Exhibit 2
AGREEMENT AND PLAN OF MERGERS, dated as of the 18th day of November, 1997
(this "Plan"), by and between CoreStates Financial Corp ("CoreStates") and First
Union Corporation ("First Union").
RECITALS:
(A) CORESTATES. CoreStates is a corporation duly organized and existing in
good standing under the laws of the Commonwealth of Pennsylvania, with its
principal executive offices located in Philadelphia, Pennsylvania. As of the
date hereof, CoreStates has 350,000,000 authorized shares of common stock, each
of $1.00 par value ("CoreStates Common Stock"), and 10,000,000 authorized shares
of preferred stock, no par value ("CoreStates Preferred Stock") (no other class
or series of capital stock being authorized), of which 197,813,302 shares of
CoreStates Common Stock and no shares of CoreStates Preferred Stock were issued
and outstanding as of November 3, 1997.
(B) FIRST UNION. First Union is a corporation duly organized and existing
in good standing under the laws of the State of North Carolina, with its
principal executive offices located in Charlotte, North Carolina. As of the date
hereof, First Union has 750,000,000 authorized shares of common stock, each of
$3.33 1/3 par value ("First Union Common Stock"), 40,000,000 authorized shares
of Class A Preferred Stock, no-par value ("First Union Class A Preferred
Stock"), and 10,000,000 authorized shares of Preferred Stock, no-par value
("First Union No-Par Preferred Stock"; and, together with the First Union Class
A Preferred Stock, "First Union Preferred Stock") (no other class or series of
capital stock being authorized), of which 568,541,346 shares of First Union
Common Stock and no shares of First Union Preferred Stock were issued and
outstanding as of October 31, 1997.
(C) CORESTATES BANK. CoreStates Bank, N.A. ("CoreStates Bank") is a
national banking association, having its principal place of business in
Philadelphia, Pennsylvania. As of September 30, 1997 (rounded to the nearest
thousand dollars), CoreStates Bank had capital of $3,060,419,000 divided into
common stock of $37,308,000, surplus of $2,393,290,000, and undivided profits,
including capital reserves, of $621,992,000, and net unrealized holding gains
(losses) on available for sale securities of $7,829,000. All of the issued and
outstanding shares of capital stock of CoreStates Bank ("CoreStates Bank Capital
Stock") are owned by CoreStates.
(D) FUNB. First Union National Bank ("FUNB") is a national banking
association having its principal place of business in Avondale, Pennsylvania. As
of September 30, 1997, FUNB had capital of $2,291,534,000, divided into common
stock of $452,155,620, preferred stock of $160,540,000, surplus of
$1,300,079,773, undivided profits, including capital reserves, of $356,154,000,
and net unrealized holding gains (losses) on available for sale securities of
$22,604,000. All of FUNB's issued and outstanding shares of capital stock are
owned by First Fidelity Incorporated ("FFI"), a wholly-owned subsidiary of First
Union Corporation of New Jersey ("FUNC-NJ"), a wholly-owned subsidiary of First
Union.
(E) STOCK OPTION AGREEMENTS. As a condition and inducement to First Union's
willingness to enter into this Plan, concurrently with the execution and
delivery of this Plan, CoreStates has executed and delivered a Stock Option
Agreement with First Union (the "CoreStates Stock Option Agreement") in
substantially the form attached hereto as EXHIBIT A, pursuant to which
CoreStates is granting to First Union an option to purchase, under certain
circumstances, shares of CoreStates Common Stock. As a condition and inducement
to CoreStates's willingness to enter into this Plan, concurrently with the
execution and delivery of this Plan, First Union has executed and delivered a
Stock Option Agreement with CoreStates (the "First Union Stock Option
Agreement"; and, together with the CoreStates Stock Option Agreement, the "Stock
Option Agreements") in substantially the form attached hereto as EXHIBIT B,
pursuant to which First Union is granting to CoreStates an option to purchase,
under certain circumstances, shares of First Union Common Stock.
(F) INTENTION OF THE PARTIES. It is the intention of the parties to this
Plan that (i) the Corporate Merger (as defined in SECTION 1.01) shall be
accounted for as a pooling of interests under generally accepted accounting
principles and (ii) the Mergers (as defined in SECTION 1.02) shall qualify as
reorganizations under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
(G) APPROVALS. The Board of Directors of each of the parties hereto (i) has
determined that this Plan and the transactions contemplated hereby are in their
respective best interests and in the best interests of, in the case of First
Union, its stockholders, and in the case of CoreStates, its stakeholders, (ii)
has determined that this Plan and the transactions contemplated hereby are
consistent with, and in furtherance of, its respective business strategies and
(iii) has approved, at meetings of each of such Boards of Directors, this Plan.
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NOW, THEREFORE, in consideration of their mutual promises and obligations,
the parties hereto approve, adopt and make this Plan and prescribe the terms and
conditions hereof and the manner and basis of carrying it into effect, which
shall be as follows:
I. THE MERGERS; EFFECTS OF THE MERGERS
1.01. THE CORPORATE MERGER.
(A) THE CONTINUING CORPORATION. At the Effective Time (as defined in
SECTION 1.03), CoreStates shall merge with and into First Union (the
"Corporate Merger"), the separate corporate existence of CoreStates shall
cease and First Union shall survive and continue to exist as a North
Carolina corporation (First Union, as the surviving corporation in the
Corporate Merger, sometimes being referred to herein as the "Continuing
Corporation"). First Union may at any time prior to the Effective Time
change the method of effecting the Mergers (including, without limitation,
the provisions of this ARTICLE I) if and to the extent it deems such change
to be necessary, appropriate or desirable; provided, however, that no such
change shall (i) alter or change the amount or kind of consideration to be
issued to holders of CoreStates Common Stock as provided for in this Plan,
(ii) adversely affect the tax treatment of CoreStates's stockholders or
(iii) materially impede or delay consummation of the transactions
contemplated by this Plan.
(B) EFFECT OF THE CORPORATE MERGER. Subject to the satisfaction or
waiver of the conditions set forth in ARTICLE VI, the Corporate Merger
shall become effective upon the occurrence of the filing in the office of
the Secretary of the Commonwealth of Pennsylvania (the "Department of
State") of articles of merger in accordance with Section 1928 of the
Pennsylvania Business Corporation Law of 1988, as amended (the "PBCL") and
the filing in the Office of the Secretary of State of the State of North
Carolina (the "North Carolina Secretary") of articles of merger in
accordance with Section 55-11-05 of the North Carolina Business Corporation
Act (the "NCBCA") or such later date and time as may be set forth in such
articles. The Corporate Merger shall have the effects prescribed in the
NCBCA and the PBCL.
(C) ARTICLES OF INCORPORATION AND BY-LAWS. The articles of
incorporation and by-laws of First Union immediately after the Corporate
Merger shall be those of First Union as in effect immediately prior to the
Effective Time.
(D) DIRECTORS AND OFFICERS OF THE CONTINUING CORPORATION. The
directors and officers of First Union immediately after the Corporate
Merger shall be the directors and officers of First Union immediately prior
to the Effective Time, together with such additional directors and officers
as Previously Disclosed and as may thereafter be elected, who shall hold
office until such time as their successors shall be duly elected and
qualified.
(E) RIGHTS, ETC. The Continuing Corporation shall thereupon and
thereafter possess all the rights, privileges, immunities and franchises,
of a public as well as of a private nature, of each of the corporations so
merged as provided in Chapter 55 of the NCBCA and Subchapter C of Chapter
19 of the PBCL.
(F) LIABILITIES, ETC. The Continuing Corporation shall thenceforth be
responsible and liable for all the liabilities, obligations and penalties
of the corporations so merged. All rights of creditors and obligors and all
liens on the property of each of CoreStates and First Union shall be
preserved unimpaired.
1.02. THE BANK MERGER. Following the Corporate Merger on the Effective Date
or as soon thereafter as First Union may deem appropriate:
(A) CONTRIBUTION OF CORESTATES BANK CAPITAL STOCK. First Union shall
contribute the CoreStates Bank Capital Stock to FUNC-NJ and shall cause
FUNC-NJ to contribute the CoreStates Bank Capital Stock to FFI.
(B) THE CONTINUING BANK. CoreStates Bank shall be merged with and into
FUNB or, at First Union's option, FUNB shall be merged with and into
CoreStates Bank (the "Bank Merger" and together with the Corporate Merger,
the "Mergers"), the separate existence of the merging bank shall cease and
the surviving bank (the "Continuing Bank") shall survive; the name of the
Continuing Bank shall be "First Union National Bank"; and the Continuing
Bank shall continue to conduct the business of a national banking
association at FUNB's main office in Avondale, Pennsylvania and at the
legally established branches of CoreStates Bank and FUNB. Certain
additional matters relating to the Continuing Bank have been Previously
Disclosed.
(C) RIGHTS, ETC. The Continuing Bank shall thereupon and thereafter
possess all the rights, privileges, immunities and franchises, of a public
as well as of a private nature, of each of the banks so merged; and all
property, real, personal and mixed, and all debts due on whatever account,
and all other choices in action, and all and every other interest, of or
belonging to or due to each of the banks so merged, shall be taken and
deemed to be transferred to and vested in the
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Continuing Bank without further act or deed, including appointments,
designations and nominations and all other rights and interests in any
fiduciary capacity; and the title to any real estate or any interest
therein, vested in each of such banks, shall not revert or be in any way
impaired by reason of the Bank Merger.
(D) LIABILITIES, ETC. The Continuing Bank shall thenceforth be
responsible and liable for all the liabilities, obligations and penalties
of the banks so merged (including liabilities arising out of the operation
of any trust departments). All rights of creditors and obligors and all
liens on the property of each of CoreStates Bank and FUNB shall be
preserved unimpaired.
(E) CHARTER; BYLAWS; DIRECTORS; OFFICERS. The charter and bylaws of
the Continuing Bank shall be those of CoreStates Bank, as in effect
immediately prior to the Bank Merger becoming effective. The directors and
officers of FUNB in office immediately prior to the Bank Merger becoming
effective shall be the directors and officers of the Continuing Bank,
together with such additional directors and officers as may thereafter be
elected, who shall hold office until such time as their successors are
elected and qualified.
(F) OUTSTANDING STOCK OF THE CONTINUING BANK. First Union shall cause
the amount of the capital stock of the Continuing Bank to be not less than
$37,308,000 which shall consist of not less than 1,865,400 issued and
outstanding shares of common stock, each of $20.00 par value, and 160,540
issued and outstanding shares of preferred stock, each of $1.00 par value,
and such issued and outstanding shares shall remain issued and outstanding
as shares of the Continuing Bank, each of $20.00 par value and $1.00 par
value, as applicable, and the holders thereof shall retain their rights
therein.
(G) OUTSTANDING STOCK OF CORESTATES BANK. Promptly after the Bank
Merger becomes effective, FFI shall deliver all of the issued and
outstanding shares of the capital stock of the merging bank to the
Continuing Bank for cancellation.
1.03. EFFECTIVE DATE AND EFFECTIVE TIME. Subject to the conditions to the
obligations of the parties to effect the Mergers as set forth in ARTICLE VI, the
effective date (the "Effective Date") of the Corporate Merger shall be such date
as the parties hereto mutually agree upon; provided, however, that if the
parties are not able to agree upon such date, such date shall be the date as
First Union shall notify CoreStates in writing not less than five days prior
thereto, which date shall not be more than 15 days after such conditions have
been satisfied or waived in writing (other than such conditions as by their
terms are to be satisfied at the Effective Time). The time on the Effective Date
at which the Corporate Merger becomes effective is referred to as the "Effective
Time".
II. CONSIDERATION
2.01. MERGER CONSIDERATION. Subject to the provisions of this Plan, at the
Effective Time, automatically by virtue of the Corporate Merger and without any
action on the part of any party or stockholder:
(A) OUTSTANDING FIRST UNION COMMON STOCK. Each share of First Union
Common Stock (and each attached right (a "First Union Right") issued
pursuant to the Amended and Restated Shareholder Protection Rights
Agreement, dated as of October 15, 1996 (as amended, the "First Union
Rights Agreement"), between First Union and First Union National Bank, as
Rights Agent) issued and outstanding immediately prior to the Effective
Time shall be unchanged and shall remain issued and outstanding.
(B) OUTSTANDING CORESTATES COMMON STOCK. Each share (excluding shares
held by CoreStates or any of its subsidiaries (as defined in SECTION 8.08)
or by First Union or any of its subsidiaries, in each case other than in a
trust, fiduciary or nominee capacity or as a result of debts previously
contracted ("Treasury Shares")) of CoreStates Common Stock issued and
outstanding immediately prior to the Effective Time shall become and be
converted into 1.62 shares (subject to possible adjustment as set forth in
SECTIONS 2.05 AND 7.01(F), the "Exchange Ratio") of First Union Common
Stock (with the appropriate number of First Union Rights, which shall be
attached thereto or represented by Rights Certificates in accordance with
the First Union Rights Agreement).
(C) TREASURY SHARES. Each Treasury Share immediately prior to the
Effective Time shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
2.02. STOCKHOLDER RIGHTS; STOCK TRANSFERS. At the Effective Time, holders
of CoreStates Common Stock shall cease to be, and shall have no rights as,
stockholders of CoreStates, other than to receive any dividend or other
distribution with respect to the CoreStates Common Stock with a record date
occurring prior to the Effective Time and the consideration provided under this
ARTICLE II. After the Effective Time, there shall be no transfers on the stock
transfer books of CoreStates or the Continuing Corporation of shares of
CoreStates Common Stock.
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2.03. FRACTIONAL SHARES. Notwithstanding any other provision hereof, no
fractional shares of First Union Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the
Corporate Merger; instead, First Union shall pay to each holder of CoreStates
Common Stock who would otherwise be entitled to a fractional share an amount in
cash determined by multiplying such fraction by the average of the last sale
prices of First Union Common Stock, as reported by the New York Stock Exchange
(the "NYSE") Composite Transactions tape (as reported in THE WALL STREET JOURNAL
or, if not reported therein, in another authoritative source), for the five NYSE
trading days immediately preceding the Effective Date.
2.04. EXCHANGE PROCEDURES.
(A) As promptly as practicable after the Effective Date, First Union
shall send or cause to be sent to each former holder of shares (other than
Treasury Shares) of CoreStates Common Stock of record immediately prior to
the Effective Time transmittal materials for use in exchanging such
stockholder's certificates formerly representing CoreStates Common Stock
("Old Certificates") for the consideration set forth in this ARTICLE II.
The certificates representing the shares of First Union Common Stock ("New
Certificates") into which shares of such stockholder's CoreStates Common
Stock are converted at the Effective Time and any checks in respect of a
fractional share interest or dividends or distributions which such person
shall be entitled to receive will be delivered to such stockholder only
upon delivery to First Union National Bank, as Exchange Agent (the
"Exchange Agent") of Old Certificates representing all of such shares of
CoreStates Common Stock (or indemnity reasonably satisfactory to First
Union and the Exchange Agent, if any of such certificates are lost, stolen
or destroyed) owned by such stockholder. No interest will be paid on any
such cash to be paid in lieu of fractional share interests or dividends or
distributions which any such person shall be entitled to receive pursuant
to this ARTICLE II upon such delivery. Old Certificates surrendered for
exchange by any CoreStates Affiliate (as defined in SECTION 5.07) shall not
be exchanged for New Certificates until First Union has received a written
agreement from such person as specified in SECTION 5.07.
(B) Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to any former holder of CoreStates Common
Stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(C) At the election of First Union, no dividends or other
distributions with a record date occurring after the Effective Time shall
be paid to the holder of any unsurrendered Old Certificates representing
CoreStates Common Stock until such Old Certificates have been surrendered
for exchange for New Certificates. After becoming so entitled in accordance
with this SECTION 2.04, the record holder thereof also shall be entitled to
receive any such dividends or other distributions, without any interest
thereon, which theretofore had become payable with respect to shares of
First Union Common Stock such holder had the right to receive upon
surrender of the Old Certificate.
2.05. ANTI-DILUTION PROVISIONS. In the event First Union changes (or
establishes a record date for changing) the number of shares of First Union
Common Stock issued and outstanding prior to the Effective Date as a result of a
stock split, stock dividend, recapitalization or similar transaction with
respect to the outstanding First Union Common Stock and the record date therefor
shall be prior to the Effective Date, the Exchange Ratio shall be
proportionately adjusted.
2.06. OPTIONS.
(A) From and after the Effective Time, all employee and director stock
options to purchase shares of CoreStates Common Stock (each, a "CoreStates
Option"), which are then outstanding and unexercised, shall be converted
into and become options to purchase shares of First Union Common Stock, and
First Union shall assume each such CoreStates Option in accordance with the
terms of the plan and agreement by which it is evidenced, including but not
limited to the accelerated vesting of such CoreStates Options which shall
occur in connection with and by virtue of the Corporate Merger as and to
the extent required by such plans and agreements; PROVIDED, HOWEVER, that
from and after the Effective Time (i) each such CoreStates Option assumed
by First Union may be exercised solely to purchase shares of First Union
Common Stock, (ii) the number of shares of First Union Common Stock
purchasable upon exercise of such CoreStates Option shall be equal to the
number of shares of CoreStates Common Stock that were purchasable under
such CoreStates Option immediately prior to the Effective Time multiplied
by the Exchange Ratio and rounding to the nearest whole share, and (iii)
the per share exercise price under each such CoreStates Option shall be
adjusted by dividing the per share exercise price of each such CoreStates
Option by the Exchange Ratio, and rounding up to the nearest cent. The
terms of each CoreStates Option shall, in accordance with its terms, be
subject to further adjustment as appropriate to reflect any stock split,
stock dividend, recapitalization or other similar transaction with respect
to First Union Common Stock on or subsequent to the Effective Date.
Notwithstanding the foregoing, the number of shares and the per share
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exercise price of each CoreStates Option which is intended to be an
"incentive stock option" (as defined in SECTION 422 of the Code) shall be
adjusted in accordance with the requirements of SECTION 424 of the Code.
Accordingly, with respect to any incentive stock options, fractional shares
shall be rounded down to the nearest whole number of shares and where
necessary the per share exercise price shall be rounded up to the nearest
cent.
(B) Prior to the Effective Time, First Union shall reserve for
issuance the number of shares of First Union Common Stock necessary to
satisfy First Union's obligations under SECTION 2.06(A). Promptly after the
Effective Time, First Union shall file with the SEC a registration
statement on an appropriate form under the Securities Act with respect to
the shares of First Union Common Stock subject to options to acquire First
Union Common Stock issued pursuant to SECTION 2.06(A) hereof, and shall use
its reasonable best efforts to maintain the current status of the
prospectus contained therein, as well as comply with any applicable state
securities or "blue sky" laws, for so long as such options remain
outstanding.
III. ACTIONS PENDING MERGERS
From the date hereof until the Effective Time, except as expressly
contemplated in this Plan, (i) without the prior written consent of First Union
(which consent shall not be unreasonably withheld or delayed) CoreStates will
not, and will cause each of its subsidiaries not to, and (ii) without the prior
written consent of CoreStates (which consent shall not be unreasonably withheld
or delayed) First Union will not, and will cause each of its subsidiaries not
to:
3.01. ORDINARY COURSE. Conduct the business of it and its subsidiaries
other than in the ordinary and usual course or, to the extent consistent
therewith, fail to use reasonable efforts to preserve intact their business
organizations and assets and maintain their rights, franchises and existing
relations with customers, suppliers, employees and business associates, or take
any action that would (i) adversely affect the ability of any party to obtain
any necessary approvals of any Regulatory Authorities (as defined in SECTION
4.03(I)) required for the transactions contemplated hereby without the
imposition of a condition or restriction of the type referred to in the proviso
to SECTION 6.02 or (ii) adversely affect its ability to perform any of its
material obligations under this Plan, provided that nothing in this Plan shall
be deemed to restrict the ability of a party to exercise its rights under the
applicable Stock Option Agreement.
3.02. CAPITAL STOCK. In the case of CoreStates, other than (i) as
Previously Disclosed (as defined in SECTION 8.08), (ii) in connection with
acquisitions of businesses permitted in SECTION 3.06 or as permitted pursuant to
SECTION 3.04, (iii) under the CoreStates Stock Option Agreement or (iv) upon the
exercise of CoreStates Options and stock appreciation rights that were
outstanding on the date hereof, (A) issue, sell or otherwise permit to become
outstanding any additional shares of capital stock, any stock appreciation
rights, or any Rights (as defined in SECTION 8.08), (B) enter into any agreement
with respect to the foregoing, or (C) permit any additional shares of capital
stock to become subject to new grants of employee stock options, stock
appreciation rights, or similar stock-based employee rights.
3.03. DIVIDENDS, ETC. (A) Make, declare or pay any dividend (other than (i)
in the case of CoreStates, subject to SECTION 5.16, quarterly cash dividends on
CoreStates Common Stock payable at a rate not to exceed $0.50 per share and
dividends from subsidiaries to CoreStates or another subsidiary of CoreStates,
as applicable, and (ii) in the case of First Union, quarterly cash dividends on
First Union Common Stock, dividends payable in First Union Common Stock and
dividends from subsidiaries to First Union or another subsidiary of First Union,
as applicable) on or in respect of, or declare or make any distribution on, any
shares of its capital stock, or (B) in the case of CoreStates, except as
Previously Disclosed or as contemplated by SECTION 5.08(B), directly or
indirectly combine, redeem, reclassify, purchase or otherwise acquire, any
shares of its capital stock.
3.04. COMPENSATION; EMPLOYMENT AGREEMENTS; ETC. In the case of CoreStates
and its subsidiaries, enter into or amend any written employment, severance or
similar agreements or arrangements with any of its directors, officers or
employees, or grant any salary or wage increase or increase any employee benefit
(including incentive or bonus payments), except for (i) normal individual
increases in compensation to employees in the ordinary course of business
consistent with past practice or consistent with individual increases by First
Union for similarly situated employees of First Union, (ii) other changes as may
be required by law or to satisfy contractual obligations existing as of the date
hereof or additional grants of awards (including CoreStates Options and other
equity-based awards, not to exceed 3,300,000 shares of CoreStates Common Stock
in the aggregate) to employees consistent with past practice, which to the
extent practicable have been Previously Disclosed, (iii) any changes proposed in
the CoreStates Pay Practices Study prepared by Hewitt Associates previously
communicated to the employees of CoreStates or its subsidiaries, or (iv) as
otherwise contemplated by this Plan.
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3.05. BENEFIT PLANS. In the case of CoreStates and its subsidiaries, enter
into or modify (except as may be required by applicable law or to satisfy
contractual obligations existing as of the date hereof, which to the extent
practicable have been Previously Disclosed, and except as otherwise contemplated
by this Plan) any pension, retirement, stock option, stock purchase, savings,
profit sharing, deferred compensation, consulting, bonus, group insurance or
other employee benefit, incentive or welfare contract, plan or arrangement, or
any trust agreement related thereto, in respect of any of its directors,
officers or other employees, including without limitation taking any action
(including discretionary action pursuant to the terms of such contract, plan or
arrangement) that accelerates the vesting or exercise of any benefits payable
thereunder.
3.06. ACQUISITIONS AND DISPOSITIONS. In the case of CoreStates, except as
Previously Disclosed and except for dispositions and acquisitions of assets in
the ordinary and usual course of business consistent with past practice, dispose
of or discontinue any portion of its assets, deposits, business or properties,
in excess of $20 million in the aggregate, or merge or consolidate with, or
acquire (other than by way of foreclosures or acquisitions of control in a BONA
FIDE trust or fiduciary capacity or in satisfaction of debts previously
contracted in good faith, in each case in the ordinary and usual course of
business consistent with past practice) all or any portion of, the business or
property of any other entity which is material to it and its subsidiaries taken
as a whole (any of the foregoing, a "Business Combination Transaction"); it
being understood, for purposes of this SECTION 3.06, that (i) Business
Combination Transactions in which the purchase price to be paid or received by
CoreStates and/or its subsidiaries consists solely of cash in an amount not
exceeding $500 million in any one case shall be considered not to be material to
CoreStates and its subsidiaries taken as a whole and (ii) no Business
Combination Transaction involving the issuance by CoreStates and/or its
subsidiaries of shares of capital stock or other securities would be permissible
without First Union's prior consent.
3.07. AMENDMENTS. Amend its articles of incorporation or by-laws (or
similar constitutive documents) (except that First Union may amend its articles
of incorporation to increase the number of authorized shares of First Union
Common Stock from 750,000,000 shares to 2,000,000,000).
3.08. ACCOUNTING METHODS. Implement or adopt any material change in its
accounting principles, practices or methods, other than as may be required by
generally accepted accounting principles.
3.09. ADVERSE ACTIONS. (A) Take any action that would, or is reasonably
likely to, prevent or impede the Mergers from qualifying (1) for
pooling-of-interests accounting treatment or (2) as a reorganization within the
meaning of SECTION 368(A) of the Code; or (B) knowingly take any action that is
intended or is reasonably likely to result in (i) any of its representations or
warranties set forth in this Plan being or becoming untrue in any material
respect at any time prior to the Effective Time, (ii) any of the conditions to
the Mergers set forth in ARTICLE VI not being satisfied or (iii) a material
violation of any provision of this Plan or the Stock Option Agreements except,
in every case, as may be required by applicable law; PROVIDED, HOWEVER, that
nothing contained herein shall limit the ability of CoreStates or First Union to
exercise its rights under either Stock Option Agreement.
3.10. RISK MANAGEMENT. Except as required by applicable law or regulation,
(A) implement or adopt any material change in its interest rate and other risk
management policies, procedures or practices; (B) fail to follow in any material
respect its existing policies or practices with respect to managing its exposure
to interest rate and other risk; or (C) fail to use commercially reasonable
means to avoid any material increase in its aggregate exposure to interest rate
risk.
3.11. INDEBTEDNESS. In the case of CoreStates, incur any indebtedness for
borrowed money other than in the ordinary course of business.
3.12. AGREEMENTS. Agree or commit to do anything prohibited by SECTIONS
3.01 through 3.11.
IV. REPRESENTATIONS AND WARRANTIES
4.01. DISCLOSURE SCHEDULE. On or prior to the date hereof, First Union has
delivered to CoreStates and CoreStates has delivered to First Union a schedule
(as the case may be, its "Disclosure Schedule") setting forth, among other
things, items the disclosure of which is necessary or appropriate either (i) in
response to an express disclosure requirement contained in a provision hereof or
(ii) as an exception to one or more representations or warranties in SECTION
4.03 or to one or more of its covenants contained in ARTICLE III; PROVIDED, that
(a) no such item is required to be set forth in a Disclosure Schedule as an
exception to a representation or warranty if its absence would not be reasonably
likely to result in the related representation or warranty being deemed untrue
or incorrect under the standards established by Section 4.02, and (b) the mere
inclusion of an item in a Disclosure Schedule as an exception to a
representation or warranty shall not be deemed an admission by a party that such
item represents a material exception or fact, event or circumstance or that such
item is reasonably likely to result in a Material Adverse Effect (as defined in
SECTION 8.08).
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4.02. STANDARD. No representation or warranty of First Union or CoreStates
contained in SECTION 4.03 shall be deemed untrue or incorrect, and no party
hereto shall be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, circumstance or event if such fact,
circumstance or event, individually or taken together with all other facts,
circumstances or events inconsistent with any paragraph of SECTION 4.03, is not
reasonably likely to have a Material Adverse Effect on the party making such
representation or warranty.
4.03. REPRESENTATIONS AND WARRANTIES. Subject to SECTIONS 4.01 and 4.02,
CoreStates hereby represents and warrants to First Union, and First Union hereby
represents and warrants to CoreStates, as follows:
(A) RECITALS. In the case of the representations and warranties of
CoreStates, the facts set forth in Recitals A, C, E, F and G of this Plan
with respect to it and CoreStates Bank are true and correct. In the case of
the representations and warranties of First Union, the facts set forth in
Recitals B, D, E, F and G of this Plan with respect to it and FUNB are true
and correct.
(B) ORGANIZATION, STANDING, AND AUTHORITY. It is duly qualified to do
business and is in good standing in the states of the United States and
foreign jurisdictions where its ownership or leasing of property or the
conduct of its business requires it to be so qualified. It has in effect
all federal, state, local, and foreign governmental authorizations
necessary for it to own or lease its properties and assets and to carry on
its business as it is now conducted.
(C) SHARES.
(1) The outstanding shares of its capital stock have been duly
authorized and are validly issued and outstanding, fully paid and
nonassessable, and subject to no preemptive rights (and were not issued
in violation of any preemptive rights). In the case of CoreStates,
except as Previously Disclosed, there are no shares of its capital stock
authorized and reserved for issuance, it does not have any Rights issued
or outstanding with respect to its capital stock, and it does not have
any commitment to authorize, issue, sell, repurchase or redeem any such
shares or Rights, except pursuant to this Plan or the relevant Stock
Option Agreement or pursuant to outstanding CoreStates Options. Since
October 31, 1997, it has issued no shares of its capital stock except
pursuant to plans or commitments Previously Disclosed.
(2) (i) The number of shares of CoreStates Common Stock which are
issuable upon exercise of CoreStates Options as of the date of this Plan
has been Previously Disclosed by CoreStates and (ii) the number of
shares of First Union Common Stock which are issuable upon exercise of
options to purchase shares of First Union Common Stock as of the date of
this Plan has been Previously Disclosed by First Union.
(3) In the case of the representations and warranties of First
Union, the shares of First Union Common Stock to be issued in exchange
for shares of CoreStates Common Stock in the Corporate Merger, when
issued in accordance with the terms of this Plan, will be duly
authorized, validly issued, fully paid and nonassessable, and subject to
no preemptive rights.
(D) SUBSIDIARIES.
(1) In the case of the representations and warranties of
CoreStates, (a) it has Previously Disclosed a list of all its
significant subsidiaries together with state of incorporation for each
such significant subsidiary, (b) no equity securities of any of its
significant subsidiaries (as defined in SECTION 8.08) are or may become
required to be issued (other than to it or a subsidiary of it) by reason
of any Rights, (c) there are no contracts, commitments, understandings,
or arrangements by which any of such significant subsidiaries is or may
be bound to sell or otherwise transfer any shares of the capital stock
of any such significant subsidiary (other than to it or a subsidiary of
it), (d) there are no contracts, commitments, understandings, or
arrangements relating to its rights to vote or to dispose of such shares
(other than to it or a subsidiary of it), and (e) all of the shares of
capital stock of each such significant subsidiary held by it or its
subsidiaries are fully paid and (except pursuant to 12 U.S.C.
(section mark) 55 or equivalent state statutes in the case of banking
subsidiaries) nonassessable and are owned by it or its subsidiaries free
and clear of any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance ("Liens").
(2) Each of its significant subsidiaries has been duly organized
and is validly existing in good standing under the laws of the
jurisdiction in which it is incorporated or organized, and is duly
qualified to do business and in good standing in the jurisdictions where
its ownership or leasing of property or the conduct of its business
requires it to be so qualified.
7
(E) CORPORATE POWER. It and each of its significant subsidiaries has
the corporate power and authority to carry on its business as it is now
being conducted and to own all its material properties and assets; and it
has the corporate power and authority to execute, deliver and perform its
obligations under this Plan and the Stock Option Agreements.
(F) Corporate Authority. Subject, in the case of this Plan, to receipt
of the requisite approval of its stockholders referred to in SECTION 6.01,
this Plan and the Stock Option Agreements, and the transactions
contemplated hereby and thereby, have been authorized by all necessary
corporate action of it and this Plan and the Stock Option Agreements have
been duly executed and delivered by it, each is a valid and binding
agreement of it, and is enforceable in accordance with its terms (except as
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws of general applicability
relating to or affecting creditors' rights or by general equity
principles).
(G) REGULATORY APPROVALS; NO DEFAULTS.
(1) No consents or approvals of, or filings or registrations with,
any Regulatory Authority (as defined in SECTION 4.03(I)) or with any
third party are required to be made or obtained by it or any of its
subsidiaries in connection with the execution, delivery or performance
by it of this Plan or the respective Stock Option Agreement or to
consummate the Mergers except for (a) filings of applications or notices
with federal banking authorities, (B) filings with the Securities and
Exchange Commission (the "SEC") and state securities authorities and the
approval of this Plan by the stockholders of it, and (C) the filing of
articles of merger with the Department of State pursuant to the PBCL and
the North Carolina Secretary pursuant to the NCBA and the issuance of
related certificates of merger. As of the date hereof, it is not aware
of any reason why the approvals set forth in SECTION 6.02 will not be
received without the imposition of a condition, restriction or
requirement of the type described in SECTION 6.02.
(2) Subject to receipt of the regulatory approvals referred to in
the preceding paragraph, and expiration of related waiting periods, and
required filings under federal and state securities laws, the execution,
delivery and performance of this Plan and the respective Stock Option
Agreement and the consummation of the transactions contemplated hereby
and thereby do not and will not (A) constitute a breach or violation of,
or a default under, or give rise to any Lien, any acceleration of
remedies or any right of termination under, any law, rule or regulation
or any judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of it or of any of its subsidiaries
or to which it or any of its subsidiaries or properties is subject or
bound, (B) constitute a breach or violation of, or a default under, its
articles of incorporation or by-laws, or (C) require any consent or
approval under any such law, rule, regulation, judgment, decree, order,
governmental permit or license, agreement, indenture or instrument.
(H) FINANCIAL REPORTS AND SEC DOCUMENTS. Its Annual Reports on Form
10-K for the fiscal years ended December 31, 1994, 1995 and 1996, and all
other reports, registration statements, definitive proxy statements or
information statements filed or to be filed by it or any of its
subsidiaries subsequent to December 31, 1994 under the Securities Act of
1933, as amended (together with the rules and regulations thereunder, the
"Securities Act") or under SECTIONS 13(A), 13(C), 14 AND 15(D) of the
Securities Exchange Act of 1934, as amended (together with the rules and
regulations thereunder, the "Exchange Act"), in the form filed, or to be
filed, with the SEC (collectively, its "SEC Documents") (i) complied or
will comply in all material respects as to form with the applicable
requirements under the Securities Act or the Exchange Act, as the case may
be, and (ii) did not and will not, at the time of such filing, contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading; and each of the balance sheets in or incorporated by reference
into any such SEC Document (including the related notes and schedules
thereto) fairly presents and will fairly present the financial position of
the entity or entities to which it relates as of its date and each of the
statements of income and changes in stockholders' equity and cash flows or
equivalent statements in such report and documents (including any related
notes and schedules thereto) fairly presents and will fairly present the
results of operations, changes in stockholders' equity and changes in cash
flows, as the case may be, of the entity or entities to which it relates
for the periods set forth therein, in each case in accordance with
generally accepted accounting principles consistently applied during the
periods involved, except in each case as may be noted therein, subject to
normal year-end audit adjustments in the case of unaudited statements.
8
(I) LITIGATION; REGULATORY ACTION.
(1) Except as Previously Disclosed, no litigation, proceeding or
claim before any court or governmental agency is pending against it or
any of its subsidiaries and, to the best of its knowledge, no such
litigation, proceeding or claim has been threatened.
(2) Except as Previously Disclosed, neither it nor any of its
subsidiaries or properties is a party to or is subject to any order,
decree, agreement, memorandum of understanding or similar arrangement
with, or a commitment letter or similar submission to, any federal or
state governmental agency or authority charged with the supervision or
regulation of financial institutions or engaged in the insurance of
deposits (including, without limitation, the Office of the Comptroller
of the Currency, the Board of Governors of the Federal Reserve System
and the Federal Deposit Insurance Corporation), or issuers of securities
(including, without limitation, the SEC and non-governmental
self-regulatory bodies), or the supervision or regulation of it or any
of its subsidiaries (collectively, the "Regulatory Authorities").
(3) Neither it nor any of its subsidiaries has been advised by any
Regulatory Authority that such Regulatory Authority is contemplating
issuing or requesting (or is considering the appropriateness of issuing
or requesting) any such order, decree, agreement, memorandum or
understanding, commitment letter or similar submission.
(J) COMPLIANCE WITH LAWS. Except as Previously Disclosed, it and each
of subsidiaries:
(1) is in compliance, in the conduct of its business, with all
applicable federal, state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees applicable
thereto or to the employees conducting such businesses, including,
without limitation, the Equal Credit Opportunity Act, the Fair Housing
Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act
and all other applicable fair lending laws and other laws relating to
discriminatory business practices;
(2) has all permits, licenses, authorizations, orders and approvals
of, and has made all filings, applications and registrations with, all
Regulatory Authorities that are required in order to permit it to
conduct its businesses substantially as presently conducted; all such
permits, licenses, certificates of authority, orders and approvals are
in full force and effect and, to the best of its knowledge, no
suspension or cancellation of any of them is threatened; and
(3) has received, since December 31, 1995, no notification or
communication from any Regulatory Authority (i) asserting that it or any
of its subsidiaries is not in compliance with any of the statutes,
regulations, or ordinances which such Regulatory Authority enforces or
(ii) threatening to revoke any license, franchise, permit, or
governmental authorization, (iii) threatening or contemplating
revocation or limitation of, or which would have the effect of revoking
or limiting, federal deposit insurance (nor, to its knowledge, do any
grounds for any of the foregoing exist) or (iv) failing to approve any
proposed acquisition, or stating its intention not to approve any
acquisition pending or proposed to be effected by it prior to the date
hereof.
(K) MATERIAL CONTRACTS; DEFAULTS. Except for those agreements and
other documents filed as exhibits to its SEC Documents or Previously
Disclosed, neither it nor any of its subsidiaries is a party to, bound by
or subject to any agreement, contract, arrangement, commitment or
understanding (whether written or oral) that is a "material contract"
within the meaning of Item 601(b)(10) of the SEC's Regulation S-K (without
giving effect to the "ordinary course" exception set forth therein).
Neither it nor any of its subsidiaries is in default under any contract,
agreement, commitment, arrangement, lease, insurance policy or other
instrument to which it is a party, by which its respective assets,
business, or operations may be bound or affected, or under which it or its
respective assets, business, or operations receives benefits, and there has
not occurred any event that, with the lapse of time or the giving of notice
or both, would constitute such a default. Neither it nor any of its
subsidiaries is subject to, or bound by, any contract containing covenants
which (i) limit the ability of it or any subsidiary to compete in any
material line of business or with any person, or (ii) involve any material
restriction of geographical area in which, or method by which, it or any
subsidiary may carry on its business (other than as may be required by law
or any applicable Regulatory Authority).
(L) NO BROKERS. All negotiations relative to this Plan and the
transactions contemplated hereby have been carried on by it directly with
the other party hereto and no action has been taken by it that would give
rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other like payment, excluding, in the case of
CoreStates, fees to be paid to J.P. Morgan Securities Inc. and Credit
Suisse First Boston Corporation, and, in the case of First Union, a fee to
be paid to Morgan, Stanley Dean Witter Discover Incorporated, which, in
each case, has been heretofore disclosed to the other party.
9
(M) EMPLOYEE BENEFIT PLANS
(1) CoreStates has delivered or will deliver to First Union copies
of all of CoreStates' Compensation and Benefit Plans (as defined below).
Compensation and Benefit Plans means all existing bonus, incentive,
paid-time-off, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus,
stock purchase, restricted stock and stock option plans, all employment
or severance contracts, all medical, dental, disability, health and life
insurance plans, all other employee benefit and fringe benefit plans,
contracts or arrangements and any applicable "change of control" or
similar provisions in any plan, contract or arrangement maintained or
contributed to by it or any of its subsidiaries for the benefit of
officers, former officers, employees, former employees, directors,
former directors, or the beneficiaries of any of the foregoing. First
Union will deliver to CoreStates copies of all qualified retirement
plans and welfare benefit plans.
(2) Except as Previously Disclosed, to its knowledge, each of its
Compensation and Benefit Plans has been operated and administered by it
in all material respects in accordance with its terms and with
applicable law, including, but not limited to, ERISA, the Code, the
Securities Act, the Exchange Act, the Age Discrimination in Employment
Act, or any regulations or rules promulgated thereunder, and all
filings, disclosures and notices required by ERISA, the Code, the
Securities Act, the Exchange Act, the Age Discrimination in Employment
Act and any other applicable law have been timely made. Except as
Previously Disclosed, to its knowledge, each of its Compensation and
Benefit Plans which is an "employee pension benefit plan" within the
meaning of SECTION 3(2) of ERISA (a "Pension Plan") and which is
intended to be qualified under SECTION 401(A) of the Code has received a
favorable determination letter (including a determination that the
related trust under such Compensation and Benefit Plan is exempt from
tax under SECTION 501(A) of the Code) from the IRS for "TRA" (as defined
in Rev. Proc. 93-39), or will file for such determination letter prior
to the expiration of the remedial amendment period for such Compensation
and Benefit Plan, and it is not aware of any circumstances likely to
result in revocation of any such favorable determination letter. There
is no pending or, to its knowledge, threatened legal action, suit or
claim relating to the Compensation and Benefit Plans. Except as
Previously Disclosed, to its knowledge, neither it nor any of its
subsidiaries has engaged in a transaction, or omitted to take any
action, with respect to any Compensation and Benefit Plan that would
reasonably be expected to subject it or any of its subsidiaries to a tax
or penalty imposed by either SECTION 4975 of the Code or SECTION 502 of
ERISA, assuming for purposes of SECTION 4975 of the Code that the
taxable period of any such transaction expired as of the date hereof.
(3) No liability (other than for payment of premiums to the PBGC
which have been made or will be made on a timely basis) under Title IV
of ERISA has been or is reasonably expected to be incurred by it or any
of its subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of SECTION 4001(A)(15) of
ERISA, currently or formerly maintained by any of them, or any
single-employer plan of any entity (an "ERISA Affiliate") which is
considered one employer with it under SECTION 4001(A)(14) of ERISA or
SECTION 414(B) OR (C) of the Code (an "ERISA Affiliate Plan"). None of
it, any of its subsidiaries or any ERISA Affiliate has contributed, or
has been obligated to contribute, to a multiemployer plan under Subtitle
E of Title IV of ERISA at any time since September 26, 1980. No notice
of a "reportable event", within the meaning of SECTION 4043 of ERISA,
for which the 30-day reporting requirement has not been waived, has been
required to be filed for any Compensation and Benefit Plan or by any
ERISA Affiliate Plan within the 12-month period ending on the date
hereof. The PBGC has not instituted proceedings to terminate any Pension
Plan or ERISA Affiliate Plan and, to it's knowledge, no condition exists
that presents a risk that such proceedings will be instituted. To its
knowledge, there is no pending investigation or enforcement action by
the PBGC, the Department of Labor (the "DOL") or IRS or any other
governmental agency with respect to any Compensation and Benefit Plan.
Under each Pension Plan and ERISA Affiliate Plan, as of the date of the
most recent actuarial valuation performed prior to the date of this
Plan, the actuarially determined present value of all "benefit
liabilities", within the meaning of SECTION 4001(A)(16) of ERISA (as
determined on the basis of the actuarial assumptions contained in such
actuarial valuation of such Pension Plan or ERISA Affiliate Plan), did
not exceed the then current value of the assets of such Pension Plan or
ERISA Affiliate Plan and since such date there has been neither an
adverse change in the financial condition of such Pension Plan or ERISA
Affiliate Plan nor any amendment or other change to such Pension Plan or
ERISA Affiliate Plan that would increase the amount of benefits
thereunder which in either case reasonably could be expected to change
such result.
(4) All contributions required to be made under the terms of any
Compensation and Benefit Plan or ERISA Affiliate Plan or any employee
benefit arrangements under any collective bargaining agreement to which
it or any of its subsidiaries is a party have been timely made or have
been reflected on its financial statements to the extent
10
required by generally accepted accounting principles. Neither any
Pension Plan nor any ERISA Affiliate Plan has an "accumulated funding
deficiency" (whether or not waived) within the meaning of SECTION 412 of
the Code or SECTION 302 of ERISA and all required payments to the PBGC
with respect to each Pension Plan or ERISA Affiliate Plan have been made
on or before their due dates. None of it, any of its subsidiaries or any
ERISA Affiliate (x) has PROVIDED, or would reasonably be expected to be
required to provide, security to any Pension Plan or to any ERISA
Affiliate Plan pursuant to SECTION 401(A)(29) of the Code, or (y) has
taken any action, or omitted to take any action, that has resulted, or
would reasonably be expected to result, in the imposition of a lien
under SECTION 412(N) of the Code or pursuant to ERISA.
(N) LABOR MATTERS. Neither it nor any of its subsidiaries is a party
to, or is bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is
it or any of its subsidiaries the subject of a proceeding asserting that it
or any such subsidiary has committed an unfair labor practice (within the
meaning of the National Labor Relations Act) or seeking to compel it or
such subsidiary to bargain with any labor organization as to wages and
conditions of employment, nor is there any strike or other labor dispute
involving it or any of its subsidiaries, pending or, to the best of its
knowledge, threatened, nor is it aware, as of the date of this Plan, of any
activity involving it or any of its subsidiaries' employees seeking to
certify a collective bargaining unit or engaging in any other organization
activity.
(O) INSURANCE. It and its subsidiaries have taken all requisite action
(including without limitation the making of claims and the giving of
notices) pursuant to its directors' and officers' liability insurance
policy or policies in order to preserve all rights thereunder with respect
to all matters (other than matters arising in connection with this Plan and
the transactions contemplated hereby) that are known to it.
(P) TAKEOVER LAWS; DISSENTERS RIGHTS. It has taken all action required
to be taken by it in order to exempt this Plan and the relevant Stock
Option Agreement, and the transactions contemplated hereby and thereby,
from, and this Plan and the relevant Stock Option Agreement and the
transactions contemplated hereby and thereby are exempt from, the
requirements of any "moratorium", "control share", "fair price", "affiliate
transaction", "control transaction", "business combination" or other
antitakeover laws and regulations (collectively, the "Takeover Laws") of
(i) the State of North Carolina in the case of the representations and
warranties of First Union, including ARTICLES 9 AND 9A of the NCBCA, and
(ii) the Commonwealth of Pennsylvania in the case of the representations
and warranties of CoreStates, including, without limitation, Chapter 25 of
the PBCL. Holders of CoreStates Common Stock and First Union Common Stock
do not have dissenters' or appraisal rights in connection with the
execution of this Plan or the consummation of any of the transactions
contemplated hereby.
(Q) ENVIRONMENTAL MATTERS. Except as Previously Disclosed, there are
no proceedings, claims, actions, or investigations of any kind, pending or
threatened, in any court, agency, or other government authority or in any
arbitral body, arising under any Environmental Law (as defined below);
there is no reasonable basis for any such proceeding, claim, action or
investigation; there are no agreements, orders, judgments or decrees by or
with any court, regulatory agency or other governmental authority, imposing
liability or obligation under or in respect of any Environmental Law; there
are and have been no Materials of Environmental Concern (as defined below)
or other conditions at any property (owned, operated, or otherwise used by,
or the subject of a security interest on behalf of, it or any of its
subsidiaries); and there are no reasonably anticipated future events,
conditions, circumstances, practices, plans, or legal requirements that
could give rise to obligations under any Environmental Law. "Environmental
Laws" means the statutes, rules, regulations, ordinances, codes, orders,
decrees, and any other laws (including common law) of any foreign, federal,
state, local, and any other governmental authority, regulating, relating to
or imposing liability or standards of conduct concerning pollution, or
protection of human health and safety or of the environment, as in effect
on or prior to the date of this Plan. "Materials of Environmental Concern"
means any hazardous or toxic substances, materials, wastes, pollutants, or
contaminants, including without limitation those defined or regulated as
such under any Environmental Law, and any other substance the presence of
which may give rise to liability under any Environmental Law.
(R) TAX REPORTS. (1) All material reports, declarations, estimates,
statements and returns (including without limitation information returns)
with respect to Taxes (as defined below) that are required to be filed by
or with respect to it or its subsidiaries, including without limitation
consolidated United States federal income tax returns of it and its
subsidiaries (collectively, the "Tax Returns"), have been timely filed, or
requests for extensions have been timely filed and have not expired, and
such Tax Returns were true, complete and accurate in all material respects;
(2) all taxes (which shall include without limitation, all United States
federal, state, local or foreign income, gross receipts, windfall profits,
severance, property, production, sales, use, license, excise, franchise,
employment, withholding or similar taxes imposed on
11
the income, properties or operations of it or its subsidiaries, together
with any interest, additions, or penalties with respect thereto and any
interest in respect of such additions or penalties, collectively "Taxes")
shown to be due on such Tax Returns have been paid in full or adequate
reserves have been established for the payment of such Taxes; (3) all Taxes
due with respect to completed and settled examinations have been paid in
full or adequate reserves have been established for the payment of such
Taxes; (4) no issues have been raised by the relevant taxing authority in
connection with the examination of any of such Tax Returns; and (5) no
waivers of statutes of limitations (excluding such statutes that relate to
years currently under examination by the Internal Revenue Service) have
been given by or requested with respect to any Taxes of it or any of its
subsidiaries.
(S) POOLING; REORGANIZATION. As of the date hereof, it is aware of no
reason why (i) the Corporate Merger will fail to qualify for
pooling-of-interests accounting treatment or (ii) the Mergers will fail to
qualify as reorganizations under SECTION 368(A) of the Code.
(T) REGULATORY APPROVALS. As of the date hereof, it is aware of no
reason why the regulatory approvals and consents referred to in SECTION
6.02 will not be received without the imposition of a condition or
requirement described in the proviso thereto.
(U) NO MATERIAL ADVERSE EFFECT. Since December 31, 1996, except as
Previously Disclosed in its SEC Documents filed with the SEC on or before
the date hereof or in any Section of its Disclosure Schedule, (i) it and
its subsidiaries have conducted their respective businesses in the ordinary
and usual course (excluding the incurrence of expenses related to this Plan
and the transactions contemplated hereby) and (ii) no event has occurred or
circumstance arisen that, individually or taken together with all other
facts, circumstances and events (described in any paragraph of SECTION 4.03
or otherwise), is reasonably likely to have a Material Adverse Effect with
respect to it.
(V) REQUIRED VOTE; RIGHTS PLAN.
(1) In the case of the representations and warranties of
CoreStates, the affirmative vote of the holders of a majority of the
shares of CoreStates Common Stock voting at the CoreStates Meeting (as
defined in SECTION 5.02) is the only vote of the holders of any class or
series of capital stock of CoreStates necessary to approve this Plan or
the Corporate Merger.
(2) In the case of the representations and warranties of First
Union, the affirmative vote of the holders of a majority of (a) the
outstanding shares of First Union Common Stock is the only vote of the
holders of any class or series of capital stock of First Union necessary
to approve this Plan, and (b) the total votes cast (provided that the
total votes cast represent over 50% of all securities entitled to vote)
by the holders of First Union Common Stock is the only vote of the
holders of any class or series of capital stock of First Union necessary
to approve the amendment to its articles or incorporation to increase
the number of authorized shares of First Union Common Stock from
750,000,000 to 2,000,000,000.
(3) In the case of the representations and warranties of First
Union, First Union has heretofore provided CoreStates with a complete
and correct copy of the First Union Rights Agreement, including all
amendments and exhibits thereto. First Union has taken all necessary
action so that none of the execution of this Agreement or the First
Union Stock Option Agreement, the acquisition of shares of First Union
Common Stock upon exercise of the option contained in the First Union
Stock Option Agreement or the consummation of the Mergers will (i) cause
the Rights issued pursuant to the First Union Rights Agreement to become
exercisable, (ii) cause any person to become an Acquiring Person (as
such term is defined in the First Union Rights Agreement) or (iii) give
rise to a Separation Time (as such term is defined in the First Union
Rights Agreement).
V. COVENANTS
CoreStates hereby covenants to and agrees with First Union, and First Union
hereby covenants to and agrees with CoreStates, that:
5.01. REASONABLE BEST EFFORTS. Subject to the terms and conditions of this
Plan, it shall use its reasonable best efforts in good faith to take, or cause
to be taken, all actions, and to do, or cause to be done, all things necessary,
proper or desirable, or advisable under applicable laws, so as to permit
consummation of the Mergers as promptly as reasonably practicable and to
otherwise enable consummation of the transactions contemplated hereby,
including, without limitation, obtaining (and cooperating with the other party
hereto in obtaining) any consent, authorization, order or approval of, or any
exemption by, any Regulatory Authority and any other third party that is
required to be obtained by First Union or CoreStates or any of their
12
respective subsidiaries in connection with the Mergers and the other
transactions contemplated by this Plan, and using reasonable efforts to lift or
rescind any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the transactions contemplated hereby,
and using reasonable efforts to defend any litigation seeking to enjoin, prevent
or delay the consummation of the transactions contemplated hereby or seeking
material damages, and each shall cooperate fully with the other parties hereto
to that end.
5.02. STOCKHOLDER APPROVALS. Each of them shall take, in accordance with
applicable law, NYSE rules and its respective articles of incorporation and
by-laws, all action necessary to convene, respectively, (A) an appropriate
meeting of stockholders of First Union to consider and vote upon (i) the
approval of an amendment to the articles of incorporation of First Union to
increase the number of authorized shares of First Union Common Stock from
750,000,000 to 2,000,000,000 and (ii) the approval of this Plan, and (iii) any
other stockholder approval matters required for consummation of the Corporate
Merger and the transactions contemplated hereby (the "First Union Meeting"), and
(B) an appropriate meeting of stockholders of CoreStates to consider and vote
upon the approval of this Plan and any other stockholder approval matters
required for consummation of the Corporate Merger and the transactions
contemplated hereby (the "CoreStates Meeting"; each of the First Union Meeting
and the CoreStates Meeting, a "Meeting"), respectively, as promptly as
practicable after the Registration Statement (as defined in SECTION 5.03) is
declared effective. The Board of Directors of each of First Union and CoreStates
will recommend approval of such matters, and each of First Union and CoreStates
will take all reasonable lawful action to solicit such approval by its
respective stockholders, provided that each of First Union and CoreStates may
withdraw, modify or change in an adverse manner to the other party its
recommendations if the Board of Directors of such party, after having consulted
with and based upon the advice of outside counsel, determines in good faith that
the failure to so withdraw, modify or change its recommendation could constitute
a breach of the fiduciary duties of such party's Board of Directors under
applicable law. In addition, nothing in this SECTION 5.02 or elsewhere in this
Plan shall prohibit accurate disclosure by either party of information that is
required to be disclosed in the Registration Statement or the Joint Proxy
Statement or any other document required to be filed with the SEC (including
without limitation a Solicitation/Recommendation Statement on Schedule 14D-9) or
otherwise required to be publicly disclosed by applicable law or regulation or
the rules of the NYSE.
5.03. REGISTRATION STATEMENT.
(A) Each of First Union and CoreStates agrees to cooperate in the
preparation of a registration statement on Form S-4 (the "Registration
Statement") to be filed by First Union with the SEC in connection with the
issuance of First Union Common Stock in the Corporate Merger (including the
joint proxy statement and prospectus and other proxy solicitation materials
of First Union and CoreStates constituting a part thereof, the "Joint Proxy
Statement"). Each of CoreStates and First Union agrees to use all
reasonable efforts to cause the Registration Statement to be declared
effective under the Securities Act as promptly as reasonably practicable
after filing thereof. First Union also agrees to use all reasonable efforts
to obtain all necessary state securities law or "Blue Sky" permits and
approvals required to carry out the transactions contemplated by this Plan.
CoreStates agrees to furnish to First Union all information concerning
CoreStates, its subsidiaries, officers, directors and stockholders as may
be reasonably requested in connection with the foregoing.
(B) Each of CoreStates and First Union agrees, as to itself and its
subsidiaries, that none of the information supplied or to be supplied by it
for inclusion or incorporation by reference in (i) the Registration
Statement will, at the time the Registration Statement and each amendment
or supplement thereto, if any, becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Joint Proxy Statement and
any amendment or supplement thereto will, at the date of mailing to
stockholders and at the times of the First Union Meeting and the CoreStates
Meeting, contain any statement which, in the light of the circumstances
under which such statement is made, will be false or misleading with
respect to any material fact, or which will omit to state any material fact
necessary in order to make the statements therein not false or misleading
or necessary to correct any statement in any earlier statement in the Joint
Proxy Statement or any amendment or supplement thereto. Each of First Union
and CoreStates agrees that the Joint Proxy Statement (except, in the case
of First Union, with respect to portions thereof prepared by CoreStates,
and except, in the case of CoreStates, with respect to portions thereof
prepared by First Union) will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations of
the SEC thereunder, and the Registration Statement (except, in the case of
First Union, with respect to portions thereof prepared by CoreStates, and
except, in the case of CoreStates, with respect to portions thereof
prepared by First Union) will comply as to form in all material respects
with the requirements of the Securities Act and the rules and regulations
of the SEC thereunder.
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(C) In the case of First Union, First Union will advise CoreStates,
promptly after First Union receives notice thereof, of the time when the
Registration Statement has become effective or any supplement or amendment
has been filed, of the issuance of any stop order or the suspension of the
qualification of the First Union Common Stock for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for any such
purpose, or of any request by the SEC for the amendment or supplement of
the Registration Statement or for additional information.
5.04. PRESS RELEASES. It will not, without the prior approval of the other,
issue any press release or written statement for general circulation relating to
the transactions contemplated hereby or the Stock Option Agreements, except as
otherwise required by applicable law or the rules of the NYSE.
5.05. ACCESS; INFORMATION.
(A) Upon reasonable notice, it shall afford the other party and its
officers, employees, counsel, accountants and other authorized
representatives, access, during normal business hours throughout the period
prior to the Effective Date, to all of its properties, books, contracts,
commitments and records and, during such period, it shall furnish promptly
to the other (i) a copy of each material report, schedule and other
document filed by it pursuant to the requirements of federal or state
securities or banking laws, and (ii) all other information concerning the
business, properties and personnel of it as the other may reasonably
request. Neither First Union nor CoreStates, nor any of their respective
subsidiaries, shall be required to provide access to or to disclose
information where such access or disclosure would violate or prejudice the
rights of its customers, jeopardize the attorney-client or similar
privilege with respect to such information or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or agreement entered
into prior to the date hereof. The parties will use their reasonable best
efforts to make appropriate substitute disclosure arrangements, to the
extent practicable, in circumstances in which the restrictions of the
preceding sentence apply.
(B) It will not use any information obtained pursuant to this SECTION
5.05 for any purpose unrelated to the consummation of the transactions
contemplated by this Plan and, if this Plan is terminated, will hold all
information and documents obtained pursuant to this paragraph in confidence
(as provided in SECTION 8.06) unless and until such time as such
information or documents become publicly available other than by reason of
any action or failure to act by it or as it is advised by counsel that any
such information or document is required by applicable law to be disclosed.
(C) No investigation by either party of the business and affairs of
the other shall affect or be deemed to modify or waive any representation,
warranty, covenant or agreement in this Plan, or the conditions to either
party's obligation to consummate the transactions contemplated by this
Plan.
5.06. ACQUISITION PROPOSALS. Without the prior written consent of the
other, neither CoreStates nor First Union shall, and each of them shall cause
its respective subsidiaries and its and its subsidiaries' officers and directors
not to, solicit or encourage inquiries with respect to, or engage in
negotiations concerning, or provide any confidential information or assistance
to, or have any discussions with, any person relating to, any tender offer or
exchange offer for, or any proposal for the acquisition of a substantial equity
interest in, or a substantial portion of the assets or deposits of, such party
or any of its significant subsidiaries (each an "Acquisition Proposal").
Notwithstanding the foregoing, each of CoreStates and First Union may, and may
authorize and permit its officers, directors, agents, advisors, attorneys,
accountants and affiliates (collectively, "Representatives") to, provide third
parties with confidential information, have discussions or negotiations with or
otherwise facilitate any effort or attempt by such third party to make or
implement an Acquisition Proposal not solicited in violation of this Agreement
if such party's Board of Directors, after having consulted with and based upon
the advice of outside counsel, determines in good faith that the failure to take
such actions could constitute a breach of the fiduciary duties of such party's
Board of Directors under applicable law; PROVIDED, that such party shall
promptly advise the other party following the receipt of any Acquisition
Proposal and the material details thereof; and PROVIDED, FURTHER, that prior to
delivery of confidential information relating to such party or providing access
to such party's books, records or properties in connection therewith, such party
shall have entered into a confidentiality agreement substantially similar to the
one previously entered into between CoreStates and First Union. Nothing
contained in this SECTION 5.06 shall prohibit the Board of Directors of either
party from complying with Rule 14e-2 promulgated under the Exchange Act with
regard to a tender offer or exchange offer. It shall instruct its and its
subsidiaries' Representatives to refrain from any violation of this SECTION
5.06.
5.07. AFFILIATE AGREEMENTS.
(A) Not later than the 15th day prior to the mailing of the Joint
Proxy Statement, CoreStates shall deliver to First Union a schedule of each
person that, to the best of its knowledge, is or is reasonably likely to
be, as of the date of the CoreStates Meeting, deemed to be an "affiliate"
of CoreStates (each, a "CoreStates Affiliate") as that term is used in Rule
145 under the Securities Act or SEC Accounting Series Releases 130 and 135.
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(B) CoreStates shall use its reasonable best efforts to cause each
person who may be deemed to be a CoreStates Affiliate to execute and
deliver to First Union on or before the date of mailing of the Proxy
Statement an agreement in the form attached hereto as EXHIBIT C. Such
CoreStates Affiliates will not receive New Certificates until such
agreement is delivered to First Union.
5.08. CERTAIN MODIFICATIONS; RESTRUCTURING CHARGES. CoreStates and First
Union shall consult with respect to their loan, litigation and real estate
valuation policies and practices (including loan classifications and levels of
reserves) and CoreStates shall make such modifications or changes to its
policies and practices, if any, and at such date prior to the Effective Time, as
may be mutually agreed upon. CoreStates and First Union shall also consult with
respect to the character, amount and timing of restructuring charges to be taken
by each of them in connection with the transactions contemplated hereby and
shall take such charges in accordance with generally accepted accounting
principles, as may be mutually agreed upon. No party's representations,
warranties and covenants contained in this Plan shall be deemed to be untrue or
breached in any respect for any purpose as a consequence of any modifications or
changes to such policies and practices which may be undertaken on account of
this SECTION 5.08.
5.09. TAKEOVER LAWS. No party hereto shall take any action that would cause
the transactions contemplated by this Plan or the Stock Option Agreements to be
subject to requirements imposed by any Takeover Law and each of them shall take
all necessary steps within its control to exempt (or ensure the continued
exemption of) the transactions contemplated by this Plan from, or if necessary
challenge the validity or applicability of, any applicable Takeover Law, as now
or hereafter in effect.
5.10. NO RIGHTS TRIGGERED. Each of CoreStates and First Union shall take
all necessary steps to ensure that the entering into of this Plan and the Stock
Option Agreements and the consummation of the transactions contemplated hereby
and thereby and any other action or combination of actions, or any other
transactions contemplated hereby or thereby, do not and will not result in the
grant of any rights to any person (A) under its articles of incorporation or
by-laws, or (B) under any material agreement to which it or any of its
subsidiaries is a party.
5.11. SHARES LISTED. In the case of First Union, First Union shall use its
reasonable best efforts to list, prior to the Effective Date, on the NYSE, upon
official notice of issuance, the shares of First Union Common Stock to be issued
to the holders of CoreStates Common Stock in the Corporate Merger.
5.12. REGULATORY APPLICATIONS.
(A) Each party shall promptly (i) cause FUNB, in the case of First
Union, and CoreStates Bank, in the case of CoreStates, to adopt and approve
the transactions contemplated by this Plan, (ii) prepare and submit
applications to the appropriate Regulatory Authorities and (iii) make all
other appropriate filings to secure all other approvals, consents and
rulings, which are necessary for it to consummate the Mergers.
(B) Each of First Union and CoreStates agrees to cooperate with the
other and, subject to the terms and conditions set forth in this Plan, use
its reasonable best efforts to prepare and file all necessary
documentation, to effect all necessary applications, notices, petitions,
filings and other documents, and to obtain all necessary permits, consents,
orders, approvals and authorizations of, or any exemption by, all third
parties and Regulatory Authorities necessary or advisable to consummate the
transactions contemplated by this Plan, including without limitation the
regulatory approvals referred to in SECTION 6.02. Each of First Union and
CoreStates shall have the right to review in advance, and to the extent
practicable each will consult with the other, in each case subject to
applicable laws relating to the exchange of information, with respect to
all material written information submitted to, any third party or any
Regulatory Authorities in connection with the transactions contemplated by
this Plan. In exercising the foregoing right, each of the parties hereto
agrees to act reasonably and as promptly as practicable. Each party hereto
agrees that it will consult with the other party hereto with respect to the
obtaining of all material permits, consents, approvals and authorizations
of all third parties and Regulatory Authorities necessary or advisable to
consummate the transactions contemplated by this Plan and each party will
keep the other party apprised of the status of material matters relating to
completion of the transactions contemplated hereby.
(C) Each party agrees, upon request, to furnish the other parties with
all information concerning itself, its subsidiaries, directors, officers
and stockholders and such other matters as may be reasonably necessary or
advisable in connection with any filing, notice or application made by or
on behalf of such other party or any of its subsidiaries to any Regulatory
Authority.
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5.13. INDEMNIFICATION.
(A) First Union shall indemnify, defend and hold harmless the present
and former directors, officers and employees of CoreStates and its
subsidiaries (each, an "Indemnified Party") against all costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities (collectively, "Costs") incurred in connection with
any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Plan and the CoreStates
Stock Option Agreement) to the fullest extent that such persons are
permitted to be indemnified under the laws of the Commonwealth of
Pennsylvania and CoreStates's articles of incorporation and by-laws as in
effect on the date hereof (and during such period First Union shall also
advance expenses (including expenses constituting Costs described in
SECTION 5.13(E)) as incurred to the fullest extent permitted under
applicable law, provided that the person to whom expenses are advanced
provides an undertaking to repay such advances if it is ultimately
determined that such person is not entitled to indemnification with no bond
or security to be required); provided that any determination required to be
made with respect to whether an officer's, director's or employee's conduct
complies with the standards set forth under Pennsylvania law and such
articles of incorporation and by-laws shall be made by independent counsel
(which shall not be counsel that provides material services to First Union)
selected by First Union and reasonably acceptable to such officer, director
or employee. First Union's obligations under this SECTION 5.13(A) shall
continue in full force and effect for a period of six years after the
Effective Date; provided that all rights to indemnification in respect of
any claim, action, suit, proceeding or investigation made, asserted or
commenced within such six year period shall continue until the final
disposition of such claim, action, suit, proceeding or investigation.
(B) First Union shall maintain CoreStates's existing directors' and
officers' liability insurance policy (or a policy providing comparable
coverage and amounts on terms no less favorable to the persons currently
covered by CoreStates's existing policy, including First Union's existing
policy if it meets the foregoing standard) covering persons who are
currently covered by such insurance for a period of three years after the
Effective Date.
(C) Any Indemnified Party wishing to claim indemnification under
SECTION 5.13(A), upon learning of any claim, action, suit, proceeding or
investigation described above, shall promptly notify First Union thereof;
provided that the failure so to notify shall not affect the obligations of
First Union under SECTION 5.13(A) unless and to the extent such failure
materially increases First Union's liability under such subsection (A).
(D) If First Union or any of its successors or assigns shall
consolidate with or merge into any other entity and shall not be the
continuing or surviving entity of such consolidation or merger or shall
transfer all or substantially all of its assets to any entity, then and in
each case, proper provision shall be made so that the successors and
assigns of First Union shall assume the obligations set forth in this
SECTION 5.13.
(E) First Union shall pay all reasonable Costs, including attorneys'
fees, that may be incurred by any Indemnified Party in enforcing the
indemnity and other obligations provided for in this SECTION 5.13. The
rights of each Indemnified Party hereunder shall be in addition to any
other rights such Indemnified Party may have under applicable law.
5.14. BENEFIT PLANS.
(A) Except as Previously Disclosed, as soon as administratively
practicable after the Effective Time, but not before January 1, 1999,
unless administratively impractical or required by law, employees of
CoreStates and its subsidiaries shall be generally entitled to participate
in the pension, benefit, and similar plans of First Union on substantially
the same terms and conditions as employees of First Union and its
subsidiaries (without duplication with respect to pension, benefit and
similar plans provided by CoreStates that survive the Effective Time) and
until such time as administratively practicable the plans of CoreStates
shall remain in effect without any adverse amendments except as required by
law; PROVIDED, HOWEVER, that the plans currently in effect for Congress
Financial Corporation shall remain in effect until December 31, 1998,
unless payroll conversion requires an earlier conversion. For the purpose
of determining eligibility to participate in such plans and the vesting of
benefits under such plans (but not for the accrual of benefits under such
plans), First Union shall give effect to years of service with CoreStates
or its subsidiaries, as the case may be, as if such service had been with
First Union or its subsidiaries. First Union intends to merge the
CoreStates tax-qualified defined benefit plan (the "CoreStates DB Plan")
into the First Union tax-qualified defined benefit plan ("First Union DB
Plan"). Effective as of the merger of such plans, First Union will cause
the following to occur: (1) the First Union DB Plan will provide that
participants in the CoreStates DB Plan who are employed by First Union as
of the date of such merger (the "CoreStates Merger Participants") will
receive service credit for purposes of benefit accrual under the First
Union DB Plan to the extent the CoreStates Merger Participants have earned
service credit for purposes of benefit accrual under the
16
CoreStates DB Plan as of the merger of such plans; and (2) the First Union
DB Plan benefit for CoreStates Merger Participants will be the greater of
(a) the CoreStates DB Plan benefit determined as of the merger of such
plans or (b) the First Union DB Plan benefit (determined by including
benefit accrual service described in the preceding sentence).
(B) SEVERANCE POLICY AND OTHER AGREEMENTS. Any employee of CoreStates
or its subsidiaries at the Effective Time whose employment is terminated by
his or her employer (or who otherwise would be eligible for benefits
pursuant to CoreStates' severance plan and/or CoreStates' outplacement
policy, as amended through and as in effect on the date immediately
preceding the Effective Time (the "Severance Plan")) prior to the first
anniversary of the Effective Time shall receive severance payments and
benefits no less favorable than those provided pursuant to the Severance
Plan. For purposes of calculating the benefits that would be payable
pursuant to the Severance Plan, the employees' period of service shall
include all of their cumulative period of service with First Union,
CoreStates or any of their respective affiliates. First Union shall honor
or cause to be honored all severance agreements and employment agreements
with CoreStates's directors, officers and employees, and shall provide
CoreStates' employees with outplacement services no less favorable than
that in effect for First Union employees.
(C) 1997 AND 1998 BONUS. First Union will maintain, or cause to be
maintained, CoreStates' bonus plans, as in effect on the date hereof,
through the end of the 1998 fiscal year, with bonuses to be paid to the
employees participating thereunder at the greater of (i) the target level,
if applicable, or (ii) such bonus as the employee would have earned if the
transactions contemplated by this Agreement had not occurred, in all events
on a basis consistent with past practices.
(D) CREDIT FOR DEDUCTIBLES. First Union will, or will cause its
affiliates to, (i) waive all limitations as to preexisting conditions,
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the employees of CoreStates under any welfare
plan that such employees may be eligible to participate in after the
Effective Time, and (ii) provide each employee of CoreStates with credit
for any co-payments and deductibles incurred under the CoreStates medical
plans during the calendar year in which CoreStates employees become covered
under similar plans offered by First Union.
5.15. ACCOUNTANTS' LETTERS. Each of CoreStates and First Union shall use
its reasonable best efforts to cause to be delivered to the other party, and to
First Union's directors and officers who sign the Registration Statement, a
letter of KPMG Peat Marwick LLP and Ernst & Young LLP, respectively, independent
auditors, dated (i) the date on which the Registration Statement shall become
effective and (ii) a date shortly prior to the Effective Date, and addressed to
such other party, and such directors and officers, in form and substance
customary for "comfort" letters delivered by independent accountants in
accordance with Statement on Auditing Standards No. 72.
5.16. DIVIDEND COORDINATION. The CoreStates Board shall cause its regular
quarterly dividend record dates and payment dates for CoreStates Common Stock to
be the same as First Union's regular quarterly dividend record dates and payment
dates for First Union Common Stock (beginning in the quarter following the
quarter in which this Plan is executed), and CoreStates shall not thereafter
change its regular dividend payment dates and record dates.
5.17. NOTIFICATION OF CERTAIN MATTERS. Each of CoreStates and First Union
shall give prompt notice to the other of any fact, event or circumstance known
to it that (i) is reasonably likely, individually or taken together with all
other facts, events and circumstances known to it, to result in any Material
Adverse Effect with respect to it or (ii) would cause or constitute a material
breach of any of its representations, warranties, covenants or agreements
contained herein.
VI. CONDITIONS TO CONSUMMATION OF THE CORPORATE MERGER
The obligations of each of the parties to consummate the Corporate Merger
is conditioned upon the satisfaction at or prior to the Effective Time of each
of the following:
6.01. STOCKHOLDER VOTE. Approval of (i) this Plan by the requisite vote of
the stockholders of CoreStates, and (ii) this Plan and the amendment to its
articles of incorporation referred to in SECTION 5.02, by the requisite vote of
the stockholders of First Union;
6.02. REGULATORY APPROVALS. Procurement by First Union and CoreStates of
all requisite approvals and consents of Regulatory Authorities and the
expiration of the statutory waiting period or periods relating thereto for the
Corporate Merger; PROVIDED, HOWEVER, that no such approval or consent shall have
imposed any condition or requirement (other than conditions or requirements
Previously Disclosed) which would so materially and adversely impact the
economic or business benefits to First Union or CoreStates of the transactions
contemplated by this Plan that, had such condition or requirement been known,
such party would not, in its reasonable judgment, have entered into this Plan;
17
6.03. THIRD PARTY CONSENTS. All consents or approvals of all persons (other
than Regulatory Authorities) required for the consummation of the Corporate
Merger shall have been obtained and shall be in full force and effect, unless
the failure to obtain any such consent or approval is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on CoreStates
or First Union;
6.04. NO INJUNCTION, ETC. No order, decree or injunction of any court or
agency of competent jurisdiction shall be in effect, and no law, statute or
regulation shall have been enacted or adopted, that enjoins, prohibits or makes
illegal consummation of the Corporate Merger;
6.05. POOLING LETTERS. First Union and CoreStates shall have received from
(i) KPMG Peat Marwick LLP, independent auditors for First Union, and (ii) Ernst
& Young LLP, independent auditors for CoreStates, letters, dated the date of or
shortly prior to each of the mailing date of the Joint Proxy Statement and the
Effective Date, to the effect that such auditors are not aware of any facts or
circumstances which might cause the Corporate Merger not to qualify for pooling
of interests accounting treatment;
6.06. REPRESENTATIONS, WARRANTIES AND COVENANTS OF FIRST UNION. (i) Each of
the representations and warranties contained herein of First Union shall be true
and correct as of the date of this Plan and upon the Effective Date with the
same effect as though all such representations and warranties had been made on
the Effective Date, except for any such representations and warranties made as
of a specified date, which shall be true and correct as of such date, in any
case subject to the standards established by SECTION 4.02, (ii) each and all of
the agreements and covenants of First Union to be performed and complied with
pursuant to this Plan on or prior to the Effective Date shall have been duly
performed and complied with in all material respects, and (iii) CoreStates shall
have received a certificate signed by the Chief Financial Officer of First
Union, dated the Effective Date, to the effect set forth in clauses (i) and
(ii);
6.07. REPRESENTATIONS, WARRANTIES AND COVENANTS OF CORESTATES. (i) Each of
the representations and warranties contained herein of CoreStates shall be true
and correct as of the date of this Plan and upon the Effective Date with the
same effect as though all such representations and warranties had been made on
the Effective Date, except for any such representations and warranties made as
of a specified date, which shall be true and correct as of such date, in any
case subject to the standards established by SECTION 4.02, (ii) each and all of
the agreements and covenants of CoreStates to be performed and complied with
pursuant to this Plan on or prior to the Effective Date shall have been duly
performed and complied with in all material respects, and (iii) First Union
shall have received a certificate signed by the Chief Financial Officer of
CoreStates, dated the Effective Date, to the effect set forth in clauses (i) and
(ii);
6.08. EFFECTIVE REGISTRATION STATEMENT. The Registration Statement shall
have become effective 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 or any other
Regulatory Authority;
6.09. BLUE-SKY PERMITS. First Union shall have received all state
securities laws and "blue sky" permits necessary to consummate the Corporate
Merger;
6.10. TAX OPINIONS. First Union and CoreStates shall have received an
opinion from (i) Alston & Bird LLP, special tax counsel to First Union, in the
case of First Union, and (ii) Simpson Thacher & Bartlett, special tax counsel to
CoreStates, in the case of CoreStates, to the effect that (a) the Corporate
Merger constitutes a reorganization under SECTION 368(A) of the Code, and (b) no
gain or loss will be recognized by stockholders of CoreStates who receive shares
of First Union Common Stock in exchange for their shares of CoreStates Common
Stock, except that gain or loss may be recognized as to cash received in lieu of
fractional share interests; in rendering their opinion, such counsel may require
and rely upon representations and agreements, including those contained in
certificates of officers of First Union, CoreStates, and others; and
6.11. NYSE LISTING. The shares of First Union Common Stock issuable
pursuant to this Plan shall have been approved for listing on the NYSE, subject
to official notice of issuance;
PROVIDED, HOWEVER, that a failure to satisfy any of the conditions set forth in
SECTION 6.07 shall only constitute conditions if asserted by First Union, and a
failure to satisfy any of the conditions set forth in SECTION 6.06 shall only
constitute conditions if asserted by CoreStates.
VII. TERMINATION
7.01. TERMINATION. This Plan may be terminated, and the Mergers may be
abandoned:
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(A) MUTUAL CONSENT. At any time prior to the Effective Time, by the
mutual consent of First Union and CoreStates, if the Board of Directors of
each so determines by vote of a majority of the members of its entire
Board.
(B) BREACH. At any time prior to the Effective Time, by First Union or
CoreStates, if its Board of Directors so determines by vote of a majority
of the members of its entire Board, in the event of either: (i) a breach by
the other party of any representation or warranty contained herein (subject
to the standards established by SECTION 4.02), which breach cannot be or
has not been cured within 30 days after the giving of written notice to the
breaching party of such breach; or (ii) a material breach by the other
party of any of the covenants or agreements contained herein, which breach
cannot be or has not been cured within 30 days after the giving of written
notice to the breaching party of such breach; provided that First Union or
CoreStates may not terminate this Plan pursuant to this SECTION 7.01(B) at
any time when such party is in material breach of any representation,
warranty, covenant or other agreement of such party contained herein.
(C) DELAY. At any time prior to the Effective Time, by First Union or
CoreStates, if its Board of Directors so determines by vote of a majority
of the members of its entire Board, in the event that the Corporate Merger
is not consummated by September 30, 1998, except to the extent that the
failure of the Corporate Merger then to be consummated arises out of or
results from the knowing failure of the party seeking to terminate pursuant
to this SECTION 7.01(C) to perform or observe the covenants and agreements
of such party set forth herein.
(D) NO APPROVAL. By CoreStates or First Union, if its Board of
Directors so determines by a vote of a majority of the members of its
entire Board, in the event (i) the consent of the Board of Governors of the
Federal Reserve System for consummation of the Corporate Merger shall have
been denied by final nonappealable action of such Regulatory Authority or
(ii) any stockholder approval required by SECTION 6.01 herein is not
obtained at the CoreStates Meeting or the First Union Meeting.
(E) FAILURE TO RECOMMEND, ETC. At any time prior to the CoreStates
Meeting, by First Union if the Board of Directors of CoreStates shall have
failed to make its recommendation referred to in SECTION 5.02, withdrawn
such recommendation or modified or changed such recommendation in a manner
adverse to the interests of First Union; or at any time prior to the First
Union Meeting, by CoreStates if the Board of Directors of First Union shall
have failed to make its recommendation referred to in SECTION 5.02,
withdrawn such recommendation or modified or changed such recommendation in
a manner adverse to the interests of CoreStates.
(F) POSSIBLE ADJUSTMENT. By CoreStates, if its Board of Directors so
determines by a vote of a majority of the members of its entire Board, at
any time during the ten-day period commencing two days after the
Determination Date, if either (x) both of the following conditions are
satisfied:
(1) the Average Closing Price on the Determination Date of shares
of First Union Common Stock shall be less than the product of 0.85 and
the Starting Price; and
(2) (i) the number obtained by dividing the Average Closing Price
on such Determination Date by the Starting Price (such number being
referred to herein as the "First Union Ratio") shall be less than (ii)
the number obtained by dividing the Index Price on the Determination
Date by the Index Price on the Starting Date and subtracting 0.15 from
the quotient in this clause (x)(2) (ii) (such number being referred to
herein as the "Index Ratio");
or (y) the Average Closing Price on the Determination Date of shares of
First Union Common Stock shall be less than the product of 0.75 and the
Starting Price;
SUBJECT, HOWEVER, to the following four sentences. If CoreStates elects to
exercise its termination right pursuant to the immediately preceding
sentence, it shall give prompt written notice to First Union which notice
shall specify which of clauses (x) or (y) is applicable (or if both would
be applicable, which clause is being invoked); provided that such notice of
election to terminate may be withdrawn at any time within the
aforementioned ten-day period. During the five-day period commencing with
its receipt of such notice, First Union shall have the option in the case
of a failure to satisfy the condition in clause (x), of adjusting the
Exchange Ratio to equal the lesser of (i) a number equal to a quotient
(rounded to the nearest one-ten-thousandth), the numerator of which is the
product of 0.85, the Starting Price and the Exchange Ratio (as then in
effect) and the denominator of which is the Average Closing Price, and (ii)
a number equal to a quotient (rounded to the nearest one-ten-thousandth),
the numerator of which is the Index Ratio multiplied by the Exchange Ratio
(as then in effect) and the denominator of which is the First Union Ratio.
During such five-day period, First Union shall have the option, in the case
of a failure to satisfy the condition in clause (y), to elect to increase
the Exchange Ratio to equal a number equal to a quotient (rounded to the
nearest one-ten-thousandth), the numerator of which is the product of 0.75,
the Starting Price and the Exchange Ratio (as then in effect) and the
denominator of which is the Average Closing
19
Price. If First Union makes an election contemplated by either of the two
preceding sentences, within such five-day period, it shall give prompt
written notice to CoreStates of such election and the revised Exchange
Ratio, whereupon no termination shall have occurred pursuant to this
SECTION 7.01(F) and this Plan shall remain in effect in accordance with its
terms (except as the Exchange Ratio shall have been so modified), and any
references in this Plan to "Exchange Ratio" shall thereafter be deemed to
refer to the Exchange Ratio as adjusted pursuant to this SECTION 7.01(F).
For purposes of this SECTION 7.01(F), the following terms shall have the
meanings indicated:
"Average Closing Price" means the average of the daily last sale
prices of First Union Common Stock as reported on the NYSE Composite
Transactions tape (as reported in THE WALL STREET JOURNAL or, if not
reported therein, in another mutually agreed upon authoritative source) for
the ten consecutive full trading days in which such shares are traded on
the NYSE ending at the close of trading on the Determination Date.
"Determination Date" means the date on which approval of the Federal
Reserve Board required for consummation of the Corporate Merger shall be
received.
"Index Group" means the group of each of the 14 bank holding companies
listed below, the common stock of all of which shall be publicly traded and
as to which there shall not have been, since the Starting Date and before
the Determination Date, an announcement of a proposal for such company to
be acquired or for such company to acquire another company or companies in
transactions with a value exceeding 25% of the acquiror's market
capitalization as of the Starting Date. In the event that the common stock
of any such company ceases to be publicly traded or any such announcement
is made with respect to any such company, such company will be removed from
the Index Group, and the weights (which have been determined based on the
number of outstanding shares of common stock) redistributed proportionately
for purposes of determining the Index Price. The 14 bank holding companies
and the weights attributed to them are as follows:
BANK HOLDING COMPANY WEIGHTING
NationsBank Corporation............................................ 18.77%
BankAmerica Corporation............................................ 16.48
Banc One Corp...................................................... 10.66
U.S. Bancorp....................................................... 8.22
First Chicago NBD Corporation...................................... 7.02
Fleet Financial Group, Inc......................................... 5.20
PNC Financial Corp................................................. 4.88
SunTrust Banks, Inc................................................ 4.71
KeyCorp............................................................ 4.50
National City Corporation.......................................... 4.45
Mellon Bank Corporation............................................ 4.33
Norwest Corporation................................................ 4.06
Wachovia Corporation............................................... 3.90
Comerica Incorporated.............................................. 2.82
100.00%
"Index Price" on a given date means the weighted average (weighted in
accordance with the factors listed above) of the closing prices of the
companies composing the Index Group.
"Starting Date" means the first full trading day following the
issuance of a press release announcing this Plan.
"Starting Price" shall mean the last sale price per share of First
Union Common Stock on the Starting Date, as reported by the NYSE Composite
Transactions tape (as reported in THE WALL STREET JOURNAL or, if not
reported therein, in another mutually agreed upon authoritative source).
If any company belonging to the Index Group or First Union declares or
effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the Starting
Date and the Determination Date, the prices for the common stock of such
company or First Union shall be appropriately adjusted for the purposes of
applying this SECTION 7.01(F).
7.02. EFFECT OF TERMINATION AND ABANDONMENT. In the event of termination of
this Plan and the abandonment of the Mergers pursuant to this ARTICLE VII, no
party to this Plan shall have any liability or further obligation to any other
party
20
hereunder except (i) as set forth in SECTION 8.01, (ii) that each of the Stock
Option Agreements shall be governed by its own terms as to termination and (iii)
that termination will not relieve a breaching party from liability for any
willful breach of this Plan giving rise to such termination.
VIII. OTHER MATTERS
8.01. SURVIVAL. All representations, warranties, agreements and covenants
contained in this Plan shall not survive the Effective Time or termination of
this Plan if this Plan is terminated prior to the Effective Time; PROVIDED,
HOWEVER, if the Effective Time occurs, the agreements of the parties in SECTIONS
5.13, 5.14, 8.01, 8.04 AND 8.09 shall survive the Effective Time, and if this
Plan is terminated prior to the Effective Time, the agreements of the parties in
SECTIONS 5.05(B), 7.02, 8.01, 8.02, 8.04, 8.05, 8.06, 8.07 AND 8.09, shall
survive such termination.
8.02. WAIVER; AMENDMENT. Prior to the Effective Time, any provision of this
Plan may be (i) waived by the party benefitted by the provision, or (ii) amended
or modified at any time, by an agreement in writing among the parties hereto
approved by their respective Boards of Directors and executed in the same manner
as this Plan, except that, after the CoreStates Meeting the consideration to be
received by the stockholders of CoreStates for each share of CoreStates Common
Stock shall not thereby be decreased.
8.03. COUNTERPARTS. This Plan may be executed in one or more counterparts,
each of which shall be deemed to constitute an original.
8.04. GOVERNING LAW. This Plan shall be governed by, and interpreted in
accordance with, the laws of the State of North Carolina, without regard to the
conflict of law principles thereof (except to the extent that mandatory
provisions of Pennsylvania or federal law govern).
8.05. EXPENSES. Each party hereto will bear all expenses incurred by it in
connection with this Plan and the transactions contemplated hereby, except that
printing expenses and SEC filing fees shall be shared equally between CoreStates
and First Union.
8.06. CONFIDENTIALITY. Except as otherwise provided in SECTION 5.05(B),
each of the parties hereto and their respective agents, attorneys and
accountants will maintain the confidentiality of all information provided in
connection herewith which has not been publicly disclosed (other than by any
party in violation of this Plan) unless and until it is advised by counsel that
any such information or document is required by applicable law to be disclosed.
8.07. NOTICES. All notices, requests and other communications hereunder to
a party shall be in writing and shall be deemed given if personally delivered,
telecopied (with confirmation) or mailed by registered or certified mail (return
receipt requested) to such party at its address set forth below or such other
address as such party may specify by notice to the parties hereto.
If to First Union, to: First Union Corporation
One First Union Center
Charlotte, North Carolina 28288
Attention: Edward E. Crutchfield
Chairman and Chief
Executive Officer
Telecopier: (704)374-3425
With a copy to: Marion A. Cowell, Jr.
General Counsel
First Union Corporation
One First Union Center
Charlotte, North Carolina 28288-0013
Telecopier: (704)374-3425
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If to CoreStates, to: CoreStates Financial Corp
Philadelphia National Bank Building
Broad & Chestnut Streets
P.O. Box 7618
Philadelphia, Pennsylvania 19101
Attention: Terrence A. Larsen
Chairman and Chief
Executive Officer
Telecopier: (215) 786-8963
With a copy to: Lee Meyerson, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telecopier: (212) 455-2502
8.08. DEFINITIONS. Any term defined anywhere in this Plan shall have the
meaning ascribed to it for all purposes of this Plan (unless expressly noted to
the contrary). In addition:
(A) the term "Material Adverse Effect" shall mean, with respect to
CoreStates or First Union, respectively, any effect that (i) is material
and adverse to the financial position, results of operations or business of
CoreStates and its subsidiaries taken as a whole, or First Union and its
subsidiaries taken as a whole, respectively, or (ii) materially impairs the
ability of CoreStates or First Union, respectively, to perform its
obligations under this Plan or the consummation of the Corporate Merger and
the other transactions contemplated by this Plan; PROVIDED, HOWEVER, that
Material Adverse Effect shall not be deemed to include the impact of (a)
changes in banking and similar laws of general applicability or
interpretations thereof by courts or governmental authorities, (b) changes
in generally accepted accounting principles or regulatory accounting
requirements applicable to banks and bank holding companies generally, (c)
actions or omissions of CoreStates or First Union taken with the prior
consent of CoreStates or First Union, as applicable, in contemplation of
the transactions contemplated hereby, and (d) the effects of the Mergers
and of the actions contemplated by SECTION 5.08 or ARTICLE III;
(B) the term "person" shall mean any individual, bank, savings
association, corporation, partnership, association, joint-stock company,
business trust or unincorporated organization;
(C) the term "Previously Disclosed" by a party shall mean information
set forth in its Disclosure Schedule that is delivered by that party to the
other parties prior to the execution of this Plan and specifically
designated as information "Previously Disclosed" pursuant to this Plan or
set forth in its SEC Documents filed with the SEC prior to the date hereof;
(D) the term "Rights" means, with respect to any person, securities or
obligations convertible into or exchangeable for, or giving any person any
right to subscribe for or acquire, or any options, calls or commitments
relating to, shares of capital stock of such person; and
(E) the terms "subsidiary" and "significant subsidiary" shall have the
meanings set forth in Rule 1-02 of Regulation S-X of the SEC.
8.09. ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES. This Plan and the
Stock Option Agreements together represent the entire understanding of the
parties hereto with reference to the transactions contemplated hereby and
thereby and supersede any and all other oral or written agreements heretofore
made. Except for SECTION 5.13, nothing in this Plan, expressed or implied, is
intended to confer upon any person, other than the parties hereto or their
respective successors, any rights, remedies, obligations or liabilities under or
by reason of this Plan. The provisions of SECTION 5.13 are intended to be for
the benefit of and shall be enforceable by each Indemnified Party.
8.10. HEADINGS. The headings contained in this Plan are for reference
purposes only and are not part of this Plan.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
CORESTATES FINANCIAL CORP
By: /s/ TERRENCE A. LARSEN
Name: Terrence A. Larsen
Title: Chairman and Chief Executive
Officer
FIRST UNION CORPORATION
By: /s/ EDWARD E. CRUTCHFIELD
Name: Edward E. Crutchfield
Title: Chairman and Chief Executive
Officer
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