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As filed with the Securities and Exchange Commission on August 12, 1998
Registration No. 333- 57097
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
POST-EFFECTIVE
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
TRIANGLE BANCORP, INC.
(Exact name of registrant as specified in its charter)
North Carolina 6022 56-1764546
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code No.) Identification No.)
-------------------------
4300 Glenwood Avenue
Raleigh, North Carolina 27612
(919) 881-0455
(Address, including ZIP Code, and telephone number, including area code, of registrant's principal executive offices)
-------------------------
ALEXANDER M. DONALDSON, ESQ. GEORGE W. MURPHY, JR., ESQ.
General Counsel and Senior Vice President Muldoon, Murphy & Faucette
Triangle Bancorp, Inc. with copy to: Fifth Floor
4300 Glenwood Avenue 5101 Wisconsin Avenue, N. W.
Raleigh, North Carolina 27612 Washington, D. C. 20016
(919) 881-0455 (202) 362-0840
Approximate date of commencement of the proposed sale of the securities to the public:
As soon as practicable after the Registration Statement becomes effective.
If the securities being registered on this Form are being offered in connection with the formation of
a holding company and there is compliance with General Instruction G, check the following box. [ ]
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This Registration Statement covers additional shares of the common
stock of the Registrant which may be issued to prevent dilution resulting from a
stock split, stock dividend or similar transaction involving the common stock of
the Registrant, pursuant to Rule 416.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
<PAGE>
TRIANGLE BANCORP, INC.
Cross-Reference Sheet Pursuant to Item 501 of Regulation S-K
Item of Form S-4
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Caption in Prospectus/Proxy Statement
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PART I - INFORMATION REQUIRED IN THE PROSPECTUS
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A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus........................... Facing Page of Registration Statement; Cross-Reference
Sheet; Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus......................................... Table of Contents; Available Information; Incorporation
of Certain Documents by Reference
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information.................................. Summary - Special Meeting of United Federal Shareholders,
- Parties to the Merger, - Structure and Terms of the
Merger, - Conditions to Consummation of the Merger, -
Required Regulatory Approvals, - Certain Federal Income
Tax Consequences, Triangle Stock and United Federal
Stock; Comparative Per Share Data; Selected Consolidated
Financial Data
4. Terms of the Transaction........................... The Merger; Summary - United Federal Stock and Triangle
Stock; Comparison of United Federal Stock and Triangle
Stock; Appendix I
5. Pro Forma Financial Information.................... Pro Forma Combined Condensed Financial Information
6. Material Contacts with the Company Being Acquired.. The Merger - Background of and Reasons for the Merger;
The Merger - Interest of Certain Persons in the Merger
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters...... Not Applicable
8. Interest of Named Experts and Counsel.............. Legal and Tax Matters
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities..................... Comparison of United Federal Stock and Triangle Stock -
Indemnification of and Elimination of Director Liability
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants........ Available Information; Incorporation of Certain Documents
by Reference; Summary; Information About Triangle and
Triangle Bank
11. Incorporation of Certain Information by Reference.. Incorporation of Certain Documents by Reference
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12. Information with Respect to S-2 or S-3 Registrants. Not Applicable
13. Incorporation of Certain Information by Reference.. Not Applicable
14. Information with Respect to Registrants Other Than S-3
or S-2 Registrants................................. Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies.......... Not Applicable
16. Information with Respect to S-2 or S-3 Companies... Incorporation of Certain Documents by Reference;
Information About United Federal; Selected Consolidated
Financial Data; Summary - United Federal Stock and
Triangle Stock; Comparison of United Federal Stock and
Triangle Stock
17. Information with Respect to Companies Other than S-3 or
S-2 Companies...................................... Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorizations are
to be Solicited.................................... Summary; Special Meeting of United Federal Shareholders;
The Merger - Interest of Certain Persons in the Merger;
Information About Triangle and Triangle Bank; Information
about United Federal
19. Information if Proxies, Consents or Authorizations are
not to be Solicited or in an Exchange Offer........ Not Applicable
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[Letterhead of United Federal Savings Bank]
August 7, 1998
To the Shareholders of United Federal:
You are cordially invited to attend a Special Meeting of the Shareholders
("Special Meeting") of United Federal Savings Bank ("United Federal") to be held
at the Carleton House, 213 North Church Street, Rocky Mount, North Carolina, at
10:00 a.m., local time, on Thursday, September 10, 1998, notice of which is
enclosed.
At the Special Meeting, you will be asked to consider and vote on a proposal to
approve an Agreement and Plan of Reorganization and Merger, dated as of March 4,
1998 and amended as of August 7, 1998 (the "Agreement"), among United Federal,
Triangle Bank and Triangle Bancorp, Inc. ("Triangle"). The Agreement provides
for the merger of United Federal with and into Triangle Bank, with Triangle Bank
being the surviving corporation, or, alternatively, the conversion of United
Federal to a North Carolina-chartered commercial bank and the acquisition of the
converted United Federal by Triangle as a wholly-owned subsidiary (whichever
occurs earlier, the "Merger"). Triangle Bank is the wholly-owned subsidiary of
Triangle. Upon consummation of the Merger, each share of United Federal common
stock ("United Federal Stock") issued and outstanding will be exchanged in an
anticipated tax-free exchange for 0.945 shares of Triangle common stock
("Triangle Stock"), subject to adjustment as provided in the Agreement, with
cash being paid in lieu of issuing fractional shares. If United Federal were to
convert to a commercial bank and become a subsidiary of Triangle, it would be
merged as soon as practicable into Triangle Bank.
Triangle is a registered North Carolina-chartered bank holding company
headquartered in Raleigh, North Carolina. Triangle Stock is listed on the New
York Stock Exchange and trades under the symbol "TGL". Currently, Triangle pays
a quarterly cash dividend of $0.09 per share. If the Agreement is approved by
United Federal's shareholders and receives all necessary regulatory approvals
and all conditions to the Agreement are met, the Merger is expected to occur on
September 17, 1998. After consummation of the Merger, United Federal
shareholders will become shareholders of Triangle, will be entitled to receive
any cash or stock dividends or other distributions made by Triangle to its
shareholders, and will be entitled to participate in Triangle's dividend
reinvestment plan. If the Merger is consummated, Triangle will cause the
necessary documents to be sent to you to exchange your United Federal stock
certificates for Triangle stock certificates. YOU SHOULD NOT SEND IN YOUR STOCK
CERTIFICATES AT THIS TIME AND YOU NEED NOT DO ANYTHING AT THIS TIME WITH YOUR
STOCK CERTIFICATES.
Enclosed are the (i) Notice of Special Meeting of Shareholders, (ii) Proxy
Statement/Prospectus, and (iii) proxy card for the Special Meeting. The Proxy
Statement/Prospectus describes in more detail the Agreement and the Merger,
including a description of the conditions to consummation of the Merger and the
effects of the Merger on the rights of United Federal shareholders. Please read
these materials carefully and consider thoughtfully the information set forth in
them.
The Board of Directors of United Federal has unanimously approved the Agreement
and consummation of the Merger contemplated thereby, believes that the proposal
to approve the Agreement and the Merger is in the best interest of United
Federal and its shareholders, employees, depositors, customers, suppliers and
communities, and unanimously recommends that you vote FOR approval of the
<PAGE>
Agreement. The Carson Medlin Company, United Federal's financial advisor, has
advised the Board of Directors of United Federal that, in its opinion, as of
August 7, 1998, the exchange ratio of 0.945 shares of Triangle Stock for each
share of United Federal Stock is fair to United Federal's shareholders from a
financial point of view. The Board of Directors of Triangle also has unanimously
approved the Agreement and Merger. For a discussion of the background of and
reasons for the Merger, please read the section of this Proxy
Statement/Prospectus entitled "THE MERGER - Background of and Reasons for the
Merger."
It is important to understand that approval of the Agreement will require the
affirmative vote of two-thirds of the votes entitled to be cast at the Special
Meeting by holders of the issued and outstanding shares of United Federal common
stock. Thus, a failure to vote will have the same effect as a vote against the
Agreement. Accordingly, whether or not you plan to attend the Special Meeting,
you are urged to complete, sign and return promptly the enclosed proxy card. If
your shares are held in the name of your broker, your broker is forwarding this
Proxy Statement/Prospectus to you; your broker cannot vote on the Merger
proposal for you. If you attend the Special Meeting, you may vote in person if
you wish, even if you previously have returned your proxy card. The proposed
Merger and your vote on this matter is of great importance.
On behalf of the Board of Directors, I urge you to vote FOR approval of the
Agreement by marking the enclosed proxy card "FOR" Proposal 1.
Sincerely,
John A. Barker
President and Chief Executive Officer
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UNITED FEDERAL SAVINGS BANK
116 South Franklin Street
Rocky Mount, North Carolina 27804
(252) 446-9191
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
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to be held
September 10, 1998
NOTICE is hereby given that a Special Meeting of Shareholders (the "Special
Meeting") of United Federal Savings Bank ("United Federal") will be held at
10:00 a.m., local time, on Thursday, September 10, 1998 at the Carleton House,
213 North Church Street, Rocky Mount, North Carolina for the following purposes:
1. PROPOSAL TO APPROVE PROPOSED MERGER. To consider and vote on a proposal to
approve the Agreement and Plan of Reorganization and Merger, dated as of March
4, 1998 and amended as of August 7, 1998, and the related Plan of Merger
(collectively, the "Agreement"), by and among Triangle Bancorp, Inc.
("Triangle"), Triangle Bank and United Federal and the transactions contemplated
pursuant to the Agreement, which include, among other matters, (i) at the
effective time, United Federal either (a) will merge with and into Triangle,
with Triangle being the surviving corporation, or (b) will convert to a North
Carolina-chartered bank and become the wholly-owned bank subsidiary of Triangle,
and thereafter merge into Triangle Bank as soon as practicable, and (ii) each
outstanding share of the common stock, $0.01 par value per share, of United
Federal will be converted into 0.945 shares of the common stock, no par value
per share, of Triangle, subject to adjustment as provided in the Agreement, all
as more fully described in the accompanying Proxy Statement/Prospectus; and
2. OTHER BUSINESS. To transact such other business as may properly come
before the Special Meeting or any adjournments thereof.
Pursuant to federal law, shareholders of United Federal do not have dissenter's
rights of appraisal in connection with the Merger.
Shareholders of record at the close of business on July 27, 1998 are entitled to
notice of, and to vote at, the Special Meeting and any adjournments thereof.
The Board of Directors unanimously recommends that the shareholders vote to
approve the Agreement.
APPROVAL OF THE MERGER REQUIRES THE AFFIRMATIVE VOTE OF HOLDERS OF NOT LESS THAN
TWO-THIRDS OF THE OUTSTANDING SHARES OF UNITED FEDERAL STOCK. Each United
Federal shareholder is invited to attend the Special Meeting in person. However,
to ensure that a quorum is present at the Special Meeting, each shareholder is
urged to complete, date, sign and return promptly the enclosed proxy in the
enclosed pre-paid envelope. If you return the enclosed proxy, you may still
attend the Special Meeting and vote in person, in which case your returned proxy
will be void.
By Order of the Board of Directors
John A. Barker, President and
Chief Executive Officer
Dated: August 7, 1998
<PAGE>
PROSPECTUS
TRIANGLE BANCORP, INC.
Up to 3,652,842 Shares
Common Stock, No Par Value
-------------------------
PROXY STATEMENT
For Special Meeting of Shareholders
United Federal Savings Bank
to be held on September 10, 1998
This Prospectus of Triangle Bancorp, Inc. ("Triangle"), a bank holding company
organized under the laws of the State of North Carolina, relates to the shares
of common stock, no par value per share, of Triangle ("Triangle Stock"), that
are issuable to the shareholders of United Federal Savings Bank ("United
Federal"), a federally chartered savings bank organized under the laws of the
United States, upon consummation of the proposed merger described herein,
pursuant to which (i) United Federal either (a) will be merged with and into
Triangle Bank, the wholly-owned subsidiary of Triangle, with Triangle Bank being
the surviving corporation, or (b) will convert to a North Carolina-chartered
commercial bank and become the wholly-owned subsidiary of Triangle (whichever
occurs earlier, the "Merger"), and (ii) each outstanding share of common stock,
$0.01 par value per share, of United Federal ("United Federal Stock") will be
converted into 0.945 shares (the "Exchange Rate") of Triangle Stock, subject to
adjustment, pursuant to the terms of an Agreement and Plan of Reorganization and
Merger, dated as of March 4, 1998 and amended as of August 7, 1998, and the
related Plan of Merger (collectively, the "Agreement"), by and among Triangle,
Triangle Bank and United Federal. A copy of the Agreement is attached hereto as
Appendix I.
In lieu of issuing fractional shares of Triangle Stock, cash will be
distributed to each United Federal shareholder otherwise entitled to receive a
fractional share in an amount equal to that fraction multiplied by the "market
value" of one whole share of Triangle Stock. See "THE MERGER -Terms of the
Merger".
Upon the consummation of the Merger, each share of United Federal Stock
outstanding immediately prior to the consummation of the Merger will cease to be
outstanding and will be converted into 0.945 shares of Triangle Stock, subject
to adjustment as provided in the Agreement, and any options to purchase United
Federal Stock remaining unexercised upon consummation of the Merger will be
converted into options to purchase 0.945 shares of Triangle Stock per share of
United Federal Stock, subject to adjustment, less any resulting fractional
share. In the event the average closing sales price of Triangle Stock for the 20
trading days preceding a date three days before the closing of the Merger (the
"Average Closing Price") is between $18.67 and $21.17, the Exchange Rate shall
be increased to provide a value of not less than $20.00 for each share of United
Federal Stock, and in the event the Average Closing Price of Triangle Stock is
between $25.51 and $28.00, the Exchange Rate shall be decreased to provide a
value of not more than $24.11 for each share of United Federal Stock. The
Average Closing Price of Triangle Stock on August 5, 1998 was $19,434; if the
Average Closing Price of Triangle Stock was $19,434 three days prior to the
Merger, pursuant to the Agreement, the Exchange Rate would be increased from
0.945 to 1.029 to provide a per share value of $20.00. See "THE MERGER -
Structure of the Merger", and "Terms of the Merger". In the event the Average
Closing Price of Triangle Stock is between $18.66 and $17.25, the Exchange Rate
shall be fixed at 1.071; and in the event the Average Closing Price of Triangle
Stock is less than $17.25, the Exchange Rate shall be increased to provide a
value of not less than $18.47 per share of United Federal Stock, provided that
Triangle or United Federal may terminate the Agreement and abandon the Merger if
the Average Closing Price of Triangle Stock is less than $16.82. In the event
the Average Closing Price of Triangle Stock is greater than $28.00, either
Triangle or United Federal may terminate the Agreement and abandon the Merger.
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In addition, after determining the Exchange Rate required by the
Average Closing Price of Triangle Stock, the Exchange Rate shall be adjusted in
the following manner: (i) if between January 1, 1998 and a date five business
days prior to the Closing, charge-offs by United Federal (net of recoveries) for
all loans (excluding any charge-offs for Pea Island loans) exceed $500,000 the
Exchange Rate shall be reduced by .0015 for each $100,000 in charge-offs in
excess of $500,000, (ii) if at month-end preceding the Closing non-performing
assets of United Federal exceed $2,000,000, the Exchange Rate shall be reduced
by .00375 for every $1,000,000 in excess of $2,000,000, on an interpolated
dollar-for-dollar basis (for purposes of this clause non-performing assets are
defined as all loans (excluding mortgage loans originated by United Federal for
sale in the secondary market and mortgage loans which are guaranteed by the FHA
or VA) which are over 90 days delinquent, on non-accrual status, or for which
the borrower has filed a petition for relief under the United States Bankruptcy
Code, and all other collateral property received under loan arrangements
currently held for resale), or (iii) if on a date five business days prior to
the closing the loan loss reserve of United Federal is less than the sum of
$2,900,000 plus 1.5% for every dollar in total loan growth over the December 31,
1997 level of $254,000,000, the Exchange Rate shall be reduced by .00375 for
every $250,000 shortfall in the loan loss reserve (excluding any write-off of
Pea Island loans) on an interpolated dollar-for-dollar basis; then if the
aggregate reduction caused by clauses (i), (ii) and (iii) above is less than or
equal to .00375, the Exchange Rate shall not be adjusted, but if the aggregate
reduction is greater than .00375 the Exchange Rate shall be adjusted, provided
that in the event the adjustment provided for herein causes the Exchange Rate
(i) to decrease by more than 1.5 basis points, either Triangle or United Federal
at its option and without penalty may terminate the Agreement, provided that in
the event that either party does not so terminate the Agreement, the Agreement
shall remain in effect, or (ii) to yield a per share dollar value to a holder of
United Federal Stock of less than $18.47, United Federal may terminate the
Agreement at its option and without penalty, provided that in the event that
United Federal does not so terminate the Agreement, the Agreement shall remain
in effect.
This Prospectus also serves as the Proxy Statement of United Federal
and is being furnished by United Federal in connection with the solicitation of
proxies to be used at the special meeting of shareholders of United Federal,
including any adjournments thereof (the "United Federal Special Meeting"), to be
held on Thursday, September 10, 1998. At the United Federal Special Meeting,
shareholders of United Federal will be asked to approve the Agreement and the
Merger.
This Proxy Statement/Prospectus and related materials enclosed herewith
are being mailed to the shareholders of United Federal on or about August 12,
1998.
The address of United Federal's principal executive office is 116 South
Franklin Street, Rocky Mount, North Carolina 27804-5707, telephone number (252)
446-9191.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE OFFICE OF THRIFT SUPERVISION ("OTS"), ANY STATE
SECURITIES COMMISSION, OR THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC") NOR
HAS THE COMMISSION, ANY STATE SECURITIES COMMISSION, THE OTS OR THE FDIC PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------------------------
The date of this Proxy Statement/Prospectus is August 7, 1998.
ii
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No person is authorized to give any information or to make any
representation other than those contained in this Proxy Statement/Prospectus,
and, if given or made, such information or representation should not be relied
upon as having been authorized by Triangle or United Federal. This Proxy
Statement/Prospectus does not constitute an offer to sell, or a solicitation of
an offer to purchase, the securities offered by this Proxy Statement/Prospectus
in any jurisdiction in which such offer is not authorized or to or from any
person to whom it is unlawful to make such offer or solicitation. The
information contained or incorporated by reference in this Proxy
Statement/Prospectus regarding Triangle has been furnished by Triangle and the
information contained or incorporated by reference in this Proxy
Statement/Prospectus regarding United Federal has been furnished by United
Federal. Neither the delivery of this Proxy Statement/Prospectus nor any
distribution of the securities being offered hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of Triangle or United Federal since the date of this Proxy
Statement/Prospectus or the information contained herein or in the documents
incorporated herein by reference is correct as of anytime subsequent to the date
hereof.
THE SHARES OF TRIANGLE STOCK BEING OFFERED TO UNITED FEDERAL'S
SHAREHOLDERS ARE NOT DEPOSITS OF ANY BANK OR OTHER FINANCIAL INSTITUTION AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.
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iii
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TABLE OF CONTENTS
Page
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Available Information..............................................................................................
Incorporation of Certain Documents by Reference....................................................................
Summary............................................................................................................
Selected Supplemental Consolidated Financial Data..................................................................
Comparative Per Share Data.........................................................................................
Special Meeting of United Federal Shareholders.....................................................................
Record Date and Voting Rights.............................................................................
Voting and Revocation of Proxies..........................................................................
Solicitation of Proxies...................................................................................
Recommendation ...........................................................................................
The Merger.........................................................................................................
Parties to the Merger.....................................................................................
Structure of the Merger...................................................................................
Terms of the Merger.......................................................................................
Exchange Rate....................................................................................
Treatment of Fractional Shares...................................................................
Closing and Effective Time.......................................................................
Conduct of Business Pending the Merger...........................................................
Conditions to Consummation of the Merger.........................................................
Required Regulatory Approvals....................................................................
Other Approvals..................................................................................
Amendment and Waivers............................................................................
Termination of the Agreement.....................................................................
Background of and Reasons for the Merger..................................................................
Background.......................................................................................
Reasons for the Merger...........................................................................
Recommendation of the United Federal Board of Directors...................................................
Opinion of United Federal's Financial Advisor.............................................................
Summary of Transaction Consideration.............................................................
Comparable Transaction Analysis..................................................................
Industry Comparative Analysis....................................................................
Contribution Analysis............................................................................
Present Value Analysis...........................................................................
Stock Trading History............................................................................
Shareholder Claims Analysis......................................................................
Other Analyses ..................................................................................
Certain Federal Income Tax Consequences...................................................................
Accounting Treatment......................................................................................
Interest of Certain Persons in the Merger.................................................................
Employees........................................................................................
United Federal Options...........................................................................
Indemnification..................................................................................
Stock Option Agreement between Triangle and United Federal.......................................
Expenses and Fees.........................................................................................
Distribution of Triangle Certificates.....................................................................
Resale of Triangle Stock..................................................................................
Pro Forma Combined Condensed Financial Information.................................................................
Information about Triangle and Triangle Bank.......................................................................
General...................................................................................................
Triangle Stock............................................................................................
Security Ownership of Management..........................................................................
Recent Acquisitions.......................................................................................
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Trust Securities Issuance.................................................................................
Information about United Federal...................................................................................
General...................................................................................................
United Federal Stock......................................................................................
Security Ownership of Management and Principal Shareholders...............................................
Comparison of United Federal Stock and Triangle Stock.............................................................
Capital Structure.........................................................................................
Governing Law ............................................................................................
Voting....................................................................................................
Preemptive Rights ........................................................................................
State Law Anti-Takeover Provisions........................................................................
Business Combinations and Changes in Control..............................................................
Amendment of Articles of Incorporation....................................................................
Amendment of Bylaws ......................................................................................
Share Purchase and Option Plans for Affiliates............................................................
Redemption and Repurchase of Stock........................................................................
Transferability by Certain Persons........................................................................
Assessments; Impairment of Capital........................................................................
Number, Election and Removal of Directors.................................................................
Indemnification and Elimination of Director Liability.....................................................
Dividend Policy...........................................................................................
Certain Regulatory Matters.........................................................................................
General...................................................................................................
Bank Holding Company Regulation...........................................................................
Bank Regulation...........................................................................................
Dividends.................................................................................................
Capital Requirements......................................................................................
Interstate Banking and Branching..........................................................................
Support of Subsidiary Institutions........................................................................
Prompt Corrective Action..................................................................................
Legislation and Governmental Policies.....................................................................
Legal and Tax Matters..............................................................................................
Experts............................................................................................................
Other Matters .....................................................................................................
Appendix I - Amended Agreement and Plan of Reorganization and Merger...............................................I-1
Appendix II - Fairness Opinion of The Carson Medlin Company........................................................II-1
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AVAILABLE INFORMATION
Triangle is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files proxy statements, reports and other information with the
Securities and Exchange Commission (the "Commission"). Proxy statements, reports
and other information concerning Triangle can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, NW, Washington, DC 20549; and at the Chicago Regional
Office, Northwestern Atrium Center, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661-2511; and at the New York Regional Office, 13th Floor, 7
World Trade Center, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, NW, Washington, D.C. 20549, at prescribed rates.
Triangle has filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Triangle Stock offered hereby. As
permitted by the rules and regulations of the Commission, this Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto, which may be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, NW, Washington, D. C. 20549, upon payment of the prescribed fees.
United Federal also is subject to the information requirements of the
Exchange Act and, in accordance therewith, files reports, proxy statements and
other information with the Office of Thrift Supervision ("OTS"). Such reports,
proxy statements and other information filed by United Federal may be obtained
from the OTS at prescribed rates by addressing written requests for such copies
to the OTS, 1700 G Street, NW, Washington, D. C. 20552. In addition, such
documents may be inspected and copied at the public reference facilities of the
OTS at 1700 G Street, NW, Washington, D. C. 20552. Lastly, certain of such
documents are exhibits to the Registration Statement and may be inspected and
copied at the public reference facilities maintained by the Commission at the
addresses set forth above.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by Triangle with the
Commission are incorporated by reference into this Proxy Statement/Prospectus:
(i) Triangle's Annual Report on Form 10-K for the fiscal year ended December 31,
1997; (ii) Triangle's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1998; and (iii) Triangle's Current Reports on Form 8-K dated
March 11, 1998, March 20, 1998, and June 17, 1998. The following documents
previously filed by United Federal with the OTS are incorporated by reference
into this Proxy Statement/Prospectus: (i) United Federal's Annual Report on Form
10-K for the fiscal year ended December 31, 1997; (ii) United Federal's
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1998; and
(iii) United Federal's Current Report on Form 8-K dated March 4, 1998.
In addition, all of the documents filed by Triangle and United Federal
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
date the United Federal Special Meeting has been finally adjourned and the
Merger consummated shall be deemed to be incorporated by reference herein. Any
statements contained in a document incorporated or deemed to be incorporated by
reference herein will be deemed to be modified or superseded for purposes of
this Proxy Statement/Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part hereof.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE OTHER
DOCUMENTS WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. DOCUMENTS
RELATED TO TRIANGLE OR UNITED FEDERAL, INCLUDING EXHIBITS WHICH ARE SPECIFICALLY
INCORPORATED BY REFERENCE INTO THOSE DOCUMENTS, BUT EXCLUDING EXHIBITS NOT
SPECIFICALLY INCORPORATED BY REFERENCE IN THOSE DOCUMENTS, ARE AVAILABLE TO EACH
PERSON INCLUDING ANY BENEFICIAL OWNER TO WHOM A COPY OF THIS PROXY
STATEMENT/PROSPECTUS IS DELIVERED WITHOUT CHARGE, FOR TRIANGLE UPON REQUEST FROM
THE SECRETARY, TRIANGLE BANCORP, INC., 4300 GLENWOOD AVENUE, RALEIGH, NORTH
CAROLINA 27612, TELEPHONE (919) 881-0455, OR FOR UNITED FEDERAL UPON REQUEST
FROM THE PRESIDENT, UNITED FEDERAL SAVINGS BANK 116 SOUTH FRANKLIN STREET, ROCKY
MOUNT, NORTH CAROLINA 27804-5707, TELEPHONE (252) 446-9191. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS BEFORE THE UNITED FEDERAL SPECIAL MEETING ANY
SUCH REQUESTS SHOULD BE MADE BY SEPTEMBER 1, 1998.
The documents are available without charge, but persons requesting
copies of exhibits to such documents which are specifically incorporated by
reference in such documents will be charged the cost of reproduction and
mailing.
UNITED FEDERAL'S ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1997 AND QUARTERLY REPORT ON FORM 10-Q FOR THE THREE MONTHS ENDED
MARCH 31, 1998 ACCOMPANY THIS PROXY STATEMENT/PROSPECTUS.
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SUMMARY
The following is a summary of certain information relating to the
United Federal Special Meeting, the Agreement and the Merger described herein
and is not intended to be a summary of all material information relating to
Triangle, United Federal, the Agreement or the Merger and is subject to and
qualified in its entirety by reference to the more detailed information and
financial statements contained elsewhere in this Proxy Statement/Prospectus,
including the Appendices hereto, and in the documents incorporated herein by
reference. As used in this Proxy Statement/Prospectus, the terms "Triangle" and
"United Federal" refer to the respective corporations and, unless the context
otherwise requires, the subsidiaries of Triangle and United Federal.
Shareholders are urged to read carefully the entire Proxy Statement/Prospectus,
including the Appendices.
Special Meeting of United Federal shareholders
The United Federal Special Meeting will be held on Thursday, September
10, 1998, at 10:00 a.m., local time, at the Carleton House, 213 North Church
Street, Rocky Mount, North Carolina. At the United Federal Special Meeting,
holders of United Federal Stock will vote upon (i) a proposal to approve the
Agreement and the Merger, and (ii) such other business as may properly come
before the Special Meeting.
The affirmative vote of at least two-thirds of the outstanding shares
of United Federal Stock entitled to vote at the United Federal Special Meeting
is required for approval of the Agreement.
On July 27, 1998, the record date of shareholders of United Federal
entitled to notice of and to vote at the United Federal Special Meeting (the
"United Federal Record Date"), there were 3,283,314 shares of United Federal
Stock outstanding. As of July 27, 1998, directors and executive officers of
United Federal and their affiliates owned and were entitled to vote
approximately 28% of the outstanding shares of United Federal Stock. The
directors and executive officers of United Federal and their affiliates are
expected to vote their shares in favor of the proposal to approve the Agreement.
See "SPECIAL MEETING OF UNITED FEDERAL SHAREHOLDERS."
Voting of Proxies. The persons named to represent United Federal's
shareholders as proxies at the United Federal Special Meeting are John A. Barker
and Robert C. White. Shares of United Federal Stock represented by each
appointment of proxy which is properly executed and returned by a United Federal
shareholder, and not revoked, will be voted by the proxies in accordance with
the directions contained therein. If no directions are given, such shares will
be voted by the proxies "FOR" approval of the Agreement and the transactions
contemplated therein. On such other matters that may properly come before the
United Federal Special Meeting, the proxies will be authorized to vote in
accordance with their judgment on such matters. See "SPECIAL MEETING OF UNITED
FEDERAL SHAREHOLDERS-Voting and Revocation of Proxies."
Revocation of Appointments of Proxy. Any United Federal shareholder who
executes an appointment of proxy has the right to revoke it at any time before
it is exercised by filing with the Secretary of United Federal either an
instrument revoking it or a duly executed appointment of proxy bearing a later
date, or by attending the United Federal Special Meeting and announcing his or
her intention to vote in person. See "SPECIAL MEETING OF UNITED FEDERAL
SHAREHOLDERS-Voting and Revocation of Proxies."
Proxy Solicitation Expenses. Except under certain circumstances
involving a wrongful breach or termination of the Agreement, United Federal will
pay the expenses associated with the United Federal Special Meeting, including
the costs of preparing, assembling and mailing this Proxy Statement/Prospectus.
See "THE MERGER - Terms of the Merger - Termination of the Agreement." In
addition to the use of the mail,
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appointments of proxy may be solicited personally or by telephone by United
Federal's officers, directors and employees, none of whom will be compensated
separately for any such solicitation activities.
Parties to the Merger
Triangle, a North Carolina corporation, is a bank holding company
registered with the Board of Governors of the Federal Reserve System (the
"Federal Reserve") under the Bank Holding Company Act of 1956, as amended (the
"BHC Act"). Triangle's business consists primarily of owning all of the
outstanding shares of Triangle Bank, headquartered in Raleigh, North Carolina,
and Bank of Mecklenburg, headquartered in Charlotte, North Carolina. Triangle
Bank and Bank of Mecklenburg are both North Carolina-chartered commercial banks
and member banks of the Federal Reserve. Triangle Bank provides full-service
commercial and consumer banking services from its 61 branches in 41 cities
located throughout eastern North Carolina. Bank of Mecklenburg provides
full-service commercial and consumer banking services from its three branches in
Charlotte, North Carolina. Triangle also owns Coastal Leasing LLC, Greenville,
North Carolina, a business equipment leasing company. As of March 31, 1998,
Triangle had consolidated assets of $1.7 billion, consolidated deposits of $1.3
billion, and consolidated shareholders' equity of $133 million. The executive
offices of Triangle are located at 4300 Glenwood Avenue, Raleigh, North Carolina
27612 (telephone (919) 881-0455). On April 16, 1998, Triangle acquired Guaranty
State Bancorp and its wholly-owned subsidiary, Guaranty State Bank, both in
Durham, North Carolina. The historical financial information for Triangle
contained in this Proxy Statement/Prospectus has been restated to give effect to
the Guaranty State Bancorp acquisition. See "THE MERGER-Parties to the
Merger-Triangle" and "INFORMATION ABOUT TRIANGLE - Recent Acquisitions."
United Federal, a federally-chartered savings bank under the
supervision of the OTS, provides mortgage, commercial and consumer banking
services through 13 branches in Rocky Mount, Cary, Greenville, Morehead City,
New Bern, Pinetops, Raleigh, Spring Hope, Tarboro, Warrenton and Wilson, North
Carolina. In addition, United Federal operates loan production offices in
Charlotte and Wilmington, North Carolina. As of March 31, 1998, United Federal
had assets of $305.6 million, deposits of $268.4 million, and shareholders'
equity of $22.9 million. The executive offices of United Federal are located at
116 South Franklin Street, Rocky Mount, North Carolina 27804-5707, telephone
number (252) 446-9191.
Background of and Reasons for the Merger
Background.
United Federal. Prior to 1980, United Federal operated as a traditional
thrift serving selected areas of eastern North Carolina, originating mortgages
for residential housing and offering savings products to its customers.
Beginning in the 1980's, United Federal entered the mortgage banking business,
originating and servicing loans sold to other investors. While profitable,
mortgage banking became increasingly competitive and in order to diversify its
banking operations and enhance shareholder value, United Federal began to
emphasize retail and commercial lending in the mid-1990's. Those transformations
allowed United Federal to remain competitive and profitable. During the past
several years, however, a number of factors have caused United Federal to
reassess its long-standing position to remain an independent community bank,
notably increased competition by larger competitors with greater resources. In
addition, technology changes have required extensive investments to be made in
order to remain competitive in today's market. United Federal's Board of
Directors and management has known that, to remain independent, United Federal
needed to be able to deliver value-added customer services on a competitive
basis and to do so profitably. Thus, in 1997, United Federal was reviewing
capital raising alternatives to enable it to expand its commercial lending.
In December, 1997, United Federal was approached by a representative of
Triangle. Negotiations between representatives of United Federal and Triangle
continued on December 19 and December 22. On December 22, 1997, an amended
proposal described as a letter of intent and styled as a conditional offer was
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delivered by Triangle. That proposal was considered at a meeting of the Board of
Directors of United Federal held on December 22, 1997, and the Board instructed
management to continue with negotiations looking toward the execution of the
letter of intent and to engage the services of a financial advisor. On December
24, 1997, United Federal executed the letter of intent and on December 30, 1997,
engaged The Carson Medlin Company ("Carson Medlin") to serve as its investment
advisor.
On January 2, 1998, United Federal was advised that a third party
intended to make an unsolicited offer looking toward the acquisition of the
Bank, which offer was received on January 9, 1998. At a meeting of the Board of
Directors held on January 11, 1998, management was directed to submit both the
Triangle and the third party proposals to Carson Medlin for evaluation and
analysis.
On January 20, 1998, the Board of Directors of United Federal met with
representatives of Carson Medlin to consider the evaluation and analysis of the
proposals by Triangle and the third party. Although Carson Medlin concluded that
both offers were fair from a financial standpoint to the United Federal
shareholders, the Board of Directors of United Federal determined on balance
that the Triangle offer was more advantageous to the shareholders of United
Federal. Negotiations on a definitive agreement and United Federal's due
diligence investigation of Triangle continued in February 1998, and, at a
telephone meeting held on March 4, 1998, the Board of Directors of United
Federal approved the definitive agreement to merge with Triangle. That action
was ratified and confirmed at its meeting held on March 26, 1998.
The market price of most publicly traded securities declined significantly,
as did the price of Triangle Stock, in the early days of August 1998. On August
5,1998, the closing price of Triangle Stock was $17.875. If the price of
Triangle Stock were to remain at that level for an extended period of time
before the Merger, the Average Price of Triangle Stock could be less than
$18.67, which would be grounds for termination of the Agreement. As a result, on
August 5, 1998, management of Triangle proposed to management of United Federal
that a revised pricing structure be agreed to in the event the Average Closing
Price of Triangle Stock were less than $18.67. Negotiations continued through
August 7, 1998, on which date the Board of United Federal, in consultation with
Carson Medlin, agreed to the amended price structure and executed the amendment
to the Agreement.
Triangle. As a result of Triangle's acquisitions during 1991 and 1993,
Triangle's management determined in 1994 that a well executed acquisition plan
in concert with internal growth would allow Triangle to achieve certain benefits
while maintaining loan quality and safe and sound operations. In particular,
management believed a well executed acquisition plan could (i) provide
opportunities to achieve economies of scale that would increase Triangle's
efficiency and profitability; (ii) improve Triangle's ability to compete with
the many financial institutions doing business in Triangle's market area; (iii)
result in an institution better able to respond to technological changes; (iv)
enable the resulting institution to better respond to the needs of its customers
and the communities it serves; and (v) allow the shareholders of Triangle
(including the former shareholders of acquired institutions) to participate in a
financial institution with greater financial resources, a more expansive banking
network, a larger market area, and a more liquid stock. After the Merger,
Triangle will remain a well-capitalized bank holding company, and Triangle Bank
will remain a well-capitalized bank and will be the eighth largest commercial
bank in North Carolina, based on assets, with a greater capacity to compete with
larger banks in its market areas.
Reasons for the Merger
United Federal. In reaching its determination that the Merger is in the
best interests of United Federal's shareholders, United Federal's Board
considered a number of factors, including the current and prospective economic
and competitive environment facing United Federal and the range of possible
values available to United Federal's shareholders, including the timing and
likelihood of actually receiving those values; the financial presentation of
Carson Medlin, United Federal's independent financial advisor, and the opinion
of Carson Medlin that, as of the date of such opinion, the Exchange Ratio is
fair from a financial point of view to the shareholders of United Federal; the
business, operations, financial condition, earnings and prospects of Triangle;
the fact that consummation of the Merger is not conditioned upon Triangle
obtaining the financing for its acquisition of United Federal; and the quality
and nature of the consideration to be received in the Merger permitting
shareholders to defer any tax liability associated with the increase in value of
their stock and permitting shareholders to become shareholders of Triangle, an
institution with strong operations, management and earnings and a liquid stock.
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Triangle. The Board of Directors of Triangle constantly analyzes
opportunities to expand its business and geographic markets by increasing its
presence in its existing markets or by entry into new banking markets, whether
by acquisition or de novo branching. Triangle considers the markets served by
United Federal to be attractive areas for expansion. While Triangle already
operates 14 branches in several of United Federal's markets, the Merger provides
the opportunity to expand Triangle's business within those markets and into new
markets without incurring the initial losses that are normally associated with
de novo branching and to gain the advantages of acquiring United Federal's
existing deposit base, established customer relationships and proven management
and staff.
For a more detailed discussion of the background of and reasons for the
Merger, see "THE MERGER Background of and Reasons for the Merger."
Structure and Terms of the Merger
Subject to the terms and conditions of the Agreement, at the effective
time of the Merger (the "Effective Time"), United Federal either (i) will be
merged with and into Triangle Bank, or (ii) will convert to a North
Carolina-chartered commercial bank and become a wholly-owned bank subsidiary of
Triangle and thereafter merge into Triangle Bank as soon as practicable.
Ultimately, Triangle Bank will be the surviving corporation resulting from the
Merger, operating as a North Carolina commercial bank under Triangle Bank's
articles of incorporation and bylaws existing immediately prior to the Merger.
See "THE MERGER-Structure of the Merger."
At the Effective Time, each issued and outstanding share of United Federal
Stock will be converted into the right to receive 0.945 shares of Triangle
Stock, subject to adjustment as provided in the Agreement. In the event the
Average Closing Price of Triangle Stock is between $18.67 and $21.17, the
Exchange Rate shall be increased to provide a value of not less than $20.00 for
each share of United Federal Stock, and in the event the Average Closing Price
of Triangle Stock is between $25.51 and $28.00, the Exchange Rate shall be
decreased to provide a value of not more than $24.11 for each share of United
Federal Stock. The Average Closing Price of Triangle Stock on August 5, 1998 was
$19,434; if the Average closing Price of Triangle Stock three days prior to the
Merger was $19,434, pursuant to the Agreement, the Exchange Rate would be
increased from 0.945 to 1.029 to provide a per share value of $20.00. Any
options to purchase United Federal Stock remaining unexercised upon consummation
of the Merger will be converted into options to purchase shares of Triangle
Stock by multiplying the number of shares of United Federal Stock subject to
options by the Exchange Rate, rounded down to the nearest whole share. Each
United Federal shareholder will receive one share of Triangle Stock equal to the
number of shares of United Federal Stock owned by such shareholder multiplied by
the Exchange Rate. Any fractional shares resulting from the Merger will not be
issued and shareholders of United Federal will instead receive cash in lieu of
the issuance of fractional shares. Each share of United Federal Stock
automatically will be canceled by virtue of the Merger. In the event the Average
Closing Price of Triangle Stock is between $18.66 and $17.25, the Exchange Rate
shall be fixed at 1.071; and in the event the Average Closing Price of Triangle
Stock is less than $17.25, the Exchange Rate shall be increased to provide a
value of not less than $18.47 per share of United Federal Stock, provided that
Triangle or United Federal may terminate the Agreement and abandon the Merger if
the Average Closing Price of Triangle Stock is less than $16.82. In the event
the Average Closing Price of Triangle Stock is greater than $28.00, either
Triangle or United Federal may terminate the Agreement and abandon the Merger.
See "THE MERGER - Terms of the Merger - Exchange Rate."
In addition, after determining the Exchange Rate required by the
Average Closing Price of Triangle Stock, the Exchange Rate shall be adjusted in
the following manner: (i) if between January 1, 1998 and a date five business
days prior to the closing charge-offs by United Federal (net of recoveries) for
all loans (excluding any charge-offs for Pea Island loans) exceed $500,000, the
Exchange Rate shall be reduced by .0015 for each $100,000 in charge-offs in
excess of $500,000, (ii) if at month-end preceding the closing non-performing
assets of United Federal exceed $2,000,000, the Exchange Rate shall be reduced
by .0375 for every $1,000,000 in excess of $2,000,000, on an interpolated
dollar-for-dollar basis (for purposes of this clause non-performing assets are
defined as all loans (excluding mortgage loans originated by United Federal for
sale in the secondary market and mortgage loans which are guaranteed by the FHA
or VA) which are over 90 days delinquent, on non-accrual status, or for
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which the borrower has filed a petition for relief under the United States
Bankruptcy Code, and all other collateral property received under loan
arrangements currently held for resale), or (iii) if on a date five business
days prior to the closing the loan loss reserve of United Federal is less than
the sum of $2,900,000 plus 1.5% for every dollar in total loan growth over the
December 31, 1997 level of $254,000,000, the Exchange Rate shall be reduced by
.00375 for every $250,000 shortfall in the loan loss reserve (excluding any
write-off of Pea Island loans) on an interpolated dollar-for-dollar basis; then
if the aggregate reduction caused by clauses (i), (ii) and (iii) above is less
than or equal to .00375, the Exchange Rate shall not be adjusted, but if the
aggregate reduction is greater than .00375 the Exchange Rate shall be adjusted,
provided that in the event the adjustment provided for herein causes the
Exchange Rate (i) to decrease by more than 1.5 basis points, either Triangle or
United Federal at its option and without penalty may terminate the Agreement,
provided that in the event that either party does not so terminate the
Agreement, the Agreement shall remain in effect, or (ii) to yield a per share
dollar value to a holder of United Federal Stock of less than $18.47, United
Federal may terminate the Agreement at its option and without penalty, provided
that in the event that United Federal does not so terminate the Agreement, the
Agreement shall remain in effect.
In the event Triangle enters into a binding written agreement to be
acquired by a third party which causes the Average Closing Price of Triangle
Stock to exceed $28.00, Triangle shall not have the right to terminate the
Agreement based on the Average Closing Price as provided above. Further, in such
event, the Exchange Rate shall be adjusted to yield a per share dollar value to
a holder of United Federal Stock of not more than $24.11. In such event, United
Federal may still exercise its right to terminate the Agreement based on the
Average Closing Price as provided above.
As of the United Federal Record Date there were 3,283,214 shares of
United Federal Stock outstanding which would be converted into 3,102,732 shares
of Triangle Stock assuming no adjustment to the Exchange Rate. Also, as of the
United Federal Record Date there were outstanding unexercised options covering
43,500 shares of United Federal Stock which would be converted into options
covering 41,075 shares of Triangle Stock, assuming no adjustment to the Exchange
Rate.
Recommendation of the Board of Directors of United Federal
The United Federal Board believes that the Merger is in the best
interests of United Federal and its shareholders and has unanimously approved
the Agreement. THE UNITED FEDERAL BOARD UNANIMOUSLY RECOMMENDS THAT UNITED
FEDERAL SHAREHOLDERS VOTE FOR THE APPROVAL OF THE AGREEMENT AND THE MERGER
CONTEMPLATED THEREBY.
Opinion of Financial Advisor
Carson Medlin, an independent financial advisory firm, with offices in
Tampa, Florida, and Raleigh, North Carolina, rendered its verbal opinion to
United Federal on March 4, 1998 that, as of the date of the Agreement and on the
basis of circumstances existing at that time, the Exchange Rate is fair, from a
financial point of view, to the holders of United Federal Stock. After its
review of a variety of relevant factors, Carson Medlin delivered to the United
Federal Board its fairness opinion dated August 7, 1998 (the "United Federal
Fairness Opinion"). A copy of the United Federal Fairness Opinion is attached to
this Proxy Statement/Prospectus as Appendix II and should be read in its
entirety for information with respect to the assumptions made and other matters
considered by Carson Medlin in rendering its opinion. See "THE MERGER - Opinion
of United Federal's Financial Advisor."
Conditions to Consummation of the Merger
In addition to required regulatory and shareholder approvals,
consummation of the Merger is conditioned upon the fulfillment of certain other
conditions described in the Agreement, unless waived by the party
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entitled to the benefits of such provision, including without limitation, (i)
receipt of an opinion to the effect that, among other things, for federal income
tax purposes the Merger will constitute a tax-free "reorganization" as defined
in Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
"Code"), (ii) receipt of the United Federal Fairness Opinion, (iii) receipt by
Triangle of a fairness opinion from its financial advisor, (iv) receipt by
Triangle of assurances in form and content satisfactory to Triangle from Coopers
& Lybrand L.L.P. to the effect that the Merger may be treated as a
pooling-of-interests for accounting purposes, (v) the portion of United
Federal's residential real estate mortgage loan portfolio originated for sale in
the secondary market (including outstanding commitments), for which no binding
contract for sale exists one week prior to the closing shall not exceed 10% of
the dollar value of the total residential real estate mortgage loan portfolio
originated for sale in the secondary market (including outstanding
commitments), and (vi) certain other conditions customary in a transaction of
this nature. See "THE MERGER - Conditions to Consummation of the Merger."
Required Regulatory Approvals
The Merger is subject to the approval of the Federal Reserve and the North
Carolina Commissioner of Banks (the "Commissioner"). Applications for such
approvals have been filed and were approved by the Federal Reserve on June 24,
1998, and by the Commissioner on July 10, 1998, which approval was ratified by
the North Carolina Banking Commission on July 22, 1998. The amended price
structure contained in the Agreement was filed by Triangle on August 7, 1998
with the Federal Reserve and the Commissioner and Triangle has no reason to
believe that either agency will revoke its approval. The Merger may not be
consummated until the thirtieth day following the date of Federal Reserve
approval during which time the United States Department of Justice (the "DOJ")
may challenge the Merger on antitrust grounds. There can be no assurance that
the DOJ will not challenge the Merger. See "THE MERGER - Terms of the Merger."
No approval of the OTS is necessary, however, the required notice of the Merger
has been filed with the OTS by Triangle.
Conduct of Business Pending Merger
The Agreement provides that, prior to the Effective Time, United
Federal will conduct its business in the regular and usual course consistent
with past practices, and maintain and preserve intact its business organization,
officers and employees and business relationships. Further, except as permitted
by the Agreement, United Federal will refrain from taking certain actions
relating to the operation of its business without the prior approval of
Triangle. See "THE MERGER-Terms of the Merger-Conduct of Business Pending the
Merger."
Amendment, Waivers, and Termination
The Agreement may be terminated and the Merger abandoned, at any
time prior to the Effective Time, (i) by the mutual agreement of the Boards of
Directors of Triangle and United Federal or (ii) by either Triangle or United
Federal: (A) if the Average Closing Price of Triangle Stock is less than $16.82
or greater than $28.00; (B) if the Effective Time shall not have occurred on or
before December 31, 1998; (C) if any appropriate regulatory authority has denied
approval of the Merger; (D) in the event of a material breach by the other party
of any representation, warranty, covenant or other agreement contained in the
Agreement, which breach is not cured within 30 days after written notice thereof
is given by the non-breaching party; or (E) United Federal's shareholders do not
approve the Merger. For the 20 trading days ending on August 5, 1998, the
average closing sales price of Triangle Stock was $19.434. See "THE MERGER -
Terms of the Merger - Termination of the Agreement." In addition, the Agreement
may be terminated and the Merger abandoned by Triangle if, after testing, United
Federal faces environmental liabilities in excess of $100,000. Triangle has
conducted such testing and the estimated potential damages and liability are
less than $100,000; therefore, this condition has lapsed. See "THE MERGER -
Terms of the Merger - Termination of the Agreement." Such termination and
abandonment would not require the approval of the shareholders of any party to
the Agreement. To the extent permitted by law, the Agreement may be amended upon
the written agreement of Triangle and United Federal without the approval of
shareholders; provided, however, that the provisions of the Agreement relating
to the
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manner or basis in which the shares of United Federal will be converted
into Triangle Stock may not be amended after the United Federal Special Meeting
without the requisite approval of the holders of the issued and outstanding
shares of United Federal Stock entitled to vote thereon. See "THE MERGER - Terms
of Merger - Amendment and Waiver."
Interest of Certain Persons in the Merger
In the event the Exchange Rate provides a value of less than $20.00 per
share of United Federal Stock, Triangle has agreed that as soon as practicable
following the Effective Time, one member of United Federal's Board of Directors,
to be selected by Triangle, will be appointed to the Board of Directors of
Triangle for a term of two years ending with Triangle's 2000 Annual Meeting of
Shareholders. For such service, this individual will be paid in accordance with
Triangle's normal policies. After the Merger, the other members of the United
Federal Board, other than those who choose not to serve, will become members of
Triangle Bank's Rocky Mount advisory board and each such individual will be paid
in accordance with Triangle Bank's normal practices.
After the Merger, Triangle will honor the employment agreement dated
January 5, 1997 between United Federal and John A. Barker, President of United
Federal, and the change in control agreement dated April 1, 1997 between United
Federal and Robert C. White, Senior Vice President and Chief Financial Officer
of United Federal. In addition, Triangle will enter into a consulting agreement
with each of Mr. Barker and Mr. White for terms of six months and three months,
respectively, each for assistance in post-Merger matters. At the conclusion of
each consulting agreement, neither Mr. Barker nor Mr. White will be employed by
Triangle Bank. Consequently, pursuant to provisions in their existing employment
and change in control agreements, Triangle will be obligated to pay Mr. Barker
and Mr. White severance benefits of approximately $550,000 and $270,000,
respectively, upon consummation of the Merger. In addition, Triangle will be
obligated to maintain life, medical and disability insurance benefits for Mr.
Barker and Mr. White for a period of three years after the Merger.
Provided they each remain employed by United Federal at the Effective
Time in their respective current positions, Triangle shall enter into an
employment agreement with each of Paul S. Jaber and Wade Spears, each a Senior
Vice President of United Federal, as of the Effective Time. Each employment
agreement will have a term of two years at base salaries comparable to the
employees' current salaries. Triangle Bank also will hire Duran Broadhurst, a
Senior Vice President of United Federal, as Triangle Bank's city executive in
Wilson, North Carolina. To retain Mr. Broadhurst, Triangle shall pay him a bonus
payment equal to 18 times his current monthly salary.
Provided they remain employed by United Federal at the Effective Time,
Triangle will attempt in good faith, but shall have no obligation, to locate
suitable positions for and to offer employment to all other employees of United
Federal (other than employees serving pursuant to an employment agreement or
change in control agreement or other similar arrangement). Any employment so
offered by Triangle to an employee of United Federal shall be in such a
position, at such location within Triangle's branch system, and for such rate of
compensation as Triangle shall determine in its sole discretion.
At the Effective Time, Triangle will pay to each individual employed by
United Federal at the Effective Time who has been continuously employed as a
full-time employee by United Federal for at least one year prior to the
Effective Time, but who is not offered employment with Triangle following the
Effective Time at a position and salary comparable to his or her current
position and salary and within 30 miles of his or her location, a severance
payment in an amount equal to one week's salary or wages for each year of full
prior continuous service with United Federal, provided that any severance
payment shall consist of a minimum of one month's salary or wages and a maximum
of three months' salary or wages for non-officers and a minimum of three months'
salary or wages and a maximum of six months' salary or wages for officers (any
employee elected as assistant vice president
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or higher), who were employed as an officer on December 24, 1997; if the officer
was not employed as an officer on December 24, 1997, he or she shall be treated
either as a non-officer or an employee with less than one year's employment, as
the case may be. Each individual employed by United Federal at the Effective
Time who has not been continuously employed as a full-time employee by United
Federal for at least one year prior to the Effective Time and who is not offered
employment with Triangle following the Effective Time shall receive a severance
payment in an amount equal to two week's salary or wages. No payment of
severance compensation shall be made to any person who does not remain an
employee of United Federal at the Effective Time. No severance payment shall be
made to any employee of United Federal who is or will be party to an employment
or consulting agreement, a change in control agreement, severance agreement or
other similar arrangement with United Federal, Triangle or Triangle Bank,
whether oral or written.
The Agreement contains provisions relating to indemnification of the
present and former directors and officers of United Federal to the same extent
currently provided by United Federal to its directors and officers.
Additionally, options to purchase shares of United Federal Stock held by
directors and officers of United Federal will be converted into options to
purchase shares of Triangle Stock by multiplying the number of shares of United
Federal Stock subject to such options by the Exchange Rate. The per share
exercise price under each option shall be adjusted by dividing the per share
exercise price of the option by the Exchange Rate.
In negotiating the Agreement, Triangle requested and received from
United Federal a Stock Option Agreement dated March 4, 1998, whereby United
Federal has granted to Triangle an option to purchase 611,788 shares of United
Federal Stock at an exercise price of $17.00 per share. The Stock Option
Agreement expires on December 31, 1998, unless such date is extended by mutual
agreement of Triangle and United Federal. The options are exercisable only in
the event (i) United Federal, without Triangle's permission, agrees to be
acquired by, merge with or sell all or substantially all of its assets to
another entity, (ii) any person or entity acquires 10% or more of the
outstanding shares of United Federal Stock, (iii) any person or entity makes a
bona fide acquisition proposal to United Federal or its shareholders, or (iv)
any person or entity files an application to acquire United Federal or all or
substantially all of its assets. In such event, Triangle may exercise the option
prior to December 31, 1998. Triangle may exercise the option only with the prior
approval of the Federal Reserve and the OTS.
For a more detailed discussion of these items, See "THE MERGER -
Interest of Certain Persons in the Merger."
Certain Federal Income Tax Consequences
As a condition of the consummation of the Merger, Triangle has received
the opinion (the "Tax Opinion") of Coopers & Lybrand L.L.P., tax advisors to
Triangle, concerning the federal income tax consequences of the Merger. It is
expected that shareholders of United Federal will recognize no gain or loss as a
result of the Merger, except with respect to the payment of cash in lieu of the
actual issuance of fractional shares of Triangle Stock. The tax basis of the
Triangle Stock received by United Federal shareholders will generally equal the
tax basis of the United Federal Stock surrendered, and the holding period of the
Triangle Stock received will generally include the holding period of the United
Federal Stock surrendered. See "THE MERGER - Certain Federal Income Tax
Consequences."
IT IS RECOMMENDED THAT EACH UNITED FEDERAL SHAREHOLDER CONSULT HIS OR HER OWN
TAX ADVISOR CONCERNING THE FEDERAL AND ANY APPLICABLE FOREIGN, STATE, AND LOCAL
INCOME TAX CONSEQUENCES OF THE MERGER.
10
<PAGE>
Accounting Treatment
The Agreement requires that the Merger qualify to be treated as a
pooling-of-interests for accounting and financial reporting purposes. Generally,
if the number of fractional shares of Triangle Stock resulting from the Merger
for which cash is paid in effecting the Merger, together with any share of
Triangle Stock deemed tainted for pooling-of-interest purposes, would represent
more than 10% of the shares issued by Triangle in connection with the Merger,
then the Merger will not qualify for the pooling-of-interests method of
accounting. In such event, or if for any other reason the Merger could not be
accounted for as a pooling-of-interests, Triangle or United Federal would be
entitled to terminate the Agreement and abandon the Merger. See "THE MERGER
- -Accounting Treatment."
Effects of the Merger on Rights of Shareholders
Following the Merger, the Articles of Incorporation and Bylaws of
Triangle will remain in full force and effect without change. Shareholders of
United Federal will be shareholders of Triangle after the Merger. The provisions
of the Articles of Incorporation and Bylaws of Triangle differ in certain
respects from the provisions of the Federal Stock Charter and Bylaws of United
Federal. For a comparison of the rights of shareholders under the Articles of
Incorporation and Bylaws of Triangle and the Federal Stock Charter and Bylaws of
United Federal, see "COMPARISON OF UNITED FEDERAL STOCK AND TRIANGLE STOCK."
Pursuant to federal law, shareholders of United Federal do not have dissenter's
rights of appraisal in connection with the Merger. The Merger will not affect
the rights of shareholders of Triangle. As the Merger will have no effect on the
Articles of Incorporation or Bylaws of Triangle or on the rights or outstanding
shares of Triangle Stock held by Triangle shareholders, and as the amount of
Triangle Stock to be issued in the Merger is less than 20% of the currently
outstanding shares of Triangle Stock, no approval of the Merger by the
shareholders of Triangle is necessary, pursuant to Section 55-11-03(g) of the
North Carolina Business Corporation Act ( the "NCBCA").
Resales of Triangle Stock Received in Merger
The shares of Triangle Stock into which United Federal Stock will be
converted in the Merger will be freely transferable by the holders thereof
except in the case of shares held by persons who may be deemed to be
"affiliates" of Triangle or United Federal under applicable federal securities
laws. Generally, United Federal's affiliates include its directors, executive
officers, principal shareholders and other persons who may be deemed to
"control" United Federal. See "THE MERGER-Resale of Triangle Stock".
Certain Provisions that May Be Deemed to Have an Anti-Takeover Effect
The Articles of Incorporation and Bylaws of Triangle contain several
provisions that may be deemed to have an "anti-takeover" effect in that they
would discourage or prevent an acquisition of Triangle unless the potential
acquiror has obtained the approval of Triangle's Board of Directors. Triangle's
Board of Directors believes that an unsolicited, nonnegotiated takeover proposal
could seriously disrupt the business and management of Triangle and cause
Triangle great expense. Although the Board of Directors of Triangle believes
these provisions are beneficial to Triangle shareholders, such provisions may
tend to discourage some acquisition proposals by potential acquirers. See
"COMPARISON OF UNITED FEDERAL STOCK AND TRIANGLE STOCK." The Merger will not
effect the rights of shareholders of Triangle.
Distribution of Triangle Certificates
As soon as practicable after the consummation of the Merger, Registrar
and Transfer Company, Cranford, New Jersey, Triangle's transfer agent (the
"Exchange Agent"), will mail to each holder of record of United Federal Stock a
letter of transmittal and instructions for use in effecting the surrender of the
certificates
11
<PAGE>
in exchange for certificates representing shares of Triangle Stock. See "THE
MERGER - Distribution of Triangle Certificates."
Market for Triangle Stock and United Federal Stock
Since January 1998, transactions in Triangle Stock have been quoted on
the New York Stock Exchange. From 1994 through 1997, transactions in Triangle
Stock were quoted on the Nasdaq National Market. As of June 30, 1998, there were
21,529,254 shares of Triangle Stock outstanding and held by approximately 8,200
holders of record, not including persons or entities whose stock is held in
nominee or street name through various brokerage firms or banks. On June 30,
1998, Triangle effected a three-for-two split of Triangle Stock in the form of a
50% stock dividend with the result that the 14,354,009 shares outstanding on
June 30, 1998 became 21,529,254 shares outstanding after the split.
United Federal Stock trades on the Nasdaq Small-Cap-Market. Trading in
United Federal Stock is infrequent. As of the United Federal Record Date, there
were 3,283,314 shares of United Federal Stock outstanding and held by
approximately 510 holders of record, not including persons or entities whose
stock is held in nominee or street name through various brokerage firms or
banks.
The following table sets forth quarterly information on the price range
of Triangle Stock and United Federal Stock for the periods indicated and shows
the high and low sale prices as quoted by the Nasdaq National Market through
1997 and the New York Stock Exchange for 1998 for Triangle Stock, and the high
and low sale prices as quoted by the Nasdaq Small-Cap Market for United Federal
Stock, respectively. The prices shown are without retail markups, markdowns or
commissions.
<TABLE>
<CAPTION>
<S> <C>
Triangle Stock (1) United Federal Stock
High Low High Low
---- --- ---- ---
1998
----
1st Quarter.................... $23.37 $19.37 $19.50 $17.50
2nd Quarter.................... $20.92 $18.75 $18.625 $16.75
3rd Quarter (through 8/5/98)... $21.06 $17.875 $18.625 $17.625
1997
----
1st Quarter.................... $13.67 $10.67 $ 9.63 $8.00
2nd Quarter.................... $15.00 $12.33 $11.88 $ 9.00
3rd Quarter.................... $20.17 $14.50 $12.00 $10.75
4th Quarter.................... $23.92 $16.33 $20.00 $10.00
1996
----
1st Quarter ................... $10.67 $9.25 $8.00 $7.50
2nd Quarter.................... $10.00 $9.00 $8.00 $7.75
3rd Quarter ................... $10.17 $9.00 $8.00 $7.00
4th Quarter ................... $10.82 $9.67 $8.25 $7.25
</TABLE>
(1) On June 30, 1998, Triangle effected a three-for-two split of
Triangle Stock effected in the form of a 50% stock dividend. The information on
Triangle Stock contained in the table has been amended to give effect to the
stock split, payable to shareholders of record on June 15, 1998.
On December 24, 1997, the last full business day preceding the public
announcement of the Merger, the last sale price for a share of Triangle Stock
was $23.33. The last sale price of United Federal Stock prior to the
announcement of the Merger and known to management was $17.00 on December 24,
1997. On August 6, 1998, the latest practical date for which such prices were
available, the last sale price of a share of Triangle Stock was $19.00 and the
last sale price of United Federal Stock since the announcement of the Merger and
known to management of United Federal was $18.188 for 9,000 shares on August 7,
1998.
12
<PAGE>
Dividends
The holders of Triangle Stock are entitled to receive dividends when
and if declared by Triangle's Board of Directors out of funds legally available
therefor. Triangle has paid cash dividends each quarter since the third quarter
of 1994. There can be no assurance that after the Merger any dividends will be
declared or paid or, if declared and paid, continued in the future. The
declaration and payment of dividends will depend upon business conditions,
operating results, capital and reserve requirements, and the Triangle Board of
Directors' consideration of other relevant factors. Subject to the foregoing, it
is currently Triangle's intent to continue to pay quarterly cash dividends. The
principal sources of funds for the payment of dividends by Triangle are
dividends from its subsidiaries, Triangle Bank, Bank of Mecklenburg and Coastal
Leasing LLC. See "CERTAIN REGULATORY MATTERS - Dividends" for information
regarding certain restrictions on the payment of dividends by Triangle Bank and
Bank of Mecklenburg to Triangle.
The holders of United Federal Stock are entitled to receive dividends
when and if declared by the Board of Directors out of funds legally available
therefor. United Federal has paid cash dividends each quarter since the first
quarter of 1995. United Federal paid cash dividends on an irregular basis prior
to 1995. Pursuant to the terms of the Agreement, United Federal may continue to
pay, but may not increase, its quarterly cash dividend at the rate of $0.06 per
share. Like Triangle, the payment of cash dividends by United Federal is limited
by certain regulatory restrictions, and is dependent upon its business
conditions, operating results, capital and reserve requirements, and its Board
of Directors' consideration of other relevant factors. See "INFORMATION ABOUT
UNITED FEDERAL - United Federal Stock ." There can be no assurance that, in the
absence of the consummation of the Merger, dividends would be paid by United
Federal in the future.
At March 31, 1998, under dividend restrictions imposed by federal and
state laws, and without obtaining regulatory approvals, Triangle Bank could
declare approximately $32 million in cash dividends, Bank of Mecklenburg could
declare approximately $4 million in cash dividends, and United Federal could
declare approximately $3.1 million in cash dividends. Sources of cash available
to Triangle for the payment of cash dividends are cash on hand at Triangle, cash
made available to Triangle from Triangle Bank, Bank of Mecklenburg and other
subsidiaries in the form of dividends to Triangle, and borrowed funds. Except
for the receipt of cash in exchange for shares of Triangle Stock in connection
with the exercise of outstanding options and warrants, Triangle does not
generate cash other than the dividends received from its subsidiaries, including
Triangle Bank and Bank of Mecklenburg, and earnings on investments. After giving
effect to the Merger, at March 31, 1998, Triangle's subsidiaries, including
Triangle Bank and Bank of Mecklenburg, and United Federal could declare
approximately $39 million in cash dividends on a combined basis, which amount in
turn would be available to Triangle.
<TABLE>
<CAPTION>
<S> <C>
The following table sets forth the cash dividends declared per share for the indicated periods.
Triangle United Federal
1998
----
1st Quarter.................... $0.08 $.06
2nd Quarter.................... $0.09 $.06
1997
----
1st Quarter.................... $.07 $.05
2nd Quarter.................... $.07 $.06
3rd Quarter.................... $.08 $.06
4th Quarter.................... $.08 $.06
1996
----
1st Quarter ................... $.05 $.05
2nd Quarter.................... $.05 $.05
3rd Quarter ................... $.05 $.05
4th Quarter ................... $.07 $.05
</TABLE>
(1) The dividends shown are dividends historically paid by Triangle on
shares of Triangle Stock outstanding on the date declared without restating such
dividends to reflect acquisitions of other entities by Triangle which were
accounted for under the pooling-of-interests method of accounting. On June 30,
1998, Triangle effected a three-for-two split of Triangle Stock effected in the
form of a 50% stock dividend, payable to shareholders of record on June 15,
1998. The information on Triangle presented in the table has been revised to
give effect to the stock split.
13
<PAGE>
SELECTED SUPPLEMENTAL CONSOLIDATED FINANCIAL DATA
The following tables set forth selected supplemental consolidated
financial information for Triangle and selected historical consolidated
financial information for United Federal. This information has been derived from
the audited and unaudited supplemental consolidated financial statements of
Triangle and the audited and unaudited consolidated financial statements of
United Federal, including the related notes thereto, incorporated herein by
reference and should be read in conjunction therewith. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE." For a discussion of recent transactions, see
"PRO FORMA COMBINED CONDENSED INFORMATION" and "INFORMATION ABOUT TRIANGLE -
Recent Acquisitions" and "INFORMATION ABOUT TRIANGLE - Trust Preferred
Securities"
<TABLE>
<CAPTION>
<S> <C>
Triangle Bancorp, Inc.
Selected Consolidated Financial Data
(Dollars in thousands, except per share data)
Three Months Ended
March 31, Year Ended December 31,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(Unaudited)
Selected Balance Sheet Data:
Loans and Leases, net $1,027,437 $873,772 $1,018,556 $816,618 $697,844 $574,320 $493,492
Securities Available for Sale 411,613 264,477 432,722 309,185 235,188 174,994 -
Securities Held to Maturity 89,815 91,395 94,793 98,112 89,452 86,427 227,142
Trading Assets - 54,447 - - - - -
Total Assets 1,710,850 1,392,791 1,711,616 1,337,954 1,137,217 953,546 863,501
Total Deposits 1,349,775 1,159,406 1,284,586 1,109,345 917,501 803,858 736,266
Advances from the FHLB 150,300 69,300 195,300 59,800 59,500 20,500 5,500
Corporation-Obligated Mandatorily
Redeemable Capital Securities 19,951 - 19,951 - - - -
Shareholders' Equity 133,190 121,304 130,492 116,186 106,545 91,484 88,495
Selected Results of Operations:
Net Interest Income $15,420 $13,399 $57,962 $49,629 $43,214 $37,647 $27,370
Provision for Loan Losses 1,152 591 3,669 2,473 706 1,443 2,501
Noninterest Income 3,095 2,615 13,620 10,236 8,738 6,307 7,024
Noninterest Expense 9,968 9,167 40,453 35,307 36,053 33,468 24,938
Net Income 4,911 3,922 17,724 14,300 10,086 6,019 5,328
Per Share Data (1):
Basic EPS $0.23 $0.19 $0.83 $0.69 $0.49 $0.35 $0.31
Diluted EPS 0.22 0.18 0.80 0.67 0.48 0.35 0.31
Book Value 6.19 5.70 6.11 5.60 5.16 4.52 4.64
Cash Dividends 0.08 0.05 0.26 0.19 0.11 0.06 0.02
Selected Ratios:
Return on Average Assets 1.18% 1.18% 1.20% 1.13% 0.99% 0.67% 0.81%
Return on Average Equity 14.92% 13.16% 14.15% 12.94% 10.17% 6.63% 7.04%
Shareholders' Equity to Total Assets 7.79% 8.71% 7.62% 8.68% 9.37% 9.59% 10.25%
</TABLE>
(1) The per share information presented has been adjusted to give effect to a
three-for-two stock split of Triangle Stock effected in the form of a 50% stock
dividend payable on June 30, 1998 to shareholders of record on June 15, 1998.
14
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
United Federal Savings Bank
Selected Consolidated Financial Data
(Dollars in thousands except per share data)
Three Months Ended
March 31, Year Ended December 31,
------------------- -----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
Financial Condition Data: (Unaudited)
Total Assets..................... $305,650 $270,180 $304,407 $260,799 $246,918 $240,740 $242,788
Loans Receivable................. 256,469 196,873 251,568 186,923 138,825 115,047 95,788
Mortgage-backed Securities....... 5,566 20,090 5,873 27,888 39,232 45,156 53,820
Investments (1).................. 26,297 40,255 27,827 34,136 58,665 69,021 79,650
Deposits......................... 268,362 241,239 265,908 235,458 220,346 196,614 206,257
Borrowed Funds................... 5,000 - 10,000 - - 20,000 -
Stockholders' Equity............. 22,905 20,532 21,980 20,217 20,714 17,390 17,592
Operating Data:
Interest Income.................. $6,288 $5,241 $22,957 $20,001 $19,411 $15,294 $15,934
Interest Expense................. 3,520 3,028 12,858 11,825 12,202 9,322 10,260
Net Interest Income.............. 2,768 2,213 10,099 8,176 7,209 5,972 5,674
Loan Loss Provisions............. 300 35 1,451 42 (675) (435) (590)
Other Income..................... 842 879 3,630 2,988 2,918 3,076 5,459
Non Interest Expense............. 2,569 2,236 9,672 9,571 7,019 7,603 7,606
Income Tax Expense............... 271 296 803 1,055 1,353 716 1,549
Net Income....................... 470 525 1,803 496 2,430 1,164 2,568
Per Share Data:
Earnings - Basic................. $0.15 $0.17 $0.59 $0.16 $0.79 $0.38 $0.84
Earnings - Diluted............... 0.14 0.17 0.57 0.16 0.79 0.38 0.84
Dividends Declared............... 0.06 0.05 0.23 0.20 0.16 0.04 -
Book Value at Period End......... 7.02 6.70 6.93 6.60 6.76 5.67 5.74
Selected Financial Ratios:
Return on Average Assets......... 0.62% 0.79% 0.64% 0.19% 1.00% 0.48% 1.02%
Return on Average Equity......... 8.41% 10.48% 8.70% 2.43% 12.75% 6.65% 16.02%
Average Equity to Average Assets 7.37% 7.53% 7.39% 7.97% 7.81% 7.23% 6.34%
Dividend Payout Ratio (2)........ 42.86% 29.41% 40.35% 125.00% 20.25% 10.53% N/A
</TABLE>
(1) Investments include amounts due from depository institutions, federal
funds sold, equity securities, US Government and agency bonds, and loans
held for sale.
(2) The dividend pay-out ratio was computed based on diluted earnings per
share.
15
<PAGE>
COMPARATIVE PER SHARE DATA
The following unaudited supplemental consolidated financial information reflects
certain comparative per share data relating to net income and book value per
common share for Triangle. United Federal is presented on a historical basis.
Net income and book value per common share is presented on a pro forma basis for
Triangle after giving effect to the Merger. Net income and book value per common
share is presented on a pro forma equivalent basis for United Federal assuming
that the Merger had been effected for the periods presented and had been
accounted for as a pooling-of-interests. The Triangle historical information for
all periods has been restated to reflect the acquisition of Guaranty State
Bancorp in April 1998. The data presented should be read in conjunction with and
has been derived from historical and supplemental consolidated financial
statements of Triangle and the historical consolidated financial statements of
United Federal and the related notes thereto incorporated herein by reference
and in conjunction with the unaudited pro forma combined condensed financial
information, including the related notes thereto, included elsewhere in this
Prospectus/Proxy Statement. The pro forma comparative per share information
presented is not necessarily indicative of what the actual financial results
would have been had such transaction been completed at each of the periods
presented and is not indicative of future financial position or future results.
See "PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION" and "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
<S> <C>
Three Months Ended March 31, Year Ended December 31,
----------------------------- -------------------------
Per Common Share (1): 1998 1997 1997 1996 1995
---- ---- ---- ---- ----
Basic Earnings Per Share
Triangle - supplemental........................ $.23 $.19 $ .83 $ .69 $.49
United Federal-historical ..................... .15 .17 .59 .16 .79
Triangle/United Federal pro forma combined..... .22 .18 .81 .63 .53
United Federal pro forma equivalent............ .21 .17 .77 .60 .50
Diluted Earnings Per Share:
Triangle - supplemental........................ $.22 $.18 $ .80 $ .67 $.48
United Federal - historical.................... .14 .17 .57 .16 .79
Triangle/United Federal pro forma combined..... .21 .18 .78 .61 .52
United Federal pro forma equivalent............ .19 .17 .74 .58 .49
Cash Dividends:
Triangle - supplemental........................ $.08 $.05 $.26 $.19 $.11
United Federal historical...................... .06 .05 .23 .20 .16
Triangle/United Federal pro forma combined:.... .08 .05 .26 .19 .12
At 3/31/98 At 12/31/97
Book Value: ---------- -----------
Triangle - supplemental........................ $6.19 $6.11
United Federal-historical...................... 7.02 6.93
Triangle/United Federal pro forma combined..... 6.34 6.26
United Federal pro forma equivalent............ 5.99 5.92
At December 24, 1997
Market Value per Share (2) (3): --------------------
Triangle Stock................................. $23.33
United Federal Stock........................... $17.00
Equivalent pro forma United Federal Stock...... $22.05
(giving effect to Merger only)
</TABLE>
(1) The per share information has been adjusted to give effect to a
three-for-two split of Triangle Stock effected in the form of a 50%
stock dividend payable on June 30, 1998 to shareholders of record on
June 15, 1998.
(2) The closing price for Triangle Stock and for United Federal Stock is
the closing sale price on the Nasdaq National Market and on the Nasdaq
Small-Cap Market, respectively, on the indicated date.
(3) Equivalent pro forma amount is calculated by multiplying the Triangle
Stock market value by the Exchange Rate. The equivalent pro forma
market value per share is dependent on the price of Triangle Stock on
any given date and the amount shown is not indicative of what the value
of Triangle Stock will be after the Merger.
16
<PAGE>
SPECIAL MEETING OF UNITED FEDERAL SHAREHOLDERS
This Proxy Statement/Prospectus is being furnished to shareholders of
record of United Federal Stock as of the close of business on July 27, 1998, in
connection with the solicitation of proxies by the United Federal Board for use
at the United Federal Special Meeting to be held on Thursday, September 10,
1998, at 10:00 a.m., local time, at the Carleton House, 213 North Church Street,
Rocky Mount, North Carolina, and at any adjournments thereof to consider and
take action upon (i) a proposal to approve the Agreement and (ii) such other
business as may properly come before the United Federal Special Meeting. Each
copy of this Proxy Statement/Prospectus being furnished to the holders of record
of United Federal Stock is accompanied by a form of proxy for use at the United
Federal Special Meeting.
HOLDERS OF UNITED FEDERAL STOCK ARE REQUESTED TO COMPLETE, DATE, AND SIGN THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
Record Date and Voting Rights
The United Federal Board has fixed the close of business on July 27,
1998 (the "United Federal Record Date") as the record date for the determination
of shareholders of United Federal entitled to receive notice of and to vote at
the United Federal Special Meeting. As of the United Federal Record Date, there
were 3,283,314 shares of United Federal Stock issued and outstanding held by
approximately 510 holders of record, not including persons or entities whose
stock is held in nominee or street name through various brokerage firms or
banks. Each share of United Federal Stock issued and outstanding as of the
United Federal Record Date is entitled to one vote on each of the matters to be
decided at the United Federal Special Meeting. The affirmative vote of at least
two-thirds of the total shares of United Federal Stock issued and outstanding is
necessary for approval of the Agreement. Because the affirmative vote of at
least two-thirds of the total shares issued and outstanding is required,
abstentions, broker non-votes and shares otherwise not voted in the affirmative
will have the same effect as votes against the Agreement.
As of the United Federal Record Date, the directors and executive
officers of United Federal and their affiliates owned and were entitled to vote
approximately 28% of the United Federal Stock . The directors and executive
officers are expected to vote their shares in favor of the proposal to approve
the Agreement.
Voting and Revocation of Proxies
The shares of United Federal Stock represented by properly executed
proxies received in time for the United Federal Special Meeting will be voted as
directed by the shareholders, unless such proxies are revoked as described
below. If no instructions are given, such proxies will be voted FOR approval of
the proposal to approve the Agreement and the Merger. If any other matter is
properly brought before the United Federal Special Meeting, such proxies will be
voted in the discretion of a majority of the proxy holders named in the United
Federal proxy card. Management of United Federal is not aware of any other
business to be presented at the United Federal Special Meeting.
Any shareholder may revoke a proxy at any time before it is voted by
attending and voting in person at the United Federal Special Meeting or by
giving a written notice of revocation to the Secretary of United Federal
provided such notice is actually received prior to the vote of shareholders. A
later dated proxy that is actually voted at the United Federal Special Meeting
also will revoke an earlier dated proxy. A proxy will not be revoked by the
death or incapacity of the shareholder executing it unless, before the shares
are voted, notice of such death or incapacity is filed with the Secretary of
United Federal or with any other person authorized to tabulate votes on
17
<PAGE>
behalf of United Federal. Whether or not you plan to attend the United Federal
Special Meeting, please complete, sign and return the enclosed proxy card.
Solicitation of Proxies
Proxies may be solicited by the directors, officers and employees of
United Federal by mail, in person or by telephone or telegraph. Such persons
will receive no additional compensation for such services. United Federal may
make arrangements with brokerage firms and other custodians, nominees, and
fiduciaries, if any, for the forwarding of solicitation materials to the
beneficial owners of United Federal Stock held of record by such persons. Any
such brokers, custodians, nominees, and fiduciaries will be reimbursed for the
reasonable out-of-pocket expenses incurred by them for such services. Except
under certain circumstances involving a wrongful breach or termination of the
Agreement by Triangle, United Federal will pay all expenses of its solicitation
of proxies and of holding the United Federal Special Meeting. This Proxy
Statement/Prospectus, Notice of the United Federal Special Meeting and form of
proxy, are first being mailed to shareholders of United Federal on or about
August 12, 1998.
Recommendation
The United Federal Board has unanimously approved the Agreement and the
Merger, believes that the proposal to approve the Agreement and the Merger is in
the best interest of United Federal and its shareholders, employees, depositors,
customers, suppliers and community, and unanimously recommends that United
Federal shareholders vote FOR approval of the Agreement and the Merger. In
making its recommendation, the United Federal Board has considered, among other
things, the United Federal Fairness Opinion that Triangle's proposal is fair to
United Federal shareholders from a financial point of view.
18
<PAGE>
THE MERGER
The following information describes certain of the important terms and
conditions of the Agreement and the Merger. This description does not purport to
be complete and is qualified in its entirety by reference to the Agreement and
the United Federal Fairness Opinion, both of which are attached hereto as
Appendices to this Proxy Statement/Prospectus. United Federal shareholders are
urged to read these materials in their entirety.
Parties to the Merger
Triangle. Triangle, a North Carolina corporation, is a bank holding
company registered with the Federal Reserve under the BHC Act. Triangle owns all
of the outstanding shares of Triangle Bank and Bank of Mecklenburg, which are
state commercial banks under the supervision of the Commissioner and the Federal
Reserve. Triangle also owns Coastal Leasing LLC, a business equipment leasing
company headquartered in Greenville, North Carolina. Triangle Bank provides
full-service commercial and consumer banking services from its 61 branches in 41
cities located throughout central and eastern North Carolina. Bank of
Mecklenburg provides full-service commercial and consumer banking services from
three branches in Charlotte, North Carolina. As of March 31, 1998, Triangle had
consolidated assets of $1.7 billion, consolidated deposits of $1.3 billion, and
consolidated shareholders' equity of $133 million. On April 16, 1998, Triangle
acquired Guaranty State Bancorp, Durham, North Carolina. See "INFORMATION ABOUT
TRIANGLE - Recent Acquisitions." The executive offices of Triangle are located
at 4300 Glenwood Avenue, Raleigh, North Carolina 27612, telephone number (919)
881-0455.
United Federal. United Federal is a federally chartered savings bank
under the supervision of the OTS. United Federal provides a range of mortgage,
commercial and consumer banking services through 13 branches in Rocky Mount,
Cary, Greenville, Morehead City, New Bern, Pinetops, Raleigh, Spring Hope,
Tarboro, Warrenton and Wilson, North Carolina. In addition, United Federal
operates loan production offices in both Charlotte and Wilmington, North
Carolina. As of March 31, 1998, United Federal had assets of $305.6 million,
deposits of $268.4 million, and shareholders' equity of $22.9 million. The
executive offices of United Federal are located at 116 South Franklin Street,
Rocky Mount, North Carolina 27804-5707, telephone number (252) 446-9191.
Structure of the Merger
Subject to the terms and conditions of the Agreement, at the Effective
Time, United Federal either (i) will be merged with and into Triangle Bank or
(ii) will convert to a North Carolina-chartered commercial bank and become the
wholly-owned bank subsidiary of Triangle, and, as soon as practicable
thereafter, merge into Triangle Bank. Ultimately, Triangle Bank will be the
surviving corporation resulting from the Merger, operating under its articles of
incorporation and bylaws as existing immediately prior to the Merger. At the
Effective Time, the issued and outstanding shares of United Federal Stock will
be converted into the right to receive shares of Triangle Stock at the Exchange
Rate. See "- Terms of the Merger - Exchange Rate." Each share of United Federal
Stock issued and outstanding at the Effective Time will be automatically
canceled by virtue of the Merger. With the exception of the issuance of
additional shares of Triangle Stock in connection with the Merger, the issued
and outstanding shares of Triangle Stock will not be changed as a result of the
Merger. See "- Terms of the Merger."
United Federal maintains a stock option plan for employees and a stock
option plan for outside directors (collectively, the "United Federal Option
Plans") under which it has granted options to purchase shares of United Federal
Stock (the "United Federal Options"). At the United Federal Record Date, United
Federal Options to purchase a total of 43,500 shares of United Federal Stock
were outstanding. All such United Federal Options will be converted into options
to purchase Triangle Stock at the Effective Time and thereafter shall provide
for the purchase of that number of shares of Triangle Stock equal to the product
of the number of shares of United Federal Stock subject to the United Federal
Option immediately prior to the Effective Time multiplied by the Exchange
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Rate and rounded down to the nearest whole number. The per share exercise price
immediately prior to the Effective Time shall be adjusted by dividing such per
share price by the Exchange Rate and rounded up to the nearest cent. See "-
Terms of the Merger - Exchange Rate."
After the Effective Time, the holders of record of shares of United
Federal Stock will have voting rights and dividend rights with respect to that
number of shares of Triangle Stock for which the shares of United Federal Stock
that such persons owned immediately prior to the Effective Time are exchanged.
Terms of the Merger
Exchange Rate. Shares of United Federal Stock issued and outstanding
immediately prior to the Effective Time will be converted into the right to
receive shares of Triangle Stock at the Exchange Rate as provided in the
Agreement. The Exchange Rate is 0.945, subject to adjustment as described below.
In the event the Average Closing Price of Triangle Stock is between $18.67 and
$21.17, the Exchange Rate shall be increased to provide a value of not less than
$20.00 for each share of United Federal Stock, and in the event the Average
Closing Price of Triangle Stock is between $25.51 and $28.00, the Exchange Rate
shall be decreased to provide a value of not more than $24.11 for each share of
United Federal Stock. As of August 5, 1998, the Average Closing Price of
Triangle Stock was $19.434; if the Average Closing Price of Triangle Stock was
$19.434 three days prior to the Merger, pursuant to the Agreement, the Exchange
Rate would be increased from 0.945 to 1.029 to provide a per share value of
$20.00. Each United Federal shareholder will receive a number of shares of
Triangle Stock equal to the number of shares of United Federal Stock owned by
such shareholder multiplied by the Exchange Rate. No fractional shares will be
issued but United Federal shareholders, in lieu of the issuance of fractional
shares, will receive cash as determined in the Agreement. In the event the
Average Closing Price of Triangle Stock is between $18.66 and $17.25, the
Exchange Rate shall be fixed at 1.071; and in the event the Average Closing
Price of Triangle Stock is less than $17.25, the Exchange Rate shall be
increased to provide a value of not less than $18.47 per share of United Federal
Stock, provided that Triangle or United Federal may terminate the Agreement and
abandon the Merger if the Average Closing Price of Triangle Stock is less than
$16.82.In the event the Average Closing Price of Triangle Stock is greater than
$28.00, either Triangle or United Federal may terminate the Agreement and
abandon the Merger.
In addition, after determining the Exchange Rate required by the
Average Closing Price of Triangle Stock, the Exchange Rate shall be adjusted in
the following manner: (i) if between January 1, 1998 and a date five business
days prior to the closing charge-offs by United Federal (net of recoveries) for
all loans (excluding any charge-offs for Pea Island loans) exceed $500,000 the
Exchange Rate shall be reduced by .0015 for each $100,000 in charge-offs in
excess of $500,000, (ii) if at month-end preceding the closing non-performing
assets of United Federal exceed $2,000,000, the Exchange Rate shall be reduced
by .00375 for every $1,000,000 in excess of $2,000,000, on an interpolated
dollar-for-dollar basis (for purposes of this clause non-performing assets are
defined as all loans (excluding mortgage loans originated by United Federal for
sale in the secondary market and mortgage loans which are guaranteed by the FHA
or VA) which are over 90 days delinquent, on non-accrual status, or for which
the borrower has filed a petition for relief under the United States Bankruptcy
Code, and all other collateral property received under loan arrangements
currently held for resale), or (iii) if on a date five business days prior to
the closing the loan loss reserve of United Federal is less than the sum of
$2,900,000 plus 1.5% for every dollar in total loan growth over the December 31,
1997 level of $254,000,000, the Exchange Rate shall be reduced by .00375 for
every $250,000 shortfall in the loan loss reserve (excluding any write-off of
Pea Island loans) on an interpolated dollar-for-dollar basis; then if the
aggregate reduction caused by clauses (i), (ii) and (iii) above is less than or
equal to .00375, the Exchange Rate shall not be adjusted, but if the aggregate
reduction is greater than .00375 the Exchange Rate shall be adjusted, provided
that in the event the adjustment provided for herein causes the Exchange Rate
(i) to decrease by more than 1.5 basis points, either Triangle or United Federal
at its option and without penalty may terminate the Agreement, provided that in
the event that either party does not so terminate the Agreement, the Agreement
shall remain in effect, or (ii) to yield a per share dollar value to a holder of
United Federal Stock of less than $18.47, United Federal may terminate the
Agreement at its option and without penalty, provided that in the event that
United Federal does not so terminate the Agreement, the Agreement shall remain
in effect.
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In the event Triangle enters into a binding written agreement to be
acquired by a third party which causes the Average Closing Price of Triangle
Stock to exceed $28.00, Triangle shall not have the right to terminate the
Agreement based on the Average Closing Price as provided above. Further, in such
event, the Exchange Rate shall be adjusted to yield a per share dollar value to
a holder of United Federal Stock of not more than $24.11. In such event, United
Federal may still exercise its right to terminate the Agreement based on the
Average Closing Price as provided above.
Treatment of Fractional Shares. No fraction of a share of Triangle
Stock will be issued in connection with the Merger. Each United Federal
shareholder who otherwise would be entitled to receive a fraction of a share of
Triangle Stock upon the conversion of that shareholder's shares of United
Federal Stock at the Effective Time shall receive, in lieu thereof, cash
(without interest) in an amount equal to that fraction multiplied by the Market
Value of one whole share of Triangle Stock at the Effective Time. As used above,
Market Value shall be equal to the closing sale price of Triangle Stock as
quoted on the New York Stock Exchange (as reported by The Wall Street Journal
or, if not so reported, by any other authoritative source) on the trading day
three days preceding the Closing Date. As of August 6, 1998, the closing sale
price of Triangle Stock on the New York Stock Exchange was $19.00 No United
Federal shareholders will be entitled to any dividend or other distribution or
any voting or other rights as a shareholder with respect to any fractional share
of Triangle Stock.
Closing and Effective Time. The Merger will not be consummated unless
and until the Agreement and the transactions contemplated thereby are approved
by the requisite vote of the shareholders of United Federal, the required
regulatory approvals are received, and the other conditions to the Merger are
satisfied (or waived to the extent permitted by applicable law). The Agreement
provides that the closing of the Merger shall occur on a date specified by
Triangle after the expiration of all required waiting periods following receipt
of the required regulatory approvals, but in no event later than December 31,
1998. The Effective Time shall occur not later than December 31, 1998. The
Merger will become effective on the date and at the time on which Articles of
Merger shall have been accepted for filing by the North Carolina Secretary of
State (or such later date and time as may be specified in the Articles of
Merger). The Effective Time is currently anticipated to occur in September 1998.
After the Merger of United Federal with and into Triangle Bank, United
Federal will cease to exist and the offices of United Federal will become
offices of Triangle Bank.
Conduct of Business Pending the Merger. The Agreement provides that,
during the period from March 4, 1998 (the date the Agreement was executed) to
the Effective Time, except as provided in the Agreement, United Federal will
conduct its business in the regular and usual course consistent with past
practice, and maintain and preserve intact its business organization, officers
and employees and business relationships. The Agreement further provides that
Triangle may enter into agreements to acquire other financial institutions prior
to the Effective Time.
In addition to other restrictions described elsewhere herein, the
Agreement provides that, prior to the Effective Time and except in the ordinary
course of its business or as otherwise required by applicable law or regulation,
United Federal may not, among other prohibited actions, (i) incur indebtedness
for borrowed money, (ii) sell, transfer, mortgage, pledge or otherwise dispose
of any of its properties or assets, or acquire any significant assets, (iii)
increase the compensation or benefits of any of its employees, (iv) settle any
claim, action or proceeding against it involving monetary damages, (v) make any
change in its capital stock, or issue, sell, purchase, redeem or retire shares
of such stock, (vi) amend its charter or bylaws, (vii) grant or issue any
additional stock options, (viii) enter into any new employment agreements or
adopt any new employee benefit plans, (ix) change its accounting practices, (x)
acquire or open any new branch offices, or (xi) enter into any contract other
than in the ordinary course of its business.
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Conditions to Consummation of the Merger. Consummation of the Merger is
subject to various conditions described in the Agreement, including without
limitation: (i) approval of the Agreement by United Federal's shareholders; (ii)
receipt of all required regulatory approvals without the imposition by any
regulatory agency of a condition to any such approval that is considered by
Triangle or United Federal to be materially disadvantageous or burdensome or to
impact the economic or business benefits of the Merger so adversely that it
would not be advisable to consummate it; (iii) receipt of the Tax Opinion; (iv)
receipt of the United Federal Fairness Opinion; and (v) receipt by Triangle of a
fairness opinion from its financial advisor.
Triangle's and United Federal's separate obligations under the
Agreement are subject to various other conditions described in the Agreement,
unless waived by the party entitled to the benefits of such provision, including
without limitation: (i) the absence of a material adverse change in the
financial condition, results of operations or business of the other party; (ii)
compliance by the other party with all laws and regulations applicable to the
transactions described in the Agreement; (iii) the absence of any violation or
breach by the other party of any of its obligations, covenants, agreements,
representations or warranties under the Agreement; and (iv) the receipt of
certain certificates and opinions of the other party's senior officers and legal
counsel.
Additionally, Triangle's obligations are subject to certain additional
conditions, unless waived by Triangle, including without limitation: (i) receipt
of a written agreement as to certain matters from persons who are considered
"affiliates" of United Federal (see " - Resale of Triangle Stock"); (ii) receipt
by Triangle of assurances from Coopers & Lybrand L.L.P. in form and content
satisfactory to Triangle to the effect that the Merger may be treated as a
"pooling-of-interests" for accounting purposes; (iii) amounts paid by United
Federal for legal, accounting and other professional services related to the
Merger (not including fees for the United Federal Fairness Opinion) may not
exceed $80,000; and (iv) the aggregate shares of United Federal Stock being paid
in cash in lieu of fractional shares, together with any shares of Triangle Stock
deemed tainted for pooling-of-interests purposes, may not exceed 10% of the
outstanding shares of United Federal Stock .
Required Regulatory Approvals. The Merger and the transactions
contemplated by the Agreement are contingent upon receipt of the following
approvals:
Federal Reserve. The Merger is subject to the approval of the Federal
Reserve under the Bank Merger Act, which prohibits the merger or consolidation
of any bank holding company or Federal Reserve member bank with any other bank
holding company or depository institution without Federal Reserve approval.
Triangle has made application to the Federal Reserve which application was
approved on June 24, 1998. The amended price structure contained in the
Agreement was filed by Triangle on August 7, 1998 with the Federal Reserve and
Triangle has no reason to believe that the Federal Reserve will revoke its
approval.
North Carolina Commissioner of Banks. Because Triangle is a North
Carolina-chartered commercial bank, the merger of United Federal into Triangle
Bank is subject to the approval of the Commissioner. North Carolina law
prohibits the merger or consolidation of any state bank with any other
depository institution without the approval of the Commissioner. Triangle has
made application to the Commissioner which application was approved on July 10,
1998 and ratified by the North Carolina Banking Commission on July 22, 1998. The
amended price structure contained in the Agreement was filed by Triangle on
August 7, 1998 with the Commissioner and Triangle has no reason to believe that
the Commissioner will revoke his approval.
Office of Thrift Supervision. Because United Federal is a federally
chartered savings bank, notice must be given to the OTS of the Merger, but no
approval of the OTS is required. Triangle Bank has given the required notice to
the OTS.
Other Approvals. Triangle and United Federal are not aware of any other
governmental approvals or actions that may be required for consummation of the
Merger except those described above. Should any such approval or action be
required, it is presently contemplated that such approval or action would be
sought. There can be no assurance, however, that any such approval or action, if
needed, could be obtained and, if obtained, would not be conditioned in a manner
that would cause the parties to abandon the Merger.
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Amendment and Waivers. Prior to the Effective Time any provision of the
Agreement (other than provisions relating to regulatory approvals, shareholder
approval and other approvals required by law) may be waived by the party
entitled to the benefits of such provision. Additionally, the Agreement may be
amended, modified or supplemented by Triangle and United Federal at any time
prior to the Effective Time, and whether before or after approval by United
Federal's shareholders, by an agreement in writing approved by a majority of
members of their respective Boards of Directors. However, except as otherwise
provided in the Agreement, following approval of the Agreement by United
Federal's shareholders, no such amendment may change the Exchange Rate without
approval of such change by United Federal's shareholders.
Termination of the Agreement. The Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Time, whether before or
after approval by United Federal's shareholders, upon the mutual agreement of
Triangle and United Federal, and may be terminated by either Triangle or United
Federal if, among other things: (i) the Average Closing Price of Triangle Stock
is less than $16.82 or is greater than $28.00 (for the 20 trading days prior to
August 5, 1998, the average closing price of Triangle Stock was $19.434); (ii)
the other party shall have violated or failed to perform fully any of its
obligations, covenants or agreements in any material respect; (iii) any of the
other party's representations or warranties shall have been false or misleading
in any material respect when made, or if there has occurred any event or
development or there exists any condition or circumstance which has caused or,
with the lapse of time or otherwise, may or could cause any such representations
or warranties to become false or misleading; (iv) United Federal's shareholders
fail to ratify and approve the Agreement; or (v) any condition to the
obligations of the terminating party is not satisfied or effectively waived, or
the Merger has not become effective by December 31, 1998 (or such later date as
shall be mutually agreeable to Triangle and United Federal).
Additionally, Triangle may terminate the Agreement if, based on the
advice of its legal counsel or consultants, it believes United Federal or
Triangle could incur or become responsible or liable at any time or over a
period of time in an amount equal to or greater than $100,000 for expenses or
monetary damages on account of any and all remediation, corrective action or
damages relating to any discharge, disposal, release or emission by any person
of any "hazardous substance" (as defined in the Agreement) on, from or relating
to any real property belonging to United Federal or serving as collateral for
any of United Federal's loans, or relating to any condition or event with
respect to any such real property which constitutes a violation of any
"environmental laws" (as defined in the Agreement). Triangle has conducted such
testing and the estimated potential damages and liabilities are less than
$100,000; therefore, this condition has lapsed.
In the event of the termination and abandonment of the Merger pursuant
to the termination provisions of the Agreement, the Agreement will become void
and have no effect, except that certain provisions of the Agreement relating to
expenses, indemnification and confidentiality of information obtained pursuant
to the Agreement or in connection with the negotiation thereof will survive any
such termination and abandonment.
Background of and Reasons for the Merger
Background.
United Federal Prior to 1980, United Federal operated as a traditional
thrift serving selected areas of eastern North Carolina, originating mortgages
for residential housing and offering savings products to its customers.
Beginning in the 1980's, United Federal entered the mortgage banking business,
originating and servicing loans sold to other investors. While profitable,
mortgage banking became increasingly competitive and in order to diversify its
banking operations and enhance shareholder value, United Federal began to
emphasize retail and commercial lending in the mid-1990's. Those transformations
allowed United Federal to remain competitive and profitable.
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During the past several years, however, a number of factors have caused
United Federal to reassess its long-standing position to remain an independent
community bank, notably increased competition by larger competitors with greater
resources. In addition, technology changes have required extensive investments
to be made in order to remain competitive in today's market. United Federal's
Board of Directors and management has known that, to remain independent, United
Federal needed to be able to deliver value-added customer services on a
competitive basis and to do so profitably. Thus, in 1997, United Federal was
reviewing capital raising alternatives to enable it to expand its commercial
lending.
In December 1997, United Federal was approached by a representative of
Triangle. Negotiations between representatives of United Federal and Triangle
continued on December 19 and December 22. On December 22, 1997, an amended
proposal described as a letter of intent and styled as a conditional offer was
delivered by Triangle. That proposal was considered at a meeting of the Board of
Directors of United Federal held on December 22, 1997, and the Board instructed
management to continue with negotiations looking toward the execution of the
letter of intent and to engage the services of a financial advisor. On December
24, 1997, United Federal executed the letter of intent and on December 30, 1997,
engaged Carson Medlin to serve as its investment advisor.
On January 2, 1998, United Federal was advised that a third party
intended to make an unsolicited offer looking toward the acquisition of United
Federal, which offer was received on January 9, 1998. At a meeting of the Board
of Directors held on January 11, 1998, management was directed to submit both
the Triangle and the third party proposals to Carson Medlin for evaluation and
analysis.
On January 20, 1998, the Board of Directors of United Federal met with
representatives of Carson Medlin to consider the evaluation and analysis of the
proposals by Triangle and the third party. Although Carson Medlin concluded that
both offers were fair from a financial standpoint to the United Federal
shareholders, the Board of Directors of United Federal determined on balance
that the Triangle offer was more advantageous to the shareholders of United
Federal. Negotiations on a definitive agreement and United Federal's due
diligence investigation of Triangle and Triangle's due diligence investigation
of United Federal continued in February 1998 and, at a telephone meeting held on
March 4, 1998, the Board of Directors of United Federal approved the definitive
agreement to merge with Triangle. That action was ratified and confirmed at its
meeting held on March 26, 1998.
The market price of most publicly traded securities declined significantly,
as did the price of Triangle Stock, in the early days of August 1998. On August
5,1998, the closing price of Triangle Stock was $17.875. If the price of
Triangle Stock were to remain at that level for an extended period of time
before the Merger, the Average Price of Triangle Stock could be less than
$18.67, which would be grounds for termination of the Agreement. As a result, on
August 5, 1998, management of Triangle proposed to management of United Federal
that a revised pricing structure be agreed to in the event the Average Closing
Price of Triangle Stock were less than $18.67. Negotiations continued through
August 7, 1998, on which date the Board of United Federal, in consultation with
Carson Medlin, agreed to the amended price structure and executed the amendment
to the Agreement.
Triangle. As a result of Triangle's acquisitions during 1991 and 1993,
Triangle's management determined in 1994 that a well executed acquisition plan
in concert with internal growth would allow Triangle to achieve certain benefits
while maintaining loan quality and safe and sound operations. In particular,
management believed a well executed acquisition plan could (i) provide
opportunities to achieve economies of scale that would increase Triangle's
efficiency and profitability; (ii) improve Triangle's ability to compete with
the many financial institutions doing business in Triangle's market area; (iii)
result in an institution better able to respond to technological changes; (iv)
enable the resulting institution to better respond to the needs of its customers
and the communities it serves; and (v) allow the shareholders of Triangle
(including the former shareholders of acquired institutions) to participate in a
financial institution with greater financial resources, a more expansive banking
network and a larger market area. After the Merger, Triangle will remain a
well-capitalized institution, and Triangle Bank will remain a well-capitalized
bank and will be the eighth largest commercial bank in North Carolina, based on
assets, with a greater capacity to compete with larger banks in its market area.
Reasons for the Merger.
United Federal. In reaching its determination that the Merger is in the
best interests of United Federal's shareholders, United Federal's Board
considered a number of factors. Following is a summary of the material factors
considered by United Federal's Board:
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(i) The familiarity of United Federal's Board with United
Federal's business, operations, financial condition, earnings
and prospects;
(ii) The current and prospective economic and competitive
environment facing United Federal and the range of possible
values available to United Federal's shareholders, including
the timing and likelihood of actually receiving those values;
(iii) The financial presentation of Carson Medlin, United Federal's
independent financial advisor, and the opinion of Carson
Medlin that, as of the date of such opinion, the Exchange
Ratio is fair from a financial point of view to the
shareholders of United Federal.
(iv) The business, operations, financial condition, earnings and
prospects of Triangle;
(v) The fact that consummation of the Merger is not conditioned
upon Triangle obtaining the financing for its acquisition of
United Federal;
(vi) The Board's evaluation of the risks to consummation of the
Merger, including the risks associated with obtaining all
necessary regulatory approvals without the imposition of terms
or conditions which could be materially burdensome to
Triangle;
(vii) The terms of the Merger Agreement and the Option Agreement
executed in connection with it; and
(viii) The nature and quality of the consideration to be received in
the Merger permitting shareholders to defer any tax liability
associated with the increase in value of their stock and
permitting shareholders to become shareholders of Triangle, an
institution with strong operations, management and earnings
and a liquid stock.
Because of the wide variety of factors considered in connection with
its evaluation of the Merger, United Federal's Board did not find it practical
to, and did not, quantify or otherwise attempt to assign relative weights to the
specific factors considered in reaching its determination.
Triangle. The Board of Directors of Triangle constantly analyzes
opportunities to expand its business and geographic markets by increasing its
presence in its existing markets or by entry into new banking markets, whether
by acquisition or de novo branching. Triangle's particular interest in the
Merger results from the opportunity to increase its market share in United
Federal's geographic markets which Triangle considers to be an attractive area
for expansion. While Triangle already operates 14 branches in several of United
Federal's markets, the Merger provides the opportunity to expand Triangle's
business within these markets and into new markets without incurring the initial
expenses and losses that are normally associated with de novo branching and to
gain the advantages of acquiring United Federal's existing deposit base,
established customer relationships and proven management and staff.
Recommendation of the United Federal Board of Directors
For the reasons described above, the United Federal Board of Directors
unanimously recommends that the shareholders of United Federal vote FOR approval
of the Agreement.
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Opinion of United Federal's Financial Advisor
Pursuant to an engagement letter dated December 30, 1997, and amended
on January 11, 1998, United Federal retained Carson Medlin to serve as its
financial advisor with respect to a proposed transaction which would lead to the
merger of United Federal into or the purchase of substantially all of the stock
or assets of United Federal by one of certain potential acquiring financial
institutions. As part of its engagement, Carson Medlin agreed to render its
opinion as to the fairness, from a financial point of view, of the terms of such
a transaction to United Federal's unaffiliated shareholders. Carson Medlin is a
National Association of Securities Dealers, Inc. member investment banking firm
which specializes in the securities of southeastern United States financial
institutions. As part of its investment banking activities, Carson Medlin is
regularly engaged in the valuation of southeastern United States financial
institutions and transactions relating to their securities, including mergers
and acquisitions. Carson Medlin will receive $90,000 for its services. United
Federal also has agreed to reimburse Carson Medlin for its out-of-pocket
expenses incurred in connection with the activities contemplated by its
engagement, regardless of whether the Merger is consummated. United Federal has
further agreed to indemnify Carson Medlin against certain liabilities, including
certain liabilities under federal securities laws. The payment of the above fees
is not contingent upon Carson Medlin rendering a favorable opinion with respect
to the Merger.
Carson Medlin rendered its verbal opinion to United Federal on March 4,
1998 that the aggregate consideration to be received in the Merger is fair to
United Federal's unaffiliated shareholders from a financial point of view.
Carson Medlin subsequently confirmed such opinion as of the date of this Proxy
Statement/Prospectus. The full text of Carson Medlin's written opinion dated
August 7, 1998, is attached as Appendix II to this Proxy Statement/Prospectus
and should be read in its entirety with respect to the procedures followed,
assumptions made, matters considered and qualifications of and limitations on
the review undertaken by Carson Medlin in connection therewith. Carson Medlin's
opinion does not constitute a recommendation to any United Federal shareholder
as to how such shareholder should vote on the Agreement and the Merger or as to
any other matter. The summary of the opinion of Carson Medlin set forth in this
Proxy Statement/Prospectus is qualified in its entirety by reference to the full
text of such opinion attached hereto as Appendix II.
Carson Medlin has relied upon, without independent verification, the
accuracy and completeness of the information reviewed by it for the purpose of
rendering its opinion. Carson Medlin did not undertake any independent
evaluation or appraisal of the assets and liabilities of United Federal or
Triangle, nor was it furnished with any such appraisals. Carson Medlin assumed
that the financial forecasts reviewed by it have been reasonably prepared on a
basis reflecting the best currently available judgments and estimates of the
managements of United Federal and Triangle, and that such projected financial
results will be realized in the amounts and at the times contemplated thereby.
Carson Medlin is not expert in the evaluation of loan portfolios,
underperforming or nonperforming assets, net charge-offs of such assets or the
adequacy of allowances for losses with respect thereto; has not reviewed any
individual credit files; and has assumed that the loan loss allowances for each
of United Federal and Triangle are in the aggregate adequate to cover such
losses. Carson Medlin is not expert in bank operations and has not examined the
data processing or other systems of either United Federal or Triangle with
respect to their readiness to satisfy requirements specific to the year 2000 or
to similar issues. Carson Medlin assumed that the Merger will be recorded as a
pooling-of-interests under generally accepted accounting principles. Carson
Medlin's opinion is necessarily based on economic, market and other conditions
as in effect on the date of its analysis, and on information made available to
it dated as of various earlier dates.
In connection with rendering its opinion, Carson Medlin performed a
variety of financial analyses. The preparation of a financial fairness opinion
of this nature involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of those methods to
the particular
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circumstances, and, therefore, is not readily susceptible to partial analysis or
summary description. Carson Medlin believes that its analyses must be considered
together as a whole and that selecting portions of such analyses and the facts
considered therein, without considering all other factors and analyses, could
create an incomplete view of the analyses and the process underlying Carson
Medlin's opinion. In its analyses, Carson Medlin made numerous assumptions with
respect to industry performance, business and economic conditions, and other
matters, many of which are beyond the control of United Federal and Triangle and
which may not be realized. Any estimates contained in Carson Medlin's analyses
are not necessarily predictive of future results or values, which may be
significantly more or less favorable than such estimates. Estimates of values of
companies do not purport to be appraisals or necessarily reflect the prices at
which such companies or their securities may actually be sold. None of the
analyses performed by Carson Medlin was assigned a greater significance by
Carson Medlin than any other.
In connection with rendering its opinion dated August 7, 1998, Carson
Medlin reviewed (i) the Agreement; (ii) the annual reports to shareholders of
United Federal, including audited financial statements for the five years ended
December 31, 1997; (iii) the Proxy Statement of United Federal dated April 10,
1998 for the annual meeting of shareholders held on May 28, 1998; (iv) the
annual report on Form 10-K of United Federal for the year ended December 31,
1997; (v) the quarterly report on Form 10-Q of United Federal for the quarter
ended March 31, 1998; (vi) the Thrift Financial Report of United Federal as of
March 31, 1998; (vii) the Uniform Thrift Performance Report for United Federal
as of December 31, 1997; (viii) the annual reports to shareholders of Triangle,
including audited financial statements for the five years ended December 31,
1997; (ix) the annual report on Form 10-K of Triangle for the year ended
December 31, 1997; (x) the Proxy Statement of Triangle dated March 20, 1998 for
the annual meeting of shareholders held on April 28, 1998; (xi) the quarterly
report on Form 10-Q of Triangle for the quarter ended March 31, 1998; (xii) the
Consolidated Report of Condition and Income of Triangle Bank as of March 31,
1998; (xiii) the Uniform Bank Performance Report for Triangle Bank as of
December 31, 1997; (xiv) a copy of the Proxy Statement/Prospectus prepared for
the special meeting of the shareholders of Guaranty State Bancorp to consider
the merger with Triangle; (xv) the consolidated financial statements of Guaranty
State Bancorp, including audited financial statements for the year ended
December 31, 1996; (xvi) the annual report on Form 10-K of Guaranty State
Bancorp for the year ended December 31, 1997; (xvii) unaudited interim financial
statements of Guaranty State Bancorp as of March 31, 1998; (xviii) the Uniform
Bank Performance Report for Guaranty State Bank as of December 31, 1997; (xix) a
preliminary copy of this Proxy Statement/Prospectus; and (xx) certain other
financial and operating information with respect to the business, operations and
prospects of United Federal and Triangle.
Carson Medlin also (i) held discussions with members of the senior
management of United Federal and Triangle; (ii) reviewed the historical market
prices and trading activity for the common stocks of United Federal and Triangle
and compared them with those of certain publicly traded companies which it
deemed to be relevant; (iii) compared the results of operations of United
Federal and Triangle with those of certain publicly traded companies which it
deemed to be relevant; (iv) compared the proposed financial terms of the Merger
with the financial terms, to the extent publicly available, of certain other
recent business combinations of commercial banking and thrift organizations; (v)
analyzed the pro forma financial impact of the Merger on Triangle; and (vi)
conducted such other studies, analyses, inquiries and examinations as Carson
Medlin deemed appropriate.
The following is a summary of the principal analyses performed by
Carson Medlin in connection with its opinion.
Summary of Transaction Consideration. Carson Medlin reviewed the terms
of the Merger, including the Exchange Rate and the aggregate transaction value.
Carson Medlin reviewed the implied value of the consideration offered based upon
the closing price of Triangle Stock on May 12, 1998 which was $20.00 per share
of United Federal Stock, or a total transaction value of approximately $66.5
million (including
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outstanding options to purchase United Federal Stock). Carson Medlin calculated
that the value of the consideration to United Federal shareholders, based on the
closing price of Triangle Stock on May 12, 1998, represented 285% of United
Federal's stated book value at December 31, 1997, 284% of United Federal's book
value at March 31, 1998 adjusted pro forma for the exercise of United Federal's
outstanding stock options, 35.1 times United Federal's diluted earnings per
share for the year ended December 31, 1997, and 37.0 times United Federal's
diluted earnings per share for the trailing 12 months ended March 31, 1998.
Carson Medlin calculated that the total transaction value (including options to
purchase United Federal Stock) represented a 19.5% premium on United Federal's
March 31, 1998 core deposits (defined as the aggregate transaction value minus
stated book value, as a percentage of core deposits) and 21.8% of the total
assets of United Federal at March 31, 1998.
Comparable Transaction Analysis. Carson Medlin reviewed certain
information relating to 15 selected southeastern thrift mergers announced in
1997 in which the acquired institutions had total assets of from $53 million to
$2.8 billion (the "Comparable Transactions"). The Comparable Transactions are
(acquiree/acquiror): Lowcountry Savings Bank, Inc./Carolina First Corporation;
Anchor Savings Bank, FSB/P.C.B. Bancorp, Inc.; American Federal Bank, FSB/CCB
Financial Corporation; F.F.O. Financial Group, Inc./Republic Bancshares, Inc.;
Seaboard Savings Bank, FSB/1st United Bancorp; Virginia First Financial
Corporation/BB&T Corporation; GF Bancshares, Inc./Regions Financial Corporation;
Home Savings Bank of Siler City, Inc., SSB/FNB Corp.; Investors Savings Bank of
South Carolina, Inc./First Financial Holdings, Inc.; ASB Bank Shares,
Inc./Colonial BancGroup, Inc.; First Southeast Financial Corporation/Carolina
First Corporation; Consumers Bancorp, Inc./BankUnited Financial Corp; Palfed,
Inc./Regions Financial Corporation; Life Bancorp, Inc./BB&T Corporation; and
FFVA Financial Corp./One Valley Bancorp., Inc. Carson Medlin considered, among
other factors, the earnings, capital level, asset size and quality of assets of
the acquired financial institutions. Carson Medlin compared the transaction
prices to the then recently reported annual earnings, stated book values, total
assets and core deposits.
Carson Medlin calculated a range of acquisition prices as a percentage
of stated book value for the Comparable Transactions from a low of 136% to a
high of 306%, with a mean of 200%. These transactions indicated a range of
values for each share of United Federal Stock from $9.55 per share to $21.46 per
share, with a mean of $14.07 per share (based on United Federal's stated book
value of $7.02 per share at March 31, 1998). The value of the transaction,
$20.00 per share of United Federal Stock (based on the price of Triangle Stock
on May 12, 1998), is near the high end of the range for the Comparable
Transactions.
Carson Medlin calculated a range of purchase prices as a multiple of
earnings for the Comparable Transactions (excluding those transactions involving
acquired thrifts with returns on assets of less than 0.50%) from a low of 13.5
times to a high of 34.1 times, with a mean of 22.5 times. These transactions
indicated a range of values for each share of United Federal Stock from $7.29
per share to $18.41 per share, with a mean of $12.15 per share (based on United
Federal's diluted earnings per common share for the 12 months ended March 31,
1998 of $0.54). The value of the transaction is an indicated $20.00 per share of
United Federal Stock, which is above the high end of the range for the
Comparable Transactions.
Carson Medlin calculated the core deposit premiums for the Comparable
Transactions and found a range of values from a low of 4.9% to a high of 35.2%,
with a mean of 14.5%. The premium on United Federal's core deposits implied by
the terms of the Agreement is 19.5%, which is above the mean for the Comparable
Transactions.
Finally, Carson Medlin calculated a range of purchase prices as a
percentage of total assets for the Comparable Transactions from a low of 10.4%
to a high of 36.0%, with a mean of 19.2%. The aggregate consideration as a
percentage of total assets implied by the terms of the Agreement is
approximately 21.8%, which is above the mean for the Comparable Transactions.
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Industry Comparative Analysis. In connection with rendering its
opinion, Carson Medlin compared selected operating results of United Federal to
those of 15 publicly-traded thrifts in Alabama, Florida, Georgia, North
Carolina, South Carolina and Virginia (the "STR Institutions") as contained in
the Southeastern Thrift Review(TM), a proprietary research publication prepared
by Carson Medlin quarterly since 1994. The STR Institutions range in asset size
from approximately $137 million to $1.8 billion and in shareholders' equity from
approximately $17 million to $116 million. Carson Medlin considers this group of
financial institutions to be generally comparable to United Federal. Carson
Medlin compared, among other factors, the profitability, capitalization, and
asset quality of United Federal to those of the STR Institutions. Carson Medlin
noted that for the quarter ended December 31, 1997: (i) United Federal had a
return on average assets (ROA) of 0.64% compared to 0.78% on average for the STR
Institutions; (ii) United Federal had a return on average equity (ROE) of 8.7%
compared to 8.6% on average for the STR Institutions; (iii) United Federal had
common equity to total assets of 7.2% compared to 9.5% on average for the STR
Institutions; and (iv) United Federal's non-performing assets ratio (defined as
loans 90 days past due, nonaccrual loans and other real estate to total loans
and other real estate) was 0.63% compared to 0.74% on average for the STR
Institutions.
Carson Medlin also compared selected operating results of Triangle to
those of 50 publicly-traded community commercial banks in Alabama, Florida,
Georgia, Mississippi, North Carolina, South Carolina, Virginia and West Virginia
(the "SIBR Banks") as contained in the Southeastern Independent Bank Review(TM),
a proprietary research publication prepared by Carson Medlin quarterly since
1991. The SIBR Banks range in asset size from approximately $124.5 million to
$2.5 billion and in shareholders' equity from approximately $13 million to $248
million. Carson Medlin considers this group of financial institutions to be
generally comparable to Triangle. Carson Medlin compared, among other factors,
the profitability, capitalization, and asset quality of Triangle to those of the
SIBR Banks. Carson Medlin noted that for the year ended December 31, 1997: (i)
Triangle had a return on average assets (ROA) of 1.20% compared to 1.25% on
average for the SIBR Banks; (ii) Triangle had a return on average equity (ROE)
of 14.5% compared to 12.5% on average for the SIBR Banks; (iii) Triangle had
common equity to total assets of 7.42% compared to 9.93% on average for the SIBR
Banks; and (iv) Triangle's non-performing assets ratio (defined as loans 90 days
past due, nonaccrual loans and other real estate to total loans and other real
estate) was 0.67% compared to 0.92% on average for the SIBR Banks.
No company or transaction used in the preceding Industry Comparative or
Comparable Transaction Analyses is identical to United Federal, Triangle or the
Merger. Accordingly, evaluating the results of these analyses necessarily
involves complex considerations and judgments concerning differences in
financial and operating characteristics of United Federal, Triangle and other
factors that could affect the value of the companies to which they are being
compared. Mathematical analysis (such as determining the average or median) is
not, in itself, a meaningful method of using comparable industry or transaction
data.
Contribution Analysis. Carson Medlin reviewed the relative
contributions in terms of various balance sheet items, net income and market
capitalization to be made by United Federal and Triangle (pro forma adjusted for
Triangle's merger with Guaranty State Bancorp) to the combined institution based
on (i) balance sheet data at March 31, 1998, and (ii) income statement data for
the year ended December 31, 1997. The income statement and balance sheet
components analyzed included total assets, loans (net of unearned income and the
allowance for loan and lease losses), total deposits, shareholders' equity, core
income (defined as income before taxes, nonrecurring gains and expenses and
amortization of core deposit intangibles and goodwill), and net income. This
analysis showed that, while United Federal's shareholders and optionholders
would own approximately 12.8% of the aggregate outstanding shares and options of
the combined institution based on the Exchange Rate, United Federal is
contributing 15.2% of total assets, 20.1% of total net loans (net of unearned
income and the allowance for loan and lease losses), 16.6% of total deposits,
14.7% of shareholders' equity, 9.7% of core income, and 9.2% of net income. For
some of the financial components, United Federal is contributing a higher
proportion than the percentage of ownership that United Federal's shareholders
and
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optionholders are receiving in the Merger; for other components, United Federal
is contributing less than its shareholders and optionholders are receiving.
Present Value Analysis. Carson Medlin calculated the present value of
United Federal Stock assuming that United Federal remains an independent
institution. For purposes of this analysis, Carson Medlin utilized certain
projections of United Federal's future earnings through the year 2002. The
analysis assumes that United Federal would continue to pay a dividend and that
in 1998 and each year thereafter the dividend would be approximately equal to
36% of projected net income and that United Federal would be acquired at the end
of 2002 at a purchase price of 260% of projected book value (adjusted for the
exercise in the fifth year of all currently outstanding options). The present
value of the annual dividends plus the merger consideration at the end of 2002
was then calculated using discount rates of 13% through 15% per annum. These
discount rates were selected to reflect the rates that investors in securities
such as United Federal Stock might be expected to require in order to be
competitive with alternative investments with similar characteristics. On the
basis of these assumptions, Carson Medlin calculated that the present value to
the shareholders of United Federal Stock ranged from $13.03 to $14.23 per share.
The consideration implied by the terms of the Agreement is $20.00 per share
(based on the closing price of Triangle Stock on May 12, 1998) which is above
the high end of the range of the calculated present values were United Federal
to remain independent through 2002. Carson Medlin considered the present value
analysis because it is a widely used valuation methodology, but noted that the
results of such methodology are highly dependent upon the numerous assumptions
that must be made, including earnings growth rates, dividend payout rates,
terminal values and discount rates.
Stock Trading History. Carson Medlin reviewed and analyzed the
historical trading prices and volumes for Triangle Stock from December 1994 to
March 1998. Carson Medlin also compared performance of Triangle Stock to the Dow
Jones Southeastern U.S. Banks Index and the Dow Jones Equity Market Index and
reviewed the trading history of Triangle Stock and compared it to the trading
history of the SIBR Banks over the previous 12 months.
For the two-year period ended May 12, 1998, the annual return for
Triangle Stock (all cash distributions and dividends reinvested on the
ex-dividend date) was approximately 47% compared to 45% for the Dow Jones
Southeastern U.S. Banks Index and 30% for the Dow Jones Equity Market Index. For
the one-year period ended May 12, 1998, the annual return for Triangle Stock
(all cash distributions and dividends reinvested on the ex-dividend date) was
approximately 63% compared to 41% for the Dow Jones Southeastern U.S. Banks
Index and 32% for the Dow Jones Equity Market Index.
For the four quarters ended March 31, 1998, the ratio of stock price to
trailing 12 months earnings per share (at quarter end) for the SIBR Banks was: a
low of 15.7 times, a high of 21.1 times, and a mean of 18.2 times. For the same
periods, Triangle's price to earnings ratio ranged from a low of 21.6 times to a
high of 27.3 times with a mean of 24.5 times. Triangle Stock has traded on
average at a higher price to earnings ratio than the SIBR Banks.
For the four quarters ended March 31, 1998, the stock price as a
percentage of book value (at quarter end) for the SIBR Banks was: a low of 214%,
a high of 268%, and a mean of 239%. For the same periods, Triangle's price to
book ratio ranged from a low of 268% to a high of 393% with a mean of 336%.
Triangle Stock has traded on average at a higher price to book value ratio
compared to the SIBR Banks.
Carson Medlin also examined the recent trading volume in Triangle
Stock, which began trading on the New York Stock Exchange on December 31, 1997.
Before that time Triangle Stock traded on the Nasdaq National Market System.
Carson Medlin considers Triangle Stock to be liquid and marketable.
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Carson Medlin also examined recent trading prices and volumes of United
Federal Stock, which trades on the Nasdaq Small-Cap Market. Carson Medlin
considered, but assigned little weight to, the market price of United Federal
Stock in its analysis.
Shareholder Claims Analysis. Carson Medlin compared the ownership of
one share of United Federal Stock to the ownership of the number of shares of
Triangle Stock indicated by the Exchange Rate, from the perspective of claims on
various balance sheet and income statement variables. For the purpose of this
analysis Triangle's financial results were adjusted pro forma for Triangle's
merger with Guaranty State Bancorp. Carson Medlin found that as a result of the
Merger United Federal's shareholders would have a claim to $0.96 of estimated
pro forma 1998 diluted earnings per share versus $0.67 without. United Federal's
shareholders and optionholders would have had a claim to $257.8 million in March
31, 1998 total assets compared to $297.1 million without the Merger. United
Federal's shareholders would have had a claim to $6.44 in March 31, 1998 pro
forma book value per share, adjusted pro forma for the exercise of all options,
compared to $7.04 before the Merger. Furthermore, United Federal's shareholders
would be expected, assuming the continuation of Triangle's recently declared
cash dividend rate, to receive cash dividends at the annual rate of $0.35 per
United Federal share after the Merger versus $0.24 per share prior to the
Merger. Based on the Exchange Rate and the price of Triangle Stock on May 12,
1998, United Federal's shareholders would receive Triangle Stock with a value of
$20.00 per United Federal share compared to a price of $11.50 per share which
was the price at which shares of United Federal traded in early December 1997,
prior to announcement of an agreement to merge with Triangle.
Other Analyses. Carson Medlin also reviewed selected investment
research reports on and earnings estimates for Triangle. In addition, Carson
Medlin performed a dilution analysis and such other analyses and comparisons
that it deemed appropriate.
The opinion expressed by Carson Medlin was based upon market, economic
and other relevant considerations as they existed. Carson Medlin confirmed the
appropriateness of its reliance on the analyses used to render its opinion dated
August 7, 1998 by performing procedures to update certain of such analyses and
by reviewing assumptions on which such analyses were based and the factors
considered in connection therewith. Events occurring after the date of issuance
of the opinion, including but not limited to, changes affecting the securities
markets, the results of operations or material changes in the assets or
liabilities of United Federal or Triangle could materially affect the
assumptions used in preparing the opinion.
Certain Federal Income Tax Consequences
The following is a summary of the federal income tax consequences of
the Merger generally applicable to United Federal and its shareholders under the
Code. It does not include consequences of state, local or other tax laws or
special consequences to particular United Federal shareholders having special
situations. Accordingly, each United Federal shareholder is urged to consult
with his or her own tax advisor regarding specific tax consequences of the
Merger.
As a condition of the consummation of the Merger, Triangle has received
an opinion of Coopers & Lybrand L.L.P., tax advisors to Triangle, concerning the
tax consequences of the Merger, which provides, in substance, that the federal
income tax consequences of the Merger are as follows:
(i) The Merger will constitute a tax-free reorganization
within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code;
(ii) The conversion of United Federal Stock into Triangle
Stock will not give rise to any income to, and no gain or loss will be
recognized by, United Federal shareholders except with respect to any cash
payments in lieu of fractional shares (see subparagraph (v) below);
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(iii) The aggregate tax basis of the shares of Triangle Stock
received by a United Federal shareholder will be equal to the tax basis of the
shares of United Federal Stock converted into such shares of Triangle Stock;
(iv) The holding period of the shares of Triangle Stock
received by a United Federal shareholder will include the holding period of the
shares of United Federal Stock converted into such shares of Triangle Stock
provided that such stock was held as a capital asset on the date of consummation
of the Merger; and,
(v) The payment of cash to United Federal shareholders in lieu
of the actual issuance of fractional shares of Triangle Stock will be treated
for tax purposes as if fractional shares of Triangle Stock were in fact issued
and the cash was then distributed by Triangle in a redemption of such fractional
shares subject to the provisions and limitations of Sections 301 and 302 of the
Code, depending on the attribution rules of Section 318 of the Code. Any gain or
loss recognized will be capital gain or loss, assuming that the shares of
Triangle Stock would have been a capital asset in the hands of the shareholder
and that Section 302 applies to the shareholder.
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN OF THE ANTICIPATED FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER. UNITED FEDERAL SHAREHOLDERS SHOULD CONSULT THEIR OWN
TAX ADVISORS REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO THEM,
INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER
APPLICABLE TAX LAWS, THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS, AND THE
TAX CONSEQUENCES OF SALES OF TRIANGLE STOCK.
Accounting Treatment
The Agreement requires that the Merger be treated as a
pooling-of-interests for accounting purposes. Accordingly, under generally
accepted accounting principles, the assets and liabilities of United Federal
will be reported on the books of Triangle at their book values at the Effective
Time and Triangle's consolidated financial statements for prior periods will be
restated to reflect the consolidated assets, liabilities and operations of
United Federal for such periods. No goodwill or other intangible assets will be
created in connection with the Merger.
Among other requirements, in order for the Merger to qualify for
pooling-of-interests accounting treatment, substantially all (at least 90%) of
the outstanding shares of United Federal Stock must be exchanged for Triangle
Stock. Generally, if the number of fractional shares of Triangle Stock resulting
from the Merger for which cash is paid, and shares of Triangle Stock deemed
tainted for pooling-of-interests purposes, together represent more than 10% of
the shares to be issued by Triangle in connection with the Merger, then the
Merger will not qualify for the pooling-of-interests method of accounting.
Consummation of the Merger is conditioned on receipt by Triangle, unless waived,
in whole or in part, of assurances in form and content satisfactory to Triangle
from its independent accountants, Coopers & Lybrand L.L.P., that the Merger may
be treated as a pooling-of-interests for accounting purposes. (See "- Conditions
to Consummation of the Merger.")
Interest of Certain Persons in the Merger
Directors. In the event the Exchange Rate provides a value of less than
$20.00 per share of United Federal Stock, Triangle has agreed that as soon as
practicable following the Effective Time, one member of United Federal's Board
of Directors, to be selected by Triangle, will be appointed to the Board of
Directors of Triangle for a term of two years ending with Triangle's 2000 Annual
Meeting of Shareholders. For such service, this individual will be paid in
accordance with Triangle's normal policies. The other members of the Board of
Directors of United Federal, other than those who choose not to serve, will
become members of Triangle Bank's Rocky Mount advisory board following the
Effective Time. Each such person shall be compensated in accordance with
Triangle Bank's then current policies and procedures.
Officers. After the Merger, Triangle will honor the employment
agreement dated January 5, 1997 between United Federal and John A. Barker,
President of United Federal and the change in control agreements dated April 1,
1997 between United Federal and Robert C. White, Senior Vice President and Chief
Financial
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Officer of United Federal. In addition, Triangle will enter into a
six-month and three-month, respectively, consulting agreement with each of Mr.
Barker and Mr. White to assist in post-Merger matters. At the conclusion of the
consulting agreement, neither Mr. Barker nor Mr. White will be employed by
Triangle Bank. Upon consummation of the Merger, pursuant to their existing
employment and change in control agreements, Triangle will be obligated to pay
Mr. Barker and Mr. White severance benefits of $550,000 and $270,000,
respectively. In addition, Triangle must continue Mr. Barker's and Mr. White's
life, medical and disability benefits for a period of three years after the
Merger.
Provided they each remain employed by United Federal at the Effective
Time in their respective current positions, Triangle shall enter into an
employment agreement with Paul S. Jaber and Wade Spears as of the Effective
Time. The exact terms of the employment agreement have not been determined, but
each agreement would be for a term of two years and each employee would receive
his current base salary. Each employee will be eligible to participate in all
benefits provided by Triangle Bank to similarly situated employees. In
consideration of the employment agreement, each employee would agree to not
compete with Triangle Bank in Nash County or any contiguous county during the
term of the agreement and for one year after termination of the Agreement by the
employee for any reason. Triangle Bank also will hire Duran Broadhurst, a Senior
Vice President of United Federal, as Triangle Bank's city executive in Wilson,
North Carolina. To retain Mr. Broadhurst, Triangle shall pay him a bonus payment
equal to 18 times his current monthly salary.
Employees. Provided they remain employed by United Federal at the
Effective Time, Triangle will attempt in good faith, but shall have no
obligation, to locate suitable positions for and to offer employment to all
other employees of United Federal (other than employees serving pursuant to an
employment agreement or change in control agreement or other similar
arrangement). Any employment so offered by Triangle to an employee of United
Federal shall be in such a position, at such location within Triangle's branch
system, and for such rate of compensation as Triangle shall determine in its
sole discretion.
At the Effective Time, Triangle will pay to each individual employed by
United Federal at the Effective Time who has been continuously employed as a
full-time employee by United Federal for at least one year prior to the
Effective Time, but who is not offered employment with Triangle following the
Effective Time at a position and salary comparable to his or her current
position and salary and within 30 miles of his or her location, a severance
payment in an amount equal to one week's salary or wages for each year of full
prior continuous service with United Federal, provided that any severance
payment shall consist of a minimum of one month's salary or wages and a maximum
of three months' salary or wages for non-officers and a minimum of three months'
salary or wages and a maximum of six months' salary or wages for officers (any
employee elected as assistant vice president or higher), who were employed as an
officer on December 24, 1997; if the officer was not employed as an officer on
December 24, 1997, he or she shall be treated either as a non-officer or an
employee with less than one year's employment, as the case may be. Each
individual employed by United Federal at the Effective Time who has not been
continuously employed as a full-time employee by United Federal for at least one
year prior to the Effective Time and who is not offered employment with Triangle
following the Effective Time shall receive a severance payment in an amount
equal to two week's salary or wages. No payment of severance compensation shall
be made to any person who does not remain an employee of United Federal at the
Effective Time. No severance payment shall be made to any employee of United
Federal who is or will be party to an employment or consulting agreement, a
change in control agreement, severance agreement or other similar arrangement
with United Federal, Triangle or Triangle Bank, whether oral or written. To the
extent United Federal maintains any plan or
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arrangement for the payment of severance or salary continuation benefits to
employees, such plan or arrangement shall be terminated at the Effective Time.
The Agreement provides that United Federal's employee benefit plans
will be reviewed and appropriate amendments, consolidations or terminations will
be made thereto at or after the Effective Time; provided, however, that the
employees of United Federal (i) shall be eligible to receive group
hospitalization, medical, life, disability and similar benefits on the same
basis and under the same terms available to the present employees of Triangle
and its subsidiaries, (ii) in the event a United Federal employee benefit plan
is terminated, the rights and benefits of a United Federal employee thereunder
shall become fully vested, with each participating United Federal employee
having the right or option either to receive the benefits to which he or she is
entitled as a result of such termination or to have such benefits "rolled" into
the appropriate Triangle employee benefit plan, on the same basis and applying
the eligibility standards as would apply to the employees of Triangle and its
subsidiaries as if such employee's prior service to United Federal had been
performed on behalf of Triangle and its subsidiaries for qualification,
participation and vesting (but not for funding purposes), and (iii) in the event
a United Federal employee benefit plan is merged into a Triangle employee
benefit plan, shall be entitled to participate in such plan on the same basis
and applying the same eligibility standards as would apply to employees of
Triangle and its subsidiaries. Triangle has agreed that for purposes of
qualification, participation and vesting, the employees of United Federal shall
receive credit for their periods of service to United Federal.
United Federal Options. Under the Agreement at the Effective Time, all
rights with respect to United Federal Options which are outstanding at the
Effective Time, whether or not then exercisable, will be converted into and will
become rights with respect to Triangle Stock, and Triangle will assume United
Federal's obligations with respect to each such United Federal Option, in
accordance with the terms of the applicable United Federal Option Plan and the
related option agreements. From and after the Effective Time, (i) each United
Federal Option assumed by Triangle may be exercised solely for shares of
Triangle Stock, (ii) the number of shares of Triangle Stock subject to each
United Federal Option will be equal to the number of shares of United Federal
Stock subject to such United Federal Option immediately prior to the Effective
Time multiplied by the Exchange Rate rounded down to the nearest whole share,
and (iii) the per share exercise price under each such United Federal Option
will be adjusted by dividing the per share exercise price thereunder by the
Exchange Rate and rounding up to the nearest cent, provided that the number of
shares of Triangle Stock subject to each United Federal Option and the per share
exercise price will, in accordance with the terms of the United Federal Option
and the per share exercise price, be subject to further adjustment as
appropriate to reflect any stock split, stock dividend, recapitalization or
other similar transaction subsequent to the Effective Time. Pursuant to the
terms of United Federal's Incentive Stock Option Plan, any unvested United
Federal incentive options shall vest in full upon the consummation of the
Merger.
Indemnification. Pursuant to the Agreement, Triangle will indemnify the
present and former officers and directors of United Federal against liabilities
from actions in their official capacities as directors and officers of United
Federal to the same extent United Federal indemnifies its directors and
officers.
Stock Option Agreement Between Triangle and United Federal. In
negotiating the Agreement, Triangle requested and received from United Federal a
stock option agreement dated March 4, 1998, whereby United Federal has granted
to Triangle an option to purchase 611,788 shares of United Federal Stock at an
exercise price of $17.00 per share. The Stock Option Agreement expires on
December 31, 1998, unless such date is extended by mutual agreement of Triangle
and United Federal. The options are exercisable only in the event (i) United
Federal, without Triangle's permission, agrees to be acquired by, merge with or
sell all or substantially all of its assets to another entity, (ii) any person
or entity acquires 10% or more of the outstanding shares of United Federal Stock
, (iii) any person or entity makes a bona fide acquisition proposal to United
Federal or its shareholders, or (iv) any person or entity files an application
to acquire United Federal or all or
34
<PAGE>
substantially all of its assets. In such event, Triangle may exercise the option
prior to December 31, 1998. Triangle may exercise the option only with the prior
approval of the Federal Reserve and the OTS.
Expenses and Fees
The Agreement provides that United Federal and Triangle each will pay
its own legal, accounting and financial advisory fees and all its other costs
and expenses (including filing fees, printing costs and travel expenses)
incurred or to be incurred in connection with the performance of its obligations
under the Agreement or otherwise in connection with the Merger. Triangle may
terminate the Agreement and abandon the Merger if United Federal's expenses for
legal, accounting and other professional fees (excluding fees for the United
Federal Fairness Opinion) exceed $80,000.
Distribution of Triangle Certificates
Registrar and Transfer Company, Cranford, New Jersey, will serve as the
Exchange Agent to effect the exchange of certificates in connection with the
Merger. Immediately prior to the Effective Time, Triangle shall deposit with the
Exchange Agent the number of shares of Triangle Stock and the amount of cash
necessary to consummate the Merger. Promptly after the Effective Time, the
Exchange Agent will forward to each holder of record of United Federal Stock as
of the Effective Time a letter of transmittal and instructions for the record
holder's use in effecting the surrender of the certificates in exchange for
certificates representing shares of Triangle Stock. Shareholders of United
Federal should not surrender their certificates for exchange until such letter
of transmittal and instructions are received. Upon surrender of any certificate
for exchange and cancellation, together with a duly endorsed letter of
transmittal, if applicable, the holder of such certificate shall be entitled to
receive in exchange therefor certificates evidencing the number of whole shares
of Triangle Stock into which their shares of United Federal Stock will have been
converted, together with cash for any fractional share.
Until surrendered as described above, each United Federal certificate
will be deemed for all corporate purposes to evidence only the right to receive
the number of shares of Triangle Stock to which the shareholder has become
entitled. However, after the Effective Time and regardless of whether they have
surrendered their United Federal certificates, United Federal shareholders shall
be entitled to vote and to receive any dividends or other distributions (for
which the record date is after the Effective Time) on the number of whole shares
of Triangle Stock into which their United Federal Stock has been converted;
provided, however, that no such dividends or other distributions will be paid to
the holders of such United Federal certificates unless and until their United
Federal certificates are surrendered. Upon surrender of each United Federal
certificate, there will be paid the amount, without interest thereon, of
dividends and other distributions, if any, that became payable on the shares of
Triangle Stock represented by such certificate after the Effective Time but had
not been paid to the record owner thereof.
Shareholders whose United Federal certificates have been lost, stolen
or destroyed will be required to furnish evidence satisfactory to Triangle of
ownership of such United Federal certificates and of such loss, theft or
destruction, and to furnish appropriate and customary indemnification (which may
include an indemnity bond), in order to receive the Triangle certificates or
cash to which they are entitled.
If any certificates for shares of Triangle Stock are to be issued in a
name other than that in which the certificates surrendered for exchange are
issued, the certificates so surrendered shall be properly endorsed or otherwise
be in proper form for transfer. The person requesting such exchange shall affix
any requisite stock transfer tax stamps to the certificates surrendered, provide
funds for such purpose, or establish to the satisfaction of the Exchange Agent
that such taxes are not payable.
35
<PAGE>
After the Effective Time, there will be no transfers on the transfer
books of United Federal of the shares of United Federal Stock that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, certificates representing such shares are presented for transfer to the
Exchange Agent, they will be canceled and exchanged for a certificate
representing shares of Triangle Stock pursuant to the terms of the Agreement.
Neither United Federal, Triangle, the Exchange Agent nor any other
person will be liable to former holders of United Federal Stock for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar law.
Resale of Triangle Stock
Although the shares of Triangle Stock to be issued in the Merger have
been registered under the Securities Act, such shares may not be traded freely
and without restriction by those shareholders deemed to be "affiliates" of
United Federal prior to the Effective Time. "Affiliates" are generally defined
as persons who control, are controlled by, or are under common control with
United Federal and generally include directors, executive officers, and any
current shareholder of United Federal who owns an amount of United Federal Stock
equal to or greater than 10% of the issued and outstanding shares of United
Federal Stock. Persons deemed to be affiliates of United Federal may not resell
shares of Triangle Stock received by them in connection with the Merger unless
(i) sales are made pursuant to an effective registration statement under the
Securities Act, (ii) sales are made in compliance with Rule 145 promulgated
under the Securities Act, or (iii) sales are made pursuant to another exemption
from registration under the Securities Act. In addition, as a condition of
treating the Merger as a pooling-of-interests for accounting purposes,
affiliates of Triangle and United Federal will be prohibited from selling or
transferring any shares of Triangle Stock from the date generally 30 days prior
to consummation of the Merger and until Triangle shall have published results of
its financial operations for a period covering at least 30 days following the
Effective Time. The stock certificates representing the shares of Triangle Stock
issued to persons deemed to be affiliates of United Federal in the Merger will
bear a legend summarizing the above restrictions, and Triangle will instruct its
transfer agent to impose stop orders with respect to such certificates.
This Proxy Statement/Prospectus may not be used for the resale of any
shares of Triangle Stock received in connection with the Merger.
36
<PAGE>
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
(Unaudited)
The following unaudited pro forma combined condensed balance sheet as
of March 31, 1998 and the unaudited pro forma combined condensed statements of
income for the three months ended March 31, 1998 and for the years ended
December 31, 1997, 1996 and 1995 combine (i) the historical and supplemental
financial statements of Triangle and the historical financial statements of
United Federal using the pooling-of-interests method of accounting for business
combinations, (ii) Triangle and United Federal pro forma financial information,
and (iii) the completed acquisition of Guaranty State Bancorp, Durham, North
Carolina (the "Guaranty Acquisition"). The pro forma combined condensed balance
sheet gives effect to the Merger and the Guaranty Acquisition as if they had
occurred on March 31, 1998. The pro forma income statements give effect to the
Merger and the Guaranty Acquisition as if they had occurred on January 1, 1995.
The historical financial statements of Triangle for all periods have been
restated to include the Guaranty acquisition using the pooling-of-interests
method. The pooling-of-interests method of accounting requires all assets and
liabilities to be carried at their book values. See "INFORMATION ABOUT TRIANGLE
AND TRIANGLE BANK - Recent Acquisitions" and "- Trust Securities Issuance".
The pro forma statements are provided for informational purposes. The
unaudited pro forma financial information presented is not necessarily
indicative of what the actual financial position or results of operations would
have been had such transactions been completed as of March 31, 1998, or as of
the beginning of each of the periods presented and is not indicative of future
financial position or future results. The unaudited pro forma financial
information does not reflect any non-recurring expenses which may be incurred in
connection with the transactions. Current estimates of non-recurring expenses
for the Merger in 1998 are $1.5 million after tax. The cost savings associated
with the possible operating efficiencies and synergies have not been quantified,
nor are any such savings assured. The pro forma financial statements should be
read in conjunction with the audited historical and supplemental consolidated
financial statements and the notes thereto of Triangle, the unaudited
consolidated interim financial statements of Triangle, the audited financial
statements and the notes thereto of United Federal and the unaudited
consolidated interim financial statements of United Federal, all incorporated
herein by reference.
37
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Triangle Bancorp, Inc.
Pro Forma Combined Condensed Balance Sheets
March 31, 1998
(Unaudited)
(In thousands)
Guaranty Triangle Bancorp
State and Guaranty State
Triangle Bancorp Bancorp Adjustments Bancorp
---------------- -------- ------------- --------
Assets
Cash and Due From Banks $ 48,272 $ 3,746 $ - $ 52,018
Investment Securities 496,123 19,087 - 515,210
Federal Funds Sold 27,525 2,125 - 29,650
Loans and Leases, net 952,120 75,137 - 1,027,437
Premises and Equipment 33,481 2,249 - 35,730
Intangible Assets 26,813 5 - 26,818
Other Assets 22,773 1,214 - 23,987
------ ----- ------------ ------
Total Assets $1,607,107 $103,743 - $1,710,850
========== ======== ============ ==========
Liabilities
Noninterest Bearing Demand $185,546 $13,076 $ - $198,622
Interest Bearing Demand 166,623 4,873 - 71,496
Savings and Money Market Deposits 243,960 27,385 - 271,345
Time Deposits 664,183 44,129 - 708,312
------- ------ ----------- -------
Total Deposits 1,260,312 89,463 - 1,349,775
--------- ------ ----------- ---------
Borrowed Funds 188,809 1,800 - 190,609
Corporation-obligated Manditorily
Redeemable Capital Securitites 19,951 - - 19,951
Other Liabilities 16,488 837 - 17,325
------ --- ----------- ------
Total Liabilities 1,485,560 92,100 - 1,577,660
--------- ------ ----------- ---------
Shareholders' Equity
Common Stock 76,737 893 4,835(1) 82,465
Surplus - 4,835 (4,835)(1) -
Retained Earnings 46,332 5,820 - 52,152
Unrealized Gain (Loss) on Securities AFS (1,522) 95 - (1,427)
------- --------- ------------ -------
Total Shareholders' Equity 121,547 11,643 - 133,190
------- --------- ------------ -------
Total Liabilities and Shareholders Equity $1,607,107 $103,743 $ - $1,710,850
========== ======== ============ ==========
<CAPTION>
Pro Forma Combined
Triangle Bancorp,
Guaranty State
Bancorp, and United
United Federal Adjustments Federal
-------------- ----------- -------------------
Assets
Cash and Due From Banks $ 14,205 $ - $ 66,223
Investment Securities 19,211 - 534,421
Federal Funds Sold - - 29,650
Loans and Leases, net 258,743 - 1,286,180
Premises and Equipment 5,619 - 41,349
Intangible Assets - - 26,818
Other Assets 7,872 - 31,859
----- ------------- ------
Total Assets $305,650 - $2,016,500
======== ============= ==========
Liabilities
Noninterest Bearing Demand $8,116 $ - $206,738
Interest Bearing Demand 16,430 - 187,926
Savings and Money Market Deposits 20,025 - 291,370
Time Deposits 223,791 - 932,103
------- ------------- -------
Total Deposits 268,362 - 1,618,137
------- ------------- ---------
Borrowed Funds 5,000 - 195,609
Corporation-obligated Manditorily
Redeemable Capital Securitites - - 19,951
Other Liabilities 9,383 - 26,708
----- ------------- ------
Total Liabilities 282,745 - 1,860,405
------- ------------- ---------
Shareholders' Equity
Common Stock 33 4,210 (1) 86,708
Surplus 4,210 (4,210)(1) -
Retained Earnings 18,592 - 70,744
Unrealized Gain (Loss) on Securities AFS 70 - (1,357)
-- -------------- -------
Total Shareholders' Equity 22,905 - 156,095
------ -------------- -------
Total Liabilities and Shareholders Equity $305,650 $ - $2,016,500
======== ============== ==========
</TABLE>
(1) To reclass surplus to no par value common stock
38
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Triangle Bancorp, Inc.
Pro Forma Combined Condensed Statements of Income
Three Months Ended March 31, 1998
(Unaudited)
(In thousands except per share data)
Pro Forma Pro Forma Combined
Combined Triangle Bancorp,
Triangle Bancorp Guaranty State
Triangle Guaranty and Guaranty Bancorp and
Bancorp State Bancorp State Bancorp United Federal United Federal
-------- ------------- -------------- -------------- ----------------
Interest Income
Loans $21,928 1,811 $23,739 $5,779 $29,518
Federal Funds Sold 101 26 127 - 127
Investment Securities 7,850 291 8,141 509 8,650
----- --- ----- --- -----
Total Interest Income 29,879 2,128 32,007 6,288 38,295
------ ----- ------ ----- ------
Interest Expense
Deposits 11,976 943 12,919 3,445 16,364
Borrowed Funds 3,640 28 3,668 75 3,743
----- -- ----- -- -----
Total Interest Expense 15,616 971 16,587 3,520 20,107
------ --- ------ ----- ------
Net Interest Income before
Provision for Loan Losses 14,263 1,157 15,420 2,768 18,188
Provision for Loan Losses 1,072 80 1,152 300 1,452
----- -- ----- --- -----
Net Interest Income after
Provision for Loan Losses 13,191 1,077 14,268 2,468 16,736
Noninterest Income 2,990 105 3,095 842 3,937
Noninterest Expenses 9,292 676 9,968 2,569 12,537
----- --- ----- ----- ------
Net Income before Taxes 6,889 506 7,395 741 8,136
Income Taxes 2,312 172 2,484 271 2,755
----- --- ----- --- -----
Net Income $4,577 $ 344 $4,911 $ 470 $5,381
====== ===== ====== ===== ======
Basic Earnings per Share (1) $ 0.23 $0.37 $ 0.23 $0.15 $ 0.22
======= ===== ======= ===== ======
Diluted Earnings per Share (1) $ 0.23 $0.35 $ 0.22 $0.14 $ 0.21
======= ===== ======= ===== ======
</TABLE>
(1) Earnings Per Share data has been adjusted to reflect the three for two stock
split effected in the form of a 50% stock dividend payable on June 30, 1998
to shareholders of record on June 15, 1998.
39
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Triangle Bancorp, Inc.
Pro Forma Combined Condensed Statements of Income
Year Ended December 31, 1997
(Unaudited)
(In thousands except per share data)
Pro Forma
Pro Forma Combined Combined
Triangle Triangle Bancorp,
Bancorp and Guaranty State
Triangle Guaranty Guaranty State Bancorp and
Bancorp State Bancorp Bancorp United Federal United Federal
Interest Income --------- ------------- --------- --------------- ---------------
Loans $82,153 $6,877 $89,030 $20,032 $109,062
Federal Funds Sold 2,030 133 2,163 - 2,163
Investment Securities 22,365 1,220 23,585 2,925 26,510
------ ----- ------ ----- ------
Total Interest Income 106,548 8,230 114,778 22,957 137,735
------- ----- ------- ------ -------
Interest Expense
Deposits 44,814 3,724 48,538 12,779 61,317
Borrowed Funds 8,148 130 8,378 79 8,357
----- --- ----- -- -----
Total Interest Expense 52,962 3,854 56,816 12,858 69,674
------ ----- ------ ------ ------
Net Interest Income before
Provision for Loan Losses 53,586 4,376 57,962 10,099 68,061
Provision for Loan Losses 3,458 211 3,669 1,451 5,120
----- --- ----- ----- -----
Net Interest Income after
Provision for Loan Losses 50,128 4,165 54,293 8,648 62,941
Noninterest Income 13,213 407 13,620 3,630 17,250
Noninterest Expenses 37,577 2,876 40,453 9,672 50,125
------ ----- ------ ----- ------
Net Income before Taxes 25,764 1,696 27,460 2,606 30,066
Income Taxes 9,180 566 9,736 803 10,539
----- --- ----- --- ------
Net Income $16,584 $1,140 $17,724 $1,803 $19,527
======= ====== ======= ====== =======
Basic Earnings per Share (1) $0.85 $1.29 $0.83 $0.59 $ 0.81
===== ===== ===== ===== =======
Diluted Earnings per Share (1) $0.83 $1.24 $0.80 $0.57 $ 0.78
===== ===== ===== ===== =======
</TABLE>
(1) Earnings Per Share data has been adjusted to reflect the three for two stock
split effected in the form of a 50% stock dividend payable on June 30, 1998
to shareholders of record on June 15, 1998.
40
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Triangle Bancorp, Inc.
Pro Forma Combined Condensed Statements of Income
Year Ended December 31, 1996
(Unaudited)
(In thousands except per share data)
Pro Forma
Pro Forma Combined
Combined Triangle Bancorp,
Triangle Bancorp Guaranty State
Triangle Guaranty and Guaranty Bancorp and
Bancorp State Bancorp State Bancorp United Federal United Federal
-------- -------------- ---------------- --------------- ----------------
Interest Income
Loans $67,633 $6,198 $73,831 $14,614 $88,445
Federal Funds Sold 296 268 564 - 564
Investment Securities 22,030 1,129 23,159 5,387 28,546
------ ----- ------ ----- ------
Total Interest Income 89,959 7,595 97,554 20,001 117,555
------ ----- ------ ------ -------
Interest Expense
Deposits 38,977 3,396 42,373 11,757 54,130
Borrowed Funds 5,345 207 5,552 68 5,620
----- --- ----- -- -----
Total Interest Expense 44,322 3,603 47,925 11,825 59,750
------ ----- ------ ------ ------
Net Interest Income before
Provision for Loan Losses 45,637 3,992 49,629 8,176 57,805
Provision for Loan Losses 2,330 143 2,473 42 2,515
----- --- ----- -- -----
Net Interest Income after
after Provision for Loan Losses 43,307 3,849 47,156 8,134 55,290
Noninterest income 9,902 334 10,236 2,988 13,224
Noninterest expenses 32,720 2,587 35,307 9,571 44,878
------ ----- ------ ----- ------
Net Income before Taxes 20,489 1,596 22,085 1,551 23,636
Income Taxes 7,269 516 7,785 1,055 8,840
----- --- ----- ----- -----
Net Income $13,220 $1,080 $14,300 $496 $14,796
======= ====== ======= ==== =======
Basic Earnings per Share (1) $0.70 $1.23 $0.69 $0.16 $ 0.63
===== ===== ===== ===== =======
Diluted Earnings per Share (1) $0.68 $1.18 $0.67 $0.16 $ 0.61
===== ===== ===== ===== ========
</TABLE>
(1) Earnings Per Share data has been adjusted to reflect the three for two stock
split effected in the form of a 50% stock dividend payable on June 30, 1998
to shareholders of record on June 15, 1998.
41
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Triangle Bancorp, Inc.
Pro Forma Combined Condensed Statements of Income
Year End December 31, 1995
(Unaudited)
(In thousands except per share data)
Pro Forma Pro Forma
Combined Combined
Triangle Triangle
Bancorp and Bancorp,
Triangle Guaranty Guaranty State Guaranty State
Bancorp State Bancorp Bancorp United Federal Bancorp and
-------- ------------- ------------ -------------- --------------
Interest Income
Loans $56,497 $5,384 $61,881 $11,508 $73,389
Federal Funds Sold 525 229 754 - 754
Investment Securities 16,702 1,055 17,757 7,903 25,660
------ ----- ------ ----- ------
Total Interest Income 73,724 6,668 80,392 19,411 99,803
------ ----- ------ ------ ------
Interest Expense
Deposits 31,288 2,909 34,197 10,806 45,003
Borrowed Funds 2,981 - 2,981 1,396 4,377
----- ------ ----- ----- ------
Total Interest Expense 34,269 2,909 37,178 12,202 49,380
------ ----- ------ ------ ------
Net Interest Income before
Provision for Loan Losses 39,455 3,759 43,214 7,209 50,423
Provision for Loan Losses 523 183 706 (675) 31
--- --- ------- ------ -----------
Net Interest Income after
Provision for Loan Losses 38,932 3,576 42,508 7,884 50,392
Noninterest Income 8,445 293 8,738 2,918 11,656
Noninterest Expenses 33,601 2,452 36,053 7,019 43,072
------ ----- -------- ------- ------
Net Income before Taxes 13,776 1,417 15,193 3,783 18,976
Income Taxes 4,662 445 5,107 1,353 6,460
----- --- ------- ------ ------------
Net Income $9,114 $972 $10,086 $2,430 $12,516
====== ==== ======= ====== ============
Basic Earnings per Share (1) $0.48 $1.09 $0.49 $0.79 $ 0.53
===== ===== ===== ===== ============
Diluted Earnings per Share (1) $0.47 $1.09 $0.48 $0.79 $ 0.52
===== ===== ===== ===== ============
</TABLE>
(1) Earnings Per Share has been adjusted to reflect the three for two stock
split effected in the form of a 50% stock dividend payable on June 30, 1998
to shareholders of record on June 15, 1998.
42
<PAGE>
INFORMATION ABOUT TRIANGLE AND TRIANGLE BANK
General
Triangle is a business corporation incorporated on November 27, 1991,
under the laws of the State of North Carolina for the purpose of becoming a
one-bank holding company. Triangle acquired Triangle Bank in August 1992 as part
of the reorganization of Triangle Bank into a one-bank holding company
structure. Pursuant to the reorganization, the former shareholders of Triangle
Bank became shareholders of Triangle. Triangle holds all of the outstanding
stock of Triangle Bank. Prior to 1997, Triangle had not engaged in any material
activities independent of the activities of Triangle Bank. In May 1997, Triangle
established a Delaware grantor trust subsidiary to effect the issuance of $20
million in trust preferred securities. On October 2, 1997, Triangle acquired
Bank of Mecklenburg as a wholly-owned subsidiary, and on October 31, 1997,
Triangle acquired Coastal Leasing LLC as a wholly-owned subsidiary. See "-Trust
Securities Issuance" and " -Recent Acquisitions."
Triangle Bank, headquartered in Raleigh, North Carolina, is chartered
as a state bank under the laws of the State of North Carolina and is a member of
the Federal Reserve System. Deposit insurance is provided by the Bank Insurance
Fund ("BIF") of the FDIC. The sole business of Triangle Bank is to provide
banking services to businesses and individuals through its 61 offices in 41
cities located in the Triangle area and throughout the central and eastern
region of North Carolina. Triangle also offers securities and insurance products
to its customers. Triangle Bank primarily serves small and medium-sized
businesses as well as consumers within its markets. Triangle Bank began business
on January 4, 1988. On June 30, 1991, Enterprise Bancorp, Inc., a North Carolina
bank holding company, and its wholly-owned subsidiary, Enterprise Bank, National
Association, a national bank, merged into Triangle Bank. On December 28, 1993,
New East Bancorp and its five subsidiary North Carolina-chartered banks merged
into Triangle Bank. On February 23, 1995, Columbus National Bank, a national
bank headquartered in Whiteville, North Carolina, merged into Triangle Bank. On
March 31, 1995, Standard Bank and Trust Company, a North Carolina-chartered
commercial bank headquartered in Dunn, North Carolina, merged into Triangle
Bank. Also, on March 31, 1995, Atlantic Community Bancorp, Inc. ("Atlantic"), a
North Carolina corporation and registered bank holding company headquartered in
Rocky Mount, North Carolina, merged with and into Triangle. Atlantic's
wholly-owned subsidiary, Unity Bank & Trust Company, a North Carolina-chartered
commercial bank also headquartered in Rocky Mount, North Carolina, merged into
Triangle Bank on May 11, 1995. On November 1, 1995, The Village Bank, a North
Carolina-chartered commercial bank headquartered in Chapel Hill, North Carolina,
merged into Triangle Bank. On September 21, 1995, Triangle Bank acquired three
branches and approximately $40 million in deposits from NationsBank of North
Carolina, and on January 12, 1996, Triangle acquired four branches and
approximately $55 million in deposits from First Union National Bank of North
Carolina. On October 24, 1996, Granville United Bank, a North Carolina-chartered
commercial bank headquartered in Oxford, North Carolina, merged into Triangle
Bank. On August 15, 1997, Triangle Bank acquired eight branches from United
Carolina Bank and two branches from Branch Banking and Trust Company and on
October 2, 1997, Triangle acquired Bank of Mecklenburg as a wholly-owned
subsidiary. See "-Recent Acquisitions."
Triangle Stock
For information regarding Triangle Stock, the market therefor and other
matters, see "SUMMARY - Market for Triangle Stock and United Federal Stock ."
Triangle has outstanding warrant agreements acquired upon its merger
with Atlantic in March 1995. Triangle has reserved 18,000 shares of Triangle
Stock for such warrants. Each warrant entitles the holder to purchase a number
of shares of Triangle Stock at a purchase price of $6.11 per share. The warrants
expire on December 31, 2000.
43
<PAGE>
In April 1995, Triangle's Board of Directors authorized the repurchase
of up to 1% of the shares of Triangle Stock outstanding at that time which
represented approximately 88,000 shares of Triangle Stock. The repurchase was
principally undertaken to fund Triangle's various stock benefit plans. Through
March 31, 1997, Triangle had repurchased 61,400 shares pursuant to this
authorization prior to its expiration in April 1997. In May 1997, Triangle's
Board of Directors authorized the repurchase of up to 170,000 shares of Triangle
Stock. The repurchase was principally undertaken to fund Triangle's various
stock benefit plans. The repurchase was rescinded on October 3, 1997. Between
May and October 1997, Triangle repurchased 67,300 shares pursuant to the
authorization. In April 1998, Triangle's Board of Directors authorized the
repurchase of up to 100,000 shares of Triangle Stock. The repurchase is being
undertaken principally to fund Triangle's various stock benefit plans. Through
July 31, 1998, Triangle has repurchased 28,300 shares pursuant to the
authorization.
Security Ownership of Management
Information regarding the ownership of Triangle Stock by management of
Triangle and information regarding directors and executive officers of Triangle,
executive compensation and certain relationships and related transactions with
management of Triangle is incorporated herein by reference to Triangle's Annual
Report on Form 10-K for the year ended December 31, 1997.
Recent Acquisitions
On August 15, 1997, Triangle Bank acquired two branch offices from
Branch Banking and Trust Company and eight branch offices from United Carolina
Bank (the "Branch Acquisition"), all of which branches were divested in
connection with the merger of those two companies. The ten branches are located
in the North Carolina counties of Duplin, Lee, Richmond, Robeson, Washington and
Wayne. In the Branch Acquisition, Triangle Bank assumed approximately $192.0
million in deposits and approximately $61.0 million in aggregate principal
amount in loans. Triangle Bank paid a premium of approximately $15.8 million for
the assumption of the deposits. The Branch Acquisition was accounted for as a
purchase, and as such is reflected in Triangle's audited and unaudited financial
statements beginning on August 15, 1997.
On October 2, 1997, Triangle acquired Bank of Mecklenburg as a
wholly-owned subsidiary. Bank of Mecklenburg operates three branches in
Charlotte, North Carolina and offers generally the same products and services as
Triangle Bank. At March 31, 1998, Bank of Mecklenburg had $245 million in
assets, $210 million in deposits and $21 million in shareholders' equity. The
Mecklenburg acquisition was accounted for under the pooling-of-interests method
of accounting and all historical financial data of Triangle has been restated to
include the balances and results of operations of Bank of Mecklenburg.
On October 31, 1997, Triangle acquired Coastal Leasing LLC as a
wholly-owned subsidiary. Coastal Leasing is a business equipment leasing company
headquartered in Greenville, North Carolina. At March 31, 1998, Coastal Leasing
had $16 million in assets and $3 million in shareholders' equity. The Coastal
Leasing acquisition was accounted for under the pooling-of-interests method of
accounting and 1997 historical financial data of Triangle has been restated to
include the balances and results of operations of Coastal Leasing.
On April 16, 1998, Triangle acquired Guaranty State Bancorp and merged
its wholly-owned subsidiary, Guaranty State Bank, into Triangle Bank. Guaranty
State Bank was a North Carolina commercial bank whose deposits were insured by
the Bank Insurance Fund (the "BIF") of the FDIC. At March 31, 1998, Guaranty had
total assets of $104 million, total deposits of $89 million, and shareholders'
equity of 12 million. Guaranty State Bank operated five branches in Durham,
North Carolina, four of which became branches of Triangle Bank. The Guaranty
Acquisition was accounted for under the pooling-of-interests method of
accounting, and all historical
44
<PAGE>
financial data of Triangle has been restated to include the balances and results
of operations of Guaranty. See "PRO FORMA COMBINED CONDENSED FINANCIAL
INFORMATION."
Trust Securities Issuance
In May 1997, Triangle caused a Delaware statutory business trust
subsidiary to be created which issued trust preferred securities in the amount
of $19.33 million to eight qualified institutional buyers, and $619,000 in trust
common securities to Triangle (collectively, the "Trust Securities"), both sales
occurring on June 3, 1997. The Trust Securities have a maturity of 30 years, pay
dividends at the rate of 9.375% and may be treated as tier 1 capital by
Triangle. To fund the trust, Triangle sold to the trust $19.95 million of junior
subordinated notes with a yield and maturity identical to the Trust Securities.
Holders of the Trust Securities are entitled to receive preferential cumulative
cash distributions accumulating from the date of original issuance and payable
semi-annually in arrears on the first day of June and December of each year,
commencing December 1, 1997, at an annual rate equal to 9.375%. The distribution
rate and distribution payment dates of the Trust Securities correspond to the
interest rate and interest payment dates of the junior subordinated debentures,
which are the sole assets of the trust. Triangle, through various agreements,
has irrevocably and unconditionally guaranteed all of the trust's obligations
under the Trust Securities regarding the payment of distributions and payment on
liquidation or redemption of the Trust Securities, but only to the extent of
funds held by the trust. The Trust Securities are subject to mandatory
redemption in whole, but not in part, upon repayment of the junior subordinated
debentures at their stated maturity or upon their early redemption. The junior
subordinated debentures may be redeemed prior to their stated maturity upon the
occurrence of certain events or at the option of Triangle on or after June 1,
2007. Triangle caused the Trust Securities to be issued because they are a
relatively inexpensive form of capital that qualifies as regulatory capital for
Triangle. The sale of the Trust Securities was effected in a transaction exempt
from the registration requirements of the Securities Act. In November 1997, the
trust preferred securities sold to institutional buyers were registered under
the Securities Act and an exchange offer conducted whereby all but $1.0 million
of such trust preferred securities were exchanged for registered securities.
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INFORMATION ABOUT UNITED FEDERAL
General
United Federal is a federally-chartered savings bank under the
supervision of the OTS. United Federal commenced operations as a North
Carolina-chartered savings institution in 1902. In 1980 United Federal converted
to a capital stock savings bank, and in 1990 United Federal converted to a
federal savings bank. United Federal conducts business from its main office
located at 116 South Franklin Street, Rocky Mount, North Carolina with
additional full service branches located in Rocky Mount, Cary, Greenville,
Morehead City, New Bern, Pinetops, Raleigh, Spring Hope, Tarboro, Warrenton and
Wilson. United Federal also operates loan production offices in both Charlotte
and Wilmington, North Carolina. United Federal's primary market area is eastern
North Carolina. United Federal provides a range of mortgage, commercial and
consumer banking services.
United Federal Stock
United Federal Stock is traded on the Nasdaq Small-Cap Market. United
Federal has paid quarterly cash dividends each quarter since the first quarter
1995. See "SUMMARY - Market for Triangle Stock and United Federal Stock ."
Security Ownership of Management and Principal Shareholders
Information regarding the ownership of United Federal Stock by
principal shareholders and by management of United Federal, and information
regarding directors and executive officers of United Federal, executive
compensation and certain relationships and related transactions with management
of United Federal is incorporated herein by reference to United Federal's Annual
Report on Form 10-K for the year ended December 31, 1997.
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COMPARISON OF UNITED FEDERAL STOCK
AND TRIANGLE STOCK
Upon consummation of the Merger, the shareholders of United Federal
will become shareholders of Triangle, and their rights as such will be
determined by North Carolina corporation law and Triangle's Articles of
Incorporation and Bylaws. The following is a summary of certain provisions of
United Federal's Federal Stock Charter and Bylaws and Triangle's Articles of
Incorporation and Bylaws, the relevant provisions of North Carolina law and the
material changes in the rights of shareholders of United Federal that would
occur as a result of the Merger. The following discussion is qualified in its
entirety by reference to United Federal's Federal Stock Charter and Bylaws and
Triangle's Articles of Incorporation and Bylaws and the North Carolina Business
Corporation Act ("NCBCA"). SHARES OF TRIANGLE STOCK AND UNITED FEDERAL STOCK ARE
NOT, AND CANNOT BE, INSURED BY THE FDIC.
Capital Structure
The authorized capital stock of United Federal consists of 10,000,000
shares of common stock, par value $0.01 per share, of which 3,263,314 shares
were outstanding as of March 31, 1998. The authorized capital stock of Triangle
consists of 50,000,000 shares of common stock, no par value per share, of which
21,520,699 shares were outstanding as of March 31, 1998 (after giving effect to
the three-for-two stock split) and of which it is anticipated approximately
24.6 million shares will be outstanding upon consummation of the Merger.
Governing Law
Triangle is chartered under the laws of the State of North Carolina and
is subject to the provisions of the NCBCA. United Federal is chartered under the
laws of the United States and is subject to the provisions of the Home Owners
Loan Act (the "HOLA"). The following is a brief summary of certain material
provisions of the NCBCA and certain material differences between the Federal
Stock Charter and Bylaws of United Federal and the Articles of Incorporation and
Bylaws of Triangle.
Voting
The holders of United Federal Stock and Triangle Stock are entitled to
one vote per share held of record on all matters submitted to a vote of
shareholders. The shareholders of United Federal have the right to vote
cumulatively in the elections of directors, whereby a shareholder can multiply
the number of shares he or she owns by the number of directors being elected and
distribute the resulting number of votes among one or more of the nominees. The
shareholders of Triangle do not have the right to vote cumulatively in the
election of directors. As a result of the absence of cumulative voting, the
majority of votes represented at a legal quorum may elect all directors and the
remaining minority shareholders may not elect any directors. The absence of
cumulative voting makes it more difficult for shareholders who hold a minority
of outstanding shares of Triangle Stock to elect representatives of their choice
Preemptive Rights
The holders of United Federal Stock and Triangle Stock do not have
preemptive rights to acquire other or additional shares that may be issued from
time to time. As shareholders of Triangle Stock have no preemptive rights, their
ownership interest in Triangle Stock may be diluted if Triangle issues
additional shares of Triangle Stock in the future.
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State Law Anti-Takeover Provisions
North Carolina Shareholder Protection Act. The North Carolina
Shareholder Protection Act (the "Shareholder Act") generally requires that,
unless certain "fair price" and procedural requirements are satisfied, the
affirmative vote of 95% of the voting shares of a corporation is required to
approve certain business combination transactions with another entity that is
the beneficial owner, directly or indirectly, of more than 20% of the voting
shares of the corporation or which is an affiliate of the corporation and
previously has been a 20% beneficial holder of such voting shares. Triangle is
not subject to the provisions of the Shareholder Act pursuant to the terms of
its Articles of Incorporation.
North Carolina Control Share Acquisition Act. The North Carolina
Control Share Acquisition Act (the "Control Act") generally provides that,
except as provided below, "Control Shares" will not have any voting rights.
Control Shares are shares acquired by a person under certain circumstances which
when added to other shares owned, would give such person effective control over
one-fifth, one-third or a majority of all voting power in the election of the
corporation's directors. However, voting rights will be restored to Control
Shares by a resolution approved by the affirmative vote of the holders of a
majority of the corporation's voting stock (other than shares held by the owner
of the Control Shares, officers of the corporation, and directors employed by
the corporation). If voting rights are granted to Control Shares which give the
holder a majority of all voting power in the election of the corporation's
directors, then the corporation's other shareholders may require the corporation
to redeem their shares at their fair value. Triangle is not subject to the
provisions of the Control Act pursuant to the terms of its Articles of
Incorporation.
United Federal, as a federally chartered savings bank, is not subject
to North Carolina law.
Business Combinations and Changes in Control
While Triangle is subject to the NCBCA, Triangle's Articles of
Incorporation provide that the affirmative vote of the holders of not less than
80% of the outstanding shares of Triangle Stock is required to approve certain
transactions with Triangle or any affiliate of Triangle specified therein,
including any merger, consolidation, sale of assets, share exchange, or
dissolution. The supermajority provision is inapplicable if the transaction has
been approved (or in the case of a dissolution recommended for shareholder
approval) by two-thirds of all directors of Triangle then in office or if the
other entity is a corporation of which a majority of the outstanding shares of
all classes of stock entitled to vote in elections of directors is owned of
record or beneficially by Triangle or its affiliates.
For purposes of such provision, an "affiliate" is any individual,
corporation, partnership, trust, estate, or other entity who directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with, the party specified. Triangle's Articles of
Incorporation further provide that the Board of Directors, when evaluating the
merits of any transaction described in such provision, including any merger,
consolidation, sale of assets, or share exchange, or any offer of a party to
make a tender or exchange offer for any equity security of Triangle, shall, in
connection with the exercise of its judgment in determining what is in the best
interest of Triangle and its shareholders, give due consideration to all
relevant factors, including, without limitation, the social and economic effects
on the employees, depositors, customers, suppliers, and other constituents of
Triangle and its affiliates, and on the communities in which Triangle and its
affiliates operate or are located.
The supermajority provision of Triangle's Articles of Incorporation may
have the effect of delaying, deferring, or preventing a change in control of
Triangle, which some holders of Triangle Stock may deem to be in their best
interests.
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The constituency provision of Triangle's Articles of Incorporation may
discourage or make more difficult certain acquisition proposals or business
combinations and, therefore, may adversely affect the ability of shareholders to
benefit from certain transactions opposed by the Board of Directors of Triangle.
The constituency provision would allow the Board of Directors of Triangle to
take into account the effects of an acquisition proposal on a broad number of
constituencies and to consider any potential adverse effect in determining
whether to accept or reject such proposal.
Neither United Federal's Federal Stock Charter nor its Bylaws contain
any anti-takeover provisions. However, federal law provides that the affirmative
vote of two-thirds of the outstanding shares of United Federal Stock is required
to approve any merger or consolidation with another entity or the transfer of
all or substantially all of United Federal's assets to another entity.
Amendment of Articles of Incorporation
Triangle is subject to the requirements of the NCBCA with respect to
amendments of its Articles of Incorporation. Generally, the NCBCA requires that
the votes cast in favor of an amendment to the Articles of Incorporation must
exceed the votes cast against such amendment in order for Triangle to amend its
Articles of Incorporation. While Triangle is subject to the NCBCA, Triangle's
Articles of Incorporation require the affirmative vote of 75% of all shares
present at a meeting where the issue considered is to amend its Articles of
Incorporation. This provision of Triangle's Articles of Incorporation makes it
more difficult for amendments to the Articles of Incorporation to be approved by
Triangle's shareholders. Accordingly, such provision makes it more difficult for
provisions in the Articles of Incorporation to be changed in the event of a
hostile takeover attempt.
United Federal's Charter provides that an amendment to the Charter
requires the affirmative vote of a majority of all outstanding shares.
Amendment of Bylaws
Triangle's bylaws may be amended or repealed and new bylaws may be
adopted by action of the Board of Directors or shareholders of Triangle, except
as otherwise provided in Triangle's Articles of Incorporation or by the NCBCA.
Under the NCBCA and the bylaws of Triangle, the Board of Directors may not
readopt, amend or repeal a bylaw adopted, amended or repealed by the
shareholders if neither the Articles of Incorporation nor a bylaw adopted by the
shareholders authorizes the Board of Directors to adopt, amend or repeal that
particular bylaw or the bylaws generally. The shareholders may amend or repeal
the bylaws of Triangle, even though the bylaws may also be amended or repealed
by the Board of Directors. Triangle's bylaws further provide that the Board of
Directors has no power to adopt a bylaw: (1) changing the statutory requirement
for a quorum of directors or action by directors or changing the statutory
requirement for a quorum of shareholders or action by shareholders; (2)
providing for management of Triangle otherwise than by the Board of Directors or
a committee thereof; (3) increasing or decreasing the fixed number of the size
of the Board of Directors or the range of directors, or changing from a fixed
number to a range, or visa versa; or (4) classifying and staggering the election
of directors. United Federal's Bylaws may be amended by a majority of the full
Board of Directors or by a majority of the votes cast at a meeting of
shareholders.
The bylaws of Triangle currently provide that the number of directors
shall be at least 10 but no more than 28. The Board of Directors may set the
number of directors in this range without shareholder approval. In addition, the
bylaws require the affirmative vote of 75% of shares of Triangle voting, in
person or by proxy, to increase or decrease the range and prohibit the Board of
Directors from changing the range without shareholder approval. The
supermajority requirement for a shareholder vote to change the range of the
number of directors makes it more difficult for Triangle's shareholders to
increase the size of the Board of Directors and elect directors
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to fill the vacancies created thereby. Accordingly, one or more shareholders
seeking to gain control of the Board (for example, a tender offer or entity
attempting a hostile takeover) would find its task more difficult. This
requirement makes it more difficult for the size of the Board of Directors to be
increased without the existing Board of Directors' consent.
The Charter of United Federal provides that the number of directors
shall be at least six but not more than 15. The Bylaws of United Federal have
set the number of directors at six.
Share Purchase and Option Plans for Affiliates
Triangle, under the NCBCA, and United Federal, under federal law, each
may issue rights, options, or warrants for the purchase of shares of its capital
stock, with the Board of Directors determining the terms upon which the rights,
options or warrants are issued, their form and content, and the consideration
for which the shares are to be issued. Shares of capital stock of Triangle or
United Federal may be issued for consideration determined by the Board of
Directors to be adequate. The foregoing rights, options, warrants or shares of
capital stock of Triangle or United Federal may generally be issued to or for
the benefit of officers, directors, and employees of Triangle or United Federal
or their respective subsidiaries free of restrictions, except as set forth above
or as required under the Securities Act. See "THE MERGER - Resale of Triangle
Stock."
Redemption and Repurchase of Stock
Triangle and United Federal each may repurchase or redeem shares of its
stock, provided that certain requirements as to the effect of the repurchase on
the company's solvency and the relationship between its assets and liabilities
are fulfilled.
As a bank holding company, Triangle is required to give the Federal
Reserve Bank of Richmond (the "Federal Reserve Bank") prior written notice of
any repurchase or redemption of any shares of its outstanding equity securities
if the gross consideration to be paid for such repurchase or redemption, when
aggregated with the net consideration paid by Triangle for all repurchases or
redemption of its equity securities during the 12 months preceding the date of
notification, equals or exceeds 10% of its consolidated net worth as of the date
of such notice. The Federal Reserve Bank must either approve the transaction
described in the notice within 30 days of receipt of the notice or refer it to
the Federal Reserve for action within 60 days after the Federal Reserve Bank's
receipt thereof.
As a federal savings bank, United Federal is required to give the OTS
prior written notice of any repurchase or redemption of any shares of its
outstanding equity securities, and the OTS must approve the transaction.
Repurchase or redemption by United Federal of shares of United Federal Stock
would trigger, under current law, the payment of tax on the assumed recapture of
United Federal's tax bad debt reserves.
Transferability by Certain Persons
The public sale by Triangle of its stock and resales of its stock by
certain persons who are at the time of resale "affiliates" of Triangle must be
registered under the Securities Act and the North Carolina Securities Act or
meet certain statutory and regulatory requirements to qualify for an exemption
from registration. The exemption from registration under the Securities Act most
often used by affiliates of public corporations is Rule 144 which requires,
among other things, that affiliates' shares be sold in "brokers' transactions"
without any solicitation of offers to purchase such shares.
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The sale of United Federal Stock by United Federal is not subject to
registration under the Securities Act, but is subject to registration
requirements under regulations of the OTS.
Assessments; Impairment of Capital
No assessment provisions are contained in North Carolina law with
respect to the Triangle Stock or Triangle's shareholders or are contained in
federal law with respect to United Federal Stock or United Federal's
shareholders for the amount of any impairment in the capital stock of Triangle
or United Federal due to losses or any other cause when the surplus and
undivided profits of Triangle or United Federal are insufficient to make good
such impairment.
Number, Election and Removal of Directors
The Board of Directors of Triangle is divided into three classes, with
the number of directors in each class to be as nearly equal in number as
possible. Directors of each class are elected to hold office for three years.
Each director holds office until the annual meeting for the year in which his or
her term expires and until his or her successor is elected and qualified or
until his or her earlier death, resignation, retirement, removal or
disqualification.
Triangle's Articles of Incorporation provide that a director may be
removed without cause by the shareholders only if (i) the removal without cause
is recommended to the shareholders by the Board of Directors pursuant to a vote
of not less than 75% of the directors then in office and (ii) the shareholders
approve such removal by a vote of 75% of the votes present at the meeting where
the issue is considered. Directors also are removable by the shareholders with
cause pursuant to a vote of 75% of the outstanding shares of Triangle Stock, but
no specific director recommendation is required. The Articles of Incorporation
define "cause" as "personal dishonesty, incompetence, mental and physical
incapacity, breach of fiduciary duty involving personal profit, a failure to
perform stated duties, or a violation of any law, rule or regulation (other than
a traffic violation or similar routine offense) based on a conviction for such
offense or an opinion of counsel to Triangle to such effect."
The supermajority provisions of Triangle's Articles of Incorporation
discourages hostile takeover attempts so that Triangle will be able to follow
through with its business plan which it has developed in the interest of all
Triangle shareholders. Management believes that, for a financial institution,
allowing Board members to be removed and replaced without cause by the
shareholders would open Triangle to acquisition or control by interests that
might not follow through with the Board's business plan for Triangle.
The Board of Directors of United Federal is divided into three classes,
with the number of directors in each class to be as nearly equal in number as
possible. Directors of each class are elected to hold office for three years.
Each director holds office until the annual meeting for the year in which his or
her term expires and until his or her successors are elected and qualified or
until his or her earlier death, resignation, retirement, removal or
disqualification. A director may be removed from office, only with cause, by a
vote of shareholders holding a majority of the shares entitled to vote at an
election of directors.
Indemnification and Elimination of Director Liability
Triangle. The NCBCA provides for indemnification by a corporation of
its officers, directors, employees and agents, and any person who is or was
serving at the corporation's request as a director, officer, employee or agent
of another entity or enterprise or as a trustee or administrator under an
employee benefit plan, against liability and expenses, including reasonable
attorneys' fees, in any proceeding (including without limitation a
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proceeding brought by or on behalf of the corporation itself) arising out of
their status as such or their activities in any of the foregoing capacities.
Permissible Indemnification. Under the NCBCA, a corporation may, but is
not required to, indemnify any such person against liability and expenses
incurred in any such proceeding, provided such person conducted himself or
herself in good faith and (i) in the case of conduct in his or her official
corporate capacity, reasonably believed that his or her conduct was in the
corporation's best interests, and (ii) in all other cases, reasonably believed
that his or her conduct was at least not opposed to the corporation's best
interests; and, in the case of a criminal proceeding, where he or she had no
reasonable cause to believe his or her conduct was unlawful. However, a
corporation may not indemnify such person either in connection with a proceeding
by or in the right of the corporation in which such person was adjudged liable
to the corporation, or in connection with any other proceeding charging improper
personal benefit to such person (whether or not involving action in an official
capacity) in which such person was adjudged liable on the basis that personal
benefit was improperly received.
Mandatory Indemnification. Unless limited by the corporation's charter,
the NCBCA requires a corporation to indemnify a director or officer of the
corporation who is wholly successful, on the merits or otherwise, in the defense
of any proceeding to which such person was a party because he or she is or was a
director or officer of the corporation against reasonable expenses incurred in
connection with the proceeding.
Advance for Expenses. Expenses incurred by a director, officer,
employee or agent of the corporation in defending a proceeding may be paid by
the corporation in advance of the final disposition of the proceeding as
authorized by the board of directors in the specific case, or as authorized by
the charter or bylaws or by any applicable resolution or contract, upon receipt
of an undertaking by or on behalf of such person to repay amounts advanced
unless it ultimately is determined that such person is entitled to be
indemnified by the corporation against such expenses.
Voluntary Indemnification. In addition to and separate and apart from
"permissible" and "mandatory" indemnification described above, a corporation
may, by charter, bylaw, contract or resolution, indemnify or agree to indemnify
any one or more of its directors, officers, employees or agents against
liability and expenses in any proceeding (including any proceeding brought by or
on behalf of the corporation itself) arising out of their status as such or
their activities in any of the foregoing capacities. However, the corporation
may not indemnify or agree to indemnify a person against liability or expenses
he may incur on account of activities which were at the time taken known or
believed by such person to be clearly in conflict with the best interests of the
corporation. Any provision in a corporation's charter or bylaws or in a contract
or resolution may include provisions for recovery from the corporation of
reasonable costs, expenses and attorneys' fees in connection with the
enforcement of rights to indemnification granted therein and may further include
provisions establishing reasonable procedures for determining and enforcing such
rights.
Court-Ordered Indemnification. Unless otherwise provided in the
corporation's charter, a director or officer of the corporation who is a party
to a proceeding may apply for indemnification to the court conducting the
proceeding or to another court of competent jurisdiction. On receipt of an
application, the court, after giving any notice the court deems necessary, may
order indemnification if it determines either (i) that the director or officer
is entitled to mandatory indemnification as described above, in which case the
court also will order the corporation to pay the reasonable expenses incurred to
obtain the court-ordered indemnification, or (ii) that the director or officer
is fairly and reasonably entitled to indemnification in view of all the relevant
circumstances, whether or not such person met the requisite standard of conduct
or was adjudged liable to the corporation in connection with a proceeding by or
in the right of the corporation or on the basis that personal benefit was
improperly received in connection with any other proceeding so charging (but if
adjudged so liable, indemnification is limited to reasonable expenses incurred).
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Parties Entitled to Indemnification. The NCBCA defines "director" to
include ex-directors and the estate or personal representative of a director.
Unless its charter provides otherwise, a corporation may indemnify and advance
expenses to an officer, employee or agent of the corporation to the same extent
as to a director and also may indemnify and advance expenses to an officer,
employee or agent who is not a director to the extent, consistent with public
policy, as may be provided in its charter or bylaws, by general or specific
action of its board of directors, or by contract.
Indemnification by Triangle and United Federal. The Bylaws of Triangle
provide for indemnification of its directors and officers to the fullest extent
permitted by North Carolina law. Under the NCBCA, a corporation also may
purchase insurance on behalf of any person who is or was a director or officer
against any liability arising out of his status as such. Triangle currently
maintains directors' and officers' liability insurance.
Elimination of Director Liability. Pursuant to the NCBCA, the Articles
of Incorporation of Triangle provide for the elimination of personal liability
of directors for monetary damage to the fullest extent permitted by applicable
law. The limitation on monetary damages does not preclude other equitable
remedies such as injunctive relief or rescission. Further, such limitation may
not be available for violations of federal and state banking and securities
laws.
United Federal. Neither United Federal's Federal Stock Charter nor its
Bylaws provide any indemnification of United Federal's directors or officers.
Indemnification would only be allowed pursuant to applicable regulations of the
OTS which provide that a federal savings institution shall indemnify any person
against whom an action is brought or threatened because that person was or is a
director, officer or employee of the institution for the amount which that
person becomes liable under a judgment and reasonable costs and attorneys fees,
only if final judgment on the merits is rendered in that person's favor or, in
case of settlement, final judgment against the person or final judgment in the
person's favor other than on the merits if a majority of the disinterested
directors of the institution determine that the person was acting in good faith,
within the scope of his or her employment or authority and could reasonably have
believed to be acting in the best interest of the savings institution.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling Triangle or
United Federal, Triangle and United Federal have been informed that, in the
opinion of the Commission, such indemnification is against public policy
expressed in the Securities Act and is, therefore, unenforceable
Dividend Policy
The holders of Triangle Stock are entitled to receive dividends when
and if declared by its Board of Directors out of funds legally available
therefor. Triangle has paid quarterly cash dividends each quarter since the
third quarter of 1994. There can be no assurance that after the Merger any
dividends will be declared or paid or, if declared and paid, continued in the
future. The declaration and payment of dividends will depend upon business
conditions, operating results, capital and reserve requirements, and Triangle's
Board of Directors' consideration of other relevant factors. Subject to the
foregoing, it is currently Triangle's intent to pay quarterly cash dividends.
The principal sources of funds for the payment of dividends by Triangle are
dividends from Triangle Bank and Bank of Mecklenburg. See "CERTAIN REGULATORY
MATTERS Dividends" for information regarding certain restrictions on the payment
of dividends by Triangle Bank and Bank of Mecklenburg to Triangle. The holders
of United Federal Stock are entitled to receive dividends when and if declared
by the United Federal Board out of funds legally available therefor. United
Federal has paid quarterly cash dividends each quarter
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since the first quarter of 1995. Like Triangle, the payment of cash dividends by
United Federal is limited by certain regulatory restrictions and is dependent
upon business conditions, operating results, capital and reserve requirements,
and the United Federal Board's consideration of other relevant factors.
CERTAIN REGULATORY MATTERS
General
Financial institution holding companies and financial institutions are
extensively regulated under both federal and state law. The following discussion
summarizes some of the statutory and regulatory restrictions imposed upon the
operations of Triangle, Triangle Bank, Bank of Mecklenburg and United Federal.
To the extent that the following information describes statutory and regulatory
provisions, it is qualified in its entirety by reference to the particular
statutory and regulatory provisions. Any change in applicable law or regulation
may have a material effect on the business of Triangle, Triangle Bank, Bank of
Mecklenburg and United Federal. Supervision, regulation, and examination of
financial institutions by the regulatory agencies are intended primarily for the
protection of depositors rather than the holders of United Federal Stock or
Triangle Stock.
From time to time bills are introduced in the United States Congress
which would provide for wide-ranging proposals for altering the structure,
regulation, and competitive relationships of the nation's financial
institutions. Among such bills which have recently been considered by Congress
and which may be introduced in the future are proposals to prohibit financial
institutions and holding companies from conducting certain activities, to
subject financial institutions to increased disclosure and reporting
requirements, and to further alter the regulatory structure relative to
financial institutions.
Legislation passed by the House of Representatives and pending in the
U.S. Senate ("H.R. 10") provides for affiliation between banking and other forms
of financial services and, to a limited extent, commercial enterprises. H.R. 10
would repeal provisions of the 1933 Glass-Steagall Act and the 1956 Bank Holding
Company Act and make other changes in law to allow for the merger of banking,
insurance and securities organizations under a holding company structure. Bank
holding companies would be permitted to acquire a limited number of commercial
businesses not related to financial services. Subject to certain general
exceptions, H.R. 10 would also amend the 1934 Securities Exchange Act to
establish functional regulation of bank securities activities.
Holding companies affiltiated with securities or insurance firms
acquiring a bank would be able to continue the nonfinancial activities they
engaged in as of September 30, 1997, as long as the activities did not
constitute more than 15% of the company's annual gross revenues before the
acquisiton of the bank. Presently, insurance and securities firms are not
subject to the commercial business restrictions applicable to bank and bank
holding companies.
It cannot be predicted with accuracy whether or in what form
any of these proposals will be adopted or the extent of their effect upon all
financial institutions.
Bank Holding Company Regulation
Triangle is a bank holding company, registered with the Federal Reserve
under the BHC Act, and with the Commissioner under the North Carolina Bank
Holding Company Act of 1984, as amended (the "North Carolina Act"). As such,
Triangle is subject to the supervision, examination, and reporting requirements
contained in the BHC Act and the North Carolina Act and the regulations of the
Federal Reserve and the Commissioner.
The BHC Act requires that a bank holding company obtain the prior
approval of the Federal Reserve before (i) acquiring direct or indirect
ownership or control of more than 5% of the voting shares of any bank, (ii)
taking any action that causes a bank to become a subsidiary of the bank holding
company, (iii) acquiring all or substantially all of the assets of any bank, or
(iv) merging or consolidating with any other bank holding company.
The BHC act generally prohibits a bank holding company, with certain
exceptions, from engaging in activities other than banking, or managing or
controlling banks or other permissible subsidiaries, and from acquiring or
retaining direct or indirect control of any company engaged in any activities
other than those activities determined by the Federal Reserve to be closely
related to banking, or managing or controlling banks, as to be a proper incident
thereto. In determining whether a particular activity is permissible, the
Federal Reserve must consider whether the performance of such an activity can
reasonably be expected to produce benefits to the public, such as greater
convenience, increased competition or gains in efficiency, that outweigh
possible adverse effects, such as undue concentration of resources, decreased or
unfair competition, conflicts of interest or unsound banking practices. For
example, factoring accounts receivable, acquiring or servicing loans, leasing
personal property, conducting discount securities brokerage activities,
performing certain data processing services, acting as agent or broker in
selling credit life insurance and certain other types of insurance underwriting
activities have all been determined by regulations of the Federal Reserve to be
permissible activities of bank holding companies. Pursuant
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to delegated authority, the Federal Reserve Bank of Richmond has authority to
approve certain activities of holding companies within its district, including
the Corporation, provided the nature of the activity has been approved by the
Federal Reserve. Despite prior approval, the Federal Reserve has the power to
order a holding company or its subsidiaries to terminate any activity or to
terminate its ownership or control of any subsidiary when it has reasonable
cause to believe that continuation of such activity or such ownership or control
constitutes a serious risk to the financial safety, soundness or stability of
any bank subsidiary of that bank holding company
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve on any extensions of credit to the
bank holding company or any of its subsidiaries, investments in the stock or
securities thereof and the acceptance of such stock or securities as collateral
for loans to any borrower. A bank holding company and its subsidiaries are also
prevented from engaging in certain tie-in arrangements in connection with any
extension of credit, lease or sale of property or furnishing of services.
The Federal Reserve may issue cease and desist orders against bank
holding companies and non-bank subsidiaries to stop actions believed to present
a serious threat to a subsidiary bank. The Federal Reserve also regulates
certain debt obligations, change in control of bank holding companies and
capital requirements.
Bank Regulation
As North Carolina-chartered commercial banks, Triangle Bank and Bank of
Mecklenburg are subject to numerous state and federal statutes and regulations
that affect their business, activities and operations. Triangle Bank and Bank of
Mecklenburg are supervised and examined by the Federal Reserve. In addition,
Triangle Bank and Bank of Mecklenburg are supervised and examined by the
Commissioner. The Federal Reserve and the Commissioner are required to regularly
examine the operations of banks over which they exercise jurisdiction. They have
the authority to approve or disapprove the establishment of branches, mergers,
consolidations, and other similar corporate actions, and to prevent the
continuance or development of unsafe or unsound banking practices and other
violations of law. The Federal Reserve and the Commissioner regulate and monitor
all areas of the operations of banks and their subsidiaries, including loans,
mortgages, issuances of securities, capital adequacy, loss reserves, and
compliance with the Community Reinvestment Act and other laws and regulations.
Interest and certain other charges collected and contracted for by the banks are
also subject to state usury laws and certain federal laws concerning interest
rates.
The deposit accounts of Triangle Bank and most of the deposit accounts
of Bank of Mecklenburg are insured by the BIF of the FDIC up to a maximum of
$100,000 per insured depositor. Approximately $32 million of the deposits at
Bank of Mecklenburg are insured up to applicable limits by the SAIF. The deposit
accounts of United Federal are insured by the SAIF of the FDIC up to a maximum
of $100,000 per insured depositor and will remain so insured after the Merger.
The FDIC issues regulations and conducts periodic examinations, requires the
filing of reports, and generally supervises the operations of its insured banks.
The approval of the FDIC is required prior to a bank's merger or consolidation,
assumption of deposit liabilities, or establishment or relocation of an office
facility, unless, as in the case of Triangle Bank, such matters are subject to
the jurisdiction of the Federal Reserve. This supervision and regulation is
intended primarily for the protection of depositors. Any insured bank that is
not operated in accordance with or does not conform to federal regulations,
policies, and directives may be sanctioned for noncompliance. Civil and criminal
proceedings may be instituted against any insured bank or any director, officer,
or employee of such bank for the violation of applicable laws and regulations,
breaches of fiduciary duties, or engaging in any unsafe or unsound practice. The
FDIC has the authority to terminate insurance of accounts pursuant to procedures
established for that purpose.
55
<PAGE>
Dividends
Although Triangle is not subject to any direct legal or regulatory
restrictions on dividends (other than the requirements under the NCBCA that a
distribution may not be made if after giving it effect the corporation would not
be able to pay its debts as they become due in the usual course of business or
the corporation's total assets would be less than its liabilities), Triangle's
ability to pay cash dividends is dependent upon the amount of dividends paid by
its subsidiaries, Triangle Bank, Bank of Mecklenburg, and Coastal Leasing LLC.
The ability of Triangle Bank and Bank of Mecklenburg to pay dividends is subject
to statutory and regulatory restrictions on the payment of cash dividends,
including the requirement under the North Carolina banking laws that cash
dividends be paid only out of undivided profits and only if the bank has surplus
of a specified level. Federal bank regulatory agencies also have the general
authority to limit the dividends paid by insured banks and bank holding
companies if such payment may be deemed to constitute an unsafe and unsound
practice. If, in the opinion of the federal banking regulator, a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), such agency may
require, after notice and hearing, that such institution cease and desist from
such practice. The federal banking agencies have indicated that paying dividends
that deplete a depository institution's capital base to an inadequate level
would be an unsafe and unsound banking practice. Under the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), a depository
institution may not pay any dividend if payment would cause it to become
undercapitalized or if it already is undercapitalized. See "--Prompt Corrective
Action." Moreover, the federal agencies have issued policy statements that
provide that bank holding companies insured banks should generally only pay
dividends out of current operating earnings.
Capital Requirements
Triangle, its commercial bank subsidiaries, and United Federal are all
required by federal regulations to maintain certain minimum capital levels.
Federal regulators impose capital requirements on federally insured depository
institutions and their holding companies to ensure that such institutions have a
sufficient capital base to absorb operating losses and to provide a cushion to
the federal deposit insurance funds.
The Federal Reserve has established risk-based capital guidelines for
bank holding companies and state member banks based on the capital framework for
international banking organizations developed by the Basle Committee on Banking
Regulations and Supervisory Practices. The minimum standard for the ratio of
capital to risk-weighted assets (including certain off balance sheet
obligations, such as standby letters of credit) is 8%. At least half of this
capital must consist of common equity, retained earnings and a limited amount of
perpetual preferred stock, less certain goodwill items ("Tier I capital"). The
remainder ("Tier 2 capital") may consist of a limited amount of other preferred
stock, subordinated debt and a limited amount of loan loss reserves.
The Federal Reserve also has adopted a minimum (leverage) ratio of Tier
1 capital to total assets of 4%. The 4% Tier I capital to total assets ratio
constitutes the leverage standard for bank holding companies and state member
banks, and will be used in conjunction with the risk-based ratio in determining
the overall capital adequacy of banking organizations. In proposing such
standards, the Federal Reserve emphasized that in all cases the suggested
standards are supervisory minimums and that an institution would be permitted to
maintain such minimum levels of capital only if it were a strong banking
organization, rated composite one under the CAMELS rating system for banks or
the BOPEC rating system for bank holding companies. The Federal Reserve noted
that most expansion-oriented banking organizations have maintained leverage
capital ratios of between 4% and 5% of total assets, and it is likely that these
ratios will be applied to Triangle. At March 31, 1998, Triangle had not been
advised by the Federal Reserve of a minimum leverage capital ratio requirement
specifically applicable to it. At March 31, 1998, Triangle, Triangle Bank, Bank
of Mecklenburg and United Federal exceeded their respective capital
requirements.
56
<PAGE>
Upon consummation of the Merger, Triangle and Triangle Bank will
continue to remain in compliance with all existing capital requirements as shown
in the tables below.
<TABLE>
<CAPTION>
<S> <C>
Triangle Bancorp, Inc.
PRO FORMA CAPITAL CALCULATION
As of March 31, 1998
Pro Forma
Combined
Triangle Triangle and Minimum
Bancorp United Federal United Federal Regulatory Ratios
------- -------------- -------------- -----------------
Tier 1 capital to risk weighted assets 10.96% 9.06% 10.62% 4.0%
Total capital to risk weighted assets 12.21% 10.11% 11.87% 8.0%
Leverage ratio(1) 7.80% 7.54% 7.75% 4.0%
(1) Leverage ratio is calculated as Tier 1 capital divided by quarterly average
assets less goodwill and other disallowed intangibles.
Triangle Bank
PRO FORMA CAPITAL CALCULATION
As of March 31, 1998
Pro Forma
Combined
Triangle Bank
Triangle and Minimun
Bank United Federal United Federal Regulatory Ratios
--------- --------------- --------------- ------------------
Tier 1 capital to risk weighted assets 12.84% 9.06% 11.88% 4.0%
Total capital to risk weighted assets 14.10% 10.11% 13.14% 8.0%
Leverage ratio(1) 6.87% 7.54% 6.98% 4.0%
</TABLE>
(1) Leverage ratio is calculated as Tier 1 capital divided by quarterly average
assets less goodwill and other disallowed intangibles.
The capital requirements currently in effect could be increased by the
federal regulators. Moreover, the management of Triangle may determine that it
is advisable, or banking regulators may require, that Triangle and Triangle Bank
and Bank of Mecklenburg raise additional capital as a result of growth,
unanticipated losses or inadequate financial performance, or for other reasons.
No assurances can be given that any such additional capital would be available
to Triangle, Triangle Bank or Bank of Mecklenburg.
Failure to meet capital guidelines could subject a bank or thrift to a
variety of enforcement remedies, including issuance of a capital directive, the
termination of deposit insurance by the FDIC, a prohibition on the taking of
brokered deposits, and certain other restrictions on its business. As described
below, substantial additional restrictions can be imposed upon FDIC-insured
depository institutions that fail to meet applicable capital requirements. See
"--Prompt Corrective Action."
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the Federal Reserve, the FDIC and the OCC have, pursuant
to FDICIA, proposed an amendment to the risk-based capital standards that would
calculate the change in an institution's net economic value attributable to
increases and decreases in market interest rates and would require banks with
excessive interest rate risk exposure to hold additional amounts of capital
against such exposures. The OTS has already included an interest-rate risk
component in its risk-based capital guidelines for savings associations that it
regulates.
57
<PAGE>
Interstate Banking and Branching
In September 1994, Congress passed the Interstate Banking and Branching
Efficiency Act (the "Interstate Act"). The Interstate Act permits adequately
capitalized bank holding companies to acquire control of banks in any state.
States may require the bank being acquired to have been in existence for a
certain length of time but not in excess of five years. No bank may acquire more
than 10% of nationwide insured deposits or 30% of any state's insured deposits.
States have the right to waive the 30% limit. As of June 1, 1997, banks may
merge under the Interstate Act with other banks across state lines. States could
opt-in to such interstate branching earlier or could opt-out of interstate
branching by June 1, 1997. The states of Texas and Montana have opted out of
interstate branching. Under the Interstate Act, establishing new branches in
another state will require that state's specific approval. Legislation to have
North Carolina opt in for earlier adoption of interstate branching was passed in
1995. During 1993, North Carolina adopted legislation authorizing interstate
mergers. There can be no prediction as to what impact such legislation or the
Interstate Act might have upon Triangle and its subsidiaries.
Support of Subsidiary Institutions
Under Federal Reserve policy, Triangle is expected to act as a source
of financial strength for, and to commit resources to support, each of its
banking subsidiaries. This support may be required at times when, absent such
Federal Reserve policy, Triangle may not be inclined to provide it. In addition,
any capital loans by a bank holding company to any of its banking subsidiaries
are subordinate in right of payment to deposits and to certain other
indebtedness of such banks. In the event of a bank holding company's bankruptcy,
any commitment by the bank holding company to a federal bank regulatory agency
to maintain the capital of a banking subsidiary will be assumed by the
bankruptcy trustee and entitled to a priority of payment.
Under the Federal Deposit Insurance Act (the "FDIA"), a depository
institution insured by the FDIC can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC after August 9, 1989, in
connection with (i) the default of a commonly controlled FDIC-insured depository
institution or (ii) any assistance provided by the FDIC to any commonly
controlled FDIC-insured depository institution "in danger of default." "Default"
is defined generally as the appointment of a conservator or receiver, and "in
danger of default" is defined generally as the existence of certain conditions
indicating that a default is likely to occur in the absence of regulatory
assistance. The FDIC's claim for damages is superior to claims of stockholders
of the insured depository institution or its holding company, but is subordinate
to claims of depositors, secured creditors, and holders of subordinated debt
(other than affiliates) of the commonly controlled insured depository
institution. The subsidiary depository institutions of Triangle are subject to
these cross-guarantee provisions. As a result, any loss suffered by the FDIC in
respect of any of these subsidiaries would likely result in assertion of the
cross-guarantee provisions, the assessment of such estimated losses against the
depository institution's banking or thrift affiliates, and a potential loss of
UPC's respective investments in such other subsidiary depository institutions.
Prompt Corrective Action
FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and to make certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions in
the three undercapitalized categories, the severity of which will depend upon
the capital category in which the institution is placed. Generally, subject to a
narrow exception, FDICIA requires the banking regulator to appoint a receiver or
conservator for an institution that is critically undercapitalized. The federal
banking agencies have specified by regulation the relevant capital level for
each category.
58
<PAGE>
Under the final agency rules implementing the prompt corrective action
provisions, an institution that (i) has a Total Capital Ratio of 10% or greater,
a Tier 1 Capital Ratio of 6.0% or greater, and a Leverage Ratio of 5.0% or
greater and (ii) is not subject to any written agreement, order, capital
directive, or prompt corrective action directive issued by the appropriate
federal banking agency is deemed to be well capitalized. An institution with a
Total Capital Ratio of 8.0% or greater, a Tier 1 Capital Ratio of 4.0% or
greater, and a Leverage Ratio of 4.0% or greater is considered to be adequately
capitalized. A depository institution that has a Total Capital Ratio of less
than 8.0%, a Tier 1 Capital Ratio of less than 4.0%, or a Leverage Ratio of less
than 4.0% is considered to be undercapitalized. A depository institution that
has a Total Capital Ratio of less than 6.0%, a Tier 1 Capital Ratio of less than
3.0%, or a Leverage Ratio of less than 3.0% is considered to be significantly
undercapitalized, and an institution that has a tangible equity capital to
assets ratio equal to or less than 2.0% is deemed to be critically
undercapitalized. For purposes of the regulation, the term "tangible equity"
includes core capital elements counted as Tier 1 Capital for purposes of the
risk-based capital standards, plus the amount of outstanding cumulative
perpetual preferred stock (including related surplus), minus all intangible
assets with certain exceptions. A depository institution may be deemed to be a
capitalization category that is lower than is indicated by its actual capital
position if it receives an unsatisfactory examination rating.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary depository
institution meet its capital restoration plan, subject to certain limitations.
The obligation of a controlling bank holding company under FDICIA to fund a
capital restoration plan is limited to the lesser of 5.0% of an undercapitalized
subsidiary's assets or the amount required to meet regulatory capital
requirements. An undercapitalized institution is also generally prohibited from
increasing its average total assets, making acquisitions, establishing any
branches, or engaging in any new line of business, except in accordance with an
accepted capital restoration plan or with the approval of the depository
institution to take any of the actions it is required to or may take with
respect to a significantly undercapitalized institution as described below if it
determines "that those actions are necessary to carry out the purpose" of
FDICIA.
For those institutions that are significantly undercapitalized or
undercapitalized and either fail to submit an acceptable capital restoration
plan or fail to implement on a approved capital restoration plan, the
appropriate federal banking agency must require the institution to take one or
more of the following actions: (i) sell enough shares, including voting shares,
to become adequately capitalized; (ii) merge with (or be sold to) another
institution (or holding company), but only if grounds exist for appointing a
conservator or receiver; (iii) restrict certain transactions with banking
affiliates as if the "sister bank" exception to the requirements of Section 23A
of the Federal Reserve Act did not exist; (iv) otherwise restrict transactions
with bank or non-bank affiliates; (v) restrict interest rates that the
institution pays on deposits to "prevailing rates" in the institutions'
"region;" (vi) restrict asset growth or reduce total assets; (vii) alter,
reduce, or terminate activities; (viii) hold a new election of directors; (ix)
dismiss any director or senior executive officer who held office for more than
180 days immediately before the institution became undercapitalized, provided
that in requiring dismissal of a director or senior officer, the agency must
comply with certain procedural requirements, including the opportunity for an
appeal in which the director or officer will have the burden of proving his or
her value to the institution'; (x) employ "qualified" senior executive officers;
(xi) cease accepting deposits from correspondent depository institutions; (xii)
divest certain nondepository affiliates which pose a danger to the institution;
or (xiii) be divested by a parent holding company. In addition, without the
prior approval of the appropriate federal banking agency, a significantly
undercapitalized institution may not pay any bonus to any senior executive
officer to increase the rate of compensation for such an officer.
At March 31, 1998, Triangle Bank, Bank of Mecklenburg and United
Federal had the requisite capital levels to qualify as well capitalized.
59
<PAGE>
Legislation and Governmental Polices, Monetary Policy and Economic Controls
Legislative and regulatory proposals regarding changes in banking, and
the regulation of banks, savings and loan associations, and other financial
institutions are considered from time to time by the executive branch of the
Federal government, Congress, and various state governments, including North
Carolina. Certain of these proposals, if adopted, could significantly change the
regulation of banks and the financial services industry generally. It cannot be
predicted whether any of these proposals will be adopted, and, if adopted, how
these will affect Triangle, Triangle Bank, Bank of Mecklenburg or United
Federal.
Triangle, Triangle Bank, Bank of Mecklenburg, and United Federal are
directly affected by government monetary policy and by regulatory measures
affecting the financial services industry in general. Of primary importance is
the Federal Reserve, whose actions directly affect the money supply and, in
general, affect the lending ability of financial institutions by increasing or
decreasing the cost and availability of funds to financial institutions. The
Federal Reserve regulates the availability of credit in order to combat
recession and curb inflationary pressures in the economy by open market
operations in United States government securities, changes in the discount rate
on member bank borrowings and changes in reserve requirements against bank
deposits.
Deregulation of interest rates paid by banks and savings and loan
associations on deposits and the types of deposits that may be offered by such
institutions have eliminated minimum balance requirements and rate ceilings on
various types of time deposit accounts. The effect of these specific actions
and, in general, the deregulation of deposit interest rates have made such
institutions much more sensitive to fluctuations in money market rates. In view
of the changing conditions in the national economy and money markets, as well as
the effect of actions by monetary and fiscal authorities, no prediction can be
made as to possible future changes in interest rates, deposit levels, loan
demand, or the business and earnings of Triangle, Triangle Bank, Bank of
Mecklenburg or United Federal.
LEGAL AND TAX MATTERS
Alexander M. Donaldson, Esq., Senior Vice President and General Counsel
of Triangle, will deliver an opinion at the Effective Time to the effect that
Triangle Stock to be issued to the shareholders of United Federal in connection
with the Merger, when issued as contemplated in the Agreement, will be validly
issued, fully paid, and non-assessable. As of July 31, 1998, Mr. Donaldson
owned of record 1,588 shares of Triangle Stock.
PricewaterhouseCoopers LLP, tax advisors to Triangle, has delivered an
opinion to Triangle and United Federal concerning certain federal income tax
consequences of the Merger as required by the Agreement. See "THE MERGER-
Certain Federal Income Tax Consequences."
Certain other legal matters in connection with the Merger will be
passed upon for Triangle by Mr. Donaldson and for United Federal by Muldoon,
Murphy & Faucette, Washington, D. C.
EXPERTS
The consolidated and supplemental consolidated balance sheets of
Triangle Bancorp, Inc. as of December 31, 1997 and 1996, and the consolidated
and supplemental consolidated statements of income, changes in stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 1997, have been incorporated by reference herein and in the Registration
Statement in reliance on the reports of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
60
<PAGE>
The consolidated balance sheets of United Federal Savings Bank as of
December 31, 1997 and 1996, and the consolidated statements of income,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1997, have been incorporated by reference herein and in the
Registration Statement in reliance on the report of McGladrey & Pullen LLP,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
Representatives of McGladrey & Pullen LLP are expected to be present at
the United Federal Special Meeting, and will have an opportunity to make a
statement if they desire to do so, and are expected to be available to respond
to appropriate questions.
OTHER MATTERS
As of the date of this Proxy Statement/Prospectus, the Board of
Directors of United Federal did not know of any matters that will be presented
for consideration at the United Federal Special Meeting other than as described
in this Proxy Statement/Prospectus. However, if any other proper matters shall
come before the United Federal Special Meeting or any adjournment thereof and be
voted upon, the enclosed proxy will be deemed to confer discretionary authority
to the individuals named as proxies therein to vote the shares represented by
such proxy as to any such matters.
61
<PAGE>
APPENDIX I
AGREEMENT AND PLAN
OF REORGANIZATION AND MERGER
BY AND AMONG
UNITED FEDERAL SAVINGS BANK,
TRIANGLE BANK
AND
TRIANGLE BANCORP, INC.
MARCH 4, 1998
AMENDED AS OF AUGUST 7, 1998
<PAGE>
<PAGE>
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
BY AND AMONG
UNITED FEDERAL SAVINGS BANK,
TRIANGLE BANK
AND
TRIANGLE BANCORP, INC.
THIS AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF REORGANIZATION AND
MERGER (hereinafter called "Agreement") entered into as of the 7th day of
August, 1998, by and among UNITED FEDERAL SAVINGS BANK ("United Federal"),
TRIANGLE BANK ("Triangle") and TRIANGLE BANCORP, INC. (the "Holding Company").
WHEREAS, United Federal, Triangle and the Holding Company are
parties to an Agreement and Plan of Reorganization and Merger dated March 4,
1998 (the "Merger Agreement), pursuant to which United Federal will merge with
Triangle Bank (the "Merger"); and,
WHEREAS, to ensure the completion of the Merger despite recent
fluctuations in the price of the Holding Company's common stock ("Triangle
Stock"), the parties wish to amend the price structure contained in the Merger
Agreement; and,
WHEREAS, the parties also wish to amend the Merger Agreement to
reflect the three-for-two stock split effected by the Holding Company on June
30, 1998.
NOW, THEREFORE, in consideration of the premises, the mutual
benefits to be derived from this Agreement, and of the representations,
warranties, conditions, covenants and promises herein contained, and subject to
the terms and conditions hereof, the Holding Company, Triangle and United
Federal hereby adopt and make this Agreement and mutually agree as follows:
1. Section 1.05.a. of the Merger Agreement is deleted and replaced in its
entirety as follows:
"At the Effective Time, all rights of United Federal's shareholders with
respect to all then outstanding shares of United Federal's common stock ($0.01
par value) ("United Federal Stock") shall cease to exist, and, as consideration
for and to effectuate the Merger (and except as otherwise provided below) each
such outstanding share of United Federal Stock (other than any shares held by
the Holding Company) shall be converted, without any action on the part of the
holder of such share, the Holding Company, Triangle or United Federal, into
0.945 (the "Exchange Rate") newly issued shares of the Holding Company's no par
value common stock ("Triangle Stock"), provided, however, that in the event the
average closing sales price of Triangle Stock for the twenty (20) trading days
preceding a date three (3) business days before the Effective Time (the "Average
Closing Price") is between $18.67 and $21.17, the Exchange Rate shall be
increased to provide a per share value of not less than $20.00 for each share of
United Federal Stock, and in the event the Average Closing Price of Triangle
Stock is between $25.51 and $28.00, the Exchange Rate shall be decreased to
provide a per share value of not more than $24.11, and provided that in the
event the Average Closing Price of Triangle Stock is between $18.66 and $17.25,
the Exchange Rate shall be fixed at 1.071; and in the event the Average Closing
Price of Triangle Stock is less than $17.25, the Exchange Rate shall be
increased to provide a value of not less than $18.47 per share of United Federal
Stock, provided that Triangle or United Federal may terminate the Agreement and
abandon the Merger if the Average Closing Price of Triangle Stock is less than
$16.82, and provided further that in the event the Average Closing Price of
Triangle Stock is greater than $28.00, either party, at its option and without
penalty, may terminate this Agreement (except the Holding Company in the event
provided below), provided that in the event either party does not so terminate
this Agreement, the Agreement shall remain in effect; and provided further that,
after determining the Exchange Rate required by the Average Closing Price of
Triangle Stock, the Exchange Rate shall be adjusted in the following manner: (i)
if between January 1, 1998 and a date five (5) business days prior to the
Closing charge-offs by United Federal (net of recoveries) for all loans
(excluding any charge-offs for Pea Island) exceed $500,000 the Exchange Rate
shall be reduced by .0015 for each $100,000 in charge-offs in excess of
$500,000, (ii) if at month-end preceding the Closing non-performing assets of
United Federal exceed $2,000,000, the Exchange Rate shall be reduced by .00375
for every $1,000,000 in excess of $2,000,000, on an interpolated
dollar-for-dollar basis (for purposes of this clause non-performing assets are
defined as all loans (excluding mortgage loans originated by United Federal for
sale in the secondary market and mortgage loans which are guaranteed by the FHA
or VA) which are over ninety (90) days delinquent, on non-accrual status, or for
which the borrower has filed a petition for relief under the United States
Bankruptcy Code, and all other collateral property received under loan
arrangements currently held for resale), or (iii) if on a date five (5) business
days prior to the Closing the loan loss reserve of United Federal is less than
the sum of $2,900,000 plus one and one-half percent (1.5%) for every dollar in
total loan growth over the December 31, 1997 level of $254,000,000, the Exchange
Rate shall be reduced by .00375 for every $250,000 shortfall in the loan loss
reserve (excluding any write-off of Pea Island loans) on an interpolated
dollar-for-dollar basis; then if the aggregate reduction caused by clauses (i),
(ii) and (iii) above is less than or equal to .00375, the Exchange Rate shall
not be adjusted, but if the aggregate reduction is greater than .00375 the
Exchange Rate shall be adjusted, provided that in the event the adjustment
provided for herein causes the Exchange Rate (i) to decrease by more than one
and one-half (1.5) basis points, either party hereto at its option and without
penalty may terminate this Agreement, provided that in the event that either
party does not so terminate this Agreement, this Agreement shall remain in
effect, or (ii) to yield a per share dollar value to a holder of United Federal
Stock of less than $18.47, United Federal may terminate this Agreement at its
option and without penalty, provided that in the event that United Federal does
not so terminate this Agreement, this Agreement shall remain in effect."
In the event the Holding Company enters into a binding written
agreement to be acquired by a third party which causes the Average Closing Price
of Triangle Stock to exceed $28.00, the Holding Company shall not have the right
to terminate this Agreement based on the Average Closing Price as provided
above. Further, in such event, the Exchange Rate shall be adjusted to yield a
per share dollar value to a holder of United Federal Stock of not more than
$24.11. In such event, United Federal may still exercise its right to terminate
this Agreement as provided in this Paragraph 1.05.a.
At the Effective Time, and without any action by United Federal,
Triangle, the Holding Company or any holder thereof, United Federal's stock
transfer books shall be closed as to holders of United Federal Stock immediately
prior to the Effective Time and, thereafter, no transfer of United Federal Stock
by any such holder may be made or registered; and the holders of shares of
United Federal Stock shall cease to be, and shall have no further rights as,
shareholders of United Federal other than as provided herein. Following the
Effective Time, certificates representing shares of United Federal Stock
outstanding at the Effective Time (herein sometimes referred to as "Old
Certificates") shall evidence only the right of the registered holder thereof to
receive, and may be exchanged for, certificates for the number of whole shares
of the Triangle Stock to which such holders shall have become entitled on the
basis set forth above, plus cash for any fractional share interests as provided
herein."
2. All other terms of the Merger Agreement shall remain in full form and effect.
<PAGE>
IN WITNESS WHEREOF, United Federal, Triangle and the Holding Company each has
caused this Agreement to be executed in its name by its duly authorized officers
as of the date first above written.
TRIANGLE BANCORP, INC.
By: /s/ Michael S. Patterson
---------------------------------------
Michael S. Patterson President and Chief Executive Officer
ATTEST:
/s/ Susan C. Gilbert
Susan C. Gilbert, Secretary
TRIANGLE BANK
[Corporate Seal]
By: /s/ Michael S. Patterson
Michael S. Patterson ----------------------------------------
President and Chief Executive Officer
ATTEST:
/s/ Susan C. Gilbert
Susan C. Gilbert, Secretary
[Corporate Seal]
UNITED FEDERAL SAVINGS BANK
By: /s/ John A. Barker
----------------------------------------
John A. Barker
President and Chief Executive Officer
ATTEST:
/s/ Paula V. Walker
Paula V. Walker, Assistant Secretary
[Corporate Seal]
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TABLE OF CONTENTS
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ARTICLE I. AGREEMENT TO MERGE............................................................................... 2
1.01. Names of Merging Corporations...................................................... 2
1.02. Nature of Transaction.............................................................. 2
1.03 Effect of Merger; Surviving Corporation............................................ 2
1.04. Assets and Liabilities of United Federal........................................... 2
1.05. Conversion and Exchange of Stock................................................... 2
a. Conversion of United Federal Stock................................................. 2
b. Exchange Procedures................................................................ 4
c. Treatment of Fractional Shares.................................................... 4
d. Surrender of Certificates.......................................................... 4
e. Antidilutive Adjustments........................................................... 5
f. Lost Certificates.................................................................. 5
g. Treatment of United Federal's Stock Options........................................ 5
h. Outstanding Triangle Stock......................................................... 6
1.06. Articles, Bylaws and Management.................................................... 6
1.07. Closing; Articles of Merger; Effective Time........................................ 6
ARTICLE II. REPRESENTATIVES AND WARRANTIES
OF UNITED FEDERAL.......................................................................................... 7
2.01. Organization; Standing; Power...................................................... 7
2.02 Capital Stock...................................................................... 7
2.03 Principal Shareholders............................................................. 8
2.04 Subsidiaries....................................................................... 8
2.05 Convertible Securities, Options, Etc............................................... 8
2.06 Authorization and Validity of Agreement............................................ 8
2.07 Validity of Transactions; Absence of Required Consents
or Waivers....................................................................... 9
2.08 United Federal Books and Records................................................... 9
2.09 United Federal Reports............................................................. 9
2.10 United Federal Financial Statements................................................10
2.11 Tax Returns and Other Tax Matters..................................................10
2.12 Adverse of Material Changes or Certain Other Events................................11
2.13 Absence of Undisclosed Liabilities.................................................11
2.14 Compliance with Existing Obligations...............................................11
2.15 Litigation and Compliance with Law.................................................11
2.16 Real Properties....................................................................12
2.17 Loans, Accounts, Notes and Other Receivables.......................................13
2.18 Securities Portfolio and Investments...............................................14
2.19 Personal Property and Other Assets.................................................14
2.20 Patents, Trademarks and Licenses...................................................14
2.21 Environmental Matters..............................................................14
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2.22 Absence of Brokerage or Finders Commissions........................................16
2.23 Material Contracts.................................................................16
2.24 Employment Matters; Employee Relations.............................................17
2.25 Employee Agreements; Employee Benefit Plans........................................17
2.26 Insurance..........................................................................18
2.27 Insurance of Deposits..............................................................19
2.28 Affiliates.........................................................................19
2.29 Obstacles to Regulatory Approval, Accounting Treatment or
Tax Treatment......................................................................19
2.30 Disclosure.........................................................................19
2.31 Dissenter's Rights.................................................................19
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE HOLDING
COMPANY AND TRIANGLE........................................................................................20
3.01 Organization; Standing; Power......................................................20
3.02 Capital Stock......................................................................20
3.03 Authorization and Validity of Agreement............................................20
3.04 Validity of Transactions; Absence of Required Consents
or Waivers.......................................................................20
3.05 Holding Company Books and Records..................................................21
3.06 Holding Company Reports............................................................21
3.07 Holding Company Financial Statements...............................................22
3.08 Absence of Material Adverse Changes................................................22
3.09 Litigation and Compliance with Law.................................................22
3.10 Absence of Brokerage or Finders Commission.........................................23
3.11 Obstacles to Regulatory Approval, Accounting Treatment
or Tax Treatment.................................................................23
3.12 Disclosure.........................................................................23
ARTICLE IV. COVENANTS OF UNITED FEDERAL......................................................................24
4.01 Affirmative Covenants of United Federal............................................24
a. "Affiliates" of United Federal.....................................................24
b. Conduct of Business Prior to Effective Time........................................24
c. Periodic Information Regarding Loans and Other Information.........................25
d. Notice of Certain Changes or Events................................................26
e. Consents to Assignment of Leases...................................................26
f. Further Action; Instruments of Transfer, etc.......................................26
g. Loan Loss Reserve..................................................................26
h. Incentive Compensation.............................................................26
4.02 Negative Covenants of United Federal...............................................27
a. Amendments to Charter or Bylaws....................................................27
b. Change in Capital Stock............................................................27
c. Options, Warrants and Rights.......................................................27
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d. Dividend.......................................................................... 27
e. Employment, Benefit or Retirement Agreement........................................27
f. Increase in Compensation; Additional Compensation..................................27
g. Accounting Practices...............................................................28
h. Acquisitions; Additional Branch Offices............................................28
i. Changes in Business Practices......................................................28
j. Exclusive Merger Agreement.........................................................28
k. Acquisition or Disposition of Assets...............................................28
l. Debt; Liabilities..................................................................29
m. Liens; Encumbrances................................................................29
n. Waiver of Rights...................................................................29
o. Other Contacts.....................................................................30
ARTICLE V. COVENANTS OF THE HOLDING COMPANY AND TRIANGLE.....................................................30
5.01. Advisory Board of Directors........................................................30
5.02. NYSE Notification of Listing of Additional Shares
of Triangle Stock................................................................30
5.03. Notice of Certain Changes of Events................................................30
5.04 The Holding Company to Provide Necessary Information...............................30
ARTICLE VI. MUTUAL AGREEMENTS................................................................................31
6.01. Shareholders' Meeting; Registration Statement;
Proxy Statement/Prospectus.......................................................31
a. Meeting of Shareholders............................................................31
b. Preparation and Distribution of Proxy Statement/Prospectus.........................31
c. Registration Statement and "Blue Sky" Approvals....................................31
d. Recommendation of United Federal's Board of Directors..............................32
e. Information for Proxy Statement/Prospectus and
Registration Statement...........................................................32
6.02. Regulatory Approvals...............................................................32
6.03. Access.............................................................................32
6.04. Costs..............................................................................33
6.05 Announcements......................................................................33
6.06. Environmental Studies..............................................................33
6.07. Employees, Severance Payments, Employee Benefits...................................34
a. Consulting and Employment Agreements...............................................34
b. Employment of United Federal Employees.............................................34
c. Severance Payment..................................................................35
d. Employee Benefits..................................................................35
6.08. Confidentiality....................................................................36
6.09. Reorganization for Tax Purposes....................................................36
6.10. Accounting Treatment...............................................................37
6.11. Other Permissible Transactions.....................................................37
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6.12. Dividend Coordination..............................................................37
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ARTICLE VII. CONDITIONS PRECEDENT TO MERGER..................................................................37
7.01 Conditions to all Parties' Obligations.............................................37
a. Approval by Governmental or Regulatory Authorities; No
Disadvantageous Conditions.......................................................37
b. Effectiveness of Registration Statement; Compliance with
Securities and Other "Blue Sky" Requirements.....................................38
c. Adverse Proceedings, Injunction, Etc...............................................38
d. Approval by Boards of Directors and Shareholders...................................38
e. Fairness Opinions..................................................................38
f. Tax Opinion........................................................................39
g. No Termination or Abandonment......................................................39
7.02 Additional Conditions to United Federal's Obligations..............................39
a. Material Adverse Change............................................................39
b. Compliance with Laws...............................................................39
c. The Holding Company's and Triangle's Representations and
Warranties and Performance of Agreements;
Officers' certificate...........................................................39
d. Legal Opinion of the Holding Company's Counsel.....................................40
e. Other Documents and Information from the Holding Company...........................40
and Triangle.....................................................................40
f. Acceptance by United Federal's Counsel.............................................40
7.03 Additional Conditions to the Holding Company's and Triangle's
Obligations.......................................................................40
a. Material Adverse Change............................................................40
b. Compliance with Laws; Adverse Proceedings; Injunction, Etc.........................40
c. United Federal's Representations and Warranties
and Performance of Agreements; Officers' Certificates............................40
d. Agreements from United Federal Affiliates..........................................41
e. Accounting Treatment...............................................................41
f. Legal Opinion of United Federal's Counsel..........................................41
g. Other Documents and Information from United Federal................................41
h. Consents to Assignment of Real Property Leases.....................................41
i Acceptance by the Holding Company's Counsel........................................41
j. Expenses...........................................................................41
k. Tainted Shares.....................................................................41
l. Mortgage Loan Portfolio............................................................42
ARTICLE VIII. TERMINATION; BREACH; REMEDIES..................................................................42
8.01 Mutual Termination.................................................................42
8.02 Unilateral Termination.............................................................42
a. Termination by the Holding Company.................................................42
b. Termination by United Federal......................................................43
8.03 Breach; Remedies...................................................................44
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a. Breach of Agreement................................................................44
b. Payment of Expenses................................................................44
ARTICLE IX. INDEMNIFICATION..................................................................................44
9.01 Indemnification Following Effective Time...........................................44
9.02 Procedure for Claiming Indemnification.............................................44
ARTICLE X. MISCELLANEOUS PROVISIONS..........................................................................45
10.01 "Previously Disclosed" Information: "Material Adverse Effect".....................45
10.02 Survival of Representations, Warranties, Indemnification and
Other Agreements.................................................................45
a. Representatives, Warranties and Other Agreements...................................45
b. Indemnification....................................................................46
10.03 Waiver.............................................................................46
10.04 Amendment..........................................................................46
10.05 Notice.............................................................................46
10.06 Further Assurance..................................................................47
10.07 Headings and Captions..............................................................47
10.08 Entire Agreement...................................................................47
10.09 Severability of Provisions.........................................................47
10.10 Assignment.........................................................................47
10.11 Counterparts.......................................................................47
10.12 Governing Law......................................................................47
10.13 Inspection.........................................................................48
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AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
BY AND AMONG
UNITED FEDERAL SAVINGS BANK,
TRIANGLE BANK
AND
TRIANGLE BANCORP, INC.
THIS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
(hereinafter called "Agreement") entered into as of the 4th day of March, 1998,
by and among UNITED FEDERAL SAVINGS BANK ("United Federal"), TRIANGLE BANK
("Triangle") and TRIANGLE BANCORP, INC. (the "Holding Company").
WHEREAS, United Federal is a federally-chartered savings bank
with its principal office and place of business located in Rocky Mount, North
Carolina, and,
WHEREAS, Triangle is a North Carolina banking corporation with
its principal office and place of business located in Raleigh, North Carolina
and also is the wholly-owned subsidiary of the Holding Company, a North Carolina
business corporation with its principal office and place of business located in
Raleigh, North Carolina; and,
WHEREAS, the Holding Company and United Federal have agreed
that it is in their mutual best interests and in the best interests of their
respective shareholders for United Federal to merge with and into Triangle (the
"Merger") with the effect that each of the outstanding shares of United
Federal's common stock will be converted into newly issued shares of the Holding
Company's common stock, all in the manner and upon the terms and conditions
contained in this Agreement; and,
WHEREAS, to effectuate the foregoing, the Holding Company,
Triangle and United Federal desire to adopt this Agreement as a plan of
reorganization in accordance with the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended; and,
WHEREAS, while United Federal's Board of Directors has
approved this Agreement, United Federal has executed this Agreement subject to
the approval of its shareholders and has agreed to call a special meeting of its
shareholders for the purpose of voting on the Agreement and will recommend to
its shareholders that they approve the Agreement and the transactions described
herein; and,
WHEREAS, the Holding Company's and Triangle's Boards of
Directors have approved this Agreement and the transactions described herein,
including the issuance by the Holding Company of shares of its common stock to
United Federal's shareholders to effectuate such transactions.
NOW, THEREFORE, in consideration of the premises, the mutual
benefits to be derived from this Agreement, and of the representations,
warranties, conditions, covenants and
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promises herein contained, and subject to the terms and conditions hereof, the
Holding Company, Triangle and United Federal hereby adopt and make this
Agreement and mutually agree as follows:
ARTICLE I. AGREEMENT TO MERGE
1.01. NAMES OF MERGING CORPORATIONS. The names of the corporations
proposed to be merged are UNITED FEDERAL SAVINGS BANK ("United Federal") and
TRIANGLE BANK ("Triangle").
1.02. NATURE OF TRANSACTION. Subject to the provisions of this
Agreement, at the "Effective Time" (as defined in Paragraph 1.07. below), United
Federal shall be merged into and with Triangle (the "Merger").
1.03. EFFECT OF MERGER; SURVIVING CORPORATION. At the Effective Time,
by reason of the Merger the separate corporate existence of United Federal shall
cease while the corporate existence of Triangle as the surviving corporation in
the Merger shall continue with all of its purposes, objects, rights, privileges,
powers and franchises, all of which shall be unaffected and unimpaired by the
Merger. Following the Merger, Triangle shall operate as the wholly-owned banking
subsidiary of the Holding Company and, as a North Carolina banking corporation,
will continue to conduct its business at the then legally established branches
and main offices of Triangle and United Federal. The duration of the corporate
existence of Triangle, as the surviving corporation, shall be perpetual and
unlimited.
1.04. ASSETS AND LIABILITIES OF UNITED FEDERAL....At the Effective Time
and by reason of the Merger, all of United Federal's property, assets and rights
of every kind and character (including without limitation all real, personal or
mixed property, all debts due on whatever account including the liquidation
account established by United Federal in connection with its conversion to the
stock form of organization, all other choses in action and all and every other
interest of or belonging to or due to United Federal, whether tangible or
intangible) shall be transferred to and vest in Triangle, and Triangle shall
succeed to all the rights, privileges, immunities, powers, purposes and
franchises of a public or private nature (including all trust and fiduciary
properties, powers and rights) of United Federal, all without any conveyance,
assignment or further act or deed; and Triangle shall become responsible for all
of the liabilities, duties and obligations of every kind, nature and description
(including duties as trustee or fiduciary) of United Federal as of the Effective
Time.
1.05. CONVERSION AND EXCHANGE OF STOCK.
A. CONVERSION OF UNITED FEDERAL STOCK. At the Effective Time,
all rights of United Federal's shareholders with respect to all then outstanding
shares of United Federal's common stock ($0.01 par value) ("United Federal
Stock") shall cease to exist, and, as consideration for and to effectuate the
Merger (and except as otherwise provided below) each such outstanding share of
United Federal Stock (other than any shares held by the Holding Company) shall
be converted, without any action on the part of the holder of such share, the
Holding Company, Triangle or United Federal, into 0.63 (the "Exchange Rate")
newly issued shares of the Holding Company's no par value common stock
("Triangle Stock"), provided, however, that in the event the
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average closing sales price of Triangle Stock for the twenty (20) trading days
preceding a date three (3) business days before the Effective Time (the "Average
Closing Price") is between $28.00 and $31.75, the Exchange Rate shall be
increased to provide a per share value of not less than $20.00 for each share of
United Federal Stock, and in the event the Average Closing Price of Triangle
Stock is between $38.27 and $42.00, the Exchange Rate shall be decreased to
provide a per share value of not more than $24.11, and provided further that in
the event the Average Closing Price of Triangle Stock is less than $28.00 or is
greater than $42.00, either party, at its option and without penalty, may
terminate this Agreement (except the Holding Company in the event provided
below), provided that in the event either party does not so terminate this
Agreement, the Agreement shall remain in effect; and provided further that,
after determining the Exchange Rate required by the Average Closing Price of
Triangle Stock, the Exchange Rate shall be adjusted in the following manner: (i)
if between January 1, 1998 and a date five (5) business days prior to the
Closing charge-offs by United Federal (net of recoveries) for all loans
(excluding any charge-offs for Pea Island) exceed $500,000 the Exchange Rate
shall be reduced by .0010 for each $100,000 in charge-offs in excess of
$500,000, (ii) if at month-end preceding the Closing non-performing assets of
United Federal exceed $2,000,000, the Exchange Rate shall be reduced by .0025
for every $1,000,000 in excess of $2,000,000, on an interpolated
dollar-for-dollar basis (for purposes of this clause non-performing assets are
defined as all loans (excluding mortgage loans originated by United Federal for
sale in the secondary market and mortgage loans which are guaranteed by the FHA
or VA) which are over ninety (90) days delinquent, on non-accrual status, or for
which the borrower has filed a petition for relief under the United States
Bankruptcy Code, and all other collateral property received under loan
arrangements currently held for resale), or (iii) if on a date five (5) business
days prior to the Closing the loan loss reserve of United Federal is less than
the sum of $2,900,000 plus one and one-half percent (1.5%) for every dollar in
total loan growth over the December 31, 1997 level of $254,000,000, the Exchange
Rate shall be reduced by .0025 for every $250,000 shortfall in the loan loss
reserve (excluding any write-off of Pea Island loans) on an interpolated
dollar-for-dollar basis; then if the aggregate reduction caused by clauses (i),
(ii) and (iii) above is less than or equal to .0025, the Exchange Rate shall not
be adjusted, but if the aggregate reduction is greater than .0025 the Exchange
Rate shall be adjusted, provided that in the event the adjustment provided for
herein causes the Exchange Rate (i) to decrease by more than one (1) basis
point, either party hereto at its option and without penalty may terminate this
Agreement, provided that in the event that either party does not so terminate
this Agreement, this Agreement shall remain in effect, or (ii) to yield a per
share dollar value to a holder of United Federal Stock of less than $20.00,
United Federal may terminate this Agreement at its option and without penalty,
provided that in the event that United Federal does not so terminate this
Agreement, this Agreement shall remain in effect.
In the event the Holding Company enters into a binding written
agreement to be acquired by a third party which causes the Average Closing Price
of Triangle Stock to exceed $42.00, the Holding Company shall not have the right
to terminate this Agreement based on the Average Closing Price as provided
above. Further, in such event, the Exchange Rate shall be adjusted to yield a
per share dollar value to a holder of United Federal Stock of not more than
$24.11. In such event, United Federal may still exercise its right to terminate
this Agreement as provided in this Paragraph 1.05.a.
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At the Effective Time, and without any action by United
Federal, Triangle, the Holding Company or any holder thereof, United Federal's
stock transfer books shall be closed as to holders of United Federal Stock
immediately prior to the Effective Time and, thereafter, no transfer of United
Federal Stock by any such holder may be made or registered; and the holders of
shares of United Federal Stock shall cease to be, and shall have no further
rights as, shareholders of United Federal other than as provided herein.
Following the Effective Time, certificates representing shares of United Federal
Stock outstanding at the Effective Time (herein sometimes referred to as "Old
Certificates") shall evidence only the right of the registered holder thereof to
receive, and may be exchanged for, certificates for the number of whole shares
of the Triangle Stock to which such holders shall have become entitled on the
basis set forth above, plus cash for any fractional share interests as provided
herein.
B. EXCHANGE PROCEDURES.......As promptly as practicable
following the Effective Time, the Holding Company shall cause Registrar and
Transfer Company, the transfer agent for Triangle Stock (the "Exchange Agent"),
to mail to each former shareholder of United Federal of record immediately prior
to the Effective Time written instructions and transmittal materials (a
"Transmittal Letter") for use in surrendering Old Certificates to the Exchange
Agent. Upon the proper delivery to the Exchange Agent (in accordance with the
above instructions, and accompanied by a properly completed Transmittal Letter)
by a former shareholder of United Federal of his or her Old Certificates, the
Exchange Agent shall register in the name of such shareholder the shares of the
Triangle Stock and deliver said New Certificates to the individual shareholder
entitled thereto upon and in exchange for the surrender and delivery to the
Exchange Agent by said individual shareholder of his or her Old Certificates.
C. TREATMENT OF FRACTIONAL SHARES....No scrip or certificates
representing fractional shares of Triangle Stock will be issued to any former
shareholder of United Federal, and, except as provided below, no such
shareholder will have any right to vote or receive any dividend or other
distribution on, or any other right with respect to, any fraction of a share of
the Triangle Stock resulting from the above exchange. In the event the exchange
of shares would result in the creation of fractional shares, then, in lieu of
the issuance of fractional shares of Triangle Stock, the Holding Company shall
deliver cash to the Exchange Agent in an amount equal to the aggregate market
value of all such fractional shares, and the Exchange Agent shall divide such
cash among and remit it (without interest) to the former shareholders of United
Federal in accordance with their respective interests. For purposes of this
Paragraph 1.05.c., the "aggregate market value" of all fractional shares of the
Triangle Stock shall be equal to the total of such fractional shares multiplied
by the closing sales price of Triangle Stock as quoted on the New York Stock
Exchange ("NYSE") (as reported by The Wall Street Journal or, if not reported
thereby, any other authoritative source) on the third to last trading day
preceding the Effective Time (as defined in Paragraph 1.07 below).
D. SURRENDER OF CERTIFICATES. No certificate for any shares,
or cash for any fractional share, of Triangle Stock shall be delivered to any
former shareholder of United Federal unless and until such shareholder shall
have properly surrendered to the Exchange Agent the Old Certificate(s) formerly
representing his or her shares of United Federal Stock, together with a properly
completed Transmittal Letter in such form as shall be provided to the
shareholder by the Holding Company for that purpose. Further, until such Old
Certificate(s) are so surrendered, no
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dividend or other distribution payable to holders of record of Triangle Stock as
of any date subsequent to the Effective Time shall be delivered to the holder of
such Old Certificate(s). However, upon the proper surrender of such Old
Certificate(s) the Exchange Agent shall pay to the registered holder of the
shares of Triangle Stock represented by such Old Certificate(s) the amount of
any such cash, dividends or distributions which have accrued but remain unpaid
with respect to such shares. Neither the Holding Company, Triangle, United
Federal nor the Exchange Agent, shall have any obligation to pay any interest on
any such cash, dividends or distributions for any period prior to such payment.
Further, and notwithstanding any other provision of this Agreement, neither the
Holding Company, Triangle, United Federal nor the Exchange Agent shall be liable
to a former holder of United Federal Stock for any amount paid or property
delivered in good faith to a public official pursuant to any applicable
abandoned property, escheat, or similar law.
E. ANTIDILUTIVE ADJUSTMENTS. If, following the date of this
Agreement, the Holding Company shall change the number of outstanding shares of
Triangle Stock as a result of a dividend payable in shares of Triangle Stock, a
stock split, a reclassification or other subdivision or combination of
outstanding shares, and if the record date of such event occurs prior to the
Effective Time, then an appropriate and proportionate adjustment shall be made
to the Exchange Rate so as to appropriately and proportionately increase or
decrease the number of shares of Triangle Stock to be issued in exchange for
each of the shares of United Federal Stock.
F. LOST CERTIFICATES. Any shareholder of United Federal whose
certificate evidencing shares of United Federal Stock has been lost, destroyed,
stolen or otherwise is missing shall be entitled to receive a certificate
representing the shares of Triangle Stock to which he or she is entitled in
accordance with and upon compliance with conditions imposed by the Exchange
Agent or the Holding Company (including without limitation a requirement that
the shareholder provide a lost instruments indemnity or surety bond in form,
substance and amount satisfactory to the Exchange Agent and the Holding
Company).
G. TREATMENT OF UNITED FEDERAL'S STOCK OPTIONS.
(I) At the Effective Time, each option or other right
to purchase shares of United Federal Stock pursuant to stock options ("United
Federal Options") granted by United Federal under the United Federal Savings
Bank 1993 Incentive Stock Option Plan and the United Federal Savings Bank 1993
Stock Option Plan for outside Directors (collectively, the "United Federal Stock
Plans"), which are outstanding at the Effective Time, whether or not
exercisable, shall be converted into and become rights with respect to Triangle
Stock, and the Holding Company shall assume each United Federal Option, in
accordance with the terms of the United Federal Stock Plans and stock option
agreement by which it is evidenced, except that from and after the Effective
Time (A) the Holding Company and its Compensation Committee shall be substituted
for United Federal and the Committee of United Federal's Board of Directors
(including, if applicable, the entire Board of Directors of United Federal)
administering the United Federal Stock Plans, (B) each United Federal Option
assumed by the Holding Company may be exercised solely for shares of Triangle
Stock, (C) the number of shares of Triangle Stock subject to such United Federal
Option shall be equal to the number of shares of United Federal Stock subject to
such United Federal Option immediately prior to the Effective Time multiplied by
the Exchange Rate
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and rounding down to the nearest whole share, and (D) the per share exercise
price under each such United Federal Option shall be adjusted by dividing the
per share exercise price under each such United Federal Option by the Exchange
Rate and rounding up to the nearest cent
(II) As soon as practicable after the Effective Time,
the Holding Company shall deliver to the participants in the United Federal
Stock Plans an appropriate notice setting forth such participant's rights
pursuant thereto and the grants pursuant to the United Federal Stock Plans shall
continue in effect on the same terms and conditions (subject to the adjustments
required by Paragraph 1.05.a. after giving effect to the Merger). At or prior to
the Effective Time, the Holding Company shall take all corporate action
necessary to reserve for issuance sufficient shares of Triangle Stock for
delivery upon exercise of United Federal Options assumed by it in accordance
with this Paragraph 1.05.h. As soon as practicable after the Effective Time, the
Holding Company 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 Triangle 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
(III) All restrictions or limitations on transfer
with respect to United Federal Stock awarded under the United Federal Stock
Plans or any other plan, program, or arrangement of United Federal, to the
extent that such restrictions or limitations shall not have already lapsed, and
except as otherwise expressly provided in such plans, program, or arrangement,
shall remain in full force and effect with respect to shares of Triangle Stock
into which such restricted stock is converted pursuant to this Agreement.
(IV) Notwithstanding the foregoing provisions of this
Paragraph 1.05.g., in no event shall options to purchase more than 125,500
shares of United Federal Stock be converted into options to purchase Triangle
Stock in connection with the transactions contemplated by this Agreement. United
Federal agrees to cooperate with the Holding Company to insure the
implementation of this Paragraph 1.05.g.
H. OUTSTANDING TRIANGLE STOCK.The status of the shares of
Triangle Stock and of shares of common stock of Triangle which are outstanding
immediately prior to the Effective Time shall not be affected by the Merger.
1.06. ARTICLES, BYLAWS AND MANAGEMENT. The Articles of Incorporation
and Bylaws of Triangle in effect at the Effective Time shall be the Articles of
Incorporation and Bylaws of Triangle as the surviving corporation. The officers
and directors of Triangle in office at the Effective Time shall continue to hold
such offices until removed as provided by law or until the election or
appointment of their respective successors.
1.07. CLOSING; ARTICLES OF MERGER; EFFECTIVE TIME. The closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of the Holding Company in Raleigh, North Carolina, or at such other
place as the Holding Company shall designate, on a date specified by the Holding
Company (the "Closing Date") after the expiration of
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any and all required waiting periods following the effective date of required
approvals of the Merger by governmental or regulatory authorities (but in no
event later than December 31, 1998). At the Closing, the Holding Company,
Triangle and United Federal shall take such actions (including without
limitation the delivery of certain closing documents) as are required herein and
as shall otherwise be required by law to consummate the Merger and cause it to
become effective, and shall execute Articles of Merger under North Carolina law
which shall contain a "Plan of Merger" substantially in the form attached as
Schedule A hereto.
Subject to the terms and conditions set forth herein (including without
limitation the receipt of all required approvals of governmental and regulatory
authorities), the Merger shall be effective on the date and at the time (the
"Effective Time") designated in the Articles of Merger executed at the Closing
and filed with the North Carolina Secretary of State in accordance with law;
provided, however, that the date and time so specified as the Effective Time
shall in no event be later than December 31, 1998. If the Articles of Merger do
not designate a date or specific time as the Effective Time, then the Effective
Time shall be that date and time when the Articles of Merger are properly filed
with the North Carolina Secretary of State.
At the Holding Company's option, it may elect to have United Federal
become a wholly-owned subsidiary whereby United Federal would convert to a North
Carolina chartered commercial bank (the "Bank Conversion") and immediately
thereafter merge with an interim commercial bank subsidiary to be established by
the Holding Company (the "Interim Merger"), with United Federal being the
surviving corporation. Thereafter, the merger of United Federal and Triangle
Bank would be effected at a date selected by the Holding Company. If the Holding
Company elects such option, the effectiveness of the Bank Conversion would
immediately precede the Interim Merger which, when effective, would be the
Effective Time. The Interim Merger would be effected pursuant to Plan of Merger
substantially in the form of Schedule A. Further, in such event, the provisions
of this Article I which require amendment to provide for the Interim Merger
shall be deemed to be so amended.
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF UNITED FEDERAL
Except as otherwise specifically provided herein or as "Previously
Disclosed" (as defined in Paragraph 10.01. below) to the Holding Company, United
Federal hereby makes the following representations and warranties to the Holding
Company:
2.01. ORGANIZATION; STANDING; POWER. United Federal (I) is duly
organized and incorporated, validly existing and in good standing as a savings
bank under the laws of the United States; (II) has all requisite power and
authority (corporate and other) to own, lease and operate its properties and to
carry on its business as now being conducted; (III) is duly qualified to do
business and is in good standing in each other jurisdiction in which the
character of the properties owned, leased or operated by it therein or in which
the transaction of its business makes such qualification necessary, except where
failure so to qualify would not have a Material Adverse Effect on United
Federal; and (IV) is not transacting business or operating any properties owned
or leased by it in violation of any provision of federal or state law or any
rule or regulation promulgated thereunder, which violation would have a Material
Adverse Effect on United Federal.
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2.02. CAPITAL STOCK. United Federal's authorized capital stock consists
of 10,000,000 shares of common stock, $0.01 par value per share. As of February
12, 1998, 3,201,314 shares of United Federal Stock were issued and outstanding,
which constitute United Federal's only issued and outstanding securities.
Options to purchase 125,500 shares of United Federal Stock are outstanding under
the United Federal Stock Plans.
Each outstanding share of United Federal Stock (I) has been
duly authorized and is validly issued and outstanding, and is fully paid and
non-assessable, (II) has not been issued in violation of the preemptive rights
of any shareholder, and (III) has been issued pursuant to and in compliance with
the requirements of an applicable exemption from the registration requirements
under the Securities Act of 1933, as amended (the "1933 Act").
The United Federal Stock is registered with the Office of
Thrift Supervision ("OTS") under the Securities Exchange Act of 1934 (the
"Exchange Act"); United Federal is subject to the periodic reporting
requirements of the Exchange Act as administered by the OTS.
2.03 PRINCIPAL SHAREHOLDERS. No person or entity is known to United
Federal to beneficially own, directly or indirectly, more than 5% of the
outstanding shares of United Federal Stock.
2.04 SUBSIDIARIES. United Federal's only subsidiary is First Service
Corporation of NC ("First Service"). First Service has one subsidiary, The
Eagles Nest Bay Company ("Eagles Nest"), and, other than the ownership of First
Service and Eagles Nest, neither United Federal nor First Service owns any stock
or other equity interest in any corporation, service corporation, joint venture,
partnership or other entity. First Service's authorized capital stock consists
of 3,000 shares of common stock, $100.00 par value per share ("First Service
Stock"), of which 2,250 shares are issued and outstanding and constitute the
only securities issued by First Service. Eagles Nest's authorized capital stock
consists of 100,000 shares of common stock, $1.00 par value per share ("Eagles
Nest Stock"), of which 10,000 shares are issued and outstanding and constitute
the only securities issued by Eagles Nest. All outstanding shares of First
Service Stock are owned of record and beneficially by United Federal and all
outstanding shares of Eagles Nest Stock are owned of record and beneficially by
First Service. Each outstanding share of First Service Stock and Eagles Nest
Stock (I) has been duly authorized, is validly issued and outstanding, and is
fully paid and non-assessable, (II) has not been issued in violation of the
preemptive rights of any shareholder, and (III) has been issued pursuant to and
in compliance with the requirements of an applicable exemption from registration
requirements under the 1933 Act.
2.05. CONVERTIBLE SECURITIES, OPTIONS, ETC.. With the exception of
options to purchase an aggregate of 125,500 shares of United Federal Stock which
have been issued and are outstanding under the United Federal Stock Plans,
neither United Federal, First Service nor Eagles Nest has any outstanding (I)
securities or other obligations (including debentures or other debt instruments)
which are convertible into shares of United Federal Stock, First Service Stock
or Eagles Nest Stock or any other securities of United Federal, First Service or
Eagles Nest, (II) options, warrants, rights, calls or other commitments of any
nature which entitle any person to receive or acquire any shares
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of United Federal Stock, First Service Stock or Eagles Nest Stock or any other
securities of United Federal, First Service or Eagles Nest, or (III) plan,
agreement or other arrangement pursuant to which shares of United Federal Stock,
First Service Stock or Eagles Nest Stock or any other securities of United
Federal, First Service or Eagles Nest, or options, warrants, rights, calls or
other commitments of any nature pertaining thereto, have been or may be issued.
2.06. AUTHORIZATION AND VALIDITY OF AGREEMENT. This Agreement has been
duly and validly approved by United Federal's Board of Directors and executed
and delivered on United Federal's behalf. Subject only to approval of this
Agreement by the shareholders of United Federal in the manner required by law
(as contemplated by Paragraph 6.01.a. below), (I) United Federal has the
corporate power and authority to execute and deliver this Agreement and to
perform its obligations and agreements and carry out the transactions described
herein, (II) all corporate proceedings and approvals required to authorize
United Federal to enter into this Agreement and to perform its obligations and
agreements and carry out the transactions described herein have been duly and
properly completed or obtained, and (III) this Agreement has been executed on
behalf of United Federal and constitutes a valid and binding agreement of United
Federal enforceable in accordance with its terms (except to the extent
enforceability may be limited by (A) applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect which
affect creditors' rights generally, (B) by legal and equitable limitations on
the availability of injunctive relief, specific performance and other equitable
remedies, and (C) general principles of equity and applicable laws or court
decisions limiting the enforceability of indemnification provisions).
2.07. VALIDITY OF TRANSACTIONS; ABSENCE OF REQUIRED CONSENTS OR
WAIVERS. Except where the same would not have a Material Adverse Effect on
United Federal, neither the execution and delivery of this Agreement, nor the
consummation of the transactions described herein, nor compliance by United
Federal with any of its obligations or agreements contained herein, will: (I)
conflict with or result in a breach of the terms and conditions of, or
constitute a default or violation under any provision of, United Federal's
Charter or Bylaws, or any contract, agreement, lease, mortgage, note, bond,
indenture, license, or obligation or understanding (oral or written) to which
United Federal is bound or by which it, its business, capital stock or any of
its properties or assets may be affected; (II) result in the creation or
imposition of any lien, claim, interest, charge, restriction or encumbrance upon
any of United Federal's properties or assets; (III) violate any applicable
federal or state statute, law, rule or regulation, or any judgment, order, writ,
injunction or decree of any court, administrative or regulatory agency or
governmental body; (IV) result in the acceleration of any obligation or
indebtedness of United Federal; or (V) interfere with or otherwise adversely
affect United Federal's ability to carry on its business as presently conducted.
No consents, approvals or waivers are required to be obtained from any
person or entity in connection with United Federal's execution and delivery of
this Agreement, or the performance of its obligations or agreements or the
consummation of the transactions described herein, except for required approvals
of United Federal's shareholders as described in Paragraph 7.01.c. below and of
governmental or regulatory authorities as described in Paragraph 7.01.a. below
and other consents or approvals, the failure of which to obtain would not have a
Material Adverse Effect on United Federal or its ability to consummate the
Merger.
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2.08. UNITED FEDERAL BOOKS AND RECORDS. United Federal's books of
account and business records have been maintained in material compliance with
all applicable legal and accounting requirements and in accordance with good
business practices, and such books and records are complete and reflect
accurately in all material respects United Federal's items of income and expense
and all of its assets, liabilities and stockholders' equity. The minute books of
United Federal accurately reflect in all material respects the corporate actions
which its shareholders and board of directors, and all committees thereof, have
taken during the time periods covered by such minute books. All such minute
books have been or will be made available to Triangle and its representatives.
2.09. UNITED FEDERAL REPORTS. Since January 1, 1992, and where the
failure to file has had or could have a Material Adverse Effect on United
Federal, United Federal has filed all reports, registrations and statements,
together with any amendments required to be made with respect thereto, that were
required to be filed with (I) the OTS, (II) the Federal Deposit Insurance
Corporation (the "FDIC"), or (III) any other governmental or regulatory
authorities having jurisdiction over United Federal. All such reports,
registrations and statements filed by United Federal with the OTS, FDIC, or
other such regulatory authority are collectively referred to herein as the
"United Federal Reports." As of their respective dates, each United Federal
Report complied in all material respects with all the statutes, rules and
regulations enforced or promulgated by the regulatory authority with which it
was filed and did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; and United Federal has not been notified that any such United
Federal Report was deficient in any material respect as to form or content.
Following the date of this Agreement, United Federal shall deliver to Triangle,
simultaneous with the filing thereof, a copy of each report, registration,
statement or other regulatory filing made by United Federal with the OTS, the
FDIC or any other such regulatory authority.
2.10. UNITED FEDERAL FINANCIAL STATEMENTS. United Federal has delivered
to Triangle a copy (I) of its balance sheets as of December 31, 1995 and
December 31, 1996, and its statements of operations, changes in stockholders'
equity and cash flows for the years ended December 31, 1994, December 31, 1995
and December 31, 1996, together with notes thereto (the "United Federal
Financial Statements"), and (II) a copy of its balance sheet as of September 30,
1997 and its statement of operations for the nine months ended September 30,
1997 (the "United Federal Interim Financial Statements"); and, following the
date of this Agreement, United Federal promptly will deliver to Triangle all
other annual or interim financial statements prepared by or for United Federal.
The United Federal Financial Statements and the United Federal Interim Financial
Statements (including any related notes and schedules thereto) (I) are in
accordance with United Federal's books and records, and (II) were prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods indicated and present fairly in all
material respects United Federal's consolidated financial condition, assets and
liabilities, results of operations, changes in stockholders' equity and changes
in cash flows as of the dates indicated and for the periods specified therein.
The United Federal Financial Statements have
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been audited and certified by United Federal's independent certified public
accountants, McGladrey & Pullen LLP.
2.11. TAX RETURNS AND OTHER TAX MATTERS. (I) United Federal has timely
filed or caused to be filed all federal, state and local tax returns and reports
which are required by law to have been filed, and, to the knowledge of
management of United Federal, all such returns and reports were true, correct
and complete and contained all material information required to be contained
therein; (II) all federal, state and local income, profits, franchise, sales,
use, occupation, property, excise and other taxes (including interest and
penalties), charges and assessments which have become due from or been assessed
or levied against United Federal or its property have been fully paid, and, with
respect to any such taxes to become due from United Federal for any period or
periods through and including September 30, 1997, adequate provision has been
made for the payment of all such taxes and such provision is reflected in the
United Federal Financial Statements; (III) United Federal's tax returns and
reports have been examined or closed by applicable statutes of limitations
through the tax year ended December 31, 1993, and United Federal has not
received any indication of the pendency of any audit or examination in
connection with any tax return or report and has no knowledge that any such
return or report is subject to adjustment; and (IV) United Federal has not
executed any waiver or extended the statute of limitations (or been asked to
execute a waiver or extend a statute of limitation) with respect to any tax
year, the audit of any tax return or report or the assessment or collection of
any tax. Any deferred taxes of United Federal have been provided for in the
United Federal Financial Statements in all material respects.
2.12. ABSENCE OF MATERIAL ADVERSE CHANGES OR CERTAIN OTHER EVENTS
(I) Since December 31, 1996, United Federal has
conducted its business only in the ordinary course, and there has been no
Material Adverse Change in United Federal, and there has occurred no event or
development and, to the knowledge of management of United Federal, there
currently exists no condition or circumstance which, with the lapse of time or
otherwise, is reasonably likely to cause, create or result in a Material Adverse
Change, in United Federal.
(II) Since December 31, 1996, and other than in the
ordinary course of its business, including its normal salary review
for 1997 and 1998, United Federal has not incurred any material liability or
engaged in any material transaction or entered into any material agreement,
increased the salaries, compensation or general benefits payable to its
employees, suffered any loss, destruction or damage to any of its properties or
assets, or made a material acquisition or disposition of any assets or entered
into any material contract or lease.
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2.13. ABSENCE OF UNDISCLOSED LIABILITIES. United Federal has no
liabilities or obligations, whether known or unknown, matured or unmatured,
accrued, absolute, contingent or otherwise, whether due or to become due
(including without limitation tax liabilities or unfunded liabilities under
employee benefit plans or arrangements), other than (I) those reflected in the
United Federal Financial Statements and the United Federal Interim Financial
Statements, or (II) obligations or liabilities incurred in the ordinary course
of its business since September 30, 1997, and which are not reasonably likely
to, individually or in the aggregate, cause a Material Adverse Change in United
Federal.
2.14. COMPLIANCE WITH EXISTING OBLIGATIONS. United Federal has
performed in all material respects all obligations required to be performed by
it under, and it is not in default in any material respect under, or in
violation in any material respect of, the terms and conditions of its Charter or
Bylaws, and any contract, agreement, lease, mortgage, note, bond, indenture,
license, obligation, understanding or other undertaking (whether oral or
written) to which it is bound or by which it, its business, capital stock or any
of its properties or assets may be affected.
2.15. LITIGATION AND COMPLIANCE WITH LAW.
(I) There are no actions, suits, arbitrations,
controversies or other proceedings (or, to the knowledge of management
of United Federal, any facts or circumstances which reasonably could result in
such), including without limitation any action by any governmental or regulatory
authority, which currently exists or is ongoing, pending or, to the knowledge of
management of United Federal threatened, contemplated or probable of assertion,
against, relating to or otherwise affecting United Federal or any of its
properties or assets which, if determined adversely, could result in liability
on the part of United Federal for, or subject it to, monetary damages, fines or
penalties, or an injunction, and which could have a Material Adverse Effect on
United Federal or on the ability of United Federal to consummate the Merger;
(II) United Federal has all licenses, permits,
orders, authorizations or approvals ("Permits") of any federal, state, local
or foreign governmental or regulatory body that are material to or necessary for
the conduct of its business or to own, lease and operate its properties; all
such Permits are in full force and effect; no violations are or have been
recorded in respect of any such Permits; and no proceeding is pending or, to the
knowledge of management of United Federal, threatened or probable of assertion
to suspend, cancel, revoke or limit any Permit;
(III) United Federal is not subject to any
supervisory agreement, enforcement order, writ, injunction, capital directive,
supervisory directive, memorandum of understanding or other similar agreement,
order, directive, memorandum or consent of, with or issued by any regulatory or
other governmental authority (including without limitation the OTS or the FDIC)
relating to its financial condition, directors or officers, operations, capital,
regulatory compliance or otherwise; there are no judgments, orders,
stipulations, injunctions, decrees or awards against United Federal which in any
manner limit, restrict, regulate, enjoin or prohibit any present or past
business or practice of United Federal; and United Federal has not been advised
and has no reason to believe that any regulatory or other governmental authority
or any court is
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contemplating, threatening or requesting the issuance of any such agreement,
order, injunction, directive, memorandum, judgment, stipulation, decree or
award; and,
(IV) United Federal is not in violation or default in
any material respect under, and has complied in all material respects
with, all laws, statutes, ordinances, rules, regulations, orders, writs,
injunctions or decrees of any court or federal, state, municipal or other
governmental or regulatory authority having jurisdiction or authority over it or
its business operations, properties or assets (including without limitation all
provisions of North Carolina law relating to usury, the Consumer Credit
Protection Act, and all other laws and regulations applicable to extensions of
credit by United Federal) and there is no basis for any claim by any person or
authority for compensation, reimbursement or damages or otherwise for any
violation of any of the foregoing that would have a Material Adverse Effect on
United Federal.
2.16. REAL PROPERTIES. United Federal has Previously Disclosed to the
Holding Company a listing of all real property owned or leased by United Federal
(including United Federal's banking facilities and all other real estate or
foreclosed properties owned by United Federal) (the "Real Property") and all
leases, if any, pertaining to any such Real Property to which United Federal is
a party (the "Real Property Leases"). With respect to all Real Property owned by
United Federal, United Federal has good and marketable fee simple title to such
Real Property and owns the same free and clear of all mortgages, liens, leases,
encumbrances, title defects and exceptions to title other than (I) the lien of
current taxes not yet due and payable, and (II) such imperfections of title and
restrictions, covenants and easements (including utility easements) which do not
affect materially the value of the Real Property and which do not and will not
materially detract from, interfere with or restrict the present or future use of
the properties subject thereto or affected thereby. With respect to each Real
Property Lease (I) such lease is valid and enforceable in accordance with its
terms, (II) there currently exists no circumstance or condition which
constitutes an event of default by United Federal or its lessor or which, with
the passage of time or the giving of required notices will or could constitute
such an event of default, and (III) subject to any required consent of the
lessor, each such Real Property Lease may be assigned to Triangle and the
execution and delivery of this Agreement does not constitute an event of default
thereunder.
To the knowledge of management of United Federal, the Real Property
complies in all material respects with all applicable federal, state and local
laws, regulations, ordinances or orders of any governmental authority, including
those relating to zoning, building and use permits, and the Real Property may be
used under applicable zoning ordinances for commercial banking facilities as a
matter of right rather than as a conditional or nonconforming use.
All improvements and fixtures included in or on the Real Property are
in good condition and repair, ordinary wear and tear excepted, and, except as
may have been Previously Disclosed pursuant to Paragraph 2.21 below, there does
not exist any condition which interferes with United Federal's use or affects
the economic value thereof.
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2.17. LOANS, ACCOUNTS, NOTES AND OTHER RECEIVABLES.
(I) All loans, accounts, notes and other receivables reflected
as assets on United Federal's books and records (A) have resulted from bona fide
business transactions in the ordinary course of United Federal's operations, (B)
were made in accordance with United Federal's customary loan policies and
procedures, and (C) are owned by United Federal free and clear of all liens,
encumbrances, assignments, participation or repurchase agreements or other
exceptions to title or to the ownership or collection rights of any other person
or entity.
(II) All records of United Federal regarding all outstanding
loans, accounts, notes and other receivables, and all other real estate owned,
are accurate in all material respects, and, with respect to each loan which
United Federal's loan documentation indicates is secured by any real or personal
property or property rights ("Loan Collateral"), such loan is secured by valid,
perfected and enforceable liens on all such Loan Collateral having the priority
described in United Federal's records of such loan.
(III) Each loan reflected as an asset on United Federal's
books, and each guaranty therefor, is the legal, valid and binding obligation of
the obligor or guarantor thereon, and no defense, offset or counterclaim has
been asserted with respect to any such loan.
(IV) United Federal has Previously Disclosed to the Holding
Company a listing of (A) each loan, extension of credit or other asset of United
Federal which, as of September 30, 1997, is classified by the OTS, the FDIC or
by United Federal as "Loss", "Doubtful", "Substandard" or "Special Mention" (or
otherwise by words of similar import), or which United Federal has designated as
a special asset or for special handling or placed on any "watch list" because of
concerns regarding the ultimate collectibility or deteriorating condition of
such asset or any obligor or Loan Collateral therefor, and (B) each loan or
extension of credit of United Federal which, as of September 30, 1997, was past
due thirty (30) days or more as to the payment of principal and/or interest, or
as to which any obligor thereon (including the borrower or any guarantor)
otherwise was in default, is the subject of a proceeding in bankruptcy or
otherwise has indicated any inability or intention not to repay such loan or
extension of credit. Each such listing is accurate and complete as of the date
indicated.
(V) To the knowledge of management of United Federal, each of
United Federal's loans and other extensions of credit (with the exception of
those loans and extensions of credit specified in the written listings described
in Subparagraph (iv) above) is collectible in the ordinary course of United
Federal's business in an amount which is not less than the amount at which it is
carried on United Federal's books and records.
(VI) United Federal's reserve for possible loan losses (the
"Loan Loss Reserve") shown in the United Federal Interim Financial Statements
has been established in conformity with GAAP, sound banking practices and all
applicable requirements of the OTS and rules and policies of the OTS and the
FDIC and, in the best judgment of United Federal's management, is reasonable in
view of the size and character of United Federal's loan portfolio, current
economic conditions and other relevant factors, and is adequate to provide for
losses relating to or the risk of loss inherent in United Federal's loan
portfolio and other real estate owned.
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2.18 SECURITIES PORTFOLIO AND INVESTMENTS. All securities owned by
United Federal (whether owned of record or beneficially) are held free and clear
of all mortgages, liens, pledges, encumbrances or any other restriction or
rights of any other person or entity, whether contractual or statutory, which
would materially impair the ability of United Federal to dispose freely of any
such security and/or otherwise to realize the benefits of ownership thereof at
any time (other than pledges of securities in the ordinary course of United
Federal's business to secure public funds deposits and in connection with
repurchase agreements with customers and Federal Home Loan Bank borrowings).
There are no voting trusts or other agreements or undertakings to which United
Federal is a party with respect to the voting of any such securities. With
respect to all "repurchase agreements" to which United Federal has "purchased"
securities under agreement to resell (if any), United Federal has a valid,
perfected first lien or security interest in the government securities or other
collateral securing the repurchase agreement, and the value of the collateral
securing each such repurchase agreement equals or exceeds the amount of the debt
owed to United Federal which is secured by such collateral.
Since September 30, 1997, there has been no significant deterioration
or Material Adverse Change in the quality, or any material decrease in the
value, of United Federal's securities portfolio.
2.19. PERSONAL PROPERTY AND OTHER ASSET. All assets of United Federal
(including without limitation all banking equipment, data processing equipment,
vehicles, and all other personal property located in or used in the operation of
each office of United Federal or otherwise used by United Federal in the
operation of its business) are owned by United Federal free and clear of all
liens, leases, encumbrances, title defects or exceptions to title. All of United
Federal's banking equipment is in good operating condition and repair, ordinary
wear and tear excepted.
2.20. PATENTS, TRADEMARKS AND LICENSES. United Federal owns, possesses
or has the right to use any and all patents, licenses, trademarks, trade names,
copyrights, trade secrets and proprietary and other confidential information
necessary to conduct its business as now conducted; and, to the knowledge of
management of United Federal, United Federal has not violated, or is currently
in conflict with, any patent, license, trademark, trade name, copyright or
proprietary right of any other person or entity.
2.21. ENVIRONMENTAL MATTERS. United Federal has Previously Disclosed
and provided to the Holding Company copies of all written reports,
correspondence, notices or other materials, if any, in its possession pertaining
to environmental reports, surveys, assessments, notices of violation, notices of
regulatory requirements, penalty assessments, claims, actions or proceedings,
past or pending, of the Real Property or any of its Loan Collateral and any
improvements thereon, or to any violation of Environmental Laws (as defined
below) on, affecting or otherwise involving the Real Property, any Loan
Collateral or otherwise involving United Federal.
To the knowledge of management of United Federal:
(I) there has been no presence, use, production, generation,
handling, transportation, treatment, storage, disposal, distribution, labeling,
reporting, testing, processing,
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emission, discharge, release, threatened release, control or clean-up, in a
reportable or regulated quantity, of any hazardous, toxic or otherwise regulated
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, oil or other petroleum products or
byproducts, asbestos or materials containing (or presumed to contain) asbestos,
polychlorinated biphenyls, or radioactive materials, and/or any hazardous,
toxic, regulated or dangerous waste, substance or material defined as such by
the United States Environmental Protection Agency or any other federal, state or
local government or agency or political subdivision thereof, or for the purpose
of any Environmental Laws (as defined herein), as may now or hereafter (through
the Effective Time) be defined or in effect ("Hazardous Substances") by any
person on, from or relating to any parcel of the Real Property
(II) United Federal has not violated any federal, state or
local law, rule, regulation, order, permit or other requirement relating to
health, safety or the environment or imposing liability, responsibility or
standards of conduct applicable to environmental conditions (all such laws,
rules, regulations, orders and other requirements being herein collectively
referred to as "Environmental Laws"), and there has been no violation of any
Environmental Laws (including any violation with respect to or relating to any
Loan Collateral) by any other person or entity for whose liability or obligation
with respect to any particular matter or violation United Federal is or may be
responsible or liable;
(III) United Federal is not subject to any claims, demands,
causes of action, suits, proceedings, losses, damages, penalties, liabilities,
obligations, costs or expenses of any kind and nature which arise out of, under
or in connection with, or which result from or are based upon the presence, use,
production, generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, reporting, testing, processing, emission, discharge,
release, threatened release, control or clean-up of any Hazardous Substances on,
from or relating to the Real Property or any Loan Collateral, by United Federal
or any other person or entity; and,
(IV) No facts, events or conditions relating to the Real
Property or any Loan Collateral, or the operations of United Federal at any of
its office locations, will prevent, hinder or limit continued compliance with
Environmental Laws, or give rise to any investigatory, remedial or corrective
actions, obligations or liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise) pursuant to Environmental Laws.
For purposes of this Agreement, "Environmental Laws" shall
include:
(I) all federal, state and local statutes, regulations,
ordinances, orders, decrees, and similar provisions having the force or effect
of law,
(II) all contractual agreements, and
(III) all common law,
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, including without limitation all standards of
conduct and bases of obligations relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
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distribution, labeling, reporting, testing, processing, discharge, release,
threatened release, control or clean-up of any Hazardous Substances (including
without limitation the Comprehensive Environmental Response, Compensation and
Liability Act, the Superfund Amendment and Reauthorization Act, the Federal
Insecticide, Fungicide and Rodenticide Act, the Hazardous Materials
Transportation Act, the Resource Conservation and Recovery Act, the Clean Water
Act, the Clean Air Act, the Toxic Substances Control Act, the Oil Pollutant Act,
the Coastal Zone Management Act, any "Superfund" or "Superlien" law, the North
Carolina Oil Pollution and Hazardous Substances Control Act, the North Carolina
Water and Air Resources Act, and the North Carolina Occupational Safety and
Health Act, including any amendments thereto from time to time) as such may now
or hereafter (through the Effective Time) be defined or in effect.
2.22. ABSENCE OF BROKERAGE OR FINDERS COMMISSIONS. (I) All negotiations
relative to this Agreement and the transactions described herein have been
carried on by United Federal directly with the Holding Company; (II) no person
or firm has been retained by or has acted on behalf of, pursuant to any
agreement, arrangement or understanding with, or under the authority of, United
Federal's Board of Directors, as a broker, finder or agent or has performed
similar functions or otherwise is or may be entitled to receive or claim a
brokerage fee or other commission in connection with the transactions described
herein; and (II) United Federal has not agreed to pay any brokerage fee or other
commission to any person or entity in connection with the transactions described
herein.
2.23. MATERIAL CONTRACTS. Except for leases on United Federal's branch
offices, United Federal is not a party to or bound by any agreement involving
money or other property in an amount or with a value in excess of $25,000 (I)
which is not to be performed in full prior to December 31, 1998, (II) which
calls for the provision of goods or services to United Federal and cannot be
terminated without material penalty upon written notice to the other party
thereto, (III) which is material to United Federal and was not entered into in
the ordinary course of business, (IV) which involves hedging, options or any
similar trading activity, or interest rate exchanges or swaps, (V) which commits
United Federal to extend any loan or credit (with the exception of letters of
credit, lines of credit and loan commitments extended in the ordinary course of
United Federal's business), (VI) which involves the purchase or sale of any
assets of United Federal, or the purchase, sale, issuance, redemption or
transfer of any capital stock or other securities issued by United Federal, or
(VII) with any director, officer or principal shareholder of United Federal
(including without limitation any employment or consulting agreement, but not
including any agreement relating to loans or other banking services which were
made in the ordinary course of United Federal's business and on substantially
the same terms and conditions as were prevailing at that time for similar
agreements with unrelated persons).
United Federal is not in default in any material respect, and there has
not occurred any event which with the lapse of time or giving of notice or both
would constitute such a default, under any contract, lease, insurance policy,
commitment or arrangement to which it is a party or by which it or its property
is or may be bound or affected or under which it or its property receives
benefits, where the consequences of such default would have a Material Adverse
Effect on United Federal.
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2.24. EMPLOYMENT MATTERS; EMPLOYEE RELATIONS. United Federal (I) has
paid in full to or accrued on behalf of all its directors, officers and
employees all wages, salaries, commissions, bonuses, fees, sick pay, severance
pay, all other amounts promised to the extent required by law or when United
Federal has a policy of making such payments and other direct compensation for
all services performed by them to the date of this Agreement and (II) is in
compliance with all federal, state and local laws, statutes, rules and
regulations with regard to employment and employment practices, terms and
conditions, and wages and hours and other compensation matters; and no person
has, to the knowledge of management of United Federal, asserted that United
Federal is liable in any amount for any arrearages in wages or employment taxes
or for any penalties for failure to comply with any of the foregoing.
There is no action, suit or proceeding by any person pending
or, to the knowledge of management of United Federal, threatened, against United
Federal (or any of its employees), involving employment discrimination, sexual
harassment, wrongful discharge or similar claims.
United Federal is not a party to or bound by any collective
bargaining agreement with any of its employees, any labor union or any other
collective bargaining unit or organization. There is no pending or threatened
labor dispute, work stoppage or strike involving United Federal and any of its
employees, or any pending or threatened proceeding in which it is asserted that
United Federal has committed an unfair labor practice; and management of United
Federal is not aware of any activity involving United Federal or any of its
employees seeking to certify a collective bargaining unit or engaging in any
other labor organization activity.
2.25. EMPLOYMENT AGREEMENTS; EMPLOYEE BENEFIT PLANS.
(I) United Federal is not a party to or bound by any
employment agreements with any of its directors, officers or employees.
(II) United Federal has Previously Disclosed and has delivered
or made available to the Holding Company prior to the execution of this
Agreement copies, in each case, of all pension, stock ownership, severance pay,
vacation, bonus, or other incentive plan, all other written employee programs,
arrangements, 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 the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), currently adopted, maintained by, sponsored in whole or in part by,
or contributed to by United Federal 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 (collectively,
the "United Federal Benefit Plans"). Any of the United Federal Benefit Plans
which is an "employee pension benefit plan," as that term is defined in Section
3(2) of ERISA, is referred to herein as a "United Federal ERISA Plan." No United
Federal ERISA Plan is also a "defined benefit plan" (as defined in Section
414(j) of the Internal Revenue Code) or is or has been a multi-employer plan
within the meaning of Section 3(37) of ERISA. Neither United Federal nor any
affiliate of United Federal has ever been required to contribute to a
multi-employer plan, as defined in Section 3(37) of ERISA.
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(III) All United Federal Benefit Plans are in compliance with
the applicable terms of ERISA, the Internal Revenue Code, and any other
applicable laws, rules or regulations, the breach or violation of which are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on United Federal. Each United Federal 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 management
of United Federal is not aware of any circumstances likely to result in
revocation of any such favorable determination letter. To the knowledge of
management of United Federal, United Federal has not engaged in a transaction
with respect to any United Federal Benefit Plan that, assuming the taxable
period of such transaction expired as of the date hereof, would subject United
Federal to a tax 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 United Federal.
(IV) United Federal has no liability for retiree health and
life benefits under any of the United Federal Benefit Plans and there are no
restrictions on the rights of United Federal to amend or terminate any United
Federal Benefit Plan without incurring any liability thereunder, which liability
is reasonably likely to have a Material Adverse Effect on United Federal.
(V) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (A) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of United Federal from
United Federal under any United Federal Benefit Plan or otherwise, (B) increase
any benefits otherwise payable under any United Federal Benefit Plan or
otherwise, or (C) result in any acceleration of the time of payment or vesting
of any such benefit, where such payment, increase, or acceleration is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
United Federal.
(VI) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of United Federal and their respective beneficiaries have been
fully reflected on the United Federal Financial Statements to the extent
required by and in accordance with GAAP.
2.26. INSURANCE. United Federal has in effect a "blanket bond" and such
other policies of general liability, casualty, directors and officers liability,
employee fidelity, errors and omissions and other property and liability
insurance as have been Previously Disclosed to the Holding Company (the
"Policies"). The Policies provide coverage in such amounts and against such
liabilities, casualties, losses or risks as is customary or reasonable for
entities engaged in United Federal's business or as is required by applicable
law or regulation; and, in the reasonable opinion of management of United
Federal, the insurance coverage provided under the Policies is considered
reasonable and adequate in all respects for United Federal. Each of the Policies
is in full force and effect and is valid and enforceable in accordance with its
terms, and is underwritten by an insurer of recognized financial responsibility
and which is qualified to transact business in North Carolina;
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and United Federal has taken all requisite actions (including the giving of
required notices) under each such Policy in order to preserve all rights
thereunder with respect to all matters. United Federal is not in default under
the provisions of, has not received notice of cancellation or nonrenewal of or
any material premium increase on, and has no knowledge of any failure to pay any
premium on or any inaccuracy in any application for any Policy. There are no
pending claims with respect to any Policy (and management of United Federal is
not aware of any facts which would form the basis of any such claim), and
management of United Federal has no knowledge of any state of facts or of the
occurrence of any event that is reasonably likely to form the basis for any such
claim.
2.27. INSURANCE OF DEPOSITS. All deposits of United Federal are insured
by the Savings Association Bank Insurance Fund of the FDIC to the maximum extent
permitted by law, all deposit insurance premiums and assessments due from United
Federal to the FDIC have been paid in full in a timely fashion, and, to the
knowledge of management of United Federal, no proceedings have been commenced or
are contemplated by the FDIC or otherwise to terminate such insurance.
2.28. AFFILIATES. United Federal has Previously Disclosed to
the Holding Company a listing of those persons deemed by United Federal as of
the date of this Agreement to be "Affiliates" of United Federal (as that term is
defined in Rule 405 promulgated under the Securities Act of 1933), including
persons, trusts, estates, corporations or other entities related to persons
deemed to be Affiliates of United Federal.
2.29. OBSTACLES TO REGULATORY APPROVAL, ACCOUNTING TREATMENT
OR TAX TREATMENT. To the knowledge of management of United Federal, there exists
no fact or condition (including United Federal's record of compliance with the
Community Reinvestment Act) relating to United Federal that may reasonably be
expected to (I) prevent or materially impede or delay the Holding Company or
Triangle from obtaining the regulatory approvals required in order to consummate
transactions described herein, (II) prevent the Merger from qualifying to be a
reorganization under Section 368(a)(1)(A) of the Code, or (III) prevent the
Merger from being treated as a "pooling-of-interests" for accounting purposes;
and, if any such fact or condition becomes known to United Federal, United
Federal shall promptly (and in any event within three days after obtaining such
knowledge) communicate such fact or condition to the President of the Holding
Company.
2.30. DISCLOSURE. To the knowledge of management of United Federal, no
written statement, certificate, schedule, list or other written information
furnished by or on behalf of United Federal at any time to the Holding Company
or Triangle in connection with this Agreement (including without limitation
information "Previously Disclosed" by United Federal), when considered as a
whole, contains or will contain any untrue statement of a material fact or omits
or will omit to state a material fact necessary in order to make the statements
herein or therein, in light of the circumstances under which they were made, not
misleading. Each document delivered or to be delivered by United Federal to the
Holding Company or Triangle will be a true and complete copy of such document,
unmodified except by another document delivered by United Federal.
2.31. DISSENTERS' RIGHTS. Holders of United Federal Stock do not have
any dissenters rights.
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ARTICLE III. REPRESENTATIONS AND WARRANTIES
OF THE HOLDING COMPANY AND TRIANGLE
Except as otherwise specifically described herein or as "Previously
Disclosed" (as defined in Paragraph 10.01. below) to United Federal, the Holding
Company and Triangle each hereby makes the following representations and
warranties to United Federal.
3.01. ORGANIZATION; STANDING; POWER. The Holding Company and Triangle
each (I) is duly organized and incorporated, validly existing and in good
standing under the laws of North Carolina, (II) has all requisite power and
authority (corporate and other) to own its respective properties and conduct its
respective businesses as now being conducted, (III) is duly qualified to do
business and is in good standing in each other jurisdiction in which the
character of the properties owned or leased by it therein or in which the
transaction of its respective businesses makes such qualification necessary,
except where failure so to qualify would not have a Material Adverse Effect on
the Holding Company, and (IV) is not transacting business, or operating any
properties owned or leased by it, in violation of any provision of federal or
state law or any rule or regulation promulgated thereunder, which violation
would have a Material Adverse Effect on the Holding Company.
3.02. CAPITAL STOCK. The Holding Company's authorized capital stock
consists of 20,000,000 shares of Triangle Stock. As of December 31, 1997, an
aggregate of 12,980,925 shares of Triangle Stock were issued and outstanding.
The Holding Company's outstanding capital stock has been duly authorized and
validly issued, and is fully paid and nonassessable, and the shares of Triangle
Stock issued to United Federal's shareholders pursuant to this Agreement, when
issued as described herein, will be duly authorized, validly issued, fully paid,
nonassessable and freely tradable by all holders other than Affiliates.
3.03. AUTHORIZATION AND VALIDITY OF AGREEMENT. This Agreement has been
duly and validly approved by the Holding Company's and Triangle's Boards of
Directors and executed and delivered on the Holding Company's and Triangle's
behalf. (I) The Holding Company and Triangle each has the corporate power and
authority to execute and deliver this Agreement and to perform its obligations
and agreements and carry out the transactions described herein, (II) all
corporate proceedings required to be taken to authorize the Holding Company and
Triangle to enter into this Agreement and to perform their obligations and
agreements and carry out the transactions described herein have been duly and
properly taken, and (III) this Agreement constitutes the valid and binding
agreement of the Holding Company and Triangle enforceable in accordance with its
terms (except to the extent enforceability may be limited by (A) applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws from time to
time in effect which affect creditors' rights generally, (B) by legal and
equitable limitations on the availability of injunctive relief, specific
performance and other equitable remedies, and (C) general principles of equity
and applicable laws or court decisions limiting the enforceability of
indemnification provisions).
3.04. VALIDITY OF TRANSACTIONS; ABSENCE OF REQUIRED CONSENTS OR
WAIVERS. Except where the same would not have a Material Adverse Effect on the
Holding Company, neither the
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execution and delivery of this Agreement, nor the consummation of the
transactions described herein, nor compliance by the Holding Company or Triangle
with any of its obligations or agreements contained herein, will: (I) conflict
with or result in a breach of the terms and conditions of, or constitute a
default or violation under any provision of, the Holding Company's or Triangle's
Articles of Incorporation or Bylaws, or any contract, agreement, lease,
mortgage, note, bond, indenture, license, or obligation or understanding (oral
or written) to which the Holding Company or Triangle is bound or by which it,
its business, capital stock or any of its properties or assets may be affected;
(II) result in the creation or imposition of any lien, claim, interest, charge,
restriction or encumbrance upon any of the Holding Company's or Triangle's
properties or assets; (III) violate any applicable federal or state statute,
law, rule or regulation, or any order, writ, injunction or decree of any court,
administrative or regulatory agency or governmental body; (IV) result in the
acceleration of any obligation or indebtedness of the Holding Company or
Triangle; or (V) interfere with or otherwise adversely affect the Holding
Company's or Triangle's ability to carry on its business as presently conducted.
No consents, approvals or waivers are required to be obtained from any
person or entity in connection with the Holding Company's or Triangle's
execution and delivery of this Agreement, or the performance of its obligations
or agreements or the consummation of the transactions described herein, except
for the approval of Triangle's sole shareholder as described in Paragraph
7.01.d. below and of governmental or regulatory authorities described in
Paragraph 7.01.a. below.
3.05. HOLDING COMPANY BOOKS AND RECORDS..The Holding Company's and
Triangle's books of account and business records have been maintained in
substantial compliance with all applicable legal and accounting requirements and
in accordance with good business practices, and such books and records are
complete and reflect accurately in all material respects the Holding Company's
and Triangle's items of income and expense and all of their assets, liabilities
and stockholders' equity. The minute books of the Holding Company and Triangle
accurately reflect in all material respects the corporate actions which their
shareholders and boards of directors, and all committees thereof, have taken
during the time periods covered by such minute books. All such minute books have
been or will be made available to United Federal and its representatives.
3.06 HOLDING COMPANY REPORTS. Since January 1, 1992, and where the
failure to file has had or could have a Material Adverse Effect on the Holding
Company, the Holding Company and its consolidated subsidiaries have filed all
reports, registrations and statements, together with any amendments that were
required to be made with respect thereto, that were required to be filed with
(I) the SEC, (II) the Board of Governors of the Federal Reserve System (the
"FRB"), (III) the FDIC, (IV) the North Carolina Commissioner of Banks (the
"Commissioner"), and (V) any other governmental or regulatory authorities having
jurisdiction over the Holding Company or its subsidiaries. All such reports and
statements filed with the SEC, the FRB, the FDIC, the Commissioner or other such
regulatory authority are collectively referred to herein as the "Holding Company
Reports." As of their respective dates, the Holding Company Reports complied in
all material respects with all the statutes, rules and regulations enforced or
promulgated by the regulatory authority with which they were filed and did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to
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make the statements therein, in light of the circumstances under which they were
made, not misleading; and the Holding Company has not been notified that any of
the Holding Company Reports were deficient in any material respect as to form or
content. Following the date of this Agreement, the Holding Company shall deliver
to United Federal upon its request a copy of any report, registration, statement
or other regulatory filing made by the Holding Company or its subsidiaries with
the SEC, the FRB, the FDIC, the Commissioner or any other such regulatory
authority.
3.07. HOLDING COMPANY FINANCIAL STATEMENTS. The Holding Company has
delivered to United Federal (I) a copy of the Holding Company's consolidated
balance sheets as of December 31, 1995 and December 31, 1996, and its
consolidated statements of income, changes in shareholders' equity, and cash
flows for the years ended December 31, 1994, December 31, 1995 and December 31,
1996 (the "Holding Company Financial Statements"), and (II) a copy of the
Holding Company's balance sheet as of September 30, 1997 and its statement of
operations for the nine months ended September 30, 1997 (the "Holding Company
Interim Financial Statements"). The Holding Company Financial Statements and the
Holding Company Interim Financial Statements were prepared in accordance with
GAAP applied on a consistent basis throughout the periods indicated and present
fairly in all material respects the Holding Company's consolidated financial
condition, assets and liabilities, results of operations, changes in
shareholders' equity and changes in cash flows as of the dates and for the
periods specified therein. The Holding Company Financial Statements have been
audited by the Holding Company's independent accountants, Coopers & Lybrand
L.L.P.
3.08 ABSENCE OF MATERIAL ADVERSE CHANGES. Since September 30, 1997
there has been no material adverse change, and there has occurred no event or
development and, to the best knowledge of management of the Holding Company,
there currently exists no condition or circumstance which, with the lapse of
time or otherwise, is reasonably likely to cause, create or result in a Material
Adverse Change in the Holding Company.
3.09 LITIGATION AND COMPLIANCE WITH LAW.
(I) There are no actions, suits, arbitrations, controversies
or other proceedings or investigations (or, to the knowledge of management of
the Holding Company, any facts or circumstances which reasonably could result in
such), including without limitation any such action by any governmental or
regulatory authority, which currently exists or is ongoing, pending or, to the
knowledge of management of the Holding Company, threatened, contemplated or
probable of assertion, against, relating to or otherwise affecting the Holding
Company or any of its properties or assets which, if determined adversely, could
result in liability on the part of the Holding Company for, or subject it to,
monetary damages, fines or penalties, or an injunction, and which could have a
Material Adverse Change in the Holding or on the ability of the Holding Company
or Triangle to consummate the Merger;
(II) The Holding Company and its subsidiaries each has all
licenses, permits, orders, authorizations or approvals ("Permits") of any
federal, state, local or foreign governmental or regulatory body that are
material to or necessary for the conduct of its business or to own, lease and
operate its properties; all such Permits are in full force and effect; no
violations are or have been
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recorded in respect of any such Permits; and no proceeding is pending or, to the
knowledge of management of the Holding Company, threatened or probable of
assertion to suspend, cancel, revoke or limit any Permit;
(III) Neither the Holding Company nor any of its subsidiaries
is subject to any supervisory agreement, enforcement order, writ, injunction,
capital directive, supervisory directive, memorandum of understanding or other
similar agreement, order, directive, memorandum or consent of, with or issued by
any regulatory or other governmental authority (including without limitation the
FDIC, the FRB or the Commissioner) relating to its financial condition,
directors or officers, operations, capital, regulatory compliance or otherwise;
there are no judgments, orders, stipulations, injunctions, decrees or awards
against the Holding Company or any of its subsidiaries which in any manner
limit, restrict, regulate, enjoin or prohibit any present or past business or
practice of the Holding Company or any of its subsidiaries; and neither the
Holding Company nor any of its subsidiaries has been advised or has any reason
to believe that any regulatory or other governmental authority or any court is
contemplating, threatening or requesting the issuance of any such agreement,
order, injunction, directive, memorandum, judgment, stipulation, decree or
award; and,
(IV) Neither the Holding Company nor any of its subsidiaries
is in violation or default in any material respect under, and each has complied
in all material respects with, all laws, statutes, ordinances, rules,
regulations, orders, writs, injunctions or decrees of any court or federal,
state, municipal or other governmental or regulatory authority having
jurisdiction or authority over it or its business operations, properties or
assets (including without limitation all provisions of North Carolina law
relating to usury, the Consumer Credit Protection Act, and all other laws and
regulations applicable to extensions of credit by the Holding Company's bank
subsidiaries) and there is no basis for any claim by any person or authority for
compensation, reimbursement or damages or otherwise for any violation of any of
the foregoing that would have a Material Adverse Effect on the Holding Company.
3.10. ABSENCE OF BROKERAGE OR FINDERS COMMISSIONS.
(I) All negotiations relative to this Agreement and the
transactions described herein have been carried on by the Holding Company and
Triangle directly with United Federal; (II) no person or firm has been retained
by or has acted on behalf of, pursuant to any agreement, arrangement or
understanding with, or under the authority of, the Holding Company, Triangle or
their Boards of Directors, as a broker, finder or agent or has performed similar
functions or otherwise is or may be entitled to receive or claim a brokerage fee
or other commission in connection with the transactions described herein; and
(III) neither the Holding Company nor Triangle has agreed to pay any brokerage
fee or other commission to any person or entity in connection with the
transactions described herein.
3.11. OBSTACLES TO REGULATORY APPROVAL, ACCOUNTING TREATMENT OR TAX
TREATMENT. To the knowledge of management of the Holding Company, no fact or
condition (including the Holding Company's bank subsidiaries' records of
compliance with the Community Reinvestment Act) relating to the Holding Company
exists that may reasonably be expected to (I) prevent or
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materially impede or delay the Holding Company regulatory approvals required in
order to consummate the transactions described herein, (II) prevent the Merger
from qualifying to be a reorganization under Section 368(a)(1)(A) of the Code,
or (III) prevent the Merger from being treated as a "pooling-of-interests" for
accounting purposes; and, if any such fact or condition becomes known to the
executive officers of the Holding Company, it promptly (and in any event within
three days after obtaining such knowledge) shall communicate such fact or
condition to the President of United Federal.
3.12. DISCLOSURE. To the knowledge of management of the Holding
Company, no written statement, certificate, schedule, list or other written
information furnished by or on behalf of the Holding Company or Triangle at any
time to United Federal in connection with this Agreement (including without
limitation information "Previously Disclosed" by the Holding Company and
Triangle), when considered as a whole, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading. Each document
delivered or to be delivered by the Holding Company or Triangle to United
Federal is or will be a true and complete copy of such document, unmodified
except by another document delivered by the Holding Company or Triangle.
ARTICLE IV. COVENANTS OF UNITED FEDERAL
4.01. AFFIRMATIVE COVENANTS OF UNITED FEDERAL. United Federal hereby
covenants and agrees as follows with the Holding Company and Triangle.
A. "AFFILIATES" OF UNITED FEDERAL. United Federal will use its
best efforts to cause each person who shall be deemed by the Holding Company or
its counsel, in their sole discretion, to be an Affiliate of United Federal (as
defined in Paragraph 2.28 above), to execute and deliver to the Holding Company
at least forty-five (45) days prior to the Closing a written agreement (the
"Affiliates' Agreement") relating to restrictions on shares of Triangle Stock to
be received by such Affiliates pursuant to this Agreement and which Affiliates'
Agreement shall be in form and content reasonably satisfactory to the Holding
Company and substantially in the form attached as Schedule B to this Agreement.
Certificates for the shares of Triangle Stock issued to Affiliates of United
Federal shall bear a restrictive legend (substantially in the form as shall be
set forth in the Affiliates' Agreement) with respect to the restrictions
applicable to such shares.
B. CONDUCT OF BUSINESS PRIOR TO EFFECTIVE TIME. While the
parties recognize that the operation of United Federal until the Effective Time
is the responsibility of United Federal and its Board of Directors and officers,
United Federal agrees that, between the date of this Agreement and the Effective
Time, it will carry on its business, in and only in the regular and usual course
in substantially the same manner as such business heretofore was conducted, and,
to the extent consistent with such business and within its ability to do so,
United Federal agrees that it will:
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(I) preserve intact its present business organization, keep
available its present officers and employees, and preserve its relationships
with customers, depositors, creditors, correspondents, suppliers, and others
having business relationships with it;
(II) maintain all its properties and equipment in customary
repair, order and condition, ordinary wear and tear excepted;
(III) maintain its books of account and records in the usual,
regular and ordinary manner in accordance with sound business practices applied
on a consistent basis;
(IV) comply with all laws, rules and regulations applicable to
it, its properties and to the conduct of its business;
(V) continue to maintain in force insurance such as is
described in Paragraph 2.26. above; not modify any bonds or policies of
insurance in effect as of the date hereof unless the same, as modified, provides
substantially equivalent coverage; and not cancel, allow to be terminated or, to
the extent available, fail to renew, any such bond or policy of insurance unless
the same is replaced with a bond or policy providing substantially equivalent
coverage;
(VI) provide to the Holding Company on a monthly basis United
Federal's market value report on its investment portfolio and on its hedging
portfolio; and,
(VII) promptly provide to the Holding Company such information
about United Federal and its financial condition, results of operations,
prospects, businesses, assets, loan portfolio, investments, properties or
operations, as the Holding Company reasonably shall request.
C. PERIODIC INFORMATION REGARDING LOANS AND OTHER INFORMATION.
All new extensions of unsecured credit in excess of $50,000 and of secured
credit in excess of $100,000 will be submitted by United Federal to the Holding
Company on an after-the-fact basis for the Holding Company's review within
fifteen (15) business days of the end of the month in which the extension of
credit was made.
Additionally, United Federal agrees to make available and
provide to the Holding Company the following information with respect to United
Federal's loans and other extensions of credit (such assets herein referred to
as "Loans") as of December 31, 1997, and each month thereafter until the
Effective Time, such information for each month to be in form and substance as
is usual and customary in the conduct of United Federal's business and to be
furnished within fifteen (15) business days of the end of each month ending
after the date hereof:
(I) a list of Loans past due for sixty (60) days or more
as to principal or interest;
(II) an analysis of the Loan Loss Reserve and management's
assessment of the adequacy of the Loan Loss Reserve, which analysis and
assessment shall include a list of all classified or "watch list" Loans, along
with the outstanding balance and amount specifically
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allocated to the Loan Loss Reserve for each such classified or "watch list" Loan
(this report shall be delivered quarterly rather than monthly);
(III) a list of Loans in nonaccrual status;
(IV) a list of all Loans over $50,000 without principal
reduction for a period of longer than one year;
(V) a list of all foreclosed real property or other real
estate owned and all repossessed personal property;
(VI) a list of reworked or restructured Loans over $25,000
and still outstanding, including original terms, restructured terms and status;
(VII) a list of any actual or threatened litigation by or
against United Federal pertaining to any Loans or credits, which list shall
contain a description of circumstances surrounding such litigation, its present
status and management's evaluation of such litigation;
(VIII) mortgage pipeline report, including hedged and
unhedged positions; and
(IX) a list of the aggregate dollar amount of fundings and
commitments for floor planning, indirect lending, and speculative lending.
Further, United Federal shall provide to the Holding Company a
copy of the monthly package, including financial information, sent by United
Federal to its board members at the same time as such packages are sent to such
members.
D. NOTICE OF CERTAIN CHANGES OR EVENTS. Following the
execution of this Agreement and up to the Effective Time, United Federal
promptly will notify the Holding Company in writing of and provide to it such
information as it shall request regarding (I) any Material Adverse Change in
United Federal or of the actual or prospective occurrence of any condition or
event which, with the lapse of time or otherwise, is reasonably likely to cause,
create or result in a Material Adverse Change in United Federal, or (II) the
actual or prospective existence or occurrence of any condition or event which,
with the lapse of time or otherwise, has caused or may or could cause any
statement, representation or warranty of United Federal herein, or any
information that has been Previously Disclosed by United Federal to the Holding
Company or Triangle, to be or become materially inaccurate, misleading or
incomplete, or which has resulted or may or could cause, create or result in the
material breach or violation of any of United Federal's covenants or agreements
contained herein or in the failure of any of the conditions described in
Paragraphs 7.01. or 7.03. below.
E. CONSENTS TO ASSIGNMENT OF LEASES. United Federal will use
its reasonable best efforts to obtain all consents of its landlords and lessors
to the Merger as may be required under the Real Property Leases and all other
leases, each of which consents shall be in form and substance reasonably
satisfactory to the Holding Company.
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F. FURTHER ACTION; INSTRUMENTS OF TRANSFER, ETC. United
Federal covenants and agrees with the Holding Company and Triangle that it (I)
will use its reasonable best efforts in good faith to take or cause to be taken
all action required of it hereunder as promptly as practicable so as to permit
the consummation of the transactions described herein at the earliest possible
date, (II) shall perform all acts and execute and deliver to the Holding Company
all documents or instruments required herein or as otherwise shall be reasonably
necessary or useful to or requested by either of them in consummating such
transactions, and (III) will cooperate with the Holding Company and Triangle in
every way in carrying out, and will pursue diligently the expeditious completion
of, such transactions.
G. LOAN LOSS RESERVE. Beginning in the month after the
execution of this Agreement, United Federal will, on a monthly basis until the
Effective Time, add to its loan loss reserve an amount equal to $1.50 for each
$100.00 in aggregate commercial loan growth each month.
H. INCENTIVE COMPENSATION. Beginning in the month after the
execution of this Agreement, United Federal will not pay incentive compensation
(I) to any lending officer that approves his or her own loans, or (II) in excess
of $500.00 per loan for loans (excluding mortgage loans originated for sale in
the secondary market) approved by a credit administrator in excess of a loan
officer's authority.
4.02. NEGATIVE COVENANTS OF UNITED FEDERAL. United Federal hereby
covenants and agrees that, between the date hereof and the Effective Time, it
will not do any of the following things or take any of the following actions
without the prior written consent and authorization of the President or an
Executive Vice President of the Holding Company.
A. AMENDMENTS TO CHARTER OR BYLAWS. United Federal will not
amend its Charter or Bylaws.
B. CHANGE IN CAPITAL STOCK. Except for United Federal Stock to
be issued under the United Federal Stock Plans, United Federal will not (I) make
any change in its authorized capital stock, or create any other or additional
authorized capital stock or other securities, or (II) issue, sell, purchase,
redeem, retire, reclassify, combine or split any shares of its capital stock or
other securities issued by it, other than the issuance of shares upon the
exercise of stock options which are outstanding as of the date of this Agreement
(including securities convertible into capital stock), or enter into any
agreement or understanding with respect to any such action.
C. OPTIONS, WARRANTS AND RIGHTS. United Federal will not grant
or issue any options, warrants, calls, puts or other rights of any kind relating
to the purchase, redemption or conversion of shares of its capital stock or any
other securities (including securities convertible into capital stock) or enter
into any agreement or understanding with respect to any such action.
D. DIVIDENDS. Except for the payment of a six cents ($.06)
cash dividend per share each quarter (consistent with past practices) United
Federal will not declare or pay any
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dividends or make any other distributions on or in respect of any shares of its
capital stock or otherwise to its shareholders.
E. EMPLOYMENT, BENEFIT OR RETIREMENT AGREEMENTS OR PLANS.
Except as required by law and except as may occur under the United Federal Stock
Plans, United Federal will not (I) enter into or become bound by any contract,
agreement or commitment for the employment or compensation of any officer,
employee or consultant which is not immediately terminable by United Federal
without cost or other liability on no more than thirty (30) days notice; (II)
adopt, enter into or become bound by any new or additional profit-sharing,
bonus, incentive, change in control or "golden parachute", stock option, stock
purchase, pension, retirement, insurance (hospitalization, life or other) or
similar contract, agreement, commitment, understanding, plan or arrangement
(whether formal or informal) with respect to or which provides for benefits for
any of its current or former directors, officers, employees or consultants; or
(III) enter into or become bound by any contract with or commitment to any labor
or trade union or association or any collective bargaining group.
F. INCREASE IN COMPENSATION; ADDITIONAL COMPENSATION. Except
as otherwise provided herein, United Federal will not increase the compensation
or benefits of, or pay any bonus or other special or additional compensation to,
any of its directors, officers, employees or consultants. Notwithstanding
anything contained herein to the contrary, this Paragraph 4.02.f. shall not
prohibit annual merit increases in the salaries of its employees or other
payments, including bonuses, made to employees or directors in connection with
existing compensation or benefit plans, so long as such increases or payments,
including bonuses, are effected at such times and in such manner and amounts as
shall be consistent with United Federal's past compensation policies and
practices and, in the case of payments made pursuant to compensation or benefit
plans, consistent with the terms of those plans.
G. ACCOUNTING PRACTICES. United Federal will not make any
changes in its accounting methods, practices or procedures or in depreciation or
amortization policies, schedules or rates heretofore applied (except as required
by generally accepted accounting principles or governmental regulations).
H. ACQUISITIONS; ADDITIONAL BRANCH OFFICES. United Federal
will not directly or indirectly (I) acquire or merge with, or acquire any branch
or all or any significant part of the assets of, any other person or entity,
(II) open any new branch office, or (III) enter into or become bound by any
contract, agreement, commitment or letter of intent relating to, or otherwise
take or agree to take any action in furtherance of, any such transaction or the
opening of a new branch office.
I. CHANGES IN BUSINESS PRACTICES. Except as may be required by
the OTS, the FDIC, or any other governmental or other regulatory agency or as
shall be required by applicable law, regulation or this Agreement, United
Federal will not (I) change in any material respect the nature of its business
or the manner in which it conducts its business, (II) discontinue any material
portion or line of its business, or (III) change in any material respect its
lending, investment, asset-
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liability management or other material banking or business policies (except to
the extent required by Paragraph 4.01.b. above).
J. EXCLUSIVE MERGER AGREEMENT. United Federal will not
directly or indirectly, through any person (I) encourage, solicit or attempt to
initiate or procure discussions, negotiations or offers with or from any person
or entity (other than the Holding Company and Triangle) relating to a merger or
other acquisition of United Federal, or the purchase or acquisition of any
United Federal Stock, any branch office of United Federal or all or any
significant part of United Federal's assets; or provide assistance to any person
in connection with any such offer; (II) except as the fiduciary duties of its
Board of Directors may require, disclose to any person or entity any information
not customarily disclosed to the public concerning United Federal or its
business, or afford to any other person or entity access to its properties,
facilities, books or records; (III) except for the fiduciary duties of its Board
of Directors may require, sell or transfer any branch office of United Federal
or all or any significant part of United Federal's assets to any other person or
entity; or (IV) except for the fiduciary duties of its Board of Directors may
require, enter into or become bound by any contract, agreement, commitment or
letter of intent relating to, or otherwise take or agree to take any action in
furtherance of, any such transaction.
K. ACQUISITION OR DISPOSITION OF ASSETS. United Federal will
not, without the prior written consent of the Holding Company, which consent
shall not be unreasonably withheld:
(I) sell or lease (as lessor), or enter into or
become bound by any contract, agreement, option or commitment relating to the
sale, lease (as lessor) or other disposition of any real estate; or sell or
lease (as lessor), or enter into or become bound by any contract, agreement,
option or commitment relating to the sale, lease (as lessor) or other
disposition of any equipment or any other fixed or capital asset having a value
on United Federal's books or a fair market value, whichever is greater, of more
than $10,000 for any individual item or asset, or more than $25,000 in the
aggregate for all such items or assets;
(II) purchase or lease (as lessee), or enter into or
become bound by any contract, agreement, option or commitment relating to the
purchase, lease (as lessee) or other acquisition of any real property; or
purchase or lease (as lessee), or enter into or become bound by any contract,
agreement, option or commitment relating to the purchase, lease (as lessee) or
other acquisition of any equipment or any other fixed assets having a purchase
price, or involving aggregate lease payments, in excess of $10,000 for any
individual item or asset, or more than $25,000 in the aggregate for all such
items or assets;
(III) enter into any purchase commitment for supplies
or services which calls for prices of goods or fees for services materially
higher than current market prices or fees or which obligates United Federal for
a period longer than twelve (12) months;
(IV) other than in the ordinary course of business
and at a level consistent with past practice, sell, purchase or repurchase, or
enter into or become bound by any contract, agreement, option or commitment to
sell, purchase or repurchase, any loan or other receivable or any participation
in any loan or other receivable; or
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(V) other than in the ordinary course of business and
at a level consistent with past practice, sell or dispose of, or enter into or
become bound by any contract, agreement, option or commitment relating to the
sale or other disposition of, any other asset of United Federal (whether
tangible or intangible, and including without limitation any trade name,
copyright, service mark or intellectual property right or license); or assign
its right to or otherwise give any other person its permission or consent to use
or do business under United Federal's corporate name or any name similar
thereto; or release, transfer or waive any license or right granted to it by any
other person to use any trademark, trade name, copyright or intellectual
property right.
L. DEBT; LIABILITIES. Except in the ordinary course of its
business consistent with its past practices (including routine borrowings for
liquidity purposes from the Federal Home Loan Bank of Atlanta and other
correspondent banks),United Federal will not (I) enter into or become bound by
any promissory note, loan agreement or other agreement or arrangement pertaining
to its borrowing of money, (II) assume, guarantee, endorse or otherwise become
responsible or liable for any obligation of any other person or entity, or (III)
incur any other liability or obligation (absolute or contingent).
M. LIENS; ENCUMBRANCES. United Federal will not mortgage,
pledge or subject any of its assets to, or permit any of its assets to become or
(except as Previously Disclosed) remain subject to, any lien or any other
encumbrance (other than in the ordinary course of business consistent with its
past practices in connection with securing of public funds deposits, securities
repurchase agreements or other similar operating matters).
N. WAIVER OF RIGHTS. United Federal will not waive, release or
compromise any material rights in its favor (except in the ordinary course of
business) except in good faith for fair value in money or money's worth, nor
waive, release or compromise any rights against or with respect to any of its
officers, directors or shareholders or members of families of officers,
directors or shareholders.
O. OTHER CONTRACTS. United Federal will not enter into or
become bound by any contracts, agreements, commitments or understandings (other
than those described elsewhere in this Paragraph 4.02.) (I) for or with respect
to any charitable contributions; (II) with any governmental or regulatory agency
or authority; (III) pursuant to which United Federal would assume, guarantee,
endorse or otherwise become liable for the debt, liability or obligation of any
other person; (IV) which is entered into other than in the ordinary course of
its business; and (V) which, in the case of any one contract, agreement,
commitment or understanding and whether or not in the ordinary course of its
business, would obligate or commit United Federal to make expenditures of more
than $10,000.
ARTICLE V. COVENANTS OF THE HOLDING COMPANY
The Holding Company hereby covenants and agrees as follows with United
Federal.
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5.01. ADVISORY BOARD OF DIRECTORS. After the Effective Time, the
current members of United Federal's Board of Directors shall serve as members of
applicable Triangle local advisory boards, subject to satisfactory performance,
and for such service, such individuals shall be compensated in accordance with
Triangle's standard arrangements for the compensation of local advisory board
members.
5.02. NYSE NOTIFICATION OF LISTING OF ADDITIONAL SHARES OF TRIANGLE
STOCK. As soon as practical after the Effective Time, the Holding Company shall
file with the NYSE such notifications and other materials (and shall pay such
fees) as shall be required for the listing on the NYSE of the shares of Triangle
Stock to be issued to United Federal's shareholders at the Effective Time.
5.03 NOTICE OF CERTAIN CHANGES OR EVENTS. Following the execution of
this Agreement and up to the Effective Time, the Holding Company promptly will
notify United Federal in writing of and provide to it such information as it
shall request regarding (I) any Material Adverse Change in the Holding Company,
or of the actual or prospective occurrence of any condition or event which, with
the lapse of time or otherwise, is reasonably likely to cause, create or result
in a Material Adverse Change in the Holding Company, or (II) the actual or
prospective existence or occurrence of any condition or event which, with the
lapse of time or otherwise, has caused or may or could cause any statement,
representation or warranty of the Holding Company or Triangle herein, or any
information that has been Previously Disclosed by the Holding Company or
Triangle to United Federal, to be or become materially inaccurate, misleading or
incomplete, or which has resulted or may or could cause, create or result in the
material breach or violation of any of the Holding Company's or Triangle's
covenants or agreements contained herein or in the failure of any of the
conditions described in Paragraphs 7.01.
or 7.02. below.
5.04. THE HOLDING COMPANY TO PROVIDE NECESSARY INFORMATION. The Holding
Company will promptly provide to United Federal information regarding the
Holding Company and its subsidiaries that United Federal reasonably requests in
order to satisfy any of its obligations under Paragraph 4.01.e.
ARTICLE VI. MUTUAL AGREEMENTS
6.01. SHAREHOLDERS' MEETING; REGISTRATION STATEMENT; PROXY
STATEMENT/PROSPECTUS
A. MEETING OF SHAREHOLDERS. United Federal shall cause a
meeting of its shareholders (the "United Federal Shareholder Meeting", which may
be a regular annual meeting or a specially called meeting) to be held as soon as
reasonably possible (but in no event less than twenty (20) days following the
mailing to United Federal's shareholders of the "Proxy Statement/Prospectus"
described below) for the purpose of United Federal's shareholders voting on the
approval of the Agreement and the Merger. In connection with the call and
conduct of and all other matters relating to the United Federal Shareholder
Meeting (including the solicitation of proxies), United Federal shall fully
comply with all provisions of applicable law and regulations and with its
Charter and Bylaws.
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B. PREPARATION AND DISTRIBUTION OF PROXY STATEMENT/PROSPECTUS.
The Holding Company and United Federal jointly will prepare a "Proxy
Statement/Prospectus" for distribution to United Federal's shareholders as
United Federal's proxy statement relating to its solicitation of proxies for use
at the United Federal Shareholder Meeting and as the Holding Company's
prospectus relating to the offer and distribution of Triangle Stock as described
herein. The Proxy Statement/ Prospectus shall be in such form and shall contain
or be accompanied by such information regarding the United Federal Shareholder
Meeting, this Agreement, the parties hereto, the Merger and other transactions
described herein as is required by applicable law and regulations and otherwise
as shall be agreed upon by the Holding Company and United Federal. The Holding
Company shall include the Proxy Statement/Prospectus as the prospectus in its
"Registration Statement" described below; and each party hereto will cooperate
with the other in good faith and will use their best efforts to cause the Proxy
Statement/Prospectus to comply with any comments of the SEC thereon.
United Federal will mail the Proxy
Statement/Prospectus to United Federal's shareholders not less than twenty (20)
days prior to the scheduled date of the United Federal Shareholder Meeting;
provided, however, that no such materials shall be mailed to United Federal's
shareholders unless and until the Holding Company shall have determined to its
own satisfaction that the conditions specified in Paragraph 7.03.d. below have
been satisfied and shall have approved such mailing.
C. REGISTRATION STATEMENT AND "BLUE SKY" APPROVALS. As soon as
practicable following the execution of this Agreement, the Holding Company will
prepare and file with the SEC a registration statement on Form S-4 (or on such
other form as the Holding Company shall determine to be appropriate) (the
"Registration Statement") covering the Triangle Stock to be issued to
shareholders of United Federal pursuant to this Agreement and will use its
reasonable best efforts in good faith to see that the Registration Statement is
declared effective by the SEC under the 1933 Act. Additionally, the Holding
Company shall take all such other actions, if any, as shall be required by
applicable state securities or "blue sky" laws (I) to cause the Triangle Stock
to be issued upon consummation of the Merger, at the time of the issuance
thereof, to be duly qualified or registered (unless exempt) under such laws,
(II) to cause all conditions to any exemptions from qualification or
registration under such laws to have been satisfied, and (III) to obtain any and
all required approvals or consents to the issuance of such stock.
D. RECOMMENDATION OF UNITED FEDERAL'S BOARD OF DIRECTORS.
Unless, due to a material change in circumstances or for any other reason United
Federal's Board of Directors reasonably believes that such a recommendation
would violate the directors' duties or obligations as such to United Federal or
to its shareholders, United Federal's Board of Directors will recommend to and
actively encourage United Federal's shareholders that they vote their shares of
United Federal Stock at the United Federal Shareholder Meeting to ratify and
approve this Agreement and the Merger, and the Proxy Statement/Prospectus mailed
to United Federal's shareholders will so indicate and state that United
Federal's Board of Directors considers the Merger to be advisable and in the
best interests of United Federal and its shareholders.
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E. INFORMATION FOR PROXY STATEMENT/PROSPECTUS AND REGISTRATION
STATEMENT. Each of the Holding Company and United Federal agrees to respond
promptly, and to use its reasonable best efforts to cause its directors,
officers, accountants and affiliates to respond promptly, to requests by any
other such party and its counsel for information for inclusion in the various
applications for regulatory approvals and in the Proxy Statement/Prospectus.
Each of the Holding Company and United Federal hereby covenants with the other
that none of the information provided by it for inclusion in the Proxy
Statement/Prospectus will, at the time of its mailing to United Federal's
shareholders, contain any untrue statement of a material fact or omit any
material fact required to be stated therein or necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not false or misleading; and, at all times following such mailing up
to and including the Effective Time, none of such information contained in the
Proxy Statement/Prospectus, as it may be amended or supplemented, will contain
an untrue statement of a material fact or omit any material fact required to be
stated therein or necessary in order to make the statements contained therein,
in light of the circumstances under which they were made, not false or
misleading.
6.02. REGULATORY APPROVALS. Within sixty (60) days of the date of this
Agreement, the Holding Company, Triangle and United Federal shall use their
respective reasonable best efforts in good faith to (I) prepare and file, or
cause to be prepared and filed, all applications for regulatory approvals and
actions as may be required of them, respectively, by applicable law and
regulations with respect to the transactions described herein (including
applications or notices, as applicable, to the FRB, the OTS, the Commissioner
and the North Carolina State Banking Commission, and to any other applicable
federal or state banking, securities or other regulatory authority), and (II)
obtain all necessary regulatory approvals required for consummation of the
transactions described herein. Each such party shall cooperate with each other
party in the preparation of all applications to regulatory authorities and, upon
request, promptly shall furnish all documents, information, financial statements
or other material that may be required by any other party to complete any such
application; and, before the filing therefore, each party to this Agreement
shall have the right to review and comment on the form and content of any such
application to be filed by any other party. Should the appearance of any of the
officers, directors, employees or counsel of any of the parties hereto be
requested by any other party or by any governmental agency at any hearing in
connection with any such application, such party shall promptly use its best
efforts to arrange for such appearance.
6.03. ACCESS. Following the date of this Agreement and to and including
the Effective Time, United Federal shall provide the Holding Company and its
employees, accountants and counsel, access to all its books, records, files and
other information (whether maintained electronically or otherwise), to all its
properties and facilities, and to all its employees, accountants, counsel and
consultants, for purposes of the conduct of such reasonable investigation and
review as the Holding Company shall, in its sole discretion, consider to be
necessary or appropriate; provided, however, that any such review conducted by
the Holding Company shall be performed in such a manner as will not interfere
unreasonably with United Federal's normal operations, or with United Federal's
relationship with its customers or employees, and shall be conducted in
accordance with procedures established by the parties having due regard for the
foregoing.
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6.04. COSTS. Subject to the provisions of Paragraph 8.03. below, and
whether or not this Agreement shall be terminated or the Merger shall be
consummated, United Federal, on the one hand, and the Holding Company and
Triangle, on the other, shall pay their own legal, accounting and financial
advisory fees and all their other costs and expenses incurred or to be incurred
in connection with the execution and performance of its obligations under this
Agreement or otherwise in connection with this Agreement and the transactions
described herein (including without limitation all accounting fees, legal fees,
filing fees, printing costs, travel expenses, and, in the case of United
Federal, all fees owed to The Carson Medlin Company ("Carson Medlin") for the
cost of United Federal's fairness opinion described in Paragraph 7.01.d. below,
and, in the case of the Holding Company, the cost of the "Environmental Survey"
described in Paragraph 6.06. below). However, subject to the provisions of
Paragraph 8.03. below, all costs incurred in connection with the printing and
mailing of the Proxy Statement/Prospectus shall be deemed to be incurred and
shall be paid thirty percent (30%) by United Federal and seventy percent (70%)
by the Holding Company.
6.05. ANNOUNCEMENTS. United Federal, Triangle and the Holding Company
each agrees that no person other than the parties to this Agreement is
authorized to make any public announcement or statement about this Agreement or
any of the transactions described herein, and that, without the prior review and
consent of the others (which consent shall not unreasonably be denied or
delayed), no party hereto may make any public announcement, statement or
disclosure as to the terms and conditions of this Agreement or the transactions
described herein, except for such disclosures as may be required incidental to
obtaining the prior approval of any regulatory agency or official, or the
consent of any lessor or landlord of United Federal to the consummation of the
transactions described herein. However, notwithstanding anything contained
herein to the contrary, prior review and consent shall not be required if in the
good faith opinion of counsel to the Holding Company or United Federal any such
disclosure by such entity is required by law or otherwise is prudent.
6.06. ENVIRONMENTAL STUDIES. At its option the Holding Company may
cause to be conducted Phase I environmental assessments of the Real Property,
the real estate subject to any Real Property Lease, or the Loan Collateral, or
any portion thereof, together with such other studies, testing and intrusive
sampling and analyses as the Holding Company shall deem necessary or desirable
(collectively, the "Environmental Survey"). The Holding Company shall complete
all such Phase I environmental assessments within sixty (60) days following the
date of this Agreement and thereafter conduct and complete any such additional
studies, testing, sampling and analyses within sixty (60) days following
completion of all Phase I environmental assessments. Subject to the provisions
of Paragraph 8.03. below, the costs of the Environmental Survey shall be paid by
the Holding Company. If (I) the final results of any Environmental Survey (or
any related analytical data) reflect that there likely has been any discharge,
disposal, release or emission by any person of any Hazardous Substance on, from
or relating to any of the Real Property, real estate subject to a Real Property
Lease or Loan Collateral at any time prior to the Effective Time, or that any
action has been taken or not taken, or a condition or event likely has occurred
or exists, with respect to any of the Real Property, real estate subject to a
Real Property Lease or Loan Collateral which constitutes or would or may
constitute a violation of any Environmental Laws, and if, (II) based on the
advice of its legal counsel or other consultants, the Holding Company believes
that United Federal is reasonably likely to become responsible for the
remediation of such discharge,
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disposal, release or emission or for other corrective action with respect to any
such violation, or that United Federal is reasonably likely to become liable for
monetary damages (including without limitation any civil or criminal penalties
or assessments) resulting therefrom (or that, in the case of any of the Loan
Collateral, United Federal is reasonably likely to incur any such liability if
it acquired title to such Loan Collateral), and if, (III) based on the advice of
its legal counsel or other consultants, the Holding Company believes the amount
of expenses or liability which United Federal is reasonably likely to incur or
for which United Federal could become responsible or liable on account of any
and all such remediation, corrective action or monetary damages at any time or
over any period of time could equal or exceed an aggregate of $100,000, then the
Holding Company shall give United Federal written notice thereof (together with
all information in its possession relating thereto) within fifteen (15) days of
the completion of the Environmental Survey and, at the Holding Company's sole
option and discretion, at any time thereafter and up to the Effective Time, the
Holding Company may terminate this Agreement without further obligation or
liability to United Federal or its shareholders.
6.07. EMPLOYEES; SEVERANCE PAYMENTS; EMPLOYEE BENEFITS
A. CONSULTING AND EMPLOYMENT AGREEMENTS. From and after the
Effective Time, the Holding Company and Triangle will honor the employment
agreements between United Federal and each of John A. Barker and Robert C. White
dated January 1, 1997 and April 1, 1997, respectively. In addition, at the
Effective Time, the Holding Company will enter into a consulting agreement with
each of Mr. Barker and Mr. White in the form attached hereto as Schedule C to
this Agreement.
Provided they each remain employed by United Federal at the
Effective Time in their respective current position, Triangle shall enter into
an employment agreement with Paul S. Jaber, Duran Broadhurst and Wade Spears as
of the Effective Time which shall contain substantially the same terms and
conditions and be in substantially the same form as is attached as Schedule D to
this Agreement; provided, that in the event Triangle and any of those three
individuals do not agree within ninety (90) days prior to the Closing as to the
terms and provisions of the form of employment agreement and as to any specifics
left incomplete in the form of employment agreement, Triangle shall pay such
individual his current monthly base salary for fifteen (15) months, provided he
remains employed by United Federal from the date of this Agreement until thirty
(30) days after the Effective Time, such payments to begin in the month
following the 30-day period after the Effective Time. In consideration of this
payment, the individual would enter into a non-compete provision identical to
that contained in the form of employment agreement attached as Schedule D except
that the non-compete would (i) have a duration of the 15-month payment periods,
and (ii) prohibit employment with any financial institution operating a branch
in any county in which any banking subsidiary of the Holding Company has a
branch.
B. EMPLOYMENT OF OTHER UNITED FEDERAL EMPLOYEES. Provided they
remain employed by United Federal at the Effective Time, Triangle will attempt
in good faith, but shall have no obligation, to locate suitable positions for
and to offer employment to all other employees of United Federal (other than
employees serving pursuant to an employment agreement or change
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in control agreement or other similar arrangement). Any employment so offered by
Triangle to an employee of United Federal shall be in such a position, at such
location within Triangle's branch system, and for such rate of compensation as
Triangle shall determine in its sole discretion. Each such person's employment
shall be on an "at-will" basis, and nothing in this Agreement shall be deemed to
constitute an employment agreement with any such person or to obligate Triangle
or the Holding Company to employ any such person for any specific period of time
or in any specific position or to restrict the Holding Company's or Triangle's
right to terminate the employment of any such person at any time and for any
reason satisfactory to it.
C. SEVERANCE PAYMENT. At the Effective Time, Triangle will pay
to each individual employed by United Federal at the Effective Time who has been
continuously employed as a full-time employee by United Federal for at least one
(1) year prior to the Effective Time, but who is not offered employment with
Triangle following the Effective Time at a position and salary comparable to his
or her current position and salary and within thirty (30) miles of his or her
location, a severance payment in an amount equal to one week's salary or wages
for each year of full prior continuous service with United Federal, provided
that any severance payment shall consist of a minimum of one (1) month's salary
or wages and a maximum of three (3) months' salary or wages for non-officers and
a minimum of three (3) months' salary or wages and a maximum of six (6) months'
salary or wages for officers (any employee elected as assistant vice president
or higher), who were employed as an officer on December 24, 1997; if the officer
was not employed as an officer on December 24, 1997, he or she shall be treated
either as a non-officer or an employee with less than one (1) year's employment,
as the case may be. Each individual employed by United Federal at the Effective
Time who has not been continuously employed as a full-time employee by United
Federal for at least one (1) year prior to the Effective Time and who is not
offered employment with Triangle following the Effective Time shall receive a
severance payment in an amount equal to two (2) week's salary or wages.
Notwithstanding anything contained herein to the contrary, no payment of
severance compensation shall be made to any person who does not remain an
employee of United Federal at the Effective Time. Notwithstanding the provisions
of this paragraph, no severance payment shall be made hereunder to any employee
of United Federal who is or will be party to an employment or consulting
agreement, a change in control agreement, severance agreement or other similar
arrangement with United Federal, the Holding Company or Triangle, whether oral
or written. To the extent United Federal maintains any plan or arrangement for
the payment of severance or salary continuation benefits to employees, such plan
or arrangement (unless specifically provided to the contrary hereunder) shall be
terminated at the Effective Time.
D. EMPLOYEE BENEFITS. Except as otherwise provided in this
Paragraph 6.07, the benefit plans of United Federal ("United Federal Benefit
Plans") will be reviewed and appropriate amendments, consolidations or
terminations will be made thereto at or after the Effective Time; provided,
however, that the employees of United Federal who become employees of Triangle
Bank (i) shall be eligible to receive group hospitalization, medical, life,
disability and similar benefits on the same basis and under the same terms
available to the present employees of the Holding Company and its subsidiaries
on a "no gain, no loss" basis, (ii) in the event a United Federal Benefit Plan
is terminated, the rights and benefits of United Federal's employees thereunder
shall become fully vested, with each participating United Federal employee
having the
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right or option either to receive the benefits to which he or she is entitled as
a result of such termination or to have such benefits "rolled" into the
appropriate Holding Company benefit plan ("Triangle Benefit Plan"), on the same
basis and applying the eligibility standards as would apply to the employees of
the Holding Company and its subsidiaries as if such employee's prior service to
United Federal had been performed on behalf of the Holding Company and its
subsidiaries for qualification, participation and vesting, but not for funding,
purposes, and (iii) in the event a United Federal Benefit Plan is merged into a
Triangle Benefit Plan, shall be entitled to participate in such Triangle Benefit
Plan on the same basis and applying the same eligibility standards as would
apply to employees of the Holding Company and its subsidiaries. United Federal,
Triangle and the Holding Company agree that for purposes of qualification,
participation and vesting in Triangle Benefit Plans, the employees of United
Federal shall receive credit for their prior continuous periods of service to
United Federal, including employees who have had a break in service, but who
were granted prior service credit by United Federal when rehired by United
Federal.
6.08 CONFIDENTIALITY. The Holding Company, Triangle and United Federal
each agrees that it will treat as confidential and not disclose to any
unauthorized person any documents or other information obtained from or learned
about the others during the course of the negotiation of this Agreement and the
carrying out of the events and transactions described herein (including any
information obtained during the course of any due diligence investigation or
review provided for herein or otherwise) and which documents or other
information relates in any way to the business, operations, personnel, customers
or financial condition of such other parties; and that it will not use any such
documents or other information for any purpose except for the purposes for which
such documents and information were provided to it and in furtherance of the
transactions described herein. However, the above obligations of confidentiality
shall not prohibit the disclosure of any such document or information by any
party to this Agreement to the extent (I) such document or information is then
available generally to the public or is already known to the person or entity to
whom disclosure is proposed to be made (other than through the previous actions
of such party in violation of this Paragraph 6.08), (II) such document or
information was available to the disclosing party on a nonconfidential basis
prior to the same being obtained pursuant to this Agreement, (III) disclosure is
required by subpoena or order of a court or regulatory authority of competent
jurisdiction, or by the SEC or regulatory authorities in connection with the
transactions described herein, or (IV) to the extent that, in the reasonable
opinion of legal counsel to such party, disclosure otherwise is required by law.
In the event this Agreement is terminated for any reason, then
each of the parties hereto immediately shall return to the other parties all
copies of any and all documents or other written materials or information of or
relating to such other parties which were obtained from them during the course
of the negotiation of this Agreement and the carrying out of the events and
transactions described herein (whether during the course of any due diligence
investigation or review provided for herein or otherwise) and which documents or
other information relates in any way to the business, operations, personnel,
customers or financial condition of such other parties.
The parties' obligations of confidentiality under this
Paragraph 6.08 shall survive and remain in effect following any termination of
this Agreement
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6.09. REORGANIZATION FOR TAX PURPOSES. The Holding Company, Triangle
and United Federal each undertakes and agrees to use its reasonable best efforts
to cause the Merger to qualify as a "reorganization" within the meaning of
Section 368(a)(1)(A) of the Code, and that it will not intentionally take any
action that would cause the Merger to fail to qualify.
6.10. ACCOUNTING TREATMENT. The Holding Company, Triangle and United
Federal each undertakes and agrees to use its reasonable best efforts to cause
the Merger to qualify to be treated as a "pooling-of-interests" for accounting
purposes and that it will not intentionally take any action that would cause the
Merger to fail to so qualify.
6.11. OTHER PERMISSIBLE TRANSACTIONS. The Holding Company, Triangle and
United Federal agree that the Holding Company and its subsidiaries may offer to
acquire, enter into agreements to acquire and acquire financial institution
holding companies and their subsidiaries, financial institutions or financial
services entities and their subsidiaries, leasing companies and other entities
which are permissible for financial institution holding companies and financial
institutions to own, and/or the assets and liabilities of such entities prior to
the Effective Time, and such action by the Holding Company and its subsidiaries
shall have no effect on this Agreement.
6.12. DIVIDEND COORDINATION. The shareholders of United Federal shall
receive a quarterly dividend from either United Federal or the Holding Company,
but not from both, in the quarter in which the Merger occurs, and United Federal
and the Holding shall coordinate the Closing, the Effective Time and the payment
of such quarterly dividend to ensure such dividend payment.
ARTICLE VII. CONDITIONS PRECEDENT TO MERGER
7.01 CONDITIONS TO ALL PARTIES' OBLIGATIONS. Notwithstanding any other
provision of this Agreement to the contrary, the obligations of each of the
parties to this Agreement to consummate the transactions described herein shall
be conditioned upon the satisfaction of each of the following conditions
precedent on or prior to the Closing Date.
A. APPROVAL BY GOVERNMENTAL OR REGULATORY AUTHORITIES; NO
DISADVANTAGEOUS CONDITIONS.
(I) The Merger and other transactions described
herein shall have been approved, to the extent required by law, by the FRB, the
OTS, the Commissioner and the North Carolina State Banking Commission, and by
all other governmental or regulatory agencies or authorities having jurisdiction
over such transactions;
(II) no governmental or regulatory agency or
authority shall have withdrawn its approval of such transactions or imposed any
condition on such transactions or conditioned its approval thereof, which
condition is reasonably deemed by the Holding Company, Triangle, or United
Federal to be materially disadvantageous or burdensome or to impact so adversely
the
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economic or business benefits of this Agreement as to render it inadvisable for
such party to consummate the Merger;
(III) all waiting periods required following
necessary approvals by governmental or regulatory agencies or authorities shall
have expired, and, in the case of the waiting period following approval by the
FRB, no unwithdrawn objection to the Merger shall have been raised by the U.S.
Department of Justice; and (IV) all other consents, approvals and permissions,
and the satisfaction of all of the requirements prescribed by law or regulation,
necessary to the carrying out of the transactions contemplated herein shall have
been procured.
B. EFFECTIVENESS OF REGISTRATION STATEMENT; COMPLIANCE WITH
SECURITIES AND OTHER "BLUE SKY" REQUIREMENTS. The Registration Statement shall
be effective under the 1933 Act and no stop order suspending the effectiveness
of the Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the SEC. The Holding Company
shall have taken all such actions, if any, as required by applicable state
securities laws (I) to cause the Triangle Stock to be issued upon consummation
of the Merger, at the time of the issuance thereof, to be duly qualified or
registered (unless exempt) under such laws, (II) to cause all conditions to any
exemptions from qualification or registration under such laws to have been
satisfied, and (III) to obtain any and all required approvals or consents with
respect to the issuance of such stock, and any such required approvals or
consents shall have been obtained and shall remain in effect.
C. ADVERSE PROCEEDINGS, INJUNCTION, ETC. There shall not be
(I) any order, decree or injunction of any court or agency of competent
jurisdiction which enjoins or prohibits the Merger or any of the other
transactions described herein or any of the parties hereto from consummating any
such transaction, (II) any pending or threatened investigation of the Merger or
any of such other transactions by the U.S. Department of Justice, or any actual
or threatened litigation under federal antitrust laws relating to the Merger or
any other such transaction, (III) any suit, action or proceeding by any person
(including any governmental, administrative or regulatory agency), pending or
threatened before any court or governmental agency in which it is sought to
restrain or prohibit United Federal, Triangle or the Holding Company from
consummating the Merger or carrying out any of the terms or provisions of this
Agreement, or (IV) any other suit, claim, action or proceeding pending or
threatened against United Federal, Triangle or the Holding Company or any of
their officers or directors which shall reasonably be considered by United
Federal, Triangle or the Holding Company to be materially burdensome in relation
to the proposed Merger or materially adverse in relation to the financial
condition of either such corporation, and which has not been dismissed,
terminated or resolved to the satisfaction of all parties hereto within ninety
(90) days of the institution or threat thereof.
D. APPROVAL BY BOARDS OF DIRECTORS AND SHAREHOLDERS. The
Boards of Directors of United Federal, Triangle and the Holding Company shall
have duly approved and adopted this Agreement by appropriate resolutions, and
the shareholders of United Federal and Triangle shall have duly approved,
ratified and confirmed this Agreement, all to the extent required by and in
accordance with the provisions of this Agreement, applicable law, and applicable
provisions of their respective Charter or Articles of Incorporation and Bylaws.
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E. FAIRNESS OPINIONS United Federal shall have received from
Carson Medlin an opinion, in form and substance satisfactory to United Federal,
dated as of the date of the Proxy Statement/Prospectus, to the effect that the
terms of the Merger are fair, from a financial point of view, to United Federal
and its shareholders. The Holding Company shall have received from its financial
advisor, Orr Management Company, an opinion, in form and substance satisfactory
to the Holding Company, dated as of the Proxy Statement/Prospectus, to the
effect that the terms of the Merger are fair, from a financial point of view, to
the Holding Company and its shareholders.
F. TAX OPINION. The Holding Company shall have received, in
form and substance satisfactory to the Holding Company, an opinion of Coopers &
Lybrand L.L.P. substantially to the effect that: (I) for federal income tax
purposes, consummation of the Merger will constitute a "reorganization" as
defined in Section 368(a)(1)(A) of the Code; (II) that no taxable gain will be
recognized by a shareholder of United Federal upon such shareholder's receipt of
Triangle Stock in exchange for his or her United Federal Stock; (III) that the
basis of the Triangle Stock received by the shareholder in the Merger will be
the same as his or her United Federal Stock surrendered in exchange therefor;
(IV) that, if United Federal Stock is a capital asset in the hands of the
shareholder at the Effective Time, then the holding period of the Triangle Stock
received by the shareholder in the Merger will include the holding period of
United Federal Stock surrendered in exchange therefor; and (V) a shareholder who
receives cash in lieu of a fractional share of Triangle Stock will recognize
gain or loss equal to any difference between the amount of cash received and the
shareholder's basis in the fractional share interest. In rendering its opinion,
Coopers & Lybrand L.L.P. may rely on representations contained in certificates
of officers of the Holding Company and United Federal.
G. NO TERMINATION OR ABANDONMENT. This Agreement shall not
have been terminated by any party hereto.
7.02. ADDITIONAL CONDITIONS TO UNITED FEDERAL'S OBLIGATIONS.
Notwithstanding any other provision of this Agreement to the contrary, United
Federal's obligations to consummate the transactions described herein shall be
conditioned upon the satisfaction of each of the following conditions precedent
on or prior to the Closing Date.
A. MATERIAL ADVERSE CHANGE. There shall not have been any
Material Adverse Change in the Holding Company, and there shall not have
occurred any event or development and there shall not exist any condition or
circumstance which, with the lapse of time or otherwise, is reasonably likely to
cause, create or result in a Material Adverse Change in the Holding Company.
B. COMPLIANCE WITH LAWS. The Holding Company and Triangle
shall have complied in all material respects with all federal and state laws and
regulations applicable to the transactions described herein and where the
violation of or failure to comply with any such law or regulation is reasonably
likely to have a Material Adverse Effect on the Holding Company.
C. THE HOLDING COMPANY'S AND TRIANGLE'S REPRESENTATIONS AND
WARRANTIES AND PERFORMANCE OF AGREEMENTS; OFFICERS' CERTIFICATE. Unless waived
in writing
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by United Federal as provided in Paragraph 10.03. below, each of the
representations and warranties of the Holding Company and Triangle contained in
this Agreement shall have been true and correct as of the date hereof and shall
remain true and correct in all material respects on and as of the Effective Time
with the same force and effect as though made on and as of such date, except (I)
representations and warranties that speak as of a specific date, (II) for
changes which do not, in the aggregate, result in a Material Adverse Change in
the Holding Company, and (III) as otherwise contemplated by this Agreement; and
the Holding Company and Triangle each shall have performed in all material
respects all its respective obligations, covenants and agreements hereunder to
be performed by it on or before the Closing Date.
United Federal shall have received a certificate
dated as of the Closing Date and executed by the Holding Company's President and
Chief Financial Officer to the foregoing effect.
D. LEGAL OPINION OF THE HOLDING COMPANY COUNSEL. United
Federal shall have received from Alexander M. Donaldson, Esq., General Counsel
of the Holding Company, a written opinion dated as of the Closing Date in the
form of Schedule E attached hereto.
E. OTHER DOCUMENTS AND INFORMATION FROM THE HOLDING COMPANY
AND TRIANGLE. The Holding Company and Triangle shall have provided to United
Federal correct and complete copies of its Bylaws, Articles of Incorporation and
board resolutions (all certified by its Secretary), together with a certificate
of the incumbency of its officers and such other closing documents and
information as may be reasonably requested by United Federal or its counsel.
F. ACCEPTANCE BY UNITED FEDERAL'S COUNSEL. The form and
substance of all legal matters described herein or related to the transactions
contemplated herein shall be reasonably acceptable to United Federal's legal
counsel.
7.03. ADDITIONAL CONDITIONS TO THE HOLDING COMPANY'S AND TRIANGLE'S
OBLIGATIONS. Notwithstanding any other provision of this Agreement to the
contrary, the Holding Company's and Triangle's obligations to consummate the
transactions described herein shall be conditioned upon the satisfaction of each
of the following conditions precedent on or prior to the Closing Date.
A. MATERIAL ADVERSE CHANGE. There shall not have occurred any
Material Adverse Change in United Federal, and there shall not have occurred any
event or development and there shall not exist any condition or circumstance
which, with the lapse of time or otherwise, is reasonably likely to cause,
create or result in a Material Adverse Change in United Federal.
B. COMPLIANCE WITH LAWS; ADVERSE PROCEEDINGS, INJUNCTION, ETC.
United Federal shall have complied in all material respects with all federal and
state laws and regulations applicable to the transactions described herein and
where the violation of or failure to comply with any such law or regulation is
reasonably likely to have a Material Adverse Effect on United Federal.
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C. UNITED FEDERAL'S REPRESENTATIONS AND WARRANTIES AND
PERFORMANCE OF AGREEMENTS; OFFICERS' CERTIFICATE. Unless waived in writing by
the Holding Company as provided in Paragraph 10.03. below, each of the
representations and warranties of United Federal contained in this Agreement
shall have been true and correct as of the date hereof and shall remain true and
correct on and as of the Effective Time with the same force and effect as though
made on and as of such date, except (I) representations and warranties that
speak as of a specific date, (II) for changes which do not, in the aggregate,
result in a Material Adverse Change in United Federal, and (III) as otherwise
contemplated by this Agreement; United Federal shall have performed in all
material respects all its obligations, covenants and agreements hereunder to be
performed by it on or before the Closing Date.
The Holding Company shall have received a certificate
dated as of the Closing Date and executed by United Federal's President and
Chief Financial Officer to the foregoing effect and as to such other matters as
may be reasonably requested by the Holding Company.
D. AGREEMENTS FROM UNITED FEDERAL AFFILIATES. The Holding
Company shall have received at least thirty (30) days prior to the Effective
Time the written Affiliates' Agreements in form and content satisfactory to the
Holding Company and signed by all persons who are deemed by the Holding Company
or its counsel to be Affiliates of United Federal as provided in Paragraph
4.01.a. above.
E. ACCOUNTING TREATMENT. (I) The Holding Company shall have
received assurances from Coopers & Lybrand L.L.P., in form and content
satisfactory to it, to the effect that the Merger will qualify to be treated as
a "pooling-of-interests" for accounting purposes; (II) if requested by the
Holding Company, United Federal's independent public accountants shall have
delivered to the Holding Company a letter in form and content satisfactory to it
to the effect that such accountants are not aware of any fact or circumstance
that might cause the Merger not to qualify for such treatment; and (III) it
shall not have come to the attention of management of the Holding Company that
any event has occurred or that any condition or circumstance exists that makes
it likely that the Merger may not so qualify.
F. LEGAL OPINION OF UNITED FEDERAL'S COUNSEL. The Holding
Company shall have received from United Federal's counsel, Muldoon, Murphy &
Faucette, a written opinion, dated as of the Closing Date in the form of
Schedule F attached hereto.
G. OTHER DOCUMENTS AND INFORMATION FROM UNITED FEDERAL. United
Federal shall have provided to the Holding Company correct and complete copies
of its Articles of Incorporation, Bylaws and board and shareholder resolutions
(all certified by United Federal's Secretary), together with certificates of the
incumbency of United Federal's officers and such other closing documents and
information as may be reasonably requested by the Holding Company or its
counsel.
H. CONSENTS TO ASSIGNMENT OF LEASES. United Federal shall have
obtained all required consents to the Merger as may be required under the Real
Property Leases and all other
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leases, under the same terms, rates and conditions of such Real Property Leases
and all other leases in effect as of the date of this Agreement, and such
consents shall be in such form and substance as shall be satisfactory to the
Holding Company; and each of United Federal's lessors shall have confirmed in
writing that United Federal is not in material default under the terms and
conditions of the Real Property Lease or any other lease between such lessor and
United Federal.
I. ACCEPTANCE BY THE HOLDING COMPANY'S COUNSEL. The form and
substance of all legal matters described herein or related to the transactions
contemplated herein shall be reasonably acceptable to the Holding Company's
legal counsel.
J. EXPENSES. Amounts paid or payable by United Federal for
legal, accounting and other professional services related to the Merger (not
including fees charged by Carson Medlin to United Federal for financial advisory
services) shall not exceed $80,000, including not more than $60,000 in legal
fees.
K. TAINTED SHARES. The aggregate number of shares of United
Federal Stock as to which cash is proposed to be paid as the result of the
distribution of cash in lieu of fractional shares (as described in Paragraph
1.5.c. above), when coupled with any other shares of Triangle Stock or United
Federal Stock deemed tainted for "pooling-of-interest" purposes, shall not
exceed 10% of the total number of shares of United Federal Stock outstanding at
the date of this Agreement or at the Effective Time.
L. MORTGAGE LOAN PORTFOLIO. The portion of the real estate
mortgage loan portfolio originated for sale in the secondary market (including
outstanding commitments) for which no binding contract for sale exists one (1)
week prior to the Closing shall not exceed ten percent (10%) of the dollar value
of the total portfolio.
ARTICLE VIII. TERMINATION; BREACH; REMEDIES
8.01. MUTUAL TERMINATION. At any time prior to the Effective Time (and
whether before or after approval hereof by the shareholders of United Federal),
this Agreement may be terminated by the mutual agreement of the Holding Company
and United Federal. Upon any such mutual termination, all obligations of United
Federal, Triangle and the Holding Company hereunder shall terminate and each
party shall pay costs and expenses as provided in Paragraph 6.04. above.
8.02. UNILATERAL TERMINATION. This Agreement may be terminated by
either the Holding Company or United Federal (whether before or after approval
hereof by United Federal's shareholders) upon written notice to the other
parties and under the circumstances described below.
A. TERMINATION BY THE HOLDING COMPANY. This Agreement may be
terminated by the Holding Company by action of its Board of Directors or
Executive Committee:
(I) if United Federal shall have violated or failed
to fully perform any of its obligations, covenants or agreements contained in
Article IV or Article VI herein in any material respect;
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(II) if the Holding Company determines at any time
that any of United Federal's representations or warranties contained in Article
II or in any other certificate or writing delivered pursuant to this Agreement
shall have been false or misleading in any material respect when made, or that
there has occurred any event or development or that there exists any condition
or circumstance which has caused or, with the lapse of time or otherwise, is
reasonably likely to cause any such representations or warranties to become
false or misleading in any material respect;
(III) if, notwithstanding the Holding Company's
satisfaction of its obligations under Paragraphs 6.01.b., 6.01.c. and 6.01.e.
above, United Federal's shareholders do not ratify and approve this Agreement
and approve the Merger at the United Federal Shareholder Meeting;
(IV) under the circumstances described in Paragraph
1.05.a. or 6.06. above; or,
(V) if any of the conditions of the obligations of
the Holding Company or Triangle (as set forth in Paragraph 7.01. or 7.03. above)
shall not have been satisfied or effectively waived in writing by the Holding
Company, or if the Merger shall not have become effective on or before December
31, 1998, unless such date is extended as evidenced by the written mutual
agreement of the parties hereto.
However, before the Holding Company may terminate this
Agreement for any of the reasons specified above in (i) or (ii) of this
Paragraph 8.02.a., it shall give written notice to United Federal as provided
herein stating its intent to terminate and a description of the specific breach,
default, violation or other condition giving rise to its right to so terminate,
and such termination by the Holding Company shall not become effective if,
within thirty (30) days following the giving of such notice, United Federal
shall cure such breach, default or violation or satisfy such condition to the
reasonable satisfaction of the Holding Company.
B. TERMINATION BY UNITED FEDERAL. This Agreement may be
terminated by United Federal by action of its Board of Directors:
(I) if the Holding Company or Triangle shall have
violated or failed to fully perform any of its obligations, covenants
or agreements contained in Article V or VI herein in any material respect;
(II) if United Federal determines that any of the
Holding Company's or Triangle's representations and warranties contained
in Article III herein or in any other certificate or writing delivered pursuant
to this Agreement shall have been false or misleading in any material respect
when made, or that there has occurred any event or development or that there
exists any condition or circumstance which has caused or, with the lapse of time
or otherwise, is reasonably likely to cause any such representations or
warranties to become false or misleading in any material respect;
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(III) if, subject to United Federal's satisfaction of
its obligations contained in Paragraphs 6.01.a., 6.01.b., 6.01.d. and 6.01.e
above, its shareholders do not ratify and approve this Agreement and approve the
Merger at the United Federal Shareholder Meeting;
(IV) under the circumstances described in Paragraph
1.05.a. above; or,
(V) if any of the conditions of the obligations of
United Federal (as set forth in Paragraph 7.01. or 7.02. above) shall not have
been satisfied or effectively waived in writing by United Federal, or if the
Merger shall not have become effective on or before December 31, 1998, unless
such date is extended as evidenced by the written mutual agreement of the
parties hereto.
However, before United Federal may terminate this
Agreement for any of the reasons specified above in clause (i) or (ii) of this
Paragraph 8.02.b., it shall give written notice to the Holding Company as
provided herein stating its intent to terminate and a description of the
specific breach, default, violation or other condition giving rise to its right
to so terminate, and such termination by United Federal shall not become
effective if, within thirty (30) days following the giving of such notice, the
Holding Company shall cure such breach, default or violation or satisfy such
condition to the reasonable satisfaction of United Federal.
8.03. BREACH; REMEDIES.
A. BREACH OF AGREEMENT. In the event of a breach by United
Federal of any of its representations or warranties contained in Article II of
this Agreement, or in the event of its failure to perform or violation of any of
its obligations, agreements or covenants contained in Articles IV or VI of this
Agreement, then the Holding Company's sole right and remedy shall be to
terminate this Agreement prior to the Effective Time as provided in Paragraph
8.02. above, or, in the case of a failure to perform by United Federal or a
violation of any of its obligations, agreements or covenants, to seek specific
performance thereof.
Likewise, in the event of a breach by the Holding Company or
Triangle of any of its representations or warranties contained in Article III of
this Agreement, or in the event of its failure to perform or violation of any of
its obligations, agreements or covenants contained in Articles V or VI of this
Agreement, then United Federal's sole right and remedy shall be to terminate
this Agreement prior to the Effective Time as provided in Paragraph 8.02. above,
or, in the case of a failure to perform by the Holding Company or Triangle or
violation of any their obligations, agreements or covenants, to seek specific
performance thereof.
B. PAYMENT OF EXPENSES. Notwithstanding anything contained
herein to the contrary, if any party to this Agreement breaches this Agreement
by willfully or intentionally failing to perform or violating any of its
obligations, agreements or covenants contained in Articles IV, V or VI of this
Agreement, such party shall be obligated to pay all expenses of the other
party(ies) described in Paragraph 6.04. above (regardless of the allocation
provided in Paragraph 6.04.) together with other damages recoverable at law or
in equity.
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ARTICLE IX. INDEMNIFICATION
9.01 INDEMNIFICATION FOLLOWING EFFECTIVE TIME. Following the Effective
Time, without releasing any insurance carrier and after exhaustion of all
applicable director and officer liability insurance coverage for United Federal,
and its directors or officers, the Holding Company agrees that it will indemnify
United Federal's officers and directors to the same extent United Federal
currently indemnifies its directors and officers against liabilities arising
from actions in their official capacities as officers and directors of United
Federal.
9.02. PROCEDURE FOR CLAIMING INDEMNIFICATION. Any party seeking to be
indemnified hereunder promptly shall give written notice and furnish adequate
documentation to the other party of any claims in respect of which indemnity is
sought. The indemnifying party, through its own counsel and at its own expense,
shall defend any such claim and shall have exclusive control over the
investigation, preparation, and defense of such claim and all negotiations
relating to its settlement or compromise. The obligations of either party to
indemnify the other hereunder apply only if the party seeking to be indemnified
cooperates with and assists the indemnifying party in all reasonably necessary
respects in the conduct of the suit.
ARTICLE X. MISCELLANEOUS PROVISIONS
10.01. "PREVIOUSLY DISCLOSED" INFORMATION; "MATERIAL ADVERSE EFFECT".
(A) "Previously Disclosed" shall mean, as to United Federal or
as to the Holding Company, the disclosure of information in a letter delivered
by such party to the other prior to the date of this Agreement and which
specifically refers to this Agreement and is arranged in paragraphs
corresponding to the Paragraphs, subparagraphs and items of this Agreement
applicable thereto, all of which documents are incorporated herein by reference.
Information disclosed in either party's letter described above
shall be deemed to have been Previously Disclosed by such party for the purpose
of any given Paragraph, subparagraph or item of this Agreement only to the
extent that information is expressly set forth in such party's letter described
above and that, in connection with such disclosure, a specific reference is made
in the letter to that Paragraph, subparagraph or item.
(B) Where used in this Agreement, the terms "Material Adverse
Effect" and "Material Adverse Change" shall mean any event, matter, item or
circumstance (other than as a result of (i) changes in GAAP, (ii) changes in
banking and similar laws of general application or interpretations thereof by
courts or governmental authorities, or (iii) any non-recurring merger-related
expense of any kind) that in and of itself, or when combined with all similar
events, matters, items or circumstances, reasonably would be expected to have,
now or in the future, a material adverse effect on the business, financial
condition, operations, results of operations or prospects of either party,
including but not limited to, in the case of United Federal, a decrease in
United
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Federal's consolidated net income, exclusive of any merger-related expense and
any non-recurring income item such as the sale of any assets (other than in the
ordinary and customary course of business of United Federal), such that
consolidated net income for the months in 1998 preceding the Closing would, in
the aggregate, be less than $1,500,000, pro rated over 1998 by multiplying
$1,500,000 by the percentage of completed months preceding the Closing to all
months in 1998, or a decrease in total consolidated assets of 20% or more from
the level of total consolidated assets at December 31, 1997 for United Federal,
or, in the case of the Holding Company, a decrease in anticipated 1998
consolidated net income of $21,000,000 (exclusive of the anticipated
acquisitions of Guaranty State Bancorp and United Federal and of any
merger-related expenses and any non-recurring items) of 20% or more from net
income projected (as of the date of this Agreement) or a decrease in total
consolidated assets of 20% or more from the level of total consolidated assets
at December 31, 1997 ($1,600,000,000) for the Holding Company.
10.02. SURVIVAL OF REPRESENTATIONS, WARRANTIES, INDEMNIFICATION AND
OTHER AGREEMENTS.
A. REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. None of
the representations, warranties or agreements herein shall survive the
effectiveness of the Merger, and no party shall have any right after the
Effective Time to recover damages or any other relief from any other party to
this Agreement by reason of any breach of representation or warranty, any
nonfulfillment or nonperformance of any agreement contained herein, or
otherwise; provided, however, that the parties' agreements contained in
Paragraphs 6.07. and 6.08. and Articles VIII and IX hereof, and the Holding
Company's representations and warranties contained in Paragraph 3.02., shall
survive the effectiveness of the Merger.
B. INDEMNIFICATION. The Holding Company's indemnification
agreements and obligations pursuant to Paragraph 9.01. above shall become
effective only at the Effective Time, and the Holding Company shall not have any
obligation under that Paragraph prior to the Effective Time or in the event of
or following termination of this Agreement prior to the Effective Time.
10.03. WAIVER. Any term or condition of this Agreement may be waived
(except as to matters of regulatory approvals and approvals required by law),
either in whole or in part, at any time by the party which is, and whose
shareholders are, entitled to the benefits thereof; provided, however, that any
such waiver shall be effective only upon a determination by the waiving party
(through action of its Board of Directors or, in the case of the Holding
Company, its Executive Committee) that such waiver would not adversely affect
the interests of the waiving party or its shareholders; and, provided further,
that no waiver of any term or condition of this Agreement by any party shall be
effective unless such waiver is in writing and signed by the waiving party, or
be construed to be a waiver of any succeeding breach of the same term or
condition. No failure or delay of any party to exercise any power, or to insist
upon a strict compliance by any other party of any obligation, and no custom or
practice at variance with any terms hereof, shall constitute a waiver of the
right of any party to demand a full and complete compliance with such terms.
10.04 AMENDMENT. This Agreement may be amended, modified or
supplemented at any time or from time to time prior to the Effective Time, and
either before or after its approval by the
48
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shareholders of United Federal, by an agreement in writing approved by a
majority of the Board of Directors of the Holding Company and United Federal
executed in the same manner as this Agreement; provided however, that, except
with the further approval of United Federal's shareholders of that change or as
otherwise provided herein, following approval of this Agreement by the
shareholders of United Federal no change may be made in the number of shares of
Triangle Stock into which each share of United Federal Stock will be converted.
10.05. NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered personally
or by courier, or mailed by certified mail, postage prepaid, as follows:
A. If to United Federal, to:
United Federal Savings Bank
116 South Franklin Street
Rocky Mount, NC 27801
Attention: John A. Barker
President and Chief Executive Officer
With copy to: George W. Murphy, Jr., Esq.
Muldoon, Murphy & Faucette
5101 Wisconsin Avenue, N. W.
Washington, D.C. 20016
B. If to the Holding Company, to:
Triangle Bancorp, Inc.
4300 Glenwood Avenue
Raleigh, North Carolina 27612
Attention: Michael S. Patterson, President and
Chief Executive Officer
10.06. FURTHER ASSURANCE. United Federal, Triangle and the Holding
Company each agree to furnish to the others such further assurances with respect
to the matters contemplated herein and their respective agreements, covenants,
representations and warranties contained herein, including the opinion of legal
counsel, as such other parties may reasonably request.
10.07. HEADINGS AND CAPTIONS. Headings and captions of the sections and
paragraphs of this Agreement have been inserted for convenience of reference
only and do not constitute a part hereof.
10.08. ENTIRE AGREEMENT. This Agreement (including all schedules and
exhibits attached hereto and all documents incorporated herein by reference)
contains the entire agreement of the parties with respect to the transactions
described herein and supersedes any and all other oral or
49
<PAGE>
written agreement(s) heretofore made, and there are no representations or
inducements by or to, or and agreements between, any of the parties hereto other
than those contained herein in writing.
10.09. SEVERABILITY OF PROVISIONS. The invalidity or unenforceability
of any term, phrase, clause, paragraph, restriction, covenant, agreement or
other provision hereof shall in no way affect the validity or enforceability of
any other provision or part hereof.
10.10. ASSIGNMENT. This Agreement may not be assigned by any party
hereto except with the prior written consent of the other parties hereto.
10.11. COUNTERPARTS. Any number of counterparts of this Agreement may
be signed and delivered, each of which shall be considered an original and which
together shall constitute one agreement.
10.12. GOVERNING LAW. This Agreement is made in and shall be construed
and enforced in accordance with the internal laws (and not the laws of conflict)
of the State of North Carolina.
10.13. INSPECTION. Any right of the Holding Company or United Federal
hereunder to investigate or inspect the assets, books, records, files and other
information of the other in no way shall establish any presumption that the
Holding Company or United Federal should have conducted any investigation or
that such right has been exercised by the Holding Company, United Federal, their
respective agents, representatives or others. Any investigations or inspections
that have been made by the Holding Company or United Federal respective agents,
representatives or others prior to the Closing Date shall not be deemed in any
way in derogation or limitation of the covenants, representations and warranties
made by or on behalf of the Holding Company, Triangle or United Federal in this
Agreement.
50
<PAGE>
IN WITNESS WHEREOF, United Federal, Triangle and the Holding Company
each has caused this Agreement to be executed in its name by its duly authorized
officers as of the date first above written.
TRIANGLE BANCORP, INC.
By: /s/ Michael S. Patterson
Michael S. Patterson
President and Chief Executive Officer
ATTEST:
/s/ Susan C. Gilbert
Susan C. Gilbert, Secretary
TRIANGLE BANK
[Corporate Seal]
By: /s/ Michael S. Patterson
Michael S. Patterson
President and Chief Executive Officer
ATTEST:
/s/ Susan C. Gilbert
Susan C. Gilbert, Secretary
[Corporate Seal]
UNITED FEDERAL SAVINGS BANK
By: /s/ John A. Barker
John A. Barker
President and Chief Executive Officer
ATTEST:
/s/ Paula V. Walker
Paula V. Walker, Assistant Secretary
[Corporate Seal]
51
<PAGE>
With respect to the above Agreement and Plan of Reorganization and
Merger (the "Agreement"), each of the individuals signing below agree as
follows:
1. As a director of United Federal Savings Bank ("United Federal"),
unless there has been a material change in circumstances since the date of this
Agreement or for any reason it would, in my reasonable opinion, violate my duty
or obligations as a director to United Federal or to its shareholders, I will:
a. Recommend to United Federal's shareholders that they vote
their shares in favor of ratification and approval of the Agreement and approval
of the Merger described therein;
b. Vote against any action on the part of United Federal that
would be in violation of the Agreement; and
c. Vote in favor of any action on the part of United Federal
that is necessary or appropriate to carry out the intent and purposes or the
Agreement.
2. Further, in my individual capacity, I will:
a. Vote all shares of United Federal's common stock which I
have the power to vote (excluding shares held by me in a fiduciary capacity) in
favor of ratification and approval of the Agreement and approval of the Merger
described therein;
b. Execute and deliver to United Federal at least forty-five
(45) days prior to the Effective Time an Affiliates Agreement in the form
attached as Schedule B to this Agreement; and
c. During a period of one year following the Effective Time
(the "Restriction Period"), I will not "Compete" (as defined below), directly or
indirectly, with the Holding Company or any of its direct or indirect
subsidiaries (collectively, "Triangle") in the geographic area consisting of
Edgecombe or Nash Counties, North Carolina and any contiguous counties in North
Carolina (the "Relevant Market").
I hereby acknowledge and agree that the Relevant Market and Restriction
Period are limited in scope to the geographic territory and period of time
reasonably necessary to protect Triangle's economic interest.
For the purposes of this Paragraph 2(c), the following terms shall have
the meanings set forth below:
Compete. The term "Compete" means: (i) soliciting or securing deposits
from any Person residing in the Relevant Market for any Financial Institution;
(ii) inducing or attempting to induce any Person who is a Customer of United
Federal at the time of the Merger or a Customer of Triangle following the
Merger, to change any depository, loan and/or other banking relationship of
52
<PAGE>
the Customer from Triangle to another Financial Institution; (iii) acting as a
director, incorporator, officer or employee of any Financial Institution that
has its main or principal office in the Relevant Market, or, in acting in any
such capacity with any other Financial Institution, to maintain an office or to
be employed at or assigned to or to have any direct involvement in the
management, supervision, business or operation of any office of such Financial
Institution located in the Relevant Market; (iv) serving as a local or advisory
director for any branch or office of a Financial Institution, which branch or
office is located in the Relevant Market; or (v) communicating to any Financial
Institution the names or addresses or any financial information concerning any
Person who is a Customer of United Federal at the time of the Merger or a
Customer of Triangle following the Merger.
Customer. The terms "Customer of United Federal " and "Customer of
Triangle" mean any Person with whom United Federal or Triangle, respectively,
has or at any time has had a depository, loan and/or other banking relationship.
Financial Institution. The term "Financial Institution" means any
federal or state chartered bank, savings bank, savings and loan association,
credit union or financial services entity, or any holding company for or
corporation that owns or controls any such entity, or any other Person engaged
in the business of making loans of any type, receiving deposits, or providing
financial or investment advice or services, other than United Federal or
Triangle.
Person. The term "Person" means any natural person or any corporation,
partnership, proprietorship, joint venture, trust, estate, governmental agency
or instrumentality, fiduciary, unincorporated association or other entity.
IN WITNESS WHEREOF, the undersigned each has hereunto set his or her
hand and adopted the written word "Seal" by his or her signature as a personal
seal, all as of the date of the foregoing Agreement.
/s/ Norwood P. Blanchard (SEAL) /s/ Marshall Dunn (SEAL)
- ------------------------ -----------------
Norwood P. Blanchard Marshall Dunn
/s/ Joseph B. Brewer, Jr. (SEAL) /s/ Jake L. Rosenbloom (SEAL)
- ------------------------- ----------------------
Joseph B. Brewer, Jr. Jake L. Rosenbloom
/s/ John L. Sally (SEAL)
-----------------
John L. Sally
53
<PAGE>
NOTE
The Schedules to the Agreement and Plan of Reorganization and Merger are not
included, but copies may be obtained upon request from Susan C. Gilbert,
Secretary of Triangle Bancorp, Inc., 4300 Glenwood Avenue, Raleigh, North
Carolina 27612, (919) 881-0455, extension 151.
1
<PAGE>
APPENDIX II
August 7, 1998
Board of Directors
United Federal Savings Bank
116 South Franklin Street
Rocky Mount, NC 27802-1120
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, of the aggregate consideration to be received by the unaffiliated
shareholders of United Federal Savings Bank ("United Federal") under the terms
of a certain proposed Agreement and Plan of Reorganization and Merger dated as
of March 4, 1998, amended as of August 7, 1998 (the "Agreement") by and between
United Federal and Triangle, Bancorp, Inc. ("Triangle") pursuant to which United
Federal will merge with and into Triangle (the "Merger"). Under the terms of the
Agreement, each of the outstanding shares of United Federal common stock shall
be converted into the right to receive shares of Triangle common stock, as
determined by the Exchange Rate. The foregoing summary of the Merger is
qualified in its entirety by reference to the Agreement.
The Carson Medlin Company is a National Association of Securities Dealers, Inc.
(NASD) member investment banking firm which specializes in the securities of
southeastern United States financial institutions. As part of our investment
banking activities, we are regularly engaged in the valuation of southeastern
United States financial institutions and transactions relating to their
securities. We regularly publish our research on independent community banks and
thrifts regarding their financial and stock price performance. We are familiar
with the commercial banking and thrift industry in North Carolina and the
Southeast and the major commercial banks and thrifts operating in that market.
We have been retained by United Federal in a financial advisory capacity to
render our opinion hereunder, for which we will receive compensation.
In reaching our opinion, we have analyzed the respective financial positions,
both current and historical, of United Federal and Triangle. We have reviewed:
(i) the Agreement; (ii) the annual reports to shareholders of United Federal,
including audited financial statements for the five years ended December 31,
1997; (iii) the Proxy Statement of United Federal dated April 10, 1998 for the
annual meeting of shareholders held on May 28, 1998; (iv) the annual report on
Form 10-K of United Federal for the year ended December 31, 1997; (v) the
quarterly report on Form 10-Q of United Federal for the quarter ended March 31,
1998; (vi) the Thrift Financial Report of United Federal as of March 31, 1998;
(vii) the Uniform Thrift Performance Report for United Federal as of December
31, 1997; (viii) the annual reports to shareholders of Triangle, including
audited financial statements for the five years ended December 31, 1997; (ix)
the annual report on Form 10-K of Triangle for the year ended December 31, 1997;
(x) the Proxy Statement of Triangle dated March 20, 1998 for the annual meeting
of shareholders held on April 28, 1998; (xi) the quarterly report on
<PAGE>
Board of Directors
United Federal Savings Bank
August 7, 1998
Page 2
Form 10-Q of Triangle for the quarter ended March 31, 1998; (xii) the
Consolidated Report of Condition and Income of Triangle Bank as of March 31,
1998; (xiii) the Uniform Bank Performance Report for Triangle Bank as of
December 31, 1997; (xiv) a copy of the Proxy Statement/Prospectus prepared for
the special meeting of the shareholders of Guaranty State Bancorp to consider
the merger with Triangle; (xv) the consolidated financial statements of Guaranty
State Bancorp, including audited financial statements for the year ended
December 31, 1996; (xvi) the annual report on Form 10-K of Guaranty State
Bancorp for the year ended December 31, 1997; (xvii) unaudited interim financial
statements of Guaranty State Bancorp as of March 31, 1998; (xviii) the Uniform
Bank Performance Report for Guaranty State Bank as of December 31, 1997; (xix) a
preliminary copy of this Proxy Statement/Prospectus; and (xx) certain other
financial and operating information with respect to the business, operations and
prospects of United Federal and Triangle. We also: (i) held discussions with
members of the senior management of United Federal and Triangle regarding their
respective historical and current business operations, financial condition and
future prospects; (ii) reviewed the historical market prices and trading
activity for the common stocks of United Federal and Triangle and compared them
with those of certain publicly traded companies which we deemed to be relevant;
(iii) compared the results of operations of United Federal and Triangle with
those of certain banking and thrift companies which we deemed to be relevant;
(iv) compared the proposed financial terms of the Merger with the financial
terms, to the extent publicly available, of certain other recent business
combinations of commercial banking and thrift organizations; (v) analyzed the
pro forma financial impact of the Merger on Triangle; and (vi) conducted such
other studies, analyses, inquiries and examinations as we deemed appropriate.
We have relied upon and assumed, without independent verification, the accuracy
and completeness of all information provided to us. We have not performed or
considered any independent appraisal or evaluation of the assets of United
Federal or Triangle. The opinion we express herein is necessarily based upon
market, economic and other relevant considerations as they exist and can be
evaluated as of the date of this letter.
Based upon the foregoing, it is our opinion that the aggregate consideration
provided for in the Agreement is fair, from a financial point of view, to the
unaffiliated shareholders of United Federal Savings Bank.
Very truly yours,
THE CARSON MEDLIN COMPANY
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
The NCBCA provides for indemnification by a corporation of its officers,
directors, employees and agents, and any person who is or was serving at the
corporation's request as a director, officer, employee or agent of another
entity or enterprise or as a trustee or administrator under an employee benefit
plan, against liability and expenses, including reasonable attorneys' fees, in
any proceeding (including without limitation a proceeding brought by or on
behalf of the corporation itself) arising out of their status as such or their
activities in any of the foregoing capacities.
Permissible Indemnification. Under the NCBCA, a corporation may, but is not
required to, indemnify any such person against liability and expenses incurred
in any such proceeding, provided such person conducted himself or herself in
good faith and (i) in the case of conduct in his or her official corporate
capacity, reasonably believed that his or her conduct was in the corporation's
best interests, and (ii) in all other cases, reasonably believed that his or her
conduct was at least not opposed to the corporation's best interests, and, in
the case of a criminal proceeding, where he or she had no reasonable cause to
believe his or her conduct was unlawful. However, a corporation may not
indemnify such person either in connection with a proceeding by or in the right
of the corporation in which such person was adjudged liable to the corporation,
or in connection with any other proceeding charging improper personal benefit to
such person (whether or not involving action in an official capacity) in which
such person was adjudged liable on the basis that personal benefit was
improperly received.
Mandatory Indemnification. Unless limited by the corporation's charter, the
NCBCA requires a corporation to indemnify a director or officer of the
corporation who is wholly successful, on the merits or otherwise, in the defense
of any proceeding to which such person was a party because he or she is or was a
director or officer of the corporation against reasonable expenses incurred in
connection with the proceeding.
Advance for Expenses. Expenses incurred by a director, officer, employee or
agent of the corporation in defending a proceeding may be paid by the
corporation in advance of the final disposition of the proceeding as authorized
by the board of directors in the specific case, or as authorized by the charter
or bylaws or by any applicable resolution or contract, upon receipt of an
undertaking by or on behalf of such person to repay amounts advanced unless it
ultimately is determined that such person is entitled to be indemnified by the
corporation against such expenses.
Voluntary Indemnification. In addition to and separate and apart from
"permissible" and "mandatory" indemnification described above, a corporation
may, by charter, bylaw, contract or resolution, indemnify or agree to indemnify
any one or more of its directors, officers, employees or agents against
liability and expenses in any proceeding (including any proceeding brought by or
on behalf of the corporation itself) arising out of their status as such or
their activities in any of the foregoing capacities. However, the corporation
may not indemnify or agree to indemnify a person against liability or expenses
he may incur on account of activities which were at the time taken known or
believed by such person to be clearly in conflict with the best interests of the
corporation. Any provision in a corporation's charter or bylaws or in a contract
or resolution may include provisions for recovery from the corporation of
reasonable costs, expenses and attorneys' fees in connection with the
enforcement of rights to indemnification granted therein and may further include
provisions establishing reasonable procedures for determining and enforcing such
rights.
<PAGE>
Court-Ordered Indemnification. Unless otherwise provided in the
corporation's charter, a director or officer of the corporation who is a party
to a proceeding may apply for indemnification to the court conducting the
proceeding or to another court of competent jurisdiction. On receipt of an
application, the court, after giving any notice the court deems necessary, may
order indemnification if it determines either (i) that the director or officer
is entitled to mandatory indemnification as described above, in which case the
court also will order the corporation to pay the reasonable expenses incurred to
obtain the court-ordered indemnification, or (ii) that the director or officer
is fairly and reasonably entitled to indemnification in view of all the relevant
circumstances, whether or not such person met the requisite standard of conduct
or was adjudged liable to the corporation in connection with a proceeding by or
in the right of the corporation or on the basis that personal benefit was
improperly received in connection with any other proceeding so charging (but if
adjudged so liable, indemnification is limited to reasonable expenses incurred).
Parties Entitled to Indemnification. The NCBCA defines "director" to
include ex-directors and the estate or personal representative of a director.
Unless its charter provides otherwise, a corporation may indemnify and advance
expenses to an officer, employee or agent of the corporation to the same extent
as to a director and also may indemnify and advance expenses to an officer,
employee or agent who is not a director to the extent, consistent with public
policy, as may be provided in its charter or bylaws, by general or specific
action of its board of directors, or by contract.
Indemnification by the Registrant. The Bylaws of the Registrant provide for
indemnification of its directors, officers, employees and agents to the fullest
extent of the law, and require its Board of Directors to take all actions
necessary and appropriate to authorize such indemnification.
Under the NCBCA, a corporation also may purchase insurance on behalf of any
person who is or was a director or officer against any liability arising out of
his status as such. The Registrant currently maintains a directors' and
officers' liability insurance policy.
Item 21. Exhibits and Financial Statement Schedules.
The following exhibits and financial statement schedules are filed as part
of this Registration Statement.
(a) Exhibits
Exhibit No.
pursuant to
Item 601 of
Regulation S-K Description of Exhibit
- -------------- ----------------------
2 Agreement and Plan of Reorganization and Merger among
United Federal Savings Bank, Triangle Bancorp, Inc. and
Triangle Bank dated March 4, 1998 (included as and
incorporated by reference from Appendix I to the Proxy
Statement/Prospectus filed as a part of the Registration
Statement)
3(a) Articles of Amendment to Articles of Incorporation of
Triangle Bancorp, Inc., effective as of May 6, 1998*
3(b) Bylaws of Triangle Bancorp, Inc., amended as of September
17, 1997 (incorporated by reference from Exhibit 3(a) of
Registrant's Form 10-K for the
<PAGE>
fiscal year ended December 31, 1997, filed with the
Commission on March 27, 1998)
4 Agreement of Triangle Bancorp, Inc. to furnish a copy of
the Junior Subordinated Indenture between Triangle Bancorp,
Inc. and Bankers Trust Company (as Trustee) dated as of
December 3, 1997*
5 Opinion of Alexander M. Donaldson, Esq., Senior Vice
President and General Counsel of Triangle Bancorp, Inc., as
to the legality of the securities to be registered*
8 Opinion of Coopers & Lybrand L.L.P. as to tax matters*
10(a) Triangle Bancorp, Inc. 1988 Incentive Stock Option Plan, as
amended on August 19, 1997 and November 18, 1997
(incorporated by reference from Exhibit 10(a) to the
Registrant's Form 10-K for the fiscal year ended December
31, 1997, filed with the Commission on March 27, 1998)
10(b) Triangle Bancorp, Inc. 1988 Non-Qualified Stock Option
Plan, as amended on August 19, 1997 and November 18, 1997
(incorporated by reference from Exhibit 10(b) to the
Registrant's Form 10-K for the fiscal year ended December
31, 1997, filed with the Commission on March 27, 1998)
10(c) ` Triangle Bancorp, Inc. 1998 Omnibus Stock Plan
(incorporated by reference to Exhibit 10(c) to the
Registrant's Form 10-K for the fiscal year ended December
31, 1997 as filed with the Commission on March 27, 1998)
10(d) Triangle Bank Deferred Compensation Plan for Outside
Directors (incorporated by reference to Exhibit 10(c) to
the Registrant's Form 10-K for the fiscal year ended
December 31, 1993 as filed with the Commission on March 31,
1994)
10(e) Triangle Bancorp, Inc. 1997 Deferred Compensation Plan for
Outside Directors (incorporated by reference from Exhibit
10(e) to the Registrant's Form 10-K for the fiscal year
ended December 31, 1997, filed with the Commission on March
27, 1998)
10(f) Employment Agreement between Triangle Bank and Michael S.
Patterson (incorporated by reference to Exhibit 10(a) to
Registrant's Form 10-K for the fiscal year ended December
31, 1993 filed with the Commission on March 31, 1994)
10(g) Deferred Compensation Agreement between Triangle Bank and
Michael S. Patterson (incorporated by reference from
Exhibit 10(g) of Registrant's Registration Statement on
Form S-4 (Registration No. 33-86226))
10(h) Deferred Compensation Agreement between Triangle Bank and
Debra L. Lee (incorporated by reference from Exhibit 10(i)
of Registrant's Registration Statement on Form S-4
(Registration No. 33-86226))
<PAGE>
10(i) Split Dollar Insurance Agreement and Deferred Compensation
Agreement between Triangle Bancorp, Inc. and Michael S.
Patterson (incorporated by reference to Exhibit 10(n) to
the Registrant's Form 10-K for the fiscal year ended
December 31, 1995 as filed with the Commission on March 31,
1996)
10(j) Change of Control Agreement dated December 18, 1996 between
Triangle Bank and Steven R. Ogburn (incorporated by
reference from Exhibit 10(l) of Registrant's Form 10-K for
the fiscal year ended December 31, 1997, as filed with the
Commission on March 27, 1998)
10(k) Change of Control Agreement dated December 18, 1996 between
Triangle Bank and Debra L. Lee (incorporated by reference
from Exhibit 10(m) of Registrant's Form 10-K for the fiscal
year ended December 31, 1997, as filed with the Commission
on March 27, 1998)
10(l) Employment Agreement between Triangle Bancorp, Inc. and
Billy N. Quick, Sr. (incorporated by reference from Exhibit
10(n) of Registrant's Form 10-K for the fiscal year ended
December 31, 1997, as filed with the Commission on March
27, 1998)
10(m) Change of Control Agreement among Triangle Bancorp, Inc.,
Triangle Bank and Edward O. Wessell (incorporated by
reference from Exhibit 10(o) of Registrant's Form 10-K for
the fiscal year ended December 31, 1997, as filed with the
Commission on March 27, 1998)
10(n) Supplemental Employee Retirement Plan dated January 1, 1998
between Triangle Bank and Michael S. Patterson
(incorporated by reference from Exhibit 10(p) of
Registrant's Form 10-K for the fiscal year ended December
31, 1997, as filed with the Commission on March 27, 1998)
10(o) Form of Supplemental Employee Retirement Plan dated January
1, 1998 between Triangle Bank and each of Debra L. Lee,
Steven R. Ogburn and Edward O. Wessell (incorporated by
reference from Exhibit 10(q) of Registrant's Form 10-K for
the fiscal year ended December 31, 1997, as filed with the
Commission on March 27, 1998)
10(p) Change of Control Agreement among Triangle Bancorp, Inc.,
Triangle Bank and Robert E. Branch*
13(a) United Federal Savings Bank Annual Report on Form 10-K for
fiscal year ended December 31, 1997*
13(b) United Federal Savings Bank Quarterly Report on Form 10-Q
for quarter ended March 31, 1998*
13(c) United Federal Savings Bank Current Report on Form 8-K
dated March 4, 1998*
<PAGE>
23(a) Consent of Alexander M. Donaldson, Esq. (contained in the
opinion submitted as Exhibit 5 hereto)
23(b) Consent of Coopers & Lybrand L.L.P.*
23(c) Consent of McGladrey & Pullen LLP*
23(d) Consent of The Carson Medlin Company*
23(e) Consent of Coopers & Lybrand L.L.P. regarding tax opinion
(contained in its opinion submitted as Exhibit 8 hereto)
24 Power of Attorney (included on signature page)
99 Form of proxy to be used in connection with the Special
Meeting of Shareholders of Guaranty State Bancorp*
(b) Financial Statement Schedules All financial statement
schedules are omitted as substantially all required
information is contained in the Registrant's consolidated
financial statements which are incorporated herein by
reference or is not applicable.
* Previously filed.
Item 22. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales
are being made, a post-effective amendment to this registration
statement: (i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933; (ii) to reflect in the
prospectus any facts or events arising after the effective date of
the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and (iii) to include any material
information with respect to the plan of distribution not
previously disclosed in the registration statement or any material
change to such information in the registration statement;
(2) that, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof;
(3) to remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a)
or Section 15(b) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the
<PAGE>
securities offered herein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore,
unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of
the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction, the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of
such issue.
(d) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into
the Prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form,
within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration
Statement through the date of responding to the request.
(e) The registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the
subject of and included in the Registration Statement when it
became effective.
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933, the
registrant has duly caused this post-effective amendment to the registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Raleigh, State of North Carolina, on August 7, 1998.
TRIANGLE BANCORP, INC.
By: /s/ Michael S. Patterson
-------------------------------------
Michael S. Patterson
President and Chief Executive Officer
Each person whose signature appears below constitutes and appoints Michael
S. Patterson his or her true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as he or she might, or could,
do in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
post-effective amendment to the registration statement has been signed below by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Michael S. Patterson President, Chief Executive Officer, August 7, 1998
- ------------------------------- Chairman and Director (Principal
Michael S. Patterson Executive Officer)
/s/ Debra L. Lee Executive Vice President and August 7, 1998
- ------------------------------ Chief Financial Officer
Debra L. Lee (Principal Financial Officer)
/s/ Lisa F. Campbell Senior Vice President August 7, 1998
- --------------------------------------- (Principal Accounting Officer)
Lisa F. Campbell
*/s/ Michael S. Patterson Director August 7, 1998
- ----------------------------------------
Carole S. Anders
*/s/ Michael S. Patterson Director August 7, 1998
- --------------------------------------
Charles S. Ashford, Jr.
<PAGE>
- --------------------------------------
Cy N. Bahakel Director July __, 1998
- -------------------------------------- Director July __, 1998
Edwin B. Borden
*/s/ Michael S. Patterson Director August 7, 1998
- ---------------------------------------
Robert E. Bryan, Jr.
*/s/ Michael S. Patterson Director August 7, 1998
- ---------------------------------------
David T. Clancy
*/s/ Michael S. Patterson Director August 7, 1998
- ---------------------------------------
N. Leo Daughtry
- --------------------------------------- Director July __, 1998
Syd W. Dunn, Jr.
*/s/ Michael S. Patterson Director August 7, 1998
- ---------------------------------------
Willie S. Edwards
*/s/ Michael S. Patterson Director August 7, 1998
- ------------------------------------
James P. Godwin, Sr.
*/s/ Michael S. Patterson Director August 7, 1998
- ---------------------------------------
Robert L. Guthrie
*/s/ Michael S. Patterson Director August 7, 1998
- ----------------------------------------
B. W. Harris, III
*/s/ Michael S. Patterson Director August 7, 1998
- ----------------------------------------
John B. Harris
<PAGE>
*/s/ Michael S. Patterson Director August 7, 1998
- ---------------------------------------
George W. Holt
*/s/ Michael S. Patterson Director August 7, 1998
- ----------------------------------------
Earl Johnson, Jr.
*/s/ Michael S. Patterson Director August 7, 1998
- ------------------------------------
Michael A. Maxwell
*/s/ Michael S. Patterson Director August 7, 1998
- ------------------------------------
Wendell H. Murphy
*/s/ Michael S. Patterson Director August 7, 1998
- ----------------------------------------
Patrick H. Pope
*/s/ Michael S. Patterson Director August 7, 1998
- ---------------------------------------
William R. Pope
*/s/ Michael S. Patterson Director August 7, 1998
- --------------------------------------
Edythe M. Poyner
*/s/ Michael S. Patterson Director August 7, 1998
- ----------------------------------------
Billy N. Quick, Sr.
*/s/ Michael S. Patterson Director August 7, 1998
- ----------------------------------------
J. Dal Snipes
*/s/ Michael S. Patterson Director August 7, 1998
- ----------------------------------------
J. Charles Stewart
<PAGE>
*/s/ Michael S. Patterson Director August 7, 1998
- -----------------------------------
N. Johnson Tilghman
*/s/ Michael S. Patterson Director August 7, 1998
- -------------------------------------
Sydnor M. White, Jr.
*/s/ Michael S. Patterson Director August 7, 1998
- ---------------------------------------
J. Blount Williams
</TABLE>
* By: Michael S. Patterson,
Attorney-in-Fact
