Federated Investors Inc., United Asset Management Corp., The
John Nuveen Company, Eaton Vance Corp., Affiliated Managers Group Inc. and
Gabelli Asset Management Inc. These selected asset managers were chosen because
they are publicly traded companies with operations that, for purposes of this
analysis, may be considered reasonably similar to the operations of OFFITBANK
Holdings.
For each of these selected asset managers, Merrill Lynch
calculated the following financial data:
- enterprise value to assets under management, or AUM;
- enterprise value to latest twelve months, or LTM,
earnings before interest, taxes, depreciation and
amortization, or EBITDA;
- estimated 1999 P/E multiple; and
- estimated 2000 P/E multiple.
For purposes of this analysis, enterprise value was approximated
by market value of common stock, plus liquidation or book value of preferred
stock, long term debt and minority interests, less book value of cash and
equivalents, and other investments. For purposes of calculating the 1999 and
2000 P/E multiples of the selected asset managers, Merrill Lynch utilized the
closing price per share of their common stock on May 11, 1999 and their
estimated 1999 and 2000 calendar years EPS, based on Merrill Lynch research
estimates and IBES research estimates as of May 11, 1999.
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<PAGE> 27
The following table lists information concerning the appropriate
selected trading data extracted by Merrill Lynch for the selected asset managers
discussed above:
<TABLE>
<CAPTION>
MEDIAN
STATISTICS
<S> <C>
OFFITBANK HOLDINGS COMPARABLE ASSET MANAGERS ANALYSIS
Enterprise Value to AUM...................................................................... 2.63%
Enterprise Value to estimated 1999 EBITDA ................................................... 9.10x
Estimated 1999 P/E Multiple.................................................................. 18.80x
Estimated 2000 P/E Multiple.................................................................. 15.00x
</TABLE>
Merrill Lynch calculated implied equity values of OFFITBANK
Holdings by applying the above selected asset managers' median trading
statistics to OFFITBANK Holdings':
- enterprise value to AUM;
- enterprise value to estimated 1999 EBITDA;
- estimated 1999 P/E multiple; and
- estimated 2000 P/E multiple.
This analysis was based on base case and upside case projections
for fiscal years 1999 through 2004.
The following table presents the ranges of implied equity values
of OFFITBANK Holdings implied by applying the selected asset managers' trading
statistics as compared with the merger consideration valued at $200 million:
<TABLE>
<CAPTION>
IMPLIED EQUITY VALUE
OFFITBANK HOLDINGS
-------------------------
BASE CASE UPSIDE CASE
--------- -----------
($ IN MILLIONS)
<S> <C> <C>
OFFITBANK HOLDINGS SELECTED COMPARABLE ASSET MANAGERS ANALYSIS
Enterprise Value to AUM............................................................ $ 283 $ 283
Enterprise Value to estimated 1999 EBITDA ......................................... $ 110 $ 112
Estimated 1999 P/E Multiple........................................................ $ 118 $ 122
Estimated 2000 P/E Multiple........................................................ $ 116 $ 125
Merger Consideration............................................................... $ 200
</TABLE>
Selected Acquisitions Transaction Analysis--OFFITBANK Holdings.
Merrill Lynch analyzed information relating to selected transactions comprised
of 43 acquisitions in the asset management industry since February 1996. For
each of these selected transactions, Merrill Lynch calculated the following
financial data:
- enterprise value to AUM;
- enterprise value to LTM revenues;
- enterprise value to LTM EBITDA; and
- estimated equity value to LTM net income.
For purposes of calculating the above multiples, Merrill Lynch
used the financial data of the acquired businesses for the latest twelve-month
periods preceding the acquisition announcements and compared such
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<PAGE> 28
multiples with corresponding multiples for the merger. In the opinion of Merrill
Lynch, there were no comparable trust bank acquisitions. Accordingly, Merrill
Lynch did not analyze any such transactions.
The following table sets forth information concerning the
appropriate range of selected financial data extracted by Merrill Lynch for the
selected asset management transactions and OFFITBANK Holdings discussed above:
<TABLE>
<CAPTION>
OFFITBANK HOLDINGS SELECTED ASSET OFFITBANK HOLDINGS
MANAGEMENT TRANSACTIONS SELECTED ACQUISITION TRANSACTION MEDIAN STATISTICS
--------------------------------------------------
<S> <C>
Enterprise Value to AUM........................................ 2.5%
Enterprise Value to LTM Revenues............................... 4.9x
Enterprise Value to LTM EBITDA................................. 10.4x
Estimated Equity Value to LTM Net Income....................... 18.0x
</TABLE>
Merrill Lynch calculated implied equity values of OFFITBANK
Holdings by applying the above selected transactions multiples to OFFITBANK
Holdings' AUM, LTM revenues, LTM EBITDA and LTM net income.
The following table presents the ranges of implied equity values
of OFFITBANK Holdings implied by applying the selected asset management trading
multiples as compared with the merger consideration valued at $200 million:
<TABLE>
<CAPTION>
IMPLIED EQUITY VALUE
OF OFFITBANK HOLDINGS
---------------------
($ IN MILLIONS)
<S> <C>
OFFITBANK HOLDINGS SELECTED ASSET MANAGEMENT
TRANSACTIONS ANALYSIS
Enterprise Value to AUM.................................................................... $ 269.1
Enterprise Value to LTM Revenues........................................................... $ 204.1
Enterprise Value to LTM EBITDA............................................................. $ 97.2
Estimated Equity Value to LTM Net Income................................................... $ 86.2
</TABLE>
Discounted Cash Flow Analysis--OFFITBANK Holdings. Merrill Lynch
performed a discounted cash flow analysis of the projected after-tax unlevered
free cash flows of OFFITBANK Holdings for both the base case and the upside
case. After-tax unlevered free cash flow means operating cash flow including
amortization and depreciation. This analysis was based on projections for
calendar years 1999 through 2004 prepared by the management of OFFITBANK
Holdings.
Merrill Lynch calculated implied equity values of OFFITBANK
Holdings common stock by utilizing discount rates ranging from 13.0% to 15.0%
and estimated terminal values based on perpetuity growth rates of from 5.0% to
7.0%. Merrill Lynch arrived at these discount rates based on its judgment of the
cost of capital of selected comparable trust banks and selected asset managers,
and arrived at these terminal values based on the current and historic projected
net income multiples of the comparable trust banks and selected asset managers
and factoring in the expected growth prospects of OFFITBANK Holdings at the end
of calendar year 2004. The projections prepared by management of OFFITBANK
Holdings were estimates only and inherently subject to known and unknown risks,
uncertainties, and other factors, many of which are outside OFFITBANK Holdings'
control, which may cause the actual results to differ significantly from those
set forth in the projections.
-22-
<PAGE> 29
The following table presents the ranges of implied equity values
per share of OFFITBANK Holdings implied by this analysis as compared with the
merger consideration valued at $200 million:
<TABLE>
<CAPTION>
IMPLIED EQUITY VALUE
OF OFFITBANK HOLDINGS
---------------------------
($ IN MILLIONS)
LOW HIGH
------- -------
<S> <C> <C>
OFFITBANK HOLDINGS DISCOUNTED CASH FLOW ANALYSIS
Base Case................................................................ $141.48 $208.16
Upside Case.............................................................. $165.44 $245.19
Merger Consideration..................................................... $200.00
</TABLE>
Selected Comparable Companies Analysis--Wachovia. Merrill Lynch
compared certain financial data relating to Wachovia from public sources to
corresponding financial data from public sources for eight publicly traded banks
with a market capitalization of between $10 billion and $30 billion: BB&T
Corporation, Comerica Incorporated, Fleet Financial Group, KeyCorp, National
City Corporation, PNC Bank Corp., SunTrust Banks, U.S. Bancorp. These Wachovia
selected banks were chosen because they are publicly traded companies with
operations and other characteristics that, for purposes of this analysis, may be
considered reasonably similar to the operations of Wachovia.
For each of the Wachovia selected banks, Merrill Lynch calculated
the following financial data:
- estimated 1999 P/E Multiple;
- estimated 2000 P/E Multiple;
- First Call projected five-year EPS growth rate;
- estimated 1999 P/E multiple to First Call projected
five-year growth rate, or PEG Ratio;
- market value of equity to stated book value;
- market value of equity to stated tangible book value;
- LTM return on average assets, or ROAA;
- LTM return on average equity, or ROAE; and
- tangible equity to tangible assets.
For purposes of calculating the 1999 and 2000 P/E multiples of
the Wachovia selected banks, Merrill Lynch utilized the closing price per share
of their common stock on May 11, 1999 and their calendar years estimated 1999
and 2000 EPS, based on publicly available First Call estimates as of May 11,
1999. Nothing contained in this "Opinion of OFFITBANK Holdings' Financial
Advisor" section should be construed as an acknowledgment of the accuracy or
validity of such estimates by Wachovia.
-23-
<PAGE> 30
The following table lists information concerning the appropriate
range of trading multiples of the selected financial data extracted by Merrill
Lynch exclusively from public sources for both the Wachovia selected banks
discussed above and Wachovia:
<TABLE>
<CAPTION>
FIRST
CALL
PRICE/ PRICE/ PROJECTED PRICE/
1999 FIRST 2000 FIRST FIVE-YEAR STATED
CALL CALL EPS PRICE/ TANGIBLE TANGIBLE
ESTIMATED ESTIMATED GROWTH PEG STATED BOOK BOOK LTM LTM EQUITY/
EPS EPS RATE RATIO VALUE VALUE ROAA ROAE ASSETS
---------- ---------- --------- ----- ----------- -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Comparable Selected
Banks Mean Statistics.... 16.12x 14.54x 11.13% 1.45% 3.39x 4.30x 1.54% 18.86% 6.52%
Wachovia................. 18.08x 16.32x 11.00% 1.64% 3.36x 3.80x 1.43% 17.67% 7.43%
Premium/ (Discount) to
mean..................... 12.16% 12.21% (1.12)% 13.69% (0.76)% (11.58)% (7.36)% (6.30)% (13.88)%
</TABLE>
The information above summarizes the material analyses performed
by Merrill Lynch in connection with its opinion. This summary does not purport
to be a complete description of the analyses performed by Merrill Lynch in
connection with the rendering of its fairness opinion. The preparation of a
fairness opinion is a complex process and is not susceptible to partial analysis
or summary description. Merrill Lynch believes that its analyses and the summary
outlined above must be considered as a whole. Merrill Lynch further believes
that selecting or emphasizing portions of its analyses, including those
presented in tabular format, without considering all analyses, or selecting
part or emphasizing or all of the above summary, without considering all
factors and analyses, would create an incomplete view of the process
underlying Merrill Lynch's opinion.
In addition, Merrill Lynch considered the results of every
portion of its analysis and did not assign relative weights to any portion of
its analysis, so that the ranges of valuations resulting from any particular
analysis described above should not be taken to be Merrill Lynch's view of the
actual value of OFFITBANK Holdings or Wachovia, which may be significantly more
or less favorable than as set forth herein.
In performing its analyses, Merrill Lynch made numerous
assumptions with respect to industry performance, general business and economic
conditions, and other matters, many of which are beyond the control of OFFITBANK
Holdings or Wachovia. The analysis performed by Merrill Lynch is not necessarily
indicative of actual values, trading values or actual future results that might
be achieved, all of which may be significantly more or less favorable than
suggested by such analysis. No comparable company identified above is identical
to OFFITBANK Holdings or Wachovia, as the case may be, and none of the selected
acquisition transactions or other business combinations utilized as a comparison
is identical to the transactions contemplated by the merger agreement.
Accordingly, an analysis of publicly traded comparable companies and comparable
business combinations is not mathematical; rather, such analysis involves
complex considerations and judgments concerning differences in financial and
operating characteristics of the comparable companies or the company, or
transaction, and other factors that could affect the public trading values of
such comparable companies or company to which they are being compared.
In connection with its analyses, Merrill Lynch utilized estimates
and forecasts of future operating results of OFFITBANK Holdings and Wachovia.
Analyses based upon forecasts of future results are not necessarily indicative
of actual future results, which may be significantly more or less favorable than
suggested by such analyses. Because such analyses are inherently subject to
uncertainty, being based upon numerous factors or events beyond the control of
OFFITBANK Holdings and Wachovia, none of Merrill Lynch, OFFITBANK Holdings or
Wachovia assumes responsibility if future results or actual values are
materially different from these forecasts or assumptions.
Merrill Lynch's analyses were prepared solely as part of its
analysis of the fairness of the consideration to be received in the merger by
the shareholders of OFFITBANK Holdings, other than Wachovia and its affiliates,
from
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a financial point of view, and were provided to the OFFITBANK Holdings board in
connection with the delivery of Merrill Lynch's opinion. Merrill Lynch's
analysis is not an appraisal and is not intended to reflect the prices at which
a company might actually be sold or the prices at which any securities may be
traded in the future.
In addition, as described above, Merrill Lynch's opinion was one
of many factors taken into consideration by the OFFITBANK Holdings board in
making its determination to approve the merger. Consequently, the analysis
described above should not be viewed as determinative of the opinion of either
the OFFITBANK Holdings board or management of OFFITBANK Holdings with respect to
the value of Wachovia or a combination of Wachovia with OFFITBANK Holdings or
whether either the OFFITBANK Holdings board or management of OFFITBANK Holdings
would have been willing to agree to different merger consideration.
Fee Arrangement. Merrill Lynch acted as financial advisor to
OFFITBANK Holdings in connection with the merger. Pursuant to a letter
agreement, dated April 21, 1999, between OFFITBANK Holdings and Merrill Lynch,
OFFITBANK Holdings has agreed to pay Merrill Lynch a fee of $350,000 upon the
execution of the merger agreement and, subject to closing of this transaction,
total fees for its services of $1.8 million. In addition, OFFITBANK Holdings has
agreed to reimburse Merrill Lynch for its reasonable out-of-pocket expenses
incurred in connection with rendering financial advisory services, including
fees and disbursements of its legal counsel. OFFITBANK Holdings has agreed to
indemnify Merrill Lynch and its directors, officers, agents, employees and
controlling persons for certain costs, expenses, losses, claims, damages and
liabilities related to or arising out of its rendering of services under its
engagement as financial advisor.
EFFECTIVE TIME OF THE MERGER
The merger will be consummated if it is approved by OFFITBANK
Holdings shareholders, and, unless waived, Wachovia and OFFITBANK Holdings
obtain all required consents and approvals and satisfy the other conditions to
the obligations of the parties to consummate the merger. The merger will become
effective on the date and at the time that a certificate of merger reflecting
the merger is filed with the Secretary of State of Delaware and articles of
merger reflecting the merger are filed with the Secretary of State of North
Carolina, or a later date or time that is indicated in the certificate and
articles. Wachovia and OFFITBANK Holdings have generally agreed to cause the
effective date to occur:
- on the fifth business day after the last of the
conditions to the completion 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; or
- any other date to which Wachovia and OFFITBANK
Holdings agree in writing.
Wachovia and OFFITBANK Holdings each has the right, acting
unilaterally, to terminate the merger agreement if the merger is not completed
by December 31, 1999. See "The Merger -- Amendment, Waiver and Termination" for
further information.
DISTRIBUTION OF WACHOVIA CERTIFICATES
Within three business days of the effective date, Wachovia will
send transmittal materials to you for use in exchanging certificates
representing shares of OFFITBANK Holdings common stock for shares of Wachovia
common stock. YOU SHOULD NOT SURRENDER YOUR CERTIFICATES FOR EXCHANGE UNTIL YOU
RECEIVE THE LETTER OF TRANSMITTAL AND INSTRUCTIONS. Wachovia will deliver
certificates for Wachovia common stock and/or a check for any fractional share
interests or dividends or distributions once it receives your OFFITBANK Holdings
common stock certificates. No party will be liable to any former OFFITBANK
Holdings shareholder for any amount properly delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
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Wachovia is not required to pay any dividends or other
distributions on Wachovia common stock with a record date occurring after the
effective time to any holder who has not exchanged certificates for Wachovia
common stock. Holders of unexchanged certificates will not be eligible to vote
until those certificates are exchanged for Wachovia common stock certificates.
All paid dividends and other distributions and a check for any amount
representing fractional shares will be delivered to each shareholder who has
exchanged certificates, in each case without interest.
There will be no transfers of shares of OFFITBANK Holdings common
stock on OFFITBANK Holdings stock transfer books after the effective time.
OFFITBANK Holdings common stock certificates presented for transfer after the
effective time will be canceled and exchanged for Wachovia common stock
certificates and a check for any amount to be paid for fractional shares.
FRACTIONAL SHARES
Wachovia will not issue any fractional shares of Wachovia common
stock. Instead, you will receive cash without interest for any fractional share
of Wachovia common stock you would be entitled to. The amount of cash received
will be determined by multiplying that fraction by the closing price of Wachovia
common stock reported by the NYSE Composite Transactions Reporting System on the
trading day immediately preceding the effective date. You will not be entitled
to dividends, voting rights or any other shareholder rights with respect to any
fractional shares.
FEDERAL INCOME TAX CONSEQUENCES
The following section describes the material U.S. federal income
tax consequences of the merger to holders who hold shares of OFFITBANK Holdings
common stock as capital assets and is the opinion of Sullivan & Cromwell,
special counsel to Wachovia, and Schulte Roth & Zabel LLP, special counsel to
OFFITBANK Holdings. This section does not address state, local or foreign tax
consequences of the merger.
This section is based on the federal tax laws that are currently
in effect. These laws are subject to change at any time, possibly with
retroactive effect. This is not a complete description of all of the
consequences of the merger in your particular circumstances. We do not address
the U.S. federal income tax considerations applicable to certain classes of
shareholders, including:
- financial institutions;
- insurance companies;
- tax-exempt organizations;
- dealers in securities or currencies;
- traders in securities that elect to mark to market;
- persons who hold OFFITBANK Holdings common stock as part
of a straddle or conversion transaction;
- persons who are not for United States federal income tax
purposes:
- a citizen or resident of the United States;
- a domestic corporation;
- a domestic partnership;
- an estate whose income is subject to United States
federal income tax regardless of its source; or
- a trust if a United States court can exercise
primary supervision over the trust's administration
and one or more United States persons are
authorized to control all substantial decisions of
the trust;
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- persons who acquired or acquire shares of OFFITBANK
Holdings common stock pursuant to the exercise of employee
stock options or otherwise as compensation; and
- persons who do not hold their shares of OFFITBANK Holdings
common stock as a capital asset.
In connection with the filing of this document, Wachovia will
receive an opinion of its special counsel, Sullivan & Cromwell, and OFFITBANK
Holdings will receive an opinion of its special counsel, Schulte Roth & Zabel
LLP. Each opinion will state that:
- the merger will be treated for federal income tax purposes
as a reorganization within the meaning of Section 368(a)
of the U.S. tax code;
- each of OFFITBANK Holdings and Wachovia will be a party to
the reorganization within the meaning of Section 368(b) of
the U.S. tax code; and
- no gain or loss will be recognized by OFFITBANK Holdings
shareholders who receive shares of Wachovia common stock
in exchange for shares of OFFITBANK Holdings common stock,
except that gain or loss may be recognized as to cash
received in lieu of fractional share interests.
These opinions will be dated as of the date of this document and as of the
effective date. They will be based upon facts, representations and assumptions
outlined in each of these opinions. Counsel will require and rely upon
representations contained in letters to be received from OFFITBANK Holdings,
Wachovia and others in rendering their opinions. Neither of these tax opinions
are binding on the Internal Revenue Service. Neither Wachovia nor OFFITBANK
Holdings has requested or will request any ruling from the Internal Revenue
Service as to the U.S. federal income tax consequences of the merger.
OFFITBANK Holdings shareholders who exchange all of their shares
of OFFITBANK Holdings common stock for shares of Wachovia common stock pursuant
to the merger will be subject to the following material U.S. federal income tax
consequences:
- no gain or loss will be recognized by an OFFITBANK
Holdings shareholder, except with respect to an OFFITBANK
Holdings shareholder who receives cash in lieu of a
fractional share of Wachovia common stock;
- the aggregate adjusted tax basis of shares of Wachovia
common stock received by an OFFITBANK Holdings shareholder
will be the same as the aggregate adjusted tax basis of
the shares of OFFITBANK Holdings common stock exchanged
therefor, reduced by any amount allocable to a fractional
share interest for which cash is received; and
- the holding period of shares of Wachovia common stock
received by an OFFITBANK Holdings shareholder, including
any fractional share deemed issued and then redeemed for
cash, will include the holding period of the OFFITBANK
Holdings common stock exchanged therefor.
Cash received by an OFFITBANK Holdings shareholder in lieu of a
fractional share of Wachovia common stock will be treated as received in
redemption of the fractional share interest. An OFFITBANK Holdings 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 OFFITBANK Holdings common stock exchange
therefor. This capital gain or loss would be long-term capital gain or loss if
the OFFITBANK Holdings shareholder's holding period in the shares of OFFITBANK
Holdings 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 federal tax rate of 20%. The deductibility of capital losses is
subject to limitations for both individuals and corporations.
CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON
YOUR PARTICULAR CIRCUMSTANCES. YOU SHOULD THEREFORE CONSULT YOUR OWN TAX ADVISER
AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER,
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INCLUDING THE APPLICATION AND EFFECT OF U.S. FEDERAL, STATE AND LOCAL, FOREIGN
AND OTHER TAX LAWS IN YOUR PARTICULAR CIRCUMSTANCES.
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
by-laws 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 elected. In addition, Morris W. Offit,
Chairman and Chief Executive Officer of OFFITBANK Holdings and OFFITBANK, has
been invited to join the Wachovia board upon completion of the merger.
POST-MERGER COMPENSATION AND BENEFITS
Under the merger agreement, Wachovia has agreed to provide
employees of OFFITBANK Holdings and its subsidiaries with employee benefits
during the period commencing on the effective time and ending on December 31,
1999. These benefits will be substantially comparable in the aggregate to those
provided to these employees by OFFITBANK Holdings prior to the merger, excluding
plans providing for the issuance of the securities of OFFITBANK Holdings. In
addition, the merger agreement provides that these employees generally will
receive credit for their service rendered with OFFITBANK Holdings or any of its
subsidiaries or predecessors before the effective time, to the extent OFFITBANK
Holdings credited such service. This credit will count for purposes of
determining vesting and eligibility to participate, but not for the purpose of
benefit accrual, under Wachovia's employee benefit plans. The merger agreement
provides that Wachovia may modify or terminate any employee benefit plan after
the effective date; provided that no changes may be made to OFFITBANK Holdings'
employee welfare benefit plans prior to the later of January 1, 2000 or the end
of each plan's plan year.
TREATMENT OF OUTSTANDING OPTIONS AND STOCK PURCHASE RIGHTS
At the effective time, each outstanding OFFITBANK Holdings stock
option issued under the OFFITBANK Holdings 1993 Stock Option Plan will be
converted into a replacement option. A replacement option allows its holder to
acquire a number of Wachovia shares of common stock equal to the number of
OFFITBANK Holdings shares of common stock subject to the OFFITBANK Holdings
stock option multiplied by the exchange ratio. The exercise price per share will
be equal to (1) the aggregate exercise price for the shares of OFFITBANK
Holdings common stock which were purchasable pursuant to the OFFITBANK Holdings
stock option divided by (2) the number of full shares of Wachovia common stock
subject to the replacement option. In addition, each OFFITBANK Holdings stock
option which is intended to be an "incentive stock option" will be adjusted in
accordance with the requirements of Section 424 of the U.S. tax code. The terms
and conditions for the purchase of such options are otherwise identical to those
applicable under the OFFITBANK Holdings plan.
RETENTION PROGRAM
The merger agreement provides for a retention program to be
established by Wachovia. It will consist of approximately $3.5 million in
restricted stock units in respect of Wachovia common stock which will be awarded
to designated employees of OFFITBANK Holdings in the amounts determined by
Wachovia. Awards made under the retention program will be governed by the terms
of Wachovia's stock plan. The restricted stock units vest and become payable in
the form of Wachovia common stock at the end of the three-year period following
the effective time.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of OFFITBANK Holdings' management and the
OFFITBANK Holdings board have interests in the merger in addition to their
interests as OFFITBANK Holdings shareholders. The OFFITBANK Holdings board was
aware of these interests and considered them in approving the merger agreement.
Employment Agreement. Morris W. Offit entered into an employment
agreement with Wachovia in order to induce Wachovia to enter into the merger
agreement. The employment agreement will become effective on the effective date
of the merger and will continue to be in effect until December 31, 2001, unless
terminated earlier by either party. It provides that Mr. Offit will render
services in a senior management or executive capacity with Wachovia that will be
consistent with his background and training.
If Mr. Offit's employment is terminated during the term of the
agreement by Wachovia other than for "cause" or by Mr. Offit for certain
specified reasons, he will be entitled to receive cash compensation and certain
benefits from the date of the termination through its third anniversary or the
date on which Mr. Offit attains age 72, if earlier. The cash compensation is
payable monthly during this compensation period and is equal to 1/12th of the
sum of (1) the highest annual rate of salary for the 12 months prior to the
termination, (2) the average of any annual amounts awarded to Mr. Offit under an
OFFITBANK Holdings or Wachovia annual bonus plan for the three fiscal years
preceding the year of such termination and (3) the average of the annual
contributions made under the tax-qualified defined contribution retirement plan
applicable to Mr. Offit for the three calendar years preceding the year of the
termination. During the compensation period, Mr. Offit will continue to be
provided with health and group-term life benefits. However, Wachovia's
obligation to provide these benefits will terminate if Mr. Offit becomes
eligible to participate in the health and welfare benefit plans of another
employer. Immediately upon the termination of Mr. Offit's employment, any
options he may have to acquire shares of Wachovia common stock would become
fully vested and exercisable and certain restricted stock awards would be deemed
to be earned in full. In addition, upon a change in control of Wachovia (as
defined in the employment agreement) during the term of the employment
agreement, Mr. Offit will be entitled to receive the compensation described
above during the compensation period in the event that Mr. Offit voluntarily
terminates his employment within three years following the change in control.
The employment agreement provides for a gross-up payment to be made to Mr.
Offit, if necessary, to eliminate the effects of any excise tax levied under
Section 4999 of the U.S. tax code on the payments made thereunder and the income
and excise taxes levied on the gross-up payment.
The employment agreement contains covenants which restrict Mr.
Offit from engaging in competitive employment and requires him to provide
consulting services to Wachovia during his compensation period. The covenant not
to compete limits Mr. Offit's employment opportunities in the securities
industry if his employment is terminated under circumstances that trigger the
application of the covenant.
Invitation To Join Wachovia Board. Mr. Offit has been invited to
join the Wachovia board upon completion of the merger.
Indemnification. The merger agreement provides that for a period
of six years after the merger, Wachovia will indemnify the present directors and
officers of OFFITBANK Holdings against liabilities incurred in connection with
any claim or proceeding arising from facts or events occurring at or prior to
the effective time of the merger to the fullest extent that OFFITBANK Holdings
is permitted to indemnify its directors and officers under Delaware law and
OFFITBANK Holdings' certificate of incorporation and by-laws.
NON-COMPETITION AGREEMENTS
A number of OFFITBANK Holdings employees have entered into
non-competition agreements with Wachovia in order to induce Wachovia to enter
into the merger agreement. The non-competition agreements contain covenants
which restrict the employee from soliciting any OFFITBANK Holdings client,
customer or employee or any of its affiliates or providing trust, custodial,
wealth management, investment management or banking services to any OFFITBANK
Holdings client or any of its affiliates. The non-competition agreements also
restrict the employee from disclosing confidential information of OFFITBANK
Holdings or any of its affiliates.
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OFFITBANK HOLDINGS STOCK OPTION PLAN
Under OFFITBANK Holdings' 1993 Stock Option Plan, all stock
options become exercisable in full, whether or not otherwise exercisable, as of
the date of any OFFITBANK Holdings shareholder approval of a definitive merger
agreement. Accordingly, all outstanding stock options held by OFFITBANK Holdings
option holders will vest and become immediately exercisable as a result of the
merger.
CONDITIONS TO COMPLETION
OFFITBANK Holdings' and Wachovia's obligations to complete the
merger are subject to the satisfaction or written waiver of the following
conditions:
- the merger agreement is approved by OFFITBANK Holdings
shareholders;
- 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 have a material
adverse effect on Wachovia after the merger or would
reduce the benefits of the merger to such a degree that
Wachovia would not have entered into the merger agreement
had the conditions, restrictions or requirements been
known as of the date of the merger agreement;
- all third-party consents are obtained, generally without
any conditions, restrictions or requirements which the
Wachovia board reasonably determines would have a material
adverse effect on Wachovia after the merger or would
reduce the benefits of the merger to such a degree that
Wachovia would not have entered into the merger agreement
had the conditions, restrictions or requirements been
known as of the date of the merger agreement;
- with respect to each investment company to which OFFITBANK
Holdings provides its services (1) 75% of the members of
the investment company board which approved a new
investment advisory contract with OFFITBANK are not
"interested persons" of either Wachovia or OFFITBANK
Holdings and (2) no unfair burden is imposed on the
investment company as a result of the changes resulting
from the merger;
- no court or regulatory authority has taken any action
prohibiting the completion of the merger;
- the registration statement of which this proxy
statement/prospectus is a part is declared effective by
the SEC and is not subject to a stop order or any
threatened stop order;
- all permits or authorizations under state securities laws
necessary to complete the merger are received;
- the shares of Wachovia common stock issuable in the merger
are approved for listing on the NYSE;
- the representations and warranties of each party are true
and correct except for any inaccuracies which would not
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 has delivered
certificates confirming satisfaction of the foregoing
requirements;
- OFFITBANK Holdings receives an opinion of Schulte Roth &
Zabel LLP as to certain tax matters;
- Wachovia receives an opinion of Sullivan & Cromwell as to
certain tax matters;
- the non-competition and employment agreements referred to
above are in full force and effect, other than as a result
of death or disability, and have not been breached;
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- the shareholders' agreement is terminated and OFFITBANK
Holdings delivers a certificate confirming the
termination;
- Morris Offit and Wallace Mathai-Davis are employed by
OFFITBANK Holdings and hold positions at least as
important as each held on May 13, 1999 and OFFITBANK
Holdings delivers a certificate to that effect; and
- the OFFITBANK Holdings revenue run-rate, calculated by
adding the annualized amount of all fixed fees, other than
performance based incentive fees, payable to OFFITBANK
Holdings under its investment contracts, is not less than
85% of the revenue run-rate on March 31, 1999.
In addition, OFFITBANK Holdings has agreed to seek to obtain,
prior to the completion of the merger, approval for investment advisory
agreements by the boards and shareholders of the investment companies to which
it currently provides its advisory services.
We cannot predict if or when the conditions precedent to the
merger can or will be satisfied or waived by the appropriate party. However, as
of the date of this proxy statement/prospectus, neither Wachovia nor OFFITBANK
Holdings has reason to believe that any of these conditions will not be
satisfied.
REGULATORY APPROVALS
Federal Reserve Board. The merger is subject to prior approval by
the Federal Reserve Board under Section 4 of the Bank Holding Company Act of
1956. Section 4 requires the Federal Reserve Board to consider whether the
performance of Wachovia's and OFFITBANK Holdings' 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 OFFITBANK Holdings and the effect of the
proposed transaction on those resources.
New York Banking Department. The merger is also subject to prior
approval of the Banking Board of the State of New York Banking Department under
Section 143-b of the New York Banking Law.
Other Requisite Approvals and Consents. Approvals or notices are
also required from or to the NYSE, the Federal Trade Commission, the Department
of Justice and other self-regulatory organizations and may be required from or
to certain other regulatory agencies.
Status of Regulatory Approvals. Wachovia and OFFITBANK Holdings
will soon 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 CANNOT PROCEED IN THE ABSENCE OF THE REQUISITE
REGULATORY APPROVALS. WE DO NOT KNOW IF OR WHEN ALL SUCH REGULATORY APPROVALS
WILL BE OBTAINED. ALSO, SUCH APPROVALS MAY CONTAIN A CONDITION, RESTRICTION OR
REQUIREMENT THAT CAUSES THESE APPROVALS TO FAIL TO SATISFY THE CONDITIONS FOR
THE MERGER.
AMENDMENT, WAIVER AND TERMINATION
Prior to or at the effective time, any provision of the merger
agreement may be either waived by the party benefitted by such provision or
amended or modified by written agreement between Wachovia and OFFITBANK
Holdings. However, after the special meeting, the merger agreement may not be
amended in violation of Delaware law.
The merger agreement may be terminated, and the merger abandoned,
at any time prior to the effective time by the mutual consent of OFFITBANK
Holdings and Wachovia. In addition, the merger agreement may be terminated, and
the merger abandoned, prior to the effective time by either Wachovia or
OFFITBANK Holdings if:
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- 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 of the notice having been given to the
breaching party;
- the merger is not completed by December 31, 1999;
- a governmental authority denies by final nonappealable
action an approval of a governmental authority required
for completion of the merger; or
- the OFFITBANK Holdings shareholders fail to approve the
merger agreement.
In addition, Wachovia may terminate the merger agreement if the
OFFITBANK Holdings board withdraws or materially changes its recommendation to
approve the merger agreement.
CONDUCT OF BUSINESS PENDING THE MERGER
The following is a summary of the agreements OFFITBANK Holdings
and Wachovia have regarding actions prior to the merger.
OFFITBANK Holdings. OFFITBANK Holdings 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 without first obtaining Wachovia's consent.
- Issue any additional shares of OFFITBANK Holdings common
stock, any other OFFITBANK Holdings capital stock or any
rights to acquire OFFITBANK Holdings capital stock, except
pursuant to already existing rights to acquire OFFITBANK
Holdings capital stock or similar stock-based employee
rights.
- Make any distributions with respect to OFFITBANK Holdings
common stock or any other OFFITBANK Holdings capital stock
or change its capital structure. However, OFFITBANK
Holdings may make the customary semi-annual cash dividend
payable on OFFITBANK Holdings common stock in a maximum
amount of 16 2/3 cents per share. In addition, if the
record date for the payment of the regularly scheduled
quarterly cash dividend on Wachovia common stock, which is
expected to occur in October 1999, occurs prior to the
effective date, OFFITBANK Holdings may make a cash
dividend payment on OFFITBANK Holdings common stock in a
maximum amount of 8 1/3 cents per share.
- Enter into or amend any employment related agreements,
grant any salary or wage increase or increase any employee
related benefits, except in the ordinary course of
business, as previously disclosed to Wachovia or as
required by law.
- Enter into or amend any employee related benefit plan or
take any action to accelerate the vesting or exercise
ability of any benefits payable under any employee-related
benefit plans, except as may be required by law or
contemplated by the merger agreement.
- Sell, encumber or otherwise dispose of any material amount
of its properties except in the ordinary course of
business.
- Acquire any material assets, business, deposits or
properties of any other entity except in the ordinary
course of business.
- Amend the OFFITBANK Holdings certificate of incorporation,
OFFITBANK Holdings by-laws or the certificate of
incorporation or by-laws (or similar governing documents)
of any of OFFITBANK Holdings' subsidiaries.
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- Extend credit other than in the ordinary course of
business.
- Make any change in its accounting principles, practices or
methods, other than as may be required by GAAP.
- Enter into, terminate or amend any material contract,
except in the ordinary course of business.
- Settle any material claim or proceeding, except in the
ordinary course of business.
- Take any action which is reasonably likely to prevent or
impede the merger from qualifying as a reorganization
under Section 368 of the U.S. tax code or knowingly take
any action which would materially interfere with the
merger agreement.
- Request that any action be taken by the board of directors
of any investment company for which it acts as investment
adviser unless such action is (1) required by law, (2)
necessary for the merger, (3) previously disclosed to
Wachovia or (4) routine and would not have a material
adverse effect on OFFITBANK Holdings or any such
investment company.
- Authorize or make any capital expenditures, other than in
the ordinary course of business, in amounts exceeding
$100,000 in the aggregate.
- Materially change its interest rate and other risk
management policies, procedures or practices as applied to
the operations of OFFITBANK Holdings or fail to follow its
existing policies or practices with respect to managing
its exposure to interest rate and other risk, except as
required by law.
- Knowingly initiate any new business activity that (1)
would be impermissible for a "bank holding company" under
the Bank Holding Company Act or (2) without first
disclosing its intent to do so to Wachovia.
- Borrow money other than in the ordinary course of
business.
- Make or change any material tax-related practice other
than in the ordinary course of business.
- Agree or commit to do any of the foregoing.
OFFITBANK Holdings has also agreed that it will not, nor ask
anyone to, initiate or solicit any inquiries or any offer relating to a merger,
consolidation or similar transaction involving OFFITBANK Holdings or its
significant subsidiary. This type of proposal is referred to in this document as
an "acquisition proposal". In addition, OFFITBANK Holdings 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, except as legally required for the discharge by the
OFFITBANK Holdings board of its fiduciary duties. OFFITBANK Holdings has agreed
to promptly advise Wachovia following the receipt by OFFITBANK Holdings of any
acquisition proposal and to immediately advise Wachovia of any developments
relating to the acquisition proposal.
Wachovia. Wachovia has agreed not to do any of the following
before the effective time without first obtaining OFFITBANK Holdings' consent:
- make any extraordinary dividend;
- take any action which is reasonably likely to prevent or
impede the merger from qualifying as a reorganization
under Section 368 of the U.S. tax code or take any action
which would materially interfere with the merger
agreement; or
- agree or commit to do any of the foregoing.
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Wachovia regularly evaluates acquisition opportunities and
conducts due diligence activities in connection with possible acquisitions. As a
result, acquisition discussions and, in some cases, negotiations may take place
and future acquisitions involving cash, debt or equity securities may occur.
Acquisitions typically involve the payment of a premium over book values, and,
therefore, some dilution of Wachovia's book value and net income per share may
occur in connection with any future transactions.
TERMINATION FEE
OFFITBANK Holdings has agreed to pay Wachovia a fee of
$10,000,000 if both an "initial fee triggering event" and a "subsequent fee
triggering event" occur before:
(1) the effective time of the merger;
(2) the termination of the merger agreement under its
terms if the termination occurs prior to the
occurrence of an initial fee triggering event,
except if it is terminated because (a) OFFITBANK
Holdings willfully breached, and did not timely
cure, a representation or warranty of the merger
agreement which would have a material adverse
effect on Wachovia, (b) OFFITBANK Holdings' board
didn't recommend the merger or (c) OFFITBANK
Holdings shareholders did not approve the merger by
the effective date; or
(3) the lapse of an 18-month period after the merger
agreement is terminated due to the occurrence of an
initial fee triggering event or any event described
in clauses (a), (b) or (c) in paragraph (2) above.
An "initial fee triggering event" occurs when:
- OFFITBANK Holdings or its board recommends that it enter into
an "acquisition transaction" with a third party, without
Wachovia's prior written consent;
- a person other than Wachovia acquires or obtains the right to
acquire 10% or more of OFFITBANK Holdings' outstanding shares
of common stock;
- OFFITBANK Holdings shareholders have not approved the merger
or a proposal to engage in an "acquisition transaction" with a
third party is publicly announced before the shareholders'
special meeting;
- the OFFITBANK Holdings board withdraws its recommendation with
respect to the merger or OFFITBANK Holdings proposes,
authorizes or recommends an agreement to engage in an
"acquisition transaction";
- any person other than Wachovia proposes to engage in an
"acquisition transaction" with OFFITBANK Holdings;
- OFFITBANK Holdings willfully breaches a covenant or obligation
of the merger agreement in anticipation of an "acquisition
transaction" and the breach entitles Wachovia to terminate the
merger agreement; or
- OFFITBANK Holdings shareholders have not approved the merger
immediately before the termination of the merger agreement,
except if their failure to approve results from Wachovia not
having the registration statement declared effective at least
30 days before the termination of the merger agreement.
An "acquisition transaction" for purposes of an "initial fee triggering event"
is a merger, sale of substantially all of OFFITBANK Holdings' assets or any
similar transaction or a purchase of securities representing 10% or more of
OFFITBANK Holdings' voting power.
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A "subsequent fee triggering event" occurs when:
- any person other than Wachovia acquires 20% or more shares of
OFFITBANK Holdings outstanding common stock;
- OFFITBANK Holdings or its board recommends that it enters into
an "acquisition transaction" without Wachovia's prior written
consent; or
- OFFITBANK Holdings shareholders have not approved the merger
immediately before the termination of the merger agreement,
except if their failure to approve results from Wachovia not
having the registration statement declared effective at least
30 days before the termination of the merger agreement.
An "acquisition transaction" for purposes of a "subsequent fee triggering event"
is a merger, sale of substantially all of OFFITBANK Holdings' assets or any
similar transaction or a purchase of securities representing 20% or more of
OFFITBANK Holdings' voting power.
EXPENSES AND FEES
Each party will be responsible for all expenses incurred by it in
connection with the merger.
ACCOUNTING TREATMENT
Wachovia expects to account for the merger as a "purchase", as
that term is used under GAAP, for accounting and financial reporting purposes.
Under purchase accounting, the assets and liabilities of OFFITBANK Holdings 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 these values and would not be restated
retroactively to reflect the historical financial position or results of
operations of OFFITBANK Holdings.
STOCK EXCHANGE LISTING OF WACHOVIA COMMON STOCK
Wachovia has agreed to use its reasonable best efforts to list
the shares of Wachovia common stock to be issued to the holders of OFFITBANK
Holdings common stock in the merger on the NYSE before the effective date.
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 of 1933. However, this will
not be the case for shares issued to any shareholder who may be deemed to be an
"affiliate" of OFFITBANK Holdings for purposes of Rule 145 under the Securities
Act as of the date of the special meeting. "Affiliates" generally include
directors, certain executive officers, and beneficial owners of 10% or more of
any class of capital stock. These affiliates may not sell their shares of
Wachovia common stock acquired in the merger except pursuant to an effective
registration statement under the securities law or other applicable securities
law exemption from the registration requirements.
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 OFFITBANK Holdings. OFFITBANK Holdings 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 OFFITBANK Holdings to execute and deliver to
Wachovia an affiliates agreement. In an affiliates agreement, such person agrees
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, or in a transaction that is otherwise exempt from the
registration requirements, 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 OFFITBANK Holdings under Rule 145.
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VOTING AGREEMENTS
Certain directors and executive officers of OFFITBANK Holdings,
who together hold approximately 59% of the outstanding shares of OFFITBANK
Holdings common stock, have agreed to vote all their shares in favor of approval
of the merger and to consent to the termination of the shareholders' agreement
as a condition and an inducement to Wachovia's entering into the merger
agreement. Furthermore, they agreed not to vote any of their shares in favor of
any other acquisition proposal. A copy of the form of voting agreement executed
by each of these directors and executive officers is attached as Appendix B.
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.
DISSENTERS' APPRAISAL RIGHTS
The following discussion is not a complete description of the law
relating to appraisal rights available under Delaware law and is qualified in
its entirety by the full text of Section 262 of the Delaware General Corporation
Law. Section 262 is reprinted in its entirety as Appendix E to this proxy
statement/prospectus. If you desire to exercise appraisal rights, you should
review carefully Section 262 and are urged to consult a legal advisor before
electing or attempting to exercise these rights.
If you are an OFFITBANK Holdings shareholder as of the record
date and you comply with the applicable procedures summarized below, you will be
entitled to appraisal rights under Section 262, subject to the exceptions stated
below. If you have a beneficial interest in OFFITBANK Holdings common stock held
in the name of another person, you must act promptly to cause the record holder
to follow the steps summarized below properly and in a timely manner to perfect
appraisal rights.
Under Section 262, OFFITBANK Holdings must notify each of its
shareholders who was a shareholder on the record date for the special meeting
not less than 20 days prior to the special meeting that appraisal rights are
available, and must include in the notice a copy of Section 262. This proxy
statement/prospectus constitutes that notice and Section 262 is attached as
Appendix E to this proxy statement/prospectus. If you wish to exercise your
appraisal rights or wish to preserve your right to do so, you should review the
following discussion and Appendix E carefully. Failure to timely and properly
comply with the applicable procedures will result in the loss of your appraisal
rights under Delaware law.
Under Delaware law, except as described below, if you follow the
procedures stated in Section 262, you will be entitled to have your shares
appraised by the Court of Chancery of the State of Delaware and to receive
payment in cash of the "fair value" of your shares, exclusive of any element of
value arising from the accomplishment or expectation of the merger, together
with a fair rate of interest, if any, as determined by the court. If you
properly perfect your rights, you will not be entitled to surrender your shares
of OFFITBANK Holdings common stock for the shares of Wachovia common stock that
you would otherwise have received for your shares of OFFITBANK Holdings common
stock as a result of the merger.
If you elect to exercise your appraisal rights, you must not vote
for approval of the merger. However, a vote against approval of the merger is
not required in order for you to exercise appraisal rights. If you return a
signed proxy but do not specify a vote against approval of the merger or a
direction to abstain, the proxy, if not revoked, will be voted for approval of
the merger, which will have the effect of waiving your appraisal rights.
If you elect to exercise your appraisal rights, you must deliver
to OFFITBANK Holdings a written demand for appraisal of your OFFITBANK Holdings
common stock prior to the vote on the merger at the special meeting. The demand
must reasonably inform OFFITBANK Holdings of your identity and that you intend
to demand appraisal by this written demand. A proxy or vote against approval of
the merger does not constitute a demand. You must be the record holder of the
OFFITBANK Holdings common stock on the date the written demand for appraisal is
made and you must continue to hold your OFFITBANK Holdings common stock of
record until the date the merger is completed in order to exercise your
appraisal rights. Accordingly, you will lose any right to appraisal with
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respect to your OFFITBANK Holdings common stock if you transfer your OFFITBANK
Holdings common stock prior to the date the merger is completed.
Only a holder of record of OFFITBANK Holdings common stock is
entitled to assert appraisal rights for the OFFITBANK Holdings common stock
registered in the holder's name. A demand of appraisal should be executed by or
on behalf of the holder of record, fully and correctly, as the holder's name
appears on the holder's stock certificates. If the OFFITBANK Holdings common
stock is owned of record in a fiduciary capacity, such as by a trustee, guardian
or custodian, execution of the demand should be made in that capacity.
All written demands for appraisal should be sent or delivered to:
OFFITBANK Holdings, Inc.
520 Madison Avenue
New York, NY 10022
Attention: Morris W. Offit
Chief Executive Officer
Wachovia will, within 10 days after the date the merger is
completed, notify each OFFITBANK Holdings shareholder who has complied with the
statutory requirements summarized above that the merger has become effective.
Within 120 days after the date the merger is completed, but not thereafter,
Wachovia or any OFFITBANK Holdings shareholder who has complied with the
statutory requirements summarized above may file a petition with the Court of
Chancery demanding a determination of the fair value of the OFFITBANK Holdings
common stock. Wachovia is under no obligation to and has no present intention to
file a petition with respect to the appraisal of the fair value of the OFFITBANK
Holdings common stock. Accordingly, it is the obligation of the OFFITBANK
Holdings shareholders to initiate all necessary action to perfect their
appraisal rights within the time period prescribed in Section 262.
Within 120 days after the date the merger is completed, if you
have complied with the requirements of exercise of appraisal rights, you will be
entitled, upon written request, to receive from Wachovia a statement setting
forth the aggregate number of shares of OFFITBANK Holdings common stock not
voted in favor of the approval of the merger and with respect to which demands
for appraisal have been received and the aggregate number of holders of the
shares. These statements must be mailed within 10 days after a written request
for these statements has been received by Wachovia or 10 days after expiration
of the period for delivery of demands for appraisal described above, whichever
is later.
If a petition for an appraisal is timely filed, after a hearing
on the petition, the Court of Chancery will determine the OFFITBANK Holdings
shareholders entitled to appraisal rights and will appraise the "fair value" of
their OFFITBANK Holdings common stock, exclusive of any element of value arising
from the accomplishment or expectation of the merger, together with a fair rate
of interest, if any, to be paid upon the amount determined to be the fair value.
You should be aware that the fair value of your OFFITBANK Holdings common stock
as determined under Section 262 could be more than, the same as or less than the
value of the Wachovia common stock you would receive in the merger if you did
not seek appraisal of your OFFITBANK Holdings common stock. The Delaware courts
have stated that the appraisal value of stock must be determined by including
all factors and elements which might reasonably affect its value, such as market
value, earnings prospects and the nature of the enterprise.
The Court of Chancery will determine the amount of interest, if
any, to be paid upon the amounts received by persons whose OFFITBANK Holdings
common stock has been appraised. The costs of the appraisal action may be
determined by the Court of Chancery and taxed upon the parties as the Court of
Chancery deems equitable. The Court of Chancery may also order that all or a
portion of the expenses incurred by any OFFITBANK Holdings shareholder in
connection with an appraisal action, including, without limitation, reasonable
attorneys' fees and the fees and expenses of experts utilized in the appraisal
proceeding, be charged pro rata against the value of all the OFFITBANK Holdings
common stock entitled to appraisal.
If you have duly demanded an appraisal in compliance with Section
262, you will not, after the date the merger is completed, be entitled to vote
the OFFITBANK Holdings common stock subject to the demand for any
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purpose or be entitled to the payment of dividends or other distributions on the
OFFITBANK Holdings common stock. However, you will be entitled to dividends or
other distributions payable to holders of record of OFFITBANK Holdings common
stock as of a record date prior to the date the merger is completed.
Your OFFITBANK Holdings common stock will be converted into the
right to receive Wachovia common stock receivable with respect to the OFFITBANK
Holdings common stock in accordance with the merger if you properly demand
appraisal of your OFFITBANK Holdings common stock under Section 262 but fail to
perfect, or effectively withdraw or lose, your right to appraisal as provided
under Delaware law. For example, you will lose your right to appraisal if no
petition of appraisal is filed within 120 days after the date the merger is
completed or if you deliver to Wachovia a written withdrawal of your demand for
appraisal and acceptance of the merger. You will need Wachovia's approval if you
choose to withdraw an appraisal demand more than 60 days after the date the
merger is completed.
Delaware courts have decided that the statutory appraisal remedy,
depending on factual circumstances, may or may not be the dissenting
shareholder's exclusive remedy. Several decisions by the Delaware courts have
held that a controlling shareholder of a company involved in a merger has a
fiduciary duty to the other shareholders which requires that the merger be
"entirely fair" to the other shareholders. In determining whether a merger is
fair to minority shareholders, the Delaware courts have considered, among other
things, the type and amount of consideration to be received by shareholders and
whether there was fair dealing among the parties.
Notwithstanding the foregoing, under the shareholders' agreement
entered into by each shareholder with OFFITBANK Holdings, if the OFFITBANK
Holdings board and the holders of two-thirds of the outstanding OFFITBANK
Holdings common stock approve the merger, each OFFITBANK Holdings shareholder is
required to consent and raise no objection to the merger.
DESCRIPTION OF WACHOVIA CAPITAL STOCK
The descriptive information below outlines certain provisions of
Wachovia's articles of incorporation and by-laws and the North Carolina Business
Corporation Act. The information is not complete and is qualified by the more
detailed provisions of Wachovia's articles of incorporation and by-laws, which
are incorporated by reference as exhibits to this document, and the North
Carolina Business Corporation Act. See "Where You Can Find More Information" on
page 58 for information on how to obtain copies of these incorporated documents.
AUTHORIZED STOCK
Wachovia's articles of incorporation authorize 1,000,000,000
shares of Wachovia common stock and 50,000,000 shares of preferred stock. As of
March 31, 1999, there were 202,898,450 shares of Wachovia common stock
outstanding and no shares of Wachovia preferred stock outstanding. In addition,
at March 31, 1999, 27,542,984 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.
PREFERRED STOCK
The Wachovia board is authorized to fix the preferences,
limitations and relative rights of any Wachovia preferred stock and may cause
Wachovia to issue any preferred stock without the approval of the holders of
Wachovia common stock. The board may also establish one or more series of
Wachovia preferred stock and determine the variations between series. 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.
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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 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 voluntary or involuntary
liquidation, dissolution or winding-up of Wachovia, 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 Wachovia's articles of incorporation and
by-laws 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 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. The fair price provisions of Wachovia's
articles of incorporation limit the ability of an interested shareholder to
enter into certain transactions involving Wachovia. An "interested shareholder"
is defined in Wachovia's 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." They include:
- any merger with or consolidation into an interested
shareholder or an affiliate of an interested shareholder,
- 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,
- 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,
or
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- 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 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 (1)
directors elected by shareholders of Wachovia prior to the interested
shareholder's acquisition of more than 10% of the voting securities and (2) any
directors recommended to join the Wachovia board by a majority of the directors
mentioned in clause (1). These approval provisions are less stringent 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 North Carolina law provisions, 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 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 first public 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 these 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.
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Federal and state securities laws and regulations require that
disclosure be made to shareholders of the terms of such a transaction. However,
the financial terms of such a transaction will not necessarily be fair to
shareholders and the shareholders may not be able to effectively prevent its
consummation under the laws. 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 factors such 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 an unwanted takeover attempt. Indeed, they
assure that at least the same price and form of consideration are paid to these
shareholders as were paid in the initial step of the acquisition.
The fair price provisions generally may discourage attempts to obtain
control of Wachovia given the difficulties of complying with their requirements.
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 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, the minimum
price provisions of the fair price provisions could be arbitrary and not
indicative of value although they provide objective pricing criteria in a
business combination not receiving the supermajority approval required of
shareholders or of continuing directors.
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 of incorporation
concerning (1) their amendment, (2) the duration of the corporation, (3) the
authorized capital stock, (4) the number, classification, election and removal
of directors, (5) the absence of pre-emptive rights for shareholders and (6) 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. Each of these acts contains provisions intended
to prevent, discourage or delay a change in control of North Carolina
corporations electing to be covered by this legislation. Wachovia has elected to
be subject only to the Control Share Acquisition Act. For a summary of the
material provisions of the Control Share Acquisition Act, see "Certain
Differences in the Rights of Wachovia Shareholders and OFFITBANK Holdings
Shareholders -- Anti-Takeover Provisions; Restrictions on Certain Business
Contributions".
Control Acquisitions. The Federal Change in Bank Control Act of 1978
prohibits a person or group of persons from acquiring "control" of a bank
holding company unless the Federal Reserve Board receives 60 days' prior written
notice of the proposed acquisition and the Federal Reserve Board has not issued
within that time period 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.
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In addition, federal banking law requires any company to obtain the
approval of the Federal Reserve Board before acquiring 25%, or 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 that may constitute
control over Wachovia.
Savings and Loan Holding Company Regulations. Wachovia is subject to
additional regulations that restrict acquisitions of control by third parties
since it is a savings and loan holding company. 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 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 OFFITBANK HOLDINGS SHAREHOLDERS
You will automatically become Wachovia shareholders at the
effective time. Your rights as a Wachovia shareholder will be determined by
Wachovia's articles of incorporation, Wachovia's by-laws and North Carolina law
and not by OFFITBANK Holdings' certificate of incorporation, by-laws nor
Delaware law. The following is a summary of the material differences in the
rights of shareholders of Wachovia and OFFITBANK Holdings. This summary is
necessarily general and is not a complete discussion of, and is qualified by,
the more detailed provisions of Delaware law, North Carolina law, OFFITBANK
Holdings' certificate of incorporation, Wachovia's articles of incorporation and
the by-laws 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 March 31, 1999,
202,898,450 shares of Wachovia common stock were issued and outstanding and no
shares of Wachovia preferred stock were issued.
OFFITBANK Holdings. OFFITBANK Holdings is authorized to issue
30,000,000 shares of common stock with par value of $0.01 per share and
1,000,000 shares of undesignated preferred stock with par value $0.01 per share.
As of the record date, 9,254,808 shares of OFFITBANK Holdings common stock were
issued and outstanding and no shares of OFFITBANK Holdings preferred stock were
issued.
AMENDMENT OF ARTICLES OF INCORPORATION
Wachovia. 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 under Wachovia's articles of
incorporation to amend or repeal provisions of the articles of incorporation
that relate to (1) the duration of the corporation, (2) the authorized capital
stock, (3) the number, classification, election and removal of directors, (4)
preemptive rights of shareholders, (5) business combinations and (6) amendment
of Wachovia's articles of incorporation.
However, the affirmative vote of the holders of at least a
majority of the voting shares is sufficient to approve any amendment of this
kind if (1) there is no interested shareholder and the amendment is approved by
a majority of the Wachovia board of directors or (2) an interested shareholder
exists, but the amendment is approved by at least 66 2/3% of the continuing
directors. For the definition of an "interested shareholder" and a "continuing
director", see "Description of Wachovia Capital Stock -- Changes in Control".
OFFITBANK Holdings. Under Delaware law, the OFFITBANK Holdings
board must first propose an amendment to the OFFITBANK Holdings certificate of
incorporation. The amendment must then be submitted to a vote and be approved by
a majority of the shareholders entitled to vote on the amendment.
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NOTICE OF MEETINGS OF SHAREHOLDERS
Wachovia. The Wachovia by-laws provide that the corporation must
notify the shareholders between 10 and 60 days before any annual or special
meeting of the date, time and place of the meeting. Wachovia must briefly
describe the purpose or purposes of a special or substitute annual meeting or
any meeting where required to do so by law.
OFFITBANK Holdings. The OFFITBANK Holdings by-laws provide that
written notice of a special or annual meeting of shareholders, stating the date,
time and place, and, for special meetings, the purpose for which such meeting is
called, must be given to each shareholder entitled to vote at the meeting at
least 10 days but not more than 60 days before 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.
OFFITBANK Holdings. Delaware law provides that a special meeting
of shareholders may be called by the board of directors or by those persons
specified in the certificate of incorporation or by-laws. The OFFITBANK Holdings
by-laws provide that a special meeting of the shareholders may be called by a
majority of the board of directors, subject to the rights, if any, of the
holders of any series of preferred stock.
RECORD DATE
Wachovia. The board of directors or the chief executive officer
may fix a record date 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. This record date must not be more than 70 days
before a meeting or action requiring a determination of shareholders.
OFFITBANK Holdings. The OFFITBANK Holdings by-laws state that the
board of directors may fix a record date which is not more than 60 nor less than
10 days before a meeting requiring a determination of shareholders entitled to
vote and, in the case of any other action, not more than 60 days before the
other action.
NUMBER OF DIRECTORS; CLASSIFIED BOARD OF DIRECTORS
Wachovia. The number of directors must be between 9 and 25 under
Wachovia's by-laws. The exact number of directors is set by resolution of the
Wachovia board of directors. The Wachovia board of directors must be divided
into three classes to serve staggered three-year terms under Wachovia's by-laws.
Only approximately one-third of the members of the Wachovia board of directors
are elected each year since Wachovia has a classified board; consequently, two
annual meetings are required for Wachovia's shareholders to change a majority of
the members of the Wachovia board of directors.
OFFITBANK Holdings. The OFFITBANK Holdings by-laws provide that
the number of directors are to be fixed by board resolution. The OFFITBANK
Holdings board of directors is reelected annually by shareholders.
REMOVAL OF DIRECTORS
Wachovia. 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.
OFFITBANK Holdings. The OFFITBANK Holdings certificate of
incorporation provides that any or all directors may be removed only for cause
and only by the affirmative vote of a majority of the shareholders entitled to
elect directors.
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SHAREHOLDER PROPOSALS; ADVANCE NOTICE OF DIRECTOR NOMINATIONS
Wachovia. Business conducted at meetings of shareholders is
limited to business that is properly submitted to the meeting under Wachovia's
by-laws. 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 outlined in the corporation's articles of incorporation or
by-laws. Under Wachovia's by-laws, director nominations by the Wachovia board
must include the Chief Executive Officer and the Chairman, if the Chief
Executive Officer is not the Chairman and the nominee is not a director or his
or her term as a director is set to expire. Director nominations may also be
made by shareholders. All 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.
OFFITBANK Holdings. The OFFITBANK Holdings by-laws provide that
nominations for the election of directors may be made by the OFFITBANK Holdings
board or by any shareholder entitled to vote at an annual meeting held for the
election of directors generally. A nominating shareholder or his or her
representative must be present in person at the annual meeting held to vote on
such nomination. 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 timely written notice of such shareholder's intent to make
such nomination or nominations has been given to the secretary of the
corporation.
ANTI-TAKEOVER PROVISIONS; RESTRICTIONS ON CERTAIN BUSINESS COMBINATIONS
Wachovia. Wachovia's 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 of the articles of incorporation are described under "Description of
Wachovia Capital Stock -- Changes in Control -- Fair Price Provisions."
The North Carolina Control Share Acquisition Act precludes 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, under certain circumstances, unless a majority in interest of the
disinterested shareholders of the corporation votes to give voting power to
those shares.
The corporation's shareholders, other than holders of control
shares, may cause the corporation to redeem their shares under the North
Carolina Control Share Act 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 right of redemption is
subject to limitations on corporate distributions to shareholders and any
contrary provision in the corporation's articles of incorporation or by-laws
adopted by the shareholders prior to the occurrence of a control share
acquisition. Wachovia's articles of incorporation and by-laws do not limit the
ability of shareholders to cause Wachovia to redeem their shares under the
circumstances described above.
OFFITBANK Holdings. OFFITBANK Holdings voting stock is not listed
on a national securities exchange nor authorized for quotation on NASDAQ and
OFFITBANK Holdings has less than 2,000 record holders. Thus, under Delaware law
it is not prohibited from engaging in any business combination with an
interested shareholder or any entity if the transaction is caused by an
interested shareholder. Similarly, neither OFFITBANK Holdings' by-laws nor its
articles of incorporation prohibit it from engaging in this type of business
combination.
LIMITATION ON DIRECTOR LIABILITY; INDEMNIFICATION
Wachovia. Wachovia's 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
directors' liability. However, no provision limiting director liability shall be
effective with respect to:
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- 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,
- any liability for unlawful distributions,
- any transaction from which the director derived an improper
personal benefit, or
- acts or omissions occurring prior to the date the provisions
became effective.
Wachovia's by-laws 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.
OFFITBANK Holdings. Under the OFFITBANK Holdings certificate of
incorporation, a director will be indemnified and held harmless to the fullest
extent allowed by Delaware law. Under Delaware law, 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. Delaware law requires 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 Delaware law is not exclusive and
is in addition to any other rights granted to directors under the certificate of
incorporation or by-laws of the corporation or to any agreement between the
directors and the corporation.
SHAREHOLDER INSPECTION RIGHTS; SHAREHOLDER LISTS
Wachovia. 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 under North Carolina law. The shareholder must give Wachovia at
least 5 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 hold at least five
percent of the outstanding shares of any class of Wachovia stock.
OFFITBANK Holdings. Delaware law 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.
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DISSENTERS' APPRAISAL RIGHTS
Wachovia. North Carolina law generally provides dissenters'
rights for mergers and certain share exchanges that would require shareholder
approval, sales of all or substantially all of the assets, certain amendments to
the articles of incorporation and any corporate action taken pursuant to a
shareholder vote to the extent the articles of incorporation, by-laws or a
resolution of the board of directors entitles shareholders to dissent. However,
North Carolina law 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.
OFFITBANK Holdings. Under Delaware law, 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, unless they
have over 2,000 holders of record, are authorized for quotation on NASDAQ, or
are listed on a national securities exchange. OFFITBANK Holdings shareholders
have entered into a shareholders' agreement pursuant to which each shareholder
has agreed to consent and not raise any objection to an OFFITBANK Holdings sale
or merger if approved by the board of directors and two-thirds (or majority in
the context of a stock sale) of the shareholders entitled to vote.
COMPARATIVE MARKET PRICES AND DIVIDENDS
WACHOVIA
Wachovia common stock is traded on the NYSE under the symbol
"WB." The following table lists the high and low sale prices for Wachovia common
stock for the indicated periods 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>
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................ 96 13/16 80 7/8 .49
1999:
First................. 91 79 .49
</TABLE>
On May 12, 1999, the last trading day before public announcement
of the merger, the closing price per share of Wachovia common stock on the NYSE
was $90.25. On June 24, 1999, the last trading day before the mailing of this
proxy statement/prospectus, the closing price per share of Wachovia common stock
on the NYSE was $82.5625. Past price performance is not necessarily indicative
of likely future price performance. You should obtain current market quotations
for shares of Wachovia common stock.
The holders of Wachovia common stock receive dividends if and
when declared by the Wachovia board out of funds legally available therefor.
Wachovia expects to continue paying quarterly cash dividends on Wachovia
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common stock. However, 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.
OFFITBANK HOLDINGS
OFFITBANK Holdings common stock is not publicly traded.
Prior to the reorganization, OFFITBANK has paid semi-annual
dividends in each of the calendar years from 1995 through 1998, in the amounts
listed below. The declaration and payment of dividends by OFFITBANK Holdings is
subject to the discretion of its board. Any determination as to the payment of
dividends, as well as the level of dividends, will depend on, among other
things, general economic and business conditions, the strategic plans of
OFFITBANK, OFFITBANK Holdings' financial results and condition, contractual,
legal and regulatory restrictions on the payment of dividends by OFFITBANK
Holdings or its subsidiaries and such other factors as the board of directors of
OFFITBANK Holdings may consider to be relevant.
<TABLE>
<CAPTION>
CASH DIVIDENDS
DECLARED
END OF PERIOD FOR WHICH DIVIDEND WAS DECLARED PER SHARE
- --------------------------------------------- ---------------
<S> <C>
June 1997............................................. $.1167
December 1997......................................... $.1667
June 1998............................................. $.1667
December 1998......................................... $.1667
</TABLE>
CERTAIN ADDITIONAL INFORMATION ABOUT OFFITBANK HOLDINGS
BUSINESS DESCRIPTION AND BACKGROUND
OFFITBANK Holdings conducts its business solely through OFFITBANK
and OFFITBANK's subsidiaries. OFFITBANK is a leading provider of wealth
management services to the upper tier of the wealth management market. Its
select client base is comprised of high net worth individuals and families,
non-profit organizations and corporate and institutional investors seeking
primarily customized fixed income management.
OFFITBANK has modeled itself after the classic Swiss private bank
in which asset management is the core business, establishing a foundation for
OFFITBANK to successfully provide corollary financial services, such as custody,
foreign exchange services, trust services, deposit services and collateralized
lending. OFFITBANK believes that these corollary services are natural product
extensions of asset management. Its emphasis on asset management as the wealth
management business model has distinguished OFFITBANK from many other
institutions serving the high net worth market.
OFFITBANK's focus on the upper-tier of the wealth management
market has produced a unique client profile. As of March 31, 1999, OFFITBANK had
$10.76 billion under management for approximately 500 actively managed client
relationships. As of March 31, 1999, 60% of OFFITBANK's portfolio was comprised
of managed account relationships each in excess of $30 million. Assets under
management have grown from $6.0 billion at December 31, 1994 to $10.76 billion
at March 31, 1999.
The cornerstone of OFFITBANK's wealth management services is
fixed income investment management. The defining characteristic of OFFITBANK's
investment strategy is its emphasis on fundamental research, integrating
interest rate risk, credit risk and currency risk analyses.
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In providing investment management for its clients, OFFITBANK
seeks to satisfy four primary goals: preservation of capital, generation of
income, appreciation of assets and efficient wealth transfer. OFFITBANK's
investments generally fall within six core fixed income asset classes, which
include U.S. Treasury securities, Mortgage-Backed securities, Tax Exempt bonds,
International High Grade debt, High Yield bonds and Emerging Market debt.
OFFITBANK also uses commingled investment vehicles, such as mutual funds,
limited partnerships and structured third party insurance products to create
customized portfolio strategies specifically designed for its clients.
OFFITBANK also provides important wealth management services to
complement its core asset management business. These services include custody,
structured third party insurance products and sophisticated client reporting,
including unit and individual tax accounting, and foreign exchange services,
and, on a more limited basis, collateralized lending and trust services.
OFFITBANK is the successor to Offit Associates, Inc., a
registered investment adviser which was founded in 1983 and converted into a New
York chartered trust bank in 1989. OFFITBANK Holdings became the parent holding
company of OFFITBANK as a result of a reorganization of OFFITBANK effected on
January 1, 1999. In May 1998, OFFITBANK and OFFITBANK Holdings initiated the
legal process necessary to establish OFFITBANK Holdings as OFFITBANK's parent
holding company. The implementation of a holding company structure was
considered necessary at that time to facilitate an initial public offering. It
was also essential to enable the geographic expansion of an office network
previously believed to be a key component of OFFITBANK's business plan. The
geographic expansion contemplated bank offices throughout the United States
that, for the most part, could be opened with trust bank powers only through the
establishment of de novo independent trust banks chartered for each state where
an office was desired. Trust banks, however, could be most effectively
established through a holding company structure which offered greater
flexibility in the execution of the business plan. In October 1998, OFFITBANK
reviewed its previous plan of geographic expansion and reaffirmed its importance
despite the abandonment of the IPO strategy in September 1998. As a result, the
holding company structure was implemented through a reorganization of OFFITBANK
effected on January 1, 1999 to avoid any reporting obligations for any portion
of 1998. Consequently, under an exchange agreement among OFFITBANK Holdings and
the then shareholders of OFFITBANK, OFFITBANK Holdings exchanged its shares for
all of the shares of OFFITBANK common stock. As a result of this reorganization,
all OFFITBANK shareholders became OFFITBANK Holdings shareholders, and OFFITBANK
became a wholly-owned subsidiary of OFFITBANK Holdings. The exchange agreement
gave effect to a shareholders' agreement among OFFITBANK Holdings and its
shareholders which is substantially similar to the shareholders' agreement among
OFFITBANK and its former shareholders. Today, OFFITBANK Holdings conducts its
business solely through OFFITBANK and OFFITBANK's subsidiaries.
OFFITBANK Holdings' principal place of business is located at 520
Madison Avenue, New York, New York 10022. OFFITBANK Holdings also operates from
its San Francisco office, located at 160 Sansome Street, San Francisco,
California 94104.
REGULATORY MATTERS
This discussion of state and federal regulations is intended to
provide a general outline of the relevant regulations concerning OFFITBANK
Holdings and OFFITBANK and is not a complete discussion of these regulations.
OFFITBANK is a trust bank chartered under the New York banking
law, and is supervised and examined by the New York State Banking Department.
OFFITBANK's activities are limited to the fiduciary powers
enumerated in Section 100 of the New York banking law. These powers include:
- acting as trustee under any mortgage or bond issued by any
political body or corporation, foreign or domestic;
- being appointed as receiver, trustee or committee in any
bankruptcy or insolvency proceeding;
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- being appointed as executor or trustee under a will or
administrator of a decedent's estate;
- taking, accepting and executing any and all trusts and
fiduciary appointments and acting as custodian; and
- acting as fiscal or transfer agent of the United States, other
political bodies (such as state or local governments) or
corporations, and in that capacity, receiving and disbursing
money.
OFFITBANK is subject to the standards applicable to fiduciaries,
recordkeeping requirements and operational requirements imposed under New York
banking law in conducting its fiduciary activities.
In addition, OFFITBANK may provide discretionary asset management
services, including acting as an investment advisor, administrator, transfer
agent or custodian to an investment company and purchasing shares of an
investment company as agent for and upon the order of a client.
Under New York banking law, OFFITBANK may not declare, credit or pay
dividends so long as there is any impairment of capital stock. In addition, New
York banking law provides that, without regulatory approval, a limited purpose
trust company cannot declare and pay dividends in any calendar year in excess of
its "net profits" for such year combined with its "retained net profits" of the
two preceding years, less any required transfer to surplus or a fund for the
retirement of preferred stock.
The activities of a New York limited purpose trust company are subject
to certain limitations pursuant to its organization certificate and New York
banking law. OFFITBANK is prohibited by its charter from accepting deposits
other than deposits arising directly from its exercise of its fiduciary powers
and, accordingly, is not an insured depository institution for purposes of the
Federal Deposit Insurance Act or any other banking law or regulation. OFFITBANK
also may not exercise certain general banking powers including making extensions
of credit on real or personal security or on an unsecured basis or discounting,
purchasing and negotiating promissory notes or other evidences of indebtedness.
Furthermore, a New York chartered trust company may not continuously engage in
the issuance of its shares and cannot issue, underwrite, sell or distribute
securities or be affiliated in certain ways with an entity that engages in such
activities. Accordingly, OFFITBANK may not control or distribute the shares of
registered open-end investment companies.
OFFITBANK Holdings and OFFITBANK are not members of the Federal Reserve
System and are not subject to Sections 16, 20 or 32 of the Glass-Steagall Act,
the Bank Holding Company Act, or any other federal banking law or regulation
including, without limitation, federal capital adequacy guidelines. Moreover,
neither the Federal Deposit Insurance Corporation, the Board of Governors of the
Federal Reserve System nor any other bank regulator, other than the New York
State Banking Department, regulates the activities of OFFITBANK Holdings or
OFFITBANK.
INFORMATION RELATING TO MORRIS W. OFFIT
Background. Morris W. Offit is 62 years old. He is Chairman and Chief
Executive Officer of OFFITBANK Holdings. OFFITBANK Holdings' predecessor
company, Offit Associates Inc., was formed by him in 1983. Prior to this, Mr.
Offit was associated with the Julius Baer Group in Zurich (1980-1982) and, as a
Director of Baer Holding Ltd., he was responsible for its U.S. investment
operations. Mr. Offit joined Salomon Brothers in 1968 and for ten years was a
general partner, during which time he was responsible for worldwide fixed income
and equity sales and the Stock Research Department. He began his career in 1960
at Mercantile Safe Deposit and Trust Company in Baltimore in investment
research. Mr. Offit received a B.A. from Johns Hopkins University (1957) and an
M.B.A. from the Wharton School of the University of Pennsylvania (1960). He was
also the recipient of an Honorary Degree of Doctor of Humane Letters from Johns
Hopkins University in 1996. In 1983, he served as Adjunct Professor of Finance
at the Columbia Graduate School of Business, lecturing on secondary capital
markets. He has lectured widely at investment seminars and graduate schools of
business and international affairs. He has also authored a number of articles
for financial publications. Mr. Offit's outside affiliations include serving as
a Trustee of Johns Hopkins University, where he served as Chairman of the Board
(1990-1996). He is also a Trustee of The Jewish Museum, where he served as
Chairman of the Board (1987-1991). Other trusteeships include The
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Jewish Theological Seminary, The Union Theological Seminary, Teachers College
(Columbia University), the Nature Conservancy, Thirteen WNET and The American
Jewish Committee. Mr. Offit is currently a member of the board of Hasbro, Inc.
and Mercantile Bankshares Corporation.
Key-Man Life Insurance Policy. OFFITBANK Holdings maintains for its own
benefit a $15 million "key man" insurance policy on the life of Morris W. Offit.
In addition, OFFITBANK Holdings and Mr. Offit maintain a $10 million
"split-dollar" life insurance on the life of Mr. Offit. The beneficiaries of the
policy are OFFITBANK Holdings and a trust established for the benefit of Mr.
Offit's family. OFFITBANK Holdings and the trust pay premiums on the policy.
Under the policy, after reimbursing OFFITBANK Holdings for the aggregate amount
of its premium payments and interest accrued thereon, death benefits and cash
surrender value belong to the Offit family trust. To fund the portion of the
insurance premiums to be paid by the trust, OFFITBANK Holdings may, if required,
make annual loans to the trust. The loans are evidenced by demand promissory
notes of the trust and accrue interest at a rate per annum calculated with
reference to the short-term federal rate, compounded semiannually, as determined
under Section 1274(d) of the U.S. tax code, as amended. The loans are secured by
the cash value of the life insurance. OFFITBANK Holdings has the right to
terminate its participation at any time. At March 31, 1999 the aggregate
principal amount of the loans was $256,894 and the interest accrued thereon to
that date was $56,326. It is expected that the annual principal amount of the
loans will increase by approximately $60,000 in each of the next ten years.
Compensation. The following table lists Mr. Offit's annual compensation
with respect to OFFITBANK Holdings for 1998, 1997 and 1996.
<TABLE>
<CAPTION>
YEAR SALARY ($) BONUS ($)
---- ---------- ---------
<S> <C> <C>
1998 900,000 600,000
1997 900,000 550,000
1996 800,000 525,000
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
OFFITBANK HOLDINGS
The following discussion and analysis is intended to provide an
understanding of the significant factors that influenced OFFITBANK Holdings'
financial condition and results of operation for the year ended December 31,
1998, compared to years ended December 31, 1997 and 1996 and for the three-month
period ended March 31, 1999 compared to the three-month period ended March 31,
1998. All financial data prior to January 1, 1999, the effective date of the
OFFITBANK reorganization into a holding company structure, only reflects the
financial data of OFFITBANK. You should read this information in conjunction
with the information included under "Summary --Selected Financial Data of
OFFITBANK Holdings" and OFFITBANK Holdings financial statements and related
notes included elsewhere in this proxy statement/prospectus.
The revenues and results of operations of OFFITBANK Holdings are
largely dependent on the total value and composition of assets under management
and, accordingly, fluctuations in financial markets, the composition of assets
under management and redemptions and new infusions of managed assets have a
substantial effect on revenues and results of operations.
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 1998
Net Income
Net income for the three months ended March 31, 1999 was $1.5 million
($0.15 per diluted common share) as compared to net income for the three months
ended March 31, 1998 of $1.4 million ($0.15 per diluted common
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share), an increase of $100 thousand, or 7%. The increase was the result of
revenue growth of $400 thousand offset by increases in operating expenses.
Revenue
OFFITBANK Holdings' revenue for the three months ended March 31, 1999
was $10.6 million compared to $10.2 million for the three months ended March 31,
1998, an increase of $400 thousand or 4%. This increase was primarily due to an
increase in management fees which accounted for $600 thousand, or 150% of the
total increase. The increase was offset by a reduction of $268,000 in foreign
exchange revenue. The increase in fees is principally attributable to a $1.3
billion increase in average managed assets, or 15%, from $8.9 billion for the
three months ended March 31, 1998, to $10.2 billion for the three months ended
March 31, 1999. Managed assets increased primarily due to assets placed under
management by new clients.
Operating Expenses
Total operating expenses increased $100 thousand, or 1%, from $7.8
million for the three months ended March 31, 1998, to $7.9 million for the three
months ended March 31, 1999.
Salaries and employee benefits expense for the three months ended March
31, 1999 was $5.5 million compared to $5.3 million for the three months ended
March 31, 1998, an increase of $200 thousand or 5%. This increase was primarily
due to the addition of client service and investment management professionals.
Assets Under Management
Assets under management at March 31, 1999 increased by $1.1 billion, or
11%, to $10.8 billion from the three months ended March 31, 1998. Reinvestment
of investment income of approximately $575 million and net inflow of assets of
approximately $1 billion were offset by asset reductions due to market declines
of approximately $500 million. These declines were primarily in the high yield
and emerging markets asset classes, and were caused by the significant repricing
of risks across all markets after the well-publicized Russian default and hedge
fund turmoil.
Other Sources of Revenue
OFFITBANK acts as "riskless principal" on behalf of its clients in the
interbank foreign exchange market at a disclosed fixed bid to offer spread.
Foreign exchange revenue for the period decreased by $270 thousand or 98%.
Foreign exchange revenue is incidental to the international investments held in
client portfolios managed by OFFITBANK. Asset allocations to non-U.S. dollar
denominated securities were substantially eliminated in the current period and,
consequently, foreign exchange revenue declined.
Custody revenue for the three months ended March 31, 1999 period
compared to the three months ended March 31, 1998 period increased by $72
thousand or 45%. OFFITBANK began a broader custody initiative in late 1996 to
function as custodian for assets directly managed by it as well as acting as
master custodian for a select number of clients. The increase in custody revenue
is the result of the broader initiative and the growth of assets under
management.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED DECEMBER 31, 1997
Net Income
OFFITBANK Holdings' net income applicable to common stock for the year
ended December 31, 1998 was $4.7 million ($.49 per diluted common share) as
compared to $3.3 million ($.35 per diluted common share) for year ended December
31, 1997, an increase of $1.4 million ($0.14 per diluted common share), or 43%.
The improved performance was the result of revenue growth of $5.1 million offset
by the $2.8 million increase in operating expenses, including a $631 thousand
write-off of costs associated with a contemplated public offering.
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Revenue
OFFITBANK Holdings' revenue for the year ended December 31, 1998 was
$41.2 million as compared to $36.1 million for the year ended December 31, 1997,
an increase of $5.1 million or 14%. The primary reason for the increase was an
increase in management fees which accounted for $5.3 million, or 104% of the
total increase. The increase in fees is principally attributable to an increase
in average managed assets of $1.2 billion, 14%, to $9.8 billion for the year
ended December 31, 1998 from $8.6 billion for the year ended December 31, 1997.
Managed assets increased primarily due to new client investments.
Operating Expenses
Total operating expenses, including the write-off of offering costs,
increased by $2.8 million, or 9%, to $33 million for the year ended December 31,
1998, from $30.2 million for the year ended December 31, 1997. Excluding the
write-off of offering costs, operating expenses increased 7% or $2.2 million for
the period.
Salaries and employee benefits expense for the year ended December 31,
1998 was $21.6 million compared to $19.2 million for the year ended December 31,
1997, an increase of $2.4 million or 13%. This increase was primarily due to the
addition of client service and investment management professionals.
Occupancy expense increased $700 thousand to $2.5 million for the year
ended December 31, 1998 from $1.8 million for the year ended December 31, 1997.
This increase was primarily due to additional office space leased in New York
starting in the fourth quarter of 1997.
Professional fees decreased by $140 thousand or 23% to $475 thousand
for the year ended December 31, 1998 from $615 thousand for the year ended
December 31, 1997. The reduction was principally the result of the
non-recurrence of legal fees incurred in conjunction with new product
development in 1997.
Equity in losses of an affiliate decreased by $1.3 million to $0 for
the year ended December 31, 1998. The remaining investment was expensed during
1997. This expense was the result of OFFITBANK's equity investment in a wealth
management software development affiliate, which is a consortium of other
private banks and high net worth families. OFFITBANK has not made any oral or
written commitments to provide the company with guarantees or additional debt or
equity financing.
Assets Under Management
Assets under management for the year ended December 31, 1998 increased
by $961 million, 10%, to $10.3 billion from the year ended December 31, 1997.
Reinvestment of investment income of approximately $474 million and net inflow
of assets of approximately $660 million were offset by asset reductions due to
market declines of approximately $173 million. Growth in fee revenue exceeded
the growth in average assets due to growth in specialized fixed income
investments, such as high yield, and the expanded use in the current period of
value-added total return investment strategies for client portfolios. These
strategies employ multiple asset classes and such portfolios, which often use
mutual funds, typically generate higher average fee levels.
Other Sources of Revenue
OFFITBANK acts as "riskless principal" on behalf of its clients in the
interbank foreign exchange market at a disclosed fixed bid to offer spread.
Foreign exchange revenue for the period decreased by $282 thousand or 45%.
Foreign exchange revenue is incidental to the international investments held in
client portfolios managed by OFFITBANK. Asset allocations to non-U.S. dollar
denominated securities were reduced, and, consequently, foreign exchange revenue
declined.
Custody revenue for the period increased by $140 thousand or 23%.
OFFITBANK began a broader custody initiative in late 1996 to function as
custodian for assets directly managed by it as well as acting as master
custodian for a select number of clients. The increase in custody revenue is the
result of the broader initiative and the growth of assets under management.
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<PAGE> 59
YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1996
Net Income
OFFITBANK Holdings' net income applicable to common stock for the year
ended December 31, 1997 was $3.3 million ($.35 per diluted share of common
stock), as compared to $2.4 million ($.26 per diluted share of common stock) for
the year ended December 31, 1996 an increase of $0.9 million ($0.09 per diluted
share of common stock) or 36%. The improved performance was the result of
revenue growth of $4.6 million offset by the $3.0 million increase in operating
expenses and equity in the loss of an affiliate.
Revenue
OFFITBANK Holdings' revenue for the year ended December 31, 1997 was
$36.1 million as compared to the year ended December 31, 1996 of $31.4 million,
an increase of $4.6 million or 15%. The primary reason for the increase was an
increase in management fees which accounted for $4.6 million, or 100% of the
total increase. The increase in fees is principally attributable to an increase
in average managed assets of $1.3 billion, or 18%, to $8.6 billion for the year
ended December 31, 1997 from $7.3 billion for the year ended December 31, 1996.
Managed assets increased primarily due to new client investments.
Operating Expenses
Total operating expenses increased $3.0 million, or 11%, to $30.2
million for the year ended December 31, 1997, from $27.2 million for the year
ended December 31, 1996. Excluding equity in losses of an affiliate, operating
expenses increased 9% or $2.3 million for the period.
Salaries and employee benefits expense for the year ended December 31,
1997 was $19.2 million as compared to $17.4 million for the year ended December
31, 1996, an increase of $1.8 million or 11%. This increase was primarily due to
the addition of client service and investment management professionals.
Professional fees decreased by $178 thousand or 22% to $615 thousand
for the year ended December 31, 1997 from $793 thousand for the year ended
December 31, 1996. The reduction in cost was principally the result of the
non-recurrence of legal fees incurred in conjunction with new products begun in
1996.
Advertising and marketing expenses were $2.0 million for the year ended
December 31, 1997 as compared to $1.5 million for 1996, an increase of $0.5
million or 33%. This increase was primarily due to increasing expenditures in
connection with management's initiative to increase OFFITBANK's name recognition
which began in 1996.
Equity in losses of an affiliate increased $669 thousand to $1.3
million for the year ended December 31, 1997 from $665 thousand for the year
ended December 31, 1996. This expense is the result of OFFITBANK's equity
investment in a wealth management software development affiliate, which is a
consortium of other private banks and high net worth families. The software
affiliate experienced operating losses due to technology development costs
incurred in 1996.
Assets Under Management
Assets under management for the year ended December 31, 1997 increased
by $1.3 billion, or 16%, to $9.3 billion from the year ended December 31, 1996.
Market appreciation accounted for approximately 8% or $107 million of the
increase, reinvestment of investment income accounted for approximately 30% or
$390 million of the increase, and the remainder of approximately $803 million
was the result of net inflow of assets. Growth in fee revenue exceeded the
growth in average assets due to growth in specialized fixed income investments,
such as high yield, and the expanded use in the current period of value-added
total return investment strategies for client portfolios. These strategies
employ multiple asset classes and such portfolios, which often use mutual funds,
typically generate higher average fee levels.
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<PAGE> 60
Other Sources of Revenue
OFFITBANK acts as "riskless principal" on behalf of its clients in the
interbank foreign exchange market at a disclosed fixed bid to offer spread.
Foreign exchange revenue for the period decreased by $713 thousand or 53%.
Foreign exchange revenue is incidental to the international investments held in
client portfolios managed by OFFITBANK. Asset allocations to non-U.S. dollar
denominated securities were reduced, and, consequently, foreign exchange revenue
declined.
Custody revenue for the period increased by $247 thousand or 69%.
OFFITBANK began a broader custody initiative in late 1996 to function as
custodian for assets directly managed by it as well as master custodian for a
select number of clients. The increase in custody revenue is the result of the
broader initiative and the growth of assets under management.
LIQUIDITY AND CAPITAL RESOURCES
OFFITBANK Holdings' operations have historically generated cash flows
in excess of the needs of its business plans. Cash flow provided from OFFITBANK
Holdings' operations was $4.5 million, $5.8 million and $3.7 million for the
years ended December 31, 1998, 1997 and 1996, respectively. Cash flows from
investing activities generally include capital expenditures and the results of
investment securities sales and purchases. OFFITBANK Holdings has no material
commitments for capital expenditures.
Cash flows from financing activities include cash dividends to
shareholders. In 1998, cash dividends of approximately $3.1 million were paid.
OFFITBANK Holdings believes that its cash flows from operations will be
sufficient to fund dividends and its operations for at least the next two years.
YEAR 2000
Virtually all U.S. financial institutions are reviewing and modifying
their computer systems to ensure that they are year 2000 compliant. The main
problem is that many existing computer systems contain date-based functions
which use only two digits to identify a year in the date field, with the
assumption that the first two digits of the year are always "19". Consequently,
systems that are not year 2000 compliant may read the year as 1900 on January 1,
2000. Systems that calculate, compare or sort using the incorrect date may
malfunction. OFFITBANK's Director of Technology and his staff have been
evaluating and addressing the year 2000 issue as it relates to OFFITBANK's
systems and business since the fourth quarter of 1996 under the supervision of
the Audit Committee of OFFIT Holdings' Board of Directors. OFFITBANK has
developed a comprehensive year 2000 readiness plan in order to remediate its key
technology systems and to address year 2000 issues in other systems.
OFFITBANK has generally focused its year 2000 compliance analysis on
four areas: its "technology platform", namely the computer, telecommunications
and similar systems used in its day-to-day operations; its line of business
applications/software; the accounting and foreign exchange software used by
OFFITBANK; its other "packaged" software, namely licensed software packages used
by OFFITBANK for purposes not directly supporting its core mission; and year
2000 compliance by external vendors who provide services other than those
addressed above.
With respect to its technology platform, OFFITBANK has tested all
server and desktop hardware and has confirmed that it is year 2000 compliant. In
addition, OFFITBANK has completed an upgrade of market data applications
provided by three key information technology vendors and has confirmed that all
systems supplied to OFFITBANK by these vendors are now year 2000 compliant. In
addition, all software being run on OFFITBANK's servers has been tested and
validated as year 2000 compliant. All telecommunications equipment is also year
2000 compliant, and OFFITBANK has completed the installation of redundant
telecommunications services to provide an alternate path for local, long
distance and Internet access. All local area network equipment is year 2000
compliant, and, following the recent installation of certain new routers, all
wide-area network equipment is now year 2000 compliant.
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<PAGE> 61
All of OFFITBANK's key line-of-business software has been tested and is
year 2000 compliant. This category of software includes certain accounting
software and software used to facilitate foreign exchange transactions.
OFFITBANK recently began using a new portfolio accounting system which has been
confirmed as year 2000 compliant.
OFFITBANK also has completed a year 2000 readiness audit of the
"packaged" software in use throughout the company. This audit identified a small
number of applications requiring updates in order to be qualified as year 2000
compliant. OFFITBANK has since procured and tested all of the required service
releases and updates to address these minor problems, and the installation of
these releases and updates has been successfully completed.
Commencing in the first quarter of 1999, OFFITBANK began communicating
with, and sending written inquiries to, third parties who supply services that
are not critical to its core mission to provide financial services to
clients concerning their year 2000 readiness. These third parties include
vendors from whom OFFITBANK purchases various goods and services, providers of
general infrastructure services such as the carriers who provide voice, data and
wireless telecommunication services and utility companies serving OFFITBANK,
brokers, correspondent banks and banks with whom OFFITBANK maintains foreign
exchange relationships. OFFITBANK continues to collect and analyze information
received from these third parties as part of the process of evaluating its
alternatives and attempting to mitigate third party risks. To the extent that a
vendor or counterparty has not confirmed a satisfactory readiness status by
mid-year 1999, OFFITBANK intends to take appropriate action to readdress the
situation, possibly including replacement of the relevant vendor or
counterparty. OFFITBANK requires on an ongoing basis that new vendors or
counterparties satisfy it regarding their year 2000 readiness.
OFFITBANK has formulated a Business Continuity Plan which addresses the
recovery of current applications and services used by OFFITBANK in the event of
disruption and provides for operating from an alternative facility, if
necessary. The plan also contains manual recovery procedures to facilitate the
continued operation of critical business functions in the absence or failure of
supporting applications or services. This plan will continue to be updated and
tested throughout 1999.
OFFITBANK believes that its reasonably likely worst case year 2000
scenario would be a failure of a service provider, public utility or other third
party which would disrupt OFFITBANK's ability to service its clients for a
period of time. OFFITBANK's operations and financial condition could be
materially impacted if any of these failures were not corrected within a
reasonable period of time. OFFIT Holdings is confident that its efforts at
remediation will greatly reduce any disruption, although it is not possible to
predict accurately the consequences of a year 2000 failure.
The total out-of-pocket cost to OFFITBANK of its year 2000 readiness
efforts is expected to be approximately $300,000, of which approximately
$250,000 had been incurred through December 31, 1998. This amount primarily
includes the costs of additional hardware and software. OFFITBANK does not
separately track the internal costs incurred for its year 2000 project, but
these costs are principally the related payroll costs for its information
systems group. OFFITBANK is relying on internal personnel to achieve year 2000
readiness and, as a result, other information systems projects may be prolonged
or delayed. However, management does not believe that this is likely to have any
material adverse effect on OFFITBANK.
All year 2000 information provided in this document is a "Year 2000
Readiness Disclosure" as defined in the Year 2000 Information and Readiness
Disclosure Act and is subject to the terms thereof. This year 2000 information
is provided pursuant to securities law requirements and may not be taken as any
form of covenant, warranty, representation or guaranty.
INTEREST RATE SENSITIVITY
OFFITBANK Holdings' revenues are derived almost exclusively from fees
which are based on the values of assets managed or administered. Such values are
affected by changes in the broader financial markets which are, in part,
affected by changing interest rates. In a period of rapidly rising interest
rates, management fee revenue may be negatively impacted by reduced asset values
and redemptions, which would reduce managed assets, thereby reducing management
fees and certain other revenue.
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ECONOMIC AND MARKET CONDITIONS
The financial markets and the investment management industry in general
have experienced record performance and record growth in recent years. The
financial markets and businesses operating in the securities industry, however,
are highly volatile and are directly affected by, among other factors, domestic
and foreign economic conditions and general trends in business and finance, all
of which are beyond the control of OFFITBANK Holdings. There can be no assurance
that broader market performance will be favorable in the future. Any decline in
the financial markets or a lack of sustained growth may result in a
corresponding decline in performance by OFFITBANK Holdings and may adversely
affect managed assets and related fees.
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and notes thereto presented elsewhere herein
have been prepared in accordance with generally accepted accounting principles,
which require the measurement of financial position and operating results in
terms of historical dollars without considering the change in the relative
purchasing power of money over time and due to inflation. The impact of
inflation is reflected in the increased cost of OFFITBANK Holdings' operations.
In addition, interest rates have a greater impact on OFFITBANK Holdings'
performance than do the effects of general levels of inflation. Interest rates
do not necessarily move in the same direction or to the same extent as the price
of goods and services. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations of OFFITBANK Holdings -- Interest Rate
Sensitivity".
NEW ACCOUNTING PRONOUNCEMENTS
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is effective for financial statements for periods beginning after
December 15, 1997. This statement requires financial and descriptive information
about an entity's operating segments to be included in the annual financial
statements.
SFAS No. 132, "Employers' Disclosures about Pensions and Other
Post-Retirement Benefits," is effective for fiscal years beginning after
December 15, 1997. This statement revises employers' disclosures about pension
and other post-retirement benefit plans. It does not change the measurement or
recognition of those plans.
SFAS No. 133, "Accounting for Derivative Instruments and for Hedging
Activities," is effective for fiscal years beginning after June 15, 2000. This
statement standardizes the accounting for derivative instruments and the
derivative portion of certain other contracts that have similar characteristics
by requiring that an entity recognize those instruments and derivative portions
of other contracts as assets or liabilities in the statement of financial
position and measure them at fair value.
OFFITBANK Holdings believes that the adoption of SFAS No. 131 and SFAS
No. 132 did not have a material impact on its financial statements and that the
adoption of SFAS No. 133 will not have a material impact on its financial
statements.
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VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS OF OFFITBANK HOLDINGS
The following table lists (1) the only shareholders known by OFFITBANK
Holdings to be the beneficial owners of more than five percent of outstanding
OFFITBANK Holdings common stock and (2) the names of directors and executive
officers of OFFITBANK Holdings and their beneficial ownership of shares of
OFFITBANK Holdings common stock, each as of June 24, 1999.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE PERCENT OF
BENEFICIAL OWNER (1) OF BENEFICIAL OWNERSHIP (2) CLASS
- ------------------------- --------------------------- ----------
<S> <C> <C>
Morris W. Offit *+ 2,641,863(3)(4) 26.64
H. Furlong Baldwin + 0(5) 0
David I. Margolis + 112,500 1.13
Harvey M. Meyerhoff + 112,500 1.13
George R. Packard + 180 *
Edward V. Regan + 0 0
Ricardo Steinbruch + 884,811(6) 8.92
Leslie F. B. Ashburner * 588,624 5.93
Jack D. Burks (7) * 588,624 5.93
Carolyn N. Dolan * 588,624(8) 5.93
Wallace Mathai-Davis * 294,321 2.97
Vincent M. Rella * 58,872 *
Steven T. Shapiro * 591,000 5.96
Albert C. Bellas * 405,000 4.08
John H. Haldeman, Jr. * 176,580 1.78
Richard M. Johnston * 198,147 2.00
Stephen B. Wells * 80,610 *
Directors and Executive Officers as a group 7,322,256 73.84
</TABLE>
- -------------------------------
+ Director.
Executive officer.
* Less than 1%.
(1) Except as otherwise indicated, the address of each person is in care of
OFFITBANK Holdings at its principal executive office.
(2) Calculated pursuant to Rule 13d-3(d) of the Exchange Act. Unless stated
below, each such person has sole voting and investment power with
respect to all such shares. Includes the following number of shares of
common stock that may be acquired within sixty (60) days of the date of
this document through the exercise of stock options under OFFITBANK
Holdings' stock plans: Mr. Bellas, 315,000 shares; Mr. Johnston, 170,
874 shares; Mr. Wells, 68,196 shares; and all directors and officers as
a group, 554,070 shares.
(3) Does not include an aggregate of 90,000 shares (.9725%) owned by Mr.
Offit's two adult sons who maintain their own respective separate
residences.
(4) Includes 500,000 shares of common stock which are owned by MWO Family
LLC of which Mr. Offit is a member manager with a 1% interest in
profits and losses and in which members of his family hold the
remaining membership interests. Also includes 500,000 shares of common
stock which are owned by The Morris W. Offit Charitable Lead Annuity
Trust of which Mr. Offit's wife is one of two trustees and in which Mr.
Offit's children are the remaindermen. Mr. Offit disclaims beneficial
ownership of 495,000 of the shares owned by MWO Family LLC and
disclaims beneficial ownership of all of the shares of common stock
owned by the trust.
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(5) Does not include 225,000 shares of common stock held by Mercantile
Bankshare Corporation of which Mr. Baldwin is Chairman and Chief
Executive Officer. Mr. Baldwin disclaims beneficial interest in these
shares.
(6) These shares are held in the name of Fibra Holdings, Ltd., a British
Virgin Islands corporation controlled by Mr. Steinbruch's family. Fibra
Holdings, Ltd.'s business address is Rua Itacolomie 412, Higienopolis,
Sao Paulo, SP 01239-202.
(7) Includes 117,726 shares of common stock held by Mr. Burks under a
voting trust agreement dated September 13, 1996, under which Mr. Burks
is the voting trustee. Mr. Burks disclaims beneficial ownership of such
shares.
(8) Includes 96,000 shares of common stock which are owned by The Dolan
Limited Partnership of which Ms. Dolan is the general partner and in
which trusts for the benefit of her minor children are the limited
partners. Ms. Dolan disclaims beneficial ownership of 95,040 of the
shares of common stock owned by this partnership.
EXPERTS
Ernst & Young LLP, independent auditors, have audited Wachovia's
consolidated financial statements included in Wachovia's Annual Report on Form
10-K for the year ended December 31, 1998, as set forth in their report, which
is incorporated by reference in this prospectus and elsewhere in the
registration statement. Wachovia's financial statements are incorporated by
reference in reliance on Ernst & Young LLP's report, given on their authority as
experts in accounting and auditing.
The financial statements of OFFITBANK Holdings as of December 31, 1998
and 1997 and for each of the three years in the period ended December 31, 1998
included in this proxy statement/prospectus have been so included in reliance on
the report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
VALIDITY OF WACHOVIA COMMON STOCK
William M. Watson, Jr., Senior Vice President, Counsel & Secretary of
Wachovia, will pass upon the validity of the shares of Wachovia common stock
being offered pursuant to the merger.
OTHER MATTERS
As of the date of this proxy statement/prospectus, the OFFITBANK
Holdings board does not know of any matters that will be presented for
consideration at the special meeting other than as described in this proxy
statement/prospectus. However, 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 matters that fall within the purposes
outlined in the Notice of Special Meeting as determined by a majority of
OFFITBANK Holdings' board, including any adjournments or postponements.
Nonetheless, a proxy which is voted against the proposal to approve the merger
will not be voted in favor of any adjournment or postponement.
WHERE YOU CAN FIND MORE INFORMATION
Wachovia has filed with the SEC a registration statement under the
Securities Act that registers the distribution to OFFITBANK Holdings
shareholders of the shares of Wachovia common stock to be issued in connection
with the merger. 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 SEC allow us to omit certain
information included in the registration statement from this proxy
statement/prospectus.
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In addition, Wachovia files reports, proxy statements and other
information with the SEC under the Exchange Act. You may read and obtain copies
of this information by mail from the Public Reference Section of the SEC, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates.
The SEC also maintains an Internet worldwide web site that contains
reports, proxy statements and other information about issuers, like Wachovia,
who file electronically with the SEC. The address of the site is
http://www.sec.gov.
You can also inspect reports, proxy statements and other information
about Wachovia at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
The SEC allows Wachovia to "incorporate by reference" information into
this proxy statement/prospectus. This means that the company can disclose
important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is considered
to be a part of this 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 has previously filed with the SEC. They contain
important information about Wachovia and its financial condition.
<TABLE>
<CAPTION>
WACHOVIA SEC FILINGS PERIOD
- -------------------- ------
<S> <C>
Annual Report on Form 10-K............... Year ended December 31, 1998
Quarterly Report on Form 10-Q............ Quarter ended March 31, 1999
Current Reports on Form 8-K.............. Dated January 21 and May 14, 1999
</TABLE>
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 SEC
for the purpose of updating such description.
Wachovia incorporates by reference additional documents that it may
file with the SEC between the date of this proxy statement/prospectus and the
date of the special meeting. These documents include periodic reports, such as
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 OFFITBANK Holdings has supplied all
such information relating to OFFITBANK Holdings.
Documents incorporated by reference are available from Wachovia 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
Wachovia at the following addresses:
WACHOVIA CORPORATION
P.O. Box 3099 191 Peachtree Street, N.E.
Winston-Salem, North Carolina 27150 or Atlanta, Georgia 30303
Telephone: (336) 732-2549 Telephone: (404) 332-6661
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<PAGE> 66
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY JULY 23, 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.
-60-
<PAGE> 67
OFFITBANK HOLDINGS, INC. FINANCIAL STATEMENTS
FINANCIAL STATEMENTS:
<TABLE>
<S> <C>
UNAUDITED
Balance Sheets as of March 31, 1999 and 1998...................................................... F-2
Statements of Income for the Three Months Ended March 31, 1999 and 1998........................... F-3
Statements of Cash Flows for the Three Months Ended March 31, 1999 and 1998....................... F-4
Notes to Financial Statements..................................................................... F-5
AUDITED
Report of Independent Accountants................................................................. F-6
Balance Sheets as of December 31, 1998 and 1997................................................... F-7
Statements of Income for the Years Ended December 31, 1998, 1997 and 1996......................... F-8
Statements of Changes in Shareholders' Equity for the Years Ended December 31, 1998,
1997 and 1996................................................................................... F-9
Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and
1996............................................................................................ F-11
Notes to Financial Statements..................................................................... F-12
</TABLE>
F-1
<PAGE> 68
<TABLE>
<CAPTION>
BALANCE SHEETS (UNAUDITED)*
- ------------------------------------------------------------------------------------------------------------------------
MARCH 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Cash and interest-bearing deposits with banks ........................ $ 1,729,186 $ 914,745
Management fees receivable, net of allowance for doubtful
accounts of $40,000 ............................................... 2,608,364 2,380,510
Prepaid assets ....................................................... 745,020 595,468
Investments available for sale ....................................... 22,046,108 21,754,257
Fixed assets, net .................................................... 2,087,527 2,193,520
Other assets ......................................................... 4,278,855 4,212,880
------------ ------------
TOTAL ASSETS ........................................... $ 33,495,060 $ 32,051,380
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses ................................ $ 919,485 $ 968,890
Accrued salaries and employee benefits ............................... 1,946,177 874,034
Dividends payable .................................................... -- 1,542,468
Deferred rent ........................................................ 1,128,788 1,150,470
Other Liabilities .................................................... 1,091,166 521,405
------------ ------------
TOTAL LIABILITIES ...................................... $ 5,085,616 $ 5,057,267
============ ============
Stockholders' equity:
Common stock; $.01 par value, 30,000,000 shares authorized,
9,254,808 shares outstanding ......................................... 92,548 92,548
Paid-in-capital ...................................................... 11,489,661 11,489,661
Retained earnings .................................................... 16,987,857 15,518,252
Accumulated other comprehensive income ............................... (160,622) (106,348)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY ............................. $ 28,409,444 $ 26,994,113
============ ============
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............. $ 33,495,060 $ 32,051,380
============ ============
</TABLE>
- -------------------------
* All historical financial data relating to pre-1999 periods are based
solely on OFFITBANK operations.
F-2
<PAGE> 69
<TABLE>
<CAPTION>
STATEMENTS OF INCOME (UNAUDITED)
- --------------------------------------------------------------------------------
FOR THE THREE MONTHS
ENDED MARCH 31,
-----------------------------
1999 1998
------------ ------------
<S> <C> <C>
REVENUES:
Management fees ............................. $ 9,955,368 $ 9,379,347
Interest and dividends ...................... 302,656 284,486
Foreign exchange ............................ 8,000 276,407
Custody ..................................... 232,517 160,769
Net realized gains/(losses) in
investments available for sale ............ 120,590 81,056
Other ....................................... 39,435 32,257
------------ ------------
Total revenues ............................ $ 10,658,566 $ 10,214,322
EXPENSES:
Salaries and employee benefits .............. 5,533,859 5,272,857
Occupancy ................................... 564,701 577,671
Advertising and marketing ................... 450,716 518,536
Data processing and software
development ................................ 240,447 256,891
Depreciation and amortization ............... 182,499 198,000
Professional fees ........................... 125,000 142,917
Market research and information
services .................................. 216,197 192,889
Insurance ................................... 124,515 108,484
Other ....................................... 524,108 569,971
------------ ------------
Total expenses ............................ 7,962,042 7,838,216
Income before income taxes ................ 2,696,524 2,376,106
Income taxes .................................. 1,226,918 996,726
------------ ------------
Net income .................................. $ 1,469,606 $ 1,379,380
============ ============
Other comprehensive income (loss) ............. (54,274) 2,709
------------ ------------
Comprehensive Income ....................... $ 1,415,332 $ 1,382,089
============ ============
Net income per share ........................ $ .16 $ .15
============ ============
Net income per share, diluted ............... $ .15 $ .15
============ ============
</TABLE>
- ------------------------
* All historical financial data relating to pre-1999 periods are based
solely on OFFITBANK operations.
F-3
<PAGE> 70
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS (UNAUDITED)*
- ------------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................................... $ 1,469,605 $ 1,379,380
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
Depreciation and amortization ............................................... 182,499 198,000
Net realized gains on investments available for sale ........................ (120,590) (81,056)
Change in bond premium/discount ............................................. (1,434) (1,445)
Change in assets and liabilities:
Management fees receivable .................................... (227,854) (308,198)
Prepaid assets ................................................ (149,552) (74,039)
Other assets .................................................. (24,595) (171,419)
Accounts payable and accrued expenses ......................... (49,405) (111,236)
Accrued salaries and employee benefits ........................ 1,072,143 1,111,196
Deferred rent ................................................. (21,682) 260,844
Dividends payable and other liabilities ....................... (972,709) (831,189)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES ................................... $ 1,156,426 $ 1,370,838
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investments available for sale........................ 3,993,711 6,781,485
Proceeds from maturities of investments available for....................... 510,000 4,000,000
Purchases of investments available for sale................................. (4,769,190) (11,170,932)
Purchase of fixed assets.................................................... (76,506) (390,831)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES ....................................... $ (341,985) $ (780,278)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock options exercised ....................................... -- 100,000
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES................................... $ -- $ 100,000
------------ ------------
Net increase in cash and interestbearing deposits with banks ........................ 814,441 690,560
Cash and interest-bearing deposits with banks at beginning of
period ...................................................................... $ 914,745 $ 1,263,736
------------ ------------
Cash and interest-bearing deposits with banks at end of period ...................... $ 1,729,186 $ 1,954,296
------------ ------------
</TABLE>
- ---------------------
* All historical financial data relating to pre-1999 periods are based
solely on OFFITBANK operations.
F-4
<PAGE> 71
NOTES TO FINANCIAL STATEMENTS
The consolidated financial statements conform to generally accepted accounting
principles and to general industry practices. The accompanying interim financial
statements are unaudited; however, in the opinion of management, all adjustments
necessary for the fair presentation of the consolidated financial statements
have been included. All such adjustments are of a normal recurring nature.
F-5
<PAGE> 72
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
OFFITBANK
In our opinion, the accompanying balance sheets and the related statements of
income, of changes in stockholders' equity and of cash flows present fairly, in
all material respects, the financial position of OFFITBANK (the "Company") at
December 31, 1998 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
- ----------------------------------------------
PricewaterhouseCoopers LLP
New York, N.Y.
February 23, 1999
F-6
<PAGE> 73
OFFITBANK
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Cash and interest-bearing deposits with banks ............................................. $ 914,745 $ 1,263,736
Management fees receivable, net of allowance for doubtful accounts
of $40,000 at December 31, 1998 and 1997 .............................................. 2,380,510 1,944,955
Prepaid assets ............................................................................ 595,468 428,466
Investments available for sale ............................................................ 21,754,257 20,730,571
Fixed assets, net ......................................................................... 2,193,520 2,321,279
Other assets .............................................................................. 4,212,880 3,763,915
------------ ------------
TOTAL ASSETS ..................................................................... $ 32,051,380 $ 30,452,922
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses ................................................. $ 968,890 $ 1,372,936
Accrued salaries and employee benefits ................................................ 874,034 720,126
Dividends payable ..................................................................... 1,542,468 1,540,468
Deferred rent ......................................................................... 1,150,470 761,131
Other liabilities ..................................................................... 521,405 389,778
------------ ------------
TOTAL LIABILITIES ................................................................ $ 5,057,267 $ 4,784,439
============ ============
Commitments and contingencies (Note 12)
Stockholders' equity:
Common stock; $0.01 par value, 30,000,000 shares authorized, 9,254,808
outstanding at December 31, 1998; 9,242,808 outstanding at December 31,
1997 ................................................................................. 92,548 92,428
Additional paid-in capital ........................................................... 11,489,661 11,389,781
Retained earnings .................................................................... 15,518,252 13,903,114
Accumulated other comprehensive income ............................................... (106,348) 283,160
------------ ------------
TOTAL STOCKHOLDERS' EQUITY ....................................................... $ 26,994,113 $ 25,668,483
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ....................................... $ 32,051,380 $ 30,452,922
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 74
OFFITBANK
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
---------------------------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Management fees ............................................... $38,171,710 $32,867,879 $28,219,941
Interest and dividends ........................................ 1,363,602 1,363,450 1,200,425
Foreign exchange .............................................. 345,103 627,284 1,340,761
Custody ....................................................... 745,235 606,458 359,504
Net realized gains on investments
available for sale ....................................... 393,813 320,726 183,867
Other ......................................................... 199,154 306,525 141,654
----------- ----------- -----------
TOTAL REVENUES ........................................... $41,218,617 $36,092,322 $31,446,152
----------- ----------- -----------
EXPENSES:
Salaries and employee benefits ................................ $21,600,363 $19,232,604 $17,376,295
Occupancy ..................................................... 2,481,600 1,823,397 1,788,163
Advertising and marketing ..................................... 1,952,098 1,999,651 1,506,188
Data processing and software
development .............................................. 1,154,332 809,207 722,002
Depreciation and amortization ................................. 712,410 738,610 724,170
Professional fees ............................................. 474,998 615,000 792,956
Market research and information services ...................... 766,700 768,776 747,781
Insurance ..................................................... 479,309 434,183 430,977
Equity in losses of affiliate ................................. -- 1,334,654 665,346
Offering costs ................................................ 631,282 -- --
Other ......................................................... 2,721,451 2,425,661 2,422,478
----------- ----------- -----------
TOTAL EXPENSES ........................................... $32,974,543 $30,181,743 $27,176,356
=========== =========== ===========
INCOME BEFORE INCOME TAXES .................................... 8,244,074 5,910,579 4,269,796
Income taxes .................................................. 3,544,000 2,630,000 1,864,257
----------- ----------- -----------
NET INCOME .................................................... $ 4,700,074 $ 3,280,579 $ 2,405,539
=========== =========== ===========
EARNINGS PER SHARE - BASIC ............................... $ .51 $ .35 $ .26
=========== =========== ===========
EARNINGS PER SHARE - ASSUMING
DILUTION .................................................... $ .49 $ .35 $ .26
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE> 75
OFFITBANK
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER
-------------------- PAID-IN RETAINED COMPREHENSIVE STOCKHOLDERS'
SHARES PAR VALUE CAPITAL EARNINGS INCOME EQUITY
--------- --------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 .......................... 9,242,808 $ 92,428 $11,389,781 $12,098,976 $ 247,070 $ 23,828,255
Comprehensive income
Net income ......................................... -- -- -- 2,405,539 -- 2,405,539
Other comprehensive income, net of taxes
Unrealized (losses) on investments available
for sale, net of reclassifications (net of tax
benefit of $63,440) .............................. -- -- -- -- (81,731) (81,731)
----------- --------- ------------
Total comprehensive income .......................... 2,405,539 (81,731) 2,323,808
----------- --------- ------------
Dividends declared .................................. -- -- -- (1,263,184) -- (1,263,184)
--------- --------- ----------- ----------- --------- ------------
BALANCE, DECEMBER 31, 1996 .......................... 9,242,808 $ 92,428 $11,389,781 $13,241,331 $ 165,339 $ 24,888,879
Comprehensive income
Net income ......................................... -- -- -- 3,280,579 -- 3,280,579
Other comprehensive income, net of taxes
Unrealized gains on investments available
for sale, net of reclassifications (net of
taxes of $94,469) ................................ -- -- -- -- 117,821 117,821
----------- --------- ------------
Total comprehensive income .......................... 3,280,579 117,821 3,398,400
----------- --------- ------------
Dividends declared .................................. -- -- -- (2,618,796) -- (2,618,796)
--------- --------- ----------- ----------- --------- ------------
BALANCE, DECEMBER 31, 1997 .......................... 9,242,808 $ 92,428 $11,389,781 $13,903,114 $ 283,160 $ 25,668,483
Comprehensive income
Net income ....................................... -- -- -- 4,700,074 -- 4,700,074
Other comprehensive income, net of taxes
Unrealized gains on investments available
for sale, net of reclassifications (net of tax
benefit of $293,839) ........................... -- -- -- -- (389,508) (389,508)
----------- --------- ------------
Total comprehensive income .......................... -- -- -- 4,700,074 (389,508) 4,310,566
----------- --------- ------------
Dividends declared .................................. -- -- -- (3,084,936) (3,084,936)
Stock options exercised ............................. 12,000 120 99,880 -- -- 100,000
--------- --------- ----------- ----------- --------- ------------
BALANCE, DECEMBER 31, 1998 .......................... 9,254,808 $ 92,548 $11,489,661 $15,518,252 $(106,348) $ 26,994,113
========= ========= =========== =========== ========= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE> 76
OFFITBANK
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONT'D)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Disclosure of reclassification amounts:
Unrealized holding gains arising during period (net of taxes of $3,248,
$351,627 and $79,277 for the years ended December 31, 1998, 1997
and 1996, respectively) ........................................................ $ 4,305 $ 438,547 $ 102,136
Less-reclassification adjustment for gains included in net income (net of
taxes of $297,087, $257,158 and $142,717 for the years ended
December 31, 1998, 1997 and 1996, respectively) ................................ (393,813) (320,726) (183,867)
--------- --------- ---------
Net unrealized gains (losses) on investments available for sale ..................... $(389,508) $ 117,821 $ (81,731)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE> 77
OFFITBANK
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
----------------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ......................................................... $ 4,700,074 $ 3,280,579 $ 2,405,539
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ................................. 712,410 738,610 724,170
Provision for doubtful accounts ............................... -- -- 40,000
Net realized gains on investments available for sale .......... (393,813) (320,726) (183,867)
Equity in losses of affiliate ................................. -- 1,334,654 665,346
Change in bond premium/discount ............................... (21,071) 176,477 70,858
Changes in assets and liabilities:
Management fees receivable ................................ (435,555) 650,667 (1,278,791)
Prepaid assets ............................................ (167,002) (76,342) 240,800
Other assets .............................................. (141,700) (124,096) 220,574
Accounts payable and accrued expenses ..................... (404,046) 273,120 543,766
Accrued salaries and employee benefits .................... 153,908 151,178 119,656
Deferred rent ............................................. 389,339 (78,099) (127,466)
Dividends payable and other liabilities ................... 131,627 (159,495) 225,714
------------ ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES ..................... $ 4,524,171 $ 5,846,527 $ 3,666,299
============ ============ ============
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investments available for sale ............. 18,756,020 8,276,826 4,939,197
Proceeds from maturities of investments available for sale ........ 17,635,377 1,113,306 5,896,508
Purchases of investments available for sale ....................... (37,696,970) (11,973,424) (11,257,138)
Investment in affiliate ........................................... -- -- (2,000,000)
Purchase of fixed assets .......................................... (584,653) (567,020) (317,803)
------------ ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES ......................... $ (1,890,226) $ (3,150,312) $ (2,739,236)
============ ============ ============
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid .................................................... (3,082,936) (1,848,562) (985,900)
Proceeds from stock options exercised ............................. 100,000 -- --
------------ ------------ ------------
NET CASH USED IN FINANCING ACTIVITIES ......................... $ (2,982,936) $ (1,848,562) $ (985,900)
============ ============ ============
Net increase (decrease) in cash and interest-bearing deposits
with banks ........................................................ (348,991) 847,653 (58,837)
Cash and interest-bearing deposits with banks at beginning of
period ............................................................ 1,263,736 416,083 474,920
------------ ------------ ------------
Cash and interest-bearing deposits with banks at end of period ......... $ 914,745 $ 1,263,736 $ 416,083
============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid during the year for income taxes ........................ $ 3,181,500 $ 2,675,582 $ 1,316,808
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE> 78
OFFITBANK
NOTES TO FINANCIAL STATEMENTS
1. RECAPITALIZATION
On January 1, 1999 the Board of Directors approved the formation of OFFITBANK
Holdings, Inc. and declared a 3-for-1 stock split of its common stock
outstanding. The financial statements and the notes to the financial statements
have been retroactively restated to reflect the stock split.
2. ORGANIZATION
OFFITBANK (the "Bank") is engaged in providing investment management and
advisory services to wealthy individuals/family groups, corporations and
non-profit organizations and institutions primarily in North America, Europe,
Asia and Latin America. The Bank is an Article III banking organization
chartered with trust powers under New York State banking laws and was organized
in 1990. The Bank is the successor to Offit Associates, Inc., a registered
investment adviser established in 1983. Total assets under management at
December 31, 1998 and 1997 were approximately $10.3 billion and $9.3 billion,
respectively. In addition, the Bank provides master custody and trust services.
In connection with its fiduciary responsibilities, the Bank may engage in
collateralized lending secured by eligible securities within investment
portfolios which it manages. The Bank also purchases and sells various
currencies in the interbank foreign exchange markets on behalf of its clients.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Set forth below are the significant accounting policies followed by the Bank in
the preparation of its financial statements.
CASH AND INTEREST-BEARING DEPOSITS WITH BANKS
Cash and interest-bearing deposits with banks includes certain short term
investments recorded at cost, which approximates market value, and includes
holdings in money market mutual funds and highly liquid investments with
maturities of three months or less.
INVESTMENTS AVAILABLE FOR SALE
Available for sale investments include debt securities and mutual fund holdings
for which the Bank acts as an investment advisor. These investments are held for
yield and liquidity management purposes and may be sold in response to or in
anticipation of changes in interest rates, liquidity considerations and other
factors.
Such investments are carried at fair value with unrealized gains and losses
reported within stockholders' equity, net of taxes, until realized. Premiums and
discounts on debt securities are amortized or accreted over the life of the
underlying security as an adjustment to interest income. Debt securities and
mutual fund investments are recorded on a trade date basis and realized gains or
losses on disposition are computed using the specific identification method.
PARTNERSHIP INVESTMENTS
The Bank's investments in certain limited partnerships it advises are included
in other assets and are carried at the lower of cost or market value and
accounted for under the cost method of accounting. Investment income, realized
gains and losses and net valuation adjustments, if any, are included in other
income.
F-12
<PAGE> 79
OFFITBANK
NOTES TO FINANCIAL STATEMENTS
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially expose the Bank to concentrations of
credit risk, as defined by Statement of Financial Accounting Standards ("SFAS")
No. 105, consist primarily of investments in U.S. government and agency
securities, municipal securities, money market accounts and affiliated fixed
income mutual funds and accounts receivable. Credit risk is believed to be
minimal in that the U.S. government and agency securities are backed by the full
faith and credit of the U.S. government, municipal securities are backed by the
full taxing power of the issuing municipality or revenues from a specific
project, and the affiliated mutual funds have substantial net assets.
FIXED ASSETS
Fixed assets are stated at amortized cost. Depreciation of computer and office
equipment and furniture and fixtures is computed using the straight-line method
over the related estimated useful lives of the assets ranging between 3-7 years.
Amortization of leasehold improvements is computed using the straight-line
method over their respective lease terms or useful life, if shorter.
REVENUE RECOGNITION
Investment management fees are recorded as income during the period earned.
Performance fees are recorded as income during the period earned and no longer
subject to forfeiture.
DEFERRED RENT
Under a 1993 office space lease agreement and a subsequent 1997 amendment
acquiring additional space, the Bank made no rental payments during the initial
thirteen months of the ten-year lease period and the initial six months of the
five and a half-year amendment period. These rent benefits have been recorded as
deferred credits which are being applied against rent expense on a straight-line
basis over the remaining life of the lease.
FOREIGN EXCHANGE
The Bank engages in buying and selling foreign currencies as a principal in the
interbank market on behalf of its clients and earns a fixed spread on all
transactions in accordance with the terms of the investment management agreement
with its clients. Amounts receivable, pending settlement of such transactions,
are included in other assets.
OFFERING COSTS
In 1998, the Bank incurred $631,282 of expenses associated with its initial
public offering (IPO) which was pre-filed with the Securities and Exchange
Commission in August 1998. Due to market fluctuations, management at the Bank
decided it was in the best interests of the Bank to defer the offering and the
costs were expensed accordingly.
F-13
<PAGE> 80
OFFITBANK
NOTES TO FINANCIAL STATEMENTS
INCOME TAXES
The Bank accounts for income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes". In accordance with SFAS No. 109, deferred tax assets and
liabilities are established for the expected future tax consequences of
temporary differences between the carrying amounts and tax bases of assets and
liabilities using enacted tax rates.
EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings
per Share". SFAS No. 128 replaced the calculation of primary and fully diluted
earnings per share with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excludes any dilutive effects of
options, warrants and convertible securities. Diluted earnings per share
replaces the previous calculation of fully diluted earnings per share. All
earnings per share amounts for all periods have been presented to conform to
SFAS No. 128 requirements.
COMPREHENSIVE INCOME
The Bank has adopted SFAS No. 130, "Reporting Comprehensive Income". SFAS No.
130 requires the reporting of comprehensive income and its components.
Comprehensive income is defined as the change in equity from transactions and
other events and circumstances from non-owner sources, and excludes investments
by and distributions to owners. Comprehensive income includes net income and
other items of comprehensive income meeting the above criteria. The Bank's only
component of other comprehensive income is the unrealized gains and losses on
investments available for sale.
BASIS OF PREPARATION
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates. Certain prior period amounts
have been reclassified to conform with 1998 classifications.
INTERIM FINANCIAL DATA
The interim financial data as of March 31, 1999 and for the three months ended
March 31, 1999 and March 31, 1998 is unaudited; however, in the opinion of the
Bank, the interim data includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results for the
interim periods.
F-14
<PAGE> 81
OFFITBANK
NOTES TO FINANCIAL STATEMENTS
4. INVESTMENTS AVAILABLE FOR SALE
The amortized cost and fair value of available for sale debt securities and
mutual funds at December 31, 1998, 1997 and 1996 follow:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ----------- ----------- -----------
DECEMBER 31, 1998:
<S> <C> <C> <C> <C>
U.S. Treasury ......................... $ 1,503,710 $ 3,173 -- $ 1,506,883
Mutual funds .......................... 20,437,122 274,947 $ (464,695) 20,247,374
----------- ----------- ----------- -----------
TOTAL ........................ $21,940,832 $ 278,120 $ (464,695) $21,754,257
=========== =========== =========== ===========
DECEMBER 31, 1997:
U.S. Treasury ......................... $ 4,608,365 $ 94,754 -- $ 4,703,119
Mutual funds .......................... 15,592,468 434,984 -- 16,027,452
----------- ----------- ----------- -----------
TOTAL ........................ $20,200,833 $ 529,738 -- $20,730,571
=========== =========== =========== ===========
DECEMBER 31, 1996:
U.S. Treasury ......................... $ 6,933,075 $ 103,604 -- $ 7,036,679
Municipal ............................. 3,262,999 52,321 -- 3,315,320
----------- ----------- ----------- -----------
Total debt securities ................. 10,196,074 155,925 -- 10,351,999
Mutual funds .......................... 7,376,177 167,230 (10,197) 7,533,210
----------- ----------- ----------- -----------
TOTAL ........................ $17,572,251 $ 323,155 $ (10,197) $17,885,209
=========== =========== =========== ===========
</TABLE>
Gross realized gains and losses from the sale of debt securities and mutual
funds are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
DEBT SECURITIES:
Gross realized gains ............ $ 128,162 $ 183,082 $ 45,091
Gross realized (losses) ......... -- -- (5,705)
MUTUAL FUNDS:
Gross realized gains ............ $ 265,651 $ 141,403 $ 164,317
Gross realized losses ........... -- (3,759) (19,836)
</TABLE>
F-15
<PAGE> 82
OFFITBANK
NOTES TO FINANCIAL STATEMENTS
Taxable and nontaxable interest and dividends for the years ended December 31,
1998, 1997 and 1996 follow:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Taxable interest ............ $ 852,787 $1,025,908 $ 836,389
Nontaxable interest ......... 504,415 259,524 276,100
Dividends ................... 6,400 78,018 87,936
---------- ---------- ----------
TOTAL .............. $1,363,602 $1,363,450 $1,200,425
========== ========== ==========
</TABLE>
All U.S. Treasury securities mature within one year.
5. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS - Statement of Financial
Accounting Standards No. 107, "Disclosure about Fair Value of Financial
Instruments", requires disclosures of estimated fair values of certain on- and
off-balance sheet financial instruments. The fair value estimates, as well as
the related methods and assumptions used to value each of the Bank's significant
financial instruments, are set forth below.
CASH AND INTEREST-BEARING DEPOSITS WITH BANKS - The carrying amount of cash and
interest-bearing deposits with banks approximates fair value due to the short
maturities of these instruments.
MANAGEMENT FEES RECEIVABLE, NET - Fair value approximates the carrying amount
reported in the balance sheet as these receivables are generally collected
within sixty days and are short term in nature.
INVESTMENTS AVAILABLE FOR SALE - Fair value approximates the carrying amounts
reported in the balance sheet as these investments are classified as
available-for-sale securities and are periodically marked-to-market per the
guidance set forth in Statement of Financial Standards No. 115. Fair value
adjustments are reflected as a separate component of stockholders' equity and
accounted for in comprehensive income.
ACCOUNTS PAYABLE AND ACCRUED EXPENSES, ACCRUED SALARIES AND EMPLOYEE BENEFITS,
AND DIVIDENDS PAYABLE - Fair value approximates the carrying amounts reported in
the balance sheet as these liabilities are generally paid within sixty days and
are short term in nature.
6. INVESTMENT IN AFFILIATE
As of December 31, 1998, the Bank has a 9.72% interest in Witan Company LLP (the
"Company") which is developing a portfolio accounting system to be marketed to
investment management firms and wealthy family group offices. The value of the
Bank's remaining investment outstanding at December 31, 1996 amounting to
$1,334,654 was expensed during 1997 due to the Bank's equity share in the
Company's current period operating losses and projected operating losses and
negative cash flows. The Bank has not made any oral or written commitments to
provide the Company with guarantees or additional equity or debt financing.
F-16
<PAGE> 83
OFFITBANK
NOTES TO FINANCIAL STATEMENTS
7. FIXED ASSETS
Fixed assets consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Computer and office equipment ...................... $2,354,159 $1,911,277
Furniture and fixtures ............................. 592,771 564,793
Leasehold improvements ............................. 2,394,928 2,281,137
---------- ----------
5,341,858 4,757,207
Less - Accumulated depreciation and amortization ... 3,148,338 2,435,928
---------- ----------
$2,193,520 $2,321,279
========== ==========
</TABLE>
8. INCOME TAXES
The components of the income tax provision for the years ended December 31,
1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-------------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Current
Federal .................... $ 2,231,000 $ 1,773,000 $ 1,091,264
State and local ............ 1,601,000 1,129,000 715,520
----------- ----------- -----------
TOTAL CURRENT ....... $ 3,832,000 $ 2,902,000 $ 1,806,784
----------- ----------- -----------
Deferred
Federal .................... (183,000) (173,000) 40,093
State and local ............ (105,000) (99,000) 17,380
----------- ----------- -----------
TOTAL DEFERRED ...... $ (288,000) $ (272,000) $ 57,473
----------- ----------- -----------
TOTAL ............... $ 3,544,000 $ 2,630,000 $ 1,864,257
=========== =========== ===========
</TABLE>
F-17
<PAGE> 84
OFFITBANK
NOTES TO FINANCIAL STATEMENTS
The provision for income taxes varies from amounts which would be computed by
applying the applicable U.S. federal income tax rate to income before income
taxes, primarily due to state and local taxes and nondeductible expenses. A
reconciliation of the federal statutory income tax rate with the Bank's
effective income tax rate is presented in the following table:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1998 1997 1996
--------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Tax expense at U.S. federal income
tax rate ........................................ $ 2,802,985 34.0% $ 2,009,597 34.0% $ 1,451,731 34.0%
Increase (decrease) in effective rate resulting from:
Tax exempt interest income ........................... (284,030) (3.4%) (132,746) (2.2%) (141,174) (3.3%)
State and local income taxes ......................... 987,360 11.9% 679,800 11.5% 515,460 12.1%
Miscellaneous other .................................. 37,685 0.5% 73,349 1.2% 38,240 0.9%
----------- ---- ----------- ---- ----------- ----
TOTAL ....................................... $ 3,544,000 43.0% $ 2,630,000 44.5% $ 1,864,257 43.7%
=========== ==== =========== ==== =========== ====
</TABLE>
Deferred income taxes result primarily from deferred rent, depreciation and
certain other income or expenses being reported in different periods for
financial statement purposes than for income tax purposes.
The tax effects of timing differences that give rise to significant portions of
deferred tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Deferred tax assets:
Deferred rent ................................. $ 532,257 $ 352,099
Fixed asset depreciation ...................... 368,710 277,312
Deferred loss - affiliates .................... 139,255 --
Deferred loss - investments available for sale 86,977 --
Compensation .................................. 32,385 --
Other ......................................... 30,072 6,939
---------- ----------
TOTAL GROSS DEFERRED TAX ASSETS ........... $1,189,656 $ 636,350
Deferred tax liabilities:
Deferred gain ................................. -- 235,981
Other ......................................... 77,157 --
---------- ----------
TOTAL GROSS DEFERRED TAX LIABILITIES ...... $ 77,157 $ 235,981
---------- ----------
Net deferred tax assets ............................ $1,112,499 $ 400,369
========== ==========
</TABLE>
F-18
<PAGE> 85
OFFITBANK
NOTES TO FINANCIAL STATEMENTS
9. RELATED PARTY TRANSACTIONS
The Bank sponsors and is the investment manager for certain limited partnerships
(the "Partnerships"). At December 31, 1998, the Bank was the general partner of
each of the Partnerships. Investment management and performance fees earned from
the Partnerships for the years ended December 31, 1998, 1997 and 1996 were
approximately $738,000, $895,000 and $2,053,000, respectively. Additionally, the
Bank acts as the investment adviser for certain mutual funds which it sponsors
and has investments in these mutual funds carried at fair value of $20,247,370,
$14,645,352 and $6,257,363 at December 31, 1998, 1997 and 1996, respectively.
Investment management fees earned from these mutual funds for the years ended
December 31, 1998, 1997 and 1996 were approximately $14,973,000, $10,852,000 and
$6,077,000, respectively. OFFITBANK transacts with these mutual funds and
limited partnerships on an arm's-length basis.
10. EMPLOYEE BENEFIT PLANS
The employees of the Bank participate in a 401(k)/Profit Sharing Plan (the
"Plan").
(a) 401(k)
The Bank offers a 401(k) plan covering substantially all employees. Under the
401(k) plan, employees can make contributions at a rate of one to fifteen
percent of their compensation (as defined in the 401(k) plan), subject to
Internal Revenue Code limitations. The Bank makes a matching contribution
annually on a discretionary basis. Any matching contributions will be allocated
to those participants who have made elective contributions during the Plan year,
who complete more than 500 hours of service in a Plan year and are employed by
the Bank on the last day of the Plan year.
Employees become fully vested in the matching contributions upon the earliest of
their retirement (as defined in the 401(k) Plan), death, after four years of
service or upon termination of the plan or the complete discontinuance of
contributions thereunder. Employees are immediately vested in their 401(k)
elective contributions.
Matching contributions to the 401(k) plan amounted to $114,000, $106,000 and
$93,000, for each of the years ended December 31, 1998, 1997 and 1996,
respectively.
(b) PROFIT SHARING
The Bank may make discretionary contributions to the Plan. This contribution
will be allocated among participants in the proportion that each participant's
compensation (subject to statutory limitations) bears to the aggregate
compensation of all participants. This discretionary contribution will be
allocated by the Bank to those participants who complete more than 500 hours of
service in a Plan year and are employed by the Bank on the last day of the Plan
year.
In order to vest in the Bank's discretionary contributions, an employee must be
employed at least two years and work at least 1,000 hours per year. Upon
completion of two years of service, 20% of the employee's balance vests, with an
additional 20% vesting after three years of service. After four years of
service, the employee is fully vested.
F-19
<PAGE> 86
OFFITBANK
NOTES TO FINANCIAL STATEMENTS
Profit sharing contributions amounted to $447,000, $407,000 and $370,000, for
each of the years ended December 31, 1998, 1997 and 1996, respectively.
11. STOCK OPTION PLAN
Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
for Stock-Based Compensation" defines a fair value-based method of accounting
for stock-based employee compensation plans. Under the fair value-based method,
compensation cost is measured at the grant date based upon the value of the
award and is recognized over the service period. While SFAS 123 encourages
entities to adopt this method of accounting for employee stock compensation
plans, it also allows an entity to continue to measure compensation costs for
its plans as prescribed in APB Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"). The Bank has elected to continue to apply APB 25 and has
disclosed the pro forma effect on earnings under SFAS 123. As a result, no
compensation cost has been recognized on the Bank's stock options as the
exercise price of the options has equaled the estimated fair market value of the
underlying stock at date of grant.
The following is a combined summary of stock option activity during the
three-year period ended December 31, 1998.
<TABLE>
<CAPTION>
WEIGHTED
SHARES AVERAGE
UNDER OPTION PRICE EXERCISE PRICE
OPTION PER SHARE PER SHARE
------- --------------- --------------
<S> <C> <C> <C>
Balance at 12/31/95 ......... 613,248 $ 5.56 - $ 8.33 $ 6.38
Forfeited .............. (12,000) 8.33 8.33
------- --------------- ------
Balance at 12/31/96 ......... 601,248 5.56 - 8.33 6.34
Granted ................ 84,000 12.08 12.08
------- --------------- ------
Balance at 12/31/97 ......... 685,248 5.56 - 12.08 7.04
Exercised .............. (12,000) 8.33 8.33
------- --------------- ------
Balance at 12/31/98 ......... 673,248 $ 5.56 - $12.08 $ 7.02
======= =============== ======
</TABLE>
During 1998, an employee exercised stock options for 12,000 shares of common
stock with an exercise price of $8.33 per share. As a result, at December 31,
1998, the Bank has 673,248 options outstanding (653,796 currently exercisable)
with exercise prices ranging from $5.56 to $12.08 and a weighted average
exercise price of $7.02.
These options have expiration dates ranging from 2002 to 2005.
The Bank's pro forma net income, basic earnings per share and diluted earnings
per share for the years ended December 31, 1998, 1997 and 1996 would have been:
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Net income .................. $ 4,686,992 $ 3,176,558 $ 2,405,539
Basic earnings per share .... $.51 $.34 $.26
Diluted earnings per share .. $.49 $.33 $.26
</TABLE>
F-20
<PAGE> 87
OFFITBANK
NOTES TO FINANCIAL STATEMENTS
12. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Bank's lease agreement for office space expires in 2003. The following is a
schedule of future minimum lease payments under noncancelable lease agreements.
YEAR ENDING AMOUNTS
- ----------- -------
1999 ....................................................... $ 2,295,700
2000 ....................................................... 2,319,800
2001 ....................................................... 2,319,800
2002 ....................................................... 2,319,800
2003 ....................................................... 1,367,000
-----------
TOTAL.............................................. $10,622,100
===========
Lease expense for office space aggregated $2,262,000, $1,171,000 and $1,098,000
in 1998, 1997 and 1996, respectively. Occupancy expense includes sublease income
of $614,000, $57,000 and $320,000 in 1998, 1997 and 1996, respectively.
FINANCIAL INSTRUMENTS
The Bank engages in buying and selling foreign currencies as a principal in the
interbank market on behalf of its clients. The Bank will only enter into
transactions whereby the notional principal exposure is offset by a matched
position. As a consequence, the Bank's exposure is limited to the counterparty
failing to meet its contractual obligation. Such off-balance sheet credit
exposure is represented by the amount of unrealized gains associated with
outstanding foreign exchange contracts. At December 31, 1998, 1997 and 1996,
unrealized gains associated with such contracts totaled approximately $2,000,
$2,943,000 and $4,550,000, respectively.
The notional or contractual amounts used to express the volume of these
transactions do not necessarily represent the amounts potentially subject to
risk. In addition, the measurement of the risks associated with these
transactions is only meaningful when related and offsetting transactions are
identified. Commitments to purchase and sell foreign currencies at December 31,
1998 and 1997 consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Commitments to purchase foreign currencies ... - $ 28,544,000
Commitments to sell foreign currencies ....... $ 1,566,000 119,783,836
------------ ------------
TOTAL COMMITMENTS ............................ $ 1,566,000 $148,328,259
============ ============
</TABLE>
The currencies underlying these commitments consist of Deutsche Marks, Danish
Kronners, Canadian Dollars and Taiwan Dollars.
F-21
<PAGE> 88
OFFITBANK
NOTES TO FINANCIAL STATEMENTS
13. EARNINGS PER SHARE
The following table sets forth the computation of the basic and diluted earnings
per share:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
------------------------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Numerator
Income from continuing operations ........................... $4,700,074 $3,280,579 $2,405,539
---------- ---------- ----------
Numerator for basic and diluted earnings
per share for continuing operations ..................... $4,700,074 $3,280,579 $2,405,539
---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
---------------------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Denominator
Denominator for basic earnings per
share - weighted-average shares ............................ 9,251,915 9,242,808 9,242,808
Effect of dilutive securities:
Employee stock options ..................................... 282,899 251,111 143,929
--------- --------- ---------
Denominator for diluted earnings per
share-adjusted weighted-average shares ..................... 9,534,814 9,493,919 9,386,737
--------- --------- ---------
Earnings per share - basic .......................................... $.51 $.35 $.26
--------- --------- ---------
Earnings per share - assuming dilution .............................. $.49 $.35 $.26
--------- --------- ---------
</TABLE>
F-22
<PAGE> 89
OFFITBANK
NOTES TO FINANCIAL STATEMENTS
14. REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered by
the State of New York Banking Department. Failure to meet minimum capital
requirements can initiate certain mandatory and possible additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Bank's financial statements. The Bank's capital amounts
and classifications are calculated under regulatory accounting practices and are
subject to qualitative judgments by the regulator about components, risk
weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum ratios of total defined capital as set
forth in the table below. As of December 31, 1998 and 1997, the Bank meets all
capital adequacy requirements to which it is subject.
<TABLE>
<CAPTION>
REQUIRED FOR CAPITAL
ACTUAL ADEQUACY PURPOSES
------------------------ -------------------------
AMOUNT RATIO AMOUNT RATIO
----------- ----- ----------- -----
<S> <C> <C> <C> <C>
As of December 31, 1998:
Total capital
(to Risk-Weighted Assets) .................................... $27,100,461 91.41% $ 2,371,693 8.00%
Tier I capital
(to Risk-Weighted Assets) .................................... 27,100,461 91.41% 1,185,846 4.00%
Tier I capital
(to Average Assets) .......................................... 27,100,461 73.42% 1,476,405 4.00%
As of December 31, 1997:
Total capital
(to Risk-Weighted Assets) .................................... $25,385,324 87.80% $ 2,312,998 8.00%
Tier I capital
(to Risk-Weighted Assets) .................................... 25,385,324 87.80% 1,156,499 4.00%
Tier I capital
(to Average Assets) .......................................... 25,385,324 75.29% 1,348,757 4.00%
</TABLE>
In addition to these standard capital adequacy quantitative measures, the State
of New York Banking Department requires that Article III banking organizations
maintain a ratio of Tier I capital to client assets under discretionary
management of 0.25%. At December 31, 1998 and 1997, the Bank maintained a ratio
of 0.26% and 0.29%, respectively.
F-23
<PAGE> 90
APPENDIX A
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
dated as of May 13, 1999
by and between
Wachovia Corporation
and
OFFITBANK Holdings, Inc.
- --------------------------------------------------------------------------------
<PAGE> 91
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
RECITALS..........................................................................................................1
ARTICLE I
Certain Definitions.........................................................................................2
1.01 Certain Definitions....................................................................................2
ARTICLE II The Merger.............................................................................................8
2.01 The Merger.............................................................................................8
2.02 Effective Date and Effective Time......................................................................9
2.03 Plan of Merger.........................................................................................9
ARTICLE III Consideration; Exchange Procedures....................................................................9
3.01 Merger Consideration...................................................................................9
3.02 Rights as Stockholders; Stock Transfers...............................................................10
3.03 Fractional Shares.....................................................................................10
3.04 Exchange Procedures...................................................................................10
3.05 Anti-Dilution Provisions..............................................................................11
ARTICLE IV Actions Pending Acquisition...........................................................................11
4.01 Forbearances of OFFIT Holdings........................................................................11
4.02 Forbearances of Wachovia..............................................................................14
ARTICLE V Representations and Warranties........................................................................15
5.01 Disclosure Schedules..................................................................................15
5.02 Standard..............................................................................................15
5.03 Representations and Warranties of OFFIT Holdings......................................................15
5.04 Representations and Warranties of Wachovia............................................................30
ARTICLE VI Covenants.............................................................................................34
6.01 Reasonable Best Efforts...............................................................................34
6.02 Stockholder Approvals.................................................................................34
6.03 Registration Statement................................................................................35
6.04 Affiliate Agreements..................................................................................36
6.05 Press Releases........................................................................................36
6.06 Access; Information...................................................................................36
6.07 Acquisition Proposals.................................................................................37
6.08 Regulatory Applications...............................................................................37
6.09 Benefit Plans.........................................................................................38
6.10 Registered Funds......................................................................................39
6.11 Non-Registered Fund Client Consents...................................................................39
6.12 Notification of Certain Matters.......................................................................40
</TABLE>
A-i
<PAGE> 92
<TABLE>
<CAPTION>
Page
----
<S> <C>
6.13 NYSE Listing..........................................................................................40
6.14 Retention Program. ..................................................................................40
6.15 Indemnification.......................................................................................40
6.16 Non-Competition Agreements............................................................................41
ARTICLE VII Conditions to Consummation of the Merger.............................................................41
7.01 Conditions to Each Party's Obligation to Effect the Merger............................................41
7.02 Conditions to Obligation of OFFIT Holdings............................................................42
7.03 Conditions to Obligation of Wachovia..................................................................43
ARTICLE VIII Termination.........................................................................................46
8.01 Termination...........................................................................................46
8.02 Effect of Termination and Abandonment.................................................................46
8.03 Fee...................................................................................................47
ARTICLE IX Miscellaneous.........................................................................................49
9.01 Survival..............................................................................................49
9.02 Waiver; Amendment.....................................................................................49
9.03 Counterparts..........................................................................................49
9.04 Governing Law.........................................................................................49
9.05 Waiver of Jury Trial..................................................................................49
9.06 Assignment............................................................................................49
9.07 Expenses..............................................................................................49
9.08 Notices...............................................................................................50
9.09 Entire Understanding; No Third Party Beneficiaries....................................................51
9.10 Interpretation; Effect................................................................................51
EXHIBIT A-1 List of Certain Directors and Executive Officers [Omitted]
EXHIBIT A-2 Form of Voting Agreement [See Appendix B of this Proxy Statement]
EXHIBIT B List of Persons to Execute Non-Competition and
Employment Agreements [Omitted]
EXHIBIT C Terms and Conditions of Retention Program [Omitted]
EXHIBIT D Form of Plan of Merger
EXHIBIT E Form of Affiliates Agreement [Omitted]
</TABLE>
A-ii
<PAGE> 93
AGREEMENT AND PLAN OF MERGER, dated as of May 13, 1999 (this
"Agreement") by and between OFFITBANK Holdings, Inc. ("OFFIT Holdings") and
Wachovia Corporation ("Wachovia").
RECITALS
A. OFFIT Holdings. OFFIT Holdings is a Delaware corporation, having
its principal place of business in New York, New York. OFFITBANK ("OFFITBANK")
is a wholly owned subsidiary of OFFIT Holdings and a limited purpose trust
company chartered under the laws of the State of New York, having its principal
place of business in New York, New York.
B. Wachovia Corporation. Wachovia Corporation is a North Carolina
corporation, having its principal place of business in Winston-Salem, North
Carolina.
C. The Merger. At the Effective Time (as defined in Section 2.02),
the parties to this Agreement intend to effect the merger of OFFIT Holdings with
and into Wachovia (the "Merger"), with Wachovia surviving the Merger (Wachovia,
as the surviving corporation in the Merger, is sometimes referred to in this
Agreement as the "Surviving Corporation"). It is the intention of the parties
that the Merger qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), and any analogous
provision of state or local law.
D. Voting Agreements. As a further condition and an inducement to
Wachovia's entering into this Agreement, stockholders of OFFIT Holdings who are
also directors or executive officers of OFFIT Holdings and/or OFFITBANK
(including certain of their affiliates), each identified on Exhibit A-1, holding
the power to vote in excess of 50% of the outstanding shares of OFFIT Holdings
Common Stock have entered into agreements with Wachovia, substantially in the
form of Exhibit A-2 hereto, under which each stockholder has agreed to vote in
favor of this Agreement (the "Voting Agreements").
E. Non-Competition and Employment Agreements. As a further condition
and inducement to the willingness of Wachovia to enter into this Agreement,
certain employees of OFFIT Holdings and its Subsidiaries identified on Exhibit B
have executed and delivered non-competition and employment agreements with
Wachovia in substantially the forms provided to OFFIT Holdings.
F. Retention Program. Wachovia and OFFIT Holdings have agreed to
establish a retention program on the terms described herein and in Exhibit C,
the purpose of which is to retain the services of certain employees of OFFIT
Holdings and its Subsidiaries following the Merger.
G. Board Action. The respective Boards of Directors of each of
Wachovia and OFFIT Holdings have determined that it is in the best interests of
their respective
<PAGE> 94
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 6.07.
"Acquisition Transaction" has the meaning set forth in Section
8.03(b)(i).
"Agreement" means this Agreement, as amended or modified from time to
time in accordance with Section 9.02.
"Beneficial Ownership" has the meaning assigned to such term in
Section 13(d) of the Exchange Act.
"Business Day" means any day other than a Saturday or Sunday or a day
in which banking institutions in New York, New York are authorized or
required by law to close.
"Client" means any person, including the Registered Funds, to which
OFFIT Holdings or any of its Subsidiaries provides products or services
under any Contract.
"Code" has the meaning set forth in Recital C.
"Company Reports" has the meaning set forth in 5.03(k)(8).
"Compensation and Benefit Plans" has the meaning set forth in Section
5.03(p)(1).
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"Constituent Documents" means the charter and by-laws of a
corporation, the partnership agreement of a partnership, the trust
agreement of a trust and the comparable documents of other entities.
"Consultants" has the meaning set forth in 5.03(p)(1).
"Contract" means, with respect to any Person, any enforceable
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 6.15(a).
"DGCL" means the General Corporation Law of the State of Delaware.
"Derivatives Contracts" has the meaning set forth in Section 5.03(t).
"Determination Date" has the meaning set forth in Section 7.03(h)(2).
"Directors" has the meaning set forth in Section 5.03(p)(1).
"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.
"Employees" has the meaning set forth in Section 5.03(p)(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has the meaning set forth in Section 5.03(p)(3).
"ERISA Affiliate Plan" has the meaning set forth in Section
5.03(p)(3).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Exchange Ratio" has the meaning set forth in Section 3.01(a).
"Federal Reserve" means the Board of Governors of the Federal Reserve
System.
"Fee" has the meaning set forth in Section 8.03(a).
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"Fee Termination Event" has the meaning set forth in Section 8.03(a).
"Financial Statements" has the meaning set forth in Section
5.03(g)(1).
"Fund Board" has the meaning assigned in Section 5.03(l)(1)(A).
"Governmental Authority" means any court, administrative agency or
commission or other federal, state or local governmental authority or
instrumentality.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976.
"Indemnified Party" has the meaning set forth in Section 6.15(a).
"Initial Fee Triggering Event" has the meaning set forth in Section
8.03(b).
"Insurance Policies" has the meaning set forth in Section 5.03(w).
"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 OFFIT Holdings 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.
"Investment Contracts" means (1) each Contract relating to OFFIT
Holdings' or an OFFIT Holdings Subsidiary's rendering of investment
advisory, management, administration or any other services to an
Investment Company, including any sub-advisory or similar agreement, (2)
each plan adopted pursuant to Rule 12b-1 under the Investment Company Act
by a Registered Fund and all related agreements and (3) each Contract
pursuant to which OFFIT Holdings or an OFFIT Holdings Subsidiary renders
investment advisory or sub-advisory services to any non-Investment Company
Client.
"IRS" means the Internal Revenue Service.
"Lien" means any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance.
"Listed Termination" has the meaning set forth in Section 8.03(a).
"Litigation" has the meaning set forth in Section 5.03(n).
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"Managed Assets" means, as of any date for any Client, the aggregate
asset value of the Client's assets with respect to which OFFIT Holdings or
any of its Subsidiaries provides investment advisory or sub-advisory
services.
"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 OFFIT
Holdings and its Subsidiaries, taken as a whole, as the case may be, or
(2) the ability of either Wachovia or OFFIT Holdings to timely 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 OFFIT
Holdings, as the case may be, any effect that (1) is material and adverse
to the financial position, results of operations, business or prospects of
Wachovia and its Subsidiaries taken as a whole or OFFIT Holdings 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 OFFIT Holdings or Wachovia and
their respective Subsidiaries, or (2) would materially impair the ability
of either Wachovia or OFFIT Holdings 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 Recital C.
"Merger Consideration" has the meaning set forth in Section 2.01(a).
"MSRB" means the Municipal Securities Rulemaking Board.
"NASD" means the National Association of Securities Dealers, Inc.
"NCBCA" means the North Carolina Business Corporation Act.
"New Certificate" has the meaning set forth in Section 3.04(a).
"Non-Competition Agreement" has the meaning set forth in Section
5.03(y).
"NYSE" means the New York Stock Exchange, Inc.
"Old Certificate" has the meaning set forth in Section 3.04(a).
"OFFITBANK" has the meaning set forth in Recital A.
"OFFIT Holdings" has the meaning set forth in the preamble to this
Agreement.
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"OFFIT Holdings Affiliate" has the meaning set forth in Section
6.04(a).
"OFFIT Holdings Board" means the Board of Directors of OFFIT
Holdings.
"OFFIT Holdings By-Laws" means the by-laws of OFFIT Holdings.
"OFFIT Holdings Certificate" means the certificate of incorporation
of OFFIT Holdings.
"OFFIT Holdings Common Stock" means the common stock, par value $.01
per share, of OFFIT Holdings.
"OFFIT Holdings' Knowledge" means, with respect to OFFIT Holdings,
the knowledge after due investigation of the Management Committee of OFFIT
Holdings, which consists of the ten most highly compensated executive
officers of OFFIT Holdings.
"OFFIT Holdings Meeting" has the meaning set forth in Section 6.02.
"OFFIT Holdings Stock Option" has the meaning set forth in Section
6.09(b).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" has the meaning set forth in Section 5.03(p).
"Person" means any individual, bank, corporation, partnership,
association, joint-stock company, business trust or unincorporated
organization.
"Previously Disclosed" by a party shall mean information set forth in
its Disclosure Schedule or specifically referred to therein as having been
furnished to Wachovia.
"Proxy Statement" has the meaning set forth in Section 6.03(a).
"Registration Statement" has the meaning set forth in Section
6.03(a).
"Registered Funds" has the meaning assigned in Section 5.03(l)(1)(A).
"Replacement Option" has the meaning set forth in Section 6.09(b).
"Revenue Run-Rate" has the meaning set forth in Section 7.03(h)(3).
"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
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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 5.04(g)(1).
"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 and the MSRB
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 OFFIT Holdings, one
of its Subsidiaries or an Investment Company is otherwise subject.
"Shareholders' Agreement" has the meaning set forth in Section
5.03(aa).
"Subsequent Fee Triggering Event" has the meaning set forth in
Section 8.03(c).
"Subsidiary" and "Significant Subsidiary" have the meanings ascribed
to them in Rule 1-02 of SEC Regulation S-X.
"Surviving Corporation" has the meaning set forth in Recital C.
"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.
"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" has the meaning set forth in Section 5.03(b).
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"Voting Agreements" has the meaning set forth in Recital D.
"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.
"Y2K Plan" means a plan of reprogramming and testing for the purpose
of providing reasonable assurance that all significant computer software
and hardware developed or currently used by OFFIT Holdings or its
Subsidiaries will be Y2K Compliant.
"Y2K Compliant" means, with respect to any computer software or
hardware, to the extent such computer software or hardware has a calendar
function, that it is able to accurately process date and time data
(including calculating, comparing, and sequencing) from, into and between
the twentieth and twenty-first centuries, and the years 1999 and 2000 and
leap year calculations, and will not generate erroneous data or cause a
system to fail because of a date of the year 1999 or later (to the extent
that other information technology that is used in combination with such
software or hardware properly exchanges date and time data with it).
ARTICLE II
THE MERGER
2.01 The Merger. (a) At the Effective Time, OFFIT Holdings will merge
with and into Wachovia, the separate corporate existence of OFFIT Holdings will
cease and Wachovia will 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 OFFIT Holdings (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 (1) alter or change the amount or kind of consideration to be
issued to holders of OFFIT Holdings Common Stock as provided for in this
Agreement (the "Merger Consideration"), (2) adversely affect the tax treatment
of OFFIT Holdings or OFFIT Holdings' stockholders as a result of receiving the
Merger Consideration or (3) materially impede or delay consummation of the
transactions contemplated by this Agreement. In the event of such an election,
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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 the 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 NCBCA or such
later date and time as may be set forth in such certificate of articles. The
Merger shall have the effects prescribed in the NCBCA 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 has 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 OFFIT Holdings hereby enter into a
separate plan of merger, in substantially the form of Exhibit D, for purposes of
any filing requirement.
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 OFFIT Holdings Common Stock. Each share of OFFIT
Holdings Common Stock, excluding Treasury Stock and shares as to which
dissenters' rights
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have been properly perfected, issued and outstanding immediately prior to the
Effective Time shall become and be converted into 0.2284 of a share (subject to
adjustment pursuant to Section 3.05, the "Exchange Ratio") of Wachovia Common
Stock.
(b) Outstanding Wachovia Stock. Each share of Wachovia Stock issued
and outstanding immediately before the Effective Time will remain issued and
outstanding and unaffected by the Merger.
(c) Treasury Stock. Each share of OFFIT Holdings Common Stock held as
Treasury Stock immediately prior to the Effective Time shall be canceled and
retired at the Effective Time and no consideration shall be issued in exchange
therefor.
3.02 Rights as Stockholders; Stock Transfers. At the Effective Time,
holders of OFFIT Holdings Common Stock shall cease to be, and shall have no
rights as, stockholders of OFFIT Holdings, other than to receive any dividend or
other distribution with respect to such OFFIT Holdings Common Stock with a
record date occurring prior to the Effective Time and the consideration provided
under this Article III. After the Effective Time, there shall be no transfers on
the stock transfer books of OFFIT Holdings or the Surviving Corporation of
shares of OFFIT Holdings Common 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 OFFIT Holdings 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
closing 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) Within three Business Days of the
Effective Date, Wachovia shall send or cause to be sent to each former holder of
record of shares of OFFIT Holdings Common Stock immediately prior to the
Effective Time transmittal materials for use in exchanging such stockholder's
certificates formerly representing shares of OFFIT Holdings 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 OFFIT Holdings 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
Wachovia of Old Certificates representing such shares of OFFIT Holdings Common
Stock (or indemnity reasonably satisfactory to Wachovia, 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
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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 OFFIT
Holdings shall not be exchanged for New Certificates until Wachovia has received
a written agreement from such person as specified in Section 6.07.
(b) Notwithstanding the foregoing, neither party hereto shall be
liable to any former holder of OFFIT Holdings Common Stock for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(c) 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 OFFIT Holdings 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 3.04, and no such
shares of OFFIT Holdings 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.
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 ACQUISITION
4.01 Forbearances of OFFIT Holdings. From the date hereof until the
Effective Time, except as expressly contemplated by this Agreement, without the
prior written consent of Wachovia, OFFIT Holdings will not, and will cause each
of its Subsidiaries not to:
(a) Ordinary Course. Conduct the business of OFFIT Holdings and its
Subsidiaries other than in the ordinary course or fail to use reasonable efforts
to preserve intact in all material respects their business organizations and
assets and maintain in all material respects their rights, franchises and
existing relations with
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clients, suppliers, employees and business associates, or take any action
reasonably likely to have a Material Adverse Effect with respect to OFFIT
Holdings.
(b) Capital Stock. Other than pursuant to Rights Previously Disclosed
and outstanding on the date hereof, (1) issue, sell or otherwise permit to
become outstanding, or authorize the creation of, any additional shares of OFFIT
Holdings Common Stock, any other OFFIT Holdings capital stock or any Rights, (2)
enter into any agreement with respect to the foregoing, or (3) permit any
additional shares of OFFIT Holdings Common Stock or of any other OFFIT Holdings
capital stock to become subject to new grants of employee or director stock
options, other Rights or similar stock-based employee rights.
(c) Dividends, Etc. (1) Make, declare, pay or set aside for payment
any dividend (other than (A) the customary semi-annual cash dividend scheduled
for June or July 1999 on OFFIT Holdings Common Stock in an amount not to exceed
16 2/3 cents per share and (B) in the event that the record date for the payment
of the regularly scheduled quarterly cash dividend on Wachovia Common Stock
expected to occur in October 1999 occurs prior to the Effective Date, a cash
dividend on OFFIT Holdings Common Stock in an amount not to exceed 8 1/3 cents
per share) on or in respect of, or declare or make any distribution on, any
shares of OFFIT Holdings Common Stock or of any other OFFIT Holdings capital
stock or (2) directly or indirectly adjust, split, combine, redeem, reclassify,
purchase or otherwise acquire, any shares of OFFIT Holdings Common Stock or of
any other OFFIT Holdings capital stock.
(d) Compensation; Employment Agreements; Etc. Enter into or amend or
renew any employment, consulting, severance or similar agreements or
arrangements with any stockholder, director, officer, employee or consultant of
OFFIT Holdings or its Subsidiaries, or grant any salary or wage increase or
increase any benefit (including incentive or bonus payments), except (1) for
normal individual increases in compensation to employees in the ordinary course
of business consistent with past practice as Previously Disclosed, (2) for other
changes that are required by applicable law, (3) to satisfy Previously Disclosed
contractual obligations existing as of the date hereof or (4) employee and
consulting arrangements (other than executive officers or investment managers)
in the ordinary course of business consistent with past practice after
consultation with Wachovia and consideration of its views.
(e) Benefit Plans. Enter into, establish, adopt or amend (except as
may be required by applicable law) any pension, retirement, stock option, stock
purchase, savings, profit sharing, deferred compensation, consulting, bonus,
group insurance or other employee benefit, incentive or welfare contract, plan
or arrangement, or any trust agreement (or similar arrangement) related thereto,
in respect of any stockholder, director, partner, officer, employee or
consultant of OFFIT Holdings 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.
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(f) Dispositions. Sell, transfer, mortgage, encumber or otherwise
dispose of any of its assets, deposits, business or properties except in the
ordinary course of business and in a transaction that is not Material with
respect to OFFIT Holdings.
(g) Acquisitions. Acquire all or any portion of, the assets,
business, deposits or properties of any other entity except in the ordinary
course of business and in a transaction that is not Material with respect to
OFFIT Holdings.
(h) Governing Documents. Amend the OFFIT Holdings Certificate, OFFIT
Holdings By-Laws or the certificate of incorporation or by-laws (or similar
governing documents) of any of OFFIT Holdings' 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 with respect
to OFFIT Holdings, and that does not involve or create precedent for claims,
actions or proceedings that are reasonably likely to be Material with respect to
OFFIT Holdings.
(m) Fund Action. Except as and to the extent required by law, based
upon the written advice of outside counsel, request that any action be taken by
any Fund Board, other than (1) routine actions that would not, individually or
in the aggregate, be reasonably likely to have a Material Adverse Effect on
OFFIT Holdings or any Investment Company, (2) actions Previously Disclosed, or
(3) actions necessary to allow consummation of the Merger.
(n) Adverse Actions. (1) Knowingly take any action which would
materially adversely affect its ability to consummate the Merger; (2) 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
(3) 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.
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(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 $100,000 in the aggregate.
(p) Risk Management. Except as required by applicable law or
regulation, (1) implement or adopt any material change in its interest rate and
other risk management policies, procedures or practices applied to the operation
of OFFIT Holdings or any of its Subsidiaries; or (2) fail to follow its existing
policies or practices with respect to managing its exposure to interest rate and
other risk.
(q) New Activities. Knowingly initiate any new business activity (1)
that would be impermissible for a "bank holding company" under the Bank Holding
Company Act of 1956, as amended or (2) without first disclosing and discussing
with Wachovia and its counsel its intent to initiate any such new business
activity.
(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 Forbearances of Wachovia. From the date hereof until the
Effective Time, except as expressly contemplated by this Agreement, without the
prior written consent of OFFIT Holdings, 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.
(b) Adverse Actions. (1) Knowingly take any action which would
materially adversely affect its ability to consummate the Merger; (2) 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
(3) 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.
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(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 OFFIT Holdings a schedule and OFFIT Holdings 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 OFFIT Holdings or
Wachovia contained in Section 5.03 (other than those contained in Sections
5.03(a) (with the exception of the second sentence of Section 5.03(a)), (b),
(c)(1), (c)(2), (c)(3)(A) (with respect to OFFITBANK only), (e), (g)(1),
(g)(3)(B), (l)(2)(A), (l)(2)(F), (p)(1), (z) and (aa)) 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 OFFIT Holdings. 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, OFFIT
Holdings hereby represents and warrants to Wachovia:
(a) Organization, Standing and Authority. OFFIT Holdings is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. OFFIT Holdings 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. The reorganization of
OFFITBANK into a holding company structure, with OFFIT Holdings as the holding
company of OFFITBANK, was effected as a tax-free reorganization under the Code.
Before the date of this agreement, OFFIT Holdings
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has made available to Wachovia a complete and correct copy of the Constituent
Documents of it and each of its Subsidiaries, each as amended to such date, and
such Constituent Documents are in full force and effect.
(b) OFFIT Holdings Stock. As of the date hereof, the authorized
capital stock of OFFIT Holdings consists solely of 30,000,000 shares of OFFIT
Holdings Common Stock, of which 9,254,808 shares were outstanding as of the date
hereof, and of 1,000,000 shares of undesignated preferred stock, par value $.01
per share, of which no shares were outstanding as of the date hereof. As of the
date hereof, no shares of OFFIT Holdings Common Stock were held in treasury by
OFFIT Holdings or otherwise owned by OFFIT Holdings or its Subsidiaries
("Treasury Stock"). The outstanding shares of OFFIT Holdings 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 OFFIT Holdings Common Stock or of any other
OFFIT Holdings capital stock authorized and reserved for issuance, OFFIT
Holdings does not have any Rights issued or outstanding with respect to OFFIT
Holdings Common Stock or any other OFFIT Holdings capital stock, and OFFIT
Holdings does not have any commitment to authorize, issue or sell any OFFIT
Holdings Common Stock or any other OFFIT Holdings capital stock or Rights,
except pursuant to this Agreement. The number of shares of OFFIT Holdings Common
Stock which are issuable and reserved for issuance upon exercise of OFFIT
Holdings Stock Options as of the date hereof, and the exercise prices and other
terms thereof, are Previously Disclosed.
(c) Subsidiaries.
(1) (A) OFFIT Holdings has Previously Disclosed a list of all of its
Subsidiaries together with the jurisdiction of organization of each such
Subsidiary, (B) 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 securities and (F)
all the equity securities of each Subsidiary held by OFFIT Holdings or its
Subsidiaries are fully paid and nonassessable and are owned by OFFIT
Holdings or its Subsidiaries free and clear of any Liens.
(2) OFFIT Holdings does not own beneficially, directly or indirectly,
any equity securities or similar interests of any Person, or any interest
in a partnership or joint venture of any kind, other than its
Subsidiaries.
(3) Each of OFFIT Holdings' Subsidiaries (A) has been duly organized
and is validly existing in good standing under the laws of the
jurisdiction of its
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organization, and (B) 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. OFFIT Holdings 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 OFFIT Holdings 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. Subject to the 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 OFFIT Holdings Common Stock entitled
to vote thereon, this Agreement and the transactions contemplated hereby have
been authorized by all necessary corporate action of OFFIT Holdings and the
OFFIT Holdings Board prior to the date hereof. This Agreement is a valid and
legally binding obligation of OFFIT Holdings, 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 OFFIT Holdings Board has received the written opinion of
Merrill Lynch, Pierce, Fenner & Smith Incorporated to the effect that as of the
date hereof the Exchange Ratio is fair to the holders of OFFIT Holdings Common
Stock from a financial point of view.
(f) Regulatory Filings; No Defaults.
(1) 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 OFFIT Holdings in connection
with the execution, delivery or performance by OFFIT Holdings 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 of articles of merger with the
North Carolina Secretary of State pursuant to the NCBCA and of a
certificate of merger with the Delaware Secretary of State pursuant to the
DGCL; (C) the filing of a notice under the HSR Act; and (D) the filing of
applications or notices with, and the receipt of approvals and exemptions
from, the State of New York Banking Department, the Superintendent of
Banks or the Banking Board and the Federal Reserve.
(2) The receipt of the regulatory approvals referred to in Section
5.03(f)(1), except as may be provided in any conditions thereto, 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 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 (with or without the
giving of notice, passage of time or both) under any law, rule or
regulation or any
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judgment, decree, order, governmental or non-governmental permit or
license, or Contract of OFFIT Holdings or of any of its Subsidiaries or to
which OFFIT Holdings 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 OFFIT Holdings Certificate or the OFFIT Holdings 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; No Material Adverse Effect.
(1) OFFIT Holdings' (or, prior to the reorganization of OFFITBANK
into a holding company structure on January 1, 1999, OFFITBANK's) audited
consolidated financial statements for the fiscal years ended December 31,
1996, 1997 and 1998, and unaudited consolidated financial statements for
the quarters ended subsequent to December 31, 1998, have been made
available to Wachovia (or, in the case of unaudited financial statements
for quarters ending after the date of this Agreement and before the
Effective Time, will be made available as soon as they are completed by
OFFIT Holdings). Each of the balance sheets contained therein (including
the related notes and schedules thereto) fairly presents, or will fairly
present, the financial position of OFFIT Holdings (or OFFITBANK) 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
contained therein (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 OFFIT Holdings (or OFFITBANK) 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").
(2) Since December 31, 1998, OFFIT Holdings and its Subsidiaries have
not incurred any liability other than in the ordinary course of business
consistent with past practice.
(3) Since December 31, 1998, (A) OFFIT Holdings 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 OFFIT Holdings.
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(h) Contracts.
(1) OFFIT Holdings has Previously Disclosed each of the following
Contracts to which either OFFIT Holdings or any of its Subsidiaries is a
party as of the date hereof:
(A) any lease of real property;
(B) any agreement for the purchase of materials, supplies,
goods, services, equipment or other assets that provides for either
(x) annual payments of $250,000 or more or (y) aggregate payments of
$500,000 or more;
(C) any partnership, joint venture or other similar agreement or
arrangement, or 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 or such person;
(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 $100,000 (in
either case, whether incurred, assumed, guaranteed or secured by any
asset);
(F) any agreement that creates future payment obligations in
excess of $250,000 in the aggregate and which by its terms does not
terminate or is not terminable without penalty upon notice of 180
days or less;
(G) any license, franchise or similar agreement material to the
business and operations of OFFIT Holdings 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 OFFIT
Holdings or any of its Subsidiaries;
(H) any exclusive dealing agreement imposed on OFFIT Holdings or
any of its Subsidiaries or any agreement that limits the freedom of
OFFIT Holdings 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;
(I) any Contract with any stockholder of OFFIT Holdings or any
other Affiliate of OFFIT Holdings or of any stockholder of OFFIT
Holdings; and
(J) any other Material Contract.
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(2) Each Contract that has been, or is required to be Previously
Disclosed pursuant to this Section, is a valid and binding agreement of
OFFIT Holdings or one or more of its Subsidiaries, as the case may be, and
is in full force and effect, and the parties thereto are not in default or
breach under the terms of any such Contract.
(i) Contracts with Clients. Each of OFFIT Holdings 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 with or threatened by any Client under the terms
of any such Contract or with any former Client. OFFIT Holdings has made
available to Wachovia true and complete copies of all advisory, sub-advisory and
similar agreements with any Clients.
(j) Registrations. Neither OFFIT Holdings nor any of its Subsidiaries is
registered or required to be registered as an investment adviser under the
Investment Advisers Act or a broker/dealer under the Exchange Act. OFFIT
Holdings and its Subsidiaries and each of their employees, in their capacities
as employees, which are or who are required to be registered as a broker/dealer,
a registered representative, an investment company, 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 and such registrations as currently filed, and all
periodic reports required to be filed with respect thereto, are accurate and
complete.
(k) Compliance with Laws. Each of OFFIT Holdings and its
Subsidiaries, and, to the best of OFFIT Holdings' Knowledge, each of their
respective officers and employees:
(1) is in compliance with all applicable federal, state, local and
foreign 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;
(2) 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 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 OFFIT Holdings'
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;
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(3) has received, since January 1, 1996, 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 best of OFFIT
Holdings' Knowledge, do any grounds for any of the foregoing exist), (C)
requiring any of them (including any of OFFIT Holdings' or its
Subsidiary's directors or controlling persons) to enter into a cease and
desist order, 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);
(4) is not aware of any pending or threatened investigation, review
or disciplinary proceedings by any Governmental Authority or
Self-Regulatory Organization against OFFIT Holdings, any of its
Subsidiaries or any stockholder, officer, director or employee thereof;
(5) is not required to be registered as an investment company,
commodity trading adviser, 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;
(6) has properly administered all accounts for which it acts as a
fiduciary or agent, including but not limited to accounts for which it
serves as a trustee, agent, custodian, personal representative, guardian,
conservator or investment adviser, in accordance with the terms of the
governing documents and applicable state and federal law and regulation
and common law; and has not committed any breach of trust with respect to
any such fiduciary or agency account, and the accountings for each such
fiduciary or agency account are true and correct and accurately reflect
the assets of such fiduciary or agency account;
(7) 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, or a recipient of any supervisory letter from, or has
adopted any board resolutions at the request of, any Governmental
Authority or Self-Regulatory Organization (including the State of New York
Banking Department, Superintendent of Banks and Banking Board), or been
advised since January 1, 1996 by any Governmental Authority or
Self-Regulatory Organization that it is considering issuing or requesting
(or is considering the appropriateness of issuing or requesting) any such
order, letter, agreement or other action or have knowledge of any pending
or threatened regulatory investigation;
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(8) since January 1, 1996, 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; and
(9) to the extent that it has purchased or purchases, in its sole
discretion, in a fiduciary capacity (including as managing agent),
securities of any Investment Company for which it acts as an investment
adviser, such purchase was or is specifically authorized by the terms of
the instrument creating the fiduciary relationship, by court order, or by
the law of the jurisdiction under which the relevant relationship is
administered.
(l) Investment Advisory Activities.
(1) Investment Companies.
(A) A true and complete list of the Investment Companies (or the
trust or corporation of which it is a series) has been Previously
Disclosed and each such Investment Company 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 has been so qualified from the date it elected to be a regulated
investment company and continues to be 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 OFFIT Holdings. To the best of OFFIT Holdings'
Knowledge, the Fund Boards operate in conformity with the requirements and
restrictions of the Investment Company Act, to the extent applicable.
OFFIT Holdings has provided to Wachovia true and complete copies of all
the Constituent Documents and related Investment Contracts of all of the
Investment Companies and all registration statements and current
prospectuses and statements of additional information of all Registered
Funds.
(B) To the best of OFFIT Holdings' Knowledge, 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 or its
distributor.
(C) Each Investment Company has been operated in compliance with its
respective objectives, policies and restrictions, including those set
forth in the
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applicable prospectus and registration statement, if any, for that
Investment Company or governing instruments for a Client. OFFIT Holdings
and its Subsidiaries have operated their investment accounts in accordance
with the investment objectives and guidelines in effect for such
investment accounts.
(D) 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.
(E) Neither OFFIT Holdings, 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 adviser (or in
any other capacity contemplated by the Investment Company Act) to an
Investment Company; neither OFFIT Holdings, nor any "associated person"
(as defined in the Investment Advisers Act) thereof, is subject to
potential disqualification pursuant to Section 203 of the Investment
Advisers Act to serve as an investment adviser or as an associated person
to a registered investment adviser or subject to disqualification under
Rule 206(4)-3 or the subject of a rebuttable presumption under Rule
206(4)-4(b) of the Investment Advisers Act.
(2) Investment Contracts and Clients.
(A) OFFIT Holdings has Previously Disclosed a correct and complete
listing, in all material respects, of (i) each Client as of the date of
this Agreement, (ii) the amount of Managed Assets of each such Client as
of March 31, 1999, and (iii) the annualized investment management fees
attributable to each such Client as of such date. OFFIT Holdings has
previously made available to Wachovia a copy of each Investment Contract
(including all amendments and modifications thereto) in effect on the date
hereof.
(B) Each Investment Contract and any subsequent renewal has been duly
authorized, executed and delivered by any of OFFIT Holdings or its
Subsidiaries that is a party thereto and, to the best of OFFIT Holdings'
Knowledge, each other party thereto, in compliance with any applicable
law, and is a valid and binding agreement of any such of OFFIT Holdings
and its Subsidiaries, as the case may be, and, to the best of OFFIT
Holdings' Knowledge, each other party thereto, enforceable in accordance
with its terms (except as enforceability may be limited by bankruptcy,
insolvency, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general
equitable principles).
(C) Each of OFFIT Holdings and its Subsidiaries and, to the best of
OFFIT Holdings' Knowledge, each of the Clients is in compliance with the
terms of each Investment Contract to which it is a party, and is not
currently in default under any of the terms of any such Investment
Contract, and to the best of OFFIT Holdings' Knowledge, no event has
occurred or condition exists that with notice or the passage of time or
both would constitute such a default. Except as Previously
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Disclosed, none of the Investment Contracts, or any other arrangements or
understandings relating to OFFIT Holdings' and its Subsidiaries' rendering
of investment advisory or management services (including all sub-advisory
services) to any Client or any other person, contains any undertaking by
OFFIT Holdings or any Subsidiary of it to cap fees or to reimburse any or
all fees thereunder.
(D) OFFIT Holdings has Previously Disclosed a correct and complete
list of each Client as of the date hereof that, to the best of OFFIT
Holdings' Knowledge, is subject to ERISA, and the accounts of each such
Client have been managed by OFFIT Holdings and its Subsidiaries in
compliance with the applicable requirements of ERISA.
(E) The Managed Assets of each Client have been, are being and will
be invested in a manner consistent with the investment objectives or
policies (if any) of the Client.
(F) OFFIT Holdings has Previously Disclosed a complete and accurate
calculation of the Revenue Run-Rate as of March 31, 1999.
(m) Properties; Securities.
(1) Except as reserved against in the Financial Statements dated
before the date hereof, OFFIT Holdings 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 OFFIT Holdings and its Subsidiaries as of the dates
thereof. To the best of OFFIT Holdings' Knowledge, all buildings and all
the Material fixtures, equipment, and other property and assets held under
leases or subleases by any of OFFIT Holdings 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).
OFFIT Holdings has Previously Disclosed, as of the date hereof, a list of
all real estate owned by it or an OFFIT Holdings Subsidiary. Each of OFFIT
Holdings and its Subsidiaries has good and marketable title to all
securities held by it (except securities sold under repurchase agreements
or held in any fiduciary or agency capacity), free and clear of any Lien,
except to the extent such securities are pledged in the ordinary course of
business consistent with prudent and past business practices to secure
obligations of each of OFFIT Holdings or any of its Subsidiaries. Such
securities are valued on the books of OFFIT Holdings or its Subsidiaries
in accordance with generally accepted accounting practices.
(2) OFFIT Holdings has Previously Disclosed a list of all equity
securities it, or an OFFIT Holdings 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). OFFIT Holdings has
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Previously Disclosed a list of all partnerships, limited liability
companies, joint ventures or similar entities, in which it owns or
controls any interest, directly or indirectly, and the nature and amount
of each such interest.
(n) Litigation. No litigation, proceeding, investigation or
controversy ("Litigation") before any court, arbitrator, mediator, Governmental
Authority or Self-Regulatory Organization is pending against OFFIT Holdings,
any of its Subsidiaries or any Investment Company, and, to the best of OFFIT
Holdings' 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 OFFIT Holdings' Knowledge, threatened) arising out
of any state of facts relating to the sale of investment products or the
providing of advice by OFFIT Holdings, the OFFIT Holdings 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, Derivatives Contracts or structured
notes).
(o) No Brokers. No action has been taken by OFFIT Holdings or any of
its Subsidiaries 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, except as Previously
Disclosed.
(p) Employee Benefit Plans.
(1) Section 5.03(p)(1) of OFFIT Holdings' Disclosure Schedule
contains a complete and accurate list in all material respects 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 in which any employee or former
employee (the "Employees"), consultant or former consultant (the
"Consultants") or director or former director (the "Directors") of OFFIT
Holdings or any of its Subsidiaries participates or to which any such
Employees, Consultants or Directors are a party (the "Compensation and
Benefit Plans"). A complete and accurate copy in all material respects of
each Compensation and Benefit Plan has been provided or made available to
Wachovia prior to the date hereof. Neither OFFIT Holdings 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 required by law or as expressly contemplated hereby.
(2) 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 and the Code,
and any regulations or rules promulgated thereunder, and all filings,
disclosures and notices required by ERISA and the Code, 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
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intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter, and OFFIT Holdings 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 best of
OFFIT Holdings' Knowledge, threatened legal action, suit or claim relating
to the Compensation and Benefit Plans, other than routine claims for
benefits. Neither OFFIT Holdings 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
OFFIT Holdings 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.
(3) No Compensation and Benefit Plan is subject to Title IV of ERISA
and no liability under Title IV of ERISA has been or is expected to be
incurred by OFFIT Holdings 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 OFFIT Holdings under Section
4001(a)(14) of ERISA or Section 414(b) or (c) of the Code (an "ERISA
Affiliate Plan"). All contributions required to be made under the terms of
any Compensation and Benefit Plan or ERISA Affiliate Plan have been timely
made or have been reflected on the Financial Statements.
(4) Neither OFFIT Holdings 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. To the best of OFFIT Holdings'
Knowledge, there has been no communication to Employees by OFFIT Holdings
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.
(5) 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.
(6) 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, OFFIT Holdings or the Surviving Corporation, or
any of their respective Subsidiaries will
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be obligated to make a payment 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 OFFIT Holdings nor any of its Subsidiaries
is a party to or is bound by any collective bargaining agreement, contract or
other labor agreement or understanding with a labor union or labor organization
concerning a labor arrangement, nor is OFFIT Holdings 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 OFFIT Holdings 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 the best of OFFIT Holdings' Knowledge, threatened,
nor is OFFIT Holdings 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) Tax Matters. (1) All Tax Returns that are required to be filed by
or with respect to OFFIT Holdings and its Subsidiaries have been duly and timely
filed, (2) all Taxes owed by OFFIT Holdings or its Subsidiaries have been paid
in full or will be paid in full when due, (3) the Tax Returns referred to in
clause (1) 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, (4) all
deficiencies asserted or assessments made as a result of such examinations have
been paid in full, (5) 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 (1) are currently pending, (6) all Taxes required by law to be
withheld have been withheld and paid over to the proper governmental authority
in a timely manner, and (7) no waivers of statutes of limitation have been given
by or requested with respect to any Taxes of OFFIT Holdings or its Subsidiaries.
OFFIT Holdings has made available to Wachovia true and correct copies of the
United States federal income Tax Returns filed by OFFIT Holdings and its
Subsidiaries for each of the three most recent fiscal years ended on or before
December 31, 1998. OFFIT Holdings 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 OFFIT Holdings nor any of its Subsidiaries has
requested or received a private letter ruling from any taxing authority that is
or would be binding on it. Neither OFFIT Holdings nor any of its Subsidiaries is
a party to any tax sharing agreement or arrangement other than with each other.
Neither OFFIT Holdings nor any of its Subsidiaries has been a member of any
consolidated group for income tax purposes other than the consolidated group of
which OFFIT Holdings is the common parent. Neither OFFIT Holdings 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 the
Financial Statements available on or prior to the date hereof in excess of the
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amounts accrued with respect thereto that are reflected in the Financial
Statements available prior to the date hereof. Neither OFFIT Holdings 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. No liens for Taxes exist with respect to
any of the assets or properties of OFFIT Holdings or its Subsidiaries, except
for statutory liens for Taxes not yet due or payable or that are being contested
in good faith and reserved for in accordance with United States generally
accepted accounting principles. Neither OFFIT Holdings nor any of its
Subsidiaries has been a party to any distribution occurring during the last
three years in which the parties to such distribution treated the distribution
as one to which Section 355 of the Code applied.
(s) Internal Controls. None of the records, systems, controls, data
or information of OFFIT Holdings 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 all means of access thereto and therefrom)
are not under the exclusive ownership and direct control of OFFIT Holdings or
its Subsidiaries or accountants retained by OFFIT Holdings or its Subsidiaries.
OFFIT Holdings and its Subsidiaries have devised and maintained a system of
internal accounting controls sufficient to provide reasonable assurances that
(1) transactions are executed in accordance with management's general or
specific authorizations, (2) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (3) access to
assets is permitted only in accordance with management's general or specific
authorization and (4) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(t) 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 OFFIT Holdings' own account, or for the
account of one or more of its customers or of OFFIT Holdings' Subsidiaries or
their customers, were entered into (1) in accordance with all applicable laws,
rules, regulations and regulatory policies and (2) with counterparties
reasonably believed to be financially responsible at the time; and each of them
constitutes the valid and legally binding obligation of OFFIT Holdings 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 OFFIT Holdings nor its
Subsidiaries, nor, to the best of OFFIT Holdings' Knowledge, any other party
thereto, is in breach of any of its obligations under any such agreement or
arrangement.
(u) Names; Trademarks; and Intellectual Property. OFFIT Holdings and
its Subsidiaries have the right to use the names, service-marks, trademarks and
other
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intellectual property currently used by them in the conduct of their businesses,
including the names "OFFITBANK" and "OFFIT"; each of such names, service-marks,
trademarks and other intellectual property 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 the
best of OFFIT Holdings' Knowledge, no other person has the right to use such
names, service-marks or trademarks in any such state.
(v) Books and Records. The books and records of OFFIT Holdings and
its Subsidiaries have been fully, properly and accurately maintained, and there
are no inaccuracies or discrepancies of any kind contained or reflected therein,
and they fairly present the financial position of OFFIT Holdings and its
Subsidiaries.
(w) Insurance. OFFIT Holdings' Disclosure Schedule sets forth all of
the insurance policies, binders, or bonds maintained by OFFIT Holdings or its
Subsidiaries or under which OFFIT Holdings pays the premiums ("Insurance
Policies"). OFFIT Holdings and its Subsidiaries are insured against such risks
and in such amounts as the management of OFFIT Holdings reasonably has
determined to be prudent. All the Insurance Policies are in full force and
effect; neither OFFIT Holdings nor any of its Subsidiaries has received notice
to the effect that OFFIT Holdings or any of its Subsidiaries is in default under
any applicable Insurance Policies, and all claims thereunder have been filed in
due and timely fashion.
(x) Year 2000 Compliance. The software and hardware operated by OFFIT
Holdings, its Subsidiaries and each of the Investment Companies 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. A
true and complete copy of OFFIT Holdings' Y2K Plan has been made available to
Wachovia, and OFFIT Holdings and its Subsidiaries are in the process of
effecting the Y2K Plan in accordance with the schedule provided for therein. To
the best of OFFIT Holdings' Knowledge, incurring the costs to implement the Y2K
Plan is not reasonably likely to have a Material Adverse Effect with respect to
OFFIT Holdings.
(y) Non-Competition Agreement. OFFIT Holdings has Previously
Disclosed a complete and accurate list of each employee of OFFIT Holdings or any
OFFIT Holdings Subsidiary who has entered into a non-competition agreement with
either OFFIT Holdings or any OFFIT Holdings Subsidiary prior to the date hereof
(each, a "Non-Competition Agreement") which is in effect as of the date hereof,
and has Previously Disclosed a copy of each such Non-Competition Agreement.
(aa) Shareholders' Agreement. OFFIT Holdings has Previously Disclosed
the Shareholders' Agreement dated July 13, 1990 (the "Shareholders' Agreement").
Pursuant to the terms of the transaction pursuant to which OFFIT Holdings became
the owner of all of the shares of OFFITBANK (which transaction was consented to
in
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writing by all of the stockholders of OFFITBANK), the Shareholders' Agreement
became an agreement with OFFIT Holdings and the stockholders of OFFIT Holdings
Common Stock, except for Sections 6 and 9 thereunder. In connection with the
entering into of each of the Voting Agreements, OFFIT Holdings has taken all
action necessary under the Shareholders' Agreement by way of the adoption of
OFFIT Holdings Board resolutions, which resolutions have not been amended,
modified or rescinded and remain in full force and effect (i) to permit each of
the stockholders that is a party to a Voting Agreement to enter into such Voting
Agreement, (ii) to permit each such stockholder to take the actions required and
contemplated thereby, (iii) to waive any rights OFFIT Holdings may have pursuant
to Sections 2 and 5 of the Shareholders' Agreement and (iv) to consent to the
termination of the Shareholders' Agreement simultaneously with the effectiveness
of the Merger.
(bb) Disclosure. The representations and warranties contained in this
Section 5.03 do not contain any untrue statement of a Material fact or omit to
state any Material fact necessary in order to make the statements and
information contained in this Section 5.03 not misleading.
5.04 Representations and Warranties of 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 OFFIT Holdings 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.
(1) 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
203,693,747 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 Stock, and Wachovia does not have any
commitment to authorize, issue or sell any Wachovia Stock or Rights,
except pursuant to this Agreement.
(2) The shares of Wachovia Common Stock to be issued in exchange for
shares of OFFIT Holdings 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.
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(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. Each of Wachovia and 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 Wachovia
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.
(1) 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) the filings of applications or notices
with, and the receipt of approvals and exemptions from, the State of New
York Banking Department, Superintendent of Banks or Banking Board and the
Federal Reserve; (B) the filing of a notice under the HSR Act; (C) the
filings of articles of merger with the North Carolina Secretary of State
pursuant to the NCBCA and of 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 Common Stock in the Merger; (E) approval of the listing on the
NYSE of Wachovia Common Stock to be issued in the Merger; (F) the filing
and declaration of effectiveness of the Registration Statement; and (G) the
filings and receipts of approvals set forth in Section 7.01(b).
(2) 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
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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.
(1) Wachovia's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998, and all other reports, registration statements,
definitive proxy statements or information statements filed or to be filed
by it or any of its Subsidiaries subsequent to December 31, 1998 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 with the SEC (collectively,
Wachovia's "SEC Documents"), 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; 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.
(2) Since December 31, 1998, no event has occurred or circumstance
arisen that, individually or taken together with all other facts,
circumstances and events (described in any paragraph of this Section 5.04
or otherwise), is reasonably likely to have a Material Adverse Effect with
respect to Wachovia.
(h) Litigation; Regulatory Action.
(1) 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
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Wachovia's knowledge, no such litigation, claim or other proceeding has
been threatened.
(2) 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 Significant
Subsidiaries:
(1) in the conduct of its business, is in compliance with all
applicable federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable thereto or to
the employees conducting such businesses, including, without limitation,
the Equal Credit Opportunity Act, the Fair Housing Act, the Community
Reinvestment Act, the Home Mortgage Disclosure Act and all other
applicable fair lending laws and other laws relating to discriminatory
business practices; and
(2) 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 OFFIT Holdings' Knowledge, no
suspension or cancellation of any of them is threatened.
(j) Investment Adviser Qualification. Neither Wachovia, 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 adviser (or in any other capacity contemplated by the Investment
Company Act) to an Investment Company; neither Wachovia, nor any "associated
person" (as defined in the Investment Advisers Act) thereof, is subject to
potential disqualification pursuant to Section 203 of the Investment Advisers
Act to serve as an investment adviser or as an associated person to a registered
investment adviser or subject to disqualification under Rule 206(4)-3 or the
subject of a rebuttable presumption under Rule 206(4)-4(b) of the Investment
Advisers Act.
(k) Derivatives; Etc. All Derivatives Contracts, whether entered into
for Wachovia's own account, or for the account of one or more of its customers
or of Wachovia's Subsidiaries or their customers, were entered into (1) in
accordance with all applicable laws, rules, regulations and regulatory policies
and (2) with counterparties reasonably believed to be financially responsible at
the time; and each
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of them constitutes the valid and legally binding obligation of Wachovia 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 Wachovia nor its
Subsidiaries, nor, to the best of Wachovia's knowledge, any other party thereto,
is in breach of any of its obligations under any such agreement or arrangement.
(l) Tax Matters. Neither Wachovia nor any of its Subsidiaries has any
reason to believe that any conditions exist which might prevent or impede the
Merger from qualifying as a reorganization within the meaning of section 368(a)
of the Code.
(m) 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 other than the broker's fee payable to Credit Suisse First
Boston Corporation.
ARTICLE VI
COVENANTS
6.01 Reasonable Best Efforts. (a) Subject to the terms and conditions
of this Agreement, each of OFFIT Holdings 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), OFFIT Holdings
agrees to use its reasonable best efforts to obtain the consent or approval of
all persons party to a Contract with OFFIT Holdings or its Subsidiaries, 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. OFFIT Holdings agrees to take, in
accordance with applicable law and the OFFIT Holdings Certificate and OFFIT
Holdings By-Laws, all action necessary to convene an appropriate meeting of
stockholders of OFFIT Holdings to consider and vote upon the approval and
adoption of this Agreement and any other matters required to be approved by
OFFIT Holdings' stockholders for consummation of the Merger (including any
adjournment or postponement, the "OFFIT Holdings Meeting") as promptly as
practicable after the Registration Statement
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is declared effective. The OFFIT Holdings Board has recommended (and will
continue to recommend, except to the extent legally required for the discharge
by the OFFIT Holdings Board of its fiduciary duties (after consultation with
outside counsel) as a result of an unsolicited written, bona fide Acquisition
Proposal, such approval), and, subject to the foregoing exception, OFFIT
Holdings shall take all reasonable, lawful action to solicit such approval by
its stockholders.
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 Common Stock
in the Merger (including the proxy statement and other proxy solicitation
materials of OFFIT Holdings 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 OFFIT Holdings and its Subsidiaries have cooperated
as required above, Wachovia agrees to file the Registration Statement with the
SEC as soon as reasonably practicable. Each of OFFIT Holdings 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.
OFFIT Holdings agrees to furnish to Wachovia all information concerning OFFIT
Holdings, its Subsidiaries, officers, directors and stockholders as may be
reasonably requested in connection with the foregoing.
(b) Each of OFFIT Holdings 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 (1) 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 (2) the
Proxy Statement and any amendment or supplement thereto will, at the date of
mailing to stockholders and at the time of the OFFIT Holdings 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 OFFIT Holdings 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
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misleading, to promptly inform the other party thereof and to take the necessary
steps to correct the Proxy Statement.
(c) Wachovia agrees to advise OFFIT Holdings, 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 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 Affiliate Agreements. (a) Not later than the 15th day prior to
the mailing of the Proxy Statement, OFFIT Holdings shall deliver to Wachovia a
schedule of each person that, to the best of OFFIT Holdings' Knowledge, is or is
reasonably likely to be, as of the date of the OFFIT Holdings Meeting, deemed to
be an "affiliate" of it (each, a "OFFIT Holdings Affiliate") as that term is
used in Rule 145 under the Securities Act.
(b) OFFIT Holdings shall use its reasonable best efforts to cause
each person who may be deemed to be an OFFIT Holdings 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 E.
6.05 Press Releases. Each of OFFIT Holdings and Wachovia agrees that
it will not (nor will any of their respective Subsidiaries), 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,
after consultation where feasible, as otherwise required by applicable law or
regulation or NYSE rules.
6.06 Access; Information. (a) OFFIT Holdings 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, all Investment Contracts, tax
returns and work papers of independent auditors), properties, personnel of OFFIT
Holdings and its Subsidiaries and to such other information as Wachovia may
reasonably request and, during such period, it shall promptly make available to
Wachovia (1) a copy of each material report, schedule and other document filed
by it or its Subsidiaries pursuant to the requirements of federal or state
securities or banking laws, and (2) all other information concerning the
business, properties and personnel of it or its Subsidiaries as Wachovia 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
6.06 (as well as any other information obtained prior to the date hereof in
connection with its consideration of the transactions contemplated hereby and
the entering into of this Agreement) for any
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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 6.06 (as well as any other
information obtained prior to the date hereof in connection with the entering
into of this Agreement) unless such information (1) was already known to
Wachovia, (2) becomes available to Wachovia from other sources not known by such
party to be bound by a confidentiality obligation, (3) is disclosed with the
prior written approval of the party to which such information pertains or (4) 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 OFFIT Holdings to be returned to OFFIT Holdings. No investigation by
Wachovia of the business and affairs of OFFIT Holdings and its Subsidiaries
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.
6.07 Acquisition Proposals. OFFIT Holdings agrees that neither it nor
any of its Subsidiaries nor any of the respective officers and directors of
OFFIT Holdings or its Subsidiaries shall, and OFFIT Holdings 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 OFFIT Holdings) 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, OFFIT Holdings or its Subsidiaries
(any such proposal or offer being hereinafter referred to as an "Acquisition
Proposal") or, 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. OFFIT Holdings 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. OFFIT Holdings shall promptly (within 24
hours) advise Wachovia following the receipt by OFFIT Holdings 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.
6.08 Regulatory Applications. (a) Wachovia and OFFIT Holdings 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
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contemplated by this Agreement. Each of Wachovia and OFFIT Holdings 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.
6.09 Benefit Plans. (a) Employee Benefits. Wachovia agrees that,
during the time period commencing on the Effective Time and ending on December
31, 1999, the employees of OFFIT Holdings will continue to be provided with
benefits under employee benefit plans (other than plans involving the issuance
of securities of OFFIT Holdings or Wachovia) which in the aggregate are
substantially comparable to those currently provided by OFFIT Holdings to such
employees. To the extent that Wachovia causes an employee benefit plan
maintained by Wachovia to cover employees of OFFIT Holdings, Wachovia shall
cause such employee benefit plan to credit such Employee's service with OFFIT
Holdings prior to the Effective Date for purposes of participation, eligibility
and vesting, but not for purposes of benefit accrual, to the same extent that
such service was credited by OFFIT Holdings. Notwithstanding the foregoing,
Wachovia agrees that no changes shall be made with respect to the employee
welfare benefit plans of OFFIT Holdings prior to January 1, 2000 or the date
which coincides with the end of such plans' plan year after the Effective Time,
if later. Except as expressly provided by the immediately preceding sentence,
nothing contained herein shall in any way limit or restrict the ability of
Wachovia to amend, modify or terminate any employee benefit plan following the
Effective Time.
(b) Options. At the Effective Time, each outstanding option to
purchase shares of OFFIT Holdings Common Stock (each, an "OFFIT Holdings Stock
Option") under the OFFIT Holdings 1993 Stock Option Plan, 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 OFFIT Holdings
Stock Option, the number of shares of Wachovia Common Stock equal to (1) the
number of shares of OFFIT Holdings Common Stock subject to the OFFIT Holdings
Stock Option immediately prior to the Effective Time, multiplied by (2) the
Exchange Ratio (such
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product rounded down to the nearest whole number), at an exercise price per
share of Wachovia Common Stock (rounded up to the nearest whole cent) equal to
(x) the aggregate exercise price for the shares of OFFIT Holdings Common Stock
which were purchasable pursuant to such OFFIT Holdings Stock Option divided by
(y) the number of full shares of Wachovia Common Stock subject to such
Replacement Option determined in accordance with the foregoing. Notwithstanding
the foregoing, each OFFIT Holdings 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, OFFIT Holdings shall take all action necessary,
including obtaining any necessary consents from Optionees, to permit the
replacement of the outstanding OFFIT Holdings Stock Options by Wachovia pursuant
to this Section.
(c) Filings. As soon as practicable after 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 Section 6.09(b), or shall
cause the Replacement Options to be covered under an existing registration
statement on Form S-8, and shall use its reasonable 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 are issued and remain
outstanding.
6.10 Registered Funds. (a) OFFIT Holdings shall use its reasonable
best efforts to obtain as promptly as practicable, the approval of the Fund
Boards and stockholders of each of the Registered 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 Registered Funds, to be
effective on the Effective Date, no less favorable to OFFIT Holdings or its
Subsidiaries to that in effect immediately prior to the Effective Time.
(b) OFFIT Holdings shall assure, at 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 and the New York Banking Law and that the use of the word
"bank" has been eliminated from the name of each Investment Company.
(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 6.10 are intended only for the benefit of parties to
this Agreement and for no other person.
6.11 Non-Registered Fund Client Consents. OFFIT Holdings shall use, and
shall cause each of its Subsidiaries to use, its reasonable best efforts to
obtain, prior
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to the Effective Date, all consents required by law or contract from each
non-Registered Fund Client who is a party to an Investment Contract, each form
of consent to be mutually satisfactory to Wachovia and OFFIT Holdings.
6.12 Notification of Certain Matters. Each of OFFIT Holdings 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.
6.13 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
OFFIT Holdings Common Stock in the Merger.
6.14 Retention Program. (a) At the Effective Time, OFFIT Holdings
will have established a retention program on terms described in Exhibit C to be
used to retain certain employees of OFFIT Holdings.
(b) Notwithstanding anything to the contrary contained in this
Agreement, Wachovia shall take all actions necessary to effect the items set
forth in Exhibit C. Exhibit C shall be deemed incorporated into this Section
6.14.
6.15 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 OFFIT Holdings 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 OFFIT
Holdings is permitted to indemnify (and advance expenses to) its directors and
officers under the DGCL, the OFFIT Holdings Certificate and the OFFIT Holdings
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 OFFIT Holdings
Certificate and the OFFIT Holdings 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.
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(b) Any Indemnified Party wishing to claim indemnification under
Section 6.15(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 6.15(a) unless and to the extent that Wachovia is actually prejudiced as
a result of such failure.
(c) 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, if
required, shall be made so that the successors and assigns of Wachovia shall
assume the obligations set forth in this Section 6.15.
6.16 Non-Competition Agreements. Neither OFFIT Holdings nor any of
its Subsidiaries shall amend or terminate any Non-Competition Agreement or
relinquish or waive, or fail in any way to enforce, any rights it may have
thereunder. OFFIT Holdings and each of its Subsidiaries shall use their
reasonable best efforts to enforce each Non-Competition Agreement to the fullest
extent permitted by law.
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 OFFIT Holdings to consummate the
Merger is subject to the fulfillment or written waiver by Wachovia and OFFIT
Holdings 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 OFFIT Holdings Common Stock entitled to vote thereon in accordance with
Section 251 of the DGCL, other applicable law and the OFFIT Holdings Certificate
and the OFFIT Holdings 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 Merger or for the prevention of any termination of any
material right, privilege, license or agreement of either Wachovia or OFFIT
Holdings or their respective Subsidiaries shall have been obtained or made and
shall be in full force and effect and all waiting periods required by law shall
have expired; and none of the foregoing shall contain any conditions,
restriction or requirements which the Wachovia Board reasonably determines would
(1) following the Effective Time, have a Material Adverse Effect with respect
OFFIT Holdings or (2) 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.
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(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 or for the prevention of any
termination of any material right, privilege, license or agreement of either
Wachovia or OFFIT Holdings or their respective Subsidiaries 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 (1) following the Effective Time, have a Material
Adverse Effect with respect to OFFIT Holdings or (2) 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) Compliance with Section 15(f) of the Investment Company Act. At
the Effective Time: (1) at least 75% of the members of the Fund Boards of each
Registered Fund which has approved a new investment advisory contract shall not
be "interested persons" (as such term is defined in the Investment Company Act)
of Wachovia (or such other entity which will act as adviser to such Registered
Funds following the Effective Time), of OFFIT Holdings or of any affiliate of
OFFIT Holdings that was the investment adviser of any such Registered Fund
immediately preceding the Effective Time; and (2) the requirements of Section
15(f)(1)(B) of the Investment Company Act shall have been complied with in that
no "unfair burden" shall have been imposed on any of the Registered Funds as a
result of this Agreement, the transactions contemplated hereunder, new
investment advisory contracts or otherwise.
(e) 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.
(f) 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.
(g) 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.
(h) 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 OFFIT Holdings. The obligation of
OFFIT Holdings to consummate the Merger is also subject to the fulfillment or
written waiver by OFFIT Holdings prior to the Effective Time of each of the
following conditions:
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(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 OFFIT Holdings 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 OFFIT Holdings
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 OFFIT Holdings' Counsel. OFFIT Holdings shall have
received opinions of Schulte Roth & Zabel LLP, counsel to OFFIT Holdings, dated
the date of the Proxy Statement and the Effective Date, to the effect that, on
the basis of facts, representations and assumptions set forth in such opinion,
(1) the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, (2) each of
OFFIT Holdings and Wachovia will be a party to the reorganization within the
meaning of Section 368(b) of the Code and (3) no gain or loss will be recognized
by stockholders of OFFIT Holdings who receive shares of Wachovia Common Stock in
exchange for shares of OFFIT Holdings Common Stock, except that gain or loss may
be recognized as to cash received in lieu of fractional share interests. In
rendering its opinions, Schulte Roth & Zabel LLP may require and rely upon
representations contained in letters from OFFIT Holdings, Wachovia, stockholders
of OFFIT Holdings 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 OFFIT Holdings 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 OFFIT Holdings by the Chief Executive Officer and the Chief Financial
Officer of OFFIT Holdings to such effect.
(b) Performance of Obligations of OFFIT Holdings. OFFIT Holdings
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
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certificate, dated the Effective Date, signed on behalf of OFFIT Holdings by the
Chief Executive Officer and the Chief Financial Officer of OFFIT Holdings to
such effect.
(c) Opinion of Wachovia's Counsel. Wachovia shall have received
opinions of Sullivan & Cromwell, special counsel to Wachovia, dated the date of
the Proxy Statement and the Effective Date, to the effect that, on the basis of
facts, representations and assumptions set forth in such opinion, (1) the Merger
will be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, (2) each of OFFIT Holdings and Wachovia
will be a party to the reorganization within the meaning of Section 368(b) of
the Code and (3) no gain or loss will be recognized by stockholders of OFFIT
Holdings who receive shares of Wachovia Common Stock in exchange for shares of
OFFIT Holdings Common Stock, except that gain or loss may be recognized as to
cash received in lieu of fractional share interests. In rendering its opinions,
Sullivan & Cromwell may require and rely upon representations contained in
letters from OFFIT Holdings, Wachovia, stockholders of OFFIT Holdings and
others.
(d) Non-Competition and Employment Agreements. All of the
non-competition and employment agreements entered into with the persons listed
on Exhibit B shall be in full force and effect (other than as a consequence of
death or disability) and shall not have been breached in any manner by such
persons.
(e) Key Employees. At the Effective Date, each of Morris Offit and
Wallace Mathai-Davis shall be in the bona fide employ of OFFIT Holdings or its
Subsidiaries, as the case may be, holding a position no less than he holds as of
the date hereof provided he is able to perform (except as a result of any short
term temporary disability) the duties previously performed by him.
(f) Stockholder Agreements. All Stockholder Agreements shall have
been duly terminated (which termination may be subject to the effectiveness of
the Merger).
(g) Officer's Certificate. Wachovia shall have received a certificate
dated the Effective Date, signed on behalf of OFFIT Holdings by the Chief
Executive Officer of OFFIT Holdings with respect to the satisfaction of the
conditions specified in Section 7.03(e) and (f).
(h) Revenue Run-Rate. (1) The Revenue Run-Rate as of the
Determination Date shall not be less than 85% of the Revenue Run-Rate as of
March 31, 1999 (or $40,862,269, the Revenue Run-Rate as of March 31, 1999).
Wachovia shall have received a certificate reasonably satisfactory to Wachovia
to such effect, including a detailed calculation of the Revenue Run-Rate as of
the Determination Date and a certification of the accuracy thereof, dated the
Effective Date and signed on behalf of OFFIT Holdings by the Chief Executive
Officer and the Chief Financial Officer of OFFIT Holdings and a certification
that they have no reason to believe that, as of the Effective Date, there is any
decline in the Revenue Run-Rate computed as of the Determination Date which
would result in the above-mentioned 85% level not being met.
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(2) "Determination Date" means the date three days prior to the
Effective Date.
(3) "Revenue Run-Rate" means, as determined as of any particular
date, the annualized amount of all fixed fees (i.e., not including incentive
fees based on performance) payable to OFFIT Holdings or its Subsidiaries under
all Investment Contracts existing and in full force and effect as of the date of
determination; provided, however, that the Revenue Run-Rate shall not include
any fixed fees payable under any Investment Contract, or attributable to any
discrete portfolio managed thereunder, if OFFIT Holdings or any of its
Subsidiaries shall have received as of the date of determination notification of
cancellation or an intention to cancel from any Client of such Investment
Contract or such portfolio, as the case may be. For purposes of calculating the
Revenue Run-Rate as of the Determination Date, increases or decreases in the
Revenue Run-Rate from March 31, 1999 shall reflect only: (i) the addition of a
new Client, (ii) the addition of a new discrete portfolio under an Investment
Contract with respect to an existing Client, (iii) the termination of an
Investment Contract with respect to an existing Client or the termination of any
discrete portfolio managed thereunder (to the extent the amount of funds
withdrawn as a result of such termination are not deposited into another
existing discrete portfolio managed thereunder), (iv) fluctuations in the amount
of fixed fees payable under an Investment Contract due to changes in fee
schedules occurring on or prior to the Determination Date and notified to
Wachovia and (v) the failure of OFFIT Holdings to obtain any of (x) the
Registered Funds consents referred to in Section 6.10 or (y) the consents
referred to in Section 6.11 (provided that any negative consent given shall not
be deemed to be a failure to obtain such a consent), in each of which case the
relevant Investment Contracts shall be deemed terminated for purposes of this
Section 7.03(h). For purposes of calculating the Revenue Run-Rate as of the
Determination Date, increases or decreases in the Revenue Run-Rate from March
31, 1999 shall not reflect any fluctuations in the amount of the fixed fees
payable under any Investment Contract due to market fluctuations. The
calculation of the Revenue Run-Rate as of the Determination Date shall be made
in substantially the same method as the Previously Disclosed calculation of the
Revenue Run-Rate as of March 31, 1999, which is on a client to client basis.
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ARTICLE VIII
TERMINATION
8.01 Termination. This Agreement may be terminated, and the
Acquisition may be abandoned:
(a) Mutual Consent. At any time prior to the Effective Time, by the
mutual consent of Wachovia and OFFIT Holdings, 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
OFFIT Holdings, if its Board of Directors so determines by vote of a majority of
the members of its entire Board, in the event of either: (1) 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 (2) 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 (1) or (2)) 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
OFFIT Holdings, 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 December 31, 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 OFFIT Holdings 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 (1) 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 or (2) the stockholder approval required by Section
7.01(a) herein is not obtained prior to the Effective Date.
(e) Failure to Recommend, Etc. At any time prior to the OFFIT
Holdings Meeting, by Wachovia if OFFIT Holdings Board shall have withdrawn its
recommendation referred to in Section 6.02 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 Acquisition pursuant to
this Article VIII, no party to this Agreement shall have any liability or
further obligation to any other party hereunder except (1) as set forth in
Section 9.01 and (2) that termination will
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not relieve a breaching party from liability for any willful breach of this
Agreement giving rise to such termination.
8.03 Fee. (a) OFFIT Holdings hereby agrees to pay Wachovia, and
Wachovia shall be entitled to payment of, a fee (the "Fee") of $10,000,000 upon
the occurrence of both an Initial Fee Triggering Event and a Subsequent Fee
Triggering Event prior to the occurrence of a Fee Termination Event. Such
payment shall be made to Wachovia in immediately available funds within five
Business Days after the occurrence of the Subsequent Fee Triggering Event. Each
of the following shall be a "Fee Termination Event": (1) the Effective Time; (2)
termination of this Agreement in accordance with the provisions hereof if such
termination occurs prior to the occurrence of an Initial Fee Triggering Event
except a termination by Wachovia pursuant to Sections 8.01(b) or (e) or by
either party pursuant to clause (2) of Section 8.01(d) (each, a "Listed
Termination"); or (3) the passage of eighteen months after termination of this
Agreement if such termination follows the occurrence of an Initial Fee
Triggering Event or is a Listed Termination.
(b) The term "Initial Fee Triggering Event" shall mean any of the
following events or transactions occurring on or after the date hereof:
(1) OFFIT Holdings or OFFITBANK, without having received
Wachovia's prior written consent, shall have entered into an agreement to
engage in an Acquisition Transaction with any person (the term "person"
for purposes of this Section having the meaning assigned thereto in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act) other than Wachovia or
any of its Subsidiaries or the OFFIT Holdings Board shall have recommended
that the stockholders of OFFIT Holdings approve or accept any Acquisition
Transaction other than as contemplated by this Agreement. "Acquisition
Transaction" shall mean (x) a merger or consolidation, or any similar
transaction, involving OFFIT Holdings or OFFITBANK, (y) a purchase, lease
or other acquisition of all or any substantial part of the assets or
deposits of OFFIT Holdings or OFFITBANK, or (z) a purchase or other
acquisition (including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the voting power of
OFFIT Holdings or OFFITBANK;
(2) Any person other than Wachovia or any of its Subsidiaries
shall have acquired beneficial ownership or the right to acquire
Beneficial Ownership of 10% or more of the outstanding shares of OFFIT
Holdings Common Stock;
(3) The stockholders of OFFIT Holdings shall have voted and
failed to approve this 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 this Agreement or
shall have been canceled prior to termination of this Agreement if, prior
to such meeting (or if such meeting shall not have been held or shall have
been canceled, prior to such termination), it shall have been publicly
announced that any Person (other than Wachovia or any of its Subsidiaries)
shall have made, or disclosed an intention to make, a proposal to engage
in an Acquisition Transaction;
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<PAGE> 140
(4) The OFFIT Holdings Board shall have withdrawn or modified
(or publicly announced its intention to withdraw or modify) in any manner
adverse in any respect to Wachovia its recommendation that the
stockholders of OFFIT Holdings approve the transactions contemplated by
this Agreement, or OFFIT Holdings or OFFITBANK 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 Wachovia or any of its Subsidiaries;
(5) Any person other than Wachovia or any of its Subsidiaries
shall have made a proposal to OFFIT Holdings or its stockholders to engage
in an Acquisition Transaction;
(6) OFFIT Holdings shall have willfully breached any covenant or
obligation contained in this Agreement in anticipation of engaging in an
Acquisition Transaction, and following such breach Wachovia would be
entitled to terminate this Agreement (whether immediately or after the
giving of notice or passage of time or both); or
(7) The absence of OFFIT Holdings stockholder approval for this
Agreement immediately prior to the termination thereof, unless such
absence results from the failure of Wachovia to have the Registration
Statement declared effective at least 30 days prior to the termination of
this Agreement.
(c) The term "Subsequent Fee Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(1) The acquisition by any person (other than Wachovia or
any of its Subsidiaries) of beneficial ownership of 20% or more of
the then outstanding OFFIT Holdings Common Stock;
(2) The occurrence of the Initial Fee Triggering Event
described in Section 8.03(b)(1), except that the percentage referred
to in clause (z) of the second sentence thereof shall be 20%; or
(3) The absence of OFFIT Holdings stockholder approval for
this Agreement immediately prior to the termination thereof, unless
such absence results from the failure of Wachovia to have the
Registration Statement declared effective at least 30 days prior to
the termination of this Agreement.
(d) OFFIT Holdings shall notify Wachovia promptly in writing of the
occurrence of any Initial Fee Triggering Event or Subsequent Fee Triggering
Event.
(e) The payment by OFFIT Holdings of the fee provided by this Section
8.03 shall constitute liquidated damages for any breach by OFFIT Holdings of
this Agreement although a breach is not necessary for any payment to be required
to be made under this Section 8.03.
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ARTICLE IX
MISCELLANEOUS
9.01 Survival. No representations, warranties, agreements and
covenants contained in this Agreement shall survive the Effective Time (other
than Section 6.10 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), 6.06(b), 8.02, 8.03 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 (1) waived by the party benefitted by the provision, or
(2) 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 receipt of the stockholder approval required by Section 7.01(a), this
Agreement may not be amended if it would violate the DGCL.
9.03 Counterparts. This Agreement may be executed in two
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 New York 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 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties hereto and any
purported assignment in violation of this Section 9.06 shall be null and void.
9.07 Expenses. Each party hereto will bear all expenses incurred by
it in connection with this Agreement and the transactions contemplated hereby.
A-49
<PAGE> 142
9.08 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 OFFIT Holdings, to:
OFFITBANK Holdings, Inc.
520 Madison Avenue, 27th Floor
New York, NY 10022-4213
Attention:Wallace Mathai-Davis
Telephone: (212) 758-9600
Facsimile: (212) 486-9465
With a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Attention: Andre Weiss
Telephone: (212) 756-2431
Facsimile: (212) 593-5955
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
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<PAGE> 143
With a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Mark J. Menting, Esq.
Telephone: (212) 558-4000
Facsimile: (212) 558-3588
9.09 Entire Understanding; No Third Party Beneficiaries. This Agreement
represents the entire understanding of the parties hereto with reference to the
transactions contemplated hereby and supersedes any and all other oral or
written agreements heretofore made. 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.
9.10 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."
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<PAGE> 144
* * *
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.
OFFITBANK HOLDINGS, INC.
By: /s/ Morris W. Offit
-------------------------------------------
Name: Morris W. Offit
Title: Chairman and Chief
Executive Officer
WACHOVIA CORPORATION
By: /s/ L.M. Baker, Jr.
-------------------------------------------
Name: L. M. Baker, Jr.
Title: Chairman and Chief
Executive Officer
A-52
<PAGE> 145
EXHIBIT D
Form of Plan of Merger
PLAN OF MERGER (this "Plan") of OFFITBANK Holdings, Inc. a Delaware
corporation ("OFFIT Holdings" or the "merged corporation"); and Wachovia
Corporation, a North Carolina corporation ("Wachovia" or the "surviving
corporation").
ARTICLE I
DEFINITIONS
1.1 Certain Definitions. The following terms are used in this Plan
with the meanings set forth below:
"Business Day" means any day other than a Saturday or Sunday or a day
in which banking institutions in New York, New York are authorized or
required by law to close.
"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.
"Merger" means the merger of OFFIT Holdings with and into Wachovia.
"Merger Agreement" means the Agreement and Plan of Merger, dated as
of May 13, 1999, by and between OFFIT Holdings and Wachovia.
"Merger Consideration" means the consideration to be issued to
holders of OFFIT Holdings Common Stock as provided in this Plan.
"NCBCA" 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 OFFIT Holdings
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 OFFIT Holdings Common Stock.
<PAGE> 146
"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" means shares of OFFIT Holdings Common Stock held by
OFFIT Holdings in treasury or otherwise owned by OFFIT Holdings or its
Subsidiaries.
"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, OFFIT Holdings will merge
with and into Wachovia, the separate corporate existence of OFFIT Holdings will
cease and Wachovia will 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 OFFIT Holdings (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 (1) alter or change the amount or kind of Merger Consideration, (2)
adversely affect the tax treatment of OFFIT Holdings or OFFIT Holdings'
stockholders as a result of receiving the Merger Consideration or (3) 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 of the Merger Agreement, the Merger shall become effective upon
the occurrence of the filing in the office of the Secretary of State of the
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
NCBCA or such later date and time as may be set forth in such certificate or
articles. The Merger shall have the effects prescribed in the NCBCA and the
DGCL.
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<PAGE> 147
(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 of the Merger Agreement, 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 Article VII of the Merger
Agreement 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 OFFIT Holdings Common Stock. Each share of OFFIT
Holdings Common Stock, excluding Treasury Stock and shares as to which
dissenters' rights have been properly perfected, issued and outstanding
immediately prior to the Effective Time shall become and be converted into
0.2284 of a share (subject to adjustment pursuant to Section 3.5, the
"Exchange Ratio") of Wachovia Common Stock.
(b) Outstanding Wachovia Stock. Each share of Wachovia Stock issued
and outstanding immediately before the Effective Time will remain issued
and outstanding and unaffected by the Merger.
(c) Treasury Stock. Each share of OFFIT Holdings Common Stock held as
Treasury Stock immediately prior to the Effective Time shall be canceled
and retired at the Effective Time and no consideration shall be issued in
exchange therefor.
3.2. Rights as Stockholders; Stock Transfers. At the Effective Time,
holders of OFFIT Holdings Common Stock shall cease to be, and shall have no
rights as, stockholders of OFFIT Holdings, other than to receive any dividend or
other distribution with respect to such OFFIT Holdings Common Stock with a
record date
D-3
<PAGE> 148
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 OFFIT Holdings or the Surviving Corporation of shares of OFFIT
Holdings Common 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 OFFIT Holdings 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
closing 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.
3.4. Exchange Procedures. (a) Within three Business Days of the
Effective Date, Wachovia shall send or cause to be sent to each former holder of
record of shares of OFFIT Holdings Common Stock immediately prior to the
Effective Time transmittal materials for use in exchanging 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 Wachovia of Old Certificates representing such
shares of OFFIT Holdings Common Stock (or indemnity reasonably satisfactory to
Wachovia, 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
OFFIT Holdings 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.
(b) Notwithstanding the foregoing, neither party hereto shall be
liable to any former holder of OFFIT Holdings Common Stock for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(c) 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 OFFIT Holdings 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 OFFIT Holdings 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
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<PAGE> 149
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.
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.
D-5
<PAGE> 150
APPENDIX B
Form of Voting Agreement
------------------------
VOTING AGREEMENT, dated as of May 13, 1999 (this "Agreement"), by and
between Wachovia Corporation ("Wachovia") and the stockholder of OFFITBANK
Holdings, Inc. ("OFFIT Holdings") identified as the signatory hereto (the
"Stockholder").
WHEREAS, Wachovia is prepared to enter into an agreement and plan of
merger with OFFIT Holdings substantially in the form previously provided to
Stockholder (the "Merger Agreement");
WHEREAS, Wachovia would not enter into the Merger Agreement unless
the Stockholder enters into this Agreement;
WHEREAS, each stockholder of OFFIT Holdings will benefit directly and
substantially from the Merger Agreement.
NOW, THEREFORE, in consideration of Wachovia's entry into the Merger
Agreement, the Stockholder agrees with Wachovia as follows:
1. The Stockholder represents and warrants that (a) he, she or it
owns or controls (regardless of in what capacity) the number of shares of common
stock, par value $.01 per share, of OFFIT Holdings 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 Stockholder, enforceable in accordance with
its terms. For all purposes of this Agreement, Owned Shares shall include any
shares of OFFIT Holdings as to which the right to vote is acquired after the
execution hereof.
2. The Stockholder 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
OFFIT Holdings' stockholders called to vote upon the Merger Agreement and the
Merger and (b) will not vote such shares (or otherwise provide a proxy, consent
or a voting agreement with respect thereto) in favor of any other Acquisition
Proposal (as defined in the Merger Agreement).
3. The Stockholder 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
<PAGE> 151
Agreement and the Merger, and such Stockholder 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; (b) not exercise any appraisal rights available to such
Stockholder pursuant to Section 262 of the Delaware General Corporation Law; and
(c) take any action or omit to take any action which would prohibit, prevent or
preclude Stockholder from performing its obligations under this Agreement.
4. The Stockholder agrees (i) to the termination of the Shareholders'
Agreement entered into with OFFIT Holdings, pursuant to Section 12 thereof,
simultaneously with the effectiveness of the Merger and (ii) to execute any
other documents or instruments necessary to effect the foregoing termination.
5. The Stockholder 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.
6. The Stockholder agrees that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed by the
Stockholder in accordance with 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 Stockholder 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 Stockholder waives the
posting of any bond or security in connection with any proceeding related
thereto.
7. 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).
8. The Stockholder 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.
9. The Stockholder agrees that neither it nor, if applicable, any of
its subsidiaries nor any of the respective officers and directors of the
Stockholder or its subsidiaries shall, and the Stockholder 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 OFFIT Holdings) 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, OFFIT Holdings or any of its subsidiaries
(any such proposal
B-2
<PAGE> 152
or offer being hereinafter referred to as an "Acquisition Proposal") or engage
in any negotiations concerning, or provide any confidential information or date
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.
10. This Agreement shall terminate upon the later to occur of (a) the
first year anniversary of its execution by Stockholder and (b) the date of
termination of the Merger Agreement.
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<PAGE> 153
IN WITNESS WHEREOF, the Stockholder and Wachovia have duly executed
this Agreement as of the date first above written.
WACHOVIA CORPORATION
By:
--------------------------------
Name:
Title:
STOCKHOLDER
or
---------------------
------------------------
By:
--------------------------------
Name:
Title:
Number of Owned Shares:
------------
B-4
<PAGE> 154
APPENDIX C
PURSUANT TO SECTION 2.4 OF THE EXCHANGE AGREEMENT, DATED AUGUST 1998,
AMONG OFFITBANK HOLDINGS, INC. AND THE OFFITBANK SHAREHOLDERS, OFFITBANK
HOLDINGS, INC. SHAREHOLDERS AGREED TO BE BOUND BY THE SHAREHOLDERS' AGREEMENT,
DATED JULY 13, 1990, ENTERED INTO AMONG OFFITBANK AND ITS SHAREHOLDERS, OTHER
THAN SECTIONS 6 AND 9 OF THAT AGREEMENT.
EXCHANGE AGREEMENT
AGREEMENT dated August 1998 among OFFITBANK Holdings, Inc., a
Delaware corporation ("Holdings"), and those Shareholders ("Shareholder(s)") of
OFFITBANK, a New York limited purpose trust company, who have executed and
delivered a letter of acceptance ("Letter of Acceptance") in the form enclosed
with this Agreement in accordance with the terms thereof.
* * *
2.4 Adoption of Holdings Shareholders' Agreement. If the closing of
the Exchange takes place as provided for in Article VI, then Holdings and the
Shareholders shall automatically, and without any further action by any of the
parties hereto, be deemed to be parties to, and to be bound by, the
Shareholders' Agreement, which shall be in full force and effect with respect to
Holdings and all Holdings Common Stock, references in the Shareholders'
Agreement to "Shares" shall be deemed to be references to Holdings Common Stock
and references in the Shareholders' Agreement to "Investors" and "OFFITBANK"
shall be deemed to be references to the Shareholders and Holdings, respectively;
provided, however, that, (i) in such event, Sections 6 and 9 of the
Shareholders' Agreement shall be void and of no force or effect; and (ii) in the
event that Holdings shall make an offering of authorized and unissued Shares
pursuant to an effective registration statement in accordance with the
Securities Act of 1933, as amended, (A) the Shareholders' Agreement shall not
apply to the offering or sale of any Shares by Holdings or any Shareholder
pursuant to such Registration Statement and (B) the Shareholders' Agreement
shall terminate and be of no further force and effect upon the consummation of
such public offering.
* * *
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<PAGE> 155
FORM OF SHAREHOLDERS' AGREEMENT
Agreement dated as of July 13, 1990 among OFFITBANK, a New York
banking corporation organized under the New York Banking Law ("OFFITBANK"),
those individuals who, now or hereafter, execute a counterpart of this Agreement
and are named in Schedule A hereto as shareholders (collectively, the
"Employees") and those individuals and legal entities who, now or hereafter,
execute a counterpart of this Agreement and are named in Schedule B hereto as
shareholders (collectively, the "Investors"). The Employees and the Investors
are collectively referred to as the "Shareholders".
BACKGROUND
The present Employees are key employees of OFFITBANK who were
formerly key employees of Offit Associates Inc. ("OAI"). OFFITBANK acquired
substantially all of the assets and assumed substantially all of the liabilities
of OAI in exchange for shares of OFFITBANK, which shares were, in turn,
distributed by OAI to these Employees. Prior to the exchange, the Investors
purchased additional shares of OFFITBANK. The Shareholders and OFFITBANK desire
to enter into this Agreement to (i) assure continuity of the ownership of
OFFITBANK, (ii) limit the terms on which shares of OFFITBANK may be transferred
and (iii) resolve certain other contingencies which may hereafter arise.
It is hereby agreed as follows:
1. Certain Definitions. For purposes of this Agreement, the following
terms shall have the meanings specified:
"Actual Knowledge" means the actual knowledge of an officer of
OFFITBANK and does not include constructive knowledge or imputed knowledge.
"Bank Regulations" means the New York Banking Law, as amended, and
rules and regulations promulgated thereunder by the New York State Banking
Department, the Federal Deposit Insurance Act, as amended, the Change in Bank
Control Act of 1978, as amended, and rules and regulations promulgated under
each such Act by the Federal Deposit Insurance Corporation and any other Federal
and state banking laws, rules and regulations applicable at any time to
OFFITBANK, its operations or the Shareholders.
"Book Value" means, with respect to any Shares subject to sale under
Section 2(a), 6(a) or
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<PAGE> 156
8(a) (the "Option Shares"), the amount, if any, by which the total consolidated
assets of OFFITBANK (for this purpose, excluding goodwill and other intangible
assets, but including, under Section 6(a)(i)(B), the proceeds of any life
insurance payable to OFFITBANK upon the death of the Shareholder who owned the
Option Shares) exceed its total consolidated liabilities and deposits,
determined as of the last day of the fiscal quarter immediately preceding the
date on which OFFITBANK shall have given notice of its election to purchase the
Option Shares (but after giving effect to the receipt thereafter of any life
insurance proceeds of the type referred to in the preceding parenthetical
clause), multiplied by a fraction, the numerator of which is the number of
Option Shares and the denominator of which is the total number of Shares then
outstanding, on a fully diluted basis. In calculating Book Value, all
non-convertible shares of any preferred stock shall be treated as liabilities in
the amount of the aggregate liquidation preference of such non-convertible
preferred shares, and not as Shares. The Book Value of the Option Shares shall
be determined as promptly as reasonably practicable from OFFITBANK's books by
its auditors, without audit or review, and shall be set forth in a notice given
by such auditors to OFFITBANK and the owner of the Option Shares.
"Change in Control" means, with respect to any legal entity acquiring
any Shares, any transaction which (i) subjects OFFITBANK or any one or more of
its Shareholders to the Bank Holding Company Act of 1956, as amended, or in any
other way alters the status of any such party under such Act or (ii) results,
directly or indirectly, in a change in the record or beneficial ownership of the
economic attributes or control of any Shares, whether voluntary or involuntary,
by operation of law or otherwise, including, without limitation, Transfers of
shares of corporations that are Shareholders, beneficial interests in trusts
that are Shareholders and partnership interests in partnerships that are
Shareholders, but not including such Transfers to Permitted Transferees.
"Employment Agreement" means the written employment agreement between
an Employee and OFFITBANK, as amended from time to time.
"Fifth Anniversary" means, with respect to any Employee, the date
five years after the Employee first became the holder of any Shares, not
including the holding period of any predecessor security from which the Shares
were converted, exchanged or otherwise derived.
"First Right of Purchase" means the procedure by which a Shareholder
gives notice to OFFITBANK of the receipt of a bona fide offer from a third party
(the "Offering Person") to purchase any Shares and the rights of OFFITBANK
pursuant to such notice, as follows:
(i) The Shareholder receiving such offer (the "Offeree
Shareholder") shall give notice to OFFITBANK (the "Offer Notice") of the
proposed sale at least 90 days prior to the proposed effective date thereof,
setting forth in reasonable detail the price, effective date and other terms of
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such offer, the number of Shares proposed to be sold and the name and mailing
address of the Offering Person. As a condition to the proposed sale, the Offeree
Shareholder shall furnish, and shall cause the Offering Person to furnish, any
information (including, but not limited to, financial information concerning the
Offering Person) as OFFITBANK may reasonably request to verify that the offer
set forth in the Offer Notice is bona fide.
(ii) OFFITBANK shall have the right, but not the obligation, to
purchase, and/or designate one or more Qualified Purchasers to purchase, all,
but not less than all, of the Shares specified in the Offer Notice at the price
and on the terms specified therein by giving written notice of such election to
the Offeree Shareholder within 60 days of the delivery of the Offer Notice to
OFFITBANK or within 5 days of the date on which the Offeree Shareholder and the
Offering Person shall have provided all information requested by OFFITBANK under
the second sentence of Subsection (i) above, whichever occurs last. The closing
of any purchase of Shares under this First Right of Purchase shall take place
(A) subject to the next succeeding clause (B), 30 days after notice of election
is given under this Subsection (ii), (B) if OFFITBANK has sought any approval or
consent required under applicable Bank Regulations as a condition to its
purchase, 5 days after OFFITBANK shall have given notice to the Offeree
Shareholder that such approval or consent has been granted or (C) on such other
date as the parties to the purchase may mutually determine in accordance with
Section 10. OFFITBANK shall give prompt notice to the Offeree Shareholder of the
grant or denial of the approvals and consents referred to in clause (B).
(iii) (A) If OFFITBANK does not give notice of election under
Subsection (ii) above within the period specified therein, or (B) if OFFITBANK
does not give notice to the Offeree Shareholder under clause (B) of Subsection
(ii) above within 180 days of the delivery of the Offer Notice to OFFITBANK or
gives notice to the Offeree Shareholder that any approval or consent referred to
in clause (B) of Subsection (ii) above has been denied or (C) if OFFITBANK or a
Qualified Purchaser does not purchase all Shares specified in the Offer Notice
within the period specified in Subsection (ii) above, then, in any such event,
the Offeree Shareholder may, within 120 days after the expiration of the
applicable period, sell all Shares specified in the Offer Notice to the Offering
Person at a price and on terms no more favorable to the Offering Person than
were set forth in the Offer Notice.
"Incapacity" means (i) the dissolution or termination of any legal
entity, (ii) the filing of a voluntary petition in bankruptcy or for
reorganization or for the adoption of an arrangement under the Bankruptcy Code,
as amended, or an admission seeking the relief therein provided by any
individual or legal entity or (iii) the filing of an involuntary petition in
bankruptcy and an entry of an order for relief with respect to any individual or
legal entity.
"Incapacitated" means having an Incapacity.
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"Interest Rate" means 1% above the rate per annum designated from
time to time by Chase Manhattan Bank, N.A., New York, New York, as its prime
rate. The Interest Rate shall change as of the date of each such designation.
"Market Value" means, with respect to any Shares subject to sale
under Section 5(b) or 6(c) (the "Option Shares"), the fair value of the Option
Shares as set forth in the Valuation Notice given by OFFITBANK pursuant to the
pertinent Section, if agreed to by the owner of the Option Shares. If such
parties are unable to agree upon fair value within 30 days of the date on which
the Valuation Notice is given, the fair value of the Option Shares shall be
determined as promptly as reasonably practicable by an appraiser jointly
selected by OFFITBANK and the owner of the Option Shares. If such parties are
unable to agree on the selection of an appraiser within 15 days after the
expiration of such 30-day period, then OFFITBANK and the owner of the Option
Shares shall each select an independent appraiser of national recognition to
determine the fair value of the Option Shares. Each such appraiser shall
independently determine as promptly as reasonably practicable the fair value of
the Option Shares, and the Market Value of the Option Shares shall be equal to
the mean of such determinations, provided that if the difference between such
appraisers' determinations is more than 10% of the lesser of such two
determinations, then such two appraisers shall jointly select a third appraiser.
If such two appraisers cannot agree upon the selection of a third appraiser
within 15 days after the completion of their appraisals, then OFFITBANK's
auditors shall select a third independent appraiser of national recognition,
exclusive of any appraiser already selected. The third appraiser shall
independently determine as promptly as reasonably practicable the fair value of
the Option Shares. The Market Value of the Option Shares shall be equal to the
mean of (i) the median appraisal of such three appraisals and (ii) the appraisal
which is closest to the median appraisal. Market Value shall be determined as of
the last day of the fiscal quarter immediately preceding the date on which the
Valuation Notice is given by OFFITBANK to the owner of the Option Shares. If the
Market Value of the Option Shares is determined by one appraiser, (i) the fees
and expenses of the appraiser shall be paid by OFFITBANK, if the Market Value is
greater than the value set forth in the Valuation Notice, and (ii) such fees and
expenses shall be paid by the owner of the Option Shares, if the Market Value is
less than or equal to the value set forth in the Valuation Notice. If the Market
Value of the Option Shares is determined by more than one appraiser, the party
that would be required to make payment under the preceding sentence shall pay
the fees and expenses of the appraiser selected by it or him and of any third
appraiser, and the other party shall pay the fees and expenses of his or its
appraiser. If the Option Shares are purchased by one or more Qualified
Purchasers, all appraisers' fees and expenses paid by OFFITBANK shall be
reimbursed to it at the closing by the Qualified Purchasers, pro rata, based on
the total purchase price of the Option Shares purchased by them.
"Original Cost" means (i) with respect to each of the Shares owned by
an Investor, the mean price per Share originally paid by such Investor for all
Shares at any time purchased by the Investor (disregarding any Transfer of any
such Shares) and (ii) with respect to each of the Shares owned by
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an Employee, (A) the sum of (1) the total price (including the unpaid principal
balance of any promissory note evidencing a portion of such price) paid by such
Employee for the shares of OAI owned by the Employee at the time of the
transaction referred to under the heading "Background" above plus (2) the total
price originally paid by such Employee for all other Shares at any time
purchased by the Employee (disregarding any Transfer of any such Shares) divided
by (B) the sum of (1) the total number of Shares received by the Employee from
OAI incident to the aforesaid transaction plus (2) the total number of all other
Shares at any time purchased by the Employee (disregarding any Transfer of any
such Shares). If a Shareholder acquires any Shares by gift, inheritance or
operation of law, the Original Cost of such Shares shall be deemed to be the
Original Cost thereof in the hands of such Shareholder's transferor. Original
Cost shall be determined as promptly as reasonably practicable from OFFITBANK's
records by its auditors and shall be set forth in a notice given by such
auditors to OFFITBANK and the owner of the Shares subject to the determination.
"Permitted Transferees" means (i) a Shareholder's spouse and issue
(whether natural or adopted) and (ii) any trust for the sole benefit of any one
or more of the persons referred to in clause (i).
"Qualified Purchaser" means an individual or legal entity (including
any existing Shareholder) satisfactory to OFFITBANK that meets the suitability
standards applicable to Investors in the Subscription Agreement and, in the
reasonable judgment of OFFITBANK, has the net worth and/or income to purchase
any Shares at the price and on the other terms provided for in the applicable
Section hereof.
"Shares" means (i) all outstanding shares of OFFITBANK common stock,
par value $7.00 per share, (ii) all other equity securities of OFFITBANK at any
time outstanding and (iii) all equity securities issued or issuable, directly or
indirectly, with respect to the securities referred to in clause (i) or (ii)
above by way of a dividend, split, combination or conversion of such securities
or in connection with a recapitalization, merger, consolidation or
reorganization.
"Subscription Agreement" means the agreement signed by each Investor
and delivered to OFFITBANK to evidence the agreement of the Investor to purchase
Shares and to be bound by the provisions of this Agreement, together with the
Prospective Purchaser Questionnaire attached thereto.
"Transfer" means the sale, assignment, transfer, gift, distribution
by Will or the laws of descent or other disposition of any kind whatsoever or
the grant or creation of any security interest in or lien, claim or encumbrance
of any kind whatsoever on any Shares or any interest therein, whether voluntary
or involuntary, by operation of law or otherwise, or any Change in Control.
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2. Restrictions on Transfer, Generally.
(a) Unauthorized Transfers Void.
(i) No Shareholder may Transfer any Shares except as provided
in this Agreement. Any Transfer of any Shares otherwise than as provided in this
Agreement shall be void ab initio, and OFFITBANK shall not reflect such Transfer
in its records or otherwise recognize or give effect to such Transfer.
(ii) Within 30 days of obtaining Actual Knowledge of any such
Purported Transfer, OFFITBANK shall have the right to purchase, in compliance
with this Section 2, any or all Shares (the "Option Shares") owned by the
Shareholder purporting to make the Transfer, at a price equal to the greater of
30% of the Original Cost or 50% of the Book Value of all Option Shares, by
giving written notice of such election to such Shareholder. The closing of any
purchase of Option Shares under this Subsection (ii) shall take place (A)
subject to the next succeeding clause (B), 90 days after notices of the
determinations of Original Cost and Book Value are given, as provided for in the
definitions of those terms, (B) if OFFITBANK has sought any approval or consent
required under applicable Bank Regulations as a condition to such purchase, 5
days after OFFITBANK shall have given notice to the owner of the Option Shares
that such approval or consent has been granted or (C) on such other date as the
parties to the purchase may mutually determine in accordance with Section 10.
Subject to Section 11, the purchase price of the Option Shares shall be paid in
full at the closing by certified or bank check.
(b) Legend. There shall be legibly endorsed on each stock
certificate representing any Shares, a statement in substance as follows:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or the securities laws
of any state, and therefore cannot be resold unless the shares are
registered under such act or unless an exemption from registration is
available.
"The shares represented by this certificate are transferable only in
compliance with the provisions of a Shareholders' Agreement dated as
of __________, 1990, a copy of which is now on file at the principal
office of the Bank."
(c) Conditions to Transfer. No Shareholder may Transfer any
Shares to any party, including OFFITBANK, except upon satisfaction of the
following conditions precedent:
(i) If OFFITBANK is not a party to the proposed Transfer, the
parties shall have
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given 90 days' prior written notice to OFFITBANK setting forth the number of
Shares subject thereto, the price to be paid for such Shares, the effective date
of the proposed Transfer and such other information pertaining to the proposed
Transfer and the parties thereto as OFFITBANK may request.
(ii) OFFITBANK shall have received (A) an opinion of counsel
in form and substance satisfactory to it that the proposed Transfer is
consistent with all applicable provisions of the Securities Act of 1933, as
amended, state securities laws and Bank Regulations and will not, directly or
indirectly, subject OFFITBANK or any one or more of its Shareholders to the Bank
Holding Company Act of 1956, as amended, or in any other way alter the status of
any such party under such Act, and (B) other evidence satisfactory to it in all
respects that any consent or authorization required under applicable Bank
Regulations and from any other person has been granted and is in effect.
(iii) The proposed transferee, if other than OFFITBANK, shall
have agreed to be bound by this Agreement by executing and delivering a
counterpart hereof and such other documents, including, without limitation, a
Subscription Agreement, as OFFITBANK may require.
(iv) The proposed transferee, if a corporation, trust,
partnership or other legal entity, shall have provided OFFITBANK with evidence
satisfactory to OFFITBANK of the proposed transferee's authority to acquire the
Shares and become a party to this Agreement.
(v) If a transfer of Shares is to more than one transferee or
is for less than all of a Shareholder's total interest, OFFITBANK may require
the transferring Shareholder to designate one individual or legal entity who or
which is authorized to act on behalf of the transferor and all transferees for
all purposes under this Agreement.
(vi) The proposed transferee shall have paid all reasonable
legal fees and other expenses of OFFITBANK in connection with the matters
referred to in clauses (i) through (v) above and all other expenses specifically
allocated to the proposed transferee under this Agreement.
(d) Shareholder Representations. By executing and delivering this
Agreement, each Shareholder represents that he or it (i) is acquiring Shares for
his or its own account, for investment, and not with a view to the distribution
thereof or as agent or nominee of another party, (ii) is fully able to bear the
economic risks of an investment in the Shares and (iii) has such knowledge and
experience in financial and business matters that he or it is capable of
evaluating the merits and risks inherent in an investment in the Shares. If the
Shares to be acquired by a Shareholder would constitute "community property" or
"marital property" under applicable state law, the Shareholder's spouse shall
make the foregoing representations in writing as a condition to the ownership of
such
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Shares by the Shareholder.
(e) Shares Continue Subject to Agreement. Each of the Shares shall
be subject to all of the provisions of this Agreement, without regard to the
identity of the holder or the manner of Transfer thereof, until such Share is
sold to the public pursuant to a public offering, if any, made in accordance
with Bank Regulations and, if applicable, the Securities Act of 1933, as
amended.
3. Certain Permitted Transfers. A Shareholder may, at any time,
Transfer all or part of the Shares owned by such Shareholder, in compliance with
Section 2, to any Permitted Transferee, without the consent of OFFITBANK;
provided, however, that an Employee may not Transfer any Shares pursuant to this
Section 3, except by Will or the laws of descent, on or before the Fifth
Anniversary.
4. Qualified Purchasers. At the request of a Shareholder, OFFITBANK
shall, to the extent that it may lawfully do so, endeavor to find a Qualified
Purchaser to purchase all or part of the Shares owned by such Shareholder in
accordance with this Agreement; provided, however, that OFFITBANK shall not
undertake to find a Qualified Purchaser on behalf of an Employee on or before
the Fifth Anniversary, except upon the request of his estate representative
following his death or upon the request of an Employee or his personal
representative following the termination of the Employee's employment with
OFFITBANK pursuant to the Employment Agreement between them due to his
disability. OFFITBANK assumes no obligation ever to find a Qualified Purchaser,
if so requested by a Shareholder. OFFITBANK shall not be liable, in damages or
otherwise, to any Shareholder for any act or omission whatsoever of any
Qualified Purchaser, including, but not limited to, any breach of this Agreement
by a Qualified Purchaser.
5. Restrictions on Transfer of Shares Owned by Investors.
(a) First Right of Purchase. An Investor shall have the right, at
any time, to sell all or part of the Shares owned by such Investor to a third
party (including any other Shareholder) pursuant to a bona fide offer from such
third party to purchase such Shares for cash, subject to compliance with Section
2 and the First Right of Purchase of OFFITBANK.
(b) Right of Purchase on Incapacity or Change in Control. Upon the
Incapacity or Change in Control of an Investor (the "Subject Investor"),
OFFITBANK shall have the right to purchase, and/or designate one or more
Qualified Purchasers to purchase, all Shares (the "Option Shares") owned by the
Subject Investor, subject to compliance with Section 2 and the following terms
and conditions:
(i) The Subject Investor (which term shall include reference
to the trustee or other
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legal representative of an Incapacitated Investor) shall give prompt written
notice to OFFITBANK of the Incapacity or Change in Control.
(ii) Within 30 days after obtaining Actual Knowledge of (A)
the Incapacity or Change in Control of the Subject Investor or (B) the
qualification or appointment of a trustee or other legal representative, if any,
for the Subject Investor, whichever occurs last, OFFITBANK shall have the right
to cause a determination of the Market Value of the Option Shares by giving
notice (the "Valuation Notice") to the Subject Investor of OFFITBANK's valuation
of the Option Shares.
(iii) Within 60 days after the Market Value of the Option
Shares shall have been determined, as provided for in the definition of that
term, OFFITBANK shall have the right, but not the obligation, to purchase,
and/or designate one of more Qualified Purchasers to purchase, all, but not less
than all, of the Option Shares at a price equal to the Market Value of the
Option Shares by giving notice of such election to the Subject Investor. The
closing of any purchase of Option Shares under this Section 5(b) shall take
place (A) subject to the next succeeding clause (B), 30 days after notice of
election is given under this Subsection (iii), (B) if OFFITBANK has sought any
approval or consent required under applicable Bank Regulations as a condition to
such purchase, 5 days after OFFITBANK shall have given notice to the Subject
Investor that such approval or consent has been granted or (C) on such other
date as the parties to the purchase may mutually determine in accordance with
Section 10. Subject to Section 11, the purchase price of the Option Shares shall
be paid in full at the closing by certified or bank check.
(iv) If an Investor shall have given an Offer Notice to
OFFITBANK under Section 5(a), that Section shall govern the disposition of the
Shares owned by the Investor, notwithstanding the subsequent Incapacity or
Change in Control of the Investor. Except as described in the preceding
sentence, an Investor shall not have the right to sell any Shares pursuant to
Section 5(a) following the Incapacity or Change in Control of such Investor
unless OFFITBANK or any Qualified Purchaser designated by it shall have failed
to exercise the rights granted under this Section 5(b) within the periods
provided therefor.
6. Restrictions on Transfer of Shares Owned by Employees.
(a) Permitted Transfers on or Before the Fifth Anniversary. An
Employee shall have the right, at any time on or before the Fifth Anniversary,
to transfer all or part of the Shares owned by such Employee, subject to
compliance with Section 2 and the following terms and conditions:
(i) Upon the death of the Employee:
(A) The Estate of such Employee shall have the right, at
any time, to sell all
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or part of the Shares owned by such Estate to a third party (including any other
Shareholder) pursuant to a bona fide offer from such third party to purchase
such Shares for cash, subject to the First Right of Purchase of OFFITBANK; or
(B) The Estate of such Employee shall have the right, by
notice to OFFITBANK given at any time prior to 24 months after the date of the
Employee's death, to present all Shares (the "Option Shares") then owned by such
Estate for purchase by OFFITBANK at a price equal to the Book Value of the
Option Shares. The closing of any purchase of Option Shares under this
Subsection (B) shall take place (1) subject to the next succeeding clause (2),
90 days after notice of the determination of Book Value is given, as provided
for in the definition of that term, (2) if OFFITBANK has sought any approval or
consent required under applicable Bank Regulations as a condition to such
purchase, 5 days after OFFITBANK shall have given notice to the Estate that such
approval or consent has been granted or (3) on such other date as the parties to
the purchase may mutually determine in accordance with Section 10. Subject to
Section 11, 20% of the purchase price shall be paid at the closing by certified
or bank check and the balance of the purchase price shall be payable in 4 equal
annual installments on the anniversary of the closing, together with interest on
the unpaid balance accruing from the date of the closing at the Interest Rate,
which shall be payable on the first day of each calendar quarter and on payment
of the last installment of the purchase price. An Estate that exercises its
right of presentment under this Subsection (B) may, at any time prior to the
closing hereunder, sell all or part of the Shares owned by it in accordance with
Subsection (A); or
(C) The Estate of such Employee may, at any time, exercise
the rights granted under Section 3 or 4; or
(ii) Upon the termination of the Employee's employment with
OFFITBANK pursuant to the Employment Agreement between them due to the
disability of Employee:
(A) The Employee or the personal representative of the
Employee shall have the right, at any time, to sell all or part of the Shares
owned by such Employee to a third party (including any other Shareholder)
pursuant to a bona fide offer from such third party to purchase such Shares for
cash, subject to the First Right of Purchase of OFFITBANK; or
(B) The Employee or his personal representative shall have
the right, by notice to OFFITBANK given at any time prior to 24 months after the
date on which the termination of employment occurs, to present all Shares (the
"Option Shares") then owned by the Employee for purchase by OFFITBANK at a price
equal to the Book Value of the Option Shares. The closing of any purchase of
Option Shares under this Subsection (B) shall take place (1) subject to the next
succeeding clause (2), 90 days after notice of the determination of Book Value
is given, as provided
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for in the definition of that term, (2) if OFFITBANK has sought any approval or
consent required under applicable Bank Regulations as a condition to such
purchase, 5 days after OFFITBANK shall have given notice to the Employee or his
personal representative that such approval or consent has been granted or (3) on
such other date as the parties to the purchase may mutually determine in
accordance with Section 10. Subject to Section 11, 20% of the purchase price
shall be paid at the closing by certified or bank check and the balance of the
purchase price shall be payable in 4 equal annual installments on the
anniversary of the closing, together with interest on the unpaid balance
accruing from the date of the closing at the Interest Rate, which shall be
payable on the first day of each calendar quarter and on payment of the last
installment of the purchase price. An Employee who exercises his right of
presentment under this Subsection (B) may, at any time prior to the closing
hereunder, sell all or part of the Shares owned by him in accordance with
Subsection (A); or
(C) The Employee or his personal representative may, at
any time, exercise the rights granted under Section 4; or
(iii) Upon the termination of Employee's employment with
OFFITBANK for any reason other than death or disability on or before the Fifth
Anniversary, OFFITBANK shall have the right, by notice to such Employee given at
any time on or before the later of the Fifth Anniversary or 30 days after the
date on which termination of employment occurs, to purchase all of the Shares
(the "Option Shares") then owned by the Employee at a price equal to the greater
of the Original Cost or the Book Value of all Option Shares. The closing of any
purchase of Option Shares under this Subsection (iii) shall take place (A)
subject to the next succeeding clause (B), 30 days after notice of the
determinations of Original Cost and Book Value are given, as provided for in the
definitions of those terms, (B) if OFFITBANK has sought any approval or consent
required under applicable Bank Regulations as a condition to such purchase, 5
days after OFFITBANK shall have given notice to the Employee that such approval
or consent has been granted, provided that the rights of OFFITBANK under this
Subsection (iii) shall terminate and be void if, as a result of the operation of
this clause (B), the closing would not occur on or before the later of the Fifth
Anniversary or 180 days after the date on which termination of employment
occurs, or (C) on such other date as the parties to the purchase may mutually
determine in accordance with Section 10. Subject to Section 11, the purchase
price of the Option Shares, together with interest thereon, if any, accruing
from the date of the closing at the Interest Rate shall be payable in full on
the later of the Fifth Anniversary or the closing.
(iv) No Employee may Transfer any Shares on or before the
Fifth Anniversary except as provided in this Section 6(a) or in Section 2(a), 3,
4, 7, 8 or 9.
(b) First Right of Purchase after Fifth Anniversary. An Employee
shall have the right, at any time after the Fifth Anniversary, to sell all or
part of the Shares owned by such Employee to
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a third party (including any other Shareholder) pursuant to a bona fide offer
from such third party to purchase such Shares for cash, subject to compliance
with Section 2 and the First Right of Purchase of OFFITBANK.
(c) Right of Purchase on Incapacity. Upon the Incapacity of the
Employee at any time, OFFITBANK shall have the right to purchase, and/or
designate one or more Qualified Purchasers to purchase, all Shares (the "Option
Shares") owned by such Employee, subject to compliance with Section 2 and the
following terms and conditions:
(i) The Incapacitated Employee (or his trustee or other legal
representative) shall give prompt written notice to OFFITBANK of the Incapacity.
(ii) Within 30 days after obtaining Actual Knowledge of (A)
the Incapacity of the Employee or (B) the qualification or appointment of a
trustee or other legal representative, if any, for the Incapacitated Employee,
whichever occurs last, OFFITBANK shall have the right to cause a determination
of the Market Value of the Option Shares by giving notice (the "Valuation
Notice") to the Incapacitated Employee (or his trustee or other legal
representative) of OFFITBANK's valuation of the Option Shares.
(iii) Within 60 days after the Market Value of the Option
Shares shall have been determined, as provided for in the definition of that
term, OFFITBANK shall have the right, but not the obligation, to purchase,
and/or designate one of more Qualified Purchasers to purchase, all, but not less
than all, of the Option Shares at a price equal to the Market Value of the
Option Shares by giving notice of such election to the Incapacitated Employee
(or his trustee or other legal representative). The closing of any purchase of
Option Shares under this Section 6(c) shall take place (A) subject to the next
succeeding clause (B), 30 days after notice of election is given under this
Subsection (iii), (B) if OFFITBANK has sought any approval or consent required
under applicable Bank Regulations as a condition to such purchase, 5 days after
OFFITBANK shall have given notice to the Incapacitated Employee that such
approval or consent has been granted or (C) on such other date as the parties to
the purchase may mutually determine in accordance with Section 10. Subject to
Section 11, the purchase price of the Option Shares shall be paid in full at the
closing by certified or bank check.
(iv) If an Employee's employment with OFFITBANK shall have
terminated or if he shall have given an Offer Notice to OFFITBANK under Section
6(b), then Section 6(a) or 6(b) shall govern the disposition of the Shares owned
by the Employee, notwithstanding his subsequent Incapacity. Except as described
in the preceding sentence, an Employee shall not have the right to sell any
Shares pursuant to Section 6(b) following his Incapacity, unless OFFITBANK or
any Qualified Purchaser designated by it shall have failed to exercise the
rights granted under this Section
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6(c) within the periods provided therefor.
7. Sale of OFFITBANK.
(a) Approved Sale. If the board of directors of OFFITBANK and the
holders of two-thirds of the Shares then outstanding and entitled to vote
thereon approve a sale of all or substantially all of OFFITBANK's assets or a
merger of OFFITBANK with or into an independent third party, or if the holders
of a majority of the Shares outstanding propose to sell their Shares to an
independent third party (an "Approved Sale"), each of the Shareholders shall
consent and raise no objection to the Approved Sale, and if the Approved Sale is
structured as a sale of stock, each of the Shareholders shall agree to sell all
Shares owned by him or it on the terms and conditions approved by the holders of
a majority of the Shares then outstanding and entitled to vote on the Approved
Sale. Each of the Shareholders shall take all necessary and desirable action in
connection with the consummation of the Approved Sale. For purposes of this
Section 7, an "independent third party" is any individual or legal entity that
does not own in excess of 10% of the Shares, on a fully-diluted basis, that is
not controlling, controlled by or under common control with any such 10% owner
and that is not the spouse, ancestor or descendent (by birth or adoption) of any
such 10% owner.
(b) Same Consideration. The obligations of the Shareholders with
respect to an Approved Sale are subject to the satisfaction of the condition
that, upon the consummation of the Approved Sale, all of the Shareholders will
receive the same form and amount of consideration for each of the outstanding
Shares, or if any of the Shareholders is given an option as to the form and
amount of consideration to be received, all Shareholders shall be given the same
option. The Shareholders agree that amounts paid by a party to an Approved Sale
to an Employee for services rendered by such Employee to such party or for such
Employee's agreement not to compete with such party following consummation of
the Approved Sale shall not be deemed to constitute consideration for the Shares
owned by such Employee for purposes of this Section 7.
8. Repurchase Rights.
(a) Shareholder Misstatements. If a Shareholder misstates his or
its financial condition or any other matter, in any material respect, in his or
its Subscription Agreement or in any other document furnished by such
Shareholder to OFFITBANK in connection with the purchase of any Shares,
OFFITBANK shall, within 90 days of obtaining Actual Knowledge of any such
misstatement by a Shareholder, have the right to purchase, in compliance with
Section 2, any or all Shares (the "Option Shares") owned by such Shareholder at
a price equal to the greater of 30% of the Original Cost or 50% of the Book
Value of all Option Shares, by giving written notice of such election to such
Shareholder. The closing of any purchase of Option Shares under this Section
8(a) shall take place (i) subject to the next succeeding clause (ii), 90 days
after notices of the
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determinations of Original Cost and Book Value are given, as provided for in the
definitions of those terms, (ii) if OFFITBANK has sought any approval or consent
required under applicable Bank Regulations as a condition to such purchase, 5
days after OFFITBANK shall have given notice to the Shareholder that such
approval or consent has been granted or (ii) on such other date as the parties
to the purchase may mutually determine in accordance with Section 10. Subject to
Section 11, the purchase price of the Option Shares shall be paid in full at the
closing by certified or bank check.
(b) Negotiated Repurchase. OFFITBANK shall have the right, in its
sole and absolute discretion, to purchase, in compliance with Section 2, any or
all Shares owned by a Shareholder, at such Shareholder's request, at a price and
on terms mutually agreeable to them, provided that such purchase is, in the
judgment of OFFITBANK's Board of Directors, in OFFITBANK's interests. In
determining whether or not to make any such purchase, OFFITBANK shall treat the
Shareholders without partiality. OFFITBANK shall not be obligated ever to
repurchase any Shares except for obligations that it elects to assume pursuant
to the express provisions of this Agreement.
9. Assessment under Bank Regulations. If a Shareholder (the "Subject
Shareholder") shall not have paid any assessment of which he or it shall have
been given notice pursuant to Section 114 of the New York Banking Law, as
amended (or other applicable law then in effect governing assessments against
Shares), within the period provided by law, OFFITBANK shall have the right, in
addition to all other rights existing in its favor, to sell any or all Shares
(the "Option Shares") owned by the Subject Shareholder to a Qualified Purchaser
in a private sale, subject to compliance with Section 2 and the following terms
and conditions:
(i) OFFITBANK shall obtain a written offer to purchase the
Option Shares from a Qualified Purchaser.
(ii) At least 14 days prior to the proposed sale (or within
such other period as may be provided by law), OFFITBANK shall give notice to the
Subject Shareholder setting forth in reasonable detail the price (which shall
not be less than the amount of the assessment and costs of sale) and other terms
of the offer, the number of Option Shares proposed to be sold and the name and
mailing address of the offeror.
(iii) If, within the period referred to in clause (ii) above,
the Subject Shareholder shall not have paid to OFFITBANK the full amount of the
assessment, OFFITBANK shall have the right to sell the Option Shares to the
Qualified Purchaser making the offer on the terms thereof or to any other
Qualified Purchaser offering to purchase the Option Shares at a price greater
than that stated in the earlier offer.
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(iv) The closing of any purchase of Option Shares shall take
place on such date as may be agreed upon by OFFITBANK and the Qualified
Purchaser. If the Subject Shareholder does not deliver certificates representing
the Option Shares in accordance with Section 10, a sale of Option Shares under
this Section 9 shall effect a cancellation of the certificates held by the
Subject Shareholder representing the Option Shares and new certificates
representing the Option Shares shall be issued by OFFITBANK to the purchaser
thereof.
(v) The purchase price for the Option Shares shall be used by
OFFITBANK to pay the costs of sale and the unpaid assessment against the Option
Shares, and the balance, if any, shall be paid by OFFITBANK to the Subject
Shareholder.
If any Shares are Transferred in accordance with this Agreement after the date
on which notice of an assessment against such Shares shall have been given under
this Section 9, the transferee shall be liable for the full amount of such
assessment and such Shares shall be subject to sale as provided for in this
Section.
10. Closing. The closing of the purchase of any Shares by OFFITBANK
and/or one or more Qualified Purchasers under this Agreement shall take place at
the principal offices of OFFITBANK at 10:00 A.M. (New York time) on the date
specified in, or fixed pursuant to, the Section giving rise to the purchase and
sale obligations of the parties or on such other date or at such other time and
place as the parties to the purchase may theretofore agree in writing. At the
closing, the purchaser or purchasers shall comply with the requirements of such
Section applicable to them, including those relating to payment of the purchase
price for the Shares to be sold, and the seller (which term shall include a
Subject Shareholder under Section 9) shall deliver a certificate or certificates
representing such Shares, duly endorsed for transfer, which Shares shall be free
and clear of any security interest, lien, encumbrance or claim of any kind
whatsoever. The rights and obligations of OFFITBANK and the seller to purchase
and sell any Shares at the closing may be terminated by OFFITBANK by notice to
the seller, without liability or obligation on the part of either party, if
there has been a denial of any approval or consent required under applicable
Bank Regulations as a condition to such purchase. OFFITBANK shall give prompt
notice to the seller of the grant or denial of such approvals and consents.
11. Option to Defer Payment. If, with respect to any fiscal period,
the total amount payable (including interest on installment obligations) by
OFFITBANK for Shares purchased by it under this Agreement (collectively, the
"Obligations") would exceed the "Maximum Amount" (hereinafter defined)
established for that fiscal period, then payment of such excess amount (the
"Deferred Amount") may be deferred at the option of OFFITBANK, and an amount
equal to the Maximum Amount for such period shall be paid to the individuals and
legal entities (the "Obligees") to which the Obligations are owed in the ratio
that the portion of the Obligations owed to each Obligee bears
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to the total Obligations. The total Deferred Amount at any time outstanding
shall be paid in each succeeding fiscal period (to the extent that the
Obligations payable in that period are less than the Maximum Amount established
for the period), to the Obligees in the ratio specified in the preceding
sentence. Notwithstanding the foregoing, if a portion of the Deferred Amount
owed to any Obligee has been deferred for more than 36 full calendar months from
the date of its first deferral (determined, for this purpose, by treating each
payment of the Deferred Amount to an Obligee as payment of the oldest
outstanding portion of the total Deferred Amount owed to that Obligee), then an
amount equal to such portion shall nevertheless be paid by OFFITBANK to the
Obligee (in addition to the Maximum Amount otherwise payable to all Obligees for
the fiscal period in which such payment occurs), unless such payment would cause
OFFITBANK to violate Bank Regulations or other applicable law or would result in
a default by OFFITBANK under any agreement or instrument to which it is a party,
as determined by OFFITBANK in its sole and absolute discretion. The Deferred
Amount shall bear interest from the date of deferral at the Interest Rate. All
payments of the Deferred Amount shall, with respect to each Obligee, be applied,
pari passu (except as described in the preceding sentence), first to interest
accrued thereon. The "Maximum Amount" means an amount (whether fixed or
determined by formula), if any, established from time to time by the Board of
Directors of OFFITBANK or a committee thereof, that would be available for use
by OFFITBANK in any fiscal quarter or other period fixed by the Board or such
committee to pay the purchase price of Shares purchased by it under this
Agreement, taking into account OFFITBANK's actual and anticipated revenues and
operating requirements.
12. Amendment and Waiver. This Agreement may be amended only with the
written consent of Shareholders owning at least 80% of the Shares; provided,
however, that no such amendment may (i) enlarge the obligations of any
Shareholder without his or its written consent or (ii) reduce the price payable
for any Shares theretofore purchased hereunder or adversely affect the other
terms of such purchase without the written consent of the individual or legal
entity entitled to payment. Notwithstanding the foregoing, OFFITBANK may,
without the consent of the Shareholders, (i) amend Schedules A and B to reflect
changes in the ownership of Shares and (ii) amend this Agreement in order to
cure any ambiguity or to correct or supplement any provision herein which may be
inconsistent with any other provision, provided that such amendment does not
adversely affect the rights of any Shareholder in any material respect. No
waiver of any provision of this Agreement shall be effective unless such waiver
is in writing and signed by the party against whom or which such waiver is
claimed.
13. Miscellaneous.
(a) Compliance with Bank Regulations. Anything herein to the
contrary notwithstanding, OFFITBANK shall not have the right or the obligation
to purchase any Shares under this Agreement without having obtained any consent
or approval required under applicable
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Bank Regulations, including, without limitation thereto, the prior written
consent of the New York State Banking Department (the "Banking Department") and
the Federal Deposit Insurance Corporation (the "FDIC"), as the case may be, to
the terms of the particular purchase. The Banking Department shall not be deemed
to have given any such consent by the issuance of an Authorization Certificate
in connection with the formation of OFFITBANK and the FDIC shall not be deemed
to have given any such consent by granting to OFFITBANK deposit insurance and,
in any case, the Banking Department, the FDIC or any other Federal or state
entity exercising jurisdiction over OFFITBANK under applicable Bank Regulations
shall not be deemed to have given any such consent by granting any other
authorization, approval or consent which does not by its terms specifically
refer to a particular purchase. Each Shareholder acknowledges that it has been
the policy of the Banking Department and the FDIC not to approve such purchases.
(b) Remedies. Each of the parties to this Agreement (including
OFFITBANK) shall be entitled to enforce his or its rights under this Agreement
to recover damages by reason of any breach of any provision of this Agreement
and to exercise all other rights existing in his or its favor. The parties agree
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that any party may, in his or its sole
discretion, apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive relief, without proof of actual damage,
in order to enforce or prevent any violation of the provisions of this
Agreement, and no bond or other security shall be required in connection
therewith.
(c) Notices. Any notice required or permitted to be given under
or in connection with this Agreement shall be in writing and shall be duly given
if delivered personally, telecopied (which is confirmed), or mailed by
registered or certified mail (return receipt requested), and if mailed to
OFFITBANK, addressed to the address of its principal office, and if mailed to a
Shareholder, addressed to his or its address set forth in Schedule A or B, or to
such address as is then in the books and records of OFFITBANK. The date of
confirmation of such telecopy or the date of registry of such notice or the date
of the certified receipt therefor shall be deemed the date of the giving of such
notice; provided, however, that any written communication actually received by a
party shall constitute notice for all purposes of this Agreement.
(d) Binding Provisions. This Agreement shall be binding upon and
inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and permitted assigns of the parties.
(e) Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws, and not the laws of conflicts,
of the State of New York. Each of the parties acknowledges that the entry into
and performance of this Agreement by such party constitutes the transaction of
business in the State of New York for purposes of conferring personal
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jurisdiction over such party on the appropriate Federal or State court in the
State of New York. Any action, suit or other proceeding arising out of, under or
in connection with this Agreement shall be brought and determined in the
appropriate Federal or State court in the State of New York and in no other
forum. The parties hereby submit themselves to the jurisdiction of any such
court and agree that service of process on them in any such action, suit or
proceeding shall be deemed valid by registered mail, return receipt requested,
to the address provided for in Section 13(c).
(f) Counterparts. This Agreement may be executed in several
counterparts, all of which together shall constitute one agreement binding on
all parties hereto, notwithstanding that all the parties have not signed the
same counterpart, except that no counterpart shall be binding unless signed on
behalf of OFFITBANK by a duly authorized officer. A Shareholder shall be deemed
to have executed a counterpart of this Agreement by executing and delivering a
Subscription Agreement to OFFITBANK.
(g) Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(h) Headings. The descriptive headings are intended only for
convenience and do not constitute part of this Agreement.
(i) Entire Agreement. This Agreement, including the Schedules
hereto, constitutes the entire agreement among the parties. This Agreement
supersedes any prior agreement or understanding among the parties and may not be
modified or amended in any manner other than as set forth herein.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
OFFITBANK
By:
-------------------------
Morris W. Offit, Chairman
EMPLOYEES:
-----------------------------
-----------------------------
-----------------------------
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Schedule A
Schedule of Employees
Address for
Name Notice Purposes Number of Shares Owned
- ---- --------------- ----------------------
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Schedule B
Schedule of Investors
Address for
Name Notice Purposes Number of Shares Owned
- ---- --------------- ----------------------
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APPENDIX D
[MERRILL LYNCH LETTERHEAD]
May 13, 1999
Board of Directors
OFFITBANK Holdings, Inc.
520 Madison Avenue
New York, NY 10022
Members of the Board:
We understand that OFFITBANK Holdings, Inc. ("OFFITBANK") and Wachovia
Corporation ("Wachovia") have entered into an Agreement and Plan of Merger (the
"Agreement"), dated as of May 13, 1999, pursuant to which OFFITBANK will be
merged with and into Wachovia (the "Merger") in which each outstanding share of
OFFITBANK common stock, par value $0.01 per share (the "OFFITBANK Shares"), will
be converted into the right to receive 0.2284 shares (the "Exchange Ratio") of
common stock of Wachovia, par value $5.00 per share (the "Wachovia Shares"), in
accordance with and subject to the limitations set forth in the Agreement. As a
condition to Wachovia entering into this Agreement, stockholders of OFFITBANK
holding the power to vote in excess of 50% of the outstanding OFFITBANK shares
have entered into agreements with Wachovia under which each such stockholder has
agreed to vote its OFFITBANK shares in favor of the Agreement ("Voting
Agreements").
You have asked us whether, in our opinion, the Exchange Ratio is fair
from a financial point of view to the holders of OFFITBANK Shares.
In arriving at the opinion set forth below, we have, among other
things:
(1) Reviewed certain business and historical financial information
relating to OFFITBANK provided to us by OFFITBANK management
and certain publicly available business and historical
financial information relating to Wachovia that we deemed to
be relevant;
(2) Reviewed certain information, including financial forecasts,
relating to the respective businesses, earnings, assets,
liabilities and prospects of OFFITBANK and Wachovia furnished
to us by senior management of OFFITBANK and Wachovia, as well
as the amount and timing of the cost savings, revenue
enhancements and related expenses expected to result from the
Merger (the "Expected Synergies") furnished to us by senior
management of OFFITBANK and Wachovia;
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(3) Conducted discussions with members of senior management and
representatives of OFFITBANK and Wachovia concerning the
matters described in clauses (1) and (2) above, as well as
their respective businesses and prospects before and after
giving effect to the Merger and the Expected Synergies;
(4) Reviewed the market prices and valuation multiples for certain
publicly traded companies comparable to OFFITBANK that we
deemed to be relevant;
(5) Reviewed the market prices and valuation multiples for the
Wachovia Shares and compared them with those of certain
publicly traded companies that we deemed to be relevant;
(6) Compared the proposed financial terms of the Merger with the
financial terms of certain other transactions that we deemed
to be relevant;
(7) Participated in certain discussions and negotiations among
representatives of OFFITBANK and Wachovia and their respective
financial and legal advisors;
(8) Reviewed the potential pro forma impact of the Merger and
expected synergies on Wachovia;
(9) Reviewed a draft of the Agreement and all related documents
and instruments (collectively, the "Documents"), each dated
May 11, 1999; and
(10) Reviewed such other financial studies and analyses and took
into account such other matters as we deemed necessary,
including our assessment of general economic, market and
monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of the assets or liabilities
of OFFITBANK or Wachovia or been furnished with any such evaluation or
appraisal. We are not experts in the evaluation of allowances for loan losses,
and we have neither made an independent evaluation of the adequacy of the
allowances for loan losses of Wachovia, nor have we reviewed any individual
credit files of Wachovia or been requested to conduct such a review, and, as a
result, we have assumed that the aggregate allowance for loan losses for
Wachovia is adequate to cover such losses and will be adequate on a pro forma
basis for the combined entity. In addition, we have not assumed any obligation
to conduct, nor have we conducted, any physical inspection of the properties or
facilities of OFFITBANK or Wachovia. With respect to the financial forecast
information and the Expected Synergies furnished to or discussed with us by
OFFITBANK and Wachovia, we have assumed that they have been reasonably prepared
and reflect the best currently available estimates and judgments of the senior
management of OFFITBANK and Wachovia as to the future financial performance of
OFFITBANK, Wachovia or the combined entity, as the case may be, and the Expected
Synergies. We have further assumed that the Merger will be accounted for as a
purchase under generally accepted accounting principles and that it will qualify
as a tax-free reorganization for U.S. federal income tax purposes. We have also
assumed that the final form of the Agreement will be substantially similar to
the last draft reviewed by us.
Our opinion is necessarily based upon market, economic and other
conditions as in effect, and on the information made available to us as of the
date hereof. For the purposes of rendering this opinion, we have assumed that
the Merger will be consummated substantially in accordance with the terms set
forth in the Agreement, including in all respects material to our analysis, that
the representations and warranties of each party in the Documents contained
therein are true and correct, that each party to the Documents will perform all
of the
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covenants and agreements required to be performed by such party under such
Documents, and that all conditions to the consummation of the Merger will be
satisfied without waiver thereof. We have also assumed that, in the course of
obtaining the necessary regulatory or other consents or approvals (contractual
or otherwise) for the Merger, no restrictions, including any divestiture
requirements or amendment or modifications, will be imposed that will have a
material adverse effect on the future results of operations or financial
condition of the combined entity or the contemplated benefits of the Merger,
including the Expected Synergies.
In connection with the preparation of this opinion, we have not been
authorized by OFFITBANK or its Board of Directors to solicit, nor have we
solicited, third-party indications of interest for the acquisition of all or
any part of OFFITBANK.
We have been retained to act as financial advisor to OFFITBANK in
connection with the Merger and will receive a fee for our services, a
significant portion of which is contingent upon the consummation of the Merger.
In addition, OFFITBANK has agreed to indemnify us for certain liabilities
arising out of our engagement. We have, in the past provided financial
advisory, investment banking and other services to OFFITBANK and Wachovia and
received customary fees for the rendering of such services. In the ordinary
course of our securities business, we also may actively trade debt and/or
equity securities of Wachovia and its affiliates for our own account and the
accounts of our customers, and we therefore may from time to time hold a long
or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of
OFFITBANK. Our opinion does not address the merits of the underlying decision
by OFFITBANK to engage in the Merger and does not constitute a recommendation to
any shareholder of OFFITBANK as to how such shareholder should vote on the
proposed Merger. This opinion shall not be reproduced, disseminated, quoted,
summarized or referred to at any time, in any manner or for any purpose, nor
shall any public references to Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") or any of its affiliates be made by OFFITBANK or
any of its affiliates, without the prior written consent of Merrill Lynch;
provided, however, we hereby consent to the use of this opinion letter which
forms a part of the Registration Statement on Form S-4 relating to the proposed
merger of OFFITBANK and Wachovia and to the references to this opinion in such
Proxy Statement/Prospectus. In giving such consent, we do not admit and we
hereby disclaim that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the
rules and regulations of the Securities and Exchange Commission thereunder, nor
do we thereby admit that we are experts with respect to any part of such
Registration Statement within the meaning of the term "experts" as used in
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
We are not expressing any opinion herein as to the prices at which the
Wachovia Shares will trade following the announcement or consummation of the
Merger.
On the basis of and subject to the foregoing, we are of the opinion
that, as of the date hereof, the Exchange Ratio is fair from a financial point
of view to the shareholders of OFFITBANK.
Very truly yours,
/s/ Merrill Lynch, Pierce, Fenner &
Smith Incorporated
_____________________________________
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
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APPENDIX E
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
TITLE 8. CORPORATIONS
CHAPTER I. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER OR CONSOLIDATION
8 DEL. C. SECTION 262(1998)
SECTION 262. Appraisal rights
(a) Any stockholder of a corporation of this State who holds shares
of stock on the date of the making of a demand pursuant to subsection (d) of
this section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in favor
of the merger or consolidation nor consented thereto in writing pursuant to
Section 228 of this title shall be entitled to an appraisal by the Court of
Chancery of the fair value of the stockholder's shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the work "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class
or series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or consolidation,
were either (i) listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or (ii) held of record by more
than 2,000 holders; and further provided that no appraisal rights shall be
available for any shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in subsection (f) of
Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to Sections
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository receipts in respect
thereof;
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b. Shares of stock of any other corporation, or depository
receipts thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under Section 253 of this title is not
owned by the parent corporation immediately prior to the merger, appraisal
rights shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of
any class or series of its stock 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 assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record date
for such meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available for
any or all of the shares of the constituent corporations, and shall include in
such notice a copy of this section. Each stockholder electing to demand the
appraisal of such stockholder's shares shall deliver to the corporation, before
the taking of the vote on the merger or consolidation, a written demand for
appraisal of such stockholder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and that
the stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not constitute
such a demand. A stockholder electing to take such action must do so by a
separate written demand as herein provided. Within 10 days after the effective
date of such merger or consolidation, the surviving or resulting corporation
shall notify each stockholder of each constituent corporation who has complied
with this subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective;
or
(2) If the merger or consolidation was approved pursuant to
Section 228 or Section 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of stock of
such constituent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section; provided
that, if the notice is given on or after the effective date of the merger or
consolidation, such notice shall be given by the surviving or resulting
corporation to all such holders of any class or series of stock of a constituent
corporation that are entitled to appraisal rights. Such notice may, and, if
given on or after the effective date of the merger or consolidation, shall, also
notify such stockholders of the effective
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<PAGE> 181
date of the merger or consolidation. Any stockholder entitled to appraisal
rights may, within 20 days after the date of mailing of such notice, demand in
writing from the surviving or resulting corporation the appraisal of such
holder's shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holder's shares. If such notice did not
notify stockholders of the effective date of the merger or consolidation,
either (i) each such constituent corporation shall send a second notice before
the effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send such a
second notice to all such holders on or within 10 days after such effective
date; provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be sent
to each stockholder who is entitled to appraisal rights and who has demanded
appraisal of such holder's shares in accordance with this subsection. An
affidavit of the secretary or assistant secretary or of the transfer agent of
the corporation that is required to give either notice that such notice has
been given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein. For purposes of determining the stockholders entitled to
receive either notice, each constituent corporation may fix, in advance, a
record date that shall be not more than 10 days prior to the date the notice is
given, provided, that if the notice is given on or after the effective date of
the merger or consolidation, the record date shall be such effective date. If
no record date is fixed and the notice is given prior to the effective date,
the record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service
of a copy thereof shall be made upon the surviving or resulting corporation,
which shall within 20 days after such service file in the office of the Register
in Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
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<PAGE> 182
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal,
the Court shall appraise the shares, determining their fair value exclusive of
any element of value arising from the accomplishment or expectation of the
merger or consolidation, together with a fair rate of interest, if any, to be
paid upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court may, in its
discretion, permit discovery or other pretrial proceedings and may proceed to
trial upon the appraisal prior to the final determination of the stockholder
entitled to an appraisal. Any stockholder whose name appears on the list filed
by the surviving or resulting corporation pursuant to subsection (f) of this
section and who has submitted such stockholder's certificates of stock to the
Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder is not entitled
to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple or
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and the
case of holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree may
be enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights as provided in
subsection (d) of this section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on the stock
(except dividends or other distributions payable to stockholders of record at a
date which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal of
such stockholder's demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding
in Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms as
the Court deems just.
E-4
<PAGE> 183
(l) The shares of the surviving or resulting corporation to which
the shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
E-5
<PAGE> 184
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 By-laws 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
<TABLE>
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS
<S> <C>
2.1 Agreement and Plan of Merger, dated as of May 13, 1999, by and
between Wachovia Corporation and OFFITBANK Holdings, 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 By-laws (Exhibit 3.2 to Wachovia Corporation's Registration
Statement on Form S-4 dated December 14, 1998, File No.
333-68823*).
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 By-laws (Exhibit 3.2 to Wachovia Corporation's Registration
Statement on Form S-4 dated December 14, 1998, File No.
333-68823*).
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 SEC.)
5.1 Opinion of William M. Watson, Jr., including consent.
8.1 Opinion of Sullivan & Cromwell, including consent.
8.2 Opinion of Schulte Roth & Zabel LLP, including consent.
10.1 Employment Agreement dated as of May 13, 1999 by and between
Wachovia Corporation and Morris W. Offit.
23.1 Consent of William M. Watson, Jr. (appears in Legal Opinion,
Exhibit 5.1).
23.2 Consent of Sullivan & Cromwell (appears in Legal Opinion,
Exhibit 8.1).
</TABLE>
II-1
<PAGE> 185
23.3 Consent of Schulte Roth & Zabel LLP (appears in Legal Opinion, Exhibit
8.2).
23.4 Consent of Ernst & Young LLP.
23.5 Consent of KPMG LLP.
23.6 Consent of PricewaterhouseCoopers LLP.
23.7 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated (included in
Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Appendix D
to the proxy statement/prospectus).
24.1 Power of Attorney.
99.1 Form of Proxy.
99.2 Consent of Morris W. Offit.
- -------------------------
* 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;
(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 SEC 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.
II-2
<PAGE> 186
(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 SEC
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.
(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.
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<PAGE> 187
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 June 24, 1999.
WACHOVIA CORPORATION
By: /s/ L.M. BAKER, JR.
------------------------------------
L.M. BAKER, JR.
CHAIRMAN 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. Chairman and June 24, 1999
- -------------------------------------- Chief Executive Officer
L.M. BAKER, JR.
/s/ JAMES L. BALLOUN* Director June 24, 1999
- --------------------------------------
JAMES L. BALLOUN
/s/ PETER C. BROWNING* Director June 24, 1999
- --------------------------------------
PETER C. BROWNING
/s/ JOHN T. CASTEEN III* Director June 24, 1999
- --------------------------------------
JOHN T. CASTEEN III
/s/ JOHN L. CLENDENIN* Director June 24, 1999
- --------------------------------------
JOHN L. CLENDENIN
/s/ THOMAS K. HEARN, JR.* Director June 24, 1999
- --------------------------------------
THOMAS K. HEARN, JR.
/s/ GEORGE W. HENDERSON, III* Director June 24, 1999
- --------------------------------------
GEORGE W. HENDERSON, III
/s/ W. HAYNE HIPP* Director June 24, 1999
- --------------------------------------
W. HAYNE HIPP
</TABLE>
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<PAGE> 188
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ ROBERT A. INGRAM* Director June 24, 1999
- --------------------------------------
ROBERT A. INGRAM
/s/ GEORGE R. LEWIS* Director June 24, 1999
- --------------------------------------
GEORGE R. LEWIS
/s/ ELIZABETH VALK LONG* Director June 24, 1999
- --------------------------------------
ELIZABETH VALK LONG
/s/ ROBERT S. McCOY, JR.* Vice Chairman and June 24, 1999
- -------------------------------------- Chief Financial Officer
ROBERT S. McCOY, JR.
/s/ JOHN G. MEDLIN, JR.* Director June 24, 1999
- --------------------------------------
JOHN G. MEDLIN, JR.
/s/ LLOYD U. NOLAND, III* Director June 24, 1999
- --------------------------------------
LLOYD U. NOLAND, III
/s/ SHERWOOD H. SMITH, JR.* Director June 24, 1999
- --------------------------------------
SHERWOOD H. SMITH, JR.
/s/ DONALD K. TRUSLOW* Senior Executive Vice June 24, 1999
- -------------------------------------- President, Treasurer and
DONALD K. TRUSLOW Comptroller
/s/ JOHN C. WHITAKER, JR.* Director June 24, 1999
- --------------------------------------
JOHN C. WHITAKER, JR.
*By: /s/ WILLIAM M. WATSON, JR. June 24, 1999
----------------------------------
WILLIAM M. WATSON, JR.
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE> 189
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS
2.1 Agreement and Plan of Merger, dated as of May 13, 1999, by
and between Wachovia Corporation and OFFITBANK Holdings,
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 By-laws (Exhibit 3.2 to Wachovia Corporation's Registration
Statement on Form S-4 dated December 14, 1998, File No.
333-68823*).
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 By-laws (Exhibit 3.2 to Wachovia Corporation's Registration
Statement on Form S-4 dated December 14, 1998, File No.
333-68823*).
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 SEC.)
5.1 Opinion of William M. Watson, Jr., including consent.
8.1 Opinion of Sullivan & Cromwell, including consent.
8.2 Opinion of Schulte Roth & Zabel LLP, including consent.
10.1 Employment Agreement dated as of May 13, 1999 by and between
Wachovia Corporation and Morris W. Offit.
23.1 Consent of William M. Watson, Jr. (appears in Legal Opinion,
Exhibit 5.1).
23.2 Consent of Sullivan & Cromwell (appears in Legal Opinion,
Exhibit 8.1).
23.3 Consent of Schulte Roth & Zabel LLP (appears in Legal
Opinion, Exhibit 8.2).
23.4 Consent of Ernst & Young LLP.
23.5 Consent of KPMG LLP.
23.6 Consent of PricewaterhouseCoopers LLP.
23.7 Consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated (included in Opinion of Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Appendix D to the proxy
statement/prospectus).
24.1 Power of Attorney.
99.1 Form of Proxy.
99.2 Consent of Morris W. Offit.
- --------------
* Incorporated herein by reference
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF WACHOVIA CORPORATION]
June 24, 1999
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 2,268,000 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 May 13, 1999, by and between the Company and OFFITBANK
Holdings, 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/ William M. Watson, Jr.
---------------------------
William M. Watson, Jr.
Senior Vice President
<PAGE> 1
EXHIBIT 8.1
June 24, 1999
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 OFFITBANK Holdings, Inc., a Delaware Corporation ("OFFITBANK
Holdings") with and into the Company, pursuant to the Agreement and Plan of
Merger, dated as of May 13, 1999, by and between OFFITBANK Holdings and the
Company (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:
(i) The Merger will be completed in the manner set forth in
the Agreement and the Proxy Statement/Prospectus of the Company and
OFFITBANK Holdings (the "Proxy/Prospectus").
(ii) The representations contained in the letters of
representation from the Company and OFFITBANK Holdings to us and
Schulte Roth & Zabel LLP, special counsel to OFFITBANK Holdings, both
dated June 24, 1999, 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, that:
(1) The Merger will be treated for federal income tax purposes
as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
(2) Each of the Company and OFFITBANK Holdings will be a party
to the reorganization within the meaning of Section 368(b) of the Code;
and
(3) No gain or loss will be recognized by stockholders of
OFFITBANK Holdings who receive shares of Wachovia common stock in
exchange for shares of OFFITBANK Holdings common stock, except that
gain or loss may be recognized as to cash received in lieu of
fractional share interests.
The tax consequences described above may not be applicable to financial
institutions, insurance companies, tax-exempt organizations, dealers in
securities or currencies, traders in securities that elect to mark to market,
persons who hold OFFITBANK Holdings common stock as part of a "straddle" or
"conversion" transaction, foreign persons, persons who acquired or acquire
shares of OFFITBANK Holdings common stock pursuant to the
<PAGE> 2
exercise of employee stock options or otherwise as compensation, or persons who
do not hold their shares of OFFITBANK Holdings common stock as a capital asset.
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 also hereby confirm to you that the discussions set forth
under the heading "THE MERGER - Federal Income Tax Consequences" in the
Proxy/Prospectus which form a part of the Registration Statement of the Company
to which this opinion is filed as an exhibit is our opinion, subject to the
limitations set forth therein.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to us under the heading "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> 1
EXHIBIT 8.2
June 24, 1999
Board of Directors
OFFITBANK Holdings, Inc.
520 Madison Avenue
New York, NY 10022-4213
Ladies and Gentlemen:
You have requested our opinion concerning certain federal
income tax issues relating to the Agreement and Plan of Merger, dated as of May
13, 1999 (the "Merger Agreement"), between Wachovia Corporation, a North
Carolina corporation ("Wachovia") and OFFITBANK Holdings, Inc., a Delaware
corporation ("OFFITBANK Holdings"). The Merger Agreement provides for the merger
of OFFITBANK Holdings with and into Wachovia (the "Merger"). Capitalized terms
not otherwise defined in this letter shall have the same meanings as those terms
have in the Merger Agreement. In rendering the opinion we have examined (i) the
Merger Agreement; (ii) the representation letters from Wachovia and OFFITBANK
Holdings, both dated June 24, 1999; and (iii) such other documents as we have
deemed necessary or appropriate in order to render the requested opinion.
In connection with such examination we have assumed (1) the
authenticity of all documents, agreements and instruments which we have
reviewed; (2) that the documents reviewed in connection with rendering the
opinion are complete and accurate and will be complete and accurate as of the
effective date of the Merger; (3) that the Merger will be effective under
applicable state laws; and (4) that the Merger Agreement accurately describes
the terms of the Merger. In rendering our opinion, we have not undertaken
independent investigation of the accuracy of any assumptions stated herein, the
veracity of written statements as to factual matters upon which we have relied
or the authenticity of documents.
Our opinion is based on the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury Regulations promulgated under the Code, published
Revenue Rulings, published Revenue Procedures and existing judicial and
administrative decisions, all as of the date of this letter. All of the
foregoing are subject to change and any such change (which could be retroactive)
could affect the opinion contained in this letter.
The opinion is our legal judgment as to certain of the federal
income tax consequences of the proposed Merger. Our opinion is not binding on
the Internal Revenue Service and the Internal Revenue Service may reach a
different conclusion, which conclusion could be sustained by a court if
litigated. The opinion is limited to the specific conclusions reached in the
opinion and does not purport to reach any other conclusions, such as the tax
consequences to holders of OFFITBANK Holdings common stock who hold such shares
as other than capital assets or as part of a straddle or conversion transaction,
financial institutions, insurance companies, tax-exempt organizations, dealers
in securities or currencies, traders in securities that elect to mark to market,
foreign persons and persons who acquired or acquire shares of OFFITBANK Holdings
common stock pursuant to the exercise of employee stock options or otherwise as
compensation. The opinion does not address foreign, state, local, estate or
other potential tax consequences of the Merger.
<PAGE> 2
On the basis of the foregoing, we are of the opinion that:
1. The Merger will be treated for federal income tax purposes
as a "reorganization" within the meaning of Section 368(a) of the Code.
2. Each of Wachovia and OFFITBANK Holdings will be a party to
the reorganization within the meaning of Section 368(b) of the Code.
3. No gain or loss will be recognized by OFFITBANK Holdings
stockholders who receive shares of Wachovia common stock in exchange for shares
of OFFITBANK Holdings common stock, except that gain or loss may be recognized
as to cash received in lieu of fractional share interests.
This opinion is limited to the federal income tax laws of the
United States and does not purport to discuss the consequences of the Merger
under any other laws.
We also hereby confirm to you that the discussions set forth
under the heading "THE MERGER -- Federal Income Tax Consequences" in the Proxy
Statement/Prospectus of Wachovia and OFFITBANK Holdings (the "Proxy/Prospectus")
which form a part of the Registration Statement of Wachovia to which this
opinion is filed as an exhibit is our opinion, subject to the limitations set
forth therein.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to the firm under the caption
"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.
Sincerely yours,
/s/ Schulte Roth & Zabel LLP
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, made as of the 13th day of May, 1999, by and
between WACHOVIA CORPORATION (the "Corporation") and Morris W. Offit (the
"Executive");
RECITALS
WHEREAS, Executive's current employer, OFFITBANK Holdings, Inc., the
parent of OFFITBANK ("OFFITBANK"), has entered into an Agreement and Plan of
Merger with the Corporation (the "Merger Agreement"), the Corporation desires
to secure the services of the Executive in its behalf or in behalf of one or
more of its subsidiaries for which the Executive may render services hereunder
from time to time, following the Effective Time (as such term is defined in the
Merger Agreement), and in accordance with the terms and conditions set forth
herein. In addition, the Corporation desires to provide the Executive with an
incentive to remain in the service of the Corporation or one or more of its
subsidiaries by granting to the Executive compensation security as set forth
herein should his employment be terminated by the Corporation without cause
during the term of this Agreement.
NOW, THEREFORE, the Corporation and the Executive hereby mutually agree as
follows:
1. Employment. The Executive shall devote his working time exclusively to
the performance of such services for the Corporation or one or more of its
subsidiaries as may be assigned to him by the Corporation from time to time;
provided, however, that Executive may engage in other activities, such as (i)
activities involving public interest, charitable, religious and similar types
of organizations, (ii) continuing to serve as a director on the boards of
for-profit businesses listed on Schedule A hereto, (iii) subject in each case
to the prior written consent of the Chairman of the Corporation, which shall
not be unreasonably withheld, serving on new boards and new committees of
for-profit corporations or not-for-profit corporations other than Wachovia
Corporation or OFFITBANK and (iv) managing personal and family investment
activities, to the extent that such other activities do not interfere with the
performance of Executive's duties under this Agreement, or conflict in any
material way with the business of Wachovia Corporation or any of its
affiliates. Executive shall perform such services faithfully and to the best of
his ability. Such services shall be rendered in a senior management or
executive capacity and shall be of a type for which the Executive is suited by
background and training. In no event shall the nature of the services require
the Executive to relocate his residence from New York, New York, unless the
Executive shall agree to such relocation. References herein to services
rendered for the Corporation and compensation and benefits payable or provided
by the Corporation shall refer to services rendered for and compensation and
benefits payable or provided by the subsidiary of the Corporation which employs
Executive hereunder.
2. Term of Agreement. The term of this Agreement shall commence on the
Effective Date, as defined in the Merger Agreement, and shall continue in
effect until December 31, 2001; provided, however, that commencing on the first
anniversary of the Effective Date, and each anniversary thereafter, the term of
this Agreement shall automatically be extended for one additional year unless
at least 90 days prior to any such anniversary date either party shall notify
the other in writing that it does not wish to extend the term of this Agreement
beyond the then applicable expiration date. In no event, however, may the term
of this Agreement extend beyond the first of the month following the month in
which Executive attains age 72. References herein to the "term" of this
Agreement shall mean the original term plus any continuation as provided in
this Section 2. The "term" shall not be deemed to refer to the Compensation
Period described in Section 4.
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<PAGE> 2
3. Termination of Employment by the Corporation. The Corporation may
terminate the employment of the Executive at any time for any reason;
provided, that except as set forth in Sections 6 and 7, the Corporation will
provide the Executive with Compensation Continuance to the extent described in
Section 4 if the Executive's employment is involuntarily terminated. The
Executive's employment shall be deemed to be involuntarily terminated if he is
terminated by the Corporation for any reason other than for "cause" as defined
in Section 6, or if he voluntarily terminates employment within six months
after: (a) his base salary is reduced below its level in effect on the date
hereof without the Executive's consent, or (b) the duties assigned to the
Executive are not of the status and type described in Section 1 and the
Executive has not consented thereto. The Executive shall be deemed to have
consented to any reduction described in (a) or assignment described in (b),
unless he shall object thereto in writing within thirty days after he receives
notice thereof.
4. Compensation Continuance. If the Executive's employment hereunder is
involuntarily terminated as described in Section 3, he will be entitled to
receive the cash compensation and benefits described in (a), (b) and (c) below
(herein, "Compensation Continuance") for the period beginning with the date of
such involuntary termination and ending with the earlier of (i) the third
anniversary of the date of such termination, or (ii) the first of the month
following the month in which Executive attains age 72 (such period is referred
to herein as the "Compensation Period"). The duration of the Compensation Period
shall not be affected by the fact that the term of this Agreement otherwise
would end before such Period expires. The cash compensation and benefits are as
follows:
(a) Cash Compensation. The amount of cash compensation to be
received monthly during the Compensation Period shall equal one-twelfth of the
sum of (i) the Executive's highest annual rate of salary from the Corporation
in effect during the 12-month period prior to his involuntary termination, plus
(ii) an amount equal to the average of the incentive Compensation paid to the
Executive by the Corporation, if any, for the three consecutive calendar years
next preceding the year of such termination; provided, that the incentive
Compensation to be recognized for this purpose shall be approved by the
Management Resources and Compensation Committee, plus (iii) the average of any
annual contributions by the Corporation under the tax-qualified defined
contribution retirement plan applicable to the Executive as of the date of
termination (excluding participant contributions) for the three consecutive
calendar years preceding the year of such termination. Each monthly payment of
such cash compensation shall have deducted therefrom all payroll taxes and
withholdings required by law.
(b) Employee Benefits. During the Compensation Period, the Executive
shall be carried on the payroll of the Corporation, and shall be deemed to be
continuing in the employment of the Corporation for the purpose of applying and
administering employee benefit plans of the Corporation which applied to
Executive immediately prior to his involuntary termination of employment (other
than any tax-qualified retirement plans). The Executive shall participate in any
changes during the Compensation Period in benefit plans or programs applicable
generally to employees of the Corporation, or to a class of employees which
includes senior executives of the Corporation, but shall not have any right or
option to participate in any such plan or program in which he was not a
participant immediately prior to his involuntary termination of employment. Any
individual contract between the Corporation and the Executive in effect at the
time of his involuntary termination of employment may be terminated or amended
by the Corporation to the extent permitted by the terms of such contract. The
Corporation shall have no obligation to the Executive to make any change or
improvement in any such contract during the Compensation Period even if the
Corporation shall make changes or improvements during such period in similar
contracts, if any, with other senior executives of the Corporation.
(c) Acceleration of Stock Options and Restricted Awards. Immediately
upon termination of the Executive's employment, all options previously granted
to the Executive and outstanding on the date of termination to acquire shares
of common stock of the Corporation shall become fully vested and
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<PAGE> 3
exercisable (or subject to surrender) in full and all restricted awards shall
be deemed to be earned in full; provided, that restricted awards based upon
performance criteria or a combination of performance criteria and continued
service shall be deemed to be earned in accordance with the terms, conditions
and procedures of the plan or plans pursuant to which any such restricted
awards were granted.
In the event that the Executive shall engage in full-time employment permitted
hereunder for another employer or on a self-employed basis during the
Compensation Period, his employment with the Corporation shall be deemed to
have terminated for purposes of Section 4(b) as of the date he begins such
full-time employment, but the payments in Section 4(a) shall continue for the
remainder of the Compensation Period and the rights under Section 4(c) shall be
applicable, in each case subject to the provisions of Section 7.
5. Voluntary Termination of Employment by the Executive. The Executive
reserves the right to terminate his employment voluntarily at any time for any
reason following at least six months' notice to the Corporation. If such notice
shall be given, this Agreement shall terminate as of the effective date of
termination as set forth in such notice (or the date six months from the date
of receipt by the Corporation of such notice, if no effective date shall be set
forth therein), unless sooner terminated as provided in Section 3, 6 or 8. The
Executive shall not be entitled to any form of Compensation Continuance as a
result of such voluntary termination.
6. Termination for Cause. This Agreement shall immediately be terminated
and neither party shall have any obligation hereunder (including but not
limited to any obligation on the part of the Corporation to provide
Compensation Continuance) if the Executive's employment is terminated for
"cause". Termination for cause shall occur when termination results from the
Executive's (a) criminal dishonesty, (b) refusal to perform his duties
hereunder on substantially a full-time basis, (c) refusal to act in accordance
with any specific substantive instructions of the Chief Executive Officer or
the Board of Directors of Wachovia Corporation, or (d) engaging in conduct
which could be materially damaging to the Corporation and its affiliates
without a reasonable good faith belief that such conduct was in the best
interests of the Corporation or its affiliates. The determination of whether a
termination is for cause shall be made by the Management Resources and
Compensation Committee of the Board of Directors of Wachovia Corporation (the
"Committee"), and such determination shall be final and conclusive on the
Executive and all other persons affected thereby.
7. Executive's Obligations; Early Termination of Compensation Period.
(a) During the Compensation Period, the Executive shall provide
consulting services to the Corporation at such time or times as the Corporation
shall reasonably request, subject to appropriate notice and to reimbursement by
the Corporation of all reasonable travel and other expenses incurred and paid
by the Executive. In the event the Executive shall engage in full-time
employment permitted hereunder during the Compensation Period for another
employer or on a self-employed basis, his obligation to provide the consulting
services hereunder shall be limited by the requirements of such employment.
(b) The Executive shall not disclose to any other person any
material information or trade secrets concerning the Corporation or any of its
subsidiaries at any time during or after the Compensation Period. The Executive
will at all times refrain from taking any action or making any statements,
written or oral, which are intended to and do disparage the business, goodwill
or reputation of the Corporation or any of its subsidiaries, or their
respective directors, officers, executives or other employees, or which could
adversely affect the morale of employees of the Corporation or any subsidiaries.
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<PAGE> 4
(c) The Executive shall not, without the Corporation's written
consent, engage in competitive employment at any time during the Compensation
Period. The Executive shall be deemed to engage in competitive employment if he
shall render services as an employee, officer, director, consultant or
otherwise, for any employer which conducts a principal business or enterprise
that competes directly with the Corporation or affiliate of the Corporation.
(d) In the event that the Executive shall refuse to provide
consulting services in accordance with paragraph (a), or shall materially
violate the terms and conditions of paragraph (b) or (c), the Corporation may,
at its election, terminate the Compensation Period and Compensation Continuance
to the Executive. The Corporation may also initiate any form of legal action it
may deem appropriate seeking damages or injunctive relief with respect to any
material violations of paragraph (a), (b) or (c).
(e) The Committee shall be responsible for determining whether the
Executive shall have violated this Section 7, and all such determinations shall
be final and conclusive. Upon the request of the Executive, the Committee will
provide an advance opinion as to whether a proposed activity would violate the
provisions of paragraph (c).
(f) Executive acknowledges that paragraphs (b), (c) and (d) above
are in addition to, and do not supercede, the provisions of the Non-Competition
Agreement between the Executive and the Corporation dated as of the date hereof.
8. Death and Disability. In the event that, during the term of this
Agreement or during the Compensation Period, the Executive shall die or shall
become entitled to benefits under the Corporation's Long-Term Disability Plan,
this Agreement shall thereupon terminate and neither the Executive nor any
other person shall have any further rights or benefits hereunder (including any
rights to Compensation Continuance).
9. Other Severance Benefits. Except as otherwise provided in this
Agreement, the Executive shall not be entitled to any form of severance
benefits, including benefits otherwise payable under any of the Corporation's
regular severance plans or policies, irrespective of the circumstances of his
termination of employment. The Executive agrees that the payments and benefit
provided hereunder, subject to the terms and conditions hereof, shall be in full
satisfaction of any rights which he might otherwise have or claim by operation
of law, by implied contract or otherwise, except for rights which he may have
under employee benefit plans of the Corporation or individual written contracts
with the Corporation.
10. Change of Control.
(a) Notwithstanding any other provision of this Agreement, the
Executive will be entitled to receive the Compensation Continuance
described in Section 4 in the event the Executive voluntarily terminates
his employment during the period beginning on the date of a Change of
Control (as defined in Section 10(b) herein) and ending on the third
anniversary of such date.
(b) For the purposes herein, a "Change of Control" shall be deemed to
have occurred on the earliest of the following dates:
(i) The date any entity or person shall have become the
beneficial owner of, or shall have obtained voting control over,
twenty-five percent or more of the outstanding Common Stock of
Wachovia Corporation;
(ii) The date the shareholders of Wachovia Corporation approve a
definitive agreement (A) to merge or consolidate Wachovia Corporation
with or into another corporation, in
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which Wachovia Corporation is not the continuing or surviving corporation
or pursuant to which any shares of Common Stock of Wachovia Corporation
would be converted into cash, securities or other property of another
corporation, other than a merger of Wachovia Corporation in which holders
of Common Stock immediately prior to the merger have the same proportionate
ownership of Common Stock of the surviving corporation immediately after
the merger as immediately before, or (B) to sell or otherwise dispose of
substantially all the assets of Wachovia Corporation; or
(iii) The date there shall have been a change in a majority of
the Board of Directors of Wachovia Corporation within a twelve month period
unless the nomination for election by the Corporation's shareholders of
each new director was approved by the vote of two-thirds of the directors
then still in office who were in office at the beginning of the twelve
month period.
For the purposes herein, the term "person" shall mean any individual,
corporation, partnership, group, association or other person, as such term is
defined in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, other than
the Corporation, a subsidiary of the Corporation or any employee benefit
plan(s) sponsored or maintained by the Corporation or any subsidiary thereof,
and the term "beneficial owner" shall have the meaning given the term in
Rule 13d-3 under the Exchange Act.
(c)(i) In the event it shall be determined that any payment, benefit
or distribution (or combination thereof) by the Corporation or one or more
trusts established by the Corporation for the benefit of its employees, to
or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement, or
otherwise) (a "Payment") would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1996, as amended (the
"Code"), or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such
interest and penalties, hereinafter collectively referred to as the
"Excise Tax"), the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect thereto) and the
Excise Tax imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(ii) Subject to the provisions of Section 10(c)(iii), all
determinations required to be made under this Section 10, including
whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by a nationally recognized certified public
accounting firm designated by the Executive (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Corporation and
the Executive within fifteen business days of the receipt of notice from
the Executive that there has been a Payment, or such earlier time as is
requested by the Corporation. In the event that the Accounting Firm is
serving as accountant or auditor for an individual, entity or group
effecting the change in ownership or effective control (within the meaning
of Section 280G of the Code), the Executive shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm
shall be borne solely by the Corporation. Any Gross-Up Payment, as
determined pursuant to this Section 10, shall be paid by the Corporation
to the Executive within five days after the receipt of the Accounting
Firm's determination. If the Accounting Firm determines that no Excise Tax
is payable by the Executive, it shall so indicate to the Executive in
writing. Any determination by the Accounting Firm shall be binding upon
the Corporation and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Corporation should
have been made
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<PAGE> 6
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Corporation exhausts its remedies
pursuant to Section 10(c)(iii) and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment
shall be promptly paid by the Corporation or for the benefit of the
Executive.
(iii) The Executive shall notify the Corporation in writing of any
claim by the Internal Revenue Service that, if successful, would require
the payment by the Corporation of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than ten business days
after the Executive is informed in writing of such claim and shall apprise
the Corporation of the nature of such claim and the date on which such
claim is requested to be paid. The Executive shall not pay such claim prior
to the expiration of the 30-day period following the date on which it gives
such notice to the Corporation (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If the
Corporation notifies the Executive in writing prior to the expiration of
such period that it desires to contest such claim, the Executive shall:
(A) give the Corporation any information reasonably requested by
the Corporation relating to such claim;
(B) take such action in connection with contesting such claim as
the Corporation shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the Corporation;
(C) cooperate with the Corporation in good faith in order to
effectively contest such claim; and
(D) permit the Corporation to participate in any proceedings
relating to such claim;
provided, however, that the Corporation shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred
in connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 10(c)(iii), the
Corporation shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Corporation shall determine; provided, however, that if the
Corporation directs the Executive to pay such claim and sue for a refund,
the Corporation shall advance the amount of such payment to the Executive,
on an interest-free basis, and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect
to such advance; and provided, further, that if the Executive is required
to extend the statute of limitations to enable the Corporation to contest
such claim, the Executive may limit this extension solely to such
contested amount. The Corporation's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
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(iv) If, after the receipt by the Executive of an amount advanced by the
Corporation pursuant to Section 10(c)(iii), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall
(subject to the Corporation's complying with the requirements of Section
10(c)(iii)) promptly pay to the Corporation the amount of such refund
(together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by Company pursuant to Section 10(c)(iii), a determination is
made that the Executive shall not be entitled to any refund with respect
to such claim and the Corporation does not notify the Executive in writing
of its intent to contest such denial of refund prior to the expiration of
30 days after such determination, then such advance shall be forgiven and
shall not be required to be prepaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid.
11. Waiver of Claims. In the event of the termination of Executive's
employment, in consideration of the obligations of the Corporation hereunder,
the Executive shall, and does hereby, unconditionally release the Corporation,
its directors, officers, employees and shareholders, from any and all claims,
liabilities and obligations of any nature pertaining to termination of the
Executive's employment by the Corporation or otherwise, including but not
limited to (a) any claims under federal, state or local laws prohibiting
discrimination, including without limitation the Age Discrimination in
Employment Act of 1967, as amended, or (b) any claims growing out of any alleged
legal restrictions on the Corporation's right to terminate the Executive's
employment, such as any alleged implied contract of employment or termination
contrary to public policy. The Executive acknowledges, and shall acknowledge in
such release, that he has been advised to consult with an attorney prior to
signing the release, that he has had no less than twenty-one days to consider
the release prior to its execution, and that he may revoke the release at any
time within seven days following the execution thereof.
12. Notices. All Notices hereunder shall be in writing and deemed properly
given if delivered by hand and receipted or if mailed by registered mail, return
receipt requested. Notices to the Corporation shall be directed to the Secretary
of Wachovia Corporation with a copy directed to the Chairman of the Board of
Directors of Wachovia Corporation. Notices to the Executive shall be directed to
his last known address.
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13. Miscellaneous.
(a) The waiver, whether express or implied, by either party of a
violation of any of the provisions of this Agreement shall not operate or be
construed as a waiver of any subsequent violation of any such provision.
(b) No right, benefit or interest hereunder shall be subject to
assignment, encumbrance, charge, pledge, hypothetical or set off in respect of
any claim, debt or obligation, or similar process.
(c) This Agreement may not be amended, modified or canceled except
by written agreement of the parties.
(d) In the event that any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall remain in full force and effect to
the fullest extent permitted by law.
(e) This Agreement shall be binding upon and inure to the benefit of
the Executive and the Corporation, and their respective heirs, successors and
assigns.
(f) No benefit or promise hereunder shall be secured by any specific
assets of the Corporation. The Executive shall have only the rights of an
unsecured general creditor of the Corporation in seeking satisfaction of such
benefits or promises.
(g) This Agreement shall be governed by and construed in accordance
with the laws of the State of North Carolina.
(h) This Agreement sets forth the entire agreement and understanding
of the parties hereto with respect to the matters covered hereby, and amends
and supersedes any prior arrangements regarding the employment of the Executive
by the parties hereto.
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IN WITNESS WHEREOF, this Agreement has been executed by or in behalf of
the parties hereto as of the date first above written.
WACHOVIA CORPORATION
By: /s/ L.M. Baker, Jr.
-----------------------
Chief Executive Officer
Attest:
- ---------------------
Secretary
[Corporate Seal]
MORRIS W. OFFIT
/s/ Morris W. Offit (Seal)
-------------------
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Schedule A
1. Hasbro, Inc.
2. Any mutual fund boards with respect to funds managed by OFFITBANK
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<PAGE> 1
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 14, 1999, 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, 1998, filed with the Securities and
Exchange Commission.
Ernst & Young LLP
Winston-Salem, North Carolina
June 22, 1999
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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.
KPMG LLP
Richmond, Virginia
June 23, 1999
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EXHIBIT 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-4 of
Wachovia Corporation of our report dated February 23, 1999 relating to the
financial statements of OFFITBANK, which appears in such Registration
Statement. We also consent to the reference to us under the heading "Experts"
in such Registration Statement.
PricewaterhouseCoopers LLP
New York, New York
June 23, 1999
<PAGE> 1
EXHIBIT 24.1
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of
Wachovia Corporation (the "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), our true and lawful
attorneys-in-fact (with full power of substitution and resubstitution) to act
for us and in our name, place and stead, in the capacities set forth opposite
our names, to execute and file a Registration Statement on Form S-4, or other
applicable form, relating to one of more offerings of the Corporation's common
stock, with the Securities and Exchange Commission, and to sign and file any and
all amendments (including post-effective amendments) to the Registration
Statement, with any exhibits 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 take all actions
necessary to effect the purposes of this Power of Attorney, as fully to all
intents and purposes as we 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.
This the 4th day of June 1999.
<TABLE>
<CAPTION>
<S> <C>
/s/ Robert S. McCoy, Jr. Vice Chairman and
- ----------------------------- Chief-Financial-Officer
Robert S. McCoy, Jr. (Principal Financial Officer)
/s/ Donald K. Truslow Senior Executive Vice President, Comptroller,
- ----------------------------- and-Treasurer
Donald K. Truslow (Principal Financial Officer)
</TABLE>
<PAGE> 2
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 27th day of May 1999.
<TABLE>
<CAPTION>
<S> <C>
/s/ L.M. Baker, Jr. /s/ James S. Balloun
- ----------------------------- -------------------------------
L.M. Baker, Jr. James S. Balloun
/s/ Peter C. Browning /s/ John T. Casteen III
- ----------------------------- -------------------------------
Peter C. Browning John T. Casteen, III
/s/ John L. Clendenin /s/ Thomas K. Hearn, Jr.
- ----------------------------- -------------------------------
John L. Clendenin 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/ Elizabeth Valk Long /s/ John G. Medlin, Jr.
- ----------------------------- -------------------------------
Elizabeth Valk Long John G. Medlin, Jr.
/s/ Lloyd U. Noland, III /s/ Sherwood H. Smith, Jr.
- ----------------------------- -------------------------------
Lloyd U. Noland, III Sherwood H. Smith, Jr.
/s/ John C. Whitaker, Jr.
- -----------------------------
John C. Whitaker, Jr.
</TABLE>
-2-
<PAGE> 1
EXHIBIT 99.1
PROXY AND CONSENT SOLICITED BY OFFITBANK HOLDINGS, INC.
- --------------------------------------------------------------------------------
PROXY
The undersigned, a holder of record of shares of common stock, par value
$0.01 per share ("OFFITBANK Holdings Common Stock"), of OFFITBANK Holdings,
Inc., a Delaware corporation ("OFFITBANK Holdings"), hereby appoints E. Robert
Goodkind and Richard P. Ackerman, and each of them, with full power of
substitution, to attend the special meeting of OFFITBANK Holdings shareholders
at 10:00 a.m., on August 2, 1999, at OFFITBANK Holdings, Inc., 520 Madison
Avenue, New York, NY 10022 (and any adjournments, postponements, continuations
or reschedulings thereof), and to vote as specified in this proxy all the shares
of OFFITBANK Holdings 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
OFFITBANK HOLDINGS BOARD AS TO ANY OTHER MATTER. THE OFFITBANK HOLDINGS BOARD
UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL SET FORTH BELOW:
1. Approval of the Agreement and Plan of Merger, dated as of May 13, 1999,
and the related Plan of Merger, between OFFITBANK Holdings and Wachovia
Corporation, pursuant to which OFFITBANK Holdings 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONSENT
The undersigned hereby [ ] CONSENTS [ ] DOES NOT CONSENT to the
termination of the Shareholders' Agreement, entered into by OFFITBANK Holdings
and each OFFITBANK Holdings shareholder pursuant to Section 2.4 of the Exchange
Agreement, dated August 1998, among OFFITBANK Holdings and each shareholder of
OFFITBANK, a wholly-owned subsidiary of OFFITBANK Holdings, to take effect
simultaneously with the completion of the merger.
IF RETURNED CARDS ARE SIGNED BUT NOT MARKED, THE UNDERSIGNED WILL HAVE
CONSENTED TO THE TERMINATION OF THE SHAREHOLDERS' AGREEMENT. A CONSENT TO
TERMINATE THE SHAREHOLDERS' AGREEMENT MAY NOT BE REVOKED ONCE THIS CARD IS
RETURNED. HOWEVER, A DECISION NOT TO CONSENT MAY BE SUBSEQUENTLY CHANGED AT ANY
TIME BY SUBMITTING A NEW PROXY AND CONSENT CARD INDICATING DECISION TO CONSENT
TO THE TERMINATION OF THE SHAREHOLDERS' AGREEMENT.
- --------------------------------------------------------------------------------
Please sign your name exactly as it appears hereon. When shares of
OFFITBANK Holdings 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:
Signature
--------------------------------------
(Title, if any)
<PAGE> 1
EXHIBIT 99.2
June 23, 1999
Wachovia Corporation
100 North Main Street
Winston-Salem, North Carolina 27150
To the Board of Directors:
I hereby consent to being named as a person invited to become a
director of Wachovia Corporation ("Wachovia") upon completion of the merger of
OFFITBANK Holdings, Inc. with and into Wachovia (the "Merger") in the
Registration Statement on Form S-4 filed by Wachovia with the Securities and
Exchange Commission in connection with the Merger, and to the filing of this
consent as an exhibit to such registration statement.
Sincerely,
/s/ Morris W. Offit
----------------------------------
Morris W. Offit
