<PAGE>
FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-53344
[LOGO OF REPUBLIC SECURITY FINANCIAL CORPORATION] [LOGO OF WACHOVIA]
Proxy Statement of Prospectus of
Republic Security Financial Corporation Wachovia
Corporation
Your board of directors has approved unanimously the merger of Republic into
a wholly owned subsidiary of Wachovia. This strategic transaction provides
Republic 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 Republic common stock will be
converted into between 0.1245 and 0.1521 of a share of Wachovia common stock.
We will determine the exact exchange ratio by dividing $7.00 by the average
closing price of Wachovia common stock for the fifteen trading days before the
merger, subject to a minimum of 0.1245 of a share of Wachovia common stock for
each share of Republic common stock and a maximum of 0.1521 of a share of
Wachovia common stock for each share of Republic common stock. The exchange
ratio determined using the average closing price of Wachovia common stock for
the fifteen trading days preceding January 8, 2001 is .1245 of a share. This
represents a value of $7.81 based on the actual closing price of Wachovia
common stock on January 8, 2001. In addition, we expect that the conversion of
your shares of Republic common stock into Wachovia common stock generally will
not be subject to U.S. federal income tax.
To complete this merger, Republic needs your approval. This document is
being furnished to you in connection with the solicitation of proxies by
Republic's board of directors for its use at the special meeting of
shareholders.
The special meeting will be held at the Palm Beach Gardens Marriott, 4000
RCA Boulevard, Palm Beach Gardens, Florida 33410, at 10 a.m. on February 16,
2001. At the special meeting, you will be asked to consider and vote on the
merger agreement and the related plan of merger.
Your board of directors believes that the merger is in the best interests of
Republic and its shareholders and strongly encourages you to vote "FOR"
approval of the merger agreement and the related plan of merger. Republic's
financial advisor, Sandler O'Neill & Partners L.P., has issued its opinion to
the Republic board of directors that the exchange ratio in the merger is fair
from a financial point of view to Republic shareholders.
Wachovia common stock is traded on the New York Stock Exchange 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 January 10, 2001, and it is
being mailed or otherwise delivered to Republic shareholders on or about that
date.
<PAGE>
REFERENCES TO ADDITIONAL INFORMATION ABOUT WACHOVIA
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
<TABLE>
<S> <C> <C>
P.O. Box 3099 191 Peachtree Street, N.E.
Winston-Salem, NC 27150 or Atlanta, Georgia 30303
Attention: Secretary Attention: Secretary
(336) 732-2549 (404) 332-6661
</TABLE>
If you would like to request documents, please do so by February 9, 2001 in
order to receive them before the special meeting.
See "Where You Can Find More Information" on page 52 for further
information.
<PAGE>
REPUBLIC SECURITY FINANCIAL CORPORATION
450 South Australian Avenue
West Palm Beach, Florida 33401
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on February 16, 2001
----------------
To The Shareholders of Republic Security Financial Corporation:
Notice is hereby given that a special meeting of shareholders of Republic
Security Financial Corporation will be held at the Palm Beach Gardens Marriott,
4000 RCA Boulevard, Palm Beach Gardens, Florida 33410 at 10 a.m. on February
16, 2001, for the following purposes:
(1) To approve an Agreement and Plan of Merger, dated as of October 29,
2000, by and between Republic Security Financial Corporation and
Wachovia Corporation and the related Plan of Merger pursuant to which
Republic will merge with and into a wholly owned subsidiary of
Wachovia.
In the merger, each share of Republic common stock issued and
outstanding at the effective time of the merger will be converted into
a number of shares of Wachovia common stock equal to $7.00 divided by
the average closing price of Wachovia common stock for the fifteen
trading days immediately preceding the effective time of the merger,
subject to a minimum of 0.1245 of a share of Wachovia common stock for
each share of Republic common stock and a maximum of 0.1521 of a share
of Wachovia common stock for each share of Republic 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, if any, 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 January 3, 2001 are
entitled to receive notice of and to vote at the special meeting or any
adjournment or postponement of the special meeting.
Shareholders are cordially invited to attend the meeting. To ensure your
representation at the meeting, please complete and promptly mail your proxy in
the prepaid return envelope provided. This will not prevent you from voting in
person, should you so desire. Shareholders holding stock in brokerage accounts
will need to bring a copy of a brokerage statement reflecting stock ownership
as of the record date. Cameras, recording devices and other electronic devices
will not be permitted at the meeting.
The Republic board of directors unanimously recommends that shareholders
vote "FOR" approval of the merger.
By Order of the Board of Directors,
Alissa E. Ballot
Secretary
January 10, 2001
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Questions and answers about the Wachovia/Republic Merger.................... 1
Summary..................................................................... 2
Comparison of Unaudited Per Share Data.................................... 7
Selected Financial Data of Wachovia....................................... 8
Selected Financial Data of Republic....................................... 9
A Warning about Forward-Looking Statements.................................. 10
Special Meeting............................................................. 11
Record Date............................................................... 11
Quorum; Effect of Abstentions and Broker Non-Votes........................ 11
Proxies................................................................... 11
Vote Required............................................................. 12
Recommendation of Board of Directors...................................... 12
The Merger.................................................................. 13
Overview.................................................................. 13
Background of the Merger.................................................. 13
Reasons of Republic for the Merger........................................ 17
Opinion of Republic's Financial Advisor................................... 19
Effective Time of the Merger.............................................. 26
Distribution of Wachovia Stock Certificates............................... 26
Fractional Shares......................................................... 26
Federal Income Tax Consequences........................................... 27
Interests of Republic's Management and Directors in the Merger............ 28
Post-Merger Compensation and Benefits..................................... 30
Noncompetition Agreements................................................. 31
The First Palm Beach Bancorp, Inc. Indenture.............................. 31
Conditions to Completion of the Merger.................................... 31
Regulatory Approvals...................................................... 32
Amendment, Waiver and Termination......................................... 33
Termination Fee Agreement................................................. 34
Conduct of Business Pending the Merger.................................... 35
Management and Operations after the Merger................................ 37
Expenses and Fees......................................................... 37
Accounting Treatment...................................................... 37
Resales of Wachovia Common Stock.......................................... 37
Dissenters' Appraisal Rights.............................................. 38
Shareholder Litigation.................................................... 38
Description of Wachovia Capital Stock....................................... 39
Authorized Stock.......................................................... 39
Preferred Stock........................................................... 39
Common Stock.............................................................. 39
Anti-Takeover Provisions.................................................. 40
</TABLE>
<TABLE>
<S> <C>
Certain Differences in the Rights of Wachovia Shareholders and Republic
Shareholders.............................................................. 43
Authorized Capital...................................................... 43
Amendment of Articles of Incorporation.................................. 43
Notice of Meetings of Shareholders...................................... 43
Special Meetings of Shareholders........................................ 44
Record Date............................................................. 44
Number of Directors; Classified Board of Directors...................... 44
Removal of Directors.................................................... 44
Shareholder Proposals; Advance Notice of Director Nominations........... 45
Anti-Takeover Provisions; Restrictions on Certain Business
Combinations........................................................... 45
Shareholder Rights Agreement............................................ 46
Limitation on Director Liability; Indemnification....................... 46
Shareholder Inspection Rights; Shareholder Lists........................ 47
Dissenters' Appraisal Rights............................................ 48
Shareholder Proposals..................................................... 49
Comparative Market Prices and Dividends................................... 50
Wachovia................................................................ 50
Republic................................................................ 51
Experts................................................................... 52
Validity of Wachovia Common Stock......................................... 52
Other Matters............................................................. 52
Where You Can Find More Information....................................... 52
</TABLE>
Appendices:
Appendix A--Agreement and Plan of Merger and Related Plan of Merger
Appendix B--Termination Fee Agreement
Appendix C--Opinion of Sandler O'Neill & Partners L.P.
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE WACHOVIA/REPUBLIC MERGER
Q:What do I need to do now?
A: Just indicate on your proxy card how you want to vote with respect to the
merger agreement. Sign and return the proxy card in the enclosed prepaid
return envelope marked "Proxy" as soon as possible, so that your shares may
be represented and voted at the special meeting to be held on February 16,
2001.
However, if your shares are held in "street name" by your broker, only your
broker can vote your shares. In this case, you should instruct your broker
how to vote by following the directions provided by your broker.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me without instructions from me?
A: No. Your broker will not be able to vote your shares without instructions
from you. You should instruct your broker to vote your shares, following
the directions provided by your broker. Your failure to instruct your
broker to vote your shares will be the equivalent of voting against the
approval of the merger agreement.
Q: Can I change my vote after I have mailed my signed proxy card?
A: Yes. There are three ways in which you may revoke your proxy and change
your vote. First, you may send a written notice to the Secretary of
Republic stating that you would like to revoke your proxy. Second, you may
complete and submit a new proxy card. Third, you may attend the special
meeting and vote in person. Simply attending the special meeting, however,
will not revoke your proxy. Moreover, if your shares are held in "street
name" and you have instructed your broker to vote your shares, you must
follow directions provided by your broker to change your vote.
Q: Should I send in my stock certificates now?
A: No. After the merger is completed, Wachovia will send you written
instructions explaining how you should exchange your stock certificates.
Q: When do you expect the merger to be completed?
A: We expect the merger to be completed during the first quarter of 2001. We
are working towards completing the merger as quickly as possible. To do so,
the shareholders of Republic must approve the merger agreement and the
related plan of merger and we must obtain the banking and other regulatory
approvals that are necessary to complete the merger.
Q: Whom should I call with questions or to obtain additional copies of this
proxy statement/prospectus?
A: You should contact Alissa E. Ballot, Secretary at Republic Security
Financial Corporation, 450 South Australian Avenue, West Palm Beach,
Florida 33401, telephone (561) 655-8511.
<PAGE>
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. Each item in this summary refers to the page where that
subject is discussed in more detail. You should carefully read the entire proxy
statement/prospectus and the other documents to which we refer to understand
fully the merger. See "Where You Can Find More Information" on page 52 on how
to obtain copies of those documents. In addition, 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.
Information regarding Wachovia and Republic (see page 52)
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 September 30, 2000, Wachovia had
679 branches and 1,364 ATMs throughout the Southeast United States. Wachovia
also has subsidiaries engaged in large corporate and institutional relationship
management and business development, corporate leasing, remittance processing
and brokerage services. Based on its consolidated asset size and market
capitalization at September 30, 2000, Wachovia was ranked 15th and 19th,
respectively, among domestic U.S. bank holding companies. At that date,
Wachovia had consolidated assets of $72.020 billion, deposits of $44.262
billion and shareholders' equity of $6.090 billion.
Republic Security Financial Corporation
450 South Australian Avenue
West Palm Beach, Florida 33401
(561) 655-8511
Republic is a Florida corporation, whose principal subsidiary is Republic
Security Bank, organized under the laws of Florida. As of September 30, 2000,
Republic Security Bank had 99 branches of which 58 are traditional branches and
41 are in-store supermarket branches and all of which are located in Florida.
At September 30, 2000, Republic had consolidated assets of $3.397 billion,
deposits of $2.013 billion and shareholders' equity of $207 million.
Merger consideration will be between 0.1245 and 0.1521 Wachovia shares for each
Republic share (see page 13)
When the merger is complete, each of your shares of Republic common stock
will be converted into between 0.1245 and 0.1521 of a share of Wachovia common
stock. We will determine the exact exchange ratio by dividing $7.00 by the
average closing price of Wachovia common stock for the fifteen trading days
before the merger, subject to a minimum of 0.1245 of a share of Wachovia common
stock for each share of Republic common stock and a maximum of 0.1521 of a
share of Wachovia common stock for each share of Republic common stock. The
minimum ratio of 0.1245 would apply when the average closing price of Wachovia
common stock is $56.2375 or more and the maximum ratio of 0.1521 would apply
when the average closing price is $46.0125 or less. In the case of fractional
shares, you will receive cash instead of a fractional share.
For example, if you hold 100 shares of Republic common stock, then:
. Assuming the average price of Wachovia common stock for the fifteen trading
days before the merger is $50, you will receive 14 shares of Wachovia common
stock.
. Assuming the average price of Wachovia common stock for the fifteen trading
days before the merger is equal to or greater than $56.2375, you will receive
12 shares of Wachovia common
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stock, plus a cash payment equal to the value of 0.45 of a share of Wachovia
common stock.
. Assuming the average price of Wachovia common stock for the fifteen trading
days before the merger is equal to or less than $46.0125, you will receive 15
shares of Wachovia common stock, plus a cash payment equal to the value of
0.21 of a share of Wachovia common stock.
The average closing price used to calculate the exchange ratio is likely to
be different from the closing price per share of Wachovia common stock at the
time of merger. As a result, the value of the Wachovia common stock you receive
for each of your shares of Republic common stock is likely to be different from
$7.00. This will be particularly the case if the average closing price is less
than $46.0125 or more than $56.2375, in which case the limits we have placed on
the exchange ratio will cause the value of what you receive for each share of
Republic common stock to be unrelated to $7.00.
Share information and market prices of Wachovia common stock (see page 50)
Wachovia common stock is traded on the NYSE under the symbol "WB". Republic
common stock is traded on the Nasdaq National Market under the symbol "RSFC".
The following table lists the closing price of Wachovia common stock, the
closing price of Republic common stock and the equivalent value of a share of
Republic common stock giving effect to the merger on
. October 27, 2000, the last trading day before we announced the merger and
. January 8, 2001, the last practical day to obtain share price information
before the date of this proxy statement/prospectus.
<TABLE>
<CAPTION>
Equivalent
Per Share
Value
Wachovia Republic of Republic
Common Common Common
Stock Stock Stock
-------- -------- -----------
<S> <C> <C> <C>
October 27, 2000.................................. $52.6875 $5.9375 $7.07
January 8, 2001................................... $ 62.75 $ 7.625 $7.81
</TABLE>
The "equivalent per share value of Republic common stock" on each of these
two days represents the closing price of a share of Wachovia common stock on
that day multiplied by the relevant exchange ratio. For each of these two days,
we calculated the exchange ratio by dividing $7.00 by the average closing price
of Wachovia common stock for the preceding fifteen trading days, subject to a
minimum exchange ratio of 0.1245 and a maximum exchange ratio of 0.1521.
Because the closing price was different from this average price, "equivalent
per share value" differed from $7.00. As of October 27, 2000, the average
closing price of Wachovia common stock was $52.1333 and as of January 8, 2001,
the average closing price of Wachovia common stock was $56.4833.
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.
Generally, the merger will be a tax-free transaction for Republic shareholders
(see page 27)
It is a condition to the merger that both Republic and Wachovia receive
legal opinions that the federal income tax treatment will be as described in
this document.
Assuming that we receive these legal opinions, 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 instead of
a fractional share 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
Republic common stock exchanged in the merger.
This tax treatment may not apply to certain Republic 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 and will depend on
your specific situation and on variables not within our control. You should
consult your own tax
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advisor for a full understanding of the merger's tax consequences for you.
The Republic board unanimously recommends that you approve the merger agreement
(see page 12)
The Republic board believes that the merger is in your best interests and
has unanimously approved the merger agreement. The Republic board of directors
recommends that you vote "FOR" approval of the merger agreement and the related
plan of merger.
Financial advisor says exchange ratio fair to Republic shareholders from a
financial point of view (see page 19)
Sandler O'Neill & Partners L.P., the financial advisor to Republic in
connection with the merger, has delivered an opinion to the Republic board that
the exchange ratio in the merger is fair from a financial point of view to
Republic shareholders. A copy of Sandler O'Neill & Partners L.P.'s opinion is
attached to this document as Appendix C. You should read the opinion in full to
understand the assumptions made, matters considered and the limitations of the
review undertaken by Sandler O'Neill & Partners L.P. in providing this opinion.
Republic has agreed to pay Sandler O'Neill a transaction fee in connection
with the merger, a substantial portion of which is contingent on completion of
the merger. Based on the closing price of Wachovia common stock on January 8,
2001 (the latest practicable date prior to the date of this proxy
statement/prospectus), Republic would pay Sandler O'Neill a transaction fee of
approximately $2.3 million, of which $150,000 has been paid and the balance
will be paid when the merger is completed. Republic has also paid Sandler
O'Neill a fee of $250,000 for rendering its fairness opinion. Republic has also
agreed to reimburse Sandler O'Neill for its reasonable out-of-pocket expenses
incurred in connection with its engagement.
Special meeting to be held on February 16, 2001 (see page 11)
The special meeting of Republic shareholders will be held at 10 a.m. on
February 16, 2001, at the Palm Beach Gardens Marriott, 4000 RCA Boulevard, Palm
Beach Gardens, Florida 33410. At the special meeting, you will be asked to
consider and vote to approve the merger agreement and the related plan of
merger.
Record date set at January 3, 2001; majority vote of shares entitled to vote on
the merger agreement is required to approve merger (see page 12)
You can vote at the special meeting if you owned Republic common stock at
the close of business on January 3, 2001. As of that date, there were
48,782,021 shares of Republic common stock issued and outstanding and entitled
to be voted at the special meeting.
The affirmative vote of the holders of a majority of the votes entitled to
be cast on the merger agreement is required for approval. If you do not vote
your shares of common stock, it will have the effect of a vote against the
merger.
The directors and executive officers of Republic beneficially owned, as of
the record date, and are entitled to vote 1,848,166 shares of Republic common
stock (including 304,025 shares held by Republic's 401(k) plan as of December
31, 2000, as to which one executive officer, as one of two trustees, shares
voting power), which represents approximately 3.79% of the outstanding shares
of Republic common stock. Each of them has indicated to us that they intend to
vote "FOR" approval of the merger agreement and the related plan of merger.
The merger does not need to be approved by Wachovia's shareholders.
Distribution of Wachovia stock certificates (see page 26)
Promptly after the effective time of the merger, you will receive
transmittal materials for use in exchanging certificates representing shares of
Republic 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.
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Wachovia is not required to pay you any dividends on Wachovia common stock
with a record date after the merger until you have exchanged your Republic
stock certificates for Wachovia stock certificates. Also, you will not be able
to vote your converted Republic shares after the merger until your certificates
are exchanged for Wachovia stock certificates. Wachovia will pay you all
dividends on Wachovia common stock with a record date after the merger that
have been paid to other Wachovia shareholders and an amount representing any
fractional share interest when you exchange your certificates, in each case
without interest.
Interests of Republic's management and directors in the merger (see page 28)
In considering the Republic board's recommendation that you vote "FOR" the
merger agreement, you should know that Republic's directors and executive
officers have some interests in the merger that are different from, or in
addition to, their interests as shareholders of Republic generally.
. Most executive officers have one or more agreements with Republic that
provide for severance or supplemental retirement payments on termination of
employment after a change of control of Republic. To settle these agreements
and to provide that each of these executive officers does not have an
incentive to leave Republic as soon as the merger occurs, Republic will pay
all of the severance payments provided by these agreements immediately before
the merger. Republic estimates the total payment will be about $11 million,
plus any "gross-up" payment that Republic is required to pay to compensate
some of the executive officers for any "golden parachute" excise tax that is
imposed on them.
. Republic also has retirement agreements with some of its non-employee
directors, which provide for payments on a change of control of Republic.
Republic will make these payments immediately before the merger and estimates
that the total payment will be about $1.8 million.
. Options issued under Republic's benefit plans will become fully vested. In
addition, Republic has agreed to settle all of its outstanding stock
appreciation rights before the merger. Republic estimates that the total
payment to settle these stock appreciation rights will be about $3.6 million.
. Wachovia has required Rudy E. Schupp, Chairman and Chief Executive Officer of
Republic, to enter into an employment agreement with it. The agreement
provides for two years of employment after the merger and contains
noncompetition and nonsolicitation provisions during Mr. Schupp's employment
and for two years after his employment with Wachovia ends.
. Wachovia has determined to establish a local advisory board on which the non-
employee directors of Republic will be permitted to serve. The minimum term
of the advisory board is two years after the merger, and the minimum
compensation for each director who attends all meetings is $1,200 annually.
Each non-employee director also entered into a noncompetition agreement with
Wachovia.
The Republic 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 37)
Wachovia common stock issued in the merger will be freely transferable by
you unless you are deemed to be an "affiliate" of Republic under applicable
federal securities laws. Generally, "affiliates" include directors, certain
executive officers and 10% or greater shareholders.
Conditions that must be satisfied for the merger to occur (see page 31)
Completion of the merger is subject to various conditions. These include:
. approval of the merger agreement by Republic shareholders;
. receipt of all banking and other regulatory and non-regulatory consents and
approvals necessary to permit the merger;
. receipt of the legal opinions concerning the tax implications of the merger;
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<PAGE>
. continuing effectiveness of the employment agreement with Mr. Schupp and the
noncompetition agreements with the non-employee directors of Republic; and
. ability to defease the indenture relating to Republic's outstanding public
debt securities, which it assumed in its acquisition of First Palm Beach
Bancorp, Inc.
Regulatory approvals we must obtain for the merger (see page 32)
We cannot complete the merger unless it is approved by the Board of
Governors of the Federal Reserve System and the Florida Department of Banking
and Finance. Wachovia has filed applications with both the Federal Reserve
Board and the Florida Department for approval of the merger. In addition, the
merger is subject to the approval of or notice to other 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 33)
Republic and Wachovia can agree at any time to terminate the merger
agreement, even if Republic shareholders have approved it. Also, either of our
boards can decide, without the consent of the other, to terminate the merger
agreement if any of the following occur:
. The other party breaches the merger agreement in a material way and does not,
or cannot, correct the breach in 30 days;
. The merger has not been completed by June 30, 2001;
. A regulatory authority denies an approval necessary to complete the merger,
in a final and nonappealable way; or
. Republic's shareholders fail to vote for approval of the merger agreement.
In addition, Wachovia may abandon the merger if the Republic board fails to
make, withdraws or adversely modifies its recommendation to Republic
shareholders to approve the merger agreement.
Termination fee agreement (see page 34)
In connection with the merger agreement, Wachovia and Republic have entered
into a termination fee agreement. This agreement provides that Republic is
required to pay Wachovia a cash fee of $15 million if:
. the merger agreement is terminated because of a material breach by Republic
or under circumstances related to a competing offer for Republic; and
. within 12 months of the termination a third party merges with Republic, buys
substantially all of its assets or deposits or buys 30% or more of the voting
power of its stock or Republic agrees to any of the preceding.
The termination fee agreement is intended to increase the likelihood that
the merger will be completed. The termination fee agreement may discourage
competing offers for Republic, even if someone may have been prepared to pay
more to Republic shareholders than the market price of the Wachovia common
stock to be received by Republic shareholders in the merger.
Wachovia will use purchase accounting treatment (see page 37)
Wachovia will account for the merger as a purchase for financial reporting
purposes.
Shareholder Rights (see page 43)
Currently, your rights as a Republic shareholder are governed by Florida law
and Republic's articles of incorporation and by-laws. However, Wachovia
shareholder rights are governed by North Carolina law and Wachovia's articles
of incorporation and by-laws. After the merger, if you receive Wachovia common
stock in the merger you will become a Wachovia shareholder and your rights as a
shareholder will be governed by North Carolina law and Wachovia's articles of
incorporation and by-laws.
Dissenters' appraisal rights (see page 38)
Republic shareholders are not entitled to appraisal rights under Florida law
because Republic stock is listed on the Nasdaq National Market.
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Comparison of 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, 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 .1383 in computing the pro forma combined and
equivalent pro forma combined per share data. The exchange ratio of .1383
represents the midpoint in the range of .1245 and .1521 stated in the merger
agreement.
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 for the periods presented.
You should read the information in the following table together with the
historical financial information that Wachovia and Republic have presented in
their prior SEC filings. This material has been incorporated into this document
by reference to those filings. See "Where You Can Find More Information" on
page 52.
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
Wachovia Common Stock
Net income per basic common share
Historical......................................... $ 2.90 $ 4.99
Pro forma combined(1).............................. 2.85 4.91
Net income per diluted common share
Historical......................................... 2.87 4.90
Pro forma combined(1).............................. 2.83 4.83
Dividends per common share
Historical......................................... 1.68 2.06
Pro forma combined(2).............................. 1.68 2.06
Book value per common share
Historical......................................... 29.93 28.04
Pro forma combined................................. 30.97 29.09
Republic Common Stock
Net income per basic common share
Historical......................................... $ .36 $ .58
Equivalent pro forma combined(3)................... .39 .68
Net income per diluted common share
Historical......................................... .36 .58
Equivalent pro forma combined(3)................... .39 .67
Dividends per common share
Historical......................................... .18 .24
Equivalent pro forma combined(3)................... .23 .28
Book value per common share
Historical......................................... 4.26 4.02
Equivalent pro forma combined(3)................... 4.28 4.02
</TABLE>
--------
(1) The effect of estimated non-recurring merger and integration costs
resulting from the merger has not been included in the pro forma amounts.
(2) Pro forma dividends per share represent historical dividends paid by
Wachovia.
(3) Represents Wachovia's pro forma results multiplied by the exchange ratio of
.1383.
7
<PAGE>
Selected Financial Data of Wachovia
The table below presents selected Wachovia historical financial data for the
five years ended December 31, 1999, which is derived from its previously filed
audited consolidated financial statements for those years. The table also
presents selected Wachovia historical financial data for the nine months ended
September 30, 2000 and 1999, which is derived from its previously filed
unaudited consolidated financial statements for those interim periods. We note
that results for interim periods do not necessarily indicate the results you
should expect 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. See "Where You Can
Find More Information" on page 52.
<TABLE>
<CAPTION>
Nine Months
Ended
September 30, Year Ended December 31,
---------------- -------------------------------------------
2000 1999 1999 1998 1997 1996 1995
------- ------- ------- ------- ------- ------- -------
(Dollars in millions except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations
Interest Income......... $ 3,941 $ 3,442 $ 4,667 $ 4,665 $ 4,262 $ 4,010 $ 3,790
Interest Expense........ 2,051 1,600 2,197 2,314 2,169 2,086 2,011
Other Income............ 1,461 1,181 1,621 1,249 1,007 879 816
Other Expense........... 1,978 1,650 2,251 1,996 1,967 1,509 1,442
Net Income.............. 588 748 1,011 874 593 757 708
Per Share Amounts
Net Income, Basic....... $ 2.90 $ 3.69 $ 4.99 $ 4.26 $ 2.99 $ 3.70 $ 3.40
Net Income, Diluted..... 2.87 3.62 4.90 4.18 2.94 3.65 3.36
Weighted Average Shares
Outstanding, Basic
(thousands)............ 202,848 203,007 202,795 205,058 198,290 204,889 208,230
Weighted Average Shares
Outstanding, Diluted
(thousands)............ 204,470 206,562 206,192 209,153 201,901 207,432 210,600
Dividends............... $ 1.68 $ 1.52 $ 2.06 $ 1.86 $ 1.68 $ 1.52 $ 1.38
Statement of Condition
(Period End)
Total Assets............ $72,020 $65,806 $67,353 $64,123 $65,397 $57,229 $55,792
Interest Earning
Assets................. 64,228 58,542 59,583 56,537 57,333 50,728 50,182
Loans................... 54,225 47,625 49,621 45,719 44,194 38,007 35,585
Deposits................ 44,262 39,709 41,786 40,995 42,654 35,322 34,355
Shareholders' Equity.... 6,090 5,628 5,658 5,338 5,174 4,608 4,601
Ratios
Return on Average
Assets(1).............. 1.14% 1.54% 1.55% 1.37% 1.03% 1.36% 1.37%
Return on Average
Equity(1).............. 13.45 18.52 18.62 16.92 13.08 16.99 17.00
Dividend Payout Ratio... 58.13 41.32 41.38 43.68 55.21 40.37 39.91
Average Equity to
Average Assets Ratio... 8.44 8.30 8.30 8.08 7.87 8.02 8.05
</TABLE>
--------
(1) Including non-recurring items.
8
<PAGE>
Selected Financial Data of Republic
The table below presents selected Republic historical financial data.
Republic derived the historical financial data for the five years ended
December 31, 1999 from its previously filed audited consolidated financial
statements. The table also presents selected Republic historical financial data
for the nine months ended September 30, 2000 and 1999, which is derived from
its previously filed unaudited consolidated financial statements for those
interim periods. We note that results for interim periods do not necessarily
indicate the results you should expect for any other interim or annual period.
You should read the following table together with the historical financial
information that Republic has presented in its prior SEC filings. Republic has
incorporated this material into this document by reference. See "Where You Can
Find More Information" on page 52.
<TABLE>
<CAPTION>
Nine Months
Nine Months Ended Ended
September 30, Year Ended December 31, December 31,
---------------------- ----------------------------------------------- ------------
2000 1999 1999(2) 1998(2) 1997(2) 1996(2) 1995(1)
---------- ---------- ---------- ---------- ---------- ---------- ------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations
Interest Income......... $ 173,570 $ 156,953 $ 210,525 $ 209,499 $ 198,525 $ 178,917 $ 116,038
Interest Expense........ 105,657 83,124 112,439 120,171 105,720 90,903 60,566
Other Income............ 27,533 21,357 28,151 25,830 18,976 20,111 9,327
Other Expense........... 65,988 59,620 78,189 105,397 86,509 78,292 45,057
Net Income.............. 17,573 22,041 29,469 (10,456) 12,607 8,451 12,020
Per Share Amounts
Net Income, Basic....... $ 0.36 $ 0.44 $ 0.58 $ (0.22) $ 0.25 $ 0.19 $ 0.29
Net Income, Diluted..... 0.36 0.43 0.58 (0.22) 0.25 0.18 0.28
Weighted Average Shares
Outstanding, Basic..... 48,677 50,564 50,469 48,807 46,489 43,699 41,573
Weighted Average Shares
Outstanding, Diluted... 49,063 51,191 51,047 48,807 48,147 45,854 43,633
Dividends............... $ 0.18 $ 0.18 $ 0.24 $ 0.22 $ 0.19 $ 0.12 $ 0.07
Statement of Condition
(Period End)
Total Assets............ $3,396,980 $3,052,135 $3,192,212 $3,081,225 $2,970,120 $2,541,610 $2,146,056
Interest Earning
Assets(3).............. 2,991,078 2,793,752 2,808,241 2,755,432 2,473,106 2,213,073 1,953,273
Loans (Gross)........... 2,074,099 1,888,200 1,906,734 2,040,338 1,935,365 1,726,868 1,487,798
Deposits................ 2,013,253 2,131,110 2,064,936 2,368,360 2,160,715 2,010,311 1,659,438
Shareholders' Equity.... 206,881 212,916 200,662 207,978 215,585 208,721 203,002
Ratios
Return on Average
Assets................. 0.71% 1.09% 0.98% (0.35)% 0.47% 0.36% 0.78%
Return on Average
Equity................. 11.89 15.46 14.04 (4.72) 5.92 3.94 8.81
Dividend Payout Ratio... 50 41 41 48 51 36 24
Average Equity to
Average Assets Ratio... 6.00 7.03 6.95 7.46 8.01 9.08 8.82
</TABLE>
--------
(1) Presented only for the nine months ended December 31, 1995 because of
Republic's change from a March 31 fiscal year to December 31.
(2) Includes merger-related and one-time expenses of $2.4 million related to
the Northside acquisition, $32.6 million related to the First Palm Beach
Bancorp and Unifirst acquisitions and $6.5 million related to the Family
and County acquisition, net of taxes, for the years ended December 31,
1999, 1998 and 1997, respectively and the effect of the reduction of the
allowance for deferred tax assets of $1.1 million for the year ended
December 31, 1997. Excludes a litigation settlement and FDIC assessment of
$7.4 million, net of taxes, for the year ended December 31, 1996.
(3) Average interest earning assets are presented.
9
<PAGE>
A WARNING ABOUT 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 or Republic. 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 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 Republic are greater than expected;
. retaining key personnel is more difficult than expected;
. post-merger revenues are lower than expected;
. competitive pressure among financial institutions increases
significantly;
. effects of changes in interest rates on interest margins, loan volumes
and asset valuations;
. general economic conditions or conditions in securities markets are less
favorable than expected; and
. legislation or regulatory changes adversely affect the businesses of
Wachovia or Republic.
10
<PAGE>
SPECIAL MEETING
The Republic board is providing this proxy statement/prospectus to you in
connection with its solicitation of proxies for use at the special meeting of
Republic shareholders and at any adjournments or postponements of the special
meeting. The special meeting will be held at the Palm Beach Gardens Marriott,
4000 RCA Boulevard, Palm Beach Gardens, Florida 33410 at 10 a.m. on February
16, 2001. At the special meeting, you will be asked to consider and vote to
approve the merger agreement and the related plan of merger, which provide for
the merger of Republic with and into a wholly owned subsidiary of 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 Republic's proposed merger.
Your vote is important. Please complete, date and sign the enclosed proxy
card and return it in the postage prepaid envelope provided. If your shares are
held in "street name," you should instruct your broker how to vote by following
the directions provided by your broker.
Record Date
The Republic board has fixed the close of business on January 3, 2001 as the
record date for determining the Republic shareholders entitled to receive
notice of and to vote at the special meeting. As of the record date, there were
48,782,021 issued and outstanding shares of Republic common stock held by
approximately 3,515 holders of record. Only holders of record of Republic
common stock as of the record date are entitled to notice of and to vote at the
special meeting.
Quorum; Effect of Abstentions and Broker Non-Votes
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares entitled to vote 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.
Because approval of the merger agreement and the related plan of merger
requires the affirmative vote of the holders of a majority of the outstanding
shares of Republic common stock, abstentions and broker non-votes will have the
same effect as a vote against the merger agreement. The proposal to approve the
merger agreement and the related plan of merger is a "non-discretionary" item,
meaning that brokerage firms may not vote shares in their discretion on behalf
of a client if the client has not given voting instructions.
Proxies
Solicitation. Proxies in the form included in the proxy card accompanying
this proxy statement/prospectus are being solicited by the Republic 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 agreement and the related plan of 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 approval of the merger agreement will be voted in favor of any
adjournment or postponement of the special meeting.
Directors, officers and other employees of Republic or its subsidiaries may
solicit proxies personally, by telephone or facsimile or otherwise. None of
these people will receive any special compensation for solicitation activities.
Republic will arrange with brokerage firms and other custodians, nominees and
fiduciaries to forward solicitation material to the beneficial owners of stock
held of record by such persons, and Republic will reimburse these persons for
their reasonable out-of-pocket expenses.
11
<PAGE>
Republic has also made arrangements with D.F. King & Co., Inc. to assist in
soliciting proxies in connection with Republic's special meeting of
shareholders. For its services, Republic will pay D.F. King & Co., Inc. a fee
of $7,500, plus reimbursement of expenses. As of the date hereof, D.F. King &
Co., Inc. does not own, beneficially or of record, any securities of Republic.
The address of D.F. King & Co., Inc. is 77 Water Street, New York, New York
10005. The phone number of D.F. King & Co., Inc. is 800-549-6697.
Revocability. If you hold your shares in your own name you may revoke your
proxy at any time before its exercise at the special meeting by:
. giving written notice of revocation to the Secretary of Republic,
. 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 to Republic Security Financial
Corporation, 450 South Australian Avenue, West Palm Beach, Florida 33401,
Attention: Alissa E. Ballot, 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 American Stock Transfer
& Trust Company or other person responsible for tabulating votes on behalf of
Republic, before the shares are voted.
If your shares are held in "street name" and you have instructed your broker
to vote your shares, you must follow directions provided by your broker to
change your vote.
Vote Required
The affirmative vote of the holders of a majority of the outstanding shares
of Republic common stock is required for approval. Each share of Republic
common stock is entitled to one vote on each matter submitted to the meeting.
If you do not vote your shares, it will have the same effect as a vote
"against" the merger agreement.
As of the record date, the directors and executive officers of Republic
owned, and are entitled to vote 1,848,166 shares of Republic common stock
(including 304,025 shares held by Republic's 401(k) plan as of December 31,
2000, as to which one executive officer, as one of two trustees, shares voting
power), which represents approximately 3.79% of the outstanding shares of
Republic common stock. Each of them has indicated to us that they intend to
vote "FOR" approval of the merger agreement and the related plan of merger. As
of the record date, neither Wachovia nor any of its directors or executive
officers or their affiliates held any shares of Republic common stock.
Recommendation of Board of Directors
The Republic board has unanimously approved the merger agreement, believes
that the merger is in the best interests of Republic and recommends that you
vote "FOR" approval of the merger agreement. See "The Merger--Reasons of
Republic for the Merger" on page 17.
12
<PAGE>
THE MERGER
This section describes the material information pertaining to the merger and
the merger agreement. The description is not complete and is qualified by the
more detailed Appendices to this document which are incorporated 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 Republic will merge
with and into a wholly owned subsidiary of Wachovia organized under North
Carolina law. The subsidiary will be the surviving corporation in the merger.
At the time of the merger, each share of issued and outstanding Republic common
stock will be converted into a number of shares of Wachovia common stock equal
to $7 divided by the average closing price of Wachovia common stock for the
fifteen trading days immediately preceding the merger, subject to a minimum of
0.1245 of a share of Wachovia common stock for each share of Republic common
stock and a maximum of 0.1521 of a share of Wachovia common stock for each
share of Republic common stock. The minimum ratio of 0.1245 would apply when
such average sale price of Wachovia common stock is equal to or greater than
$56.2375 and the maximum ratio of 0.1521 would apply when such average sale
price of Wachovia common stock is equal to or less than $46.0125. Following the
merger, Wachovia intends to merge Republic's principal subsidiary, Republic
Security Bank, with and into its principal banking subsidiary, Wachovia Bank,
National Association.
Background of the Merger
Over the years the Republic board has regularly reviewed Republic's
strategic alternatives, including periodic consideration of whether Republic
should continue as an independent entity or combine with a larger financial
institution. This review generally took into account a variety of factors,
including Republic's historical and projected earnings, the merger and
acquisition environment affecting financial institutions and Republic's
competitive position relative to other banks and financial services
institutions.
Most recently, the Republic board undertook a strategic review over the
course of several board meetings commencing in May 2000. The Republic board
considered Republic's prospects in light of Republic's competitive position and
determined that in order for Republic to remain competitive it would be
necessary for Republic to enter new lines of business to diversify its sources
of revenue and to invest in new technologies to improve efficiency and the
delivery of products and services to customers. However, the Republic board
believed that the cost of establishing or acquiring new businesses and
investing in new technologies would have adversely affected Republic's
operating results in the short term and could have adversely affected market
prices for shares of Republic common stock.
In addition, the Republic board considered a series of restructuring
initiatives aimed at improving Republic's profitability. The restructuring
initiatives considered by the Republic board included an expense reduction
program, the closing of underperforming branches and the retail mortgage
banking operation and the disposition of lower-yielding loans and investment
securities. The Republic board noted that a number of banking companies had
announced various restructuring initiatives, in many cases to address the
impact of rising interest rates.
The Republic board determined that continuing as an independent entity
without a restructuring of Republic's balance sheet was not an attractive
alternative because it would have resulted in Republic experiencing a reduced
level of profitability for an uncertain period of time. The board's decision
was made in light of the increase in Republic's cost of interest bearing
liabilities resulting from a series of increases in interest rates instituted
by the Board of Governors of the Federal Reserve System beginning in June 1999
and the impact such increased cost of funds was having, and was expected to
continue to have, on Republic's results of operations. The Republic board also
determined that implementation of the restructuring initiatives
13
<PAGE>
was not an attractive alternative in light of the significant restructuring
charges that Republic would be required to incur in connection with the
implementation of such initiatives, the execution risk that such initiatives
would have entailed and the risk that, even assuming the success of such
initiatives and an improved level of profitability, there might not be a
sufficient increase in Republic's stock price in light of prevailing
price/earnings multiples for mid-size banks such as Republic.
At a meeting of the Republic board on August 23, 2000, the Republic board
determined, based on its review of information presented by the management of
Republic and an analysis prepared by Sandler O'Neill and the values that the
Republic board believed might be obtainable in a business combination
transaction, that it was likely that a business combination transaction would
provide Republic shareholders with greater value than that obtainable by
Republic through a course of continued independence, whether or not the
restructuring and new business and technology-related initiatives described
above were implemented. The Republic board therefore determined that Republic
should seek indications of interest from third parties with respect to a
potential business combination, authorized the engagement of Sandler O'Neill as
financial advisor to Republic and directed Sandler O'Neill to seek such
indications of interest.
Sandler O'Neill contacted fifteen financial institution holding companies
believed by it and Republic's management to be potentially interested in and
financially and otherwise capable of engaging in a business combination with
Republic. Seven of these companies, including Wachovia, requested information
about Republic. Each of these companies received from Sandler O'Neill a package
containing information about Republic and executed confidentiality and
standstill agreements. In addition, Rudy E. Schupp, Chairman and Chief
Executive Officer of Republic, and a representative of Sandler O'Neill met with
representatives of five of these companies to familiarize them with Republic.
Each of these companies was requested to deliver a written proposal by
September 22, 2000 containing the proposed terms upon which such party would be
willing to enter into a business combination with Republic.
Although several companies expressed interest in a possible business
combination, only one company submitted a proposal by the date specified by
Sandler O'Neill. This proposal provided for a stock-for-stock merger with
Republic in a transaction where Republic's shareholders would have received a
fixed number of shares of common stock of the initial bidder in exchange for
each Republic share, subject to an adjustment in the exchange ratio so that the
value to be received for each Republic share would not be more than $8.24 or
less than $6.74. The proposal was subject to conditions, including the
satisfactory completion of due diligence with respect to Republic, the
execution of definitive transaction documents, the execution of non-competition
agreements by Republic's management and members of the Republic board and the
execution of employment agreements by specified executives of Republic,
including Mr. Schupp.
Although Wachovia did not submit a proposal on the due date, it advised
Sandler O'Neill that it might be interested in a business combination
transaction with Republic but that Wachovia would not be in a position to
submit a proposal until the following month.
At a meeting of the Republic board on September 27, 2000, the Republic board
reviewed with Republic management and Sandler O'Neill the financial terms of
the initial proposal, the business, operations and prospects of Republic and
the initial bidder, both independently and on a combined basis, and the
strategic alternatives available to Republic, including the possibility of
remaining independent, both with and without the implementation of the
restructuring initiatives described above, as well as the possibility of
engaging in a business combination transaction with the initial bidder. At the
conclusion of this meeting, the Republic board authorized management to seek to
negotiate a business combination transaction with the initial bidder.
Shortly thereafter, legal representatives of Republic and the initial bidder
commenced negotiations of the terms of definitive transaction documents, and
during the week of October 2nd and continuing through the week of October 9th
each of the companies conducted a due diligence review of the other.
Negotiation of definitive transaction documents continued throughout this time.
14
<PAGE>
On October 11, 2000 Wachovia orally advised Sandler O'Neill that Wachovia
would be prepared to enter into a stock-for-stock merger with Republic on terms
which Sandler O'Neill advised would not be competitive with the proposal then
under consideration.
On October 18, 2000, Wachovia orally submitted to Sandler O'Neill a revised
proposal, which contemplated two alternative pricing structures. Under the
first alternative (the "fixed value alternative"), Republic shareholders would
receive Wachovia common stock having a calculated value of $6.75 per Republic
share, subject to a minimum exchange ratio of .1180 and a maximum exchange
ratio of .1442. Under the second alternative (the "fixed exchange ratio
alternative"), Republic shareholders would receive .12 shares of Wachovia
common stock.
In late afternoon on October 18, the Republic board met to consider the
status of the initial proposal and the oral proposals submitted earlier that
day by Wachovia. Based on the closing price of the common stock of the initial
bidder on October 18, 2000, its proposal had an indicated value of $6.74 per
Republic share. Based on the closing price of Wachovia common stock on October
18, 2000, Wachovia's fixed value alternative had an indicated value of $6.75
per Republic share and Wachovia's fixed exchange ratio alternative had an
indicated value of $6.00 per Republic share. Management, together with its
legal and financial advisors, reviewed for the Republic board the discussions
and contacts with the initial bidder and Wachovia to date, the financial terms
of the initial proposal and the alternative Wachovia proposals, the pro forma
impact of each proposal on the holders of Republic common stock, the results of
the due diligence review conducted by Republic and its advisors with respect to
the initial bidder, and the terms of the various transaction documents that had
been negotiated to date with the initial bidder. The Republic board was also
advised that the board of directors of the initial bidder was scheduled to meet
on October 20, 2000 to consider the proposed merger with Republic. On the basis
of this review, including the facts that negotiations with the initial bidder
appeared to be almost completed, that the indicated value of the initial
bidder's proposal was comparable to the higher indicated value of Wachovia's
two proposals, that Wachovia had not yet commenced its due diligence review of
Republic, and that legal representatives of Republic and Wachovia had not yet
commenced the preparation and negotiation of definitive transaction documents,
the Republic board determined not to pursue either of the Wachovia proposals
and to meet again on October 20, 2000 following the scheduled meeting of the
board of directors of the initial bidder for the purpose of considering
approval of the business combination transaction proposed by the initial
bidder.
The following day Sandler O'Neill advised Wachovia that its proposals were
not sufficiently attractive to cause Republic to enter into formal negotiations
with Wachovia but that, if Wachovia acted promptly to improve the terms of its
proposals, such proposals would be reviewed by the Republic board. At the same
time, counsel for Republic and the initial bidder reached agreement on what was
believed to be the final form of the transaction documents between Republic and
the initial bidder.
In the morning of October 20, Wachovia submitted a written proposal
containing two alternative pricing structures, both of which contemplated a
stock-for-stock merger. One alternative contemplated a fixed exchange ratio of
.1271 shares of Wachovia common stock for each Republic share (the "revised
fixed exchange ratio alternative"). Under the other alternative (the "revised
fixed value alternative"), Republic shareholders would receive Wachovia common
stock having a calculated value (based on the average closing price) of $7.00
per Republic share, subject to a minimum exchange ratio of .1245 and a maximum
exchange ratio of .1521. Accordingly, under the revised Wachovia fixed value
alternative, Republic shareholders would receive Wachovia common stock having a
calculated value of $7.00 per Republic share so long as the average closing
price of Wachovia common stock was between $46.0125 and $56.2375.
In the afternoon of October 20, the initial bidder's counsel contacted
Republic's counsel to advise it that the board of directors of the initial
bidder had determined to double the two-year non-competition provision
contained in an employment agreement that the initial bidder had required from
Mr. Schupp and which had been previously agreed to between Mr. Schupp and the
initial bidder. The initial bidder's counsel also indicated that the initial
bidder was not prepared to pay any additional consideration for the extended
non-competition
15
<PAGE>
arrangement. After consulting with Mr. Schupp, Republic's counsel advised the
initial bidder's counsel that the proposed change was not acceptable to Mr.
Schupp. Counsel for Republic also advised counsel for the initial bidder that,
insofar as the initial bidder's proposal was conditioned on obtaining a non-
competition agreement from Mr. Schupp, the initial bidder should resolve this
issue prior to the meeting of the Republic board scheduled later that day.
However, no representative of the initial bidder contacted Mr. Schupp or any
other representative of Republic to seek to resolve this issue.
In late afternoon on October 20, the Republic board met to consider the
initial proposal and the proposals contained in Wachovia's bid letter. Of the
proposals then under consideration by the Republic board, the revised Wachovia
fixed value alternative, providing a calculated value of $7.00 per Republic
share, offered the highest nominal per share consideration to the holders of
Republic common stock. Based on the closing price of the common stock of the
initial bidder on October 20, the initial bid had an indicated value of $6.76
per Republic share, and based on the closing price of Wachovia common stock on
October 20, Wachovia's revised fixed exchange ratio alternative had an
indicated value of $6.61 per Republic share. Republic's management, together
with its legal and financial advisors, reviewed for the Republic board the
status of the negotiations with the initial bidder, the financial terms of the
alternative Wachovia proposals, and the pro forma impact of each of the
Wachovia proposals on the holders of Republic common stock. At the October 20
meeting, the Republic board authorized management to commence merger
discussions with Wachovia with respect to the revised fixed value alternative,
and also directed it to continue negotiations with the initial bidder. The
Republic board determined to meet again on October 22 for the purpose of
reconsidering Wachovia's proposal and the initial bid.
Following the October 20th meeting, Sandler O'Neill advised Wachovia that
Republic was prepared to enter into merger discussions with Wachovia with
respect to the revised Wachovia fixed value alternative but that it required
additional information about Wachovia's proposal. At roughly the same time, the
initial bidder advised Sandler O'Neill that the initial bidder was withdrawing
its merger proposal. On October 21 and 22, Wachovia and its legal advisors
provided additional information concerning its proposal to Republic and its
legal advisors, including that Wachovia was willing to agree to many of the
arrangements previously negotiated with the initial bidder.
At a meeting of the Republic board on October 22, the Republic board
reviewed with management and its legal and financial advisors the financial and
non-financial terms of Wachovia's proposal, the business, operations and
prospects of Wachovia and the pro forma impact of the proposed merger on the
holders of Republic common stock. At the conclusion of the October 22 meeting,
the Republic board authorized continued negotiations with Wachovia.
Following the October 22nd meeting, legal representatives of Republic and
Wachovia proceeded to negotiate the terms of definitive transaction documents
and representatives of each company conducted a due diligence examination of
the other company.
On October 27, 2000 the Republic board held a meeting to discuss and review,
with the assistance of its legal and financial advisors, the merger agreement,
the termination fee agreement and related matters, including the
employment/non-competition agreement to be entered into between Wachovia and
Mr. Schupp as required by Wachovia. See "--Interests of Republic's Management
and Directors in the Merger" on page 28. Management and Republic's legal and
financial advisors also reviewed with the Republic board their due diligence
findings concerning Wachovia. Representatives of Sandler O'Neill reviewed
financial information concerning Wachovia, Republic and the proposed
transaction, and delivered to the Republic board Sandler O'Neill's oral opinion
(which was subsequently confirmed in writing) that, as of such date, the
exchange ratio in the merger was fair, from a financial point of view, to
Republic shareholders. See "--Opinion of Republic's Financial Advisor" on page
19. Based upon the Republic board's review of the definitive terms of the
transaction, the opinion of Sandler O'Neill and other relevant factors, the
Republic board, by unanimous vote (with two directors absent) of all directors,
authorized and approved the execution of the merger agreement and the
termination fee agreement. The absent directors subsequently concurred in the
Republic board's authorization and approval of the execution of the merger
agreement and the termination fee agreement.
16
<PAGE>
On October 29, 2000, the parties entered into the merger agreement and
termination fee agreement, and Wachovia entered into the employment/non-
competition agreement with Mr. Schupp and the non-competition agreements with
the non-employee directors of Republic.
Reasons of Republic for the Merger
In reaching its determination to approve and adopt the merger agreement, the
Republic board consulted with Republic's management and its financial and legal
advisors, and considered a number of factors. The following include all of the
material factors considered by the Republic board:
. the Republic board's familiarity with and review of Republic's business,
operations, financial condition and earnings on an historical and a
prospective basis, including:
--the effect on Republic's operating margins of a higher interest rate
environment in light of the composition of Republic's existing assets
and liabilities and the Republic board's analysis of the risks in
restructuring such assets and liabilities;
--the relatively low price/earnings multiples at which the common stocks
of mid-size depository institutions, including Republic, had recently
traded and could continue to trade, and the effect of such trading
prices on Republic's ability to bid at competitive price levels for
attractive acquisition targets; and
--the current and prospective economic and competitive environment facing
the financial services industry generally, and Republic in particular,
including the continued rapid consolidation in the industry and the
increasing importance of operational scale and financial resources in
maintaining efficiency and remaining competitive over the long term and
in being able to capitalize on technological developments which
significantly impact industry competition;
. the terms of the merger agreement and the merger, including the merger
consideration, noting that it reflected a premium ranging from 42% to 47%
over the average trading prices of the Republic common stock for the
five, ten and fifteen-day trading periods prior to the publication of a
newspaper story on September 29, 2000 reporting rumors that Republic may
be in merger discussions with third parties, and that the structure of
the merger consideration offered partial protection against a potential
decline in the market prices for the Wachovia common stock before the
merger and permitted the holders of Republic common stock to participate
in the potential appreciation in the market prices for the Wachovia
common stock before the merger to the extent that the average closing
price exceeds $56.2375;
. the pro forma impact of the merger on holders of Republic common stock,
including the increase in 2001 pro forma earnings per share of 51.7% as
compared to 2001 projected earnings per share on a stand-alone basis, and
the increase in 2001 pro forma dividends per share of 24.6% as compared
to 2001 projected dividends on a stand-alone basis (see the discussion of
these projections in "--Opinion of Republic's Financial Advisor" on page
19);
. the Republic board's review, based in part on presentations by its
financial advisor and Republic's management, of the business, operations,
financial condition and earnings of Wachovia on an historical and a
prospective basis and of the combined company on a pro forma basis and
the historical stock price performance of the Wachovia common stock, and
the resulting relative interests of Republic shareholders and Wachovia
shareholders in the common equity of the combined company;
. the presentations of Sandler O'Neill to the Republic board, the financial
information reviewed by Sandler O'Neill at the meetings of the Republic
board on September 27, October 18 and October 27, 2000, and the opinion
of Sandler O'Neill, rendered on October 27, 2000, that, as of such date
and based upon and subject to the procedures followed, assumptions made,
matters considered, and limitations on the analyses undertaken, the
exchange ratio in the merger was fair from a financial point of view to
Republic shareholders (see "--Opinion of Republic's Financial Advisor" on
page 19);
17
<PAGE>
. the process conducted by Republic's management and its financial advisor
in exploring and determining the potential value which could be realized
by Republic shareholders in a business combination transaction, including
the contacts between Republic and/or its financial advisor and certain
financial institution holding companies determined to be the most likely
companies to be both interested in and financially and otherwise capable
of engaging in a business combination transaction with Republic, the fact
that each of such selected holding companies which expressed interest in
a business combination transaction with Republic was afforded an
opportunity to submit proposals for such a transaction to Republic, and
the terms of the proposals received by Republic from such holding
companies (see "--Background of the Merger" on page 13)
. the Republic board's review, based on the presentations of its management
and Sandler O'Neill, of alternatives to the merger for enhancing
shareholder value, the range of possible values to Republic shareholders
obtainable through implementation of such alternatives, and the timing
and likelihood of actually achieving such value, and the Republic board's
belief, based upon such review, that such alternatives were not likely to
result in greater value for Republic shareholders than the value to be
realized in the merger. In this regard, the Republic board considered,
among other things, Republic's ability to continue to generate revenue
growth, improved profitability and superior shareholder returns on a
stand-alone basis (both with and without the implementation of
restructuring, new business and technology-related initiatives), and the
availability of acquisition opportunities for Republic.
. the general impact that the merger could be expected to have on the
constituencies served by Republic, including its customers, employees and
communities.
. the expectation that the merger would constitute a "reorganization" under
Section 368(a) of the Internal Revenue Code and that it would be
accounted for as a "purchase" for accounting and financial reporting
purposes (see "--Federal Income Tax Consequences" on page 27 and "--
Accounting Treatment" on page 37);
. the fact that the non-management members of the Republic board would
enter into non-competition agreements with Wachovia and serve on a local
advisory board of Wachovia for at least a two-year period following the
merger. The Republic board also considered that Mr. Schupp would enter
into an employment/non-competition agreement with Wachovia to be
effective as of the effective time and that the directors and officers of
Republic might be deemed to have interests in the merger other than their
interests generally as Republic shareholders (see "--Interests of
Republic's Management and Directors in the Merger" on page 28); and
. the results of the due diligence investigation of Wachovia conducted by
Republic's management and Sandler O'Neill, the Republic board's
assessment, with the assistance of counsel, concerning the likelihood
that Wachovia would obtain all requisite regulatory approvals required
for the merger (see "--Regulatory Approvals" on page 32); and the terms
of the termination fee agreement, including the risk that the termination
fee agreement might discourage third parties from offering to acquire
Republic by increasing the cost of such an acquisition, and recognizing
that the execution of the termination fee agreement was a condition to
Wachovia's willingness to enter into the merger agreement (see "--
Termination Fee Agreement" on page 34).
The foregoing discussion of the information and factors considered by the
Republic board was not intended to be exhaustive but includes all of the
material factors considered by the Republic board. In the course of its
deliberations with respect to the merger, the Republic board discussed the
anticipated impact of the merger on Republic, its shareholders and its various
other constituencies, and no material disadvantages expected to result from the
merger were identified during these discussions. In reaching its determination
to approve and recommend the merger, the Republic board did not assign any
relative or specific weights to the factors considered in reaching such
determination, and individual directors may have given differing weights to
different factors.
18
<PAGE>
The Republic board believes the merger is fair to, and in the best interests
of, Republic and the Republic shareholders. The Republic board unanimously
recommends that Republic shareholders vote "FOR" the approval and adoption of
the merger agreement and the consummation of the transactions contemplated
thereby.
Opinion of Republic's Financial Advisor
On August 23, 2000, Republic retained Sandler O'Neill as an independent
financial advisor in connection with Republic's consideration of a possible
business combination. Sandler O'Neill is a nationally recognized investment
banking firm whose principal business specialty is financial institutions. In
the ordinary course of its investment banking business, Sandler O'Neill is
regularly engaged in the valuation of financial institutions and their
securities in connection with mergers and acquisitions and other corporate
transactions.
Sandler O'Neill acted as financial advisor to Republic in connection with
the merger and participated in some of the negotiations leading to the merger
agreement. At the request of the Republic board, representatives of Sandler
O'Neill attended the October 27, 2000 meeting of the Republic board at which
the board considered and approved the merger agreement. At the meeting, Sandler
O'Neill delivered to the Republic board its oral opinion, subsequently
confirmed in writing, that, as of such date, the exchange ratio in the merger
was fair to Republic shareholders from a financial point of view. Sandler
O'Neill has also delivered to the Republic board a written opinion dated the
date of this proxy statement/prospectus which is substantially identical to the
October 27, 2000 opinion. The full text of Sandler O'Neill's opinion is
attached as Appendix C to this proxy statement/prospectus. The Sandler O'Neill
opinion outlines the procedures followed, assumptions made, matters considered
and qualifications and limitations on the review undertaken by Sandler O'Neill
in rendering the opinion. The opinion is incorporated by reference into this
description of the opinion and this description is qualified in its entirety by
reference to the opinion. Republic shareholders are urged to read carefully the
opinion in connection with their consideration of the proposed merger.
Sandler O'Neill's opinion was directed to the Republic board and was
provided to the board for its information in considering the merger. The
opinion is directed only to the fairness of the exchange ratio in the merger to
Republic shareholders from a financial point of view. It does not address the
underlying business decision of Republic to engage in the merger or any other
aspect of the merger and is not a recommendation to any Republic shareholder as
to how such shareholder should vote at the special meeting with respect to the
merger or any other related matter.
In rendering its opinion, Sandler O'Neill performed a variety of financial
analyses. The following is a summary of the material analyses performed by
Sandler O'Neill, but is not a complete description of all the analyses
underlying Sandler O'Neill's opinion. The preparation of a fairness opinion is
a complex process involving subjective judgments as to the most appropriate and
relevant methods of financial analysis and the application of those methods to
the particular circumstances. The process, therefore, is not necessarily
susceptible to a partial analysis or summary description. Sandler O'Neill
believes that its analyses must be considered as a whole and that selecting
portions of the factors and analyses considered without considering all factors
and analyses, or attempting to ascribe relative weights to some or all such
factors and analyses, could create an incomplete view of the evaluation process
underlying its opinion. Also, no company included in Sandler O'Neill's
comparative analyses described below is identical to Republic or Wachovia, and
no transaction is identical to the merger. Accordingly, an analysis of
comparable companies or transactions is not mathematical; rather it involves
complex considerations and judgments concerning differences in financial and
operating characteristics of the companies and other factors that could affect
the public trading values or merger transaction values, as the case may be, of
Republic or Wachovia and the companies to which they are being compared.
The earnings projections for Republic and Wachovia relied upon by Sandler
O'Neill in its analyses were reviewed with management and were based upon
internal projections of Republic for the year ending December 31, 2001 and
published First Call Corporation consensus earnings estimates for 2000 and 2001
for
19
<PAGE>
Republic and Wachovia. For periods after 2001, Sandler O'Neill assumed, with
the consent of the management of Republic, an annual growth rate on earning
assets of Republic of 7% and of 10% for Wachovia. Under these projections and
analyses, earnings per share for Republic were forecast at $0.50 for 2001,
$0.53 for 2002, $0.57 for 2003 and $0.61 for 2004. The 2001 earnings
projections furnished to Sandler O'Neill were prepared by the senior management
of Republic for internal purposes only and not with a view towards public
disclosure. Those projections, as well as the other earnings estimates relied
upon by Sandler O'Neill in its analyses, were based on numerous variables and
assumptions which are inherently uncertain and accordingly, actual results
could vary materially from those set forth in such projections.
In performing its analyses, Sandler O'Neill also made numerous assumptions
with respect to industry performance, business and economic conditions and
various other matters, many of which cannot be predicted and are beyond the
control of Republic, Wachovia and Sandler O'Neill. The analyses performed by
Sandler O'Neill are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested by
such analyses. Sandler O'Neill prepared its analyses solely for purposes of
rendering its opinion and provided such analyses to the Republic Board at the
October 27th meeting. Estimates on the values of companies do not purport to be
appraisals or necessarily reflect the prices at which companies or their
securities may actually be sold. Such estimates are inherently subject to
uncertainty and actual values may be materially different. Accordingly, Sandler
O'Neill's analyses do not necessarily reflect the value of Republic common
stock or Wachovia common stock or the prices at which Republic common stock or
Wachovia common stock may be sold at any time.
Summary of Proposal. Sandler O'Neill reviewed the financial terms of the
proposed transaction. Based on the closing price of Wachovia common stock on
October 26, 2000 of $51.1875 and a transaction value per share of $7.00,
Sandler O'Neill calculated an implied exchange ratio of .1368 Wachovia common
shares for each Republic common share. The implied aggregate transaction value
was approximately $348 million, based upon 49,161,393 diluted shares of
Republic common stock outstanding, which was determined using the treasury
stock method at the implied value of $7.00, and included the consideration to
be received for the Republic stock appreciation rights. Based upon the implied
transaction value per share and Republic's September 30, 2000 financial
information, Sandler O'Neill calculated the following ratios:
<TABLE>
<S> <C>
Implied value/Book value.............................................. 1.64x
Implied value/Tangible book value..................................... 1.84x
Implied value/Last Quarter (9/30/00) EPS annualized................... 18.15x
Implied value/Last Twelve Months (9/30/00) EPS........................ 13.84x
Implied value/Projected 2000 EPS...................................... 15.22x
Implied value/Projected 2001 EPS...................................... 14.00x
</TABLE>
For purposes of Sandler O'Neill's analyses, earnings per share were based on
diluted earnings per share. Sandler O'Neill noted that the implied transaction
value represented a 17.9% premium over the October 26, 2000 closing price of
Republic common stock of $5.94 and a 41.1% premium to the closing price of
Republic common stock on September 29, 2000, the day of publication of a
newspaper story reporting rumors that Republic may be in merger discussions
with third parties. Sandler O'Neill also noted that the implied transaction
value represents a 46.4%, 47.2% and a 42.4% premium to the average trading
prices of Republic common stock for the five, ten and fifteen day trading
periods, respectively, ending on September 29, 2000.
Stock Trading History. Sandler O'Neill reviewed the history of the reported
trading prices and volume of Republic common stock and Wachovia common stock,
and the relationship between the movements in the prices of Republic common
stock and Wachovia common stock, respectively, to movements in certain stock
indices, including the Standard & Poor's 500 Index, the Nasdaq Bank Index and
the median performance of a composite group of publicly traded commercial banks
of comparable sizes selected by Sandler O'Neill. During the one year period
ended October 25, 2000, both the Republic common stock and the Wachovia common
stock underperformed each of the indices to which it was compared.
20
<PAGE>
Comparable Company Analysis. Sandler O'Neill used publicly available
information to compare selected financial and market trading information for
Republic and two groups of commercial banks selected by Sandler O'Neill, a
Regional Group and a High Performing Group.
The Regional Group consisted of Republic and the following 11 publicly traded
regional commercial banks:
Alabama National BanCorp. BancorpSouth Inc.
F&M National Corp. First Charter Corp.
Hamilton Bancorp Inc. Hancock Holding Co.
National Commerce Bancorp. Republic Bancshares Inc.
Simmons First National Corp. South Financial Group Inc.
Trustmark Corp.
The High Performing Group consisted of the following 10 publicly traded
commercial banks which had a return on average equity of greater than 15%
(based on last twelve months' earnings) and a price-to-tangible book value of
greater than 200%:
Chittenden Corp. East West Bancorp Inc.
First Financial Bancorp. Greater Bay Bancorp
Pacific Capital Bancorp Park National Corp.
Silicon Valley Bancshares Southwest Bancorp. of Texas
TrustCo Bank Corp of NY United Bankshares Inc.
The analysis compared publicly available financial information for Republic
and the median data for each of the Regional Group and High Performing Group as
of and for each of the years ended December 31, 1995 through 1999 and as of and
for the twelve months ended September 30, 2000. The table below sets forth the
comparative data as of and for the twelve months ended September 30, 2000.
<TABLE>
<CAPTION>
Republic Regional Group High Performing Group
---------- -------------- ---------------------
<S> <C> <C> <C>
Total assets................. $3,396,980 $3,194,329 $3,666,729
Annual growth rate of total
assets...................... 11.30% 10.99% 9.96%
Tangible equity/total
assets...................... 5.43% 7.62% 7.63%
Intangible assets/total
equity...................... 11.24% 9.87% 0.88%
Net loans/total assets....... 60.39% 64.32% 68.12%
Cash & securities/total
assets...................... 33.47% 32.42% 27.17%
Gross loans/total deposits... 103.02% 88.15% 88.76%
Total borrowings/total
assets...................... 33.35% 12.24% 11.26%
Non-performing assets/total
assets...................... .30% .44% .34%
Loan loss reserves/gross
loans....................... 1.10% 1.32% 1.42%
Net interest margin.......... 3.12% 4.16% 4.74%
Loan loss provision/average
assets...................... .10% .26% .26%
Non-interest income/average
assets...................... 1.05% 1.39% 1.02%
Non-interest expense/average
assets...................... 2.61% 3.05% 2.81%
Efficiency ratio............. 65.72% 59.81% 45.61%
Return on average assets..... .77% 1.03% 1.48%
Return on average equity..... 12.52% 11.47% 19.27%
Price/tangible book value per
share....................... 146.29% 142.48% 312.35%
Price/earnings per share..... 11.00x 11.97x 13.48x
Dividend yield............... 4.31% 3.84% 2.86%
Dividend payout ratio........ 46.15% 42.00% 42.63%
</TABLE>
21
<PAGE>
Sandler O'Neill also used publicly available information to perform a
similar comparison of selected financial and market trading information for
Wachovia and a group of nationwide commercial banks. The Nationwide Group
consisted of Wachovia and the following 10 publicly traded nationwide
commercial banks:
Bank of New York Co. BB&T Corp
Comerica Inc. Fifth Third Bancorp
Firstar Corp. Mellon Financial Corp.
PNC Financial Services Group Regions Financial Corp.
SouthTrust Corp. State Street Corp.
The analysis compared publicly available financial information for Wachovia
with the median data for the Nationwide Group as of and for each of the years
ended December 31, 1995 through 1999 and as of and for the twelve months ended
September 30, 2000. The table below sets forth the comparative data as of and
for the twelve months ended September 30, 2000.
<TABLE>
<CAPTION>
Wachovia Nationwide Group
----------- ----------------
<S> <C> <C>
Total assets...................................... $72,020,000 $56,671,181
Annual growth rate of total assets................ 9.44% 7.12%
Tangible equity/total assets...................... 7.08% 6.76%
Intangible assets/total equity.................... 16.28% 16.10%
Net loans/total assets............................ 74.18% 71.24%
Cash & securities/total assets.................... 18.86% 24.07%
Gross loans/total deposits........................ 122.51% 104.21%
Total borrowings/total assets(1).................. 27.00% 26.64%
Non-performing assets/total assets................ .64% .49%
Loan loss reserves/gross loans.................... 1.47% 1.41%
Net interest margin............................... 4.20% 3.78%
Loan loss provision/average assets................ .78% .25%
Non-interest income/average assets................ 2.70% 2.21%
Non-interest expense/average assets............... 3.55% 3.03%
Efficiency ratio.................................. 54.38% 52.86%
Return on average assets.......................... 1.24% 1.64%
Return on average equity.......................... 14.77% 18.85%
Price/tangible book value per share............... 176.30% 326.83%
Price/earnings per share.......................... 12.68x 14.92x
Dividend yield.................................... 4.22% 2.77%
Dividend payout ratio............................. 53.49% 42.96%
</TABLE>
--------
(1) Reflects data for Wachovia as of the period ending June 30, 2000.
Analysis of Selected Merger Transactions. Sandler O'Neill reviewed certain
transactions announced from January 1, 2000 to October 25, 2000 involving
publicly traded commercial banks as acquired institutions with transaction
values between $100 million and $500 million. Sandler O'Neill reviewed 13
transactions announced nationwide and 3 transactions announced in the Southeast
region. Sandler O'Neill reviewed the multiples of transaction value to last
four quarters' earnings, transaction value to book value, transaction value to
tangible book value, tangible book premium to core deposits, transaction value
to total assets, transaction value to total deposits and premium to market and
computed high, low, mean and median multiples and premiums for the respective
groups of transactions. Sandler O'Neill also analyzed certain relative pricing
multiples for the same groups of transactions. The relative multiples were
determined by dividing the absolute transaction multiples by the relevant
trading multiples of the buyers. Sandler O'Neill then calculated relative
implied price/earnings and price/book multiples by applying the relative
multiples to Wachovia's trading multiples as of the close on October 26, 2000
of 9.69x last quarter annualized earnings and 171.02% of book value. These
multiples were applied to Republic's financial information as of and for the
quarter ended September 30, 2000. As illustrated
22
<PAGE>
in the following table, Sandler O'Neill derived an imputed range of values per
share of Republic common stock of $4.50 to $14.99 based upon the median
multiples for nationwide transactions and $4.03 to $12.10 based upon the median
multiples for Southeast transactions. The assumed transaction value per share
of Republic common stock in the merger was $7.00, which was within the range of
values of the transactions reviewed.
<TABLE>
<CAPTION>
Nationwide Transactions Southeast Transactions
------------------------ ------------------------
Median Implied Median Implied
Multiple Value Multiple Value
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Transaction value/EPS(1)... 19.29x $ 7.52 16.07x $ 6.27
Transaction value/Book
value..................... 2.47x 10.53 1.75x 7.46
Transaction value/Tangible
book value................ 2.79x 10.58 1.87x 7.10
Tangible book premium/Core
deposits.................. 19.7% 11.35 11.9% 8.35
Transaction value/Total
assets.................... 21.6% 14.99 17.4% 12.10
Premium to market(2)....... 41.0% 6.65 32.9% 6.27
Transaction value/Total
deposits.................. 26.3% 10.82 22.5% 9.24
Imputed transaction
value/EPS(1).............. 11.54x 4.50 10.34x 4.03
Imputed transaction
value/Book value.......... 1.94x 8.25 1.63x 6.94
</TABLE>
--------
(1) Utilizes Republic's annualized earnings for the quarter ended September 30,
2000.
(2) Reflects premiums to the seller's price one month before the announcement
of the transaction and were applied to Republic's closing stock price as of
September 26, 2000.
Discounted Dividend Stream and Terminal Value Analysis. Sandler O'Neill also
performed an analysis which estimated the future stream of after-tax dividend
flows of Republic through December 31, 2004 under various circumstances,
assuming Republic's current dividend payout ratio and that Republic performed
in accordance with the earnings forecasts reviewed with management. To
approximate the terminal value of Republic common stock at December 31, 2004,
Sandler O'Neill applied price/earnings multiples ranging from 6x to 22x and
applied multiples of tangible book value ranging from 75% to 275%. The dividend
income streams and terminal values were then discounted to present values using
different discount rates ranging from 9% to 15% chosen to reflect different
assumptions regarding required rates of return of holders or prospective buyers
of Republic common stock. As illustrated in the following table, this analysis
indicated an imputed range of values per share of Republic common stock of
$2.83 to $10.21 when applying the price/earnings multiples and $2.91 to $10.51
when applying multiples of tangible book value. The assumed transaction value
per share of Republic common stock in the merger was $7.00, which was within
the range of values as calculated above.
<TABLE>
<CAPTION>
Price/Earnings Tangible Book Value
Multiples Multiples
----------------------------------- ---------------------------------
Discount Rate 6x 22x .75x 2.75x
------------- ------ ------- ----- ------
<S> <C> <C> <C> <C>
9% $ 3.48 $ 10.21 $3.57 $10.51
11 3.24 9.48 3.33 9.76
13 3.03 8.81 3.11 9.07
15 2.83 8.20 2.91 8.44
</TABLE>
In connection with its analysis, Sandler O'Neill considered and discussed
with the Republic board how the present value analysis would be affected by
changes in the underlying assumptions, including variations with respect to the
growth rate of assets, net interest spread, non-interest income, non-interest
expenses and dividend payout ratio. Sandler O'Neill noted that the discounted
dividend stream and terminal value analysis is a widely used valuation
methodology, but the results of such methodology are highly dependent upon the
numerous assumptions that must be made, and the results thereof are not
necessarily indicative of actual values or future results.
Pro Forma Merger Analysis. Sandler O'Neill analyzed certain potential pro
forma effects of the merger based upon the assumed exchange ratio of .1368 to
Republic's projected March 31, 2001 tangible book value per share and projected
nine months ending December 31, 2001 earnings per share and dividend. As
illustrated
23
<PAGE>
in the following table, the analysis indicated that, from a Republic
shareholder's perspective, as compared to the projected stand-alone performance
of Republic, the merger would be accretive to Republic's projected earnings per
share and dividend for the nine months ending December 31, 2001, but dilutive
to the projected tangible book value per share as of the quarter ended March
31, 2001. The actual results achieved by Wachovia and Republic may vary from
projected results and the variations may be material.
<TABLE>
<CAPTION>
Nine months ending December 31, 2001 Republic
------------------------------------ ----------------------
Pro Forma
Stand-alone Equivalent
----------- ----------
<S> <C> <C>
Projected 2001 EPS.................................... $ .37 $ .57
Tangible book value as of 3/31/01..................... 3.90 3.65
Projected 2001 dividend............................... .21 .26
</TABLE>
Contribution Analysis. Sandler O'Neill reviewed the relative contributions
to be made by Republic and Wachovia to the combined institution based on data
at and for the quarter ended June 30, 2000. The percentage of pro forma shares
owned was determined using an assumed exchange ratio of 0.1368. This analysis
indicated that the implied contributions to the combined entity were as
follows:
<TABLE>
<CAPTION>
Republic Wachovia
-------- --------
<S> <C> <C>
Total assets.............................................. 4.56% 95.44%
Total net loans........................................... 3.74 96.26
Goodwill.................................................. 2.20 97.80
Total deposits............................................ 4.39 95.61
Total borrowings.......................................... 5.85 94.15
Tangible equity........................................... 3.49 96.51
Total equity.............................................. 3.27 96.73
Earnings for the twelve months ended September 30, 2000... 3.04 96.96
Percentage of pro forma shares owned...................... 3.17 96.83
</TABLE>
In connection with rendering its opinion, Sandler O'Neill reviewed, among
other things: (1) the merger agreement and exhibits thereto; (2) the
termination fee agreement; (3) certain publicly available financial statements
and other historical financial information of Republic that they deemed
relevant; (4) certain publicly available financial statements and other
historical financial information of Wachovia that they deemed relevant; (5)
certain internal financial analyses and forecasts of Republic for the years
ending December 31, 2000 and 2001 prepared by management of Republic, consensus
earnings per share estimates for Republic for the years ending December 31,
2000 and 2001 published by First Call Corporation and the views of senior
management of Republic, based on limited discussions with members of senior
management, regarding Republic's past and current business, financial
condition, results of operations and future prospects; (6) consensus earnings
per share estimates for Wachovia for the years ending December 31, 2000 and
2001 published by First Call Corporation and the views of senior management of
Wachovia, based on limited discussions with members of senior management of
Wachovia, regarding Wachovia's past and present business, financial condition,
results of operations and future prospects; (7) the pro forma impact of the
merger, including the relative contributions of Republic and Wachovia to the
resulting institution; (8) the publicly reported historical price and trading
activity for Republic's and Wachovia's common stock, including a comparison of
certain financial and stock market information for Republic and Wachovia with
similar publicly available information for certain other companies the
securities of which are publicly traded; (9) the financial terms of recent
business combinations in the commercial banking industry, to the extent
publicly available; (10) the current market environment generally and the
banking environment in particular; and (11) such other information, financial
studies, analyses and investigations and financial, economic and market
criteria as they considered relevant.
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In connection with rendering its opinion included as an appendix to this
proxy statement/prospectus, Sandler O'Neill confirmed the appropriateness of
its reliance on the analyses used to render its October 27, 2000 opinion by
performing procedures to update certain of such analyses and by reviewing the
assumptions upon which such analyses were based and the other factors
considered in rendering its opinion.
In performing its reviews and analyses, Sandler O'Neill assumed and relied
upon the accuracy and completeness of all the financial information, analyses
and other information that was publicly available or otherwise furnished to,
reviewed by or discussed with it, and Sandler O'Neill did not assume any
responsibility or liability for independently verifying the accuracy or
completeness of any of such information. Sandler O'Neill did not make an
independent evaluation or appraisal of the assets, the collateral securing
assets or the liabilities, contingent or otherwise, of Republic or Wachovia or
any of their respective subsidiaries, or the collectibility of any such assets,
nor was it furnished with any such evaluations or appraisals. Sandler O'Neill
is not an expert in the evaluation of allowances for loan losses and it has not
made an independent evaluation of the adequacy of the allowance for loan losses
of Republic or Wachovia, nor has it reviewed any individual credit files
relating to Republic or Wachovia. With Republic's consent, Sandler O'Neill has
assumed that the respective allowances for loan losses for both Republic and
Wachovia are adequate to cover such losses and will be adequate on a pro forma
basis for the combined entity. In addition, Sandler O'Neill has not conducted
any physical inspection of the properties or facilities of Republic or
Wachovia. With respect to all financial projections and the published earnings
per share estimates prepared by and/or reviewed with the management of Republic
and Wachovia used by Sandler O'Neill in its analyses, Sandler O'Neill assumed
that they reflected the best currently available estimates and judgments of the
respective managements of the respective future financial performances of
Republic and Wachovia and that such performances will be achieved. Sandler
O'Neill expressed no opinion as to such financial projections or the
assumptions on which they were based.
Sandler O'Neill's opinion was necessarily based upon market, economic and
other conditions as they existed on, and could be evaluated as of, the date of
its opinion. Sandler O'Neill assumed, in all respects material to its analysis,
that all of the representations and warranties contained in the merger
agreement and all related agreements are true and correct, that each party to
such agreements will perform all of the covenants required to be performed by
such party under such agreements and that the conditions precedent in the
Agreement are not waived. Sandler O'Neill also assumed, with Republic's
consent, that there has been no material change in Republic's or Wachovia's
assets, financial condition, results of operations, business or prospects since
the date of the last publicly filed financial statements available to them,
that Republic and Wachovia will remain as going concerns for all periods
relevant to its analyses, and that the merger will be accounted for using the
purchase method and will qualify as a tax-free reorganization for federal
income tax purposes.
Republic has agreed to pay Sandler O'Neill a transaction fee in connection
with the merger, a substantial portion of which is contingent upon the closing
of the merger. Based on the closing price of Wachovia common stock on January
8, 2001 (the latest practicable date prior to the date of this proxy
statement/prospectus), Republic would pay Sandler O'Neill a transaction fee of
approximately $2.3 million, of which $150,000 has been paid and the balance
will be paid when the merger is closed. Republic has also paid Sandler O'Neill
a fee of $250,000 for rendering its fairness opinion. Republic has also agreed
to reimburse Sandler O'Neill for its reasonable out-of-pocket expenses incurred
in connection with its engagement and to indemnify Sandler O'Neill and its
affiliates and their respective partners, directors, officers, employees,
agents, and controlling persons against certain expenses and liabilities,
including liabilities under securities laws.
Sandler O'Neill has in the past provided other investment banking services
to Republic and has received compensation for such services. In the ordinary
course of its business as a broker-dealer, Sandler O'Neill may also purchase
securities from and sell securities to Republic and Wachovia and may actively
trade the equity or debt securities of Republic and Wachovia and their
respective affiliates for its own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
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Effective Time of the Merger
The merger will be consummated if it is approved by Republic shareholders,
and, unless waived, Wachovia and Republic 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 the articles of merger reflecting the merger are filed with the
Secretary of State of Florida and the certificate of merger reflecting the
merger is filed with the Secretary of State of North Carolina, or a later date
or time that is indicated in the articles and certificate. Wachovia and
Republic have generally agreed to cause the effective time to occur:
. on the fifth business day to occur after the last of the conditions to
the completion of the merger in the merger agreement has been satisfied
or waived;
. at the election of Wachovia, on the first business day of the month
immediately after the month in which such day occurs; or
. any other date to which Wachovia and Republic agree.
Wachovia and Republic each have the right, acting unilaterally, to terminate
the merger agreement if the merger is not completed by June 30, 2001, so long
as the failure to consummate the merger by such date is not caused by a breach
of the merger agreement by the party electing to terminate the agreement. See
"The Merger--Amendment, Waiver and Termination" on page 33 for further
information.
Distribution of Wachovia Stock Certificates
Promptly after the effective time of the merger, Wachovia and Republic will
cause EquiServe Trust Company, N.A., or another exchange agent selected by
Wachovia, to mail transmittal materials to you for use in exchanging
certificates representing shares of Republic 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 interest or dividends or distributions once it receives your
Republic common stock certificates. Neither Wachovia, Republic, nor the
exchange agent will be liable to any former Republic shareholder for any amount
properly delivered to a public official pursuant to any applicable abandoned
property law.
Wachovia is not required to pay you any dividends on Wachovia common stock
with a record date after the merger until you have exchanged your Republic
stock certificates for Wachovia stock certificates. Also, you will not be able
to vote your converted Republic shares after the merger until your certificates
are exchanged for Wachovia stock certificates. Wachovia will pay you all
dividends on Wachovia common stock with a record date after the merger that
have been paid to other Wachovia shareholders and an amount representing any
fractional share interest when you exchange your certificates, in each case
without interest.
There will be no transfers of shares of Republic common stock on Republic
stock transfer books after the effective time. Until exchanged as set forth in
the transmittal materials, the Republic stock certificates represent only the
right to receive Wachovia common stock and cash for any amount to be paid for a
fractional share interest.
Fractional Shares
Wachovia will not issue any fractional shares of Wachovia common stock in
the merger. Instead, you will receive cash without interest for any fractional
share interest. The amount of cash received will be determined by multiplying
that fraction by the closing price of Wachovia common stock reported by the New
York Stock Exchange on the trading day immediately preceding the effective time
of the merger. You will not be entitled to dividends, voting rights or any
other shareholder rights with respect to any fractional share interest.
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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 Republic common stock
as capital assets and is the opinion of Sullivan & Cromwell, special counsel to
Wachovia, and Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Republic.
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 Republic common stock as part of a hedge, 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;
--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;
. persons who acquired or acquire shares of Republic common stock pursuant
to the exercise of employee stock options or otherwise as compensation;
. persons who exercise their dissenters' appraisal rights; and
. persons who do not hold their shares of Republic 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 stating that the merger
will be treated for U.S. federal income tax purposes as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code. Also, at the time
of the merger, Wachovia will receive an opinion of Sullivan & Cromwell and
Republic will receive an opinion of its special counsel, Skadden, Arps, Slate,
Meagher & Flom, LLP. Each opinion will state that the merger will be treated
for U.S. federal tax purposes as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code.
In addition, the opinion of Sullivan & Cromwell will state that:
. no gain or loss will be recognized by holders of Republic common stock
who exchange all of their Republic common stock solely for Wachovia
common stock pursuant to the merger, except with respect to a Republic
shareholder who receives cash instead of a fractional share of Wachovia
common stock;
. the aggregate adjusted tax basis of shares of Wachovia common stock
received by holders of Republic common stock who exchange all of their
Republic common stock solely for Wachovia common stock pursuant to the
merger will be the same as the aggregate adjusted tax basis of the shares
of Republic common stock exchanged therefor, reduced by any amount
allocable to a fractional share interest for which cash is received; and
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. the holding period of shares of Wachovia common stock received by holders
of Republic common stock who exchange all of their Republic common stock
solely for Wachovia common stock pursuant to the merger, including any
fractional share deemed issued and then redeemed for cash, will include
the holding period of the Republic common stock exchanged therefor,
provided that such Republic common stock is held as a capital asset at
the effective time of the merger.
Cash received by a Republic shareholder instead of a fractional share of
Wachovia common stock will be treated as received in redemption of the
fractional share interest. The shareholder will 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 Republic common stock allocable to such fractional share interest. This
capital gain or loss will be long-term capital gain or loss if the Republic
shareholder's holding period for such Republic common stock 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.
The opinions described above will be based upon the facts, representations
and assumptions outlined in the opinions. Counsel will require and rely upon
representations contained in letters to be received from Republic and Wachovia
in rendering the opinions. Neither of these opinions is binding on the Internal
Revenue Service. Neither Wachovia nor Republic has requested or will request
any ruling from the Internal Revenue Service as to the U.S. federal income tax
consequences of the merger.
Each party's obligation to consummate the merger is conditioned upon the
receipt of an opinion from its respective counsel, each dated the date of the
merger, as described above, in form and substance reasonably satisfactory to
Wachovia and Republic, respectively.
The tax consequences of the merger may vary depending upon your particular
circumstances. You should therefore consult your own tax advisor as to the
specific tax consequences of the merger for you, including the application and
effect of U.S. federal, state and local, foreign and other tax laws.
Interests of Republic's Management and Directors in the Merger
In considering the Republic board's recommendation that you vote "FOR"
approval of the merger agreement, you should know that Republic's directors and
executive officers have some interests in the merger that are different from,
or in addition to, their interests as shareholders of Republic generally. The
Republic board was aware of these interests and considered them, among other
matters, in making its recommendation.
Severance, Employment and Supplemental Executive Retirement
Agreements. Republic has employment agreements with each of Rudy E. Schupp,
Richard J. Haskins, Louis J. Dunham, R. Michael Strickland and Carla H. Pollard
and change of control agreements with each of Roger Savage, Bruce Keir, W.
Andrew Kirkman and Alissa E. Ballot. Each of these agreements provides for a
severance payment on termination of employment under the circumstances provided
in the agreement, including:
. in the case of Mr. Schupp, termination for any reason following
shareholder approval of the merger and
. in the case of the other executive officers, termination for any reason
during the 90-day period following completion of the merger.
The severance payment required under these agreements is equal to the
salary, bonus and pension benefit that the executive officer would have
received had the executive officer remained employed with Republic for an
additional two years (three years in the case of Messrs. Schupp and Haskins).
Messrs. Schupp and Haskins are also entitled to receive a "gross-up" payment to
compensate the executive officer for any "golden parachute" excise tax that
will be imposed on him. Severance payments made to the other executive officers
are limited to the extent necessary to ensure that no "golden parachute" excise
tax will be imposed. In addition, Republic has supplemental executive
retirement agreements with each of Messrs. Schupp and Haskins.
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To settle these agreements and to provide that each of these executive
officers does not have an incentive to leave Republic as soon as the merger
occurs, Republic will pay all of the severance payments provided for under
these agreements, including amounts in satisfaction of the supplemental
executive retirement agreements, immediately before the merger. Republic
estimates that the total amount of these payments will be about $11 million,
not including any "gross-up" payments that may be made with respect to any
excise tax.
In addition to the severance payments, each executive officer is entitled to
be covered under Republic's welfare benefit plans for two years (except for Mr.
Haskins, who will be covered for three years, and Mr. Schupp, who will be
covered by his employment agreement described below). In addition, on
shareholder approval of the merger, so long as he is not covered under a
subsequent employer's plans, Mr. Haskins will become entitled to receive health
and medical benefits through the date on which he becomes eligible to receive
Medicare and, after such eligibility date, Medicare supplemental insurance for
life. However, the cost of such coverage and supplemental insurance cannot
exceed the amount of insurance which could be purchased with the funds
accumulated at the rate of $7,700 per year beginning October 1, 1995.
Director Retirement Agreements. Republic is party to retirement agreements
with H. Gearl Gore, Eugene W. Hughes, Jr., Lennart E. Lindahl, Jr., Carol R.
Owen, Richard C. Rathke, Dr. Bruce E. Wiita, Paula Berliner and Mary A.
McCarty. The retirement agreements provide for payments based on annualizing
board and committee fees paid with respect to meetings held during a board
member's final calendar year of board service, and become fully vested and
payable in a lump sum following a change of control. Based on the number of
board and committee meetings held and expected to be held in 2000, Republic
estimates that the total payments owed will be about $1.8 million. Republic
will make these payments immediately before the merger.
Stock Options and Stock Appreciation Rights. All unvested options held by
Republic's directors and executive officers will become vested if Republic's
shareholders approve the merger agreement and the related plan of merger. As of
the date of the special meeting, Republic's directors and executive officers
are expected to hold unvested options to buy a total of 425,845 shares of
Republic common stock, of which options to buy a total of 47,500 shares have an
exercise price of less than $7.00 per share and options to buy 6,667 shares
have an exercise price of $7.5625. Any of these options and any other options
granted under Republic's benefit plans that are not exercised before the merger
will be converted into options for Wachovia common stock with equivalent terms.
Some of Republic's executive officers and directors have been granted stock
appreciation rights by Republic that would have continued after the merger.
Each of these officers and directors has agreed to allow Republic to terminate
their stock appreciation rights before the merger. As a result, each will
receive, immediately before the merger, a cash payment equal to:
. the number of shares to which the agreement relates multiplied by
. the excess of the "high water mark" (as defined in the stock appreciation
right agreement--currently $13.625) over the exercise price specified in
the agreement.
As of the date of this proxy statement/prospectus, Republic's executive
officers and directors held a total of 564,000 stock appreciation rights with
an exercise price of $8.00 and 60,000 stock appreciation rights with an
exercise price of $5.75.
New Employment Agreement with Mr. Schupp. Wachovia has entered into an
employment agreement with Mr. Schupp, effective on completion of the merger.
The agreement provides that Mr. Schupp will serve Wachovia Bank, N.A. as
Florida Banking Chairman for two years following the completion of the merger
at an initial base salary of $435,000 per year, which is equal to his current
base salary. Mr. Schupp will be eligible to earn an annual bonus of up to 100%
of his base salary. If Mr. Schupp's employment is involuntarily terminated
(including by reason of Mr. Schupp's resignation following certain breaches of
the agreement by Wachovia) during the term of the agreement, Wachovia will
continue to provide Mr. Schupp with his compensation and
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benefits for the remainder of the term of the agreement, and will pay Mr.
Schupp a "gross-up" payment to compensate him for any "golden parachute" taxes
imposed on him. Mr. Schupp will be subject to restrictive covenants (including
non-competition and non-solicitation covenants) during his employment and for
24 months following termination of employment.
Advisory Board. It is expected that the non-employee directors of Republic
will continue to serve as directors of Republic Security Bank until sometime
after the merger. In addition, Wachovia has determined to establish a local
advisory board for Palm Beach, Florida. When Wachovia determines to replace the
directors of Republic Security Bank, which is expected to be when it is merged
with Wachovia Bank, N.A., Wachovia has agreed to appoint to the advisory board
each former non-employee director of Republic who is willing to serve. Each
such non-employee director of Republic will serve on the board of Republic
Security Bank and subsequently on the advisory board for a total of at least
two years following the completion of the merger and will receive fees of at
least $1,200 per year. This service will be treated as service with Wachovia
for purposes of Republic's equity incentive plans. Each non-employee director
has also entered into a noncompetition agreement with Wachovia which continues
for two years following termination of service on the Republic board and the
advisory board.
401(k) Plan. Under Republic's 401(k) retirement plan, all employer match
accounts will become 100% vested upon shareholder approval of the merger. Of
Republic's executive officers who participate in the plan, only two are not
currently fully vested in their employer match accounts. The aggregate value of
the acceleration of the match for these two executive officers is approximately
$11,000.
Indemnification Rights. Wachovia has also agreed that for a period of six
years after the merger it will indemnify the present directors and officers of
Republic and its subsidiaries against costs or expenses (including reasonable
attorney's fees), judgments, fines, liens, losses, claims, damages or
liabilities incurred in connection with any claim, action, suit, proceeding or
investigation (civil or criminal), administrative or investigative, arising out
of actions or omissions occurring at or prior to the merger, to the fullest
extent that Republic is permitted to indemnify (and advance expenses to) its
directors and officers under the laws of Florida and Republic's articles of
incorporation and by-laws in effect on the date of the merger agreement,
provided any such director's or officer's conduct complies with the standards
set forth under Florida law and Republic's articles of incorporation and by-
laws, to be determined by independent counsel selected by Wachovia and
reasonably acceptable to such officer or director. In addition, Wachovia has
agreed that for a period of three years after the merger it will use its
reasonable efforts to obtain directors' and officers' liability insurance for
the benefit of Republic's and its subsidiaries' directors and officers, to
provide insurance coverage that will reimburse the present and former directors
and officers of Republic or any of its subsidiaries with respect to claims
against such directors and officers arising from facts or events which occurred
before the merger. The coverage and policy limits will be no less advantageous
than the coverage provided by Republic of the date of the merger agreement,
subject to the cost for the insurance not exceeding 150 percent of the amount
expended by Republic for similar insurance on the date of the merger agreement.
Post-Merger Compensation and Benefits
Under the merger agreement, Wachovia has agreed to provide employee benefits
to officers and employees of Republic and its subsidiaries on terms and
conditions which, when taken as a whole, are substantially similar to those
currently provided by Wachovia and its subsidiaries to similarly situated
officers and employees. Prior to the time that these benefits are provided, the
employees of Republic or Republic Security Bank who receive benefits under
Republic employee benefit plans are deemed to receive benefits no less
favorable than those provided by Wachovia or its subsidiaries. In addition, the
merger agreement provides that these employees generally will receive credit
for their service rendered with Republic or Republic Security Bank before the
effective time, to the extent Republic or Republic Security Bank credited that
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 amend, modify or terminate any employee benefit plan after the effective
date of the merger.
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Noncompetition Agreements
In connection with the merger, each non-employee director of Republic signed
a noncompetition agreement with Wachovia. Under the agreements, each director
agrees that, following the merger, while serving as a director of Republic
Security Bank or as a local advisory board member of Wachovia Bank and for 2
years after termination of such services, they will not engage in activities
competitive with Wachovia. Under the agreement, the directors also agree to
exercise before the effective time of the merger all in-the-money options and
warrants for Republic common stock.
The First Palm Beach Bancorp, Inc. Indenture
Wachovia and Republic intend to defease the indenture relating to Republic's
outstanding debt securities. The indenture relates to the 10.35% Senior
Debentures Due 2002 of First Palm Beach Bancorp, Inc. and was assumed by
Republic in its merger with First Palm Beach.
Under the terms of the indenture, Republic may defease the indenture if it
deposits with the indenture trustee an amount of money or U.S. Government
obligations that is sufficient to cover all future interest and principal
payments and fulfills other requirements. In the merger agreement, Republic has
agreed to use all reasonable efforts to cause the defeasance of the indenture,
but it will not be required to deposit the required funds unless Wachovia lends
the funds to Republic.
In order to complete the defeasance of the indenture, the trustee must
receive an opinion of counsel as to the related tax effects. Republic and the
trustee have amended the indenture (in a manner not adverse to debt holders in
any material respect) in order to facilitate this opinion.
It is not a condition of the merger that the indenture has been defeased.
However, it is a condition that no event or circumstance has occurred that
would prevent the defeasance and that legal counsel has delivered, or is
prepared to deliver, the necessary tax opinion.
Conditions to Completion of the Merger
Republic's and Wachovia's obligations to complete the merger are both
subject to the satisfaction or written waiver of the following conditions:
. approval of the merger agreement and the related plan of merger by
Republic's shareholders;
. receipt of the required regulatory approvals described below under
"Regulatory Approvals" and expiration of all relevant waiting periods,
generally without any conditions, restrictions or requirements that would
have a material adverse effect on Wachovia or Republic;
. receipt of all other approvals and consents required for the merger, if
the failure to receive the consent or approval is reasonably likely to
have a material adverse effect on Wachovia or Republic, generally without
any conditions, restrictions or requirements that would have a material
adverse effect;
. absence of any action by any court or governmental or regulatory
authority prohibiting the completion of the merger;
. continued effectiveness of the registration statement of which this proxy
statement/prospectus is a part and no stop order by the SEC being issued
or threatened;
. receipt of all approvals under state or federal securities laws necessary
to complete the merger; and
. approval for listing on the NYSE of the shares of Wachovia common stock
issuable in the merger.
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The obligations of Wachovia and its subsidiary to complete the merger are
also subject to the satisfaction or written waiver of the following other
conditions:
. continued accuracy of the representations and warranties of Republic in
the merger agreement, subject to exceptions relating to materiality, and
Wachovia's receipt of an officers' certificate to that effect;
. performance by Republic in all material respects of all of the
obligations required to be performed by it pursuant to the merger
agreement and Wachovia's receipt of an officers' certificate to that
effect;
. continued effectiveness of the employment agreement with Rudy E. Schupp
and the director noncompetition agreements;
. receipt by Wachovia of an opinion of Sullivan & Cromwell as to tax
matters related to the merger;
. no event or circumstance having occurred that would prevent the
defeasance of the indenture for Republic's outstanding public debt
securities and legal counsel having delivered, or being prepared to
deliver, the legal opinion required for defeasance of the indenture; and
. Republic having delivered resolutions adopted by its board and its
shareholders evidencing the taking of all action necessary to authorize
the merger agreement and the merger.
The obligation of Republic to complete the merger is also subject to the
satisfaction or written waiver of the following other conditions:
. continued accuracy of the representations and warranties of Wachovia in
the merger agreement, subject to exceptions relating to materiality, and
Republic's receipt of an officers' certificate to that effect;
. performance by Wachovia in all material respects of all of the
obligations required to be performed by it pursuant to the merger
agreement and Republic's receipt of an officers' certificate to that
effect;
. receipt by Republic of an opinion of Skadden, Arps, Slate, Meagher & Flom
LLP as to tax matters related to the merger; and
. Wachovia having delivered resolutions adopted by its board evidencing the
taking of all action necessary to authorize the merger agreement and the
merger.
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 Republic has any
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 3 of the Bank Holding Company ("BHC") Act
of 1956. The BHC Act requires the Federal Reserve Board, when considering a
transaction such as this merger, to take into consideration the financial and
managerial resources (including the competence, experience and integrity of the
officers, directors and principal shareholders) and future prospects of the
institutions and the convenience and needs of the communities to be served. In
addition, under the Community Reinvestment Act of 1977, as amended, the Federal
Reserve Board must take into account the record of performance of the acquiring
institution in meeting the credit needs of the entire community, including low-
and moderate-income neighborhoods, served by the institution.
The BHC Act also prohibits the Federal Reserve Board from approving a merger
if it would result in a monopoly or be in furtherance of any combination or
conspiracy to monopolize or attempt to monopolize the business of banking in
any part of the United States, or if its effect in any section of the country
would be substantially to lessen competition or to tend to create a monopoly,
or if it would in any other manner result in a restraint of trade, unless the
Federal Reserve Board finds that the anticompetitive effects of the merger are
clearly outweighed in the public interest by the probable effect of the
transaction in meeting the convenience and needs of the communities to be
served.
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Pursuant to the BHC Act, the merger may not be consummated until 30 days
after Federal Reserve approval, during which time the United States Department
of Justice may challenge the merger on antitrust grounds. The commencement of
an antitrust action would stay the effectiveness of the Federal Reserve Board's
approval unless a court specifically ordered otherwise. With the approval of
the Federal Reserve Board and the concurrence of the Department of Justice, the
waiting period may be reduced to no less than 15 days. Wachovia and Republic
believe that the merger does not raise substantial antitrust or other
significant regulatory concerns and that they will be able to obtain all
requisite regulatory approvals on a timely basis without the imposition of any
condition that would have a material adverse effect on Wachovia or Republic.
Florida Department Approval. The Florida Department of Banking and Finance
must approve the change of control of Republic Security Bank which would be
effected by the merger. Under Section 658.28 of the Florida Banking Code, the
Florida Department will issue a certificate of approval for a change of control
of a Florida state bank only after it has made an investigation and has
determined that the proposed new owner of a controlling interest is qualified
by reputation, character, experience and financial responsibility to control
and operate the bank in legal and proper manner and that the interest of the
other shareholders, if any, and the depositors and creditors of the bank and
the interest of the public generally will not be jeopardized by the proposed
change in ownership, controlling interest or management.
In addition, under Section 658.295 of the Florida Banking Code, the Florida
Department will not permit the merger unless the bank has been in existence and
continuously operating, on the date of its acquisition, for more than three
years. Also, the Florida Department will not permit the merger if, upon
consummation of the transaction, Wachovia, including all of its insured
depository institutions that would be "affiliates," as defined in the BHC Act,
would control 30% or more of the total amount of deposits held by all insured
depository institutions in the State of Florida.
Other Requisite Approvals and Consents. Approvals or notices are also
required from or to the NYSE and other self-regulatory organizations and may be
required from or to certain other regulatory agencies.
Status of Regulatory Approvals. Wachovia has filed applications with both
the Federal Reserve Board and the Florida Department for approval of the
merger.
The merger cannot proceed in the absence of the requisite regulatory
approvals. We do not know if or when all of these regulatory approvals will be
obtained. Also, these 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
To the extent permitted by applicable law, the merger agreement may be
amended in a writing signed by each of the parties upon the approval of the
Board of Directors of each of the parties, whether before or after the merger
agreement has been approved by the Republic shareholders. The provisions of the
merger agreement relating to the manner in which shares of Republic stock will
be exchanged for Wachovia stock, however, may not be amended after the
shareholders' meeting without the requisite approval of the Republic
shareholders.
Before the merger, Wachovia and Republic each has the right to waive the
performance of any term of the merger agreement, to waive or extend the time
for the compliance or fulfillment by the other party of any of its obligations
under the merger agreement, and to waive any of the conditions to the
completion of the merger, except any condition which, if not satisfied, would
result in the violation of any law. Once the merger is completed, any
unfulfilled conditions will be deemed to have been waived at the effective time
of the merger.
The merger agreement may be terminated at any time before the merger by the
agreement of Republic and Wachovia. In addition, the merger agreement may be
terminated by either Wachovia or Republic if:
. the other party materially breaches a representation, warranty, covenant
or other agreement contained in the merger agreement, provided that such
party is not itself in material breach of the merger agreement,
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and the breach cannot be or has not been cured within 30 days after notice
to the breaching party of such breach;
. the merger is not completed by June 30, 2001;
. a governmental or regulatory authority denies a necessary approval for
completion of the merger by final nonappealable action; or
. the Republic shareholders fail to approve the merger agreement.
In addition, Wachovia may terminate the merger agreement if Republic's
board of directors fails to make, withdraws, or adversely modifies or changes
its recommendation to approve the merger agreement.
Termination Fee Agreement
As an inducement to Wachovia's entering into the merger agreement, Republic
and Wachovia entered into a termination fee agreement, dated as of October 29,
2000. The following description of the termination fee agreement is qualified
in its entirety by reference to the text of the termination fee agreement. For
a more complete description, we urge you to read carefully the termination fee
agreement, which is attached as Appendix B to this proxy statement/prospectus.
Under the termination fee agreement, Republic is required to pay Wachovia a
cash fee of $15 million if:
. the merger agreement is terminated either:
--by Wachovia because of a material breach by Republic; or
--by either party for any reason permitted in the merger agreement and,
prior to or concurrently with such termination, a "first trigger event",
as defined below, has occurred; and
. prior to, at the same time or within 12 months after such termination, an
"acquisition event", as defined below, occurs.
Under the termination fee agreement, "first trigger event" means:
. Republic's board fails to make, withdraws or adversely modifies its
recommendation that Republic's shareholders approve the merger agreement;
. Republic or any significant subsidiary enters into an agreement with
respect to or authorizes or approves any "acquisition proposal";
. the merger agreement is not approved by Republic's shareholders and,
prior to the vote, any other person has made, or disclosed an intention
to make, an "acquisition proposal";
. any person or group has acquired beneficial ownership of 10% or more of
Republic's voting securities;
. any person makes an "acquisition proposal" and Republic breaches any
covenant or agreement in the merger agreement; or
. any person other than Wachovia makes an "acquisition proposal" and such
proposal is publicly announced.
Under the termination fee agreement, "acquisition proposal" means any
publicly announced proposal, regulatory application or notice, agreement or
disclosure of an intention to make a proposal with respect to any of the
following transactions by Republic or its subsidiaries with any person other
than Wachovia:
. merger or consolidation;
. purchase, lease or other acquisition of substantially all of the assets
or deposits; or
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. purchase of 10% or more of the voting power.
Under the termination fee agreement, "acquisition event" means:
. the execution by Republic of a definitive agreement that provides for any
of the transactions described above under the definition of "acquisition
proposal", except that the purchase of 30% or more of the voting power
will be an "acquisition event", rather than 10% or more as under the
definition of "acquisition proposal".
. the acquisition by any person or group of beneficial ownership, or the
right to acquire beneficial ownership, of 30% or more of the outstanding
voting shares of Republic.
As of the date of this proxy statement/prospectus, neither Republic nor
Wachovia are aware of any "first trigger event" or "acquisition event" having
occurred.
The termination fee agreement is intended to increase the likelihood that
the merger will be completed and to compensate Wachovia for its efforts and any
related expenses, losses and opportunity costs if the merger is not completed
and Republic enters into an alternative transaction. The termination fee
agreement may discourage competing offers for Republic, even if someone may
have been prepared to pay more to Republic shareholders than the market price
of the Wachovia common stock to be received by Republic shareholders in the
merger.
If the Republic shareholders do not approve the merger agreement, either
Republic or Wachovia may terminate the agreement. At that time, Wachovia's
potential right to a termination fee will expire unless a "first trigger event"
occurs before the termination. If a first trigger event has occurred, or if
Wachovia was to terminate the merger agreement because of a breach by Republic,
Wachovia would be entitled to a termination fee if an "acquisition event"
occurs within 12 months of termination.
Conduct of Business Pending the Merger
The following is a summary of the agreements Republic and Wachovia have made
regarding actions before the merger.
Republic. Republic has agreed that it and its subsidiaries will:
. operate their businesses in the ordinary course;
. preserve intact their business organization and assets and maintain their
rights and franchises; and
. use their reasonable efforts to maintain current employee relationships.
In addition, Republic has agreed that it and its subsidiaries will not:
. issue any additional shares of its stock or any rights for its stock,
except pursuant to the merger agreement or pre-existing rights;
. repurchase, redeem or otherwise acquire any shares of its stock or make
any distributions with respect to its stock. Republic is permitted,
however, to make quarterly cash dividends on Republic common stock in an
amount not to exceed $0.06 per share and wholly owned subsidiaries of
Republic may also pay dividends. After December 31, 2000, Republic is
required to cause its regular dividend record dates and payment dates
(except for the payment date in the first quarter of 2001) to be the same
as Wachovia's;
. adjust, split or reclassify any of its capital stock, or sell, encumber
or otherwise transfer any capital stock of its subsidiaries, or any asset
or deposit other than in the ordinary course of business;
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. enter into, amend or renew any employment related agreements, grant any
salary or wage increase or increase any employee benefits except for
normal increases in the ordinary course of business, as previously
disclosed to or agreed with Wachovia, or grants to newly hired employees
consistent with past practice or as required by law;
. enter into, adopt or amend any employee benefit plan or take any action
to accelerate the vesting or exerciseability of any benefits payable
under any employee benefit plan, except as may be required by law, as may
be necessary or advisable to maintain the tax qualified status of the
plan, or as previously disclosed by Republic;
. except for purchases of U.S. Treasury or U.S. Government agency
securities with maturities of three years or less, purchase or invest in
any material amount of securities or make any material investment in any
other person or entity;
. amend Republic's articles of incorporation, Republic's by-laws or the
articles of incorporation, by-laws or similar governing documents of any
of Republic's subsidiaries;
. make any change in its accounting principles, practices or methods, other
than as may be required by generally accepted accounting principles or
applicable regulatory requirements;
. enter into, terminate or amend any material contract, or waive, release
or assign any material rights, except in the ordinary course of business;
. commence any claim, proceeding or litigation, except as necessary for the
operation of its business or as Republic deems necessary to enforce its
rights under the merger agreement, or settle any claim, proceeding or
litigation, except for those that solely involve an immaterial amount of
money damages or that do not involve or create precedent for claims,
actions or proceedings that are reasonably likely to be material;
. except as required by law, change materially its interest rate and other
risk management policies, procedures or practices or fail to follow its
existing policies or practices on managing its exposure to interest rate
and other risk, or fail to use commercially reasonable means to avoid any
material increase in its aggregate exposure to interest rate risk;
. borrow money or incur indebtedness in excess of an aggregate of $500,000,
other than in the ordinary course of business consistent with past
practices;
. make or change any material tax-related practice other than in the
ordinary course of business or as required to conform to changes in the
tax laws;
. knowingly take any action that is intended or is reasonably likely to
result in any of its representations and warranties set forth in the
merger agreement being or becoming untrue in any material respect, any of
the conditions to the merger not being satisfied, a material violation of
any provision of the merger agreement, or a delay in the effective time
beyond June 30, 2001, except, in each case, as may be required by law; or
. agree or commit to do any of the foregoing.
Republic 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 Republic or Republic Security Bank or any other
subsidiary of Republic. In addition, Republic will not negotiate or provide any
confidential information or data to, or have any discussions with, any person
relating to an inquiry or offer of this type, except if Republic's board
determines, consistent with its fiduciary duties, that the inquiry or offer
would be likely to result in a proposal more favorable to Republic shareholders
and that is reasonably capable of being completed. Prior to providing
confidential information, Republic agrees to execute a confidentiality
agreement with the other party. Republic has also agreed to promptly advise
Wachovia following the receipt by Republic of any inquiry or offer of this type
and to immediately advise Wachovia of the material terms and conditions
relating to it.
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Wachovia. Wachovia has agreed that it and its subsidiaries will not
knowingly take any action intended or reasonably likely to result in:
. any of its representations and warranties in the merger agreement being
or becoming untrue in any material respect at or prior to the effective
time;
. any of the conditions to the merger not being satisfied;
. a material violation of any provision of the merger agreement; or
. a delay in the effective time beyond June 30, 2001.
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 value and,
therefore, some dilution of Wachovia's book value and net income per share may
occur in connection with any future transactions.
Management and Operations after the Merger
Wachovia's wholly owned subsidiary 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
until otherwise amended or repealed.
The directors and officers of Wachovia's wholly owned subsidiary before the
merger will continue to be the directors and officers of the surviving
corporation after the merger, together with such additional persons as may
thereafter be elected.
Expenses and Fees
Each party generally will be responsible for all expenses incurred by it in
connection with the merger, except that Wachovia will pay the SEC filing fees
in connection with this proxy statement/prospectus and that Wachovia and
Republic will share equally the printing expenses in connection with this proxy
statement/prospectus.
Accounting Treatment
Wachovia expects to account for the merger as a "purchase," as that term is
used under generally accepted accounting principles, for accounting and
financial reporting purposes. Under purchase accounting, the assets and
liabilities of Republic as of the effective time will be recorded at their
respective fair values and added to those of Wachovia. Any excess of the value
of Wachovia common stock issued for Republic common stock over the fair value
of Republic's net assets will be recognized as goodwill. Financial statements
of Wachovia issued after the effective time will reflect these values and will
not be restated retroactively to reflect the historical financial position or
results of operations of Republic.
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 Republic 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
exemptions from the registration requirements.
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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 Republic.
Republic has agreed in the merger agreement to use its reasonable efforts to
cause each person who may be deemed to be an "affiliate" of Republic to execute
and deliver to Wachovia an affiliate agreement. As provided for in these
agreements, Republic's affiliates have agreed 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 of, 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 Republic under Rule
145.
Dissenters' Appraisal Rights
Appraisal rights are statutory rights that enable shareholders who object to
extraordinary transactions, such as mergers, to demand that the corporation pay
the fair value for their shares as determined by a court in a judicial
proceeding instead of receiving the consideration offered to shareholders in
connection with the extraordinary transaction. Appraisal rights are not
available in all circumstances and exceptions to such rights are set forth in
the laws of Florida with respect to the rights of Republic shareholders.
Republic shareholders are not entitled to appraisal rights under Florida law
in connection with the merger because shares of Republic common stock are
listed on the Nasdaq National Market. Florida law states that shareholders of a
company whose stock is 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. are not entitled to appraisal
rights.
Shareholder Litigation
On November 1, 2000, George Apelian ("Plaintiff") filed a class action
complaint against Republic and the members of Republic's board of directors
(and one former director) in the Fifteenth Judicial Circuit in and for Palm
Beach County, Florida. Plaintiff alleges that, among other things, the
defendants have breached their fiduciary duties in connection with the merger
and that the consideration to be paid by Wachovia in the merger is inadequate.
Plaintiff seeks to prevent the completion of the merger and to recover damages.
Republic believes the claims are entirely without merit and intends to defend
against them vigorously.
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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 52 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 September
30, 2000, there were 203,463,756 shares of Wachovia common stock outstanding
and no shares of Wachovia preferred stock outstanding. In addition, at
September 30, 2000, 31,674,606 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.
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 in some
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.
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Anti-Takeover Provisions
Some 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 $25 million or more 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 an interested shareholder, of equity securities of
Wachovia or a subsidiary having a fair market value of $10 million or
more; or
. 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 shares 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 "--Anti-takeover Legislation" on page 42), 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:
. 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:
--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
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--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
. 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:
. 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;
. have received the benefit, directly or indirectly, of financial
assistance from Wachovia; or
. 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.
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 will not necessarily be fair to shareholders and the shareholders may not
be able to effectively prevent consummation of the transaction. 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
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.
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Amendment of Wachovia Articles. Except in 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.
Anti-takeover Legislation. 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 Acquisition 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.
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.
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.
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CERTAIN DIFFERENCES IN THE RIGHTS OF WACHOVIA SHAREHOLDERS
AND REPUBLIC SHAREHOLDERS
You will automatically become a Wachovia shareholder at the effective time
of the merger. After the merger, your rights as a Wachovia shareholder will be
determined by Wachovia's articles of incorporation, Wachovia's by-laws and
North Carolina law. The following is a summary of the material differences in
the rights of shareholders of Wachovia and Republic. This summary is general
and is not a complete discussion of, and is qualified by, the more detailed
provisions of Florida law, North Carolina law, Republic's articles 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 per share and 50,000,000 shares of Preferred Stock
with par value of $5 per share. As of September 30, 2000, 203,463,756 shares of
Wachovia common stock were issued and outstanding and no shares of Wachovia
preferred stock were issued.
Republic. Republic is authorized to issue 500,000,000 shares of common stock
with par value of $0.01 per share and 20,000,000 shares of preferred stock with
par value $0.01 per share. The preferred stock consists of 5,000,000 shares of
Series B Junior Participating Preferred Stock, none of which is currently
outstanding, and 15,000,000 shares authorized for designation into series. As
of the record date, 48,782,021 shares of Republic common stock were issued and
outstanding.
Amendment of Articles of Incorporation
Wachovia. The affirmative vote of at least 66 2/3% of outstanding 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--Anti-Takeover Provisions" on page 40.
Republic. Republic's articles of incorporation state that the articles may
not be amended unless the Republic Board of Directors first adopts a resolution
setting forth the proposed amendment and directs that such proposed amendment
be submitted to a vote at a meeting of shareholders. At such meeting, the
proposed amendment will generally be adopted upon receiving a majority of the
votes entitled to be cast that are represented at the meeting and entitled to
vote on such amendment. The affirmative vote of not less than 80% of the votes
entitled to be cast by the holders of Republic common stock is required to
amend the provisions of the articles dealing with shareholder meetings and
amendments to the articles of incorporation.
Notice of Meetings of Shareholders
Wachovia. The Wachovia by-laws provide that Wachovia 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.
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<PAGE>
Republic. The Republic by-laws provide that Republic must notify the
shareholders between 10 and 60 days before any annual or special meeting of the
date, time and place of the meeting, and, for special meetings, the purpose for
which the meeting is called.
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.
Shareholders have no power to call a special meeting of shareholders.
Republic. Special meetings of the shareholders may only be called by the
Republic board of directors. Shareholders have no power to call a special
meeting of shareholders. Florida law provides that special meetings of
shareholders can be called at the request of the holders of at least 10% of all
votes entitled to be cast on any issue, unless a greater percentage, not to
exceed 50%, is required by the corporation's articles of incorporation.
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.
Republic. The board of directors 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 and, in the case of a meeting of shareholders, not less
than ten days prior to the date on which the particular action requiring such
determination of shareholders is to be taken.
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.
Republic. Under Republic's by-laws, the board of directors consists of 13
directors. Directors are divided into three classes, of as equal size as
possible and serving a term of three years. As the case with Wachovia, only
approximately one-third of the members of the Republic board of directors are
elected each year; consequently, two annual meetings are required for
Republic's shareholders to change a majority of the members of the Republic
board of directors.
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.
Republic. A director of Republic may be removed only for cause and only by
the affirmative vote of at least 80% of the votes entitled to be cast by the
holders of Republic common stock.
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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 Wachovia's articles of incorporation or by-laws.
Under the 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.
Republic. Business conducted at meetings of shareholders is limited to the
election of directors and other business specified by the board or properly
brought before the meeting. The Republic by-laws provide that for business to
be properly brought before the annual meeting, all shareholder proposals must
be in writing and delivered or mailed to the Secretary of Republic between 60
and 90 days prior to the anniversary of the preceding year's annual meeting;
however, if the annual meeting is more than 30 days before or more than 60 days
after such anniversary date, notice by the shareholder must be delivered not
later than the later of the 60th day prior to the annual meeting or the 10th
day following the day on which the public announcement of the date of the
meeting is first made by Republic, and no earlier than the close of business on
the 90th day prior to the annual meeting. All director nominations made by a
shareholder must be in writing and delivered or mailed to the Secretary of
Republic between 30 and 60 days prior to the annual meeting of shareholders at
which directors are to be elected; however, if less than 30 days notice of the
annual meeting is given to the shareholders, the nomination must be delivered
or mailed to the Secretary not later than the close of the seventh day
following the day on which notice of the annual meeting was mailed to
shareholders.
Anti-Takeover Provisions; Restrictions on Certain Business Combinations
Wachovia. Wachovia's articles of incorporation have restrictions that
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--Anti-Takeover Provisions--Fair Price Provisions" on
page 40.
For a description of the North Carolina Control Share Acquisition Act, see
"Description of Wachovia Common Stock--Anti-takeover Provisions--Anti-Takeover
Legislation" on page 42.
Republic. Republic's articles of incorporation provide that if the board of
directors determines that an acquisition offer should be rejected, it may take
any lawful action to accomplish its purpose including, but not limited to,
advising shareholders not to accept the offer, litigation against the bidder,
filing complaints with all governmental and regulatory authorities, acquiring
its securities, selling or otherwise issuing authorized but unissued securities
or treasury stock or granting options with respect thereto, acquiring a company
to create an antitrust or other regulatory problem for the offeror, or
obtaining a more favorable offer from another entity.
The Florida control-share acquisition statute provides that when a purchaser
of shares of a public corporation crosses one of three voting thresholds with
respect to the election of directors (20%, 33%, or 50%) such shares have the
same voting rights as were accorded the shares before the control-share
acquisition only to the extent granted by resolution approved by the
shareholders of the issuing public corporation. The resolution must be approved
by each class or series entitled to vote separately on the proposal by a
majority of all the votes entitled to be cast by the class or series and by
each class or series entitled to vote separately on the proposal by a majority
of all the votes entitled to be cast by that group, excluding all interested
shares.
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If authorized in a corporation's articles of incorporation or bylaws before
a control-share acquisition has occurred, control shares acquired in a control-
share acquisition with respect to which no acquiring person statement has been
filed with the issuing public corporation may, at any time during the period
ending 60 days after the last acquisition of control shares by the acquiring
person, be subject to redemption by the corporation at the fair value thereof
pursuant to the procedures adopted by the corporation. Control shares acquired
in a control-share acquisition are not subject to redemption after an acquiring
person statement has been filed unless the shares are not accorded full voting
rights by the shareholders.
Shareholder Rights Agreement
Wachovia. Wachovia does not have a shareholder rights plan.
Republic. Republic is party to a shareholder rights agreement with The Bank
of New York, which succeeded IBJ Schroder Bank & Trust Company, as rights
agent. Pursuant to this agreement, on April 14, 1995, Republic's board of
directors declared a dividend granting shareholders one right for each
outstanding common share of Republic. On October 27, 2000, Republic's board
approved an amendment to the rights agreement. The amendment, dated October 29,
2000, ensures that the shareholder rights agreement does not apply to the
transactions contemplated by the merger agreement. In addition, the amendment
provides that the shareholder rights agreement will terminate when the merger
is completed.
The rights agreement has the effect of deterring potential acquirors, other
than Wachovia, from acquiring control of Republic. If Republic, however, were
to terminate the merger agreement in order to accept an unsolicited takeover
proposal from a third party as permitted under the merger agreement, Republic
could further amend its rights agreement to exempt from its effects the new
transaction. See "The Merger Agreement and Related Agreements--The Merger
Agreement--Conduct of Business Pending the Merger" on page 35.
For a more complete description of the shareholder rights agreement, as
amended, see Republic's Form 8-A filed with the Securities and Exchange
Commission on April 23, 1995, and Form 8-A/A filed on December 21, 2000,
incorporated by reference in this proxy statement/prospectus. See "Where You
Can Find More Information" on page 52.
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:
. 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
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<PAGE>
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.
Republic. Republic's by-laws provide that any person who is or was serving
at the request of the corporation as a director, officer, employee, or agent
will be indemnified against expenses, judgments, fines and amounts paid in
settlement (to the extent permitted by law), including any appeals thereof, but
if found liable, he or she will only be indemnified if the court in which such
proceeding was brought determines that such person is fairly and reasonably
entitled to indemnification. Indemnification will be authorized if such person
acted in good faith and in a manner he or she believed to be in the best
interests of the corporation. With regard to expenses, such person will be
indemnified for expenses actually and reasonably incurred to the extent that he
or she has been successful on the merits or otherwise. No indemnification
provided by the by-laws will be in addition to the indemnification rights
provided by the Florida Business Corporation Act and will not be deemed
exclusive of any other rights to seek indemnification. In any event, Florida
law generally provides that a director is not personally liable for monetary
damages to the corporation or any other person for any statement, vote,
decision or failure to act regarding corporate management or policy, unless:
(1) the director breached or failed to perform his duties as a director and (2)
the director's breach of or failure to perform those duties constitutes:
. a violation of the criminal law, unless the director had reasonable cause
to believe his conduct was lawful or had no reasonable cause to believe
his conduct was unlawful;
. a transaction from which the director derived an improper personal
benefit;
. an unlawful distribution;
. conscious disregard for the best interest of the corporation or willful
misconduct; or
. recklessness or an act or omission which was committed in bad faith or
with malicious purpose or in a manner exhibiting willful disregard of
human rights, safety or property.
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.
The shareholder must give Wachovia at least five business days' written notice
of the demand, describing with reasonable particularity the purpose and the
requested records. The records must be directly connected with the
shareholder's purpose. However, Wachovia is under no duty to provide any
accounting records or any records with respect to any matter that Wachovia
determines in good faith may adversely affect Wachovia in the conduct of its
business or may constitute material non-public information. Additionally, the
rights of inspection and copying are limited to shareholders who either have
been shareholders for at least six months or hold at least five percent of the
outstanding shares of any class of Wachovia stock.
Republic. Under Florida law, upon five days written notice of a demand to
inspect corporate records, a stockholder is entitled to inspect corporate books
and records. Except for certain categories of records, including the current
articles of incorporation and bylaws, list of names and business addresses of
current officers and directors, and minutes of stockholder meetings and
communications directed to shareholders generally, the demand must be made in
good faith with a proper purpose, and must state with reasonable particularity
the purpose and the records desired to be inspected, and the records must
relate directly to the purpose.
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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 entitle shareholders to dissent. However,
North Carolina law does not provide dissenters' rights for North Carolina
corporations which have over 2,000 record holders or whose voting stock is
listed on a national securities exchange and therefore holders of Wachovia's
common stock do not have dissenters' rights.
Republic. Under Florida law, a shareholder is entitled to dissent and obtain
payment of the fair value of his shares in the event of, among other things,
(a) consummation of a plan of merger to which the corporation is a party, if
either (i) shareholder approval is required and the shareholder is entitled to
vote on the merger or (ii) the corporation is a subsidiary that is owned 80% by
and is merged into its parent; (b) consummation of a plan of share exchange to
which the corporation is a party as the corporation whose shares will be
acquired, if the shareholder is entitled to vote on the plan; (c) consummation
of a sale or exchange of substantially all of the property of the corporation
other than in the usual and regular course of the business if shareholder
approval is required; (d) an amendment to the articles of incorporation that
materially and adversely affects rights in respect of the dissenter's shares in
specified ways; (e) in the event of a control share acquisition as discussed in
Section 607.0902 of the FBCA; or (f) any corporate action taken pursuant to a
shareholder vote to the extent that the Articles of Incorporation provide that
dissenters' rights shall apply. However, Florida law does not have appraisal
rights for Florida corporations whose voting stock is listed on a national
securities exchange or an interdealer quotation system by the National
Association of Securities Dealers, Inc., or held of record by at least 2,000
shareholders and therefore holders of Republic's common stock do not have
dissenters' rights.
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SHAREHOLDER PROPOSALS
In the event that the merger is not completed prior to Republic's 2001
annual meeting, any proposal which a shareholder wished to have presented at
the next annual meeting of shareholders and included in Republic's proxy
materials must have been received at the main office of Republic, 450 South
Australian Avenue, West Palm Beach, Florida 33401, no later than November 24,
2000. Any proposal in compliance with all of the requirements of Rule 14a-8 of
the Securities Exchange Act, would have been included in Republic's proxy
statement and set forth on the form of proxy issued for the next annual meeting
of shareholders. No such proposals were received.
Republic's by-laws provide an advance notice procedure for a shareholder to
bring business before the 2001 annual meeting or to nominate any person for
election to the board. For business other than nominating directors, the
shareholder must give written advance notice to Republic's Secretary not less
than 60 nor more than 90 days before April 26, 2001. If, however, the date of
the annual meeting is more than 30 days before or more than 60 days after April
26, 2001, notice by the shareholder must be delivered by the 60th day prior to
such annual meeting or the 10th day following the public announcement of the
date of such meeting. The advance notice by shareholders must include the
shareholder's name and address, as they appear on Republic's record of
shareholders, the class and number of shares of Republic's capital stock that
are beneficially owned by such shareholder, a brief description of the proposed
business, and any material interest of such shareholder in the proposed
business. In the case of nominations for election to the board, such
nominations must be made in writing and delivered by registered or certified
mail, postage prepaid, return receipt requested, to Republic's Secretary not
less than 30 nor more than 60 days prior to the annual meeting. Information
regarding the nominee must also be provided. Nothing in this paragraph will be
deemed to require Republic to include in its proxy statement and proxy relating
to an annual meeting any shareholder proposal or nomination which does not meet
all of the requirements for inclusion established by the SEC in effect at the
time such proposal is received or any shareholder nomination is made.
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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>
Cash Dividends
Declared
High Low Per Share
-------- -------- --------------
<S> <C> <C> <C>
1998:
First Quarter........... $85.75 $72.75 $0.44
Second Quarter.......... 90.1875 77.375 0.44
Third Quarter........... 90.9375 72.875 0.49
Fourth Quarter.......... 96.8125 80.875 0.49
1999:
First Quarter........... 91 79 0.49
Second Quarter.......... 92.3125 80.5625 0.49
Third Quarter........... 85.25 75.3125 0.54
Fourth Quarter.......... 88.875 65.4375 0.54
2000:
First Quarter........... 68.9375 53.625 0.54
Second Quarter.......... 75.25 53.5625 0.54
Third Quarter........... 60.375 53.375 0.60
Fourth Quarter.......... 58.5625 47.4375 0.60
2001:
First Quarter (through
January 8, 2001)....... 65.25 57.25 N/A
</TABLE>
On October 27, 2000, the last trading day before public announcement of the
merger, the closing price per share of Wachovia common stock on the NYSE was
$52.6875. On January 8, 2001, the last practical day to obtain share price
information before the date of this proxy statement/prospectus, the closing
price per share of Wachovia common stock on the NYSE was $62.75. 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 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.
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Republic
Republic common stock is traded on the Nasdaq National Market under the
symbol "RSFC". The following table lists the high and low sale prices for
Republic common stock for the indicated periods as reported by the Nasdaq
National Market, and the cash dividends declared per share of Republic common
stock.
<TABLE>
<CAPTION>
Cash Dividends
Declared
High Low Per Share
-------- -------- --------------
<S> <C> <C> <C>
1998:
First Quarter........... $11.50 $ 8.25 $0.05
Second Quarter.......... 13.875 10.625 0.05
Third Quarter........... 11.625 7.50 0.06
Fourth Quarter.......... 12.4375 6.50 0.06
1999:
First Quarter........... 12.00 8.00 0.06
Second Quarter.......... 10.875 8.00 0.06
Third Quarter........... 9.9375 8.0312 0.06
Fourth Quarter.......... 9.0625 6.5625 0.06
2000:
First Quarter........... 8.50 5.75 0.06
Second Quarter.......... 6.9062 3.875 0.06
Third Quarter........... 5.625 4.00 0.06
Fourth Quarter.......... 7.375 4.6875 0.06
2001:
First Quarter (through
January 8, 2001)....... 7.9688 6.9688 N/A
</TABLE>
On October 27, 2000, the last trading day before public announcement of the
merger, the closing price per share of Republic common stock on the Nasdaq
National Market was $5.9375. On January 8, 2001, the last practical day to
obtain share price information before the date of this proxy
statement/prospectus, the closing price per share of Republic common stock on
the Nasdaq National Market was $7.625. Past price performance is not
necessarily indicative of likely future price performance. You should obtain
current market quotations for shares of Republic common stock.
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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, 1999, 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 consolidated financial statements of Republic Security Financial
Corporation at December 31, 1999 and 1998, and for each of the three years in
the period ended December 31, 1999, incorporated by reference in this proxy
statement/prospectus have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon and incorporated by reference
elsewhere herein which, as to the year 1997, are based in part on the report of
KPMG Peat Marwick LLP, independent auditors. The financial statements referred
to above are included in reliance upon such reports given on the authority of
such firms as experts in accounting and auditing.
The consolidated statements of income, stockholders' equity, and cash flows
for the year ended December 31, 1997 of Unifirst Federal Savings Bank (acquired
by Republic in 1998) have been incorporated by reference herein and in the
registration statement on Form S-4 in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
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 Republic 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 Republic's 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 shares of Wachovia common stock to be issued
and distributed to Republic shareholders 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.
In addition, Wachovia and Republic both file reports, proxy statements and
other information with the SEC under the Securities Exchange Act. You may read
and obtain copies of this information by mail from the Public Reference Room of
the SEC, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at
prescribed rates. You may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330.
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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.
Wachovia also maintains an Internet worldwide web site that contains company
information; its address is http://www.wachovia.com and Republic maintains an
Internet worldwide web site that contains information about it and Republic
Security Bank; its address is http://www.republicsecuritybank.com.
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 and Republic 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 or Republic has previously filed with the SEC. They
contain important information about Wachovia or Republic and each of their
financial conditions.
<TABLE>
<CAPTION>
Wachovia SEC Filings Period
-------------------- ------
<C> <S>
Annual Report on Form 10-K....... Year ended December 31, 1999
Quarterly Reports on Form 10-Q... Quarters ended March 31, 2000, June 30,
2000 and September 30, 2000
Current Reports on Form 8-K...... April 20, 2000, June 15, 2000, July 24,
2000 and August 28, 2000
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.
Republic SEC Filings Period
-------------------- ------
<C> <S>
Annual Report on Form 10-K....... Year ended December 31, 1999
Quarterly Reports on Form 10-Q... Quarters ended March 31, 2000, June 30,
2000 and September 30, 2000
Current Reports on Form 8-K...... January 25, 2000, April 18, 2000, July
14, 2000, October 17, 2000 and November
8, 2000
The description of Republic's
shareholder rights agreement in
Republic's registration statement
on Form 8-A 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.
</TABLE>
Each of Wachovia and Republic 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.
53
<PAGE>
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 Republic has supplied all information
contained in this proxy statement/prospectus relating to Republic.
Documents incorporated by reference are available from Wachovia or Republic
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 or 191 Peachtree Street, N.E.
Winston-Salem, North Carolina 27150 Atlanta, Georgia 30303
Telephone: (336) 732-2549 Telephone: (404) 332-6661
Republic Security Financial Corporation
450 South Australian Avenue
West Palm Beach, Florida 33401
Telephone: (561) 655-8511
If you would like to request documents, please do so by February 9, 2001 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.
54
<PAGE>
Appendix A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of October 29, 2000, by and between REPUBLIC SECURITY FINANCIAL
CORPORATION ("Republic"), a corporation organized and existing under the Laws
of the State of Florida, with its principal office located in West Palm Beach,
FL; and WACHOVIA CORPORATION ("Buyer"), a corporation organized and existing
under the Laws of the State of North Carolina, with its principal offices
located in Winston-Salem, NC and Atlanta, GA.
Preamble
The Boards of Directors of Republic and Buyer are of the opinion that the
transactions described herein are in the best interests of the parties to this
Agreement and their respective stockholders. This Agreement provides for the
acquisition of Republic by Buyer pursuant to the merger of Republic with and
into a wholly owned subsidiary of Buyer to be organized under the laws of the
State of North Carolina ("Newco"). At the effective time of the merger, the
outstanding shares of the capital stock of Republic shall be converted into
shares of the common stock of Buyer (except as provided herein). As a result,
stockholders of Republic shall become stockholders of Buyer, and each of the
subsidiaries of Republic shall continue to conduct its business and operations
as an indirect subsidiary of Buyer. The transactions described in this
Agreement are subject to the approvals of the stockholders of Republic, the
Board of Governors of the Federal Reserve System, and certain state regulatory
authorities, and the satisfaction of certain other conditions described in this
Agreement. It is the intention of the parties to this Agreement that the Merger
for federal income tax purposes shall qualify as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code and that this Agreement
shall constitute a "plan of reorganization" for purposes of Section 368 of the
Internal Revenue Code. As conditions and inducements to Buyer's entering into
this Agreement, Republic has entered into a Termination Fee Agreement with
Buyer, the President and Chief Executive Officer of Republic has entered into
an Employment Agreement with Buyer and the non-employee directors of Republic
have entered into Noncompetition Agreements with Buyer.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the Parties agree
as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time, Republic shall be merged with and into Newco in accordance with
the provisions of Section 607.1107 of the FBCA and Section 55-11-07 of the
NCBCA and with the effect provided in Section 607.1106 of the FBCA and
Section 55-11-06 of the NCBCA, respectively (the "Merger"). Newco shall be the
Surviving Corporation resulting from the Merger and shall continue to be
governed by the Laws of the State of North Carolina. The Merger shall be
consummated pursuant to the terms of this Agreement, which has been approved
and adopted by the respective Boards of Directors of Republic and Buyer and
will be approved and adopted by the Board of Directors of Newco upon its
formation.
1.2 Time and Place of Closing. The consummation of the Merger (the
"Closing") shall take place at 6:00 P.M. on the date that the Effective Time
occurs (or the immediately preceding day if the Effective Time is earlier than
9:00 A.M.), or at such other time as the Parties, acting through their duly
authorized officers, may mutually agree. The place of Closing shall be at such
location as may be mutually agreed upon by the Parties.
A-1
<PAGE>
1.3 Effective Time. The Merger and the other transactions contemplated by
this Agreement shall become effective on the date and at the time the Florida
Articles of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of Florida and the North Carolina Certificate
of Merger reflecting the Merger shall become effective with the Secretary of
State of the State of North Carolina (the "Effective Time"). Subject to the
terms and conditions hereof, unless otherwise mutually agreed upon by the duly
authorized officers of each Party, the Parties shall use their reasonable
efforts to cause the Effective Time to occur on such date as may be designated
by Buyer within the fifth business day to occur after the last of the
conditions set forth in Article 9 (other than the conditions relating to items
to be delivered on the day of the Closing) shall have been satisfied or waived
in accordance with the terms of this Agreement (or, at the election of Buyer,
on the first business day of the month immediately succeeding the month in
which such day occurs).
1.4 Integration. Following the Effective Time, the Parties currently intend
to effectuate, or cause to be effectuated, the combination (the "Subsidiary
Combination") of the business of Republic Security Bank with that of Wachovia
Bank, National Association. Subject to the terms of this Agreement, Republic
agrees to cooperate with Buyer and to take all reasonable actions prior to or
following the Effective Time, including executing all requisite documentation,
as may be reasonably requested by Buyer to effect the Subsidiary Combination.
Subject to the terms of this Agreement, Republic also agrees to cooperate with
Buyer and to take all reasonable restructuring steps for regulatory purposes,
as may be reasonably requested by Buyer to merge or otherwise consolidate such
legal entities to the extent desirable for regulatory or other reasons.
1.5 Plan of Merger. The Parties agree to enter into (and Buyer agrees to
cause Newco to enter into) a separate plan of merger, in substantially the form
of Exhibit 1 (the "Plan of Merger"), for purposes of any filing requirement.
ARTICLE 2
TERMS OF MERGER
2.1 Articles of Incorporation. The Articles of Incorporation of Newco in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation after the Effective Time until
otherwise amended or repealed.
2.2 Bylaws. The Bylaws of Newco in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation after the Effective Time
until otherwise amended or repealed.
2.3 Directors and Officers. The directors of Newco in office immediately
prior to the Effective Time, together with such additional persons as may
thereafter be elected, shall serve as the directors of the Surviving
Corporation from and after the Effective Time in accordance with the Bylaws of
the Surviving Corporation. The officers of Newco in office immediately prior to
the Effective Time, together with such additional persons as may thereafter be
elected, shall serve as the officers of the Surviving Corporation from and
after the Effective Time in accordance with the Bylaws of the Surviving
Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of Buyer, Newco or Republic, or the stockholders of any of the foregoing, the
shares of the constituent corporations shall be converted as follows:
(a) Each share of Newco Common Stock issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding from and
after the Effective Time.
A-2
<PAGE>
(b) Each share of Republic Common Stock (including any associated stock
purchase rights but excluding shares held by any Republic Company or any
Buyer Company, in each case other than in a fiduciary capacity or as a
result of debts previously contracted) issued and outstanding at the
Effective Time shall cease to be outstanding and shall by virtue of this
Agreement and without any action on the part of the holder thereof, be
converted into and exchangeable for the number of shares (the "Exchange
Ratio") of the common stock, par value $5.00 per share of Buyer ("Buyer
Common Stock"), rounded to the nearest ten-thousandth of a share,
determined by dividing 7.00 by the Average Closing Price (as defined
below); provided that (i) if the Average Closing Price is equal to or
greater than $56.2375, the Exchange Ratio shall be .1245 (the "Minimum
Exchange Ratio") and (ii) if the Average Closing Price is equal to or less
than $46.0125, the Exchange Ratio shall be .1521 (the "Maximum Exchange
Ratio").
3.2 Anti-Dilution Provisions. In the event Republic changes the number of
shares of Republic Common Stock issued and outstanding prior to the Effective
Time as a result of a stock split, stock dividend, or similar recapitalization
with respect to such stock, the Exchange Ratio, the Minimum Exchange Ratio and
the Maximum Exchange Ratio shall be proportionately adjusted. In the event
Buyer changes the number of shares of Buyer Common Stock issued and outstanding
prior to the Effective Time as a result of a stock split, stock dividend, or
similar recapitalization with respect to such stock and the record date
therefor (in the case of a stock dividend) or the effective date thereof (in
the case of a stock split or similar recapitalization for which a record date
is not established) shall be prior to the Effective Time, the formula for
calculating the Minimum Exchange Ratio and the Maximum Exchange Ratio shall be
adjusted appropriately.
3.3 Shares Held by Republic or Buyer. Each of the shares of Republic Common
Stock held by any Republic Company or by any Buyer Company, in each case other
than in a fiduciary capacity or as a result of debts previously contracted,
shall be cancelled and retired at the Effective Time and no consideration shall
be issued in exchange therefor.
3.4 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of Republic Common Stock exchanged pursuant to
the Merger who would otherwise have been entitled to receive a fraction of a
share of Buyer Common Stock (after taking into account all certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to a fractional part of a share of Buyer Common
Stock multiplied by the market value of one share of Buyer Common Stock at the
Effective Time. The market value of one share of Buyer Common Stock at the
Effective Time shall be the closing price of Buyer Common Stock on the New York
Stock Exchange (as reported by The Wall Street Journal or, if not reported
thereby, any other authoritative source selected by Buyer) on the last trading
day preceding the Effective Time. No such holder will be entitled to dividends,
voting rights, or any other rights as a stockholder in respect of any
fractional shares.
3.5 Conversion of Stock Rights.
(a) Except as provided in Section 3.5(d), at the Effective Time, each award,
option, or other right to purchase or acquire shares of Republic Common Stock
pursuant to stock options, stock appreciation rights ("SAR's"), or stock awards
and awards or other rights the value of which is determined by reference to the
value of shares of Republic Common Stock ("Republic Rights"), in each case
granted by Republic under the Republic Stock Plans, which are outstanding at
the Effective Time, whether or not exercisable, shall be converted into and
become rights with respect to Buyer Common Stock, and Buyer shall assume each
Republic Right, in accordance with the terms of the Republic Stock Plan and
stock option agreement by which it is evidenced, except that from and after the
Effective Time, (i) Buyer and its Compensation Committee shall be substituted
for Republic and the Committee of Republic's Board of Directors (including, if
applicable, the entire Board of Directors of Republic) administering such
Republic Stock Plan, (ii) each Republic Right assumed by Buyer may be exercised
solely for shares of Buyer Common Stock (or cash in the case of stock
appreciation rights), (iii) the number of shares of Buyer Common Stock subject
to such Republic Right shall be equal to the number of shares of Republic
Common Stock subject to such Republic Right immediately prior to the Effective
Time multiplied by the Exchange Ratio and rounding down to the nearest whole
share, and
A-3
<PAGE>
(iv) the per share exercise price (or similar threshold price, in the case of
stock awards) under each such Republic Right shall be adjusted by dividing the
per share exercise (or threshold) price under each such Republic Right by the
Exchange Ratio and rounding up to the nearest cent. In addition,
notwithstanding the provisions of clauses (iii) and (iv) of the first sentence
of this Section 3.5(a), each Republic Right which is an "incentive stock
option" shall be adjusted as required by Section 424 of the Internal Revenue
Code and the regulations promulgated thereunder, so as not to constitute a
modification, extension, or renewal of the option, within the meaning of
Section 424(h) of the Internal Revenue Code. At or prior to the Effective Time,
Republic shall take all action, if any, necessary with respect to the Republic
Stock Plans to permit the foregoing provisions of this Section 3.5(a) and the
proviso to the first sentence of Section 3.5(b).
(b) At the Effective Time, Buyer shall assume the Republic Stock Option
Plans; provided that such assumption shall be only in respect of the Republic
Rights assumed pursuant to Section 3.5(a) and that Buyer shall have no
obligation to make any additional grants or awards under assumed Republic Stock
Plans. As soon as reasonably practicable after the Effective Time, Buyer shall
deliver to the participants in each Republic Stock Plan an appropriate notice
setting forth such participant's rights pursuant thereto and Republic Rights
pursuant to such Republic Stock Plan shall continue in effect on the same terms
and conditions (subject to the adjustments required by Section 3.5(a) after
giving effect to the Merger), and Buyer shall comply with the terms of each
Republic Stock Plan to ensure, to the extent required by, and subject to the
provisions of, such Republic Stock Plan, that Republic Rights which qualified
as incentive stock options prior to the Effective Time continue to qualify as
incentive stock options after the Effective Time. At or prior to the Effective
Time, Buyer shall take all corporate action necessary to reserve for issuance
sufficient shares of Buyer Common Stock for delivery upon exercise of Republic
Rights assumed by it in accordance with this Section 3.5. As soon as reasonably
practicable (but in no event more than 15 days) after the Effective Time, Buyer
shall file a registration statement on Form S-3 or Form S-8, as the case may be
(or any successor or other appropriate forms), with respect to the shares of
Buyer Common Stock subject to such options and shall use its reasonable efforts
to maintain the effectiveness of such registration statements (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as such options remain outstanding. With respect to those individuals who
subsequent to the Merger will be subject to the reporting requirements under
Section 16(a) of the 1934 Act, where applicable, Buyer shall administer the
Republic Stock Plan assumed pursuant to this Section 3.5 in a manner that
complies with Rule 16b-3 promulgated under the 1934 Act, to the extent it has
been so administered through the Effective Time.
(c) All restrictions or limitations on transfer with respect to Republic
Common Stock awarded under the Republic Stock Plans or any other plan, program,
or arrangement of any Republic Company, to the extent that such restrictions or
limitations shall not have already lapsed, and except as otherwise expressly
provided in such plan, program, or arrangement, shall remain in full force and
effect with respect to shares of Buyer Common Stock into which such restricted
stock is converted pursuant to Section 3.1 of this Agreement.
(d) Notwithstanding any other provision in this Section 3.5, (i) Republic
shall take all of the actions set forth in paragraph 2 of Section 7.2(b) of the
Republic Disclosure Memorandum with respect to SAR's of Republic at the time
set forth in that paragraph and (ii) at the Effective Time each of the SAR's of
Republic referred to in such paragraph shall have been fully satisfied and
shall have ceased to exist.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective Time, Buyer and
Republic shall cause EquiServe Trust Company, N.A. or another exchange agent
selected by Buyer (the "Exchange Agent") to mail to the former stockholders of
Republic appropriate transmittal materials (which shall specify that delivery
shall be effected, and risk of loss and title to the certificates theretofore
representing shares of Republic Common Stock shall pass, only upon proper
delivery of such certificates to the Exchange Agent). The Exchange Agent
A-4
<PAGE>
may establish reasonable and customary rules and procedures in connection with
its duties. After the Effective Time, each holder of shares of Republic Common
Stock (other than shares to be canceled pursuant to Section 3.3 of this
Agreement) issued and outstanding at the Effective Time promptly upon surrender
of the certificate or certificates representing such shares to the Exchange
Agent, together with properly completed transmittal materials, shall receive in
exchange therefor the consideration provided in Section 3.1 of this Agreement,
together with all undelivered dividends and other distributions in respect of
such shares (without interest thereon) pursuant to Section 4.2 of this
Agreement. To the extent required by Section 3.4 of this Agreement, each holder
of shares of Republic Common Stock issued and outstanding at the Effective Time
also shall receive, upon surrender of the certificate or certificates
representing such shares, cash in lieu of any fractional share of Buyer Common
Stock to which such holder may be otherwise entitled (without interest). Until
so surrendered, each outstanding certificate of Republic Common Stock shall be
deemed for all purposes, other than as provided below with respect to voting
and the payment of dividends or other distributions, to represent the
consideration into which the number of shares of Republic Common Stock
represented thereby prior to the Effective Time shall have been converted.
Buyer shall not be obligated to deliver the consideration to which any former
holder of Republic Common Stock is entitled as a result of the Merger until
such holder surrenders such holder's certificate or certificates representing
the shares of Republic Common Stock for exchange as provided in this Section
4.1. The certificate or certificates of Republic Common Stock so surrendered
shall be duly endorsed as the Exchange Agent may require. Any other provision
of this Agreement notwithstanding, neither the Surviving Corporation, Republic,
nor the Exchange Agent shall be liable to a holder of Republic Common Stock for
any amounts paid or property delivered in good faith to a public official
pursuant to any applicable abandoned property Law.
4.2 Rights of Former Republic Stockholders. At the Effective Time, the stock
transfer books of Republic shall be closed as to holders of Republic Common
Stock immediately prior to the Effective Time and no transfer of Republic
Common Stock by any such holder shall thereafter be made or recognized. Until
exchanged in accordance with the provisions of Section 4.1 of this Agreement,
each certificate theretofore representing shares of Republic Common Stock
(other than shares to be canceled pursuant to Section 3.3 of this Agreement)
shall from and after the Effective Time represent for all purposes only the
right to receive the consideration provided in Sections 3.1 and 3.4 of this
Agreement in exchange therefor. Former stockholders of record of Republic shall
not be entitled to vote after the Effective Time at any meeting of Buyer
stockholders until such holders have exchanged their certificates representing
Republic Common Stock for certificates representing Buyer Common Stock in
accordance with the provisions of this Agreement. Whenever a dividend or other
distribution is declared by Buyer on the Buyer Common Stock, the record date
for which is at or after the Effective Time, the declaration shall include
dividends or other distributions on all shares of Buyer Common Stock issuable
pursuant to this Agreement, but no dividend or other distribution payable to
the holders of record of Buyer Common Stock as of any time subsequent to the
Effective Time shall be delivered to the holder of any certificate representing
shares of Republic Common Stock issued and outstanding at the Effective Time
until such certificate is exchanged as provided in Section 4.1 of this
Agreement. However, upon exchange of such Republic Common Stock certificate,
both the Buyer Common Stock certificate (together with all such undelivered
dividends or other distributions without interest) and any undelivered
dividends and cash payments to be paid for fractional share interests (without
interest) shall be delivered and paid with respect to each share represented by
such certificate. In the event any Republic Common Stock certificate shall have
been lost, stolen, or destroyed, upon the making of an affidavit of that fact
by the person claiming such certificate to be lost, stolen, or destroyed and,
if required by Buyer, the posting by such person of a bond in such amount as
Buyer may reasonably direct as indemnity against any claim that may be made
against it with respect to such certificate, the Exchange Agent shall issue in
exchange for such lost, stolen, or destroyed certificate, the shares of Buyer
Common Stock and cash in lieu of fractional shares deliverable in respect
thereof pursuant to this Agreement.
A-5
<PAGE>
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF REPUBLIC
Republic hereby represents and warrants to Buyer as follows:
5.1 Organization, Standing, and Power. Republic is a corporation duly
organized, validly existing, and in good standing under the Laws of the State
of Florida, and has the corporate power and authority to carry on its business
as now conducted and to own, lease, and operate its Material Assets. Republic
is duly qualified or licensed to transact business as a foreign corporation in
good standing in the States of the United States and foreign jurisdictions
where the character of its Assets or the nature or conduct of its business
requires it to be so qualified or licensed, except for such jurisdictions in
which the failure to be so qualified or licensed is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Republic.
5.2 Authority; No Breach of Agreement.
(a) Republic has the corporate power and authority necessary to execute,
deliver, and perform its obligations under this Agreement and the Termination
Fee Agreement and to consummate the transactions contemplated hereby and
thereby. The execution, delivery, and performance of this Agreement and the
Termination Fee Agreement, and the consummation of the transactions
contemplated herein and therein, including the Merger, have been duly and
validly authorized by all necessary corporate action (including valid
authorization and adoption of this Agreement and the Termination Fee Agreement
by Republic's duly constituted Board of Directors) in respect thereof on the
part of Republic, subject in the case of consummation of the Merger to the
approval of this Agreement by the holders of a majority of the shares of
Republic Common Stock entitled to vote thereon, which is the only stockholder
vote required for consummation of the Merger by Republic. Assuming due
authorization, execution, and delivery of this Agreement by Buyer, this
Agreement represents a legal, valid, and binding obligation of Republic,
enforceable against Republic in accordance with its terms (except in all cases
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium, or similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding
may be brought).
(b) Except as set forth in Section 5.2 of the Republic Disclosure
Memorandum, neither the execution and delivery of this Agreement by Republic,
nor the consummation by Republic of the transactions contemplated hereby, nor
compliance by Republic with any of the provisions hereof, will (i) conflict
with or result in a breach of any provision of Republic's Articles of
Incorporation or Bylaws, or (ii) constitute or result in a Default under, or
require any Consent pursuant to, or result in the creation of any Lien on any
Asset of any Republic Company under, any Contract, Order or Permit of any
Republic Company, where such Default or Lien, or any failure to obtain such
Consent, is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Republic, or (iii) subject to receipt of the
requisite Consents referred to in Section 9.1(b) of this Agreement, violate any
Law or Order applicable to any Republic Company or any of their respective
Material Assets.
(c) Other than as disclosed in Section 5.2 of the Republic Disclosure
Memorandum, and other than in connection or compliance with the provisions of
the Securities Laws, applicable state corporate and securities Laws, and rules
of the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation or both with respect to any employee
benefit plans, or under the HSR Act, and other than Consents, filings, or
notifications which, if not obtained or made, are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Republic,
no notice to, filing with, or Consent of, any public body or authority or self-
regulatory authority is necessary for the consummation by Republic of the
Merger and the other transactions contemplated in this Agreement or the
Termination Fee Agreement.
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<PAGE>
5.3 Capital Stock.
(a) The authorized capital stock of Republic consists, as of the date of
this Agreement, of (i) 500,000,000 shares of Republic Common Stock, of which
48,614,060 (exclusive of treasury stock) shares are issued and outstanding as
of the date of this Agreement and not more than 52,228,654 (exclusive of
treasury stock) shares will be issued and outstanding at the Effective Time,
and (ii) 20,000,000 shares of Republic Preferred Stock, none of which is
outstanding. All of the issued and outstanding shares of Republic Common Stock
are duly and validly issued and outstanding and are fully paid and
nonassessable. None of the outstanding shares of Republic Common Stock has been
issued in violation of any preemptive rights of the current or past
stockholders of Republic (and are not subject to any preemptive rights).
Republic has reserved not more than 5,800,000 shares of Republic Common Stock
for issuance on the exercise of outstanding stock options and warrants.
(b) Except as set forth in Section 5.3(a) of this Agreement (with respect to
shares of capital stock) or Section 5.3(b) of the Republic Disclosure
Memorandum or as provided in the Republic Rights Agreement, there are no shares
of capital stock or other equity securities of Republic outstanding and no
outstanding Rights relating to the capital stock of Republic. The number of
shares of Republic Common Stock (or other capital stock of Republic) that are
issuable upon exercise of any outstanding Rights as of the date of this
Agreement is set forth in Section 5.3(b) of Republic's Disclosure Memorandum.
5.4 Republic Subsidiaries. Republic has disclosed in Section 5.4 of the
Republic Disclosure Memorandum all Republic Subsidiaries. Except as set forth
in Section 5.4 of the Republic Disclosure Memorandum, Republic or one of its
wholly owned Subsidiaries owns all of the issued and outstanding shares of
capital stock of each Republic Subsidiary. No equity securities of any Republic
Subsidiary are or may become required to be issued (other than to Republic or a
wholly owned Republic Subsidiary) by reason of any Rights, and there are no
Contracts by which any Republic Subsidiary is bound to issue (other than to
Republic or a wholly owned Republic Subsidiary) additional shares of its
capital stock or Rights or by which any Republic Company is or may be bound to
transfer any shares of the capital stock of any Republic Subsidiary (other than
to Republic or a wholly owned Republic Subsidiary). There are no Contracts
relating to the rights of any Republic Company to vote or to dispose of any
shares of the capital stock of any Republic Subsidiary. All of the shares of
capital stock of each Republic Subsidiary held by a Republic Company are fully
paid and nonassessable (except pursuant to 12 U.S.C. ss.55) and are owned by
the Republic Company free and clear of any Lien. Each Republic Subsidiary is
either a bank or a corporation, and is duly organized, validly existing, and
(to the extent applicable) in good standing under the Laws of the jurisdiction
in which it is incorporated or organized, and has the corporate power and
authority necessary for it to own, lease, and operate its Assets and to carry
on its business as now conducted. Each Republic Subsidiary is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of
its Assets or the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the failure to be
so qualified or licensed is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Republic. Each Republic Subsidiary
that is a depository institution is an "insured depository institution" as
defined in the Federal Deposit Insurance Act and applicable regulations
thereunder, and the deposits in which are insured by the Bank Insurance Fund or
Savings Association Insurance Fund to the fullest extent permitted by Law. The
minute book and other organizational documents (and all amendments thereto) for
Republic and each Republic Subsidiary that is a "Significant Subsidiary" (as
such term is defined in Regulation S-X promulgated under the 1934 Act) have
been made available to Buyer for its review, and are true and complete as in
effect as of July 31, 2000. No Material actions have been taken by the Board of
Directors of Republic or any such Republic Subsidiary since such date, other
than such actions taken to authorize the execution of this Agreement and the
consummation of the transactions contemplated herein, and to authorize actions
described in the Republic Disclosure Memorandum. Republic 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 equity securities or interests (i) of Republic
Subsidiaries, (ii) of any entity acquired through foreclosure in the ordinary
course of business or (iii) that are owned or controlled in a fiduciary
capacity in the ordinary course of business.
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5.5 SEC Filings; Financial Statements.
(a) Republic has filed and made available to Buyer all of Republic's SEC
Documents required to be filed with the SEC since December 31, 1995
(collectively, the "Republic SEC Reports"). The Republic SEC Reports (i) at the
time filed, complied in all Material respects with the applicable requirements
of the 1933 Act and the 1934 Act, as the case may be, and (ii) did not at the
time they were filed (or if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing) contain any untrue
statement of a Material fact or omit to state a Material fact required to be
stated in such Republic SEC Reports or necessary in order to make the
statements in such Republic SEC Reports, in light of the circumstances under
which they were made, not misleading. Except for any Republic Subsidiaries that
are registered as a broker, dealer, or investment advisor or filings required
due to fiduciary holdings of the Republic Subsidiaries, none of Republic's
Subsidiaries is required to file any forms, reports, or other documents with
the SEC.
(b) Each of the Republic Financial Statements (including, in each case, any
related notes) contained in the Republic SEC Reports, including any Republic
SEC Reports filed after the date of this Agreement until the Effective Time,
complied or will comply as to form in all Material respects with the applicable
published rules and regulations of the SEC with respect thereto, was prepared
or will be prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to
such financial statements, or, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC), and fairly presented or will fairly present
the consolidated financial position of Republic and its Subsidiaries as at the
respective dates and the consolidated results of its operations and cash flows
for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or will not be Material in amount or effect.
5.6 Absence of Undisclosed Liabilities. No Republic Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Republic, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of Republic as
of June 30, 2000 or included in the Republic Financial Statements filed after
such date but before the date of this Agreement (or reflected in the notes
thereto), Liabilities incurred in the ordinary course of business subsequent to
June 30, 2000, Liabilities to be incurred in connection with the transactions
contemplated by this Agreement or the Termination Fee Agreement (in each case
in accordance with the terms of this Agreement and the Termination Fee
Agreement), and except as set forth in Section 5.6 of the Republic Disclosure
Memorandum. No Republic Company has incurred or paid any Liability since
December 31, 1999, except for such Liabilities incurred or paid in the ordinary
course of business consistent with past business practices and which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Republic.
5.7 Absence of Certain Changes or Events. Since December 31, 1999, except as
disclosed in the Republic Financial Statements delivered prior to the date of
this Agreement or as otherwise disclosed in the Republic Disclosure Memorandum,
there have been no events, changes, or occurrences which have had, or are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Republic.
5.8 Tax Matters. Except as set forth in Section 5.8 of the Republic
Disclosure Memorandum:
(a) Since December 31, 1994, all Material Tax Returns required to be
filed by or on behalf of any of the Republic Companies have been timely
filed, or requests for extensions have been timely filed, granted, and have
not expired for periods ended on or before December 31, 1999, and all
Material Tax Returns filed are complete and accurate in all Material
respects. All Tax Returns for periods ending on or before the date of the
most recent fiscal year end immediately preceding the Effective Time will
be timely filed or requests for extensions will be timely filed. All Taxes
shown on filed Tax Returns have been paid. There is no audit examination,
deficiency, or refund Litigation with respect to any Taxes, that is
reasonably likely to result in a determination that would have,
individually or in the aggregate, a Material Adverse Effect on Republic,
except to the extent reserved against in the Republic Financial Statements
dated prior to the date of this Agreement. All Material Taxes and other
Material Liabilities due with respect to completed and settled examinations
or concluded Litigation have been paid.
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(b) None of the Republic Companies has executed an extension or waiver
of any statute of limitations on the assessment or collection of any Tax
due (excluding such statutes that relate to years currently under
examination by the Internal Revenue Service or other applicable taxing
authorities) that is currently in effect.
(c) Adequate provision for any Material Taxes due or to become due for
any of the Republic Companies for the period or periods through and
including the date of the respective Republic Financial Statements has been
made and is reflected on such Republic Financial Statements.
(d) Each of the Republic Companies is in Material compliance with, and
its records contain the information and documents (including properly
completed IRS Forms W-9) necessary to comply with, in all material
respects, applicable information reporting and Tax withholding requirements
under federal, state, and local Tax Laws, and such records identify with
specificity all accounts subject to backup withholding under Section 3406
of the Internal Revenue Code.
(e) None of the Republic Companies has made any payments, is obligated
to make any payments, or is a party to any contract, agreement, or other
arrangement that could obligate it to make any payments that would be
disallowed as a deduction under Section 280G or 162(m) of the Internal
Revenue Code.
(f) There are no Material Liens with respect to Taxes upon any of the
Assets of the Republic Companies.
(g) There has not been an ownership change, as defined in Internal
Revenue Code Section 382(g), of the Republic Companies (other than with
respect to Republic Companies acquired directly or indirectly by Republic)
that occurred during or after any Taxable Period in which such Republic
Companies incurred a net operating loss that carries over to any Taxable
Period ending after December 31, 1999.
(h) No Republic Company has filed any consent under Section 341(f) of
the Internal Revenue Code concerning collapsible corporations.
(i) No Republic Company has or has had a permanent establishment in any
foreign country, as defined in any applicable tax treaty or convention
between the United States and such foreign country, including any operation
for which a provision in any applicable tax treaty or convention between
the United States and such foreign country corresponding to the provision
on permanent establishments in the U.S. Model Income Tax Treaty applies to
such operation.
5.9 Assets. Except as set forth in Section 5.9 of the Republic Disclosure
Memorandum, the Republic Companies have good and marketable title, free and
clear of all Liens, to all of their respective Assets other than such defects
and liens which are not reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect on Republic. All tangible properties used in the
businesses of the Republic Companies are in good condition, reasonable wear and
tear excepted, and are usable in the ordinary course of business consistent
with Republic's past practices. All Assets which are Material to Republic's
business on a consolidated basis, held under leases or subleases by any of the
Republic Companies, are held under valid Contracts enforceable in accordance
with their respective terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceedings
may be brought), and each such Contract is in full force and effect. The
Republic Companies currently maintain insurance (that is in full force and
effect) in amounts, scope and coverage reasonably necessary for their
operations. Except as set forth in Section 5.9 of the Republic Disclosure
Memorandum, none of the Republic Companies has received notice from any
insurance carrier that (i) such insurance will be canceled or that coverage
thereunder will be reduced or eliminated, or (ii) premium costs with respect to
such policies of insurance will be substantially increased. Except as set forth
in Section 5.9 of the Republic Disclosure Memorandum, there are no claims
pending under such policies of insurance and no notices have been given by any
Republic Company under such policies. No Republic Company is in Material
Default under such policies of insurance. The Assets of the Republic Companies
include all Material Assets required to operate the business of the Republic
Companies as presently conducted.
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5.10 Environmental Matters. Except as disclosed in Section 5.10 of the
Republic Disclosure Memorandum:
(a) Each Republic Company, its Participation Facilities, and, to the
Knowledge of Republic, its Loan Properties are, and have been, in
compliance with all Environmental Laws, except those instances of non-
compliance which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Republic.
(b) There is no Litigation pending or, to the Knowledge of Republic,
threatened before any court, governmental agency, or authority, or other
forum in which any Republic Company or any of its Participation Facilities
has been or, with respect to threatened Litigation, may reasonably be
expected to be named as a defendant (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or (ii) relating
to the release into the environment of any Hazardous Material, whether or
not occurring at, on, under, or involving a site owned, leased, or operated
by any Republic Company or any of its Participation Facilities, except for
such Litigation pending or threatened that is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on
Republic.
(c) There is no Litigation pending, or to the Knowledge of Republic,
threatened before any court, governmental agency, or board, or other forum
in which any of its Loan Properties (or Republic in respect of such Loan
Property) has been or, with respect to threatened Litigation, may
reasonably be expected to be named as a defendant or potentially
responsible party (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release
into the environment of any Hazardous Material, whether or not occurring
at, on, under, or involving a Loan Property, except for such Litigation
pending or threatened that is not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on Republic.
(d) To the Knowledge of Republic, there is no reasonable basis for any
Litigation of a type described in subsections (b) or (c), except such as is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Republic.
(e) To the Knowledge of Republic, during the period of (i) any Republic
Company's ownership or operation of any of their respective current
properties, (ii) any Republic Company's participation in the management of
any Participation Facility, or (iii) any Republic Company's holding of a
security interest in a Loan Property, there have been no releases of
Hazardous Material in, on, under, or affecting (or potentially affecting)
such properties, except such as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Republic.
Prior to the period of (i) any Republic Company's ownership or operation of
any of their respective current properties, (ii) any Republic Company's
participation in the management of any Participation Facility, or (iii) any
Republic Company's holding of a security interest in a Loan Property, to
the Knowledge of Republic, there were no releases of Hazardous Material in,
on, under, or affecting any such property, Participation Facility, or Loan
Property, except such as are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Republic.
5.11 Compliance with Laws. Republic is duly registered as a bank holding
company under the BHC Act. Each Republic Company has in effect all Permits
necessary for it to own, lease, or operate its Material Assets and to carry on
its business as now conducted, except for those Permits the absence of which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Republic, and there has occurred no Default under any such
Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Republic. None
of the Republic Companies:
(a) is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Republic; and
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(b) as received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that any Republic Company is
not in compliance with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, where such noncompliance is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Republic, (ii) threatening to revoke any Permits, the
revocation of which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Republic, or (iii) requiring any
Republic Company (x) to enter into or consent to the issuance of a cease
and desist order, formal agreement, directive, commitment, or memorandum of
understanding, or (y) to adopt any Board resolution or similar undertaking,
which restricts materially the conduct of its business, or in any Material
manner relates to its capital adequacy, its credit or reserve policies, its
management, or the payment of dividends (and no Republic Company has
entered into, consented to or adopted any of the preceding). To Republic's
Knowledge, no grounds for any of the foregoing in this Section 5.11(b)
exist.
5.12 Labor Relations. No Republic Company is the subject of any Litigation
asserting that it or any other Republic Company has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state Law) or seeking to compel it or any other Republic Company to bargain
with any labor organization as to wages or conditions of employment, nor is any
Republic Company a party to or bound by any collective bargaining agreement,
Contract, or other agreement or understanding with a labor union or labor
organization, nor is there any strike or other labor dispute involving any
Republic Company, pending or, to the Knowledge of Republic, threatened, or to
the Knowledge of Republic, is there any activity involving any Republic
Company's employees seeking to certify a collective bargaining unit or engaging
in any other organization activity.
5.13 Employee Benefit Plans.
(a) Republic has disclosed in Section 5.13 of the Republic Disclosure
Memorandum, and has delivered or made available to Buyer prior to the execution
of this Agreement correct and complete copies in each case of, all Republic
Benefit Plans, including, but not limited to, any trust instruments and
insurance contracts forming a part of any Republic Benefit Plans and all
amendments thereto. For purposes of this Agreement, "Republic Benefit Plans"
means all pension, retirement, profit-sharing, deferred compensation, stock
option, employee stock ownership, severance pay, vacation, bonus, or other
compensation or incentive plan, all other employee programs or agreements, all
medical, vision, dental, or other health plans, all life insurance plans, and
all other employee benefit plans or fringe benefit plans, including "employee
benefit plans" as that term is defined in Section 3(3) of ERISA maintained by,
sponsored in whole or in part by, or contributed to by, any Republic Company
for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate. Any of the Republic Benefit Plans
which is an "employee welfare benefit plan," as that term is defined in Section
3(l) of ERISA, or an "employee pension benefit plan," as that term is defined
in Section 3(2) of ERISA, is referred to herein as a "Republic ERISA Plan." Any
Republic ERISA Plan which is also subject to Section 412 of the Internal
Revenue Code or Section 302 of ERISA is referred to herein as a "Republic
Pension Plan." Neither Republic nor any Republic Company has an "obligation to
contribute" (as defined in ERISA Section 4212) to a "multiemployer plan" (as
defined in ERISA Sections 4001(a)(3) and 3(37)(A)). Each "employee pension
benefit plan," as defined in Section 3(2) of ERISA, ever maintained by any
Republic Company, that was intended to qualify under Section 401(a) of the
Internal Revenue Code is disclosed as such in Section 5.13 of the Republic
Disclosure Memorandum.
(b) Republic has delivered or made available to Buyer prior to the execution
of this Agreement correct and complete copies of the following documents: (i)
all trust agreements or other funding arrangements for such Republic Benefit
Plans (including insurance contracts), and all amendments thereto, (ii) with
respect to any such Republic Benefit Plans or amendments, all determination
letters, Material rulings, Material opinion letters, Material information
letters, or Material advisory opinions issued by the Internal Revenue Service,
the United States Department of Labor, or the Pension Benefit Guaranty
Corporation after December 31, 1994, (iii) annual reports or returns, audited
or unaudited financial statements, actuarial valuations and reports, and
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summary annual reports prepared for any Republic Benefit Plan with respect to
the most recent plan year and (iv) the most recent summary plan descriptions
and any Material modifications thereto.
(c) All Republic Benefit Plans are in compliance with the applicable terms
of ERISA, the Internal Revenue Code, and any other applicable Laws, other than
instances of noncompliance which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Republic. Each
Republic ERISA Plan which is intended to be qualified under Section 401(a) of
the Internal Revenue Code has received a favorable determination letter from
the Internal Revenue Service, and Republic is not aware of any circumstances
likely to result in revocation of any such favorable determination letter or
the loss of qualification of such Republic Benefit Plan under Section 401(a) of
the Internal Revenue Code. Each trust created under any Republic ERISA Plan has
been determined to be exempt from Tax under Section 501(a) of the Internal
Revenue Code and Republic is not aware of any circumstance which will or could
reasonably result in revocation of such exemption. With respect to each
Republic Benefit Plan to the Knowledge of Republic, no event has occurred which
will or could reasonably give rise to a loss of any intended Tax consequences
under the Internal Revenue Code or to any Tax under Section 511 of the Internal
Revenue Code that is reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect on Republic. There is no Material pending or, to
the Knowledge of Republic, threatened Litigation relating to any Republic ERISA
Plan.
(d) No Republic Company has engaged in a transaction with respect to any
Republic Benefit Plan that, assuming the Taxable Period of such transaction
expired as of the date of this Agreement, would subject any Republic Company to
a tax or penalty imposed by either Section 4975 of the Internal Revenue Code or
Section 502(i) of ERISA in amounts which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Republic.
Neither Republic nor, any administrator or fiduciary of any Republic Benefit
Plan (or any agent of any of the foregoing) has engaged in any transaction, or
acted or failed to act in any manner with respect to any Republic Benefit Plan
which could subject Republic to any direct or indirect Liability (by indemnity
or otherwise) for breach of any fiduciary, co-fiduciary, or other duty under
ERISA, where such Liability, individually or in the aggregate, is reasonably
likely to have a Material Adverse Effect on Republic. No oral or written
representation or communication with respect to any aspect of the Republic
Benefit Plans has been made to employees of any Republic Company which is not
in conformity with the written or otherwise preexisting terms and provisions of
such plans, where any Liability resulting from such non-conformity is
reasonably likely to have a Material Adverse Effect on Republic. Each Republic
ERISA Plan which is intended to be part of a voluntary employees' beneficiary
association within the meaning of Section 501(c)(9) of the Internal Revenue
Code has (i) received an opinion letter from the Internal Revenue Service
recognizing its exempt status under Section 501(c)(9) of the Internal Revenue
Code and (ii) filed a timely notice with the Internal Revenue Service pursuant
to Section 505(c) of the Internal Revenue Code, and Republic is not aware of
circumstances likely to result in the loss of the exempt status of such
Republic ERISA Plan under Section 501(c)(9) of the Internal Revenue Code.
(e) No Republic Pension Plan has any "unfunded current liability," as that
term is defined in Section 302(d)(8)(A) of ERISA, and the fair market value of
the Assets of any such plan exceeds the plan's "benefit liabilities," as that
term is defined in Section 4001(a)(16) of ERISA, when determined under
actuarial factors that would apply if the plan terminated in accordance with
all applicable legal requirements. Since the date of the most recent actuarial
valuation, there has been (i) no Material change in the financial position or
funded status of any Republic Pension Plan, (ii) no change in the actuarial
assumptions with respect to any Republic Pension Plan, and (iii) no increase in
benefits under any Republic Pension Plan as a result of plan amendments or
changes in applicable Law, any of which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Republic.
Neither any Republic Pension Plan nor any "single-employer plan," within the
meaning of Section 4001(a)(15) of ERISA, currently maintained by any Republic
Company, or the single-employer plan of any entity which is considered one
employer with Republic under Section 4001 of ERISA or Section 414 of the
Internal Revenue Code or Section 302 of ERISA (whether or not waived) (a
"Republic ERISA Affiliate") has an "accumulated funding deficiency" within the
meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA and
no Republic ERISA Affiliate has an outstanding
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funding waiver. All required contributions with respect to an Republic Pension
Plan or any single-employer plan of an Republic ERISA Affiliate have been
timely made and there is no lien or expected to be a lien under Internal
Revenue Code Section 412(n) or ERISA Section 302(f) or Tax under Internal
Revenue Code Section 4971. No Republic Company has provided, or is required to
provide, security to an Republic Pension Plan or to any single-employer plan of
an Republic ERISA Affiliate pursuant to Section 401(a)(29) of the Internal
Revenue Code. All premiums required to be paid under ERISA Section 4006 have
been timely paid by Republic, except to the extent any failure to timely pay
would not have a Material Adverse Effect on Republic.
(f) No Liability under Title IV of ERISA has been or is expected to be
incurred by any Republic Company with respect to any defined benefit plan
currently or formerly maintained by any of them or by any Republic ERISA
Affiliate that has not been satisfied in full (other than Liability for Pension
Benefit Guaranty Corporation premiums, which have been paid when due, except
for Liabilities that, individually or in the aggregate, would not have a
Material Adverse Effect on Republic). Except as set forth in Section 5.13 of
the Republic Disclosure Memorandum, no notice of a "reportable event", within
the meaning of Section 4043 of ERISA for which the 30-day reporting requirement
has not been waived or extended, other than pursuant to PBGC Reg. Section
4043.66, has been required to be filed for any Republic Pension Plan or any
Republic ERISA Affiliate within the 12-month period ending on the date hereof.
(g) Except as set forth in Section 5.13 of the Republic Disclosure
Memorandum, no Republic Company has any obligations for retiree health and
retiree life benefits under any of the Republic Benefit Plans other than with
respect to benefit coverage mandated by applicable Law. Except as set forth in
Section 5.13 of the Republic Disclosure Memorandum, the Republic Companies may
amend or terminate such Republic Benefit Plans without incurring any liability
thereunder.
(h) Except as set forth in Section 5.13 of the Republic Disclosure
Memorandum, there has been no amendment to, announcement by Republic or any
Republic Company relating to, or change in employee participation or coverage
under, any Republic Benefit Plan that would increase materially the expense of
maintaining such Republic Benefit Plan above the level of expense incurred
therefor for the most recent fiscal year. Except as disclosed in Section 5.13
of the Republic Disclosure Memorandum, neither the execution of this Agreement
nor the consummation of the transactions contemplated hereby will (1) entitle
any employees of Republic or any of its Subsidiaries to severance pay or any
increase in severance pay upon any termination of employment prior to or after
the date hereof, (2) accelerate the time of payment or vesting or trigger any
payment or funding (through a grantor trust or otherwise) of compensation or
benefits under, increase the amount payable or trigger any other material
obligation pursuant to, any of the Republic Benefit Plans, (3) cause Republic
to record additional compensation expense on its income statement with respect
to any stock option or other equity award, or (4) result in any payments under
any of the Republic Benefit Plans which would not be deductible under Section
162(m) or Section 280G of the Internal Revenue Code.
(i) The aggregate dollar amount to be paid immediately prior to the
Effective Time pursuant to paragraphs 1, 2, 6 and 7 of Section 7.2(b) of the
Republic Disclosure Memorandum will not exceed $20 million (excluding the cost
of any continuing obligations and excluding any payments resulting from
compensating any officer or director of Republic for any excise tax imposed by
Section 4999 of the Internal Revenue Code or any interest or penalties that are
incurred with respect to such excise tax).
5.14 Material Contracts. Except as set forth in the Republic Disclosure
Memorandum and except for Contracts filed as exhibits to Republic's Form 10-K
for the fiscal year ended December 31, 1999 (or as an exhibit to another
Republic SEC Report filed before the date of this Agreement and which Contract
has been identified to Buyer), as of the date of this Agreement, none of the
Republic Companies, nor any of their respective Assets, businesses, or
operations, is a party to, or is bound or affected by, or receives benefits
under, (i) any employment, severance, termination, consulting, or retirement
Contract providing for aggregate payments to any Person in any calendar year in
excess of $75,000, (ii) any Contract relating to the borrowing of money by any
Republic Company or the guarantee by any Republic Company of any such
obligation (other than Contracts evidencing deposit liabilities, purchases of
federal funds, fully-secured repurchase agreements,
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and Federal Home Loan Bank advances of depository institution Subsidiaries,
trade payables, and Contracts relating to borrowings or guarantees made in the
ordinary course of business), (iii) any exclusive dealing Contract or other
Contract that materially limits the ability of any Republic Company to compete
in any line of business or with any Person or in any area or that would so
limit its ability (or the ability of the Surviving Corporation or any of its
Affiliates) after the Effective Time and (iv) any other Contract or amendment
thereto that is a "material contract" within the meaning of Item 601(b)(10) of
the SEC's regulation S-K (together with all Contracts referred to in Sections
5.9 and 5.13(a) of this Agreement, the "Republic Contracts"). With respect to
each Republic Contract: (i) the Contract is in full force and effect; (ii) no
Republic Company is in Default thereunder, other than Defaults which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Republic; (iii) no Republic Company has repudiated or waived any
Material provision of any such Contract; and (iv) no other party to any such
Contract is, to the Knowledge of Republic, in Default in any Material respect,
other than Defaults which are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Republic, or has repudiated or
waived any Material provision thereunder. Except for Federal Home Loan Bank
advances or as set forth in Section 5.14 of the Republic Disclosure Memorandum,
all of the indebtedness of any Republic Company for money borrowed is repayable
at any time by such Republic Company without penalty or premium.
5.15 Legal Proceedings.
(a) There is no Litigation instituted or pending, or, to the Knowledge of
Republic, threatened against any Republic Company, or against any Asset,
interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Republic, nor
are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against any Republic Company, that are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Republic.
(b) Section 5.15(b) of the Republic Disclosure Memorandum includes a summary
report of all Litigation as of the date of this Agreement to which any Republic
Company is a party and which names a Republic Company as a defendant or cross-
defendant.
5.16 Reports. Since December 31, 1996, or the date of organization if later,
each Republic Company has timely filed all reports and statements, together
with any amendments required to be made with respect thereto, that it was
required to file with any Regulatory Authorities, except failures to file which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Republic. As of their respective dates, each of such reports
and documents, including the financial statements, exhibits, and schedules
thereto, complied in all Material respects with all applicable Laws.
5.17 Statements True and Correct. None of the information supplied or to be
supplied by any Republic Company or any Affiliate thereof regarding Republic or
such Affiliate for inclusion in the Registration Statement to be filed by Buyer
with the SEC will, when the Registration Statement becomes effective, contain
any untrue statement of a Material fact, or omit to state any Material fact
required to be stated thereunder or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. None
of the information supplied or to be supplied by any Republic Company or any
Affiliate thereof for inclusion in the Proxy Statement to be mailed to
Republic's stockholders in connection with the Stockholders' Meeting will, when
first mailed to the stockholders of Republic, contain any misstatement of
Material fact, or omit to state any Material fact required to be stated
thereunder or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or, in the case of
the Proxy Statement or any amendment thereof or supplement thereto, at the time
of the Stockholders' Meeting, omit to state any Material fact required to be
stated thereunder or necessary to correct any Material statement in any earlier
communication with respect to the solicitation of any proxy for the
Stockholders' Meeting. All documents that any Republic Company or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all
Material respects with the provisions of applicable Law.
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5.18 Tax and Regulatory Matters. No Republic Company or any Affiliate
thereof has taken or agreed to take any action, and as of the date hereof
Republic has no Knowledge of any fact or circumstance that is reasonably likely
to (i) prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, or (ii) materially
impede or delay receipt of any Consents of Regulatory Authorities referred to
in Section 9.1(b) of this Agreement. As of the date hereof, to the Knowledge of
Republic there exists no fact, circumstance, or reason why the requisite
Consents referred to in Section 9.1(b) of this Agreement cannot be received in
a timely manner.
5.19 Intellectual Property. All of the Intellectual Property rights of
Republic and the Republic Subsidiaries are in full force and effect and, if
applicable, constitute legal, valid, and binding obligations of the respective
parties thereto, and there have not been, and, to the Knowledge of Republic,
there currently are not, any Defaults thereunder by Republic or a Republic
Subsidiary, where such Default is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Republic. Republic or a Republic
Subsidiary owns or is the valid licensee of all such Intellectual Property
rights free and clear of all Liens or claims of infringement. Neither Republic
nor any of the Republic Subsidiaries nor, to the Knowledge of Republic, their
respective predecessors has infringed the Intellectual Property rights of
others and, to the Knowledge of Republic, none of the Intellectual Property
rights as used in the business conducted by Republic or the Republic
Subsidiaries infringes upon or otherwise violates the rights of any Person, nor
has any Person asserted a claim of such infringement. Except as disclosed in
Section 5.19 of the Republic Disclosure Memorandum, neither Republic nor the
Republic Subsidiaries is obligated to pay any royalties to any Person with
respect to any such Intellectual Property. Republic or a Republic Subsidiary
owns or has the valid right to use all of the Intellectual Property rights
which it is presently using, or in connection with performance of any material
Contract to which it is a party. No officer, director, or employee of Republic
or the Republic Subsidiaries is party to any Contract which requires such
officer, director, or employee to assign any interest in any Intellectual
Property or keep confidential any trade secrets, proprietary data, customer
information, or other business information or, except as disclosed in Section
5.19 of the Republic Disclosure Memorandum, which restricts or prohibits such
officer, director, or employee from engaging in activities competitive with any
Person, including Republic or any of the Republic Subsidiaries.
5.20 State Takeover Laws. Each Republic Company has taken all necessary
action to exempt the transactions contemplated by this Agreement and the
Termination Fee Agreement from any applicable "moratorium," "control share,"
"fair price," "business combination," or other anti-takeover laws and
regulations of any state (collectively, "Takeover Laws") including Sections
607.0901 and 607.0902 of the FBCA.
5.21 Charter Provisions. Each Republic Company has taken all action so that
the entering into of this Agreement and the Termination Fee Agreement and the
consummation of the Merger and the other transactions contemplated by this
Agreement or the Termination Fee Agreement do not and will not result in the
grant of any rights to any Person under the Articles of Incorporation, Bylaws,
or other governing instruments of any Republic Company or restrict or impair
the ability of Buyer or any of its Subsidiaries to vote, or otherwise to
exercise the rights of a stockholder with respect to, shares of any Republic
Company that may be directly or indirectly acquired or controlled by it.
5.22 Rights Agreement. Republic has taken all necessary action (including,
if required, redeeming all of the outstanding stock purchase rights or amending
or terminating the Republic Rights Agreement) so that the entering into of this
Agreement and the Termination Fee Agreement, and consummation of the Merger and
the other transactions contemplated hereby and thereby do not and will not
result in any Person becoming able to exercise any stock purchase rights under
the Republic Rights Agreement or enabling or requiring the stock purchase
rights to be separated from the shares of Republic Common Stock to which they
are attached or to be triggered or to become exercisable. Republic has approved
the amendment to the Republic Rights Agreement substantially in the form of
Exhibit 2 hereto.
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5.23 Derivatives. All interest rate swaps, caps, floors, option agreements,
futures and forward contracts, and other similar risk management arrangements,
whether entered into for Republic's own account, or for the account of one or
more of the Republic Subsidiaries or their customers, were entered into (i) in
accordance with prudent business practices and all applicable Laws, and (ii)
with counterparties believed to be financially responsible.
5.24 Fairness Opinion. Republic has received an opinion of Sandler O'Neill &
Partners LP, dated as of the date of this Agreement, to the effect that, in the
opinion of such firm, the Exchange Ratio is fair, from a financial point of
view, to the stockholders of Republic.
5.25 No Brokers. No action has been taken by Republic that would give rise
to any valid claim against any Party for a brokerage commission, finder's fee
or other like payment with respect to the transactions contemplated by this
Agreement other than the Contract with Sandler O'Neill & Partners LP, a copy of
which has been previously delivered to Buyer.
5.26 Republic Indenture. No "Default" or "Event of Default" has occurred
under the Indenture (as defined in Section 9.2(f)), as such terms are used in
the Indenture.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Republic as follows:
6.1 Organization, Standing, and Power. Buyer is a corporation duly
organized, validly existing, and in good standing under the Laws of the State
of North Carolina. Following its formation, Newco will be a corporation duly
organized, validly existing and in good standing under the Laws of the State of
North Carolina. Buyer has, and Newco will have, the corporate power and
authority to carry on its business as now conducted and to own, lease, and
operate its Material Assets. Buyer is, and Newco will be, duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of
its Assets or the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the failure to be
so qualified or licensed is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Buyer.
6.2 Authority; No Breach of Agreement.
(a) Buyer has, and Newco will have, the corporate power and authority
necessary to execute, deliver, and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. The execution,
delivery, and performance of this Agreement and the consummation of the
transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of Buyer and will be duly and validly authorized by all necessary
corporate action in respect thereof on the part of Newco. This Agreement
represents a legal, valid, and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms, and upon its execution and delivery by
Newco, this Agreement will represent a legal, valid and binding obligation of
Newco, enforceable against Newco in accordance with its terms (except in all
cases as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, receivership, conservatorship, moratorium, or
similar Laws affecting the enforcement of creditors' rights generally and
except that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by Buyer or Newco,
nor the consummation by Buyer or Newco of the transactions contemplated hereby,
nor compliance by Buyer or Newco with any of the provisions hereof, will (i)
conflict with or result in a breach of any provision of Buyer's Articles of
Incorporation or By-laws or Newco's Articles of Incorporation or Bylaws, (ii)
constitute or result in a Default
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under, or require any Consent pursuant to, or result in the creation of any
Lien on any Asset of any Buyer Company under, any Contract, Order or Permit of
any Buyer Company, where such Default or Lien, or any failure to obtain such
Consent, is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Buyer, or (iii) subject to receipt of the requisite
Consents referred to in Section 9.1(b) of this Agreement, violate any Law or
Order applicable to any Buyer Company or any of their respective Material
Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws (including with respect to the listing on the New York Stock
Exchange of Buyer Common Stock to be issued in the Merger), applicable state
corporate and securities Laws, and rules of the NASD, and other than Consents
required from Regulatory Authorities, and other than notices to or filings with
the Internal Revenue Service or the Pension Benefit Guaranty Corporation with
respect to any employee benefit plans, or under the HSR Act, and other than
Consents, filings, or notifications which, if not obtained or made, are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Buyer, no notice to, filing with, or Consent of, any public body or
authority is necessary for the consummation by Buyer or Newco of the Merger and
the other transactions contemplated in this Agreement.
6.3 Capital Stock. The authorized capital stock of Buyer consists, as of the
date of this Agreement, of 1,000,000,000 shares of Buyer Common Stock, of which
not more than 204,000,000 (exclusive of treasury stock) shares were issued and
outstanding as of September 30, 2000, and 50,000,000 shares of preferred stock,
par value $5.00 per share, of Buyer, of which no shares were outstanding as of
September 30, 2000. All of the issued and outstanding shares of Buyer Common
Stock are, and all of the shares of Buyer Common Stock to be issued in exchange
for shares of Republic Common Stock upon consummation of the Merger, when
issued in accordance with the terms of this Agreement, will be, duly and
validly issued and outstanding and fully paid and nonassessable. None of the
outstanding shares of Buyer Common Stock has been, and none of the shares of
Buyer Common Stock to be issued in exchange for shares of Republic Common Stock
upon consummation of the Merger will be, issued in violation of any preemptive
rights of the current or past stockholders of Buyer.
6.4 Buyer Subsidiaries. Other than as is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Buyer, (i) Buyer
or one of its wholly owned Subsidiaries owns all of the issued and outstanding
shares of capital stock of each Buyer Subsidiary that is a "Significant
Subsidiary" (as such term is defined in Regulation S-X promulgated under the
1934 Act), (ii) no equity securities of any such Buyer Subsidiary are or may
become required to be issued (other than to Buyer or a wholly owned Buyer
Subsidiary) by reason of any Rights, (iii) there are no Contracts by which any
such Buyer Subsidiary is bound to issue (other than to Buyer or a wholly owned
Buyer Subsidiary) additional shares of its capital stock or Rights or by which
any such Buyer Company is or may be bound to transfer any shares of the capital
stock of any Buyer Subsidiary (other than to Buyer or a wholly owned Buyer
Subsidiary), (iv) there are no Contracts relating to the rights of any Buyer
Company to vote or to dispose of any shares of the capital stock of any such
Buyer Subsidiary and (v) all of the shares of capital stock of each such Buyer
Subsidiary held by a Buyer Company are fully paid and nonassessable (except
pursuant to 12 U.S.C. ss.55) and are owned by the Buyer Company free and clear
of any Lien. Each Buyer Subsidiary is duly organized, validly existing, and (to
the extent applicable) in good standing under the Laws of the jurisdiction in
which it is incorporated or organized, and has the corporate power and
authority necessary for it to own, lease, and operate its Assets and to carry
on its business as now conducted. Each Buyer Subsidiary is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of
its Assets or the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the failure to be
so qualified or licensed is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Buyer.
6.5 SEC Filings; Financial Statements.
(a) Buyer has filed all of Buyer's SEC Documents required to be filed with
the SEC since January 1 of the second complete fiscal year preceding the date
of this Agreement (collectively, the "Buyer SEC Reports").
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The Buyer SEC Reports (i) at the time filed, complied in all Material respects
with the applicable requirements of the 1933 Act and the 1934 Act, as the case
may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a Material fact or omit to state a
Material fact required to be stated in such Buyer SEC Reports or necessary in
order to make the statements in such Buyer SEC Reports, in light of the
circumstances under which they were made, not misleading.
(b) Each of the Buyer Financial Statements (including, in each case, any
related notes) contained in the Buyer SEC Reports, including any Buyer SEC
Reports filed after the date of this Agreement until the Effective Time,
complied or will comply as to form in all Material respects with the applicable
published rules and regulations of the SEC with respect thereto, was or will be
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted by Form 10-Q
of the SEC), and fairly presented or will fairly present the consolidated
financial position of Buyer and its Subsidiaries as at the respective dates and
the consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are not
expected to be Material in amount or effect.
6.6 Absence of Certain Changes or Events. Since December 31, 1999, except as
disclosed in the Buyer Financial Statements delivered prior to the date of this
Agreement, there have been no events, changes or occurrences which have had, or
are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Buyer.
6.7 Compliance with Laws. Buyer is duly registered as a financial holding
company under the BHC Act. Each Buyer Company has in effect all Permits
necessary for it to own, lease, or operate its Material Assets and to carry on
its business as now conducted, except for those Permits the absence of which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Buyer, and there has occurred no Default under any such
Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Buyer. None of
the Buyer Companies:
(a) is in violation of any Laws, Orders, or Permits applicable to its
business or employees conducting its business, except for violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Buyer; and
(b) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that any Buyer Company is not
in compliance with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, where such noncompliance is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Buyer, (ii) threatening to revoke any Permits, the
revocation of which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Buyer, or (iii) requiring any Buyer
Company (x) to enter into or consent to the issuance of a cease and desist
order, formal agreement, directive, commitment, or memorandum of
understanding, or (y) to adopt any Board resolution or similar undertaking,
which restricts materially the conduct of its business, or in any manner
relates to its capital adequacy, its credit or reserve policies, its
management, or the payment of dividends (and no Buyer Company has entered
into, consented to or adopted any of the preceding). To Buyer's Knowledge,
no grounds for any of the foregoing in this Section 6.7(b) exist.
6.8 Legal Proceedings. Other than as set forth in the Buyer SEC Reports
filed on or before the date of this Agreement, there is no Litigation
instituted or pending, or, to the Knowledge of Buyer, threatened against any
Buyer Company, or against any Asset, employee benefit plan, interest, or right
of any of them, that is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Buyer, nor are there any Orders of any
Regulatory Authorities, other governmental authorities, or arbitrators
outstanding against any Buyer Company, that are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Buyer.
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6.9 Statements True and Correct. None of the information supplied or to be
supplied by any Buyer Company or any Affiliate thereof regarding Buyer or such
Affiliate for inclusion in the Registration Statement to be filed by Buyer with
the SEC will, when the Registration Statement becomes effective, contain any
untrue statement of a Material fact, or omit to state any Material fact
required to be stated thereunder or necessary to make the statements therein
not misleading. None of the information supplied or to be supplied by any Buyer
Company or any Affiliate thereof for inclusion in the Proxy Statement to be
mailed to Republic's stockholders in connection with the Stockholders' Meeting,
will, when first mailed to the stockholders of Republic, contain any
misstatement of Material fact, or omit to state any Material fact required to
be stated thereunder or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or, in the case
of the Proxy Statement or any amendment thereof or supplement thereto, at the
time of the Stockholders' Meeting, omit to state any Material fact required to
be stated thereunder or necessary to correct any Material statement in any
earlier communication with respect to the solicitation of any proxy for the
Stockholders' Meeting. All documents that any Buyer Company or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all
Material respects with the provisions of applicable Law.
6.10 Tax and Regulatory Matters. No Buyer Company or any Affiliate thereof
has taken or agreed to take any action, and as of the date hereof Buyer has no
Knowledge of any fact or circumstance that is reasonably likely to (i) prevent
the Merger from qualifying as a reorganization within the meaning of Section
368(a)(1)(B) of the Internal Revenue Code, or (ii) materially impede or delay
receipt of any Consents of Regulatory Authorities referred to in Section 9.1(b)
of this Agreement. As of the date hereof, to the Knowledge of Buyer there
exists no fact, circumstance, or reason why the requisite Consents referred to
in Section 9.1(b) of this Agreement cannot be received in a timely manner.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Affirmative Covenants of Republic. Unless the prior written consent of
Buyer shall have been obtained, and except as otherwise expressly contemplated
herein or set forth in Section 7.1 or Section 7.2 of the Republic Disclosure
Memorandum, Republic shall and shall cause each of its Subsidiaries to (i)
operate its business only in the usual, regular, and ordinary course, (ii)
preserve intact its business organization and Assets and maintain its rights
and franchises and(iii) use its reasonable efforts to maintain its current
employee relationships.
7.2 Negative Covenants of Republic. From the date of this Agreement until
the earlier of the Effective Time or the termination of this Agreement,
Republic covenants and agrees that, except as set forth in Section 7.2 of the
Republic Disclosure Memorandum, it will not do or agree or commit to do, or
permit any of its Subsidiaries to do or agree or commit to do, any of the
following without the prior written consent of Buyer, which consent shall not
be unreasonably withheld:
(a) amend the Articles of Incorporation, Bylaws, or other governing
instruments of any Republic Company, or
(b) incur, guarantee, or otherwise become responsible for, any
additional debt obligation or other obligation for borrowed money (other
than indebtedness of a Republic Company to Republic or wholly owned
Republic Subsidiary) in excess of an aggregate of $500,000 (for the
Republic Companies on a consolidated basis), except in the ordinary course
of business consistent with past practices (which shall include, for
Republic Subsidiaries that are depository institutions, creation of deposit
liabilities, purchases of federal funds, advances from the Federal Reserve
Bank or Federal Home Loan Bank, and entry into repurchase agreements fully
secured by U.S. government or agency securities, to the extent each are
conducted in the ordinary course and consistent with past practice), or
impose, or suffer the imposition, on any Asset of any Republic Company of
any Material Lien or permit any such Material Lien to exist (other
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than in connection with deposits, repurchase agreements, bankers
acceptances, "treasury tax and loan" accounts established in the ordinary
course of business consistent with past practice, the satisfaction of legal
requirements in the exercise of trust powers, and Liens in effect as of the
date hereof that are disclosed in the Republic Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any Rights with respect to any shares, of the
capital stock of any Republic Company, or make, declare, pay or set aside
for payment any dividend or other distribution in respect of any capital
stock of any Republic Company; provided that (i) Republic may (to the
extent legally able to do so), but shall not be obligated to, declare and
pay regular quarterly cash dividends on the Republic Common Stock in an
amount per share not to exceed $.06 and (ii) Republic Subsidiaries that are
wholly owned by Republic or another wholly owned Republic Subsidiary may
pay dividends to Republic or such other wholly owned Republic Subsidiary;
and provided, further, that, notwithstanding the provisions of Section 1.3
after December 31, 2000, the Board of directors of Republic shall cause its
regular quarterly dividend record dates and payment dates for Republic
Common Stock to be the same as Buyer's regular quarterly dividend record
dates and payment dates for Buyer's Common Stock, and Republic shall not
thereafter change its regular dividend payment dates and record dates (it
being the intention of the Parties hereto that holders of Republic Common
Stock shall not receive more than one dividend, or fail to receive one
dividend, for any single calendar quarter); or
(d) except for this Agreement or pursuant to the exercise of Rights
outstanding as of the date of this Agreement and pursuant to the terms
thereof in existence on the date of this Agreement, issue, sell, pledge,
encumber, authorize the issuance of, enter into any Contract to issue,
sell, pledge, encumber, or authorize the issuance of, or otherwise permit
to become outstanding, any additional shares of Republic Common Stock or
any capital stock of any Republic Company or any Rights with respect to any
of the preceding (including any stock appreciation right, and any option,
warrant, conversion, or other right to acquire any such stock, or any
security convertible into any such stock); or
(e) adjust, split, combine, or reclassify any capital stock of any
Republic Company or issue or authorize the issuance of any other securities
in respect of or in substitution for shares of such capital stock, or sell,
lease, mortgage, or otherwise dispose of or otherwise encumber (i) any
shares of capital stock of any Republic Subsidiary (unless any such shares
of stock are sold or otherwise transferred to Republic or a wholly owned
Republic Subsidiary) or (ii) any Asset other than in the ordinary course of
business consistent with past practice for reasonable and adequate
consideration; or
(f) except for purchases of U.S. Treasury securities or U.S. Government
agency securities, which in either case have maturities of three years or
less, purchase any securities or make any Material investment, either by
purchase of stock or securities, contributions to capital, Asset transfers,
or purchase of any Assets, in any Person other than a wholly-owned Republic
Subsidiary, or otherwise acquire direct or indirect control over any
Person, other than in connection with (i) foreclosures in the ordinary
course of business, (ii) acquisitions of control by a depository
institution Subsidiary in its fiduciary capacity, or (iii) the creation of
new wholly-owned Subsidiaries organized to conduct or continue activities
otherwise permitted by this Agreement; or
(g) enter into or amend or renew any employment, consulting, severance
or similar Contract or arrangements with any director, officer, employee or
consultant of any Republic Company, or grant any salary or wage increase or
increase any employee benefit (including incentive or bonus payments),
except (i) for normal individual increases in compensation to employees in
the ordinary course of business consistent with past practice, (ii) for
other changes that are required by Law, (iii) as expressly provided in
Section 7.2 of the Republic Disclosure Memorandum, or (iv) for grants of
awards to newly hired employees consistent with past practice; or
(h) enter into, establish, adopt or amend (except (i) as may be required
by Law, (ii) as, in the opinion of counsel, is necessary or advisable to
maintain the tax qualified status of any of the following or (iii) as
expressly provided in Section 7.2 of the Republic Disclosure Memorandum)
any pension, retirement, stock
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option, stock purchase, savings, profit sharing, deferred compensation,
consulting, bonus, severance, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
(or similar arrangement) related thereto, in respect of any director,
officer, employee or consultant of any Republic Company, or take any action
to accelerate the vesting or exercisability of stock options, restricted
stock or other compensation or benefits payable thereunder; or
(i) make or change any Material Tax election, change any Material annual
Tax accounting period, adopt or change any Material method of Tax
accounting, 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 (i) are not Material and which
are taken in the ordinary and usual course of business consistent with past
practice or (ii) are required to conform to changes in Tax Laws; or
(j) implement or adopt any change in its accounting principles,
practices or methods or systems of internal accounting controls, except as
may be required to conform to changes in regulatory accounting requirements
or GAAP; or
(k) commence any Litigation (other than as necessary for the prudent
operation of its business or as Republic may deem necessary to enforce its
rights under this Agreement) or settle any Litigation (other than any
Litigation involving solely money damages in an amount, individually or in
the aggregate for all such settlements, that is not Material and that does
not involve or create precedent for claims, actions or proceedings that are
reasonably likely to be Material; or
(l) except in the ordinary course of business, enter into, modify,
amend, or terminate any Material Contract or waive, release, compromise, or
assign any Material rights or claims; or
(m) knowingly take any action that is intended or is reasonably likely
to result in (i) any of its representations and warranties set forth in
this Agreement being or becoming untrue in any Material respect at any time
at or prior to the Effective Time, (ii) any of the conditions to the Merger
set forth in Article 9 not being satisfied, (iii) a Material violation of
any provision of this Agreement or (iv) a delay in the Effective Time
beyond the date set forth in Section 10.1(e) of this Agreement, except, in
each case, as may be required by Law; or
(n) except as required by Law, (i) implement or adopt any Material
change in its interest rate and other risk management policies, procedures
or practices; (ii) fail to follow its existing policies or practices with
respect to managing its exposure to interest rate and other risk; or (iii)
fail to use commercially reasonable means to avoid any material increase in
its aggregate exposure to interest rate risk.
7.3 Negative Covenants of Buyer. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, Buyer
covenants and agrees that it will not, or permit any of its Subsidiaries to,
without the prior written consent of Republic, which consent shall not be
unreasonably withheld, knowingly take any action that is intended or is
reasonably likely to result in (i) any of its representations and warranties
set forth in this Agreement being or becoming untrue in any Material respect at
any time at or prior to the Effective Time, (ii) any of the conditions to the
Merger set forth in Article 9 not being satisfied, (iii) a Material violation
of any provision of this Agreement or (iv) a delay in the Effective Time beyond
the date set forth in Section 10.1(e) of this Agreement; except, in each case,
as may be required by Law.
7.4 Adverse Changes in Condition. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
Material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
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7.5 Reports. Each Party and its Subsidiaries shall file all reports required
to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, such financial statements
will fairly present the consolidated financial position of the entity filing
such statements as of the dates indicated and the consolidated results of
operations, changes in stockholders' equity, and cash flows for the periods
then ended in accordance with GAAP (subject in the case of interim financial
statements to normal recurring year-end adjustments that are not Material). As
of their respective dates, such reports filed with the SEC will comply in all
Material respects with the Securities Laws 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 in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. Any financial
statements contained in any other reports to another Regulatory Authority shall
be prepared in accordance with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Registration Statement; Proxy Statement; Stockholder Approval. Buyer
agrees to prepare the Registration Statement (including the Proxy Statement and
all related documents). Each of the Parties 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 Republic and its Subsidiaries have cooperated as required above,
Buyer agrees to file the Registration Statement with the SEC as soon as
reasonably practicable. Each of the Parties shall use its reasonable efforts to
cause the Registration Statement to become effective under the 1933 Act as
promptly as practicable after the filing thereof, and Buyer shall use its
reasonable efforts to take any action required to be taken under the applicable
state Blue Sky or securities Laws in connection with the issuance of the shares
of Buyer Common Stock upon consummation of the Merger. Republic shall furnish
all information concerning it, its directors and officers and the holders of
its capital stock as Buyer may reasonably request for inclusion in the
Registration Statement. Republic shall call and cause to be convened a
Stockholders' Meeting, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon approval of this Agreement and such other related matters as it
deems appropriate. In connection with the Stockholders' Meeting, (i) the Board
of Directors of Republic shall recommend to its stockholders the approval of
the matters submitted for approval, and (ii) the Board of Directors and
officers of Republic shall use their reasonable efforts to obtain such
stockholders' approval, provided that Republic may withdraw, modify, or change
in an adverse manner to Buyer its recommendations if the Board of Directors of
Republic, after having consulted with and based upon the advice of outside
counsel, determines in good faith that the failure to so withdraw, modify, or
change its recommendation could reasonably constitute a breach of the fiduciary
duties of Republic's Board of Directors under applicable Law. In addition,
nothing in this Section 8.1 or elsewhere in this Agreement shall (i) prohibit
accurate disclosure by Republic of information that is required to be disclosed
in the Registration Statement or the Proxy Statement or in any other document
required to be filed with the SEC (including, without limitation, a
Solicitation/Recommendation Statement on Schedule 14D-9) or otherwise required
to be publicly disclosed by applicable Law or regulations or rules of the NASD
or (ii) relieve Republic from its obligation to call and convene the
Stockholders' Meeting. Each of Buyer and Republic further agrees that if it
shall become aware prior to the Effective Time of any information furnished by
it that would cause any of the statements in the Proxy Statement to be false or
misleading with respect to any material fact, or to omit to state any material
fact necessary to make the statements therein not false or misleading, to
promptly inform the other party thereof and to take the necessary steps to
correct the Proxy Statement.
8.2 Applications. Buyer and Republic and their respective Subsidiaries shall
promptly prepare and file, and cooperate with each other in the preparation
and, where appropriate, filing of, applications with all Regulatory Authorities
having jurisdiction over the transactions contemplated by this Agreement
seeking the requisite Consents necessary to consummate the transactions
contemplated by this Agreement. Each Party will
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have the right to review in advance, and to the extent practicable each will
consult with each other, subject to applicable laws relating to the exchange of
information, with respect to all written information submitted to all
Regulatory Authorities, and will provide the other with copies of written
communications received by it from any Regulatory Authorities, in each case
with respect to the transactions contemplated hereby.
8.3 Filings with State Offices. Upon the terms and subject to the conditions
of this Agreement, Buyer shall cause Newco to execute and file the North
Carolina Articles of Merger with the Secretary of State of the State of North
Carolina and the Florida Articles of Merger with the Secretary of State of the
State of Florida in connection with the Closing.
8.4 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
reasonably practicable after the date of this Agreement, the transactions
contemplated by this Agreement, including, without limitation, (i) using its
reasonable efforts to lift or rescind any Order adversely affecting its ability
to consummate the transactions contemplated herein and to cause to be satisfied
the conditions referred to in Article 9 of this Agreement and (ii) if
necessary, the filing of any amendments or supplements to the Registration
Statement or Proxy Statement or a resolicitation of proxies as a consequence of
an acquisition or business combination of Buyer or any of its Subsidiaries;
provided, that nothing herein shall preclude either Party from exercising its
rights under this Agreement. Each Party shall use, and shall cause each of its
Subsidiaries to use, its reasonable efforts to obtain all Consents necessary or
desirable for the consummation of the transactions contemplated by this
Agreement. 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 necessary or advisable in
connection with any filing, notice or application by or on behalf of such other
Party with respect to any such Consent.
8.5 Investigation and Confidentiality.
(a) Prior to the Effective Time, each Party shall keep the other Party
advised of all Material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause to
be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the
other Party reasonably requests, provided that such investigation shall be
reasonably related to the transactions contemplated hereby and shall not
interfere unnecessarily with normal operations. No investigation by a Party
shall affect the representations and warranties of the other Party.
(b) Each Party shall, and shall cause its advisers and agents to, maintain
the confidentiality of all confidential information furnished to it by the
other Party concerning its and its Subsidiaries' businesses, operations, and
financial positions to the extent required by, and in accordance with,
confidentiality agreements between the Parties, and shall not use such
information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior to the
Effective Time, each Party shall promptly return or certify the destruction of
all documents and copies thereof, and all work papers containing confidential
information received from the other Party.
(c) Each Party agrees to give the other Party notice as soon as practicable
after any determination by it of any fact or occurrence relating to the other
Party which it has discovered through the course of its investigation and which
represents, or is reasonably likely to represent, either a Material breach of
any representation, warranty, covenant, or agreement of the other Party or
which has had or is reasonably likely to have a Material Adverse Effect on the
other Party; provided, however, that the giving of such notice shall not be
dispositive of the occurrence of such breach or a Material Adverse Effect.
(d) Neither Party nor any of their respective Subsidiaries shall be required
to provide access to or to disclose information where such access or disclosure
would violate or prejudice the rights of its customers, jeopardize the
attorney-client or similar privilege with respect to such information or
contravene any Law,
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Order or Contract entered into prior to the date of this Agreement. The Parties
will use their reasonable efforts to make appropriate substitute disclosure
arrangements, to the extent practicable, in circumstances in which the
restrictions of the preceding sentence apply.
8.6 Press Releases. Prior to the Effective Time, Buyer and Republic shall
consult with each other as to the form and substance of any press release
materially related to this Agreement or any other transaction contemplated
hereby; provided, that nothing in this Section 8.6 shall be deemed to prohibit
any Party from making any disclosure which its counsel deems necessary or
advisable in order to satisfy such Party's disclosure obligations imposed by
Law or by the rules of the New York Stock Exchange.
8.7 Certain Actions. Except with respect to this Agreement and the
transactions contemplated hereby, no Republic Company nor any Affiliate thereof
nor any Representative thereof retained by any Republic Company shall, directly
or indirectly, initiate, solicit, encourage or knowingly facilitate (including
by way of furnishing information) any inquiries or the making of any
Acquisition Proposal. Notwithstanding anything herein to the contrary, Republic
and its Board of Directors shall be permitted (i) to the extent applicable, to
comply with Rule 14d-9 and Rule 14e-2 promulgated under the 1934 Act with
regard to an Acquisition Proposal, (ii) to engage in any discussions or
negotiations with, or provide any information to, any Person in response to an
unsolicited bona fide written Acquisition Proposal by any such Person, if and
only to the extent that (a) Republic's Board of Directors concludes in good
faith and consistent with its fiduciary duties to Republic's stockholders under
applicable Law that such Acquisition Proposal would reasonably be expected to
result in a Superior Proposal, (b) prior to providing any information or data
to any Person in connection with an Acquisition Proposal by any such Person,
Republic's Board of Directors receives from such Person an executed
confidentiality agreement containing terms at least as stringent as those
contained in the Republic Confidentiality Agreement, and (c) prior to providing
any information or data to any Person or entering into discussions or
negotiations with any Person, Republic's Board of Directors notifies Buyer
promptly of such inquiries, proposals, or offers received by, any such
information requested from, or any such discussions or negotiations sought to
be initiated or continued with, any of its Representatives indicating, in
connection with such notice, the name of such Person and the material terms and
conditions of any inquiries, proposals or offers. Republic agrees that it will,
and will cause its officers, directors and Representatives to, immediately
cease and cause to be terminated any activities, discussions, or negotiations
existing as of the date of this Agreement with any parties conducted heretofore
with respect to any Acquisition Proposal. Republic agrees that it will use
reasonable best efforts to promptly inform its directors, officers, key
employees, agents, and Representatives of the obligations undertaken in this
Section 8.7. Nothing in this Section 8.7 shall (i) permit Republic to terminate
this Agreement (except as specifically provided in Article 10 of this
Agreement) or (ii) affect any other obligation of Buyer or Republic under this
Agreement.
8.8 Tax Treatment. Each of the Parties undertakes and agrees to use its
reasonable efforts to cause the Merger, and to take no action which would cause
the Merger not, to qualify for treatment as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code for federal income tax
purposes.
8.9 State Takeover Laws. Each Republic Company shall take all necessary
steps to exempt the transactions contemplated by this Agreement from, and if
necessary, the Parties shall challenge the validity or applicability of, any
applicable Takeover Laws.
8.10 Charter Provisions. Each Republic Company shall take all necessary
action to ensure that the entering into of this Agreement and the consummation
of the Merger and the other transactions contemplated hereby do not and will
not result in the grant of any rights to any Person under the Articles of
Incorporation, Bylaws, or other governing instruments of any Republic Company
or restrict or impair the ability of Buyer or any of its Subsidiaries to vote,
or otherwise to exercise the rights of a stockholder with respect to, shares of
any Republic Company that may be directly or indirectly acquired or controlled
by it.
8.11 Rights Agreement. Republic shall take all necessary action (including,
if required, redeeming all of the outstanding stock purchase rights or amending
or terminating the Republic Rights Agreement) so that the
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entering into of this Agreement and consummation of the Merger and the other
transactions contemplated hereby do not and will not result in any Person
becoming able to exercise any stock purchase rights under the Republic Rights
Agreement or enabling or requiring the stock purchase rights to be separated
from the shares of Republic Common Stock to which they are attached or to be
triggered or to become exercisable. Republic shall use all reasonable efforts
to enter into an amendment to the Republic Rights Agreement as soon as
practicable after the date hereof (and in any event prior to the Effective
Time) in substantially the form of Exhibit 2.
8.12 Agreement of Affiliates. Republic has disclosed in Section 8.12 of the
Republic Disclosure Memorandum each Person whom it reasonably believes may be
deemed an "affiliate" of Republic for purposes of Rule 145 under the 1933 Act.
Republic shall use its reasonable efforts to cause each Person who may be
deemed to be an "affiliate" of Republic for purposes of Rule 145 under the 1933
Act as of the date of the Stockholders' Meeting to deliver to Buyer not later
than the Effective Time, a written agreement, in substantially the form of
Exhibit 3, providing that such Person will not sell, pledge, transfer, or
otherwise dispose of the shares of Republic Common Stock held by such Person
except as contemplated by such agreement or by this Agreement and will not
sell, pledge, transfer, or otherwise dispose of the shares of Buyer Common
Stock to be received by such Person upon consummation of the Merger except in
compliance with applicable provisions of the 1933 Act and the rules and
regulations thereunder. Shares of Buyer Common Stock issued to such affiliates
of Republic in exchange for shares of Republic Common Stock shall not be
transferable, regardless of whether each such affiliate has provided the
written agreement referred to in this Section 8.12 (and Buyer shall be entitled
to place restrictive legends upon certificates for shares of Buyer Common Stock
issued to affiliates of Republic pursuant to this Agreement to enforce the
provisions of this Section 8.12), except as provided herein. Buyer shall not be
required to maintain the effectiveness of the Registration Statement under the
1933 Act for the purposes of resale of Buyer Common Stock by such affiliates.
8.13 Employee Benefits and Contracts. Following the Effective Time, Buyer
shall provide generally to officers and employees of the Republic Companies,
who at or after the Effective Time become employees of a Buyer Company
("Continuing Employees"), employee benefits under employee benefit plans (other
than stock option or other plans involving the potential issuance of Buyer
Common Stock except as set forth in this Section 8.13), on terms and conditions
which when taken as a whole are substantially similar to those currently
provided by the Buyer Companies to their similarly situated officers and
employees. For purposes of participation and vesting (but not accrual of
benefits) under such employee benefit plans, (i) service under any qualified
defined benefit plans of any Republic Company or any of its predecessors shall
be treated as service under Buyer's qualified defined benefit plans, (ii)
service under any qualified defined contribution plans of any Republic Company
or any of its predecessors shall be treated as service under Buyer's qualified
defined contribution plans, and (iii) service under any other employee benefit
plans of any Republic Company or any of its predecessors shall be treated as
service under any similar employee benefit plans maintained by Buyer. Buyer
shall cause the Buyer welfare benefit plans that cover the Continuing Employees
after the Effective Time to (i) waive any waiting period and restrictions and
limitations for preexisting conditions or insurability (except for pre-existing
conditions that were excluded under Republic's welfare benefit plans), and (ii)
cause any deductible, co-insurance, or maximum out-of-pocket payments made by
the Continuing Employees under Republic's welfare benefit plans to be credited
to such Continuing Employees under the Buyer welfare benefit plans, so as to
reduce the amount of any deductible, co-insurance, or maximum out-of-pocket
payments payable by the Continuing Employees under the Buyer welfare benefit
plans. The continued coverage of the Continuing Employees under the employee
benefits plans maintained by Republic and/or any Republic Subsidiary
immediately prior to the Effective Time during a transition period shall be
deemed to provide the Continuing Employees with benefits that are no less
favorable than those offered to other employees of Buyer and its Subsidiaries,
provided that after the Effective Time there is no Material reduction
(determined on an overall basis) in the benefits provided under the Republic
employee benefit plans. Buyer shall and shall cause Republic and its
Subsidiaries to honor all employment, severance, consulting, and other
compensation Contracts disclosed in Sections 7.2 or 8.13 of the Republic
Disclosure Memorandum to Buyer between any Republic
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Company and any current or former director, officer, or employee thereof, and
all provisions for vested benefits or other vested amounts earned or accrued
through the Effective Time under the Republic Benefit Plans. Except as
expressly provided in this Section 8.13, nothing contained herein shall in any
way limit or restrict the ability of Buyer to amend, modify, or terminate any
employee benefit plan, including any Republic Benefit Plan, following the
Effective Time. Buyer shall be responsible for the fees related to the
termination of the Republic Benefit Plans.
8.14 Indemnification.
(a) From and after the Effective Time and for a period of six years
thereafter, Buyer shall indemnify, defend and hold harmless the present
directors and officers of the Republic Companies (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 Republic is permitted to indemnify (and
advance expenses to) its directors and officers under the laws of the State of
Florida, the Republic's Articles of Incorporation and Republic's Bylaws 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 Florida law, such Articles of Incorporation and such
Bylaws shall be made by independent counsel (which shall not be counsel that
provides material services to Buyer) selected by Buyer and reasonably
acceptable to such officer or director; and provided, further, that in the
absence of applicable Florida 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 Buyer shall have the burden to
demonstrate that such officer's or director's conduct failed to comply with
such standard. All rights to indemnification in respect of any claim assertion
or made within the six-year period referred to above shall continue until the
final disposition of such claim.
(b) For a period of three years from the Effective Time, Buyer shall use its
reasonable efforts to provide that portion of director's and officer's
liability insurance that serves to reimburse the present and former officers
and directors of Republic or any of its Subsidiaries (determined as of the
Effective Time) (as opposed to Republic) with respect to claims against such
directors and officers arising from facts or events which occurred before the
Effective Time, which insurance shall contain at least the same coverage and
amounts, and contain terms and conditions no less advantageous, as that
coverage currently provided by Republic; provided, however, that in no event
shall Buyer be required to expend more than 150 percent of the current amount
expended by Republic (the "Insurance Amount") to maintain or procure such
directors and officers insurance coverage; provided, further, that if Buyer is
unable to maintain or obtain the insurance called for by this Section 8.14(b),
Buyer shall use its reasonable best efforts to obtain as much comparable
insurance as is available for the Insurance Amount; provided, further, that
officers and directors of Republic or any Subsidiary may be required to make
application and provide customary representations and warranties to Buyer's
insurance carrier for the purpose of obtaining such insurance.
(c) Any Indemnified Party wishing to claim indemnification under Section
8.14(a), upon learning of any claim, action, suit, proceeding or investigation
described above, shall promptly notify Buyer thereof; provided that the failure
so to notify shall not affect the obligations of Buyer under Section 8.14(a)
unless and to the extent that Buyer is actually prejudiced as a result of such
failure.
(d) If Buyer or any of its successors or assigns shall consolidate with or
merge into any other Person and shall not be the continuing or surviving Person
of such consolidation or merger or shall transfer all or substantially all of
its Assets to any Person, then and in each case, proper provision shall be made
so that the successors and assigns of Buyer shall assume the obligations set
forth in this Section 8.14.
(e) The provisions of this Section 8.14 are intended to be for the benefit
of and shall be enforceable by, each Indemnified Party, his or her heirs and
representatives.
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8.15 Exemption from Liability Under Section 16(b). If Republic delivers to
Buyer in a timely fashion prior to the Effective Time accurate information
regarding those officers and directors of Republic subject to the reporting
requirements of Section 16(a) of the 1934 Act (the "Republic Insiders"), the
number of shares of Republic Common Stock held or to be held by each such
Republic Insider expected to be exchanged for the Buyer Common Stock in the
Merger, and the number and description of the options to purchase shares of
Republic Common Stock held by each such Republic Insider and expected to be
converted into options to purchase the Buyer Common Stock in the Merger, the
Board of Directors of Buyer, or a committee of non-employee directors thereof
(as such term is defined for purposes of Rule 16b-3(d) under the 1934 Act),
shall reasonably promptly thereafter, and in any event prior to the Effective
Time, adopt a resolution providing that the receipt by the Republic Insiders of
the Buyer Common Stock in exchange for shares of Republic Common Stock, and of
options to purchase shares of the Buyer Corporation Common Stock upon
conversion of options to purchase Republic Common Stock, in each case pursuant
to the transactions contemplated by this Agreement and to the extent such
securities are listed in the information provided by Republic, are approved by
such Board of Directors or by such committee thereof, and are intended to be
exempt from Liability pursuant to Section 16(b) of the 1934 Act, such that any
such receipt shall be so exempt. Republic shall take all such steps as may be
required to cause the transactions contemplated by Section 3.5 and any other
dispositions of Republic equity securities (including derivative securities) in
connection with this Agreement by each individual who is a director or officer
of Republic to be exempt under Rule 16b-3 promulgated under the 1934 Act.
8.16 Assumption of Republic Debentures. Newco agrees to assume all
obligations under the Indenture, including executing any supplemental indenture
thereto.
8.17 Accountants' Letters. Republic shall use its reasonable efforts to
cause to be delivered to Buyer, and to Buyer's directors and officers who sign
the Registration Statement, a letter of Ernst & Young LLP independent auditors
with respect to Republic, dated (i) the date on which the Registration
Statement shall become effective and (ii) a date shortly prior to the Effective
Time, and addressed to Buyer, and such directors and officers, in form and
substance customary for "comfort" letters delivered by independent accountants
in accordance with Statement of Accounting Standards No. 72.
8.18 Certain Policies. Prior to the Effective Time, Republic shall,
consistent with generally accepted accounting principles and on a basis
mutually satisfactory to it and Buyer, modify and change its loan, litigation
and real estate valuation policies and practices (including loan
classifications and levels of reserves) so as to be applied on a basis that is
consistent with those of Buyer; provided, however, that Republic shall not be
obligated to take any such action pursuant to this Section 8.18 unless and
until Buyer acknowledges that all conditions to its obligation to consummate
the Merger have been satisfied or waived and all rights to terminate this
Agreement have been waived.
8.19 Local Advisory Board. From the Effective Time until the earlier of time
that (i) the Subsidiary Combination is consummated or (ii) Buyer otherwise
determines to replace the directors of Republic Security Bank, Buyer shall
permit the non-employee directors of Republic Security Bank as of the date of
this Agreement to continue as directors thereof. From the earlier of (i) and
(ii) in the preceding sentence, Buyer will cause Wachovia Bank, N.A. to create
a local advisory board for Palm Beach, Florida and to appoint to the advisory
board each such non-employee director who is willing to serve. The local
advisory board and each director's appointment will continue in accordance with
Wachovia Bank, N.A.'s customary practices for a minimum period of two years
from the Effective Time. From the Effective Time, each continuing member of
Republic Security Bank's Board of directors or of the advisory board shall
receive fees in accordance with Buyer's usually and customary practices, but in
no event less than $1,200 annually (with an appropriate reduction in fees for
unattended meetings). Service on the Board of Directors of Republic Security
Bank and the advisory board shall be treated as service with Buyer for purposes
of any Republic Rights outstanding at the Effective Time under Republic's 1991
Director Stock Option Plan, 1993 Director Stock Option Plan, 1997 Performance
Incentive Plan, or the plans of any company previously acquired by Republic.
Notwithstanding any other provision in this Section 8.19, Buyer shall not be
obligated to permit any person to continue as a
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director of Republic Security Bank or to serve on the advisory board unless
such director shall have exercised on or prior to the Effective Time each of
the options and warrants that are beneficially owned by him or her and that
would be in-the-money at the Effective Time.
8.20 Amendment of Indenture. As promptly as practicable after the date
hereof, Republic shall use reasonable efforts to amend the Indenture in such
manner as shall be necessary to permit either Buyer's counsel or Republic's
counsel to render the opinion contemplated by Section 9.1(g).
8.21 Formation of Newco. As soon as practicable following the date of this
Agreement, Buyer shall cause Newco to be duly organized as a wholly owned
subsidiary of Buyer and to become a party to this Agreement by executing and
delivering a supplement hereto.
8.22 Defeasance of Republic Senior Debenture. At the request of Buyer,
Republic agrees that it will use all reasonable efforts promptly to take each
of the actions contemplated by Section 11.05 of the Indenture, provided that
Republic is not required to make the deposit contemplated by Section 11.05(a)
of the Indenture unless Buyer has agreed (pursuant to an agreement reasonably
satisfactory to Republic) to lend Republic the funds necessary therefor on
terms that are substantially equivalent to the remaining terms of the Senior
Debenture except (1) the use of proceeds would be limited to making the deposit
contemplated by Section 11.05(a) of the Indenture and (2) the loan would need
to be repaid before any change in control of Republic.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party. The respective obligations of
each Party to perform this Agreement and to consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 11.6 of
this Agreement:
(a) Stockholder Approval. The stockholders of Republic shall have
approved this Agreement, and the consummation of the transactions
contemplated hereby, including the Merger, as and to the extent required by
Law and by the provisions of any governing instruments.
(b) Regulatory Approvals. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for
consummation of the Merger shall have been obtained or made and shall be in
full force and effect, all waiting periods required by Law shall have
expired and no such Consent shall contain any conditions, restrictions or
requirements which would, individually or in the aggregate, have a Material
Adverse Effect on Buyer or Republic.
(c) Consents and Approvals. Each Party shall have obtained any and all
Consents required for consummation of the Merger (other than those referred
to in Section 9.1(b) of this Agreement) or for the preventing of any
Default under any Contract, Order or Permit of such Party which in the case
of non-governmental Consents, if not obtained or made, is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on
such Party, and no such Consent shall contain any conditions, restrictions
or requirements which would, individually or in the aggregate, have a
Material Adverse Effect on Buyer or Republic.
(d) Legal Proceedings. No court or governmental or Regulatory Authority
of competent jurisdiction shall have enacted, issued, promulgated,
enforced, or entered any Law or Order (whether temporary, preliminary, or
permanent) or taken any other action which prohibits, restricts, or makes
illegal consummation of the transactions contemplated by this Agreement.
(e) Registration Statement. The Registration Statement shall be
effective under the 1933 Act, no stop order suspending the effectiveness of
the Registration Statement shall have been issued, no action,
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suit, proceeding, or investigation by the SEC to suspend the effectiveness
thereof shall have been initiated and be continuing, and all necessary
approvals under state securities Laws or the 1933 Act or 1934 Act relating
to the issuance or trading of the shares of Buyer Common Stock issuable
pursuant to the Merger shall have been received.
(f) Listing. The shares of Buyer Common Stock to be issued in the Merger
shall have been approved for listing on the New York Stock Exchange,
subject to official notice of issuance.
9.2 Conditions to Obligations of Buyer and Newco. The obligations of Buyer
and Newco to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by Buyer pursuant to Section 11.6(a) of
this Agreement:
(a) Representations and Warranties. For purposes of this Section 9.2(a),
the accuracy of the representations and warranties of Republic set forth in
this Agreement shall be assessed as of the date of this Agreement and as of
the Effective Time with the same effect as though all such representations
and warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of Republic
set forth in Sections 5.3 and 5.26 of this Agreement shall be true and
correct (except for inaccuracies which are de minimis in amount). The
representations and warranties of Republic set forth in Sections 5.13(h),
5.13(i), 5.17, 5.20, 5.21, 5.22, 5.24, and 5.25 of this Agreement shall be
true and correct in all Material respects. There shall not exist
inaccuracies in the representations and warranties of Republic set forth in
this Agreement (including the representations and warranties set forth in
Sections 5.3, 5.13(h), 5.13(i), 5.17, 5.20, 5.21, 5.22, 5.24, 5.25 and
5.26) such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a Material Adverse Effect on Republic; provided
that, for purposes of this sentence only, those representations and
warranties which are qualified by references to "material, " Material,"
"Material Adverse Effect," or variations thereof, or to the "Knowledge" of
Republic or to a matter being "known" by Republic shall be deemed not to
include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of Republic to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all Material respects.
(c) Certificates. Republic shall have delivered to Buyer (i) a
certificate, dated as of the Effective Time and signed on Republic's behalf
by its duly authorized officers, to the effect that the conditions set
forth in Section 9.2(a) and 9.2(b) of this Agreement have been satisfied,
and (ii) certified copies of resolutions duly adopted by Republic's Board
of Directors and stockholders evidencing the taking of all corporate action
necessary to authorize the execution, delivery, and performance of this
Agreement, and the consummation of the transactions contemplated hereby,
all in such reasonable detail as Buyer and its counsel shall request.
(d) Buyer's Tax Opinion. Buyer shall have received a written opinion
from Sullivan & Cromwell ("Buyer's Counsel"), in a form reasonably
satisfactory to Buyer ("Buyer's Tax Opinion"), dated the date of the
Effective Time, substantially to the effect that, (i) the Merger will
constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, (ii) no gain or loss will be recognized by holders
of Republic Common Stock who exchange all of their Republic Common Stock
solely for Buyer Common Stock pursuant to the Merger (except with respect
to any cash received in lieu of a fractional share interest in Buyer Common
Stock), (iii) the tax basis of the Buyer Common Stock received by holders
of Republic Common Stock who exchange all of their Republic Common Stock
solely for Buyer Common Stock in the Merger will be the same as the tax
basis of the Republic Common Stock surrendered in exchange for the Buyer
Common Stock (reduced by an amount allocable to a fractional share interest
in Buyer Common Stock for which cash is received), and (iv) the holding
period of the Buyer Common Stock received by holders who exchange all of
their Republic Common Stock solely for Buyer Common Stock in the Merger
will be the same as the holding period of the Republic Common Stock
surrendered in exchange thereof, provided that such Republic Common Stock
is held as a capital
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asset at the Effective Time. In rendering Buyer's Tax Opinion, Buyer
Counsel shall be entitled to rely upon representations of officers of
Republic and Buyer reasonably satisfactory in form and substance to such
counsel.
(e) Employment Agreements. The Employment Agreement entered into with
Rudy E. Schupp shall be in full force and effect (other than as a
consequence of death or disability). The Noncompetition Agreements entered
into with the non-employee directors of Republic shall be in full force and
effect (other than as a consequence of death or disability).
(f) Indenture. Either Buyer's Counsel (as defined in Section 9.2(d)) or
Republic's Counsel (as defined in Section 9.3(d)), or other counsel
reasonably acceptable to Buyer, shall have delivered, or shall be prepared
to deliver, the opinion contemplated by Section 11.05(d) of the Indenture,
dated as of June 30, 1997 between First Palm Beach Bancorp, Inc. and The
Bank of New York, as trustee (the "Trustee"), relating to the 10.35% Senior
Debentures due 2002 of Republic (the "Indenture") in form satisfactory to
the Trustee, and no event or circumstance shall have occurred that would
cause the conditions contained in Section 11.05 of the Indenture to be not
able to be satisfied as of the Effective Time.
9.3 Conditions to Obligations of Republic. The obligations of Republic to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by Republic pursuant to Section 11.6(b) of this
Agreement:
(a) Representations and Warranties. For purposes of this Section 9.3(a),
the accuracy of the representations and warranties of Buyer set forth in
this Agreement shall be assessed as of the date of this Agreement and as of
the Effective Time with the same effect as though all such representations
and warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of Buyer
set forth in Section 6.3 of this Agreement shall be true and correct
(except for inaccuracies which are de minimis in amount). The
representations and warranties of Buyer set forth in Section 6.9 of this
Agreement shall be true and correct in all Material respects. There shall
not exist inaccuracies in the representations and warranties of Buyer set
forth in this Agreement (including the representations and warranties set
forth in Sections 6.3 and 6.9) such that the aggregate effect of such
inaccuracies has, or is reasonably likely to have, a Material Adverse
Effect on Buyer; provided that, for purposes of this sentence only, those
representations and warranties which are qualified by references to
"material," "Material," "Material Adverse Effect," or variations thereof,
or to the "Knowledge" of Buyer or to a matter being "known" by Buyer shall
be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of Buyer to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all Material respects.
(c) Certificates. Buyer shall have delivered to Republic (i) a
certificate, dated as of the Effective Time and signed on Buyer's behalf by
its duly authorized officers, to the effect that the conditions set forth
in Section 9.3(a) and 9.3(b) of this Agreement have been satisfied, and
(ii) certified copies of resolutions duly adopted by Buyer's Board of
Directors evidencing the taking of all corporate action necessary to
authorize the execution, delivery, and performance of this Agreement, and
the consummation of the transactions contemplated hereby, all in such
reasonable detail as Republic and its counsel shall request.
(d) Republic's Tax Opinion. epublic shall have received a written
opinion from Skadden, Arps, Slate, Meagher & Flom LLP ("Republic's
Counsel"), in a form reasonably satisfactory to Republic ("Republic's Tax
Opinion"), dated the date of the Effective Time, substantially to the
effect that, on the basis of facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts existing
at the Effective Time, the Merger will be treated as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code. In
rendering Republic's Tax Opinion, Republic's Counsel may require and rely
upon representations and covenants, including those contained in
certificates of Buyer, Republic, and others, reasonably satisfactory in
form and substance to Republic's Counsel.
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ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement by the stockholders of
Republic, this Agreement may be terminated and the Merger abandoned at any
time prior to the Effective Time:
(a) By mutual consent of the Board of Directors of Buyer and the Board
of Directors of Republic; or
(b) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of Republic and Section 9.3(a)
of this Agreement in the case of Buyer or in Material breach of any
covenant or other agreement contained in this Agreement) in the event of an
inaccuracy of any representation or warranty of the other Party contained
in this Agreement which cannot be or has not been cured within 30 days
after the giving of written notice to the breaching Party of such
inaccuracy and which inaccuracy would provide the terminating Party the
ability to refuse to consummate the Merger under the applicable standard
set forth in Section 9.2(a) of this Agreement in the case of Republic and
Section 9.3(a) of this Agreement in the case of Buyer; or
(c) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of Republic and Section 9.3(a)
in the case of Buyer or in Material breach of any covenant or other
agreement contained in this Agreement) in the event of a Material breach by
the other Party of any covenant or agreement contained in this Agreement
which cannot be or has not been cured within 30 days after the giving of
written notice to the breaching Party of such breach; or
(d) By the Board of Directors of either Party in the event (i) any
Consent of any Regulatory Authority required for consummation of the Merger
and the other transactions contemplated hereby shall have been denied by
final nonappealable action of such authority, or (ii) the stockholders of
Republic fail to vote their approval of the matters submitted for the
approval by such stockholders at the Stockholders' Meeting where the
transactions were presented to such stockholders for approval and voted
upon; or
(e) By the Board of Directors of either Party in the event that the
Merger shall not have been consummated by June 30, 2001, if the failure to
consummate the transactions contemplated hereby on or before such date is
not caused by any breach of this Agreement by the Party electing to
terminate pursuant to this Section 10.1(e); or
(f) At any time prior to the Stockholders' Meeting, by the Board of
Directors of Buyer if the Board of Directors of Republic shall have failed
to make its recommendation referred to in Section 8.1, withdrawn such
recommendation or modified or changed such recommendation in a manner
adverse in any respect to the interests of Buyer.
10.2 Effect of Termination. In the event of the termination and abandonment
of this Agreement pursuant to Section 10.1 of this Agreement, this Agreement
shall become void and have no effect, and none of Buyer, Republic, any of
their respective Subsidiaries, or any of the officers or directors of any of
them, shall have any Liability of any nature whatsoever hereunder or in
conjunction with the transactions contemplated hereby, except that (i) the
provisions of Section 8.5(b), this Section 10.2, Section 10.3, and Article 11
of this Agreement shall survive any such termination and abandonment, and (ii)
a termination of this Agreement shall not relieve the breaching Party from
Liability for an uncured willful breach of a representation, warranty,
covenant, or agreement of such Party contained in this Agreement. The
Termination Fee Agreement shall be governed by its terms as to its
termination.
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<PAGE>
10.3 Non-Survival of Representations and Covenants. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time, except for those covenants and
agreements which by their terms apply in whole or in part after the Effective
Time.
ARTICLE 11
MISCELLANEOUS
11.1 Definitions.
(a) Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:
"Acquisition Proposal" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger, acquisition of all of
the stock or Assets of, or other business combination involving such Party
or any of its Subsidiaries or the acquisition of a substantial equity
interest in, or a substantial portion of the Assets of, such Party or any
of its Subsidiaries.
"Affiliate" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by
or under common control with such Person; (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner of any 10% or
greater equity or voting interest of such Person; or (iii) any other Person
for which a Person described in clause (ii) acts in any such capacity.
"Agreement" shall mean this Agreement and Plan of Merger, including the
Exhibits delivered pursuant hereto and incorporated herein by reference.
"Assets" of a Person shall mean all of the assets, properties,
businesses, and rights of such Person of every kind, nature, character, and
description, whether real, personal, or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or
not carried on the books and records of such Person, and whether or not
owned in the name of such Person or any Affiliate of such Person and
wherever located.
"Average Closing Price" shall mean the average of the daily closing
prices of Buyer Common Stock as reported on the New York Stock Exchange (as
reported by The Wall Street Journal or, if not reported thereby, another
authoritative source) for the fifteen consecutive trading days in which
such shares are traded on the New York Stock Exchange ending at the close
of trading on the day preceding the Effective Time. If the price of Buyer
Common Stock is adjusted at any time following the first day of such period
and prior to the Effective Time by reason of any action by Buyer of the
nature described in the second sentence of Section 3.2, then all prices
preceding such adjustment shall themselves be adjusted so as to be
comparable with those following such adjustment.
"BHC Act" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"Buyer Companies" shall mean, collectively, Buyer and all Buyer
Subsidiaries.
"Buyer Confidentiality Agreement" that certain Confidentiality
Agreement, dated October 25, 2000, by and between Buyer and Republic.
"Buyer Financial Statements" shall mean (i) the consolidated statements
of condition (including related notes and schedules, if any) of Buyer as of
June 30, 2000 and as of December 31, 1999 and 1998, and the related
statements of income, changes in stockholders' equity, and cash flows
(including related notes and schedules, if any) for the six months ended
June 30, 2000 and for each of the three years ended December 31, 1999,
1998, and 1997, as filed by Buyer in SEC Documents, and (ii) the
consolidated statements of condition of Buyer (including related notes and
schedules, if any) and related statements of income, changes in
stockholders' equity, and cash flows (including related notes and
schedules, if any) included in SEC Documents filed with respect to periods
ended subsequent to June 30, 2000.
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"Buyer Subsidiaries" shall mean the Subsidiaries of Buyer.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets, or business.
"Default" shall mean (i) any breach or violation of or default under any
Contract, Order, or Permit, (ii) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a breach
or violation of or default under any Contract, Order, or Permit, or (iii)
any occurrence of any event that with or without the passage of time or the
giving of notice would give rise to a right to terminate or revoke, change
the current terms of, or renegotiate, or to accelerate, increase, or impose
any Liability under, any Contract, Order, or Permit.
"Employment Agreement" means the employment agreement between Buyer and
Rudy E. Schupp dated the date of this Agreement and in the form provided by
Buyer.
"Environmental Laws" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air,
surface water, ground water, land surface, or subsurface strata) and which
are administered, interpreted, or enforced by the United States
Environmental Protection Agency and state and local agencies with
jurisdiction over, and including common law in respect of, pollution or
protection of the environment, including the Comprehensive Environmental
Response Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq.
("CERCLA"), the Resource Conservation and Recovery Act, as amended, 42
U.S.C. 6901 et seq., and other Laws relating to emissions, discharges,
releases, or threatened releases of any Hazardous Material, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of any Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"FBCA" shall mean the Florida 1989 Business Corporation Act.
"Florida Articles of Merger" shall mean the Articles of Merger executed
by Newco and filed with the Secretary of State of the State of Florida
relating to the Merger as contemplated by Section 1.1 of this Agreement.
"GAAP" shall mean generally accepted accounting principles, consistently
applied during the periods involved.
"Hazardous Material" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as
those terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil
(and specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and
any polychlorinated biphenyls).
"HSR Act" shall mean Section 7A of the Clayton Act, as added by Title II
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations promulgated thereunder.
"Intellectual Property" shall mean copyrights, patents, trademarks,
service marks, service names, trade names, applications therefor,
technology rights and licenses, computer software (including any source or
object codes therefor or documentation relating thereto), trade secrets,
franchises, know-how, inventions and other intellectual property rights.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
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<PAGE>
"Knowledge" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean the personal
knowledge of the chairman, president, or chief financial officer of such
Person, after due investigation.
"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its
Assets, Liabilities, or business, including those promulgated, interpreted,
or enforced by any Regulatory Authority.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost, or expense (including
costs of investigation, collection, and defense), claim, deficiency,
guaranty, or endorsement of or by any Person (other than endorsements of
notes, bills, checks, and drafts presented for collection or deposit in the
ordinary course of business) of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention, or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for property Taxes not
yet due and payable, and (ii) for depository institution Subsidiaries of a
Party, pledges to secure deposits, and other Liens incurred in the ordinary
course of the banking business.
"Litigation" shall mean any action, arbitration, cause of action, claim,
complaint, criminal prosecution, demand letter, governmental or other
examination or investigation, hearing, inquiry, administrative or other
proceeding, or notice (written or oral) by any Person alleging potential
Liability or requesting information relating to or affecting a Party, its
business, its Assets (including Contracts related to it), or the
transactions contemplated by this Agreement, but shall not include regular,
periodic examinations of depository institutions and their Affiliates by
Regulatory Authorities.
"Loan Property" shall mean any property owned, leased, or operated by
the Party in question or by any of its Subsidiaries or in which such Party
or Subsidiary holds a security or other interest (including an interest in
a fiduciary capacity), and, where required by the context, includes the
owner or operator of such property, but only with respect to such property.
"Material" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"Material Adverse Effect" on a Party shall mean an event, change, or
occurrence which, individually or together with any other event, change, or
occurrence, has a Material adverse impact on (i) the financial condition,
results of operations, or business of such Party and its Subsidiaries,
taken as a whole, or (ii) the ability of such Party to perform its
obligations under this Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement, provided that "Material
Adverse Effect" shall not be deemed to include the impact of (a) changes in
banking and similar Laws of general applicability or interpretations
thereof by courts or governmental authorities, (b) changes in GAAP or
regulatory accounting principles generally applicable to banks and their
holding companies, (c) actions and omissions of a Party (or any of its
Subsidiaries) taken with the prior informed written consent of the other
Party in contemplation of the transactions contemplated hereby, and (d)
compliance with the provisions of this Agreement (in accordance with its
terms and including, without limitation, the fees and expenses described in
this Article 11) on the operating performance of the Parties.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NCBCA" shall mean the North Carolina Business Corporation Act.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
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<PAGE>
"Noncompetition Agreements" shall mean the noncompetition agreements
between Buyer and each of the non-employee directors of Republic, each
dated the date of this Agreement and in the form provided by Buyer.
"North Carolina Articles of Merger" shall mean the certificate of merger
to be executed by Newco and filed with the Secretary of State of the State
of North Carolina, relating to the Merger as contemplated by Section 1.1 of
this Agreement.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local, or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"Participation Facility" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the
management, as such term is defined in CERCLA (including, but not limited
to, participating in a fiduciary capacity), and, where required by the
context, said term means the owner or operator of such facility or
property, but only with respect to such facility or property.
"Party" shall mean either Republic or Buyer (and, where necessary or
appropriate, Newco), and "Parties" shall mean both Republic and Buyer (and,
where necessary or appropriate, Newco).
"Permit" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit, or right to which any Person is a party or that is or may
be binding upon or inure to the benefit of any Person or its securities,
Assets, or business.
"Person" shall mean a natural person or any legal, commercial, or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting
in a representative capacity.
"Proxy Statement" shall mean the proxy statement used by Republic to
solicit the approval of its stockholders of the transactions contemplated
by this Agreement, which shall include the prospectus of Buyer relating to
the issuance of the Buyer Common Stock to holders of Republic Common Stock.
"Reasonable efforts" shall mean the reasonable best efforts of a Party,
but shall not require any Party to take any commercially unreasonable
action.
"Registration Statement" shall mean the Registration Statement on Form
S-4, or other appropriate form, including any pre-effective or post-
effective amendments or supplements thereto, filed with the SEC by Buyer
under the 1933 Act with respect to the shares of Buyer Common Stock to be
issued to the stockholders of Republic in connection with the transactions
contemplated by this Agreement.
"Regulatory Authorities" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the
Governors of the Federal Reserve System, the Office of the Comptroller of
the Currency, the Federal Deposit Insurance Corporation, the Office of
Thrift Supervision, all state regulatory agencies having jurisdiction over
the Parties and their respective Subsidiaries, the NASD, and the SEC.
"Representative" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative of a Person.
"Republic Common Stock" shall mean the $.01 par value common stock of
Republic.
"Republic Companies" shall mean, collectively, Republic and all Republic
Subsidiaries.
"Republic Confidentiality Agreement" shall mean that certain
Confidentiality Agreement, dated September 1, 2000 by, and between Republic
and Wachovia.
"Republic Disclosure Memorandum" shall mean the written information
entitled "Republic Disclosure Memorandum" delivered prior to the execution
of this Agreement to Buyer describing in
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reasonable detail the matters contained therein and, with respect to each
disclosure made therein, specifically referencing each Section or
subsection of this Agreement under which such disclosure is being made. The
inclusion of any matter in this document shall not be deemed an admission
or otherwise to imply that any such matter is Material for purposes of this
Agreement.
"Republic Financial Statements" shall mean (i) the consolidated
statements of condition (including related notes and schedules, if any) of
Republic as of June 30, 2000, and the related statements of income, changes
in stockholders' equity, and cash flows (including related notes and
schedules, if any) for the six months ended June 30, 2000, (ii) the
consolidated statements of condition (including related notes and
schedules, if any) of Republic for each of the three years ended December
31, 1999, 1998, and 1997, filed by Republic in SEC documents and (iii) the
consolidated statements of condition of Republic (including related notes
and schedules, if any) and related statement of income, change in
stockholders equity, and cash flows (including related notes and schedules,
if any) included in SEC Documents filed with respect to periods ended
subsequent to June 30, 2000.
"Republic Preferred Stock" shall mean the $.01 par value preferred stock
of Republic.
"Republic Rights Agreement" shall mean the Rights Agreement by and
between Republic and IBJ Schroder Bank and Trust Company, dated as of April
14, 1995.
"Republic Stock Plans" shall mean the existing stock option and other
stock-based compensation plans of Republic, including, without limitation,
the stock option plans and programs of any Persons acquired by Republic or
a Republic Subsidiary.
"Republic Subsidiaries" shall mean the Subsidiaries of Republic.
"Rights" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to (or the value
of which is wholly or partially derived from), or securities or rights
convertible into or exchangeable for, shares of the capital stock of a
Person or by which a Person is or may be bound to issue additional shares
of its capital stock or other Rights.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC Documents" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to
be filed, by a Party or any of its Subsidiaries with any Regulatory
Authority pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
"Stockholders' Meeting" shall mean the meeting of the stockholders of
Republic to be held pursuant to Section 8.1 of this Agreement, including
any adjournment or adjournments thereof.
"Subsidiaries" shall have the meaning ascribed to such term in Rule 1-02
of Regulation S-X of the SEC; provided, there shall not be included any
entity acquired through foreclosure in the ordinary course of business or
any entity the equity securities of which are owned or controlled in a
fiduciary capacity in the ordinary course of business.
"Superior Proposal" means, with respect to Republic, any written
Acquisition Proposal made by a Person other than Buyer which is for (i) (a)
a merger, reorganization, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution, or similar
transaction involving Republic as a result of which either (1) Republic's
stock-holders prior to such transaction (by virtue of their ownership of
Republic's shares) in the aggregate cease to own at least 50% of the voting
securities of the entity surviving or resulting from such transaction (or
the ultimate parent entity thereof) or (2) the individuals comprising the
Board of Directors of Republic prior to such transaction do not constitute
a majority of the board of directors of such ultimate parent entity, (b) a
sale, lease, exchange, transfer, or other disposition
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of at least 50% of the assets of Republic and its Subsidiaries, taken as a
whole, in a single transaction or a series of related transactions, or (c)
the acquisition, directly or indirectly, by a Person of beneficial
ownership of 50% or more of the common stock of Republic whether by merger,
consolidation, share exchange, business combination, tender, or exchange
offer or otherwise, and (ii) which is otherwise on terms which the Board of
Directors of Republic in good faith concludes (after consultation with its
financial advisors and outside counsel), taking into account, among other
things, all legal, financial, regulatory, and other aspects of the proposal
(including the impact of the exercise of the Termination Fee Agreement) and
the Person making the proposal, (a) would, if consummated, result in a
transaction that is more favorable to its stockholders (in their capacities
as stockholders), from a financial point of view, than the transactions
contemplated by this Agreement, and (b) is reasonably capable of being
completed.
"Surviving Corporation" shall mean Newco as the surviving corporation
resulting from the Merger.
"Tax" or "Taxes" shall mean all federal, state, local, and foreign
taxes, charges, fees, levies, imposts, duties, or other assessments,
including income, gross receipts, excise, employment, sales, use, transfer,
license, payroll, franchise, severance, stamp, occupation, windfall
profits, environmental, federal highway use, commercial rent, customs
duties, capital stock, paid-up capital, profits, withholding, Social
Security, single business and unemployment, disability, real property,
personal property, registration, ad valorem, value added, alternative or
add-on minimum, estimated, or other tax or governmental fee of any kind
whatsoever, imposed or required to be withheld by the United States or any
state, local, or foreign government or subdivision or agency thereof,
including any interest, penalties, or additions thereto.
"Taxable Period" shall mean any period prescribed by any governmental
authority, including the United States or any state, local, or foreign
government or subdivision or agency thereof for which a Tax Return is
required to be filed or Tax is required to be paid.
"Tax Return" shall mean any report, return, information return, or other
information required to be supplied to a taxing authority in connection
with Taxes, including any return of an affiliated or combined or unitary
group that includes a Party or its Subsidiaries.
"Termination Fee Agreement" means the letter agreement between Buyer and
Republic, dated the date of this Agreement and providing for the payment of
a fee by Republic under certain circumstances in connection with or
following the termination of this Agreement.
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(b) The terms set forth below shall have the meanings ascribed thereto in
the referenced sections:
<TABLE>
<S> <C>
Closing................................................. Section 1.2
Continuing Employees.................................... Section 8.13
Covered Parties......................................... Section 8.13(b)
Effective Time.......................................... Section 1.3
Exchange Agent.......................................... Section 4.1
Exchange Ratio.......................................... Section 3.1(b)
Indemnified Parties..................................... Section 8.14(a)
Merger.................................................. Section 1.1
Buyer SEC Reports....................................... Section 6.5(a)
Buyer's Counsel......................................... Section 9.2(d)
Buyer's Tax Opinion..................................... Section 9.2(d)
Republic Benefit Plans.................................. Section 5.13(a)
Republic Contracts...................................... Section 5.14
Republic ERISA Affiliate................................ Section 5.13(e)
Republic ERISA Plan..................................... Section 5.13(a)
Republic Insiders....................................... Section 8.15
Republic Pension Plan................................... Section 5.13(a)
Republic Rights......................................... Section 3.5(a)
Republic SEC Reports.................................... Section 5.5(a)
Republic's Counsel...................................... Section 9.3(d)
Republic's Tax Opinion.................................. Section 9.3(d)
Takeover Laws........................................... Section 5.20
Tax Opinion............................................. Section 9.1(f)
</TABLE>
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes," or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
11.2 Expenses.
(a) Except as otherwise provided in this Section 11.2, each of the Parties
shall bear and pay all direct costs and expenses incurred by it or on its
behalf in connection with the transactions contemplated hereunder, including
filing, registration, and application fees, printing fees, and fees and
expenses of its own financial or other consultants, investment bankers,
accountants, and counsel, except that Buyer shall bear and pay the filing fees
payable in connection with the Registration Statement and the Proxy Statement
and that Buyer and Republic each shall bear and pay one half of the printing
costs incurred in connection with the printing of the Registration Statement
and the Proxy Statement.
(b) Nothing contained in this Section 11.2 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party of
the terms of this Agreement or otherwise limit the rights of the nonbreaching
Party.
11.3 Waiver of Jury Trial. Each Party acknowledges and agrees that any
controversy which may arise under this Agreement is likely to involve
complicated and difficult issues, and therefore each 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 (i) no Representative of the other Party has
represented, expressly or otherwise, that such other party would not, in the
event of litigation, seek to enforce the foregoing waiver, (ii) each Party
understands and has considered the implications of this waiver, (iii) each
Party makes this waiver voluntarily, and (iv) each party has been induced to
enter into this Agreement by, among other things, the mutual waivers and
certifications in this Section 11.3.
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<PAGE>
11.4 Entire Agreement. Except as otherwise expressly provided herein, this
Agreement (including the Republic Disclosure Memorandum) together with the
Republic Confidentiality Agreement, the Buyer Confidentiality Agreement and the
Termination Fee Agreement constitutes the entire agreement between the Parties
with respect to the transactions contemplated hereunder and supersedes all
prior arrangements or understandings with respect thereto, written or oral,
which shall remain in effect. Nothing in this Agreement expressed or implied,
is intended to confer upon any Person, other than the Parties or their
respective successors, any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, other than as provided in Sections 8.14 and
8.19 of this Agreement and Section 7.2 of the Republic Disclosure Memorandum.
11.5 Amendments. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties, whether before or after
stockholder approval of this Agreement has been obtained; provided, that the
provisions of this Agreement relating to the manner or basis in which shares of
Republic Common Stock will be exchanged for Buyer Common Stock shall not be
amended (except in accordance with Section 3.1(b) of this Agreement) after the
Stockholders' Meeting without the requisite approval of the holders of the
issued and outstanding shares of Republic Common Stock entitled to vote
thereon.
11.6 Waivers.
(a) Prior to or at the Effective Time, Buyer, acting through its Board of
Directors, chief executive officer, chief financial officer, or other
authorized officer, shall have the right to waive any Default in the
performance of any term of this Agreement by Republic, to waive or extend the
time for the compliance or fulfillment by Republic of any and all of its
obligations under this Agreement, and to waive any or all of the conditions
precedent to the obligations of Buyer under this Agreement, except any
condition which, if not satisfied, would result in the violation of any Law. No
such waiver shall be effective unless in writing signed by a duly authorized
officer of Buyer except that any unfulfilled conditions shall be deemed to have
been waived at the Effective Time.
(b) Prior to or at the Effective Time, Republic, acting through its Board of
Directors, chief executive officer, chief financial officer, or other
authorized officer, shall have the right to waive any Default in the
performance of any term of this Agreement by Buyer, to waive or extend the time
for the compliance or fulfillment by Buyer of any and all of its obligations
under this Agreement, and to waive any or all of the conditions precedent to
the obligations of Republic under this Agreement, except any condition which,
if not satisfied, would result in the violation of any Law. No such waiver
shall be effective unless in writing signed by a duly authorized officer of
Republic except that any unfulfilled conditions shall be deemed to have been
waived at the Effective Time.
(c) The failure of any Party at any time or times to require performance of
any provision hereof shall in no manner affect the right of such Party at a
later time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this
Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
11.7 Assignment. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests, or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by the Parties and their respective successors and assigns.
11.8 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage
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<PAGE>
pre-paid, or by courier or overnight carrier, to the persons at the addresses
set forth below (or at such other address as may be provided hereunder), and
shall be deemed to have been delivered as of the date so delivered:
<TABLE>
<C> <S>
Republic: Republic Security Financial Corporation
450 S. Australian Avenue
West Palm Beach, Florida 33401
Telecopy Number: (561) 650-2336
Attention: Rudy E. Schupp
Chairman, President, and Chief Executive Officer
Copy to Counsel: Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036-6522
Telecopy Number: (212) 735-2000
Attention: William S. Rubenstein
Buyer: Wachovia Corporation
100 North Main Street
P.O. Box 3099
Winston-Salem, North Carolina 27150
Telecopy Number: (336) 732-6630
Attention: General Counsel
Copy to Counsel: Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Telecopy Number: (212) 558-3588
Attention: Mark J. Menting
</TABLE>
11.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of North Carolina, without regard to any
applicable principles of conflicts of Laws, except to the extent that the Laws
of the State of Florida relate to the consummation of the Merger.
11.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 Captions. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
11.12 Interpretations. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any Party, whether
under any rule of construction or otherwise. No Party to this Agreement shall
be considered the draftsman. The Parties acknowledge and agree that this
Agreement has been reviewed, negotiated, and accepted by all Parties and their
attorneys and shall be construed and interpreted according to the ordinary
meaning of the words used so as fairly to accomplish the purposes and
intentions of the Parties.
11.13 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
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<PAGE>
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
Republic Security Financial
Corporation
/s/ Alissa E. Ballot /s/ Rudy E. Schupp
By: _________________________________ By: _________________________________
Alissa E. Ballot Rudy E. Schupp
Secretary Chairman, President, and
Chief Executive Officer
[Corporate Seal]
Wachovia Corporation
/s/ Stanhope A. Kelly
By: _________________________________
Stanhope A. Kelly
Senior Executive Vice President
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<PAGE>
Exhibit 1
FORM OF PLAN OF MERGER
PLAN OF MERGER (this "Plan") of Republic Security Financial Corporation, a
Florida corporation ("Republic"), , a North Carolina Corporation
("Newco"), and Wachovia Corporation, a North Carolina corporation ("Buyer").
DEFINITIONS
Certain Definitions. The following terms are used in this Plan with the
meanings set forth below:
"Assets" of a Person shall mean all of the assets, properties, businesses,
and rights of such Person of every kind, nature, character, and description,
whether real, personal, or mixed, tangible or intangible, accrued or
contingent, or otherwise relating to or utilized in such Person's business,
directly or indirectly, in whole or in part, whether or not carried on the
books and records of such Person, and whether or not owned in the name of such
Person or any Affiliate of such Person and wherever located.
"Average Closing Price" shall mean the average of the daily closing prices
of Buyer Common Stock as reported on the New York Stock Exchange (as reported
by The Wall Street Journal or, if not reported thereby, another authoritative
source) for the fifteen consecutive trading days in which such shares are
traded on the New York Stock Exchange ending at the close of trading on the day
preceding the Effective Time. If the price of Buyer Common Stock is adjusted at
any time following the first day of such period and prior to the Effective Time
by reason of any action by Buyer of the nature described in the second sentence
of Section 3.2, then all prices preceding such adjustment shall themselves be
adjusted so as to be comparable with those following such adjustment.
"Buyer" shall have the meaning set forth in the preamble of this Plan.
"Buyer Common Stock" shall have the meaning set forth in Section 3.1(b) of
this Plan.
"Buyer Companies" means, collectively, Buyer and all Buyer Subsidiaries.
"Closing" shall have the meaning set forth in Section 1.2 of this Plan.
"Exchange Ratio" shall have the meaning set forth in Section 3.1 of this
Plan.
"Effective Time" shall have the meaning set forth in Section 1.3 of this
Plan.
"Exchange Agent" shall have the meaning set forth in Section 4.1 of this
Plan.
"FBCA" means the Florida Business Corporation Act.
"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its Assets,
Liabilities, or business, including those promulgated, interpreted, or enforced
by any Regulatory Authority.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost, or expense (including costs
of investigation, collection, and defense), claim, deficiency, guaranty, or
endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course
of business) of any type, whether accrued, absolute or contingent, liquidated
or unliquidated, matured or unmatured, or otherwise.
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<PAGE>
"Maximum Exchange Ratio" shall have the meaning set forth in Section 3.1 of
this Plan.
"Merger" shall have the meaning set forth in Section 1.1 of this Plan.
"Merger Agreement" means the Agreement and Plan of Merger, dated as of
October 29, 2000, by and between Republic and Buyer.
"Minimum Exchange Ratio" shall have the meaning set forth in Section 3.1 of
this Plan.
"Newco" shall have the meaning set forth in the preamble of this Plan.
"NCBCA" means the North Carolina Business Corporation Act.
"Party" shall mean either Republic or Buyer (and, where necessary or
appropriate, Newco), and "Parties" shall mean both Republic and Buyer (and,
where necessary or appropriate, Newco).
"Person" shall mean a natural person or any legal, commercial, or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"Regulatory Authorities" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the Governors
of the Federal Reserve System, the Office of the Comptroller of the Currency,
the Federal Deposit Insurance Corporation, the Office of Thrift Supervision,
all state regulatory agencies having jurisdiction over the Parties and their
respective Subsidiaries, the NASD, and the SEC.
"Republic" shall have the meaning set forth in the preamble to this Plan.
"Republic Common Stock" means the $0.01 par value common stock of Republic.
"Republic Companies" means, collectively, Republic and all Republic
Subsidiaries.
"Republic Rights" shall have the meaning set forth is Section 3.5 of this
Plan.
"Republic Stock Plans" means the existing stock option and other stock-based
compensation plans of Republic, including, without limitation, the stock option
plans and programs of any Person acquired by Republic or a Republic Subsidiary.
"Subsidiaries" shall have the meaning ascribed to such term in Rule 1-02 of
the Securities and Exchange Commission's Regulation S-X; provided, there shall
not be included any entity acquired through foreclosure in the ordinary course
of business or any entity the equity securities of which are owned or
controlled in a fiduciary capacity in the ordinary course of business.
"Surviving Corporation" means Buyer, as the surviving corporation resulting
from the Merger.
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Plan, at the
Effective Time, Republic shall be merged with and into Newco in accordance with
the provisions of Section 607.1107 of the FBCA and Section 55-11-07 of the
NCBCA and with the effect provided in Section 607.1106 of the FBCA and Section
55-11-06 of the NCBCA, respectively (the "Merger"). Newco shall be the
Surviving Corporation resulting from the Merger and shall continue to be
governed by the Laws of the State of North Carolina. The Merger shall be
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<PAGE>
consummated pursuant to the terms of this Plan, which has been approved and
adopted by the respective Boards of Directors of Republic, Newco and Buyer.
1.2 Time and Place of Closing. The consummation of the Merger (the
"Closing") shall take place at 6:00 P.M. on the date that the Effective Time
occurs (or the immediately preceding day if the Effective Time is earlier than
9:00 A.M.), or at such other time as the Parties, acting through their duly
authorized officers, may mutually agree. The place of Closing shall be at such
location as may be mutually agreed upon by the Parties.
1.3 Effective Time. The Merger and the other transactions contemplated by
this Plan shall become effective on the date and at the time the Florida
Articles of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of Florida and the North Carolina Certificate
of Merger reflecting the Merger shall become effective with the Secretary of
State of the State of North Carolina (the "Effective Time"). Subject to the
terms and conditions hereof, unless otherwise mutually agreed upon by the duly
authorized officers of each Party, the Parties shall use their reasonable
efforts to cause the Effective Time to occur on such date as may be designated
by Buyer within the fifth business day to occur after the last of the
conditions set forth in Article 5 (other than the conditions relating to items
to be delivered on the day of the Closing) shall have been satisfied or waived
in accordance with the terms of this Plan (or, at the election of Buyer, on the
first business day of the month immediately succeeding the month in which such
day occurs).
ARTICLE 2
TERMS OF MERGER
2.1 Articles of Incorporation. The Articles of Incorporation of Newco in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation after the Effective Time until
otherwise amended or repealed.
2.2 Bylaws. The Bylaws of Newco in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation after the Effective Time
until otherwise amended or repealed.
2.3 Directors and Officers. The directors of Newco in office immediately
prior to the Effective Time, together with such additional persons as may
thereafter be elected, shall serve as the directors of the Surviving
Corporation from and after the Effective Time in accordance with the Bylaws of
the Surviving Corporation. The officers of Newco in office immediately prior to
the Effective Time, together with such additional persons as may thereafter be
elected, shall serve as the officers of the Surviving Corporation from and
after the Effective Time in accordance with the Bylaws of the Surviving
Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of Buyer, Newco or Republic, or the stockholders of any of the foregoing, the
shares of the constituent corporations shall be converted as follows:
(a) Each share of Newco Common Stock issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding from and
after the Effective Time.
(b) Each share of Republic Common Stock (including any associated stock
purchase rights but excluding shares held by any Republic Company or any
Buyer Company, in each case other than in a fiduciary capacity or as a
result of debts previously contracted) issued and outstanding at the
Effective Time shall cease to be outstanding and shall by virtue of the
Merger Agreement and without any action on the part of the holder thereof,
be converted into and exchangeable for the number of shares (the
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<PAGE>
"Exchange Ratio") of the common stock, par value $5.00 per share of Buyer
("Buyer Common Stock"), rounded to the nearest ten-thousandth of a share,
determined by dividing 7.00 by the Average Closing Price; provided that (i)
if the Average Closing Price is equal to or greater than $56.2375, the
Exchange Ratio shall be .1245 (the "Minimum Exchange Ratio") and (ii) if
the Average Closing Price is equal to or less than $46.0125, the Exchange
Ratio shall be .1521 (the "Maximum Exchange Ratio").
3.2 Anti-Dilution Provisions. In the event Republic changes the number of
shares of Republic Common Stock issued and outstanding prior to the Effective
Time as a result of a stock split, stock dividend, or similar recapitalization
with respect to such stock, the Exchange Ratio, the Minimum Exchange Ratio and
the Maximum Exchange Ratio shall be proportionately adjusted. In the event
Buyer changes the number of shares of Buyer Common Stock issued and outstanding
prior to the Effective Time as a result of a stock split, stock dividend, or
similar recapitalization with respect to such stock and the record date
therefor (in the case of a stock dividend) or the effective date thereof (in
the case of a stock split or similar recapitalization for which a record date
is not established) shall be prior to the Effective Time, the formula for
calculating the Minimum Exchange Ratio and the Maximum Exchange Ratio shall be
adjusted appropriately.
3.3 Shares Held by Republic or Buyer. Each of the shares of Republic Common
Stock held by any Republic Company or by any Buyer Company, in each case other
than in a fiduciary capacity or as a result of debts previously contracted,
shall be cancelled and retired at the Effective Time and no consideration shall
be issued in exchange therefor.
3.4 Fractional Shares. Notwithstanding any other provision of this Plan,
each holder of shares of Republic Common Stock exchanged pursuant to the Merger
who would otherwise have been entitled to receive a fraction of a share of
Buyer Common Stock (after taking into account all certificates delivered by
such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to a fractional part of a share of Buyer Common Stock multiplied
by the market value of one share of Buyer Common Stock at the Effective Time.
The market value of one share of Buyer Common Stock at the Effective Time shall
be the closing price of Buyer Common Stock on the New York Stock Exchange (as
reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source selected by Buyer) on the last trading day preceding the
Effective Time. No such holder will be entitled to dividends, voting rights, or
any other rights as a stockholder in respect of any fractional shares.
3.5 Conversion of Stock Rights.
(a) Except as provided in Section 3.5(d), at the Effective Time, each award,
option, or other right to purchase or acquire shares of Republic Common Stock
pursuant to stock options, stock appreciation rights ("SAR's"), or stock awards
and awards or other rights the value of which is determined by reference to the
value of shares of Republic Common Stock ("Republic Rights"), in each case
granted by Republic under the Republic Stock Plans, which are outstanding at
the Effective Time, whether or not exercisable, shall be converted into and
become rights with respect to Buyer Common Stock, and Buyer shall assume each
Republic Right, in accordance with the terms of the Republic Stock Plan and
stock option agreement by which it is evidenced, except that from and after the
Effective Time, (i) Buyer and its Compensation Committee shall be substituted
for Republic and the Committee of Republic's Board of Directors (including, if
applicable, the entire Board of Directors of Republic) administering such
Republic Stock Plan, (ii) each Republic Right assumed by Buyer may be exercised
solely for shares of Buyer Common Stock (or cash in the case of stock
appreciation rights), (iii) the number of shares of Buyer Common Stock subject
to such Republic Right shall be equal to the number of shares of Republic
Common Stock subject to such Republic Right immediately prior to the Effective
Time multiplied by the Exchange Ratio and rounding down to the nearest whole
share, and (iv) the per share exercise price (or similar threshold price, in
the case of stock awards) under each such Republic Right shall be adjusted by
dividing the per share exercise (or threshold) price under each such Republic
Right by the Exchange Ratio and rounding up to the nearest cent. In addition,
notwithstanding the provisions of clauses (iii) and (iv) of the first sentence
of this Section 3.5(a), each Republic Right which is an "incentive stock
option" shall be adjusted as required by Section 424 of the Internal Revenue
Code and the regulations
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<PAGE>
promulgated thereunder, so as not to constitute a modification, extension, or
renewal of the option, within the meaning of Section 424(h) of the Internal
Revenue Code. At or prior to the Effective Time, Republic shall take all
action, if any, necessary with respect to the Republic Stock Plans to permit
the foregoing provisions of this Section 3.5(a) and the proviso to the first
sentence of Section 3.5(b).
(b) At the Effective Time, Buyer shall assume the Republic Stock Plans;
provided that such assumption shall be only in respect of the Republic Rights
assumed pursuant to Section 3.5(a) and that Buyer shall have no obligation to
make any additional grants or awards under assumed Republic Stock Plans.
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly after the Effective Time, Buyer and
Republic shall cause EquiServe Trust Company, N.A. or another exchange agent
selected by Buyer (the "Exchange Agent") to mail to the former stockholders of
Republic appropriate transmittal materials (which shall specify that delivery
shall be effected, and risk of loss and title to the certificates theretofore
representing shares of Republic Common Stock shall pass, only upon proper
delivery of such certificates to the Exchange Agent). The Exchange Agent may
establish reasonable and customary rules and procedures in connection with its
duties. After the Effective Time, each holder of shares of Republic Common
Stock (other than shares to be canceled pursuant to Section 3.3 of this Plan)
issued and outstanding at the Effective Time promptly upon surrender of the
certificate or certificates representing such shares to the Exchange Agent,
together with properly completed transmittal materials, shall receive in
exchange therefor the consideration provided in Section 3.1 of this Plan,
together with all undelivered dividends and other distributions in respect of
such shares (without interest thereon) pursuant to Section 4.2 of this Plan. To
the extent required by Section 3.4 of this Plan, each holder of shares of
Republic Common Stock issued and outstanding at the Effective Time also shall
receive, upon surrender of the certificate or certificates representing such
shares, cash in lieu of any fractional share of Buyer Common Stock to which
such holder may be otherwise entitled (without interest). Until so surrendered,
each outstanding certificate of Republic Common Stock shall be deemed for all
purposes, other than as provided below with respect to voting and the payment
of dividends or other distributions, to represent the consideration into which
the number of shares of Republic Common Stock represented thereby prior to the
Effective Time shall have been converted. Buyer shall not be obligated to
deliver the consideration to which any former holder of Republic Common Stock
is entitled as a result of the Merger until such holder surrenders such
holder's certificate or certificates representing the shares of Republic Common
Stock for exchange as provided in this Section 4.1. The certificate or
certificates of Republic Common Stock so surrendered shall be duly endorsed as
the Exchange Agent may require. Any other provision of this Plan
notwithstanding, neither the Surviving Corporation, Republic, nor the Exchange
Agent shall be liable to a holder of Republic Common Stock for any amounts paid
or property delivered in good faith to a public official pursuant to any
applicable abandoned property Law.
4.2 Rights of Former Republic Stockholders. At the Effective Time, the stock
transfer books of Republic shall be closed as to holders of Republic Common
Stock immediately prior to the Effective Time and no transfer of Republic
Common Stock by any such holder shall thereafter be made or recognized. Until
exchanged in accordance with the provisions of Section 4.1 of this Plan, each
certificate theretofore representing shares of Republic Common Stock (other
than shares to be canceled pursuant to Section 3.3 of this Plan) shall from and
after the Effective Time represent for all purposes only the right to receive
the consideration provided in Sections 3.1 and 3.4 of this Plan in exchange
therefor. Former stockholders of record of Republic shall not be entitled to
vote after the Effective Time at any meeting of Buyer stockholders until such
holders have exchanged their certificates representing Republic Common Stock
for certificates representing Buyer Common Stock in accordance with the
provisions of this Plan. Whenever a dividend or other distribution is declared
by Buyer on the Buyer Common Stock, the record date for which is at or after
the Effective Time, the declaration shall include dividends or other
distributions on all shares of Buyer Common
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Stock issuable pursuant to this Plan, but no dividend or other distribution
payable to the holders of record of Buyer Common Stock as of any time
subsequent to the Effective Time shall be delivered to the holder of any
certificate representing shares of Republic Common Stock issued and outstanding
at the Effective Time until such certificate is exchanged as provided in
Section 4.1 of this Plan. However, upon exchange of such Republic Common Stock
certificate, both the Buyer Common Stock certificate (together with all such
undelivered dividends or other distributions without interest) and any
undelivered dividends and cash payments to be paid for fractional share
interests (without interest) shall be delivered and paid with respect to each
share represented by such certificate. In the event any Republic Common Stock
certificate shall have been lost, stolen, or destroyed, upon the making of an
affidavit of that fact by the person claiming such certificate to be lost,
stolen, or destroyed and, if required by Buyer, the posting by such person of a
bond in such amount as Buyer may reasonably direct as indemnity against any
claim that may be made against it with respect to such certificate, the
Exchange Agent shall issue in exchange for such lost, stolen, or destroyed
certificate, the shares of Buyer Common Stock and cash in lieu of fractional
shares deliverable in respect thereof pursuant to this Plan.
ARTICLE 5
CONDITIONS TO THE MERGER
5.1. Consummation of the Merger is subject to the conditions set forth in
Article 9 of the Merger Agreement.
ARTICLE 6
TERMINATION
6.1. This Plan may be terminated, and the Merger may be abandoned prior to
the Effective Time as provided in Article 10 of the Merger Agreement.
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<PAGE>
Exhibit 2
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
AMENDMENT NO. 1, dated as of October 29, 2000 (this "Amendment"), to the
Rights Agreement, dated as of April 14, 1995 (the "Rights Agreement"), between
Republic Security Financial Corporation, a Florida corporation (the
"Company"), and IBJ Schroder Bank & Trust Company, as rights agent (the
"Rights Agent").
WITNESSETH
WHEREAS, the Company and the Rights Agent have previously entered into the
Rights Agreement; and
WHEREAS, no Distribution Date (as defined in Section 1(h) of the Rights
Agreement) has occurred as of the date of this Amendment; and
WHEREAS, Section 26 of the Rights Agreement provides that the Company may
from time to time supplement or amend the Rights Agreement in accordance with
the terms of Section 26; and
WHEREAS, the Company and Wachovia Corporation, a North Carolina corporation
("Wachovia") have entered into an Agreement and Plan of Merger, dated as of
October 29, 2000 (the "Merger Agreement"), pursuant to which a subsidiary of
Wachovia will merge (the "Merger") with and into the Company with the Company
as the surviving corporation in the Merger; and
WHEREAS, the Board of Directors has determined that the transactions
contemplated by the Merger Agreement are in the best interests of the Company
and its stockholders; and
WHEREAS, the Board of Directors has determined that it is advisable and in
the best interest of the Company and its stockholders to amend the Rights
Agreement to provide for the termination of the Rights upon consummation of
the Merger; and
WHEREAS, the Board of Directors of the Company has approved and adopted
this Amendment and directed that the proper officers take all appropriate
steps to execute and put into effect this Amendment.
NOW, THEREFORE, the Company hereby amends the Rights Agreement as follows:
1. The last sentence of subsection (d) of Section 13 of the Rights
Agreement is hereby amended in its entirety to read as follows:
"Upon consummation of the earlier of (A) any such transaction
contemplated by this section (d), or (B) the merger of the Company
and a subsidiary of Wachovia Corporation, a North Carolina
corporation ("Wachovia") as contemplated by the Agreement and Plan
of Merger, dated as of October 29, 2000 (the "Merger Agreement"), by
and between the Company and Wachovia, all Rights hereunder shall
expire."
2. Section 15 of the Rights Agreement is hereby amended to add the
following sentence at the end thereof:
"Nothing in this Agreement shall be construed to give any holder of
Rights or any other Person any legal or equitable rights, remedies
or claims under this Agreement in connection with any transactions
contemplated by the Merger Agreement."
3. Except as amended hereby, the Rights Agreement shall remain in full
force and effect and shall be otherwise unaffected hereby.
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4. Capitalized terms used in this Amendment and not defined herein shall
have the meanings assigned thereto in the Rights Agreement.
5. This Amendment may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and the same
instrument.
6. In all respects not inconsistent with the terms and provisions of
this Amendment, the Rights Agreement is hereby ratified, adopted, approved
and confirmed. In executing and delivering this Amendment, the Rights Agent
shall be entitled to all the privileges and immunities afforded to the
Rights Agent under the terms and conditions of the Rights Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
be duly executed and attested as of the day and year first above written.
ATTEST: Republic Security Financial
Corporation
By: _________________________________
Name: By: _________________________________
Title Name:
Title:
ATTEST:
IBJ Schroder Bank & Trust Company
By: _________________________________
Name: By: _________________________________
Title Name:
Title:
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Exhibit 3
October __ , 2000
Wachovia Corporation
100 North Main Street
Winston-Salem, NC 27101
Republic Security Financial Corporation
450 S. Australian Avenue
West Palm Beach, FL 33401
Ladies and Gentlemen:
I have been advised that I may be deemed to be, but do not admit that I am,
an "affiliate" of Republic Security Financial Corporation, a Florida
corporation ("Republic"), as that term is defined in Rule 144 and used in Rule
145 promulgated by the Securities and Exchange Commission (the "SEC") under the
Securities Act 1933, as amended (the "Securities Act"). I understand that
pursuant to the terms of the Agreement and Plan of Merger, dated as of October
29, 2000 (the "Merger Agreement"), by and between Republic and Wachovia
Corporation, a North Carolina corporation ("Buyer"), Republic plans to merge
with and into a subsidiary of Buyer (the "Merger") and that the Merger is
intended to be accounted for under the "purchase" accounting method.
I further understand that as a result of the Merger, I may receive shares of
common stock, par value $5.00 per share, of Buyer ("Buyer Common Stock") (i) in
exchange for shares of common stock, par value $0.01 per share, of Republic
("Republic Common Stock") or (ii) as a result of the exercise of Rights (as
defined in the Merger Agreement).
I have carefully read this letter and reviewed the Merger Agreement and
discussed their requirements and other applicable limitations upon my ability
to sell, transfer, or otherwise dispose of Buyer Common Stock and Republic
Common Stock, to the extent I felt necessary, with my counsel or counsel for
Republic.
I represent, warrant and covenant with and to Buyer that in the event I
receive any Buyer Common Stock as a result of the Merger:
1. I shall not make any sale, transfer, or other disposition of such
Buyer Common Stock unless (i) such sale, transfer or other disposition has
been registered under the Securities Act, (ii) such sale, transfer or other
disposition is made in conformity with the provisions of Rule 145 under the
Securities Act (as such rule may be amended from time to time), or (iii) in
the opinion of counsel in form and substance reasonably satisfactory to
Buyer, or under a "no-action" letter obtained by me from the staff of the
SEC, such sale, transfer or other disposition will not violate or is
otherwise exempt from registration under the Securities Act.
2. I understand that Buyer is under no obligation to register the sale,
transfer or other disposition of shares of Buyer Common Stock by me or on
my behalf under the Securities Act or to take any other action necessary in
order to make compliance with an exemption from such registration
available.
3. I understand that stop transfer instructions will be given to Buyer's
transfer agent with respect to shares of Buyer Common Stock issued to me as
a result of the Merger and that there will be placed on the certificates
for such shares, or any substitutions therefor, a legend stating in
substance:
"The shares represented by this certificate were issued
as a result of the merger of Republic Security Financial
Corporation with and into a subsidiary of Wachovia
Corporation on , 2000, in a transaction to which
Rule 145 promulgated under the Securities Act of 1933
applies. The shares represented by
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this certificate may be transferred only in accordance
with the terms of a letter agreement between the
registered holder hereof and Wachovia Corporation, a copy
of which agreement is on file at the principal offices of
Wachovia Corporation."
4. I understand that, unless transfer by me of the Buyer Common Stock
issued to me as a result of the Merger has been registered under the
Securities Act or such transfer is made in conformity with the provisions
of Rule 145(d) under the Securities Act, Buyer reserves the right, in its
sole discretion, to place the following legend on the certificates issued
to my transferee:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 and were
acquired from [Shareholder] who, in turn, received such
shares as a result of the merger of Republic Security
Financial Corporation with and into a subsidiary of
Wachovia Corporation on , 2000, in a transaction
to which Rule 145 under the Securities Act of 1933
applies. The shares have been acquired by the holder not
with a view to, or for resale in connection with, any
distribution thereof within the meaning of the Securities
Act of 1933 and may not be offered, sold, pledged or
otherwise transferred except in accordance with an
exemption from the registration requirements of the
Securities Act of 1933."
It is understood and agreed that the legends set forth in paragraphs (3)and
(4) above shall be removed by delivery of substitute certificates without such
legends if I shall have delivered to Buyer (i) a copy of a "no action" letter
from the staff of the SEC, or an opinion of counsel in form and substance
reasonably satisfactory to Buyer, to the effect that such legend is not
required for purposes of the Act, or (ii) evidence or representations
satisfactory to Buyer that Buyer Common Stock represented by such certificates
is being or has been sold in conformity with the provisions of Rule 145(d).
I further understand and agree that this letter agreement shall apply to all
shares of Republic Common Stock and Buyer Common Stock that I am deemed to
beneficially own pursuant to applicable federal securities law and I further
represent, warrant and covenant with and to Buyer that I will have, and will
cause each of the other parties whose shares are deemed to be beneficially
owned by me to have, all shares of Republic Common Stock or Buyer Common Stock
owned by me or such parties registered in my name or the name of such parties,
as applicable, prior to the effective date of the Merger and not the name of
any bank, broker or dealer, nominee or clearing house.
Very truly yours,
By __________________________________
Name:
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Accepted this day of October 2000.
REPUBLIC SECURITY FINANCIAL
CORPORATION
By __________________________________
Name:
Title:
WACHOVIA CORPORATION
By __________________________________
Name:
Title:
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Appendix B
REPUBLIC SECURITY FINANCIAL CORPORATION
450 South Australian Avenue
West Palm Beach, Florida 33401
October 29, 2000
Attention:
Ladies and Gentlemen:
We refer to the Agreement and Plan of Merger (the "Agreement") of even date
herewith between Wachovia Corporation ("Buyer") and Republic Security
Financial Corporation ("Republic"). Capitalized terms used but not defined
herein shall have the meanings ascribed to them in the Agreement.
In order to induce Buyer to enter into the Agreement, and in consideration
of Buyer's undertaking of efforts in furtherance of the transactions
contemplated thereby, Republic agrees as follows:
1. Representations and Warranties. Republic hereby represents and warrants
to Buyer that Republic has all requisite corporate power and authority to
enter into this letter agreement (the "Letter Agreement") and to perform its
obligations set forth herein. The execution, delivery and performance of this
Letter Agreement have been duly and validly authorized by all necessary
corporate action on the part of Republic. This Letter Agreement has been duly
executed and delivered by Republic and is a valid and legally binding
obligation of Republic.
2. Termination Fee. (a) In the event that:
(i) Either (x) the Agreement shall have been terminated pursuant to
Sections 10.1(b) or 10.1(c) thereof, in either case by Buyer by virtue of a
willful breach by Republic that remains uncured after written notice of
such breach shall have been provided to Republic by Buyer or (y) the
Agreement shall have been terminated pursuant to any provision of Section
10.1 thereof and prior to or concurrently with such termination, a First
Trigger Event shall have occurred; and
(ii) prior to, concurrently with or within 12 months after the
termination of the Agreement an Acquisition Event (as such term is defined
below) shall have occurred,
Republic shall pay to Buyer a cash fee of $15 million. Such fee shall be
payable in immediately available funds on or before the second business day
following the occurrence of such Acquisition Event.
(b) As used herein, a "First Trigger Event" shall mean the occurrence of
any of the following events:
(i) Republic's Board of Directors shall have failed to approve or
recommend the Agreement or the Merger, or shall have withdrawn or modified
in a manner adverse to Buyer its approval or recommendation of the
Agreement or the Merger, or shall have resolved or publicly announced an
intention to do either of the foregoing;
(ii) Republic or any Significant Subsidiary (as such term is defined
below), or the Board of Directors of Republic or a Significant Subsidiary,
shall have recommended that the stockholders of Republic approve any
Acquisition Proposal (as such term is defined below) or shall have entered
into an agreement with respect to, or authorized, approved, proposed or
publicly announced its intention to enter into, any Acquisition Proposal;
(iii) the Agreement shall not have been approved at a meeting of
Republic stockholders which has been held for that purpose prior to
termination of the Agreement in accordance with its terms or such meeting
shall not have been held in violation of the Agreement or shall have been
cancelled before
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termination of the Agreement, if prior thereto it shall have been publicly
announced that any person (other than Buyer or any of its subsidiaries)
shall have made, or disclosed an intention to make, an Acquisition
Proposal;
(iv) any person (together with its affiliates and associates) or group
(as such terms are used for purposes of Section 13(d) of the Exchange Act)
other than Buyer and its subsidiaries shall have acquired beneficial
ownership (as such term is used for purposes of Section 13(d) of the
Exchange Act) or the right to acquire beneficial ownership of 10% or more
of the then outstanding shares of the stock then entitled to vote generally
in the election of directors of Republic or a Significant Subsidiary;
(v) following the making of an Acquisition Proposal, Republic shall have
intentionally breached any covenant or agreement contained in the Agreement
such that Buyer would be entitled to terminate the Agreement under Section
10.1(c) thereof (without regard to any grace period provided for therein)
unless such breach is promptly cured without jeopardizing consummation of
the Merger pursuant to the terms of the Agreement; or
(vi) any person other than Buyer or any of its subsidiaries shall have
made an Acquisition Proposal and such Acquisition Proposal shall have been
publicly announced.
(c) As used herein, "Acquisition Event" shall mean (i) the execution by
Republic of a definitive agreement providing for, or the consummation of, any
transaction described in clauses (A), (B), or (C) of the definition of
"Acquisition Proposal," except that the percentage reference contained in
clause (C) of such definition shall be 30% instead of 10% or (ii) the
acquisition by any person (together with its affiliates and associates) or
group (as such terms are used for purposes of Section 13(d) of the Exchange
Act) other than Republic, Buyer and any of their respective subsidiaries of
beneficial ownership (as such term is used for purposes of Section 13(d) of the
Exchange Act) or the right to acquire beneficial ownership of more than 30% of
the then outstanding shares of the stock then entitled to vote generally in the
election of directors of Republic or a Significant Subsidiary.
(d) As used herein, "Acquisition Proposal" shall mean after the date hereof
any (i) publicly announced proposal, (ii) regulatory application or notice
(whether in draft or final form), (iii) agreement or understanding, (iv)
disclosure of an intention to make a proposal, or (v) amendment to any of the
foregoing, made or filed on or after the date hereof, in each case with respect
to any of the following transactions with a counterparty other than Buyer or
any of its subsidiaries: (A) a merger or consolidation, or any similar
transaction, involving Republic or any Significant Subsidiary (other than
mergers, consolidations or similar transactions involving solely Republic
and/or one or more wholly-owned subsidiaries of Republic and other than a
merger or consolidation as to which the common stockholders of Republic
immediately prior thereto in the aggregate own at least 60% of the common stock
of the publicly held surviving or successor corporation (or any publicly held
ultimate parent company thereof) immediately following consummation thereof);
(B) a purchase, lease or other acquisition of all or substantially all of the
assets or deposits of Republic or any Significant Subsidiary; or (C) 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
Republic or any Significant Subsidiary.
(e) As used herein, "Significant Subsidiary" shall mean a "significant
subsidiary," as defined in Rule 1-02 of Regulation S-X promulgated by the
Securities and Exchange Commission, of Republic.
3. To the extent that Republic is prohibited by applicable law or
regulation, or by administrative actions or policy of a federal or state
financial institution supervisory agency having jurisdiction over it, from
making the payments required to be paid by Republic herein in full, it shall
immediately so notify Buyer and thereafter deliver or cause to be delivered,
from time to time, to Buyer, the portion of the payments required to be paid by
it herein that it is no longer prohibited from paying, within five business
days after the date on which Republic is no longer so prohibited; provided,
however, that if Republic at any time is prohibited by applicable law or
regulation, or by administrative actions or policy of a federal or state
financial institution supervisory agency having jurisdiction over it, from
making the payments required hereunder in full, it shall (i) use its reasonable
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best efforts to obtain all required regulatory and legal approvals and to file
any required notices as promptly as practicable in order to make such payments,
(ii) within five days of the submission or receipt of any documents relating to
any such regulatory and legal approvals, provide Buyer with copies of the same,
and (iii) keep Buyer advised of both the status of any such request for
regulatory and legal approvals, as well as any discussions with any relevant
regulatory or other third party reasonably related to the same.
4. In the event of an Acquisition Event and the payment by Republic of the
fee provided for in Section 2 hereof, Buyer shall have the right to no further
remedy from Republic as a result of the termination of the Agreement and the
consummation of an Acquisition Event.
5. Except where federal law specifically applies, this Agreement shall be
construed and interpreted according to the laws of the State of North Carolina
without regard to conflicts of laws principles thereof.
6. This Letter Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
7. Nothing contained herein shall be deemed to authorize Republic or Buyer
to breach any provision of the Agreement.
8. The provisions of this Letter Agreement shall be binding upon, inure to
the benefit of, and be enforceable by the parties and their respective
successors and assigns.
Please confirm your agreement with the understanding set forth herein by
signing and returning to us the enclosed copy of this Letter Agreement.
Very truly yours,
Republic Security Financial
Corporation
/s/ Rudy E. Schupp
By: _________________________________
Rudy E. Schupp
Chairman, President and
Chief Executive Officer
Accepted and agreed to as of the date first above written:
Wachovia Corporation
/s/ Stanhope A. Kelly
By: ______________________________________
Stanhope A. Kelly
Senior Executive Vice President
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Appendix C
January 10, 2001
Board of Directors
Republic Security Financial Corporation
450 S. Australian Avenue
West Palm Beach, FL 33401
Ladies and Gentlemen:
Republic Security Financial Corporation ("Republic") and Wachovia
Corporation ("Wachovia") have entered into an Agreement and Plan of Merger,
dated as of October 29, 2000 (the "Agreement"), pursuant to which Republic will
be merged with and into a wholly-owned subsidiary of Wachovia (the "Merger").
Upon consummation of the Merger, each share of Republic common stock, par value
$.01 per share, issued and outstanding immediately prior to the Merger
(together with the associated stock purchase rights issued pursuant to the
Rights Agreement dated as of April 14, 1995 by and between Republic and IBJ
Schroder, as Rights Agent, the "Republic Shares"), other than certain shares
specified in the Agreement, will be converted into the right to receive that
number of shares (the "Exchange Ratio") of Wachovia common stock, par value
$5.00 per share, as shall be equal to the quotient of $7.00 divided by the
Average Closing Price (as defined in the Agreement); provided, however, that if
the Average Closing Price is less than $46.0125, the Exchange Ratio shall be
0.1521, and if the Average Closing Price is greater than $56.2375, the Exchange
Ratio shall be 0.1245. The terms and conditions of the Merger are more fully
set forth in the Agreement. You have requested our opinion as to the fairness,
from a financial point of view, of the Exchange Ratio to the holders of
Republic Shares.
Sandler O'Neill & Partners, L.P., as part of its investment banking
business, is regularly engaged in the valuation of financial institutions and
their securities in connection with mergers and acquisitions and other
corporate transactions. In connection with this opinion, we have reviewed,
among other things: (i) the Agreement and exhibits thereto, including the form
of Plan of Merger; (ii) the Termination Fee Agreement dated October 29, 2000 by
and between Republic and Wachovia; (iii) certain publicly available financial
statements and other historical financial information of Republic that we
deemed relevant; (iv) certain publicly available financial statements and other
historical financial information of Wachovia that we deemed relevant; (v)
certain internal financial analyses and forecasts of Republic for the years
ending December 31, 2000 and 2001 prepared by management of Republic, consensus
earnings per share estimates for Republic for the years ending December 31,
2000 and 2001 published by First Call Corporation and the views of senior
management of Republic, based on limited discussions with members of senior
management, regarding Republic's past and current business, financial
condition, results of operations and future prospects; (vi) consensus earnings
per share estimates for Wachovia for the years ending December 31, 2000 and
2001 published by First Call Corporation and the views of senior management of
Wachovia, based on limited discussions with members of senior management of
Wachovia, regarding Wachovia's past and current business, financial condition,
results of operations and future prospects; (vii) the pro forma impact of the
Merger, including the relative contributions of Republic and Wachovia to the
resulting institution; (viii) the publicly reported historical price and
trading activity for Republic's and Wachovia's common stock, including a
comparison of certain financial and stock market information for Republic and
Wachovia with similar publicly available information for certain other
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Sandler O'Neill
Board of Directors
Republic Security Financial Corporation
January 10, 2001
Page 2
companies the securities of which are publicly traded; (ix) the financial terms
of recent business combinations in the commercial banking industry, to the
extent publicly available; (x) the current market environment generally and the
banking environment in particular; and (xi) such other information, financial
studies, analyses and investigations and financial, economic and market
criteria as we considered relevant.
In performing our review, we have relied upon the accuracy and completeness
of all of the financial and other information that was available to us from
public sources, that was provided to us by Republic or Wachovia or their
respective representatives or that was otherwise reviewed by us and have
assumed such accuracy and completeness for purposes of rendering this opinion.
We have not been asked to and have not undertaken an independent verification
of any of such information and we do not assume any responsibility or liability
for the accuracy or completeness thereof. We did not make an independent
evaluation or appraisal of the specific assets, the collateral securing assets
or the liabilities (contingent or otherwise) of Republic or Wachovia or any of
their subsidiaries, or the collectibility of any such assets, nor have we been
furnished with any such evaluations or appraisals. We did not make an
independent evaluation of the adequacy of the allowance for loan losses of
Republic or Wachovia nor have we reviewed any individual credit files relating
to Republic or Wachovia. We have assumed that the respective aggregate
allowances for loan losses for both Republic and Wachovia are adequate to cover
such losses and will be adequate on a pro forma basis for the combined entity.
We are not accountants and have relied upon the reports of the independent
accountants for each of Republic and Wachovia for the accuracy and completeness
of the financial statements made available to us. With respect to the financial
projections and earnings estimates prepared by and/or reviewed with the
respective managements of Republic and Wachovia, we have assumed that they have
been reasonably prepared and that they reflect the best currently available
estimates and judgments of the respective managements of the respective future
financial performances of Republic and Wachovia and that such performances will
be achieved, and we express no opinion as to such financial projections or
estimates or the assumptions on which they are based. We have also assumed that
there has been no material change in Republic's or Wachovia's assets, financial
condition, results of operations, business or prospects since the date of the
most recent financial statements made available to us. We have assumed in all
respects material to our analysis that Republic and Wachovia will remain as
going concerns for all periods relevant to our analyses, that all of the
representations and warranties contained in the Agreement and all related
agreements are true and correct, that each party to such agreements will
perform all of the covenants required to be performed by such party under such
agreements, that the conditions precedent in the Agreement are not waived and
that the Merger will be accounted for using the purchase method and will
qualify as a tax-free reorganization for federal income tax purposes.
Our opinion is necessarily based on financial, economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof. Events occurring after the date hereof could materially affect
this opinion. We have not undertaken to update, revise, reaffirm or withdraw
this opinion or otherwise comment upon events occurring after the date hereof.
We are expressing no opinion herein as to what the value of Wachovia's common
stock will be when issued to Republic's shareholders pursuant to the Agreement
or the prices at which Republic's or Wachovia's common stock will trade at any
time.
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Board of Directors
Republic Security Financial Corporation
January 10, 2001
Page 3
We have acted as Republic's financial advisor in connection with the Merger
and will receive a fee for our services, a significant portion of which is
contingent upon consummation of the Merger. We will also receive a fee for
rendering this opinion. In the past, we have also provided certain other
investment banking services for Republic and have received compensation for
such services.
In the ordinary course of our business as a broker-dealer, we may purchase
securities from and sell securities to Republic and Wachovia. We may also
actively trade the debt and equity securities of Republic and Wachovia for our
own account and for the accounts of our customers and, accordingly, may at any
time hold a long or short position in such securities.
Our opinion is directed to the Board of Directors of Republic in connection
with its consideration of the Merger and does not constitute a recommendation
to any shareholder of Republic as to how such shareholder should vote at any
meeting of shareholders called to consider and vote upon the Merger. Our
opinion is not to be quoted or referred to, in whole or in part, in a
registration statement, prospectus, proxy statement or in any other document,
nor shall this opinion be used for any other purposes, without Sandler
O'Neill's prior written consent; provided, however, that we hereby consent to
the inclusion of this opinion as an appendix to Republic's and Wachovia's Proxy
Statement/Prospectus dated the date hereof and to the references to this
opinion therein.
Based upon and subject to the foregoing, it is our opinion, as of the date
hereof, that the Exchange Ratio is fair, from a financial point of view, to the
holders of Republic Shares.
Very truly yours,
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